Second Quarter Of 1999
NEWS RELEASE TRANSMITTED BY CANADIAN CORPORATE NEWS
FOR: DERLAN INDUSTRIES LIMITED
TSE SYMBOL: DRL
AUGUST 10, 1999
Derlan Industries Limited: Reports Financial Results For
Second Quarter Of 1999
TORONTO, ONTARIO--Derlan Industries Limited today announced net
income from continuing operations of $0.9 million, or $0.03 per
share, for the quarter ended June 30, 1999, compared to net income
of $1.7 million, or $0.05 per share, for the second quarter of
1998. For the six months of 1999, net earnings per share were
$0.06 per share compared to earnings of $0.04 in 1998.
Sales from continuing operations were $51.5 million, an increase
of 4.5 percent from sales of $49.3 million in 1998. Sales for the
six months ended June 30, 1999 were up 14.0 percent to $102.8
million from $90.2 million. Aerospace sales increased 5.5 percent
and Pump sales increased 2.9 percent from comparable second
quarter sales in 1998.
Cash flow per share from continuing operations, before considering
the change in non-cash working capital balances, was $0.12 as
compared to $0.14 in the second quarter of 1998.
EBITDA from continuing operations, after corporate and other
costs, was $6.6 million for the quarter compared to $7.3 million
in 1998 and for the first six months of 1999 was $12.8 million
compared to $11.3 million in 1998. Backlog at the end of June 30,
1999 was $189.2 million, compared to $179.5 million in the
previous year's second quarter and $195.9 million at March 31,
1999.
During the quarter, Derlan signed a definitive agreement with The
Boeing Company to develop a new generation of drive train systems
for the AH-64 Apache Attack Helicopter. Once development work is
complete this agreement is expected to increase Derlan's aerospace
sales by approximately $500 million over the following 10 years
and put Derlan in the forefront of helicopter drive train
technology around the world.
Management continues to work closely with Derlan's advisor,
Deutsche Banc Alex. Brown, in efforts to create increased value
for shareholders. The Company will make any appropriate
announcement regarding this as soon as that is possible.
After quarter's end, on July 12, 1999, Derlan announced the sale
of several assets for $57.9 million, substantially completing a
divestment program of its discontinued operations, which the
Company had announced in November 1998. Since announcing the
restructuring program in November 1998, Derlan has realized
proceeds of approximately $150 million from divestment of
discontinued operations. These divestments have strengthened
Derlan's balance sheet, simplified the operations of the Company
and allowed management to focus more closely on the growth of the
Aerospace and Pump operations.
In addition, the Company announced today that its Board of
Directors has determined to use a portion of the proceeds not
otherwise deployed from its recently completed dispositions to
make a net cash proceeds offer in accordance with the terms of the
indenture governing its subsidiary Derlan Manufacturing Inc.'s 10
percent Senior Notes due 2007. The offer will be made to purchase
from all holders of the Senior Notes on a pro rata basis U.S.
$27.5 million principal amount of the Senior Notes at par, plus
accrued and unpaid interest thereon of approximately U.S. $0.3
million, for a total of U.S. $27.8 million. This offer price is in
excess of the current trading price. Payment will be made in
mid-September, 1999 to holders of Senior Notes accepting the
offer. Derlan anticipates that formal documentation concerning the
offer will soon be mailed to holders of the Senior Notes.
The Company's Year 2000 plan is proceeding on schedule. The
process of identifying systems and equipment rated as critical to
the Company's business has been completed and the implementation
and testing of certified Year 2000 software and hardware will be
fully complete by September 30, 1999. In addition, failure
recovery and contingency plans are being developed to address Year
2000 issues for all critical systems. The Company is working
closely with third parties to determine their Year 2000 readiness
and any possible impact on Derlan. Despite these measures, it is
not possible to be certain that all potential difficulties,
particularly as they relate to systems beyond our control, will be
fully resolved by year-end.
Derlan is an industrial corporation, manufacturing products for
the aerospace and pump industries. The Company has operations in
Canada, the United States, Mexico and Germany. Its shares are
listed on the Toronto Stock Exchange under the symbol DRL.
/T/
Attachments:
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Derlan Industries Limited
Consolidated Income Statement
for the three and six months ended June 30, 1999 and 1998
(Unaudited)
(thousands of dollars except per share amounts)
Three months ended Six months ended
June 30 June 30
1999 1998 1999 1998
------- ------- -----------------
Sales $51,481 $49,332 $102,784 $90,150
------- ------- -----------------
Manufacturing expenses 36,332 34,294 74,529 64,000
Selling, general and
administration expenses 8,541 7,772 15,460 14,872
Depreciation and amortization 2,284 1,623 4,231 3,053
Interest 2,498 1,956 4,751 3,912
------- ------- -----------------
Income from continuing operations
before income taxes and
minority interest 1,826 3,687 3,813 4,313
Provision for income taxes 640 1,290 1,325 1,510
Minority shareholders' interests
in earnings of subsidiary
companies 318 719 896 1,237
------- ------- -----------------
Income from continuing
operations 868 1,678 1,592 1,566
Discontinued operations - (207) - 1,380
------- ------- -----------------
Net income $868 $1,471 $1,592 $2,946
------- ------- -----------------
------- ------- -----------------
See accompanying notes to consolidated financial statements.
Derlan Industries Limited
Consolidated Balance Sheet
as at June 30, 1999 and December 31, 1998
(Unaudited)
June 30 December 31
(thousands of dollars) 1999 1998
-------- --------
Assets
Current assets
Cash $23,070 $49,897
Accounts receivable 61,215 62,557
Income taxes recoverable 5,891 7,527
Inventories 84,696 94,091
Prepaid expenses and other 5,026 5,172
-------- --------
179,898 219,244
Fixed assets, net 95,821 96,384
Goodwill, net 7,644 9,928
Other assets, net 15,516 17,941
-------- --------
$298,879 $343,497
-------- --------
-------- --------
Liabilities
Current liabilities
Accounts payable and accrued
liabilities $52,383 $77,206
Current portion of
long-term debt 2,345 2,083
-------- --------
54,728 79,289
Long-term debt 148,461 176,336
Deferred taxes 3,039 3,039
Minority shareholders' interests
in subsidiary companies 18,960 13,499
Other non-current
liabilities 10,168 10,005
-------- --------
235,356 282,168
Shareholders' Equity
Share capital 152,625 152,625
Currency translation
adjustment (12,176) (12,778)
Retained earnings (Deficit) (76,926) (78,518)
-------- --------
63,523 61,329
-------- --------
$298,879 $343,497
-------- --------
-------- --------
See accompanying notes to consolidated financial statements.
Derlan Industries Limited
Consolidated Statement of Cash Flows
for the six months ended June 30, 1999 and 1998
(Unaudited)
Six months ended June
(thousands of dollars) 1999 1998
-------- --------
Operating Activities
Income from continuing operations $1,592 $1,566
Add: Non-cash items --
Depreciation and amortization 4,231 3,053
Deferred income taxes - 60
Minority shareholders' interest
in earnings of subsidiary companies 896 1,237
-------- --------
6,719 5,916
Net change in non-cash working capital balances
related to continuing operations (8,967) (913)
-------- --------
(2,248) 5,003
-------- --------
Investing Activities
Acquisitions (1,311) (840)
Capital expenditures (6,765) (3,958)
Other 1,039 449
-------- --------
(7,037) (4,349)
Financing Activities
Additions to long-term debt - 907
Repayments and reclassification of
long-term debt (22,921) (305)
Common shares issued - 426
Repurchase and reclassification of
share capital, net - (477)
Dividends paid to preference shareholders - (136)
Refundable advance corporation tax - (116)
-------- --------
(22,921) 299
-------- --------
Effect of translation of foreign
currency amounts in self-sustaining
subsidiaries (2,466) 833
-------- --------
(Decrease) increase in cash from
continuing operations (34,672) 1,786
Discontinued Operations 7,845 (12,641)
-------- --------
Decrease in cash during the period (26,827) (10,855)
Cash at beginning of the period 49,897 26,230
-------- --------
Cash at end of the period $23,070 $15,375
-------- --------
-------- --------
See accompanying notes to consolidated financial statements.
Derlan Industries Limited
Notes to Consolidated Financial Statements
for the three and six months ended June 30, 1999 and 1998
(Unaudited)
1. Earnings per share
Earnings per share from continuing operations were $0.03 per
share for the three months ended June 30, 1999 (compared to
$0.05 per share in 1998) and $0.06 per share for the six months
ended June 30, 1999 (compared to $0.04 per share in 1998). The
basic earnings per share were $0.03 per share for the three
months ended June 30, 1999 (compared to $0.05 per share in 1998)
and $0.06 per share for the six months ended June 30, 1999
(compared to $0.10 per share in 1998).
2. Segmented information
Three months ended Six months ended
June 30 June 30
(thousands of dollars) 1999 1998 1999 1998
------------------------------------------- -----------------
Sales
Aerospace $28,325 $26,836 $57,155 $52,755
Pumps 23,156 22,496 45,629 37,395
------------------------------------------- -----------------
$51,481 $49,332 $102,784 $90,150
------------------------------------------- -----------------
Earnings before interest,
income taxes, depreciation
and Amortization (EBITDA)
Aerospace $6,231 $5,816 $10,293 $9,548
Pumps 2,207 3,510 5,530 6,096
------------------------------------------- -----------------
8,438 9,326 15,823 15,644
Less:
Depreciation and amortization
expenses 2,284 1,623 4,231 3,053
Corporate and other costs 1,830 2,060 3,028 4,366
Interest 2,498 1,956 4,751 3,912
------------------------------------------- -----------------
Income from continuing operations before
Income taxes and minority
interest 1,826 3,687 3,813 4,313
Provision for income taxes 640 1,290 1,325 1,510
Minority interest 318 719 896 1,237
------------------------------------------- -----------------
Income (loss) from continuing
operations $868 $1,678 $1,592 $1,566
------------------------------------------- -----------------
3. Subsequent events
Subsequent to June 30, 1999, the Company sold the net assets
of K and M Electronics and Derlan Inc. of Santa Ana, California
for cash consideration of approximately $57.9 million. No gain
was reported on the sale.
|
