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	%