Autocam Reports Second Quarter and Six-Month Results
12 February 1999
Autocam Reports Second Quarter and Six-Month Results
KENTWOOD, Mich., Feb. 12 -- Autocam Corporation
today reported its financial results for the three and six
months ended December 31, 1998. The Kentwood, Michigan-based manufacturer of
precision-machined parts reported net income for the three months ended
December 31, 1998 of $2,099,000, or 32 cents per diluted share, on sales of
$54,405,000, versus net income of $2,104,000, or 32 cents per diluted share,
on sales of $21,795,000 for the three months ended December 31, 1997. For the
six months ended December 31, 1998, the Company earned $2,276,000, or 35 cents
per diluted share, on sales of $78,424,000, versus earnings of $3,239,000, or
50 cents per diluted share, on sales of $39,224,000 for the six months ended
December 31, 1997.
Commenting on the reported financial results, Autocam President John C.
Kennedy said, "Although revenues and earnings during the quarter met our
expectations, we have some definite challenges ahead of us over the next six
months, including integrating our recently-acquired foreign operations in
France and Brazil into the Autocam fold and rededicating our corporate focus
toward continuous improvement efforts at all levels of the organization."
The acquisition of Frank & Pignard SA ("F&P"), a French manufacturer of
precision-machined components, in October 1998 added $26 million in sales,
primarily of diesel fuel, power steering and braking system components, during
the three months ended December 31, 1998 versus the same period in fiscal
1998.
As a result of the F&P acquisition, second quarter sales increased 150%
over the prior year; however, the Company did not see a corresponding
improvement in income. "Unfortunately, there has been a fundamental shift
developing in the mix of sales by the Company's U.S. operations," Kennedy
indicated. "In certain instances, customers have phased out mature products
as they change from old to new generation fuel and braking systems. The
Company historically experiences lower profitability on new program ramp-ups
until its continuous improvement efforts can improve manufacturing
efficiencies and reduce waste." The Company was involved in five major
program start-ups during the first six months of fiscal 1999.
The Company has faced other production challenges, including customer
delays in the ramp-up of new braking system business which has resulted in an
underutilization of recently-employed labor and equipment, and continued
manufacturing difficulties resulting from the transfer of production for a key
customer of its Brazilian operation to the Kentwood facility. "In the latter
case, the customer expedited the time table for this transfer of production
which has caused the Company to incur significantly more start-up costs than
originally anticipated," Kennedy commented.
Kennedy indicated that over the next 12-18 months, the Company will focus
on leveraging its global customer relationships to grow the business and on
improving the manufacturing efficiencies of its recent acquisitions in the
U.S. and overseas. "With our strategic investments in place, we are well-
positioned as the only company in our industry with the capability to
manufacture product on three continents for our customers. However, our
strategy will only be successful if we remain a low cost provider to our
customers."
The Company also reported the cancellation of a contract with one of its
coronary stent customers that was not significant with regard to revenues but
will reduce future earnings. "Our customer made a business decision to exit
the coronary stent market," Kennedy explained. He reported that the Company
received a sizable cancellation fee that helped soften the blow in the short-
term; however, future earnings will be adversely impacted until replacement
business can be identified. The Company is active in producing prototype
stents for several medical start-up companies and expects that the lost
business can be replaced over the next year.
Kennedy indicated that he expects earnings during the third quarter of
fiscal 1999 will compare unfavorably with those of the same period last year
but remains optimistic that the fourth fiscal quarter will match or slightly
exceed fourth quarter fiscal 1998 levels. The growth in demand for new fuel
systems program components should allow for improved labor and equipment
utilization, and continuous improvement activities should reduce manufacturing
costs, thereby improving profitability. "However, at least in the near-term,
the benefit of these improvement plans will be offset by the loss in margin
expected from the reduction in coronary stent sales," Kennedy said.
Autocam manufactures precision-machined components primarily used in fuel,
power steering and braking systems and electric motor assemblies for the
transportation industry, and ophthalmic and cardiovascular devices for the
medical industry. Autocam's common stock trades on the Nasdaq National Market
under the symbol "ACAM". For more information on the Company, visit our
Internet website at http://www.autocam.com.
This release may contain forward-looking statements relating to future
financial and other results. Forward-looking statements include statements
concerning plans, objectives, goals, strategies, future events or performance
and underlying assumptions and other statements that are other than statements
of historical facts. Such forward-looking statements may be identified by the
use of the words "anticipates," "estimates," "expects," "intends," "plans,"
"predicts," "projects," and similar expressions. These cautionary statements
and any other cautionary statements that may accompany the forward-looking
statements expressly qualify all such statements. Forward-looking statements
involve risk and uncertainties that could cause actual results or outcomes to
differ materially form those expressed in the forward-looking statements.
AUTOCAM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Six Months Ended
December 31, December 31,
1998 1997 1998 1997
$$ % $$ % $$ % $$ %
Sales $54,405 100.0% $21,795 100.0% $78,424 100.0% $39,224 100.0%
Cost of
sales 45,727 84.0% 16,480 75.6% 66,306 84.5% 30,500 77.8%
Gross
profit 8,678 16.0% 5,315 24.4% 12,118 15.5% 8,724 22.2%
Selling,
general
and admin-
istra-
tive 2,678 5.0% 1,376 6.3% 4,472 5.7% 2,424 6.1%
Income from
opera-
tions 6,000 11.0% 3,939 18.1% 7,646 9.8% 6,300 16.1%
Interest and
other expense,
net 2,304 4.2% 647 3.0% 3,094 4.0% 1,255 3.2%
Minority
interest
in net
income 185 0.3% 338 0.4%
Income before
tax provi-
sion 3,511 6.5% 3,292 15.1% 4,214 5.4% 5,045 12.9%
Tax provi-
sion 1,412 2.6% 1,188 5.5% 1,938 2.5% 1,806 4.6%
Net
income $2,099 3.9% $2,104 9.6% $2,276 2.9% $3,239 8.3%
Basic net
income per
share $0.33 $0.33 $0.36 $0.51
Diluted net
income per
share $0.32 $0.32 $0.35 $0.50
Basic weighted
average shares
outstand-
ing 6,352 6,325 6,383 6,315
Diluted weighted
average shares
outstand-
ing 6,553 6,517 6,585 6,490
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1998 1998
Assets:
Cash $3,244 $1,644
Accounts receivable 48,869 11,680
Inventories 17,351 6,389
Other current assets 2,314 1,088
Total current assets 71,778 20,801
Fixed assets, net 136,644 64,421
Goodwill and other
intangible assets 29,346 14,366
Other assets 16,260 13,861
Total assets $254,028 $113,449
Liabilities and shareholders' equity:
Current maturities of
long-term debt $1,659 $6,554
Accounts payable 30,033 7,831
Accrued liabilities 12,899 3,290
Total current liabilities 44,591 17,675
Long-term obligations,
net of current maturities 127,820 37,851
Deferred taxes 27,392 10,051
Other liabilities 6,171 561
Minority interest 2,605 2,250
Shareholders' equity 45,449 45,061
Total liabilities and
shareholders' equity $254,028 $113,449