Detroit Diesel Solid First Quarter 2000 Results
27 April 2000
Detroit Diesel Solid First Quarter 2000 Results
DETROIT, April 27 Detroit Diesel Corporation (NYSE: DDC)
announced today first quarter 2000 revenues of $536 million and net income of
$10.1 million, or $0.43 per common share. These figures compare to record
first quarter 1999 revenues of $592 million and net income of $12.5 million,
or $0.51 per common share.
Total first quarter 2000 engine shipments were 36,400 units compared to
42,400 units in first quarter 1999. Unit volume was impacted by a reduction
in Series 60 and two-cycle engine shipments, partially offset by an increased
demand for the company's Series 2000, Series 4000, and light duty engines for
off-road applications.
Roger S. Penske, Chairman, said, "This first quarter performance
demonstrates our ability to maintain solid profitability in light of a
dramatic shift in demand within the heavy-duty truck market. We have
furthermore implemented measures to offset the effect of reduced demand within
the truck market, and we expect to deliver consistent results throughout the
remainder of 2000."
Charles G. (Chip) McClure, President and CEO, added, "The decline in
production within the heavy-duty truck market, while much-anticipated, has
occurred rather swiftly, with essentially every major truck OEM reducing build
rates during the first quarter. Our current forecast suggests a decline of
20% in the North American heavy-duty truck production from the record 1999
level. Our efforts are focused on reducing costs to offset the effect of the
decreased demand. Furthermore, we will maintain our emphasis on generating
growth in our off-road, automotive and parts, and remanufacturing businesses,
which provide a buffer to the reduced demand for heavy-duty truck engines.
Our longer-term objective remains to reduce our cost structure and allocate
resources to generate solid and consistently improving profitability
throughout the cycle."
Revenues from parts and remanufactured products increased 16% in the first
quarter to $123 million compared to $106 million in the first quarter 1999.
Demand for the company's four-cycle components remained strong in the first
quarter, and revenues from two-cycle parts and remanufactured products
increased compared to the first quarter 1999.
An expanded lineup of remanufactured products, key component demand, and
success within new marketing initiatives such as the Power Pack injector
program all contributed to the revenue growth.
Operating income (earnings before interest and taxes) in the first quarter
was $18.0 million, compared to $22.2 million in first quarter 1999. Gross
margin increased 1.4 percentage points to 24.9% in the first quarter compared
to first quarter 1999. The gross margin increase resulted from a more
favorable revenue mix, with stronger high horsepower unit shipments, increased
parts and remanufacturing revenues, and material cost reductions associated
with the company's CCVI program.
Research and development expenses were $26.6 million for the quarter,
compared to $24.6 million in the first quarter 1999. Product development
activities continue to focus on new product applications for the company's
off-road products, the next generation Series 60 engine scheduled for 2002
production, and a number of automotive engine product programs.
Selling, general, and administrative expenses were $89.1 million for the
quarter, a decrease of $3.3 million compared to first quarter 1999, due
primarily to lower warranty expense associated with reduced unit volume.
In conjunction with the previously announced share repurchase program, the
company acquired 357,000 shares of its stock during the first quarter at a
total cost of $6.1 million.
Current total shares outstanding have been reduced to 23.3 million. As a
result of the repurchase program, the weighted average number of shares
outstanding for the first quarter is 23.5 million.
The following is a review of the company's three markets:
On-Highway. Revenues were $335 million in the first quarter compared to
$379 million in first quarter 1999. Shipments of the company's Series 60
engine for on-highway truck applications declined 17% in conjunction with the
anticipated reduced OEM production within the North American heavy-duty truck
market. Shipments to the company's coach customers continue to show steady
improvement.
Off-Road. Revenues were $156 million in the first quarter compared to
$161 million in the first quarter 1999. Increased demand for the company's
Series 2000, Series 4000, and Series 60 engines for off-road applications
reduced the effect of a $39 million decline in two-cycle engine revenues
resulting from the PowerEvolution program. Current indications are that
industry fundamentals for the various off-road engine applications are all
stable to improving. Anticipated orders for four-cycle products throughout
the remainder of 2000 currently are very strong, with increased customer
interest most prevalent in new marine and power generation applications.
Automotive. Revenues were $45 million in the first quarter compared to
$52 million in the first quarter 1999. Shipments in the first quarter were
affected by the timing of customer requirements, which were more heavily
focused on the prior quarter.
Detroit Diesel Corporation is engaged in the design, manufacture, sale and
service of heavy-duty diesel and alternative fuel engines, automotive diesel
engines and engine-related products. The company offers a complete line of
diesel engines from 22 to 11,000 horsepower for the on-highway, off-road and
automotive markets. Detroit Diesel services these markets directly and
through a worldwide network of more than 2,700 authorized distributor and
dealer locations. DDC is a QS-9000 certified company.
Detroit Diesel's major shareholder is Penske Corporation, a closely-held
diversified transportation services company whose operations include Penske
Truck Leasing Company, Diesel Technology Company, Penske Automotive Group,
Inc., Penske Auto Centers, Inc., and Penske Capital Partners, L.L.C. Penske
Corporation and its subsidiaries manage and operate businesses with annual
revenues exceeding $10 billion and employ more than 34,000 people around the
world.
This news release may include projections, forecasts and other forward-
looking statements about Detroit Diesel, the industry in which it competes and
the markets it serves. The achievement of such projections is subject to
certain risks and uncertainties, fully detailed in the "Cautionary Statement
for purposes of 'Safe Harbor' under the Private Securities Litigation Reform
Act of 1995" in the Company's most recent Annual Report on Form 10-K, which is
on file with the Securities and Exchange Commission.
Detroit Diesel's World Wide Web address is http://www.detroitdiesel.com.
DETROIT DIESEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
Three Months Ended
March 31,
2000 1999
(Unaudited)
Net revenues $536.2 $591.5
Cost of sales 402.5 452.3
Gross profit 133.7 139.2
Expenses:
Selling and administrative 89.1 92.4
Research and development 26.6 24.6
Total 115.7 117.0
Income before interest and
income taxes 18.0 22.2
Interest 2.2 2.3
Income before income taxes 15.8 19.9
Provision for income taxes 5.7 7.4
Net income available for
common shares $10.1 $12.5
Basic and diluted income per share $ .43 $ .51
SALES DATA BY MARKET
(In millions)
Three Months Ended
March 31,
2000 1999
(Unaudited)
On-Highway $335 $379
Off-Road 156 161
Automotive 45 52
Total $536 $592
DETROIT DIESEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
Mar. 31, Dec. 31,
2000 1999
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $4.0 $2.9
Receivables, net of allowances 328.8 310.2
Inventories 350.6 344.3
Prepaid expenses, deferred charges and
other current assets 15.2 10.3
Deferred tax assets 52.1 62.0
TOTAL CURRENT ASSETS 750.7 729.7
PROPERTY, PLANT AND EQUIPMENT
Net of accumulated depreciation
of $234.2 and $226.7,
respectively 310.4 313.4
DEFERRED TAX ASSETS 15.3 15.9
INTANGIBLE ASSETS, net 114.4 118.5
OTHER ASSETS 55.3 53.6
TOTAL ASSETS $1,246.1 $1,231.1
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $44.2 $27.4
Accounts payable 289.4 294.8
Accrued expenses 224.6 239.5
Current portion of long-term debt
and capital leases 2.4 3.4
TOTAL CURRENT LIABILITIES 560.6 565.1
LONG-TERM DEBT AND CAPITAL LEASES 83.4 47.1
OTHER LIABILITIES 181.1 196.0
DEFERRED TAX LIABILITIES 22.8 24.2
DEFERRED INCOME 4.8 5.0
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.01 per
share, no shares issued - -
Common stock, par value $0.01 per share,
24.7 million shares issued .2 .2
Additional paid-in capital 224.3 224.3
Treasury Stock (26.7) (20.6)
Accumulated other
comprehensive income (15.4) (14.0)
Retained earnings 211.0 203.8
TOTAL STOCKHOLDERS' EQUITY 393.4 393.7
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,246.1 $1,231.1