Margate Net Income Improves 58% in Second Quarter
27 July 1999
Margate Net Income Improves 58% in Second Quarter
Operating Improvements, Investments Drive Increased Profitability
YALE, Mich., July 27 -- Benefiting from strength in the
automotive and heavy-equipment industries, as well as improvements at its own
operations, Margate Industries, Inc. today reported sharply
higher profitability in the second quarter ended June 30, 1999.
The Yale, Mich.-based castings company reported net income of $116,870, or
$0.08 per share, on net sales of $2.6 million in the second quarter of 1999,
compared with net income of $73,823, or $0.05 per share, on net sales of $2.6
million in the prior year period. The figures represent a 58% increase in net
income and a 62% gain in earnings per share.
Increased productivity and continued focus on cost management helped
Margate improve operating results versus last year's second quarter.
Operating income increased 48% over the 1998 second period, reflecting higher
efficiency levels at the Company's castings-service operations in Michigan and
Wisconsin.
Pre-tax profit improved 66% versus last year's comparable quarter,
reflecting increased interest income and earnings related to a new
powdercoating venture at the Company's Michigan castings-service facility. In
May, Margate began offering powdercoating services to customers of its Yale
Industries unit, through an alliance with Flint, Mich.-based Wesley
Industries, Inc., a minority-owned automotive supplier.
"I am very pleased with our second-quarter results," said William H.
Hopton, president and chief executive officer of Margate Industries. "Both of
our castings-service units are performing well, which is allowing us to make
the most of demand for castings used by manufacturers of automotive vehicles
and heavy-equipment. The addition of painting services, plus better-than-
expected sales and profit performance at our Fort Atkinson Industries unit in
Wisconsin, have put us in position for continued profitability in the second
half of 1999."
Hopton said he expects Margate's 1999 third-quarter profit will
significantly exceed the Company's break-even performance in last year's
third-quarter, but will not match the Company's 1999 second quarter results.
Tooling changes at a major customer will likely reduce Margate's third-quarter
sales versus last year's comparable period; however, the new paint venture,
higher interest income and increased profitability at the Company's Wisconsin
unit should help partially offset the sales decline, he said.
For the six-month period, Margate reported net income of $202,172, or
$0.14 per share, on net sales of $5.0 million, compared with net income of
$1.8 million, or $1.18 per share, on net sales of $4.9 million in the same
period of 1998. Last year's six month figures include a one-time gain of $2.1
million related to the sale of equity in a former subsidiary. Income from
operations increased nearly 400% in the six-month period, rising to $262,195
in the first half of 1999.
Hopton concluded: "Margate's financial position is the best it has been
in five years. Our balance sheet strength and profitability are allowing us
to invest in our core castings-service operations and examine other
opportunities for growth and enhanced shareholder value. We believe our
earnings performance, cash flow and growth potential merit a higher stock
price. Our performance in the first half of 1999 strengthens our belief that
Margate is on the right track for the future."
Margate Industries employs approximately 200 at two wholly owned
subsidiaries, Yale Industries and Fort Atkinson Industries, which provide
cleaning, grinding, chipping, painting and finishing of iron castings used
primarily in the manufacture of automotive vehicles, heavy equipment and farm
equipment.
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995: The statements contained in this news release include certain
predictions and projections that may be considered forward-looking statements
under securities law. These statements involve a number of important risks
and uncertainties that could cause actual results to differ materially
including, but not limited to, the performance of the automotive industry,
certain customers and affiliated companies, as well as other economic,
competitive and technological factors involving the Company's operations,
markets, services, products and prices.
MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
NET SALES $2,566,870 $2,648,632 $5,017,571 $4,930,502
COST OF SALES 2,200,015 2,355,278 4,355,160 4,467,320
GROSS PROFIT 366,855 293,354 662,411 463,182
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 215,973 188,553 398,250 406,253
RELATED PARTY SERVICES AND
SALES COMMISSIONS 1,966 4,231 1,966 4,231
INCOME (LOSS) FROM
OPERATIONS 148,916 100,570 262,195 52,698
DIVIDEND AND INTEREST INCOME
(EXPENSE) - NET 18,453 7,780 34,476 (13,549)
OTHER (EXPENSE) 12,501 - 12,501 -
INCOME (LOSS) BEFORE PROVISION OF
EXTRAORDINARY ITEM 179,870 108,350 309,172 (143,214)
GAIN ON SALE OF 45% INTEREST IN
NEW HAVEN FOUNDRY - - - 2,075,000
INCOME (LOSS) BEFORE PROVISION FOR
FEDERAL INCOME TAX 179,870 108,350 309,172 1,970,935
PROVISION FOR FEDERAL
INCOME TAXES 63,000 34,527 107,000 166,527
INCOME (LOSS) $116,870 $73,823 $202,172 $1,804,408
BASIC EARNINGS PER COMMON
SHARE $0.08 $0.05 $0.14 $1.18
WEIGHTED AVERAGE SHARES
OUTSTANDING 1,489,214 1,524,548 1,489,214 1,524,548