Wescast Industries Posts 28 Percent Higher Q2 Earnings!
15 July 1999
Wescast Industries Posts 28 Percent Higher Q2 Earnings!
BRANTFORD, ONTARIO--July 15, 1999--Wescast Industries Inc. (TSE:WCS.A.), the world's largest exhaust manifold producer, announces strong second quarter earnings.Highlights
-Sales for the second quarter of 1999 have increased 22% over 1998, and net earnings increased 28 percent to $16.9 million compared to $13.3 million in 1998. Basic earnings per share were $1.29 compared to 1998 second quarter earnings per share of $1.01.
-The Company ratified a new three-year contract with the CAW for its Wingham casting facilities on May 20, 1999. This contract takes effect July 1, 1999 and runs through to June 30, 2002.
-Wescast launched Phase II of its General Motors GEN III engine program for the full-sized pickup truck.
-The Company's Brantford facility posted 500,000 hours with no lost-time accidents.
Sales
Sales in Q2 1999 of $95.3 million represent a 22 percent increase over the second quarter of 1998 due to new program launches and continued strong automotive sales. In Q2 1999, the Company sold 3.8 million manifolds compared to 2.9 million in Q2 1998, a 31 percent increase.
Operating Results
Wescast's 1999 Q2 operating earnings totalled $26.4 million, an increase of 38 percent compared to 1998's Q2 operating earnings of $19.1 million. The Company machined 58 percent or 2.2 million of the manifolds produced during the quarter. This compares to 51 percent or 1.5 million in Q2 1998. The significant change in product mix, the additional volume of manifolds sold, and a continued focus on quality has improved production and maintained strong margins for the Company.
Operating earnings for the first six months of 1999 were $50.2 million, 45 percent higher than $34.7 million in 1998. Net earnings for the first six months of 1999 were $31.9 million, 35 percent higher than the $23.6 million in 1998.
Balance Sheet and Financial Position Results
As of June 27, 1999, Wescast had a strong working capital ratio of 4:1 and a cash position of $86 million. Capital spending totalled $17.2 million in Q2 1999 compared to $11.6 million in Q2 1998. The Company plans to invest approximately $110 million in 1999 for the new foundry, new machine lines, and improved production equipment. These investments will enable the Company to generate additional machining and casting revenues and provide further opportunity for continued operating efficiencies.
Year 2000 Readiness
Wescast has completed step (1) through (6) of an enterprise-wide program consisting of eight steps, suggested by the Automotive Industry Action Group, for the year-2000 (Y2K) issue with respect to its computer systems and other systems compliance. Step (7), which is the integration and implementation of revised systems into the financial and production environments, is expected to be completed by the third quarter 1999. An overall readiness review, which is the final step of the program and will include re testing of major systems, will be performed throughout the remainder of 1999.
Wescast is continuing to perform Y2K assessments on approximately 50 of its critical suppliers. Wescast believes that its major customers and suppliers will be Y2K compliant; however, there can be no assurance that the company's customers or suppliers, or any other organization, with which Wescast conducts business, will be Y2K compliant by January 1, 2000. The inability of the Company's customers' or suppliers' systems to achieve Y2K compliance may have a material adverse effect on Wescast's operations.
Wescast has completed Y2K contingency plans for each facility of the company. These plans will be monitored and adjusted up to, and through, the year 2000. Each plan addresses strategies to restore operations, recovery programs and third party risks for the major systems and operating units of each facility.
This disclosure is a Year 2000 Readiness Disclosure within the meaning of the U.S. Year 2000 Information and Readiness Disclosure Act of 1998 to the extent that the disclosure relates to Year 2000 processing of the Company or products or services offered by the Company.
Conference Call
A conference call has been arranged for Thursday, July 15th, at 1:00 p.m. EST. To participate in this call, please dial 416/641-6714.
Wescast Industries Inc. is the largest manufacturer and supplier of exhaust manifolds for passenger cars and light trucks in the world. In addition, the Company produces pressure retaining high-alloy cast steel pump components for the petrochemical, pulp and paper and food processing industries. The Company operates six facilities and employs about 1,600 people.
Wescast Industries Inc. Financial Statements
Consolidated Statement of Earnings
(in thousands of Canadian dollars, except per share figures)
(Unaudited Canadian GAAP)
Three months ended Six months ended
------------------ -----------------
June 27 June 28 June 27 June 28
1999 1998 1999 1998
----------------- -----------------
Sales $95,264 $77,965 179,363 142,362
Cost of sales 62,536 54,192 117,109 98,592
------- ------- ------- -------
Gross Margin 32,728 23,773 62,254 43,770
Selling, general and
administration 5,729 3,856 10,904 7,491
Research, development
and design 573 830 1,057 1,572
------ ------ ------ ------
Operating earnings 26,426 19,087 50,293 34,707
Other (income) expense
Interest expense 91 20 238 39
Investment income (1,224) (603) (2,358) (1,414)
Other income and expenses 1,385 (917) 2,324 ( 588)
------ ----- ------ -------
Earnings before income
taxes 26,174 20,587 50,089 36,670
Income taxes 9,190 7,331 18,208 13,014
------ ------ ------ ------
Net earnings $16,984 $13,256 $31,881 $23,656
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Net earnings per share
- basic $1.29 $1.01 $2.42 $1.81
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----- ----- ----- -----
- fully diluted $1.23 $0.97 $2.31 $1.74
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NOTES TO FINANCIAL STATEMENTS
Note 1: Basic earnings per share is calculated based on the weighted average number of common shares outstanding (1999 - 13,155,765 shares; 1998 - 13,086,061 shares). Fully diluted earnings per share is calculated based on the fully diluted weighted average number of common shares outstanding (1999 - 13,996,255 shares; 1998 - 13,715,413 shares).
Note 2: Certain figures for 1998 have been reclassified to conform with the presentation adopted in 1999.
Note 3: The Consolidated Statement of Cash Flows for the three month period and the six month period ended June 28, 1998 have been restated to reflect the retroactive adoption of the CICA's revised guidelines for cash flow statements.
Wescast Industries Inc. Financial Statements
Consolidated Balance Sheet
(in thousands of Canadian dollars) (Unaudited Canadian GAAP)
As at
------------------------
June 27 June 28
1999 1998
------------------------
Current Assets
Cash and cash equivalents $86,320 $54,920
Receivables 60,205 53,908
Inventories 16,493 13,476
Prepaids 532 216
------- -------
163,550 122,520
Property and equipment 157,157 131,274
Other 3,536 224
------- -------
$324,243 $254,018
-------- --------
-------- --------
Current liabilities
Payables and accruals $33,583 $28,637
Income taxes payable 5,990 2,356
Current portion of long term debt 1,321 408
Due to affiliated companies 151 49
------- -------
41,045 31,450
Long term debt 5,005 705
Deferred income taxes 4,445 3,597
Accrued pension benefits 4,888 3,840
----- -----
55,383 39,592
------ ------
Shareholders' equity
Capital stock 107,439 104,880
Retained earnings 161,421 109,546
------- -------
268,860 214,426
------- -------
$324,243 $254,018
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-------- --------
Wescast Industries Inc. Financial Statements
Consolidated Statement of Cash Flows
(in thousands of Canadian dollars) (Unaudited Canadian GAAP)
Three months ended Six months ended
------------------- ----------------
June 27 June 28 June 27 June 28
1999 1998 1999 1998
------------------- ----------------
Cash derived from (applied to)
Operating activities
Net income $16,984 $13,256 $31,881 $23,656
Add (deduct) items not
requiring cash:
Depreciation and
amortization 4,806 3,761 9,264 7,189
Amortization of bond
issue costs 8 0 15 0
Deferred income taxes 256 339 529 678
(Gain)/loss on disposal
of assets 10 38 11 32
Pension expense 57 384 142 768
------ ------ ------ ------
22,121 17,778 41,842 32,323
(Increase) decrease in
non-cash working capital (593) 6,962 6,290 (11,730)
------- ------ ------ -------
Total cash from
operations 21,528 24,740 48,132 20,593
------ ------ ------ ------
Financing activities
Issue of long term debt 109 0 249 0
Repayment of long term debt (9) 0 (220) 0
Payment of obligations
under capital lease (150) (122) (267) (237)
Issuance of share capital
under Employee Share
Purchase Plan 85 0 183 0
Payments from Employee
Share Purchase Plan loans 6 0 9 0
Issuance of share capital
under Stock Option Plan 59 0 584 11
Dividends paid (1,055) (1,047) (2,106) (2,094)
------- ------- ------- -------
Total financing activities (955) (1,169) (1,568) (2,320)
----- ------- ------- -------
Investment activities
Purchase of property
and equipment (17,211) (11,573) (27,281) (23,477)
Purchase of licence 0 0 (74) 0
Restricted cash from
long term debt 850 0 1,969 0
Proceeds on sale of short
term investments 0 21,550 36,892 31,566
Proceeds on disposal of
assets 106 66 119 86
------ ------ ------ ------
Total investment
activities (16,255) 10,043 11,625 8,175
-------- ------ ------ -----
Net increase in cash and
cash equivalents 4,318 33,614 58,189 26,448
Cash and cash equivalents
Beginning of period 82,002 21,306 28,131 28,472
------ ------ ------ ------
End of period $86,320 $54,920 $86,320 $54,920
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