Chemfab Earnings Up; Tent City Accounts for Change
MERRIMACK, N.H. -- Chemfab Corporation (NYSE:CFA) today announced that its third quarter diluted earnings per share increased 18% over the same period in the prior year. Diluted earnings per share for the first nine months increased 12% over the comparable period a year ago. Basic earnings per share increased 14% and 12% for the quarter and the nine-month period, respectively.
Net income for the third quarter, which ended March 28, 1999, was $3,235,000, or $0.40 per share diluted, compared with $2,808,000, or $0.34 per share diluted, for the same quarter a year ago. Worldwide sales for the quarter increased 63% to $44.5 million from $27.3 million in the same quarter of the prior year. Excluding sales to the Tent City project in Mina, Saudi Arabia, sales for the quarter increased only by 2.1%, due in part to capacity devoted to the Tent City project. Measured in constant foreign currency rates, sales for the quarter would have increased 62%. Gross profit margins decreased in the quarter to 30.9% from 34.0% in the same quarter in the prior year. The decrease was primarily attributable to the unusually low margins on Tent City sales.
For the nine months ended March 28, 1999, net income increased 10% to $8,136,000, or $1.01 per share diluted, from $7,395,000, or $0.90 per share diluted, for the comparable period in the preceding year. Year-to-date worldwide sales increased 30% to $97.6 million from $75.3 million in the prior year. Excluding Tent City sales, year-to-date sales would have increased 3.3%. Measured in constant foreign currency rates, the sales for the nine month period would have increased 28%. Year-to-date gross profit margins decreased to 32.4% from 33.9% in the prior year. The decrease was primarily attributable to the unusually low margins on Tent City sales.
"Despite project delays in our fabricated products business and the relative softness in the European market, the Company realized significant sales growth for the third quarter," noted John W. Verbicky, Chemfab's President and Chief Executive Officer, "as the result of substantial shipments on the Tent City project and strong industrial product sales in Asia Pacific and in the Americas."
Commenting on the robust growth in net income for the third quarter, Mr. Verbicky added, "During the quarter, net income benefited from the favorable mix in engineered products sales, a modest in-period contribution from the Tent City project, and a lower effective tax rate. We are also pleased that we can now deploy our new highly efficient capacity for industrial production."
In the fourth quarter, the Company expects to take a non-recurring special charge of $750,000 related to product shipments made in consideration for amendments to certain supply arrangements. The Company expects that these amendments will significantly expand its sales opportunities in certain key markets over the next several years. The special charge and a foregone margin contribution from those product shipments are likely to mitigate the expected benefits of current strong order entry, backlog and shipments for industrial and architectural products.
Consequently, Mr. Verbicky offered the following observations regarding the outlook for the fourth quarter and the year. "The combined effect of the special charge and the foregone margin contribution from reduced product sales will reduce previously expected earnings growth in the quarter. The transactions will also result in expanded business opportunities and are expected to strengthen our longer-term position in key markets served worldwide. In spite of the one-time impact on net income in the fourth quarter, we expect to achieve record sales and net income for the full fiscal year."
Chemfab Corporation is a world leader in polymer-based engineered products and materials systems for use in severe service environments. Chemfab's principal core competence is in the design, manufacture and fabrication of flexible fiber-reinforced fluoropolymer composite materials, which comprise, in whole or in part, the majority of its products. The Company also produces and sells specialty fluoropolymer films and silicone-based products. Worldwide end-use applications are in electrical, environmental, food processing, architectural, aerospace, communications, protective clothing, other industrial markets and consumer bakeware applications.
NOTE: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. Actual performance and results may differ materially from those projected or suggested due to certain risks and uncertainties, including operational and market penetration challenges, any penalties from shortfalls in the Company's deliveries and any fluctuation in the demand for architectural material. Additional information concerning certain other risks and uncertainties relating to the Company's base business and that of its customers worldwide that could cause actual results to differ materially from those projected or suggested, is contained in the Company's filings with the Securities and Exchange Commission (SEC) over the last 12 months, copies of which are available from the SEC or the Company upon request. The forward-looking statements contained herein represent the Company's judgment as of the date of this release, and the Company cautions readers not to place undue reliance on such statements.