TransPro, Inc. Reports Third Quarter Results
27 October 2000
TransPro, Inc. Reports Third Quarter Results
NEW HAVEN, Conn.--Oct. 26, 2000--TransPro, Inc. today announced results for the third quarter ended September 30, 2000.Sales from continuing operations for the third quarter of 2000 were $53,625,000, compared with $58,163,000 in the third quarter of 1999. The loss from continuing operations for the third quarter of 2000 was $1,620,000, or $0.25 per diluted common share, compared with income from continuing operations of $1,248,000, or $0.18 per diluted common share, in the year-ago period. The third quarter 2000 loss from continuing operations includes a severance charge of $425,000, or $0.05 per diluted share after tax, related to the previously announced departure of the Company's President and CEO, and $250,000, or $0.03 per diluted share after tax, of doubtful collection reserves. The third quarter 1999 results include a charge for legal fees and settlement costs of $274,000, or $0.02 per diluted share after tax, associated with the settlement of an employment-related lawsuit.
Excluding the charges in both the 2000 and 1999 quarters, the loss from continuing operations in the 2000 third quarter was $1,122,000, or $0.17 per diluted common share, compared with income from continuing operations of $1,403,000, or $0.20 per diluted share, a year ago.
In the third quarter of 2000, sales of Aftermarket Heating and Cooling Systems products were 7% lower than the 1999 third quarter, reflecting lower unit sales of complete radiators and heaters to major retail customers, lower radiator core sales to the direct market and flat sales of air conditioning products. Demand for the Company's Aftermarket Heating and Cooling Systems products during the quarter continued to be affected negatively by inventory adjustments on the part of the large retailers, coupled with mild weather conditions in most parts of the country. Sales of OEM Heat Transfer Systems products were 13% lower than the prior-year third quarter primarily due to the recent decline in demand in the overall heavy-duty truck market.
Consolidated third quarter 2000 gross margins were $12,063,000 compared with $15,501,000 a year ago. As a percentage of sales, gross margins were 22.5% in this year's third quarter versus 26.7% in the prior year's third quarter. In the Aftermarket Heating and Cooling Systems segment, gross margins continued to be affected negatively by lower manufacturing cost absorption resulting from the Company's decision to reduce production levels in order to lower inventory and debt levels more aggressively by the end of the year. Pricing actions taken earlier in the year to respond to competitive pressures for Aftermarket products also continued to impact negatively gross margins during the third quarter. Gross margins in the OEM Heat Transfer Systems segment declined primarily as a result of lower sales and production volume.
Selling, General and Administrative expenses increased 5% to $12,764,000 in the third quarter of 2000 from $12,121,000 in the third quarter of 1999 due to recording a charge for the previously discussed doubtful collection reserve, higher professional fees and the comparative impact of reducing employee medical insurance accruals in the third quarter of 1999.
Commenting on the quarter, Barry Banducci, Chairman of the Board of Directors, stated, "The factors that impacted the Aftermarket negatively during the first half have continued into the third quarter. Temperate weather conditions coupled with competitive pricing pressures and inventory reduction programs instituted by our major customers have contributed to our unfavorable performance. Additionally, the significant slowing of demand at our OEM heavy-duty truck customers has negated the impact of improvements in operational efficiencies for the quarter and most likely beyond.
In order to strengthen the financial position of the Company, we will continue to execute our inventory and debt reduction plan, albeit at the expense of short-term earnings. These actions will provide a stronger foundation necessary to support core business investments for future value creation and to fortify our leadership position in the Aftermarket. As a result of the sale of our Crown Division in the second quarter of this year, we are now focused on our heating and cooling systems product lines and have reduced debt by approximately $30 million."
Continuing, Mr. Banducci stated, "We are operating under a forbearance agreement with our existing bank group while we are negotiating to amend our existing credit facility and simultaneously evaluating alternative financing arrangements to provide increased flexibility in operating our business. We are confident that we will have a satisfactory agreement in place by the end of the year. We remain committed to improving both the quality of earnings and the balance sheet of our enterprise while supporting our core business of supplying the highest quality heating and cooling systems products and services to our Aftermarket and OEM customers."
Mr. Banducci concluded "As previously announced, the Board has begun a search for a new President and CEO to replace Hank McHale, who will be leaving the Company at year-end. We have retained Korn/Ferry International to advise and assist us in this process."
For the nine-month period ended September 30, 2000, sales from continuing operations were $155,894,000 compared with $159,748,000 in the first nine months of 1999. The loss from continuing operations for the 2000 nine-month period was $3,258,000, or $0.50 per diluted common share, compared with income from continuing operations of $6,102,000, or $0.86 per diluted common share, in the year-ago period. The loss for the first nine-months of 2000 includes plant closure, severance and doubtful collection charges, while the comparable 1999 nine-month period includes plant closure and legal settlement costs and a non- recurring, non-cash deferred tax benefit.
Excluding the charges in both the 2000 and 1999 nine-month periods, the loss from continuing operations in the first three quarters of 2000 was $2,292,000, or $0.35 per diluted common share after tax, compared with income from continuing operations of $3,585,000, or $0.51 per diluted share after tax, in the year ago nine month period. On a continuing operations basis before interest and taxes, the Company broke even in the first nine months of 2000, excluding the aforementioned charges. For the first nine months of 2000, net income was $3,371,000, or $0.51 per diluted common share, due to the gain on the sale of discontinued operations, compared to $7,105,000, or $1.00 per diluted common share, in the first nine months of 1999. The Company's results for the first nine months were negatively impacted by lower volume due to lower market demand, lower production rates implemented as part of the inventory and debt reduction plan and pricing actions in response to competitive pressures.
TRANSPRO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except for per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Aftermarket Heating and
Cooling Systems $45,237 $48,469 $126,089 $130,968
OEM Heat Transfer Systems 8,388 9,694 29,805 28,780
-------- -------- -------- --------
Total Sales 53,625 58,163 155,894 159,748
Cost of Sales 41,562 42,662 120,305 116,482
-------- -------- -------- --------
Gross Margin 12,063 15,501 35,589 43,266
Selling, General and
Administrative Expenses 12,764 12,121 35,827 34,120
-------- -------- -------- --------
(Loss) Income from Continuing
Operations Before Plant
Closure and Severance Costs,
Interest and Taxes (701) 3,380 (238) 9,146
Plant Closure and Severance Costs 425 -- 1,220 325
-------- -------- -------- --------
(Loss) Income from Continuing
Operations Before
Interest and Taxes (1,126) 3,380 (1,458) 8,821
Net Interest Expense 1,071 1,180 3,500 3,153
-------- -------- -------- --------
(Loss) Income from Continuing
Operations Before Taxes (2,197) 2,200 (4,958) 5,668
Income Tax (Benefit) Provision(1) (577) 952 (1,700) (434)
-------- -------- -------- --------
(Loss) Income from
Continuing Operations (1,620) 1,248 (3,258) 6,102
Income from Discontinued
Operations, Net of Tax -- 242 440 1,003
Gain on Sale of Discontinued
Operations, Net of Tax 187 -- 6,189 --
-------- -------- -------- --------
Net (Loss) Income ($1,433) $1,490 $3,371 $7,105
======== ======== ======== ========
(Loss) Earnings from Continuing
Operations per Common Share:
Basic ($0.25) $0.19 ($0.50) $0.93
======== ======== ======== ========
Diluted ($0.25) $0.18 ($0.50) $0.86
======== ======== ======== ========
Earnings from Discontinued
Operations per Common Share:
Basic $-- $0.04 $0.07 $0.15
======== ======== ======== ========
Diluted $-- $0.03 $0.07 $0.14
======== ======== ======== ========
Net Gain on Sale of Discontinued
Operations per Common Share:
Basic $0.03 $-- $0.94 $--
======== ======== ======== ========
Diluted $0.03 $-- $0.94 $--
======== ======== ======== ========
Net (Loss) Earnings per
Common Share:
Basic ($0.22) $0.23 $0.51 $1.08
======== ======== ======== ========
Diluted ($0.22) $0.21 $0.51 $1.00
======== ======== ======== ========
Average Common Shares Outstanding
Basic 6,575 6,573 6,574 6,573
======== ======== ======== ========
Diluted 7,090 7,053 7,089 7,084
======== ======== ======== ========
(1) The tax provision for the nine months ended September 30, 1999
includes 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 Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenues
--------
Aftermarket Heating and
Cooling Systems $45,237 $48,469 $126,089 $130,968
OEM Heat Transfer Systems 8,388 9,694 29,805 28,780
-------- -------- -------- --------
Consolidated totals $53,625 $58,163 $155,894 $159,748
======== ======== ======== ========
Income (Loss) from Continuing
Operations Before
Interest and Taxes
-----------------------------
Aftermarket Heating and
Cooling Systems $1,356 $4,737 $3,561 $13,266
OEM Heat Transfer Systems (612) (200) (850) (657)
Plant closure costs -- -- (795) (325)
Doubtful collection reserve (250) -- (250) --
Legal settlement costs -- (274) -- (274)
-------- -------- -------- --------
Segment totals 494 4,263 1,666 12,010
Corporate expenses (1,195) (883) (2,699) (3,189)
Severance costs (425) -- (425) --
-------- -------- -------- --------
Consolidated totals ($1,126) $3,380 ($1,458) $8,821
======== ======== ======== ========
TRANSPRO, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(Amounts in thousands, except for per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Basic Earnings (Loss) per
Common Share:
From Continuing Operations
Before Charges ($0.17) $0.21 ($0.35) $0.55
Plant Closure Costs -- -- (0.08) (0.03)
Doubtful collection reserve (0.03) -- (0.03) --
Severance costs (0.05) -- (0.04) --
Legal settlement costs -- (0.02) -- (0.02)
-------- -------- -------- --------
From Continuing Operations
After Charges (0.25) 0.19 (0.50) 0.50
Deferred Tax Benefit -- -- -- 0.43
-------- -------- -------- --------
Total ($0.25) $0.19 ($0.50) $0.93
======== ======== ======== ========
Diluted Earnings (Loss) per
Common Share:
From Continuing Operations
Before Charges ($0.17) $0.20 ($0.35) $0.51
Plant Closure Costs -- -- (0.08) (0.03)
Doubtful collection reserve (0.03) -- (0.03) --
Severance costs (0.05) -- (0.04) --
Legal settlement costs -- (0.02) -- (0.02)
-------- -------- -------- --------
From Continuing Operations
After Charges (0.25) 0.18 (0.50) 0.46
Deferred Tax Benefit -- -- -- 0.40
-------- -------- -------- --------
Total ($0.25) $0.18 ($0.50) $0.86
======== ======== ======== ========
Depreciation and Amortization $1,234 $1,366 $4,416 $4,331
======== ======== ======== ========
TRANSPRO, INC.
BALANCE SHEET HIGHLIGHTS
(Amounts in thousands)
September 30, 2000 December 31, 1999
------------------ -----------------
(Unaudited)
Accounts Receivable, Net $ 35,533 $ 31,845
Inventories $ 85,632 $ 76,669
Net Property, Plant and Equipment $ 26,764 $ 27,156
Goodwill, Net $ 6,964 $ 7,253
Net Assets of Discontinued Operations $ -- $ 24,405
Total Assets $ 164,889 $ 176,293
Revolving Credit Debt $ 35,612 $ 48,928
Industrial Revenue Bonds $ 5,000 $ 13,000
Total Liabilities $ 88,291 $ 100,871
Stockholders' Equity $ 76,598 $ 75,422
Capital Expenditures $ 3,653 $ 6,194