Trianon Industries Corp. Reports Fourth Quarter Earnings
11 April 2000
Trianon Industries Corp. Reports Fourth Quarter Earnings
ST. QUENTIN EN YVELINES, France, April 10 Trianon
Industries Corp. today reported fourth quarter earnings:
RESULTS OF OPERATIONS - TRIANON INDUSTRIES
(in Thousands of U.S. Dollars)
Unaudited
Historical Twelve Months Ended Proforma Twelve Months Ended
December 31, December 31,
1999 1998 1997 1999 1998 1997
Results of Operations
Net sales 926.3 710.8 487.9 1,024.3 928.5 841.0
Gross profit 118.7 64.3 58.5 150.4 127.3 129.1
Operating income 41.6 12.6 19.1 57.4 30.1 37.2
Income (loss)
before taxes 6.6 (11.9) 9.2 14.5 (10.7) 0.5
Net Interest
Expense 35.0 24.6 9.9 42.9 40.8 36.7
EBITDA 79.1 43.2 46.6 99.5 71.1 83.9
Adjusted EBITDA - - - 119.4 98.2 105.5
Capital
expenditures 43.7 44.0 15.1 45.3 51.4 38.2
Depreciation and
amortization 37.4 30.5 27.5 42.1 41.3 46.7
Balance sheet
Cash & cash
equivalents 51.2 26.1 11.6 51.2 26.1 12.4
Debt 416.6 322.5 115.2 416.6 461.2 334.0
Twelve Months Ended December 31, 1999 Compared to Twelve Months Ended
December 31, 1998 - Trianon Industries
Net Sales. Pro forma net sales were $1,024.3 million in 1999, an increase
of $95.8 million or 10.3% compared to pro forma net sales of $928.5 million in
1998. Pro forma production sales in Europe and South America increased by
2.6% (and 6.8% adjusted for currency effect), while tooling and prototype
sales declined by 5.4% (and decreased by 1.5% adjusted for currency effect).
In North America, production sales increased by $81.0 million, or 27.1% and
tooling sales increased by $4.6 million or 7.6%. The increase in European
production sales was due to a strong automotive market and to models reaching
full production volumes (Peugeot 206, Mercedes S class). The increase of
North American production sales is mainly due to (i) the launch of the new
Saturn LS; (ii) the CAMI Vitara/Tracker and the Jeep Grand Cherokee reaching
full production volumes; and (iii) a strong automotive market in the United
States.
Cost of Sales and Gross Profit. Pro forma cost of sales was $873.9
million or 85.3% of sales for the twelve months ended December 31, 1999
compared to $801.2 million or 86.3% of sales for the same period in 1998.
Adjusted for currency effects, pro forma cost of sales increased by 11.7%.
Pro forma cost of sales decreased as a percentage of net sales as a result of
increased production volumes and to cost reduction plans launched late 1998
and early 1999. The cost reduction plans include: (i) an extensive program
of press line automation in Europe and North America; (ii) a progressive
rationalization of the indirect cost structure; and (iii) additional
purchasing leverage.
As a result of the factors discussed above, pro forma gross profit was
$150.4 million in 1999 or 14.7% of net sales, an increase of $23.1 million, or
18.1%, compared to pro forma gross profit of $127.3 million in 1998 or 13.7%
of 1998 net sales. Adjusted for currency effects, pro forma gross profit
increased by 20.4%.
Selling, General and Administrative Expenses. Pro forma selling, general
and administrative expenses were $69.8 million in 1999 or 6.8% of 1999 pro
forma sales, a decrease of $10.4 million, or 13.0% compared to $80.2 million
or 8.6% of sales for the same period in 1998. Adjusted for currency effects,
pro forma selling, general and administrative expenses decreased by 12.1%.
Research and Development Expenses. Pro forma research & development
expenses for the twelve months ended December 31, 1999 were $10.8 million or
1.1% of net sales, an increase of $1.3 million, or 13.7%, compared to pro
forma research & development expenses of $9.5 million or 1.0% of net sales for
the same period in 1998. Adjusted for currency effects, pro forma research &
development expenses increased by 19.3%. The research & development expenses
are due primarily to programs related to hot stamping, laser-welding and
blanking and thin aluminum stamping technologies, and various new product
developments including oils pans and complex products related to pulleys.
Other (Income) Expense. In 1999, pro forma other income & expenses were
$3.4 million and consisted primarily of (i) goodwill amortization of $4.3
million; (ii) employee profit sharing expense of $2.1 million; and (iii) a
gain on the sale of an investment in a Dutch company amounting to $2.8
million. In 1998, pro forma other expense was $7.5 million and consisted
primarily of (i) goodwill amortization of $3.7 million; (ii) employee profit
sharing expense of $1.6 million; and (iii) restructuring cost of $0.9 million.
Unusual Financing Related Fees: Pro forma unusual financing related fees
for the twelve months ended December 31, 1999 were $9.1 million and are
composed primarily of (i) write-off of legal counsel fees and miscellaneous
expenses relating to the postponed 1998 Initial Public Offering, amounting to
approximately $1.0 million; (ii) consent fees, agent fees and miscellaneous
expenses due to the Consent Solicitation agreement suspending Trianon's and
Aetna's obligations to report under the requirements of Sections 13 and 15(d)
of the Securities Exchange Act of 1934, amounting to approximately to $5.3
million, and (iii) legal counsel fees, bank fees and miscellaneous expenses
due to the Company's postponed Senior Notes offering amounting to
approximately $2.9 million.
Operating Income. As a result of the factors discussed above, pro forma
operating income was $57.4 million in 1999 or 5.6% of net sales, an increase
of $27.3 million, or 90.7%, compared to pro forma operating income of $30.1
million in 1998 or 3.2% of net sales. Adjusted for currency effects,
operating income increased by 93.2%.
Net Interest Expense. Pro forma net interest expense was $42.9 million in
1999, an increase of $2.1 million, compared to pro forma net interest expense
of $40.8 million in 1998. The weighted average interest rate and the average
debt of Sofedit (excluding Montich) were 5.9% and $104.7 million,
respectively, for 1999, compared to 5.8% and $120.4 million, respectively, for
1998.
Income Before Taxes. As a result of the factors discussed above, pro
forma income before taxes was $14.5 million in 1999 or 1.4% of net sales, an
increase of $25.2 million, compared to a pro forma loss before taxes of $10.7
million in 1998. Adjusted for currency effects pro forma income before taxes
increased by $25.6 million.
Liquidity and Capital Resources
Financial Condition. At December 31, 1999, the Company had available
cash, cash equivalents and marketable securities totaling $51.2 million,
compared to $26.1 million at December 31, 1998.
At December 31, 1999, the Company was committed to capital expenditures of
approximately $30 million through the end of 2000 for increased manufacturing
capacity. The Company expects to cover these commitments through cash flows
from operating activities and leasing contracts.
At December 31, 1999, the Company had approximately $21 million available
under its Senior Revolving Credit Agreements and approximately $40 million
under its accounts receivables sale programs in Europe.
Sales of Receivables. As of December 31, 1999, the Company had $76.4
million of receivables sold to finance short-term working capital needs. On
average, the discount rate on these sales is PIBOR +0.5%.
Outstanding Debt. At December 31, 1999, the Company had total outstanding
debt of $416.6 million, including $159.4 million in short-term debt and $257.2
million in long-term debt.
Twelve months ended December 31, 1999
(in Millions of US dollars)
EBITDA Income Notes
Before Tax
Pro forma 99.5 14.5
1998 IPO costs write-off 1.0 1.0 (1)
1999 Postponed Trianon bonds
issuance costs 2.9 2.9 (2)
Aetna bonds consent fees 5.3 5.3 (3)
Saturn delayed program launch costs 4.7 4.7 (4)
Extraordinary Zenith shareholder's
compensation 1.0 1.0 (5)
Litigation settlement (0.7) (0.7)
Zenith private company expenses 0.7 0.7 (6)
Zenith change of control payments 4.5 4.5 (7)
Zenith acquisition advisory fees 1.3 1.3
Sofedit restructuring costs 1.0 1.0 (8)
Coventry Presswork restructuring costs 1.0 1.0 (9)
Gain on sale of an investments
(Euralcom BV) (2.8) (2.8)
Pro forma Adjusted 119.4 34.4
(1) Legal counsel fees incurred in 1998. These costs were deferred in
1998, waiting for a new financial issuance in 1999. In 1999, a write-off of
the total amount was recorded in unusual financing related fees.
(2) Bonds issuance costs are composed of legal counsel fees, printers
fees, auditors fees and other miscellaneous fees expensed in 1999 for the
postponed Senior Notes Offering, and recorded as unusual financing related
fees.
(3) Fees relating to legal consent fees, agent fees and miscellaneous
expenses due to the Consent Solicitation agreement suspending Trianon's and
Aetna's obligations to report under the requirements of Sections 13 and 15(d)
of the Securities Exchange Act of 1934. These fees were recorded as Unusual
financing relating fees in 1999.
(4) Estimation of engineering costs incurred by Aetna for dies and
process on the OEM's request and claimed by the Company.
(5) Bonus paid to Zenith's shareholders before the acquisition by
Trianon. This compensation was recorded as selling, general and
administrative expenses in 1999.
(6) Accounting and legal fees paid by Zenith on behalf of its former
shareholders. These expenses were recorded as selling, general and
administrative expenses in 1999.
(7) Bonus paid to Zenith main executives before the acquisition by the
Company. These expenses were recorded as selling, general and administrative
expenses in 1999.
(8) Lay-off costs relating to the change in organization; mainly
replacement of plant managers and controllers. These expenses were recorded
as cost of sales and selling, general and administrative expenses in 1999.
(9) Lay-off costs to downsize the facility at Coventry Pressworks. These
expenses were recorded as cost of sales in 1999.
RESULTS OF OPERATIONS - AETNA INDUSTRIES
(in Thousands of U.S. Dollars)
The following table sets forth, for periods indicated, Aetna Industries'
historical statement of operations expressed as a percentage of net sales.
This table and subsequent discussions should be read in conjunction with the
consolidated financial statements and related notes thereto of Aetna
Industries.
Aetna Industries, Inc.
Twelve Months Ended December 31,
Results of Operations 1999 1998 1997
Net sales 100.0% 100.0% 100.0%
Cost of sales 91.1 92.3 88.1
Gross profit 8.9 7.7 11.9
Selling, general, and administration 6.0 7.8 8.3
Operating income (loss) 2.9 (0.1) 3.6
Net interest expense 5.4 6.7 5.3
Loss before taxes (2.5) (6.8) (1.7)
Net loss (1.3)% (5.0)% (1.1)%
Twelve Months Ended December 31, 1999 Compared to Twelve Months Ended
December 31, 1998 -- Aetna Industries.
Net Sales. Aetna Industries' net sales for the twelve months ended
December 31, 1999 were $295.0 million, an increase of $73.1 million from the
$221.9 million reported for the twelve months ended December 31, 1998.
Production sales increased by $75.1 million, while tooling and prototype sales
decreased by $2 million. The increase in production sales was largely due to
additional sales of the DaimlerChrysler Jeep Grand Cherokee following a
decrease in volume in 1998 due to a four month balance-out of the old design
Grand Cherokee. The net amount of additional sales to DaimlerChrysler in 1999
was $35.6 million. Also, General Motors launched the Saturn LS in 1999.
Saturn sales amounted to $24.1 million. The balance of the increase in 1999
production sales, $18.9 million, resulted from a full year of Cami sales,
compared to three months sales in 1988, at Aetna Manufacturing Canada, Ltd.
Gross Profit. Gross profit was $26.2 million, or 8.9% of net sales, for
the twelve months ended December 31, 1999 compared to $17.1 million, or 7.7%
of net sales, for the same period in 1998. The increase in gross profit was
due to a full year of uninterrupted production of the DaimlerChrysler Jeep
Grand Cherokee. These sales generated additional gross profit of $13.9
million. The depressed Saturn sales and plant inefficiencies created by the
low Saturn sales volume, plus increased overhead costs on a GM rear suspension
job, decreased gross profit. Also impacting gross profit was a net loss on
tooling of $2.4 million for the twelve months ended December 31, 1999, as
compared to a net gain on tooling of $4.1 million for the same period in 1998.
Selling, General and Administrative Expenses. SG&A expenses for the
twelve months ended December 31, 1999 were $17.8 million, or 6.0% of net
sales, compared to $17.2 million, or 7.8% of net sales, for the same period in
1998. As a percent of net sales, the decrease was due to a reduction in
launch expenses discontinued in the third quarter.
Interest expenses. Net interest expense for the twelve months ended
December 31, 1999 was $15.8 million, or 5.4% of net sales, compared to $14.9
million or 6.7% of net sales for the same period in the prior year. Interest
expense primarily increased due to a delay in the collection of General Motors
tooling receivables in the amount of approximately $3.1 million and $1.5
million in 1999 and 1998, respectively. Excluding the impact of the delayed
collection of tooling receivables, interest expense decreased as a result of a
reduction in the amortization of deferred financing fees.
Income Tax. The income tax credit for the twelve months ended December
31, 1999 was $3.5 million, with an effective tax rate of 46.9% compared to
$4.0 million with an effective tax rate of 26.4% for the same period in the
prior year.
Net income (loss). As a result of factors discussed above, net loss was
$3.9 million in 1999 or (1.3%) of net sales, an improvement of $7.1 million
compared to net loss of $11.0 million in 1998.