Ivaco Reports 1998 Results
26 February 1999
Ivaco Reports 1998 Results
MONTREAL--Feb. 26, 1999--Ivaco(ME:IVA.A.) (TSE:IVA.A.) (ME:IVA.B.) (TSE:IVA.B.) Ivaco Inc. today reported a net loss from continuing operations of $15,189,000 or $1.03 per share for the year ended December 31, 1998 compared to net earnings from continuing operations of $31,681,000 or $0.53 per share in 1997.(i)The 1998 amounts are after non-recurring items of $24.4 million and non-recurring losses of $10.4 million, totalling $34.8 million or $1.05 per share. These amounts are related to losses and shutdown costs at Atlantic Steel and restructuring and severance costs for the Sivaco Wire Group relocation projects. These costs, for the most part, directly impacted net earnings and have not been offset by income tax recoveries, as they pertain mostly to U.S. operations.
Paul Ivanier, Ivaco's President and Chief Executive Officer said the shutdown of Atlantic Steel's manufacturing operations was completed during the fourth quarter in order to prepare its 138 acre prime real estate site in mid-town Atlanta for delivery to the purchaser at the end of 1999. The sale price is US$76 million (approximately Cdn $114 million). Mr. Ivanier added that a phase two environmental study is nearing completion and the Company expects to commence remediation mid 1999.
Net loss for 1998 was $17,988,000 or $1.12 per share, including a loss relating to a previously discontinued operation of $2,799,000 or $0.09 per share. 1997 net earnings were $31,104,000 or $0.51 per share, including $0.26 attributable to a pre-tax gain on disposal of investments of $16.8 million.(i)
Sales for 1998 were $1.19 billion compared to $1.19 billion last year.
The following reviews the performance of each operating segment expressed in earnings before interest, taxes and amortization (EBITDA) for the year ended December 31:
EBITDA
(millions)
1998 1997 (ii)
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- Steel - Wire rod $42.3
Less: Non-recurring losses 10.4 $31.9 $22.7
- Fabricated Steel Products 75.9 88.5
- Plastic pipe and fittings -
50 percent share 39.2 38.3
- Precision machined components 10.5 11.5
- Corporate expenses (22.6) (21.0)
- Non-recurring items (24.4) --
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$110.5 $140.0
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Mr. Ivanier commented further, that had it not been for $24.4 million of non-recurring items and $10.4 million of non-recurring losses, EBITDA for 1998 would have been $145.3 million compared to $140.0 million in 1997. He added that the Company had achieved its restructuring objectives during the fourth quarter and the Sivaco Wire Group was now producing wire products at two locations rather than the previous four locations and the remaining two locations have been devoted solely to wire rod processing.
"Phase two of the upgrade program at Ivaco Rolling Mills was also completed during the fourth quarter", Mr. Ivanier said. "Connection was completed during the planned shutdown in January and the mill is now in its start-up phase". Included in the upgrade are a new billet reheat furnace, four-stand breakdown mill and automatic coil compactor. The benefits of this upgrade are larger rod coil size, superior steel quality, higher quality rolling capabilities and enhanced production capability.
Pricing pressures for wire rod are continuing into the first quarter of 1999. These pricing pressures are caused primarily by the impact of low-grade wire rod imports into the U.S. from Asia and other countries. "We are pleased by the recent initiative undertaken by U.S. wire rod producers with the filing of a Section 201 petition which is expected to address this problem while excluding imports from NAFTA countries such as Canada", Mr. Ivanier said.
The effect of pricing pressures on wire rod and fabricated steel products as well as the start-up of the phase two upgrade at Ivaco Rolling Mills, will impact first quarter earnings to a greater extent than previously expected. As a result the Company is only expected to resume reporting positive earnings per share starting with the second quarter.
Ivaco is a Canadian corporation and is a leading North American producer of steel, fabricated steel products, plastic pipe and fittings and precision machined components. Ivaco has operations in Canada and the United States. Shares of Ivaco are traded on The Toronto Stock Exchange and The Montreal Exchange (IVA).
------------------------------ Notes:
(i) Per share amounts for 1998 are after deducting preferred dividends of $16,440,000 (1997-$16,347,000) and are based on an average of 30,727,619 shares outstanding (1997-28,897,153). (ii) The 1997 amounts have been restated to conform to the presentation adopted in 1998.
(Please see attached statements)
CONSOLIDATED STATEMENTS OF EARNINGS
For the Years ended December 31 (Audited)
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Thousands of dollars except
per share amounts 1998 1997(iii)
---------------------------------------------------------------
Net Sales $1,194,563 $1,193,244
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Cost of sales and operating
expenses 1,059,632 1,053,268
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Operating earnings before
non-recurring items: 134,931 139,976
Non-recurring items (24,405) -
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Operating earnings (EBITDA) before: 110,526 139,976
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Amortization (56,634) (46,939)
Share of loss of equity accounted
investments (2,614) (571)
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Earnings from operations before
interest and other items 51,278 92,466
Net interest expense (45,070) (39,532)
Dividends on Series 5, Second
Preferred shares and Series E,
Preferred shares (5,411) (5,116)
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Earnings from continuing
operations before income taxes
and other items 797 47,818
Gain on disposal of Investments - 16,784
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Earnings from continuing operations
before income taxes 797 64,602
Income taxes 15,986 32,921
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Net earnings (loss) from continuing
operations (15,189) 31,681
Net loss from discontinued
operations (2,799) (577)
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Net earnings (loss) $(17,988) $31,104
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Earnings (loss) per share (iv & v)
Earnings (loss) per share from
continuing operations $(1.03) $0.53
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Net earnings (loss) per share $(1.12) $0.51
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CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION For the
Years ended December 31 (Audited)
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Thousands of dollars 1998 1997(iii)
---------------------------------------------------------------
OPERATING ACTIVITIES
Working capital provided from
operations $46,311 $72,655
Increase in non-cash working
capital items (6,299) (58,982)
Deferred preproduction and
development costs (5,757) (16,494)
Deferred pension asset 4,440 (14,153)
Other items (6,507) 731
---------------------------------------------------------------
Cash provided by (used in)
operating activities 32,188 (16,243)
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FINANCING ACTIVITIES
Dividends (10,906) (7,103)
Dividends - arrears - (3,672)
Additional long-term debt 105,827 125,331
Repayment of long-term debt (41,931) (136,317)
Redemption of Preferred Shares,
Series E - (7,733)
Deferred translation adjustment (25,202) (13,860)
Other items (1,332) 3,439
---------------------------------------------------------------
Cash provided by (used in)
financing activities 26,456 (39,915)
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INVESTING ACTIVITIES
Net additions to property, plant
and equipment (56,808) (98,761)
Net additions to construction
in progress (30,552) (12,226)
Proceeds from disposals of
investments and businesses 17,441 107,098
Discontinued operations (2,593) 812
Other items 2,433 (200)
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Cash used in investing activities (70,079) (3,277)
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BANK INDEBTEDNESS, NET OF CASH
Increase in bank indebtedness (11,435) (59,435)
Balance at beginning of year (21,253) 38,182
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Balance at end of year $(32,688) $(21,253)
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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at December 31 (Audited)
Thousands of dollars 1998 1997(iii)
---------------------------------------------------------------
Current assets
Cash and short-term investments $13,739 $26,983
Accounts receivable 151,554 183,468
Inventories 350,545 340,518
Prepaid expenses 7,804 8,856
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Total current assets 523,642 559,825
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Current liabilities
Bank indebtedness, partly secured 46,427 48,236
Accounts payable and accrued
liabilities 197,962 203,553
Income taxes payable 706 20,212
Current maturities of long-term
debt 46,328 34,499
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Total current liabilities 291,423 306,500
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Working capital 232,219 253,325
Investments, at cost 114,860 116,860
Investments, at equity 21,793 22,909
Property, plant and equipment 523,571 485,598
Other assets 128,664 109,627
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Total Investment 1,021,107 988,319
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Deduct:
Long-term debt 490,077 436,713
Series 5, Second Preferred Shares 51,789 44,027
Deferred income taxes 72,955 69,572
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614,821 550,312
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Shareholders' Equity $406,286 $438,007
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Represented by:
Capital stock $460,805 $461,402
Retained earnings (deficit) (74,722) (38,168)
Cumulative translation adjustment 20,203 14,773
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$406,286 $438,007
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Notes:
iii. The 1997 figures have been reclassified to conform with the
presentation adopted in 1998.
iv. Per share amounts are after deducting preferred share dividends.
v. Fully diluted earnings per share from continuing operations and
net earnings for 1997 was $0.50 and $0.48, respectively. There was
no dilutive effect in 1998.