Proliance International, Inc. (AMEX:PLI), a leading global
manufacturer and distributor of aftermarket heat exchange and
temperature control products for automotive and heavy-duty
applications, today announced results for the second quarter and
six months ended June 30, 2008. Operating income for the 2008
second quarter was $5.8 million versus a year ago loss of $2.9
million. Net income for the second quarter of 2008 was $0.5
million, or $0.03 per basic and diluted share, compared to a net
loss of $6.2 million, or $0.48 per basic and diluted share, in the
same period last year. Second quarter 2008 net sales of $102.2
million were approximately level with $102.4 million a year ago.
The second quarter of 2008 operating income included $3.1 million
of other income relating to insurance recoveries, which mostly
offset costs incurred by the Company as a result of the Southaven
casualty event. The year-ago quarter operating loss included a gain
of $0.8 million from the sale of a facility, a $3.2 million expense
from an arbitration earn-out decision and $1.1 million in
restructuring charges related to the closing of branches and
headcount reductions. �Profitability improved significantly due to
our domestic cost reduction initiatives, including related changes
in our distribution approach to the automotive and light truck
market in the U.S., along with growth in the European heavy duty
marine market, which remains quite strong,� said Charles E.
Johnson, President and CEO. �This performance was achieved despite
the continued impact on domestic sales of the February tornadoes
that destroyed our Southaven, Mississippi heat exchange products
distribution facility.� Adjusted earnings before interest, taxes,
depreciation and amortization (Adjusted EBITDA) of $7.9 million in
the second quarter of 2008 more than tripled from $2.3 million in
the year ago quarter. Adjusted EBITDA and related measures herein
constitute �non-GAAP financial measures� as defined by the rules of
the Securities and Exchange Commission. A separate tabular
presentation of this information is provided below, to indicate how
the non-GAAP financial measure was determined and to reconcile the
non-GAAP financial measure to net income. The Company has provided
the foregoing data as it believes that it provides the marketplace
with supplemental information with respect to the comparative
baseline performance of its business operations. Although Adjusted
EBITDA should not serve as a substitute for operating income or net
income, the Company believes that the marketplace may find this
non-GAAP financial measure to be useful as a supplement to the GAAP
financial information provided. Specifically, Adjusted EBITDA for
the periods presented excludes: (1) restructuring charges, which we
believe to be non-recurring in nature and not reflective of the
baseline performance of the Company�s business; (2) the gain on the
sale of an unused building, which does not reflect the results of
the Company�s core automotive parts business; (3) the arbitration
earn-out decision, which we believe to be non-recurring in nature
and not reflective of the baseline performance of the Company�s
business; and (4) the estimated operating loss impact due to the
February 5, 2008 tornadoes that destroyed the Company�s Southaven,
MS distribution center, which we believe does not accurately
reflect the Company�s core operating performance under normalized
business conditions. Second Quarter Financial Analysis Domestic net
sales for the 2008 second quarter of $68.4 million declined 11%
year over year, primarily due to the Southaven event and the change
in branch distribution. International sales of $33.8 million
increased 31%. More than half of the international growth reflected
increased volume, primarily in heavy duty marine products due to
worldwide growth in the shipping industry. The balance primarily
reflected exchange rate differences caused by the stronger Euro
versus the U.S. dollar from a year ago. Gross margin was 20.1% of
sales in the second quarter of 2008 compared to 20.7% in the year
ago quarter. Domestic gross margin reflected lower average selling
prices, in part attributable to the changes in branch distribution
structure, resulting from lower sales direct to installers and
increasing sales to wholesale customers. Lower average selling
prices were partially offset by lower manufacturing costs as a
result of product innovations and production efficiencies.
International gross margin was slightly higher, due to improved
production efficiencies and increased marine sales. Selling,
general and administrative expenses (SG&A) for the second
quarter 2008 declined to $14.8 million or 14.4% of sales compared
to $19.9 million or 19.4% of sales a year ago. Excluding previously
mentioned non-recurring items, SG&A declined as a result of the
Company�s cost reduction efforts, primarily the reduction in branch
and agency locations, which enabled Proliance to offset higher
freight costs due to increased fuel prices. Interest expense
increased $1.6 million year over year, due to higher average
interest rates and increased amortization of debt issue costs,
partially offset by lower average debt levels. The increased
interest rates and debt issue costs were a consequence of
amendments negotiated with the Company�s lead lender following the
Southaven event, which destroyed inventory used as collateral for
borrowings. Outlook The Company reiterated that it continues to be
on track with previously announced plans to achieve operating
income in the range of $20 million for the full year 2008,
excluding one-time costs related to the Southaven event and
expenses associated with amendments to the Company�s credit
facility. �We have seen positive seasonal demand in the domestic
heat exchange market, so far this year, certainly supported by
favorable weather conditions,� Mr. Johnson said. �Despite the fact
the economy is challenging, gas prices are high and miles driven
are down, we believe the increased seasonal demand is in part a
reflection of the aging vehicle population and its impact on
necessary maintenance, among other factors.� In late July,
Proliance moved from a temporary distribution center to a new,
permanent facility in Southaven and has been steadily ramping up
service levels. In addition, as previously announced, the Company�s
insurer agreed to settle all damage claims resulting from the
Southaven event and pay Proliance an additional $15.3 million by
August 15, 2008, for a total settlement of $52.0 million, which is
within the range the Company sought. Proliance continues to make
progress with its plan to raise $30 million or more in debt and/or
equity capital to partially or fully replace its current credit
facility. Replacing its credit facility in part or in total, the
Company would incur cash prepayment fees to the current lender as
well as the write-off of non-cash debt extinguishment expenses.
However, eliminating or restructuring current debt is expected to
increase the Company�s financial flexibility and support continued
growth of the business. Conference Call Proliance will host a
conference call today at 11:00 AM ET with Charles E. Johnson,
President and CEO, and Arlen F. Henock, CFO, to discuss the results
for the second quarter ended June 30, 2008. The call will be
accessible live via a webcast on the home page of the Company�s
website at www.pliii.com or at
http://www.investorcalendar.com/IC/CEPage.asp?ID=132953. A webcast
replay will be available shortly thereafter. About Proliance
International, Inc. Proliance International, Inc. is a leading
global manufacturer and distributor of aftermarket heat transfer
and temperature control products for automotive and heavy-duty
applications serving North America, Central America and Europe.
Forward Looking Statements Statements included in this press
release, which are not historical in nature, are forward-looking
statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Statements
relating to the future financial performance or liquidity of the
Company are subject to business conditions and growth in the
general economy and automotive and truck business, the impact of
competitive products and pricing, changes in customer product mix,
failure to obtain new customers or retain old customers or changes
in the financial stability of customers, changes in the cost of raw
materials, components or finished products, the discretionary
actions of its suppliers and lenders, and changes in interest
rates. Such statements are based upon the current beliefs and
expectations of Proliance management and are subject to significant
risks and uncertainties. Actual results may differ from those set
forth in the forward-looking statements. When used in this press
release, the terms "anticipate," "believe," "estimate," "expect,"
"may," "objective," "plan," "possible," "potential," "project,"
"will" and similar expressions identify forward-looking statements.
Factors that could cause Proliance's results to differ materially
from those described in the forward-looking statements can be found
in the 2007 Annual Report on Form 10-K of Proliance and Proliance's
other subsequent filings with the SEC. The forward-looking
statements contained in this press release are made as of the date
hereof, and we do not undertake any obligation to update any
forward-looking statements, whether as a result of future events,
new information or otherwise. PROLIANCE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,
except for per share amounts) (unaudited) � � � � Three Months Six
Months Ended June 30, Ended June 30, 2008 2007 2008 2007 � Net
sales $ 102,154 $ 102,414 $ 178,694 $ 194,352 Cost of sales �
81,614 � 81,162 � 147,072 � 155,742 Gross margin 20,540 21,252
31,622 38,610 Selling, general and administrative expenses 14,764
19,906 27,595 40,495 Arbitration earn-out decision � 3,174 � 3,174
Restructuring charges � � � 1,053 � 172 � 1,328 Operating income
(loss) 5,776 (2,881) 3,855 (6,387) Interest expense 4,549 2,922
8,285 5,603 Debt extinguishment costs � � � � � 576 � � Income
(loss) before income taxes 1,227 (5,803) (5,006) (11,990) Income
tax provision � 706 � 431 � 649 � 576 Net income (loss) $ 521 �
($6,234) � ($5,655) � ($12,566) � Net income (loss) per common
share - basic $ 0.03 � ($0.48) � ($0.36) � ($0.90) � Net income
(loss) per common share - diluted $ 0.03 � ($0.48) � ($0.36) �
($0.90) � Weighted average common shares - basic � 15,748 � 15,269
� 15,739 � 15,264 � Weighted average common shares - diluted �
19,151 � 15,269 � 15,739 � 15,264 PROLIANCE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) � � � June 30,
2008 December 31, 2007 (unaudited) � Cash and cash equivalents $
3,464 $ 476 Accounts receivable, net 77,509 60,153 Inventories, net
91,300 106,756 Other current assets 8,409 7,645 Net property, plant
and equipment 20,427 21,164 Other assets � 18,132 � 12,699 Total
assets $ 219,241 $ 208,893 � Accounts payable $ 69,711 $ 48,412
Accrued liabilities 26,758 24,649 Total debt 54,134 67,453 Other
long-term liabilities 5,544 5,353 Stockholders� equity � 63,094 �
63,026 Total liabilities and stockholders� equity $ 219,241 $
208,893 PROLIANCE INTERNATIONAL, INC. SUPPLEMENTAL INFORMATION (in
thousands) (unaudited) � Three Months Six Months Ended June 30,
Ended June 30, � 2008 � 2007 � 2008 � 2007 � SEGMENT DATA: Net
sales: Domestic $ 68,367 $ 76,601 $ 118,084 $ 145,642 International
� 33,787 � 25,813 � 60,610 � 48,710 Total net sales $ 102,154 $
102,414 $ 178,694 $ 194,352 � Operating income (loss): Domestic $
3,485 $ 3,158 $ 2,160 $ 2,742 Restructuring charges � � � (975) �
(172) � (1,235) Domestic total � 3,485 � 2,183 � 1,988 � 1,507
International 1,848 573 1,910 534 Restructuring charges � � � (78)
� � � (93) International total � 1,848 � 495 � 1,910 � 441
Corporate expenses � 443 � (2,385) � (43) � (5,161) Arbitration
earn-out decision � � � (3,174) � � � (3,174) Total operating
income (loss) $ 5,776 � ($2,881) $ 3,855 � ($6,387) � � NET CAPITAL
EXPENDITURES $ 1,396 (a) $ 633 (a) $ 2,833 (a) $ 963 (a) (a)
Excludes proceeds from sale of building and insurance recovery on
damaged fixed assets in 2008 and from sale of facility in 2007.
PROLIANCE INTERNATIONAL, INC. SUPPLEMENTARY INFORMATION (in
thousands) (unaudited) � � � � NON-GAAP FINANCIAL MEASURE �
ADJUSTED EBITDA - EBITDA BEFORE RESTRUCTURING, GAIN ON SALE OF
BUILDING,��ARBITRATION EARN-OUT DECISION AND ESTIMATED OPERATING
LOSS FROM TORNADO � Three Months Six Months Ended June 30, Ended
June 30, 2008 2007 2008 2007 � Net income (loss) $ 521 ($6,234)
($5,655) ($12,566) Income tax provision 706 431 649 576 Debt
extinguishment costs � � 576 � Interest expense � 4,549 � 2,922 �
8,285 � 5,603 Operating income (loss) 5,776 (2,881) 3,855 (6,387)
Depreciation and amortization(a) � 1,832 � 1,707 � 4,030 � 3,660
EBITDA 7,608 (1,174) 7,885 (2,727) Restructuring charges � 1,053
172 1,328 Gain on sale of building � (750) (1,538) (750)
Arbitration earn-out decision � 3,174 � 3,174 Estimated operating
loss from tornado(b) � 302 � � � 804 � � Adjusted EBITDA(c) $ 7,910
$ 2,303 $ 7,323 $ 1,025 (a) Depreciation and amortization does not
include amortization of deferred debt costs that are classified as
interest expense. (b) Company�s estimated operating loss from
tornado includes margin less related expenses on lost sales, costs
net of insurance recovery and gains from asset conversions in the
quarter due to the February 5 tornado damage to the Southaven,
Mississippi distribution facility. (c) Earnings before interest,
taxes, depreciation and amortization (�EBITDA�) less restructuring
charges, gain on sale of building, arbitration earn-out decision
and estimated operating loss from the tornado (Adjusted EBITDA),
constitute �non-GAAP financial measures� as defined by the rules of
the Securities and Exchange Commission. The Company has provided
the foregoing data as it believes that it provides the marketplace
with additional information useful in evaluating the financial
performance of the Company during the three and six months ended
June 30, 2008 and 2007.
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