Durakon Reports Continued Progress in Third Quarter
4 November 1998
Durakon Reports Continued Progress in Third Quarter
*Third quarter earnings increased, mainly due to the positive impact of
cost-reduction programs.
-- Profitability improved in both segments, as gross margin rose 16% and
SG&A decreased 32%.
*Durakon divested four additional Duraliner USA outlets in the third
quarter; two outlets remain.
-- The company expects to complete its divestiture of Duraliner USA's
remaining outlets by 12/31/98.
Comparative Third Quarter and 9-Month Highlights
(Amounts in thousands, except per share data)
3rd Quarter Ended 9 Months Ended
9/30/98 9/30/97 9/30/98 9/30/97
Net Sales $47,177 $45,209 $143,694 $132,023
Operating Income $2,599 $(890) $8,142 $128
Net Income $1,648 $(634) $5,016 $13
Net Income per
Share (diluted) $0.26 $(0.10) $ 0.80 $ 0.00
Weighted Avg. Shares
Outstanding (diluted) 6,231 6,287 6,258 6,310
Vehicle Accessories segment
Sales $20,779 $23,001 $69,859 $69,365
Operating Income $1,532 $(1,003) $5,974 $(165)
Towing & Recovery segment
Sales $26,398 $22,208 $73,835 $62,658
Operating Income $1,067 $113 $2,168 $293
"Durakon's progress is encouraging. Cost-reduction programs have improved
profitability, Towing & Recovery sales have increased considerably, and
favorable sales trends in Vehicle Accessories have resumed with the resolution
of the GM strike. With plans to complete the divestiture of Duraliner USA's
remaining outlets by calendar year-end, Durakon is positioned for further
progress."
-- David W. Wright, President and Chief Executive Officer
LAPEER, Mich., Nov. 4 -- Durakon Industries, Inc.
today announced higher third quarter earnings compared with a
year-ago due to stronger profitability in both of its business segments.
Third Quarter Results
Net income for the third quarter ended September 30, 1998, was $1.6
million or $0.26 diluted net income per share, compared with a net loss of
$634,000 or $0.10 diluted per share in last year's third quarter. Net sales
rose 4% to $47.2 million, led by strong sales growth in the Towing & Recovery
segment. International sales represented about 14% of bedliner unit sales in
the third quarter, with virtually no sales in Asian markets. While
international unit sales decreased, Durakon realized approximately the same
gross profit for international sales as the year-ago quarter.
Sales in Vehicle Accessories decreased 10% to $20.8 million. Sales growth
trends in the first two quarters were interrupted in the third quarter by:
the impact of the GM strike, reduced international sales, and lower sales at
Duraliner USA, which was expected due to Durakon's ongoing divestiture of that
business unit. After divesting four Duraliner USA sales and distribution
outlets in the first half of 1998, Durakon divested four additional Duraliner
USA outlets in the third quarter. Durakon had two outlets remaining at the
close of the third quarter compared with ten in the prior year, and intends to
divest the remaining two outlets by year-end 1998. In calendar year 1997,
Duraliner USA had an operating loss of $2.5 million.
Vehicle Accessories operating income rose to $1.5 million compared with a
loss of $1.0 million in last year's third quarter, which included inventory
charges of $1.3 million. The segment's increase in operating income was
mainly due to an 11% increase in the segment's gross margin and a 38% decrease
in SG&A expenses. The improvements in both measures resulted from the
continuing divestiture of Duraliner USA and the success of ongoing cost-
reduction programs.
Towing & Recovery sales climbed 19% to $26.4 million, the segment's third
consecutive quarter of strong year-to-year improvement from last year's soft
levels. The segment's sales growth was primarily due to a stronger
distribution base and higher chassis sales. Jerr-Dan's distribution base has
been strengthened considerably by the addition of several new distributors in
1997 and 1998.
Operating income in Towing & Recovery increased to $1.1 million from
$113,000 in last year's third quarter, led by a 24% increase in gross margin
and a 17% decrease in SG&A expenses. Gross margin benefited from an increase
in capacity utilization, and continued cost-reduction programs had a positive
impact on the segment's profitability.
"We are pleased with our third quarter earnings improvement, especially
given the impact of the GM strike during July and August, which may have
reduced earnings by an estimated two to three cents per share," said David W.
Wright, President and Chief Executive Officer of Durakon Industries, Inc.
"With the GM strike resolved, our Vehicle Accessories segment is resuming the
positive trends seen in the first half of 1998, and the progress at Towing &
Recovery continues to be encouraging."
Wright said Durakon is investing in information technology and is
substantially improving its overall systems capabilities throughout the
company. With these improvements, the company is working to be Year 2000
compliant by the end of the first calendar quarter of 1999. By that time,
Durakon, as part of its total systems upgrade, also plans to have a new
manufacturing system in operation for both of its business segments. Wright
commented that the new manufacturing system is expected to have a positive
impact on productivity.
Nine-Month Results
For the nine months ended September 30, 1998, Durakon's net income was
$5.0 million or $0.80 diluted net income per share, compared with $13,000 or
$0.00 diluted net income per share in the year-ago period. Sales increased 9%
to $143.7 million, led by an 18% increase in Towing & Recovery sales.
Operating income increased to $8.1 million from $128,000 in the previous nine-
month period, with strong improvements in both segments.
Forward-Looking Statements
The discussion above contains forward-looking statements about the
company's future growth, profitability and competitive position. Any such
statements are subject to risks and uncertainties, including changes in
economic and market conditions, industry competition, the success of new
product introductions, the realization of expected economies from productivity
programs and plant expansions, management of growth and other factors outside
the company's control, including factors discussed from time to time in the
company's filings with the Securities and Exchange Commission, including its
Annual Report on Form 10-K. Readers are cautioned not to place undue reliance
on forward-looking statements, which reflect management's analysis only as of
the date hereof. The company undertakes no obligation to update these
forward-looking statements to reflect events or circumstances that may arise
after the date hereof or to reflect actual results.
Durakon Industries is the world's leading producer and distributor of
pickup truck bedliners, and is a leader in the production and marketing of
rollback car carriers and wheel-lift towing vehicles. Durakon's world
headquarters and a major manufacturing facility are in Lapeer, Michigan.
Other manufacturing plants are in Greencastle, Pennsylvania; Clinton,
Tennessee; and Lerma, Mexico. Durakon's common stock is traded on the Nasdaq
Stock Market under the ticker symbol DRKN.
For more information on Durakon Industries via facsimile at no additional
cost, simply dial 1-800-PRO-INFO and enter company code 221 or the ticker
symbol DRKN.
Durakon Industries, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
($ in 000's, except per share data)
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
Net sales $47,177 $45,209 $143,694 $132,023
Cost of products sold 39,385 38,467 117,945 109,660
Gross profit 7,792 6,742 25,749 22,363
Selling, general
and administrative
expenses 5,193 7,632 17,607 22,235
Operating income 2,599 (890) 8,142 128
Interest income, net 101 2 237 44
Other (expense), net (79) (112) (433) (175)
Income before income
taxes 2,621 (1,000) 7,946 (3)
Provision for income taxes 973 (366) 2,930 (16)
Net income $1,648 $(634) $5,016 $13
Basic net income per
share of common stock $0.27 $(0.10) $0.81 $0.00
Diluted net income per
share of common stock $0.26 $(0.10) $0.80 $0.00
Weighted average basic
shares 6,131 6,245 6,175 6,258
Weighted average
diluted shares 6,231 6,287 6,258 6,310
Durakon Industries, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
($ in 000's)
September 30, December 31,
1998 1997
Assets
Current assets:
Cash and equivalents $8,101 $7,907
Accounts receivable, less
allowances of $932
and $1,252 24,193 20,039
Inventories 17,961 16,748
Prepaid expenses and other 1,457 2,401
Deferred income taxes 2,930 2,973
Total current assets 54,642 50,068
Property, plant and
equipment, net 20,052 21,943
Goodwill 10,094 10,601
Patents, net 168 270
Other assets 196 210
Total assets $85,152 $83,092
Liabilities and Shareholders'
Equity
Current liabilities:
Current maturities of
long-term debt $166 $ 248
Accounts payable 8,233 10,308
Other current liabilities 8,319 7,831
Total current liabilities 16,718 18,387
Long-term debt 502 554
Deferred income taxes 1,465 1,184
Minority interest 475 681
Total liabilites 19,160 20,806
Shareholders' equity:
Preferred stock, $1 par value -
100,000 shares authorized;
none issued
Common stock, without par value -
15,000,000 shares authorized;
6,128,200 and 6,245,292 shares
issued and outstanding 16,059 17,244
Accumulated translation
adjustment (415) (290)
Retained earnings 50,348 45,332
Total shareholders' equity 65,992 62,286
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $85,152 $83,092
Durakon Industries, Inc.
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30,
(Unaudited)
($ in 000's) 1998 1997
Cash flows from operating
activities:
Net income $5,016 $13
Adjustment to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 4,344 3,581
Increase in minority
interest, net (206) 412
Loss on sale of property,
plant and equipment -- 33
Net increase (decrease)
of other assets, net 14 125
Net decrease in deferred
income taxes 324 273
Increase (decrease) due to
changes in operating assets
and liabilities:
Accounts receivable (4,154) 62
Inventories (1,213) (57)
Prepaid expenses and other
current assets 944 54
Accounts payable (2,075) (856)
Accrued expenses and other
current liabilities 487 245
Net cash provided by
operating activities 3,481 3,885
Cash flows used in investing
activities:
Purchases of property,
plant and equipment (1,966) (4,743)
Proceeds from retirement
of property, plant and
equipment 123 2
Net cash used in investing
activities (1,843) (4,741)
Cash flows used in financing
activities:
Repayment of long-term debt (134) (117)
Repurchase of common stock (1,185) (5,200)
Cash proceeds from exercise
of stock options -- 360
Net cash used in financing
activities (1,319) (4,957)
Effect of exchange rate
changes on cash (125) 6
Cash and equivalents:
Increase (decrease) for
the period 194 (5,807)
Balance, beginning of
period 7,907 8,597
Balance, end of period $8,101 $2,790