Proliance International, Inc. (NYSE 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 fourth quarter and
year ended December 31, 2008.
- Net income for the fourth
quarter of $0.2 million, or $0.01 per share, compared to a net loss
of $4.4 million, or $0.28 per share, in the similar period last
year, a $4.6 million improvement. Net sales were $76.0 million
compared to $84.3 million in the year-ago period.
- A decline in the net loss for
the year to $4.1 million, or $0.27 per share, from a net loss of
$16.8 million, or $1.18 per share, for 2007, on net sales of $350.1
million compared to $393.9 million a year ago.
- Operating income for the fourth
quarter increased to $4.3 million from an operating loss of $0.2
million in the year-ago period, and for the year, increased to
$16.6 million from an operating loss of $0.3 million in 2007.
- The Company�s forecast of $20
million of adjusted operating income was achieved. (Adjusted
operating income and related measures herein are non-GAAP financial
measures. See attached Supplementary Information table for
reconciliation to GAAP.)
Comment
Compared to year-ago periods, net sales for the quarter and the
year declined due to the adverse effects of the February 2008
tornadoes that destroyed Proliance�s Southaven, MS heat exchange
products distribution facility, in addition to the Company�s change
in strategy to sales through wholesalers for certain products and
away from direct sales through branches.
However, operating income increased as a result of the Company�s
continuing cost reduction program, which lowered operating expenses
and product costs. This improvement was partially offset by lower
margins due to lost sales, higher product related costs and higher
operating expenses, all of which were attributable to the Southaven
casualty event, net of insurance proceeds.
Proliance�s senior lender required the Company to apply a
significant portion of the Southaven casualty event insurance
proceeds to pay down borrowings. As a result, total debt of $44.8
million at December 31, 2008 was $22.6 million less than at
December 31, 2007.
�As in previous quarters, profitability continued to improve due
to our domestic cost reduction initiatives, including our product
cost improvements, overhead reductions and branch strategy,� said
Charles E. Johnson, President and CEO. �Our international business
also had a very strong year in 2008. In all cases, our Associates
have achieved our public earnings objectives even under very
difficult business conditions. This increase in performance was
achieved despite the restrictions placed on us by our senior
lender, which have made it difficult to secure enough replacement
inventories to meet the strong customer demand we have been
experiencing.�
�This points to our biggest immediate challenge, which is
refinancing our debt. While we have been working diligently on
this, we have experienced continued delays resulting in part from
the current financial environment. To mitigate this to the greatest
extent possible, we have continued to implement new cost cutting
strategies to further improve operating performance. In addition,
we have retained a new investment banking firm to assist us in
pursuing a refinancing. Given the uncertainties in today�s
financial environment, the banker will also assist Proliance in
actively evaluating all available alternatives.�
Fourth Quarter 2008 Financial Analysis
(All comparisons are to the corresponding year-ago period unless
otherwise indicated)
Domestic net sales of $49.2 million declined 14%, primarily due
to the aftereffects of the Southaven casualty event and the change
in branch distribution strategy. The Company operated 34 branches
at the close of 2008, compared to 46 at the end of 2007 and 94 at
the end of 2006. International sales of $26.8 million declined 2%,
primarily reflecting exchange rate differences from the stronger
U.S. dollar.
Consolidated gross margin was 18.5% of sales compared to 20.4%.
Domestic gross margin reflected the impact of the Southaven
casualty event and lower average selling prices, in part
attributable to the change in distribution strategy, which were
partially offset by lower manufacturing costs as a result of
product innovations and production efficiencies. International
gross margin was slightly higher due to cost reductions.
Selling, general and administrative expenses (SG&A) declined
to $9.7 million or 12.8% of sales compared to $16.4 million or
19.5% of sales a year ago. SG&A in the fourth quarter of 2008
was favorably impacted by $4.6 million of other income associated
with the Southaven casualty event, which partially offset costs
associated with the event included in gross margin. Excluding the
impact of the Southaven casualty event, domestic overhead was
lower, reflecting the change in distribution strategy as well as
general expense reductions.
Interest expense decreased slightly as lower average debt levels
and lower discounting expense associated with customer sponsored
payment programs more than offset the impact of higher average
interest rates and higher amortization of deferred debt costs.
Opinion of Independent Accountants
Due to the possibility that a loan covenant violation could
result in future periods, requiring, at the lender�s discretion,
the retirement of the entire amount of indebtedness at that time,
amounts payable under Proliance�s credit agreement have been
classified in current liabilities at December 31, 2008 and 2007. As
a result, the Company�s independent accountants have included an
explanatory paragraph in their audit opinion in Proliance�s 2008
Annual Report on Form 10-K, concerning the Company�s ability to
continue as a going concern.
Adjusted EBITDA
Adjusted earnings before interest, taxes, depreciation and
amortization (Adjusted EBITDA) of $8.6 million for the quarter
increased from $3.1 million in the year-ago quarter, and for the
year, increased to $27.7 million from $14.5 million in 2007.
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) an 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.
Conference Call
Proliance will host a conference call today at 4:30 PM ET with
Charles E. Johnson, President and CEO, and Arlen F. Henock, CFO, to
discuss the results for the fourth quarter and year ended December
31, 2008. The call will be accessible live via a webcast on
Proliance�s Investor Relations Webcast page at
http://www.pliii.com/39-webcasts?side or
http://www.wsw.com/webcast/pli/. 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," �efforts,� "estimate," "expect," �goal,�
"may," "objective," "plan," "possible," "potential," "project,"
�proposal,� �pursue,� "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
include the effects of the financial crisis and turmoil in the
capital markets, the absence of refinancing commitments, the global
recession and other factors identified in Proliance�s 2007 Annual
Report on Form 10-K 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 Proliance does 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
Twelve Months Ended December 31, Ended December
31, 2008 2007 2008 2007 � Net sales
$ 75,986 $ 84,257 $ 350,067 $ 393,942 Cost of sales � 61,926 �
67,106 � � 284,671 � � 310,963 � Gross margin 14,060 17,151 65,396
82,979 Selling, general and administrative expenses 9,735 16,429
48,611 76,031 Arbitration earn-out decision � � � 3,174
Restructuring charges � � � 925 � � 172 � � 4,117 � Operating
income (loss) 4,325 (203 ) 16,613 (343 ) Interest expense 3,634
3,679 15,764 13,838 Debt extinguishment costs � 7 � � � � 2,829 � �
891 � Income (loss) before income taxes 684 (3,882 ) (1,980 )
(15,072 ) Income tax provision � 509 � 485 � � 2,082 � � 1,732 �
Net income (loss) $ 175 � ($4,367 ) � ($4,062 ) � ($16,804 ) Net
income (loss) per common share - basic $ 0.01 � ($0.28 ) � ($0.27 )
� ($1.18 ) Net income (loss) per common share - diluted $ 0.01 �
($0.28 ) � ($0.27 ) � ($1.18 ) Weighted average common shares -
basic � 15,756 � 15,668 � � 15,748 � � 15,368 � Weighted average
common shares - diluted � 25,304 � 15,668 � � 15,748 � � 15,368 � �
� �
PROLIANCE INTERNATIONAL, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (in thousands) � �
December 31,
2008 December 31, 2007 � � Cash and cash equivalents $
2,444 $ 476 Accounts receivable, net 57,005 60,153 Inventories
84,586 106,756 Other current assets 5,198 7,645 Net property, plant
and equipment 21,886 21,164 Other assets � 16,086 � 12,699 Total
assets $ 187,205 $ 208,893 � Accounts payable $ 64,788 $ 48,412
Accrued liabilities 18,546 24,649 Total debt 44,837 67,453 Other
long-term liabilities 16,845 5,353 Stockholders� equity � 42,189 �
63,026 Total liabilities and stockholders� equity $ 187,205 $
208,893 � �
PROLIANCE INTERNATIONAL, INC. SUPPLEMENTAL
INFORMATION (in thousands) (unaudited) �
Three
Months Twelve Months Ended December 31, Ended
December 31, 2008 2007 2008 2007 �
SEGMENT DATA:
Net sales: Domestic $ 49,202 $ 56,993 $ 227,876 $ 286,665
International � 26,784 � � 27,264 � � 122,191 � � 107,277 � Total
net sales $ 75,986 � $ 84,257 � $ 350,067 � $ 393,942 � � Operating
income (loss): Domestic $ 4,543 $ 573 $ 18,457 $ 11,105
Restructuring charges � � � � (1,164 ) � (172 ) � (3,891 ) Domestic
total � 4,543 � � (591 ) � 18,285 � � 7,214 � International 817
1,001 5,662 3,690 Restructuring charges � � � � 239 � � � � � (226
) International total � 817 � � 1,240 � � 5,662 � � 3,464 �
Corporate income (expenses) � (1,035 ) � (852 ) � (7,334 ) � (7,847
) Arbitration earn-out decision � � � � � � � � � � (3,174 ) Total
operating income (loss) $ 4,325 � � ($203 ) $ 16,613 � � ($343 ) �
�
NET CAPITAL
EXPENDITURES
$ 946 � (a)(b) $ 1,276 � (a) $ 5,156 � (a)(b) $ 3,018 � (a) �
(a)
�
Excludes proceeds from sale of
building and insurance recovery on damaged fixed assets in 2008�and
from sale of facility in 2007.
�
(b)
Excludes $2,176 for racking
acquired through capital lease.
�
PROLIANCE INTERNATIONAL, INC. SUPPLEMENTARY
INFORMATION (in thousands) (unaudited) � � � �
NON-GAAP FINANCIAL
MEASURE �ADJUSTED OPERATING
INCOMEOPERATING INCOME
ANDESTIMATED OPERATING LOSS FROM
TORNADOES
� �
Three Months Twelve Months Ended December
31, Ended December 31, 2008 2007
2008 2007 � Net income (loss) $ 175 ($4,367 ) ($4,062
) ($16,804 ) Income tax provision 509 485 2,082 1,732 Debt
extinguishment costs 7 � 2,829 891 Interest expense � 3,634 3,679 �
� 15,764 � 13,838 � Operating income (loss) 4,325 (203 ) 16,613
(343 ) Estimated operating loss from tornadoes(a) � 2,313 � � �
4,788 � � � Adjusted Operating Income(b) $ 6,638 ($203 ) $ 21,401 �
($343 ) �
(a)
�
Estimated operating loss from
tornadoes includes margin less related expenses on lost sales,
costs net of insurance recovery and gains from asset conversions
due to the February 5, 2008 tornado damage to the Southaven,
Mississippi distribution facility.
�
(b)
Operating income excluding the
estimated operating loss from the tornadoes ("Adjusted Operating
Income"), constitutes a �non-GAAP financial measure� 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 twelve
months ended December 31, 2008 and 2007.
� � � �
PROLIANCE INTERNATIONAL, INC. SUPPLEMENTARY
INFORMATION (in thousands) (unaudited) �
NON-GAAP FINANCIAL
MEASURE � ADJUSTEDEBITDA - EBITDA BEFORE
RESTRUCTURING,GAIN ON SALE OF BUILDING,
ARBITRATIONEARN-OUT DECISION AND
ESTIMATEDOPERATING LOSS FROM
TORNADOES
�
Three Months Twelve Months Ended December
31, Ended December 31, 2008 2007
2008 2007 � Net income (loss) $ 175 ($4,367 ) ($4,062
) ($16,804 ) Income tax provision 509 485 2,082 1,732 Debt
extinguishment costs 7 � 2,829 891 Interest expense � 3,634 � 3,679
� � 15,764 � � 13,838 � Operating income (loss) 4,325 (203 ) 16,613
(343 ) Depreciation and amortization(a) � 1,982 � 2,403 � � 7,675 �
� 8,260 � EBITDA 6,307 2,200 24,288 7,917 Restructuring charges �
925 172 4,117 Gain on sale of building � � (1,538 ) (750 )
Arbitration earn-out decision � � � 3,174 Estimated operating loss
from tornadoes(b) � 2,313 � � � � 4,788 � � � � Adjusted EBITDA(c)
$ 8,620 $ 3,125 � $ 27,710 � $ 14,458 � �
(a)
�
Depreciation and amortization does
not include amortization of deferred debt costs that are classified
as interest expense.
�
(b)
Estimated operating loss from
tornadoes includes margin less related expenses on lost sales,
costs net of insurance recovery and gains from asset conversions
due to the February 5, 2008 tornado damage to the Southaven,
Mississippi distribution facility.
�
(c)
Earnings before interest, taxes,
depreciation and amortization (�EBITDA�) and 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 twelve months ended December 31, 2008 and 2007.
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