Detroit Diesel Reports Second Quarter 2000 Results
27 July 2000
Detroit Diesel Reports Second Quarter 2000 Results
DETROIT - Detroit Diesel Corporation announced today second quarter 2000
revenues of $538 million and net income of $9.7 million, or $0.42 per common
share. These figures compare to record second quarter 1999 revenues of $585
million and net income of $12.8 million, or $0.52 per common share.
For the six months ended June 30, 2000, total revenues were $1.07 billion,
compared to $1.18 billion for the first six months of 1999. Year to date net
income was $19.8 million, or $0.85 per common share, compared to $25.3
million, or $1.03 per common share for the same period in 1999.
Total second quarter 2000 engine shipments were 40,500 units compared to
42,300 units in second quarter 1999. Total Series 60 engine shipments
declined 17% compared to second quarter 1999, while the company's Series 2000,
Series 4000, Series 50 and automotive products all reported increased
shipments.
Year to date total shipments were 76,900 compared to 84,700 units in the
first six months of 1999, including a decline in two-cycle engine shipments of
over 2,000 units due to the company's PowerEvolution program.
Roger S. Penske, Chairman, said, "Our second quarter results reflect the
actions we have implemented to improve our off-road and automotive businesses,
helping to offset the decline we are experiencing in North American heavy-duty
truck production. As we see further reductions in truck production in the
coming months, we are stepping up our measures to reduce costs, and I am also
encouraged by the range of opportunities within the automotive, off-road and
aftermarket portions of our business. Our recently-announced merger agreement
with DaimlerChrysler will help us attain an even stronger competitive position
in the future."
Charles G. (Chip) McClure, President and CEO, added, "Our second quarter
performance was accomplished by adapting to a continued decline in on-highway
truck engine demand. Our current forecast indicates a reduction of 25% to 30%
in North American heavy-duty truck production versus record 1999 full year
levels. We anticipate third quarter production to be substantially below
prior year levels, and in light of these expected production declines, we have
increased our emphasis on cost reduction to remain competitive and enhance
profitability. However, we remain committed to efficiently utilizing
resources to retain Detroit Diesel's leadership position in product technology
and customer service."
Revenues from parts and remanufactured products were $110 million compared
to $112 million in the second quarter 1999. Sales of remanufactured products
has continued to show improvement while service parts revenues were affected
by the timing of certain promotion programs.
Operating income (earnings before interest and taxes) in the second
quarter was $16.8 million, compared to $22.4 million in second quarter 1999.
Gross margin was 23.8% in the second quarter compared to 23.9% in the second
quarter 1999, as a result of reduced unit volumes and product mix. The
company also recorded a reduction in its tax rate over prior periods,
resulting from realization of certain foreign income tax benefits.
Research and development expenses were $25.5 million for the quarter, a
decrease of 8% compared to the second quarter 1999, despite a significant
investment in new product development activities for the next generation
Series 60 engine and automotive application projects. Selling, general, and
administrative expenses were $85.5 million for the quarter, a decrease of 5%
compared to second quarter 1999, as a result of cost reduction initiatives and
a decline in product coverage expense consistent with reduced unit volume.
In conjunction with the previously announced share repurchase program, the
company acquired 138,800 shares of its stock during the second quarter at a
total cost of $2.2 million. Current total shares outstanding have been
reduced to 23.1 million, and the weighted average number of shares outstanding
for the second quarter is 23.2 million.
The following is a review of the company's three markets:
On-Highway. Revenues were $323 million in the second quarter compared to
$380 million in second quarter 1999, as a result of a 17.5% reduction in
Series 60 engine shipments for on-highway truck applications. Unit shipments
for the remainder of the year are currently expected to be at significantly
lower levels than the comparable period in 1999, as OEM production is
significantly reduced to coincide with lower demand. Year to date revenues
were $658 million compared to $759 million for the first six months of 1999.
Off-Road. Revenues increased 7% to $170 million in the second quarter
compared to the second quarter 1999, despite a 26% decline in shipments of
two-cycle engines in association with the PowerEvolution program. Strong
customer demand generated increased unit shipments for all of the company's
four cycle products. Light duty industrial engine shipments continued to show
strong growth in the second quarter compared to 1999 shipments. Year to date
revenues increased 2% to $326 million compared to the first six months of
1999.
Automotive. Revenues were $45 million in the second quarter, consistent
with the second quarter 1999. The company will transition production to its
new 2.5 liter 16 valve common rail engine for certain vehicle applications
beginning fourth quarter 2000 and continuing into the first half of 2001.
Year to date revenues were $90 million compared to $98 million in 1999.
As previously announced, DDC has signed a definitive merger agreement with
a subsidiary of DaimlerChrysler AG. Under the terms of the merger agreement,
DaimlerChrysler, a shareholder of DDC since 1993 that currently owns 21.3% of
the outstanding common shares of DDC, will commence a cash tender offer for
the remaining 78.7% of DDC at a price of $23.00 per common share for a total
transaction value of $423 million. Penske Corporation, which currently owns
48.6% of the outstanding common shares of DDC, has committed to tender its
shares to DaimlerChrysler.
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.
DETROIT DIESEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
(Unaudited) (Unaudited)
Net revenues $538.0 $585.2 $1,074.2 $1,176.7
Cost of sales 410.2 445.1 812.7 897.4
Gross profit 127.8 140.1 261.5 279.3
Expenses:
Selling and administrative 85.5 90.0 174.6 182.4
Research and development 25.5 27.7 52.1 52.3
Total 111.0 117.7 226.7 234.7
Income before interest and income
taxes 16.8 22.4 34.8 44.6
Interest 2.8 2.1 5.0 4.4
Income before income taxes 14.0 20.3 29.8 40.2
Provision for income taxes 4.3 7.5 10.0 14.9
Net income available
for common shares $9.7 $12.8 $19.8 $25.3
Basic income per share $.42 $.52 $.85 $1.03
Diluted income per share $.42 $.52 $.85 $1.02
Sales Data by Market
(In millions)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
(Unaudited) (Unaudited)
On-Highway $323 $380 $658 $759
Off-Road 170 159 326 320
Automotive 45 46 90 98
Total $538 $585 $1,074 $1,177
DETROIT DIESEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
June 30, Dec. 31,
2000 1999
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $6.7 $2.9
Receivables, net of allowances 321.9 310.2
Inventories 348.9 344.3
Prepaid expenses, deferred charges and
other current assets 23.4 10.3
Deferred tax assets 51.9 62.0
TOTAL CURRENT ASSETS 752.8 729.7
PROPERTY, PLANT AND EQUIPMENT
Net of accumulated depreciation of $243.9
and $226.7, respectively 310.9 313.4
DEFERRED TAX ASSETS 8.7 15.9
INTANGIBLE ASSETS, net 113.1 118.5
OTHER ASSETS 51.6 53.6
TOTAL ASSETS $1,237.1 $1,231.1
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $36.8 $27.4
Accounts payable 292.7 294.8
Accrued expenses 216.1 239.5
Current portion of long-term debt
and capital leases 2.8 3.4
TOTAL CURRENT LIABILITIES 548.4 565.1
LONG-TERM DEBT AND CAPITAL LEASES 79.6 47.1
OTHER LIABILITIES 184.9 196.0
DEFERRED TAX LIABILITIES 21.9 24.2
DEFERRED INCOME 4.7 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 (28.9) (20.6)
Accumulated other comprehensive income (15.8) (14.0)
Retained earnings 217.8 203.8
TOTAL STOCKHOLDERS' EQUITY 397.6 393.7
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,237.1 $1,231.1