J.L. French Automotive Castings, Inc. Announces Third Quarter Results
MINNEAPOLIS--Nov. 4, 2003--J.L. French Automotive Castings, Inc., today announced results for its third quarter and nine months ended September 30, 2003.The company reported third-quarter revenues of $114.2 million compared to $132.6 million in the 2002 period. Operating income before the impact of restructuring and impairment charges was $7.0 million versus $10.9 million in the prior-year quarter. The net loss was $116.4 million versus a net loss of $1.6 million in the third quarter last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) before restructuring and impairment charges decreased to $18.2 million from $22.6 million in the third quarter of 2002. EBITDA before restructuring and impairment charges and loss contract reserve reversals was $17.9 million in the third quarter of 2003 compared to $21.9 million in the 2002 period. Cash interest expense was $15.2 million, up from $12.3 million in the third quarter of 2002 as a result of higher weighted average interest rates in the 2003 period.
During the third quarter of 2003, the company recorded restructuring and impairment charges of $104.5 million. Approximately $96.0 million represents a non-cash charge to write off goodwill pursuant to Statement of Financial Accounting Standards No. 142. Approximately $6.7 million relates to a non-cash write-off of assets at the company's Saltillo, Mexico facility. The remaining $1.8 million primarily represents expenses associated with the Grandville, Mich., facility, which was closed in the second quarter of 2003.
"Our third-quarter revenues were impacted by decreased production levels at our largest customer, Ford Motor Company," said Jack Falcon, president and chief executive officer. "Despite the lower production levels, we have been successful in reducing our breakeven point and in improving productivity. We are continuing to aggressively seek new business to utilize our available capacity. To date, we have been awarded business from three new customers that will begin generating revenues in the first quarter of 2004."
For the first nine months of 2003, revenues were $390.8 million, a decrease of $22.9 million compared to the 2002 period. Operating income before the impact of restructuring and impairment charges was $34.6 million compared to $40.3 million for the first nine months of 2002. The net loss totaled $125.7 million versus a net loss of $201.6 million in the prior-year period. Before restructuring and impairment charges and loss contract reserve reversals, EBITDA decreased to $67.0 million, or 17.1 percent of sales, in the nine months of 2003 compared to $69.6 million, or 16.8 percent of sales, in the same period last year. As a result of the higher weighted average interest rates in the 2003 period, cash interest expense increased to $44.1 million versus $36.1 million for the first nine months of 2002. During the first nine months of 2003, the company recorded non-cash income of $0.6 million related to exchange rate fluctuations on debt denominated in foreign currencies.
The following table reconciles net income (loss) to operating income before restructuring and impairment charges, EBITDA before restructuring and impairment charges, and EBITDA before restructuring and impairment charges and loss contract reserve reversals for the three and nine months ended September 30, 2003, and 2002:
Three months ended Nine months ended
($ in thousands) September 30, September 30,
-------------------- ---------------------
2003 2002 2003 2002
---------- --------- ---------- ----------
Net income (loss) $(116,387) $(1,626) $(125,662) $(201,601)
Cumulative effect of
accounting change - - - 202,622
---------- --------- ---------- ----------
Income (loss) before
cumulative effect of
accounting change (116,387) (1,626) (125,662) 1,021
Provision (benefit) for
income taxes 277 (464) 374 1,315
Restructuring and
impairment charges 104,464 - 104,599 -
Interest expense, net 18,671 12,960 55,858 37,979
Other (income) - - (617) -
---------- --------- ---------- ----------
Operating income before
restructuring and
impairment charges (1) 7,025 10,870 34,552 40,315
Depreciation and
amortization 11,205 11,767 34,535 34,472
---------- --------- ---------- ----------
EBITDA before
restructuring and
impairment charges (1) 18,230 22,637 69,087 74,787
Loss contract reserve
reversals (357) (706) (2,079) (5,206)
---------- --------- ---------- ----------
EBITDA before
restructuring and
impairment charges and
loss contract reserve
reversals (1) $17,873 $21,931 $67,008 $69,581
========== ========= ========== ==========
(1) Operating income before restructuring and impairment charges,
EBITDA before restructuring and impairment charges and EBITDA
before the restructuring and impairment charges and loss
contract reserve reversals do not represent and should not be
considered as alternatives to net income or cash flow from
operations, as determined by accounting principles generally
accepted in the United States, or GAAP, and our calculations
thereof may not be comparable to that reported by other
companies. EBITDA before restructuring and impairment charges
and EBITDA before restructuring and impairment charges and
loss contract reserve reversals are included in this press
release because they are a basis upon which we assess our
liquidity position and because certain covenants in our
borrowing arrangements are tied to similar measures. We also
believe that it is widely accepted that EBITDA provides useful
information regarding a company's ability to service and/or
incur indebtedness. This belief is based on our negotiations
with our lenders who have indicated that the amount of
indebtedness we will be permitted to incur will be based, in
part, on our EBITDA. EBITDA before restructuring and
impairment charges and EBITDA before restructuring and
impairment charges and loss contract reserve reversals do not
take into account our working capital requirements, debt
service requirements and other commitments and, accordingly,
is not necessarily indicative of amounts that may be available
for discretionary use.
J.L. French Automotive Castings, Inc., a privately held automotive supplier, is a leading global designer and manufacturer of highly engineered aluminum die cast automotive parts including oil pans, engine front covers and transmission cases. The company has manufacturing facilities in Sheboygan, Wis.; Glasgow, Ky.; San Andres de Echevarria, Spain; Saltillo, Mexico; as well as five plants in the United Kingdom. The company is based in Sheboygan, Wis., and has its corporate office in Minneapolis, Minn.
This press release contains forward-looking statements that are subject to risks and uncertainties. These statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," or similar expressions. These statements are based on certain assumptions that the company has made in light of its experience in the industry as well as its perspective of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Actual results may differ materially from the anticipated results because of certain risks and uncertainties, including but not limited to (i) unanticipated difficulties servicing the level of indebtedness at the company, (ii) costs or operational difficulties related to integrating the operations of the acquired entities with those of the company being greater than expected; (iii) labor disputes involving the company or its significant customers, (iv) risks associated with conducting business in foreign countries, and (v) general economic or business conditions affecting the automotive industry, either nationally or regionally, being less favorable than expected.
J.L. FRENCH AUTOMOTIVE CASTINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands - unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30,
------------- -------------
2003 2002 2003 2002
---- ---- ---- ----
Sales $114,237 $132,604 $390,828 $413,739
Cost of sales (1) 103,633 119,479 344,837 362,883
---------- --------- ---------- ----------
Gross profit 10,604 13,125 45,991 50,856
Selling, general and
administrative expenses (1) 3,579 2,255 11,439 10,541
Restructuring and impairment
charges 104,464 - 104,599 -
---------- --------- ---------- ----------
Operating income (loss) (97,439) 10,870 (70,047) 40,315
Cash interest expense 15,172 12,265 44,149 36,140
Deferred interest and
amortization of debt issue
costs 3,499 695 11,709 1,839
---------- --------- ---------- ----------
Interest expense, net 18,671 12,960 55,858 37,979
Other (income) - - (617) -
---------- --------- ---------- ----------
Income (loss) before
provision (benefit) for
income taxes and
cumulative effect of
change in accounting
principle (116,110) (2,090) (125,288) 2,336
Provision (benefit) for
income taxes 277 (464) 374 1,315
---------- --------- ---------- ----------
Income (loss) before
cumulative effect of change
in accounting principle (116,387) (1,626) (125,662) 1,021
Cumulative effect of change
in accounting principle --
writeoff of goodwill -- -- -- (202,622)
---------- --------- ---------- ----------
Net income (loss) $(116,387) $(1,626) $(125,662) $(201,601)
========== ========= ========== ==========
(1) Beginning in 2003, the Company began classifying certain plant
related expenses as a cost of sales. Previously, these costs
were classified as selling, general and administrative
expenses. Results for the three and nine months ended
September 30, 2002 have been restated to conform to the new
presentation. The restatement had no impact on previously
reported operating income (loss) or net income (loss).
J.L. FRENCH AUTOMOTIVE CASTINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands - unaudited)
September 30, December 31,
Assets 2003 2002
------ ---- ----
Current assets:
Cash and cash equivalents $816 $3,337
Accounts receivable, net 53,299 49,574
Inventories 34,679 35,357
Assets held for sale 3,276 --
Other current assets 15,583 13,437
------------- ------------
Total current assets 107,653 101,705
Property, plant and equipment, net 251,202 250,969
Intangible and other assets, net 14,935 112,265
------------- ------------
$373,790 $464,939
============= ============
Liabilities and Stockholders' Deficit
-------------------------------------
Current liabilities:
Current portion of long-term debt $17,338 $12,342
Accounts payable 57,109 56,187
Accrued liabilities 38,821 31,107
------------- ------------
Total current liabilities 113,268 99,636
Long-term debt, net of current portion 418,946 398,221
Subordinated notes 175,000 175,000
Other noncurrent liabilities 24,523 26,593
------------- ------------
Total liabilities 731,737 699,450
------------- ------------
Redeemable common stock 60,000 60,000
Stockholders' deficit:
Additional paid-in capital 87,145 87,538
Accumulated deficit (496,995) (371,333)
Accumulated other comprehensive loss (8,097) (10,716)
------------- ------------
Total stockholders' deficit (417,947) (294,511)
------------- ------------
$373,790 $464,939
============= ============