Edelbrock Corp. Maintains Strong Revenue and Earnings Momentum
3 February 1999
Edelbrock Corp. Maintains Strong Revenue and Earnings Momentum in Second Quarter and First Six Months of Fiscal 1999
TORRANCE, Calif.--Feb. 3, 1999--Edelbrock Corp. Wednesday reported strong, double-digit gains in revenues and earnings for both its fiscal 1999 second quarter and first six months ended Dec. 25, 1998.
Edelbrock attributed its improved results primarily to continued sales growth across a broad range of product categories and a favorable sales mix weighted toward higher-margin company-manufactured products.
For the second quarter of fiscal 1999, revenues rose 12.3 percent to $25.6 million from revenues of $22.8 million in the second quarter of last year. Net income for the fiscal 1999 second quarter increased to $1.4 million, or 27 cents per diluted share, from net income of $473,000, or 9 cents per diluted share, in the second quarter of fiscal 1998.
Net income for the fiscal 1999 and 1998 periods included pretax write-offs for uncollectible receivables of approximately $400,000 from Champion Auto Stores Inc. and $1.9 million from Super Shops Inc., respectively.
Exclusive of those charges, net income for the fiscal 1999 quarter would have been reported as $1.7 million, or 32 cents per diluted share, and net income for the fiscal 1998 quarter would have been reported as $1.6 million, or 31 cents per diluted share.
Champion Auto Stores was a Minnesota-based automotive-aftermarket parts retailer that filed voluntary petitions for reorganization under Chapter 11 of the Federal Bankruptcy Code in May 1998 and was further converted to Chapter 7 liquidation in December 1998. The $400,000 write-off represents all of the outstanding receivable balance, a portion of which was previously reserved.
For the first six months of fiscal 1999, revenues improved 11.5 percent to $48.2 million from revenues of $43.2 million in the comparable period of fiscal 1998. Net income for the first half of fiscal 1999 rose 72.3 percent to $2.8 million, or 52 cents per diluted share, from net income of $1.6 million, or 30 cents per diluted share, in the first six months of fiscal 1998.
Excluding the aforementioned receivables write-offs, net income for the fiscal 1999 period would have been reported as $3.0 million, or 57 cents per diluted share, and net income for the fiscal 1998 period would have been reported as $2.8 million, or 52 cents per diluted share.
Both established and emerging product lines contributed to the growth in sales for the second quarter. For example, sales of the company's renowned aluminum automotive intake manifolds and cylinder heads improved 24.2 percent and 21.2 percent, respectively, while sales of Edelbrock Performer Series carburetors increased 11.6 percent.
Sales of Edelbrock's new line of Performer IAS(tm) shock absorbers continued to trend upward behind strong consumer acceptance and expansion of the product's application base, with a 68.5 percent improvement over the second quarter of fiscal 1998.
Edelbrock attributes the increasing popularity of the Performer IAS to its ability to deliver both a comfortable ride and improved handling in the same product. The company believes the Performer IAS, which utilizes a unique design based on the patented RICOR Inertia Active System, to be extremely effective in delivering a combination of these desirable performance characteristics.
Ongoing cost controls enabled Edelbrock to effectively manage selling, general and administrative expenses during the second quarter as the company continued to invest in the infrastructure and advertising necessary to enhance its competitive position.
For the quarter, SG&A increased to 25.0 percent of sales from 23.7 percent of sales in the second quarter of fiscal 1998. Overall, SG&A for the quarter increased 18.5 percent to $6.4 million from $5.4 million in the comparable period of fiscal 1998.
For the first six months of fiscal 1999, SG&A expenses increased 14.5 percent to $12.7 million from $11.1 million for the same period of fiscal 1998. For the first half of fiscal 1999, SG&A expenses increased to 26.3 percent of sales from 25.6 percent of sales a year ago.
A portion of the increase in Edelbrock's second-quarter SG&A resulted from the following strategic efforts, all of which were successfully completed during the period: installation of a state-of-the-art Oracle database system; companywide compliance with Year 2000 computer standards; increased advertising expenditures and marketing promotions pertaining to display products; and certification for the QS-9000 quality standard.
QS-9000 is a worldwide quality assurance management system for the automotive and heavy-trucking industries.
Research and development expenses for the second quarter increased 25.5 percent over fiscal 1998 as Edelbrock moved aggressively to meet the rising demand for its products with a host of new automotive manifolds and cylinder heads, Performer IAS shock absorbers and other products.
For the quarter, R&D expenses increased to $763,000, or 3.0 percent of sales, from $608,000, or 2.7 percent of sales, a year ago. For the first six months of fiscal 1999, R&D expenses rose 22.6 percent to $1.4 million, or 3.0 percent of sales, from 2.7 percent of sales in the comparable year-ago period.
Commenting on the company's results, Edelbrock Chairman and Chief Executive Officer Vic Edelbrock said: "Financially and strategically, this was an outstanding quarter for us. The continued improvement in our financial results reflects the great vitality of the market for high-quality aftermarket performance products, our solid positioning within that market, and our effectiveness in managing our growth.
"We saw a good balance in sales across our line of products, both established and emerging. We're also very pleased with the improvement in sales we're seeing from our new Performer IAS shock absorbers, a product that in little over a year has really become the talk of our industry.
"We now make the Performer IAS for more than 163 different vehicle applications, and we'll continue to expand that line to leverage this product's exceptional long-term potential.
"Strategically, I am very pleased with the progress we made during the quarter to keep Edelbrock competitive in the years ahead," Edelbrock continued. "We completed the Year 2000 upgrade of our new computer system, and we earned QS 9000 certification, which opens the door to a large number of potential sales opportunities in the years ahead.
"We also renewed and extended by another six years our contract with Magneti Marelli U.S.A. Inc., which manufactures the popular Performer Series carburetors that are a key component of our highly successful Total Power Package marketing concept.
"Currently, we are breaking ground on a new 66,000-square-foot automated distribution facility that will give us the ability to keep pace with the strong growth we anticipate going forward.
"In total, I think these activities depict a company that not only is committed to delivering strong performance today, but one that is doing everything necessary to ensure that it achieves even greater success in the future," Edelbrock said.
Founded in 1938, Torrance-based Edelbrock is recognized as one of the nation's premier designers, manufacturers and distributors of performance replacement parts for the automotive and motorcycle aftermarkets.
In addition to three production facilities in Torrance, the company owns and operates a state-of-the-art aluminum foundry and its QwikSilver Division for motorcycle-aftermarket parts in San Jacinto, Calif., at which it manufactures many of its quality products.
"Safe-harbor" statement under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts are forward-looking statements that involve known and unknown risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include such factors as the financial strength and competitive pricing environment of the automotive and motorcycle aftermarket industries; product demand; market acceptance; manufacturing efficiencies; new-product development; the success of planned advertising, marketing and promotional campaigns; the success of the company's, its vendors' and its suppliers' Year 2000 compliance programs; and other risks identified herein and in other documents filed by the company with the Securities and Exchange Commission.
EDELBROCK CORP.
Consolidated Statements of Income
(Unaudited)
Three months ended Six months ended
Dec. 25, Dec. 25,
1998 1997 1998 1997
Revenues $25,602,000 $22,805,000 $48,197,000 $43,243,000
Cost of sales 15,789,000 14,181,000 29,334,000 26,608,000
Gross profit 9,813,000 8,624,000 18,863,000 16,635,000
Operating expenses:
Selling, general and
administrative 6,403,000 5,404,000 12,675,000 11,073,000
Research and
development 763,000 608,000 1,441,000 1,175,000
Write-off of
uncollectible
receivable 400,000 1,878,000 400,000 1,878,000
Total operating
expenses 7,566,000 7,890,000 14,516,000 14,126,000
Operating income 2,247,000 734,000 4,347,000 2,509,000
Interest expense 51,000 69,000 102,000 138,000
Interest income 66,000 83,000 172,000 192,000
Income before taxes
on income 2,262,000 748,000 4,417,000 2,563,000
Taxes on income 838,000 275,000 1,635,000 948,000
Net income $ 1,424,000 $ 473,000 $ 2,782,000 $ 1,615,000
Basic net income
per share $ 0.27 $ 0.09 $ 0.53 $ 0.31
Diluted net income
per share $ 0.27 $ 0.09 $ 0.52 $ 0.30
Basic weighted
average number of
shares outstanding 5,249,000 5,250,000 5,253,000 5,250,000
Diluted weighted
average number of
shares outstanding 5,309,000 5,389,000 5,311,000 5,398,000
EDELBROCK CORP.
Condensed Consolidated Balance Sheets
Dec. 25, June 30,
1998 1998
(Unaudited)
Assets:
Current assets:
Cash and cash equivalents $ 4,165,000 $ 8,370,000
Accounts receivable, net 23,334,000 21,222,000
Inventories 16,935,000 16,776,000
Prepaid expenses and other 1,363,000 1,288,000
Total current assets 45,797,000 47,656,000
Property, plant and equipment, net 35,365,000 35,676,000
Other 1,495,000 1,643,000
Total assets $82,657,000 $84,975,000
Liabilities and shareholders' equity:
Current liabilities:
Accounts payable $10,572,000 $14,724,000
Accrued expenses 2,650,000 3,610,000
Current portion of long-term debt 62,000 62,000
Total current liabilities 13,284,000 18,396,000
Long-term debt 2,093,000 2,123,000
Deferred income taxes 2,790,000 2,725,000
Shareholders' equity 64,490,000 61,731,000
Total liabilities and shareholders' equity $82,657,000 $84,975,000