Wescast Transfers Steel Manifold Programs
BRANTFORD, Ontario--Sept. 13, 2001--Wescast Industries Inc. has agreed with its' customers that production of the GM 8.1 Litre and Jaguar steel manifold programs will be transferred to other suppliers who will assume full production responsibilities.These programs would have represented less than 8% of sales in 2002.
"We will now be able to refocus valuable technical and leadership resources on the growth of our core iron manifold operations and eliminate a drain on cash resources and future profitability at the same time," said Ray Finnie, President and C.E.O. "We will, however, continue to develop materials and processes for higher temperature applications in a controlled, scientific research environment."
This decision was taken in light of a number of factors including 1) an overall reduction in the long term market potential for steel manifolds in North America, 2) current demand that is significantly below original estimates, 3) manufacturing and technology related issues associated with an aggressive launch timeline and, 4) a revised view of the long term profitability of this niche.
Wescast is working with customers to ensure there is no disruption in current supply or to future program launches as a result of this decision. The target date for complete transfer of this production is June 30, 2002.
The company will follow the appropriate accounting treatment prescribed by the CICA and treat this as a discontinued operation. Accordingly, the company will restate previously released financial statements as summarized on the attached schedule. This will increase earnings from continuing operations for the six months to July 1, 2001 by $2.8 million or ($.21 per share fully diluted). In addition, the company will make a provision in its third quarter financial statements to cover asset write-downs, severance and losses from operations until the complete transfer of production. This provision is not expected to exceed $21 million, ($33 million pre-tax) or $1.65 per share fully diluted.
Wescast Industries Inc. is the world's largest supplier of exhaust manifolds for passenger cars and light trucks. The Company designs, develops, casts, and machines high-quality iron exhaust manifolds for automotive OEMs. Wescast operates seven production facilities in North America, and three sales and design offices in North America and Europe. The Company is recognized worldwide for its quality products, innovative design solutions, and highly committed workforce.
Advisory
Certain information regarding the Company set forth in this document, including management's assessment of the Company's future plans and operations, may constitute forward-looking statements under applicable securities law and necessarily involve risks associated with the automotive industry, production, marketing, and transportation such as loss of market, volatility of prices, currency fluctuations, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources; as a consequence, actual results may differ materially from those anticipated in the forward-looking statements.
Wescast Industries Inc.
Restatement of Continuing Operations
July 1, 2001
in 000's Six Months
Ended
First Quarter Second Quarter July 1
2001 2001 2001
---------------------------------------
Sales, as originally reported $100,695 $106,551 $207,246
Impact on sales of discontinued
operations (3,672) (2,022) (5,694)
---------------------------------------
Sales from continuing
operations, as restated $97,023 $104,529 $201,552
---------------------------------------
---------------------------------------
Net earnings, as originally
reported $16,755 $17,757 $34,512
Loss from discontinued
operations 1,620 1,165 2,785
---------------------------------------
Earnings from continuing
operations, as restated $18,375 $18,922 $37,297
---------------------------------------
---------------------------------------
Net earnings per share
Basic $1.30 $1.37 $2.67
Fully diluted $1.28 $1.35 $2.63
Earnings from continuing
operations per share, as restated
Basic $1.43 $1.47 $2.90
Fully diluted $1.40 $1.43 $2.84