Margate Industries Reports Sharply Higher Sales, Profits
23 October 1998
Margate Industries Reports Sharply Higher Sales, Profits; Progress Continues on Share Repurchase Program
YALE, Mich., Oct. 23 -- Margate Industries, Inc.
continued to post improved performance this year, reporting
increased net sales and profitability in the third quarter ended September 30,
1998.
The Yale, Mich.-based castings company said net sales increased 34% and
net income improved by $237,647 over last year's third-quarter results.
Margate said the improvements came despite a temporary slowdown at the
Company's Fort Atkinson, Wisc. facility, caused by the General Motors
automotive strike. Margate reported net income of $3,202 on net sales of $2.5
million in the 1998 third quarter, compared with a net loss of $234,445 on net
sales of $1.9 million in the same period last year.
"I am pleased with our performance in the third quarter," said William H.
Hopton, Margate President and Chief Executive Officer. "Were it not for the
GM strike, Margate would have posted even stronger net income in the most
recent reporting period. With this challenge behind us, and increased
business from existing and new customers coming online, Margate is
well-positioned for improved profitability."
For the nine months ended September 30, 1998, Margate posted record net
income of $1.8 million, or $0.40 per share, on net sales of $7.5 million,
compared with net income of $83,741, or $0.02 per share, on net sales of $8.0
million, in the same period in 1997. The Company attributed the decline in
sales primarily to the General Motors strike. The 1998 period included a $2.1
million pre-tax gain on the sale of Margate's 45% equity interest in New Haven
Foundry in the first quarter.
"We are on track for a record year, and believe the operational
improvements we are making should help us sustain our profit momentum in
1999," Hopton said. "The sale of New Haven Foundry earlier this year has had
a positive impact on earnings and cash flow. Additionally, it has allowed us
to focus on our core cleaning business, which should benefit from improved
productivity and our efforts to manage costs."
Margate reported that selling general and administrative expenses (SG&A)
decreased 15.8% in the first nine months of the year, reflecting Margate's
ongoing cost-management efforts. In the 1998 third quarter, SG&A decreased to
8.2% of net sales, versus 12.8% of net sales in the same period last year.
The Company said its 1998 third-quarter gross profit increased by $288,832
compared with the year-ago third quarter, reflecting increased sales and
better efficiencies at its Yale Industries facility in Yale, Mich.
"We are focused on improving efficiency at our Michigan and Wisconsin
facilities by working with our customers on their production processes and
quality systems. This proactive approach helps Margate provide better service
to customers, improve productivity and develop additional business in our
niche of casting services," Hopton said.
Margate emphasized its optimism for the future in the 1998 third quarter
with an authorization to repurchase up to 10% of its common stock over the
next 12 months. Margate has repurchased 100,000 shares to date in open market
transactions.
"Margate's growth prospects, coupled with our current valuation at less
than one-half book value and a price-to-earnings ratio of one, make the stock
a strong buy from our perspective," said Hopton. "Margate has the earnings
performance, cash flow and the future growth potential to support a higher
stock price, and the board is committed to backing up its belief with action."
Margate Industries employs approximately 200 at two wholly owned
subsidiaries, Yale Industries and Fort Atkinson Industries, which provide
cleaning, grinding, chipping and finishing of iron castings.
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995: The statements contained in this news release include certain
predictions and projections that may be considered forward-looking statements
under securities law. These statements involve a number of important risks
and uncertainties that could cause actual results to differ materially
including, but not limited to, the performance of the automotive industry,
certain customers and affiliated companies, as well as other economic,
competitive and technological factors involving the Company's operations,
markets, services, products and prices.
MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
NET SALES $2,523,248 $1,885,119 $7,453,750 $8,032,290
COST OF SALES 2,317,488 1,968,191 6,784,808 7,067,655
GROSS PROFIT 205,760 (83,072) 668,942 964,635
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 207,368 240,465 613,621 728,525
RELATED PARTY SERVICES
AND SALES COMMISSIONS -- -- 4,231 10,808
INCOME (LOSS) FROM OPERATIONS (1,608) (323,537) 51,090 225,302
DIVIDEND AND INTEREST
INCOME (EXPENSE) - NET 8,690 (26,908) (4,859) (86,561)
OTHER (EXPENSE) -- -- (143,214) --
INCOME (LOSS) BEFORE PROVISION
OF EXTRAORDINARY ITEM 7,082 (350,445) (96,983) 138,741
GAIN ON SALE OF 45% INTEREST IN
NEW HAVEN FOUNDRY -- -- 2,075,000 --
INCOME (LOSS) BEFORE PROVISION
FOR FEDERAL INCOME TAX 7,082 (350,445) 1,978,017 138,741
PROVISION FOR FEDERAL INCOME
TAXES 3,880 (116,000) 170,407 55,000
INCOME (LOSS) $3,202 $(234,445) $1,807,610 $83,741
BASIC EARNINGS PER COMMON
SHARE $0.00 $(0.05) $0.40 $0.02
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,552,658 4,573,637 4,566,557 4,573,637