TransPro, Inc. Reports Second Quarter Results
3 August 2000
TransPro, Inc. Reports Second Quarter Results
NEW HAVEN, Conn. - TransPro, Inc. today announced results for the second quarter ended June 30, 2000.Sales from continuing operations for the second quarter of 2000 declined 2% to $53,839,000, compared with sales from continuing operations of $54,670,000 in the second quarter of 1999. Income from continuing operations before interest and taxes was $2,511,000 for the second quarter of 2000, compared with $4,045,000 in the second quarter of 1999, excluding plant closure costs of $325,000 related to the closure of the Company's Atlanta, Georgia and Philadelphia, Pennsylvania condenser manufacturing plants.
After interest and taxes, income from continuing operations for the second quarter of 2000 was $1,023,000, or $0.14 per diluted common share. This compares with income from continuing operations of $1,717,000, or $0.25 per diluted share, in the second quarter of 1999, after interest and taxes and before the aforementioned plant closure costs of $325,000, equivalent to $0.03 per diluted common share, and a non-recurring, non-cash deferred tax benefit of $2,858,000, equivalent to $0.40 per diluted common share, related to the incorporation of the Company's GO/DAN Industries partnership in the 1999 second quarter.
As previously disclosed, during the second quarter of 2000 the Company recognized a pre-tax gain of approximately $9,900,000, equivalent to $6,002,000 after tax, or $0.85 per diluted common share, related to the sale of its Crown specialty metal fabrication division to Leggett & Platt on May 5, 2000 for $37,500,000. The Company used the net proceeds from the sale to reduce its debt by approximately $35,000,000, which should result in annual pre-tax interest expense savings of over $2,000,000, or $0.17 per diluted common share.
Net income for the second quarter of 2000, which includes income from discontinued operations as well as the aforementioned net gain on the sale of discontinued operations, was $7,025,000, or $0.99 per diluted common share. This compares with net income of $5,110,000, or $0.72 per diluted common share, in the prior year quarter, including plant closure costs and the non-recurring deferred tax benefit.
Sales of Aftermarket Heating and Cooling Systems products in the second quarter of 2000 were 2% lower than the prior year second quarter, reflecting lower unit volume in complete radiators and heaters to major retail customers as well as radiator cores to the direct market, partially offset by modest volume increases in condensers and other air conditioning parts. Customer inventory adjustments, along with mild weather conditions in certain parts of the country, continued to affect demand for the Company's Aftermarket Heating and Cooling Systems products in the quarter.
Consolidated second quarter 2000 gross margins were $13,837,000 compared with $15,097,000 in the second quarter of 1999. As a percent of sales, gross margins declined to 25.7% in the second quarter of this year from 27.6% in the prior year second quarter. Gross margins in the Aftermarket Heating and Cooling Systems segment were affected by lower manufacturing cost absorption as a result of lower production volume. The Company has deliberately lowered production levels in the first half of 2000 in order to lower inventory and debt levels in the latter part of 2000. Second quarter 2000 Aftermarket Heating and Cooling Systems gross margins were also affected by temporary inefficiencies related to the start up of production in Mexico of plastic tank aluminum core radiators and six-millimeter condensers, two new product lines. Cost savings from these new product lines are expected to have a favorable impact on operating results in the second half of 2000. In addition, pricing actions in response to competitive pressures impacted gross margins during the quarter. Gross margins in the OEM Heat Transfer Systems segment increased compared with the prior year period as a result of continued improvements in manufacturing efficiencies and cost management.
Selling, General and Administrative expenses increased slightly to $11,325,000 in the second quarter of 2000 from $11,052,000 in the second quarter of 1999 due to increased headcount to position the Aftermarket air conditioning parts operation for future growth and higher freight costs resulting from higher fuel prices, partially offset by lower bonus and employee medical insurance accrual requirements.
Commenting on the quarter, Hank McHale, President and Chief Executive Officer, stated, "Many of the factors that negatively impacted the entire Aftermarket in the first quarter persisted in the second quarter. Weather patterns in the Northeast and upper Midwest remained moderate and our customers were still working down their inventory levels. We are beginning to see signs that our customers may have attained their inventory adjustment goals and expect the market to begin to pick up in the second half. However, the second quarter saw an improvement in our OEM Heat Transfer operations, where the actions we have taken to improve operational efficiencies resulted in improved operating results for the period."
Mr. McHale concluded, "During the quarter we made substantial progress on our plans to refocus the Company on the heating and cooling systems businesses. We successfully completed the sale of our Crown specialty metal fabrication division and began the production of six-millimeter condensers and plastic tank aluminum core radiators at our Mexico facility. In Dallas, we have signed a lease on a new larger facility for our air conditioning parts operation. We have also invested in equipment that will allow us to produce about 20% of current domestic compressor models in addition to our existing coverage of essentially all import compressor models, enabling us to produce over one-half of the compressor models sold in the Aftermarket. We have also broadened our low cost offshore sources for raw material and components, moved the production of certain OEM products to Mexico for cost advantage and developed plans to market certain heavy duty products to the Aftermarket, while continuing to execute our inventory and debt reduction plans. We believe that our planned initiatives during the first half have positioned us well to take advantage of any market improvements and will result in significantly improved operating results in the second half of 2000 and beyond. Going forward, we remain focused on executing on our strategy and on identifying and implementing cost reduction and efficiency improvement initiatives that in the long run will further strengthen our leadership position in the Aftermarket and return our OEM operation to solid profitability."
For the six-month period ended June 30, 2000, sales from continuing operations increased to $102,269,000 from $101,585,000 in the first six months of 1999. The Company reported income from continuing operations of $462,000, before plant closure costs, interest and taxes in the first six months of 2000 compared with $5,766,000, before plant closure costs, interest and taxes in the year ago period. Excluding plant closure costs, the Company reported a loss from continuing operations after interest and taxes of $1,170,000, or $0.18 per diluted common share, in the first half of 2000. In the first half of 1999, income from continuing operations was $2,181,000 or $0.31 per diluted common share after interest and taxes, and before plant closure costs and the non-recurring, non-cash deferred tax benefit. The results for the first six months were negatively impacted by lower volume due to lower market demand and lower production rates implemented as part of the inventory and debt reduction plan.
Net income, including plant closure costs, income from discontinued operations, and the gain on the sale of discontinued operations, was $4,804,000, or $0.68 per diluted common share, for the first six months of 2000 compared to $5,615,000 or $0.79 per diluted common share, including plant closure costs and the non-recurring, non-cash deferred tax benefit.
TransPro, Inc. is a manufacturer and supplier of heating and cooling systems and components for a variety of Aftermarket and OEM automotive, truck and industrial applications.
TRANSPRO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except for per share data)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
Aftermarket Heating and Cooling $44,098 $45,150 $80,852 $82,499
Systems
OEM Heat Transfer Systems 9,741 9,520 21,417 19,086
Total Sales 53,839 54,670 102,269 101,585
Cost of Sales 40,003 39,573 78,743 73,820
Gross Margin 13,836 15,097 23,526 27,765
Selling, General and 11,325 11,052 23,064 21,999
Administrative Expenses
Income from Continuing 2,511 4,045 462 5,766
Operations Before
Plant Closure Costs,
Interest and Taxes
Plant Closure Costs -- 325 795 325
Income (Loss) from Continuing 2,511 3,720 (333) 5,441
Operations Before Interest
and Taxes
Net Interest Expense 1,093 1,059 2,429 1,973
Income (Loss) from Continuing 1,418 2,661 (2,762) 3,468
Operations Before Taxes
Income Tax Provision (Benefit)(1) 395 (1,727) (1,124) (1,384)
Income (Loss) from Continuing 1,023 4,388 (1,638) 4,852
Operations
Income from Discontinued -- 722 440 763
Operations, Net of Tax
Gain on Sale of Discontinued 6,002 -- 6,002 --
Operations Net of Tax
Net Income $7,025 $5,110 $4,804 $5,615
Earnings (Loss) from Continuing
Operations per Common Share:
Basic $0.16 $0.67 ($0.25) $0.74
Diluted $0.14 $0.62 ($0.25) $0.68
Earnings from Discontinued
Operations per Common Share:
Basic $ -- $0.11 $0.07 $0.12
Diluted $ -- $0.10 $0.06 $0.11
Net Gain on Sale of Discontinued
Operations per Common Share:
Basic $0.91 $ -- $0.91 $ --
Diluted $0.85 $ -- $0.85 $ --
Net Earnings
per Common Share:
Basic $1.07 $0.78 $0.73 $0.86
Diluted $0.99 $0.72 $0.68 $0.79
Average Common Shares
Outstanding
Basic 6,575 6,573 6,574 6,573
Diluted 7,087 7,077 7,086 7,077
(1) The tax provision for the three and six months ended June 30,1999
include a non-recurring, non-cash deferred tax benefit of $2,858
related to the incorporation of the Company's GO/DAN Industries
partnership.
TRANSPRO, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
Revenues
Aftermarket Heating and $44,098 $45,150 $80,852 $82,499
Cooling Systems
OEM Heat Transfer Systems 9,741 9,520 21,417 19,086
Consolidated totals $53,839 $54,670 $102,269 $101,585
Income (Loss) from Continuing
Operations Before Interest
and Taxes
Aftermarket Heating and $3,102 $5,514 $2,205 $8,529
Cooling Systems
OEM Heat Transfer Systems (119) (320) (238) (457)
Plant closure costs -- (325) (795) (325)
Segment totals 2,983 4,869 1,172 7,747
Corporate expenses (471) (1,149) (1,505) (2,306)
Consolidated totals $2,512 $3,720 ($333) $5,441
TRANSPRO, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(Amounts in thousands, except for per share data)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
Basic Earnings (Loss) per Common Share:
From Continuing Operations
Before Plant Closure Costs $0.16 $0.26 ($0.18) $0.33
Plant Closure Costs -- (0.03) (0.07) (0.03)
From Continuing Operations
After Plant Closure Costs 0.16 0.23 (0.25) 0.30
Deferred Tax Benefit -- 0.44 -- 0.44
Total $0.16 $0.67 ($0.25) $0.74
Diluted Earnings (Loss) per Common Share:
From Continuing Operations
Before Plant Closure Costs $0.14 $0.25 ($0.18) $0.31
Plant Closure Costs -- (0.03) (0.07) (0.03)
From Continuing Operations
After Plant Closure Costs 0.14 0.22 (0.25) 0.28
Deferred Tax Benefit -- 0.40 -- 0.40
Total $0.14 $0.62 ($0.25) $0.68
Depreciation and Amortization $1,347 $1,942 $2,989 $3,754
TRANSPRO, INC.
BALANCE SHEET HIGHLIGHTS
(Amounts in thousands)
June 30, 2000 December 31, 1999
(Unaudited) (Proforma)
Accounts Receivable, Net $ 37,800 $ 31,845
Inventories $ 85,129 $ 76,669
Net Property, Plant and Equipment $ 26,490 $ 27,156
Goodwill, Net $ 7,060 $ 7,253
Net Assets of Discontinued -- $ 24,405
Operations
Total Assets $164,557 $176,293
Current Liabilities $ 43,342 $ 34,785
Long-term Debt $ 39,349 $ 61,928
Total Liabilities $ 85,702 $ 100,871
Stockholders' Equity $ 78,855 $ 75,422
Capital Expenditures $ 2,404 $ 8,200