Durakon Reports Second Quarter Improvement
31 July 1998
Durakon Reports Second Quarter Improvement
-- Second quarter earnings increased compared with a year ago, due to:
-- Higher sales, improved productivity, and 17% lower SG&A.
-- Durakon divested four of its nine Duraliner USA outlets in Q2, and
divested one more so far in Q3.
-- The company expects to complete its divestiture of Duraliner USA
by calendar year-end.
Comparative Second Quarter and 6-Month Highlights
(Amounts in thousands, except per share data.)
2nd Quarter Ended 6-Months Ended
6/30/98 6/30/97 6/30/98 6/30/97
Net Sales $50,449 $46,198 $96,517 $86,814
Operating Income $3,211 $626 $5,543 $1,018
Net Income $2,007 $390 $3,368 $647
Net Income per Share
(diluted)* $0.32 $0.06 $0.54 $0.10
Weighted Avg. Shares
Outstanding* 6,246 6,283 6,273 6,321
Vehicle Accessories segment
-- Sales $25,785 $25,324 $49,080 $46,364
-- Operating Income $2,552 $ 640 $4,442 $ 838
Towing & Recovery segment
-- Sales $24,664 $20,874 $47,437 $40,450
-- Operating Income $659 $(14) $1,101 $ 180
*Both fiscal years reflect diluted net income per share per SFAS 128.
"Durakon's improvement in second quarter earnings reflects the company's
stronger operating position. We are on track to complete the divestiture of
the Duraliner USA locations by year-end, and will continue our common stock
buy-back program."
-- David W. Wright, President and Chief Executive Officer
LAPEER, Mich., July 31 -- Durakon Industries, Inc.
today announced stronger results for the second quarter
compared with the year-ago quarter.
Second Quarter Results
Net income for the second quarter ended June 30, 1998, was $2.0 million or
$0.32 diluted net income per share, compared with $0.4 million or $0.06
diluted net income per share in last year's second quarter. Net sales rose
9% to $50.5 million in this year's second quarter. Vehicle Accessories
segment sales increased 2% to $25.8 million, as record unit bedliner sales
were offset by lower sales at Duraliner USA, which was expected due to
Durakon's divestiture of four of its nine sales and distribution outlets
during the second quarter. Towing & Recovery sales climbed 18% to $24.7
million, mainly due to higher chassis sales and continued progress by Jerr-
Dan's newer distributors.
Profitability also increased. Second quarter gross margin rose to 18.8%
from 17.6%, led by productivity improvements at Durakon. SG&A expenses
decreased 17% in the second quarter due to cost reductions this year and the
divestiture of four Duraliner USA outlets during the quarter. Also, last
year's second quarter was reduced by certain nonrecurring charges. As a
result, SG&A expenses as a percentage of sales decreased to 12.4% from 16.3%,
and operating margin rose to 6.4% from 1.4% in the year-ago quarter.
Management said savings realized from the divestiture of the four
Duraliner USA locations during the second quarter were offset by costs
involved in the divestiture process. In addition to the divestiture of four
of the nine outlets during the second quarter, one additional outlet has been
divested so far in the third quarter, leaving four outlets in operation.
Also, a Duraliner USA location that became a joint venture in mid-1997, was
sold at the beginning of the third quarter. In calendar year 1997, Duraliner
USA had an operating loss of $2.5 million.
"We are pleased to report our second consecutive quarter of earnings
improvement," said David W. Wright, President and Chief Executive Officer of
Durakon Industries, Inc. "Our productivity programs are working -- we reduced
SG&A by 17% in the second quarter and we're on track with our continuing
divestiture of Duraliner USA, which should be completed by year-end. While
our markets remain challenging, second quarter bedliner unit sales reached
record levels, Jerr-Dan's sales are improving, and we are positioned for
further progress."
Six-Month Results
For the six months ended June 30, 1998, Durakon's net income was $3.4
million or $0.54 diluted net income per share, compared with $0.6 million or
$0.10 diluted net income per share in the year-ago period. Sales were up 11%
to $96.5 million, paced by a 6% rise in Vehicle Accessories sales and a 17%
increase in Towing & Recovery sales. Operating income increased to $5.5
million from $1.0 million in the year-ago period, with strong improvements in
both segments.
At June 30, 1998, the company had bought back more than 110,000 shares of
its 600,000 share repurchase program announced in March. Durakon had
6,133,500 shares outstanding at June 30, 1998.
Forward-Looking Statements
The discussion above contains forward-looking statements about the
company's future growth, profitability and competitive position. Any such
statements are subject to risks and uncertainties, including changes in
economic and market conditions, industry competition, the success of new
product introductions, the realization of expected economies from productivity
programs and plant expansions, management of growth and other factors outside
the company's control, including factors discussed from time to time in the
company's filings with the Securities and Exchange Commission, including its
Annual Report on Form 10-K. Readers are cautioned not to place undue reliance
on forward-looking statements, which reflect management's analysis only as of
the date hereof. The company undertakes no obligation to update these
forward-looking statements to reflect events or circumstances that may arise
after the date hereof or to reflect actual results.
Durakon Industries is the world's leading producer and distributor of
pickup truck bedliners, and is a leader in the production and marketing of
rollback car carriers and wheel-lift towing vehicles. Durakon's world
headquarters and a major manufacturing facility are in Lapeer, Michigan.
Other manufacturing plants are in Greencastle, Pennsylvania; Clinton,
Tennessee; and Lerma, Mexico. Durakon's common stock is traded on the Nasdaq
Stock Market under the ticker symbol DRKN.
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Amounts in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Net sales $50,449 $46,198 $96,517 $86,814
Cost of products sold 40,989 38,053 78,560 71,193
Gross profit 9,460 8,145 17,957 15,621
Selling, general, and
administrative expenses 6,249 7,519 12,414 14,603
Operating income 3,211 626 5,543 1,018
Interest income, net 69 1 136 42
Other (expense), net (226) (18) (354) (63)
Income before income taxes 3,054 609 5,325 997
Provision for income taxes 1,047 219 1,957 350
Net income $2,007 $390 $3,368 $647
Basic net income per share of
common stock $0.32 $0.06 $0.54 $0.10
Diluted net income per share of
common stock $0.32 $0.06 $0.54 $0.10
Weighted average shares outstanding:
Basic shares 6,153 6,236 6,196 6,264
Diluted shares 6,246 6,283 6,273 6,321
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
($ in thousands)
June 30, December 31,
1998 1997
ASSETS
Current assets:
Cash and equivalents $9,831 $7,907
Accounts receivable, less allowances
of $1,098 and $1,252 20,454 20,039
Inventories
Raw materials and work in process 9,198 8,279
Finished goods 10,847 8,469
Total Inventories 20,045 16,748
Prepaid expenses and other current assets 2,048 2,401
Deferred income taxes 2,930 2,973
Total current assets 55,308 50,068
Property, plant and equipment, net 20,842 21,943
Goodwill 10,263 10,601
Patents, net 202 270
Other assets 209 210
TOTAL ASSETS $86,824 $83,092
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $162 $248
Accounts payable 10,572 10,308
Other current liabilities 9,042 7,831
Total current liabilities 19,776 18,387
Long-term debt 520 554
Deferred income taxes 1,216 1,184
Minority interest 854 681
Total liabilities 22,366 20,806
Shareholders' equity:
Preferred stock, $1 par value -
100,000 shares authorized; none issued -- --
Common stock, without par value -
15,000,000 shares authorized;
6,133,500 and 6,245,292 shares issued
and outstanding 16,116 17,244
Accumulated translation adjustment (358) (290)
Retained earnings 48,700 45,332
Total shareholders' equity 64,458 62,286
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $86,824 $83,092
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
($ in thousands)
1998 1997
Cash flows from operating activities:
Net income $3,368 $647
Adjustment to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 3,103 2,342
Increase in minority interest, net 173 303
Loss on sale of property, plant and equipment-- 24
Net increase (decrease) of tangible and
other assets, net 1 (296)
Net decrease in deferred income taxes 75 224
Increase/(decrease) due to changes in
operating assets and liabilities:
Accounts receivable (415) 39
Inventories (3,297) (864)
Prepaid expenses and other current assets 353 (363)
Accounts payable 264 1,173
Accrued expenses and other current
liabilities 1,211 (157)
Net cash provided by operating activities 4,836 3,072
Cash flows used in investing activities:
Purchases of property, plant and equipment (1,712) (3,480)
Proceeds from retirement of property,
plant and equipment 116 2
Net cash used in investing activities (1,596) (3,478)
Cash flows used in financing activities:
Repayment of long-term debt (120) (105)
Repurchase of common stock (1,128) (5,200)
Cash proceeds from exercise of stock options -- 422
Net cash used in financing activities (1,248) (4,883)
Effect of exchange rate changes on cash (68) 2
Cash and equivalents:
Increase/(decrease) for the period 1,924 (5,287)
Balance, beginning of period 7,907 8,597
Balance, end of period $9,831 $3,310