Aftermarket Technology Reports Q2 1998 Financial Results
7 August 1998
Aftermarket Technology Reports Second Quarter 1998 Financial Results
WESTMONT, Ill.--Aug. 7, 1998--Revenues Increase 53% Due to Acquisitions
Income from Operations before Special Charges Increases 17%
Profit Improvement Initiatives to Add 8 cents EPS in 1999
Aftermarket Technology Corp. today announced that for the quarter ended June 30, 1998, the company had revenues of $130.5 million, a 53% increase compared to the second quarter of last year, primarily due to the company's acquisition of the OEM division of Autocraft.
The company recorded earnings of $6.1 million or 29 cents per diluted share, not including special charges of $3.6 million or 10 cents per diluted share, net of tax. Including the special charges, the company recorded net income of $4.0 million or 19 cents per diluted share, for the quarter. That compares to net income of $5.9 million or 31 cents per diluted share in the second quarter of 1997. The number of shares used to calculate net income per diluted share was 21.3 million for the first quarter of 1998, compared to 18.9 million for the comparable quarter of 1997.
For the six months ended June 30, 1998, the company had revenues of $237.5 million, a 41% increase compared to the same period of last year. The company had earnings of $12.5 million or 59 cents per diluted share, before the special charges and an extraordinary charge of $0.4 million or two cents per diluted share, net of tax, which related to the amendment and restatement of the company's credit facility in March 1998. Net income, as reported for the six months, was $9.9 million or 47 cents per diluted share, including the extraordinary and special charges. By comparison, for the six months ended June 30, 1997, the company reported revenues of $168.1 million and net income of $7.7 million or 41 cents per diluted share, including an extraordinary charge of $3.7 million or 20 cents per diluted share, net of tax, recorded in February 1997 primarily related to the early retirement of debt. The number of shares used to calculate net income per diluted share was 21.3 million for the first six months of 1998, compared to 18.9 million for the comparable six months of 1997.
"We are encouraged by our increase in operating income of 17% compared to last year's quarter, excluding certain special charges that were recorded in the second quarter of 1998," commented Stephen J. Perkins, chairman, president and CEO of Aftermarket Technology. "We have taken these special charges in connection with commencing two initiatives designed to reduce costs and improve operating efficiencies: the introduction of "lean" manufacturing techniques and the consolidation and integration of our Distribution Group from nine companies into a single entity. The introduction of lean manufacturing has allowed us to consolidate our engine remanufacturing production from two plants to one, thereby reducing overhead and required square footage. Special charges of $3.6 million recorded during the second quarter covers the first phase of our consolidation efforts. These initiatives are anticipated to produce pre-tax cost savings of approximately $3.0 million for 1999, or 8 cents on an EPS basis.
"We experienced lower sales volume from each of our OEM customers during the first six months of 1998 compared to the first six months of last year, although our sales to our OEM customers as a group were up due to acquisitions. As previously mentioned, we believe this has been due to the mild weather resulting in reduced demand for transmission replacements. In addition, we are working with our OEM customers to reduce their excess inventory to targeted levels and as a result we expect that sales volumes for the second half of this year will be slightly below what was originally anticipated. Nevertheless, based upon customer indications, we believe that sales volumes will return back to normal levels by the end of 1998. Volumes should also increase with the ramp-up of our new remanufactured rear wheel drive program for Chrysler, which we announced in May.
"Based on the anticipated return of OEM sales volumes to normal levels, the ramping up of the Chrysler rear wheel drive program, and the cost savings from our Distribution Group consolidation and our lean manufacturing initiatives, we expect the company to be in an excellent position to achieve very strong double-digit earnings growth for 1999."
The preceding paragraphs contains forward-looking statements that are subject to risks and uncertainties that are described in the company's filings with the Securities and Exchange Commission. There can be no assurance that actual results will not differ materially from those projected or implied by such statements.
Aftermarket Technology is a leading remanufacturer and distributor of drive train products used in the repair of vehicles in the automotive aftermarket. Aftermarket Technology's principal products include remanufactured transmissions, torque converters, engines, electronic control modules, instrument display clusters and radios as well as remanufactured and new parts for the repair of automotive drive train assemblies. The company's customers include original equipment manufacturers, independent transmission rebuilders, general repair shops, distributors and retail automotive parts stores. Established in 1994, the company maintains over 50 distribution centers throughout the United States and Canada, and also has facilities in Mexico and England.
(table to follow)
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
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---------------------------------------
(Unaudited) (Unaudited)
Net sales $130,468 $ 85,410 $237,469 $168,098
Cost of sales 89,038 52,047 158,561 103,160
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Gross profit 41,430 33,363 78,908 64,938
Selling, general and
administrative expense 23,157 18,277 44,263 35,736
Amortization of intangible assets 1,751 1,007 3,239 1,991
Special charges 3,580 -- 3,580 --
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Income from operations 12,942 14,079 27,826 27,211
Interest and other income 299 307 950 1,008
Interest expense 6,451 4,499 11,636 9,023
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Income before income taxes
and extraordinary item 6,790 9,887 17,140 19,196
Provision for income taxes 2,792 3,975 6,839 7,717
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Income before extraordinary item 3,998 5,912 10,301 11,479
Extraordinary item - net of income
tax benefit of $242 and
$2,520 for 1998 and 1997 -- -- 363 3,749
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Net income $3,998 $5,912 $9,938 $7,730
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Basic earnings per common share:
Income before extraordinary
item $0.20 $0.35 $0.52 $0.68
Extraordinary item -- -- (0.02) (0.22)
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Net income $0.20 $0.35 $0.50 $0.46
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Weighted average number of
common shares outstanding 20,015 17,000 19,898 16,990
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Diluted earnings per common share:
Income before extraordinary
item $0.19 $0.31 $0.49 $0.61
Extraordinary item -- -- (0.02) (0.20)
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Net income $0.19 $0.31 $0.47 $0.41
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Weighted average number of common and
common equivalent shares
outstanding 21,251 18,897 21,259 18,882
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