Delco Remy Announces Interim Decision in Mexico Joint Venture Arbitration Proceedings
ANDERSON, Ind., March 22 -- Delco Remy International, Inc. today announced that the panel of arbitrators has issued an interim decision in the dispute with its Mexican joint venture partner, GCID Autopartes, S.A. de C.V. that resolves the Company's financial obligations to GCID in an amount consistent with its previous guidance. The Company currently estimates that the total net payments for GCID's minority partnership interest, the award for past service fees, and other claims, including interest and costs, will be approximately $18 million. The award is subject to finalization by the arbitrators and is expected to be paid in the second quarter.
Commenting on the decision, Thomas J. Snyder, President and CEO, said, "We are pleased to put this uncertainty behind us and are now able to complete the process begun last year of transitioning the joint venture operations to our nearby lower cost facilities. The arbitrators' decision also allows us to hire the employees previously provided to us by our former partner. As a result, we can eliminate unnecessary costs and begin realizing anticipated savings in our Mexico operations."
Under U.S. generally accepted accounting principles, the Company is required to reflect approximately $14 million of the estimated costs associated with the arbitrators' interim decision in its 2003 financial results. Accordingly, the Company is adjusting its operating loss for the year ended December 31, 2003 from $64.5 million, as previously reported, to $78.8 million. However, as these amounts are treated as an adjustment to EBITDA, the Company's Adjusted EBITDA for 2003, as previously reported, is unchanged. The revised 2003 financial results are set forth on the accompanying Condensed Consolidated Statements of Operations, Balance Sheets and Statements of Cash Flows. The revised results for 2003 will be reflected in the Company's Annual Report on Form 10-K to be filed with the Securities and Exchanges Commission. The balance of the costs associated with the decision will be recorded in the Company's books on the date the final award is paid.
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:
This press announcement contains statements relating to future results of the Company that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 (the "Act") or by the Securities and Exchange Commission ("SEC") in its rules, regulations and releases. The Company desires to take advantage of the "safe harbor" provisions in the Act for forward-looking statements made in this press announcement. Any statements set forth in this press announcement with regard to its expectations as to financial results and other aspects of its business may constitute forward-looking statements. These statements relate to the Company's future plans, objectives, expectations and intentions and may be identified by words like "believe," "expect," "may," "will," "should," "seek," or "anticipate," and similar expressions. The Company cautions readers that any such forward-looking statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks including, but not limited to, risks associated with the uncertainty of future financial results, pending arbitration and other litigation proceedings, 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 SEC. Due to these uncertainties, the Company cannot assure readers that any forward-looking statements will prove to have been correct.
DELCO REMY INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions)
Three Month Period Twelve Month Period
Ended December 31 Ended December 31
2003 2002 2003 2002
(unaudited)
Net sales $261.0 $250.5 $1,053.2 $1,027.0
Cost of goods sold 216.9 215.5 865.4 858.8
Cost of goods sold - special charges:
Core inventory valuation 104.1 - 104.1 -
Litigation settlement 14.3 - 14.3 -
Gross (loss) profit (74.3) 35.0 69.4 168.2
Selling, general and
administrative expenses 22.9 25.4 98.7 97.7
Restructuring charges (credits) 2.2 - 49.5 (4.4)
Operating (loss) income (99.4) 9.6 (78.8) 74.9
Interest expense 15.8 14.2 62.1 56.4
Income (loss) from continuing
operations before income taxes,
minority interest, loss from
unconsolidated joint ventures
and cumulative effect of change
in accounting principle (115.2) (4.6) (140.9) 18.5
Income tax expense 24.7 0.5 36.8 8.5
Minority interest (2.4) (0.6) (0.1) 4.3
Loss from unconsolidated
joint ventures 0.5 1.1 6.4 3.8
Net (loss) income from
continuing operations before
cumulative effect of change
in accounting principle (138.0) (5.6) (184.0) 1.9
Discontinued operations:
Loss from discontinued
operations, net of tax - (9.7) (4.9) (32.0)
(Loss) gain on disposal of
businesses, net of tax (0.1) (1.8) 2.3 (28.2)
Net loss from discontinued
operations (0.1) (11.5) (2.6) (60.2)
Cumulative effect of change
in accounting principle, net - - - (74.2)
Net loss (138.1) (17.1) (186.6) (132.5)
Accretion for redemption of
preferred stock 8.5 7.6 32.9 29.4
Net loss attributable to
common stockholders $(146.6) $(24.7) $(219.5) $(161.9)
Adjusted EBITDA:
(Loss) income before tax $(115.2) $(4.6) $(140.9) $18.5
Interest expense 15.8 14.2 62.1 56.4
Depreciation and amortization 6.5 7.4 24.6 27.3
Restructuring charges
(credits) 2.2 - 49.5 (4.4)
Special charges 118.4 - 118.4 -
Adjusted EBITDA $27.7 $17.0 $113.7 $97.8
Adjusted EBITDA is not a measure of performance under accounting principles generally accepted in the United States (GAAP). The Company believes Adjusted EBITDA is a meaningful measure of performance that is commonly utilized in the industry to analyze operating performance, liquidity and entity valuation. Adjusted EBITDA should not be construed as income from operations, net income or net cash flow from operating activities as determined by GAAP.
DELCO REMY INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
December 31 December 31
2003 2002
ASSETS
Current Assets
Cash and cash equivalents $21.3 $12.4
Trade accounts receivable, net 151.2 143.0
Inventories 214.8 281.0
Assets of discontinued operations - 40.5
Other current assets 28.9 41.3
Total Current Assets 416.2 518.2
Property and equipment, net 135.7 157.0
Goodwill, net 132.6 119.0
Deferred financing costs 14.0 17.3
Other assets 25.5 41.3
Total Assets $724.0 $852.8
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $161.8 $138.5
Accrued restructuring charges 10.9 5.2
Other accrued liabilities 134.8 75.2
Liabilities of discontinued operations - 17.2
Short-term debt 31.4 30.2
Total Current Liabilities 338.9 266.3
Long-term debt 593.1 596.4
Accrued restructuring charges 8.8 4.7
Other noncurrent liabilities 37.0 50.2
Minority interest in subsidiaries 15.2 17.8
Redeemable preferred stock 307.0 274.1
Stockholders' Deficit (576.0) (356.7)
Total Liabilities and Stockholders' Deficit $724.0 $852.8
DELCO REMY INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Twelve Months Ended
December 31
2003 2002
Operating activities:
Net loss attributable to common stockholders $(219.5) $(161.9)
Adjustments to reconcile net loss attributable to
common stockholders to cash provided by
operating activities:
Cumulative effect of change in accounting principle - 74.2
Loss from discontinued operations 4.9 32.0
(Gain) loss on disposal of discontinued operations (2.3) 28.2
Depreciation and amortization 24.6 27.3
Accretion for redemption of preferred stock 32.9 29.4
Change in net working capital, net of acquisitions,
restructuring and non-cash special charges 8.6 18.4
Restructuring charges (credits) 49.5 (4.4)
Cash payments for restructuring charges (15.4) (15.8)
Special charges 118.4 -
Other, net 25.5 17.8
Net cash provided by operating activities
of continuing operations 27.2 45.2
Investing activities:
Acquisitions, net of cash acquired (18.9) (17.2)
Net proceeds on sale of businesses 30.0 -
Purchases of property and equipment (20.0) (19.2)
Investments in joint ventures (0.1) (3.0)
Net cash used in investing activities
of continuing operations (9.0) (39.4)
Financing activities:
Net borrowings under revolving line of credit
and other (2.2) 15.3
Deferred financing costs (2.0) (7.8)
Distributions to minority interests - (1.8)
Net cash (used in) provided by financing activities
of continuing operations (4.2) 5.7
Effect of exchange rate changes on cash 1.0 2.0
Cash flows of discontinued operations (6.1) (23.7)
Net increase (decrease) in cash and
cash equivalents 8.9 (10.2)
Cash and cash equivalents at beginning of year 12.4 22.6
Cash and cash equivalents at end of year $21.3 $12.4
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