C2, Inc. Reports Improved Financial Results for the Second Quarter
21 July 1999
C2, Inc. Reports Improved Financial Results for the Second Quarter
MILWAUKEE--July 21, 1999--C2, Inc. today reported net earnings for the second quarter ended June 30, 1999 of $440,000 or $0.08 per share. This represents a 17 percent increase over comparable proforma earnings for the second quarter of 1998 of $375,000 and a 177 percent increase over first quarter 1999 earnings before merger and acquisition-related charges.For the first six months of fiscal 1999, net earnings before merger and acquisition- related charges, totaled $611,000, or $0.12 per share versus comparable proforma net earnings of $571,000 for the same period last year, an increase of 7 percent.
William T. Donovan, C2 Chairman and CFO, commented, "While this is only the first full quarter of operating results for both of C2's business units, we are very pleased with the progress being achieved. C2's businesses are generating strong growth in revenues and earnings. In particular, Zero Zone is achieving record volume and operating earnings. We are operating at high utilization in our warehousing and logistics business, however margins were negatively impacted this quarter by implementation costs for new logistics accounts and expanded refrigerated warehousing programs. We see continued strong demand across all lines of our business and expect margin growth beginning in the third quarter and into 2000 as productivity enhancements are achieved."
Second Quarter Financial Results
Revenues for the second quarter ended June 30, 1999 increased 16 percent to $35,007,000 compared to proforma revenues of $30,273,000 reflecting strong growth in both TLC and Zero Zone's businesses. Operating earnings before capital charges (EBITDA) for the quarter increased 9 percent to $4,438,000 compared to proforma results for the same period last year and increased 62 percent over the first quarter of fiscal 1999 driven by record volume at Zero Zone and its inclusion for a full quarter. Net earnings for the quarter increased 17 percent to $440,000, or $0.08 per share, over comparable proforma earnings for the same period last year and increased 177 percent over first quarter net earnings of $159,000 before one-time merger and acquisition-related charges.
First Six Months of Fiscal 1999
Revenues for the six months ended June 30, 1999 increased 17 percent to $60,882,000 compared to proforma revenues of $52,138,000 driven by growth at both TLC and Zero Zone. Both operating units reported record volume for the first six months of fiscal 1999. Zero Zone's operations are included for the period since its acquisition on March 12, 1999. Operating earnings before capital charges (EBITDA) for the six months totaled $7,170,000, essentially flat compared to proforma EBITDA of $7,298,000 for the same period last year. Net earnings before one-time merger and acquisition-related charges totaled $611,000 or $0.12 per share, versus comparable proforma net earnings of $571,000 or $0.11 per share, reflecting an increase of 7 percent.
During the first six months of fiscal 1999, both TLC and Zero Zone incurred one-time charges which, combined, totaled $541,000 ($349,000 after taxes and minority interest, or $0.07 per share). Including these special charges, C2 reported net earnings for the first six months of fiscal 1999 of $262,000, or $0.05 per share.
Total Logistic Control
Total Logistic Control (TLC), based in Zeeland, Michigan, is a national provider of integrated logistic services which include refrigerated and dry warehousing, transportation, transportation management, international freight forwarding, food distribution and packaging. Operations are conducted through a network of 12 distribution warehouses of which seven are refrigerated or frozen facilities with an aggregate capacity of 34 million cubic feet. TLC also operates a transportation fleet of 190 refrigerated units. C2, Inc. purchased 66.7 percent of TLC in connection with the merger of Christiana Companies, Inc. and Weatherford International, Inc. on February 8, 1999.
Operating results of TLC for the second quarter reflect strong growth in revenues driven by higher utilization of refrigerated warehouse capacity, new logistics programs and expanded food distribution activities. Revenues for the quarter increased 13 percent to $24,389,000, compared to $21,600,000 reported for the same period last year. For the six months ended June 30, 1999, revenues generated by TLC totaled $48,136,000, an increase of 11 percent versus the comparable period last year.
EBITDA for the second quarter of 1999 totaled $3,356,000 which was essentially level with last year's second quarter EBITDA of $3,436,000. For the six month period EBITDA totaled $6,221,000, down 7 percent from last year's level of $6,681,000. Operating margins were negatively impacted in the first half of fiscal 1999 by implementation costs associated with large new logistics accounts which are scheduled to ramp up in future periods and expanded refrigerated warehousing programs which incurred higher than planned labor expenses. Margin improvement and growth in EBITDA is expected beginning in the third quarter and into 2000 as scheduled increased volume in new logistics programs occurs and productivity enhancements in warehousing operations are achieved.
Zero Zone
Zero Zone is a Wisconsin-based manufacturer of refrigerated and freezer display cases used in grocery, convenience and drug store chains for retail merchandising of food, beverage and floral products. C2 purchased 70.6 percent of Zero Zone on March 12, 1999.
Operating results of Zero Zone for the second quarter reflect record volume in sales and operating earnings driven by both high growth in existing key accounts as well as new customers. Sales for the second quarter totaled $10,618,000 reflecting a 22 percent increase over sales for the same period last year. The new retail store construction and refurbishment of existing stores continues to be an important factor in overall demand for Zero Zone's high quality display case products. Zero Zone continues to maintain important sole source relationships with large retailers and is achieving meaningful success in new customers, incorporating its products in their construction and refurbishment programs.
EBITDA for the second quarter of 1999 were $1,318,000, up 55 percent over the comparable period last year. Zero Zone recently completed construction of a significant expansion of its manufacturing capacity at its main plant in North Prairie, Wisconsin and unit volumes are now increasing monthly, along with steady productivity gains.
C2, Inc.
Milwaukee-based C2, Inc. is a new public company principally engaged in third party product distribution services and equipment manufacturing. C2's operating units include Total Logistic Control, a provider of refrigerated and non-refrigerated third party integrated logistic services which include warehousing, transportation, distribution and international freight forwarding; and Zero Zone, a manufacturer of refrigerated and freezer display cases used in grocery, convenience and drug store chains for retail merchandising of food, beverage and floral products.
This press release contains forward-looking statements within the meaning of the Private Securities Reform Act of 1995 concerning, among other things, C2, Inc.'s prospects for its operations. These risks and uncertainties are more fully described in the C2, Inc. prospectus filed with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should certain assumptions prove incorrect, actual results may vary in material aspects from those currently anticipated.
C2, INC.
Consolidated Statement of Earnings
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ------------------------
1999 1998(1) 1998(2) 1999 1998(1) 1998(2)
Actual Proforma Actual Actual Proforma Actual
------------------------- ------------------------
Revenues:
Logistic Revenues $24,389 $21,600 $21,600 $48,136 $43,465 $43,465
Product Sales 10,618 8,673 — 12,746 8,673 —
------------------------- ------------------------
$35,007 $30,273 $21,600 $60,882 $52,138 $43,465
Costs and Expenses:
Logistic Expenses 19,404 16,721 16,721 38,477 33,712 33,712
Cost of Product
Sales 7,616 6,559 — 9,361 6,559 —
Depreciation and
Amortization 1,938 1,749 1,547 3,688 3,557 3,355
SG&A Expenses 3,549 2,938 1,443 5,874 4,569 3,072
------------------------- ------------------------
32,507 27,967 19,711 57,400 48,397 40,139
------------------------- ------------------------
Earnings from
Operations 2,500 2,306 1,889 3,482 3,741 3,326
Other Income (Expense):
Interest Expense (1,266) (1,240) (589) (2,092) (2,199) (1,294)
Merger-Related
Expenses (17) — — (343) — —
Other Income
(Expense) (12) (3) (3) (21) 5 5
Minority
Interests (322) (343) — (332) (441) —
------------------------- ------------------------
(1,617) (1,586) (592) (2,788) (2,635) (1,289)
------------------------- ------------------------
Earnings before
Income Taxes 883 720 1,297 694 1,106 2,037
Income Tax Provision 443 345 — 432 535 —
------------------------- ------------------------
Net Earnings (Loss)$ 440 $ 375 $ 1,297 $ 262 $ 571 $ 2,037
========================= ========================
Basic Net Earnings
Per Share $0.08 $0.07 $0.25 $0.05 $0.11 $0.39
========================= ========================
Three Months Ended
June 30,
-----------------------------------
1999 1998(1) 1998(2)
Actual Proforma Actual
-----------------------------------
Average Number of Shares
Outstanding 5,202,664 5,202,664 5,202,664
Six Months Ended
June 30,
-----------------------------------
1999 1998(1) 1998(2)
Actual Proforma Actual
-----------------------------------
Average Number of Shares
Outstanding 5,202,664 5,202,664 5,202,664
(1) Proforma June 30, 1998 represents actual results for Total
Logistic Control for the quarter and six months ended June 30,
1998 adjusted for increased interest expense, minority interest
and income tax provision. Proforma June 30, 1998 results for Zero
Zone include their actual results for the period April 1 through
June 30, 1998 adjusted for increased interest expense, minority
interest and goodwill. An estimate of corporate charges for the
period ended June 30, 1998 are also included.
(2) 1998 actual reflects the comparative operating results for Total
Logistic Control only, as presented in Form 10-Q.