Mark IV Reports Second Quarter Results
15 September 1998
Mark IV Reports Second Quarter Results
AMHERST, N.Y.--Sept. 15, 1998--Mark IV Industries, Inc. today reported results for its second fiscal quarter and six months ended August 31, 1998.In the quarter, net income decreased 24 percent, to $20.9 million from $27.5 million last year, while diluted earnings per share decreased 19 percent, to 35 cents from 43 cents last year.
Sales for the quarter increased nine percent, to $578.5 million from $531.1 million last year. Excluding the effects of acquisitions in the latter part of fiscal 1998, sales for the quarter reflect an increase of approximately $20 million, or four percent over last year's like period. Operating income (income before interest expense and taxes) was down 18 percent in the quarter, to $49.4 million from $60.5 million in fiscal 1998.
Diluted weighted average shares outstanding increased three percent in the quarter, to 66.2 million from 64.2 million in fiscal 1998, due to the issuance of $275 million of 4- 3/4% convertible subordinated notes which occurred late in the third quarter of the last fiscal year. All share and share-related amounts are presented on a diluted basis.
In the first half of fiscal 1999, income before an extraordinary charge for early debt extinguishment decreased 17 percent, to $47.8 million, or 76 cents per share, from $57.6 million, or 89 cents per share last year.
Sales for the six-month period increased eight percent, to $1.18 billion from $1.09 billion last year. Excluding the effects of acquisitions in the latter part of fiscal 1998, sales for the half reflect an increase of approximately $43 million, or four percent over last year's first half. Operating income for the period was down 14 percent, to $106.9 million from $124.1 million in the first half of fiscal 1998.
Diluted weighted average shares outstanding increased five percent in the half, to 68.3 million from 65.1 million, again reflecting last year's third quarter issuance of $275 million of 4-3/4% subordinated convertible notes.
Net income in the first half of fiscal 1999 decreased to $45.2 million, or 72 cents per share, from $57.6 million, or 89 cents per share last year. Fiscal 1999 results reflect an extraordinary charge for early debt extinguishment of $2.6 million after taxes, or four cents per share, which was recognized in the first quarter.
The GM strike, which commenced in June and ended in early August with its subsequent ramp up, negatively impacted Mark IV's earnings in the second quarter. Although the strike is over and all affected Mark IV units are now back up-and- running, the shut down cost the company approximately $3.2 million, net of taxes, or five cents per share in earnings in the second quarter and first half of fiscal 1999. Most of the strike impact was felt in the Automotive division with a small amount falling on the Industrial group.
Commenting on the company's results, Sal H. Alfiero, chairman and chief executive officer, said, "Although Mark IV's operating results were down in the first two quarters of fiscal 1999, they were in line with previously announced expectations, including the GM strike effects. Earnings from revenue gains achieved in the periods were offset by the continuation of duplicate costs stemming from the additional time required to complete our restructuring program. We are pleased to say that the restructuring will be substantially complete within the third quarter.
"Cash flow from operations continued to improve in the quarter, in line with our expectations for the year. The improvement was due, in part, to a significant reduction in capital expenditures, which returned to more normal levels in both the second quarter and first half of fiscal 1999 versus last year, and tighter working capital management. Both of these factors are trends we expect to continue in the second half of the year and beyond.
"Since March 1997 to date, Mark IV has repurchased an aggregate of 12.0 million shares of common stock. In fiscal 1999 alone, we have bought back more than 8.5 million shares of stock at an average cost of $19.45 per share, not only completing a 7.3 million share repurchase program authorized last year, but also almost half (4.7 million shares) of a newly authorized ten million share repurchase program."
In discussing the company's operations, Mr. Alfiero, said, "Automotive OEM revenues, while hurt by the GM strike, are up over last year in both North America and Europe. In South America, where our asset base remains relatively small, we are now operating at profitable levels in Brazil. In addition, our new facility in Argentina, which is currently in the prototype phase, should be fully operational near the end of the current fiscal year, ending a drain on earnings. In our Industrial business segment, the Transportation products group is leading revenue and earnings growth, followed by increased sales of industrial filter products, bolstering a somewhat slower pace of earnings growth in the industrial rubber products business. However, improvements in Mark IV's Automotive OEM and Industrial businesses were not enough to offset the negative effects of a weak Automotive Aftermarket, the GM strike, foreign currency effects and the wind-down of the duplicate restructuring costs, as previously discussed."
Mr. Alfiero added, "We are beginning to see signs of improving profitability, notwithstanding global market conditions, due in large part to the elimination of duplicate and other costs associated with our essentially complete restructuring program, combined with ongoing cost control and margin improvement initiatives. In addition, depending upon market conditions, we will continue to purchase the company's stock from time to time at current price levels which we find extremely attractive."
This press release contains forward-looking statements that involve risk and uncertainties as detailed from time to time in the company's SEC reports, including its report on Form 10-K for its fiscal year ended February 28, 1998. These risks and uncertainties could affect the company's actual results and cause them to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the company.
Mark IV Industries, Inc. is a $2.2 billion global manufacturing company headquartered in the Buffalo suburb of Amherst, New York, employing 17,000 people worldwide. The company's core technologies include power transmission, fluid transfer and filtration systems and components for global industrial and automotive markets. For more information on Mark IV, visit the company's web site at http://www.mark-iv.com.
MARK IV INDUSTRIES, INC.
(Amounts in thousands, except per share data)
Three Months Ended Six Months Ended
August 31, August 31,
1998 1997 1998 1997
Sales $578,500 $531,100 $1,183,000 $1,091,200
Operating income (a) $ 49,400 $ 60,500 $ 106,900 $ 124,100
Interest expense $ 16,800 $ 15,600 $ 32,400 $ 29,900
Operating income, net of
interest expense $ 32,600 $ 44,900 $ 74,500 $ 94,200
Income before
extraordinary loss (b) $ 20,900 $ 27,500 $ 47,800 $ 57,600
Extraordinary loss (c) - - $ (2,600) -
Net income $ 20,900 $ 27,500 $ 45,200 $ 57,600
Earnings per share:
Basic:
Income before
extraordinary loss $.36 $.43 $.80 $ .89
Extraordinary loss - - (.04) -
Net income $.36 $.43 $.76 $ .89
Diluted:
Income before
extraordinary loss $.35 $.43 $.76 $ .89
Extraordinary loss - - (.04) -
Net income $.35 $.43 $.72 $ .89
Weighted average number
of shares outstanding:
Basic 57,600 63,700 59,600 64,600
Diluted 66,200 64,200 68,300 65,100
(a) Represents income before interest expense and taxes.
(b) Presented net of related tax effects.
(c) Represents extraordinary loss from early debt extinguishment,
presented net of related tax effects.