FastenTech, Inc. Reports Fourth Quarter and Year-to-Date Results
MINNEAPOLIS--Nov. 21, 2003--FastenTech, Inc., a leading manufacturer and marketer of highly engineered specialty components providing critical applications to a broad range of end-markets, today announced its results for the fourth quarter and fiscal year ended September 30, 2003.Revenues for the quarter ended September 30, 2003 were $58.1 million, an increase of 12.8% compared with revenues of $51.5 million in the same period in 2002. The increase in revenues is primarily the result of revenues from the February 2003 acquisition of an engineered components business.
Operating income was $8.9 million for the quarter ended September 30, 2003 compared to $7.7 million in the prior-year quarter, an increase of 15.1%. The increase in operating income was primarily due to the result of operating results from the acquisition offset by a non-cash write-off of certain equipment of $0.5 million included in selling, general and administrative expenses in the quarter ended September 30, 2003 and a gain of $.5 million related to the reversal of restructuring charges included in the results for the quarter ended September 30, 2002. Results of operations from the acquired business are included in the 2003 quarterly results, but are not included in the 2002 results.
Depreciation and amortization for the three months ended September 30, 2003 was $2.5 million compared to $3.2 million for the same period in the prior year. The decrease relates to the elimination of goodwill following the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, effective October 1, 2002.
Other income for the quarter ended September 30, 2003 was $0.0 million compared to $0.4 million for the same period in 2002. The decrease in other income primarily relates to the unrealized non-cash gains of $0.6 million related to mark to market adjustments on interest rate swaps that were included in the three months ended September 30, 2002 offset by other expense items. These swap agreements were terminated in conjunction with the successful completion of our $175.0 million senior subordinated notes offering in May 2003.
Year-to-Date Results
Revenues for the year ended September 30, 2003 increased 0.5% to $209.9 million from $208.8 million in the same period in 2002. The increase in revenues was primarily the result of revenues from the February 2003 acquisition of an engineered components business offset by softness in the OEM power generation market.
Operating income for the year ended September 30, 2003 was $31.4 million compared to $32.3 million in the same period in 2002. The decrease in operating income was primarily a result of a non-cash write-off of certain equipment of $0.5 million included in the year ended September 30, 2003 and a gain of $0.5 million related to the reversal of restructuring reserves included in the results for the year ended September 30, 2002. Results from the February 2003 acquisition of an engineered components business are included in the results for the year ended September 30, 2003, but are not included in the 2002 results.
Depreciation and amortization for the year ended September 30, 2003 was $11.1 million compared to $14.3 million for the same period in the prior year. The decrease relates to the elimination of goodwill following the adoption of SFAS No. 142, effective October 1, 2002.
Other income for the year ended September 30, 2003 was $1.7 million compared to $2.6 million for the fiscal year ended September 30, 2002. Other income for fiscal 2003 relates primarily to unrealized non-cash gains related to mark to market adjustments on interest rate swaps. Other income for fiscal 2002 relates primarily to unrealized non-cash gains of $1.4 million related to mark to market adjustments on interest rate swaps and $1.2 million of non-cash gains on the curtailment of certain pension plans in 2002. The interest rate swap agreements were terminated in conjunction with our $175.0 million senior subordinated notes offering in May 2003.
Effective October 1, 2002, the company adopted the new rules for accounting for goodwill. As a result, the company wrote off $26.9 million of goodwill, net of tax, which was determined to be impaired under the new rules. This non-cash charge has been retroactively recorded in the first quarter of fiscal 2003.
During fiscal 2003, the Company recorded a loss on early extinguishment of debt of $2.6 million related to the early retirement of debt resulting from our $175.0 million senior subordinated notes offering in May 20, 200403.
Quarterly Conference Call
FastenTech will host a conference call on November 21, 2003 at 11:30 a.m. EDT to discuss fourth quarter and fiscal year 2003 results. You can access the conference call via a toll-free number. For listen only access, please call the toll-free number 1-888-792-1079 (the ID for the call is 325592) by 11:30 a.m. EDT. For those unable to participate in the conference call, a replay will be available until 12:00 midnight EDT on Tuesday, November 25, 2003. The replay number is 1-888-266-2081. The passcode for the replay will be 325592.
FastenTech, Inc., headquartered in Minneapolis, Minnesota, is a leading manufacturer and marketer of highly engineered specialty components that provide critical applications to a broad range of end-markets, including the automotive and light truck, construction, industrial, military, power generation, and medium-and heavy-duty truck markets.
Forward Looking Statements
The matters discussed in this press release may constitute forward-looking statements that are subject to many uncertainties. Forward-looking statements are identified by such forward-looking terms as "may," "will," "could," "should," "seeks," "intends," "estimates," "guidance," "expects," "believes," "anticipates" or "plans" or the negative thereof or other comparable terms, or by discussions of strategy, plans or intentions. In particular, any statements, express or implied, concerning future operating results or ability to generate revenues, income or cash flow to service debt are forward looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. These include risks associated with: our actual versus expected internal growth; our high degree of leverage; our ability to comply with certain financial and other covenants in our loan agreements and indentures; the success or failure of our growth strategies, including international expansion; our ability to attract and retain customers; our ability to accurately predict our production capacity requirements; our ability to attract and retain key personnel; our ability, and the ability of our customers, to maintain good labor relations with our and their respective employees and the union representing them; our ability to develop and market new products and to innovate existing product lines; our ability to protect our intellectual property; the cost and availability of raw materials, especially steel; trends and conditions in our business, including trends in the markets that we serve; our ability to identify and integrate acquisitions; our future capital needs; our ability to continue to control costs and maintain quality; our ability to comply with applicable governmental laws and regulations and the cost of such compliance; and competitive conditions in the markets in which we operate. In light of these and other uncertainties, the inclusion of forward-looking statements in this press release should not be regarded as a representation by FastenTech that FastenTech's plans and objectives will be achieved. The Company does not assume any obligation to update any forward-looking statements or other information contained in this press release.
FastenTech, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations - Unaudited
(Amounts in Thousands)
Three months ended Year ended
September 30, September 30,
2003 2002 2003 2002
------- ------- -------- --------
Net sales $58,092 $51,497 $209,892 $208,798
Cost of sales 39,011 33,871 142,207 140,237
------- ------- -------- --------
Gross profit 19,081 17,626 67,685 68,561
Selling, general & administrative
expenses 10,203 10,365 36,277 36,749
Restructuring and non-recurring
charges - (452) - (452)
------- ------- -------- --------
Operating income 8,878 7,713 31,408 32,264
Other income (expense):
Interest expense (5,487) (4,915) (21,000) (19,266)
Loss on early extinguishment of
debt - - (2,615) -
Other, net (30) 442 1,738 2,619
------- ------- -------- --------
Income before provision for income
taxes, minority interest and
cumulative effect of a change
in accounting principle 3,361 3,240 9,531 15,617
Income tax expense 1,464 1,376 3,933 6,663
------- ------- -------- --------
Income before minority interest
and cumulative effect of a
change in accounting principle 1,897 1,864 5,598 8,954
Minority interest in income of
subsidiaries 147 - 192 1,185
------- ------- -------- --------
Income before cumulative effect of
a change in accounting principle 1,750 1,864 5,406 7,769
Cumulative effect of a change in
accounting principle, net of tax - - (26,892) -
Net income (loss) $ 1,750 $ 1,864 $(21,486)$ 7,769
======= ======= ======== ========
FastenTech, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in Thousands)
September September
30 30
2003 2002
-------- --------
Assets
Current assets:
Cash and cash equivalents $ 10,359 $ 10,983
Accounts receivable, net 38,033 32,285
Inventory 44,235 35,073
Other current assets 7,300 3,245
-------- --------
Total current assets 99,927 81,586
Goodwill, net 58,880 94,006
Property, plant and equipment, net 70,638 70,842
Other assets 8,296 5,106
-------- --------
Total assets $237,741 $251,540
======== ========
Liabilities and Stockholders' Equity (Deficiency in
Assets)
Current liabilities:
Accounts payable $ 17,136 $ 15,829
Other accrued liabilities 18,697 13,340
Current portion of long-term debt - 9,699
-------- --------
Total current liabilities 35,833 38,868
Long-term debt, net of current portion 183,000 165,017
Other long-term liabilities 32,303 33,612
-------- --------
Total liabilities 251,136 237,497
Minority interests 1,439 1,492
Redeemable preferred stock 27,665 31,994
Total stockholders' equity (deficiency in assets) (42,499) (19,443)
-------- --------
Total liabilities and stockholders' equity
(deficiency in assets) $237,741 $251,540
======== ========
FastenTech, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows - Unaudited
(Amounts in Thousands)
Year ended Three months ended
September 30, September 30
2003 2002 2003 2002
--------- -------- ------- --------
Cash flows from operating
activities
Net income (loss) $ (21,486)$ 7,769 $ 1,750 $ 1,864
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Loss on early extinguishment of
debt 2,615 - 1,046 -
Depreciation 10,877 11,530 2,476 2,546
Amortization 180 2,724 42 699
Deferred income taxes 4,281 3,532 4,281 3,532
Noncash interest expense 4,307 5,687 283 1,550
Minority interest in income of
subsidiaries 192 1,185 147 -
Unrealized gain on interest
rate swaps (1,418) (1,444) - (590)
Cumulative effect of a change
in accounting principle 26,892 - - -
Loss on write-off of property
plan and equipment 490 - 490 -
Changes in operating assets and
liabilities: (6,137) 120 (695) (649)
--------- -------- ------- --------
Net cash provided by operating
activities 20,793 31,103 9,820 8,952
Cash flows from investing
activities
Cash used for acquisitions, net
of cash acquired (12,645) (6,216) (2,657) (141)
Additions to property, plant and
equipment (5,544) (4,623) (1,436) (1,565)
--------- -------- ------- --------
Net cash used in investing
activities (18,189) (10,839) (4,093) (1,706)
Cash flows from financing
activities
Proceeds from long-term
borrowings, net of issuance
costs 175,090 28,562 (287) 28,562
Net long-term borrowings
(Repayments) (176,035) (46,506) - (36,056)
Repurchase of redeemable
preferred stock (2,162) (91) -
Other (228) (228) -
------------------ ------- --------
Net cash used in financing
activities (3,335) (17,944) (606) (7,494)
Effect of exchange rate
fluctuations on cash 107 22 136 22
--------- -------- ------- --------
Net (decrease) increase in cash
and cash equivalents (624) 2,342 5,257 (226)
Cash and cash equivalents at
beginning of period 10,983 8,641 5,102 11,209
--------- -------- ------- --------
Cash and cash equivalents at end
of period $ 10,359 $ 10,983 $10,359 $ 10,983
========= ======== ======= ========
The following table reconciles net income to EBITDA for the three months and year ended September 30, 2003:
Three months ended Year ended
September 30, September 30,
EBITDA Reconciliation : 2003 2002 2003 2002
------- ------- -------- -------
Net income (loss) $ 1,750 $ 1,864 $(21,486)$ 7,769
Add back:
Minority interest in income of
subsidiaries 147 - 192 1,185
Income tax expense 1,464 1,376 3,933 6,663
Depreciation and amortization 2,518 3,245 11,057 14,254
Interest expense 5,487 4,915 21,000 19,266
Cumulative effect of a change in
accounting principle - - 26,892 -
Loss on early extinguishment of
debt - - 2,615 -
Impairment losses on long-lived
assets included in SG&A 490 - 490 -
------- ------- -------- -------
EBITDA $11,856 $11,400 $ 44,693 $49,137
Memo: Other income (expense),
net, included in net income
(loss) above (30) 442 1,738 2,619
Memo: Non-cash restructuring
reversals included in net income
(loss) above - 452 - 452
EBITDA is a non-GAAP financial measure that the Company currently calculates according to the schedule above. EBITDA is presented in this manner because we believe it is a widely accepted financial indicator of a company's ability to service and/or incur indebtedness. The Company also believes that EBITDA provides useful information about the productivity and cash generation potential of its ongoing business. EBITDA is also used by management to evaluate financial performance and determine resource allocation for each of its operating units and for the Company as a whole. EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated from operations or other financial statement data presented in the consolidated financial statements. Because EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, EBITDA as presented may not be comparable to other similarly titled measures of other companies.