RAY Raytech Corp

Raytech Corporation (NYSE:RAY) today announced net income of $1.6 million for the thirteen-week period ended April 3, 2005, amounting to $.04 per basic and diluted share compared to a net income of $1.4 million or $.03 per basic and diluted share for the same period in the prior year. The Company recorded sales for the thirteen-week period ended April 3, 2005 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, 2005, in connection with a notification of late filing for the first quarter, the Company reported an estimated net loss of $675 thousand, 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 thousand 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, 2005, the Company, through its majority owned subsidiary, APC, purchased shares of APC owned by Raymark Corporation 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. Raytech Corporation is a worldwide manufacturer of wet and dry clutch, power transmission and brake systems as well as specialty engineered polymer matrix composite products and related services for vehicular applications, including automotive OEM, heavy duty on-and-off highway vehicles and aftermarket vehicular power transmission systems. Through two technology and research centers and five manufacturing operations worldwide, Raytech develops and delivers energy absorption, power transmission and custom-engineered components focusing on niche applications where its expertise and technological excellence provide a competitive edge. Raytech Corporation, headquartered in Shelton, Connecticut, operates manufacturing facilities in the United States, Germany and China as well as technology and research centers in Indiana and Germany. The Company's operations are strategically situated in close proximity to major customers and within easy reach of geographical areas with demonstrated growth potential. Raytech common stock is listed on the New York Stock Exchange and trades under the symbol "RAY." Company information may be accessed on our Internet website http://www.raytech.com. -0- *T RAYTECH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (000's omitted, except share data) Comparative results are as follows: For the 13 Weeks Ended April 3, 2005 March 28, 2004 --------------- ---------------- (Unaudited) Net Sales $ 63,352 $ 56,598 Net income $ 1,620 $ 1,351 Basic and diluted earnings per share: Earnings per share $ .04 $ .03 Weighted average shares 41,737,306 41,737,306 *T