Margate Reports First-Quarter Results
Company's sales, profits affected by auto-related slowdown in early 2001
YALE, Mich., April 24 Feeling the
effects of the automotive industry slowdown, Margate Industries, Inc.
today announced lower sales and earnings for its first quarter
ended March 31, 2001. The Company also reiterated an earlier warning that it
expects to report lower results compared to last year's second quarter.
The Yale, Mich.-based provider of specialty services to the foundry
industry reported net income of $38,729, or $0.02 per share, on net sales of
$2.1 million in the first quarter of 2001, compared with net income of
$218,223, or $0.14 per share, on net sales of $2.4 million in the first
quarter of 2000. Lower sales, combined with ongoing fixed cost levels,
contributed to the decrease in profitability. The Company said higher
interest and other income helped partially offset lower sales and comparable
fixed costs compared with prior-year.
Margate also reported that it received payment in full on past due
accounts and notes receivables of approximately $900,000 that had been in
default. The Company received the payment from New Haven Foundry in mid-April
2001, including interest and related costs.
In reporting first-quarter results, Margate attributed its decrease in
sales to the slowdown in the North American automotive industry. Margate,
which cleans and finishes automotive and other foundry castings, said it
generated lower first-quarter service revenues from its largest customer, auto
supplier New Haven Foundry. Gross profit decreased to $198,686, reflecting
lower sales and absorption of fixed overhead costs. Increased use of
automated equipment as well as improved productivity on the part of Margate's
employees helped the Company reduce costs in the first quarter. Continued
efforts to manage operating expenses helped Margate reduce selling, general
and administrative expenses by 2 percent versus the year ago quarter.
"Like virtually all other automotive-related suppliers, the slowing
economy and drop in vehicle sales has reduced demand for our services," said
William H. Hopton, president and chief executive officer of Margate
Industries. "While we will continue to feel the impact of this downturn,
Margate is well-positioned to weather these difficult market conditions. We
have a solid balance sheet, with virtually no debt and a strong cash position.
Additionally, we are aggressively bidding on new cleaning work with other
foundries, though current market conditions have made winning new business
difficult."
Margate said it expects to post a pre-tax loss of between $100,000 and
$200,000 on lower service revenues from its automotive related customers
during the next quarter. The Company said it has increased its sales efforts
and has sharpened its focus on managing costs to help offset lower revenue
levels that are expected in the quarter ending June 30, 2001.
Margate also reported that it continues to move forward with its
previously announced strategy to merge with c-Spectra, Inc., a New York City-
based provider of broadband wireless telecommunications and Internet access
systems. c-Spectra is developing a technologically advanced global wireless
network capable of providing "last mile" Internet access in underdeveloped
regions of the globe where wire-based telecommunications infrastructure is
lacking. Initial deployment of its network has begun in Buenos Aires,
Argentina and, after the merger is completed, c-Spectra plans to expand its
network in major South American markets.
Margate Industries employs approximately 200 at two wholly owned
subsidiaries, Yale Industries and Fort Atkinson Industries, which provide
cleaning, grinding, chipping and finishing of iron castings.
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995: The statements contained in this news release include certain
predictions and projections that may be considered forward-looking statements
under securities law. These statements involve a number of important risks
and uncertainties that could cause actual results to differ materially
including, but not limited to, the performance of the automotive industry,
certain customers and affiliated companies, as well as other economic,
competitive and technological factors involving the Company's operations,
markets, services, products and prices.
MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(unaudited)
Three Months Ended
March 31,
2001 2000
NET SALES $2,111,090 $2,467,217
COST OF SALES 1,912,404 1,972,200
GROSS PROFIT 198,686 495,017
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 241,261 245,195
OPERATING INCOME (LOSS) (42,575) 249,822
OTHER INCOME (EXPENSE):
Dividend and interest income 24,465 37,977
Interest expense (1,491) (3,399)
Other Income 79,330 48,823
102,304 83,401
INCOME FROM CONTINUING OPERATIONS
BEFORE
PROVISION FOR INCOME TAXES 59,729 333,223
PROVISION FOR FEDERAL INCOME TAXES 21,000 115,000
NET INCOME $38,729 $218,223
========== ===========
BASIC EARNINGS PER COMMON SHARE $0.021 $0.137
WEIGHTED AVERAGE SHARES
OUTSTANDING 1,879,542 1,595,445
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