Hastings Reports Second-Quarter, Six-Month Results
28 July 2000
Net Income Rises 70 Percent During First Half of 2000; Second-Quarter Results are Comparable
HASTINGS, Mich. - Hastings Manufacturing Company today announced comparable
sales and earnings performance and improved margins in the second quarter ended
June 30, 2000.
The Hastings, Mich.-based manufacturer of piston rings and other
automotive products reported net income of $228,811, or $0.31 per diluted
share, on net sales of $9.6 million in the second quarter of 2000, compared
with net income of $255,572, or $0.33 per diluted share, on net sales of $9.7
million in the second quarter of 1999.
Hastings said increased export sales in the second quarter helped offset
decreased volume of its private brand and original equipment products and
lower sales in the Canadian aftermarket. Second-quarter sales to the domestic
aftermarket were comparable to the year-ago period.
"Despite lower sales figures, I am pleased with the progress we made in
the second quarter of 2000," said Andrew F. Johnson, co-chief executive
officer of Hastings Manufacturing. "We have been focused on adapting our
sales and marketing strategy to match changes in the marketplace. Likewise,
we continue to focus our manufacturing to improve efficiency and meet customer
expectations for quality and delivery."
Hastings' gross margin improved to 30.8 percent in the second quarter of
2000, compared with 29.4 percent in last year's second quarter. As such,
gross profit increased 3 percent to $3.0 million in the second quarter of
2000, versus the same period a year-ago, despite the lower sales level. This
gain reflects improvements in operating processes and the absence of charges
incurred during 1999 to fund the initial conversion to lean manufacturing.
Operating income decreased 3 percent versus the year-ago period, due to a
4.8 percent increase in operating expenses. Hastings attributed the rise in
expenses to increases in performance-based personnel costs, employee training
and insurance costs. Legal and professional fees also increased over the
second quarter of 1999 due to the class-action lawsuit brought by the
Company's retirees. The Company has denied any wrongdoing in this suit, and
intends to defend it and any related class certification.
"The investments we made last year to improve processes, reduce scrap and
enhance efficiency are helping us toward the transition into a 'lean
manufacturing' environment," Johnson said. "Our gross profit margin has
returned to our historic levels, and our focus on cost-management has helped
Hastings post sharply higher profitability in the first half of 2000."
Hastings reported net income of $511,362, or $0.68 per diluted share, on
net sales of $18.5 million in the first six months of 2000, compared with net
income of $301,215, or $0.39 per diluted share, on net sales of $18.7 million
in the first six months of 1999.
Net income improved 70 percent for the six-month period, reflecting
improved gross margin and higher operating income. Gross margin improved to
31 percent in the first half of 2000, versus 28 percent in the year-ago
period. Hastings said operating income grew 51 percent to $1.2 million for
the first six months of 2000, primarily reflecting the increase in gross
margins.
"We are encouraged that we have been able to improve margins while also
improving our manufacturing processes," said Mark R.S. Johnson, co-chief
executive officer. "These improvements, combined with the absence of the
various production issues that negatively affected the Company's financial
results in 1999, should result in improved cash flow for the remainder of
2000. Additionally, our joint venture company, Casite Intraco, LLC, has
introduced new automotive additive products that are allowing us to leverage
the respected Casite(R) brand name. We expect Casite will have a positive
impact on our results in 2000.
"We need to build on the momentum we are creating. We are determined to
maintain our levels of productivity and profitability through lean
manufacturing principles, and will continue to focus on additional sales
opportunities in the second half of 2000."
Hastings Manufacturing Company serves the automotive parts market with
piston rings, mechanics' specialty tools and additives for engines,
transmissions and fuel systems. The piston rings and mechanics' specialty
tools, available under the "HASTINGS" brand name, are marketed primarily
through independent warehouse distributors, retailers, and on a limited basis,
direct to original equipment manufacturers. The additives products available
under the "CASITE" brand name are marketed through The Casite Company, a joint
venture that markets both directly and through independent representatives.
Canadian distribution of all products is handled through a wholly owned
subsidiary, Hastings, Inc., located in Barrie, Ontario. During 1999,
Hastings, Inc. began to distribute and administer products for other U.S.
based suppliers into the Canadian market. These products complement the
current piston ring offerings as to both distribution channels and customer
base.
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Net Sales 9,610,963 9,738,166 18,513,186 18,697,297
Cost of Sales 6,651,316 6,870,929 12,770,053 13,468,483
Gross Profit 2,959,647 2,867,237 5,743,133 5,228,814
Operating Expenses:
Advertising 64,143 84,306 126,853 154,607
Selling 798,531 781,863 1,584,270 1,518,573
General &
Administrative 1,538,703 1,425,072 2,865,877 2,785,112
Total Operating
Expenses 2,401,377 2,291,241 4,577,000 4,458,292
Operating Income 558,270 575,996 1,166,133 770,522
Other Expenses (Income):
Interest
expense 179,227 153,705 330,999 300,792
Interest Income - - - -
Other, net (4,768) (4,281) (23,228) (41,485)
Total Other
Expenses 174,459 149,424 307,771 259,307
Income Before
Taxes 383,811 426,572 858,362 511,215
Income Tax
Expense 155,000 171,000 347,000 210,000
Net Income 228,811 255,572 511,362 301,215
Net Income Per
Share of
Common Stock:
Basic 0.31 0.33 0.68 0.39
Diluted 0.31 0.33 0.68 0.39
Average Shares
Outstanding:
Basic 745,046 775,046 752,299 775,046
Diluted 745,046 775,046 752,299 775,046
Dividends Per
Share of Common
Stock 0.080 0.080 0.160 0.160