CHAMPION PARTS REPORTS THIRD-QUARTER PROFITS UP OVER 9 PERCENT
ON SLIGHTLY LOWER SALES
OAK BROOK, Ill., Nov. 4 /PRNewswire/ -- Champion Parts, Inc. (NASDAQ: CREB) today reported that profits rose over 9 percent in the third quarter, compared to a year ago, on slightly lower sales.
For the nine months, nonrecurring charges made in the second quarter for plant consolidation and product restructuring led to a loss, compared to a profit last year when sales were 5 percent higher.
Sales for the third quarter ended Sept. 29, were down 1 percent to $30,864,000, compared to $31,181,000 a year ago. Sales for the first nine months declined 5 percent to $88,240,000 from $92,827,000.
Net earnings for the third quarter were $210,000, or 6 cents per share, compared to $192,000, or 5 cents per share a year ago. For the first nine months, a loss of $135,000 or 4 cents per share occurred after a nonrecurring plant consolidation and product restructuring charge of $1,034,000. This compares to net earnings of $871,000, or 24 cents per share last year.
Earlier (on Oct. 21), the company announced it had called for redemption on Nov. 21 of all of its $12,200,000 subordinated debt, which carries an average interest rate of 12 percent, until it is due late in 1993. The move will be funded under an amendment to the company's $31 million unsecured bank revolving credit agreement, which has also been extended to Aug. 31, 1994. Through purchase of an interest rate "swap", interest costs on these funds will be reduced to an 8.3-percent rate, which is 30 percent less than the interest cost on the debt being redeemed. Through this program, the company will save more than $600,000 over the next two years through lower net interest expense.
After this debt repayment, the company will write off during the fourth quarter of 1991, as an extraordinary charge associated with the early retirement of this debt, $670,000 of unamortized debt discount and expense that would have otherwise been a cost in 1992, 1993, and the remainder of 1991.
"The quarter's results are encouraging when one notes various challenges that existed during the period," said Charles P. Schwartz Jr., Champion's chairman. "In addition to lackluster general aftermarket conditions, which have created overcapacity and often destructive competition, at Champion Parts we had the challenge of moving out of our Texas plant, which has been taken by eminent domain for highway expansion. This move was accompanied by the inevitable inefficiencies that occurred as Texas operations were transferred to other Champion plants. All production has ended at the Texas plant and transferred to other Champion plants and we have received payment from the state, which was used to reduce debt. The move should improve future utilization of plant overhead throughout the company.
"The quarter also reflected the impact of unexpected events that temporarily increased operating costs and reduced efficiency. This included recovery from a fire that occurred at the end of May at the Fresno (Calif.) plant. While the loss was covered by insurance, the recovery reduced operational efficiency.
"At our Hope, Ark., plant, a strike occurred soon after Labor Day. We had been operating at this location without a contract since the end of April. The main items in dispute involved the revision of the Champion Parts medical program. We had announced that to serve our customers, replacement employees would be hired to maintain operations at this plant, which employs about 450 people. A large number of employees continued to come to work at the Hope plant, and we have hired additional men and women so that the plant is now operating satisfactorily in terms of production volume, product quality and costs. However, there was increased overhead expense and reduced efficiency during September and October. While such a situation is never pleasant, we have sought to approach it with patience and understanding, tempered with the realities of today's marketplace and our customers' needs," added Schwartz.
The company's financial condition continues to improve, and at the end of the quarter, debt had been reduced $2 million, compared to the start of the year. Through Sept. 30, interest expense was $817,000 less than the same period last year.
"Currently, our customers' inventories are lean, and we are moving into the winter season when cold weather puts an added strain on vehicles that can lead to replacement of parts such as those made by Champion Parts. The low level of new car sales should also increase maintenance work on existing vehicles.
"Whether or not there is an economic recovery under way, at Champion Parts, we are making our operations as 'tight' as possible in terms of people, facilities and financial resources. Thereby, we are gearing ourselves for profitable progress as the 1990s proceed," Schwartz said.
Champion Parts is the country's largest independent automotive replacement parts remanufacturer in the multi-billion-dollar automotive, truck and farm-equipment aftermarket. It remanufactures, tests and distributes more than 4 million parts each year throughout the U.S. and Canada. Its major products, representing some 80 percent of the sales volume of rebuilt parts sold by automotive jobbers and retail outlets, include fuel-system products such as carburetors, and a wide line of automotive electrical and mechanical parts. The company currently employs about 1,800 men and women and operates four plants in the U.S. and Canada.
CHAMPION PARTS, INC.
Third Quarter Ended 9 Months Ended
9/29/91 9/30/90 9/29/91 9/30/90
Net sales $30,864,000 $31,181,000 $88,240,000 $92,827,000
uring cost and
income taxes 1,265,000 1,404,000 3,554,000 5,070,000
Interest 902,000 1,074,000 2,752,000 3,569,000
ing cost and income
taxes 363,000 330,000 802,000 1,501,000
ing cost --- --- 1,034,000 ---
bef. income taxes 363,000 330,000 (232,000) 1,501,000
(benefit) 153,000 138,000 (97,000) 630,000
Net earnings (loss) 210,000 192,000 (135,000) 871,000
Net earnings (loss)
per common share .06 .05 (.04) .24
outstanding 3,655,266 3,655,266 3,655,266 3,651,822
/CONTACT: Charles P. Schwartz Jr. of Champion Parts, Inc., 708-573-6600; or Alex Tassos of Alex Tassos & Associates, 619-451-8784, for Champion Parts, Inc./
(CREB) CO: Champion Parts, Inc. ST: Illinois IN: AUT SU: ERN ML -- DE004 -- 0598 11/04/91 09:26 EST