FastenTech, Inc. Reports Record Fourth Quarter Results
MINNEAPOLIS--Nov. 19, 2004--FastenTech, Inc. today reported improved net sales and operating income for its fiscal fourth quarter and fiscal year ended September 30, 2004. The Company said that it is reporting the results from its Application-specific segment, which the Company is in the process of divesting, as discontinued operations. Therefore, the results of this segment are not included in the Company's consolidated net sales and operating income. Included in the Company's consolidated results for 2004 are the results of the following acquisitions: Speigelberg Manufacturing, Inc. (October 2003), Gear & Broach, Inc. (February 2004), and MECO, Inc. (August 2004) from the date of their acquisition.Net sales from continuing operations for the quarter ended September 30, 2004 were $66.3 million, an increase of $23.4 million or 54.7% higher than the $42.9 million recorded in the same period last year. Approximately $9.3 million of the net sales increase relates to businesses that were acquired during or after the fourth quarter of the prior year. Excluding these net sales, net sales for the current quarter were $57.0 million or up 32.9%. This increase in net sales was due to increased demand in all market sectors, especially military and heavy-duty truck.
Operating income from continuing operations was $7.9 million for the quarter compared to $7.0 million in the prior-year quarter, an increase of 12.4%. The increase in operating income was due to the significant increase in sales volume and the results of the acquired businesses. These increases were partially offset by higher steel costs, higher administrative expenses relating to the transition to a public filing company, and higher selling expenses relating to certain strategic actions. In addition, during the quarter, the Company took a non-cash charge of $1.0 million compared to a $0.5 million charge in the same period last year for the impairment of long-lived assets at its Specialized components segment.
The Company reported depreciation and amortization for the three months ended September 30, 2004 and 2003 of $2.2 million and $1.5 million, respectively.
Year End Results
Net sales from continuing operations for the fiscal year ended September 30, 2004 were $225.3 million, an increase of $81.0 million or 56.2% higher than the $144.3 million reported for the same period in 2003. Approximately $24.8 million of the net sales increase relates to incremental sales from the businesses that were acquired during or after the prior year. Excluding these net sales, fiscal year 2004 net sales were $200.6 million or up 39.0% over the prior fiscal year. This increase is primarily the result of increased demand in all market sectors, with a significant portion of the increased demand coming from military and heavy-duty truck customers.
Operating income from continuing operations was $29.0 million for the fiscal year ended September 30, 2004 compared to $20.3 million recorded in the prior year, an increase of 43.1%. The increase in operating income was primarily due to the operating results of the acquired businesses and the increased sales volume, partially offset by higher steel costs, additional operating expenses relating to the company's transition to a public filing company, and higher selling expenses relating to certain strategic actions. In addition, during fiscal year 2004, the Company took a non-cash charge of $1.0 million compared to $0.5 million in the prior year for the impairment of long-lived assets at its Specialized components segment.
The Company reported depreciation and amortization for the fiscal years ended September 30, 2004 and 2003 of $8.1 million and $7.2 million, respectively.
Other income for the fiscal year ended September 30, 2004 was $0.3 million compared to $1.7 million reported in the prior year. The decrease in other income primarily relates to the unrealized non-cash gains of $1.4 million from mark to market adjustments on interest rate swaps that were included in the results of operations for the fiscal year ended September 30, 2003. These swap agreements were terminated in conjunction with the completion of the Company's $175.0 million senior subordinated notes offering in May 20, 200503.
Discontinued Operations
Based upon the Company's ongoing review of its business portfolio, management determined that the potential long-term returns from its Application-specific segment were becoming less attractive and no longer core to its long-term growth strategy. As a result, in September 2004, the Company sold substantially all of the assets of FabriSteel Products, Inc. and Profile Steel and Wire, Inc. and has committed to a plan to divest of Progressive Stamping Co., the last remaining business unit in this segment.
Quarterly Conference Call
FastenTech will host a conference call on Friday, November 19, 2004 at 10:30 a.m. EDT to discuss its fourth quarter results. You can access the conference call via a toll-free number. For listen only access, please call the toll-free number (866) 244-4526 (the ID for the call is 590933) by 10:30 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 23, 2004. The replay number is (888) 266-2081. The passcode for the replay will be 590933.
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 military, power generation, construction, industrial, medium-and heavy-duty truck, light truck and automotive markets.
FastenTech, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations - Unaudited
(Amounts in Thousands)
Three months ended Year ended
September 30 September 30
--------------------- ---------------------
2004 2003 2004 2003
--------------------- ---------------------
Net Sales $ 66,348 $ 42,893 $ 225,349 $ 144,307
Cost of sales 47,089 28,412 157,803 97,311
--------------------- ---------------------
Gross profit 19,259 14,481 67,546 46,996
Selling, general and
administrative expenses 10,320 6,943 37,534 26,241
Impairment of long-lived
assets 1,018 490 1,018 490
--------------------- ---------------------
Operating income 7,921 7,048 28,994 20,265
Other income (expense):
Interest expense (6,238) (4,915) (23,318) (21,000)
Loss on early
extinguishment of debt - - - (2,615)
Other, net 32 437 344 1,722
--------------------- ---------------------
(6,206) (4,478) (22,974) (21,893)
--------------------- ---------------------
Income (loss) from continuing
operations before income tax
expense and discontinued
operations 1,715 2,570 6,020 (1,628)
Income tax expense
(benefit) (1,541) 803 511 119
Minority interest in
income of subsidiaries - - - 192
--------------------- ---------------------
Income (loss) from
continuing operations 3,256 1,767 5,509 (1,939)
Income from discontinued
operations (822) 1,262 3,952 7,345
Cumulative effect of a
change in accounting
principle, net - - - (26,892)
--------------------- ---------------------
Net income (loss) $ 2,434 $ 3,029 $ 9,461 $ (21,486)
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FastenTech, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in Thousands)
September 30
2004 2003
---------------------
Assets
Current assets:
Cash and cash equivalents $ 28,819 $ 10,128
Accounts receivable, net 42,893 29,150
Inventory 52,433 37,925
Other current assets 3,733 7,495
Current assets of discontinued
operations 5,717 15,229
---------------------
Total current assets 133,595 99,927
Goodwill and intangible assets, net 41,455 27,859
Property, plant and equipment, net 61,105 50,986
Other assets 9,001 9,074
Noncurrent assets of discontinued operations 8,927 49,474
---------------------
Total assets $ 254,083 $ 237,320
=====================
Liabilities and Stockholders' Equity
(Deficiency in Assets)
Current liabilities:
Accounts payable $ 23,583 $ 12,070
Other accrued liabilities 12,070 17,479
Current liabilities of discontinued operations 3,796 6,284
---------------------
Total current liabilities 54,540 35,833
Long-term debt 175,000 183,000
Other long-term liabilities 37,703 31,882
---------------------
Total liabilities 267,243 250,715
Minority interest - 1,439
Redeemable preferred stock 23,422 27,665
Stockholders' equity (deficiency in assets) (36,582) (42,499)
---------------------
Total liabilities and stockholders' equity
(deficiency in assets) $ 254,083 $ 237,320
=====================
FastenTech, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows - Unaudited
(Amounts in Thousands)
Year ended
September 30
2004 2003
---------------------
Cash flows from operating activities
Net income (loss) from continuing operations $ 5,509 $ (1,939)
Adjustments to reconcile net income (loss) from
continuing operations to net cash provided by
(used in) operating activities:
Loss on early extinguishment of debt - 2,615
Depreciation 7,733 7,198
Amortization 383 -
Deferred income taxes 2,014 4,281
Noncash interest expense 1,179 4,307
Minority interest in income of subsidiaries - 192
Unrealized gain on interest rate swaps - (1,418)
Loss on write-off of property, plant and
equipment 1,018 490
Change in operating assets and liabilities (2,689) (5,761)
---------------------
Net cash provided by operating activities from
continuing operations 15,147 9,965
Cash flows from investing activities
Cash provided by divestitures 48,440 -
Cash used for acquisitions, net of cash
acquired (26,936) (9,695)
Additions to property, plant and equipment (9,712) (2,500)
---------------------
Net cash provided by (used in) investing
activities from continuing operations 11,792 (12,195)
Cash flows from financing activities
Proceeds from long-term borrowings, net of
issuance costs - 167,000
(Payments) borrowings on revolving credit
facility (8,000) 8,000
Debt issuance cost (1,121) -
Repayments of long-term borrowings - (176,035)
Repurchase of redeemable and subsidiary
preferred stock (6,141) (2,162)
Other 8 (228)
---------------------
Net cash used in financing activities from
continuing operations (15,254) (3,335)
Effect of exchange rate fluctuations on cash 139 107
Net cash provided by discontinued operations 6,867 5,660
---------------------
Net increase in cash and cash equivalents 18,691 202
Cash and cash equivalents at beginning of
period 10,128 9,926
---------------------
Cash and cash equivalents at end of period $ 28,819 $ 10,128
---------------------
The following table reconciles net income to EBITDA for the three and
twelve months ended September 30, 2004:
Three Months Three Months
Ended Ended
September 30 September 30
--------------------- ---------------------
2004 2003 2004 2003
--------------------- ---------------------
EBITDA Reconciliation:
Income (loss) from
continuing operations $ 3,256 $ 1,767 $ 5,509 $ (1,939)
Add back:
Minority interest in income
of subsidiaries - - - 192
Income tax expense
(benefit) (1,541) 803 511 119
Depreciation and
amortization 2,150 1,514 8,116 7,198
Interest expense 6,238 4,915 23,318 21,000
Loss on early
extinguishment of debt - - - 2,615
Impairment of long-lived
assets 1,018 490 1,018 490
--------------------- ---------------------
EBITDA $ 11,121 $ 9,489 $ 38,472 $ 29,675
===================== =====================
Memo: Other income, net,
included above 32 437 344 1,722
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.