Wescast Delivers Outstanding First Quarter Results
25 April 2000
Wescast Delivers Outstanding First Quarter Results
Business Editors
BRANTFORD, Ontario--April 25, 2000--
Wescast Industries Inc. Reports a 25% Increase in Sales
and 33% Increase in Net Earnings Marking the 22nd Consecutive
Quarter of Record Sales and Earnings for the Company Since It
Became Public in Late 1994.
Highlights
* Wescast (NASDAQ:WCST)(TSE:WCS.A.)sales of $105.2 million in the
first quarter of 2000 were 25% higher than the $84.1 million in
the first quarter of 1999.
* Net earnings of $19.8 million were 33% higher than the same
quarter in 1999. Fully diluted earnings per share were $1.42 in
the first quarter of 2000 compared to $1.08 in 1999, representing
a 31% increase.
* Ford Motor Company recently honoured Wescast with the World
Excellence Award -- Gold Award -- for superior supplier
performance in 1999. Wescast was one of only eleven suppliers
world wide to receive the Gold Award at last month's ceremonies
in Detroit, Michigan.
* Wescast was the recipient of the 1999 Saturn Quality Achievement
Award for maintaining an exceptionally low "parts per million"
quality rating throughout the year.
* The Company reached its one-millionth hour of no lost-time
accidents in the Wingham Casting facility on March 1, 2000. This
facility has posted no lost-time accidents since May 1999.
* Wescast recently announced its intention to purchase up to
569,212 of its outstanding Class A Subordinate Voting Common
Shares commencing April 26, 2000. Given current profitability,
long-term prospects and current share price, the Company believes
that such purchases are in the best interests of Wescast and an
excellent investment of corporate funds.
Sales
Sales for the Company continue to grow at double digits. Sales
increased 25% to reach an all-time record of $105.2 million for the
first quarter. The following factors contributed to the increase in
sales:
- Continued strong demand for vehicles, particularly in the light
truck and sport utility segment of the market in which Wescast
supplies many manifold programs.
- An increasing shift in production from ductile iron to the
higher-value-added SiMo manifolds which provide greater
temperature and strength characteristics necessary for
hotter-running engines.
- Considerable growth in the number of new internal machining
programs as well as increased volumes on existing programs.
The Company anticipates a stronger than expected automotive
market for the remainder of the year. This, in addition to increased
market share, will provide for continued growth.
Operations
Gross margins were $37.5 million or 35.6% of sales compared to
$29.5 and 35.1% of sales in the same quarter of 1999 an increase of
27%. Operating earnings for the quarter were $30.0 million compared to
$23.9 million in 1999, representing a 26% improvement. These
improvements were a result of significant production efficiencies such
as improved uptime, better attainment, and reduced scrap throughout
our casting and machining facilities.
Cash Flow
Cash flow from operations continues to be positively affected by
increased earnings. Timing and cut-off related issues resulted in high
receivable balances and tooling inventory at the end of the first
quarter. As a result, operating cash flow for the quarter, at $12
million, was below the $26 million of the previous year. These
receivables have since been collected and the tooling inventory has or
will be invoiced in the near future.
Capital expenditures for the quarter were $15.1 million, up from
$10.0 million for the first quarter of 1999. Approximately $5.0
million was invested in the commissioning of the North Huron casting
facility as well as maintaining buildings and equipment at other
facilities. Approximately $4.5 million can be attributed to the
expansion of our stainless steel division in Stratford to accommodate
the new 8.1L program. Another $4.0 million was invested in new machine
lines at the machining operation in Wingham to accommodate the ramp up
of several new programs coming into production this year. The Company
is on target to spend over $80.0 million by the end of the year.
The Company also deferred $4.1 million of pre-production costs in
the quarter, primarily for the commissioning of the new Wingham
foundry and the expansion of our stainless steel facility in
Stratford.
Balance Sheet and Financial Position
As of April 2, 2000, the Company had $70.2 million in cash and
short-term investments compared to $76.8 million at the end of 1999.
Wescast continues to maintain a strong financial position to support
future investments in human resources, production facilities,
technical strength and research and development, all of which are
integral to sustaining a competitive advantage for the continued
growth and profitability of Wescast.
The following table provides an overview of the above mentioned
highlights for the first quarter:
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Wescast Industries Inc.
Q1 2000 Highlights
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in millions of dollars, except per share data and otherwise noted
Q1 2000 Q1 1999 % change
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Sales 105.2 84.1 25%
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Net Earnings 19.8 14.9 33%
EPS
basic 1.49 1.13 32%
fully diluted 1.42 1.08 31%
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Sales Breakdown - dollars
Casting & Machining 93.3 78.4 19%
Cast 70.8 58.9 20%
Internal Machining 21.8 18.2 20%
External Machining 0.7 1.3 -46%
Tooling & prototype 9.0 3.7 143%
Magalloy pump sales 1.8 1.8 0%
UMI 1.0 0.1 900%
Wesvac 0.1 0.1 0%
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Sales Breakdown - units (000's)
Ductile 0.6 0.8 -25%
SiMo 3.4 2.6 31%
Total 4.0 3.4 18%
Sales Breakdown - percentage
SiMo Penetration 85.0% 76.5%
Internal Machining Penetration 58.0% 56.6%
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Gross Margin 37.5 29.5 27%
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Gross Margin % 35.6% 35.1%
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Capital Expenditures 15.1 10.0 51%
R&D 1.0 0.5 100%
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S G & A (% of sales) 6.2% 6.1%
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Tax Rate 36.3% 37.7%
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*T
Wescast Industries Inc. is the world's largest supplier of cast
exhaust manifolds for passenger cars and light trucks. The Company
designs, develops, casts, and machines high-quality iron and steel
exhaust manifolds for automotive OEMs. In addition to auto parts, the
Company produces pressure retaining high-alloy cast steel pump
components for the petrochemical, pulp and paper and food processing
industries. Wescast operates seven production facilities in North
America, and three sales and design offices in North America and
Europe. The Company is recognized world wide for its quality products,
innovative design solutions, and highly committed workforce. Wescast
trades under the TSE symbol WCS.A as well as the new NASDAQ symbol of
WCST effective April 3, 2000.
*T
A conference call has been arranged for:
April 25, 2000
1:00 p.m. EST
To participate, please dial (416) 641-6663
*T
Wescast Industries Inc. Financial Statements Consolidated
Statement of Earnings and Retained Earnings (in thousands of Canadian
dollars, except per share figures) (Canadian GAAP)
Three months ended
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April 2 March 28
2000 1999
---------------------------
Sales $105,228 $84,099
Cost of sales 67,684 54,573
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Gross margin 37,544 29,526
Selling, general and administration 6,481 5,175
Research, development and design 1,049 484
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Operating earnings 30,014 23,867
Other (income) expense
Interest expense 99 147
Investment income 970) (1,134)
Other (income) and expense (129) 939
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Earnings before income taxes 31,014 23,915
Income taxes 11,251 9,018
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Net earnings $19,763 $14,897
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Net earnings per share
- basic $1.49 $1.13
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---------------------------
- fully diluted $1.42 $1.08
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Retained earnings, beginning of period $188,983 $131,646
Net Earnings 19,763 14,897
Dividends paid (1,588) (1,051)
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Retained earnings, end of period $207,158 $145,492
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Wescast Industries Inc. Financial Statements
Consolidated Balance Sheet
(in thousands of Canadian dollars) (Canadian GAAP)
As at
---------------------------
April 2 January 2
2000 2000
---------------------------
Current assets
Cash and cash equivalents $70,178 $43,164
Short-term investments 0 33,594
Receivables 56,105 45,149
Inventories 21,524 19,809
Prepaids 603 728
Due from affiliated companies 157 0
---------------------------
148,567 142,444
Property and equipment 225,303 215,589
Other 10,193 6,129
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$384,063 $364,162
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Current liabilities
Payables and accruals $39,528 $40,042
Income taxes payable 3,762 5,197
Current portion of long-term debt 3,346 2,196
---------------------------
46,636 47,435
Long-term debt 4,606 4,502
Employee benefits 5,980 5,775
Future income taxes 10,347 8,707
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67,569 66,419
---------------------------
Shareholders' equity
Capital stock 109,302 108,760
Retained earnings 207,158 188,983
Cumulative translation adjustment 34 0
---------------------------
316,494 297,743
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$384,063 $364,162
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Wescast Industries Inc. Financial Statements
Consolidated Statement of Cash Flows
(in thousands of Canadian dollars) (Canadian GAAP)
Three months ended
---------------------------
April 2 March 28
2000 1999
---------------------------
Cash derived from (applied to)
Operating
Net earnings $19,763 $14,897
Add (deduct) items not requiring cash:
Depreciation and amortization 5,370 4,458
Amortization of bond issue costs 3 7
Future income taxes 1,640 273
Loss on disposal of equipment 16 1
Employee benefits 335 85
---------------------------
27,127 19,721
Change in non-cash working capital (15,141) 6,883
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11,986 26,604
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Financing
Issue of long-term debt 1,012 140
Repayment of long-term debt (9) (211)
Payment of obligations under capital lease (140) (117)
Employee benefits paid (130) 0
Issuance of share capital under
Employee Share Purchase Plan 198 98
Employee share loan repayments 13 3
Issuance of share capital under
Stock Option Plan 47 525
Dividends paid (1,588) (1,051)
---------------------------
(597) (613)
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Investing
Purchase of property and equipment (14,785) (10,070)
Purchase of license 0 (74)
Restricted cash from long-term debt 340 1,119
Deferred pre-production costs (4,156) 0
Redemption of short-term investments 34,209 36,892
Proceeds on disposal of equipment 17 13
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15,625 27,880
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Net increase in cash and cash equivalents 27,014 53,871
Cash and cash equivalents
Beginning of period 43,164 28,131
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End of period $70,178 $82,002
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Wescast Industries Inc. Financial Statements
Notes to the Consolidated Financial Statements
Note 1: Basic earnings per share is calculated based on the
weighted average number of common shares outstanding
(2000-13,231,317 shares; 1999-13,155,255 shares). Fully
diluted earnings per share is calculated based on the fully
diluted weighted average number of common shares outstanding
(2000-14,123,284 shares; 1999-13,994,292 shares).
Note 2: Outstanding Share Information
Class A common shares - 5,766,872 shares
(1999-5,745,843 shares)
Class B common shares - 7,466,907 shares
(1999 - 7,466,907 shares)
Stock options to acquire Class A common shares -
891,967 options (1999 - 894,867 options)
Note 3: These interim financial statements follow the same
accounting policies and methods of computation as the most
recent annual financial statements for the year ended January
2, 2000.
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