Hastings Reports Third-Quarter, Nine-Month Results
30 October 2000
Hastings Reports Third-Quarter, Nine-Month Results
Net Income Increases 48% In First Nine Months;
Company Announces Dividend Change
HASTINGS, Mich., Oct. 30 Hastings Manufacturing Company
(Amex: HMF) today announced results for the third quarter and nine months
ended Sept. 30, 2000.
The Hastings, Mich.-based manufacturer of piston rings and other
automotive products reported net income of $25,331, or $0.03 per diluted
share, on net sales of $8.0 million in the third quarter of 2000, compared
with net income of $62,565, or $0.08 per diluted share, on net sales of $9.0
million in the same quarter in 1999.
Hastings attributed the decrease in earnings primarily to lower sales and
increased investment in sales and marketing. The Company said the decrease in
sales during the 2000 third quarter reflects overall softness in the market
for replacement parts. Hastings reported lower sales in the domestic and
Canadian aftermarkets, as well as decreased sales in the private brand and
original equipment markets due to market consolidation. These sales were
offset partially by stronger sales in the export market, reflecting increased
sales by one of the Company's primary export customers.
"We are pleased to see a rebound in our export markets, and we are
investing in sales and marketing initiatives that we believe will help spur
additional domestic sales moving forward," said Andrew F. Johnson, co-chief
executive officer of Hastings Manufacturing. "Our move to lean production has
allowed us to realize some operating efficiencies that, when coupled with
sales increases, should benefit our bottom-line profitability."
The Company's gross profit margin improved to 29.8 percent in the third
quarter of 2000, compared with 26.4 percent during the same period last year.
Hastings attributed the improvement to improved productivity, lower raw
material costs and the absence of certain manufacturing costs incurred in the
1999 third quarter.
Operating expense increased 3.5 percent over the prior-year quarter,
reflecting additional investment in advertising, promotional and selling
efforts in the 2000 third quarter. General and administrative expenses fell
slightly versus the year-ago period.
"We are working to manage costs and invest in the appropriate programs to
generate additional sales," Johnson said. "Additionally, we continue to make
strides in improving our gross profit margin, which is a tribute to our shift
to lean manufacturing, and we are encouraged that, despite lower sales, we
have been able to post higher net income for the first nine months of the
year."
Hastings reported net income increased 47.5 percent to $536,693, or $0.72
per share, during the first nine months of 2000, compared with $363,780, or
$0.47 per share, during the same period in 1999. The Company reported sales
of $26.5 million for the first nine months of 2000, compared with $27.7
million during the first nine months of 1999. Hastings generated $507,890 in
net cash flow from operations during the first nine months of 2000.
Hastings attributed the increase in net income over the first nine months
of 2000 to improved gross profit margin. During the first nine months of
2000, gross profit margin increased to 30.7 percent, compared with 27.5
percent during the year-ago period. The Company also noted that 1999 costs
were negatively affected by the conversion to lean manufacturing and related
start-up costs for new production processes.
"We are pleased that our gross profit margin has returned to historic
levels, evidence that the improvements we have made in our operating processes
are providing us with greater efficiencies," said Mark R.S. Johnson, co-chief
executive officer. "The shift to lean manufacturing created additional labor
and overhead costs during 1999, but we have substantially addressed these
issues and now look forward to improving production levels, quality and
delivery over the quarters to come."
Hastings also reported that its Board of Directors declared a $0.05
regular quarterly dividend, payable December 15, 2000 to shareholders of
record at the close of business on Friday, November 17, 2000. In light of
soft market conditions and the Company's efforts to invest in additional sales
and growth initiatives, the board voted to suspend indefinitely the $0.03
extra dividend it has paid quarterly since the second quarter of 1998.
Hastings Manufacturing Company And Subsidiaries
Condensed Consolidated Statements of Operations
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Net Sales 7,998,550 8,977,347 26,511,736 27,674,644
Cost of Sales 5,613,643 6,605,965 18,383,696 20,074,448
Gross Profit 2,384,907 2,371,382 8,128,040 7,600,196
Operating Expenses:
Advertising 93,615 44,726 220,468 199,333
Selling 745,335 712,926 2,329,605 2,231,499
General &
Administrative 1,354,854 1,361,764 4,220,731 4,146,876
Total Operating
Expenses 2,193,804 2,119,416 6,770,804 6,577,708
Operating Income 191,103 251,966 1,357,236 1,022,488
Other Expenses:
Interest expense 169,090 149,635 500,089 450,427
Other, net (20,318) (1,234) (43,546) (42,719)
Total Other
Expenses, net 148,772 148,401 456,543 407,708
Income Before Taxes 42,331 103,565 900,693 614,780
Income Tax Expense 17,000 41,000 364,000 251,000
Net Income 25,331 62,565 536,693 363,780
Net Income Per Share of Common Stock:
Basic 0.03 0.08 0.72 0.47
Diluted 0.03 0.08 0.72 0.47
Average Shares Outstanding:
Basic 745,046 775,046 749,864 775,046
Diluted 745,046 775,046 749,864 775,046
Dividends Per Share
of Common Stock 0.080 0.080 0.240 0.240