Delco Remy International Announces Year End Operating Results
ANDERSON, Ind., March 12 -- Delco Remy International, Inc., a leading worldwide manufacturer and remanufacturer of automotive electrical and drivetrain/powertrain products, today announced its financial performance for the fourth quarter and year ended December 31, 2002.
For the fourth quarter, the Company reported Net Sales of $259.8 million, an increase of $13.0 million, or 5.3 percent, over the fourth quarter of 2001. A Net Loss From Continuing Operations of $7.5 million in the fourth quarter of 2002 compares with a net loss of $48.1 million in the fourth quarter of 2001. Excluding special charges totaling $26.4 million, a restructuring charge of $33.4 million and the related income tax effect of $22.7 million, the Net Loss From Continuing Operations was $11.0 million in the fourth quarter of 2001.
For the year 2002, the Company reported Net Sales of $1,069.4 million, an increase of $62.2 million, or 6.2 percent, over 2001. Net Income From Continuing Operations of $0.6 million in 2002 compares with a net loss of $47.8 million in 2001. Excluding a $4.4 million post-employment benefit curtailment gain and related income tax effect of $1.7 million recorded in the first quarter of 2002 and the non-recurring charges totaling $70.0 million and the related income tax effect of $26.6 million recorded in 2001, the Net Loss From Continuing Operations was $2.1 million in 2002 compared with $4.4 million in 2001.
In accordance with the provisions of Statement of Financial Accounting Standards No. 142, the Company recorded a $74.2 million charge to write down goodwill in certain of its operations. This charge has been reported as the cumulative effect of a change in accounting principle and is effective in the first quarter of 2002.
Results for both 2002 and 2001 have been adjusted to reflect the classification of the Company's retail gas engine business as a discontinued operation.
Commenting on these results, Thomas J. Snyder, President and CEO, stated: "Overall, the Company made good progress on its goals to improve liquidity and achieve organic growth. The results for the fourth quarter fell short of our expectations due to weaker demand in the Aftermarket and the related production curtailment. We did, however, realize organic growth of about 6 percent and, more importantly, a substantial improvement of $30.7 million in Cash Provided by Operating Activities."
Performance Highlights:
Sales growth in 2002 compared with 2001 reflects higher industry volume in the North American Automotive OE market, increased market share in the retail Electrical Aftermarket and the effect of 2001 acquisitions. These gains were partially offset by softness in Europe and the transmission and diesel engine aftermarket.
Operating Income of $72.2 million in 2002 (excluding the $4.4 million post-employment benefit curtailment gain recorded in the first quarter) was down $13.4 million from $85.6 million in 2001 (excluding the special and restructuring charges totaling $65.8 million discussed above and goodwill amortization of $6.7 million). Virtually all of this decline was attributable to the Aftermarket business, primarily in the fourth quarter, and was due to adverse customer and product mix, including lower electrical sales to OEMs and higher product returns in the fourth quarter of 2002.
The Company continued to make significant improvements in cash flows as Cash Provided by Operating Activities of Continuing Operations increased $30.7 million to $46.5 million in 2002. This improvement primarily reflected working capital efficiency including accelerated collection of customer receivables through arrangements with certain financial institutions.
The loss from discontinued operations in the fourth quarter of $9.6 million included operating losses, the write down of assets to realizable value and costs for severance and facility closure.
Other Items:
In January 2003, the Company announced that it will close its starter and alternator manufacturing operations in Anderson, Indiana during the first quarter of 2003. The Company is also developing plans to rationalize certain other of its operations. Negotiations are currently in process and the Company cannot reasonably estimate the cost of these actions, which will be recorded as restructuring charges primarily in the first quarter of 2003.
Effective March 7, 2003, the Company successfully concluded the sale of a non-core business and has signed definitive agreements to complete the sale of a second non-core business before the end of March. The net proceeds are expected to be approximately $29.0 million.
The Company is continuing its negotiations with Delphi Corporation to purchase certain of its generator assets. In the fourth quarter of 2002, the Company completed the acquisition of intellectual property rights for the light duty alternator product line and certain other assets for the production of automotive alternators. Additional agreements are expected to be completed in 2003.
Commenting on the outlook for 2003, Snyder stated: "While we continue to see difficult industry conditions, particularly in the aftermarket in the near term, we expect improvements from our fourth quarter operational results. Over the longer term, we continue to take the necessary actions to strengthen the Company and improve operations."
About Delco Remy:
Delco Remy International, Inc., headquartered in Anderson, Indiana, is a leading designer, manufacturer, remanufacturer and distributor of electrical, drivetrain/powertrain and related products and core exchange service for automobiles and light trucks, medium- and heavy-duty trucks and other heavy-duty off-road and industrial applications. It was formed in 1994 as a partial divestiture by General Motors Corporation of the former Delco Remy division, which traces its roots to Remy Electric, founded in 1896.
Caution Regarding Forward-Looking Statements:
Statements in this press announcement, which are not historical, are forward-looking statements that involve certain risks and uncertainties, including, but not limited to risks associated with the uncertainty of future financial results, acquisitions, additional financing requirements, development of new products and services, the effect of competitive products or pricing, the effect of economic conditions, and other uncertainties detailed from time to time in the Company's filings with the Securities and Exchange Commission.
DELCO REMY INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions)
Three Month Period Year Ended
Ended December 31 December 31
2002 2001 2002 2001
(unaudited)
Net sales $ 259.8 $ 246.8 $ 1,069.4 $ 1,007.1
Cost of goods sold 224.9 205.3 890.3 822.2
Special charges - cost of
goods sold - 10.2 - 16.2
Gross profit 34.9 31.3 179.1 168.7
Selling, general and
administrative expenses 26.0 25.8 101.2 99.2
Special charges - selling,
general and administrative
expenses - 16.2 - 16.2
Amortization of goodwill and
intangibles 0.9 1.9 1.3 6.8
Restructuring charge - 33.4 - 33.4
Operating income (loss) 8.0 (46.0) 76.6 13.1
Interest expense (14.4) (14.4) (58.9) (56.5)
Non-recurring merger and
tender offer expenses - 0.5 - (4.2)
Other non-operating income
(expense) (0.7) 1.5 (1.8) 1.8
Income (loss) from continuing
operations before income taxes,
minority interest in (income) loss
of subsidiaries, loss from
unconsolidated joint ventures,
extraordinary items and cumulative
effect of change in accounting
principle (7.1) (58.4) 15.9 (45.8)
Income tax expense (benefit) (0.2) (14.6) 7.2 (10.1)
Minority interest in (income) loss
of subsidiaries 0.6 (2.6) (4.3) (9.2)
Loss from unconsolidated joint
ventures (1.2) (1.7) (3.8) (2.9)
Net income (loss) from continuing
operations before extraordinary
items and cumulative effect of
change in accounting principle (7.5) (48.1) 0.6 (47.8)
Discontinued operations:
Loss from discontinued operations
before income tax (including
estimated loss on disposal of
$28.2 million in 2002) (9.6) (23.0) (57.8) (32.3)
Income tax benefit - (3.4) - (6.8)
Net loss on discontinued
operations (9.6) (19.6) (57.8) (25.5)
Extraordinary items:
Gain (loss) on early
extinguishments of debt,
net of income tax - - (1.1) 0.7
Cumulative effect of change in
accounting principle, net - - (74.2) -
Net loss (17.1) (67.7) (132.5) (72.6)
Preferred dividends 7.6 6.8 29.4 21.0
Loss attributable to common
stockholders $ (24.7) $ (74.5) $ (161.9) $ (93.6)
EBITDA:
Income (loss) before tax $ (7.1) $ (58.4) $ 15.9 $ (45.8)
Interest expense 14.4 14.4 58.9 56.5
Depreciation 7.6 7.2 29.3 26.5
Amortization 0.9 1.9 1.3 6.8
EBITDA 15.8 (34.9) 105.4 44.0
Less tender offer and merger
costs - (0.5) - 4.2
Less restructuring charges - 33.4 - 33.4
Less special charges - 26.4 - 32.4
Adjusted EBITDA $15.8 $24.4 $105.4 $114.0
DELCO REMY INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
December 31 December 31
2002 2001
ASSETS
Current Assets
Cash and cash equivalents $12.9 $23.9
Trade accounts receivable, net 149.6 155.4
Inventories 289.9 283.9
Assets of discontinued operations 3.6 41.4
Other current assets 42.8 43.0
Total Current Assets 498.8 547.6
Property and equipment, net 169.7 175.8
Goodwill, net 122.9 180.2
Deferred financing costs 17.3 12.6
Other assets 40.8 31.0
Total Assets $849.5 $947.2
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $143.4 $128.8
Accrued restructuring charges 10.8 27.9
Other accrued liabilities 77.1 66.7
Liabilities of discontinued operations 6.5 8.6
Short-term debt 30.2 6.8
Total Current Liabilities 268.0 238.8
Long-term debt 596.4 593.2
Other noncurrent liabilities 49.8 42.6
Minority interest in subsidiaries 17.9 30.1
Redeemable preferred stock 274.1 244.7
Stockholders' Deficit (356.7) (202.2)
Total Liabilities and Stockholders' Deficit $849.5 $947.2
DELCO REMY INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Year Ended
December 31
2002 2001
Operating activities:
Net loss $(132.5) $(72.6)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Cumulative effect of change in accounting
principle 74.2 -
Loss from discontinued operations 29.6 25.5
Loss on disposal of discontinued operations 28.2 -
Extraordinary items 1.1 (0.7)
Depreciation 29.3 26.5
Amortization 1.3 6.8
Change in net working capital excluding
restructuring and special charges 18.8 (31.2)
Restructuring charges - 33.4
Cash payments for restructuring charges (16.9) (6.5)
Non-cash special charges - 32.4
Other, net 13.4 2.2
Net cash provided by operating activities
of continuing operations 46.5 15.8
Investing activities:
Acquisitions, net of cash acquired (17.3) (28.9)
Purchases of property and equipment (20.4) (20.0)
Investments in joint ventures (3.0) (8.7)
Net cash used in investing activities
of continuing operations (40.7) (57.6)
Financing activities:
Net borrowings under revolving line of credit
and other 15.3 75.0
Deferred financing costs (7.8) (5.5)
Merger and tender offer costs - (5.3)
Distributions to minority interests (1.8) (0.8)
Net cash provided by financing activities
of continuing operations 5.7 63.4
Effect of exchange rate changes on cash 2.2 (0.7)
Cash flows of discontinued operations (24.7) (19.4)
Net increase (decrease) in cash and cash
equivalents (11.0) 1.5
Cash and cash equivalents at beginning of year 23.9 22.4
Cash and cash equivalents at end of year $12.9 $23.9
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