J.L. French Automotive Castings, Inc.
November 4, 2003
Page 5
Exhibit 99.1
DATE: November 4, 2003 | ||
FROM: | FOR: | |
Padilla Speer Beardsley Inc. | J.L. French Automotive Castings, Inc. | |
1101 West River Parkway | 4508 IDS Center | |
Minneapolis, Minnesota 55415 | Minneapolis, Minnesota 55402 | |
Shawn Brumbaugh/Marian Briggs | Anthony A. Barone (920) 458-7724 | |
(612) 455-1700 |
FOR IMMEDIATE RELEASE
J.L. FRENCH AUTOMOTIVE CASTINGS, INC. ANNOUNCES
THIRD QUARTER RESULTS
MINNEAPOLIS, November 4, 2003 — J.L. French Automotive Castings, Inc., today announced results for its third quarter and nine months ended September 30, 2003.
The company reported third-quarter revenues of $114.2 million compared to $132.6 million in the 2002 period. Operating income before the impact of restructuring and impairment charges was $7.0 million versus $10.9 million in the prior-year quarter. The net loss was $116.4 million versus a net loss of $1.6 million in the third quarter last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) before restructuring and impairment charges decreased to $18.2 million from $22.6 million in the third quarter of 2002. EBITDA before restructuring and impairment charges and loss contract reserve reversals was $17.9 million in the third quarter of 2003 compared to $21.9 million in the 2002 period. Cash interest expense was $15.2 million, up from $12.3 million in the third quarter of 2002 as a result of higher weighted average interest rates in the 2003 period.
During the third quarter of 2003, the company recorded restructuring and impairment charges of $104.5 million. Approximately $96.0 million represents a non-cash charge to write off goodwill pursuant to Statement of Financial Accounting Standards No. 142. Approximately $6.7 million relates to a non-cash write-off of assets at the company’s Saltillo, Mexico facility. The remaining $1.8 million primarily represents expenses associated with the Grandville, Mich., facility, which was closed in the second quarter of 2003.
“Our third-quarter revenues were impacted by decreased production levels at our largest customer, Ford Motor Company,” said Jack Falcon, president and chief executive officer. “Despite the lower production levels, we have been successful in reducing our breakeven point and in improving
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J.L. French Automotive Castings, Inc.
November 4, 2003
Page 6
productivity. We are continuing to aggressively seek new business to utilize our available capacity. To date, we have been awarded business from three new customers that will begin generating revenues in the first quarter of 2004.”
For the first nine months of 2003, revenues were $390.8 million, a decrease of $22.9 million compared to the 2002 period. Operating income before the impact of restructuring and impairment charges was $34.6 million compared to $40.3 million for the first nine months of 2002. The net loss totaled $125.7 million versus a net loss of $201.6 million in the prior-year period. Before restructuring and impairment charges and loss contract reserve reversals, EBITDA decreased to $67.0 million, or 17.1 percent of sales, in the nine months of 2003 compared to $69.6 million, or 16.8 percent of sales, in the same period last year. As a result of the higher weighted average interest rates in the 2003 period, cash interest expense increased to $44.1 million versus $36.1 million for the first nine months of 2002. During the first nine months of 2003, the company recorded non-cash income of $0.6 million related to exchange rate fluctuations on debt denominated in foreign currencies.
The following table reconciles net income (loss) to operating income before restructuring and impairment charges, EBITDA before restructuring and impairment charges, and EBITDA before restructuring and impairment charges and loss contract reserve reversals for the three and nine months ended September 30, 2003, and 2002:
Three months ended | Nine months ended | ||||||||||||||||
($ in thousands) | September 30, | September 30, | |||||||||||||||
2003 | 2002 | 2003 | 2002 | ||||||||||||||
Net income (loss) | $ | (116,387 | ) | $ | (1,626 | ) | $ | (125,662 | ) | $ | (201,601 | ) | |||||
Cumulative effect of accounting change | — | — | — | 202,622 | |||||||||||||
Income (loss) before cumulative effect of accounting change | (116,387 | ) | (1,626 | ) | (125,662 | ) | 1,021 | ||||||||||
Provision (benefit) for income taxes | 277 | (464 | ) | 374 | 1,315 | ||||||||||||
Restructuring and impairment charges | 104,464 | — | 104,599 | — | |||||||||||||
Interest expense, net | 18,671 | 12,960 | 55,858 | 37,979 | |||||||||||||
Other (income) | — | — | (617 | ) | — | ||||||||||||
Operating income before restructuring and impairment charges (1) | 7,025 | 10,870 | 34,552 | 40,315 | |||||||||||||
Depreciation and amortization | 11,205 | 11,767 | 34,535 | 34,472 | |||||||||||||
EBITDA before restructuring and impairment charges (1) | 18,230 | 22,637 | 69,087 | 74,787 | |||||||||||||
Loss contract reserve reversals | (357 | ) | (706 | ) | (2,079 | ) | (5,206 | ) | |||||||||
EBITDA before restructuring and impairment charges and loss contract reserve reversals (1) | $ | 17,873 | $ | 21,931 | $ | 67,008 | $ | 69,581 | |||||||||
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J.L. French Automotive Castings, Inc.
November 4, 2003
Page 7
(1) Operating income before restructuring and impairment charges, EBITDA before restructuring and impairment charges and EBITDA before the restructuring and impairment charges and loss contract reserve reversals do not represent and should not be considered as alternatives to net income or cash flow from operations, as determined by accounting principles generally accepted in the United States, or GAAP, and our calculations thereof may not be comparable to that reported by other companies. EBITDA before restructuring and impairment charges and EBITDA before restructuring and impairment charges and loss contract reserve reversals are included in this press release because they are a basis upon which we assess our liquidity position and because certain covenants in our borrowing arrangements are tied to similar measures. We also believe that it is widely accepted that EBITDA provides useful information regarding a company’s ability to service and/or incur indebtedness. This belief is based on our negotiations with our lenders who have indicated that the amount of indebtedness we will be permitted to incur will be based, in part, on our EBITDA. EBITDA before restructuring and impairment charges and EBITDA before restructuring and impairment charges and loss contract reserve reversals do not take into account our working capital requirements, debt service requirements and other commitments and, accordingly, is not necessarily indicative of amounts that may be available for discretionary use.
J.L. French Automotive Castings, Inc., a privately held automotive supplier, is a leading global designer and manufacturer of highly engineered aluminum die cast automotive parts including oil pans, engine front covers and transmission cases. The company has manufacturing facilities in Sheboygan, Wis.; Glasgow, Ky.; San Andres de Echevarria, Spain; Saltillo, Mexico; as well as five plants in the United Kingdom. The company is based in Sheboygan, Wis., and has its corporate office in Minneapolis, Minn.
This press release contains forward-looking statements that are subject to risks and uncertainties. These statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or similar expressions. These statements are based on certain assumptions that the company has made in light of its experience in the industry as well as its perspective of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Actual results may differ materially from the anticipated results because of certain risks and uncertainties, including but not limited to (i) unanticipated difficulties servicing the level of indebtedness at the company, (ii) costs or operational difficulties related to integrating the operations of the acquired entities with those of the company being greater than expected; (iii) labor disputes involving the company or its significant customers, (iv) risks associated with conducting business in foreign countries, and (v) general economic or business conditions affecting the automotive industry, either nationally or regionally, being less favorable than expected.
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J.L. French Automotive Castings, Inc.
November 4, 2003
Page 8
J.L. FRENCH AUTOMOTIVE CASTINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands — unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2003 | 2002 | 2003 | 2002 | ||||||||||||||
Sales | $ | 114,237 | $ | 132,604 | $ | 390,828 | $ | 413,739 | |||||||||
Cost of sales (1) | 103,633 | 119,479 | 344,837 | 362,883 | |||||||||||||
Gross profit | 10,604 | 13,125 | 45,991 | 50,856 | |||||||||||||
Selling, general and administrative expenses (1) | 3,579 | 2,255 | 11,439 | 10,541 | |||||||||||||
Restructuring and impairment charges | 104,464 | — | 104,599 | — | |||||||||||||
Operating income (loss) | (97,439 | ) | 10,870 | (70,047 | ) | 40,315 | |||||||||||
Cash interest expense | 15,172 | 12,265 | 44,149 | 36,140 | |||||||||||||
Deferred interest and amortization of debt issue costs | 3,499 | 695 | 11,709 | 1,839 | |||||||||||||
Interest expense, net | 18,671 | 12,960 | 55,858 | 37,979 | |||||||||||||
Other (income) | — | — | (617 | ) | — | ||||||||||||
Income (loss) before provision (benefit) for income taxes and cumulative effect of change in accounting principle | (116,110 | ) | (2,090 | ) | (125,288 | ) | 2,336 | ||||||||||
Provision (benefit) for income taxes | 277 | (464 | ) | 374 | 1,315 | ||||||||||||
Income (loss) before cumulative effect of change in accounting principle | (116,387 | ) | (1,626 | ) | (125,662 | ) | 1,021 | ||||||||||
Cumulative effect of change in accounting principle — writeoff of goodwill | — | — | — | (202,622 | ) | ||||||||||||
Net income (loss) | $ | (116,387 | ) | $ | (1,626 | ) | $ | (125,662 | ) | $ | (201,601 | ) | |||||
(1) Beginning in 2003, the Company began classifying certain plant related expenses as a cost of sales. Previously, these costs were classified as selling, general and administrative expenses. Results for the three and nine months ended September 30, 2002 have been restated to conform to the new presentation. The restatement had no impact on previously reported operating income (loss) or net income (loss).
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J.L. French Automotive Castings, Inc.
November 4, 2003
Page 9
J.L. FRENCH AUTOMOTIVE CASTINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands — unaudited)
September 30, | December 31, | |||||||||
Assets | 2003 | 2002 | ||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 816 | $ | 3,337 | ||||||
Accounts receivable, net | 53,299 | 49,574 | ||||||||
Inventories | 34,679 | 35,357 | ||||||||
Assets held for sale | 3,276 | — | ||||||||
Other current assets | 15,583 | 13,437 | ||||||||
Total current assets | 107,653 | 101,705 | ||||||||
Property, plant and equipment, net | 251,202 | 250,969 | ||||||||
Intangible and other assets, net | 14,935 | 112,265 | ||||||||
$ | 373,790 | $ | 464,939 | |||||||
Liabilities and Stockholders’ Deficit | ||||||||||
Current liabilities: | ||||||||||
Current portion of long-term debt | $ | 17,338 | $ | 12,342 | ||||||
Accounts payable | 57,109 | 56,187 | ||||||||
Accrued liabilities | 38,821 | 31,107 | ||||||||
Total current liabilities | 113,268 | 99,636 | ||||||||
Long-term debt, net of current portion | 418,946 | 398,221 | ||||||||
Subordinated notes | 175,000 | 175,000 | ||||||||
Other noncurrent liabilities | 24,523 | 26,593 | ||||||||
Total liabilities | 731,737 | 699,450 | ||||||||
Redeemable common stock | 60,000 | 60,000 | ||||||||
Stockholders’ deficit: | ||||||||||
Additional paid-in capital | 87,145 | 87,538 | ||||||||
Accumulated deficit | (496,995 | ) | (371,333 | ) | ||||||
Accumulated other comprehensive loss | (8,097 | ) | (10,716 | ) | ||||||
Total stockholders’ deficit | (417,947 | ) | (294,511 | ) | ||||||
$ | 373,790 | $ | 464,939 | |||||||
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