SHELTON, CT — Raytech Corp., a manufacturer of wet and dry clutch, power transmission and brake systems, announced a net income of $1.6 million for its first quarter of 2005, which ended on April 3. The net income amounted to 4 cents per basic and diluted share compared to a net income of $1.4 million or 3 cents per basic and diluted share for the same period in the prior year. The company recorded sales for the first quarter of $63.4 million compared to $56.6 million in the same period in the prior year, an increase of 11.9 percent.
On May 19, in connection with a notification of late filing for the first quarter, the company reported an estimated net loss of $675,000, subject to the completion of purchase accounting for the acquisition of a minority interest in Allomatic Products Company (APC). The notification also indicated that the estimated net loss was partially due to the recognition of a $1.3 million product liability claim in the International segment.
Completion of purchase accounting for the APC acquisition resulted in, among other things, the reduction of certain deferred tax assets and consequently, a $995,000 reduction in amounts payable to the Raytech Asbestos Personal Injury Settlement Trust (PI Trust), recorded as non-operating income. In addition, upon further review of the product liability claim described above, it was determined that, while a loss is reasonably possible, no liability should be recognized at this time.
The increase in net income over the prior year was primarily due to the recognition of non-operating income related to the decrease in amounts payable to the PI Trust, partially offset by restructuring expense and a decline in operating profit, primarily in the domestic OEM segment which, despite achieving 8.9 percent sales growth, realized a 32 percent decrease in gross profit compared to the same period in 2004. Reduced gross profit in the domestic OEM segment was primarily the result of the increased price of steel, a key raw material used in that segment. First quarter 2005 operating results were also negatively impacted in all segments by costs incurred to transfer certain production from the company’s facilities to be closed during 2005 to facilities to remain open as part of the company’s facility restructuring program.
The increase in sales was driven by increased demand for the company’s heavy-duty wet friction products, its commercial dry friction products and its aftermarket products.
On March 21, the company, through its majority owned subsidiary, APC, purchased shares of APC owned by Raymark Corp. in exchange for a ten-year unsecured promissory note of $7.2 million which increased the company’s indirect ownership of APC from approximately 57 percent of its outstanding common stock to approximately 96 percent of its outstanding common stock.
For more information about Raytech Corp., go to: http://www.raytech.com .
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