MSX International Announces Third Quarter 2003 Financial Results
SOUTHFIELD, Mich., Nov. 7, 2003 -- MSX International, a global provider of technical business services, announced net sales totaling $167.9 million for the third fiscal quarter of 2003, which ended September 28, 2003. Compared to the third quarter of 2002, net sales declined 16.3% from $200.6 million. Lower net sales are due to cost containment initiatives by major U.S. and European automotive customers, reduced demand for information technology staffing, and greater than customary seasonal factors.
Included in third quarter operating results are $2.0 million of restructuring and severance costs related to staff reduction actions implemented during the quarter. Financial results also reflect a non-cash loss of $1.8 million prompted by the sale of selected assets of our translation management business. As a result, the company recorded a slight operating loss of $(651) thousand. Similar charges are expected in the fourth quarter of 2003, when the remaining actions included in the company's cost management plan are completed. The plan, which affects about 300 employees in Europe and the United States, is expected to generate approximately $30 million in annualized savings when fully implemented in 2004.
Thomas T. Stallkamp, vice chairman and chief executive officer, commented, "Recently directed cost actions at selected customers impacted our near-term financial results. After recognizing the potential impact, we responded quickly with a plan and actions to reduce variable costs proportionally. At the same time, we maintained availability under our bank revolver through disciplined cash management. Robert Netolicka, who joined us in June as president and chief operating officer, is providing aggressive leadership for these initiatives and for the expansion of our services beyond our traditional customers. Looking ahead, we are committed to providing the outsourced technical business services our customers require to meet their individual growth objectives."
Interest expense totaled $9.4 million in the third quarter, reflecting an increase of $2.5 million from the prior year due primarily to a $2.4 million non-cash charge in connection with the company's recent refinancing of senior secured debt. Due to continuing lower operating performance of selected businesses, the company also recorded a non-cash valuation allowance of $17.0 million to establish reserves against a substantial portion of its deferred tax assets. As a result, the company's third quarter consolidated net loss was $(24.9) million.
MSX International will host a conference call at 2:00 p.m. EST on Monday, November 10, to review these results. To listen to the call, dial 212-676-5242 and provide reservation number 21164687. A replay of the call will be available beginning at 4:00 p.m. EST Monday, November 10, at 800-633-8284 (Domestic) or 402-977-9140 (International), with the same reservation number.
MSX International, headquartered in Southfield, Mich., is a global provider of technical business services. The company combines innovative people, standardized processes and today's technologies to deliver a collaborative, competitive advantage. MSX International has over 7,000 employees in 25 countries. Visit their Web site at http://www.msxi.com/ .
Certain of the statements made in this press release including the success of restructuring activities and other operational improvements constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current management projections and expectations. They involve significant risks and uncertainties. As such, they are not guarantees of future performance. MSX International disclaims any intent or obligation to update such statements.
Actual results may vary materially from those in the forward-looking statements as a result of any number of factors, many of which are beyond the control of management. These important factors include: our substantial indebtedness; our reliance on major customers in the automotive industry, including the timing of their product development and other initiatives, and the value of our associated accounts receivable from them; the market demand for our technical business services in general; our ability to recruit and place qualified personnel; delays or unexpected costs associated with cost reduction efforts; risks associated with operating internationally, including economic, political and currency risks; and risks associated with our acquisition strategy. Additional information concerning these and other factors are discussed under the heading "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K (dated March 27, 2003), in the Company's Registration Statement on Form S-4 (filed September 30, 2003; effectiveness pending), and in other filings with the Securities and Exchange Commission.
MSX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
for the fiscal quarters and fiscal nine months ended September 28, 2003
and September 29, 2002
Fiscal Quarter Ended Fiscal Nine Months Ended
September 29, September 29,
September 28, 2002 September 28, 2002
2003 (as restated) 2003 (as restated)
(in thousands)
Net sales $167,860 $200,556 $536,946 $618,170
Cost of sales 149,870 173,119 475,679 537,479
Gross profit 17,990 27,437 61,267 80,691
Selling, general
and administrative
expenses 14,842 19,432 46,267 59,981
Restructuring
and severance
costs 2,002 1,314 3,902 1,739
Loss on asset
impairment and
sale 1,797 - 1,893 -
Operating
income
(loss) (651) 6,691 9,205 18,971
Interest
expense, net 9,406 6,892 22,713 19,459
Loss before
income taxes,
minority
interests,
and equity in
affiliates (10,057) (201) (13,508) (488)
Income tax
provision 14,764 229 14,998 1,896
Less minority
interests and
equity in
affiliates,
net of taxes 40 (94) (195) 522
Loss before
cumulative
effect of
accounting
change for
goodwill
impairment (24,861) (336) (28,311) (2,906)
Cumulative
effect of
accounting
change for
goodwill
impairment,
net of taxes
of $9,745 - - - (38,102)
Net loss (24,861) (336) (28,311) (41,008)
Preferred stock
dividends (2,329) (2,067) (6,784) (6,023)
Net loss
available to
common
shareholders $(27,190) $(2,403) $(35,095) $(47,031)
MSX INTERNATIONAL, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
for the fiscal quarters and fiscal nine months ended September 28, 2003
and September 29, 2002
Fiscal Quarter Ended Fiscal Nine Months Ended
September 28, September 29, September 28, September 29,
2003 2002 2003 2002
(in thousands)
Reconciliation
of EBITDA:
Operating
income (loss) $(651) $6,691 $9,205 $18,971
Michigan Single
Business and
similar taxes 725 717 2,499 2,510
EBIT, as defined 74 7,408 11,704 21,481
Depreciation 4,208 4,798 13,653 13,921
Restructuring
and severance
costs 2,002 1,314 3,902 1,739
Loss on asset
impairment and
sale 1,797 - 1,893 -
EBITDA before
restructuring and
severance costs
and asset
disposition,
as defined $8,081 $13,520 $31,152 $37,141