Sales Growth Continues - Tesma First Quarter Net Income Up 67%
2 December 1999
Sales Growth Continues - Tesma First Quarter Net Income Up 67%
CONCORD, ON, Dec. 2 - Tesma International Inc. (TSE:TSM.A;
NASDAQ:TSMA) today announced record first quarter sales, income and earnings
per share for the period ended October 31, 1999.
Three Months Ended
October 31
(Canadian dollars in
millions, except per
share figures)
1999 1998
Sales $279.4 $204.6
Income before income taxes $ 31.4 $ 19.5
Net income $ 19.8 $ 11.8
Operating cash flow $ 22.2 $ 10.0
Basic earnings per share $ 0.69 $ 0.42
Fully diluted earnings per share $ 0.66 $ 0.40
Weighted average number of shares outstanding on a
fully diluted basis (in millions) 30.2 30.1
The first quarter of fiscal 2000 represents Tesma's 17th consecutive
quarter (on a comparative year-over-year basis) of increased sales and
operating income.
Sales for the quarter increased by 37% over the prior year to a record
$279.4 million. This increase reflects the sales generated by new products and
production programs launched in the last half of fiscal 1999 which are
continuing to ramp up towards full production, the inclusion of sales
generated by our South Korean subsidiary acquired in January 1999, as well as
the continued strong vehicle production volumes in North America which were up
8% over the comparable period last year.
Income before income taxes increased by 61% to a record $31.4 million,
compared to $19.5 million in the first quarter of fiscal 1999. This increase
is attributed to the Company's new business, higher sales volumes and
improvements in operating efficiencies which resulted in a higher gross
margin. Net income for the quarter of $19.8 million was also a record and
compares to $11.8 million a year ago.
While sales increased by 37%, Tesma's fully diluted earnings per share for
the first quarter of fiscal 2000 increased by 65% to $0.66 from $0.40 last
year.
"Although the high automotive production volumes in North America have
bolstered our sales, a substantial portion of the first quarter 2000 sales
growth is attributable to the continuing successful launch of new engine and
transmission products business which commenced in the third quarter of fiscal
1999," stated Manfred Gingl, Tesma's President and CEO. "In terms of quarter-
to-quarter comparisons, this new product sales growth should also be reflected
in our second and third quarters of the current year, and is not dependent on
industry volumes. With the uncertainty relating to the North American OEMs'
labour contract negotiations behind us, we will continue to concentrate on the
implementation of Tesma's long-term strategic goals, while remaining focused
on the key fundamentals of our business, Innovation, Engineering and
Performance. These "elements of high performance" will continue to distinguish
us as a leader in our engine, transmission and fuel systems product lines."
Cash provided from operations was $22.2 million in the first quarter, an
increase of $12.2 million over fiscal 1999. Net investment activities for the
quarter included $15.7 million for fixed and other asset additions, primarily
related to new business which will be launched over the next twelve months.
On December 1, 1999, in light of Tesma's continuing growth and
profitability, Tesma's Board of Directors declared a dividend in respect of
the first quarter of fiscal 2000 of $0.125 per share on the Class A
Subordinate Voting and Class B shares. This represents an increase of 79% over
the dividend paid for the corresponding quarter last year. The dividend is
payable on January 14, 2000 to shareholders of record on December 31, 1999.
Tesma continues to address the "Year 2000 Issue" and, based on its current
assessment, believes that this issue will not have a material adverse impact
on its results of operations or financial condition. Remediation and
validation testing for the Company's manufacturing and processing equipment
and primary administrative business computer systems was substantially
completed prior to October 31, 1999. In addition, Tesma has substantially
completed its third party assessments and contingency planning activities
relating to internal systems and third party requirements. Given the inherent
complexities of the Year 2000 Issue and the interdependent nature of the
Company's business relationships, Tesma cannot guarantee the success of its
remediation efforts or that it will not be affected by the issue either prior
to or after January 1, 2000.
Tesma is a global supplier of highly-engineered engine, transmission and
fueling systems and components for the automotive industry. Tesma employs over
3,750 employees in North America, Europe and Asia in 23 manufacturing
facilities and two research centres.
Tesma will hold a conference call to discuss its first quarter 2000
results on Friday, December 3, 1999 at 9:00 a.m. EST. The numbers for this
call are 416-461-6654 (local/overseas) or 1-800-281-9619 (North America), with
call-in required 10 minutes prior to the start of the conference. The
conference call will be chaired by Anthony E. Dobranowski, Executive Vice
President and Chief Financial Officer. A taped replay of the conference call
will also be made available from 11:00 a.m. on December 3, 1999 until 12:00
midnight on December 10, 1999. The numbers for the replay are 416-626-4100,
reference number 13617828 (local/overseas) or 1-800-558-5253, reference number
13622719 (North America).
This press release contains forward looking statements within the meaning
of applicable securities legislation. Such statements involve certain risks
and uncertainties which may cause actual results or objectives to be
materially different from those expressed or implied herein. These factors
include the Company's financial performance, changes in the economic and
competitive markets in which the Company competes, relationships with
customers and other factors as set out in the Company's Form 40-F for its
fiscal year ended July 31, 1998 and subsequent SEC filings.
TESMA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Canadian dollars in thousands)
(Unaudited)
As at As at
October 31, July 31,
1999 1999
ASSETS
Current
Cash $102,233 $ 78,582
Accounts receivable 160,401 134,395
Inventories 73,355 76,043
Prepaid expenses and other 10,037 9,813
------------------------------------------------------------------------
346,026 298,833
Fixed assets 278,264 276,297
Other assets 30,153 32,173
------------------------------------------------------------------------
$654,443 $607,303
------------------------------------------------------------------------
------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness $ 47,943 $ 30,618
Accounts payable 79,090 78,654
Accrued salaries and wages 26,146 25,108
Other accrued liabilities 55,398 41,854
Income taxes payable 6,123 5,673
Long-term debt due within one year 10,163 10,029
------------------------------------------------------------------------
224,863 191,936
Long-term debt 81,714 82,340
Deferred income taxes 29,690 29,538
SHAREHOLDERS' EQUITY
Class A Subordinate Voting Shares 181,000 180,265
Class B Shares 2,583 2,583
Retained earnings 137,575 120,595
Currency translation adjustment (2,982) 46
------------------------------------------------------------------------
318,176 303,489
------------------------------------------------------------------------
$654,443 $607,303
------------------------------------------------------------------------
------------------------------------------------------------------------
TESMA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Canadian dollars in thousands, except per share figures)
(Unaudited)
THREE MONTHS ENDED
October 31
1999 1998
Sales $279,424 $204,589
------------------------------------------------------------------------
Cost of goods sold 213,368 159,243
Depreciation and amortization 10,900 7,640
Selling, general and administrative 18,819 15,624
Interest, net 1,417 44
Affiliation fees and other charges 3,538 2,572
------------------------------------------------------------------------
Income before income taxes 31,382 19,466
Income taxes 11,538 7,628
------------------------------------------------------------------------
Net income for the period 19,844 11,838
Retained earnings, beginning of period 120,595 77,085
Dividends on Class A Subordinate Voting Shares
and Class B Shares (2,864) (1,996)
------------------------------------------------------------------------
Retained earnings, end of period $137,575 $ 86,927
------------------------------------------------------------------------
------------------------------------------------------------------------
Earnings per Class A Subordinate Voting Share
or Class B Share
Basic $ 0.69 $ 0.42
Fully diluted $ 0.66 $ 0.40
------------------------------------------------------------------------
------------------------------------------------------------------------
Average number of Class A Subordinate Voting
Shares and Class B Shares outstanding
(in millions)
Basic 28.6 28.5
Fully diluted 30.2 30.1
------------------------------------------------------------------------
------------------------------------------------------------------------
TESMA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Canadian dollars in thousands)
(Unaudited)
THREE MONTHS ENDED
October 31
1999 1998
Cash provided from (used for):
OPERATING ACTIVITIES
Net income $ 19,844 $ 11,838
Items not involving current cash flows 11,712 6,973
------------------------------------------------------------------------
31,556 18,811
Net change in non-cash working capital (9,396) (8,854)
------------------------------------------------------------------------
22,160 9,957
------------------------------------------------------------------------
INVESTING ACTIVITIES
Fixed asset additions (15,564) (17,607)
Purchase of subsidiaries - (32,180)
Increase in other assets (118) (296)
Proceeds from disposition of fixed and
other assets 769 739
------------------------------------------------------------------------
(14,913) (49,344)
------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in bank indebtedness 18,755 21,505
Issues of long-term debt 1,377 113
Repayments of long-term debt (1,080) (455)
Dividends on Class A Subordinate Voting Shares
and Class B Shares (2,864) (1,996)
Issuance of Class A Subordinate Voting Shares 735 -
------------------------------------------------------------------------
16,923 19,167
------------------------------------------------------------------------
Effect of exchange rate changes on cash (519) 1,044
------------------------------------------------------------------------
Net increase (decrease) in cash during the period 23,651 (19,176)
Cash, beginning of period 78,582 43,998
------------------------------------------------------------------------
Cash, end of period $102,233 $ 24,822
------------------------------------------------------------------------
------------------------------------------------------------------------