J.L. French Automotive Castings, Inc. Announces 2003 Fourth Quarter and Year-End Results
MINNEAPOLIS--March 10, 2004--J.L. French Automotive Castings, Inc., today reported fourth-quarter revenues for the period ended December 31, 2003 of $130.3 million compared to $136.7 million in the 2002 period.Operating income before the impact of restructuring and impairment charges, loss on sale of business and loss on early retirement of debt was $15.5 million versus $14.7 million in the prior-year quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) before restructuring and impairment charges, loss on sale of business assets, loss on early retirement of debt and loss contract reserve reversals was $26.5 million, or 20.4 percent of sales, in the fourth quarter of 2003 compared to $25.4 million, or 18.6 percent of sales, in the 2002 period. Cash interest expense was $16.1 million, up from $12.7 million in the fourth quarter of 2002 as a result of higher weighted average interest rates and debt levels in the 2003 period.
During the fourth quarter of 2003, the company recorded restructuring and impairment charges of $1.8 million, which primarily represents expenses associated with the Grandville, MI., facility, which was closed in the second quarter of 2003 and certain charges of $0.8 million related to the restructuring of its United Kingdom operations. In the fourth quarter of 2002, the company recorded a restructuring charge of $21.3 million related to the closure of the Grandville, MI, facility.
"We continued to be affected by lower automotive production levels during the fourth quarter of 2003," said Jack Falcon, president and chief executive officer. "These lower production levels have accelerated our cost reduction and productivity improvement efforts. Our previously announced restructuring of our UK operations reduce our costs, and we have added key top management to our leadership team who will help us achieve our profitability goals."
For the year ended December 31, 2003, revenues were $521.1 million, a decrease of $29.4 million compared to 2002. EBITDA before the impact of restructuring and impairment charges, loss on sale of business assets, loss on early retirement of debt and loss contract reserve reversals decreased to $93.6 million, or 18.0 percent of sales, in 2003 compared to $95.0 million, or 17.3 percent of sales, in 2002. As a result of the higher weighted average interest rates and debt levels in 2003, cash interest expense increased to $60.2 million versus $48.9 million for 2002. During 2003, the company recorded non-cash income of $0.6 million related to exchange rate fluctuations on debt denominated in foreign currencies.
Restructuring and impairment charges for the year ended December 31, 2003 totaled $106.4 million and consisted of $96.0 million write-off of goodwill related to the Sheboygan and Spain reporting units in the third quarter, $4.9 million write-down of assets at the Saltillo, Mexico facility, $2.2 million write-down of assets of the UK operations, and $3.3 million in restructuring costs.
The following table reconciles the reported net loss to operating income before restructuring and impairment charges, loss on sale of business assets, and loss on early retirement of debt, EBITDA before restructuring and impairment charges, loss on sale of business assets, and loss on early retirement of debt, and EBITDA before restructuring and impairment charges, loss on sale of business assets, loss on early retirement of debt and loss contract reserve reversals for the three months and year ended December 31, 2003, and 2002:
Three months ended Year ended
(in thousands) December 31, December 31,
------------------ ---------------------
2003 2002 2003 2002
-------- --------- ---------- ----------
Net loss $(7,027) $(70,512) $(132,689) $(272,113)
Cumulative effect of
accounting change -- -- -- 202,622
-------- --------- ---------- ----------
Loss before cumulative
effect of accounting change (7,027) (70,512) (132,689) (69,491)
Provision for income taxes 941 37,213 1,315 38,528
Restructuring and impairment
charges 1,815 21,308 106,414 21,308
Loss on sale of business
assets 808 -- 808 --
Loss on early retirement of
debt -- 13,507 -- 13,507
Interest expense 18,981 13,168 74,839 51,147
Other (income) -- -- (617) --
-------- --------- ---------- ----------
Operating income before
restructuring and impairment
charges, loss on sale of
business and loss on early
retirement of debt (1) 15,518 14,684 50,070 54,999
Depreciation and amortization 11,205 11,756 45,738 46,228
-------- --------- ---------- ----------
EBITDA before restructuring
and impairment charges,
loss on sale of business
and loss on early
retirement of debt (1) 26,723 26,440 95,808 101,227
Loss contract reserve
reversals (179) (1,043) (2,258) (6,249)
-------- --------- ---------- ----------
EBITDA before restructuring
and impairment charges,
loss on sale of business,
loss on early retirement
of debt and loss contract
reserve reversals (1) $26,544 $25,397 $93,550 $94,978
======== ========= ========== ==========
(1) Operating income before restructuring and impairment charges, loss
on sale of business assets, and loss on early retirement of debt,
EBITDA before restructuring and impairment charges, loss on sale of
business assets, and loss on early retirement of debt and EBITDA
before the restructuring and impairment charges, loss on sale of
business assets, loss on early retirement of debt 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 of
America, or GAAP, and our calculations thereof may not be comparable
to that reported by other companies. EBITDA before restructuring and
impairment charges, loss on sale of business assets, and loss on early
retirement of debt and EBITDA before restructuring and impairment
charges, loss on sale of business assets, loss on early retirement of
debt 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,
loss on sale of business assets, and loss on early retirement of debt
and EBITDA before restructuring and impairment charges, loss on sale
of business assets, loss on early retirement of debt 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.
About J.L. French Automotive Castings, Inc.
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, WI; Glasgow, KY; Benton Harbor, MI; San Andres de Echevarria, Spain; Saltillo, Mexico; as well as five plants in the United Kingdom. The company is based in Sheboygan, WI, and has its corporate office in Minneapolis, MN.
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 or achieving compliance with debt covenants, (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
(In thousands - unaudited)
Three Months Ended Year Ended
------------------ ----------
December 31, December 31,
------------ ------------
2003 2002 2003 2002
--------- --------- ---------- ----------
Sales $130,255 $136,708 $521,083 $550,447
Cost of sales (1) 107,790 118,425 452,627 481,308
--------- --------- ---------- ----------
Gross profit 22,465 18,283 68,456 69,139
Selling, general and
administrative expenses (1) 6,947 3,599 18,386 14,140
Restructuring and impairment
charges 1,815 21,308 106,414 21,308
Loss on sale of business
assets 808 -- 808 --
Loss on early retirement of
debt (2) -- 13,507 -- 13,507
--------- --------- ---------- ----------
Operating income (loss) 12,895 (20,131) (57,152) 20,184
Cash interest expense 16,063 12,715 60,212 48,855
Non-cash interest expense 2,918 453 14,627 2,292
--------- --------- ---------- ----------
Interest expense 18,981 13,168 74,839 51,147
Other income -- -- (617) --
--------- --------- ---------- ----------
Loss before income taxes
and cumulative effect of
change in accounting
principle (6,086) (33,299) (131,374) (30,963)
Income tax provision 941 37,213 1,315 38,528
--------- --------- ---------- ----------
Loss before cumulative effect
of change in accounting
principle (7,027) (70,512) (132,689) (69,491)
Cumulative effect of change
in accounting principle --
write-off of goodwill -- -- -- 202,622
--------- --------- ---------- ----------
Net loss $(7,027) $(70,512) $(132,689) $(272,113)
========= ========= ========== ==========
(1) Beginning in 2003, the Company began classifying certain
plant-related expenses from selling, general administrative expenses
to cost of sales. Results for the three months and year ended December
31, 2002 have been reclassified to conform to the new presentation.
The reclassification had no impact on previously reported operating
income (loss) or net loss.
(2) In the fourth quarter of 2002, the Company recognized a loss on
early retirement of debt totaling $13.5 million. Under new accounting
rules, the loss is reflected as an expense before operating income.
Previously, the loss was recorded as an extraordinary item.
J.L. FRENCH AUTOMOTIVE CASTINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands - unaudited)
December 31, December 31,
Assets 2003 2002
------ ---- ----
Current assets:
Cash and cash equivalents $1,497 $3,337
Accounts receivable, net 46,550 49,574
Inventories 32,623 35,357
Assets held for sale 4,677 --
Other current assets 12,742 13,437
--------- ---------
Total current assets 98,089 101,705
Property, plant and equipment, net 251,993 250,969
Intangibles and other assets, net 16,599 112,265
--------- ---------
$366,681 $464,939
========= =========
Liabilities and Stockholders' Deficit
-------------------------------------
Current liabilities:
Current portion of long-term debt $23,333 $12,342
Accounts payable 52,332 56,187
Accrued liabilities 33,485 31,107
--------- ---------
Total current liabilities 109,150 99,636
Long-term debt, net of current portion 419,192 398,221
Subordinated notes 175,000 175,000
Other noncurrent liabilities 21,680 26,593
--------- ---------
Total liabilities 725,022 699,450
Redeemable common stock 60,000 60,000
Stockholders' deficit:
Common stock 1 1
Additional paid-in capital 87,144 87,537
Accumulated deficit (504,022) (371,333)
Accumulated other comprehensive loss (1,464) (10,716)
--------- ---------
Total stockholders' deficit (418,341) (294,511)
--------- ---------
$366,681 $464,939
========= =========