Meridian Technologies Inc. Financial Results
17 July 1998
Meridian Technologies Inc. Financial Results
TORONTO--July 17, 1998--(TSE:MNI.) Meridian Technologies Inc. of Toronto announces its financial results for the period ended June 30, 1998 as follows:
3 months ended 6 months ended
June 30 June 30
---------------------- --------------------
1998 1997(x) 1998 1997(x)
(Restated) (Restated)
---------------------- --------------------
Revenues 88,340 91,831 186,393 184,912
(Loss) earnings
before interest
and taxes (2,075) 4,192 (523) 7,241
Net (loss) earnings (4,089) 2,515 (4,542) 3,667
(Loss) earnings per
share $(0.13) $0.07 $(0.14) $0.11
Weighted average
number of
shares 33,526,735 32,817,883 33,468,406 32,644,576
(in thousands of dollars except share data)
(x) Note: Due to the change in the pre-production cost accounting policy in the prior year, certain comparative figures have been restated to conform with the revised financial statement presentation.
Meridian reports revenues of $88,340,000 and a net loss of $4,089,000 or $0.13 per share for the second quarter ended June 30, 1998 compared with net earnings of $2,515,000 or $0.07 per share for the comparable prior year period.
Meridian's loss before interest and taxes for the second quarter of this fiscal year was $2,075,000 compared with earnings of $4,192,000 in the comparable quarter of the prior year. The significant deterioration in results was attributable to two main factors: the continued operating losses incurred at the Company's Accurcast aluminum facility as well as the impact in June of the shutdown of General Motors vehicle production due to the strikes at two GM parts production facilities.
The Company's Aluminum North America division ("ANA") reported a loss before interest and taxes of $5,777,000 for the second quarter compared with earnings of $168,000 in the prior year period. Revenue of $28.9 million in the second quarter was reduced from $33.7 million in the prior year as a result of lower tooling revenue and due to the General Motors strike which impacted June revenues by $3.4 million. The impact of the GM strike on ANA's results was approximately $1.0 million or $0.03 per share in the second quarter. In addition, ANA's Accurcast facility reported a loss of $5.2 million in the second quarter as it continued to experience excessive costs associated with limited capacity on large tonnage die cast machines and the start-up of the Borg-Warner transfer case program.
Earnings before interest and taxes in the second quarter at the Magnesium North America ("MNA") division were $6,957,000 on revenue of $53.9 million compared with earnings of $7,531,000 on revenue of $55.8 million in the prior year. The revenue reduction resulted from reduced Borg-Warner shipments and the impact of the General Motors strike, partially offset by higher tooling revenues and shipments on the recently launched New Venture Gear transfer case program. It is estimated that the General Motors strike impacted MNA's earnings by approximately $700,000 or $0.02 per share in the second quarter.
The Magnesium Europe facility in Verres, Italy reported a loss before interest and taxes of $2,386,000 on revenue of $5.5 million for the second quarter compared with a loss of $1,817,000 for the prior year on revenue of $2.4 million. The Company continued its efforts to develop the European market by opening a sales and engineering office in the United Kingdom. The costs associated with development efforts are expected to increase over the next two years. These costs, coupled with the current low level of capacity utilization, will result in the Company continuing to incur losses at Magnesium Europe until significant new production orders are secured.
Shipments of products for installation in General Motors vehicles accounted for 46 percent of Meridian's revenue in the first half of 1998. In addition, most of the revenues to be derived from new programs currently launching at MNA are related to GM vehicles. A continuation of the current labour disruption at General Motors will have a material adverse effect on Meridian's financial performance. In addition, improvement in the financial results at the Accurcast aluminum facility will require further time to complete the installation of new large tonnage die cast cells, and the implementation of process changes and tooling modifications to increase productivity. Accordingly, the Company does not anticipate a return to profitability in the third quarter.
Meridian is one of the world leaders in the production of magnesium and aluminum die cast automotive components.
Meridian's controlling shareholders, Teksid S.p.A. ("Teksid") and Norsk Hydro Produksjon a.s. ("Norsk Hydro"), have previously announced a take-over bid for all of the publicly held shares of Meridian at a price of $11.00 per share to be tendered by July 23, 1998. The Board of Directors of Meridian has unanimously approved the offer and recommends that holders of shares accept the offer.
Meridian Technologies Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
Periods ended June 30 (unaudited)
Three months Six months
1998 1997(x) 1998 1997(x)
(Restated) (Restated)
($000) ($000) ($000) ($000)
------------------- ------------------
Revenues 88,340 91,831 186,393 184,912
Expenses:
Cost of sales 80,766 79,435 167,310 161,277
Selling and general 4,596 3,868 9,547 7,934
Depreciation 5,053 4,336 10,059 8,460
------------------- ------------------
90,415 87,639 186,916 177,671
------------------- ------------------
(Loss) earnings before
interest and taxes (2,075) 4,192 (523) 7,241
Interest expense (1,587) (1,505) (3,358) (3,342)
------------------- ------------------
(Loss) earnings before
income taxes (3,662) 2,687 (3,881) 3,899
Income tax expense (427) (172) (661) (232)
------------------- ------------------
Net (loss) earnings (4,089) 2,515 (4,542) 3,667
------------------- ------------------
(Loss) earnings
per share $(0.13) $0.07 $(0.14) $0.11
Weighted average
number of shares 33,526,735 32,817,883 33,468,406 32,644,576
Period end number
of shares 33,983,080 33,154,780 33,983,080 33,154,780
(x) Note: Due to the change in the pre-production cost accounting policy in the prior year, certain comparative figures have been restated to conform with the revised financial statement presentation.
Meridian Technologies Inc.
CONSOLIDATED BALANCE SHEETS
As at June 30, 1998 (unaudited) and December 31, 1997
June 30, December 31,
1998 1997
--------------------------
($000) ($000)
Assets
Cash 1,627
Accounts receivable 44,298 60,860
Inventory 30,074 21,526
Prepaid expenses 9,449 10,394
--------------------------
Total current assets 85,448 92,780
Land, buildings and equipment 187,671 178,980
Other 631 667
--------------------------
273,750 272,427
--------------------------
Liabilities and Shareholders' Equity
Bank indebtedness 4,537
Accounts payable and
accrued liabilities 68,515 71,074
Current portion of long-term debt 9,103 7,502
--------------------------
Total current liabilities 77,618 83,113
Long-term debt 71,973 65,036
--------------------------
149,591 148,149
Common shares 172,061 168,287
Deficit (50,285) (45,743)
Cumulative translation adjustment 2,383 1,734
--------------------------
Total shareholders' equity 124,159 124,278
--------------------------
273,750 272,427
--------------------------
Meridian Technologies Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
Periods ended June 30 (unaudited)
Three months Six months
1998 1997(x) 1998 1997(x)
(Restated) (Restated)
--------------------- -----------------
($000) ($000) ($000) ($000)
Operations:
Net (loss) earnings (4,089) 2,515 (4,542) 3,667
Depreciation 5,053 4,336 10,059 8,460
Other (5) 7 (5) 44
---------------- ----------------
959 6,858 5,512 12,171
(Investment) reduction
in working capital (3,177) (5,828) 6,686 (6,496)
---------------- ----------------
(2,218) 1,030 12,198 5,675
---------------- ----------------
Financing:
Repayment of
long-term debt (13,609) (15,027) (15,744) (15,695)
Increase in
long-term debt 16,614 1,406 22,800 1,928
Common shares issued 2,294 3,562 3,774 4,319
---------------- ----------------
5,299 (10,059) 10,830 (9,448)
---------------- ----------------
Investments:
Buildings and
equipment (8,678) (8,286) (16,804) (11,686)
Sale of divisions 1,000 2,500
Translation adjustment (227) 27 (60) 352
---------------- ----------------
(8,905) (7,259) (16,864) (8,834)
---------------- ----------------
(Decrease) increase
in cash (5,824) (16,288) 6,164 (12,607)
Cash (bank indebtedness),
beginning of period 7,451 7,779 (4,537) 4,098
---------------- ----------------
Cash (bank indebtedness),
end of period 1,627 (8,509) 1,627 (8,509)
---------------- ----------------
Cash includes short-term deposits and is net of bank indebtedness.
(x) Note: Due to the change in the pre-production cost accounting policy in the prior year, certain comparative figures have been restated to conform with the revised financial statement presentation.