Ivaco Reports Third Quarter Results: Net Earnings $75.9 Million or $2.34 per Share
19 November 1999
Ivaco Reports Third Quarter Results: Net Earnings $75.9 Million or $2.34 per Share
MONTREAL--Nov. 18, 1999--IVACO(ME:IVA.A.) (TSE:IVA.A.) (ME:IVA.B.) (TSE:IVA.B.)Ivaco Inc. today reported its third quarter and nine month results.
Third quarter ended September 30, 1999 and 1998 Net earnings were $75,988,000 or $2.34 per share compared to a net loss of $8,081,000 or $0.40 per share last year.
Net earnings from discontinued operations were $94,865,000 compared to $4,375,000 last year. (Notes 1 and 2)
Net loss from continuing operations was $18,877,000 after deducting one-time pre-tax costs of $33,182,000 (approximately $21,516,000 after taxes) associated with defeasance of the Company's 11 1/2 % Senior Notes. Last year's net loss from continuing operations was $12,456,000. (Note 2)
Sales were $229.4 million compared to $242.1 million last year. The 1998 amount of $242.1 million includes $31.6 million of sales related to Atlantic Steel's operations, which were shut down in December 1998.
EBITDA for the Company's Steel segment was $12,156,000 compared to $4,525,000 for last year's third quarter. The Fabricated Steel Products segment's EBITDA was $20,081,000 compared to $9,312,000 last year and the Precision Machined Components segment had EBITDA of $1,906,000 compared to $2,001,000 for last year's third quarter.
Earnings from continuing operations before costs associated with defeasance of 11 1/2 % Senior Notes and income taxes was $8,641,000 compared to a loss of $13,769,000 during last year's third quarter.
Paul Ivanier, President and Chief Executive Officer, said that
during the third quarter the Company:
(i) completed the sale of its 50 % interest in IPEX Inc. for $260
million cash and realized an after tax gain on the transaction
of approximately $92.7 million or $3.02 per share;
(ii) deposited $201.1 million (US$135.2 million) in an irrevocable
trust for the early redemption of Ivaco's 11 1/2 % Senior Notes
and recognized one-time costs related thereto of $33,182,000
($21,516,000 after tax or a loss of $0.70 per share). These
costs represent interest for the twelve months ended September
15, 2000, premium on redemption and other costs associated with
defeasance of the Senior Notes; and
(iii) announced plans to create Numesh Inc., Canada's largest producer
of wire mesh, in an equally owned joint venture with Fertek Inc.
This transaction closed on October 29, 1999.
Mr. Ivanier further commented that Ivaco's long-term debt was reduced, from cash proceeds received from the IPEX sale, to $282.2 million at September 30, 1999 from $490.1 million at December 31, 1998 as a result of defeasance of the Senior Notes. He also noted that the book value of Ivaco's common shares had increased by $2.34 per share to about $8.50 per share at September 30, 1999, reflecting the results of the gains realized during the third quarter.
Nine months ended September 30, 1999 and 1998 Net earnings were $81,412,000 or $2.25 per share compared to net earnings of $5,222,000 or a loss per share of $0.10 last year.
Net earnings from discontinued operations were $101,383,000 compared to $9,531,000 last year. (Notes 1 and 2)
Net loss from continuing operations was $19,971,000 after deducting one-time pre-tax costs of $33,182,000 (approximately $21,516,000 after taxes) associated with defeasance of the Company's 11 1/2 % Senior Notes. Last year's net loss from continuing operations was $4,309,000. (Note 2)
Sales were $687.7 million compared to $766.9 million last year. The 1998 amount of $766.9 million includes $89.7 million of sales related to Atlantic Steel's operations, which were shut down in December 1998.
EBITDA for the Company's Steel segment was $33,953,000 compared to $26,543,000 last year. The Fabricated Steel Products segment's EBITDA was $57,770,000 compared to $52,073,000 last year and the Precision Machined Components segment had EBITDA of $4,877,000 compared to $8,157,000 last year.
Earnings from continuing operations before costs associated with defeasance of 11 1/2 % Senior Notes and income taxes was $11,829,000 compared to $3,356,000 last year.
Mr. Ivanier said that pressure on wire rod selling prices from imports into North America continued throughout the third quarter and are continuing into the fourth quarter, even though bookings for wire rod remain strong. These pricing pressures are also having an impact on selling prices for some of our downstream fabricated steel products, he added. The decision by the President of the United States with respect to the recommendation by the U.S. International Trade Commission for the imposition of a tariff has still not been made. The ITC recommended the imposition of a 15 % duty tariff on all wire rod imports, except NAFTA countries such as Canada and Mexico which would be exempt.
He also added that Ivaco Rolling Mills has now reached a production level of approximately 70,000 tons during the most recent month as a result of its previously announced qualitative upgrade program. The Company's other downstream facilities are also at high operating levels. He commented that, "The outlook for Ivaco's operations is favourable for next year and is expected to reflect the benefits of the positive changes made during the year".
Ivaco is a Canadian corporation and is a leading North American producer of steel, fabricated steel products and precision machined components. Ivaco has operations in Canada and the United States. Shares of Ivaco are traded on The Toronto Stock Exchange and The Montreal Exchange (IVA).
CONSOLIDATED STATEMENTS OF EARNINGS
For the Nine Months ended September 30 (Unaudited)
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Three months Nine months
Thousands of dollars ended September 30 ended September 30
except per share 1999 1998 1999 1998
amounts (Note 1) (Note 1)
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Net Sales $229,414 $242,149 $687,747 $766,948
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Cost of sales
and operating
expenses 199,276 231,151 605,704 695,486
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Operating earnings
(EBITDA) before: 30,138 10,998 82,043 71,462
Amortization (10,702) (12,051) (33,749) (32,521)
Share of loss of
equity accounted
investments (1,011) (831) (1,475) (2,424)
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Earnings (loss) from
operations before
interest and other
items 18,425 (1,884) 46,819 36,517
Net interest expense (8,085) (10,512) (30,180) (29,164)
Dividends on Series 5,
Second Preferred
Shares (1,699) (1,373) (4,810) (3,997)
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Earnings (loss) from
continuing operations
before other items and
income taxes 8,641 (13,769) 11,829 3,356
Interest, premium, and
costs associated with
defeasance of 11 1/2 %
Senior Notes (33,182) - (33,182) -
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Earnings (loss) from
continuing operations
before income taxes (24,541) (13,769) (21,353) 3,356
Income taxes (5,664) (1,313) (1,382) 7,665
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Net earnings (loss)
from continuing
operations (18,877) (12,456) (19,971) (4,309)
Net earnings from
discontinued
operations(Note 1) 94,865 4,375 101,383 9,531
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Net earnings
(loss) (Note 2) $75,988 $(8,081) $81,412 $5,222
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SEGMENT REPORTING (Unaudited) (Note 1)
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Thousands of dollars Three months ended September 30, 1999
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Fabricated Precision
Steel Machined Corporate
BUSINESS SEGMENTS Steel Products Components cost Total
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Net sales
- external $78,315 $136,953 $14,146 - $229,414
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Net sales
- intersegment $30,798 $53 - - $30,851
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Operating earnings
(loss) (EBITDA) $12,156 $20,081 $1,906 $(4,005) $30,138
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Thousands of dollars Three months ended September 30, 1998
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Fabricated Precision
Steel Machined Corporate
BUSINESS SEGMENTS Steel Products Components cost Total
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Net sales
- external $100,280 $125,609 $16,260 - $242,149
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Net sales
- intersegment $31,681 $41 $- - $31,722
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Operating earnings
(loss) (EBITDA) $4,525 $9,312 $2,001 $(4,840) $10,998
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Thousands of dollars Nine months ended September 30, 1999
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Fabricated Precision
Steel Machined Corporate
BUSINESS SEGMENTS Steel Products Components cost Total
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Net sales
- external $213,424 $423,447 $50,876 - $687,747
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Net sales
- intersegment $97,681 $248 - - $97,929
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Operating earnings
(loss) (EBITDA) $33,953 $57,770 $4,877 $(14,557) $82,043
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Thousands of dollars Nine months ended September 30, 1998
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Fabricated Precision
Steel Machined Corporate
BUSINESS SEGMENTS Steel Products Components cost Total
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Net sales
- external $311,889 $395,174 $59,885 - $766,948
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Net sales
- intersegment $105,205 $298 - - $105,503
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Operating earnings
(loss) (EBITDA) $26,543 $52,073 $8,157 $(15,311) $71,462
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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
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(Unaudited) (Audited)
Thousands of dollars September 30, 1999 December 31, 1998
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Current Assets
Cash and short-term
investments $37,167 $13,739
Accounts receivable 135,252 151,554
Inventories 276,015 350,545
Prepaid expenses 7,415 7,804
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Total Current Assets 455,849 523,642
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Current Liabilities
Bank indebtedness,
partly secured 19,695 46,427
Accounts payable and
accrued liabilities 164,698 197,962
Income taxes payable 15,932 706
Current maturities of
long-term debt 57,347 46,328
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Total Current Liabilities 257,672 291,423
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Working Capital 198,177 232,219
Investments, at cost 114,860 114,860
Investments, at equity 19,694 21,793
Property, plant and equipment 440,393 523,571
Other assets 106,124 128,664
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Total Investment 879,248 1,021,107
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Deduct:
Long-term debt 282,192 490,077
Series 5, Second Preferred Shares 61,087 51,789
Deferred income taxes 63,896 72,955
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407,175 614,821
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Shareholders' Equity $472,073 $406,286
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Represented by:
Capital stock $460,382 $460,805
Retained earnings (deficit) (5,447) (74,722)
Cumulative translation adjustment 17,138 20,203
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Shareholders' Equity $472,073 $406,286
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CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months ended
September 30 (Unaudited)
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Thousands of dollars 1999 1998 (Note 1)
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OPERATING ACTIVITIES
Working capital provided
from operations $30,289 $31,484
Increase in non-cash
working capital items (13,116) (24,729)
Deferred preproduction and
development costs (21,088) (5,944)
Other items (1,215) 7,175
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Cash (used in) provided from
operating activities (5,130) 7,986
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FINANCING ACTIVITIES
Dividends (4,550) (9,906)
Additional long-term debt 42,202 37,828
Repayment of long-term debt (220,220) (31,138)
Decrease in bank indebtedness (6,403) (5,083)
Other items (917) (1,132)
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Cash used in financing activities (189,888) (9,431)
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INVESTING ACTIVITIES
Net additions to property,
plant and equipment (15,553) (18,241)
Additions to construction
in progress (11,125) (8,987)
Discontinued operations (2,731) 4,608
Net proceeds on disposal of
discontinued operations 246,879 -
Proceeds on disposal of
investments and businesses - 14,841
Other items 976 (5,538)
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Cash provided from (used in)
investing activities 218,446 (13,317)
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Increase (decrease) in cash
and cash equivalents 23,428 (14,762)
Cash and cash equivalents, January 1 13,739 26,983
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Cash and cash equivalents, September 30 $37,167 $12,221
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NOTES:
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On August 5, 1999, the Company disposed of its 50 % interest in
IPEX Inc. for $260 million cash, resulting in a net gain of $92.7
million after deducting income taxes of $14.3 million. Accordingly,
the results of the Plastic Pipe and Fittings segment for the three
months ended September 30, 1999 of $2.2 million (1998 - $4.4 million)
and for the nine months ended September 30, 1999 of $8.7 million (1998
- $9.5 million) have been reclassified as discontinued operations.
Sales from these operations for the three months and nine months ended
September 30, 1999 were $24.6 million (1998 - $57.1 million) and
$126.6 million (1998 - $145.2 million), respectively.
2.
Three months ended Nine months ended
September 30 September 30
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Earnings (loss)
per share: 1999 1998 1999 1998
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Earnings (loss) per
share from continuing
operations before costs
of defeasance of
11 1/2 % Senior Notes $(0.05) $(0.54) $(0.35) $(0.41)
Earnings (loss) per
share from defeasance
of 11 1/2 % Senior
Notes (0.70) - (0.70) -
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Earnings (loss) per
share from continuing
operations $(0.75) $(0.54) $(1.05) $(0.41)
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Earnings per share
from discontinued
operations - gain
on disposal of 50 %
interest in IPEX Inc. 3.02 - 3.02 -
Earnings per share
from discontinued
Plastic Pipe and
Fittings segment 0.07 0.14 0.28 0.31
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Earnings per share
from discontinued
operations 3.09 0.14 3.30 0.31
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Net earnings (loss)
per share $2.34 $(0.40) $2.25 $(0.10)
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Per share amounts are after deducting preferred share dividends
of $4,094,000 (1998 - $4,103,000) and $12,290,000 (1998 - $12,337,000)
for the three months and nine months ended September 30, 1999,
respectively and are based on an average of 30,738,022 (1998 - 30,
734,793) and 30,738,022 (1998 - 30,724,113) shares outstanding for the
three months and nine months ended September 30, 1999, respectively.
Fully diluted net earnings per share for the three months and
nine months ended September 30, 1999 were $2.16 and $2.08,
respectively.
There was no dilutive effect in 1998.