Glas-Aire Reports 54% Increase in Net Income for Q2
17 September 1998
Glas-Aire Reports 54% Increase in Net Income for Second Quarter
VANCOUVER, British Columbia--Sept. 17, 1998-- Glas-Aire Industries Group Ltd. , a leading designer, developer, manufacturer, and marketer of automotive wind deflector accessories to automobile manufacturers worldwide, today announced that its second quarter net income increased 54 percent to $176,000 compared to $114,000 in the second quarter a year ago.
Net income increased 32 percent for the first six months of 1998 to $198,000 from $150,000 for the same period in 1997.
Alex Ding, president of Glas-Aire, stated, "We're still focused on what we do best, which is being a contract manufacturer for the car companies. We're keeping an eye open for new distribution opportunities in the aftermarket plus we are focusing on getting factory certified for QS 9000, a quality system made by General Motors, Ford and Chrysler."
Net sales for the second quarter were down 1 percent to $1.77 million from $1.79 million a year earlier. Net sales for the six months were down 4 percent to $2.85 million from $2.98 million a year earlier. The decrease was caused primarily by a temporary unavailability of two parts and a general decline in automotive sales during the first quarter of 1998.
The company's gross profit on sales increased 8.8 percent from $549,000 to $597,000 for the second quarter of 1998. The company's gross profit for the first six months of 1998 increased 1.3 percent from $930,000 in 1997 to $942,000 in 1998. Gross profit margin for the second quarter increased to 34 percent from 31 percent for the same period in 1997. Gross profit margin for the six-month period increased to 33 percent from 31 percent in 1997.
Cost of sales decreased 5 percent to $1.17 million for the second quarter compared with $1.24 million for the same period in 1997. It decreased by 6.9 percent to $1.9 million for the first six months compared with $2 million in 1997. The decrease was the result of lower sales, a decrease in direct labor expenses and overhead charges, a decline in the cost of materials and a gain in the foreign exchange rate.
Selling and distribution expenses decreased 15 percent from $112,000 for the second quarter of 1997 to $95,000 for 1998 and declined 12 percent from $199,000 for the first six months of 1997 to $174,000 in 1998. This decrease is due to the following factors: 1) lower sales commissions due to the elimination of a sales agent; 2) a decrease in warranty claims; and, 3) an increase in the marketing and promotion of new products.
General and administrative expenses increased one percent from $99,000 for the second quarter of 1997 to $100,000 in 1998. The reasons are a decrease in the number of persons employed in administration, losses on foreign exchange and an additional maintenance support fee.
General and administrative expenses decreased 10 percent for the first half of 1998 from $228 thousand in 1997 to $204 thousand in 1998. The reasons are a decrease in the number of persons employed in administration, a gain on foreign exchange, a loss on the sale of fixed assets in 1997 and lower general administration costs.
Depreciation expense increased by 21 percent for both the three- and six-month periods. It increased to $48,000 for the second quarter from $40,000 in 1997 and to $91,000 from $75,000 for the first half of the year in 1997. The increase was a result of adding new equipment into service.
Expenses for research and development decreased by 33 percent from $125,000 in 1997 to $83,000 for the second quarter of 1998. For the first half of 1998, expenses for research and development decreased 16 percent from $221,000 in 1997 to $186,000 in 1998. The causes of the decrease are a technology fee of $17,000 that was included in the previous year, lower travel expenses to Japan and decreased research and development activities for aftermarket and Japanese projects.
Provision for profit sharing increased 35 percent from $21,000 for the second quarter of 1997 to $28,000 for the same period in 1998. It increased 19 percent from $27,000 to $32,000 for the first six months of 1998 because of the income increase.
Income before income taxes for the second quarter increased 48 percent from $170,000 to $251,000. It increased 27 percent from $223,000 in 1997 to $283,000 for the first half of 1998. The increase was due primarily to a lower cost of sale, savings on operating costs and gain on foreign exchange.
Interest income (net of interest expense) decreased 55 percent from $18,000 in the second quarter of 1997 to $8,000 of 1998. It decreased 35 percent from $42,000 for the first half in 1997 to $27,000 in 1998. The decrease was caused by an increase in interest earnings on cash deposits, higher interest expenses and interest and penalty charges of $10,000 related to a provincial sales tax audit performed on years 1992 to 1997.
For more information on Glas-Aire Industries Group Ltd., look up the company's web site at www.glasair.com or contact Chris G. Mendrop at 303/292-9077.
Further information regarding new customers, higher order quantities and cost savings that the management of Glas-Aire Industries Group Ltd. anticipates is forward-looking and actual results could differ materially from the results that the company's management currently anticipates. The specific factors and events that could cause the actual results to differ materially from the expected results include, among other things, 1) the company's customers and prospective customers do not see value in the company's production capabilities resulting in their not placing new orders with the company; and, 2) competitive factors and general economic conditions.
Glas-Aire Industries Group Ltd.
Consolidated Balance Sheet at July 31, 1998
July 31, 1998 July 31, 1997
(Unaudited) (Audited)
Assets
Current Assets
Cash and Equivalents $ 2,061,554 $ 1,645,953
Accounts receivable 1,081,437 1,200,451
Inventories 627,060 772,780
Prepaid expenses 35,438 19,095
3,805,489 3,638,279
Fixed assets 1,609,785 1,408,816
$ 5,415,274 $ 5,047,095
Liabilities and Shareholders'
Equity
Current
Bank indebtedness $ --- $ ---
Accounts payable and
accrued liabilities 559,315 460,680
Income taxes payable 71,663 92,464
Current portion-capital
lease 28,729 ---
659,707 553,144
Long Term Debt
Obligation Under Capital Lease 107,063 ---
Deferred income taxes 281,327 281,327
1,048,097 834,471
Shareholders' equity
Share capital 15,875 15,875
Contributed surplus 3,462,334 3,462,334
Treasury stock (248,351) (236,163)
Retained earnings 1,243,787 1,045,962
Cumulative translation
adjustment (106,468) (75,384)
4,367,177 4,212,624
$ 5,415,274 $ 5,047,095
Glas-Aire Industries Group Ltd.
Consolidated Condensed Statement of Operations
(Unaudited)
Three Months Ended Six Months Ended
July 31, July 31, July 31, July 31,
1998 1997 1998 1997
Sales $ 1,768,732 $ 1,786,976 $ 2,854,328 $ 2,982,617
Cost of sales 1,171,631 1,238,152 1,912,023 2,052,769
Gross profit 597,101 548,824 942,305 929,848
Expenses
Depreciation 48,025 39,841 90,976 75,259
Research and
development 83,374 124,803 185,972 220,679
Selling and
distribution 95,094 112,414 174,400 198,508
General and
administrative 99,731 99,286 204,082 227,805
Provision for
profit sharing 28,020 20,713 31,550 26,545
Interest (8,078) (17,869) (27,339) (41,774)
346,166 379,188 659,641 707,022
Income before income
taxes 250,935 169,636 282,664 222,826
Income taxes-current 75,214 55,322 84,839 72,419
Income taxes-
deferred --- --- --- ---
Net income (loss)
for the period $ 175,721 $ 114,314 $ 197,825 $ 150,407
Net income per
share of common
stock 0.12 0.08 0.13 0.10
Weight average
common shares
outstanding 1,483,512 1,509,021 1,483,512 1,509,021