TTII Reports Revenues and Earnings for Second Quarter and First Half
28 July 1999
TTII Reports Revenues and Earnings for Second Quarter and First Half
CHICAGO--July 28, 1999--Transportation Technologies Industries, Inc. announced today its first quarterly results since selling its freight car operations on June 3, 1999 and changing its name from Johnstown America Industries, Inc.In the quarter ended June 30, 1999, revenues from continuing operations totaled $134.4 million, compared to $109.0 million a year ago. Income from continuing operations, before extraordinary items, increased almost 90 percent to $4.7 million, or $0.46 per diluted share, from $2.5 million, or $0.24 per diluted share in the second quarter of 1998. Second quarter 1999 revenues and earnings include results of Imperial Group and EMI Company, TTII's two recent strategic acquisitions, for the portion of the quarter following their respective acquisition dates.
Net income was $43.3 million, or $4.23 per diluted share, compared to $6.2 million, or $0.61 per diluted share in the second quarter of 1998. Second quarter 1999 net income includes after-tax income of $11.0 million from the divested freight car operations; an after-tax gain of $29.8 million from the sale of the freight car operations; and after-tax extraordinary charges of $2.2 million from the non-cash write-off of deferred financing costs in connection with prepayments of senior debt. Net income in the second quarter of 1998 included after-tax income of $4.3 million from the divested freight car operations; an after-tax extraordinary charge of $0.6 million from the non-cash write-off of deferred financing costs in connection with prepayment of senior debt; and a one-time after-tax gain of $1.0 million from the settlement of a former pension plan.
Through the first six months of 1999, revenues from continuing operations were $251.7 million, up from $222.8 million in the year-earlier period. First-half 1999 income from continuing operations, before extraordinary items, was $7.9 million, or $0.77 per diluted share, compared to $3.4 million, or $0.34 per diluted share a year ago.
Net income for the first six months of 1999 was $57.9 million, or $5.70 per diluted share, up from $20.2 million, or $2.00 per diluted share a year ago. Net income for the first half of 1999 includes after-tax income of $22.7 million from the divested freight car operations; a $29.8 million after-tax gain on the sale of the freight car operations; and after-tax extraordinary charges of $2.5 million from the non-cash write-off of deferred financing costs in connection with prepayments of senior debt. Net income in the first half of 1998 included after-tax income of $17.3 million from the divested freight car operations and an after-tax extraordinary charge of $0.6 million from the non-cash write-off of deferred financing costs in connection with the prepayment of senior debt.
"The second quarter was one of our most eventful, highlighted by the sale of our freight car operations and two strategic acquisitions," said Thomas M. Begel, chairman, president and chief executive officer. "All our resources and energies now are focused on the truck components business, which offers strong growth potential and significantly reduced exposure to market cyclicality. The performance of our continuing operations through the first half of the year and the current outlook for the truck market demonstrates that we are on the right course."
Gunite, Bostrom and Fabco all posted increases in revenues and operating income during the second quarter and first six months of 1999 versus the prior year, benefiting from continued strong sales of heavy-duty trucks. In the second quarter, Gunite's results were enhanced by the acquisition of EMI Company on May 17, 1999, which now is operating as a Gunite facility. After a transition period, the additional production capacity at this facility will enable Gunite to better serve its OEM customers and increase its participation in the higher-margin aftermarket for wheel-end components.
As previously announced, Gunite recently reached a new four-year union contract covering employees at one of its Elkhart, Indiana plants, ending a strike which began on June 28, 1999. The impact of the strike will result in a one-time after-tax earnings impact of $1.2 million to $1.5 million, or approximately $0.12 to $0.15 per diluted share for the third quarter of 1999.
Revenues at Brillion were down about 10 percent in the second quarter from the comparable period last year, due primarily to the continuing sales downturn in agricultural and construction equipment businesses. "During the second half of 1999, Brillion will begin to benefit as Gunite's EMI facility increases production of wheel-end components and a significant portion of its current job work production is transferred to Brillion," Begel said.
"Imperial Group, which we acquired April 29, 1999, also contributed positively to our revenue and operating income during the quarter, and we anticipate continued growth and improvement from this unit," he said.
"With the continued strong outlook for the heavy-duty truck market and the settlement of Gunite's strike, all of our units should produce strong operating performances during the remainder of 1999," Begel said.
At June 30, 1999, the company had $43.8 million in cash on hand. During the quarter the company put in place a new $100 million senior bank term loan, which was used primarily to finance the acquisition of Imperial Group and repay $37 million of outstanding bank debt. Cash, primarily from the after-tax proceeds of the sale of the freight car division, was used to prepay $80 million of senior bank debt, reducing the debt to capital ratio to 55 percent at quarter-end versus 70 percent at December 31, 1998 and 65 percent at March 31, 1999.
"With both debt and interest costs reduced significantly, we are in a better position to take advantage of strategic acquisition opportunities that may arise as a result of the ongoing consolidation of the truck components industry," Begel said.
Excluding extraordinary and non-recurring items and discontinued operations, earnings before interest, taxes, depreciation and amortization (EBITDA) were $21.2 million in the second quarter of 1999, compared to $15.0 million a year earlier. Through six months of 1999 and 1998, EBITDA were $38.9 million and $31.1 million, respectively.
"Future prospects for TTII are promising," Begel said. "With the sale of our freight car operations completed, we move forward with a strong and growing operating base, an improved capital structure, a clearly-defined identity, a focused strategy and a commitment to creating shareholder value."
Transportation Technologies Industries, Inc. is a leading manufacturer of components for heavy-duty and medium-duty trucks and buses and the truck parts aftermarket. Product lines include: Gunite wheel-end components; Brillion custom iron castings; Imperial body and chassis components; Bostrom truck and bus seating systems; and Fabco steerable drive axles and gearboxes. The company is headquartered in Chicago, Illinois and has manufacturing operations in Alabama, California, Illinois, Indiana, Pennsylvania, Tennessee, Texas, Washington and Wisconsin.
The statements herein, which are not historical facts, including statements about future expectations, are "forward-looking statements" that involve certain risks and uncertainties that could cause actual future results to differ materially from those stated. These risks are spelled out more fully in the company's SEC filings. The company assumes no obligation to update its forward-looking statements.
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1999 1998(A) 1999(A) 1998(A)
-------- -------- -------- --------
Net Sales $ 134,371 $ 109,014 $ 251,671 $ 222,831
Cost of Sales 106,074 87,148 198,722 178,034
-------- -------- -------- --------
Gross Profit 28,297 21,866 52,949 44,797
Operating Expense (income):
Selling, general &
administrative 10,962 9,876 21,079 19,757
Amortization 1,914 1,698 3,607 3,391
Pension termination gain (1,688) (1,688)
-------- -------- -------- --------
Operating Income 15,421 11,980 28,263 23,337
Interest expense, net 6,808 6,839 13,639 14,129
-------- -------- -------- --------
Income before income taxes,
extraordinary items
and discontinued
operations 8,613 5,141 14,624 9,208
Income taxes 3,891 2,664 6,749 5,771
-------- -------- -------- --------
Income before extraordinary
items and discontinued
operations 4,722 2,477 7,875 3,437
Extraordinary items,
net of taxes (2,206) (585) (2,505) (585)
Discontinued operations:
Income, net of taxes 10,966 4,258 22,728 17,341
Gain on sale, net
of taxes 29,817 29,817
-------- -------- -------- --------
Net income and
comprehensive income $ 43,299 $ 6,150 $ 57,915 $ 20,193
======== ======== ======== ========
Diluted Weighted average
equivalent shares
outstanding 10,239 10,165 10,169 10,114
======== ======== ======== ========
Diluted earnings per share
before extraordinary items
and discontinued operations $ 0.46 $ 0.24 $ 0.77 $ 0.34
======== ======== ======== ========
Diluted earnings per share $ 4.23 $ 0.61 $ 5.70 $ 2.00
======== ======== ======== ========
(A) Restated to reflect discontinued operations.
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
Condensed Consolidated Balance Sheets
(in thousands)
June 30, December 31,
1999 1998 (A)
----------- -------------
Assets:
Cash and cash equivalents $ 43,848 $ 33,382
Accounts receivable, net 72,066 55,550
Inventories 38,884 29,566
Prepaid expenses and other 18,735 16,331
Net assets of discontinued operations - 37,555
----------- -------------
173,533 172,384
Property, plant and equipment, net 119,142 82,402
Excess costs over assets acquired and other
intangible assets, net and other 262,482 238,217
----------- -------------
$555,157 $ 493,003
=========== =============
Liabilities and Shareholders Equity:
Accounts payable $ 39,513 $ 19,601
Accrued expenses and other payables 55,473 51,662
Accrued income taxes on discontinued
operations 15,513 -
Current maturities of long-term debt
and capital lease 1,924 9,039
----------- -------------
112,423 80,302
Long-term debt and capital lease 22,663 49,186
Senior subordinated notes 182,162 182,338
Deferred income tax liabilities 30,390 34,571
Other long-term liabilities 35,767 35,889
----------- -------------
270,982 301,984
Shareholders Equity 171,752 110,717
----------- -------------
$555,157 $ 493,003
=========== =============
(A) Restated to reflect discontinued operations.
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
Six Months Ended
June 30, (A)
-------------------
1999 1998
--------- ---------
Cash Flows from Operating Activities:
Net Income $57,915 $ 20,193
Deduct income from discontinued operations 22,728 17,341
--------- ---------
Income from continuing operations 35,187 2,852
Net gain on sale of discontinued operations (29,817) -
Depreciation 6,511 5,517
Amortization - other 4,218 3,951
Amortization - deferred financing costs 414 835
Deferred income taxes (624) (585)
Pension termination gain - (1,688)
Extraordinary items, net of taxes 2,505 585
Accrued post retirement benefits 783 793
--------- ---------
19,177 12,260
Change in operating assets and liabilities (4,132) 5,537
--------- ---------
Net cash provided by operating activities 15,045 17,797
--------- ---------
Cash Flows from Investing Activities:
Proceeds from the sale of discontinued operations 101,783 -
Cash paid for acquisitions (76,288) -
Capital expenditures (5,654) (3,849)
--------- ---------
Net cash provided (used) by investing activities 19,841 (3,849)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from the issuance of long-term debt 103,100 -
Payment of term loans and capital leases (136,738) (16,760)
Deferred financing costs (1,993) (8)
Other 342 106
--------- ---------
Net cash used by financing activities (35,289) (16,662)
--------- ---------
Net decrease in cash from continuing operations (403) (2,714)
Net cash provided (used) by discontinued operations 10,869 (2,906)
Cash and cash equivalents, beginning of period 33,382 27,884
========= =========
Cash and cash equivalents, end of period $43,848 $ 22,264
========= =========
(A) Restated to reflect discontinued operations.