EXHIBIT 99.1
United Components Reports Results of Operations for
Third Quarter 2005
Third Quarter 2005
EVANSVILLE, IN November 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, atwww.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.
For More Information, Contact:
Charlie Dickson, Chief Financial Officer (812) 867-4726
Dave Barron (812) 867-4727
Dave Barron (812) 867-4727
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United Components, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(in thousands)
(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 | ||||
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)
(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 | ||||||||
(1) | Write-down of assets related to the abandonment of a foreign subsidiary. |
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United Components, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
(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)
(dollars in millions)
2005 | 2004 | |||||||||||||||||||||||||||||||
Nine | Nine | |||||||||||||||||||||||||||||||
months | months | |||||||||||||||||||||||||||||||
ended | ended | |||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Sept 30, | Q1 | Q2 | Q3 | Sept 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: | ||||||||||||||||||||||||||||||||
¾ Sale of inventory that was written-up to market from historical cost per US GAAP acquisition rules | — | — | — | — | 0.5 | — | — | 0.5 | ||||||||||||||||||||||||
¾ Facilities consolidations and severance costs | 0.8 | 1.4 | 2.2 | — | — | — | — | |||||||||||||||||||||||||
¾ 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)
(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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