Detroit Diesel Reports Significantly Improved First Quarter 1998 Results
24 April 1998
Detroit Diesel Reports Significantly Improved First Quarter 1998 Results
DETROIT, April 24 -- Detroit Diesel Corporation
announced today first quarter 1998 revenues of $589 million and net income of
$9.7 million, or $0.39 per common share. Total revenues increased 13%
compared to first quarter 1997 revenues of $520 million, and net income rose
51% versus first quarter 1997 earnings of $6.4 million, or $0.26 per common
share.
Total first quarter 1998 shipments were 43,700 units, an increase of 9%
compared to first quarter 1997. Continued strong engine shipments to the
heavy-duty truck market, partially offset by reduced two-cycle engine
shipments, generated the unit growth.
Roger S. Penske, Chairman, said "Our first quarter performance reflects
continued solid demand for our products coupled with our emphasis on cost
control and increased efficiencies. I am pleased with the results of our
efforts during the first quarter, but recognize that we must continue to
maintain our focus on operating more efficiently in order to realize improved
results throughout 1998."
The Company's parts and remanufacturing operations also reported further
revenue gains, with first quarter increases of 5% and 3%, respectively,
compared to first quarter 1997.
Gross margin was 22.8% in the first quarter, compared to 23.5% in the
first quarter 1997, due to a stronger 1998 ratio of product sales relative to
service parts.
Research and development expenses were $24.5 million for the quarter,
compared to $25.5 million in first quarter 1997. Selling, general and
administrative expenses were $91.2 million for the quarter, as a result of
increased unit volume.
As previously reported, the Company's risk in the Asia region, on both a
revenue and earnings contribution basis, is considered to be minimal. The
impact of economic events in this region is currently anticipated to result in
a moderate decline in revenues in the Power Generation market for the
remainder of 1998. Sales in the On-Highway and Off-Road segments are also
expected to be modestly affected, although demand in other regions is expected
to offset any declines in these markets.
Commencing in 1998, Detroit Diesel has revised its reported market
segments. The following is a review of the Company's four market segments:
On-Highway. Revenues increased 20% to $332 million in the first quarter
compared to first quarter 1997. Strong demand in the North American heavy-
duty truck market and by the Company's on-highway coach customers resulted in
a 29% increase in Series 60 unit shipments compared to first quarter 1997.
Based upon current order backlog, Series 60 demand is anticipated to remain
steady for the next several months.
Off-Road. Revenues increased 17% to $160 million in the first quarter
compared to 1997. Increased shipments of the Series 2000 and Series 4000
engines, particularly in the industrial and marine sectors, contributed to the
revenue gain. Acceptance of the new product has been strong. Production of
the Series 2000 and Series 4000 is currently forecasted to ramp up throughout
the year. Revenues to military customers were $8 million higher due to
increased service parts sales and the timing of certain shipments.
Automotive. Revenues were $63 million in the first quarter compared to
$71 million in the first quarter 1997. The transition of certain OEM product
programs, coupled with the effect of changes in currency exchange rates
resulted in the revenue change.
Power Generation. Revenues were $34 million in the first quarter compared
to $36 million in the first quarter 1997. Shipments were more heavily
weighted towards smaller, lower horsepower units and order flow from the Far
East region declined during the period.
As previously reported, the Company and the heavy-duty diesel engine
industry are having on-going discussions with the U.S. Environmental
Protection Agency (EPA), the U.S. Department of Justice and the California Air
Resources Board to address NOx emissions from heavy-duty diesel engines under
certain driving conditions. DDC believes its engines are in compliance with
EPA emissions standards and fully supports cooperative efforts of industry and
government to meet increasingly stringent Clean Air Act emissions standards.
At this stage, the Company cannot predict the final results of these
discussions.
Detroit Diesel Corporation is engaged in the design, manufacture, sale and
service of heavy-duty diesel and alternative fuel engines, automotive diesel
engines, and engine 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; off-road;
automotive; and power generation markets. Detroit Diesel services these
markets directly and through a worldwide network of more than 2,500 authorized
distributors and dealers. DDC is a QS-9000 certified company.
Detroit Diesel's major shareholder is Penske Corporation, a closely-held,
diversified transportation services company whose operations include Penske
Truck Leasing Company, Diesel Technology Company, 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 28,000 people 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, 1997,
which is on file with the Securities and Exchange Commission.
Detroit Diesel's World Wide Web address is http://www.detroitdiesel.com
Detroit Diesel Corporation
Consolidated Statements of Income
(In millions, except per share amounts)
Three Months Ended
March 31,
1998 1997
(Unaudited)
Net revenues $588.8 $519.7
Cost of sales 454.4 397.5
Gross profit 134.4 122.2
Expenses:
Selling and administrative 91.2 83.3
Research and development 24.5 25.5
Interest 3.3 3.2
Total 119.0 112.0
Income before income taxes
and minority interests 15.4 10.2
Provision for income taxes 5.7 3.8
Minority interests - -
Net income available for common shares $9.7 $6.4
Basic net income per share $.39 $.26
Diluted net income per share $.39 $.26
Sales Data by Market
(In millions)
Three Months Ended
March 31,
1998 1997
On-Highway $332 $276
Off-Road 160 137
Automotive 63 71
Power Generation 34 36
Total $589 $520
Detroit Diesel Corporation
Consolidated Balance Sheets
(In millions, except per share amounts)
Mar. 31, Dec. 31,
1998 1997
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $8.8 $3.2
Receivables, net of allowances 356.6 318.8
Inventories 310.7 305.8
Prepaid expenses, deferred charges and
other current assets 12.4 13.0
Deferred tax assets 52.0 52.1
TOTAL CURRENT ASSETS 740.5 692.9
PROPERTY, PLANT AND EQUIPMENT
Net of accumulated depreciation of $162.8
and $153.7, respectively 296.0 298.3
DEFERRED TAX ASSETS 18.4 18.4
INTANGIBLE ASSETS, net 100.8 104.8
OTHER ASSETS 41.1 42.1
TOTAL ASSETS $1,196.8 $1,156.5
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $30.0 $44.7
Accounts payable 329.2 297.0
Accrued expenses 188.4 175.0
Current portion of long-term debt
and capital leases 2.8 6.9
TOTAL CURRENT LIABILITIES 550.4 523.6
LONG-TERM DEBT AND CAPITAL LEASES 74.6 73.8
OTHER LIABILITIES 186.8 182.5
DEFERRED TAX LIABILITIES 25.0 25.3
DEFERRED INCOME 5.8 5.9
MINORITY INTERESTS .6 .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 224.2 224.2
Retained earnings 148.5 138.8
Additional minimum pension adjustment (9.7) (9.7)
Currency translation adjustment (9.6) (8.7)
TOTAL STOCKHOLDERS' EQUITY 353.6 344.8
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,196.8 $1,156.5
SOURCE Detroit Diesel Corporation