Wescast Delivers Superior Third Quarter Results
24 October 2000
Wescast Delivers Superior Third Quarter Results
Business Editors
BRANTFORD, Ontario--Oct. 24, 2000--Wescast
Industries Inc
Wescast Industries Inc. reports a 14% increase in manifold sales,
and a 12% increase in net earnings for the third quarter 2000 versus
1999. This exceptional performance was achieved in spite of a slowing
market, production problems at the OEMs as well as new program
launches and new plant commissioning.
Highlights
* Sales of $100.4 million in the third quarter of 2000 were 22%
higher than the $82.4 million in the third quarter of 1999.
Year-to-date sales were $311.7 million compared to $261.8 million in
1999, an increase of 19%.
* Net earnings of $13.5 million for the quarter were 12% higher
than the same quarter in 1999. Basic earnings per share were $1.04 in
the third quarter of 2000 compared to $.91 in 1999, representing a 14%
improvement. Fully diluted earnings per share in the third quarter of
2000 were $1.00 versus $0.87 in 1999.
* For the nine months ending October 1, 2000, net earnings were
$52.4 million compared to $43.9 million in 1999, up 19%. Return on
equity for the last four quarters at 22.7% was comparable to the
previous year. Basic earnings per share were $3.98 versus $3.33 in
1999, an increase of 20%. Fully diluted earnings per share were $3.80,
compared to $3.18 in 1999.
* Chrysler has awarded Wescast takeover business for the Minivan
program, representing an additional 1.2 million units commencing the
fourth quarter of this year. In addition, Wescast has successfully
launched six new Ford programs, the Chrysler Neon, and an Isuzu
program this year.
* The commissioning of the new foundry in Wingham is on target,
and a third shift has been hired to manufacture manifolds for the
Chrysler minivan.
* The company will build a new technical development centre and
corporate office in Brantford, Ontario. Construction of the new 75,000
square foot facility will begin in 2001.
* Wescast purchased 194,400 of its own shares at an average cost
of $41.45 for the third quarter. To date, the company has purchased
310,000 of its own shares at an average cost of $42.36. The company
believes it represents an excellent investment given the Company's
profitability and long-term prospects.
Operations:
The manifold gross margin was $24.5 million or 29.1% of sales in
the third quarter of 2000, compared to $22.2 million or 30.0% of sales
for the third quarter of 1999. This reflects strong operating
performance by our plants during a quarter with unprecedented launch
and commissioning activity. Increased SiMo and machining penetration
also contributed. For the year-to-date, the manifold gross margin was
$93.8 million or 34.3% of sales, as opposed to $81.2 million or 33.9%
of sales for the same period last year.
Total gross margin, including tooling and prototype sales was
$26.8 million or 26.7% of sales for the third quarter versus $23.2
million or 28.1% for the same quarter last year. Total year-to-date
gross margin, including tooling and prototypes, was $100.5 million or
32.2% of sales versus $85.4 million or 32.6% of sales for 1999. This
year over year decline in the total gross margin percentage is largely
attributable to a doubling of lower margin tooling and prototype
sales.
Operating earnings for the quarter were $19.5 million compared to
$17.7 million for the same period in 1999, an increase of 10%. For the
year-to-date, operating earnings were $78.1 million compared to $68.0
million in 1999, an increase of 15%.
Cash Flow
Operating cash flow before investment in working capital increased
to $21.4 million for the quarter compared to $17.3 million in 1999.
For the year to date, the company generated $73.1 million in cash from
operations before investment in working capital, up from $59.2 million
the previous year.
The continued increase in revenues and market share has required a
significant investment in tooling receivables, accounts receivable and
inventories. In addition, the Wingham foundry construction project
resulted in higher than usual accounts payable balances in 1999. As a
result, cash flow from operations for the third quarter, after
considering this working capital investment of $13.8 million, was $7.6
million versus $27.5 million in the third quarter of 1999.
Year-to-date cash flow from operations was $40.7 million compared to
$75.7 million for the same period last year.
Capital expenditures for the quarter were $7.7 million compared to
$30.0 million last year. The year over year difference in capital
expenditures relates primarily to the building of the new Wingham
facility in 1999. For the year-to-date, capital expenditures were
$36.3 million compared to $57.2 million last year.
The Company has deferred an additional $1.4 million of
pre-production costs for the quarter and $7.2 million year-to-date.
These costs relate to the new facility in Wingham and our stainless
steel facility in Stratford.
Balance Sheet and Financial Position
As of October 1, 2000, the Company had $57.6 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 continued growth
and profitability.
The following table provides an overview of the above mentioned
highlights for the third quarter:
Wescast Industries Inc.
Q3 2000 Highlights
in millions of dollars, except
per share data and otherwise noted
----------------------------------------------------------------------
Q3 2000 Q3 1999 % change YTD 00 YTD 99 % change
----------------------------------------------------------------------
Sales 100.4 82.4 22% 311.7 261.8 19%
----------------------------------------------------------------------
Net Earnings 13.5 12.0 12% 52.4 43.9 19%
----------------------------------------------------------------------
EPS
basic 1.04 0.91 14% 3.98 3.33 20%
fully diluted 1.00 0.87 15% 3.80 3.18 19%
----------------------------------------------------------------------
Sales Breakdown- dollars
Casting & Machining 82.9 73.2 13% 269.9 238.4 13%
Cast 60.1 55.2 9% 201.4 179.6 12%
Internal Machining 21.9 17.4 26% 66.2 55.9 18%
External Machining 0.9 0.6 50% 2.3 2.9 -21%
Tooling & prototype 15.3 7.0 118% 34.4 17.0 102%
Magalloy pump sales 0.8 1.4 -43% 4.1 4.9 -16%
UMI 1.3 0.7 86% 3.2 1.3 146%
Stainless Steel
Manifolds 0.1 0.1 0.1 0.2 -50%
----------------------------------------------------------------------
Sales Breakdown
- units (000's)
Ductile 0.4 0.6 -33% 1.5 2.3 -35%
SiMo 2.9 2.5 16% 9.7 8.0 21%
Total 3.3 3.1 11.2 10.3
Sales Breakdown
- percentage
SiMo Penetration 87.9% 80.6% 86.6% 77.7%
Internal Machining
Penetration 69.9% 59.1% 61.9% 57.9%
----------------------------------------------------------------------
Gross Margin 26.8 23.2 15% 100.5 85.4 18%
Casting & Machining 24.5 22.2 10% 93.8 81.2 16%
Tooling, prototypes
and other 2.3 1.0 130% 6.7 4.2 60%
----------------------------------------------------------------------
Gross Margin % 26.7% 28.1% 32.2% 32.6%
Casting & Machining 29.1% 30.0% 34.3% 33.9%
Tooling, prototypes
& other 13.9% 11.6% 17.3% 18.9%
----------------------------------------------------------------------
Depreciation
Depreciation
- cost of sales 5.9 4.5 31% 14.8 12.9 15%
Depreciation - SG&A 0.75 0.50 50% 2.0 1.3 54%
----------------------------------------------------------------------
Capital Expenditures 7.7 30.0 -74% 36.3 57.3 -37%
R&D 1.0 0.8 25% 2.8 1.9 47%
----------------------------------------------------------------------
S G & A (% of sales) 6.1% 5.6% 6.3% 5.9%
----------------------------------------------------------------------
Tax Rate 35.1% 37.1% 35.7% 36.6%
----------------------------------------------------------------------
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 NASDAQ symbol of
WCST.
A conference call has been arranged for:
October 24, 2000
3:00 p.m. EST
To participate, please dial (416) 620-9810
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 Nine months ended
October 1 September 26 October 1 September 26
2000 1999 2000 1999
----------------------------------------------------------------------
Sales $100,452 $82,427 $311,654 $261,790
Cost of sales 73,682 59,251 211,150 176,360
----------------------------------------------------------------------
Gross margin 26,770 23,176 100,504 85,430
Selling, general and
administration 6,172 4,617 19,666 15,521
Research, development
and design 1,047 813 2,778 1,870
----------------------------------------------------------------------
Operating earnings 19,551 17,746 78,060 68,039
Other (income) expense
Interest expense 134 81 362 319
Investment income (702) (1,212) (2,599) (3,570)
Other (income) and
expense (678) (277) (1,162) 2,047
----------------------------------------------------------------------
Earnings before income
taxes 20,797 19,154 81,459 69,243
Income taxes 7,304 7,111 29,048 25,319
----------------------------------------------------------------------
Net earnings $13,493 $12,043 $52,411 $43,924
----------------------------------------------------------------------
----------------------------------------------------------------------
Net earnings per share
- basic $1.04 $0.91 $3.98 $3.33
----------------------------------------------------------------------
----------------------------------------------------------------------
- fully diluted $1.00 $0.87 $3.80 $3.18
----------------------------------------------------------------------
----------------------------------------------------------------------
Retained earnings,
beginning of period $221,593 $161,423 $188,983 $131,648
Net Earnings 13,493 12,043 52,411 43,924
Dividends paid (1,578) (1,055) (4,756) (3,161)
Excess of cost over
assigned value of
Class A common shares
purchased and cancelled (4,789) 0 (7,919) 0
----------------------------------------------------------------------
Retained earnings,
end of period $228,719 $172,411 $228,719 $172,411
----------------------------------------------------------------------
----------------------------------------------------------------------
Wescast Industries Inc. Financial Statements
Consolidated Balance Sheet
(in thousands of Canadian dollars) (Canadian GAAP)
As at
October 1 January 2
2000 2000
-----------------------------
Current assets
Cash and cash equivalents $27,650 $43,164
Short-term investments 30,000 33,594
Receivables 69,271 45,149
Inventories 25,544 19,809
Prepaids 942 728
Due from affiliated companies 20 0
-----------------------------
153,427 142,444
Property and equipment 235,531 215,589
Other 14,714 6,129
-----------------------------
$403,672 $364,162
-----------------------------
-----------------------------
Current liabilities
Payables and accruals $38,815 $40,042
Income taxes payable 5,516 5,197
Current portion of long-term debt 2,906 2,196
-----------------------------
47,237 47,435
Long-term debt 4,648 4,502
Employee benefits 6,390 5,775
Future income taxes 11,309 8,707
-----------------------------
69,584 66,419
-----------------------------
Shareholders' equity
Capital stock 105,382 108,760
Retained earnings 228,719 188,983
Cumulative translation adjustment (13) 0
-----------------------------
334,088 297,743
-----------------------------
$403,672 $364,162
-----------------------------
-----------------------------
Wescast Industries Inc. Financial Statements
Consolidated Statement of Cash Flows
(in thousands of Canadian dollars) (Canadian GAAP)
Three months ended Nine months ended
----------------------------------------------------------------------
October 1 September 26 October 1 September 26
2000 1999 2000 1999
----------------------------------------------------------------------
Cash derived from
(applied to)
Operating
Net earnings $13,493 $12,043 $52,411 $43,924
Add (deduct) items
not requiring cash:
Depreciation and
amortization 6,671 4,962 16,707 14,226
Amortization of
bond issue costs 5 3 9 18
Future income taxes 607 253 2,602 782
Loss on disposal of
equipment 286 74 355 85
Employee benefits 334 3 1,003 145
----------------------------------------------------------------------
21,396 17,338 73,087 59,180
Change in non-cash
working capital (13,799) 10,196 (32,418) 16,486
----------------------------------------------------------------------
7,597 27,534 40,669 75,666
----------------------------------------------------------------------
Financing
Issue of long-term debt 210 0 2,229 249
Repayment of long-term
debt (795) (12) (1,873) (232)
Payment of obligations
under capital lease (264) (166) (618) (433)
Employee benefits paid (138) 0 (388) 0
Issuance of share capital
under Employee Share
Purchase Plan 126 106 469 289
Employee share loan
repayments 114 251 157 260
Issuance of share capital
under Stock Option Plan 358 0 405 584
Repurchase of shares (8,059) 0 (13,130) 0
Dividends paid (1,578) (1,055) (4,756) (3,161)
----------------------------------------------------------------------
(10,026) (876) (17,505) (2,444)
----------------------------------------------------------------------
Investing
Purchase of property
and equipment (7,679) (29,974) (36,269) (57,255)
Purchase of short-term
investments (30,000) (34,209) (30,000) (34,209)
Purchase of license 0 0 0 (74)
Restricted cash from
long-term debt 0 379 378 2,348
Deferred pre-production
costs (1,379) 0 (7,263) 0
Redemption of short-term
investments 0 0 34,209 36,892
Proceeds on disposal of
equipment 152 91 267 210
----------------------------------------------------------------------
(38,906) (63,713) (38,678) (52,088)
----------------------------------------------------------------------
Net (decrease) increase
in cash and cash
equivalents (41,335) (37,055) (15,514) 21,134
Cash and cash equivalents
Beginning of period 68,985 86,320 43,164 28,131
----------------------------------------------------------------------
End of period $27,650 $49,265 $27,650 $49,265
----------------------------------------------------------------------
----------------------------------------------------------------------
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 (2000-13,070,037
shares; 1999-13,166,138 shares). Fully diluted earnings per share is
calculated based on the fully diluted weighted average number of
common shares outstanding (2000-13,927,338 shares; 1999-13,962,642
shares).
Note 2: Outstanding Share Information
Class A common shares - 5,511,756 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 - 857,301 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.