Aftermarket Technology Corp. Reports Second Quarter 2005 Results
- Net sales increased 7.1% quarter-over-quarter
- Record sales in Logistics
- Income from continuing operations increased 21.0% quarter-over-quarter
- Earnings per share at $0.35 exceeded guidance
DOWNERS GROVE, Ill., July 27 -- Aftermarket Technology Corp. , today reported financial results for the second quarter of 2005.
For the quarter ended June 30, 2005, net sales increased by $7.0 million, or 7.1%, to $105.1 million from $98.1 million for the quarter ended June 30, 2004. Income from continuing operations increased by $1.3 million, or 21.0%, to $7.5 million compared to $6.2 million for the second quarter 2004. Income from continuing operations per diluted share increased to $0.35 for the second quarter of 2005 from $0.30 for the second quarter 2004.
Management Comments
In commenting on the Company's results, Don Johnson, President and CEO said, "During the second quarter, we delivered significantly increased net sales, income from continuing operations, and earnings per share. Of particular note, earnings per diluted share of $0.35 exceeded our guidance of $0.28-$0.32. We believe our solid second quarter performance puts us on track for the year while we continue to invest in our future to grow and diversify our product line, customer base and markets."
"Within our Drivetrain Segment, second quarter sales of $65.3 million and segment profit of $9.4 million were slightly higher than our guidance, although down 5% and 13%, respectively, on a quarter-over-quarter basis. Strength in the segment is attributed to increases in the Ford transmission volume due to market incentives offered during the second quarter and our ongoing cost reduction program. Offsetting factors that we anticipated were the scheduled, annual price adjustments that were previously agreed to in the 2003 contract extensions, as well as some continued weakness in Jaguar volume."
"The Drivetrain Segment results were also impacted by continued investment in our business development work during the quarter, which is aimed at expanding existing long-term customer relationships and establishing new ones. Our investments resulted in two new, exciting opportunities that will diversify both our customer base and product offerings."
"First, as a part of our previously announced agreement with Fallbrook Technologies, we expect to produce new and leading CVT technology for transmissions for a number of customers' vehicles and markets. Our investments are related to exploring opportunities in bicycle, light electric vehicle, mower/utility vehicle, and medium-duty tractor, and other applications."
"Secondly, we won new business to supply remanufactured transmissions to a leading transmission OEM for medium- and heavy-duty trucks. We expect to launch this new line of products in the fourth quarter with expected annual revenues of approximately $10 million."
"Our Logistics Segment delivered a record quarter of net sales at $33.8 million, or a 37% improvement, compared to the second quarter of 2004, which was in line with our guidance. Segment profit of $3.3 million was also in line with our guidance, but 11% lower than the prior year's second quarter. The lower segment profit was anticipated due to start-up expenses associated with the very successful June opening of our Fort Worth-based returns, test and repair facility for the new contracts and the growth associated with Cingular, Nokia and T-Mobile."
"Strength in the quarter came from the implementation of new business signed in late 2004 and early 2005 as well as growth in our base Logistics business in the wireless and electronics industry. We continue to gain momentum with new business from both existing and new customers, which is driven largely by the quality and value-added services our Logistics organization provides to customers."
"Our Independent Aftermarket business also made significant strides in the quarter. Sales increased 22% in the second quarter to $6.0 million, up from $4.9 million in the same period last year. The restructuring efforts during the past twelve months have enabled us to narrow our operating loss by 94% to $0.1 million for the second quarter of this year, compared to a loss of $1.7 million in the comparable quarter last year."
Mr. Johnson concluded, "As we look ahead to the third quarter and the balance of the year, we expect continued strength in our financial performance as we realize the benefits from the new business implemented during the first half of the year and as we continue toward our goal of $21 million in cost reductions for the year. Our third quarter 2005 earnings per share from continuing operations is expected to be in the range of $0.35-$0.39 driven by the anticipated return to planned transmission volumes with Ford, higher than previously expected volumes with Honda, full quarter effect of the significant revenue improvement associated with the new returns, test and repair center for Cingular, Nokia and T-Mobile, continued growth in the base Logistics business, and sustained improvement in the Independent Aftermarket."
"We remain committed to achieving our full year guidance of $1.38-$1.42 earnings per diluted share from continuing operations as we continue to invest in business and product development to grow and diversify ATC's revenues, customers, products, and markets."
ATC is headquartered in Downers Grove, Illinois. The Company provides outsourced engineered solutions and supply chain logistics services to the light vehicle (cars and light trucks) aftermarket and consumer electronics industries.
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
For the three months For the six months
ended June 30, ended June 30,
2005 2004 2005 2004
(Unaudited) (Unaudited)
Net sales:
Products $71,327 $73,512 $134,091 $138,966
Services 33,793 24,597 64,990 44,168
Total net sales 105,120 98,109 199,081 183,134
Cost of sales:
Products 53,601 54,584 101,737 105,655
Services 25,431 16,742 48,649 30,003
Total cost of sales 79,032 71,326 150,386 135,658
Gross profit 26,088 26,783 48,695 47,476
Selling, general and
administrative expense 13,101 13,281 25,816 25,787
Amortization of intangible assets 32 32 63 63
Exit, disposal, certain severance
and other charges 348 2,685 459 3,476
Income from operations 12,607 10,785 22,357 18,150
Interest income 408 634 1,210 1,212
Other income, net 624 3 600 7
Equity in income (losses) of investee 20 (45) - 51
Interest expense (1,920) (1,831) (3,871) (3,612)
Income from continuing operations
before income taxes 11,739 9,546 20,296 15,808
Income tax expense 4,285 3,341 7,408 5,796
Income from continuing operations 7,454 6,205 12,888 10,012
Gain (loss) from discontinued
operations, net of income taxes - 226 (84) 332
Net income $7,454 $6,431 $12,804 $10,344
Per common share - basic:
Income from continuing operations $0.35 $0.30 $0.61 $0.47
Net income $0.35 $0.31 $0.60 $0.49
Gain (loss) from discontinued
operations $- $0.01 $- $0.02
Weighted average number of common
shares outstanding 21,255 20,743 21,213 21,297
Per common share - diluted:
Income from continuing operations $0.35 $0.30 $0.60 $0.46
Net income $0.35 $0.31 $0.60 $0.48
Gain (loss) from discontinued
operations $- $0.01 $- $0.02
Weighted average number of common
and common equivalent shares
outstanding 21,436 21,027 21,414 21,619