Precision Partners, Inc. Announces 2001 Fourth Quarter and Year-End Financial Results
HAZLET, N.J.--March 22, 2002--Precision Partners, Inc., a leading supplier of precision-machined metal parts, tooling and assemblies, today announced results for its fourth quarter and year ended December 31, 2001.Net sales for the year ended December 31, 2001 totaled $181.2 million, a 6.6% increase over the prior year's sales of $170.0 million. The increase is primarily due to growth in the company's sales of power generation components and the first-time full year inclusion of sales of heavy construction and off-road diesel engine blocks and heavy truck axle components produced at operating facilities opened during 2000. Offsetting the increases, in part, were weaknesses in aerospace tooling shipments, lower business machine and medical diagnostic equipment components sales and lower sales volume in automotive and light truck components.
The company reported operating income of $4.5 million, before restructuring, impairment and other charges, in the year ended 2001 compared to $5.7 million in the prior year. These restructuring, impairment and other charges included in operating income totaled $10.0 million and $10.2 million in 2001 and 2000, respectively. Included in the 2001 results are charges related to the closing of production facilities at Galaxy and Certified Fabricators (Certified) and the disposal of idle equipment at these and other of the company's business units. Most of the 2001 charges were recorded in the third quarter and previously disclosed.
Operating income plus depreciation and amortization (EBITDA) before restructuring, impairment and other charges (adjusted EBITDA) was $23.5 million in 2001, compared to adjusted EBITDA of $22.4 million in the prior year.
The company recorded a net loss in 2001 of $23.3 million compared to a net loss of $16.9 million in 2000 including restructuring, impairment and other charges in both periods. A tax benefit recorded in 2000 and higher interest expense in 2001 due to higher average debt balances contributed to the higher net loss in 2001.
Net sales for the fourth quarter of 2001 decreased 6.6% to $41.4 million from $44.3 million in the comparable period of 2000. Sales decreases were the result of lower sales volume in automotive and light truck, medical and business machine components, despite growth in power generation equipment components.
The company reported operating income near break-even for the fourth quarter of 2001, compared to $1.8 million in the comparable period of 2000. Adjusted EBITDA was $4.5 million for the fourth quarter of 2001 versus $5.8 million during the comparable period of 2000. The lower results were related to the reduction in sales noted above.
Net losses, including the charges discussed below, totaled $4.2 million for the fourth quarter of 2001 compared to $2.3 million in the comparable period of 2000. The reduction in sales and operating income noted above and higher interest expense due to higher average debt balances contributed to a higher net loss in the current quarter.
As a result of the plant consolidation plans at the company's Galaxy and Certified subsidiaries, along with the disposal of assets and inventory valuation adjustments at the General Automation and Gillette subsidiaries, the company incurred pre-tax charges totaling $10.2 million in 2001. Charges in 2000 totaled $10.9 million. The charges in 2001 related to the impairment and disposal of fixed assets, lease and other costs related to the closure of production facilities and reductions in the carrying value of inventory. Related cash charges of approximately $0.4 million were incurred in the fourth quarter of 2001, and the company expects to incur a total of $0.7 million of related cash expenses in the first and second quarters of 2002, primarily for relocation of equipment at Certified. The charges related to 2000 were all recorded in the third quarter and related to the impairment of goodwill at Galaxy, the impairment and disposal of machinery and equipment at Galaxy and Certified and reductions in the carrying value of inventory and other assets.
Outlook
John Raos, president and chief executive officer, said, "Although we expect to benefit from the general improvement in the U.S. economy in 2002, continuing improvement at our automotive and industrial operations will be offset by the recent slowdown in the power generation sector and should result in full year sales comparable to 2001. We expect full-year adjusted EBITDA to be marginally higher than the prior year. Consolidated sales and adjusted EBITDA for the first quarter are forecasted to be well below the comparable period of the prior year."
Precision Partners, Inc. (www.precisionpartnersinc.com) is a leading supplier of precision- machined metal parts, tooling and assemblies for original equipment manufacturers ("OEM's") with annual sales in excess of $180 million. By using its broad manufacturing capabilities and highly engineered processes to provide a full line of high quality manufacturing and sub-assembly services, as well as engineering and design assistance, Precision Partners, Inc. meets the critical specifications of customers in a wide range of industries who rely on "Preferred" or "Qualified" suppliers for outsourced manufacturing.
In addition to the historical financial information contained herein, this release contains certain forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Company's actual results in future periods to differ materially from forecasted results.
A number of factors, including those identified below, could adversely affect the Company's ability to obtain these results: the Company's liquidity, capital resources, and debt levels, the Company's ability to comply with the covenants in its senior debt agreement, the Company's ability to attract new business, the Company's ability to acquire adequate raw materials and to obtain favorable pricing for such materials, pricing pressures for the Company's products and services, increased competition in the precision machining and OEM markets, the ability to consummate suitable acquisitions, the ability to effectively integrate acquisitions or implement new production programs, economic factors which affect our customers, the manufacturing industry, or the economy in general and changes in government regulations. Certain of these risks are described in the Company's Form 10-K for the year ended December 31, 2001, which is expected to be filed shortly. Copies of this report, when available, may be obtained via the World Wide Web at www.precisionpartnersinc.com.
Precision Partners, Inc.
Selected Consolidated Financial Information
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
Selected Consolidated
Statement of Operations
and Other Information 2001 2000 2001 2000
-------- --------- ------- ---------
Net sales $41,366 $44,312 $181,203 $169,976
Gross profit (1) 7,295 10,472 24,705 30,035
Operating (loss) income (2) (50) 1,800 (5,551) (4,426)
Interest expense, net 4,163 4,359 17,394 16,526
Net loss (4,233) (2,251) (23,291) (16,899)
Depreciation and amortization 4,452 4,043 19,017 16,695
EBITDA (2) (3) 4,402 5,843 13,466 12,269
Adjusted EBITDA (see below) 4,471 5,843 23,513 22,423
Selected Consolidated Balance December 31, December 31,
Sheet Information 2001 2000
--------------- -------------
Total current assets
(including cash of $11,144
and $ -- at December 31, 2001
and 2000, respectively) $ 46,943 $ 43,390
Total current liabilities 34,837 38,398
--------------- -------------
Net current assets $ 12,106 $ 4,992
Total assets 185,670 207,351
Total net debt (4) 138,806 149,835
Total stockholder's equity 1,976 25,247
(1) The quarter and twelve months ended December 31, 2001 included
approximately $0.1 million and $9.1 million, respectively, of expenses
related to restructuring, impairment and other charges recorded at
Galaxy, Certified, Gillette and General Automation. The twelve months
ended December 31, 2000 included approximately $7.3 million of
expenses related to impairment and other charges at Galaxy and
Certified.
(2) The quarter and twelve months ended December 31, 2001 included
approximately $0.1 million and $10.0 million, respectively, of
expenses related to restructuring, impairment and other charges
recorded at Galaxy, Certified, Gillette and General Automation. The
twelve months ended December 31, 2000 included approximately $10.2
million of expenses related to impairment and other charges at Galaxy
and Certified.
(3) EBITDA is defined as operating income plus depreciation and
amortization. EBITDA is not a measure of performance under generally
accepted accounting principles. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in
the Company's Form 10-K for the year ended December 31, 2001 which is
expected to be filed shortly. In addition, the definition of EBITDA
used in this report may not be comparable to the definition of EBITDA
used by other companies.
(4) As of December 31, 2001, total net debt equaled total debt less
cash of $11.1 million. As of December 31, 2000, total net debt equaled
total debt outstanding.
The table below outlines the restructuring, impairment and other
charges recorded during the three and twelve-month periods ended
December 31, 2001 and 2000:
Three months ending Twelve months ending
December 31, December 31,
-------------------- ---------------------
2001 2000 2001 2000
Goodwill impairment $ --- $ --- $ --- $ 2,318
Fixed asset impairment 69 --- 5,344 4,453
Restructuring charges --- --- 1,189 ---
Other charges (1) --- --- 3,514 3,383
------- ------- --------- --------
Included in operating
(loss) income $ 69 $ --- $ 10,047 $ 10,154
Other --- --- 161 727
-------- ------- -------- ---------
Included in pre-tax
Income $ 69 $ --- $ 10,208 $ 10,881
======== ======= ======== =========
(1) The charges shown here exclude certain cash expenses related to
the reorganization plans commenced in 2000 and 2001 related to Galaxy
and Certified. These amounts were $0.3 million and $1.2 million,
respectively for the three and twelve months ended December 31, 2001
and totaled $0.6 million in each of the three and twelve months ended
December 31, 2000.
The table below reconciles operating (loss) income to operating
income before restructuring, impairment and other charges, and to
adjusted EBITDA for each of the three and twelve-month periods ended
December 31, 2001 and 2000 (please refer to the above tables):
Three months ending Twelve months ending
December 31, December 31,
---------------------- ----------------------
2001 2000 2001 2000
Operating (loss) income (50) 1,800 (5,551) (4,426)
Restructuring, impairment
and other charges
included in operating
(loss) income (1) 69 --- 10,047 10,154
-------- --------- ------- ---------
Operating income before
restructuring, impairment
and other charges $ 19 $ 1,800 $ 4,496 $ 5,728
Depreciation and
amortization 4,452 4,043 19,017 16,695
-------- --------- -------- ---------
Adjusted EBITDA $ 4,471 $ 5,843 $ 23,513 $ 22,423
======== ========= ======== =========
(1) The charges shown here exclude certain cash expenses related to
the reorganization plans commenced in 2000 and 2001 related to Galaxy
and Certified. These amounts were $0.3 million and $1.2 million,
respectively for the three and twelve months ended December 31, 2001
and totaled $0.6 million in each of the three and twelve months ended
December 31, 2000.