Elamex S.A. DE C.V (NASDAQ:ELAM)
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Elamex Announces Fourth-Quarter and Year-End Financial Results
Outlines Key Initiatives for 2004
EL PASO, Texas, Feb. 29 /PRNewswire-FirstCall/ -- Elamex S.A. de C.V. , a
diversified manufacturing services company with food, plastics and metals
operations and real estate holdings in Mexico and the United States, today
announced financial results for the fourth quarter and year ended December 31,
2003. The Company also provided insight into its key 2004 initiatives.
Fourth Quarter Results
As detailed below under "Financial Reporting for Precision Tool, Die and Machine
Company," operations through December 19th, 2003 are comprised of the Food
Products segment (Franklin Connections), the Metal Stamping segment (Precision)
and Shelter Services. No Precision revenues or expenses occurring subsequent to
December 19, 2003 are reflected in the Elamex consolidated statement of
operations. The Company also has a 50.1% investment in Qualcore, an
unconsolidated joint venture that manufactures plasticsand metal parts.
Fourth quarter consolidated net sales totaled $38.0 million compared with $43.0
million for the fourth quarter of 2002. The Food Products segment represented
$21.3 million, or 56%, of fourth-quarter 2003 consolidated net sales, compared
with $19.5 million, or 45%, of consolidated net sales for the fourth quarter of
2002. The Metal Stamping segment represented $16.1 million, or 42% of fourth
quarter net sales, compared with $18.9 million, or 44% in the 2002 fourth
quarter. ShelterServices generated $3.7 million in fourth- quarter 2003 net
sales, a year-over-year decrease of 52%, due primarily to the divestiture of the
majority of this business segment during the second quarter of 2003. There were
$3.1 million of intersegment sales between Food Products and Shelter Services
that were eliminated in consolidated net sales for the fourth quarter of 2003.
Gross profit was $5.5 million, or 15% of sales, for the fourth quarter of 2003,
compared with gross profit of $5.6 million or13% of sales for the fourth
quarter of 2002. Total operating expenses were $25.2 million compared with $6.3
million for the fourth quarter of 2002. Total operating expenses for the fourth
quarter included a $17.8 million impairment of long-lived assets, comprised of a
$13.2 million expense at Precision in recognition of the impairment of
long-lived assets and an expense of $4.5 million recorded at the parent company
level for the impairment of Precision goodwill.
The $17.8 million impairment of long-lived assets and the $1.1 million
accounting for equity in losses of unconsolidated subsidiaries contributed to a
net loss of $23.7 million, or $3.15 per basic and diluted share, for the fourth
quarter of 2003 compared to a net loss of $1.9 million, or $0.25 per basic and
diluted share, in the fourth quarter of 2002. In addition to the impairments
cited above, losses from manufacturing operations at Precision also contributed
to the Company's overall operating loss and net loss.
Financial Reporting for Precision Tool, Die and Machine Company
In December 2003, Elamex announced that its board of Directors had authorized
the sale of Precision Tool, Die and Machine Company ("Precision"), the company's
Metal Stamping segment, which filed for Chapter 11 protection on December 19,
2003.
Neither Elamex nor any of its subsidiaries or affiliates have guaranteed any of
the obligations of Precision.
As a consequence of seeking protection under bankruptcy laws, and in view of the
specific pattern of facts in this situation, accounting rules require that
Precision results of operations are included in the consolidated results of
operations for Elamex and subsidiaries only through December 19, 2003.
Thereafter, earnings or losses of Precision are recognized in accordance with
the equity method of accounting, as defined by generally accepted accounting
principles. Accordingly, no Precision revenues or expenses occurring subsequent
to December 19, 2003, are reflected in the Elamex consolidated statement of
operations. Management expects that no future losses will be recognized in
connection with Precision because the parent company's investment in this
subsidiary has been reduced to zero.
The equity method also defines the balance sheet presentationof Precision. As
of December 31, 2003, the net amount of Elamex's investment in Precision is
zero, excluding Precision entirely from the consolidated balance sheet as of
that date. Precision continues to be included in the consolidated balance sheets
of Elamex and it subsidiaries for periods prior to December 31, 2003.
2003 Results
The Company reported a net sales increase of 17% to $157.3 million in the
fifty-two weeks ended December 31, 2003 from $134.3 million for 2002. The Food
Products segment represented $75.6 million or 48% of 2003 consolidated net
sales, compared with $33.2 million, or 25% of consolidated net sales for the
prior year. The Metal Stamping segment represented $71.0 million, or 45% of
2003 consolidated net sales, compared to $75.3 million, or 56%, of consolidated
net sales in 2002. Shelter Services generated $25.7 million in 2003 net sales,
a year-over-year decrease of 19%, due primarily to the divestiture of the
majority of this business segment during the second quarter of 2003. There were
$15.1 million of intersegment sales between Food Products and Shelter Services
that were eliminated in 2003 consolidated net sales. Elamex acquired the Food
Products segment on July 18, 2002, and the revenues and expenses occurring prior
to June 28, 2002 are not included in the Elamex consolidation.
Gross profit was $17.9 million, or 11% of sales, for the 2003 year, compared
with gross profit of $14.1 million or 11% of sales for 2002. Total operating
expenses were $46.6 million compared with $15.4 million for 2002. Operating loss
increased to $28.7 million from $1.3 million in 2002. Net loss for the 2003 year
totaled $34.6 million, or $4.61 per basic and diluted share, compared to a net
loss of $6.0 million, or $0.84 per basic and diluted share, in 2002. The
increase in the operating loss and in the net loss is primarily caused by the
losses of the Metal Stamping segment, as described above. Also during 2003, an
expense of $3.5 million was recognized in the first quarter in connection with
goodwill for the Metal Stamping Segment, and an expense of $2.3 million was
recorded to provide a realization reserve for certain tax assets recorded in
prior periods in connection with operating losses in Mexico.
Financial Condition
At December 31, 2003, the Company had cash and cash equivalents totaling $2.3
million and total assets of $67.7 million. Long-term debt and capital leases,
excluding current portion, totaled $17.1 million at December 31, 2003, and
stockholders' equitytotaled $31.0 million.
Key Initiatives for 2004
"Clearly, 2003 was a year of challenge and a year of change as we made the
decision to reposition our business portfolio," Elamex President and Chief
Executive Officer Richard P. Spencer said. "We haveshifted our focus to our
Food Products Segment which offers the most attractive opportunities for future.
Elamex and its joint-venture partner will continue to actively pursue strategic
options for the Qualcore business".
"During 2003 the Franklin Sunrise Candy Division made significant progress in
securing its private label candy business with some of the largest grocery
chains and retailers in the United States. Regarding the Azar Nut group within
our Food Services Segment, Spencer further commented, "This group continues to
add new products that are helping to attract new customers and grow existing
accounts. This group does not just market food product items, but develops menu
offerings for all types of eateries using Franklin products. The sales and
marketing strategy is one of the many reasons the Azar Nut group within our Food
Service Segment was recently named the 10th best supplier to SYSCO."
Looking ahead, Spencer intends to focus on the execution and implementation of
its growth initiatives at Franklin. These initiatives include:
* Continue to build on existing revenue momentum. Comparing full-year
2003 to full-year 2002, Franklin net sales increased 16.7 million, or
28%.
* Improve the profit margin structure. Comparing full-year 2003 to
full-year 2002, Franklin gross profit increased $5.4 million, or 45%.
* Expand contract manufacturing of food products. Franklin added two new
projects and expanded an existing project.
* Continue the ongoing process of sizing operating expenses to revenues.
Comparing full year 2003 to full year 2002, Franklin operating expenses
as a percent of net sales were 22% compared to 26% in 2002.
About Elamex
Elamex is a Mexican company with manufacturing operations and real estate
holdings in Mexico and the United States. The Company is involved in the
production of food items related to its candy manufacturing and nut packaging
operations, and metal and plastic parts for the appliance and automotive
industries. Elamex's competitive advantage results from its demonstrated
capability to leverage low cost, highly productive labor, strategic North
American locations, recognized quality and proven ability to combine high
technology with labor-intensive manufacturing processes in world-class
facilities. As a value added provider, Elamex's key business objectives include
superior customer satisfaction, long-term supplier relationships and employee
growth and development, with the ultimate goal of continuously building
shareholder value.
Press releases by Elamex may include forward-looking statements that involve
risks and uncertainties, including, but not limited to, risks associated with
the Company's future growth and development. Information contained herein should
be read in conjunction with the Company's periodic filings with the Securities
and Exchange Commission, including its Form 10-Q filing with the Securities and
Exchange Commission for the period ended October 3, 2003. The forward-looking
statements are made pursuant to safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Actual results could differ materially.
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
(Unaudited)
December 31, 2003 December 31, 2002
Assets
Current assets $22,051 $ 45,906
Property, plant and equipment, net 39,956 69,979
Other assets, net 5,696 18,616
$67,703 $134,501
Liabilities and Stockholders' Equity
Current liabilities $19,535 $ 32,407
Long-term debt and liabilities 17,140 36,429
Total liabilities 36,675 68,836
Stockholders' equity 31,028 65,665
$67,703 $134,501
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE DATA)
(UNAUDITED)
13 Weeks ended 52 Weeks ended
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
Net sales $37,967 $ 42,973 $157,250 $134,269
Cost of sales 32,431 37,375 139,336 120,142
Gross profit 5,536 5,598 17,914 14,127
Operating expenses:
General and
administrative 3,192 2,013 8,787 7,092
Selling 1,831 2,039 7,009 4,179
Distribution 2,424 2,236 9,463 4,149
Impairment of long
lived assets 17,775 21,355
Total operating
expenses
25,222 6,288 46,614 15,420
Operating loss (19,686) (690) (28,700) (1,293)
Other (expense) income:
Interest income -- 19 14 506
Interest expense (920) (913) (3,517) (2,280)
Equity in losses of
unconsolidated
subsidiaries (1,090) (396) (2,107) (1,125)
Gain on sale of certain
shelter operations -- 1,680
Other, net (403) (974) 441 (1,533)
Total other expense (2,413) (2,264) (3,489) (4,432)
Loss before income
taxes and cumulative
effect of change in
accounting principle (22,099) (2,954) (32,189) (5,725)
Income tax provision
(benefit) 1,555 (1,095) 2,419 (561)
Loss before cumulative
effect of change in
accounting principle (23,654) (1,859)(34,608) (5,164)
Cumulative effect of
change in accounting
principle, net of tax -- -- 853
Net loss $ (23,654) $ (1,859) $(34,608) $(6,017)
Other comprehensive
income, net of
income tax benefit $518 $379
Comprehensive loss (23,654) (1,341) (34,608) (5,638)
Net loss per share,
basic and diluted
before cumulative
effect of change in
accounting principle $(3.15) $(0.25) $ (4.61) $(0.72)
Cumulative effect of
change in accounting
principle net of tax (0.12)
Net loss per share,
basic and diluted $(3.15) $(0.25) $ (4.61) $(0.84)
Shares used to compute
net loss per share,
basic and diluted 7,502,561 7,510,762 7,505,257 7,188,431
DATASOURCE: Elamex
CONTACT: Sam Henry, Chief Financial Officer of Elamex, +1-915-298-3071,
; or MoiraConlon of Financial Relations Board,
+1-310-407-6524, , for Elamex
Web site: http://www.elamex.com/