(Delco)Remy International Announces Record Sales and Strong Second Quarter 2004 Operating Results
ANDERSON, Ind., Aug. 3, 2004 -- Remy International, Inc. ("Remy International" or the "Company" and formerly Delco Remy International, Inc.), a leading worldwide manufacturer and remanufacturer of automotive electrical and drivetrain/powertrain products, today announced record net sales from continuing operations of $295.6 million and Adjusted EBITDA of $34.2 million in the second quarter ended June 30, 2004. Net sales increased $23.4 million, or 8.6%, and Adjusted EBITDA increased $3.1 million, or 9.8%, compared with the second quarter of 2003. Operating income of $27.1 million in the second quarter of 2004 increased $0.8 million, or 3.1%, over the comparable period of 2003.
Second Quarter Highlights:
-- Net sales - second consecutive quarterly record.
-- Gross profit - at 19.5% is 150 basis points over 1st quarter 2004 and
80 basis points over 2nd quarter 2003.
-- Adjusted EBITDA - solid growth of 9.8% over the second quarter of
2003.
-- Cash flows from operating activities - $11.6 million improvement over
2nd quarter 2003, and $19.7 million improvement year to date.
-- Global business expansion:
* OEM - awards for $20 million of annual new starter and alternator
business, equating to $70 million of sales over the life of the
contract.
* Aftermarket - obtained $11 million of new independent distributor
and OES business in Europe.
* New products - awarded first major hybrid motor business,
representing almost $100 million in sales over the life of the
award.
* Far East expansion - site selection completed for the formation of
a Wholly Owned Foreign Enterprise in China.
-- Announced change in corporate name in connection with the Company's 10
year anniversary.
Continued strong customer demand in the heavy-duty and industrial sectors, higher Automotive OEM volume from new alternator business awards and improved remanufactured transmission, diesel engine and parts volume all contributed to the year over year sales growth.
Savings resulting from the restructuring and other cost reduction actions taken in 2003, combined with strong sales growth, generated the significant year over year gross margin and Adjusted EBITDA improvements.
Commenting on the second quarter results, Thomas J. Snyder, President and CEO, stated, "We continued our momentum with another quarter of record sales. We continue to focus on further cost improvements while, at the same time, increasing our investment in product engineering and marketing initiatives."
Net sales of $588.8 million in the first six months of 2004 were a first half record and increased $60.1 million, or 11.4%, over the comparable period in 2003. Adjusted EBITDA for the six months ended June 30, 2004 increased 16.9% to $65.2 million compared to last year's first half and operating income of $51.2 million compares with an operating loss of $1.6 million in 2003. Included in operating income are restructuring charges of $1.8 million and $44.6 million that were recorded in the first six months of 2004 and 2003, respectively.
Cash used in operating activities improved $11.6 million year over year in the second quarter and $19.7 million in the first six months due to higher earnings, improved working capital performance and lower restructuring payments. The increase in debt from year end includes acquisition payments in the first half of the year totaling $19.3 million and financing costs totaling $11.5 million in connection with the Company's refinancing actions. Subsequent to the end of the second quarter, the Company made net cash payments totaling $17.3 million to the former minority shareholders of our Mexican operations. This payment, coupled with acquisition payments of $19.3 million in the second quarter of 2004, completes the significant cash payments for prior acquisitions.
Recent Developments:
During the second quarter, the Company completed several major global expansion initiatives.
The Company's Automotive OE group was awarded $20 million in annual new alternator and starter business. This award equates to over $70 million of sales over the life of the contract. Production for these new programs will commence in 2007.
The European Aftermarket operations obtained $11 million in new independent distributor and OES business.
The Company was also awarded its first major hybrid motor business, representing almost $100 million of sales over the life of the award.
Additionally during the second quarter, the Company completed site selection for the formation of a Wholly Owned Foreign Enterprise in China.
Effective August 1, 2004, and coinciding with the ten year anniversary of its separation from General Motors Corporation, the Company announced the change of its corporate name to Remy International, Inc. The Company will continue to market certain starters and heavy-duty alternators for original equipment and aftermarket customers under the Delco Remy trade mark and will add the Remy brand name to its portfolio for a variety of automotive products.
Future Outlook:
Commenting on the remainder of 2004, Snyder said, "The general economic and political uncertainty, and more specifically, the high commodity prices and the increased inventory levels in the light duty automotive business, indicate some weakening in the second half of the year. We believe that with the momentum in operational performance improvements our company has made in the first half of this year, we are solidly positioned to deliver the full year growth previously indicated."
Reconciliation to GAAP:
For a reconciliation of GAAP financial information to the non-GAAP financial information appearing in this release, please refer to the table following the accompanying Condensed Consolidated Statements of Operations.
Second Quarter Conference Call:
Remy International's executive management team will conduct a live conference call on Tuesday August 3 at 10:00 a.m. Eastern Daylight Time (9:00 a.m. Eastern Standard Time) to discuss additional details regarding the Company's performance for the second quarter and the outlook for 2004. The call may be accessed by dialing 888-428-4469 ten minutes prior to the start of the presentation. A replay of the conference will be archived for two weeks, and may be accessed by dialing 800-475-6701 (USA), 320-365-3844 (International), Access Code 740482.
About Remy International, Inc.:
Remy International, Inc., headquartered in Anderson, Indiana, is a leading designer, manufacturer, remanufacturer and distributor of electrical, drivetrain/powertrain and related products for automobiles, light-duty trucks, heavy-duty trucks and other heavy-duty off-road and industrial applications. Products include starter motors, alternators, engines, transmissions, torque converters and fuel systems. The Company also provides exchange services for used components, commonly known as cores, for remanufacturers. Remy International, Inc. 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.
Remy International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Six Months
IN THOUSANDS, For the period
ended June 30, 2004 2003 2004 2003
Net sales $295,578 $272,132 $588,765 $528,702
Cost of goods sold 237,944 221,116 478,411 434,255
Gross profit 57,634 51,016 110,354 94,447
Selling, general and
administrative expenses 29,823 25,207 57,401 51,429
Restructuring charges (credits) 700 (485) 1,795 44,600
Operating income (loss) 27,111 26,294 51,158 (1,582)
Interest expense, net 25,153 16,772 41,355 30,888
Income (loss) from continuing
operations before income taxes,
minority interest and loss from
unconsolidated joint ventures 1,958 9,522 9,803 (32,470)
Income tax (benefit) expense (290) 4,904 1,147 10,164
Minority interest 822 972 1,370 759
Loss from unconsolidated joint
ventures 314 5,012 768 5,727
Net income (loss) from continuing
operations 1,112 (1,366) 6,518 (49,120)
Discontinued operations:
Income (loss) from discontinued
operations, net of tax 346 (640) 88 (4,387)
Gain on disposal of businesses,
net of tax 107 - 215 2,417
Net income (loss) from discontinued
operations, net of tax 453 (640) 303 (1,970)
Net income (loss) 1,565 (2,006) 6,821 (51,090)
Accretion for redemption of preferred
stock 9,356 8,385 17,908 15,941
Net loss attributable to common
stockholders $(7,791) $(10,391) $(11,087) $(67,031)
Adjusted EBITDA:
Operating income (loss) $27,111 $26,294 $51,158 $(1,582)
Depreciation and amortization 6,382 5,320 12,294 12,800
Restructuring charges (credits) 700 (485) 1,795 44,600
Adjusted EBITDA $34,193 $31,129 $65,247 $55,818
Remy International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30 December 31
IN THOUSANDS, At 2004 2003
(unaudited)
Assets:
Current assets:
Cash and cash equivalents $23,184 $21,328
Trade accounts receivable, net 173,349 151,221
Inventories 237,319 214,764
Other current assets 26,361 28,921
Total current assets 460,213 416,234
Property, plant and equipment, net 135,235 135,746
Goodwill, net 138,073 132,571
Other assets 42,446 39,425
Total assets $775,967 $723,976
Liabilities and Stockholders' Deficit:
Current liabilities:
Accounts payable $180,656 $161,828
Accrued restructuring 5,260 10,826
Other liabilities and accrued expenses 123,098 133,222
Liabilities of discontinued operations 906 1,565
Current maturities of long-term debt 24,161 31,397
Total current liabilities 334,081 338,838
Long-term debt, net of current portion 647,301 593,103
Accrued restructuring 8,053 8,801
Other noncurrent liabilities 37,720 37,066
Minority interest 9,953 15,193
Redeemable preferred stock 324,877 306,969
Total stockholders' deficit (586,018) (575,994)
Total liabilities and stockholders' deficit $775,967 $723,976
Remy International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
IN THOUSANDS, For the six months ended June 30, 2004 2003
Cash Flows from Operating Activities:
Net loss attributable to common stockholders $(11,087) $(67,031)
Adjustments to reconcile net loss to net cash
used in operating activities:
(Income) loss from discontinued operations (88) 4,387
Gain on disposal of discontinued operations (215) (2,417)
Depreciation and amortization 12,294 12,800
Non-cash interest expense 2,263 2,370
Debt extinguishment costs 7,939 -
Accretion for redemption of preferred stock 17,908 15,941
Restructuring charges 1,795 44,600
Cash payments for restructuring charges (7,830) (11,850)
Changes in net working capital, net of
acquisitions and restructuring charges (28,625) (34,126)
Other, net (2,857) 7,165
Net cash used in operating activities
of continuing operations (8,503) (28,161)
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired (19,263) (4,919)
Net proceeds on sale of businesses 216 27,876
Purchases of property, plant and equipment (9,735) (8,966)
Net cash (used in) provided by investing
activities of continuing operations (28,782) 13,991
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt 275,000 4,545
Retirement of long-term debt (200,000) -
Net (repayments) borrowings under revolving
line of credit and other (23,253) 10,004
Financing costs (11,491) -
Distributions to minority interests (1,010) -
Net cash provided by financing activities
of continuing operations 39,246 14,549
Effect of exchange rate changes on cash 190 273
Cash flows of discontinued operations (295) (2,940)
Net increase (decrease) in cash and cash
equivalents 1,856 (2,288)
Cash and cash equivalents at beginning of year 21,328 12,426
Cash and cash equivalents at end of period $23,184 $10,138