United Components Reports Results of Operations for Third Quarter 2005
EVANSVILLE, Ind.--Nov. 9, 2005--United Components, Inc. ("UCI") today announced results for the quarter ended September 30, 2005. Revenue of $257.4 million was flat with the year-ago quarter, with increases in the retail, original equipment service and heavy-duty channels, and declines in the original equipment manufacturer and traditional channels. Net income for the quarter was $6.0 million, compared to $10.3 million for the third 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 $30.3 million for the third quarter, compared with $36.5 million for the year-ago quarter.
"We achieved solid revenue performance this quarter, given a challenging market due to increasing gas prices and weather-related disruptions in the southeast," said Bruce Zorich, Chief Executive Officer of UCI. "Our overall performance was again impacted by higher operating costs, particularly in raw materials and freight. We were able, however, to offset a significant amount of these costs with ongoing benefits from our long-term cost reduction initiatives."
UCI ended the quarter with $7.9 million in cash. As of September 30, the company's debt stood at $443 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 Thursday, November 10, 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 November 11, 2005, for a ninety day period, at www.ucinc.com/investors. Click on the link for the United Components, Inc. Third Quarter 2005 Financial Results Conference Call.
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)
September 30, December 31,
2005 2004
------------- ------------
Assets
------
Current assets
Cash and cash equivalents $7,889 $11,291
Accounts receivable, net 270,516 238,581
Inventories, net 186,481 188,212
Deferred tax assets 20,483 18,578
Other current assets 20,562 12,188
------------- ------------
Total current assets 505,931 468,850
Property, plant and equipment, net 205,252 216,849
Goodwill 166,559 166,559
Other intangible assets, net 99,313 94,229
Deferred financing costs, net 6,500 7,686
Pension and other assets 12,933 12,772
------------- ------------
Total assets $996,488 $966,945
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Liabilities and shareholder's equity
------------------------------------
Current liabilities
Accounts payable $110,815 $91,505
Short-term borrowings 805 1,267
Current maturities of long-term debt 39 228
Accrued expenses and other current
liabilities 82,198 67,808
------------- ------------
Total current liabilities 193,857 160,808
Long-term debt, less current maturities 442,132 456,674
Pension and other postretirement liabilities 47,637 53,141
Deferred tax liabilities 12,894 6,430
Other liabilities 2,019 1,972
------------- ------------
Total liabilities 698,539 679,025
------------- ------------
Shareholder's equity 297,949 287,920
------------- ------------
Total liabilities and shareholder's
equity $996,488 $966,945
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United Components, Inc.
Condensed Consolidated Income Statements (unaudited)
(in thousands)
Three Months ended Nine Months ended
September 30, September 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Net sales $257,397 $257,566 $772,188 $788,329
Cost of sales 205,880 202,834 621,293 618,254
--------- --------- --------- ---------
Gross profit 51,517 54,732 150,895 170,075
Operating expenses
Selling and warehousing 18,534 17,436 55,392 55,823
General and administrative 10,755 10,201 35,516 34,400
Amortization of intangible
assets 1,708 1,566 4,772 5,268
Losses on abandonment of an
operation (1) 577 -- 2,759 --
--------- --------- --------- ---------
Operating income 19,943 25,529 52,456 74,584
Other income (expense)
Interest expense, net (9,223) (8,099) (26,845) (26,687)
Management fee expense (500) (500) (1,500) (1,500)
Miscellaneous, net (180) 168 (323) 294
--------- --------- --------- ---------
Income before income taxes 10,040 17,098 23,788 46,691
Income tax expense 4,044 6,818 10,689 18,659
--------- --------- --------- ---------
Net income $5,996 $10,280 $13,099 $28,032
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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)
Nine Months ended
September 30,
-----------------
2005 2004
-------- --------
Net cash provided by operating activities $38,257 $55,600
-------- --------
Cash flows from investing activities:
Final Acquisition purchase price payment -- (8,000)
Capital expenditures (26,389) (28,636)
Proceeds from sale of property, plant and equipment 161 399
-------- --------
Net cash used in investing activities (26,228) (36,237)
-------- --------
Cash flows from financing activities:
Issuances of debt 33,000 467
Debt repayments (48,667) (40,591)
Shareholder's equity contribution 536 1,735
-------- --------
Net cash used in financing activities (15,131) (38,389)
-------- --------
Effect of exchange rate changes on cash (300) 56
-------- --------
Net decrease in cash and cash equivalents (3,402) (18,970)
Cash and cash equivalents at beginning of year 11,291 46,130
-------- --------
Cash and cash equivalents at end of period $7,889 $27,160
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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
----------------------- ------------------------
Nine Nine
months months
ended ended
Sept Sept
Q1 Q2 Q3 30, Q1 Q2 Q3 30,
----- ----- ----- ----- ----- ----- ----- ------
Net income $2.7 $4.4 $6.0 $13.1 $7.5 $10.2 $10.3 $28.0
Interest expense, net 8.8 8.8 9.2 26.8 9.6 9.0 8.1 26.7
Income tax expense 1.8 4.8 4.1 10.7 5.1 6.8 6.8 18.7
Depreciation 8.3 8.2 7.9 24.4 9.0 8.7 8.9 26.6
Amortization of
intangibles 1.5 1.6 1.7 4.8 1.9 1.8 1.6 5.3
----- ----- ----- ----- ----- ----- ----- ------
EBITDA 23.1 27.8 28.9 79.8 33.1 36.5 35.7 105.3
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 0.6 2.8 -- -- -- --
Non-cash charges
(primarily pension) 0.2 0.1 0.3 0.6 -- 0.7 0.3 1.0
Management fee 0.5 0.5 0.5 1.5 0.5 0.5 0.5 1.5
----- ----- ----- ----- ----- ----- ----- ------
Adjusted EBITDA $24.6 $32.0 $30.3 $86.9 $34.1 $37.7 $36.5 $108.3
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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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