Strong First Quarter 2002 Financial Results - 4/26/02
STACKPOLE LTD ("SKD-T;SCKLF-0") - Strong First Quarter 2002 Financial Results
Stackpole Limited reported its results of operations for the first quarter of fiscal year 2002.
Highlights
Stackpole's operating highlights for the first quarter 2002 include the following:
- Business development efforts in the first quarter 2002 included the implementation of a new sales and marketing organization that will provide Stackpole with greatly expanded local presence in customer locations throughout the United States and in Mexico as well as improving Stackpole's representation at the foreign domestic OEM's and Tier 1 powertrain system integrators.
- On April 22, 2002, Stackpole announced that it has entered into a cooperation agreement with a leading European based powder metal manufacturer, Miba A.G. to expand market opportunities and provide cooperative development for our automotive customers in Europe. As a result of the cooperation with Miba, Stackpole will launch a new main bearing cap program in 2003 that will generate approximately $8 million in annual revenue.
- A 13.8% increase in sales to $59.4 million from $52.2 million in first quarter 2001.
- A significant improvement in net income to $3.5 million, or diluted earnings of $0.37 per share, in the first quarter 2002 versus $0.4 million or $0.04 per share in the prior year.
- Cash flow provided by operating activities in the first quarter 2002 remained at a strong level of $5.4 million, an improvement from the cash used in operating activities of $3.0 million in the first quarter 2001.
Results of Operations
First quarter 2002 sales of $59.4 million increased by 13.8% compared with the first quarter of 2001. With North American automotive production virtually unchanged from the first quarter of the prior year, Stackpole's increased sales reflected the impact of content growth from new engine and transmission oil pump programs that reached full production in late 2001.
The year over year increase in first quarter sales coupled with operational improvements implemented throughout 2001 combined to produce a year over year increase in gross margin from 18% in 2001 to 21.2% in first quarter 2002. Lower market interest rates and a reduction in long term debt of approximately $21 million led to the reduction in interest expense to $0.5 million in the first quarter of 2002 from $1.0 million in the prior year. Income tax expense as a percentage of income before income taxes at 27% was less then the expected rate of 31% due to a $375,000 recovery of taxes paid in prior periods resulting from a favourable tax reassessment from Canadian tax authorities.
At $3.5 million or diluted earnings per share of $0.37, net income in the first quarter of 2002 compared with net income of $0.4 million or diluted earnings per share of $0.04 in 2001. With the issuance in the first quarter of 60,214 common shares under the Company's option and share purchase plans, Stackpole has 9,171,652 shares outstanding at March 31, 2002.
Cash Flow
In the first quarter 2002, cash flow from operations before changes in non-cash working capital was $10.3 million compared with $6.4 million in the prior year. During the first quarter 2002, non-cash working capital increased by $4.9 million as a result of higher accounts receivable associated with the higher level of sales in the month of March compared with the seasonally low level in December 2001. Inventories were reduced by $0.4 million in the quarter and by 23% on a year over year basis as a result of Company efforts to implement lean production systems.
The first quarter 2002 cash flow from operations of $5.4 million coupled with proceeds from the issuance of common shares of $0.8 million and a decrease in cash on hand of $0.7 million were employed to reduce debt by $0.3 million and fund capital expenditures of $6.6 million.
Outlook
Robert Lander, President and Chief Executive Officer of Stackpole, commented on the first quarter 2002 results: "Plant downtime by certain customers in January resulted in lower and somewhat sporadic demand for a number of key products and this impacted our first quarter results. In addition, we incurred over $500,000 in one-time expenses aimed at improving long-term performance as well as the full impact of annual wage increases and contracted price reductions that took effect January 1st. In light of these factors, we are very satisfied with the operating performance in the quarter.
Looking ahead, healthy vehicle sales and OEM production forecasts bode well for a strong balance of 2002. Furthermore, in July 2002 we are scheduled to launch several new programs with combined annual revenue of approximately $60 million.
Long term we will continue to aggressively pursue the material conversion and outsourcing initiatives being considered by the OEM's to reduce their costs. The considerable expansion of our sales and marketing presence and our association with Miba AG represent two very important steps to support these efforts. We are very excited about the added momentum both these initiatives will lend our business development efforts and look forward to reporting on our continued progress in the near future."
Certain information regarding Stackpole set forth in this document, including management's assessment of the Company's future plans and operations, may constitute forward-looking statements under applicable securities law and necessarily involve risks; as a consequence, actual results may differ materially from those anticipated in the forward-looking statements.
Stackpole Limited is one of the world's leading manufacturers of highly engineered, technologically differentiated, automotive powertrain systems and components. Stackpole has more than 1,500 highly skilled employees at five operating plants in Canada and the United Kingdom. Stackpole is a public company and its common shares are listed and traded on The Toronto Stock Exchange under the symbol SKD.
A conference call to discuss the Company's quarterly results has been arranged for April 24th, 2002 at 11:00 a.m. To participate, please dial 1-888-243-1119. If you are unable to participate, a recording of the call will be made available until May 1, 2002 at 1-800-558-5253 (code 20536874).
STACKPOLE LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS & RETAINED EARNINGS
(Unaudited) (Dollars in thousands except for earnings per share amounts)
Three Months Ended
March 31, April 1,
2002 2001
Sales $ 59,393 $ 52,205
Manufacturing, selling, general and
administrative expenses 46,806 42,884
Depreciation and amortization 5,596 5,807
Research and development expenses, net 1,792 1,741
Income before interest and income taxes 5,199 1,773
Interest on long-term debt 452 1,033
Income before income taxes 4,747 740
Income taxes 1,281 370
Net income $ 3,466 $ 370
Retained earnings, beginning of period 89,334 81,370
Retained earnings, end of period $ 92,800 $ 81,740
Earnings per share:
Basic $0.38 $0.04
Diluted $0.37 $0.04
STACKPOLE LIMITED
CONSOLIDATED BALANCE SHEETS
(Unaudited) (Dollars in thousands)
March 31, Dec. 31,
2002 2001
ASSETS
CURRENT
Cash and cash equivalents $ 6,461 $ 7,144
Accounts receivable 29,493 24,924
Inventories 10,812 11,242
Other current assets 2,073 1,803
48,839 45,113
PROPERTY, PLANT AND EQUIPMENT 146,671 145,856
OTHER ASSETS 1,041 958
$ 196,551 $191,927
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 25,550 $ 26,072
Current portion of long-term debt 1,271 1,271
26,821 27,343
LONG-TERM DEBT 26,720 26,974
FUTURE INCOME TAX LIABILITIES 16,786 15,460
70,327 69,777
SHAREHOLDERS' EQUITY
Share capital 31,906 31,064
Retained earnings 92,800 89,334
Foreign currency translation adjustments 1,518 1,752
126,224 122,150
$ 196,551 $191,927
STACKPOLE LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (Dollars in thousands)
Three Months Ended
March 31, Apr. 1,
2002 2001
OPERATING ACTIVITIES
Net income $ 3,466 $ 370
Non-cash items:
Depreciation and amortization 5,596 5,807
Future income taxes 1,288 184
Other (4) 21
Changes in non-cash operating working
capital items (4,930) (9,338)
Cash provided by (used in) operating activities 5,416 (2,956)
FINANCING ACTIVITIES
(Repayments of) proceeds from long-term debt (254) (227)
Issuance of common shares 842 -
Cash provided by (used in) financing activities 588 (227)
INVESTING ACTIVITIES
Additions to property, plant and equipment (6,564) (5,112)
Proceeds from sale of machinery and equipment - 217
Other (123) (28)
Cash used in investing activities (6,687) (4,923)
Decrease in cash and cash equivalents (683) (8,106)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 7,144 11,945
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 6,461 $ 3,839
Supplementary Information:
Income taxes (recovered) paid $233 $440
Interest paid $515 $1,042
TEL: (905) 829-2050 (Ext. 225) Mr. Gary S. Love, Vice President, Finance and Chief Financial Officer E-mail: mailto:glove@stackpole.on.ca
website: stackpole.ca
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