Detroit Diesel Reports 24% Second Quarter Earnings Increase
22 July 1999
Detroit Diesel Reports 24% Second Quarter Earnings Increase
Best Quarterly Earnings in Company's History
DETROIT, July 22 -- Detroit Diesel Corporation
announced today record second quarter net income of $12.8 million, or $0.52
per common share, an increase of 24% over second quarter 1998 net income of
$10.4 million, or $0.42 per common share. These results represent the best
quarterly performance in the Company's history. Total revenues for the second
quarter reached $585 million, an increase of 5% compared to second quarter
1998 revenues of $556 million.
For the six months ended June 30, 1999, total revenues were $1.18 billion,
a 3% increase over the first six months of 1998. Year to date net income rose
26% to a record $25.3 million, or $1.03 per common share compared to the same
period in 1998.
Total second quarter 1999 engine shipments were 42,300 units compared to
38,200 units in second quarter 1998. Year to date total shipments were 84,700
units, an increase of 4% over the first six months of 1998 despite a reduction
in new two-cycle engine unit shipments of 38%.
Roger S. Penske, Chairman, said, "Our second quarter performance again
reflects our emphasis on generating consistent earnings improvement and
building a better balance in the sources of earnings. We are encouraged at
the strength of our results despite the weakness in some facets of our
business such as the mining and energy markets. While demand for many of our
four-cycle products has been excellent, we have also realized some benefits
from our improved cost structure. Should current market conditions remain
steady, we anticipate that our full-year 1999 results will be the best in the
Company's history. Additionally, we currently expect our performance in the
year 2000 to be very strong. Furthermore, our product development activities
will permit DDC to remain the technological leader in the industry. Our focus
will remain on taking the proper strategic and operational measures to enable
long-term growth in our earnings."
Total second quarter service parts and remanufactured products revenue,
after inter-company eliminations, was $112 million, compared to $115 million
in second quarter 1998.
Operating income (earnings before interest and taxes) increased 16% to
$22.4 million compared to second quarter 1998. Gross margin was 23.9% in the
second quarter, an increase of 0.4 percentage points over the second quarter
1998.
Research and development expenses were $27.7 million for the quarter,
compared to $23.7 million in the second quarter 1998. Selling, general and
administrative expenses were $90.0 million for the quarter, compared to
$88.0 million in second quarter 1998.
The following is a review of the Company's three markets:
On-Highway. Revenues increased 17% to $380 million in the second quarter
compared to second quarter 1998. Series 60 engine shipments to truck and bus
customers increased 19% in the second quarter compared to the previous year's
quarter, and the sale of four-cycle service parts has maintained its
consistent growth. Based upon current conditions, demand within the North
American heavy-duty truck market is expected to continue to be strong through
the remainder of 1999 and into the early part of 2000. Year to date revenues
increased 15% to $759 million compared to 1998.
Off-Road. Revenues were $159 million in the second quarter compared to
$185 million in 1998, as production of the majority of the Company's two-cycle
engines was completed as planned during the period.
Shipments of four-cycle products to off-road customers increased 33%
compared to the second quarter 1998, although continued weakness was
experienced in the mining and energy sectors. Service parts and
remanufactured products sales have likewise remained at lower levels due to
softness in the mining and energy sectors. Year to date revenues were
$320 million, compared to $379 million for the first six months of 1998 as a
result of lower two-cycle unit volumes and service parts sales.
Automotive. Revenues increased 2% to $46 million in the second quarter
compared to the second quarter 1998. The Company recently exhibited
prototypes of the 3.0 liter V-6 VECTOR diesel engine for passenger car, sport
utility and commercial vehicle applications to complement its 4.0 liter V-6
DELTA diesel engine prototype introduced in 1998. Efforts in this market are
being directed towards anticipated new product programs. Year to date
revenues were $98 million compared to $108 million in 1998.
Detroit Diesel Corporation is engaged in the design, manufacture, sale and
service of heavy-duty diesel and alternative fuel engines, automotive diesel
engines, and engine related products. The Company offers a complete line of
diesel engines from 22 to 10,000 horsepower for the on-highway, off-road
(including power generation), and automotive markets.
Detroit Diesel services these markets directly and through a worldwide
network of more than 2,800 authorized distributors and dealer locations. DDC
is a QS-9000 certified company.
Detroit Diesel's major shareholder is Penske Corporation, a closely-held,
diversified transportation services company whose operations include Penske
Truck Leasing Company, Diesel Technology Company, Penske Automotive Group,
Inc., Penske Auto Centers, Inc., Penske Motorsports, Inc., and Penske Capital
Partners, L.L.C. The Penske Group manages businesses with annual revenues
exceeding $10 billion and employs more than 30,000 people around the world.
This news release may include projections, forecasts and other forward-
looking statements about the Company, the industry in which it competes and
the markets it serves. The achievement of such projections is subject to
certain risks and uncertainties, fully detailed in the "Cautionary Statement
for purposes of 'Safe Harbor' under the Private Securities Reform Act of 1995"
in the Company's most recent Annual Report on Form 10-K, which is on file with
the Securities and Exchange Commission.
Detroit Diesel's World Wide Web address is http://www.detroitdiesel.com
DETROIT DIESEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
(Unaudited) (Unaudited)
Net revenues $585.2 $556.3 $1,176.7 $1,145.1
Cost of sales 445.1 425.3 897.4 879.7
Gross profit 140.1 131.0 279.3 265.4
Expenses:
Selling and administrative 90.0 88.0 182.4 179.2
Research and development 27.7 23.7 52.3 48.2
Interest 2.1 2.7 4.4 6.0
Total 119.8 114.4 239.1 233.4
Income before income taxes
and minority interests 20.3 16.6 40.2 32.0
Provision for income taxes 7.5 6.1 14.9 11.8
Minority interests 0.0 0.1 0.0 0.1
Net income available
for common shares $12.8 $10.4 $25.3 $20.1
Basic net income per share $.52 $.42 $1.03 $.81
Diluted net income per share $.52 $.42 $1.02 $.81
Sales Data by Market
(In millions)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
(Unaudited) (Unaudited)
On-Highway $380 $326 $759 $658
Off-Road 159 185 320 379
Automotive 46 45 98 108
Total $585 $556 $1,177 $1,145
DETROIT DIESEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
June 30, Dec. 31,
1999 1998
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $4.1 $3.2
Receivables, net of allowances 360.0 313.3
Inventories 342.3 344.2
Prepaid expenses, deferred charges and
other current assets 14.8 14.9
Deferred tax assets 64.5 61.8
TOTAL CURRENT ASSETS 785.7 737.4
PROPERTY, PLANT AND EQUIPMENT
Net of accumulated depreciation
of $209.0 and $191.6,
respectively 296.1 309.4
DEFERRED TAX ASSETS 13.6 15.1
INTANGIBLE ASSETS, net 133.5 144.7
OTHER ASSETS 45.2 34.1
TOTAL ASSETS $1,274.1 $1,240.7
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $30.7 $38.3
Accounts payable 305.7 278.2
Accrued expenses 239.1 210.3
Current portion of long-term debt
and capital leases 3.2 4.1
TOTAL CURRENT LIABILITIES 578.7 530.9
LONG-TERM DEBT AND CAPITAL LEASES 44.6 62.6
OTHER LIABILITIES 232.3 240.5
DEFERRED TAX LIABILITIES 25.6 28.9
DEFERRED INCOME 5.2 5.5
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $0.01 per
share, no shares issued - -
Common Stock, par value $0.01 per share,
24.7 million shares issued .2 .2
Additional paid-in capital 224.2 224.2
Retained earnings 185.9 166.8
Additional minimum pension
adjustment (9.7) (9.7)
Currency translation adjustment (12.9) (9.2)
TOTAL STOCKHOLDERS' EQUITY 387.7 372.3
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,274.1 $1,240.7