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EVANSVILLE, IN March 21, 2006 – United Components, Inc. (“UCI”) today announced revenue of $236.7 million for the quarter ended December 31, 2005. Revenue for the quarter, as reported, was adjusted downward by $14.0 million to reflect an increase in the company’s warranty reserves. Before this adjustment, revenue was $250.7 million, an increase of 5.2% over the year-ago quarter, with increases in all sales channels except heavy duty.
Net loss for the quarter was $17.6 million, including the effect of the revenue adjustment referenced above, as well as $18.8 million in one time, non-cash charges, primarily related to impairment write downs of a trademark, software assets and property and equipment. For the fourth quarter of 2004, net income was $2.8 million.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, as adjusted pursuant to the company’s credit agreement for its senior credit facilities, was $28.0 million for the fourth quarter, compared with $30.2 million for the year-ago quarter.
“We were pleased with our sales performance this quarter and, as expected, our overall performance was affected by continuing higher operating costs, particularly raw materials,” said Bruce Zorich, Chief Executive Officer of UCI. “As we exit 2005, we expect the investment we’ve made in revenue and profitability initiatives throughout the year to lead to a successful 2006.”
The company launched several initiatives in 2005 to improve its future performance in light of higher material and operating costs. These initiatives include selected price increases in steel-related products, targeted new business opportunities, and operational enhancements to reduce operating costs and inventory while improving customer fulfillment.
For the full year 2005, revenue was $1,008.8 million, reflecting the $14.0 million downward adjustment discussed above. Before this adjustment, revenue was $1,022.8 million for the year, flat with the prior year. Net loss was $4.5 million for 2005, including the revenue adjustment and one-time charges previously discussed, compared to net income of $30.8 million for 2004. EBITDA, as adjusted pursuant to the company’s credit agreement for its senior credit facilities, was $114.9 million for 2005 and $138.5 million for 2004.
UCI generated $18.3 million in cash during the fourth quarter, ending the year with $26.2 million in cash. As of December 31, 2005, the company’s debt stood at $443 million, down from $581 million in June 2003 when the acquisition occurred.
Acquisition Announcement
On March 9, UCI and ASC Industries, Inc. announced that UCI had agreed to acquire the capital stock of water pump manufacturer ASC. As announced, the transaction values ASC at $154.7 million, including assumption of certain debt, and also calls for UCI to pay ASC stockholders an additional $4 million in purchase price following the acquisition based upon the achievement of certain operational objectives. Completion of the transaction is subject to regulatory approval and other customary closing conditions.
UCI believes that the acquisition is important strategically for UCI, as it will combine the rapidly growing ASC product line with the long-established and well-respected line of Airtex water pumps. In addition, with ASC’s 15-year presence in China, the transaction will immediately provide a proven global sourcing and manufacturing platform for UCI in this increasingly competitive worldwide marketplace.
ASC has grown rapidly over the last several years, reaching revenue of $105.6 million and $15.7 million of adjusted EBITDA, calculated on a basis consistent with that used by UCI.
UCI anticipates that the combination of ASC and Airtex will produce a unique global sourcing, manufacturing and flexible delivery platform. UCI expects significant synergy savings with this platform and believes that it can achieve annual EBITDA savings of $10 to $12 million within two years of the integration.
UCI plans to fund the acquisition through an amendment to its existing senior credit facilities, including additional borrowings of approximately $135 million. UCI’s total debt to EBITDA leverage ratio stood at approximately 3.9x as of December 31, 2005. UCI expects that its pro forma leverage following the acquisition will be approximately 4.3x, comparable to the leverage for UCI in June 2003 when the company was acquired by the Carlyle Group.
Conference Call
The company will host a conference call to discuss its results and performance on Wednesday, March 22, at 11:00 a.m. Eastern Standard Time (EST). Interested parties are invited to listen to the call by telephone. Domestic callers can dial (800) 637-1381. International callers can dial (641) 297-7667.
A replay of the call will be available here from March 23, 2006, for a ninety-day period.
About United Components, Inc
United Components, 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 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.
For More Information, Contact:
Charlie Dickson, Chief Financial Officer (812) 867-4726
Dave Barron, (812) 867-4727
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