Hilite Enters Into Tender Offer Agreement With Investment Group
27 April 1999
Hilite Industries, Inc. Enters Into Tender Offer Agreement With Investment Group at $14.25 Per Share and Reports Third Quarter Earnings
CARROLLTON, Texas, April 27 -- Hilite Industries, Inc.
("Hilite") today announced that it has entered into an
agreement with an investment group lead by Cleveland-based Carreras, Kestner &
Co., LLC, ("CK & Co.") whereby an offer will be made to acquire all of the
outstanding common stock of Hilite at $14.25 per share.
The transaction will take the form of a tender offer by Hilite for all of
its shares at a net cash price of $14.25 per share which will be funded by a
simultaneous purchase of shares by the investment group as well as financing
arranged by the investment group. This transaction will be followed by a
merger in which the remaining public shareholders of Hilite will receive the
same per share cash consideration that participants in the initial tender
offer will receive. The total consideration to be offered for Hilite shares
is approximately $69.8 million. The tender offer and subsequent merger are
subject to customary terms and conditions.
Certain shareholders and management personnel of Hilite have agreed to
retain approximately 143,000 shares, representing approximately a 7.8% post-
closing interest in Hilite. Such shareholders and management personnel have
agreed to tender the balance of their respective shares, representing
approximately 73% of Hilite's outstanding shares, at the time of the tender
offer. After completion of the transactions referred to above, the new
investors will own approximately 92.2% of Hilite and Hilite's shares will no
longer be publicly traded.
Hilite's Board of Directors has unanimously recommended that shareholders
accept the offer and has received an opinion from Bowles Hollowell Conner &
Co., a division of First Union Capital Markets Corp., ("Bowles Hollowell")
that the transaction is financially fair to shareholders.
Daniel W. Brady, Chief Executive Officer, said, "I am very pleased that
our shareholders can realize an appreciated value for their shares in the
Company. The Board of Directors has been concerned for some time that the
value of our company has not been reflected in the trading price of its
shares. The price offered in the tender is a higher price than the shares
have ever traded. The Company's third quarter earnings are strong. At the
Board's request, these earnings were taken into consideration by Bowles
Hollowell in issuing its fairness opinion. The Board of Directors considered
the fairness opinion and other factors related to the outlook of the Company
and the automotive industry in concluding that the offer is fair and should be
recommended to the shareholders.
CK & Co. was founded in 1998 to take controlling equity and management
positions in manufacturing companies. Joseph W. Carreras, a principal of
CK & Co., said "We were attracted to Hilite by its growth track record, the
quality of its management and its leading position in the markets it serves.
Hilite will be a cornerstone of an aggressive acquisition program to build a
substantially larger automotive parts supply company."
The Company is also announcing its third quarter, fiscal 1999 operating
results which includes strong sales and earnings for the third fiscal quarter
of 1999. Sales for the quarter ended March31, 1999 were $25,631,000, an
increase of $3,524,000 or 16% over sales of $22,107,000 for the third fiscal
quarter of 1998. Earnings in the third quarter were $1,943,000 or $0.40 per
share, increasing 33% over the earnings of $1,463,000 ($0.30 per share) in the
third quarter last year. Sales for the nine months ended March 31, 1999 were
$68,214,000, increasing 7% over sales of $63,763,000 for the same period of
the prior year. Earnings for the nine-month period were $4,299,000 ($0.88 per
share), a 35% increase over earnings of $3,193,000 ($0.65 per share) in the
prior year. Shareholders' equity per share was $6.14 at March 31, 1999,
compared to $5.34 per share at June 30, 1998.
The Board of Directors approved a cash dividend of $0.025 per share for
the third quarter. The record date has been set for May 11, 1999. The
dividend is expected to be distributed on or about May 25, 1999.
Daniel W. Brady, CEO of Hilite Industries, commented: "Sharply increased
automobile and heavy truck build rates contributed to a strong quarter. The
Company was well positioned to take advantage of this opportunity, which
resulted in significant earnings improvement over the second quarter and the
third quarter of the prior year. Currently, the fourth quarter is expected to
also benefit from this volume surge, but not to the same extent as the third
quarter. At this time, it is too early to conclude that these higher build
rates will be sustained for the longer term."
Except for historical information, certain statements contained herein are
forward-looking statements that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Words
such as expects, anticipates, intends, plans, believes, seeks, estimates, or
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve unknown risks and uncertainties, which may cause the
Company's actual results in future periods to differ materially from
forecasted results. Those risks include, among others, risks associated with
changes in automotive and non-automotive build rates as well as risks
associated with the manufacturing process and start-up of new products and
risks related to technological changes in components which affect the life of
the product. These and other risks are described in the Company's Form 10-K
filed with the Securities and Exchange Commission (SEC) on September28, 1998
and Forms 10-Q filed quarterly with the SEC, copies of which are available
from the SEC or may be obtained upon request from the Company. The Company
does not undertake any obligation to update or revise any forward-looking
statements.
Hilite Industries, Inc. designs, manufactures and sells a diversified line
of highly engineered components and assemblies for the automotive industry
including brake proportioning valves, electromagnetic clutches, machined
components such as mounting brackets and pulleys, and specialty components and
assemblies such as stampings, specialty springs and automated assemblies. The
Company's customers include all three domestic automotive companies: Ford
Motor Company, General Motors Corporation and Daimler Chrysler Corporation as
well as other original equipment manufacturers such as Navistar International
Transportation Corporation and non-automotive companies such as Motorola, Inc.
The Company also sells products to first-tier suppliers of the automotive
industry including Borg-Warner Corporation, Bosch Braking Systems Corporation,
Denso of Los Angeles, Inc. and ITT Automotive of North America, Inc.
For further information call Investor Relations at (972) 466-0475 or
access Hilite Industries, Inc.'s website at http://www.hilite-ind.com.
HILITE INDUSTRIES, INC.
Financial Highlights
(In Thousands, Except Share and Per Share Data)
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
Income Statement Data:
Brake Valves $ 8,869 $ 7,298 $ 25,310 $ 19,859
Power Transmission
Components 9,814 5,961 23,099 16,559
Specialty Comp. and
Assemblies 6,948 8,848 19,805 27,346
Net Sales 25,631 22,107 68,214 63,764
Gross Profit 5,695 4,515 14,619 12,801
Operating Income 3,370 2,447 7,845 6,023
Net Income 1,942 1,463 4,298 3,194
Earnings (Loss) Per
Share $ 0.40 $ 0.30 $ 0.88 $ 0.65
Weighted average number of
shares outstanding 4,900 4,900 4,900 4,900
Mar. 31, 1999 June 30, 1998
Balance sheet data:
Working capital $ 14,660 $ 10,569
Property, plant, equipment, net 27,842 27,616
Total assets 60,826 57,356
Long-term obligations (A) 13,170 12,957
Total liabilities 30,745 31,209
Shareholders' equity 30,081 26,147
(A) Does not include current portion of long-term debt of $2,543 at
March 31, 1999 and $2,423 at June 30, 1998.