ABC-NACO Reports Five-Month Stub-Year Results
14 February 2000
ABC-NACO Reports Five-Month Stub-Year Results, Expects Solid 2000 Performance
DOWNERS GROVE, Ill.--Feb. 14, 2000--ABC-NACO Inc. (ABCR) reported a loss for the five months of its stub year ended December 31, 1999. The results were in line with the Company's estimates and reflected a dramatic short-term drop in rail product orders, along with the impact of the loss of numerous working days due to scheduled year-end shutdowns and holidays. The Company expects results in calendar 2000 to be improved based on its accelerated growth in the rapidly expanding service, repair and maintenance segment (including the recently executed long-term service agreement with the Union Pacific Railroad), recent test approvals for advanced technology products in Europe, added flexibility through restructuring, refinancing of the Company's balance sheet, and disposal of non-core assets. The five-month reporting period, August 1, 1999, through December 31, 1999, results from the Company's previously announced decision to change its fiscal year-end from July 31 to December 31.For the two months ended December 31, 1999, the Company had a net loss of $3.6 million, or $0.19 per share. Net sales for the two-month period totaled $95.7 million, while gross profit from operations totaled $9.2 million. The operating loss for this period was $3.4 million.
For the five months ended December 31, 1999, the Company had a net loss of $5.5 million, or $0.30 per share. Net sales of the stub period were $239.9 million, while gross profit from operations totaled $25.0 million. The operating loss for the stub period was $1.1 million.
The Company previously reported that sales and earnings would be lower through the end of 1999 as major customers stopped replenishing inventories of freight rail car components and severely reduced specialty track product orders.
"As we have moved through this stub period, our customers accelerated their cutback in orders to adjust their production and inventory levels to the rail industry's outlook for the coming year," said Joseph A. Seher, Chief Executive Officer. The outlook for 2000 is positive, however, as annual freight car builds are expected to reach more historical levels of 50,000-55,000 units per year.
"In addition to this impact, November and December are typically the slowest months of the year for us. In our case, a number of facilities were closed for scheduled maintenance operations, in addition to the numerous holidays which occur during this period.
"As the new year begins, we are seeing a much stronger performance from our Flow and Specialty Products division, as the global valve market returns to higher levels and productivity increases at Richmond as the result of restructuring. We are also pleased that track product orders have been strengthening after a long period of softness. We are optimistic, yet remain cautious, as we watch this development.
"We are now able to fully realize the synergy savings expected from our merger with even better than expected savings in SG&A. This, in conjunction with our orders returning to higher levels, strengthens our belief that 2000 will be a year of solid performance for the Company.
"We are beginning to see signs of increased market activity in North America and Europe; and with our rapidly growing service and e-commerce businesses, I believe ABC-NACO will return to profitability in the current quarter. Our financial performance should improve as the year progresses, and I look for overall solid financial results for the year 2000," said Seher.
ABC-NACO is one of the world's leading suppliers of technologically advanced products to the railroad and flow control industries through its three business segments or groups: Rail Products, Rail Services and Systems, and Specialty Products. With four technology centers around the world, ABC-NACO holds pre-eminent market positions in the design, engineering, and manufacture of high performance freight car, locomotive and passenger rail suspension and coupler systems, wheels and mounted wheel sets, and specialty track products. The Company also supplies railroad and transit signaling systems and services, as well as highly engineered valve bodies and components for industrial flow control systems worldwide. It has 32 offices and facilities in the United States, Canada, Mexico, Scotland, Portugal, and China.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: The statements contained in this release which are not historical facts, may be deemed to be forward-looking statements that are subject to change based on various factors which may be beyond the control of ABC-NACO Inc. Accordingly, actual results could differ materially from those expressed or implied in any such forward-looking statement. Factors that could affect actual results are described more fully in the Company's Annual Report on 10-K for the fiscal year ended July 31, 1999, under the caption "Cautionary Statement Concerning Forward Looking Statements," and other risks described from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.
ABC-NACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Two and Five Months Ended December 31, 1999
(Unaudited)
(In thousands, except per share data)
December 31, 1999
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Two Months Ended Five Months Ended
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Net sales $ 95,689 $ 239,861
Cost of sales 86,513 214,833
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Gross profit 9,176 25,028
Selling, general and
administrative expenses 11,339 24,962
Merger and other restructuring
charges 1,201 1,201
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Operating loss (3,364) (1,135)
Equity loss (income) from
unconsolidated joint ventures 149 (29)
Interest expense 3,830 8,801
Amortization of deferred
financing costs 357 597
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Loss before income taxes (7,700) (10,504)
Benefit from income taxes (4,093) (4,979)
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Net loss $ (3,607) $ (5,525)
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Diluted shares outstanding 19,064 18,623
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Diluted loss per share $ (0.19) $ (0.30)
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