REMY INTERNATIONAL INC PENDLETON, Ind., Aug. 3, 2015 /PRNewswire/ -- Remy International, Inc. (NASDAQ: REMY), a leading worldwide manufacturer, remanufacturer, and distributor of starter motors and alternators, multi-line products and hybrid electric motors, today announced its financial results for the second quarter ended June 30, 2015.
Jay Pittas, Remy International, Inc. President and CEO commented, "We performed as expected in the second quarter. As we had previously stated, the first half of 2015 presented challenging comparisons to 2014, primarily due to the loss of a major retail customer in the automotive aftermarket. We continue to expect improved performance going forward."
Financial Results Three months ended June 30, Six months ended June 30,
-----------------
(In millions, except per share data) 2015 2014 2015 2014
----------------------------------- ---- ---- ---- ----
Net sales $272.0 $302.9 $575.4 $608.9
Net income (loss) $(1.0) $5.0 $15.6 $10.0
Diluted earnings (loss) per share $(0.03) $0.16 $0.49 $0.31
Net cash provided by (used in) operating activities $16.1 $5.5 $28.3 $(3.9)
Cash earnings per share $0.41 $0.69 $0.82 $1.31
Adjusted EBITDA $25.5 $36.7 $51.2 $72.6
Second Quarter Highlights
-- Net sales of $272.0 million for the second quarter of 2015 compared to
$302.9 million for the second quarter of 2014. The decrease in net sales
was driven by decreased volume and mix of $28.4 million, a negative
pricing impact of $2.9 million, and unfavorable foreign currency
translation of $9.2 million. The net sales decrease was partially offset
by $9.7 million in second quarter sales of Maval, which we acquired in
March 2015.
-- Reported a quarterly net loss of $1.0 million in the second quarter of
2015, compared to prior year, due to lower volume/mix, currency
translation, restructuring costs and $1.2 million expense for
professional fees related to the Maval acquisition and the pending
BorgWarner transaction.
-- Made significant progress in our ongoing effort to reduce overhead cost
structure with $5.0 million lower selling, general and administrative
expenses, compared to prior year.
-- Adjusted EBITDA of $25.5 million for the second quarter of 2015 compared
to $36.7 million for the second quarter of 2014. The decrease of $11.2
million in Adjusted EBITDA is primarily driven by an $8.5 million
decrease in volume and mix of products and $1.2 million of negative
foreign currency impact in second quarter of 2015 compared to the second
quarter of 2014.
-- Generated $16.1 million cash from operations during the second quarter
of 2015, an increase of $10.6 million over the second quarter of 2014.
-- During the second quarter of 2015, we returned $13.4 million to
stockholders through the share repurchase program and dividends.
-- On July 12, 2015, we entered into a definitive agreement to be acquired
by BorgWarner Inc. The Merger Agreement provides that at the effective
time of the merger, if it occurs, each of the outstanding shares of Remy
common stock (other than certain shares owned by BorgWarner, Remy and
their respective subsidiaries, and shares that are owned by Remy
stockholders who have perfected and not withdrawn a demand for appraisal
rights pursuant to Delaware law) will be cancelled and converted into
$29.50 in cash, without interest. The completion of the transaction is
subject to the approval of our stockholders as well as certain customary
terms and conditions, including antitrust and other regulatory
clearances in the U.S. and abroad. Assuming timely satisfaction of the
closing conditions, the transaction is expected to close during the
fourth quarter of 2015.
-- On July 30, 2015, the Board of Directors declared a quarterly dividend
of $0.11 per share payable on August 28, 2015 to stockholders of record
as of August 14, 2015.
Conference Call Cancellation and Guidance Withdrawal
As previously announced, Remy has signed a definitive agreement to be acquired by BorgWarner. In light of the pending transaction, the Company will not hold a conference call on Tuesday, August 4, 2015, at 9:00 am Eastern to discuss its second quarter results as previously announced in a press release dated June 30, 2015. Also in light of the pending transaction, Remy is withdrawing its full year 2015 guidance for key financial metrics.
About Remy International, Inc.
Founded by the Remy brothers in 1896, Remy International, Inc. (NASDAQ: REMY) is a leading global manufacturer, remanufacturer, and distributor of alternators, starter motors, and electric traction motors for the automotive and commercial vehicle industry, marketed under the Remy® and Delco Remy® brands. The company also provides multi-line products through its subsidiaries. Headquartered in Pendleton, Indiana, with operations across five continents and ten countries, Remy is a trusted partner to original equipment manufacturers and aftermarket organizations worldwide, delivering creative solutions for today's vehicle challenges. For more information visit http://www.remyinc.com.
Use of Non-U.S. GAAP Financial Information
Accounting principles generally accepted in the United States (U.S. GAAP) is the standard framework of guidelines for financial accounting. U.S. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions and in the preparation of financial statements. In addition to reporting financial results in accordance with U.S. GAAP, Remy has provided adjusted EBITDA, cash earnings and cash earnings per share, non-U.S. GAAP financial measures, which are frequently used by management, analysts, investors and other interested parties. Management believes that the non-U.S. GAAP financial measures presented provide a useful measure of Remy's financial performance since they exclude certain items which do not reflect ongoing operations. A reconciliation of U.S. GAAP net income to adjusted EBITDA, and adjusted EBITDA to cash earnings and cash earnings per share is provided herein. Adjusted EBITDA is defined by the Company as net income before (i) interest expense-net, (ii) income tax expense, (iii) depreciation and amortization, (iv) stock-based compensation expense, (v) restructuring, other charges and other impairment charges, (vi) certain purchase accounting finished goods inventory step-up costs, (vii) litigation settlements and related legal fees, (viii) acquisition related costs, and (ix) other adjustments. In the fourth quarter 2014, we updated our definition to include litigation settlements and related legal fees, as well as, Transaction related fees. All periods presented conform to this definition. Cash earnings is defined as adjusted EBITDA less cash paid for (i) income taxes, (ii) interest expense and (iii) capital expenditures. Adjusted EBITDA, cash earnings and cash earnings per share as defined by the Company may differ from non-U.S. GAAP measures used by other companies and is not a measurement under U.S. GAAP. There are limitations inherent in non-U.S. GAAP financial measures in that they exclude a variety of charges and credits that are required to be included in a U.S. GAAP presentation, and therefore do not present the full measure of the Company's recorded costs against its revenue. Accordingly, in analyzing Remy's future financial performance, non-U.S. GAAP results presented should be considered together with U.S. GAAP results, rather than as an alternative to U.S. GAAP basis financial measures. Reconciliations of non-U.S. GAAP measures to related U.S. GAAP measures are presented in the financial schedules which accompany this release.
Cautionary Statements Regarding Forward-Looking Information
Some of the statements contained in this filing with respect to the Company 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, and are subject to the safe harbor created thereby under the Private Securities Litigation Reform Act of 1995.
These statements include declarations regarding intents, beliefs, estimates and current expectations of the Company. In some cases, forward-looking statements can be identified by terminology such as "may," "might," "will," "should," "could," "expects," "intends," "assumes," "seeks to," "plans," "anticipates," "believes," "projects," "estimates," "predicts," "potential," "future," "goal," "objective," or "continue," or the negative of such terms or other variations thereof or comparable terminology, or by discussions of strategy that involve risks and uncertainties. Forward-looking statements are not guarantees or assurances of future performance, and actual results could differ materially from those indicated by the forward-looking statements. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Such estimates, assumptions, risks, uncertainties and other factors include, but are not limited to, those related to (i) the likelihood that the transaction is consummated on a timely basis or at all, including whether government approvals sought in connection with the transaction will be obtained (or obtained within the time periods anticipated) and whether the other conditions required to complete the transaction will be met (or met within the time periods anticipated), (ii) whether the expected benefits of the transaction will be realized, (iii) the risk that, and uncertainty as to whether, costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, suppliers and other counterparties) related to the transaction may be greater than expected, and (iv) future financial results and liquidity, (v) development of new products and services, (vi) the effect of competitive products or pricing, (vii) the effect of commodity and raw material prices, (viii) the impact of supply chain cost management initiatives, (ix) restructuring risks, (x) customs duty claims, (xi) litigation uncertainties and warranty claims, (xii) conditions in the automotive industry, (xiii) foreign currency fluctuations, (xiv) costs related to re-sourcing and outsourcing products and (xv) the effect of economic conditions.
These forward-looking statements are also qualified by, and should be read together with the "Forward-looking Statements", the "Risk Factors" and the other statements in the Company's Annual Report on Form 10-K for the year-ended December 31, 2014, subsequent Quarterly Reports on Form 10-Q, and other filings, in each case as filed with the Securities and Exchange Commission (SEC) and available at www.sec.gov, and investors should refer to such risk factors and other statements in evaluating the forward-looking statements contained in the summaries above.
Any forward-looking statements speak only as to the date this press release, and the Company does not undertake any obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of unanticipated events except as otherwise required by law. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. Furthermore, it may not be possible for the Company to assess the impact of any such factor on its business (viewed independently or together) or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. The foregoing factors should not be construed as exhaustive.
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in respect of the proposed acquisition of Remy by BorgWarner. In connection with the proposed acquisition, Remy and Borg Warner intend to file relevant materials with the SEC, including Remy's proxy statement on Schedule 14A, a preliminary version of which has been filed with the SEC on August 3, 2015. STOCKHOLDERS OF REMY ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING REMY'S PROXY STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders may obtain the documents free of charge at the SEC's web site, http://www.sec.gov, or the Company's web site, http://www.remyinc.com under "Investors - SEC Filings".
Participants in Solicitation
Remy and its directors, executive officers and other members of management and employees and BorgWarner and its directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the holders of Remy common stock in respect of the proposed transaction. Information about the directors and executive officers of Remy is set forth in the proxy statement for Remy's Annual Meeting of Stockholders, which was filed with the SEC on April 30, 2015. Information about the directors and executive officers of BorgWarner is set forth in the proxy statement for BorgWarner's Annual Meeting of Stockholders, which was filed with the SEC on March 20, 2015. Investors may obtain additional information regarding the interest of such participants by reading the proxy statement regarding the acquisition, a preliminary version of which has been filed with the SEC on August 3, 2015.
A copy of the second quarter 2015 Form 10-Q will be available on the Remy International Website at: http://www.remyinc.com under "Investor Relations."
Investor Contact:
Investor Relations
ir@remyinc.com
(765) 778-6602
Remy International, Inc.
Index of consolidated financial information
Consolidated balance sheets as of
June 30, 2015 (unaudited) and
December 31, 2014 A-2
---
Consolidated statements of
operations (unaudited) for the
three and six months ended June
30, 2015 and June 30, 2014 A-3
---
Consolidated statements of cash
flows (unaudited) for the six
months ended June 30, 2015 and
June 30, 2014 A-4
---
Reconciliation of non-U.S. GAAP
financial measures (unaudited)
for the three and six months
ended June 30, 2015 and June 30,
2014 A-5
---
The accompanying unaudited consolidated
financial information and reconciliation
schedules should be read in conjunction with
the Remy International, Inc. Annual Report on
Form 10-K for the year ended December 31, 2014
and Quarterly Reports on Form 10-Q for the
periods ended March 31, 2015 and June 30, 2015,
each of which were filed with the United States
Securities and Exchange Commission.
A-1
Remy International, Inc.
Consolidated balance sheets
June 30, December 31,
(In
thousands,
except
share
information) 2015 2014
------------- ---- ----
Assets: (unaudited)
Current assets:
Cash and
cash
equivalents $102,446 $84,885
Trade
accounts
receivable
(less
allowances
of $1,973
and $1,519) 228,821 210,356
Other
receivables 13,970 16,692
Inventories 191,777 164,143
Deferred
income
taxes 35,715 42,308
Prepaid
expenses
and other
current
assets 12,713 11,865
------ ------
Total
current
assets 585,442 530,249
Property,
plant and
equipment 231,665 226,073
Less
accumulated
depreciation
and
amortization (75,225) (61,615)
------- -------
Property,
plant and
equipment,
net 156,440 164,458
Deferred
financing
costs, net
of
amortization 1,341 1,471
Goodwill 263,491 259,586
Intangibles,
net 279,877 298,023
Other
noncurrent
assets 47,844 65,309
------ ------
Total assets $1,334,435 $1,319,096
========== ==========
Liabilities and Equity:
Current liabilities:
Short-term
debt $5,793 $7,761
Current
maturities
of long-
term debt 3,489 3,509
Accounts
payable 183,797 177,333
Accrued
interest 121 94
Accrued
restructuring 420 331
Other
current
liabilities
and accrued
expenses 113,607 128,509
------- -------
Total
current
liabilities 307,227 317,537
Long-term
debt, net
of current
maturities 340,191 298,295
Postretirement
benefits
other than
pensions 1,378 1,484
Accrued
pension
benefits 33,310 34,267
Deferred
income
taxes 49,683 54,783
Other
noncurrent
liabilities 26,992 26,483
Equity:
Remy International, Inc.
stockholders' equity:
Common
stock, Par outstanding
value of at December
$0.0001; 31, 2014
31,811,724
shares
outstanding
at June 30,
2015, and
32,201,086
shares 3 3
Treasury
stock, at 31, 2014
cost;
634,064
treasury
shares at
June 30,
2015, and
no treasury
shares at
December (11,062) -
Additional
paid-in
capital 598,115 595,627
Retained
earnings 8,972 -
Accumulated
other
comprehensive
loss (20,374) (9,383)
------- ------
Total Remy
International,
Inc.
stockholders'
equity 575,654 586,247
Total
liabilities
and equity $1,334,435 $1,319,096
========== ==========
A-2
Remy International, Inc.
Consolidated statements of operations
(Unaudited)
Three months ended June 30, Six months ended June 30,
(In thousands, except per share amounts) 2015 2014 2015 2014
--------------------------------------- ---- ---- ---- ----
Net sales $271,997 $302,910 $575,408 $608,915
Cost of goods sold 237,151 252,913 478,560 512,567
------- ------- ------- -------
Gross profit 34,846 49,997 96,848 96,348
Selling, general, and administrative expenses 30,906 35,890 64,326 68,821
Restructuring and other charges 371 79 444 393
--- --- --- ---
Operating income 3,569 14,028 32,078 27,134
Interest expense-net 4,123 5,337 9,134 10,591
Income (loss) before income taxes (554) 8,691 22,944 16,543
Income tax expense 396 3,661 7,324 6,569
Net income (loss) $(950) $5,030 $15,620 $9,974
===== ====== ======= ======
Basic earnings (loss) per share:
Earnings (loss) per share $(0.03) $0.16 $0.49 $0.31
Weighted average shares outstanding 31,674 31,787 31,759 31,720
====== ====== ====== ======
Diluted earnings (loss) per share:
Earnings (loss) per share $(0.03) $0.16 $0.49 $0.31
====== ===== ===== =====
Weighted average shares outstanding 31,674 31,866 31,842 31,844
====== ====== ====== ======
Dividends declared per common share $0.11 $0.10 $0.21 $0.20
===== ===== ===== =====
A-3
Remy International, Inc.
Consolidated statements of cash flows
(Unaudited)
Six months ended June 30,
(In
thousands) 2015 2014
----------- ---- ----
Cash flows from operating
activities:
Net
income $15,620 $9,974
Adjustments to reconcile
net income to cash
provided by (used in)
operating activities:
Depreciation
and
amortization 36,031 36,664
Stock-
based
compensation 2,325 2,561
Deferred
income
taxes 1,020 (5,192)
Accrued
pension
and
postretirement
benefits,
net (1,119) (2,123)
Restructuring
and
other
charges 444 393
Cash
payments
for
restructuring
charges (355) (1,266)
Other 1,602 263
Changes in operating assets
and liabilities, net of
restructuring charges:
Accounts
receivable (11,357) (39,230)
Inventories (16,936) (13,998)
Accounts
payable 4,865 19,939
Other
current
assets
and
liabilities,
net (19,913) 979
Other
noncurrent
assets
and
liabilities,
net 16,105 (12,908)
------ -------
Net
cash
provided
by
(used
in)
operating
activities 28,332 (3,944)
Cash flows from investing
activities:
Purchases
of
property,
plant
and
equipment (10,412) (11,830)
Net
proceeds
on
sale
of
assets 29 80
Acquisition
of
Maval
Manufacturing,
Inc. (22,000) -
Acquisition
of USA
Industries,
Inc.,
net of
cash
acquired
of
$109 - (40,070)
--- -------
Net
cash
used
in
investing
activities (32,383) (51,820)
Cash flows from financing
activities:
Change
in
short-
term
debt (1,904) 4,930
Proceeds
from
borrowings
on
Asset-
Based
Revolving
Credit
Facility 155,750 -
Payments
made
on
Asset-
Based
Revolving
Credit
Facility (112,150) -
Payments
made
on
long-
term
debt,
including
capital
leases (1,756) (1,693)
Dividend
payments
on
common
stock (6,800) (6,548)
Purchase
of
treasury
stock (11,062) (2,505)
Other 1,634 1,227
----- -----
Net
cash
provided
by
(used
in)
financing
activities 23,712 (4,589)
Effect
of
exchange
rate
changes
on
cash
and
cash
equivalents (2,100) 1,619
------ -----
Net
increase
(decrease)
in
cash
and
cash
equivalents 17,561 (58,734)
Cash
and
cash
equivalents
at
beginning
of
period 84,885 114,884
------ -------
Cash
and
cash
equivalents
at end
of
period $102,446 $56,150
======== =======
Supplemental disclosure
information:
Cash
paid
for
income
taxes,
net of
refunds
received $6,004 $9,251
Cash
paid
for
interest
expense $8,835 $9,779
Noncash investing and
financing activities:
Purchases
of
property,
plant
and
equipment
in
accounts
payable $1,808 $2,816
A-4
Remy International, Inc.
Reconciliation of non-U.S. GAAP financial measures
(Unaudited)
Adjusted EBITDA
Adjusted EBITDA is not a measure of performance defined in accordance with U.S. GAAP. We use adjusted EBITDA as a supplement to our U.S. GAAP results in evaluating our business. Other companies in our industry define adjusted EBITDA differently from us and, as a result, our measure is not comparable to similarly titled measures used by other companies in our industry.
We define adjusted EBITDA as net income (loss) before interest expense-net, income tax expense, depreciation and amortization, stock-based compensation expense, restructuring, other charges and other impairment charges, certain purchase accounting finished goods inventory step-up costs and other adjustments as set forth in the reconciliations provided below. In the fourth quarter 2014, we updated our definition to include litigation settlements and related legal fees, as well as, acquisition related costs. All periods presented conform to this definition.
Adjusted EBITDA is one of the key factors upon which we assess performance. As an analytical tool, adjusted EBITDA assists us in comparing our performance over various reporting periods on a consistent basis because it excludes items that we do not believe reflect our ongoing operating performance.
Adjusted EBITDA should not be considered as an alternative to net income as an indicator of our performance, as an alternative to net cash provided by operating activities as a measure of liquidity, or as an alternative to any other measure prescribed by U.S. GAAP. There are limitations to using non-U.S. GAAP measures such as adjusted EBITDA. Although we believe that adjusted EBITDA may make an evaluation of our operating performance more consistent because it removes items that do not reflect our ongoing operations, adjusted EBITDA excludes certain financial information that some may consider important in evaluating our performance.
The following table sets forth a reconciliation of adjusted EBITDA to its most directly comparable U.S. GAAP measure, net income (loss).
Three months ended June 30, Six months ended June 30,
(In thousands) 2015 2014 2015 2014
------------- ---- ---- ---- ----
Net income (loss) $(950) $5,030 $15,620 $9,974
Adjustments:
Interest expense-net 4,123 5,337 9,134 10,591
Income tax expense 396 3,661 7,324 6,569
Depreciation and
amortization 18,994 18,607 36,031 36,664
Stock-based
compensation expense 1,009 1,342 2,325 2,561
Restructuring and
other charges 371 79 444 393
Litigation settlements
and related legal
fees - 1,587 - 2,324
Acquisition related
costs 1,175 - 1,271 -
Purchase accounting
finished goods
inventory step-up - 965 587 3,474
Other nonrecurring
adjustments (a) 411 57 (21,492) 54
--- --- ------- ---
Total adjustments 26,479 31,635 35,624 62,630
Adjusted EBITDA $25,529 $36,665 $51,244 $72,604
======= ======= ======= =======
(a) Represents the elimination of
the $22.0 million net impact
of one-time core settlements
with customers in Q1 2015 and
(gain)/loss on sale of fixed
assets in both periods.
A-5
Remy International, Inc.
Reconciliation of non-U.S. GAAP financial measures
(Unaudited)
Cash earnings and cash earnings per share
Management believes cash earnings and cash earnings per share, which are non-U.S. GAAP measures, are useful in evaluating the ongoing operating performance of the Company. We define cash earnings as adjusted EBITDA less cash paid for (i) income taxes, (ii) interest expense and (iii) capital expenditures. Cash earnings per share is defined as cash earnings divided by the weighted average number of diluted shares outstanding for the period. Other companies in our industry define cash earnings and cash earnings per share differently from us and, as a result, our measures are not comparable to similarly titled measures used by other companies in our industry.
The following table sets forth a reconciliation of cash earnings per share to its most directly comparable U.S. GAAP measure, diluted earnings (loss) per share:
Three months ended June 30, Six months ended June 30,
(In thousands, except per share amounts) 2015 2014 2015 2014
--------------------------------------- ---- ---- ---- ----
Adjusted EBITDA (a) $25,529 $36,665 $51,244 $72,604
Adjustments:
Cash paid for income taxes (3,083) (4,381) (6,004) (9,251)
Cash paid for interest expense (4,357) (4,845) (8,835) (9,779)
Purchases of property, plant and equipment (5,030) (5,317) (10,412) (11,830)
Total adjustments (12,470) (14,543) (25,251) (30,860)
------- ------- -------
Cash earnings $13,059 $22,122 $25,993 $41,744
======= ======= ======= =======
Diluted earnings (loss) per share:
Diluted weighted average shares outstanding (b) 31,739 (c) 31,866 31,842 31,844
====== ====== ====== ======
Diluted earnings (loss) per share $(0.03) $0.16 $0.49 $0.31
====== ===== ===== =====
Diluted cash earnings per share $0.41 $0.69 $0.82 $1.31
===== ===== ===== =====
(a) See accompanying Non-U.S. GAAP
reconciliation schedule of
Adjusted EBITDA.
(b) Weighted average shares outstanding
is calculated based on the Old
Remy weighted average diluted
shares outstanding and assuming
the additional 272,851 shares
issued in respect of the
contribution of Imaging were
outstanding for the entire period
under common control, or August
2012 through December 31, 2014.
(c) The weighted average diluted shares
outstanding for the quarter ended
June 30, 2015 includes 65,390
shares that were anti-dilutive
and excluded from the U.S. GAAP
diluted EPS calculation due to the
U.S. GAAP reported quarterly net
loss.
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