Detroit Diesel Reports Second Quarter 1997 Results
21 July 1997
Detroit Diesel Reports Second Quarter 1997 Results
DETROIT, July 21 -- Detroit Diesel Corporation
announced today second quarter 1997 revenues of $557 million and net income
of $7.4 million or $0.30 per common share. These figures compare to second
quarter 1996 revenues of $491 million and a net loss of $16.2 million or
$0.66 per common share after a special charge. Revenues for the period were
7% higher than first quarter 1997, and net income increased 16% over the
previous period.
Total second quarter 1997 shipments were 45,300, an increase of 33%
compared to second quarter 1996. Continued strong shipments in the heavy-duty
truck and automotive markets generated the unit growth. Series 60 shipments
in the second quarter were 16,700, an increase of 38% over the second quarter
1996. Total shipments year-to-date were 85,300 units, compared to 66,400
units in 1996.
Roger S. Penske, Chairman, said "Detroit Diesel's second quarter results
reflect the continuing recovery in the North American heavy-duty truck market
and our success in gaining penetration. Additionally, our automotive
operations generated another solid quarter, and we are encouraged by the
future opportunities within this segment. Lastly, I am pleased to report that
we shipped our first Series 4000 units in the second quarter and will commence
production on the Series 2000 in July."
The Company's service parts operations revenues for the second quarter
were $104 million, an increase of 6% versus the second quarter 1996. Revenues
from both the two-cycle and four-cycle service parts showed increases versus
the prior year. The Company's remanufacturing operations revenues grew 25% to
$34 million compared to the second quarter 1996.
Gross margin was 22.6% in the second quarter, compared to 22.9% in the
second quarter 1996. As anticipated, the gross margin in the second quarter
was affected by the new product introductions during the period and product
mix. Year-to-date gross margin was 23.0%, consistent with the full-year 1996
gross margin.
Research and development expenses were $23.8 million for the quarter,
compared to $27.0 million in second quarter 1996, partially due to the timing
of certain expenditures. Selling, general and administrative expenses were
$86.3 million for the quarter, due to increased unit volumes and the
introduction of new products.
Following is a review of the Company's market segments:
On-Highway Truck. Revenues increased 28% to $243 million in the second
quarter compared to 1996, as the North American heavy-duty truck market
continues to show signs of improvement. Series 60 production rates were
raised early in the quarter to accommodate increased demand levels, and
the Company's share of the North American heavy-duty truck market reached
30.3% through May 1997. Demand for the recently introduced Series 60 engine
with a 1650 lb. ft. torque rating has also contributed to the share gain.
Year-to-date 1997 revenues were $462 million, a 20% increase versus the first
six months of 1996.
Construction and Industrial. Revenues were $86 million in the second
quarter, down 6% compared to 1996, due to the discontinuance of the Perkins
distributed products at the end of 1996. Excluding the Perkins business,
revenues for the period rose 13% versus the second quarter 1996.
Additionally, revenues increased 12% compared to first quarter 1997, due to a
shift in mix to the Company's higher horsepower and four-cycle products.
Initial shipments of Series 4000 production engines were made during the
period, and demand for the new models remains strong. Year-to-date revenues
were $163 million versus $179 million in 1996.
Automotive. Revenues increased 27% to $70 million in the second quarter
compared to 1996, as strong demand within existing OEM customers continued
through the quarter. Unit shipments for the quarter were 19,300, compared to
13,600 units in the second quarter 1996. Shipments in the second half of the
year are anticipated to be less than the first six months due to a reduced
number of production days and model changeovers. Year-to-date 1997 revenues
were $141 million, an increase of 32% compared to 1996.
Coach and Bus. Revenues increased 19% to $63 million in the second
quarter compared to 1996. Shipments of two-cycle products as well as strong
demand for Series 60 on-highway coach units generated the revenue gains.
Year-to-date 1997 revenues were $120 million, a 15% increase compared to 1996.
Power Generation. Revenues increased 12% to $37 million in the second
quarter compared to 1996, as the mix of shipments continues to move to higher
horsepower units. Spectrum-branded orders placed by the Company's U.S.
distributors remain strong. Year-to-date 1997 revenues were $73 million, a 14%
increase compared to 1996.
Marine. Revenues were $36 million in the second quarter, compared to $44
million in the second quarter 1996. Year-to-date 1997 revenues were $71
million versus $82 million in 1996. Reduced unit shipments during the period
are due to the anticipated deliveries of Series 2000 engines during the third
quarter 1997. However, demand for the Company's new Series 2000 and Series 60
commercial marine products for the latter half of 1997 and into 1998 is
strong.
Military. Revenues were $22 million in the second quarter, a decline of
$2 million compared to 1996. Year-to-date revenues were $47 million versus
$50 million in the prior year. The lack of significant new U.S. defense
spending awards has been partially offset by remanufacturing programs and
international opportunities.
Detroit Diesel Corporation is engaged in the design, manufacture, sale and
service of heavy-duty diesel and alternative fuel engines, automotive diesel
engines and related products and provides financing through Detroit Diesel
Capital Corporation. The Company offers a complete line of diesel engines
from ten to 10,000 horsepower for the on-highway truck; construction, mining
and industrial; automotive; coach and bus; marine; power generation; and
military markets. Detroit Diesel serves these markets directly and through a
worldwide network of more than 2,500 authorized distributors and dealers.
Detroit Diesel's major shareholder is a wholly-owned subsidiary of Penske
Corporation, a closely-held, diversified transportation services company which
conducts it business through a number of wholly- or partially-owned companies,
including Penske Truck Leasing Company, Diesel Technology Company, AG Kuhnle,
Kopp and Kausch, Penske Automotive Group, Inc., Penske Auto Centers, Inc.,
Penske Motorsports, Inc., and Penske Capital Partners. The Penske group of
businesses has annual revenues exceeding $6 billion and employs more than
25,000 around the world.
This news release may include projections, forecasts and other forward-
looking statements about the Company, the industry in which it competes and
the markets it serves. The achievement of such projections is subject to
certain risks and uncertainties, fully detailed in the "Cautionary Statement
for purposes of 'Safe Harbor' under the Private Securities Act of 1995" in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996,
which is on file with the Securities and Exchange Commission.
Detroit Diesel Corporation
Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Net revenues $ 557.4 $ 491.3 $ 1,077.1 $970.1
Cost of sales 431.4 378.6 828.9 745.2
Gross profit 126.0 112.7 248.2 224.9
Expenses:
Selling and administrative 86.3 69.4 169.6 141.1
Research and development 23.8 27.0 49.3 51.5
Interest 3.4 2.6 6.6 5.4
Special charge* - 38.3 - 38.3
Total 113.5 137.3 225.5 236.3
Income (loss) before income taxes
and minority interests 12.5 (24.6) 22.7 (11.4)
Provision for income taxes 5.1 (8.6) 8.9 (4.0)
Minority interests - .2 - .5
Net income (loss) $ 7.4 $ (16.2) $ 13.8 $ (7.9)
Primary net income (loss)
per share $ .30 $ (0.66) $ .56$ (0.32)
* Consists of product coverage and reduction in the value of an
investment in
Mexico of $24.9 million after tax or $1.01 per share.
Net Revenues by Market
(In millions)
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
On-Highway Truck $ 243 $ 190 $ 462 $ 384
Construction & Industrial 86 92 163 179
Automotive 70 55 141 107
Coach & Bus 63 53 120 104
Power Generation 37 33 73 64
Marine 36 44 71 82
Military 22 24 47 50
Total $ 557 $ 491 $ 1,077 $ 970
Detroit Diesel Corporation
Consolidated Balance Sheets
(In millions, except per share amounts)
June 30, Dec. 31,
1997 1996
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9.5 $ 3.0
Receivables, net of allowances 316.5 293.1
Inventories 285.1 292.1
Prepaid expenses, deferred charges and
other current assets 14.0 19.8
Deferred tax assets 52.7 56.4
TOTAL CURRENT ASSETS 677.8 664.4
PROPERTY, PLANT AND EQUIPMENT
Net of accumulated depreciation of $138.9
and $125.3, respectively 289.8 281.5
DEFERRED TAX ASSETS 24.5 26.0
INTANGIBLE ASSETS, net 90.5 103.9
OTHER ASSETS 35.3 36.8
TOTAL ASSETS $1,117.9 $1,112.6
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 24.3 $ 16.6
Accounts payable 310.5 279.9
Accrued expenses 175.9 179.8
Current portion of long-term debt
and capital leases 7.9 9.8
TOTAL CURRENT LIABILITIES 518.6 486.1
LONG-TERM DEBT AND CAPITAL LEASES 67.0 92.6
OTHER LIABILITIES 170.3 165.2
DEFERRED TAX LIABILITIES 23.2 35.4
DEFERRED INCOME 6.2 6.5
MINORITY INTERESTS .6 5.6
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $0.01 per
share, no shares issued - -
Common Stock, par value $0.01 per share,
24.7 million shares issued .2 .2
Additional paid-in capital 217.8 217.8
Retained earnings 122.7 108.9
Additional minimum pension liability (2.5) (2.5)
Currency translation adjustment (6.1) (3.0)
Deferred compensation on restricted stock (.1) (.2)
TOTAL STOCKHOLDERS' EQUITY 332.0 321.2
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,117.9 $1,112.6
SOURCE Detroit Diesel Corporation