Edelbrock Corp. Reports Results for Fourth Quarter and Fiscal Year 2003
TORRANCE, Calif.--Sept. 3, 2003--Edelbrock Corporation today reported sales and earnings for its fiscal 2003 fourth quarter and year ended June 30, 2003.For the quarter ended June 30, 2003, revenues totaled $32,678,000 as compared to revenues of $39,318,000 in the same period of fiscal 2002. Net income for the fourth quarter of fiscal 2003 was $709,000, or $0.13 per basic and diluted share, compared to net income of $2,247,000, or $0.41 per basic and diluted share, for the fourth quarter of fiscal 2002.
For the year ended June 30, 2003, revenues totaled $115,225,000 as compared to revenues of $123,579,000 in fiscal 2002. Net income for fiscal 2003 was $2,970,000, or $0.54 per basic and diluted share, compared to net income of $5,360,000, or $0.98 per basic and diluted share, a year ago.
Edelbrock attributed its decrease in sales for both the fourth quarter and fiscal 2003 to a prolonged period of unseasonable inclement weather that affected many parts of the United States, consumer concerns related to the war in Iraq, and the sluggish national economy. Edelbrock also pointed to significant increases in workers' compensation and general insurance costs during the year and continued investment in its advertising programs as factors that contributed to the reduction in the Company's earnings for the quarter and the fiscal year.
Edelbrock reported that for the fourth quarter ended June 30, 2003, sales of Edelbrock Performer Series automotive carburetors decreased by 13.8% and sales of aluminum automotive intake manifolds decreased 25.2%. While revenues for the fourth quarter declined across a majority of Edelbrock product lines, revenues remained strong in such lines as camshaft kits (up 21.8%), remanufactured carburetors (up 7.7%), and water pumps (up 5.8%). In addition, Edelbrock reported an increase in third-party casting work at its aluminum foundry, sales of which improved 165.5% from the fourth quarter of 2002.
Edelbrock reported that selling, general and administrative (SG&A) expense, as a percentage of revenues, increased to 29.0% for the fourth quarter of fiscal 2003 from 25.9% in the year-ago period. Overall, SG&A declined 7.0%, or $717,000, to $9,485,000 for the fourth quarter of fiscal 2003. The year-to-year decrease in SG&A was primarily attributable to decreased commissions and other variable selling expenses associated with lower revenues. The quarterly increase in SG&A, as a percentage of revenues, was primarily attributable to moderate increases in advertising costs, general insurance costs, payroll, and other employee-related expenses spread over lower revenues.
Research and development (R&D) expenses for the fourth quarter of fiscal 2003 decreased 7.1%, or $90,000, over the year-ago period, totaling $1,185,000. As a percentage of revenues, R&D expenses increased to 3.6% from 3.2% in the same quarter of fiscal 2002.
Commenting on the Company's results, Edelbrock Chairman and Chief Executive Officer Vic Edelbrock said, "The performance products industry as a whole continued to be impacted by such uncontrollable environmental factors as adverse weather, uncertainties related to the national economy, and ongoing turmoil in the Middle East -- all of which have combined to make enthusiasts hesitant to perform the upgrades they otherwise would have during the spring and summer months of the year. Of these three factors, the weather had the biggest impact on our industry. Both the Midwest and the East Coast had experienced a miserable spring, weekends had been washouts, and tourism/business had consequently suffered.
"During times such as these," Mr. Edelbrock said, "one of our greatest advantages as a company is the unique perspective we have acquired from more than 65 years of continuous operation. I think it important to note that, over that more than half-century of time, we have witnessed -- and have successfully managed -- Edelbrock through far more difficult times than we are now experiencing.
"In short, we believe we know what it takes to maintain our position among the elite of the performance industry, and we're doing the things we expect will enable us to continue to grow sales and profitability as the conditions I mentioned earlier abate, as history indicates they will," Mr. Edelbrock continued. "For example, we're maintaining a strong investment in R&D and advertising so as to keep our lines fresh and of maximum desirability to our customers. This way, we will keep our name and product identity in the forefront of the consumer's mind when normal business conditions return. We're also ensuring that our manufacturing facilities remain up to date and capable of maintaining the unsurpassed quality that has become synonymous with the name Edelbrock among enthusiasts. We're also continuing to be highly aggressive in promoting our products to ensure that, when enthusiasts do purchase performance products, the name Edelbrock will be the one they look for on the shelves.
"Despite the current sales environment, it's critical to understand that there has been no drop-off in excitement for motorsports among consumers, which remains at an all-time high," Mr. Edelbrock concluded. "With that in mind I have no doubt that, by following our time-tested business plan, Edelbrock will continue to succeed as a leader in the performance industry in the years ahead," he said.
Founded in 1938, Torrance-based Edelbrock Corp. is recognized as one of the nation's premier designers, manufacturers, and distributors of performance replacement parts for the automotive and motorcycle aftermarkets. In addition to three production facilities and an automated distribution center in Torrance, the Company owns and operates a state-of-the-art aluminum foundry and its motorcycle carburetor division in San Jacinto, Calif., at which it manufactures many of its quality products.
EDELBROCK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended Fiscal Year ended
June 30, June 30,
2003 2002 2003 2002
Revenues $32,678,000 $39,318,000 $115,225,000 $123,579,000
Cost of sales 21,248,000 24,293,000 73,409,000 78,074,000
Gross profit 11,430,000 15,025,000 41,816,000 45,505,000
Operating expenses
Selling,
general and
administrative 9,485,000 10,202,000 33,648,000 33,151,000
Research and
development 1,185,000 1,275,000 3,827,000 3,852,000
Total operating
expenses 10,670,000 11,477,000 37,475,000 37,003,000
Operating income 760,000 3,548,000 4,341,000 8,502,000
Interest expense 10,000 45,000 48,000 96,000
Interest income 8,000 15,000 54,000 53,000
Income before
taxes on income 758,000 3,518,000 4,347,000 8,459,000
Taxes on income 49,000 1,271,000 1,377,000 3,099,000
Net income $709,000 $2,247,000 $2,970,000 $5,360,000
Basic net income
per share(a) $0.13 $0.41 $0.54 $0.98
Diluted net
income per
share(a) $0.13 $0.41 $0.54 $0.98
Basic weighted
average number
of shares
outstanding(a) 5,452,000 5,451,000 5,452,000 5,492,000
Effect of
dilutive stock
options and
warrants(a) 1,000 46,000 6,000 1,000
Diluted weighted
average number
of shares
outstanding(a) 5,453,000 5,497,000 5,458,000 5,493,000
(a) Earnings per share and share amounts for the three-month and
twelve-month periods ended June 30, 2002, have been retroactively
adjusted to account for the Company's 10% stock dividend distributed
in June 2002.
EDELBROCK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, June 30,
2003 2002
ASSETS
Current assets
Cash and cash equivalents $8,707,000 $7,682,000
Accounts receivable, net 26,858,000 32,192,000
Inventories 26,398,000 23,359,000
Prepaid expenses and other 3,835,000 2,869,000
Total current assets 65,798,000 66,102,000
Property, plant and equipment, net 37,965,000 38,029,000
Real estate properties, net 266,000 303,000
Goodwill and license agreement 1,930,000 1,930,000
Other 1,441,000 1,498,000
Total assets $107,400,000 $107,862,000
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Accounts payable $12,038,000 $14,519,000
Accrued expenses 4,692,000 5,254,000
Current portion of long-term
debt 48,000 67,000
Total current liabilities 16,778,000 19,840,000
Long-term debt 494,000 527,000
Deferred income taxes 3,090,000 3,318,000
Shareholders' equity 87,038,000 84,177,000
Total liabilities and shareholders'
equity $107,400,000 $107,862,000
Certain prior-period amounts have been reclassified for comparison with the 2003 presentation.