Detroit Diesel Reports Record Third Quarter Results
26 October 1999
Detroit Diesel Reports Record Third Quarter Results Operating Earnings Increase 14% Over Previous Year
DETROIT, Oct. 25 -- Detroit Diesel Corporation
announced today record third quarter net income of $11.9 million, or $0.48 per
common share, an increase of 18% over third quarter 1998 net income (before a
special charge) of $10.1 million, or $0.41 per common share. Total revenues
for the third quarter reached $588.2 million, an increase of 8% compared to
third quarter 1998 revenues of $543.0 million.
For the nine months ended September 30, 1999, total revenues were
$1.8 billion, a 5% increase over the first nine months of 1998. Year to date
net income established another record for the Company, increasing 23% to
$37.2 million, or $1.51 per common share compared to net income (before a
special charge) for the first nine months of 1998.
Total third quarter 1999 engine shipments were 40,100 units compared to
36,800 units in third quarter 1998. Year to date total shipments were
124,800, an increase of 5% over the first nine months of 1998 as continued
strong demand for the Detroit Diesel Series 60 and automotive products offset
anticipated reductions in the two-cycle engine unit shipments.
Roger S. Penske, Chairman, said, "These third quarter results, our ninth
consecutive quarter of increased year-over-year operating earnings, is an
indication of the constant focus on improving our bottom line. We continue to
anticipate that our full-year 1999 results will set another record for Detroit
Diesel. Based on current expectations, we have positioned our Company to
deliver even stronger results in calendar year 2000. Our objective remains to
make the strategic steps necessary to strengthen our revenue and earnings base
in the future."
Charles G. (Chip) McClure, CEO, added, "The entire Detroit Diesel team
remains committed to generating earnings improvements, despite current
industry expectations of a decline in North American Class 8 truck production
of 10-15% during the year 2000. The operational improvements we have
implemented are designed to yield cost reduction and productivity enhancements
over a range of expected production levels.
Furthermore, our current targeted earnings growth will come despite our
intention to invest the resources necessary to maintain our technological
edge, thereby delivering products that continue to consistently satisfy
customer requirements."
Parts and remanufactured products revenues for the third quarter were
$109.0 million, consistent with the third quarter 1998, as demand for two-
cycle service parts increased relative to prior periods and related four-cycle
products continued to report strong gains.
Operating income (earnings before interest and taxes) increased 14% to a
record third quarter performance of $20.5 million compared to pre-charge
results in the third quarter 1998. Gross margin was 23.8% in the third
quarter, an increase of 0.3 percentage points over the third quarter 1998.
Research and development expenses were $27.7 million for the quarter,
compared to $22.7 million in the third quarter 1998, due to activities to
support new product development and potential incremental business
opportunities. Selling, general and administrative expenses were
$91.8 million for the quarter, compared to $86.8 million in third quarter
1998.
The following is a review of the Company's three markets:
On-Highway. Revenues increased 19% to $398 million in the third quarter
compared to third quarter 1998. Shipments of the Company's Series 60 engine
within this market increased 23% over third quarter 1998, as demand from North
American truck and bus customers has remained robust. Year to date revenues
increased 17% to $1.2 billion compared to the first nine months of 1998.
Off-Road. Revenues were $148 million in the third quarter compared to
$170 million in the third quarter 1998. As anticipated, shipments for new
two-cycle engines were reduced, as production (other than a few specific
exceptions) was ceased in the second quarter. Four-cycle unit volumes
continue to show steady increases, and the petroleum and mining markets have
shown initial signs of improvement. Year to date revenues were $468 million,
compared to $549 million for the first nine months of 1998
Automotive. Revenues increased 11% to $42 million in the third quarter
compared to the third quarter 1998. Improved shipment levels were achieved by
certain OEM introductions during the quarter. The Company continued to
support a number of new potential vehicle applications. Year to date revenues
were $140 million compared to $146 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;
automotive; and power generation markets. Detroit Diesel services these
markets directly and through a worldwide network of more than 2,800 authorized
distributor 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., and Penske Capital Partners, L.L.C. Penske
Corporation and its subsidiaries manage and operate businesses with annual
revenues exceeding $10 billion and employ more than 33,000 people around the
world.
This news release may include projections, forecasts and other forward-
looking statements about Detroit Diesel, 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 Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
(Unaudited) (Unaudited)
Net revenues $588.2 $543.0 $1,764.9 $1,688.1
Cost of sales 448.2 415.5 1,345.6 1,295.2
Gross profit 140.0 127.5 419.3 392.9
Expenses:
Selling and administrative 91.8 86.8 274.2 266.0
Research and development 27.7 22.7 80.0 70.9
Total 119.5 109.5 354.2 336.9
Income before interest and taxes 20.5 18.0 65.1 56.0
Interest 1.6 2.8 6.0 8.8
Special charge 0.0 12.5 0.0 12.5
Income before income taxes 18.9 2.7 59.1 34.7
Provision for income taxes 7.0 5.2 21.9 17.0
Minority interests 0.0 (0.1) 0.0 0.0
Net income available
for common shares $ 11.9 $ (2.4) 37.2 $ 17.7
Basic net income per share $ .48 $ (.10) $ 1.51 $ .72
Diluted net income per share $ .48 $ (.10) $ 1.50 $ .71
Sales Data by Market
(In millions)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
(Unaudited) (Unaudited)
On-Highway $ 398 $ 335 $1,157 $ 993
Off-Road 148 170 468 549
Automotive 42 38 140 146
Total $ 588 $ 543 $1,765 $1,688
DETROIT DIESEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
Sept. 30, Dec. 31,
1999 1998
ASSETS (Unaudited)
CURRENT ASSETS:
Cash $ 2.6 $ 3.2
Receivables, net of allowances 352.5 313.3
Inventories 350.7 344.2
Prepaid expenses, deferred charges and
other current assets 12.7 14.9
Deferred tax assets 70.8 61.8
TOTAL CURRENT ASSETS 789.3 737.4
PROPERTY, PLANT AND EQUIPMENT
Net of accumulated depreciation of $219.3
and $191.6, respectively 310.3 309.4
DEFERRED TAX ASSETS 12.9 15.1
INTANGIBLE ASSETS, net 133.9 144.7
OTHER ASSETS 47.0 34.1
TOTAL ASSETS $1,293.4 $1,240.7
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 38.0 $ 38.3
Accounts payable 296.0 278.2
Accrued expenses 264.2 210.3
Current portion of long-term debt
and capital leases 3.8 4.1
TOTAL CURRENT LIABILITIES 602.0 530.9
LONG-TERM DEBT AND CAPITAL LEASES 39.3 62.6
OTHER LIABILITIES 223.7 240.5
DEFERRED TAX LIABILITIES 26.3 28.9
DEFERRED INCOME 5.1 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 224.3 224.2
Retained earnings 194.7 166.8
Additional minimum pension adjustment (9.7) (9.7)
Currency translation adjustment (12.5) (9.2)
TOTAL STOCKHOLDERS' EQUITY 397.0 372.3
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,293.4 $1,240.7