Earnings of Wescast Industries Inc. up by 36%
19 October 1999
Earnings of Wescast Industries Inc. up by 36%
BRANTFORD, Ontario--Oct. 19, 1999--Wescast Industries Inc. continued its consecutive string of quarterly improvement of earnings and sales. Earnings increased 36% on a 31% increase in sales, over the same quarter of the previous year. Basic earnings for the quarter reached $0.91 per share.
Highlights
-- Both sales and earnings were at an all time high for third
quarters.
-- Announced a joint venture manufacturing plant in Hungary with
Linamar Corporation to supply the growing demand for our
products. The plant will also provide diversification into other
parts for the automotive industry.
-- Completed a strategic alliance agreement with Linamar Corporation
to cooperate in other new markets to supply cast components to
automotive customers outside of Europe. Wescast supplies the
foundry expertise and Linamar the machining expertise.
-- Established a sales and product development center in Kassel,
Germany to better serve European customers.
-- Received orders for Mazda for 140,000 castings per year, and from
Isuzu for up to 400,000 castings per year.
-- Received General Motor's replacement program for the Inline 6.
-- Completed installation of new machine lines in Strathroy
providing even greater growth.
-- Announced appointment of Mr. D. James Slattery as Chief Financial
Officer responsible for financial operations of the Company, as
well as directing global corporate development activities.
Earnings
Net earnings increased by 36% over those of the same quarter of 1998, to $12 million, or $0.91 basic earnings per share compared to $0.67 per share in 1998. This increase was accomplished although the Canadian dollar strengthened. Wescast also absorbed start-up costs for the new Wingham foundry, and ramp-up costs for the new machine lines in Strathroy. The benefits of these expenditures will come in future quarters.
Sales & Operations
Exhaust manifold sales increased 31% to $82.4 million in the third quarter of 1999. This increase was driven by the following factors:
-- Increasing market share
-- Continued strong demand for light truck and sport utility
vehicles in which many of Wescast manifolds are used
-- Increasing percentage of in house machining of castings
-- Higher percentage of SiMo manifolds
Operating earnings for the quarter were $17.7 million (21.5% margin), compared to $12.0 million (19.1% margin) for the same quarter of 1998. The higher margins are positively influenced by earlier capital expenditure programs introducing more efficient manufacturing processes, and by continuous improvement efforts.
Balance Sheet and Financial Position
The Company continues to have a very strong working capital position even after investing $30 million during the quarter on capital expenditures such as the new Wingham foundry and new machining production lines. As of September 26, the Company had $83 million in cash and short-term investments, and a working capital ratio of 3:1. The new Wingham foundry project remains on target with respect to cost and timing. Capital expenditures for the year are expected to come in a little below the projected $110 million.
Year 2000 Update
The Company has a comprehensive Year 2000 program consisting of eight steps suggested by the Automotive Industry Action Group and is fully described in the Company's December 27, 1998 Annual Report.
As of the third quarter of 1999, the integration and implementation of revised systems into the financial and production environments are near completion. The final step of the program involves re-testing major systems and will be performed throughout the remainder of 1999. In addition, Wescast has completed Year 2000 contingency plans for each facility of the company and these will be monitored and adjusted up to, and through, the year 2000.
While the Company's eight step program includes all reasonable efforts to be prepared for the Year 2000, the Year 2000 readiness of third parties with which the Company has a material relationship is largely outside the Company's control. Wescast believes that its major customers and suppliers will be Y2K compliant by January 1, 2000. However, there can be no assurance, and the inability of the Company's customers or suppliers to achiever Y2K compliance may have a material adverse effect on Wescast's operations.
This disclosure is a Year 2000 Readiness Disclosure within the meaning of the U.S. Year 2000 Information and Readiness Disclosure Act of 1998 to the extent that the disclosure relates to Year 2000 processing of the Company or products or services offered by the Company.
Wescast Industries Inc. Financial Statements
Consolidated Statement of Earnings
(in thousands of Canadian dollars, except per share figures)
(Unaudited Canadian GAAP)
Three months ended Nine months ended
-------------------- -------------------
Sept 26 Sept 27 Sept 26 Sept 27
1999 1998 1999 1998
-------------------- -------------------
Sales $82,427 $62,961 261,790 205,323
Cost of sales 59,251 46,105 176,360 144,697
------ ------ ------- -------
Gross margin 23,176 16,856 85,430 60,626
Selling, general and
administration 4,617 3,985 15,521 11,476
Research, development
and design 813 823 1,870 2,395
------ ------ ------ ------
Operating earnings 17,746 12,048 68,039 46,755
Other (income) expense
Interest expense 81 23 319 62
Investment income (1,212) (658) (3,570) (2,072)
Other income
and expenses (277) (834) 2,047 (1,422)
------- ----- ------- -------
Earnings before
income taxes 19,154 13,517 69,243 50,187
Income taxes 7,111 4,713 25,319 17,727
------ ------ ------ ------
Net earnings $12,043 $ 8,804 $43,924 $32,460
------ ------ ------ ------
------ ------ ------ ------
Net earnings per share
- basic $0.91 $0.67 $3.33 $2.48
---- ---- ---- ----
---- ---- ---- ----
- fully diluted $0.87 $0.66 $3.18 $2.40
---- ---- ---- ----
---- ---- ---- ----
Notes to financial statements
Note 1: Basic earnings per share is calculated based on the
weighted average number of common shares outstanding (1999 -
13,166,138 shares; 1998 - 13,095,125 shares). Fully diluted earnings
per share is calculated based on the fully diluted weighted average
number of common shares outstanding (1999 - 13,962,642 shares; 1998 -
13,724,043 shares).
Note 2: Certain figures for 1998 have been reclassified to
conform with the presentation adopted in 1999.
Note 3: The Consolidated Statement of Cash Flows for the three
month period and the nine month period ended September 27, 1998 have
been restated to reflect the retroactive adoption of the CICA's
revised guidelines for cash flow statements.
Wescast Industries Inc. Financial Statements
Consolidated Balance Sheet
(in thousands of Canadian dollars)
(Unaudited Canadian GAAP)
As at
---------------------------
Sept 26 Sept 27
1999 1998
---------------------------
Current Assets
Cash and cash equivalents $49,265 $24,117
Short term investments 33,886 36,702
Receivables 60,624 52,530
Inventories 17,620 17,053
Prepaids 374 373
------ ------
161,769 130,775
Property and equipment 182,349 133,264
Other 3,255 1,054
------- -------
$347,373 $265,093
------- -------
------- -------
Current liabilities
Payables and accruals $44,023 $32,023
Income taxes payable 6,414 639
Current portion of long term debt 1,380 408
Due to affiliated companies 63 112
------ ------
51,880 33,182
Long term debt 5,042 589
Accrued pension benefits 4,890 4,224
Deferred income taxes 4,699 3,946
----- -----
66,511 41,941
------ ------
Shareholders' equity
Capital stock 108,451 105,851
Retained earnings 172,411 117,301
------- -------
280,862 223,152
------- -------
$347,373 $265,093
------- -------
------- -------
Wescast Industries Inc. Financial Statements
Consolidated Statement of Cash Flows
(in thousands of Canadian dollars)
(Unaudited Canadian GAAP)
Three months ended Nine months ended
-------------------- --------------------
Sept 26 Sept 27 Sept 26 Sept 27
1999 1998 1999 1998
-------------------- --------------------
Cash derived from
(applied to)
Operating activities
Net income $12,043 $8,804 43,924 $32,460
Add (deduct) items
not requiring cash:
Depreciation
and amortization 4,962 4,618 14,226 11,807
Amortization of bond
issue costs 3 0 18 0
Deferred income
taxes 253 349 782 1,027
Loss on disposal
of equipment 74 54 85 86
Pension expense 3 384 145 1,152
------ ----- ------ ------
17,338 14,209 59,180 46,532
Change in non-cash
working capital 10,196 (168) 16,486 (11,898)
------ ------ ------ ------
Total cash
from operations 27,534 14,041 75,666 34,634
------ ------ ------ ------
Financing activities
Issue of long term debt 0 0 249 0
Repayment of long
term debt (12) 0 (232) 0
Payment of obligations
under capital lease (166) (117) (433) (354)
Issuance of share capital
under Employee Share
Purchase Plan 106 33 289 33
Payments from Employee
Share Purchase
Plan loans 251 0 260 0
Issuance of share
capital under Stock
Option Plan 0 17 584 28
Dividends paid (1,055) (1,049) (3,161) (3,143)
----- ----- ----- -----
Total financing
activities (876) (1,116) (2,444) (3,436)
------- ------- ------- -------
Investment activities
Purchase of property
and equipment (29,974) (6,924) (57,255) (30,401)
Purchase of short
term investments (34,209) (36,837) (34,209) (36,837)
Purchase of licence 0 0 (74) 0
Restricted cash from
long term debt 379 0 2,348 0
Proceeds on sale of
short term investments 0 0 36,892 31,566
Proceeds on disposal
of assets 91 33 210 119
------ ------ ------ ------
Total investment
activities (63,713) (43,728) (52,088) (35,553)
------ ------ ------ ------
Net increase (decrease)
in cash and
cash equivalents (37,055) (30,803) 21,134 (4,355)
Cash and cash equivalents
Beginning of period 86,320 54,920 28,131 28,472
------ ------ ------ ------
End of period $49,265 $24,117 $49,265 $24,117
------ ------ ------ ------
------ ------ ------ ------
Corporate Description
Wescast Industries Inc. is the world's largest supplier of exhaust manifolds for light trucks, sports utility vehicles, and passenger cars. The Company is a fully integrated supplier, selling in both North America and Europe. Additionally, the Company produces pressure retaining high-alloy cast steel components for the petrochemical, pulp and paper, and food processing industries. Wescast has six production plants throughout Southwestern Ontario and Detroit, Michigan employing 1700 people.
Conference Call
A conference call has been arranged for October 19, 1999 at 1:00 p.m. eastern standard time. To participate, please dial 416/641-6711.