Ivaco Reports Third Quarter Results
5 November 1998
Ivaco Reports Third Quarter Results
MONTREAL--Nov. 5, 1998--Ivaco Inc. (ME:IVA) (TSE:IVA) today reported a net loss of $8,081,000 or $0.40 per share for the third quarter ended September 30, 1998. Included in the third quarter results were non-recurring items approximating $14.9 million or $0.45 per share. These non-recurring items were primarily related to losses and shutdown costs at Atlantic Steel and restructuring and severance costs for the Sivaco Wire Group relocation projects. During the third quarter of 1997 net earnings were $14,562,000 or $0.37 per share of which approximately $0.26 was attributable to a pre-tax gain on disposal of investments of $16.8 million. (1)Sales for the 1998 third quarter were $299.2 million compared to $301.0 million last year.
For the nine months ended September 30, 1998 net earnings were $5,222,000 or a loss of $0.23 per share including third quarter non-recurring items of approximately $14.9 million or $0.45 per share. These non-recurring items were primarily related to losses and shutdown costs at Atlantic Steel and restructuring and severance costs for the Sivaco Wire Group relocation projects. For the nine months ended September 30, 1997 net earnings were $27,597,000 or $0.54 per share of which approximately $0.26 was attributable to a pre-tax gain on disposal of investments of $16.8 million. (2)
Sales for the first nine months of 1998 were $912.1 million compared to $900.6 million in 1997.
Notes:
1. Per share amounts for the third quarter are after deducting preferred dividends of $4,103,000 (1997 - $4,077,000) and are based on an average of 30,734,793 shares outstanding (1997 - 28,719,359).
2. Per share amounts for the nine months are after deducting preferred dividends of $12,337,000.
3. (1997 - $12,230,000) and are based on an average of 30,724,113 shares outstanding (1997 - 28,686,061).
4. The 1997 amounts have been restated to conform to the presentation adopted in 1998.
The following reviews the performance of each of Ivaco's main businesses expressed in earnings before interest, taxes and amortization (EBITDA) for the nine months ended September 30:
EBITDA
(millions)
1998 1997 (3)
---- ----
- Steel (wire rod) $26.1 $17.9
- Fabricated Steel Products
(fasteners, wire and wire products) 60.2 59.2
- Other Diversified Fabricated Products
(precision machined components and
plastic pipe and fittings) 30.6 30.3
- Non-recurring losses and
restructuring costs (14.9) -
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$102.0 $107.4
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Paul Ivanier, President and Chief Executive Officer, commented that if not for the $14.9 million of non-recurring losses and restructuring costs EBITDA at September 30, 1998 would have been $116.9 million compared to $107.4 million in 1997. The third quarter results were adversely impacted by non-recurring items, primarily related to losses and shutdown costs at Atlantic Steel and restructuring and severance costs for the Sivaco Wire Group relocation projects. These non-recurring items, for the most part, directly impacted net earnings since they primarily apply to U.S. operations and have not been offset by income tax recoveries since the U.S. operations have accumulated tax losses.
Mr. Ivanier stated that Atlantic Steel's operations in Atlanta, Georgia will be closed by year end in order to make its 138-acre property available for delivery to the purchaser. The Company previously announced that it had reached an agreement for the sale of the Atlanta property for US$76 million (approximately Cdn $117 million). Closing of the transaction is expected at the end of 1999. The SWG relocation projects, also previously announced, are proceeding on schedule and should be completed by year end. Mr. Ivanier also noted that the lower costs of purchasing scrap will not benefit operations until late in the fourth quarter. In addition, increased shipments of predominantly low grade imported rod into the U.S. during the third quarter from Asia and other countries was negatively impacting wire rod selling prices.
Mr. Ivanier commented further that factors affecting the third quarter will continue during the balance of 1998. In particular, additional non-recurring costs which are not yet determinable, will be incurred in connection with the shutdown of operations at Atlantic Steel and completion of the Sivaco Wire Group relocation projects. Mr. Ivanier said, "Completion of these projects by year end is expected to result in a strong basis for improved earnings starting in 1999. As far as our crystal ball can tell and barring unforeseen circumstances, we expect 1999 earnings to exceed the upper range of current estimates made by brokerage analysts".
The Company said that its mills have been running full out during the third quarter and are continuing on this path during the fourth quarter. It also noted that phase two of its upgrade program at Ivaco Rolling Mills is progressing on schedule. It includes a new billet reheat furnace, a four-stand breakdown mill and an automatic coil compactor. Installation should be completed by the end of the fourth quarter. Connection and start-up is expected in January 1999. The upgrade program will result in a larger rod coil size, superior steel quality, higher quality rolling capabilities and enhanced production capability.
Ivaco is a Canadian corporation and is a leading North American producer of steel, fabricated steel products and other diversified fabricated products. Ivaco has operations in Canada and the United States. Shares of Ivaco are traded on The Toronto Stock Exchange and The Montreal Exchange (IVA).
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CONSOLIDATED STATEMENTS OF EARNINGS
For the Nine Months ended September 30 (Unaudited)
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Three months ended Nine months ended
September 30 September 30
Thousands of
dollars except
per share amounts 1998 1997 1998 1997
(Note 1) (Note 1)
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Net Sales $299,207 $300,950 $912,120 $900,568
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Cost of sales and
operating expenses 260,066 264,100 795,249 793,128
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Operating earnings
before non-recurring
items 39,141 36,850 116,871 107,440
Non-recurring items (14,865) - (14,865) -
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Operating earnings
(EBITDA) before: 24,276 36,850 102,006 107,440
Amortization (15,165) (11,818) (40,531) (34,687)
Share of equity
accounted investments (831) (924) (2,424) (896)
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Earnings from operations
before interest
and other items 8,280 24,108 59,051 71,857
Net interest expense (11,997) (10,071) (33,313) (30,150)
Dividends on Series E,
Preferred shares and
Series 5, Second
Preferred shares (1,373) (1,361) (3,997) (3,906)
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Earnings (loss) from
continuing operations
before income taxes (5,090) 12,676 21,741 37,801
Gain on disposal
of investments - 16,784 - 16,784
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Earnings (loss) from
continuing operations
before income taxes (5,090) 29,460 21,741 54,585
Income taxes 2,991 14,969 16,519 27,407
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Earnings (loss) from
continuing operations (8,081) 14,491 5,222 27,178
Gain from discontinued
operations - 71 - 419
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Net earnings (loss) $(8,081) $14,562 $5,222 $27,597
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Earnings (loss) per share
(Notes 2 & 3)
Earnings (loss) per
share from
continuing
operations $(0.40) $0.37 $(0.23) $0.52
Net earnings (loss)
per share $(0.40) $0.37 $(0.23) $0.54
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CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION For the
Nine Months ended September 30 (Unaudited)
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Thousands of dollars 1998 1997
(Note 1)
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OPERATING ACTIVITIES
Working capital provided from operations $49,700 $56,982
Increase in non-cash working capital items (44,436) (81,392)
Other items (163) (19,039)
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Cash provided by (used in)
operating activities 5,101 (43,449)
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FINANCING ACTIVITIES
Dividends (9,906) (9,767)
Additional long-term debt 89,410 102,575
Repayment of long-term debt (31,138) (119,120)
Deferred translation adjustment (25,387) (2,273)
Other items (1,652) (6)
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Cash provided by (used in)
financing activities 21,327 (28,591)
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INVESTING ACTIVITIES
Additions to property, plant and equipment,
net of disposals (50,748) (73,719)
Additions to construction in progress (8,987) (3,168)
Proceeds on disposal of investments
and businesses 14,841 107,098
Discontinued operations - 1,716
Other items (4,144) 2,799
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Cash (used in) provided by investing
activities (49,038) 34,726
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Increase in bank indebtedness (22,610) (37,314)
Bank indebtedness, net of cash, January 1 (21,253) 38,182
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Bank indebtedness, net of cash,
September 30 $(43,863) $868
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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(Audited)
Thousands of dollars September 30, 1998
December 31, 1997
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Current Assets
Cash and short-term investments $12,221 $26,983
Accounts receivable 205,980 183,468
Inventories 348,848 340,518
Prepaid expenses 10,137 8,856
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Total Current Assets 577,186 559,825
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Current Liabilities
Bank indebtedness, partly secured 56,084 48,236
Accounts payable and accrued liabilities 209,747 203,553
Income taxes payable 1,166 20,212
Current maturities of long-term debt 44,905 34,499
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Total Current Liabilities 311,902 306,500
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Working Capital 265,284 253,325
Investments, at cost 117,625 116,860
Investments, at equity 21,102 22,909
Property, plant and equipment 506,559 485,598
Other assets 136,111 109,627
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Total Investment 1,046,681 988,319
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Deduct:
Long-term debt 485,849 436,713
Series 5, Second Preferred shares 50,239 44,027
Deferred income taxes 76,239 69,572
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612,327 550,312
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Shareholders' Equity $434,354 $438,007
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Represented by:
Capital stock $460,802 $461,402
Retained earnings (deficit) (47,409) (38,168)
Cumulative translation adjustment 20,961 14,773
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Shareholders' Equity $434,354 $438,007
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Notes:
1. The 1997 amounts have been reclassified to reflect as
discontinued the operations of the Structural Steel Segment which was
sold during 1998. Sales from these operations were $27.5 million for
the 1997 third quarter and $18.5 million and $81.8 million
respectively, for the 1998 and 1997 nine month periods.
2. Per share amounts are after deducting preferred share
dividends.
3. Fully diluted earnings per share from continuing operations
and net earnings were $0.46 and $0.48 respectively for the 1997 nine
month period, and $0.32 for the 1997 third quarter. There was no
dilutive effect in 1998.