Elamex Reports Fourth Quarter 2001 Results
EL PASO, Texas--Feb. 15, 2002--Elamex, S.A. de C.V. announced today its results for the fourth quarter and for the full year that ended Dec. 31, 2001.Sales for the fourth quarter of this year decreased 29% ($11.4 million) to $28.6 million from $40.0 million in the fourth quarter of the prior year. Net loss for the quarter of $1.4 million was $1.2 million more from the net loss of $166,000 in the same quarter in 2000. Net loss per share for the fourth quarter of 2001 of $0.20 compared to the net loss per share of $0.02 for the same quarter one year ago. There were 6,866,100 weighted average shares outstanding for the fourth quarter for both 2000 and 2001.
The decrease in Elamex's net sales of $11.4 million was primarily the result of the non-consolidation of Qualcore in the last quarter of 2001 which had net sales of $7.0 million in the fourth quarter of 2000 and a $4.5 million decrease in sales at Precision, the Kentucky metal stamping operation.
Consolidated gross profit increased by $1.8 million in the fourth 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 $1.8 million in the fourth quarter of 2000. |
| -- | Shelter Services had an increase in gross profit of $896,000 resulting primarily from a decrease in fixed manufacturing costs of $607,000. |
| -- | Precision had a decrease in gross profit of $897,000 largely due to reduced tooling sales in 2001 compared to the same quarter the previous year. |
Operating expenses of $3.0 million in the fourth quarter of this year decreased $601,000 from the $3.6 million of one year ago. This decrease is primarily due to the following:
| -- | Non-recurring restructuring costs of $932,000 in Shelter Services, $96,000 in Precision. These costs consisted of $589,000 of severance and related expenses associated with a reduction in personnel and $396,000 from the write-off of non-productive assets and were compensated by decreases in operating expenses during the quarter of $960,000 compared to the same quarter a year ago. |
| -- | The non-consolidation of Qualcore which incurred operating expenses of $626,000 in the fourth quarter of 2000. |
Other expense in the fourth quarter 2001 was $724,000, compared to other income of $1.3 million in the same quarter of 2000. The decrease of $2.0 million is primarily due to the following:
| -- | Gain on sale of subsidiaries of $1 million recorded in the fourth quarter 2000 compared to zero in the fourth quarter of 2001. |
| -- | Equity in losses of joint venture of $709,000 represents Elamex's share of the operating losses of Qualcore for the fourth quarter of this year. |
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 $723,000, a decrease of $427,000 from the $1.1 million benefit for the same period of the prior year.
Sales for the full year 2001 of $132.0 million decreased 24% ($42.7 million) from the sales recorded in 2000 of $174.7 million. Net loss for full year 2001 was $11.0 million, a $28.4 million change from the $17.4 million net income in 2000. Net loss per share for 2001 of $1.61 compares to the net income of $2.53 per share for 2000.
The decrease in net sales in 2001 of $42.7 million was primarily the result of the sale of our Electronic Manufacturing Services operation (EMS) in May of 2000 that reported sales in that year of $26.8 million and to a reduction of $20.7 million due to the non-consolidation of Qualcore in the last half of 2001.
Consolidated gross profit decreased by $474,000 to $2.1 million in 2001 from $2.6 million in 2000. The primary contributors to this decrease were the following:
| -- | Precision had a decrease in gross profit of $1.3 million in 2001 resulting primarily from a decrease in tooling sales. |
| -- | The non-consolidation of Qualcore in the last half of 2001, which incurred a negative gross profit of $5.2 million in 2000 compared to a negative gross profit of $4.5 million from consolidated Qualcore Operations during the first two quarters of 2001, contributed a positive variance of $688,000. |
| -- | Shelter Services had a decrease in gross profit of $309,000 primarily from a reduction in business volume. |
| -- | The sale of EMS resulted in a positive variance of $461,000 as it reported a negative gross profit of this amount in 2000. |
Operating Expenses of $23.6 million in 2001 increased $8.6 million from the $15.0 million of 2000. This increase is primarily due to the following:
| -- | Non-recurring restructuring costs of $6.9 million in Qualcore resulting directly from the closure of the Cd. Juarez plant, $3.2 million in corporate expenses, $2.6 million in Shelter Services and $286,000 in Precision. Shelter Services, Corporate and Precision's non-recurring restructure costs were primarily the result of expenses incurred in connection with personnel reduction and the write-off of unproductive assets. |
| -- | The sale of EMS which had $1.3 million in operating expenses in 2000. |
| -- | The non-consolidation of Qualcore, which incurred operating expenses of $1.9 million in 2000 compared to $612,000 in operating expenses from consolidated Qualcore operations during the first two quarters of 2001, resulted in a positive variance of $1.3 million. |
| -- | A net reduction of $2.7 million in Corporate overhead to $3.5 million in 2001 compared to $6.2 million in 2000, resulting primarily from a decrease in the number of corporate personnel and associated costs. |
| -- | A net increase of $629,000 in Shelter Services related to an increase resulting from a charge to the accounts receivable of Shelter Services of $650,000 for uncollectible receivables. |
Other Income in 2001 was $704,000 compared to $23.1 million in 2000, a decrease of $22.4 million. This decrease was primarily due to the following:
| -- | Gain on sale of subsidiaries of $22.5 million in 2000 which includes $20.5 million from sale of EMS and compares to $2.6 million in 2001, a reduction of $19.9 million. |
| -- | Equity in losses of joint venture of $1.5 million represents Elamex's share of the operating losses of Qualcore for the second half of 2001. |
| -- | Other income of $374,000 in 2001 was $1.1 million less than the $1.4 million of 2000. The decrease is primarily due to the sale of securities of $475,000 and to the recovery of state payroll taxes of $346,000 in 2000. |
The income tax benefit for the 2001 was $3.4 million compared to $3.2 million in 2000.
Minority interest in losses of subsidiaries increased from $3.5 million in 2000 to $6.4 million in 2001, due to the consolidated losses of Qualcore in both years.
Richard P. Spencer, president and CEO of Elamex, made the following comments regarding the fourth quarter results:
"Elamex's financial results for fourth quarter 2001 reflect the concluding steps of the implementation of our business plan to bring ongoing expenses in line with revenues, to streamline our business structure and to place our operating units in a position to generate positive cash flow. The expense reduction steps taken to date continue to show positive financial results.
"Fourth quarter 2001 consolidated operating cash flow (operating income/(loss) before depreciation, amortization and non-recurring restructuring charges) amounted to $482,000, compared to a negative operating cash flow of $2.7 million in the fourth quarter of 2000. Non-recurring items during the quarter amounted to $985,000, all related to severance and salary expenses associated with our continuing focus on personnel reductions and to the write-off of non-productive assets.
"Precision's revenues remained at forecasted levels for the fourth quarter of 2001 as new management has begun to bring a new focus to the business that portends well for enhanced profitability. Revenues in 2002 are projected to decrease as our customers continue to suffer the consequences of the recession in the U.S., however, through aggressive expense reduction and increased productivity efforts, our operating cash flow is projected to improve significantly in fiscal year 2002.
"In June 2001, the FASB issued Statement of Financial Accounting Standard (`SFAS') No. 142, `Goodwill and other Intangible Assets.' This statement is effective for all fiscal quarters of fiscal years beginning after Dec. 15, 2001. SFAS No. 142 requires, among other things, the discontinuance of goodwill amortization. SFAS No. 142 also requires Elamex to complete a transitional goodwill impairment test within six months of the date of adoption.
"We are in the process of valuing the $8.9 million balance of goodwill that we currently hold on our balance sheet resulting from the acquisition of Precision. Under these new accounting rules, any reduction in value due to impairment will be recorded on the income statement as the cumulative effect of change in accounting policy during this first quarter.
"At this time, we do not know the amount, if any, of the potential reduction in value, however, this process will be completed, and any necessary impairment adjustment would be taken, up to the full value of goodwill, in the first quarter of 2002.
"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. However, the plant continues to operate well below installed capacity and efforts continue to seek a buyer for this operation. Elamex continues to jointly manage the business with GE Mexico. As of Dec. 31, 2001, Elamex's investment in Qualcore represented approximately $2.8 million or approximately 4% of Elamex's equity of approximately $69.4 million.
"Our shelter business has largely completed its process of adjusting operating costs to ongoing revenues. It is now contributing a positive operating cash flow to the Company on an ongoing basis. While some business has been lost to China and India because of heavy subsidies offered to manufacturing businesses to relocate to those countries, we have been successful in retaining a strong operating base which is increasing its already existing manufacturing volume.
"We are encouraged with the possibility of new projects relocating from the U.S. to our owned facilities in Mexico. We continue the process of further defining our market strategy to place our Mexico manufacturing services in an optimum position to not only attract new customers, but also to better service our existing customer base.
"We have successfully completed the move of our corporate headquarters from Cd. Juarez to El Paso and four of our five corporate staff are now located here. This move also brings to near conclusion our aggressive cost-reduction strategy which has resulted in a reduction of ongoing corporate G&A expenses (net of restructure costs) from $1.1 million in the fourth quarter of 2000 to $573,000 in the same quarter of 2001 and from $6.3 million in fiscal 2000 to $3.5 million in fiscal 2001.
"In conclusion, we feel that we achieved our objective in 2001 of streamlining our operations in order to position our operating units to produce an ongoing flow of operating cash in order to increase value and enhance shareholder value in the Company. 2002 will be a year in which our expense reduction will be reflected in a full year of operations.
"We believe that Elamex is now in the position to aggressively pursue business opportunities which will utilize some of its cash resources. 2002 will be a year of further definition of our business strategy, leading to further enhancement of revenues, cash flow and earnings."
Elamex will conduct a group conference call on Tuesday, Feb. 19, at 11:00 a.m. (EST) to discuss fourth quarter 2001 results. Please contact Dolores Sierra for conference call information at 915/351-2382. 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, appliance 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 Statements of Operations
(In Thousands of U. S. Dollars, except share data)
(Unaudited)
13 Weeks ended 52 Weeks ended
--------------------- ---------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2000 2001 2000
--------------------- ---------------------
Net sales $ 28,573 $ 39,967 $ 131,984 $ 174,664
Cost of sales 27,050 40,223 129,878 172,084
--------- --------- --------- ---------
Gross profit (loss) 1,523 (256) 2,106 2,580
--------- --------- --------- ---------
Operating expenses:
General and
administrative 1,824 3,151 9,373 13,108
Selling 158 417 1,265 1,874
Restructuring charges 985 -- 12,916 --
--------- --------- --------- ---------
Total operating
expenses 2,967 3,568 23,554 14,982
--------- --------- --------- ---------
Operating loss (1,444) (3,824) (21,448) (12,402)
Other income:
Interest income 75 504 1,176 1,797
Interest expense (155) (363) (1,994) (2,556)
Other, net 65 61 374 1,392
Equity in losses on
unconsolidated joint
venture (709) -- (1,464) --
Gain on sale of
subsidiaries -- 1,049 2,612 22,494
--------- --------- --------- ---------
Total other
(expense) income (724) 1,251 704 23,127
--------- --------- --------- ---------
(Loss) income before
income taxes and
minority interest (2,168) (2,573) (20,744) 10,725
Income tax benefit (723) (1,150) (3,362) (3,203)
--------- --------- --------- ---------
(Loss) income before
minority interest (1,445) (1,423) (17,382) 13,928
Minority interest in
losses of
subsidiaries 68 1,257 6,352 3,453
--------- --------- --------- ---------
Net (loss) income (1,377) (166) (11,030) 17,381
Other comprehensive
loss, net of income
tax benefit -- -- (343) (37)
--------- --------- --------- ---------
Comprehensive (loss)
income $ (1,377) $ (166) $ (11,373) $ 17,344
========= ========= ========= =========
Basic and diluted
(loss) income per
common share $ (0.20) $ (0.02) $ (1.61) $ 2.53
Weighted average
shares outstanding 6,866,100 6,866,100 6,866,100 6,866,100
========= ========= ========= =========
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In Thousands of U. S. Dollars)
(Unaudited)
Dec. 31, Dec. 31,
2001 2000
-------- --------
Assets
Current assets $ 45,251 $ 76,775
Property, plant and equipment, net 38,582 55,108
Other assets, net 20,735 10,485
-------- --------
$104,568 $142,368
======== ========
Liabilities and Stockholders' Equity
Current liabilities $ 15,759 $ 34,667
Long-term debt and liabilities 19,410 26,455
-------- --------
Total liabilities 35,169 61,122
Minority interest -- 474
Stockholders' equity 69,399 80,772
-------- --------
$104,568 $142,368
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