Margate Reports Second-Quarter Results
Company expects third-quarter results will be impacted by slowing economy
YALE, Mich., Aug. 7 Margate Industries, Inc.
today reported better-than-expected results for its 2001-second
quarter, but warned that continuing softness in the automotive industry would
negatively impact the Company's third-quarter profitability.
The Yale, Mich.-based holding company also said it is progressing toward
the execution of a definitive agreement on its proposed merger with wireless
telecom provider USA Teleport, Inc. By mutual consent, the two companies have
extended the date to complete the definitive agreement until August 31, 2001.
In the second quarter ended June 30, 2001, Margate reported a net loss of
$12,290, or $0.01 per share, on net sales of $1.8 million in the second
quarter ended June 30 2001, compared with net income of $218,051, or $0.14 per
share, on net sales of $3.2 million in the same period in 2000. Margate said
continued efforts to manage operating costs and higher income from fees paid
by affiliate companies helped the Company post a narrower loss than was
previously anticipated. In April, Margate reported that it expected to post
lower sales and a pre-tax loss of between $100,000 and $200,000 in the second
quarter.
Margate, which cleans and finishes gray iron castings primarily for
foundries serving the auto industry, said the slowdown in the North American
automotive industry has lead several of the Company's key customers to
decrease production of castings and scale back the outsourcing of their
cleaning operations. Additionally, Margate's largest customer has
significantly reduced its production volumes as automakers convert from gray
iron cylinder heads to aluminum. Because of the softer sales from its
customer base, Margate said it would cease operations at its Wisconsin-based
Fort Atkinson facility, effective August 31, 2001. Margate employs 30 at the
Wisconsin operation
"Like many automotive suppliers, our sales have been impacted negatively
by the slowdown in the economy," said William H. Hopton, president and chief
executive officer of Margate Industries. "We are managing costs and continue
to look for opportunities to improve productivity and quality. While we made
good progress in these areas -- as evidenced by the 14.6 percent reduction in
selling, general and administrative costs versus the year-ago quarter --
market conditions remain difficult. As a result, we expect to post a pre-tax
loss of between $100,000 and $300,000 on lower revenues from our automotive
related customers during the third quarter."
Hopton continued: "The downturn in the auto industry further affirms our
need to diversify beyond our foundry business. While we are financially
strong and well positioned to endure the difficult market we are currently
facing, Margate is committed to pursuing additional growth opportunities that
will create long-term value for shareholders. The board of directors believes
that USA Teleport represents one such opportunity."
In June, Margate announced that it had signed a non-binding letter of
intent to enter into negotiations for a merger with USA Teleport, Inc., a
Miami-based firm that provides broadband wireless and Internet solutions in
North, South and Central America. Under the terms being discussed, Margate
shareholders and the shareholders of USA Teleport will have equal ownership in
the post-merger company.
USA Teleport (http://www.usateleport.com ) owns and operates 10 earth stations in
Florida, Argentina, Brazil, Peru, Paraguay and Venezuela. The USA Teleport
earth stations receive and transmit voice, data and Internet connectivity
throughout the Americas. Margate said the transaction with USA Teleport will
not result in any operational, management or employment changes at its wholly
owned foundry-services units, Yale Industries and Fort Atkinson Industries.
For six months ended June 30, 2001, Margate reported net income of
$26,439, or $0.01 per share, on net sales of $3.9 million, compared with net
income of $436,274, or $0.27 per share, on net sales of $5.7 million in the
same period in 2000.
MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
NET SALES $1,762,676 $3,230,379 $3,873,766 $5,697,596
COST OF SALES 1,638,290 2,489,845 3,550,694 4,489,045
GROSS PROFIT 124,386 740,534 323,072 1,208,551
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 245,581 287,009 486,842 505,204
OPERATING INCOME
(LOSS) (121,195) 453,525 (163,770) 703,347
OTHER INCOME (EXPENSE):
Dividend and
interest income 39,997 46,040 64,462 84,017
Interest expense (1,275) (4,756) (2,766) (8,155)
Other Income 62,183 (139,758) 141,513 (90,935)
100,905 (98,474) 203,209 (15,073)
INCOME FROM CONTINUING
OPERATIONS BEFORE
PROVISION FOR INCOME
TAXES (20,290) 355,051 39,439 688,274
PROVISION FOR FEDERAL
INCOME TAXES (8,000) 137,000 13,000 252,000
NET INCOME $(12,290) $218,051 $26,439 $436,274
BASIC EARNINGS PER
COMMON SHARE ($0.01) $0.14 $0.01 $0.27
WEIGHTED AVERAGE SHARES
OUTSTANDING 1,879,542 1,595,042 1,879,542 1,595,243
