Elamex Reports Third Quarter 2001 Results
EL PASO, Texas--Nov. 1, 2001--Elamex, S.A. de C.V. announced today its results for the quarter ended September 28, 2001.Sales for the third quarter of this year decreased 14% ($5.2 million) to $31.5 million from $36.7 million in the third quarter of the prior year. Net loss for the quarter of $1.1 million was $104,000 more from the net loss of $958,000 in the same quarter in 2000. Net loss per share for the third quarter of 2001 of $0.15 compared to the net loss per share of $0.14 for the same quarter one year ago. There were 6,866,100 weighted average shares outstanding at the end of the third quarter for both 2000 and 2001.
Beginning in July 2001, General Electric and Elamex agreed to manage the joint venture with a general manager that reports directly to a four-member board of directors in which the two partners have equal voting rights. As a result of this change, effective the third quarter of 2001, the operating results of Qualcore, the joint venture with General Electric, are being reported on the equity method. Prior to this quarter, the operating results of Qualcore were consolidated into Elamex's operating results.
The decrease in Elamex's net sales of $5.2 million was primarily the result of the non-consolidation of Qualcore which had net sales of $7.9 million in the third quarter of 2000. Shelter operations had an increase in net sales of $2.3 million and Precision, the Kentucky metal stamping operation, had an increase of $605,000.
Consolidated gross profit increased by $2.8 million in the third quarter of 2001 compared to the same period one year ago. The primary contributors to this improvement were the following:
| -- | The non-consolidation of Qualcore which incurred a negative gross profit of $2.3 million in the third quarter of 2000. |
| -- | Shelter operations had an increase in gross profit of $275,000 resulting primarily from a decrease in fixed manufacturing expenses of $668,000, offset by a decrease in gross profit from discontinued contracts of $83,000 in addition to a decrease of $310,000 in gross profit from continuing contracts. |
| -- | Precision had an increase in gross profit of $202,000. The two stamping plants provided $301,000 of that increase, primarily from a reduction in material costs of $222,000. |
Sales General and Administrative expenses of $2.2 million in the third quarter of this year decreased $1.1 million from the $3.3 million of one year ago. This decrease is primarily due to the following:
-- The non-consolidation of Qualcore which incurred in $435,000
in the second quarter of 2000.
-- A net reduction of $594,000 in corporate overhead resulting
primarily from a decrease in number of corporate personnel and
associated costs.
-- A net decrease of $76,000 related to a decrease in number of
personnel and associated costs in Shelter and Precision.
Other expense in the third quarter 2001 was $1.1 million, compared to other income of $1.5 million in the same quarter of 2000. The decrease is primarily due to the following:
-- Our equity in the losses on joint venture of $755,000
represents Elamex's share of the operating losses of Qualcore
for the third quarter of this year. The Qualcore operations,
which were consolidated in the third quarter of the prior year
generated a loss of approximately $1.3 million for that
quarter.
-- Net interest expense for the third quarter of 2001 is
$340,000, compared to net interest income of $200,000 in the
same period of 2000. The decrease was primarily due to a
decrease in cash investments, combined with lower interest
rates.
-- Other income of $45,000 in the third quarter of 2001 was
$388,000 less than the $433,000 recorded in the same quarter
of the prior year. The decrease is primarily due to decrease
in income related to extraordinary services.
-- Gain on sale of subsidiaries of $910,000 recorded in the third
quarter 2000 compared to zero in this quarter.
The income tax liability for the Quarter is based on our calculation of the income tax for the entire year. Factors affecting this liability include Company results, year end exchange rates and projections for inflation. Based on the quarter's operating losses, the Company estimates a tax benefit of $488,000, a decrease from the $623,000 benefit for the same period of the prior year.
Minority interest in losses of subsidiaries decreased from $1.3 million in the third quarter 2000 to zero in this quarter due to the non-consolidation of Qualcore.
Richard P. Spencer, president and CEO of Elamex, made the following comments regarding the third quarter results:
"Elamex's financial results for third quarter 2001 reflect the implementation of our business plan to bring ongoing expenses in line with revenues and streamline our business structure. The steps taken to date continue to show positive financial results.
"The 2001 third quarter consolidated operating cash flow (operating income/(loss) before depreciation and non-recurring charges) amounted to $622,000, compared to $441,000 in the second quarter and a negative $1.2 million in the first quarter. Non-recurring items during the quarter amounted to $205,000, all related to severance and salary expenses associated with our continuing focus on personnel reductions.
"We are pleased that Precision's revenues have remained at forecasted levels. Precision makes metal stampings for popular automobiles and consumer white good products that have remained strong in the U.S. economic downturn. We are undertaking several initiatives at Precision to enhance profitability and to position the Company to weather erosion in its revenue streams due to short-term uncertain economic conditions.
"Besides making operations more efficient by reducing personnel count, we are announcing that, effective Oct. 30, 2001, Tom Hudson has assumed the role of president and chief operating officer of the company. Tom has extensive experience in re-engineering companies to enhance shareholder value.
"Qualcore, Elamex's joint venture with General Electric, continues to operate at a loss. Senior management has been changed and has made significant strides in reducing manufacturing costs. We are managing the business jointly with GE Mexico. As of Sept. 30, 2001, Elamex's investment in Qualcore represented approximately $3.0 million or approximately 4.2% of Elamex's equity of approximately $70.8 million.
"Our shelter business continued to show operating cash flow improvement from quarter to quarter, however at a slower pace than that experienced in the second quarter. This was anticipated. Excluding non-recurring expenses due to asset write downs and severance payments, shelter operating cash flow has increased from a loss of $706,000 in the first quarter to a positive $574,000 in the third quarter.
"This improvement is directly related to personnel reduction and other cost containment initiatives. Shelter operations reduced total administrative personnel by 39 during the quarter, a reduction of 34% to a total of 77 at end of quarter. We continue to look at ways we can be more efficient and to analyze the continuance of the shelter business model from a strategic perspective.
"Although significant progress has been made in operating cash flow improvements over the past two quarters, more remains to be done. In the short term, Elamex's operating results will be closely tied to the performance of the U.S. economy, particularly the automotive and consumer durable goods sectors.
"We are grateful that no one from the Elamex organization was directly impacted by the tragic events of Sept. 11. We wish to express our sympathy and condolences to the many individuals and families who have suffered great loss as a result of these events."
Elamex will conduct a group conference call on Friday, Nov. 2, 2001, at 12:30 a.m. (EST) to discuss third quarter 2001 results. Please contact Dolores Sierra for conference call information at 915/774-8252. For any who cannot participate in the conference call, the conference call script will be posted in the Elamex Web site.
Elamex is a Mexican manufacturer service provider. The Company, in addition to production of plastic and stamped metal components delivers high quality finished assemblies to U.S. and Canadian Original Equipment Manufacturers (OEM) in the consumer, telecommunications, industrial, medical and automotive industries. Elamex participates in a high growth industry, where its unique competitive advantage results from its demonstrated capability to leverage low cost, highly productive labor, strategic North American locations, recognized world class quality and proven ability to combine high technology with labor intensive manufacturing processes.
(This press release includes forward-looking statements that involve risks and uncertainties, including, but not limited to, risks associated with the Company's and Precision's future growth and profitability, the ability of the Company to increase sales to existing customers and to make sales to new customers, the effects of competitive and general economic conditions and the ability of the Company's own customers to meet their expectations and projections)
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In Thousands of U.S. Dollars)
(Unaudited)
Sept. 28, Dec. 31,
2001 2000
-------- --------
Assets
Current assets $ 50,594 $ 76,776
Property, plant and equipment, net 39,295 55,108
Other assets, net 16,225 10,486
-------- --------
$106,114 $142,370
======== ========
Liabilities and Stockholders' Equity
Current liabilities $ 18,112 $ 34,667
Long-term debt and liabilities 17,226 26,457
-------- --------
Total liabilities 35,338 61,124
Minority interest -- 474
Stockholders' equity 70,776 80,772
-------- --------
$106,114 $142,370
======== ========
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(In Thousands of U.S. Dollars, except share data)
(Unaudited)
13 Weeks Ended 39 Weeks Ended
-------------------- --------------------
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
2001 2000 2001 2000
--------- --------- --------- ---------
Net sales $ 31,489 $ 36,677 $ 103,411 $ 134,697
Cost of sales 29,752 37,734 102,828 131,862
--------- --------- --------- ---------
Gross profit (loss) 1,737 (1,057) 583 2,835
--------- --------- --------- ---------
Operating expenses:
General and
administrative 1,768 2,861 7,549 9,957
Selling 264 465 1,107 1,457
Restructuring charges 205 -- 11,931 --
--------- --------- --------- ---------
Total operating expenses 2,237 3,326 20,587 11,414
--------- --------- --------- ---------
Operating loss (500) (4,383) (20,004) (8,579)
Other income:
Interest income 191 729 1,101 1,293
Interest expense (531) (529) (1,839) (2,192)
Other, net 45 433 309 1,331
Equity in losses on
unconsolidated
joint venture (755) -- (755)
Gain on sale
of subsidiaries -- 910 2,612 21,445
--------- --------- --------- ---------
Total other
(expense) income (1,050) 1,543 1,428 21,877
--------- --------- --------- ---------
(Loss) income before
income taxes and
minority interest (1,550) (2,840) (18,576) 13,298
Income tax benefit (488) (623) (2,639) (2,053)
--------- --------- --------- ---------
(Loss) income before
minority interest (1,062) (2,217) (15,937) 15,351
Minority interest in
losses of subsidiaries -- 1,259 6,284 2,196
--------- --------- --------- ---------
Net (loss) income (1,062) (958) (9,653) 17,547
Other comprehensive loss,
net of income tax benefit
of $28 and $283
respectively (37) -- (379) --
--------- --------- --------- ---------
Comprehensive
(loss) income $ (1,099) $ (958) $ (10,032) $ 17,547
========= ========= ========= =========
Basic and diluted (loss)
income per common share $ (0.15) $ (0.14) $ (1.41) $ 2.56
Weighted average
shares outstanding 6,866,100 6,866,100 6,866,100 6,866,100
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