Glas-Aire Reports 62 Percent Increase in Net Income for Third Quarter
13 January 1999
Glas-Aire Reports 62 Percent Increase in Net Income for Third Quarter
VANCOUVER, British Columbia--Jan. 13, 1999-- Glas-Aire Industries Group Ltd , a leading designer, developer, manufacturer and marketer of automotive wind deflector accessories to automobile manufacturers worldwide, today announced that third quarter net income increased 62 percent to $165 thousand from $102 thousand for the same period in 1997.Net income increased 44 percent for the first nine months of 1998 to $363 thousand from $253 thousand for the same period of 1997.
Revenues increased by one-half percent for the third quarter to $1.9 million from $1.89 million in 1997 but decreased by 2 percent for the nine months to $4.76 million from $4.88 million in 1998.
"Sales to domestic auto manufacturers reached an all-time high. This has been counter-balanced with declining orders for existing products from Japan. This situation has resulted in flat sales for the last three quarters and the third quarter of this year versus the same periods last year," stated Glas-Aire president Alex Ding in his third quarter president's letter.
Income from operations for the third quarter increased 62 percent from $166 thousand in 1997 to $268 thousand in 1998. It increased 42 percent from $389 thousand for the first nine months of 1997 to $551 thousand in 1998. This increase was primarily due to the lower cost of sales, savings on operating costs, and a gain on foreign exchange.
"Despite flat sales, the company enjoyed significant increase in income from operations both the third quarter as well as the first three quarters of this year compared to the same periods last year. This is particularly encouraging as the product mix has been changing and the product complexity increased over the past year," said Ding.
Gross profit margin increased to 35 percent for the third quarter of 1998 from 28 percent in 1997. For the nine-month period, gross profit margin increased to 34 percent from 30 percent the year earlier. The company's gross profit on sales increased 25 percent from $534 thousand to $668 thousand for the third quarter of 1998. The company's gross profit for the first nine months of 1998 increased 10 percent from $1.46 million in 1997 to $1.61 million in 1998.
Cost of sales decreased 9 percent to $1.2 million from $1.4 million for the third quarter of 1998 and by 8 percent to $3.1 million from $3.4 million for the first nine months of the year.
The improvement was caused by a decrease in cost of materials, a decrease in direct labor and overhead charges, a decrease on freight and delivery charges, and a 2 percent gain on foreign exchange.
Selling and distribution expenses decreased by 3 percent for the third quarter of 1998 to $105 thousand from $107 thousand in 1997 and by 9 percent to $279 thousand for the first nine months of 1998 from $306 thousand in 1997.
The decrease was due primarily to a 3 percent reduction in sales commissions due to the elimination of a sales agent, a decrease in warranty claims, and a decrease in travel expenses related to the company's marketing efforts.
General and administrative expenses decreased by 3 percent for the third quarter from $127 thousand in 1997 to $123 thousand in 1998 because fewer people were employed in administration and additional maintenance support fees were paid to the EDI program.
For the nine-month period, general and administrative expenses decreased by 8 percent from $355 thousand in 1997 to $327 thousand in 1998. The improvement was caused by a decrease in the number of persons employed in the administration, a reduction in other general administrative costs, and a gain on foreign exchange.
"General and administrative expenses have been steadily improving since the Initial Public Offering. These improvements are mainly derived from evolving computerized business systems and office automation in general plus the team of motivated professionals assembled over the last few years," said Ding.
Depreciation expense increased 8 percent to $47 thousand for the third quarter of 1998 from $44 thousand in 1997. Depreciation expense increased 16 percent to $138 thousand for the first nine months of 1998 from $119 thousand. The increase was the result of adding new equipment into service.
Expenses for research and development increased by 31 percent for the third quarter from $90 thousand in 1997 to $118 thousand in 1998 because of additional engineers, a rise in travel expenses, and an increase in monies paid to outside contractors.
For the nine-month period, expenses for research and development decreased 2 percent to $303 thousand in 1998 from $311 thousand in 1997. The decrease was caused by the inclusion of a $25 thousand technology fee in the previous year.
Provision for profit sharing increased for both periods. The provision increased 75 percent for third quarter from $17 thousand in 1997 to $29 thousand in 1998. It increased 40 percent from $43 thousand to $61 thousand for the nine-month period in 1998.
Interest income (net of interest expense) increased by 28 percent from $17 thousand to $22 thousand for the third quarter of 1998. The company had more cash on deposit earning interest during this period, which more than offset the increase of $2,690 in interest expenses from the lease cost of the CNC Milling Machine Center.
Interest income (net of interest expense) decreased by 16 percent from $59 thousand in 1997 to $50 thousand for the first nine months of 1998. This occurred because of a 12 percent increase in interest expenses from the lease cost of the milling machine center and interest penalties of $10,300 related to the provincial sales tax audit performed for the years 1992 to 1997.
Except for the historical information contained herein, the statements in this press release are forward-looking statements that involve risks and uncertainties. Potential risks and uncertainties include, without limitation, the market for new automobiles; the effect that competitive and economic factors and the Company's reaction to them may have on buying decisions with respect to the Company's products; and the ability of the Company to make timely delivery of new products and successful technological innovations to the marketplace. More information on potential factors that could affect the Company's financial results is included in the Company's public reports filed with the SEC, including the Company's Form 10-K for the fiscal year ended January 31, 1998, and the Company's Form 10-Q for the first, second and third fiscal quarters.
For more information on Glas-Aire Industries Group Ltd., visit the company's website at www.glasaire.com or contact Chris G. Mendrop at 303/292-9077.
Glas-Aire Industries Group Ltd.
Consolidated Condensed Statement of Operations
(Unaudited)
Three Months Ended Nine Months Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1998 1997 1998 1997
Sales $ 1,909,250 $ 1,899,446 $ 4,763,578 $ 4,882,063
Cost of Sales 1,241,307 1,365,662 3,153,330 3,418,431
Gross Profit 667,943 533,784 1,610,248 1,463,632
Expenses
Depreciation 47,464 44,039 138,440 119,298
Research and
Development 117,516 90,035 303,488 310,714
Selling and
Distribution 104,634 107,505 279,033 306,014
General and
Administrative 123,243 127,121 327,325 354,924
Provision for
Profit Sharing 29,101 16,655 60,651 43,200
Interest (22,362) (17,494) (49,701) (59,268)
-------- -------- -------- --------
399,596 367,861 1,059,236 1,074,882
Income from
Operations 268,347 165,923 551,012 388,750
Income Taxes
- Current 102,967 63,643 187,806 136,062
Income Taxes
- Deferred -- -- -- --
Net Income (loss)
for the Period $ 165,380 $ 102,280 $ 363,206 $ 252,688
Net Income Per
Share of Common
Stock $ 0.11 $ 0.07 $ 0.25 $ 0.17
Weighted Average
Common Shares
Outstanding 1,458,301 1,509,021 1,458,301 1,509,021
Glas-Aire Industries Group Ltd.
Consolidated Balance Sheet at October 31, 1998
Oct. 31, 1998 Jan. 31, 1998
(Unaudited) (Audited)
Assets
Current
Cash and Equivalents $ 2,213,808 $ 1,645,953
Accounts Receivable 1,125,430 1,200,451
Inventories 640,121 772,780
Prepaid Expenses 16,939 19,095
----------- -----------
3,996,298 3,638,279
Fixed Assets 1,553,360 1,408,816
----------- -----------
$ 5,549,658 $ 5,047,095
Liabilities and
Shareholders' Equity
Current
Bank Indebtedness $ -- --
Accounts Payable and
Accrued Liabilities 617,476 460,680
Income Taxes Payable 99,621 92,464
Current Portion
- Capital Lease 45,130 --
--------- ---------
762,227 553,144
Long Term Debt
Obligation Under
Capital Lease 74,852 --
Deferred Income Taxes 281,327 281,327
--------- ---------
1,118,406 834,471
Shareholders' Equity
Share Capital 15,875 15,875
Contributed Surplus 3,462,334 3,462,334
Treasury Stock (294,705) (236,163)
Retained Earnings 1,409,170 1,045,962
Cumulative Translation
Adjustment (161,422) (75,384)
---------- ----------
4,431,252 4,212,624
----------- -----------
$ 5,549,658 $ 5,047,095