Delco Remy Reports Q4 and Fiscal 1998 Sales and Earnings
16 September 1998
Delco Remy International Reports Sales and Earnings for the Fourth Quarter and Fiscal Year 1998
ANDERSON, Ind., Sept. 15 -- Delco Remy International, Inc.
, a leading supplier of aftermarket and OEM electrical systems and
powertrain/drivetrain products for automotive and heavy duty applications,
today reported its financial results for the fourth quarter and year ended
July 31, 1998.
Adjusted net income, before non-recurring charges, for the fourth quarter
was $2.6 million, or $0.10 per share, compared to $4.2 million, or $0.16 per
share, for the same period last year. Net sales for the fourth quarter were
$196.0 million, a 9% improvement over the $180.1 million, reported the
previous year.
The reported net sales and earnings for the fourth quarter were impacted
by the GM strike. The Company estimates that the GM strike reduced net sales
by $22.3 million, and net income by $5.3 million, or $.20 per share. The
Company's concentration of GM OEM sales is currently 28%.
For fiscal year 1998, adjusted net income, before non-recurring charges,
strengthened to $15.6 million, or $ 0.60 per share, representing an increase
of 49% over adjusted net income of $10.5 million, or $0.40 per share, for the
preceding year. Net sales for the year were $815.3 million, compared to
$689.8 million, a gain of 18% from last year.
Net loss, after non-recurring charges, for the fourth quarter was $13.6
million, or $0.57 per share, compared to a loss of $17.7 million, or $1.22 per
share, for the prior year. For fiscal year 1998, the net loss, after non-
recurring charges, was $4.0 million, or $0.20 per share, compared to a loss of
$14.3 million, or $1.00 per share, for fiscal year 1997.
During the fourth quarter, the Company recorded a non-recurring
restructuring charge of $26.5 million, or $0.62 per share, to complete an
additional employee buyout program related to its OEM focus factory strategy.
During the third quarter of fiscal year 1998, the Company closed two of the
factories acquired from GM and completed three new focus factories. A third
GM factory will be replaced by a focus factory by fiscal year 2000. The
Company negotiated this additional employee buyout program during the fourth
quarter to release employees who are becoming excess due to the continued
implementation of the focus factory strategy. The employee buyout program
lowers the Company's cost, strengthens its competitive position and will be
accretive to earnings in future years.
Harold K. Sperlich, Chairman, commented "We are very pleased with the
excellent progress made on a significant number of strategic initiatives in
our first year as a public company."
During the fourth quarter, the Company improved its aftermarket
remanufacturing position in Europe with the acquisition of Electro Diesel
Rebuild (EDR), a full line remanufacturer of automotive and heavy duty
starters and alternators.
Additionally, the Company entered into a new agreement during the fourth
quarter with GM Service Parts Operations (SPO), for the distribution of heavy
duty products to the independent aftermarket. This agreement provides the
Company with the opportunity to expand its distribution through OE dealers, AC
Delco distributors and Delco Remy heavy duty distributors.
To ensure that the Company retains a leading technology position with its
electrical systems products, the Company entered into a joint venture plan
with Continental AG during the fourth quarter for the joint industrialization
of the Integrated Starter Alternator Damper (ISAD) motor. This new technology
combines the starter and alternator functions in one compact high performance
unit integrated between the engine and gearbox.
Delco Remy International designs, manufactures, remanufacturers and
distributes electrical, powertrain/drivetrain and related components for
automobiles and light trucks, medium and heavy duty trucks and other heavy
duty vehicles. The Company's products include starter motors, alternators,
engines, transmissions, fuel system and traction control systems. The Company
serves the aftermarket and the original equipment manufacturer market,
principally in North America as well in Europe, Latin America and Asia
Pacific.
Statements in this press announcement, which are not historical facts, are
forward-looking statements that involve certain risks and uncertainties,
including, but not limited to risks associated with the uncertainty of future
financial results, acquisitions, additional financing requirements,
development of new products and services, the effect of competitive products
or pricing, the effect of economic conditions and other uncertainties detailed
in the Company's filings with the Securities and Exchange Commission.
DELCO REMY INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share amounts)
Three Month Period Twelve Month Period
Ended July 31 Ended July 31
1998 1997 1998 1997
Net Sales $196.0 $180.1 $815.3 $689.8
Cost of Sales 160.6 138.6 657.9 540.2
Gross Profit 35.4 41.5 157.4 149.6
Selling, Engineering and
Administrative Expense 23.7 23.3 90.4 89.1
Restructuring Charges 26.5 34.5 26.5 34.5
Operating (Loss) Income (14.8) (16.3) 40.5 26.0
Non-Operating Expense (Income) 0.5 (2.1) 0.5 (2.1)
Interest Expense 9.9 9.9 40.3 38.8
Loss from Continuing Operations
Before Income Taxes (Benefit),
Minority Interests, Deemed
Dividend on Preferred Stock
Conversion, Preferred Dividend
Requirement of Subsidiary and
Income from Unconsolidated
Joint Ventures (25.2) (24.1) (0.3) (10.7)
Income Taxes (Benefit) (9.8) (8.3) (0.1) (3.0)
Minority Interest in Income
of Subsidiaries 0.9 0.3 2.5 0.9
Non-Recurring Deemed Dividend on
Preferred Stock Conversion -- -- 1.6 --
Preferred Dividend Requirement
of Subsidiary -- 0.4 0.6 1.6
Income from Unconsolidated
Joint Ventures (2.7) -- (2.7) --
Loss from Continuing Operations (13.6) (16.5) (2.2) (10.2)
Discontinued Operations:
Loss from Operations -- 0.3 -- 0.8
Loss on Disposal -- 0.9 -- 0.9
Loss Before Extraordinary Item (13.6) (17.7) (2.2) (11.9)
Extraordinary Item:
Write-Off of Debt Issuance Costs
Less Applicable Tax Benefit -- -- 1.8 2.4
Net Loss $(13.6) $(17.7) $(4.0) $(14.3)
Basic and Diluted Loss Per Share:
Loss From Continuing
Operations $(0.57) $(1.14) $(0.11) $(0.71)
Discontinued Operations -- 0.08 -- 0.12
Extraordinary Items -- -- 0.09 0.17
Net Loss $(0.57) $(1.22) $(0.20) $(1.00)
Adjusted Net Income
Net Loss $(13.6) $(17.7) $(4.0) $(14.3)
Restructuring Charges (Net
of tax benefit) 16.2 20.7 16.2 20.7
Non-Recurring Deemed Dividend
on Preferred Stock -- -- 1.6 --
Loss from Discontinued
Operations -- 1.2 -- 1.7
Extraordinary Items -- -- 1.8 2.4
Adjusted Net Income $2.6 $4.2 $15.6 $10.5
Adjusted Earnings Per Share
Adjusted Net Income $0.10 $0.16 $0.60 $0.40
Adjusted Weighted Shares
Outstanding (A) 26,100 26,100 26,100 26,100
(A) Adjusted Weighted Shares Outstanding assumes exercise of all warrants
and all shares were outstanding for all periods.
DELCO REMY INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
As of July 31
1998 1997
ASSETS
Current Assets
Cash and Cash Equivalents $8.1 $10.1
Trade Accounts Receivable -
Net of Reserve 126.9 110.2
Inventory 198.4 164.4
Other current assets 36.2 39.4
Total Current Assets 369.6 324.1
Property and Equipment (Net) 158.0 120.4
Goodwill 115.4 86.6
Deferred Financing Costs 10.8 8.8
Net Assets Held for Disposal 14.9 25.3
Other Non-Current Assets 16.2 5.4
TOTAL ASSETS $684.9 $570.6
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable $85.8 $88.6
Other Accrued Liabilities 46.9 43.6
Accrued Restructuring Charges 35.5 37.4
Current Portion of Long-Term Debt 1.9 0.5
Total Current Liabilities 170.1 170.1
Long Term Debt 393.8 363.3
Other Non-Current Liabilities 26.3 22.9
Minority Interest in Subsidiaries 10.5 8.0
Redeemable Exchangeable Preferred
Stock of Subsidiary -- 16.1
Stockholders' Equity 84.2 (9.8)
Total Liabilities and
Stockholders' Equity $684.9 $570.6