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Accuride Corporation Reports Third Quarter 2012 Results, Revises Guidance

Stocks in this article: ACW

Industry ConditionsNorth American truck fleets have scaled back their rate of equipment replacement from historic patterns and are managing their businesses more conservatively in a weak economic environment. Truck fleets’ conservatism translated into weak Class 8 truck orders in the third quarter, leading OEMs to abruptly reduce their production schedules as they depleted their order backlogs. Equipment orders are expected to improve in the fourth quarter as the industry’s traditional peak order season arrives; however, overall Class 8 production will likely remain lower into the first half of 2013. Medium-duty truck production continues improving at a modest pace, while trailer builds are expected to remain stable through year-end.

Third Quarter Business Segment Results

Accuride WheelsAccuride Wheels segment net sales were $98.3 million, down $7.7 million, or 7.3 percent, from the same period in 2011, due to lower year-over-year build rates and declining aftermarket orders in the face of increased offshore competition. Wheels’ Adjusted EBITDA was $19.4 million, a decrease of $6.1 million, or 24.1 percent from the third quarter of 2011. Year-over-year, earnings were impacted by increased material costs and pricing of $4.5 million. Installation of additional aluminum wheel capacity at our Camden and Monterrey plants remained on schedule in the quarter, which will position the company to gain share in this growing segment. The abrupt decline in customer orders created a challenging operating environment, requiring us to take aggressive cost reduction measures in response.

GuniteGunite segment net sales were $49.6 million, down $13.8 million, or 21.8 percent, from the third quarter of 2011, attributable primarily to the impact of low-cost offshore competitors, customer schedule changes and recent business losses. Gunite’s Adjusted EBITDA was negative $1.7 million, compared to negative $1.4 million in the third quarter of 2011. Gunite’s major capital investment program to install efficient machining and assembly equipment, upgrade casting operations and consolidate manufacturing operations is on schedule to conclude before year-end. In response to industry weakness and Navistar’s and Paccar’s decisions to no longer offer Gunite hub and drum assemblies as standard equipment, Gunite eliminated shifts, resized its workforce and will accelerate the consolidation of machining operations from the Elkhart and Brillion facilities into the Rockford operation by the end of November. We continue to discuss opportunities with Navistar and Paccar to minimize the impact of these decisions.

Brillion Iron WorksBrillion Iron Works’ third quarter net sales were $39.4 million, up $2.7 million, or 7.2 percent, from the third quarter of 2011, while Adjusted EBITDA was $3.8 million, an increase of $2.1 million, or 129.6 percent, from the third quarter of 2011. After strong first-half demand, conditions quickly declined during the quarter due to weakness in Brillion’s core industrial, construction, and oil and gas markets. Brillion responded by resizing its workforce in early September to the new level of demand.

ImperialImperial segment’s third quarter net sales were $28.0 million, a decline of $6.7 million, or 19.4 percent, over the same period in 2011 due to the drop in OEM customer production volumes. Imperial’s Adjusted EBITDA declined to negative $1.6 million in the current quarter from a positive $2.0 million in last year’s third quarter. We continue to work through operational challenges in our Decatur, Texas facility, which have delayed the consolidation of the Portland, Tenn. facility during the first half of 2012. We now expect to complete the repair and transfer of the remaining equipment in the first quarter of 2013.

Liquidity and DebtAs of September 30, 2012, total debt was $323.9 million, consisting of $303.9 million of our outstanding 9.5% senior secured notes, net of discount, and a $20.0 million draw on our ABL facility. As of September 30, 2012, the Company had $20.3 million of cash plus $59.4 million in availability under its ABL credit facility for total liquidity of $79.7 million. Despite lower earnings in the quarter, the Company’s positive operating cash flow partially offset its capital spending of $18.6 million in the quarter.

Outlook and Summary“Although current and near-term North American Class 8 production is weaker than we originally anticipated, long-term industry fundamentals remain positive,” Dauch said. “That is why we’re confident that our strategic investments to streamline and fix our core operations will serve us well when the industry cycle strengthens. We are responding aggressively to the near-term weakness and customer decisions by taking cost out of the business, but not at the expense of jeopardizing our efforts to fundamentally fix our business. As we plan for 2013, we expect Class 8 builds to be in the range of 220,000 to 230,000 units. Capital spending will be reduced by approximately 40 to 50 percent year-over-year, primarily reflecting the completion of our recent capital investment projects. We remain focused on ensuring Accuride’s long-term success. Our 2011-2012 actions to fix the business will make us much stronger and more dependable for our customers and shareholders in the future.”

Revised 2012 Financial GuidanceBased on our first nine months’ results and projections for the remainder of the year, Accuride management now expects its 2012 net sales to be in the range of $900 to $925 million, and a fully diluted loss per share of between $1.00 and $0.89 – including Elkhart closure costs and other one-time severance-related costs totaling $0.11 per share – and Adjusted EBITDA now ranging from $60 to $65 million for the year. The revised guidance reflects the likelihood of continued weakness in North American Class 8 truck orders and the resulting impact on customer production schedules during the fourth quarter.

Earnings Conference Call InformationAccuride will hold a conference call to discuss its Third Quarter 2012 financial and operational results on Friday, November 2, 2012, beginning at 9:00 a.m. Central Time. Analysts and investors may participate on the live conference call by dialing (877) 261-8992 in the United States, or (847) 619-6548 internationally, and using participant code 33645018. A live webcast of the conference call can be accessed via the Investors section of the Company’s website at Accuridecorp.com/investors. A replay of the call will be available from November 2, 2012 at 11:30 a.m. to November 9, 2012 at 11:59 p.m. Central Time by calling (888) 843-7419 in the United States, or (630) 652-3042 internationally, and using access code 33645018.

About Accuride CorporationWith headquarters in Evansville, Ind., USA, Accuride Corporation is a leading supplier of components to the North American commercial vehicle industry. The company’s products include commercial vehicle wheels, wheel-end components and assemblies, truck body and chassis parts, and other commercial vehicle components. The company’s products are marketed under its brand names, which include Accuride ®, Accuride Wheel End Solutions TM, Gunite ®, Imperial TM and Brillion TM. Accuride’s common stock trades on the New York Stock Exchange under the ticker symbol ACW. For more information, visit the Company’s website at http://www.accuridecorp.com.

Forward-Looking Statements Statements contained in this news release that are not purely historical 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, including statements regarding Accuride’s expectations, hopes, beliefs, and intentions with respect to future results. Such statements are subject to the impact on Accuride’s business and prospects generally of, among other factors, market demand in the commercial vehicle industry, general economic, business and financing conditions, labor relations, governmental action, competitor pricing activity, expense volatility and other risks detailed from time to time in Accuride’s Securities and Exchange Commission filings, including those described in Item 1A of Accuride’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. Any forward-looking statement reflects only Accuride’s belief at the time the statement is made. Although Accuride believes that the expectations reflected in these forward-looking statements are reasonable, it cannot guarantee its future results, levels of activity, performance or achievements. Except as required by law, Accuride undertakes no obligation to update any forward-looking statements to reflect events or developments after the date of this news release.

 
 

Three Months Operating Results

       
Three Months Ended September 30,
(Dollars in thousands)         2012     2011
     
Net sales:
Wheels $ 98,290 45.7 % $ 105,994 44.0 %
Gunite 49,592 23.0 % 63,421 26.3 %
Brillion Iron Works 39,373 18.3 % 36,721 15.3 %
Imperial Group   27,956 13.0 %   34,693 14.4 %
Total net sales $ 215,211 100 % $ 240,829 100 %
 
Gross Profit $ 4,130 1.9 % $ 19,238 8.0 %
 
Income (loss) from Operations:
Wheels $ 9,302 9.5 % $ 15,408 14.5 %
Gunite (8,076 ) (16.3 )% (3,083 ) (4.9 )%
Brillion Iron Works 2,510 6.4 % 367 1.0 %
Imperial Group (1,891 ) (6.8 )% 287 0.8 %
Corporate / Other   (11,524 ) %   (8,488 ) %
Consolidated Total $ (9,679 ) (4.5 )% $ 4,491 1.9 %
 
Net loss $ (17,679 ) (8.4 )% $ (17,220 ) (7.2 )%
 
Adjusted EBITDA
Wheels $ 19,396 19.7 % $ 25,544 24.1 %
Gunite (1,657 ) (3.3 )% (1,365 ) (2.2 )%
Brillion Iron Works 3,757 9.5 % 1,636 4.4 %
Imperial Group (1,610 ) (5.8 )% 1,963 5.7 %
Corporate / Other   (9,160 ) %   (8,499 ) %
Continuing Operations $ 10,726 5.0 % $ 19,279 8.0 %
 
Bostrom Seating % %
Fabco Automotive   %   2,933 %
Consolidated Total $ 10,726 5.0 % $ 22,212 9.2 %
 
 
 

Nine Months Operating Results

       
Nine Months Ended September 30,
(Dollars in thousands)         2012     2011
     
Net sales:
Wheels $ 328,115 43.5 % $ 300,430 43.3 %
Gunite 185,435 24.6 % 189,745 27.4 %
Brillion Iron Works 132,509 17.6 % 110,175 15.9 %
Imperial Group   107,453 14.3 %   93,246 13.4 %
Total net sales $ 753,512 100 % $ 693,596 100 %
 
Gross Profit $ 51,055 6.8 % $ 58,972 8.5 %
 
Income (loss) from Operations:
Wheels $ 43,850 13.4 % $ 39,032 13.0 %
Gunite (12,119 ) (6.5 )% (1,007 ) (0.5 )%
Brillion Iron Works 13,281 10.0 % 1,789 1.6 %
Imperial Group (2,712 ) (2.5 )% 3,178 3.4 %
Corporate / Other   (35,151 ) %   (28,600 ) %
Consolidated Total $ 7,149 0.9 % $ 14,392 2.1 %
 
Net loss $ (21,469 ) (2.8 )% $ (21,104 ) (3.0 )%
 
Adjusted EBITDA
Wheels $ 73,532 22.4 % $ 69,255 23.1 %
Gunite (83 ) (0.0 )% 5,381 2.8 %
Brillion Iron Works 16,999 12.8 % 6,282 5.7 %
Imperial Group (1,921 ) (1.8 )% 4,908 5.3 %
Corporate / Other   (30,850 ) %   (29,218 ) %
Continuing Operations $ 57,677 7.7 % $ 56,608 8.2 %
 
Bostrom Seating % (22 ) %
Fabco Automotive   %   5,172 %
Consolidated Total $ 57,677 7.7 % $ 61,758 8.9 %
 
         
 

ACCURIDE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)

 
 

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands except per share data) 2012   2011 2012   2011
 
NET SALES $ 215,211 $ 240,829 $ 753,512 $ 693,596
COST OF GOODS SOLD 211,081 221,591 702,457 634,624
GROSS PROFIT 4,130 19,238 51,055 58,972
OPERATING EXPENSES:
Selling, general and administrative 13,809 14,747 43,906 44,580
INCOME (LOSS) FROM OPERATIONS (9,679 ) 4,491 7,149 14,392
OTHER INCOME (EXPENSE):
Interest expense, net (8,921 ) (8,824 ) (26,324 ) (25,564 )
Other income (loss), net 815 809 536 3,205
LOSS BEFORE INCOME TAXES FROM CONTINUING OPERATIONS (17,785 ) (3,524 ) (18,639 ) (7,967 )
INCOME TAX PROVISION (BENEFIT) (106 ) 10,032 2,830 10,424
LOSS FROM CONTINUING OPERATIONS (17,679 ) (13,556 ) (21,469 ) (18,391 )
DISCONTINUED OPERATIONS, NET OF TAX (3,664 ) (2,713 )
NET LOSS $ (17,679 ) $ (17,220 ) $ (21,469 ) $ (21,104 )
Weighted average common shares outstanding—basic 47,408 47,295 47,368 47,271
Basic loss per share – continuing operations $ (0.37 ) $ (0.28 ) $ (0.45 ) $ (0.39 )
Basic loss per share – discontinued operations (0.08 ) (0.06 )
Basic loss per share $ (0.37 ) $ (0.36 ) $ (0.45 ) $ (0.45 )
Weighted average common shares outstanding—diluted 47,408 47,295 47,368 47,271
Diluted loss per share – continuing operations $ (0.37 ) $ (0.28 ) $ (0.45 ) $ (0.39 )
Diluted loss per share – discontinued operations (0.08 ) (0.06 )
Diluted loss per share $ (0.37 ) $ (0.36 ) $ (0.45 ) $ (0.45 )
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Foreign currency translation adjustments (317 ) 353 (356 ) 206
COMPREHENSIVE LOSS $ (17,996 ) $ (16,867 ) $ (21,825 ) $ (20,898 )
 
       
 

ACCURIDE CORPORATION

CONSOLIDATED ADJUSTED EBITDA

(UNAUDITED)

 
Three Months Ended September 30,
(In thousands)         2012     2011
 
Net income (loss) $ (17,679 )   $ (17,220 )
Income tax expense (benefit) (106 ) 9,643
Interest expense, net 8,921 8,824
Depreciation and amortization 13,153 12,112
Restructuring, severance and other charges 1 6,587 2,433
Other items related to our credit agreement 2 (150 ) 6,420
Adjusted EBITDA $ 10,726 $ 22,212
 

Note:

1)     For the three months ended September 30, 2012, Adjusted EBITDA represents net income before net interest expense, income tax expense, depreciation and amortization, plus $6.6 million in costs associated with restructuring items. For the three months ended September 30, 2011, Adjusted EBITDA represents net income before net interest expense, income tax benefit, depreciation and amortization, plus $2.4 million in costs associated with restructuring items.
2) Items related to our credit agreement refer to amounts utilized in the calculation of financial covenants in Accuride’s senior credit facility. For the three months ended September 30, 2012, items related to our credit agreement consisted of foreign currency income and other income or expenses of $0.2 million. For the three months ended September 30, 2011, items related to our credit agreement consisted of foreign currency losses and other income or expenses of $6.4 million .
 
       
Nine Months Ended September 30,
(In thousands)         2012     2011
 
Net loss $ (21,469 )   $ (21,104 )
Income tax expense 2,830 10,034
Interest expense, net 26,324 25,564
Depreciation and amortization 38,465 38,065
Restructuring, severance and other charges 1 9,683 3,734
Other items related to our credit agreement 2 1,844 5,465
Adjusted EBITDA $ 57,677 $ 61,758
 

Note:

1)     For the nine months ended September 30, 2012, Adjusted EBITDA represents net income before net interest expense, income tax expense, depreciation and amortization, plus $9.7 million in costs associated with restructuring items. For the nine months ended September 30, 2011, Adjusted EBITDA represents net income before net interest expense, income tax expense, depreciation and amortization, plus $3.7 million in costs associated with restructuring items.
2) Items related to our credit agreement refer to amounts utilized in the calculation of financial covenants in Accuride’s senior credit facility. For the nine months ended September 30, 2012, items related to our credit agreement consisted of foreign currency income and other income or expenses of $1.8 million. For the nine months ended September 30, 2011, items related to our credit agreement consisted of foreign currency losses and other income or expenses of $5.5 million .
 
 
 

ACCURIDE CORPORATION

SEGMENT ADJUSTED EBITDA RECONCILIATION

(UNAUDITED)

       
 
Three Months Ended September 30, 2012
(In thousands)        

Income (loss) from Operations

   

Depreciation and Amortization

  Other  

Adjusted EBITDA

Wheels $ 9,302   $ 8,333   $ 1,761 $ 19,396
Gunite (8,076 ) 2,655 3,764 (1,657 )
Brillion Iron Works 2,510 1,217 30 3,757
Imperial Group (1,891 ) 256 25 (1,610 )
Corporate / Other   (11,524 )   692   1,672   (9,160 )
Continuing Operations $ (9,679 ) $ 13,153 $ 7,252 $ 10,726
 
Bostrom
Fabco Automotive        
Consolidated Total $ (9,679 ) $ 13,153 $ 7,252 $ 10,726
 
Three Months Ended September 30, 2011
(In thousands)        

Income (loss) from Operations

   

Depreciation and Amortization

  Other  

Adjusted EBITDA

Wheels $ 15,408 $ 8,252 $ 1,884 $ 25,544
Gunite (3,083 ) 1,671 47 (1,365 )
Brillion Iron Works 367 1,242 27 1,636
Imperial Group 287 175 1,501 1,963
Corporate / Other   (8,488 )   420   (431 )   (8,499 )
Continuing Operations $ 4,491 $ 11,760 $ 3,028 $ 19,279
 
Bostrom
Fabco Automotive   2,581   352     2,933
Consolidated Total $ 7,072 $ 12,112 $ 3,028 $ 22,212
 
Nine Months Ended September 30, 2012
(In thousands)        

Income (loss) from Operations

   

Depreciation and Amortization

  Other  

Adjusted EBITDA

Wheels $ 43,850 $ 24,443 $ 5,239 $ 73,532
Gunite (12,119 ) 7,772 4,264 (83 )
Brillion Iron Works 13,281 3,628 90 16,999
Imperial Group (2,712 ) 716 75 (1,921 )
Corporate / Other   (35,151 )   1,906   2,395   (30,850 )
Continuing Operations $ 7,149 $ 38,465 $ 12,063 $ 57,677
 
Bostrom
Fabco Automotive        
Consolidated Total $ 7,149 $ 38,465 $ 12,063 $ 57,677
 
Nine Months Ended September 30, 2011
(In thousands)        

Income (loss) from Operations

   

Depreciation and Amortization

  Other  

Adjusted EBITDA

Wheels $ 39,032 $ 24,933 $ 5,290 $ 69,255
Gunite (1,007 ) 6,008 380 5,381
Brillion Iron Works 1,789 4,409 84 6,282
Imperial Group 3,178 179 1,551 4,908
Corporate / Other   (28,600 )   1,078   (1,696 )   (29,218 )
Continuing Operations $ 14,392 $ 36,607 $ 5,609 $ 56,608
 
Bostrom (112 ) 90 (22 )
Fabco Automotive   3,804   1,368     5,172
Consolidated Total $ 18,084 $ 38,065 $ 5,609 $ 61,758
 

We define Adjusted EBITDA as our net income or loss before income tax expense or benefit, interest expense, net, depreciation and amortization, restructuring, severance, and other charges, impairment, and currency losses, net. Adjusted EBITDA has been included because we believe that it is useful for us and our investors to measure our ability to provide cash flows to meet debt service. Adjusted EBITDA should not be considered an alternative to net income (loss) or other traditional indicators of operating performance and cash flows determined in accordance with accounting principles generally accepted in the United States (“GAAP”). We present the table of Adjusted EBITDA because covenants in the agreements governing our material indebtedness contain ratios based on this measure on a quarterly basis. While Adjusted EBITDA is used as a measure of liquidity and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculations.

           
 

ACCURIDE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 
 
September 30, December 31,
(In thousands) 2012 2011
 
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 20,269 $ 56,915
Customer and other receivables 89,527 98,075
Inventories, net 70,382 72,827
Other current assets 12,024 12,332
Total current assets 192,202 240,149
PROPERTY, PLANT AND EQUIPMENT, net 296,726 271,562
OTHER ASSETS:
Goodwill and other assets 346,628 357,151
TOTAL $ 835,556 $ 868,862
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 63,268 $ 80,261
Other current liabilities 44,870 48,228
Total current liabilities 108,138 128,489
LONG-TERM DEBT 323,870 323,082
OTHER LIABILITIES 165,820 159,908
STOCKHOLDERS’ EQUITY:
Total stockholders’ equity 237,728 257,383
TOTAL $ 835,556 $ 868,862
 




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