Sequa Reports First Quarter Results at Annual Stockholders' Meeting
NEW YORK--May 4, 2006--Sequa Corporation recorded increased sales and a sustained high level of after-tax income from continuing operations for the first quarter, company chief executive, Martin Weinstein, announced at the annual stockholders' meeting here today.Sales for the quarter ended March 31, 2006 rose ten percent to $524.1 million from $475.0 million in the same period a year ago. Operating income of $30.3 million was virtually unchanged from last year's first quarter operating income of $30.4 million.
After-tax income from continuing operations of $10.6 million was on a par with the prior year. Earnings per basic share amounted to 95 cents versus 96 cents a year ago.
Net income for the 2006 quarter rose to $15.2 million or $1.38 per share, after including income from discontinued operations of $4.6 million or 43 cents per share - the result of a gain on the disposition of two leveraged leases. Discontinued operations had no effect on net income for the first quarter of 2005.
In remarks to stockholders, Weinstein said, "Progress continues across many of Sequa's operations," and noted that the company's first quarter results reflect advances at several of the company's principal businesses - Chromalloy Gas Turbine, Precoat Metals and MEGTEC Systems. "Advances at these units," he said, "were offset mainly by one-time charges at ARC Automotive attributable to the transfer of production to low cost centers in China and Mexico."
Weinstein told stockholders that Sequa continues to focus on strengthening its financial condition and that the company has important opportunities "to grow our businesses from within through investments in new technologies and additions to capacity . . ." and to accomplish niche-filling acquisitions, which he described as "targeted moves to add a new product or service; to extend our market reach; and to strengthen our ties to customers."
Summary of Segment Results
Aerospace
Chromalloy Gas Turbine posted a 20 percent increase in sales and a 31 percent increase in operating income for the first quarter. The advances were driven chiefly by the increasing benefit of multi-year agreements with a number of airline customers to provide engine maintenance, component repair and replacement parts for specific engines and auxiliary power units in each airline's fleet.
Automotive
Sales of the automotive segment were unchanged from last year's first quarter, with higher sales at Casco Products tempered by a decline at ARC Automotive. Segment profits were lower, as an increase at Casco Products was more than offset by a sharp decline at ARC Automotive. The lower profits at ARC Automotive were due chiefly to $3.5 million of start-up costs at new plants in Mexico and China and $1.3 million of redundancy costs in the US associated with the transfer of production to these lower cost locations.
Metal Coating
Precoat Metals posted a six percent increase in sales and a 16 percent increase in operating income. This unit benefited from higher demand for coated metal from the building products market, which more than offset the unfavorable effect of higher energy costs.
Specialty Chemicals
Warwick International recorded a ten percent sales decline in the first quarter due to the translation of local currency results into US dollars - which lowered reported sales by $4.0 million - and a softening of demand for the bleach additive, TAED. Profits for this unit declined $1.7 million, due to the combined effect of lower TAED sales and higher energy costs. Results were further affected by unfavorable exchange rate movements.
Industrial Machinery
With increased shipments of graphic arts equipment to US customers and higher sales of emission control equipment in Asia, MEGTEC Systems posted a 17 percent advance in sales for the quarter. The gain was tempered by the translation of local currency sales into US dollars, which lowered sales by $2.6 million. Profits also moved higher, though the rate of advance was slowed by an unfavorable product mix and lower margins on equipment sales in Europe.
Other Products
The businesses that make up the other products segment include After Six, a supplier of men's formalwear, and Centor, a real estate holding company. After Six experienced strong demand in the first quarter, and posted improved results for the period.
Note: This press release includes forward-looking statements that are subject to risks and uncertainties.
A number of factors, including political, currency, regulatory and competitive and technological developments, could result in material differences between actual results and those outlined in any forward-looking statements. For additional information, see the comments included in Sequa's filings with the Securities and Exchange Commission.
Sequa Corporation and Subsidiaries
Consolidated Statement of Income
Report for the Three Months Ended March 31,
(Amounts in thousands, except per share)
(Unaudited)
Three Months
---------------------
2006 2005
--------- ----------
Sales $ 524,052 $ 475,022
Costs and expenses 493,791 444,609
--------- ----------
Operating income 30,261 30,413
Other income (expense)
Interest expense (20,028) (18,104)
Interest income 2,517 1,318
Other, net 3,449 1,797
--------- ----------
Income from continuing operations
before
income taxes 16,199 15,424
Income tax provision (5,600) (4,800)
--------- ----------
Income from continuing operations 10,599 10,624
Income from discontinued operations,
net
of income taxes 4,649 -
--------- ----------
Net income 15,248 10,624
Preferred dividends (327) (516)
--------- ----------
Net income available to common stock $ 14,921 $ 10,108
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Basic earnings per share
Income from continuing operations $ 0.95 $ 0.96
Income from discontinued operations 0.43 -
--------- ----------
Net income $ 1.38 $ 0.96
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Diluted earnings per share
Income from continuing operations $ 0.93 $ 0.95
Income from discontinued operations .41 -
--------- ----------
Net income $ 1.34 $ 0.95
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Results by Business Segment
---------------------------
(Amounts in thousands)
Three Months
---------------------
2006 2005
--------- ----------
Sales
-----
Aerospace $ 247,829 $ 207,322
Automotive 91,307 91,062
Metal Coating 66,905 63,065
Specialty Chemicals 50,765 56,680
Industrial Machinery 61,326 52,284
Other Products 5,920 4,609
--------- ----------
Total $ 524,052 $ 475,022
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Operating Income (Loss)
-----------------------
Aerospace $ 19,204 $ 14,621
Automotive 3,022 8,756
Metal Coating 7,738 6,659
Specialty Chemicals 5,620 7,283
Industrial Machinery 3,566 3,393
Other Products 540 534
Corporate (9,429) (10,833)
--------- ----------
Total $ 30,261 $ 30,413
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