UCI Holdings Limited Reports Results of Operations for Second Quarter 2015

By Business Wire News August 5, 2015

LAKE FOREST, Ill.

UCI Holdings Limited, the parent company of UCI International, LLC (“UCI”), today announced UCI’s results for the second quarter ended June 30, 2015. The company reported net sales from continuing operations of $201.5 million compared to $200.3 million for the second quarter of 2014. The company, a leading manufacturer of vehicle replacement parts, reported that net sales increased in its filtration and cooling systems product lines and decreased in its fuel delivery systems product line. As a result of the sale of the Wells vehicle electronics business on July 1, 2015, the vehicle electronics product line is accounted for as a discontinued operation for all periods presented.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, for UCI’s continuing operations, as adjusted, was $16.2 million for the second quarter of 2015, compared to $21.3 million in the year-ago quarter. The reconciliation of net loss to EBITDA and adjusted EBITDA, a non-GAAP measure of financial performance, is set forth in Schedule A.

Net loss from continuing operations for the second quarter of 2015 was $18.8 million, including $8.2 million, net of tax, in special items, consisting primarily of restructuring costs, business optimization costs, new business changeover and sales commitment costs, an environmental accrual adjustment and other litigation costs. Excluding these items, adjusted net loss from continuing operations would have been $10.6 million for the quarter. Net loss from continuing operations for the second quarter of 2014 was $27.4 million, including $26.5 million, net of tax, in special items, consisting primarily of a trademark impairment loss, restructuring costs, business optimization costs and new business changeover and sales commitment costs.

As of June 30, 2015, the company’s cash on hand for continuing operations was $43.0 million and total debt was $716.5 million.

Conference Call

UCI will host a conference call to discuss its results and performance on Thursday, August 6, 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 August 7 for a 14 day period, at www.uciholdings.com. Click on the UCI 2015 2^nd Quarter Results button.

About UCI International, LLC

UCI International, LLC 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) (Unaudited)
(in thousands)


			Three Months Ended June 30,						Six Months Ended June 30,
			2015			2014			2015			2014
Net sales
	Third party net sales		$	187,244		$	186,276		$	373,805		$	370,341
	Related party net sales			14,325			13,974			29,035			28,227
		Total net sales		201,569			200,250			402,840			398,568
Cost of sales				178,732			171,911			367,663			347,982
	Gross profit			22,837			28,339			35,177			50,586
Operating expenses
	Selling, general and administrative			(13,563	)		(13,959	)		(27,366	)		(28,727	)
	Amortization of acquired intangible assets			(4,044	)		(4,085	)		(8,091	)		(8,168	)
	Restructuring costs, net			(6,411	)		(4,268	)		(6,740	)		(8,377	)
	Trademark impairment loss			–			(38,000	)		–			(38,000	)
		Operating loss		(1,181	)		(31,973	)		(7,020	)		(32,686	)
Other expense
	Interest expense, net			(1,017	)		(11,303	)		(6,669	)		(26,699	)
	Miscellaneous, net			(1,017	)		(788	)		(1,931	)		(1,807	)
Loss from continuing operations before income taxes				(3,215	)		(44,064	)		(15,620	)		(61,192	)
Income tax (expense) benefit				(15,581	)		16,658			(12,132	)		20,367
Loss from continuing operations				(18,796	)		(27,406	)		(27,752	)		(40,825	)
(Loss) income from discontinued operations, net of tax				(12,265	)		1,806			(15,574	)		2,683
	Net loss			(31,061	)		(25,600	)		(43,326	)		(38,142	)
Other comprehensive income (loss), net of tax
	Foreign currency translation adjustments			(8,636	)		973			(16,380	)		6,164
	Pension and OPEB liability, net of tax			396			32			779			62
Total other comprehensive (loss) income				(8,240	)		1,005			(15,601	)		6,226
Comprehensive loss			$	(39,301	)	$	(24,595	)	$	(58,927	)	$	(31,916	)


UCI Holdings Limited
Condensed Consolidated Balance Sheets
(in thousands)

			June 30,			December 31,
			2015			2014
Assets			(Unaudited)
Current assets
	Cash and cash equivalents		$	43,030		$	41,468
	Accounts receivable, net			130,888			140,762
	Related party receivables			11,720			17,185
	Inventories			177,083			180,517
	Deferred tax assets			12,993			27,009
	Discontinued current assets			111,821			133,601
	Other current assets			24,501			19,358
		Total current assets		512,036			559,900
Property, plant and equipment, net				129,721			138,404
Goodwill				218,170			219,125
Other intangible assets, net				244,329			253,685
Deferred financing costs, net				9,128			11,578
Discontinued long-term assets				177,257			176,051
Other long-term assets				745			1,380
		Total assets	$	1,291,386		$	1,360,123

Liabilities and shareholder’s equity
Current liabilities
	Accounts payable		$	104,708		$	111,888
	Current maturities of long-term debt			33,063			23,066
	Related party payables			4,813			2,450
	Product returns liability			28,227			35,736
	Interest payable			14,632			13,083
	Discontinued current liabilities			31,934			44,628
	Accrued expenses and other current liabilities			55,391			39,970
		Total current liabilities		272,768			270,821
Long-term debt, less current maturities				683,402			684,798
Pension and other post-retirement liabilities				89,382			90,296
Deferred tax liabilities				46,395			55,695
Long-term related party payables				101			101
Discontinued long-term liabilities				29,142			30,183
Other long-term liabilities				3,542			2,648
		Total liabilities		1,124,732			1,134,542
Contingencies
Shareholder’s equity
	Common stock			320,038			320,038
	Retained deficit			(96,220	)		(52,894	)
	Accumulated other comprehensive loss			(57,164	)		(41,563	)
		Total shareholder’s equity		166,654			225,581
		Total liabilities and shareholder’s equity	$	1,291,386		$	1,360,123


UCI Holdings Limited
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)


			Six Months Ended June 30,
			2015			2014
Net cash provided by (used in) operating activities			$	5,586		$	(21,679	)
Cash flows from investing activities:
	Capital expenditures			(12,138	)		(21,522	)
	Proceeds from sale of property, plant and equipment			13			893
		Net cash used in investing activities		(12,125	)		(20,629	)
Cash flows from financing activities:
	Revolver borrowings			10,000			–
	Debt repayments			(1,550	)		(1,534	)
		Net cash provided by (used in) financing activities		8,450			(1,534	)
Effect of exchange rate changes on cash				(341	)		(13	)
Net increase (decrease) in cash and cash equivalents				1,570			(43,855	)
Cash and cash equivalents at the beginning of period				44,468			76,619
Cash and cash equivalents at the end of period			$	46,038		$	32,764
Less: discontinued operations cash and cash equivalents at the end of period				(3,008	)
Cash and cash equivalents of continuing operations at the end of period			$	43,030

Schedule A

Reconciliation of EBITDA to 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. We additionally 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. Furthermore, until a business has been sold, certain of our financial covenants are measured using the aggregation of continuing and discontinued operations. Accordingly, the table below presents the aggregation of Adjusted EBITDA from continuing operations and discontinued operations.


Reconciliation of Net Loss to EBITDA and Adjusted EBITDA
(dollars in millions)

		Three Months Ended June 30,						Six Months Ended June 30,
		2015			2014			2015			2014
Net loss from continuing operations		$	(18.7	)	$	(27.4	)	$	(27.7	)	$	(40.8	)
Income tax (benefit) expense			15.5			(16.7	)		12.1			(20.4	)
Net interest expense			1.0			11.3			6.7			26.7
Depreciation and amortization expense			10.2			11.2			21.1			22.0
	EBITDA from continuing operations		8.0			(21.6	)		12.2			(12.5	)

Restructuring costs, net			6.4			4.3			6.7			8.4
Business optimization costs			0.9			0.2			1.0			0.7
New business changeover and sales commitment costs			0.5			0.2			1.2			1.4
Environmental accrual adjustment			0.3			–			0.3			–
Other litigation costs			0.1			–			0.2			–
Trademark impairment loss			–			38.0			–			38.0
Cost related to implementation of cost sharing and
	manufacturing arrangements with FRAM Group		–			0.1			–			0.1
Miscellaneous non-operating expenses			–			0.1			–			0.1

Adjusted EBITDA from continuing operations		$	16.2		$	21.3		$	21.6		$	36.2
Adjusted EBITDA from discontinued operations			2.1			9.7			5.8			17.9
Adjusted EBITDA		$	18.3		$	31.0		$	27.4		$	54.1
Net sales from continuing operations		$	201.5		$	200.3		$	402.8		$	398.6
Adjusted EBITDA margin from continuing operations			8.0	%		10.6	%		5.4	%		9.1	%