FastenTech, Inc. Reports Record Third Quarter Results
MINNEAPOLIS--July 23, 2004--FastenTech, Inc., a leading manufacturer and marketer of highly engineered specialty components that support critical applications in a broad range of end-markets, today announced record revenues and operating income for the third quarter ended June 30, 2004. The Company reported record revenues of $77.0 million, 10.0% higher than the previous record set last quarter and record operating income of $11.6 million, 16.2% higher than last quarter.Revenues for the quarter ended June 30, 2004 were $77.0 million, an increase of 40.1% compared with revenues of $55.0 million recorded in the same period last year. Approximately $5.8 million of the increase in revenues relates to businesses that were acquired after or during the third quarter of the prior year. Excluding these revenues, revenues for the current quarter were $71.2 million or up 29.6%. The increase in revenues was provided by increased demand in all markets, especially in the military and heavy-duty truck markets.
Operating income, including the results of the acquired businesses from their date of acquisition, was $11.6 million for the quarter ended June 30, 2004 compared to $8.0 million in the prior-year quarter, an increase of 43.9%. The increase in operating income was due to the significant increase in sales volume and the inclusion of the operating results from acquisitions. These increases were partially offset by higher expenses relating to the transition to a public filing company and higher selling expenses relating to certain strategic actions.
Depreciation and amortization for the three months ended June 30, 2004 and 2003 was $3.1 million and $2.9 million, respectively.
Other income for the quarter ended June 30, 2004 was $0.1 million compared to $0.2 million for the same period in 2003.
Year-to-Date Results
Revenues for the nine months ended June 30, 2004 were a record $206.1 million, an increase of 35.8% compared with revenues of $151.8 million in the same period in 2003. Approximately $15.5 million of the revenue increase relates to businesses that were acquired after or during the first nine months of the prior year. Excluding these revenues, revenue for the nine months ended June 30, 2004 was $190.6 million or up 25.6%. This increase is primarily the result of increased demand in all markets except for automotive.
Operating income, including the results of the acquired businesses from their date of acquisition, was a record $28.5 million for the nine months ended June 30, 2004 compared to $22.5 million in the same period of the prior-year, an increase of 26.4%. The increase in operating income was primarily due to operating results from acquisitions and the increased sales volume, partially offset by additional operating expenses relating to the company's transition to a public filing company and higher selling expenses relating to certain strategic actions.
Depreciation and amortization for the nine months ended June 30, 2004 and 2003 was $8.8 million and $8.5 million, respectively.
Other income for the nine months ended June 30, 2004 was $0.3 million compared to $1.8 million for the same period in the prior year. The decrease in other income primarily relates to the unrealized non-cash gains of $1.4 million related to mark to market adjustments on interest rate swaps that were included in the nine months ended June 30, 2003. These swap agreements were terminated in conjunction with the completion of our $175.0 million senior subordinated notes offering in May 20, 200403.
Quarterly Conference Call
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.
FastenTech, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations - Unaudited
(Amounts in Thousands)
Three months ended Nine months ended
June 30 June 30
2004 2003 2004 2003
----------------- -----------------
Net sales $76,994 $54,963 $206,125 $151,800
Cost of sales 53,256 37,949 142,846 103,197
----------------- -----------------
Gross profit 23,738 17,014 63,279 48,603
Selling, general &
administrative expenses 12,176 8,976 34,797 26,074
----------------- -----------------
Operating income 11,562 8,038 28,482 22,529
Other income (expense):
Interest expense (5,876) (5,113) (17,080) (15,513)
Loss on early
extinguishment of debt - (2,615) - (2,615)
Other, net 60 194 310 1,767
----------------- -----------------
(5,816) (7,534) (16,770) (16,361)
----------------- -----------------
Income before provision for
income taxes, minority interest
and cumulative effect of a
change in accounting
principle 5,746 504 11,712 6,168
Income tax expense 2,299 180 4,685 2,445
----------------- -----------------
Income before minority
interest and cumulative
effect of a change in
accounting principle 3,447 324 7,027 3,723
Minority interest in
income of subsidiaries - - - 45
----------------- -----------------
Income before cumulative
effect of a change in
accounting principle 3,447 324 7,027 3,678
Cumulative effect of a
change of accounting
principle - - - (26,892)
----------------- -----------------
Net income (loss) $3,447 $ 324 $7,027 $(23,214)
================= =================
FastenTech, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in Thousands)
June 30 September 30
2004 2003
------------ ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 8,517 $ 10,359
Accounts receivable, net 45,787 38,033
Inventory 53,686 44,235
Other current assets 7,089 7,300
------------ ------------
Total current assets 115,079 99,927
Goodwill, net 65,192 58,880
Property, plant and equipment, net 75,972 70,638
Other assets 10,446 8,296
------------ ------------
Total assets $ 266,689 $ 237,741
============ ============
Liabilities and Stockholders' Equity
(Deficiency in Assets)
Current liabilities:
Accounts payable $ 25,393 $ 17,136
Other accrued liabilities 21,791 18,697
------------ ------------
Total current liabilities 47,184 35,833
Long-term debt, net of current portion 199,000 183,000
Other long-term liabilities 35,032 32,303
------------ ------------
Total liabilities 281,216 251,136
Minority interests - 1,439
Redeemable preferred stock 23,422 27,665
Stockholders' equity (deficiency in assets) (37,949) (42,499)
------------ ------------
Total liabilities and stockholders' equity
(deficiency in assets) $ 266,689 $ 237,741
============ ============
FastenTech, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows - Unaudited
(Amounts in Thousands)
Nine months ended
June 30
2004 2003
----------------------------
Cash flows from operating activities
Net income (loss) $ 7,027 $ (23,214)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 8,607 8,401
Amortization 214 138
Noncash interest expense 837 5,571
Minority interests in income of
subsidiaries - 45
Unrealized gain on interest rate
swaps - (1,418)
Cumulative effect of a change in
accounting principle - 26,892
Changes in other operating assets
and liabilities (1,787) (5,442)
----------------------------
Net cash provided by operating
activities 14,898 10,973
Cash flows from investing activities
Cash used for acquisitions, net of
cash acquired (18,342) (9,988)
Additions to property, plant and
equipment (7,478) (4,108)
----------------------------
Net cash used in investing activities (25,820) (14,096)
Cash flows from financing activities
Net borrowings (repayments) under
revolver 16,000 8,000
Net long-term borrowings
(repayments) - (8,658)
Debt issuance costs (872) -
Repurchase of subsidiary preferred
stock (6,133) (2,071)
----------------------------
Net cash provided by financing
activities 8,995 (2,729)
Effect of exchange rate fluctuations
on cash 85 (29)
----------------------------
Net decrease in cash and cash
equivalents (1,842) (5,881)
Cash and cash equivalents at
beginning of period 10,359 10,983
----------------------------
Cash and cash equivalents at end of
period $ 8,517 $ 5,102
The following table reconciles net income to EBITDA for the three and
nine months ended June 30, 2004:
Three months ended Nine months ended
June 30 June 30
EBITDA Reconciliation: 2004 2003 2004 2003
------------------- -----------------
Net income (loss) $3,447 $ 324 $7,027 $(23,214)
Add back:
Minority interest in income of
subsidiaries - - - 45
Income tax expense 2,299 180 4,685 2,445
Depreciation and amortization 3,135 2,884 8,821 8,539
Interest expense 5,876 5,113 17,080 15,513
Loss on early extinguishment
of debt - 2,615 - 2,615
Cumulative effect of a change in
accounting principle - - - 26,892
------------------ -----------------
EBITDA $14,757 $11,116 $37,613 $32,835
Memo: Other income (expense), net,
included above 60 194 310 1,767
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.