Decoma Announces Fiscal Results and Strategic Update
12 June 1998
Decoma Announces Fiscal 1998 Third Quarter Results and Strategic Update
CONCORD, Ont., June 11 /CNW-PRN/ - Decoma International Inc. (TSE:DEC.A;
NASDAQ:DECAF) today announced its financial results for the third quarter and
nine months ended April 30, 1998.
Three Months Ended Nine Months Ended
April 30 April 30
1998 1997 1998 1997
(millions of
Canadian dollars,
except per share
figures)
Sales $ 199.3 $ 135.2 $ 489.2 $ 377.4
Operating Income $ 18.3 $ 8.2 $ 34.8 $ 23.6
Net Income $ 11.3 $ 7.8 $ 23.5 $ 21.0
Fully diluted
earnings per share $ 0.25 $ - $ 0.61 $ -
Sales for the third quarter and first nine months of fiscal 1998 were
$199.3 million and $489.2 million respectively, an increase of 47.4% and 29.6%
over the comparable periods in fiscal 1997. The higher sales level reflects a
29% increase in North American content per vehicle over the first nine months
of the year, a period in which North American vehicle production increased 3%
to 11.3 million vehicles.
Gross margin as a percentage of total sales also continued to improve in
the third quarter, increasing 2.3% to 24%, compared to 21.7% in the third
quarter of 1997. For the first nine months of the year gross margin improved
1.9% to 24.2%, compared to 22.3% in fiscal 1997. This year-over-year
improvement is the result of higher production volumes on core programs and
cost reduction programs.
Operating income in the third quarter more than doubled to $18.3 million
compared to $8.2 million in fiscal 1997. On a year-to-date basis, operating
income improved 47% to $34.8 million compared to $23.6 million in the 1997
period.
Net income for the third quarter and first nine months of 1998 was $11.3
million and $23.5 million respectively, compared to $7.8 million and $21.0
million in the comparable periods in fiscal 1997. This reflects a higher gross
margin offset by increased selling, general and administrative expenses, and a
decrease in income from equity investments.
Fully diluted earnings per share were $0.25 for the third quarter and
$0.61 per share for the nine-month period. The fully diluted average number of
shares outstanding for the quarter was 54.6 million and 42.5 million for the
nine-month period.
During the first nine months of fiscal 1998 cash generated from operations
was $62.1 million. Net investment activities were $124.7 million, including
$96.0 million in fixed assets and $28.7 million in investments, principally
for the acquisition of Decomex.
On June 11, 1998 the Decoma Board of Directors declared, in addition to
the dividend on the 5% Convertible Series Preferred Shares, a quarterly
dividend in respect of the third quarter of fiscal 1998 of $0.03 per share on
the Class A Subordinate Voting Shares and the Class B Shares payable on July
15, 1998 to shareholders of record on June 30, 1998.
Commenting on Decoma's third quarter performance, Mr. Alan J. Power, the
President and CEO of Decoma, noted, ``Our positive results suggest that our
strategic plan to focus on our three main business units, and provide systems
integration solutions that meet our customers needs, has been well received by
the market.''
Equity income for the third quarter was lower than originally planned as
the operations of one of Decoma's equity investments experienced unanticipated
operational difficulties. However, Mr. Power noted that, ``A turnaround
strategy is being implemented and Decoma has taken a very hands-on approach to
resolving these issues. ``According to Mr. Power, ``Management is confident
that this restructuring, combined with an aggressive sales growth strategy,
will cause the Company to meet our expectations in the near future.''
Subsequent to the completion of the Company's third quarter, Decoma
entered into a consulting services agreement with Frank Stronach & Co.,
through which the Company will access the services of Mr. Frank Stronach, to
assist the Company in its overall growth and business development. In
particular, Frank Stronach & Co. will support Decoma in implementing it's
global product mandate both in Europe and in other emerging markets. A special
committee of independent directors reviewed the transaction and recommended
its approval to the Board of Directors of the Company. In reviewing the
proposed transaction, the special committee noted that the consulting services
to be provided under the agreement will be of significant benefit to the
Company particularly in areas where the Company does not have existing strong
relationships with European based OEM's. Mr. Power noted that he, ``Is looking
forward to working closely with Mr. Stronach in achieving Decoma's global
growth objectives.'' As a performance incentive, compensation under the
consulting services agreement has been structured in the form of the grant of
options to Frank Stronach & Co. to acquire Class A Shares in Decoma. By
linking compensation to the overall growth in the value of Decoma's Class A
Shares, management believes that all shareholders of the Company will
participate in the benefits to be realized under the agreement.
Decoma designs, engineers and manufactures automotive fascias, and related
components and plastic body panels and exterior appearance systems for cars
and light trucks, principally for automobile manufacturers in North America,
Mexico and Europe. Decoma has approximately 4,500 employees in 11
manufacturing facilities in four countries.
For further information please contact S. Randall Smallbone, Vice
President, Finance and Chief Financial Officer of Decoma at (905) 669-2888.
-------------------------------------------------------------------------
DECOMA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------
(Unaudited)
(Canadian dollars in thousands)
-------------------------------------------------------------------------
As at April 30 As at July 31
1998 1997
-------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------
Current assets:
Cash $113,672 $6,556
Accounts receivable 119,639 78,338
Inventories 67,135 40,511
Income taxes receivable - 200
Prepaid Expenses 7,315 10,093
-------------------------------------------------------------------------
307,761 135,698
-------------------------------------------------------------------------
Investments 35,613 33,876
-------------------------------------------------------------------------
Fixed assets (net) 332,083 190,515
-------------------------------------------------------------------------
Other assets 5,051 2,975
-------------------------------------------------------------------------
$680,508 $363,064
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------
Current liabilities:
Bank indebtedness $4,092 $14,718
Accounts payable 74,075 32,862
Accrued salaries and wages 16,406 12,963
Other accrued liabilities 26,403 12,739
Income taxes payable 1,657 -
Accounts payable to related
companies 605 -
Long-term debt due within one year 5,889 250
Debt due to Magna within one year 48,805 -
-------------------------------------------------------------------------
177,932 73,532
Long-term debt 10,982 15,580
Long-term debt due to Magna 71,495 -
Deferred income taxes 24,240 14,366
Convertible Series Preferred Shares 130,909 -
Minority interest 13,241 -
-------------------------------------------------------------------------
Magna's net investment - 259,586
-------------------------------------------------------------------------
Shareholders' equity:
Convertible Series Preferred Shares 21,348 -
Class A Subordinate Voting Shares 103,661 -
Class B Shares 95,303 -
Retained earnings 21,261 -
Currency translation adjustment 10,136 -
-------------------------------------------------------------------------
251,709 -
-------------------------------------------------------------------------
$680,508 $363,064
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
DECOMA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME, MAGNA'S NET INVESTMENT AND
RETAINED EARNINGS
-------------------------------------------------------------------------
(Unaudited)
(Canadian dollars in thousands,
except per share figures) Three Months Ended Nine Months Ended
-------------------------------------------------------------------------
April 30 April 30
1998 1997 1998 1997
-------------------------------------------------------------------------
Sales $199,287 $135,160 $489,165 $377,365
-------------------------------------------------------------------------
Cost of goods sold 151,376 105,828 370,843 293,254
Depreciation and amortization 9,327 7,499 26,639 22,643
Selling, general and
administrative 13,462 9,018 37,838 24,305
Interest expense (net) 879 2,381 7,967 6,902
Amortization of discount on
Convertible Series Preferred
Shares 2,257 - 2,257 -
Affiliation fees and other
charges 3,716 2,275 8,822 6,670
-------------------------------------------------------------------------
Operating income 18,270 8,159 34,799 23,591
Equity income 1,075 2,664 3,402 6,135
-------------------------------------------------------------------------
Income before income taxes and
minority interest 19,345 10,823 38,201 29,726
Income taxes 7,383 3,048 13,393 8,741
Minority interest 667 - 1,351 -
-------------------------------------------------------------------------
Net income 11,295 7,775 23,457 20,985
Retained earnings, beginning of
period 9,966 - 54,444 -
Magna's net investment,
beginning of period 346,600 247,706 196,250 213,936
Net contribution by
(distribution to) Magna (346,600) (9,250) (252,890) 16,066
Change in currency translation
adjustment - 2,525 - (2,231)
-------------------------------------------------------------------------
Magna's net investment, end of
period - $248,756 - $248,756
Retained earnings, end of
period $21,261 - $21,261 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per Class A
Subordinate Voting Share or
Class B Share
Basic $0.29 - $0.68 -
Fully diluted $0.25 - $0.61 -
-------------------------------------------------------------------------
Average number of Class A
Subordinate Voting Shares and
Class B Shares outstanding (in
millions)
Basic 39.4 - 34.4 -
Fully diluted 54.6 - 42.5 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
DECOMA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------
(Unaudited)
(Canadian dollars in thousands) Three Months Ended Nine Months Ended
-------------------------------------------------------------------------
April 30 April 30
1998 1997 1998 1997
-------------------------------------------------------------------------
Cash provided from (used for):
OPERATING ACTIVITIES
Net Income $11,295 $7,775 $23,457 $20,985
Items not involving current
cash flows 19,420 10,318 38,599 20,331
-------------------------------------------------------------------------
30,715 18,093 62,056 41,316
Changes in non-cash working
capital (10,123) 8,222 (8,782) 5,262
-------------------------------------------------------------------------
20,592 26,315 53,274 46,578
-------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Fixed asset additions (33,194) (9,622) (96,030) (29,665)
Acquisition of subsidiary net
of cash and debt assumed - - (27,741) -
Increase in investments and
other 1,849 357 (1,088) (27,947)
Proceeds from disposition of
fixed assets and other 18 19 137 381
-------------------------------------------------------------------------
(31,327) (9,246) (124,722) (57,231)
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of Convertible Series
Preferred Shares 150,000 - 150,000 -
Issuance of Class A Subordinate
Voting Shares 103,661 - 103,661 -
Issuance of Class B Shares 95,303 - 95,303 -
Increase in debt due to Magna 120,300 - 120,300 -
Increase (decrease) in bank
indebtedness (5,967) (2,419) (10,626) 5,409
Issues of long term debt 1,966 - 16,830 12,521
Repayments of long term debt (10,607) (4,043) (44,014) (23,513)
Net contribution by
(distribution to) Magna (346,600) (9,250) (252,890) 16,066
-------------------------------------------------------------------------
108,056 (15,712) 178,564 10,483
-------------------------------------------------------------------------
Net increase (decrease) in cash 97,321 1,357 107,116 (170)
Cash, beginning of period 16,351 7,299 6,556 8,826
-------------------------------------------------------------------------
Cash, end of period $113,672 $8,656 $113,672 $8,656
-------------------------------------------------------------------------