Precision Partners, Inc. Announces First Quarter Financial Results
HAZLET, N.J.--May 10, 2002--Precision Partners, Inc., a leading supplier of precision-machined metal parts, tooling and assemblies, today announced results for its first quarter ended March 31, 2002.Net sales for the first quarter of 2002 decreased 15.1% to $42.0 million from $49.5 million in the comparable period of 2001, primarily as a result of significantly reduced demand for power generation component parts, the company's actions in 2001 to eliminate unprofitable automotive and engine component product lines and weakness in medical and business machine component sales. Partially offsetting those decreases were higher sales of diesel engine blocks, light truck braking components and heavy truck axle components.
The company reported operating income of $1.8 million for the current quarter, the same as in the comparable period of 2001. The company's quarterly operating income was positively impacted by the adoption of SFAS No. 142, which eliminates the amortization of goodwill, an item that totaled approximately $1.0 million in the first quarter of 2001. Additional benefits to operating income were gained from restructuring cost savings at Galaxy and Certified, as announced in the third quarter of 2001, and from the elimination of certain unprofitable product lines, which together partially mitigated the negative impact of lower power generation and medical and business machine component sales.
Operating income plus depreciation and amortization (EBITDA) was $5.5 million for the first quarter of 2002 versus EBITDA of $6.6 million during the comparable period of 2001.
Net loss totaled $3.7 million for the current quarter compared to a net loss of $3.2 million in the comparable period of 2001. Contributing to the net loss for 2002's first quarter was higher interest expense primarily due to the $0.9 million write-off of unamortized deferred financing costs related to the credit facilities extinguished in the company's February 2002 refinancing. However, no tax provision was recorded in the current quarter versus $0.3 million in the comparable period of the prior year.
John Raos, president and chief executive officer, said, "The first quarter results were in line with our stated expectations. Our focus on improving sales overall and controlling costs at our automotive and diesel engine block operations partially offset the negative impact from the slowdown in the power generation sector."
Raos also offered an outlook for the coming period, "We expect sales and adjusted EBITDA in the second quarter to be slightly lower than the results reported in the second quarter of 2001 as continued improvement in operating results at our automotive and light truck component and diesel-engine block facilities will help mitigate the continuing reduction in operating profits from our power generation component business. Due to the deteriorating conditions in the power generation marketplace, we now expect full year consolidated sales to be slightly lower than 2001; however, due to improved efficiencies and cost control measures, adjusted EBITDA is expected to be comparable to the prior year. Our outlook assumes the continuation of a general economic recovery."
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 sales for the year ended December 31, 2001 of approximately $181 million. By using our 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, we meet the critical specifications of our customers across a wide range of industries who rely on their "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-Q for the quarter ended March 31, 2002, 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.
Unaudited Selected Consolidated Financial Data
(in thousands)
Three Months Ended
March 31,
Selected Consolidated Statement
of Operations
and Other Information 2002 2001
----------- -----------
Net sales $41,986 $ 49,481
Gross profit 7,828 9,824
Operating income 1,845 1,809
Interest expense, net (1) 5,471 4,533
Net loss (3,650) (3,215)
Depreciation and amortization 3,666 4,830
EBITDA (2) 5,511 6,639
Adjusted EBITDA (3) 5,449 6,639
Selected Consolidated March 31, December 31,
Balance Sheet Information 2002 2001
----------- -----------
Total current assets (4) $ 37,372 $ 46,943
Total current liabilities 33,005 34,837
----------- -----------
Net current assets $ 4,367 $ 12,106
Total assets 181,176 185,670
Total debt (5) 152,158 149,950
Total stockholder's equity (deficit) (1,674) 1,976
(1) Interest expense includes a $0.9 million write-off of
unamortized deferred debt costs related to debts refinanced in
February 2002. The Company elected to early adopt SFAS No.
145, Rescission of FASB Statements No. 4, 44, 64 Amendment of
FASB Statement No. 13 and Technical Corrections, which
requires that losses on the extinguishment of debt no longer
be recorded as an extraordinary item.
(2) 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-Q for the
quarterly period ended March 31, 2002 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.
(3) Adjusted EBITDA for the quarter ended March 31, 2002 excludes
gains on sale of previously impaired assets of approximately
$62,000.
(4) Cash balances included in total current assets at March 31,
2002 and December 31, 2001 were $18,000 and $11.1 million,
respectively.
(5) As of March 31, 2002, total debt included $6.0 million of
capitalized lease obligations that were classified as
operating leases prior to the company's February 2002
refinancing.