FastenTech, Inc. Reports Fiscal 2007 First Quarter Results
MINNEAPOLIS--FastenTech, Inc. today reported that its net sales for the fiscal first quarter ended December 31, 2006 grew 4.0% to $96.1 million from $92.4 million a year ago. Sales from acquisitions completed during and after the fiscal first quarter of 2006 added 4.2% to sales. Pro forma net sales (see accompanying tables) were down 0.4% (and up 4.0% excluding a 36% drop in military sales, reflecting double digit sales growth from the power generation and industrial end markets).
Operating income for the period was $9.6 million versus $9.0 million a year ago. Net cash used in operating activities during the current quarter was $2.3 million compared to cash provided by operating activities of $1.4 million during the year ago quarter. The change in cash flow was due principally to higher inventory levels in the current quarter to support new products and higher sales anticipated in our fiscal 2007 second quarter.
Pro forma adjusted earnings before interest, taxes, depreciation and amortization (“Pro forma Adjusted EBITDA,”) (see accompanying tables for details) for the current quarter were $14.8 million, or 15.4% of net sales, compared to $14.5 million, or 15.1% of net sales a year ago.
Higher interest expense and the absence of a $2.2 million gain on the repurchase of the Company’s redeemable preferred stock recorded a year ago resulted in net income of $0.3 million compared to net income of $2.4 million a year ago.
As of December 31, 2006, the Company reported total debt, net of $14.0 million of cash and cash equivalents, of $283.4 million.
“We continued to see solid demand from our power generation and industrial end markets and results from the non-residential construction end market reflected typical seasonality for that market segment,” said Ron Kalich, President and Chief Executive Officer of FastenTech. “While the year-over-year comparison for our military business was unfavorable in the first quarter, we should begin to see improvement in the quarterly comparison in the balance of fiscal 2007 as the downturn in our military business is about a year behind us. Moreover, we expect meaningful sales and performance growth in 2007 from new products and process improvements as a result of the substantial investments we’ve made in both our high-stress and recreational product lines, which should help to mitigate the expected cyclical downturn in critical diesel engine component sales.”
2007 Guidance
The Company’s guidance for fiscal 2007 remains unchanged with projected 2007 pro forma sales growth in the 2% to 5% range and, subject to changes in sales mix, EBITDA margins between 15.8% and 16.8%. (See Note to Accompanying Financial Statements section below for information on Pro forma presentations.) This press release should be read in conjunction with the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2006, which is available at www.fastentech.com.
Quarterly Conference Call
FastenTech will hold a conference call on Tuesday, February 13, 2007 at 9:00 a.m. ET to discuss its fiscal 2007 first quarter results. Please dial (800) 474-8920 and provide the operator with confirmation code 7293442 to participate in the call in a listen only mode. The Company will also provide a live webcast of the call which may be accessed under the Investor Relations tab of the Company’s website (www.fastentech.com). A telephonic replay of the call will be available approximately two hours after the call until Monday, February 19, 2007 by dialing (888) 203-1112 and using the same confirmation code. A webcast replay of the call will also be available for ninety days, as well as a conference call transcription, which will be available three business days after the conference call, on the Company’s website under the Investor Relations tab.
About the Company
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 power generation, industrial, military, construction, truck, recreational and automotive markets. For more information about the Company, please visit: www.fastentech.com.
Adjusted EBITDA and Other Non-GAAP Supplemental Information
Adjusted EBITDA and pro forma results are non-GAAP measures presented in this press release as supplemental disclosures to operating income and reported results. The Company uses Adjusted EBITDA as a basis for presenting and using financial data to aid it in making internal operating decisions. It defines Adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, and non-operating items. Pro forma results are presented to aid in the analyses of reported results because of the significant acquisition activity the Company has engaged in over the past twenty-four months. Pro forma results are calculated as if the acquisitions that were completed after the beginning of a reported accounting period had occurred as of the beginning of the respective accounting period. Neither Adjusted EBITDA, nor pro forma results are intended to represent and should not be considered more meaningful than, or an alternative to, operating income, cash flows from operating activities or other measures of performance in accordance with generally accepted accounting principles.
The Company includes Adjusted EBITDA data and pro forma results because it is how management measures operating segment performance. It also realizes that certain investors use such information as one measure of an issuer’s historical ability to service debt and as a measure of operations. However, because of potential inconsistencies in the method of calculation, neither Adjusted EBITDA nor pro forma results are necessarily comparable to other similarly titled captions used by other companies or definitions used in the Company’s debentures, credit, or other similar agreements.
Note to Accompanying Financial Statements
In the accompanying financial statements, the unaudited pro forma information assumes that the acquisitions of BNC & Associates, Inc. and Erie Bolt Corporation had occurred at the beginning of fiscal 2006. The pro forma results are not necessarily indicative of what actually would have occurred if the transactions had been in effect for the periods presented, are not intended to be a projection of future results, and do not reflect any cost savings that might be achieved from the combined operations. The Condensed Consolidated Income Statements include the operating results for the acquired companies from the date of acquisition.
Forward Looking Statements
Certain statements in this press release are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. Please read these results in conjunction with the company’s documents filed with the Securities and Exchange Commission, including the company’s quarterly report on Form 10-K for the fiscal year ended September 30, 2006. These filings identify important risk factors and other uncertainties that could cause actual results to differ from those contained in the forward-looking statements. Actual results may differ materially from these statements. 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 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. Further information concerning factors that could cause actual results to differ materially from those in the forward-looking statements are contained from time to time in the Company’s SEC filings which can be viewed on the Company’s website at www.fastentech.com or at www.sec.gov.
| FastenTech, Inc. and Subsidiaries | ||||||
| Condensed Consolidated Statement of Operations | ||||||
| (Amounts in Thousands) | ||||||
| (Unaudited) | ||||||
| Three months ended | ||||||
| December 31, | ||||||
| 2006 | 2005 | |||||
| Net sales | $ | 96,133 | $ | 92,417 | ||
| Cost of sales | 71,227 | 69,752 | ||||
| Gross profit | 24,906 | 22,665 | ||||
| Selling, general and administrative expenses | 15,294 | 13,650 | ||||
| Operating income | 9,612 | 9,015 | ||||
| Other income (expense): | ||||||
| Interest expense - long term debt | (8,099) | (7,664) | ||||
| Interest expense - redeemable preferred stock | (806) | (724) | ||||
| Gain on repurchase of redeemable preferred stock | - | 2,210 | ||||
| Other, net | 224 | 201 | ||||
| (8,681) | (5,977) | |||||
| Income before income tax expense | 931 | 3,038 | ||||
| Income tax expense | 677 | 604 | ||||
| Net income | $ | 254 | $ | 2,434 | ||
| FastenTech, Inc. and Subsidiaries | |||||||||
| Condensed Consolidated Balance Sheets | |||||||||
| (Amounts in Thousands) | |||||||||
| December 31, | September 30, | ||||||||
| 2006 | 2006 | ||||||||
| Assets | (Unaudited) | ||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 13,953 | $ | 13,784 | |||||
| Accounts receivable, net | 61,327 | 65,735 | |||||||
| Inventory, net | 90,932 | 84,507 | |||||||
| Other current assets | 5,452 | 5,724 | |||||||
| Total current assets | 171,664 | 169,750 | |||||||
| Goodwill and intangible assets, net | 103,370 | 104,710 | |||||||
| Property, plant and equipment, net | 91,240 | 92,628 | |||||||
| Other assets | 10,236 | 10,489 | |||||||
| Total assets | $ | 376,510 | $ | 377,577 | |||||
| Liabilities and Stockholders’ Equity | |||||||||
| (Deficiency in Assets) | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 34,927 | $ | 36,189 | |||||
| Accrued Interest | 5,537 | 9,224 | |||||||
| Other accrued liabilities | 13,759 | 16,589 | |||||||
| Current portion of long-term debt | 4,000 | 4,000 | |||||||
| Total current liabilities | 58,223 | 66,002 | |||||||
| Long–term debt | 293,400 | 288,750 | |||||||
| Redeemable preferred stock and dividends | 29,151 | 28,344 | |||||||
| Other long–term liabilities | 18,344 | 18,100 | |||||||
| Total liabilities | 399,118 | 401,196 | |||||||
| Stockholders’ equity (deficiency in assets) | (22,608) | (23,619) | |||||||
| Total liabilities and stockholders’ equity (deficiency in assets) | $ | 376,510 | $ | 377,577 | |||||
| FastenTech, Inc. and Subsidiaries | ||||||
| Condensed Consolidated Statement of Cash Flows | ||||||
| (Amounts in Thousands) | ||||||
| (Unaudited) | ||||||
| Three Months ended | ||||||
| December 31, | ||||||
| 2006 | 2005 | |||||
| Cash flows from operating activities | ||||||
| Net income | $ | 254 | $ | 2,434 | ||
| Adjustments to reconcile net income to net cash | ||||||
| provided by (used in) operating activities: | ||||||
| Depreciation | 3,745 | 3,311 | ||||
| Amortization | 1,316 | 956 | ||||
| Noncash interest expense-long term debt | 366 | 362 | ||||
| Noncash interest expense-redeemable preferred stock | 806 | 724 | ||||
| Gain on repurchase of redeemable preferred stock | - | (2,210) | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | 4,728 | 8,523 | ||||
| Inventory | (6,240) | (1,933) | ||||
| Other current assets | 239 | 92 | ||||
| Accounts payable | (1,350) | (2,779) | ||||
| Accrued interest | (3,687) | (4,688) | ||||
| Income taxes | 38 | 291 | ||||
| Other liabilities | (2,360) | (2,828) | ||||
| Other | (124) | (893) | ||||
| Net cash provided by (used in) operating activities | (2,269) | 1,362 | ||||
| Cash flows from investing activities | ||||||
| Cash used for acquisitions, net of cash acquired | - | (21,063) | ||||
| Additions to property, plant and equipment | (2,184) | (1,627) | ||||
| Net cash used in investing activities | (2,184) | (22,690) | ||||
| Cash flows from financing activities | ||||||
|
Net borrowings under revolver |
4,650 | 33,000 | ||||
| Repurchase of common and preferred stock, net | - | (8,307) | ||||
| Net cash provided by financing activities | 4,650 | 24,693 | ||||
| Effect of exchange rate fluctuations on cash | (28) | 93 | ||||
| Net increase in cash and cash equivalents | 169 | 3,458 | ||||
| Cash and cash equivalents at beginning of period | 13,784 | 11,730 | ||||
| Cash and cash equivalents at end of period | $ | 13,953 | $ | 15,188 | ||
| FastenTech, Inc. and Subsidiaries | ||||||
| Supplemental Information | ||||||
| Sales, Adjusted EBITDA, Proforma Reconciliation | ||||||
| (Amounts in Thousands) | ||||||
| (Unaudited) | ||||||
| Three months ended | ||||||
| December 31, | ||||||
| Sales Reconciliation: | 2006 | 2005 | ||||
| Net Sales per income statement | $ | 96,133 | $ | 92,417 | ||
| Pre-acquisition sales of acquired companies | - | 4,068 | ||||
| Pro Forma Sales | $ | 96,133 | $ | 96,485 | ||
| EBITDA Reconciliation : | ||||||
| Net income | $ | 254 | $ | 2,434 | ||
| Add back: | ||||||
| Income tax expense | 677 | 604 | ||||
| Depreciation and amortization | 5,061 | 4,267 | ||||
| Interest expense - long term debt | 8,099 | 7,664 | ||||
| Interest expense - redeemable preferred stock | 806 | 724 | ||||
| Gain on repurchase of redeemable preferred stock | - | (2,210) | ||||
| Excess of fair value assigned to inventory included in cost of sales | - | 362 | ||||
| Reported EBITDA | $ | 14,897 | $ | 13,845 | ||
| Memo: Other income, net, included above | (224) | (201) | ||||
| Memo: Severance/restructuring related charges included above | 89 | 45 | ||||
| Adjusted EBITDA | $ | 14,762 | $ | 13,689 | ||
| Pre-acquisition operating income of acquired companies | - | 805 | ||||
| Pre-acquisition depreciation and amortization of acquired companies | - | 35 | ||||
| Pro Forma Adjusted EBITDA | $ | 14,762 | $ | 14,529 | ||
| FastenTech, Inc. and Subsidiaries | ||||||
| Supplemental Information | ||||||
| Segment Analyses - Reported and Pro Forma | ||||||
| (Amounts in Thousands) | ||||||
| (Unaudited) | ||||||
| Three Months Ended | ||||||
| December 31, | ||||||
| Reported Segment Results | 2006 | 2005 | ||||
| Net sales | ||||||
| Specialized Components | $ | 50,048 | 44,398 | |||
| Aerospace-grade Components | 46,146 | 48,067 | ||||
| Eliminations | (61) | (48) | ||||
| Total Reported Net Sales | $ | 96,133 | $92,417 | |||
| Adjusted EBITDA | ||||||
| Specialized Components | $ | 6,656 | 6,190 | |||
| Aerospace-grade Components | 10,106 | 9,227 | ||||
| Unallocated corporate operating expenses | (2,000) | (1,728) | ||||
| Adjusted EBITDA | $ | 14,762 | $13,689 | |||
| Three Months Ended | ||||||
| December 31, | ||||||
| Proforma Segment Results | 2006 | 2005 | ||||
| Net sales | ||||||
| Specialized Components | $ | 50,048 | 48,809 | |||
| Aerospace-grade Components | 46,146 | 47,724 | ||||
| Eliminations | (61) | (48) | ||||
| Total Proforma Net Sales | $ | 96,133 | $96,485 | |||
| Adjusted EBITDA | ||||||
| Specialized Components | $ | 6,656 | 6,876 | |||
| Aerospace-grade Components | 10,106 | 9,381 | ||||
| Unallocated corporate operating expenses | (2,000) | (1,728) | ||||
| Proforma Adjusted EBITDA | $ | 14,762 | $14,529 | |||
| FastenTech, Inc. and Subsidiaries | |||||||||
| Supplemental Information | |||||||||
| Sales Analyses by Market - Reported and Pro Forma | |||||||||
| (Amounts in Thousands) | |||||||||
| (Unaudited) | |||||||||
| (Amounts in thousands) | Three Months Ended | % of | |||||||
| December 31, | Y-O-Y | 2006 | |||||||
| 2006 | 2005 | % Chg. | Sales | ||||||
| Reported Sales by Market | |||||||||
| Power Generation/Aerospace | $ | 31,463 | $ | 30,122 | 4% | 33% | |||
| Construction | 13,836 | 10,635 | 30% | 14% | |||||
| Industrial | 16,962 | 14,238 | 19% | 18% | |||||
|
Truck |
11,206 | 11,157 | 0% | 12% | |||||
| Light Vehicle | 8,719 | 8,495 | 3% | 9% | |||||
| Recreational | 7,211 | 7,210 | 0% | 8% | |||||
| Military | 6,797 | 10,608 | -36% | 7% | |||||
| Interco Eliminations | (61) | (48) | 0% | ||||||
| Total Reported Sales | $ | 96,133 | $ | 92,417 | 4% | 100% | |||
| Proforma Sales by Market | |||||||||
| Power Generation/Aerospace | 31,463 | 29,779 | 6% | 33% | |||||
| Construction | 13,836 | 13,872 | 0% | 14% | |||||
| Industrial | 16,962 | 14,854 | 14% | 18% | |||||
|
Truck |
11,206 | 11,157 | 0% | 12% | |||||
| Light Vehicle | 8,719 | 9,053 | -4% | 9% | |||||
| Recreational | 7,211 | 7,210 | 0% | 8% | |||||
| Military | 6,797 | 10,608 | -36% | 7% | |||||
| Interco Eliminations | (61) | (48) | 0% | ||||||
| Total Proforma Sales | $ | 96,133 | $ | 96,485 | -0.4% | 100% | |||