Edelbrock Corp. Reports Continued Improvement in Sales
3 September 1998
Edelbrock Corp. Reports Continued Improvement in Sales for Fourth Quarter and Fiscal Year 1998
TORRANCE, Calif.--Sept. 3, 1998--Edelbrock Corp. (Nasdaq NM:EDEL) Thursday reported continued sales improvement for its fiscal 1998 fourth quarter and year ended June 30, 1998.The quarterly and annual sales gains were led by strong growth in the sale of the company's automotive manifolds, cylinder heads and Performer Series carburetors. Edelbrock also reported that sales of its new Performer IAS shock absorbers continued to trend upward in response to aggressive advertising support and ongoing expansion of the product's application base.
For the fourth quarter of fiscal 1998, revenues improved 9.0 percent to $29.4 million from revenues of $27.0 million in the fourth quarter of fiscal 1997. Net income for the fiscal 1998 quarter was $2.4 million, or 46 cents per basic share (45 cents per diluted share), compared with net income of $2.6 million, or 50 cents per basic share (49 cents per diluted share) for the same period of fiscal 1997.
Net income for the fiscal 1998 period included increased sales, general and administrative (SG&A) expenses related to advertising; increased depreciation and operational costs resulting from the implementation of the state-of-the-art Oracle database and applications; and ongoing expenses related to the implementation of QS 9000.
Additionally, the current quarter reflects royalty expenses to RICOR Racing and Development Inc. relating to the sales of Edelbrock's Performer IAS shock absorbers as well as an increase in the reserve for doubtful accounts of $200,000 to offset possible future uncollectible receivables.
For fiscal 1998, revenues increased 9.6 percent to $95.5 million from revenues of $87.1 million last year. Net income for fiscal 1998 was $5.8 million, or $1.10 per basic share ($1.08 per diluted share), compared with net income of $7.1 million, or $1.36 per basic share ($1.34 per diluted share) for fiscal 1997.
In addition to the aforementioned expenses incurred during the fourth quarter, net income for fiscal 1998 was influenced by a $1.9 million pretax charge taken against earnings in the second quarter for the write-off of unsecured receivables with Super Shops Inc., formerly the company's second largest customer, which declared Chapter 11 bankruptcy and eventual liquidation.
Excluding the receivable write-off, net income for fiscal 1998 would have been reported as $7.0 million, or $1.33 per basic share.
The improvement in revenues for the fourth quarter of fiscal 1998 was attributable to continuing strong demand for Edelbrock's automotive aluminum intake manifolds and cylinder heads, and its popular Performer Series carburetors -- sales of which rose 10.2 percent, 17.6 percent and 24.5 percent, respectively, over the fourth quarter of fiscal 1997.
The company also experienced strong comparative gains in the sale of its revolutionary Performer IAS shock absorber since its introduction in the fourth quarter of last year.
On the year, sales improved across a broad range of new and established automotive product lines. Sales of aluminum cylinder heads and intake manifolds increased 32.1 percent and 11.4 percent, respectively; sales of Performer Series carburetors rose 16.2 percent; chrome and aluminum air cleaners and valve covers climbed 6.9 percent; and exhaust products improved 8.9 percent.
Edelbrock reported that the quarterly and annual sales increases resulted primarily from aggressive advertising and other promotional activities, continued expansion of the application base for most of the aforementioned products, and the strong reputation for quality and performance enjoyed by the products among consumers.
SG&A expenses rose 19.1 percent in the fourth quarter of fiscal 1998 to 25.5 percent of sales from 23.4 percent of sales in the fourth quarter of fiscal 1997. Year-to-year, SG&A expenses increased 14.0 percent to 25.4 percent of sales in fiscal 1998 from 24.5 percent of sales last year.
The increases in SG&A for fiscal 1998 resulted primarily from the company's investment in a state-of-the-art Oracle database system, companywide development of the QS 9000 quality standard, and increased advertising necessary to promote its growing line of products and vehicle applications.
SG&A expenses for fiscal 1998 also include the aforementioned $1.9 million write-off for unsecured receivables taken in the second quarter and an increase of $200,000 in the reserve for doubtful accounts to offset possible future uncollectible receivables.
Additionally, the current year reflects royalty expenses to RICOR Racing and Development relating to the sales of Edelbrock's Performer IAS shock absorbers.
Research and development expenses for the fourth quarter of fiscal 1998 increased 8.4 percent from the year-ago period to $1.2 million from $1.1 million recorded in the same period last year. As a percent of sales, R&D expenses remained unchanged at 4.1 percent for both quarterly periods.
For the fiscal year, R&D expenses increased 3.4 percent to $3.0 million from $2.9 million in the previous period. As a percent of sales, R&D expenses for the fiscal year decreased to 3.1 percent from 3.3 percent in the previous period.
Commenting on the company's results, Edelbrock Chairman and Chief Executive Officer Vic Edelbrock said: "We are very gratified by the results we achieved this year. After losing our second largest customer early in the year, sales rebounded by year-end to a virtual double-digit improvement, and we completed the year with incoming fourth quarter orders up 7.8 percent over fiscal 1997, and an increase in backlog of 74 percent at the end of the prior fiscal year period.
"We're also very encouraged by the sales mix we've been seeing," Edelbrock noted. "Not only are we continuing to achieve double-digit improvements in established lines like cylinder heads, manifolds and carburetors, but a number of newer lines, like exhaust system components, have begun to emerge as consistent contributors to our growth," he said.
"We also remain extremely excited by the ongoing ramp-up in sales for our new Performer IAS shock absorbers," Edelbrock continued. "Because this is a true bolt-on product that delivers the improved ride and handling, all drivers -- not just enthusiasts -- can appreciate, it has significant market potential that goes far beyond the majority of our other products, which are generally purchased only by performance enthusiasts.
"We're working aggressively to maximize sales of this breakthrough product by expanding the application base and supporting it with solid multimedia advertising. We know, based on the exceptional testimonials we receive almost daily from those who use the Performer IAS, that these efforts are truly paying off.
"The trends we have seen taking shape throughout fiscal 1998, and the enhancements we have made internally to our operations during this year of growth, make us in management very confident in the future of Edelbrock Corporation," Edelbrock concluded.
Founded in 1938, Torrance-based Edelbrock is recognized as one of the nation's premier designers, manufacturers and distributors of performance replacement parts for the automotive and motorcycle aftermarkets.
In addition to three production facilities in Torrance, the company owns and operates a state-of-the-art aluminum foundry in San Jacinto, Calif., at which it manufactures many of its quality products.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.
Potential risks and uncertainties include such factors as the financial strength and competitive pricing environment of the automotive and motorcycle aftermarkets industries, product demand, market acceptance, manufacturing efficiencies, new product development, the success of planned advertising, marketing and promotional campaigns, and other risks identified in documents filed by the company with the Securities and Exchange Commission.
EDELBROCK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Fiscal Year Ended
June 30, June 30,
1998 1997 1998 1997
Revenues $29,424,000 $27,000,000 $95,504,000 $87,120,000
Cost of sales 17,105,000 15,733,000 57,410,000 52,163,000
Gross
profit 12,319,000 11,267,000 38,094,000 34,957,000
Operating expenses
Selling,
general and
administrative 7,510,000 6,305,000 24,281,000 21,308,000
Research and
development 1,207,000 1,113,000 2,972,000 2,874,000
Write-off of
uncollectible
receivable -- -- 1,878,000 --
Total operating
expenses 8,717,000 7,418,000 29,131,000 24,182,000
Operating income 3,602,000 3,849,000 8,963,000 10,775,000
Interest expense 63,000 80,000 269,000 340,000
Interest income 189,000 76,000 410,000 317,000
Other income -- 192,000 -- 469,000
Income before
taxes on income 3,728,000 4,037,000 9,104,000 11,221,000
Taxes on income 1,315,000 1,418,000 3,304,000 4,076,000
Net income $2,413,000 $2,619,000 $5,800,000 $7,145,000
Basic net
income per
share $0.46 $0.50 $1.10 $1.36
Diluted net
income per
share $0.45 $0.49 $1.08 $1.34
Basic weighted
average number
of shares
outstanding 5,257,000 5,248,000 5,252,000 5,244,000
Diluted weighted
average number
of shares
outstanding 5,377,000 5,395,000 5,388,000 5,352,000
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EDELBROCK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, June 30,
1998 1997
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $8,370,000 $9,744,000
Accounts receivable, net 21,222,000 19,876,000
Inventories 16,776,000 13,048,000
Prepaid expenses and other 1,288,000 1,203,000
Total current assets 47,656,000 43,871,000
Property, plant and equipment, net 35,676,000 31,918,000
Real estate properties, net 902,000 1,282,000
Other 741,000 797,000
Total assets $84,975,000 $77,868,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $14,724,000 $13,444,000
Accrued expenses 3,610,000 3,023,000
Current portion of long-term debt 62,000 976,000
Total current liabilities 18,396,000 17,443,000
Long-term debt 2,123,000 2,178,000
Deferred income taxes 2,725,000 2,597,000
Shareholders' equity 61,731,000 55,650,000
Total liabilities and shareholders' equity $84,975,000 $77,868,000