Prestolite Electric Intends to Shed Two Business Units
24 January 2000
Prestolite Electric Intends to Shed Two Business Units; Fourth Quarter Earnings to be Lower than Expected
ANN ARBOR, Mich.--Jan. 21, 2000--Prestolite Electric Incorporated and its parent, Prestolite Electric Holding, Inc., announced today that the company intends to sell two business units. Those businesses are:| -- | Prestolite's direct current motor business, which had 1999 sales of approximately $28 million from facilities in Decatur, Alabama; Dearborn Heights, Michigan; Florence, Kentucky; Wagoner, Oklahoma and Leyland, England. This business also includes a 50% interest in a Korean manufacturer of material handling motors and a minority interest in a company which designs controllers for direct current motors. Prestolite intends to retain its other businesses located in Decatur, Alabama (switches) and in Leyland, England (remanufacturing and warehousing for heavy-duty starters and alternators). Prestolite plans to relocate its North American production of starter motors to Arcade, New York from Decatur, Alabama. |
| -- | Prestolite's battery charger business in Troy, Ohio, which generated $18 million in 1999 sales. This business produces and sells battery chargers for the material handling market under the Hobart brand name. |
Kim Packard, president and CEO, commented, "We are selling these businesses in order to reduce debt and to focus on our alternator, starter motor and switch businesses, giving attention to our key automotive and heavy-duty markets. We believe that simplifying and focusing our company will improve performance and will be in the best interests of our investors, employees and customers."
Prestolite has retained Lincoln Partners LLC of Chicago, Illinois, and Robert W. Baird & Co. Incorporated of Milwaukee, Wisconsin, to assist in the sale of the businesses. The company has targeted proceeds to be more than $35 million.
Separately, Prestolite announced that its expected results for the year and quarter ended December 31, 1999 would be below expectations. Before treating the businesses to be sold as discontinued, fourth quarter 1999 sales of approximately $63 million declined about 4% from the third quarter, with the entire decrease due to lower sales in Argentina. Total 1999 sales of approximately $259 million represent a decline of more than 8% from 1998. Before anticipated adjustments and charges associated with sale of the businesses (which were not disclosed), earnings before interest, taxes, depreciation and amortization (EBITDA) for 1999 are expected to be slightly more than 10% of sales. The company expects to release its 1999 results on February 18, 2000.
The company also indicated that it is closing its technical center in Ann Arbor, Michigan, which previously employed six people. Responsibility for the development projects in process at the technical center is being transferred to division engineering centers in Decatur, Alabama and Arcade, New York. Those projects include advanced motor designs associated with the businesses to be sold and development of integrated electrical-system controls for heavy-duty trucks.
In addition to the businesses being sold, Prestolite Electric Incorporated manufactures alternators, starter motors and switching devices. These are supplied under the Prestolite, Leece-Neville, and Indiel brand names for original equipment and aftermarket application on a variety of vehicles and industrial equipment. Through Prestolite Electric Holding, Inc. Genstar Capital Corporation and management own the equity of the company.
EBITDA is a widely accepted financial indicator of a company's ability to service debt but is not calculated the same by all companies. EBITDA should not be considered by an investor as an alternative to net income as an indicator of a company's operating performance or as an alternative to cash flow as a measure of liquidity. This release contains forward-looking statements that involve risks and uncertainties regarding the anticipated financial and operating results of the company. The company undertakes no obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events or circumstances occurring after the date of this release, including the status of the proposed sales of businesses referred to herein, proceeds from those sales or any changes in the company's decision to sell those businesses. The company's actual results may differ materially from those projected in forward-looking statements made by, or on behalf of, the company.