Hastings Manufacturing Announces Third-Quarter Results
10 November 1999
Hastings Manufacturing Announces Third-Quarter Results
HASTINGS, Mich., Nov. 10 -- Hastings Manufacturing Company
(Amex: HMF) posted financial results for the third quarter and nine months
ended September 30, 1999.
The Hastings, Michigan manufacturer and marketer of automotive-related
products reported sales of $9.0 million for the third quarter compared with
sales of $9.3 million for the same period in 1998. Net sales decreased 3
percent due to the Company's lower piston ring exports, which offset slightly
improved sales in the domestic market for aftermarket piston rings, private
brand and original equipment products.
Hastings reported third-quarter net income of $62,565, or $0.08 per
diluted share, compared with $255,538, or $0.33 per diluted share, for the
third quarter of 1998. Higher production costs, including non-recurring
expenses related to upgrades in its manufacturing processes as well as
additional labor and overhead expenses, contributed to the decline in net
profitability.
Hastings posted sales for the first nine months of 1999 of $27.7 million,
compared with $29.8 million during the same period in 1998. The Company
attributed the decline to lower export sales, due primarily to political and
economic factors in the countries where Hastings does business, as well as the
Company's efforts to realign distribution channels within one of its major
foreign markets.
Net income during the first nine months of 1999 was also lower, coming in
at $363,780, or $0.47 per diluted share, versus $1.2 million, or $1.55 per
diluted share, during the first nine months of 1998.
"We are making critical and significant changes in our manufacturing
processes and have incurred additional expenses as a result of shifting to
cell-based production," said Andrew Johnson, Hastings co-CEO. "These
investments are helping make our operations more cost-effective and improve
our quality, delivery and, ultimately, customer satisfaction levels. We are
already seeing stronger demand in the domestic piston ring and automotive
products markets, and are optimistic that the tide will also change in our
export business, reversing these sales and earnings declines."
Gross margin (gross profit as a percentage of sales) was 26.4 percent for
the third quarter compared to 29.7 percent for the same period in 1998. For
the first nine months of 1999, gross profit was 27.5 percent of sales compared
to 31.1 percent during the same period in 1998. The decline in gross margin
is primarily attributable to changes in the production process, as well as
additional labor and overhead costs to improve the Company's production fill
rate. Margins were also impacted by higher-priced components the Company
purchased in its efforts to meet customer requirements while it worked through
its production process change.
Total operating expenses decreased 3 percent during the third quarter of
1999 and 4.9 percent for the first nine months, reflecting the Company's
efforts to manage costs. General and administrative expenses decreased in the
quarter and nine-month periods, enabling the Company to increase certain sales
and promotional spending.
Hastings also reported that it is in discussions with legal counsel for
its retired union workers over cost-sharing of healthcare benefits. Hastings
amended its health benefit plan in 1997, asking its retirees to pay a portion
of their health benefits. Legal counsel for the retirees has recently asked
that the Company eliminate cost-sharing and provide benefits to retirees at
the pre-amendment level. Hastings reported it is analyzing the proposal,
which, if implemented, could have a material adverse effect on the Company's
future operations.
"This issue does not impact our day-to-day operations," Andrew Johnson
said. "Like many companies in America, we are grappling with the issue of
spiraling healthcare costs. We believe that cost-sharing is an appropriate
solution to help ensure the long-term results of Hastings Manufacturing."
Subsequent to the third quarter, Hastings entered a joint venture with
Troy, Mich.-based Intraco Corp. As previously announced, the two companies
have formed Casite Intraco, L.L.C., which will do business as The Casite
Company. The new entity will develop, market and sell Casite(R)-branded
vehicle chemicals around the world.
"This joint venture will maximize the Casite(R) brand over the long term,"
Hastings Co-CEO Mark Johnson said. "Hastings expects the new Casite(R)
business will contribute a modest, positive impact to financial results in the
year 2000."
Hastings Manufacturing (http://www.hastingsmfg.com ) is a leading manufacturer
and marketer of piston rings and specialty tools under the Hastings(R) brand,
and additives for engines, transmissions, cooling systems and fuel systems
under the Casite(R) brand. The Company is also involved in a joint venture --
The Casite Company -- that will market and sell Casite-branded products around
the world.
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 laws. These statements involve a number of important risks
and uncertainties that could cause actual results to differ materially,
including but not limited to economic, competitive, governmental and
technological factors affecting the Company's operations, markets, products,
services and prices.
Hastings Manufacturing Company And Subsidiaries
Condensed Consolidated Statements of Operations
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Net Sales 8,977,347 9,255,806 27,674,644 29,829,994
Cost of Sales 6,605,965 6,503,789 20,074,448 20,538,990
Gross Profit 2,371,382 2,752,017 7,600,196 9,291,004
Operating Expenses:
Advertising 44,726 50,234 199,333 240,288
Selling 712,926 717,858 2,231,499 2,311,676
General &
Administrative 1,361,764 1,417,429 4,146,876 4,365,661
Total Operating
Expenses 2,119,416 2,185,521 6,577,708 6,917,625
Operating Income 251,966 566,496 1,022,488 2,373,379
Other Expenses (Income):
Interest expense 149,635 114,223 450,427 336,793
Interest Income - (16,205) - (35,982)
Other, net (1,234) (5,060) (42,719) (5,261)
Total Other Expenses 148,401 92,958 407,708 295,550
Income Before Taxes 103,565 473,538 614,780 2,077,829
Income Tax Expense 41,000 218,000 251,000 879,000
Net Income 62,565 255,538 363,780 1,198,829
Net Income Per Share of Common Stock:
Basic 0.08 0.33 0.47 1.55
Diluted 0.08 0.33 0.47 1.55
Average Shares Outstanding:
Basic 775,046 771,496 775,046 771,496
Diluted 775,046 772,332 775,046 772,562
Dividends Per Share
of Common Stock 0.080 0.080 0.240 0.235