MS Acquisition Corp Reports Third Quarter Results
6 November 1998
MS Acquisition Corp Reports Third Quarter Results
CENTER LINE, Mich., Nov. 5 -- MS Acquisition Corp, consisting
of wholly owned subsidiaries AETNA Industries, Inc. and Sofedit SA, announced
financial results for the third quarter and nine months ended September 27,
1998. This discussion first presents the consolidated proforma results of MS
Acquisition Corp, consisting of Sofedit SA and AETNA Industries, Inc., and
then follows with a separate analysis of AETNA Industries, Inc.'s financial
performance.
MS Acquisition Corp's total net sales for the third quarter of 1998 were
$151.1 million, or 2.2%, lower than third quarter 1997 sales of $154.5 million
Gross profit was $9.9 million, or 6.6% of net sales, for the third quarter
of 1998 compared to $14.2 million, or 9.2% of net sales, for the same period
in 1997.
SG&A expenses for the third quarter of 1998 were $15.0 million, or 10.0%
of net sales, compared to $12.5 million, or 8.1% of net sales, for the same
period in 1997.
Interest expense for the third quarter of 1998 was $6.7 million, or 4.4%
of net sales, compared to $6.5 million or 4.2% of net sales for the same
period in 1997. Interest expense was impacted by higher levels of borrowings
to support product launches plus the assumption of promissary notes related to
the combination of Sofedit and AETNA.
The income tax credit in the third quarter of 1998 was $5.3 million with
an effective tax rate of 45.3% as compared to a credit of $3.0 million with an
effective tax rate of 60.7% for the same period in 1997.
EBITDA was $3.5 million for the three months of the third quarter compared
to $5.1 million for the same period in 1997.
MS Acquisition Corp's total net sales for the nine months ended
September 27, 1998 were $526.4 million, down from the $513.9 million reported
for the nine months ended September 28, 1997. Europe's sales were up $23.9
million or 8% over last year or 13.4% excluding the impact of foreign
exchange.
Gross profit was $53.9 million, or 10.0% of net sales, for the nine months
ended September 27, 1998 compared to $62.6 million, or 12.3% of net sales, for
the same period in 1997.
SG&A expenses for the nine months ended September 27, 1998 were $43.4
million, or 6.1% of net sales, compared to $40.9 million, or 8.0% of net
sales, for the same period in 1997.
Interest expense for the nine months ended September 27,1998 was $19.5
million, or 3.7% of net sales, compared to $19.3 million or 3.8% of net sales
for the same period in the prior year.
The income tax credit for the nine months ended September 27, 1998 was
$4.1 million with an effective tax rate of 45.6% as compared to a credit of
$0.9 million for the same period in the prior year.
EBITDA was $37.3 million for the nine months ended September 27, 1998
compared to $45.8 million for the same period in 1997.
MS Acquisition Corp's principal capital requirements for the nine months
ended September 27, 1998 were the renovation of AETNA's Plant 7, which will be
used to stamp the majority of the new Saturn LS jobs, and the purchase of
equipment for the launch of the AETNA Manufacturing Canada plant in London,
Ontario serving CAMI's J II platform.
AETNA Industries, Inc. recorded net sales for the third quarter of 1998 of
$32.3 million, or 29.1%, lower than third quarter 1997 sales of $45.6 million.
Production sales of $27.6 million in the third quarter of 1998 were down $16.9
million from $44.5 million in the third quarter of 1997 due to the planned
ramp -- up of the new Grand Cherokee, and the 8 week strike at General Motors,
which ended in early August. Tooling and prototype sales were up $3.6 million
for the same period.
Gross profit was a loss of $(0.2) million, or (0.7)% of net sales, for the
third quarter of 1998 compared to $4.6 million, or 10.0% of net sales, for the
same period in 1997. The decrease in both sales and profit was primarily the
result of the impact of the UAW strike at General Motors and the ramp - up of
the Grand Cherokee production.
SG&A expenses for the third quarter of 1998 were $4.6 million, or 14.1% of
net sales, compared to $4.7 million, or 10.2% of net sales, for the same
period in 1997. The increase is due principally to ongoing launch costs for
Saturn, WJ and CAMI platforms.
Interest expense for the third quarter of 1998 was $3.6 million, or 11.2%
of net sales, compared to $2.7 million or 5.9% of net sales for the same
period in 1997. Interest expense was impacted by higher levels of short term
debt used to finance the launch of the Saturn and WJ programs, production
inefficiencies incurred during the General Motors strike, and the planned ramp
-- up of Jeep Grand Cherokee production.
The income tax credit in the third quarter of 1998 was $3.2 million with
an effective tax rate of 37.5% as compared to a credit of $1.1 million with an
effective tax rate of 40.0% for the same period in 1997.
EBITDA was a loss of $(2.3) million for the third quarter 1998 compared to
$1.8 million for the same period in 1997.
AETNA Industries, Inc.'s net sales for the nine months ended September 27,
1998 were $132.6 million, down from the $149.4 million reported for the nine
months ended September 28, 1997. Production sales decreased $22.9 million,
while tooling and prototype sales increased $6.1 million.
Gross profit was $11.4 million, or 8.6% of net sales, for the nine months
ended September 27, 1998 compared to $18.7 million, or 12.5% of net sales, for
the same period in 1997. The decline in gross profit was due primarily to the
strike at GM and the transition to the new Grand Cherokee. The eight week GM
strike that occurred from June through early August of this year resulted in
approximately $5.3 million of lost revenue with an estimated $0.8 million loss
in earnings before interest and taxes (EBIT).
SG&A expenses for the nine months ended September 27, 1998 were $13.7
million, or 10.3% of net sales, compared to $12.4 million, or 8.3% of net
sales, for the same period in 1997. As a percent of sales, the increase was
due to the interruption of production sales during the GM strike, along with
ongoing launch costs for Saturn, WJ and CAMI programs, and costs associated
with quoting a worldwide OEM platform launching in model year 2002.
Interest expense for the nine months ended September 27, 1998 was $9.7
million, or 7.3% of net sales, compared to $8.0 million or 5.4% of net sales
for the same period in the prior year. Working capital requirements necessary
to fund tooling expenditures relating to three major program launches resulted
in higher interest expense year over year. The full effect on sales of these
new jobs will be realized in 1999 as two of the new platforms are launched by
the 4th quarter 1998 and the third platform is planned to launch in the 2nd
quarter, 1999.
The income tax credit for the nine months ended September 27, 1998 was
$4.0 million with an effective tax rate of 33.7% as compared to a credit of
$0.7 million with an effective tax rate of 40.0% for the same period in the
prior year.
EBITDA was $4.2 million for the nine months ended September 27, 1998
compared to $11.8 million for the same period in 1997.
AETNA's principal capital requirements for the nine months ended
September 27, 1998 were the renovation of Plant 7, which will be used to
produce new Saturn LS components, and the purchase of equipment for AETNA's
Canadian operations serving CAMI's J II platform.
MS ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
Three Months Ended Nine Months Ended
Actual Proforma Proforma Proforma
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1998 1997 1998 1997
Net Sales 151,045 154,491 526,381 513,887
Cost of Sales 141,095 140,309 472,506 451,337
Selling, general &
administrative expenses 15,040 12,547 43,406 40,899
Operating Income (5,090) 1,635 10,469 21,651
Dividend Income - - - -
Interest Expense (6,662) (6,510) (19,526) (19,253)
Income (loss) before
income tax (11,752) (4,875) (9,057) 2,398
Taxes (5,329) (2,958) (4,134) (934)
Net Income before
discontinued operations (6,423) (1,917) (4,923) 3,332
Minority Interest - 48 - (107)
Discontinued Operations (1,754) (1,788) (3,244) (3,161)
Preferred Stock Dividend 381 - 751 487
Net Income (loss) (8,558) (3,753) (8,918) (209)
* These combined proforma financial statements reflect the operations and
financial position of the company as if the combination had occurred Jan. 1,
1998 and Jan. 1, 1997 respectively.
MS ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
Actual Proforma
September 28, December 31,
1998 1997
ASSETS
Current Assets:
Intercompany Accounts Receivable
Cash 22,034 11,649
Accounts receivable (less
allowance for doubtful accounts
of $1,921 and $1,293,
respectively) 163,281 156,262
Inventories 76,163 71,489
Tooling 49,151 11,796
Other Current Assets 13,694 38,486
Total Current Assets 324,323 289,682
Net Property, plant and equipment 193,674 180,516
Deferred Costs and Other Assets 13,526 10,919
Goodwill 65,914 66,465
597,437 547,582
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable 174,730 143,361
Accrued Expense 72,615 62,697
Customer deposits and advances - 8,448
Deferred income taxes - 4,882
Short term borrowings 59,537 57,308
Current portion of
Long term debt 51,750 57,570
Total current liabilities 358,632 334,266
Long term debt 185,333 156,416
Junior subordinated notes 7,789 7,789
Deferred Interest, junior
subordinate notes 857 -
Deferred income taxes 12,265 16,279
Redeemable Preferred stock
Series A - $100 stated value;
293,123 shares authorized;
135,096 shares issued and
outstanding 14,440 14,440
Series B - $100 stated value;
270,000 shares authorized;
270,000 shares issued and
outstanding 27,000 27,000
Stockholders' Equity
Class A, common stock - $.01
par value, 12,000,000
shares authorized, 3,899,998
shares issued and outstanding 39 39
Additional paid-in capital 39,132 54,991
Contributed capital - 14,159
Retained Earnings
(accumulated deficit) (47,984) (73,255)
Cumulative Translation Adjustment (66) (4,542)
597,437 547,582
See accompanying notes to financial statements.
* These combined proforma financial statements reflect the operations and
financial position of the company as if the combination had occurred Jan. 1,
1998 and Jan. 1, 1997, respectively.