Sequa Posts Higher Results for Third Quarter and Nine Months
11 November 1998
Sequa Posts Higher Results for Third Quarter and Nine Months
NEW YORK--Nov. 10, 1998--Sequa Corporation posted a 17 percent increase in sales and a 21 percent increase in operating income for the third quarter of 1998.
Sales for the third quarter ended September 30, 1998 amounted to $459 million, up from $391.3 million in the same period of 1997. Operating income rose to $28.3 million from $23.4 million in the year-ago quarter, with particular strength at the MEGTEC Systems machinery business and Warwick International, the overseas detergent chemicals unit.
Net income for the third quarter advanced 59%, rising to $10.6 million or 97 cents per share from $6.6 million or 59 cents per share in the same period of 1997.
With the addition of continued strong results for the third quarter, Sequa similarly posted higher results for the nine months of the year. Sales rose to $1.4 billion from $1.2 billion and operating income increased to $82.5 million from $61.6 million in the same period of 1997. Net income for the nine months totaled $27.3 million or $2.50 per share, up from $12.7 million or $1.05 per share in the comparable period of 1997.
Third Quarter Segment Results
Aerospace
The two operating units in the company's largest segment -- Chromalloy Gas Turbine and ARC Propulsion -- posted higher sales for the third quarter. For both units, however, the benefit to operating income of increased sales was affected by several factors. Chromalloy Gas Turbine moved higher for the period, though this unit was unfavorably affected by continued competitive pressures in the repair market and by start-up and scrap costs on new original equipment programs. Gas Turbine results also included litigation expense of $1.5 million in the 1998 quarter, down from $2.3 million a year ago. For ARC Propulsion, income comparisons with 1997 were affected by the year-ago resolution of an environmental issue that had bolstered results for the earlier period. In addition, a seasonal decline in production limited the the third-quarter 1998 contribution to earnings from the now-consolidated automotive airbag inflator operation.
Machinery and Metal Coatings
Sharply higher results for the segment reflect a continuing strong advance at MEGTEC Systems, which was formed in late 1997 through the combination of TEC Systems with the MEG unit of Sequa. The combined operation generated a sales increase in excess of 100% and operated at a solid profit for the third quarter of 1998. The can machinery unit also posted improved results for the quarter, despite the ongoing cyclical downturn in demand from the international metal container market. The metal coatings unit posted lower results, primarily due to a reduction in sales to the building products market and lower operating margins.
Specialty Chemicals
Results for the specialty chemicals segment reflect a sharp increase in demand from overseas customers for the detergent chemical additive, TAED, produced by Warwick, as well as an increased contribution from a growing international network of chemical distribution units. Due largely to a higher volume of sales, Warwick overcame the lingering effect of currency issues to post a significant increase in operating income for the quarter. The domestic chemicals unit, which had higher sales but lower income for the third quarter, was sold after the end of the period. An after-tax gain on the sale of approximately $31 million will be recorded in the fourth quarter of 1998.
Other Products
The lower results for the segment reflect the absence of contribution from a business that was sold in late 1997. Results of the two businesses continuing in the segment were mixed, with the men's apparel unit moving higher and the automotive products unit moving lower. The latter reflects the effect of the General Motors strike, as well as the cost to facilitize operations at new locations in the United States and Brazil.
Report for the Three Months and Nine Months Ended September 30,
(Amounts in thousands, except per share)
(Unaudited)
Three Months Nine Months
1998 1997 1998 1997
---- ---- ---- ----
Sales $ 458,954 $ 391,333 $1,356,473 $1,158,119
Costs and expenses 430,691 367,974 1,273,933 1,096,476
Operating income 28,263 23,359 82,540 61,643
Other income (expense)
Interest expense (13,402) (12,727) (39,288) (37,797)
Interest income 1,400 1,426 3,930 4,078
Other, net (905) 921 2,306 3,205
Income before
income taxes 15,356 12,979 49,488 31,129
Tax provision (4,800) (6,330) (22,200) (18,400)
Net income $ 10,556 $ 6,649 $ 27,288 $ 12,729
Basic and diluted
earnings
per share $ 0.97 $ 0.59 $ 2.50 $ 1.05
Results by Business Segment
(Amounts in thousands)
Three Months Nine Months
1998 1997 1998 1997
---- ---- ---- ----
Sales
Aerospace $ 262,676 $ 229,022 $788,518 $ 661,336
Machinery and metal
coatings 108,002 79,134 306,727 236,088
Specialty chemicals 64,526 51,871 182,628 158,771
Other products 23,750 31,306 78,600 101,924
Total $ 458,954 $ 391,333 $ 1,356,473 $1,158,119
Operating income
Aerospace $ 17,465 $ 18,075 $ 58,721 $ 42,277
Machinery and metal
coatings 7,009 2,469 15,541 11,562
Specialty chemicals 9,921 7,448 22,459 19,185
Other products 2,016 2,734 8,932 10,622
Corporate expense (8,148) (7,367) (23,113) (22,003)
Total $ 28,263 $ 23,359 $ 82,540 $ 61,643