ANDERSON, IN — Remy International, Inc. announced net sales of $312.3 million and adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of $6.2 million for the quarter ending June 30, 2005. Net sales increased $40.3 million, or 14.8 percent, and adjusted EBITDA decreased $24.7 million, or 80 percent, compared with the second quarter of 2004. An operating loss of $3.1 million in the second quarter of 2005 compares with operating income of $24.4 million in the same period of 2004. Adjusted EBITDA in the second quarter of 2005 decreased over the same period in 2004 mainly due to lower gross margins as discussed above and higher selling, general and administrative costs.
The net sales increase of $40.3 million in the second quarter mainly reflects a full quarter of results from our recent acquisition of Unit Parts Company (UPC) in March 2005 and continued strong Powertrain Diesel Product sales.
In the second quarter of 2005, Remy notified U.S. Customs of a probable underpayment of a U.S. duty and recorded a charge of $6.0 million for the periods 2000-2004 on remanufactured starters and alternators imported into the U.S. Remy intends to appeal any assessment.
Additionally in the quarter, the company incurred significant costs in its Mexican operations arising from the insourcing of components for its OEM operations, the implementation of a new ERP system and the integration costs relating to the UPC acquisition. Costs in the quarter were substantially higher than anticipated.
“Market softness in our North American automotive and electrical aftermarket businesses continue to adversely impact our results, said President and CEO Tom Snyder. “As we have previously indicated, commodity price pressures and the weak dollar have reduced our gross margins. Moreover, the second quarter performance was impacted by the startup and integration cost discussed above. We do believe, however, that the majority of issues we faced, particularly with respect to the systems implementation, are behind us and the majority of insourcing projects are now complete.”
Remy has announced a realignment of management responsibilities. This realignment will enable the company to increase its focus on improving operational and financial performance.
Additionally, the company has commenced new actions to reduce overhead and other costs and expects to record a restructuring charge related to these actions of approximately $4 million in the third quarter of 2005.
“Clearly, we are disappointed with our second quarter results,” said Synder. “We continue to be affected by the difficult conditions in the automotive industry. We believe that the actions taken in the second and early third quarter combined with the synergies from the UPC integration will generate significant improvements in the third quarter compared with our second quarter results.”
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