MRO Magazine

UCI Holdings Limited Reports Results of Operations for Fourth Quarter 2014


March 4, 2015
By Business Wire News

LAKE FOREST, Ill.

UCI Holdings Limited, the parent company of UCI International, Inc. (“UCI”), today announced UCI’s results for the fourth quarter ended December 31, 2014. Net sales of $255.4 million increased 4.0% from the $245.6 million reported for the fourth quarter of 2013. The company, a leading manufacturer of vehicle replacement parts, reported that net sales increased in its cooling systems, vehicle electronics and filtration product lines, and declined in the fuel delivery systems product line.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, as adjusted, increased 5.5% to $30.7 million for the fourth quarter, compared to $29.1 million in the year-ago quarter. The reconciliation of net loss to adjusted EBITDA, a non-GAAP measure of financial performance, is set forth in Schedule A.

Net loss for the quarter was $0.7 million, including $5.0 million, net of tax, in special items, consisting primarily of restructuring costs, costs of obtaining new business, costs of a corporate strategic review, business optimization costs, and costs related to implementation of our cost sharing and manufacturing arrangements with FRAM Group. Excluding these items, adjusted net income would have been $4.3 million for the quarter. Adjusted net income for the fourth quarter of 2013 was $0.5 million, excluding $7.5 million, net of tax, in special items, consisting primarily of restructuring costs, patent litigation settlement costs, a trademark impairment charge, business optimization costs, costs of obtaining new business, adjustment of an environmental accrual and costs related to implementation of our cost sharing and manufacturing arrangements with FRAM Group.

For the year ended December 31, 2014, net sales increased to $1,009.8 million, compared to $995.9 million in 2013. Adjusted EBITDA for 2014 was $111.7 million compared to $114.7 million for 2013.

“We finished the year with good fourth quarter sales volume, led by our OE cooling system programs and new product introductions in our vehicle electronics line,” said Bruce Zorich, Chief Executive Officer of UCI. “The increased volume, along with the continued benefits of our cost savings initiatives and reduced costs from our OE rollout, helped us to overcome lower customer pricing and unfavorable product mix, to post a year-over-year and sequential improvement in our fourth quarter adjusted EBITDA.”

As of December 31, 2014, the company’s cash on hand was $44.5 million and total debt was $708.2 million.

Conference Call

UCI will host a conference call to discuss its results and performance on Thursday, March 5, at 11:00 a.m. Eastern Time (ET). Interested parties are invited to listen to the call by telephone. Domestic callers can dial (800) 637-1381. International callers can dial (502) 498-8424.

A replay of the call will be available from March 6 for a 14 day period, at www.uciholdings.com. Click on the UCI 2014 4th Quarter Results button.

About UCI International, Inc.

UCI International, 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 investors that these uncertainties and factors could cause UCI’s actual results to differ materially from those stated in the forward-looking statements. 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.

               
UCI Holdings Limited
Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

   
 
Three Months Ended December 31, Twelve Months Ended December 31,
  2014     2013     2014     2013  
Net sales
Third party net sales $ 244,189 $ 233,256 $ 958,540 $ 927,996
Related party net sales   11,223     12,315     51,253     67,934  
Total net sales 255,412 245,571 1,009,793 995,930
Cost of sales   221,274     206,535     871,229     837,267  
Gross profit 34,138 39,036 138,564 158,663
Operating expenses
Selling, general and administrative (14,191 ) (19,464 ) (63,218 ) (84,655 )
Amortization of acquired intangible assets (5,530 ) (5,547 ) (22,167 ) (22,176 )
Restructuring costs, net (2,676 ) (4,657 ) (16,876 ) (7,593 )
Trademark impairment loss (2,000 ) (38,000 ) (2,000 )
Patent litigation costs (82 ) (2,200 ) (158 ) (2,200 )
Antitrust litigation costs       (17 )   (44 )   (198 )
Operating income (loss) 11,659 5,151 (1,899 ) 39,841
Other expense
Interest expense, net (14,569 ) (13,687 ) (50,454 ) (51,453 )
Miscellaneous, net   (3,068 )   (1,637 )   (8,589 )   (3,623 )
Loss before income taxes (5,978 ) (10,173 ) (60,942 ) (15,235 )
Income tax benefit   5,231     3,162     24,694     2,993  
Net loss   (747 )   (7,011 )   (36,248 )   (12,242 )
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments (1,622 ) 800 (9,743 ) 1,318
Pension and OPEB liability, net of tax   (25,142 )   33,594     (25,049 )   35,545  
Total other comprehensive (loss) income   (26,764 )   34,394     (34,792 )   36,863  
Comprehensive (loss) income $ (27,511 ) $ 27,383   $ (71,040 ) $ 24,621  
 
       
UCI Holdings Limited
Condensed Consolidated Balance Sheets
(in thousands)
   
December 31, December 31,
  2014     2013  
 
Assets
Current assets
Cash and cash equivalents $ 44,468 $ 76,619
Accounts receivable, net 216,473 221,872
Related party receivables 17,208 17,179
Inventories 230,924 202,412
Deferred tax assets 30,901 30,256
Other current assets   19,926     22,776  
Total current assets 559,900 571,114
Property, plant and equipment, net 168,834 168,772
Goodwill 308,080 309,703
Other intangible assets, net 310,351 373,433
Deferred financing costs, net 11,578 14,622
Other long-term assets   1,380     4,115  
Total assets $ 1,360,123   $ 1,441,759  
 
Liabilities and shareholder’s equity
Current liabilities
Accounts payable $ 143,618 $ 152,052
Current maturities of long-term debt 23,166 3,176
Related party payables 2,450 587
Product returns liability 37,635 42,031
Interest payable 13,083 13,081
Accrued expenses and other current liabilities   50,869     58,665  
Total current liabilities 270,821 269,592
Long-term debt, less current maturities 684,998 687,860
Pension and other post-retirement liabilities 97,720 62,256
Deferred tax liabilities 78,254 122,983
Long-term related party payables 101 361
Other long-term liabilities   2,648     2,925  
Total liabilities 1,134,542 1,145,977
Contingencies
Shareholder’s equity
Common stock 320,038 320,038
Retained deficit (52,894 ) (17,485 )
Accumulated other comprehensive loss   (41,563 )   (6,771 )
Total shareholder’s equity   225,581     295,782  
Total liabilities and shareholder’s equity $ 1,360,123   $ 1,441,759  
 
       
UCI Holdings Limited
Condensed Consolidated Statements of Cash Flows
(in thousands)
     
 
Twelve Months Ended December 31,
  2014     2013  
Net cash (used in) provided by operating activities $ (18,657 ) $ 39,865  
Cash flows from investing activities:
Capital expenditures (34,451 ) (40,619 )
Proceeds from sale of property, plant and equipment   4,395     1,448  
Net cash used in investing activities   (30,056 )   (39,171 )

Cash flows from financing activities:

Revolver borrowings 30,000
Revolver repayments (10,000 )
Debt repayments (3,070 ) (3,089 )

Excess proceeds over net book value of long-lived assets sold to an entity under common control

  839      

Net cash provided by (used in) financing activities

  17,769     (3,089 )
Effect of exchange rate changes on cash   (1,207 )   97  
Net decrease in cash and cash equivalents (32,151 ) (2,298 )
Cash and cash equivalents at beginning of period   76,619     78,917  
Cash and cash equivalents at end of period $ 44,468   $ 76,619  
 

Schedule A

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA

EBITDA, a measure used by our strategic owner to measure operating performance, is defined as net income (loss) for the period plus income tax expense (benefit), net interest expense, depreciation expense of property, plant and equipment and amortization expense of identifiable intangible assets. Adjusted EBITDA presented herein is also a financial measure used by our strategic owner to measure operating performance. Adjusted EBITDA is calculated as EBITDA adjusted to exclude items of a significant or unusual nature that cannot be attributed to ordinary business activities, such as business optimization costs, restructuring costs and costs related to implementation of cost sharing arrangements with FRAM Group. EBITDA and Adjusted EBITDA are not presentations in accordance with GAAP, or measures of our financial condition, liquidity or profitability and should not be considered as a substitute for net income (loss), operating profit or any other performance measures derived in accordance with GAAP or as a substitute for cash flow from operating activities as a measure of our liquidity in accordance with GAAP. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow, as they do not take into account certain items such as interest and principal payments on our indebtedness, working capital needs, tax payments and capital expenditures. We believe that the inclusion of EBITDA and Adjusted EBITDA is appropriate to provide additional information to investors about our operating performance and to provide a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. Additionally, we believe that issuers of high yield debt securities also present EBITDA and Adjusted EBITDA because investors, analysts and rating agencies consider these measures useful. In addition, Adjusted EBITDA is used to determine our compliance with certain covenants, including the fixed charge coverage ratio used for purposes of debt incurrence under the indenture governing the Senior Notes and certain other agreements governing our indebtedness. Because not all companies calculate EBITDA and Adjusted EBITDA identically, this presentation of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures used by other companies.

               
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA
(dollars in millions)
 
Three Months Ended December 31,   Twelve Months Ended December 31,
  2014     2013     2014     2013  
Net loss $ (0.7 ) $ (7.0 ) $ (36.2 ) $ (12.2 )
Income tax benefit (5.2 ) (3.1 ) (24.7 ) (3.0 )
Net interest expense 14.5 13.6 50.4 51.4
Depreciation and amortization expense   14.0     13.4     56.1     52.8  
EBITDA 22.6 16.9 45.6 89.0
 
Trademark impairment loss 2.0 38.0 2.0
Restructuring costs, net 2.7 4.7 16.9 7.6
New business changeover and sales commitment costs 2.5 1.0 4.5 1.6
Business optimization costs 0.4 1.2 3.1 8.5
Strategic review costs 1.7 2.6

Cost related to implementation of cost sharing and manufacturing arrangements with FRAM Group

0.4 0.5 0.5 4.6
Patent litigation costs 0.2 2.2 0.2 2.2
Unrealized loss on derivatives 0.1 0.2
Environmental accrual adjustment 0.1 0.7 0.1 0.7
Cost of defending class action and other litigation (0.1 ) 0.1 0.4
Gain on forgiveness of debt (0.1 ) (0.1 )
Non-operating expenses 0.1
Collection of tax refunds               (1.9 )
Adjusted EBITDA $ 30.7   $ 29.1   $ 111.7   $ 114.7  
 
Net sales $ 255.4 $ 245.6 $ 1,009.8 $ 995.9
Adjusted EBITDA margin 12.0 % 11.8 % 11.1 % 11.5 %
 

UCI International, Inc.
Ricardo Alvergue, Chief Financial Officer, 847-482-4165