United Components Reports Results of Operations for Second Quarter 2004
EVANSVILLE, Ind.--Aug. 1, 20040, 2004--United Components, Inc. today announced revenue of $274.0 million for the quarter ended June 30, 2004. Sales increased 13.1 percent over the year-ago quarter, with volume increases in all market channels. Net income for the quarter was $10.2 million. For the second quarter of 2003, a net loss of $3.5 million was reported.Earnings before interest, taxes, depreciation and amortization, or EBITDA, as adjusted pursuant to the company's credit agreement for its senior credit facilities, was $37.7 million for the second quarter, compared with $28.2 million for the year-ago quarter.
"We are pleased with our results for the second quarter and continue our efforts to improve our business and performance," said Bruce Zorich, Chief Executive Officer of UCI. "We remain focused on delivering increased value and quality to our customers, while improving our operations, profitability and cash flow."
Sales for the six months ended June 30, 2004 were $530.8 million, 10.9% higher than the comparable 2003 six month period. Net income for the six months ended 2004 and 2003 was $17.8 million and $18.8 million, respectively. EBITDA, as adjusted pursuant to the Company's credit agreement for its senior credit facilities, was $71.8 million in the 2004 period compared to $59.7 million in the 2003 six month period.
UCI ended the quarter with $31.1 million in cash. In the year since the June 20, 2003 acquisition, UCI has used cash flow from operations to reduce debt, net of cash, from $569 to $452 million. The cash flow has come from improvements in working capital, as well as improved profitability of operations.
Conference Call
The company will host a conference call to discuss its results and performance on Wednesday, August 11, at 11:00 a.m. Eastern Standard Time (EST). Interested parties are invited to listen to the call by telephone. Domestic callers can dial (800) 936-4602. International callers can dial (507) 726-3418.
A replay of the call will be available from August 12, 2004, for a thirty day period, at www.champlabs.com. Click on the UCINC 2nd Quarter Results button.
About United Components, Inc.
United Components, Inc. is among North America's largest and most diversified companies servicing the vehicle replacement parts market. We supply a broad range of products to the automotive, trucking, marine, mining, construction, agricultural and industrial vehicle markets. Our customer base includes leading aftermarket companies, as well as a diverse group of original equipment manufacturers.
Forward Looking Statements
All statements other than statements of historical facts included in this press release and the attached report that address activities, events or developments that United Components, Inc. ("UCI") expects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements give UCI's current expectations and projections relating to the financial condition, results of operations, plans, objectives, future performance and business of UCI and its subsidiaries. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They are subject to uncertainties and factors relating to UCI's operations and business environment, all of which are difficult to predict and many of which are beyond UCI's control. UCI cautions that investors should not place undue reliance on any of these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, UCI undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.
United Components, Inc. ("UCI")
Condensed Balance Sheets
(in thousands)
UCI
UCI Consolidated
Consolidated December 31,
June 30, 2004 2003
----------------- ---------------
Assets (unaudited)
--------
Current assets
Cash and cash equivalents $ 31,077 $ 46,130
Accounts receivable, net 269,422 230,345
Inventories 175,307 168,797
Deferred tax 14,405 17,756
Other current assets 9,347 10,877
----------------- ---------------
Total current assets 499,558 473,905
Property, plant and equipment, net 214,018 219,973
Goodwill 166,559 163,823
Other intangible assets, net 89,722 77,124
Deferred financing costs 8,792 10,146
Deferred tax -- 13,609
Pension and other assets 9,752 11,359
----------------- ---------------
Total assets $ 988,401 $ 969,939
================= ===============
Liabilities and shareholder's equity
-------------------------------------
Current liabilities
Accounts payable $ 102,148 $ 74,652
Notes payable 1,219 752
Current maturities of long-term
debt 139 1,034
Accrued expenses and other current
liabilities 76,898 66,729
----------------- ---------------
Total current liabilities 180,404 143,167
Long-term debt, less current
maturities 481,549 520,472
Pension and other postretirement
liabilities 50,201 50,038
Deferred tax 1,567 --
Other liabilities 2,772 2,172
----------------- ---------------
Total liabilities 716,493 715,849
Shareholder's equity 271,908 254,090
----------------- ---------------
Total liabilities and shareholder's
equity $ 988,401 $ 969,939
================= ===============
United Components, Inc.
Condensed Income Statements (unaudited)
(in thousands)
UCI Predecessor
UCI Total Consolidated Combined
Consolidated Three June 21, April 1,
Three Months Months 2003 2003
Ended Ended Through Through
June 30, June 30, June 30, June 20,
2004 2003 2003 2003
------------ --------- ------------ -----------
Net sales $ 273,952 $242,321 $ 26,179 $ 216,142
Cost of sales 214,156 214,339 23,402 190,937
------------ --------- ------------ -----------
Gross profit 59,796 27,982 2,777 25,205
------------ --------- ------------ -----------
Operating expenses
Selling and
warehousing 19,342 17,688 2,213 15,475
General and
administrative 12,127 12,105 1,440 10,665
Amortization of
intangible assets 1,851 194 164 30
------------ --------- ------------ -----------
Operating income
(loss) 26,476 (2,005) (1,040) (965)
------------ --------- ------------ -----------
Other income (expense)
Interest income 48 830 -- 830
Interest expense (9,070) (3,981) (3,860) (121)
Management fee
expense (500) (58) (55) (3)
Miscellaneous, net 41 (144) 111 (255)
------------ --------- ------------ -----------
Income (loss) before
income taxes 16,995 (5,358) (4,844) (514)
Income tax expense 6,778 (1,864) (1,841) (23)
------------ --------- ------------ -----------
Net income (loss) $ 10,217 $ (3,494) $ (3,003) $ (491)
============ ========= ============ ===========
United Components, Inc.
Condensed Income Statements (unaudited)
(in thousands)
Predecessor
UCI Total Combined
Consolidated Six UCI January 1,
Six Months Months Consolidated 2003
Ended Ended June 21, 2003 through
June 30, June 30, through June 20,
2004 2003 June 30, 2003 2003
------------ --------- ------------- -----------
Net sales $ 530,763 $478,646 $ 26,179 $ 452,467
Cost of sales 415,420 401,613 23,402 378,211
------------ --------- ------------- -----------
Gross profit 115,343 77,033 2,777 74,256
------------ --------- ------------- -----------
Operating expenses
Selling and
warehousing 38,387 35,798 2,213 33,585
General and
administrative 24,199 20,368 1,440 18,928
Amortization of
intangible assets 3,702 224 164 60
------------ --------- ------------- -----------
Operating income
(loss) 49,055 20,643 (1,040) 21,683
------------ --------- ------------- -----------
Other income (expense)
Interest income 113 1,712 -- 1,712
Interest expense (18,701) (4,105) (3,860) (245)
Management fee
expense (1,000) (73) (55) (18)
Miscellaneous, net 126 (297) 111 (408)
------------ --------- ------------- -----------
Income (loss) before
income taxes 29,593 17,880 (4,844) 22,724
Income tax expense 11,841 (899) (1,841) 942
------------ --------- ------------- -----------
Net income (loss)$ 17,752 $ 18,779 $ (3,003) $ 21,782
============ ========= ============= ===========
United Components, Inc.
Condensed Statements of Cash Flow (unaudited)
(in thousands)
Predecessor
UCI UCI Combined
Consolidated Consolidated January 1,
Six Months June 21,2003 2003
Ended through through
June 30, June 30, June 20,
2004 2003 2003
------------ ------------ -----------
Net cash provided by operating
activities $ 49,650 $ 6,963 $ 23,893
------------ ------------ -----------
Cash flows from investing
activities:
Acquisition and related fees (8,000) (818,180) --
Capital expenditures (17,165) (78) (21,388)
Proceeds from sale of assets 184 -- 215
------------ ------------ -----------
Net cash used in investing
activities (24,981) (818,258) (21,173)
------------ ------------ -----------
Cash flows from financing
activities:
Issuances of debt 467 585,110 --
Financing fees and debt
issuance cost -- (21,340) --
Debt repayments (40,134) -- (98)
Stockholder's equity
contribution -- 260,000 --
Dividends and transfers to
UIS, Inc., net -- -- (28,033)
Other (28) -- --
------------ ------------ -----------
Net cash provided by (used
in) financing activities (39,695) 823,770 (28,131)
------------ ------------ -----------
Effect of exchange rate changes
on cash (27) (236) 1,509
------------ ------------ -----------
Net increase (decrease) in cash
and equivalents (15,053) 12,239 (23,902)
Cash and cash equivalents at
beginning of period 46,130 4,452 28,354
------------ ------------ -----------
Cash and cash equivalents at end
of period $ 31,077 $ 16,691 $ 4,452
============ ============ ===========
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are presented because they are believed to
be frequently used by parties interested in United Components, Inc.
("UCI"). Management believes that EBITDA and Adjusted EBITDA provide
useful information to investors because they facilitate an investor's
comparison of UCI's operating results to that of companies with
different capital structures and with cost basis in assets that have
not been revalued and written-up in an allocation of a recent
acquisition's purchase price.
The calculation of Adjusted EBITDA, presented below, is as defined in
the credit agreement for UCI's senior credit facilities. This Adjusted
EBITDA is used to measure compliance with covenants of that agreement
such as interest coverage. (The amounts presented below are for all of
UCI. The actual amounts used to measure compliance to the credit
agreement covenants may differ in that under certain circumstances the
results of certain foreign subsidiaries are excluded.)
EBITDA and Adjusted EBITDA are not measures of financial performance
under United States generally accepted accounting principles
("US GAAP") and should not be considered as alternatives to net
income, operating income or any other performance measures derived in
accordance with US GAAP or as an alternative to cash flow from
operating activities as a measure of liquidity.
Schedule A
----------
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(dollars in millions)
2004 2003
-------------------- --------------------
Six Six
Q1 Q2 Months Q1 Q2 Months
------ ------ ------ ------ ------ ------
Net income (loss) $7.5 $10.2 $17.7 $22.3 $(3.5) $18.8
Interest, net 9.6 9.0 18.6 (0.8) 3.2 2.4
Income tax expense (benefit) 5.1 6.8 11.9 1.0 (1.9) (0.9)
Depreciation 9.0 8.7 17.7 6.7 7.3 14.0
Amortization of intangibles 1.9 1.8 3.7 0.2 0.2
------ ------ ------ ------ ------ ------
EBITDA 33.1 36.5 69.6 29.2 5.3 34.5
One-time or unusual items:
-- Sale of inventory that
was written-up to
market from historical
cost per US GAAP
acquisition rules 0.5 0.5 2.6 2.6
-- Slow moving / obsolete
inventory reserve 0.3 12.3 12.6
-- Environmental accrual 4.6 4.6
-- Product line
relocations, facilities
upgrades and
consolidations, patent
disputes, other 1.2 2.9 4.1
Non-cash charges (primarily
pension) 0.7 0.7 0.8 0.4 1.2
Management fee 0.5 0.5 1.0 0.1 0.1
------ ------ ------ ------ ------ ------
ADJUSTED EBITDA $34.1 $37.7 $71.8 $31.5 $28.2 $59.7
====== ====== ====== ====== ====== ======
Schedule B
----------
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(dollars in millions)
2003
-----------------------------------
Full
Q1 Q2 Q3 Q4 Year
------ ------ ------ ------ -------
Net income (loss) $22.3 $(3.5) $(7.6) $1.8 $13.0
Interest, net (0.8) 3.2 10.4 12.1 24.9
Income tax expense
(benefit) 1.0 (1.9) (4.6) 2.2 (3.3)
Depreciation 6.7 7.3 10.3 9.8 34.1
Amortization of
intangibles 0.2 1.2 1.8 3.2
------ ------ ------ ------ -------
EBITDA 29.2 5.3 9.7 27.7 71.9
One-time or unusual
items :
-- Sale of
inventory that
was written-up
to market from
historical cost
per US GAAP
acquisition
rules 2.6 22.6 2.3 27.5
-- Slow moving /
obsolete
inventory
reserve 0.3 12.3 12.6
-- Environmental
accrual 4.6 4.6
-- Product line
relocations,
facilities
upgrades and
consolidations,
patent
disputes, other 1.2 2.9 (0.3) 3.8
-- Costs re:
transition to a
new, more
strategically
focused,
stand-alone
company 1.5 1.5
Non-cash charges
(primarily pension) 0.8 0.4 0.5 0.8 2.5
Management fee 0.1 0.5 0.4 1.0
------ ------ ------ ------ -------
ADJUSTED EBITDA $31.5 $28.2 $34.8 $30.9 $125.4
====== ====== ====== ====== =======
United Components, Inc.
Notes to Condensed Financial Statements
United Components, Inc. is a wholly owned subsidiary of UCI
Acquisition Holdings, Inc. UCI Acquisition Holdings, Inc. and United
Components, Inc. are corporations formed at the direction of The
Carlyle Group ("Carlyle"). Affiliates of Carlyle own 99.2% of UCI
Acquisition Holdings, Inc.'s common stock, and the remainder is owned
by certain members of senior management and a member of the Company's
Board of Directors.
On June 20, 2003, United Components, Inc. ("UCI") purchased from UIS,
Inc. and UIS Industries, Inc. (together "UIS"), the vehicle parts
business of UIS.
For periods after June 20, 2003, the accompanying consolidated
condensed financial statements include the accounts of UCI and its
subsidiaries. For periods prior to June 21, 2003, the accompanying
combined condensed financial statements include the accounts of the
vehicle parts businesses of UIS, which are collectively referred to in
these financial statements as the "Predecessor Company" or
"Predecessor." December 31, 2003 balance sheet amounts reflect the
preliminary allocation of the June 20, 2003 acquisition purchase
price. June 30, 2004 balance sheet amounts have been reclassified to
reflect the impact of the final allocation of the June 20, 2003
acquisition purchase price. Such changes had no effect on previously
reported results of operation.
Acquisition Purchase Price, Funding and Accounting -- The acquisition
purchase price was $808 million. In addition, UCI assumed $2 million
of debt and capital lease obligations. Fees and expenses associated
with the acquisition (excluding financing fees) were $18.2 million and
are accounted for as additional purchase price. Financing for the
acquisition was comprised of a $260 million equity contribution by
Carlyle, proceeds from $585 million of debt, and an $8 million accrued
liability, which was paid in January 2004. In addition to funding the
purchase price, proceeds from the borrowings were used to pay for the
aforementioned $18.2 million of acquisition-related fees and $21.6
million of financing fees.
The acquisition is accounted for under the purchase method of
accounting, and accordingly, the results of operations of the acquired
companies are included in the results of UCI beginning on June 21,
2003. The acquisition purchase price was allocated to the balance
sheet based on the estimated fair values of the assets acquired and
liabilities assumed at the date of acquisition. December 31, 2003
balance sheet amounts reflect the preliminary allocation of the June
20, 2003 acquisition purchase price. June 30, 2004 balance sheet
amounts have been reclassified to reflect the impact of the final
allocation of the June 20, 2003 acquisition purchase price. Such
changes had no effect on previously reported results of operation.
Change in Tax Filing Status -- Prior to June 21, 2003 the subsidiaries
comprising the Predecessor Company were treated as disregarded
entities for U.S. tax purposes (Qualified Subchapter S subsidiaries,
or Q subs). As Q subs of UIS, the subsidiaries were included in the
U.S. Federal and certain state S corporation income tax returns of
UIS. As such, the income taxes on the earnings of the Predecessor
Company were paid by the sole shareholder of UIS pursuant to an
election for Federal income tax purposes not to be taxed as a
corporation. No tax sharing arrangement existed for the subsidiaries
comprising the predecessor Company. Accordingly, no provision has been
made in the accompanying combined condensed financial statements for
Federal income taxes on the net earnings of these companies for the
periods prior to June 21, 2003. A provision for certain state
franchise and income taxes has been made.
The Q sub status and the S corporation status terminated immediately
prior to the acquisition. UCI became a C corporation and is subject to
both Federal and state income taxes. UCI's effective tax rate
increased accordingly.
If the Predecessor Company were a C corporation, pro forma income tax
benefit would have been $2.0 million for the second quarter of 2003
and pro forma income tax expense would have been $6.7 million for the
2003 six month period.
Income Statement Reclassifications -- The income statement for the
2003 periods have been reclassified to conform to the 2004
presentation.