Investor Contact: Jeremy Friedman
Executive Vice President and Chief Financial Officer
978-570-6900
Jeremy.Friedman@accellent.com
For Immediate Release
Accellent Inc. Reports Third Quarter 2008 Financial Results
Wilmington, MA (November 13, 2008)– Accellent Inc. (the “Company”), a wholly owned subsidiary of Accellent Holdings Corp. (“Accellent”), today announced results for its fiscal third quarter ended September 30, 2008.
“Accellent had a strong third quarter,” said Robert Kirby, President and CEO of Accellent. “Revenue increased 13%, operating income increased 28% and adjusted EBITDA increased 24% compared with the same period a year ago. Intense focus on enhancing the value we provide to our customers has been a key driver of revenue growth. Our associates’ commitment to continuous improvement in everything we do is yielding improved profitability. Year to date revenues increased 14% and adjusted EBITDA increased 22% reflecting the ongoing hard work and dedication of our team.”
Third Quarter 2008 Financial Results
Net sales increased 12.8% to $134.7 million in the third quarter, compared with $119.4 million in the third quarter of 2007. Income from operations was $13.8 million in the third quarter, compared to $10.8 million in the third quarter last year. Our net loss was $0.8 million in the third quarter, compared with a net loss of $8.1 million in the third quarter of 2007.
Adjusted EBITDA for the third quarter was $26.1 million, or 19.4% of net sales, compared to adjusted EBITDA of $21.0 million, or 17.6 % of net sales, in the third quarter last year.
Nine Months Ended September 30, 2008 Financial Results
Net sales increased 14.1 % to $399.4 million in the first nine months of 2008, compared with $350.0 million last year. Year to date income from operations was $43.3 million, compared with a loss from operations of $44.4 million in the first nine months of 2007. A net loss of $9.8 million was recorded in the first nine months of 2008 compared with a net loss of $98.0 million last year.
During the first nine months of 2007 we completed a goodwill impairment analysis resulting in a goodwill impairment charge of $82.3 million which is reflected in both the loss from operations and net loss for that period.
Adjusted EBITDA for the first nine months of 2008 was $78.5 million or 19.7% of net sales compared to adjusted EBITDA of $64.2 million, or 18.3% of net sales, last year.
Reconciliations of non-GAAP financial measures to GAAP financial measures are provided in the financial information accompanying this press release.
Conference Call
Robert Kirby, President and Chief Executive Officer and Jeremy Friedman, Executive Vice President and Chief Financial Officer will discuss third quarter and year to date 2008 results in a conference call scheduled for today, November 13, 2008 at 5:00 p.m. Eastern Time. The teleconference can be accessed live on the Internet through the Investor Relations section of the Accellent website at www.accellent.com or by calling (888) 713-4215 pass code 97936158. Please visit the website or dial in 10 to 15 minutes prior to the beginning of the call to download and install any necessary audio software. A replay of the conference call will be available at www.accellent.com or by telephone at (888) 286-8010 pass code 84988906 until November 20, 2008.
About Accellent
Accellent provides fully integrated outsourced manufacturing and engineering services to the medical device industry in the cardiology, endoscopy, drug delivery, neurology and orthopaedic markets. Accellent has broad capabilities in design and engineering services, precision component fabrication, finished device assembly and complete supply chain management. These capabilities enhance customers’ speed to market and return on investment by allowing them to refocus internal resources more efficiently. For more information, please visit www.accellent.com
Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended. All statements included herein, other than statements of historical fact, may constitute forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from the Company’s expectations are disclosed in the risk factors contained in the Company’s Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission on March 31, 2008. All forward-looking statements are expressly qualified in their entirety by such factors.
Accellent Inc.
Condensed Consolidated Statements of Operations
(in thousands)
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2008 | September 30, 2007 | September 30, 2008 | September 30, 2007 | |||||||||||||
Net sales | $ | 134,670 | $ | 119,396 | $ | 399,428 | $ | 349,961 | ||||||||
Cost of sales (exclusive of amortization) | 100,031 | 89,904 | 293,998 | 259,007 | ||||||||||||
Gross profit | 34,639 | 29,492 | 105,430 | 90,954 | ||||||||||||
Selling, general and administrative expenses | 15,596 | 14,395 | 45,533 | 38,622 | ||||||||||||
Research and development expenses | 751 | 582 | 2,231 | 1,933 | ||||||||||||
Restructuring charges (recovery) | 794 | (7 | ) | 3,165 | 701 | |||||||||||
Amortization of intangibles | 3,735 | 3,735 | 11,205 | 11,771 | ||||||||||||
Impairment of goodwill and other intangible assets | — | — | — | 82,340 | ||||||||||||
Income (loss) from operations | 13,763 | 10,787 | 43,296 | (44,413 | ) | |||||||||||
Interest expense, net | (16,026 | ) | (17,165 | ) | (49,363 | ) | (50,079 | ) | ||||||||
Loss on derivative instruments | (171 | ) | (122 | ) | (528 | ) | (64 | ) | ||||||||
Other income (expense) | 924 | (420 | ) | 136 | (515 | ) | ||||||||||
Loss before income tax expense (benefit) | (1,510 | ) | (6,920 | ) | (6,459 | ) | (95,071 | ) | ||||||||
Income tax expense (benefit) | (661 | ) | 1,212 | 3,360 | 2,897 | |||||||||||
Net loss | $ | (849 | ) | $ | (8,132 | ) | $ | (9,819 | ) | $ | (97,968 | ) |
Accellent Inc.
Reconciliation of Net Loss to EBITDA to Adjusted EBITDA
(in thousands)
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2008 | September 30, 2007 | September 30, 2008 | September 30, 2007 | |||||||||||||
RECONCILIATION OF NET LOSS TO EBITDA: | ||||||||||||||||
Net loss | $ | (849 | ) | $ | (8,132 | ) | $ | (9,819 | ) | $ | (97,968 | ) | ||||
Interest expense, net | 16,026 | 17,165 | 49,363 | 50,079 | ||||||||||||
Income tax expense (benefit) | (661 | ) | 1,212 | 3,360 | 2,897 | |||||||||||
Depreciation and amortization | 9,122 | 8,802 | 26,630 | 26,537 | ||||||||||||
EBITDA (1) | $ | 23,638 | $ | 19,047 | $ | 69,534 | $ | (18,455 | ) | |||||||
Adjustments: | ||||||||||||||||
Impairment | - | - | - | 82,340 | ||||||||||||
Restructuring and other charges | 1,257 | (7 | ) | 3,697 | 701 | |||||||||||
Stock-based compensation - employees | 1,435 | (151 | ) | 2,349 | (4,912 | ) | ||||||||||
Stock-based compensation - non-employees | 90 | 480 | 924 | 1,521 | ||||||||||||
Employee severance and relocation | 131 | 792 | 729 | 1,228 | ||||||||||||
Chief executive recruiting costs | - | - | (26 | ) | 225 | |||||||||||
Currency transaction (gain) / loss | (1,220 | ) | 404 | (534 | ) | 552 | ||||||||||
Loss on derivative instruments | 171 | 122 | 528 | 64 | ||||||||||||
Loss on sale of property and equipment | 297 | 34 | 401 | 4 | ||||||||||||
Management fees to stockholder | 276 | 291 | 931 | 902 | ||||||||||||
Adjusted EBITDA (1) | $ | 26,075 | $ | 21,012 | $ | 78,533 | $ | 64,170 |
(1) EBITDA and Adjusted EBITDA presented in this press release are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net loss or any other performance measures derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity.
EBITDA represents net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted to give effect to unusual items, non-cash items, the pro forma effect of acquisitions as if they had taken place at the beginning of the periods covered by the covenant calculation and other adjustments, all of which are required in calculating covenant ratios and compliance under the indenture governing our senior subordinated notes and under our senior secured credit facility. For the periods presented, Adjusted EBITDA includes adjustments for: restructuring and other related charges, impairment of goodwill and other intangible assets, gains and losses from derivative instruments, gain on sale of property, non-operating currency transaction losses, certain stock compensation related charges, severance, executive relocation, CEO search costs, non-cash consulting expenses and management fees.
We believe that the presentation of EBITDA and Adjusted EBITDA is appropriate to provide additional information to investors about the calculation of certain financial covenants in the indenture governing our senior subordinated notes and under our senior secured credit facility. Adjusted EBITDA is a material component of these covenants. We also present EBITDA because we consider it an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of high yield issuers, many of which present EBITDA when reporting their results.
Accellent Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
September 30, 2008 | December 31, 2007 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 15,593 | $ | 5,688 | ||||
Accounts receivable, net of allowances of $1,308 and $1,212, respectively | 54,508 | 50,961 | ||||||
Inventories, net | 68,792 | 67,399 | ||||||
Prepaid expenses and other current assets | 3,576 | 4,971 | ||||||
Total current assets | 142,469 | 129,019 | ||||||
Property and equipment, net | 128,892 | 133,045 | ||||||
Goodwill | 629,854 | 629,854 | ||||||
Intangibles, net | 198,240 | 209,444 | ||||||
Deferred financing costs and other assets | 18,234 | 21,003 | ||||||
Total assets | $ | 1,117,689 | $ | 1,122,365 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 4,009 | $ | 4,187 | ||||
Accounts payable | 26,118 | 23,571 | ||||||
Accrued payroll and benefits | 12,934 | 8,442 | ||||||
Accrued interest | 13,176 | 5,615 | ||||||
Accrued income taxes | 2,711 | 772 | ||||||
Accrued expenses | 13,467 | 11,439 | ||||||
Total current liabilities | 72,415 | 54,026 | ||||||
Long-term debt | 703,429 | 717,014 | ||||||
Other long-term liabilities | 34,461 | 39,330 | ||||||
Total liabilities | 810,305 | 810,370 | ||||||
Stockholders’ equity: | ||||||||
Common stock, par value $0.01 per share, 50,000,000 shares authorized and 1,000 shares issued and outstanding at September 30, 2008 and December 31, 2007 | — | — | ||||||
Additional paid-in capital | 634,162 | 628,368 | ||||||
Accumulated other comprehensive income (loss) | (508 | ) | 78 | |||||
Accumulated deficit | (326,270 | ) | (316,451 | ) | ||||
Total stockholders’ equity | 307,384 | 311,995 | ||||||
Total liabilities and stockholders’ equity | $ | 1,117,689 | $ | 1,122,365 |