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 third quarter and
nine months ended September 30, 2008. For the quarter, net income
increased to $1.4 million, or $0.07 per diluted share, compared to
$129,000, or $0.01 per diluted share, in the same period last year.
Net sales in the 2008 third quarter were $95.4 million compared to
$115.3 million in the prior year period, the variance reflecting
the Company�s change in strategy away from direct sales through
branches, and toward sales through wholesalers for certain
products, and the adverse effects of the Southaven casualty event,
which also impacted first and second quarter sales this year.
Operating income increased 35%, to $8.4 million in the third
quarter of 2008 compared to $6.2 million in the prior year period.
The 2008 third quarter benefited from the Company�s continuing cost
reduction program, partially offset by costs net of insurance
proceeds related to lost sales, lower margins due to higher product
related costs and higher operating expenses, all attributable to
the Southaven casualty event. The 2007 third quarter included $1.9
million of restructuring costs associated with the Company�s change
in distribution strategy. The third quarters of 2008 and 2007 also
included debt extinguishment costs of $2.2 million and $0.9
million, respectively. In 2008, these costs represented the
write-down of deferred debt costs and prepayment penalties
associated with the Company�s credit agreement. The agreement
required Proliance to apply a significant portion of the Southaven
casualty event insurance proceeds to pay down borrowings. As a
result, total debt of $47.8 million at September 30, 2008 was $19.7
million less than at December 31, 2007. �As we�ve seen in previous
quarters this year, profitability continued to improve
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., as well as margin
improvement in our International heavy duty operations,� said
Charles E. Johnson, President and CEO. �This performance was
achieved despite the continued impact on domestic sales of the
February 2008 tornadoes that destroyed our Southaven heat exchange
products distribution facility and challenged the Company to secure
the replacement inventory to meet customer demand; the impact of
the Gulf Coast hurricanes on September 2008 sales, which affected
consumer driving and heavy duty customers in the oil service
industry; and generally softer economic conditions.� Third quarter
adjusted earnings before interest, taxes, depreciation and
amortization (Adjusted EBITDA) of $11.8 million increased 14% from
$10.3 million in the year ago quarter. For the nine months ended
September 30, 2008, Adjusted EBITDA increased 68%, to $19.1 million
from $11.3 million in the year ago period. 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.
Third Quarter 2008 Financial Analysis (All comparisons are to the
corresponding year-ago period unless otherwise indicated) Domestic
net sales of $60.6 million declined 28%, primarily due to the
Southaven casualty event and the change in branch distribution. The
Company operated 35 branches in the September 2008 quarter,
compared to 83 as of September 30, 2007. International sales of
$34.8 million increased 11%, primarily reflecting exchange rate
differences from the stronger Euro versus the U.S. dollar.
Consolidated gross margin was 20.7% of sales compared to 23.6%.
Domestic gross margin reflected lower average selling prices, in
part attributable to the changes in distribution, which were
partially offset by lower manufacturing costs as a result of
product innovations and production efficiencies. This change in
distribution strategy also brought about significantly lower
domestic SG&A expenses, as noted below. International gross
margin was slightly higher, due to improved production efficiencies
and increased marine sales. Selling, general and administrative
expenses (SG&A) declined to $11.3 million or 11.8% of sales
compared to $19.1 million or 16.6% of sales a year ago. Excluding
previously mentioned non-recurring items, including insurance
reimbursements, SG&A fell as a result of cost reduction
efforts, which enabled Proliance to more than offset higher freight
costs due to increased fuel prices. Interest expense decreased $0.7
million 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. Outlook �As a result of our
third quarter performance, we continue to be in line with our
previous guidance of adjusted operating income in the range of
about $20 million for the full year 2008, excluding one-time costs
related to the Southaven casualty event and expenses associated
with amendments to the Company�s credit facility,� Mr. Johnson
said. Mr. Johnson added, �Southaven has been steadily ramping up
service levels, which will help us satisfy available sales
opportunities. To improve gross margin, we have continued to
initiate new cost reduction actions, some of which were delayed by
the tornados, such as shifting production of certain radiator
product, previously purchased from the Far East, to our
manufacturing facility in Nuevo Laredo, Mexico. We also anticipate
continued quarterly expense reductions as a result of initiatives
that took place in 2007 and earlier this year.� Proliance continues
to make progress toward the refinancing of its current senior debt
with the goal of completing a transaction in the fourth quarter of
2008. As previously reported, Proliance has signed a letter of
intent with a group of institutional lenders to provide $30 million
of mezzanine financing to the Company. 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 would increase the Company�s financial
flexibility and support continued growth of the business.
Conference Call Proliance will host a conference call today at 5:00
PM ET with Charles E. Johnson, President and CEO, and Arlen F.
Henock, CFO, to discuss the results for the third quarter ended
September 30, 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.investorcalendar.com/IC/CEPage.asp?ID=136559. 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 Nine
Months Ended September 30, Ended September 30, 2008 2007 2008 2007
� Net sales $95,387 $115,333 $274,081 $309,685 Cost of sales 75,673
88,115 222,745 � 243,857 � Gross margin 19,714 27,218 51,336 65,828
Selling, general and administrative expenses 11,281 19,107 38,876
59,602 Arbitration earn-out decision � � � 3,174 Restructuring
charges � 1,864 172 � 3,192 � Operating income (loss) 8,433 6,247
12,288 (140 ) Interest expense 3,845 4,556 12,130 10,159 Debt
extinguishment costs 2,246 891 2,822 � 891 � Income (loss) before
income taxes 2,342 800 (2,664 ) (11,190 ) Income tax provision 924
671 1,573 � 1,247 � Net income (loss) $1,418 $129 ($4,237 )
($12,437 ) � Net income (loss) per common share - basic $0.09 $0.01
($0.28 ) ($0.89 ) � Net income (loss) per common share - diluted
$0.07 $0.01 ($0.28 ) ($0.89 ) � Weighted average common shares -
basic 15,756 15,269 15,745 � 15,265 � � Weighted average common
shares - diluted 19,572 17,454 15,745 � 15,265 � � PROLIANCE
INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in
thousands) � � � September 30, 2008 December 31, 2007 (unaudited) �
Cash and cash equivalents $3,301 $476 Accounts receivable, net
70,152 60,153 Inventories 96,020 106,756 Other current assets 5,227
7,645 Net property, plant and equipment 22,684 21,164 Other assets
16,024 12,699 Total assets $213,408 $208,893 � Accounts payable
$69,290 $48,412 Accrued liabilities 29,557 24,649 Total debt 47,845
67,453 Other long-term liabilities 5,165 5,353 Stockholders� equity
61,551 63,026 Total liabilities and stockholders� equity $213,408
$208,893 � PROLIANCE INTERNATIONAL, INC. SUPPLEMENTAL INFORMATION
(in thousands) (unaudited) � Three Months Nine Months Ended
September 30, Ended September 30, 2008 2007 2008 2007 � SEGMENT
DATA: Net sales: Domestic $60,589 $84,030 $178,674 $229,672
International 34,798 31,303 � 95,407 � 80,013 � Total net sales
$95,387 $115,333 � $274,081 � $309,685 � � Operating income (loss):
Domestic $2,623 $7,804 $3,244 $10,532 Restructuring charges �
(1,492 ) (172 ) (2,727 ) Domestic total 2,623 6,312 � 3,072 � 7,805
� International 2,935 2,141 4,845 2,689 Restructuring charges �
(372 ) � � (465 ) International total 2,935 1,769 � 4,845 � 2,224 �
Corporate income (expenses) 2,875 (1,834 ) 4,371 � (6,995 )
Arbitration earn-out decision � � � � � (3,174 ) Total operating
income (loss) $8,433 $6,247 � $12,288 � ($140 ) � � NET CAPITAL
EXPENDITURES $3,554 (a) $847 � (a) $6,387 � (a) $1,810 � (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 Nine Months Ended September 30,
Ended September 30, 2008 2007 2008 2007 � Net income (loss) $1,418
$129 ($4,237 ) ($12,437 ) Income tax provision 924 671 1,573 1,247
Debt extinguishment costs 2,246 891 2,822 891 Interest expense
3,845 4,556 12,130 � 10,159 � Operating income (loss) 8,433 6,247
12,288 (140 ) Depreciation and amortization(a) 1,669 2,197 5,693 �
5,857 � EBITDA 10,102 8,444 17,981 5,717 Restructuring charges �
1,864 172 3,192 Gain on sale of building � � (1,538 ) (750 )
Arbitration earn-out decision � � � 3,174 Estimated operating loss
from tornado(b) 1,671 � 2,475 � � � Adjusted EBITDA(c) $11,773
$10,308 $19,090 � $11,333 � (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 due to
the February 5 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 nine months ended September 30, 2008 and 2007.
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