MRO Magazine

Accuride Reports Increase in Profitability in Second Quarter 2015


July 27, 2015
By Business Wire News

EVANSVILLE, Ind.

Accuride Corporation (NYSE:ACW) – a leading supplier of components to the North American commercial vehicle industry – today reported strong financial results for the second quarter ended June 30, 2015, reporting increased year-over-year profitability.

Second Quarter 2015 Results

Second quarter 2015 net sales were $185.4 million, compared with $181.6 million in the same period in 2014, an increase of 2.1 percent, primarily reflecting the impact of stronger industry conditions in the Company’s Wheels segment during the quarter. Accuride’s operating income was $14.2 million for the quarter, compared to operating income of $12.3 million in the second quarter of 2014. The Company reported income from continuing operations of $6.1 million, or $0.13 per share, during the quarter, compared to income from continuing operations of $5.1 million, or $0.11 per share, in 2014. Second quarter Adjusted EBITDA increased by 11.5 percent year-over-year to $25.9 million, or 14.0 percent of net sales, compared to $23.2 million, or 12.8 percent of net sales, in the same quarter of 2014. As of June 30, 2015, Accuride had $30.8 million of cash plus $59.4 million in availability under its ABL Credit Facility, for total liquidity of $90.2 million.

Industry Conditions

North American commercial vehicle industry conditions remained robust in the second quarter, with truck and trailer production continuing to increase at a healthy pace. Class 8, Class 5-7 and Trailer production grew by 20.3 percent, 0.5 percent and 13.4 percent, respectively, over 2014. Class 8 and Trailer net orders continued to moderate in the quarter, but full-year production is expected to remain strong. The Class 8 backlog remains high at 42 percent above year-ago levels, while the Trailer backlog is 33 percent above last year. As a result, few Class 8 OEM production slots remain open for the remainder of the year, and many Trailer makers are completely sold out for 2015. Demand in the medium duty segment is steady, with backlogs standing 11 percent above year-ago levels. Fleets are generally optimistic about current industry conditions, despite some driver-shortage constraints. U.S. freight tonnage is forecasted to steadily increase over the next several years, which will continue to drive future demand for trucks and trailers.

Second Quarter Business Segment Results

Accuride Wheels

Accuride Wheels segment net sales were $114.4 million, up $13.2 million, or 13.1 percent, from the same period in 2014, primarily due to stronger OEM demand and market share gains in the aftermarket. Wheels’ Adjusted EBITDA was $26.1 million, an increase of $5.2 million, or 24.6 percent, from the second quarter of 2014. Accuride flexed up its expanded aluminum wheel production capacity to accommodate the increase in volume.

Gunite

Gunite segment net sales of $47.0 million were down $1.3 million, or 2.7 percent, from the second quarter of 2014, due primarily to lower pricing related to reduced raw material costs that are passed through to our customers. Gunite’s Adjusted EBITDA increased by $0.4 million to $8.7 million from $8.3 million in the second quarter of 2014. As previously announced, Gunite secured and began serving a multi-year contract as primary aftermarket brake drum supplier to Daimler Trucks North America. The Company continues to see increased interest in Gunite’s products, as recent independent tests validated that Gunite’s 3600A®X brake drum delivers 15 percent longer life than the nearest North American competitor and twice the drum life of offshore competitors.

Brillion Iron Works

Brillion Iron Works’ second quarter net sales were $24.0 million, down $8.1 million, or 25.2 percent, from the second quarter of 2014 on lower customer volumes. Brillion’s Adjusted EBITDA was a negative $0.3 million, a decrease of $1.9 million, from the second quarter of 2014. The Company currently expects Brillion’s 2015 net sales will be 15 percent to 20 percent lower year-over-year, as compared to its previous guidance of flat top-line growth. This primarily reflects the impact of global commodity prices on demand in Brillion’s oil and gas, agricultural and mining end markets.

Liquidity and Debt

As of June 30, 2015, total debt was $316.8 million, consisting of $306.8 million of our outstanding 9.5% senior secured notes, net of discount, and a $10.0 million draw on our ABL Credit Facility. As of June 30, 2015, Accuride had $30.8 million of cash plus $59.4 million in availability under its ABL Credit Facility, for total liquidity of $90.2 million.

Business and Market Outlook

“Accuride achieved record profitability in the quarter as the result of Aftermarket share gains for aluminum wheels, and world-class operating performance and cost containment by Wheels and Gunite,” Accuride President and CEO Rick Dauch said. “Looking ahead to the second half of 2015, we are confident in our outlook for continued strong performance from our Wheels and Gunite businesses. Conditions in the North American commercial vehicle industry remain robust, with healthy order backlogs and OEM tractor and trailer build schedules pointing to a near-record year for the industry. In addition, we are experiencing strong demand for aluminum wheels and Gunite drums in the aftermarket. Customers are actively interested in the quality and test-proven superior durability of our Made-in-the-USA Gunite brake drums. Both trends enable us to maintain our full-year earnings guidance, despite weaker end-market demand at Brillion. In our drive to boost profitability, Accuride continues to actively explore potential opportunities to expand our business globally, and opportunistically refinance our debt.”

2015 Financial Guidance

Accuride management expects the Company’s 2015 net sales to be in the range of $700 million to $750 million, and Adjusted EBITDA to be in the range of $85 million to $95 million. The midpoints of the Company’s revenue and Adjusted EBITDA ranges represent increases of 3 percent and 15 percent, respectively, over Accuride’s 2014 results. The Company has based its 2015 guidance on the following projections for the North American commercial vehicle industry: Class 8 production in the range of 310,000 to 330,000 units, Class 5-7 production in the range of 220,000 to 225,000 units and Trailer segment production in the range of 280,000 to 300,000 units. In addition, management expects net sales for the Brillion business unit to be down by 15 percent to 20 percent versus 2014 due to continued softness in its oil and gas, agricultural and mining end markets.

Earnings Conference Call Information

Accuride will host a conference call to discuss the financial and operational results of its Second Quarter 2015 on Monday, July 27, 2015, beginning at 9:00 a.m. CDT. Analysts and investors may participate on the conference call by dialing (855) 542-4217 in the United States, or (412) 455-6081 internationally, and using participant code 85101918. A live webcast of the call can be accessed at the Accuride website Investors section: www.AccurideCorp.com/investors. A replay will be available from July 27, 2015, at Noon CDT until 10:59 p.m. CDT, August 3, 2015, by calling (855) 859-2056 in the United States, or (404) 537-3406 internationally, using access code 85101918.

About Accuride Corporation

With headquarters in Evansville, Ind., USA, Accuride Corporation is a leading supplier of components to the North American commercial vehicle industry. The company’s products include commercial vehicle wheels; wheel-end components and assemblies; and specialty cast-iron components for a range of agricultural, construction and mining, and oil and gas equipment applications. The company’s products are marketed under its brand names, which include Accuride®, Accuride Wheel End SolutionsTM, Gunite®, and BrillionTM. Accuride’s common stock trades on the New York Stock Exchange under the ticker symbol ACW. For more information, visit the Company’s website at http://www.accuridecorp.com.

Forward-Looking Statements

Statements contained in this news release that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding Accuride’s expectations, hopes, beliefs, and intentions with respect to future results. Such statements are subject to the impact on Accuride’s business and prospects generally of, among other factors, market demand in the commercial vehicle industry, general economic, business and financing conditions, labor relations, governmental action, competitor pricing activity, expense volatility and other risks detailed from time to time in Accuride’s Securities and Exchange Commission filings, including those described in Item 1A of Accuride’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Any forward-looking statement reflects only Accuride’s belief at the time the statement is made. Although Accuride believes that the expectations reflected in these forward-looking statements are reasonable, it cannot guarantee its future results, levels of activity, performance or achievements. Except as required by law, Accuride undertakes no obligation to update any forward-looking statements to reflect events or developments after the date of this news release.

 

Three Months Operating Results
(UNAUDITED)

 
   

Three Months Ended June 30,

(Dollars in thousands)2015  2014
   
Net sales:
Wheels $ 114,356 61.7 % $ 101,155 55.7 %
Gunite 47,006 25.3 % 48,304 26.6 %
Brillion   24,018 13.0 %   32,116 17.7 %
Total net sales $ 185,380 100.0 % $ 181,575 100.0 %
 
Gross Profit $ 25,906 14.0 % $ 22,422 12.3 %
 
Income (loss) from Operations:
Wheels $ 17,405 15.2 % $ 11,857 11.7 %
Gunite 7,338 15.6 % 7,243 15.0 %
Brillion Iron Works (1,470) (6.1) % 489 1.5 %
Corporate / Other   (9,089)   (7,285)
Consolidated Total $ 14,184 7.7 % $ 12,304 6.8 %
 
Net Income $ 6,339 3.4 % $ 5,295 2.9 %
 
Adjusted EBITDA:
Wheels $ 26,090 22.8 % $ 20,934 20.7 %
Gunite 8,694 18.5 % 8,304 17.2 %
Brillion Iron Works (256) (1.1) % 1,605 5.0 %
Corporate / Other   (8,625)   (7,609)
Continuing Operations $ 25,903 14.0 % $ 23,234 12.8 %
 
 

Six Months Operating Results
(UNAUDITED)

 
   

Six Months Ended June 30,

(Dollars in thousands)2015  2014
   
Net sales:
Wheels $ 222,692 60.3 % $ 193,373 55.5 %
Gunite 84,746 23.0 % 92,277 26.5 %
Brillion   61,601 16.7 %   62,709 18.0 %
Total net sales $ 369,039 100.0 % $ 348,359 100.0 %
 
Gross Profit $ 46,837 12.7 % $ 39,445 11.3 %
 
Income (loss) from Operations:
Wheels $ 30,657 13.8 % $ 21,599 11.2 %
Gunite 10,079 11.9 % 10,521 11.4 %
Brillion Iron Works 726 1.2 % 1,764 2.8 %
Corporate / Other   (17,950)   (15,011)
Consolidated Total $ 23,512 6.4 % $ 18,873 5.4 %
 
Net Income $ 5,751 1.6 % $ 1,722 0.5 %
 
Adjusted EBITDA:
Wheels $ 48,319 21.7 % $ 40,130 20.8 %
Gunite 12,770 15.1 % 12,621 13.7 %
Brillion Iron Works 3,125 5.1 % 4,019 6.4 %
Corporate / Other   (17,026)   (15,580)
Continuing Operations $ 47,188 12.8 % $ 41,190 11.8 %
 
 

ACCURIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)

 
 

Three Months Ended June
30,

 

Six Months Ended June
30,

(In thousands except per share data)2015  20142015  2014
 
NET SALES $ 185,380 $ 181,575 $ 369,039 $ 348,359
COST OF GOODS SOLD 159,474 159,153 322,202 308,914
GROSS PROFIT 25,906 22,422 46,837 39,445
OPERATING EXPENSES:
Selling, general and administrative 11,722 10,118 23,325 20,572
INCOME FROM OPERATIONS 14,184 12,304 23,512 18,873
OTHER INCOME (EXPENSE):
Interest expense, net (8,354) (8,487) (16,704) (16,907)
Other loss, net (84) (169) (1,256) (699)
INCOME BEFORE INCOME TAXES FROM CONTINUING OPERATIONS 5,746 3,648 5,552 1,267
INCOME TAX EXPENSE (BENEFIT) (378) (1,461) 8 (557)
INCOME FROM CONTINUING OPERATIONS 6,124 5,109 5,544 1,824
DISCONTINUED OPERATIONS, NET OF TAX 215 186 207 (102)
NET INCOME $ 6,339 $ 5,295 $ 5,751 $ 1,722
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Defined benefit plans 17,566 140 18,840 473
COMPREHENSIVE INCOME $ 23,905 $ 5,435 $ 24,591 $ 2,195
Weighted average common shares outstanding—basic 47,991 47,737 47,907 47,667
Basic income per share-continuing operations 0.13 0.11 0.12 0.04
Basic income per share-discontinued operations
Basic income per share $ 0.13 $ 0.11 $ 0.12 $ 0.04
Weighted average common shares outstanding—diluted 49,286 49,003 48,554 48,299
Diluted income per share-continuing operations 0.13 0.11 0.12 0.04
Diluted income per share-discontinued operations
Diluted income per share $ 0.13 $ 0.11 $ 0.12 $ 0.04
 
 

ACCURIDE CORPORATION
CONSOLIDATED ADJUSTED EBITDA
(UNAUDITED)

 
 

Three Months Ended June 30,

(In thousands)2015  2014
 
Net income $ 6,339 $ 5,295
Income tax benefit (378) (1,461)
Interest expense, net 8,354 8,487
Depreciation and amortization 10,413 10,230
Restructuring, severance and other charges1 531
Other items related to our credit agreement2   644   683
Adjusted EBITDA $ 25,903 $ 23,234
 

Note:

1)   For the three months ended June 30, 2015, Adjusted EBITDA represents net income before net interest expense, income tax expense, depreciation and amortization, plus $0.5 million in costs associated with restructuring items. For the three months ended June 30, 2014, Adjusted EBITDA represents net income before net interest expense, income tax benefit, depreciation and amortization.
2) Items related to our credit agreement refer to amounts utilized in the calculation of financial covenants in Accuride’s senior credit facility. For the three months ended June 30, 2015, items related to our credit agreement consisted of foreign currency losses and other income or expenses of $0.6 million. For the three months ended June 30, 2014, items related to our credit agreement consisted of foreign currency losses and other income or expenses of $0.7 million.
 
 
 

Six Months Ended June 30,

(In thousands)2015  2014
 
Net income $ 5,751 $ 1,722
Income tax expense (benefit) 8 (557)
Interest expense, net 16,704 16,907
Depreciation and amortization 21,009 20,502
Restructuring, severance and other charges1 1,239 627
Other items related to our credit agreement2   2,477   1,989
Adjusted EBITDA $ 47,188 $ 41,190
 

Note:

3)   For the six months ended June 30, 2015, Adjusted EBITDA represents net income before net interest expense, income tax expense, depreciation and amortization, plus $1.2 million in costs associated with restructuring items. For the six months ended June 30, 2014, Adjusted EBITDA represents net income before net interest expense, income tax benefit, depreciation and amortization, plus $0.6 million in costs associated with restructuring items.
4) Items related to our credit agreement refer to amounts utilized in the calculation of financial covenants in Accuride’s senior credit facility. For the six months ended June 30, 2015, items related to our credit agreement consisted of foreign currency losses and other income or expenses of $2.5 million. For the six months ended June 30, 2014, items related to our credit agreement consisted of foreign currency losses and other income or expenses of $2.0 million.
 

ACCURIDE CORPORATION
SEGMENT ADJUSTED EBITDA RECONCILIATION
(UNAUDITED)

 
 

Three Months Ended June 30, 2015

(In thousands)

Income (loss)
from
Operations

 

Depreciation and
Amortization

 Other  

Adjusted
EBITDA

Wheels $ 17,405 $ 7,485 $ 1,200 $ 26,090
Gunite 7,338 1,106 250 8,694
Brillion Iron Works (1,470) 1,184 30 (256)
Corporate / Other   (9,089)   627   (163)   (8,625)
Continuing Operations $ 14,184 $ 10,402 $ 1,317 $ 25,903
 
Imperial Group   (11)   11    
Consolidated Total $ 14,173 $ 10,413 $ 1,317 $ 25,903
 
 
 

Three Months Ended June 30, 2014

(In thousands)

Income (loss)
from
Operations

 

Depreciation and
Amortization

 Other  

Adjusted
EBITDA

Wheels $ 11,857 $ 7,877 $ 1,200 $ 20,934
Gunite 7,243 811 250 8,304
Brillion Iron Works 489 1,086 30 1,605
Corporate / Other   (7,285)   446   (770)   (7,609)
Continuing Operations $ 12,304 $ 10,220 $ 710 $ 23,234
 
Imperial Group   (10)   10    
Consolidated Total $ 12,294 $ 10,230 $ 710 $ 23,234
 
 
 

Six Months Ended June 30, 2015

(In thousands)

Income (loss)
from
Operations

 

Depreciation and
Amortization

 Other  

Adjusted
EBITDA

Wheels $ 30,657 $ 15,262 $ 2,400 $ 48,319
Gunite 10,079 2,191 500 12,770
Brillion Iron Works 726 2,339 60 3,125
Corporate / Other   (17,950)   1,196   (272)   (17,026)
Continuing Operations $ 23,512 $ 20,988 $ 2,688 $ 47,188
 
Imperial Group   (21)   21    
Consolidated Total $ 23,491 $ 21,009 $ 2,688 $ 47,188
 
 
 

Six Months Ended June 30, 2014

(In thousands)

Income (loss)
from
Operations

 

Depreciation and
Amortization

 Other  

Adjusted
EBITDA

Wheels $ 21,599 $ 15,784 $ 2,747 $ 40,130
Gunite 10,521 1,600 500 12,621
Brillion Iron Works 1,764 2,195 60 4,019
Corporate / Other   (15,011)   902   (1,471)   (15,580)
Continuing Operations $ 18,873 $ 20,481 $ 1,836 $ 41,190
 
Imperial Group   (21)   21    
Consolidated Total $ 18,852 $ 20,502 $ 1,836 $ 41,190
 

We define Adjusted EBITDA as our net income or loss before income tax expense or benefit, interest expense, net, depreciation and amortization, restructuring, severance, and other charges, impairment, and currency losses, net. Adjusted EBITDA has been included because we believe that it is useful for us and our investors to measure our ability to provide cash flows to meet debt service. Adjusted EBITDA should not be considered an alternative to net income (loss) or other traditional indicators of operating performance and cash flows determined in accordance with accounting principles generally accepted in the United States (“GAAP”). We present the table of Adjusted EBITDA because covenants in the agreements governing our material indebtedness contain ratios based on this measure on a quarterly basis. While Adjusted EBITDA is used as a measure of liquidity and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculations.

 

ACCURIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

 
 

June 30,

 December 31,
(In thousands)20152014
 
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 30,847 $ 29,773
Customer and other receivables 77,691 63,570
Inventories 40,724 43,065
Other current assets   13,586   13,472
Total current assets 162,848 149,880
PROPERTY, PLANT AND EQUIPMENT, net 206,174 212,183
OTHER ASSETS:
Goodwill and other assets   234,678   236,359
TOTAL $ 603,700 $ 598,422
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 65,573 $ 56,452
Other current liabilities   38,172   40,619
Total current liabilities 103,745 97,071
LONG-TERM DEBT 316,760 323,234
OTHER LIABILITIES 126,763 147,314
STOCKHOLDERS’ EQUITY:
Total stockholders’ equity   56,432   30,803
TOTAL $ 603,700 $ 598,422
 

Accuride Corporation
Investor Relations:
Todd Taylor, 812-962-5105
ttaylor@accuridecorp.com
or
Media Relations:
Timothy G. Weir, APR, 812-962-5128
tweir@accuridecorp.com