BFGoodrich and Coltec Industries Both Achieve Record Second Quarter Results
21 July 1999
BFGoodrich and Coltec Industries Both Achieve Record Second Quarter Results
CHARLOTTE, N.C., July 21 -- BFGoodrich and Coltec
Industries each reported record results for the second quarter, continuing the
impressive growth that the recently merged companies have achieved
individually during the past 12 quarters. Excluding special items, BFGoodrich
net income increased 22 percent to $68.0 million, or 90 cents per share,
compared to $55.9 million, or 74 cents per share, in the year-ago quarter.
Coltec's net earnings increased to $31.8 million, or 48 cents per share, from
$30.3 million, or
44 cents per share, a per-share increase of 9 percent compared to last year's
second quarter, excluding non-recurring charges and extraordinary items. In
addition, Coltec achieved free cash flow of $26 million for the quarter,
excluding merger-related expenditures, and is more than halfway toward its
stated goal of $100 million in free cash flow for all of 1999.
Second quarter sales increased 7 percent to $1.1 billion at BFGoodrich,
while Coltec reported sales of $382 million, about equal to last year
excluding the Holley Performance Products business which Coltec divested in
the second quarter of 1998. The companies completed their merger on July 12
and will begin reporting consolidated results in the third quarter.
In commenting on the quarter's results, David L. Burner, BFGoodrich's
chairman and chief executive officer, said, "BFGoodrich and Coltec continued
to deliver strong earnings growth. During the second quarter, the aerospace
businesses of both companies achieved operating income growth of approximately
20 percent on higher sales and improved margins. Performance Materials
generated higher profits and margins as steady improvement continues in the
operations despite soft business conditions throughout the chemical industry.
And Coltec's industrial operations reported a slight decline in operating
income, excluding Holley. Burner added that, "With the completion of the
merger, management's focus is on quickly integrating the two organizations and
realizing the shareholder value inherent in this combination."
BFGoodrich's results in the 1999 second quarter as discussed above exclude
an after-tax charge of $6.4 million, or 8 cents per share, related to the
closing of the corporate aircraft operations and certain executive severance
payments. Including this charge, net income was $61.6 million, or 82 cents per
share.
Coltec's results in the 1999 second quarter as discussed above exclude an
after-tax gain of $4.1 million, or 6 cents per share, related to the sale of
real estate and an equity interest in a specialty bearings venture. Including
this gain, net income in the quarter was $35.9 million, or 54 cents per share.
BFGoodrich Segment Review
Aerospace segment sales increased 15 percent to $771 million from
$670 million in the second quarter of 1998. Operating income increased
20 percent to $108.9 million from $90.9 million reflecting strong demand,
particularly for aftermarket products and services. All four operating groups
contributed to higher sales and operating income. The results also benefited
from a settlement related to the supply of aerostructures for the PW4000
engine for the A300/310 and MD-11 program.
In Performance Materials, segment sales declined to $311 million from
$341 million in the year-ago quarter; however, operating income increased 7
percent to $43.0 million from $40.2 million in last year's second quarter. The
increase in profits reflects significantly improved results in two operating
groups -- polymer additives and specialty plastics, and consumer specialties -
- offset to a degree by lower volumes and prices in the textiles and coatings
solutions business.
Coltec Segment Review
In the Aerospace segment, second quarter sales increased 7 percent to
$196 million and operating income equaled $34.5 million, 21 percent above the
year-ago quarter excluding non-recurring charges in that period. Every
business contributed to higher profits with the greatest gains coming from the
landing gear operations reflecting increased shipments of fully dressed
landing gear systems, improved operations at the Texas facility, and
continuing strength in the landing gear overhaul and maintenance business. The
engine component businesses achieved higher results reflecting increased
demand for regional jets, higher productivity, and the positive impact of new
programs and mix changes.
In the Industrial segment, sales equaled $187 million, approximately
6 percent below last year, excluding Holley. Operating profit in the quarter
was $37.6 million, approximately 4 percent below last year excluding non-
recurring charges and Holley in that period. Weakness continued in most
manufacturing industries.
First Half Review
For the first six months of 1999, BFGoodrich's income from continuing
operations and net income, excluding special items, increased 22 percent to
$133.8 million or $1.78 per share, compared to $110.1 million, or $1.46 per
share, from continuing operations in the first half of last year. Special
items totaled $22.9 million after-tax, or 30 cents per share, for
restructuring costs in the Performance Materials segment, the closing of
corporate aircraft operations and executive severance payments. Including
these charges, net income and income from continuing operations in the first
half of 1999 was $110.9 million, or $ 1.48 per share. Sales in the first half
of 1999 were $2.1 billion, up 9 percent from $1.9 billion last year.
For the first six months of 1999, Coltec Industries' earnings from
operations, excluding the second quarter gain, equaled $59.3 million, or
90 cents per share. Coltec's net income in the first half, including this
gain, was $63.3 million, or 96 cents per share, compared to $60.6 million, or
89 cents per share, in the first half of 1998.
As a result of the merger with Coltec Industries, BFGoodrich has become a
Fortune 300 multi-industry company with annual revenues of approximately $6
billion and leading market positions in aerospace systems, performance
materials and industrial products. The company is headquartered in Charlotte,
North Carolina. For more information, please visit our website at www.
bfgoodrich.com.
The tables that follow provide more detailed information about BFGoodrich
and Coltec Industries results for the second quarter and first half of 1999
and 1998.
[Part of this announcement contains forward-looking statements that
involve risks and uncertainties, and actual results could differ materially
from those projected in the forward-looking statements. The risks and
uncertainties are detailed from time to time in reports filed with the
Securities and Exchange Commission, including but not limited to the last
section of the Management's Discussion and Analysis entitled "Forward-Looking
Information is Subject to Risk and Uncertainty" contained in the company's
Annual Report on Form 10-K and in other filings.]
THE BFGOODRICH COMPANY
(Dollars in millions except per share amounts)
Three Months Ended
June 30
1999 1999
As Reported As Adjusted(A) 1998
Sales $1,081.7 $1,081.7 $1,011.0
Income before Income Taxes
and Trust Distributions 101.7 111.8 95.3
Income Tax Expense (37.5) (41.2) (36.8)
Distributions on Trust Preferred
Securities (2.6) (2.6) (2.6)
Net Income $ 61.6 $ 68.0 $ 55.9
Income (Loss) Per Share:
Basic $ .83 $ .91 $ .76
Diluted $ .82 $ .90 $ .74
Weighted - Average Number
of Shares Outstanding
(in millions):
Basic 74.5 74.5 73.4
Diluted 75.2 75.2 75.3
(A) Results exclude the effect of an after-tax charge of $6.4 million,
or 8 cents a diluted share, related to merger-related and
consolidation costs.
THE BFGOODRICH COMPANY
(Dollars in millions except per share amounts)
Six Months Ended
June 30
1999 1999
As Reported As Adjusted(A) 1998
Sales $2,117.3 $2,117.3 $1,948.7
Income from Continuing Operations
before Income Taxes and
Trust Distributions 184.0 220.3 187.6
Income Tax Expense (67.9) (81.3) (72.3)
Distributions on Trust Preferred
Securities (5.2) (5.2) (5.2)
Income from Continuing
Operations 110.9 133.8 110.1
Income (Loss) from Discontinued
Operations -- -- (1.6)
Net Income $ 110.9 $ 133.8 $ 108.5
Income (Loss) Per Share:
Basic
Continuing Operations $ 1.49 $ 1.80 $ 1.50
Discontinued Operations -- -- (.02)
Net Income $ 1.49 $ 1.80 $ 1.48
Diluted
Continuing Operations $ 1.48 $ 1.78 $ 1.46
Discontinued Operations -- -- (.02)
Net Income $ 1.48 $ 1.78 $ 1.44
Weighted - Average Number
of Shares Outstanding
(in millions):
Basic 74.5 74.5 73.1
Diluted 75.0 75.0 75.1
(A) Results exclude the effect of an after-tax charge of $22.9 million,
or 30 cents a diluted share, related to merger-related and
consolidation costs.
BFGOODRICH SEGMENT REPORTING
(Dollars in millions)
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
Sales:
Aerospace:
Aerostructures $ 323.2 $ 282.4 $ 633.4 $ 585.0
Landing Systems 165.3 143.5 328.1 286.4
Sensors & Integrated
Systems 145.5 139.8 298.0 280.0
Maintenance, Repair &
Overhaul 136.7 104.4 246.8 204.0
770.7 670.1 1,506.3 1,355.4
Performance Materials:
Textile and Coatings
Solutions 159.6 179.3 313.3 300.5
Polymer Additives and
Specialty Plastics 106.1 108.7 211.6 219.0
Consumer Specialties 45.3 52.9 86.1 73.8
311.0 340.9 611.0 593.3
Total Sales $1,081.7 $1,011.0 $2,117.3 $1,948.7
Operating Income:
Aerospace:
Aerostructures $ 46.7 $ 43.3 $ 97.4 $ 82.8
Landing Systems 24.7 16.3 48.8 32.2
Sensors & Integrated
Systems 26.2 25.3 55.5 53.3
Maintenance, Repair &
Overhaul 11.3 6.0 19.4 10.5
108.9 90.9 221.1 178.8
Performance Materials:
Textile and Coatings
Solutions 13.6 20.6 21.9 36.3
Polymer Additives and
Specialty Plastics 17.6 12.1 36.8 27.4
Consumer Specialties 11.8 7.5 17.5 13.1
43.0 40.2 76.2 76.8
Total Segment Operating
Income 151.9 131.1 297.3 255.6
Corporate General and
Administrative Costs (14.3) (13.7) (28.6) (27.5)
Merger-related and Consolidation
Costs (10.1) -- (36.3) --
Total Operating Income $ 127.5 $ 117.4 $ 232.4 $ 228.1
COLTEC INDUSTRIES AND SUBSIDIARIES
Summary Consolidated Statements of Earnings
(in thousands, except per share data)
Three Months Ended Six Months Ended
July 4 June 28 July 4 June 28
1999 1998 1999 1998
Net sales $ 381,665 $ 394,754 $ 757,897 $ 769,195
Costs and expenses (319,164) (333,932) (639,451) (655,079)
Non-recurring
charges (A) 0 (42,054) 0 (42,054)
Operating income (A) 62,501 18,768 118,446 72,062
Gain on sale of
assets 6,140 56,194 6,140 56,194
Interest expense and
other, net (12,348) (13,230) (24,728) (28,310)
Earnings before income
taxes, minority interest
and extraordinary
item 56,293 61,732 99,858 99,946
Income taxes (19,139) (20,989) (33,951) (33,982)
Minority interest in net
loss of subsidiaries,
net of tax (1,300) (1,085) (2,600) (1,085)
Earnings before
extraordinary item
(B) 35,854 39,658 63,307 64,879
Extraordinary item, net
of tax (D) 0 (4,326) 0 (4,326)
Net earnings $ 35,854 $ 35,332 $ 63,307 $ 60,553
Earnings from
operations (B) $ 31,801 $ 30,326 $ 59,254 $ 55,547
Diluted earnings per share
Earnings from
operations (C) $ 0.48 $ 0.44 $ 0.90 $ 0.82
Non-recurring charges -- (0.39) -- (0.39)
Gain on sale of
business 0.06 0.52 0.06 0.52
Earnings before
extraordinary item 0.54 0.57 0.96 0.95
Extraordinary item (D) -- (0.06) -- (0.06)
Net earnings $ 0.54 $ 0.51 $ 0.96 $ 0.89
Diluted weighted average
common and common
stock equivalents 69,089 71,304 68,902 69,220
Footnotes to Summary Consolidated Statements of Earnings
(A) Operating income for the three months and six months ended June 28,
1998 included non-recurring charges as follows:
a) $25.0 million non-cash charge to recognize program costs during
the ramp-up of the Boeing 777 program which will reduce future
shipset costs,
b) $12.0 million non-cash charge to record additional warranty and
legal reserves, and
c) $5.0 million expense related to Year 2000 compliance costs for new
computer systems.
Excluding these charges totaling $42.0 million, operating income for
the three months and six months ended June 28, 1998 was $60.8 million
and $114.1 million, respectively.
(B) Earnings before extraordinary item excluding the non-recurring charges
of $42.0 million and the gain on the sale of Holley Performance
Products (Holley) of $56.2 million was $30.3 million and $55.5 million
for the three and six months ended June 28, 1998, respectively. For
the three months and six months ended July 4, 1999, earnings before
extraordinary item excluding the gain on sale of assets was $31.8
million and $59.3 million, respectively.
(C) For the three months and six months ended June 28, 1998, represents
diluted earnings per share before extraordinary item excluding the
non-recurring charges and the gain on the sale of Holley. Such one-
time items net to $14.1 million of pretax income ($9.3 million after-
tax) or $0.13 per share. For the three months and six months ended
July 4, 1999, represents diluted earnings per share before
extraordinary item excluding the gain on sale of assets.
(D) The Company incurred extraordinary charges of $4.3 million (net of
income taxes of $2.2 million) in connection with early repayment of
debt in second quarter 1998.
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Industry Segment Information
(in millions)
Three Months Ended Six Months Ended
July 4 June 28 July 4 June 28
1999 1998 1999 1998
Sales:
Aerospace $ 195.2 $ 182.6 $ 385.8 $ 348.7
Industrial 186.6 212.2 372.4 421.3
Intersegment
elimination (0.1) 0.0 (0.3) (0.8)
Total $ 381.7 $ 394.8 $ 757.9 $ 769.2
Operating income:
Aerospace (A) $ 34.5 $ 1.4 $ 65.0 $ 27.5
Industrial (B) 37.6 26.5 73.2 63.8
Total segments 72.1 27.9 138.2 91.3
Corporate unallocated (9.6) (9.1) (19.8) (19.2)
Operating income $ 62.5 $ 18.8 $ 118.4 $ 72.1
(A) Operating income in the Aerospace Segment for the three months and six
months ended June 28, 1998 included a non-recurring charge of
$25.0 million to recognize program costs during the ramp-up of the
Boeing 777 program and a $2.0 million expense for Year 2000 compliance
for new computer systems. Excluding these one-time charges, Aerospace
operating income was $28.4 million and $54.5 million for the three and
six months ended June 28, 1998, respectively.
(B) Operating income in the Industrial Segment for the three months and
six months ended June 28, 1998 included non-recurring charges of
$12.0 million to record additional warranty and legal reserves and
$3.0 million expense for Year 2000 compliance for new computer
systems. Excluding these one-time charges, Industrial Segment
operating income was $41.5 million and $78.8 million for the three and
six months ended June 28, 1998, respectively.
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Summary Consolidated Balance Sheets
(in thousands)
July 4 December 31
Assets 1999 1998
Current assets
Cash and cash equivalents $ 28,810 $ 21,785
Accounts and notes receivable, net
of allowance 211,064 148,185
Inventories 242,341 236,003
Deferred income taxes 24,340 20,464
Other current assets 81,294 15,612
Total current assets 587,849 442,049
Property, plant and equipment, net 301,542 306,642
Costs in excess of net assets, net 211,856 214,647
Other assets 106,938 92,310
$1,208,185 $1,055,648
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt $ 5,845 $ 2,513
Accounts payable 96,160 91,595
Accrued expenses 281,497 171,084
Liabilities of discontinued
operations 4,999 4,999
Total current liabilities 388,501 270,191
Long-term debt 540,643 580,092
Deferred income taxes 148,049 139,909
Other liabilities 87,353 85,490
Liabilities of discontinued operations 132,545 134,995
Company-obligated, mandatorily redeemable
convertible preferred securities of
subsidiary Coltec Capital Trust holding
solely convertible junior subordinated
debentures of the company 146,305 145,293
Shareholders' equity:
Common stock 706 706
Capital surplus 647,107 643,615
Retained deficit (733,061) (795,356)
Unearned compensation (1,232) (2,671)
Accumulated other comprehensive
income (21,962) (18,688)
(108,442) (172,394)
Less treasury shares (126,769) (127,928)
(235,211) (300,322)
$ 1,208,185 $ 1,055,648
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Summary Consolidated Statements of Cash Flows
(in thousands)
Six Months Ended
July 4 June 28
1999 1998
Cash flows from operating activities:
Net earnings $ 63,307 $ 60,553
Adjustments to reconcile net
earnings to cash provided by
operating activities
Gain on sale of assets (6,140) (56,194)
Extraordinary item -- 6,554
Depreciation and amortization 26,051 24,611
Deferred income taxes 4,264 6,802
Payment of liabilities of
discontinued operations (2,450) (6,894)
Foreign currency translation
adjustment (3,274) (8,407)
Other operating items (14,454) (3,834)
Changes in assets and liabilities,
net of effect from acquisitions
and divestitures:
Accounts and notes receivable (48,479) (42,911)
Inventories (6,338) 11,169
Other current assets (13,018) 1,908
Accounts payable 4,565 4,361
Accrued expenses and other 56,682 42,456
Cash provided by operating
activities 60,716 40,174
Cash flows from investing activities:
Proceeds from divestitures 3,886 100,000
Capital expenditures (18,960) (27,187)
Acquisition of businesses -- (80,518)
Cash used in investing
activities (15,074) (7,705)
Cash flows from financing activities:
Issuance of long-term debt -- 292,151
Issuance of convertible preferred
securities 144,472
Repayment of long-term debt (617) (18,847)
Decrease in revolving facility,
net (35,500) (440,000)
Repayment of borrowings under
receivables facility (2,500)
Purchase of treasury stock -- (994)
Other -- (3,871)
Cash provided by (used in)
financing activities (38,617) (27,089)
Increase in cash and cash
equivalents 7,025 5,380
Cash and cash equivalents -
beginning of period 21,785 14,693
Cash and cash equivalents - end
of period $ 28,810 $ 20,073