Maxco Reports Sharply Higher 2nd-quarter Sales, Earnings
15 November 1999
Maxco Reports Sharply Higher 2nd-quarter Sales, Earnings; Net income improves 110% over previous year period
LANSING, Mich--Nov. 12, 1999--Benefiting from strength in the Midwestern construction market and the record pace in the North American automotive industry, Maxco, Inc. today announced results for the second quarter ended September 30, 1999, highlighted by sharply higher sales and profitability.Maxco, a Lansing, Mich.-based holding company, said second-quarter net income rose 110% to $1.3 million, or $0.37 per diluted share, on net sales of $47.2 million in the second quarter of fiscal year 2000, versus net income of $609,000, or $0.15 per diluted share, on net sales of $35.6 million in the same period last year.
Maxco attributed the 33% sales increase to double-digit sales growth at its two Lansing-based subsidiaries: Ersco Corporation, which provides construction supplies in the Midwest, and Atmosphere Annealing, which provides heat-treating services for the automotive industry. Higher sales at Ersco and Atmosphere Annealing more than offset flat sales performance at the Company's Sparta, Mich.-based Pak-Sak unit, which makes specialty packaging.
Operating earnings increased 71% over the prior-year quarter, reflecting improved profitability in each of Maxco's three operating segments. Operating earnings increased 56% at Ersco due primarily to Ersco's increased sales levels from new and same branch locations and an increase in sales of higher margin products such as form rental equipment. Atmosphere Annealing's operating earnings increased 55% versus the year-ago period, reflecting higher sales and improved processing capabilities. Pak-Sak narrowed its operating loss to $26,000, an improvement of nearly $100,000 compared with the prior-year quarter.
Equity in earnings of affiliates improved $218,000 versus the year-ago quarter, due largely to increased equity from at the Company's 24%-owned Integral Vision, Inc. unit.
"We are extremely pleased with our second-quarter performance," said Max A. Coon, president and chief executive officer of Maxco. "The investments we have made in expanding capacity and capabilities, combined with our focus on productivity and cost-management, are allowing our Maxco associates to make the most of the current opportunities in the automotive industry and robust Midwestern construction market."
Sales at Atmosphere Annealing increased 18% compared with the prior-year quarter, due in part to increased business from one of the major North American automakers whose operations had been affected by a labor strike in the prior period. Additionally, sales of coating and other services increased due to greater processing capabilities of equipment and facilities recently placed in service.
Sales at Ersco increased 45% in the fiscal year 2000 second quarter to $33.2 million. The heightened revenues were the result of increased same-branch sales, as well as sales from new branches added since September 1998 in St. Louis, MO, Columbus, OH, and Louisville, KY. Additionally, Ersco has continued to open and acquire new branches in recent months. In September, Ersco opened a new sales office in Andale, Kansas to serve the Kansas, Oklahoma, Colorado, Nebraska and western Missouri markets. Last week, Ersco acquired a St. Louis, MO area company that specializes in concrete repair and restoration projects in order to expand its presence in the St. Louis market.
"Acquisitions and new outlets are proving a key strategic element in Ersco's effort to consolidate the Midwestern construction supplies market," said Max A. Coon, president and CEO of Maxco. "By pursuing geographic expansions and broadened product lines, Ersco has positioned itself to be a sole-source supplier for contractors. In particular, its acquisitions have enabled Ersco to expand its expertise and quality of service in order to make the most of the healthy Midwestern construction market, as well as the growth in federally funded highway projects under the Transportation Equity Act for the 21st Century."
Coon concluded: "We are confident that our second quarter results reflect the route to success that we have charted for the future. By continuing to invest in equipment and human resources at our construction supplies unit and heat-treating units, Maxco will create long-term value for shareholders, employees, and customers."
A diversified holding company, Maxco's businesses include Ersco, a construction supplies unit; Atmosphere Annealing Inc., a production metal heat-treating service company; and Pak-Sak Industries Inc., which makes polyethylene packaging. Maxco also holds investments in real estate development companies: L/M Associates LLC, LandEquities Corp., and Nilson Builders; service companies: Blasen Brogan Asset Management Co., and Mid-State Industrial Services Inc.; energy related companies: AMI Energy, Inc. and Robinson Oil Co. LLS; and several technology-related businesses: Integral Vision, PROVANT, Inc., AXSON, S.A. and Foresight Solutions, Inc.
Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements made pursuant to the safe harbor provisions of Section 27A of the securities Act of 1933 and Section 21 E of the Securities Act of 1934. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. These forward-looking statements represent the company's best estimates as of the date of this press release. The company assumes no obligation to update such estimates except as required by the rules and regulations of the Securities and Exchange Commission.
CONSOLIDATED STATEMENTS OF OPERATIONS
Maxco, Inc. and Subsidiaries
Three Months Ended September 30,
1999 1998
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(in thousands,
except per share data)
Net sales $47,227 $35,553
Costs and expenses:
Cost of sales and operating expenses 36,569 28,146
Selling, general and administrative 6,982 5,233
Depreciation and amortization 1,199 728
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44,750 34,107
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Operating Earnings 2,477 1,446
Other income (expense)
Investment and interest income 134 256
Interest expense (838) (629)
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Income Before Federal Income Taxes
and Equity in Earnings (Loss) of Affiliates 1,773 1,073
Federal income tax expense 626 376
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Income Before Equity in Earnings (Loss)
of Affiliates 1,147 697
Equity in earnings (loss) of affiliates,
net of tax 130 (88)
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Net Income 1,277 609
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Net Income Per Common Share - Assuming Dilution: $ .37 $ .15
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Weighted average number of shares of common and
common stock equivalents outstanding 3,165 3,315
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CONSOLIDATED STATEMENTS OF OPERATIONS
Maxco, Inc. and Subsidiaries
Six Months Ended September 30,
1999 1998
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(in thousands,
except per share data)
Net sales $91,203 $71,249
Costs and expenses:
Cost of sales and operating expenses 70,045 56,354
Selling, general and administrative 13,459 10,103
Depreciation and amortization 2,368 1,425
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85,872 67,882
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Operating Earnings 5,331 3,367
Other income (expense)
Investment and interest income 289 472
Interest expense (1,583) (1,231)
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Income Before Federal Income Taxes
and Equity in Earnings of Affiliates 4,037 2,608
Federal income tax expense 1,407 913
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Income Before Equity in Earnings of Affiliates 2,630 1,695
Equity in earnings of affiliates, net of tax 555 42
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Net Income 3,185 1,737
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Net Income Per Common Share - Assuming Dilution: $ .94 $ .46
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Weighted average number of shares of common and
common stock equivalents outstanding 3,180 3,333
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