UCI Holdings Limited Reports Results of Operations for First Quarter 2013

UCI Holdings Limited Reports Results of Operations for First Quarter 2013

LAKE FOREST, Ill.--(BUSINESS WIRE)-- UCI Holdings Limited, the parent company of UCI International, Inc. ("UCI"), today announced UCI's results for the first quarter ended March 31, 2013. Net sales of $245.8 million decreased from the $261.6 million reported for the first quarter of 2012. The company, a leading manufacturer of vehicle replacement parts, reported that net sales increased in the traditional, OES (new car dealer service) and OEM (original equipment manufacturer) channels, and declined in the retail and heavy duty channels. Net sales for the first quarter of 2013 also included $19.6 million in related party sales to FRAM Group, compared to $6.0 million for the first quarter of 2012.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, as adjusted, was $25.5 million for the first quarter of 2013, compared to $45.4 million in the year-ago quarter. The reconciliation of net income to adjusted EBITDA, a non-GAAP measure of financial performance, is set forth in Schedule A.


Net loss for the first quarter of 2013 was $5.1 million, including $4.0 million, net of tax, in special items, consisting primarily of business optimization costs, costs related to implementation of our cost sharing and manufacturing arrangements with FRAM Group and restructuring costs. Net income for the first quarter of 2012 was $6.9 million, including $3.8 million, net of tax, in special items, consisting primarily of costs related to implementation of our cost sharing and manufacturing arrangements with FRAM Group, business optimization costs, costs of defending class action litigation and costs of obtaining new business.

"General economic conditions, as well as weather conditions and continued general slowness in the aftermarket affected our revenue in the first quarter," said Bruce Zorich, Chief Executive Officer of UCI.

As of March 31, 2013, the company's cash on hand was $69.8 million and total debt was $692.6 million.

Conference Call

UCI will host a conference call to discuss its results and performance on Thursday, May 9, 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 May 10 for a 14 day period, at www.uciholdings.com. Click on the UCI 2013 1st 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) (Unaudited)

(in thousands)

Three Months

Three Months

Ended

Ended

March 31,

March 31,

2013

2012

Net sales

$

245,857

$

261,631

Cost of sales

198,625

194,634

Gross profit

47,232

66,997

Operating expenses

Selling and warehousing

(18,080

)

(17,598

)

General and administrative

(15,725

)

(15,708

)

Amortization of acquired intangible assets

(5,544

)

(5,526

)

Restructuring costs, net

(320

)

4

Antitrust litigation costs

(24

)

(530

)

Operating income

7,539

27,639

Other expense

Interest expense, net

(13,455

)

(13,868

)

Miscellaneous, net

(1,331

)

(1,524

)

Income (loss) before income taxes

(7,247

)

12,247

Income tax (expense) benefit

2,190

(5,394

)

Net income (loss)

(5,057

)

6,853

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments

(135

)

2,731

Pension and OPEB liability, net of tax

632

15,438

Total other comprehensive income

497

18,169

Comprehensive income (loss)

$

(4,560

)

$

25,022

UCI Holdings Limited

Condensed Consolidated Balance Sheets

(in thousands)

March 31,

December 31,

2013

2012

(unaudited)

(audited)

Assets

Current assets

Cash and cash equivalents

$

69,765

$

78,917

Accounts receivable, net

217,931

227,542

Related party receivables

24,721

19,872

Inventories

177,112

175,291

Deferred tax assets

28,297

28,877

Other current assets

34,168

27,105

Total current assets

551,994

557,604

Property, plant and equipment, net

160,795

160,174

Goodwill

308,675

309,102

Other intangible assets, net

393,391

399,585

Deferred financing costs, net

16,784

17,483

Other long-term assets

3,742

3,732

Total assets

$

1,435,381

$

1,447,680

Liabilities and shareholder's equity

Current liabilities

Accounts payable

$

133,347

$

132,803

Current maturities of long-term debt

2,485

3,177

Related party payables

581

734

Accrued expenses and other current liabilities

106,695

115,453

Total current liabilities

243,108

252,167

Long-term debt, less current maturities

690,064

690,748

Pension and other post-retirement liabilities

119,421

120,093

Deferred tax liabilities

113,820

110,965

Other long-term liabilities

2,367

2,546

Total liabilities

1,168,780

1,176,519

Contingencies

Shareholder's equity

Common stock

320,038

320,038

Retained deficit

(10,300

)

(5,243

)

Accumulated other comprehensive loss

(43,137

)

(43,634

)

Total shareholder's equity

266,601

271,161

Total liabilities and shareholder's equity

$

1,435,381

$

1,447,680

UCI Holdings Limited

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Three Months

Three Months

Ended

Ended

March 31,

March 31,

2013

2012

Net cash provided by (used in) operating activities

$

(650

)

$

11,888

Cash flows from investing activities:

Capital expenditures

(7,284

)

(10,728

)

Proceeds from sale of property, plant and equipment

21

1,394

Net cash used in investing activities

(7,263

)

(9,334

)

Cash flows from financing activities:

Debt repayments

(1,452

)

(825

)

Net cash used in financing activities

(1,452

)

(825

)

Effect of exchange rate changes on cash

213

255

Net increase (decrease) in cash and cash equivalents

(9,152

)

1,984

Cash and cash equivalents at beginning of period

78,917

67,697

Cash and cash equivalents at end of period

$

69,765

$

69,681

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. Additionally, Adjusted EBITDA is used in the calculation of compliance with certain covenants in the Senior Secured Credit Facilities and the indenture governing the Senior Notes. 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.

Schedule A

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

(dollars in millions)

Three Months

Three Months

Ended March

Ended March

31, 2013

31, 2012

Net income (loss)

$

(5.1

)

$

6.9

Income tax expense (benefit)

(2.2

)

5.4

Net interest expense

13.5

13.9

Depreciation and amortization expense

12.8

13.0

EBITDA

19.0

39.2

Business optimization costs

5.0

2.3

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

1.2

3.2

Restructuring costs, net

0.3

-

Cost of defending class action litigation

-

0.5

New business changeover and sales commitment costs

-

0.2

Adjusted EBITDA

$

25.5

$

45.4

Net sales

$

245.8

$

261.6

Adjusted EBITDA margin

10.4

%

17.4

%

Schedule A (continued)

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

(dollars in millions)

Trailing Twelve

Months Ended

March 31, 2013

Net income

$

2.6

Income tax expense

-

Net interest expense

54.4

Depreciation and amortization expense

52.0

EBITDA

109.0

Business optimization costs

17.3

Restructuring costs, net

6.2

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

5.1

Cost of defending class action litigation

0.7

Environmental accrual adjustment

0.5

New business changeover and sales commitment costs