Defiance, Inc. Reports Fourth Quarter and Fiscal Year Results
5 August 1998
Defiance, Inc. Reports Fourth Quarter and Fiscal Year Results
CLEVELAND, Aug. 5 -- Defiance, Inc. today
reported net earnings for its fourth fiscal quarter ended June 30, 1998
reached $1,709,000, or $0.28 per share, up from $1,363,000, or $0.21 per
share, for the same period last year. Sales for the quarter were $23,642,000,
compared with $24,948,000 for the same quarter last year.
Fiscal year net earnings were $4,516,000, or $0.73 per share, compared
with $4,335,000, or $0.67 per share, in the prior year. Prior year earnings
included a pretax charge of $632,000 in the third fiscal quarter ($0.06 per
share on a pro-forma basis) to close out a pension plan. Without the effect
of this one-time charge, prior year earnings per share would have been $0.73.
Fiscal year sales were $89,251,000, compared with $92,123,000 for the same
period last year. Prior year sales included $1,307,000 from business units
sold or closed during the first half last year.
Jerry A. Cooper, president and chief executive officer, said, "Fourth
quarter earnings improved 7 cents per share over last year despite 5 percent
lower sales. Lower testing services revenues and prototype parts sales were
partially offset by higher sales of cam follower rollers and axles and tooling
development services. The increase in net earnings for the quarter was driven
by a 3 percentage point increase in gross margins and substantially lower
interest costs. The General Motors labor strike affected fourth quarter
earnings by about 2 cents a share. We began to see the effect of the strike
on shipments of cam follower rollers to General Motors' Delphi Automotive
Systems unit in late June.
"For the year, earnings per share matched last year's results before the
pension charge. Sales from ongoing operations finished 2 percent below last
year. Revenues from testing services, prototype parts and tooling development
services were down as a result of delays in the release of new prototype and
tooling programs from both Ford and Chrysler during the first half of the year
combined with scaled-back testing demand from automotive OEM and Tier One
suppliers. This decline was nearly offset by increased sales of cam follower
rollers and axles to Eaton Corporation for its Chrysler automotive
requirements and increased sales of diesel engine rollers and axles resulting
from a strong heavy-duty truck market. Gross margins, as a percentage of
sales, were consistent with last year. Selling and administrative expenses
were down slightly, while interest costs were 31 percent lower than last year,
the result of $6.5 million in debt reduction during the year. Our debt to
total capitalization ratio finished the year at 25 percent, compared with
34 percent at last fiscal year end and nearly 40 percent the year before.
"We also returned $3.6 million to our shareholders in the form of
dividends and stock repurchases during fiscal 1998, which represents 58 cents
per share based on the average number of shares held during the year. In
addition to a 4 cent per share quarterly dividend, we repurchased 360,000
shares of stock during the year under a plan adopted in January 1996. This
brings the total shares repurchased since the plan was adopted to 864,100
shares at an average price of $6.68 per share.
"The General Motors labor strike, resolved in late July, will affect
earnings in the first quarter of fiscal 1999. We normally ship about
$1 million a month in cam follower rollers to Delphi for General Motors'
automotive and light truck applications."
Defiance, headquartered in Cleveland, is a manufacturer of specialty anti-
friction bearings and metal prototype dies and parts, and provides testing and
tooling development services to the U.S. motor vehicle industry.
Defiance's Internet address is http://www.defiance-inc.com.
This press release contains forward-looking statements within the meaning
of the Private Litigation Reform Act of 1995. Actual results may differ
materially from anticipated results due to certain risks and uncertainties,
including but not limited to general economic conditions in the markets in
which Defiance operates, fluctuations in the production of vehicles for which
Defiance is a supplier, fluctuations in the level of new model development
activity at Defiance's significant customers, labor disputes involving
Defiance or its significant customers, and other risks detailed from time to
time in Defiance's Securities and Exchange Commission filings.
DEFIANCE, INC.
Consolidated Financial Highlights
Operations and Cash Flow
Three Months Ended Twelve Months Ended
6/30/98 6/30/97 6/30/98 6/30/97
Net sales $23,642,000 $24,948,000 $89,251,000 $92,123,000
Cost of goods sold 18,313,000 20,085,000 70,719,000 72,719,000
Gross profit 5,329,000 4,863,000 18,532,000 19,404,000
Selling and
administrative
expenses 2,629,000 2,541,000 10,569,000 10,699,000
Other charges -- -- -- 632,000
Operating
earnings 2,700,000 2,322,000 7,963,000 8,073,000
Interest
expense - net 237,000 404,000 1,160,000 1,673,000
Earnings before
income tax
provision 2,463,000 1,918,000 6,803,000 6,400,000
Income tax provision 754,000 555,000 2,287,000 2,065,000
Net earnings $1,709,000 $1,363,000 $4,516,000 $4,335,000
Basic and diluted
earnings per share $0.28 $0.21 $0.73 $0.67
Average common
outstanding shares:
Used for basic
earnings per
share 6,100,926 6,423,835 6,170,884 6,423,420
Used for diluted
earnings per
share 6,138,681 6,472,091 6,211,338 6,505,456
Cash dividends
per share $0.04 $0.04 $0.16 $0.16
Depreciation and
amortization $1,674,000 $1,809,000 $7,258,000 $7,155,000
Capital
expenditures $1,397,000 $1,067,000 $2,988,000 $4,208,000
Financial Condition 6/30/98 6/30/97
Current assets $27,297,000 $28,974,000
Property - net 34,722,000 37,822,000
Goodwill 4,619,000 4,871,000
Other assets 1,304,000 2,152,000
Total assets $67,942,000 $73,819,000
Current liabilities $14,675,000 $17,193,000
Long-term obligations 9,955,000 14,968,000
Deferred income taxes 3,209,000 3,267,000
Stockholders' equity 40,103,000 38,391,000
Total liabilities and
stockholders' equity $67,942,000 $73,819,000
Funded (interest-bearing) debt $13,308,000 $19,797,000
Debt to total capitalization ratio 25% 34%