Wescast Delivers Impressive Fourth Quarter Results And Exceeds 2001 Earnings Projections
BRANTFORD, Ontario--Feb. 13, 2002--Wescast Industries Inc. delivered impressive results for the fourth quarter and full year that exceeded expectations. These results are in line with forecasts provided in the press release issued January 21, 2002."I am delighted with our fourth quarter results." says Ray Finnie, President and C.E.O. "Our plants were able to take advantage of higher than expected volumes and generate impressive profits."
Highlights
| -- | Very strong results. Earnings for the fourth quarter 2001 at $16.5 million were up 26% from the $13.1 recorded in the fourth quarter of 2000. Fully diluted earnings per share from continuing operations, were $1.25 compared to $.96 in 2000. For the full year, earnings at $66.0 million were only marginally down from the $67.6 million recorded in 2000 despite tough market conditions. Fully diluted earnings per share from continuing operations for the year at $5.01 is comparable to 2000 at $5.03. |
| -- | The Company maintained the profitability of its core operations despite significant cost and pricing pressure. Earnings were positively affected by a one time reduction in flex comp and profit sharing following the discontinuance of the steel operations in Stratford. Gross margin, before depreciation, at 38.4% for the fourth quarter is up from 35.2% for the same quarter last year. Gross margin, before depreciation, for the year of 39.7% is up from 37.7% in 2000. |
| -- | Wescast outperformed the overall market and sustained only marginal decreases in total shipments (3% in the fourth quarter and 1% for the total year). This is despite a decline in the overall market of 3.6% for the quarter and 10% for the year. The Big 3's decline was even greater at 3.9% for the quarter and 12.1% for the year. This is attributable to an increase in North American market share to 56% in 2001 from 50% in 2000. Operations |
Total sales for the quarter at $94.0 million were down 2.2% from the $96.1 million achieved in the fourth quarter of 2000. For the year, sales at $383.5 million were down 3.3% from the $396.7 million recorded in 2000.
Casting and machining revenues for the fourth quarter of $87.6 million were down less than 1% compared to the fourth quarter of 2000. For the year sales, at $361.2 million, are up 1.0% from the $358.5 million recorded last year. Our revenue mix shifted to casting at the same time as machining penetration dropped relative to the fourth quarter of 2000. This is due to overall product mix and the impact of an in-line engine replacing a V type engine for one of our major programs, reducing the number of manifolds sold per engine. This is compensated for by increased revenue per part in both casting and machining.
Tooling, prototype and other sales at $6.4 million for the fourth quarter, were below the $7.7 million recorded in the fourth quarter of 2000. For the year, this category of sales was $22.3 million down from last year at $38.2 million. This decline reflects the unusually high tooling revenues in the comparable period due to a number of significant new product launches.
Gross profit after depreciation for the fourth quarter was $29.9 million or 31.8%, up from the $26.9 million or 27.9% in the comparable period in 2000. For the year, gross profit, at 33.4%, is 1% higher than the previous year. This change is attributable to:
-- Focused continuous improvement in our plants, offsetting cost
increases and pricing pressures.
-- Reduced variable compensation and profit sharing following the
provision for discontinuing the stainless steel operations at
Stratford. This positively affected gross profit by
approximately $3.6 million.
Selling, general and administration expenses for the quarter of $5.8 million were down $0.7 million from the fourth quarter of 2000. This reflects reduced profit sharing and flexible compensation of $1.7 million, partly offset by an additional provision of $1.0 million to cover the collections risk associated with a tier I customer. On a year-to-date basis selling, general and administration expenses at $26.5 million are up from the $24.2 million recorded last year. This increase illustrates the Company's commitment to expand our global sales network and provide infrastructure for future growth.
Research, design and development costs for the fourth quarter were comparable to the same period the previous year. For the full year, research, design and development, at $6.1 million, is up 63% from the $3.7 million in 2000, reflecting investments in expanded design and testing capabilities as well as focused new product and material development.
The favorable swing in other income for the quarter and the year is attributable to foreign exchange gains on net working capital resulting from a weakening Canadian dollar.
Cash Flow
Operating cash flow was $18.6 million for the quarter compared to $29.8 million in the same quarter last year. The decrease is attributable to the timing of some collections made immediately following the 2001 fiscal year end. For the year operating cash flow was $97.1 million in 2001 compared to $70.4 million in 2000. The increase relates to tooling inventories built in 2000 that were billed and collected in 2001, partly offset by the timing of production receivables collections.
Capital expenditures for continuing operations were $13.1 million and comparable to the same quarter last year. Capital expenditures for continuing operations for the year were $54.6 million, up from the $42.6 million in fiscal 2000. The increase in capital for 2001 is primarily related to Weslin, offset by a decrease in machine line expansion when compared to the previous year.
The Company has deferred $1.9 million of pre-production costs for the fourth quarter, and $4.7 million on a year-to-date basis relative to its Weslin facility.
Balance Sheet and Financial Position
At December 31, 2001, the Company had $88.0 million in cash, short-term investments and long-term bond investments compared to $64.4 million at the end of 2000. Wescast continues to maintain a strong financial position to support future strategic growth initiatives.
The following table provides an overview of the above-mentioned highlights for the fourth quarter:
Wescast Industries Inc.
Q4 2001 Highlights
----------------------------------------------------------------------
----------------------------------------------------------------------
in millions of
dollars, except
per share data
and where
otherwise noted Q4 2001 Q4 2000 % change YTD 01 YTD 00 % change
----------------------------------------------------------------------
Sales 94.0 96.1 -2% 383.5 396.7 -3%
----------------------------------------------------------------------
Earnings from
continuing
operations 16.5 13.1 26% 66.0 67.6 -2%
----------------------------------------------------------------------
Loss from
discontinued
operations 0.0 (0.2) -100% (24.8) (0.5) 4860%
----------------------------------------------------------------------
Net Earnings 16.5 12.9 28% 41.2 67.1 -39%
----------------------------------------------------------------------
Earnings from
continuing
operations
per share
basic 1.27 1.00 27% 5.11 5.14 -1%
fully diluted 1.25 0.96 30% 5.01 5.03 0%
----------------------------------------------------------------------
Net earnings
per share
basic 1.27 0.99 28% 3.19 5.11 -38%
fully diluted 1.25 0.94 33% 3.12 4.99 -37%
----------------------------------------------------------------------
Sales
Breakdown - dollars
(net of
pre-production
deferrals)
Casting &
Machining 87.6 88.4 -1% 361.2 358.5 1%
Cast 62.6 62.3 0% 259.4 260.8 -1%
Internal
Machining 24.3 25.8 -6% 99.2 95.1 4%
External
Machining 0.7 0.3 133% 2.6 2.6 0%
Tooling &
prototype 6.4 7.7 -17% 22.3 38.2 -42%
----------------------------------------------------------------------
Sales
Breakdown - units
(000's)
Ductile iron 0.2 0.3 -33% 1.1 1.8 -39%
SiMO iron 3.2 3.2 0% 13.3 12.8 4%
Total 3.4 3.5 -3% 14.4 14.6 -1%
Sales
Breakdown -
percentage
SiMo Penetration 94.1% 91.4% 92.4% 87.7%
Internal Machining
Penetration 63.0% 68.7% 60.9% 64.0%
----------------------------------------------------------------------
Gross Margin
(before
depreciation) 36.1 33.8 7% 152.3 149.6 2%
Iron manifolds 35.1 33.8 4% 147.0 144.0 2%
Tooling,
prototypes
& other 1.0 0.0 5.3 5.6 -5%
----------------------------------------------------------------------
Gross Margin %
(before
depreciation) 38.4% 35.2% 39.7% 37.7%
Iron manifolds 40.1% 38.3% 40.7% 40.2%
Tooling,
prototypes
& other 14.5% -0.4% 23.6% 14.6%
----------------------------------------------------------------------
Gross Profit
(after
depreciation) 29.9 26.9 11% 128.1 128.7 0%
Iron manifolds 28.9 26.9 7% 122.8 123.1 0%
Tooling,
prototypes
& other 1.0 0.0 5.3 5.6 -5%
----------------------------------------------------------------------
Gross Profit %
(after
depreciation) 31.8% 27.9% 33.4% 32.4%
Iron manifolds 33.1% 30.4% 34.0% 34.3%
Tooling,
prototypes
& other 14.5% -0.4% 23.6% 14.6%
----------------------------------------------------------------------
Depreciation
and amortization
Depreciation and
amortization-
cost of sales 6.1 6.9 -12% 24.1 20.9 15%
Depreciation-
SG & A 1.1 0.7 57% 3.5 2.7 30%
----------------------------------------------------------------------
Capital
Expenditures 13.1 13.3 -2% 54.6 42.6 28%
----------------------------------------------------------------------
R&D 1.1 1.0 10% 6.1 3.7 65%
----------------------------------------------------------------------
SG & A (% of sales) 6.1% 6.7% 6.9% 6.1%
----------------------------------------------------------------------
Tax Rate 31.9% 33.3% 34.1% 35.2%
----------------------------------------------------------------------
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Wescast Industries Inc. is the world's largest supplier of cast exhaust manifolds for passenger cars and light trucks. The Company designs, develops, casts and machines high-quality iron exhaust manifolds for automotive OEM's. Wescast has three sales and design offices in North America and Europe. The Company operates seven production facilities in North America and has a 50% joint venture interest in Weslin Autoipari Rt., a Hungarian based supplier of cast iron exhaust manifolds and turbo charger housings for the European light vehicle market. The Company is recognized worldwide for its quality products, innovative design solutions and highly committed workforce. Wescast trades under the TSE symbol WCS.A as well as the NASDAQ symbol of WCST. Forward Looking Statements
Wescast and its representatives may periodically make written or oral statements that are "forward-looking", including statements included in this news release and in our filings with applicable Securities commissions and in reports to our stockholders. These statements may be identified by words such as "believe," "anticipate," "project," "expect," "intend" or other similar expressions, and include all statements which address operating performance, events or developments that we expect or anticipate may occur in the future (including statements relating to future sales or earnings expectations, volume growth, awarded sales contracts and earnings per share expectations or statements expressing general optimism about future operating results). Such statements involve risks and uncertainties that may cause unanticipated events and actually evolve to be materially different from those either expressed or implied. These factors include, but are not limited to, 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. For more detailed information regarding these risks you may refer to Wescast's publicly filed documents with applicable Canadian securities authorities and the U.S. Securities and Exchange Commission. Wescast undertakes no obligation to update any of these forward-looking statements.
A conference call has been arranged for:
February 13, 2002
3:00 p.m. EST
To participate, please dial 416/620-2406
Post view is available from February 13 to February 20, 2002.
To access please dial 416/626-4100 and enter passcode 20264556.
Wescast Industries Inc.
Consolidated Statement of Earnings and Retained Earnings
(in thousands of Canadian dollars, except per share amounts)
(Unaudited Canadian GAAP)
Three months ended Twelve months ended
------------------------------------------------
December 30, December 31, December 30, December 31,
2001 2000 2001 2000
(Restated (Restated
Note 5) Note 5)
---------------------- ----------------------
Sales $94,017 $96,141 $383,502 $396,721
Cost of sales 64,085 69,277 255,386 268,047
---------------------- ----------------------
Gross profit 29,932 26,864 128,116 128,674
Selling, general and
administration 5,774 6,430 26,547 24,242
Research, development
and design 1,071 1,015 6,077 3,736
---------------------- ----------------------
23,087 19,419 95,492 100,696
Other (income) expense
Interest expense 91 145 409 507
Investment income (734) (932) (3,433) (3,531)
Other (income)
and expenses (539) 559 (1,762) (603)
---------------------- ----------------------
Earnings from continuing
operations before
income taxes 24,269 19,647 100,278 104,323
Income taxes 7,739 6,540 34,240 36,733
---------------------- ----------------------
Earnings from
continuing operations 16,530 13,107 66,038 67,590
Results of
discontinued operations 0 (238) (24,768) (540)
---------------------- ----------------------
Net earnings $16,530 $12,869 $41,270 $67,050
---------------------- ----------------------
---------------------- ----------------------
Earnings from
continuing operations
per share (Note 4)
- basic $1.27 $1.00 $5.11 $5.14
---------------------- ----------------------
---------------------- ----------------------
- fully diluted $1.25 $0.96 $5.01 $5.03
---------------------- ----------------------
---------------------- ----------------------
Net earnings per share
(Note 4)
- basic $1.27 $0.99 $3.19 $5.11
---------------------- ----------------------
---------------------- ----------------------
- fully diluted $1.25 $0.94 $3.12 $4.99
---------------------- ----------------------
---------------------- ----------------------
Retained earnings,
beginning of period $257,952 $230,489 $238,052 $188,983
Net earnings 16,530 12,869 41,270 67,050
Dividends paid (1,560) (1,558) (6,209) (6,314)
Excess of cost over
assigned value of
Class A common shares
purchased and cancelled 0 (3,748) (191) (11,667)
---------------------- ----------------------
Retained earnings,
end of period $272,922 $238,052 $272,922 $238,052
------------------------------------------------
------------------------------------------------
Wescast Industries Inc.
Consolidated Balance Sheet
(in thousands of Canadian dollars) (Unaudited Canadian GAAP)
As at
----------------------------
December 30, December 31,
2001 2000
----------------------------
Current assets
Cash and cash equivalents $58,579 $34,428
Short-term investments 22,567 30,000
Receivables 56,421 60,590
Inventories 19,839 20,602
Prepaids 1,437 1,291
Current Assets - discontinued
operations 3,979 4,469
----------------------------
162,822 151,380
Property and equipment 251,548 224,162
Other 19,601 10,208
Long-term assets - discontinued
operations 12,678 23,627
----------------------------
$446,649 $409,377
----------------------------
----------------------------
Current liabilities
Payables and accruals $31,908 $35,002
Income taxes payable 4,252 260
Current portion of long-term debt 3,249 4,001
Current liabilities - discontinued
operations 8,121 2,151
----------------------------
47,530 41,414
Long-term debt 4,614 4,622
Future income taxes 7,094 15,306
Employee benefits 7,964 6,661
----------------------------
67,202 68,003
----------------------------
Shareholders' equity
Capital stock (Note 3) 106,601 103,334
Retained earnings 272,922 238,052
Cumulative translation adjustment (76) (12)
----------------------------
379,447 341,374
----------------------------
$446,649 $409,377
----------------------------
----------------------------
Wescast Industries Inc.
Consolidated Statement of Cash Flows
(in thousands of Canadian dollars) (Unaudited Canadian GAAP)
Three months ended Twelve months ended
---------------------- ----------------------
December 30, December 31, December 30, December 31,
2001 2000 2001 2000
(Restated (Restated
Note 5) Note 5)
---------------------- ----------------------
Cash derived from
(applied to)
Operating
Earnings from
continuing
operations $16,530 $13,107 $66,038 $67,590
Add (deduct) items
not requiring cash:
Depreciation and
amortization 7,285 7,910 27,665 23,856
Amortization of
bond costs 144 4 218 13
Future income taxes 1,447 3,997 2,368 6,599
Loss on disposal
of equipment 65 63 1,338 409
Employee benefits 880 593 2,287 1,596
---------------------- ----------------------
26,351 25,674 99,914 100,063
Change in non-cash
working capital (5,323) 4,170 2,387 (30,018)
---------------------- ----------------------
21,028 29,844 102,301 70,045
Discontinued
operations (2,476) (76) (5,190) 392
---------------------- ----------------------
18,552 29,768 97,111 70,437
---------------------- ----------------------
Financing
Issue of long-term
debt 744 1,323 1,553 3,552
Repayment of
long-term debt (194) (71) (2,432) (1,944)
Payment of
obligations under
capital lease (139) (230) (701) (848)
Employee benefits
paid (170) (322) (983) (710)
Issuance of share
capital under
Employee Share
Purchase Plan 132 136 569 605
Employee share
loan repayments 136 34 571 191
Issuance of share
capital under
Stock Option Plan 707 40 2,762 445
Repurchase of
common shares 0 (6,057) (340) (19,187)
Dividends paid (1,560) (1,558) (6,209) (6,314)
---------------------- ----------------------
(344) (6,705) (5,210) (24,210)
---------------------- ----------------------
Investing
Purchase of property,
equipment and
other assets (13,076) (13,281) (54,610) (42,580)
Purchase of
investments 0 0 (29,575) (30,000)
Restricted cash
from long-term debt 0 0 0 378
Deferred
pre-production
costs (1,870) (672) (4,347) (5,297)
Redemption of
short-term
investments 0 0 30,000 34,209
Proceeds on
disposal of
equipment 1 52 26 319
Discontinued
operations (681) (2,384) (9,244) (11,992)
---------------------- ----------------------
(15,626) (16,285) (67,750) (54,963)
---------------------- ----------------------
Net increase
(decrease) in cash
and cash
equivalents 2,582 6,778 24,151 (8,763)
Cash and cash
equivalents
Beginning of period 55,997 27,650 34,428 43,164
---------------------- ----------------------
End of period $58,579 $34,428 $58,579 $34,428
---------------------- ----------------------
---------------------- ----------------------
Wescast Industries Inc.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except per share amounts)
(Unaudited Canadian GAAP)
Note 1. Basis of presentation
The disclosures in these interim financial statements do not
conform in all respects to the requirements of generally accepted
accounting principles for annual financial statements. These interim
financial statements should be read in conjunction with the most
recent annual financial statements for the year ended December 31,
2000.
Note 2. Accounting policies
These interim financial statements follow the same accounting
policies and methods of their application as the most recent annual
financial statements except for:
The Company changed its accounting policy with respect to the
computation of earnings per share to that issued by the Canadian
Institute of Chartered Accountants in December 2000. The main effect
of the change to the Company's financial statements is in the
calculation of fully diluted earnings per share, which is now
calculated using the treasury stock method instead of the imputed
interest method. This change in accounting policy has been applied on
a retroactive basis and the comparative numbers have been restated
accordingly. The effect of this change for the quarter and the year
ended December 30, 2000 is an increase of $ nil and $0.11
respectively, to fully diluted earnings per share.
Note 3. Capital Stock
Authorized
Unlimited Preference shares, no par value
Unlimited Class A subordinate voting common shares, no par value
9,000,000 Class B multiple voting common shares, no par value
December 30, December 31,
2001 2000
---------------------------
Issued and outstanding
5,626,575 Class A Common Shares
(2000 - 5,383,749) $94,174 $90,755
7,376,607 Class B Common shares
(2000 - 7,466,907) 12,427 12,579
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$106,601 $103,334
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Note 4. Earnings per share
Earnings from continuing operations per share and basic net
earnings per share are calculated based on the weighted average number
of shares outstanding (2001 - 13,003,144 shares; 2000 - 12,927,159
shares). Fully diluted earnings from continuing operations per share
and net earnings per share are calculated based on the fully diluted
weighted average number of common shares outstanding (2001 -
13,209,817 shares; 2000 - 13,296,764 shares).
Note 5. Comparative figures
In 2000, the Company accrued certain annual expenses on a
pro-rated basis quarterly throughout the year. The comparative figures
have been restated to reflect the actual expenses incurred for the
quarter ended December 31, 2000. The effect on the quarter ended
December 31, 2000 is a decrease in net earnings of $1,770 or $0.14 per
share on a basic and fully diluted basis. There is no cumulative
effect for the year ended December 31, 2000.
The company has reclassified certain comparative amounts to report
discontinued operations. There was no effect on net earnings for the
quarter and year to date ended December 31, 2000.