United Components Reports Results of Operations for Second Quarter 2005
EVANSVILLE, Ind.--Aug. 1, 20056, 2005--United Components, Inc. ("UCI") today announced results for the quarter ended June 30, 2005. Revenue of $269.3 million declined 1.7 percent compared to the year-ago quarter, with increases in the heavy duty channel, and declines in the original equipment sales, original equipment service, retail and traditional channels. Net income for the quarter was $4.4 million, compared to $10.2 million for the second quarter of 2004.Earnings before interest, taxes, depreciation and amortization, or EBITDA, as adjusted pursuant to the company's credit agreement for its senior credit facilities, was $32.0 million for the second quarter, compared with $37.7 million for the year-ago quarter.
"We saw solid revenue performance this quarter, especially given the challenging market," said Bruce Zorich, Chief Executive Officer of UCI. "Our revenue came in close to last year's second quarter, which was the strongest quarter on record for the company. Higher operating costs, particularly in raw materials, continued to affect our overall performance, but we were happy to see some initial benefits from our long-term cost reduction initiatives, which we expect to continue in the quarters ahead."
UCI ended the quarter with $8.8 million in cash. In June, the company made a voluntary net prepayment of $12.5 million of its senior credit facility borrowings. As of June 30, the company's debt stood at $445 million, down from $581 million in June 2003 when the acquisition occurred.
Conference Call
The company will host a conference call to discuss its results and performance on Wednesday, August 17, at 11:00 a.m. Eastern Time (ET). 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 18, 2005, for a thirty day period, at www.champlabs.com . Click on the UCINC 2005 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 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.
Condensed Consolidated Balance Sheets (unaudited)
(in thousands)
June 30, December 31,
2005 2004
------------ ------------
Assets
------
Current assets
Cash and cash equivalents $ 8,771 $ 11,291
Accounts receivable, net 268,713 238,581
Inventories, net 182,794 188,212
Deferred tax assets 20,796 18,578
Other current assets 13,654 12,188
------------ ------------
Total current assets 494,728 468,850
Property, plant and equipment, net 209,368 216,849
Goodwill 166,559 166,559
Other intangible assets, net 97,587 94,229
Deferred financing costs, net 6,823 7,686
Pension and other assets 12,558 12,772
------------ ------------
Total assets $ 987,623 $ 966,945
============ ============
Liabilities and shareholder's equity
------------------------------------
Current liabilities
Accounts payable $ 113,460 $ 91,505
Short-term borrowings 3,264 1,267
Current maturities of long-term debt 80 228
Accrued expenses and other current
liabilities 73,422 67,808
------------ ------------
Total current liabilities 190,226 160,808
Long-term debt, less current maturities 441,978 456,674
Pension and other postretirement liabilities 55,615 53,141
Deferred tax liabilities 6,386 6,430
Other liabilities 2,019 1,972
------------ ------------
Total liabilities 696,224 679,025
------------ ------------
Shareholder's equity 291,399 287,920
------------ ------------
Total liabilities and shareholder's
equity $ 987,623 $ 966,945
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United Components, Inc.
Condensed Consolidated Income Statements (unaudited)
(in thousands)
Three Months ended June 30, Six Months ended June 30,
--------------------------- -------------------------
2005 2004 2005 2004
------------- ------------- ------------ ------------
Net sales $ 269,285 $ 273,952 $ 514,791 $ 530,763
Cost of sales 215,993 214,156 415,413 415,420
------------- ------------- ------------ ------------
Gross profit 53,292 59,796 99,378 115,343
Operating expenses
Selling and
warehousing 18,595 19,342 36,858 38,387
General and
administrative 12,342 12,127 24,761 24,199
Amortization of
intangible
assets 1,532 1,851 3,064 3,702
Losses on
abandonment of
an operation(1) 2,182 -- 2,182 --
------------- ------------- ------------ ------------
Operating
income 18,641 26,476 32,513 49,055
Other income
(expense)
Interest
expense, net (8,850) (9,022) (17,622) (18,588)
Management fee
expense (500) (500) (1,000) (1,000)
Miscellaneous,
net (91) 41 (143) 126
------------- ------------- ------------ ------------
Income before
income taxes 9,200 16,995 13,748 29,593
Income tax
expense 4,826 6,778 6,645 11,841
------------- ------------- ------------ ------------
Net income $ 4,374 $ 10,217 $ 7,103 $ 17,752
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(1) Write-down of assets related to the abandonment of a foreign
subsidiary.
United Components, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Six Months ended June 30,
-------------------------
2005 2004
------------ ------------
Net cash provided by operating activities $ 28,957 $ 49,650
------------ ------------
Cash flows from investing activities:
Final Acquisition purchase price payment -- (8,000)
Capital expenditures (18,891) (17,165)
Proceeds from sale of property, plant and
equipment 211 184
------------ ------------
Net cash used in investing activities (18,680) (24,981)
------------ ------------
Cash flows from financing activities:
Issuances of debt 10,500 467
Debt repayments (23,663) (40,134)
Shareholder's equity contribution 600 (28)
------------ ------------
Net cash used in financing activities (12,563) (39,695)
------------ ------------
Effect of exchange rate changes on cash (234) (27)
------------ ------------
Net decrease in cash and cash equivalents (2,520) (15,053)
Cash and cash equivalents at beginning of
year 11,291 46,130
------------ ------------
Cash and cash equivalents at end of period $ 8,771 $ 31,077
============ ============
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, reflects the calculation of EBITDA as used 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)
2005 2004
------------------------- -------------------------
Six Six
months months
ended ended
Q1 Q2 June 30, Q1 Q2 June 30,
------- ------- --------- ------- ------- ---------
Net income $ 2.7 $ 4.4 $ 7.1 $ 7.5 $ 10.2 $ 17.7
Interest expense,
net 8.8 8.8 17.6 9.6 9.0 18.6
Income tax expense 1.8 4.8 6.6 5.1 6.8 11.9
Depreciation 8.3 8.2 16.5 9.0 8.7 17.7
Amortization of
intangibles 1.5 1.6 3.1 1.9 1.8 3.7
------- ------- --------- ------- ------- ---------
EBITDA 23.1 27.8 50.9 33.1 36.5 69.6
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
-- Facilities
consolidations
and severance
costs 0.8 1.4 2.2 -- -- --
-- Losses on
abandonment of
an operation -- 2.2 2.2 -- -- --
Non-cash charges
(primarily
pension) 0.2 0.1 0.3 -- 0.7 0.7
Management fee 0.5 0.5 1.0 0.5 0.5 1.0
------- ------- --------- ------- ------- ---------
Adjusted EBITDA $ 24.6 $ 32.0 $ 56.6 $ 34.1 $ 37.7 $ 71.8
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Schedule B
Reconciliation of Net Income to EBITDA and Adjusted EBITDA for 2004
(dollars in millions)
2004
-----------------------------------
Full
Q1 Q2 Q3 Q4 Year
------ ------ ------ ------ -------
Net income $ 7.5 $10.2 $10.3 $ 2.8 $ 30.8
Interest expense, net 9.6 9.0 8.1 9.3 36.0
Income tax expense 5.1 6.8 6.8 2.4 21.1
Depreciation 9.0 8.7 8.9 8.7 35.3
Amortization of
intangibles 1.9 1.8 1.6 1.6 6.9
------ ------ ------ ------ -------
EBITDA 33.1 36.5 35.7 24.8 130.1
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
-- Slow moving / obsolete
inventory reserve -- -- -- 2.8 2.8
-- Product line relocations,
facilities upgrades and
consolidations, patent
disputes, other -- -- -- 1.7 1.7
Non-cash charges (primarily
pension) -- 0.7 0.3 0.4 1.4
Management fee 0.5 0.5 0.5 0.5 2.0
------ ------ ------ ------ -------
Adjusted EBITDA $34.1 $37.7 $36.5 $30.2 $138.5
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