Tesma Announces Fiscal 1998 Year End and Q4 Results

18 September 1998

    CONCORD, Ont., Sept. 18 /CNW-PRN/ - Tesma International Inc. (TSE:TSM.A;
NASDAQ:TSMAF) today announced its fourth quarter and year end sales, income
and earnings per share for the period ended July 31, 1998.



                            Three Months Ended                Year Ended
                                 July 31                       July 31
                           1998          1997              1998        1997

    Sales                $161.4        $146.3             $645.9      $551.5

    Operating income     $ 11.0        $  9.5             $ 59.5      $ 45.7

    Net income           $  6.9        $  5.7             $ 29.7      $ 26.5

    Fully diluted
      earnings
      per share         $  0.24       $  0.23            $  1.05     $  1.13

    Fully diluted
      earnings per share
      (excluding
      non-recurring item)                                 $  1.25     $  1.13

    Weighted average
      number of shares
      outstanding on a
      fully diluted basis  30.0          28.6               30.0        26.6



    All results are reported in millions of Canadian dollars, except per
share figures. The results for fiscal 1998 include a non-recurring provision
of $9.1 million reported in the first quarter of 1998 related to the Company's
previously disclosed patent litigation settlement.
    Tesma's sales for the fourth quarter of fiscal 1998 were $161.4 million,
an increase of 10% over the prior year despite a two-month strike at General
Motors which caused North American vehicle production volumes to decline by
11% in the quarter versus a year earlier. For the year, reported sales were a
record $645.9 million, an increase of 17% over the prior year. Principal
factors contributing to this growth were Tesma's increased North American and
European content per vehicle, higher tooling sales and the sales generated by
recently acquired subsidiaries.
    For the fourth quarter, Tesma's operating income was $11.0 million, an
improvement of 16% or $1.5 million over the fourth quarter of fiscal 1997.
Higher sales and improved operating performance at Tesma's European divisions
have resulted in better capacity utilization offsetting some of the negative
impact that the GM strike had on the Company's North American divisions. For
the year, operating income increased 30% from $45.7 million to $59.5 million.
    Tesma's fully diluted earnings per share increased 4% to $0.24 from $0.23
for the fourth quarter of fiscal 1998 and, excluding the litigation
settlement, 11% to $1.25 from $1.13 for the year, despite a 13% increase in
the average number of shares outstanding.
    Cash provided from operations was $15.6 million in the fourth quarter, a
decline of $0.6 million over fiscal 1997. Net investment activities totalled
$18.6 million in the quarter for fixed and other asset additions. For the year
ended July 31, 1998, cash provided from operations was $58.3 million, with net
investment activities totalling $73.9 million.
    ``Tesma is pleased with its fourth quarter results given the challenges
presented in the face of the prolonged strike at General Motors. The strike
resulted in a reduction in our rate of sales growth to less than 11% for the
quarter, and impacted fully diluted earnings per share by approximately
$0.07,'' Tony Dobranowski, Executive Vice President and Chief Financial
Officer said,  ``The fact we were able to increase both sales and profits
under these circumstances reinforces our strategy of the past 3 years to
become a global supplier to the automotive industry and reduce our dependence
on any one customer or market.''
    The Tesma Board of Directors today declared a quarterly dividend in
respect of the fourth quarter of fiscal 1998 of $0.07 per share on the Class A
Subordinate Voting and Class B shares payable on October 15, 1998 to
shareholders of record on September 30, 1998.
    Tesma is a global supplier of highly engineered powertrain, fueling and
cooling systems and components for the automotive industry. Tesma's strong
market presence and strategy for continuing growth results from its unique
focus on Innovation, Engineering and Performance. Tesma employs over 3,000
employees in 20 manufacturing facilities in North America and Europe.



    TESMA INTERNATIONAL INC.
    CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
    (Canadian dollars in thousands, except
     per share figures) (Unaudited)

                              THREE MONTHS ENDED              YEAR ENDED

                                   July 31                     July 31
                              1998          1997          1998         1997

    Sales                 $161,364      $146,310      $645,894     $551,518
    -----------------------------------------------------------------------
    Cost of goods
      sold                 126,948       116,052       502,164      428,151
    Depreciation and
      amortization           6,396         5,220        23,676       19,058
    Selling, general
      and administrative    14,922        12,323        51,299       43,609
    Interest (net)            (245)          (67)         (356)         335
    Amortization of
     discount on Convertible
     Series Preferred Shares   228           716         1,232        3,052
    Affiliation fees
      and other charges      2,087         2,575         8,415       11,596
    -----------------------------------------------------------------------
    Income before litigation
      settlement and
      income taxes          11,028         9,491        59,464       45,717
    Litigation settlement        -             -         9,132            -
    -----------------------------------------------------------------------
    Income before income
      taxes                 11,028         9,491        50,332       45,717
    Income taxes             4,155         3,757        20,678       19,239
    -----------------------------------------------------------------------
    Net income for the
      period                 6,873         5,734        29,654       26,478
    Dividends on Convertible
      Series Preferred
      Shares (net of return
      of capital)           (1,115)         (463)       (2,876)      (1,864)
    -----------------------------------------------------------------------
    Net income attributable
      to Class A Subordinate
      Voting Shares and
      Class B Shares         5,758         5,271        26,778       24,614
    Retained earnings,
      beginning of period   73,321        51,591        55,721       34,953
    Dividends on Class A
      Subordinate Voting
      Shares and Class B
      Shares                (1,994)      (1,141)        (5,414)      (3,846)
    -----------------------------------------------------------------------
    Retained earnings,
      end of period        $77,085      $55,721        $77,085      $55,721
    -----------------------------------------------------------------------
    -----------------------------------------------------------------------
    Earnings per Class A
      Subordinate Voting
      Share or Class B Share
        Basic                $0.24        $0.24          $1.14        $1.31
        Fully diluted        $0.24        $0.23          $1.05        $1.13
    -----------------------------------------------------------------------
    -----------------------------------------------------------------------
    Average number of Class A
      Subordinate Voting Shares
      and Class B Shares
      outstanding (in millions)
        Basic                 25.1         21.1           23.4         18.8
        Fully diluted         30.0         28.6           30.0         26.6
    -----------------------------------------------------------------------
    -----------------------------------------------------------------------



    TESMA INTERNATIONAL INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Canadian dollars in thousands) (Unaudited)

                              THREE MONTHS ENDED              YEAR ENDED

                                   July 31                     July 31
                              1998          1997          1998         1997

    CASH PROVIDED FROM (USED FOR):
    OPERATING ACTIVITIES

    Net income              $6,873      $  5,734       $29,654      $26,478
    Items not involving
      current cash flows     8,700        10,461        28,656       26,815
    -----------------------------------------------------------------------
                            15,573        16,195        58,310       53,293
    Changes in non-cash
      working capital        6,747        (6,700)       (5,096)     (22,386)
    -----------------------------------------------------------------------
                            22,320         9,495        53,214       30,907
    -----------------------------------------------------------------------
    INVESTING ACTIVITIES
    Fixed asset additions  (17,471)      (12,746)      (64,960)     (48,052)
    Purchase of subsidiaries     -             -        (7,947)      (2,584)
    Increase in investments
      and other             (1,483)         (273)       (5,636)      (1,802)
    Proceeds from disposition
      of fixed assets
      and other                361         1,155         1,979        2,620
    Cash acquired on
      acquisition of
      subsidiaries               -             -         2,665           35
    -----------------------------------------------------------------------
                           (18,593)      (11,864)      (73,899)     (49,783)
    -----------------------------------------------------------------------
    FINANCING ACTIVITIES
    Repayment of notes
      receivable from
      employees                (13)          137           242          543
    Increase (decrease)
      in bank indebtedness  (3,115)        1,653        (1,467)        (104)
    Issues of long-term
      debt                      81           239         2,388        1,915
    Repayments of long-term
      debt                  (1,843)       (1,494)       (5,928)      (3,300)
    Conversion of Convertible
      Series Preferred
      Shares               (58,429)       (9,910)      (58,429)      (9,910)
    Issuance of Class A
      Subordinate Voting
      Shares                59,216        77,049        61,899       78,799
    Dividends on Class A
      Subordinate Voting
      Shares and Class B
      Shares                (1,994)       (1,141)       (5,414)      (3,846)
    Dividends on Convertible
      Series Preferred
      Shares                (1,575)       (1,234)       (4,418)      (4,675)
    -----------------------------------------------------------------------
                            (7,672)       65,299       (11,127)      59,422
    -----------------------------------------------------------------------
    Increase (decrease)
      in cash during
      the period            (3,945)       62,930       (31,812)      40,546
    Cash, beginning
      of period             47,943        12,880        75,810       35,264
    -----------------------------------------------------------------------
    Cash, end of period    $43,998       $75,810       $43,998      $75,810
    -----------------------------------------------------------------------
    -----------------------------------------------------------------------



    TESMA INTERNATIONAL INC.
    CONSOLIDATED BALANCE SHEETS
    (Canadian dollars in thousands)
    (Unaudited)

                                                    As at          As at
                                                July 31, 1998  July 31, 1997

    ASSETS
    Cash                                             $ 43,998       $ 75,810
    Accounts receivable                                90,340         75,677
    Inventories                                        57,991         42,918
    Prepaid expenses and other                          5,857          6,895
    Income taxes receivable                                 -          1,420
    -------------------------------------------------------------------------
                                                      198,186        202,720
    Fixed assets                                      186,583        138,442
    Other assets                                       14,562          8,333
    -------------------------------------------------------------------------
                                                     $399,331       $349,495
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Bank indebtedness                                $  6,002       $  7,469
    Accounts payable                                   43,897         37,179
    Accrued salaries and wages                         16,054         14,448
    Other accrued liabilities                          32,015         20,314
    Income taxes payable                                  310              -
    Long-term debt due within one year                  4,036          4,549
    -------------------------------------------------------------------------
                                                      102,314         83,959
    Long-term debt                                     14,019         13,358
    Deferred income taxes                              21,525         20,050
    Convertible Series Preferred Shares                     -         57,197
    SHAREHOLDERS' EQUITY
    Convertible Series Preferred Shares                     -          2,596
    Class A Subordinate Voting Shares                 179,367        116,413
    Class B Shares                                      2,583          2,583
    Retained earnings                                  77,085         55,721
    Currency translation adjustment                     2,438         (2,382)
    -------------------------------------------------------------------------
                                                      261,473        174,931
    -------------------------------------------------------------------------
                                                     $399,331       $349,495
    -------------------------------------------------------------------------
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    SOURCE  Tesma International Inc.