Hayes Lemmerz Reports 11% Higher Sales, Improved Operating Income, Positive Free Cash Flow, and Increased Liquidity for Third Quarter of 2005
NORTHVILLE, Mich., Dec. 8, 2005 -- Hayes Lemmerz International, Inc. today reported that sales for the fiscal third quarter ended October 31, 2005, rose 11 percent to $604.0 million from $545.9 million for the same period last year, helped by higher international volume, significant recovery from customers of increased steel prices, and favorable foreign exchange rates, while North American sales were lower than a year earlier.
The Company reported earnings from operations of $16.8 million, up 29% from $13.0 million in the year earlier quarter. Net loss for the quarter was $13.3 million, compared with a net loss of $5.3 million in the year earlier third quarter, primarily due to higher interest costs.
Adjusted EBITDA(1) was $60.8 million for the third quarter of 2005, down slightly from $62.4 million a year earlier. During the quarter, the Company generated positive free cash flow(2) of $25.1 million (excluding the change in receivables securitization), and its total liquidity improved to $179 million at October 31, 2005 from $129 million at July 31, 2005.
"In the face of lower sales of domestic auto and light truck sales, we are pleased with our third quarter results," said Curtis Clawson, President, CEO and Chairman of the Board of Hayes Lemmerz. "Our long-term strategy again demonstrated its value by making it possible for us to realize increased sales and higher operating income despite the difficult business environment in North America.
"We will continue to pursue our strategic plans to expand in low-cost countries, to serve our customers as they continue to expand in markets outside of the U.S. and Western Europe," Mr. Clawson said. In that regard, he noted that in November, the Company bought a controlling interest in its aluminum wheel joint venture in Turkey. "Increasing our stake in this joint venture further improves our ability to meet customer needs in very important Turkish and European markets," he said. He also cited the Company's recent decision to invest in low pressure aluminum wheel casting technology to serve the European truck and trailer market, where aluminum wheels are becoming widely accepted for their ability to provide improved fuel economy and increased payload.
"Consistent with our efforts to concentrate on our core business, subsequent to the quarter, we completed the sale of our Hubs and Drums business and sold our operations in Cadillac, Michigan," he said. "We will continue to cut costs, rationalize our manufacturing capacity in the U.S., and improve efficiency worldwide. Continued cash flow generation and lowering our debt level is of the highest priority."
Mr. Clawson noted that Hayes Lemmerz has secured over $300 million in new and carry-over business during the first nine months of 2005, and is winning new business internationally not only with Japanese manufacturers, but also with Korean auto makers. "We are winning new business with the OEMs who are winning the global automotive competition," Mr. Clawson said.
For the nine months ended October 31, the Company reported sales of $1.75 billion, up 9 percent from $1.61 billion a year earlier. Earnings from operations for the nine months, excluding asset impairment losses and other restructuring charges, were $18.9 million compared with $54.2 million in the prior year period. The Company recorded asset impairment and restructuring charges in the first nine months of fiscal 2005 totaling $37.6 million, compared with $6.2 million of charges in the year earlier period. Adjusted EBITDA for the nine months was $163.5 million, versus $197.2 million in the prior nine months.
The Company provided revised guidance for 2005, to reflect the continued softening in the North American market, the impact to revenue, profits, and cash flow from companies sold, and less favorable exchange rates. Adjusted EBITDA is now expected to be approximately $180 million to $190 million (revised from prior guidance of $190 million to $205 million). Revenue is now expected to be $2.2 billion to $2.3 billion for the full year, and with a free cash flow between neutral and negative $15 million for the full fiscal year. Capital expenditures for the year are still expected to be under $130 million, the Company said.
Due to uncertainties in the North American market, the Company is not providing financial guidance for fiscal year 2006 at this time, but announced that it is targeting positive free cash flow with capital expenditures of under $100 million.
Hayes Lemmerz International, Inc. announced that it will host a telephone conference call to discuss the Company's fiscal year 2005 third quarter financial results today, Thursday, December 8, 2005, at 10:00 a.m. (ET). To participate by phone, please dial 10 minutes prior to the call: (800) 399-3882 from the United States and Canada; (706) 643-7483 from outside the United States. Callers should ask to be connected to Hayes Lemmerz earnings conference call, Conference ID#1874144. The conference call will be accompanied by a slide presentation, which can be accessed through the Company's web site, in the Investor Kit presentations section at http://www.hayes-lemmerz.com/investor_kit/html/presentations.html . A replay of the call will be available from 11:30 a.m. (ET), December 8, 2005 until 11:59 p.m. (ET), December 15, 2005, by calling (800) 642-1687 (within the United States and Canada) or (706) 645-9291 (for international calls). Please refer to Conference ID#1874144. An audio replay of the call is expected to be available on the Company's website beginning Tuesday, December 13, 2005.
Hayes Lemmerz International, Inc. is a leading global supplier of automotive and commercial highway wheels, brakes, powertrain, suspension, structural and other lightweight components. The Company has 36 facilities and over 10,000 employees worldwide.
(1) Adjusted EBITDA, a measure used by management to measure operating performance, is defined as earnings from operations plus depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted to exclude: (i) asset impairment losses and other restructuring charges; (ii) reorganization items; and (iii) other items. Management references these non- GAAP financial measures frequently in its decision making because they provide supplemental information that facilitates internal comparisons to historical operating performance of prior periods and external comparisons to competitors' historical operating performance. Adjusted EBITDA is not a recognized term under GAAP and does not purport to be an alternative to earnings from operations as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies use identical calculations, these presentations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management's discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Institutional investors generally look to Adjusted EBITDA in measuring performance, among other things. The company uses Adjusted EBITDA to facilitate quantification of planned business activities and enhance subsequent follow-up with comparisons of actual to planned Adjusted EBITDA. The company is disclosing these non-GAAP financial measures in order to provide transparency to investors.
(2) Free Cash Flow is defined as cash flows from operating activities adjusted to include cash used for investing activities and discontinued operations. Management uses this non-GAAP financial measure because it identifies the amount of cash available to meet principal debt amortization requirements, pay dividends to stockholders, or make corporate investments.
This press release includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the company's expectations and beliefs concerning future events that involve risks and uncertainties which could cause actual results to differ materially from those currently anticipated. All statements other than statements of historical facts included in this release are forward looking statements. Factors that could cause actual results to differ materially from those expressed or implied in such forward looking statements include the factors set forth in our periodic reports filed with the SEC. Consequently, all of the forward looking statements made in this press release are qualified by these and other factors, risks, and uncertainties.
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
Unaudited
Three Months Ended Three Months Ended
October 31, 2005 October 31, 2004
Net sales $604.0 $545.9
Cost of goods sold 548.7 491.7
Gross profit 55.3 54.2
Marketing, general, and
administrative 37.5 38.2
Asset impairments and other
restructuring charges 3.8 2.9
Other (income) expense, net (2.8) 0.1
Earnings (loss) from operations 16.8 13.0
Interest expense, net 18.1 9.6
Other non-operating expense 0.2 1.0
Earnings (loss) from continuing
operations before taxes and
minority interest (1.5) 2.4
Income tax expense 10.2 5.2
Loss from continuing operations
before minority interest (11.7) (2.8)
Minority interest 2.4 2.2
Loss from continuing operations (14.1) (5.0)
(Income) loss from discontinued
operations, net of tax of $0.4, $0.4
in the three months ended October
31, 2005 (0.8) 0.3
Net loss $(13.3) $(5.3)
Loss per common share data
Basic and diluted:
Net loss $(0.35) $(0.14)
Weighted average shares outstanding
(in millions) 38.0 37.8
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
Unaudited
Nine Months Ended Nine Months Ended
October 31, 2005 October 31, 2004
Net sales $1,749.2 $1,612.6
Cost of goods sold 1,600.5 1,442.6
Gross profit 148.7 170.0
Marketing, general, and
administrative 123.0 116.3
Asset impairments and other
restructuring charges 37.6 6.2
Other (income) expense, net 6.8 (0.5)
Earnings (loss) from operations (18.7) 48.0
Interest expense, net 49.2 31.7
Other non-operating expense 0.6 1.2
Loss on early extinguishment of debt - 12.2
Earnings (loss) from continuing
operations before taxes, minority
interest, and cumulative effect of
change in accounting principle (68.5) 2.9
Income tax expense 18.8 15.9
Loss from continuing operations
before minority interest and
cumulative effect of change in
accounting principle (87.3) (13.0)
Minority interest 7.5 6.0
Loss from continuing operations
before cumulative effect of
change in accounting principle (94.8) (19.0)
(Income) loss from discontinued
operations, net of tax of $0.8,
$0.4 in the nine months ended October
31, 2005 (3.5) (2.4)
Cumulative effect of change in
accounting principle, net of tax of
$0.8 - (2.6)
Net loss $(91.3) $(14.0)
Loss per common share data
Basic and diluted:
Net loss $(2.41) $(0.37)
Weighted average shares outstanding
(in millions) 37.9 37.5
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
Unaudited
October 31, 2005 January 31, 2005
ASSETS
Current assets:
Cash and cash equivalents $86.6 $34.9
Receivables 274.2 226.8
Other receivables 118.8 77.0
Inventories 178.3 205.0
Prepaid expenses and other current
assets 17.3 21.4
Assets held for sale 38.9 30.4
Total current assets 714.1 595.5
Property, plant, and equipment, net 878.4 971.1
Goodwill 382.2 417.9
Intangible assets, net 209.9 233.3
Assets held for sale 25.5 29.3
Other assets 62.2 54.9
Total assets $2,272.3 $2,302.0
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings and other notes $24.6 $0.6
Current portion of long-term debt 19.3 10.5
Accounts payable and accrued
liabilities 405.9 394.7
Liabilities held for sale 17.0 10.6
Total current liabilities 466.8 416.4
Long-term debt, net of current
portion 729.6 631.1
Pension and other long-term
liabilities 480.2 506.5
Series A warrants and Series B
warrants - 0.5
Liabilities held for sale 1.5 1.2
Redeemable preferred stock of
subsidiary 11.9 11.3
Minority interest 32.7 33.7
Stockholders' equity 549.6 701.3
Total liabilities and stockholders'
equity $2,272.3 $2,302.0
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
(Dollars in millions)
Unaudited
Nine Months Ended Nine Months Ended
October 31, 2005 October 31, 2004
Cash flows from operating activities:
Loss from continuing operations $(94.8) $(16.4)
Adjustments to reconcile net loss
from continuing operations to
net cash provided by (used for)
operating activities:
Depreciation and amortization 126.2 124.2
Amortization of deferred financing
fees and accretion of discount 4.8 2.8
Interest income resulting from fair
value adjustment of Series A
warrants and Series B warrants (0.5) (7.5)
Change in deferred income taxes (7.3) (6.1)
Asset impairments 32.6 0.7
Minority interest 7.5 6.0
Subsidiary preferred stock dividends
accrued 0.6 0.6
Equity compensation expense 4.9 4.9
Loss on early extinguishment of debt - 12.2
(Gain) loss on sale of assets (1.3) 0.1
Changes in operating assets and
liabilities that increase (decrease)
cash flows:
Receivables (63.1) (57.4)
Other receivables (41.7) -
Inventories 16.0 0.1
Prepaid expenses and other (3.3) 1.0
Accounts payable and accrued
liabilities 12.7 25.2
Payments related to Chapter 11
Filings (0.1) (1.1)
Cash provided by (used for) operating
activities (6.8) 89.3
Cash flows from investing activities:
Purchase of property, plant,
equipment, and tooling (95.6) (112.4)
Proceeds from sale of assets 18.5 0.7
Cash used for investing activities (77.1) (111.7)
Cash flows from financing activities:
Changes in bank borrowings and credit
facilities 23.9 0.8
Net proceeds from issuance of common
stock - 117.0
Redemption of Senior Notes, net of
discount and related fees - (96.7)
Repayment of Term Loan B, net of
related fees (73.8) (16.0)
Borrowings from Term Loan C 150.0 -
Borrowings (repayment) of long-term
debt 33.7 (8.3)
Repayment of notes payable issued in
connection with purchases of
businesses - (13.1)
Cash provided by (used for) financing
activities 133.8 (16.3)
Net cash provided by discontinued
operations 2.5 4.5
Adjustment for the elimination of the
one month lag - 1.4
Effect of exchange rate changes on
cash and cash equivalents (0.7) 3.2
Increase (decrease) in cash and cash
equivalents 51.7 (29.6)
Cash and cash equivalents at
beginning of period 34.9 48.5
Cash and cash equivalents at end of
period $86.6 $18.9