Iteq Inc, USA

Iteq Inc, USA

June 1999 Filtration Industry Analyst FiberMark Inc, USA Iteq Inc, USA Key Figures (US$ million)l First quarter ended 31.3 Key Figures (US$ milli...

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June 1999

Filtration Industry Analyst

FiberMark Inc, USA

Iteq Inc, USA

Key Figures (US$ million)l First quarter ended 31.3

Key Figures (US$ million)1 First quarter ended 31.3

1999

1998

1999

1998

Net Sales

75.9

80.0

Revenues

69.4

71.1

Cost of Sales

60.6

64.3

Operating Expenses

66.7

62.4

Gross Profit

15.3

15.7

Earnings before Income Taxes

1 .o

5.5

Income from Operations

9.5

10.2

Net Earnings

1.0

3.9

Income before Income Taxes

6.9

7.5

Net Earnings per Share

US$O.OS

US$O.14

Net Income

4.1

4.4

Except per share data.

US$O.52

US$O.56

Basic Earnings per Share ’ Except per share data (basic).

With the exception of its technical specialtiesbusiness area, FiberMark Inc’s sales during the first quarter of 1999 were generalfy in line with management’sexpectations. The company also continued to see steady business conditions in Europe, particularly in its filter business and in saturated tape base materials. For the three-monthperiod ended 31 March 1999, the company posted net earnings of [email protected] 1 million, compared with US$4.4 million for the first quarter of 1998. Net sales for the quarter decreasedby 5.1 per cent to million from US$75.9 US$80.0 million recorded for the equivalent period of 1998. Filter product salesfor the first quarter of fiscal 1999 droppedby 1.5 per cent to US$26.2 million, compared with a figure of US$26.6 million posted for the first quarter of 1998. Technical specialties sales decreased by 20.8 per cent from USS21.2 million, recorded a year earlier, to US$l6.8 million, while sales of durable speeiaIties rose 3.7 per cent to US$19.8 million. Favuurable pufp costs and generally good manufac-

tlnitlg efficiencies contributed to gross margin improvement during the first quarter of fiscal 1399. Even though pulp price increases were announcedfor the second quarter, FiberMark expects raw material pricing overall to remain fairly flat for the rest of the year. During the quarter, the company took steps to further consolidate the marketing and operational activities of its businesses.Its North American and European filter businesseswere merged. Unifying its approach to the filter market worldwide should strengthenits marketing efforts, enhance global partnershipswith customers, and create technology transfer opportunities. Similarly, becauseof a growing overlap in marketing and mantiacturing, the Technical Specialties and Office Products operationswere consolidated into one division. FiberMark produces specialty frbre-based materials. It offers a broad range of products including filter materials for automotive and heavy equimnent, presentation materMs for of&es and schools, and specialty tape materials. I

The decline in Iteq In& rev:nues and profits for the hree-month period ended 3 1 March 1999 reflect the :ecent depression in oil arices,which causeda reduc:ion or deferral in spending )y the hydrocarbon process.ng industry. Revenues from continung operations for the first quarter ended 31 March 1999 tataIled US$69.4 milliOn, compared with IJS$71.1 million for the equivalent quarter of 1998. Net earnings from continuing operations for the first quarter of 1999 were US$l . 1 million, which represents a substantialdrop from the figure of US$3.5 million which rhe company posted a year earlier. The results for the first quarter of 1999 include an amonnt of US$2.O miIlion comprising merger, acquisition and strategic charges, and a pre-tax gain of USS4.2 million from the sale of the assetsof Iteq’s Texoma Tank leasing subsidiary. Backlog at the beginsing of the first quarter reached the lowest level recorded for the past sevuraI years,but increasedby 6 peg

cent during the three-month period. The competition for bookings during the period was extremely strong, and given the current quote activity and recent oil price increases the company is optimistic that operating results during the third and fourth quarters should be significantly better. Iteq’s historical &es revenueshave been affected by the worldwide depression in crude oil prices plus the excess of certain commodity chemicals coming into the USA from foreign sources. This caused integrated oil companies, petrochemical prodncers and refineries to cut capital expenditures during the last six months of 1998. Also, the decline in Asian markets has affected export opportunities, and to a limited degree, increased domestic competition from foreign equipment producers. The company previously atmaunced certain managemerit changes and that in response to the tight market cmditiions, it had developed and had begun implementing a mu&step strategic plan to enbwe fkl&re operations.m