EVANSVILLE, Ind. — Accuride Corp. has announced its fourth quarter and fiscal year 2008 results. Net sales in 2008 were $931.4 million, compared with $1,013.7 million in the prior year. The decrease in sales was the result of reduced demand from customers in the commercial vehicle industry. On a U.S. GAAP basis, the company reported a net loss of $335.3 million, or ($9.44) per diluted share, which was impacted by $256.8 million in non-cash goodwill and other intangible impairment, $41.5 million of tax valuation charges, and $7 million of restructuring charges totaling $305.3 million or ($8.59) per diluted share, compared with a net loss of $8.6 million or (25 cents) per diluted share, in the prior year.
In the fourth quarter, net sales were $208.8 million compared to $222.5 million in the fourth quarter of 2007. On a U.S. GAAP basis, the company reported a net loss of $125.8 million or ($3.51) per diluted share, compared with a net loss of $10.4 million or (29 cents) per diluted share, in the prior year. The results were impacted by $61.2 million in non-cash goodwill and other intangible impairment, $41.5 million of tax valuation charges, and $0.5 million of restructuring charges totaling $103.2 million or ($2.88) per diluted share.
“Our results were impacted by a difficult operating environment with demand weakening throughout the year as the macroeconomic environment worsened and freight remained at a low level,” said Bill Lasky, Accuride’s chairman, president, and CEO. “In the fourth quarter, the industry environment declined further in November and December as OEM customers reduced build schedules and the aftermarket declined. However, due to cost savings from our restructuring initiatives, we were able to partially offset the decline. For example, gross profit margins in our Wheels segment improved year-over-year despite lower volumes.”
Net sales of $208.8 million in the fourth quarter of 2008 were down 6.2 percent compared to the prior year quarter. Wheels’ net sales declined 14.5 percent due primarily to reduced demand for Class 5-7 vehicles and trailers. Components’ net sales increased 1.0 percent during the fourth quarter, largely driven by increases in wheel-end component sales and raw material surcharge recovery.
Gross profit declined to $10.1 million, or 4.8 percent of sales, from $20.6 million, or 9.3 percent of sales, in fourth quarter of 2007. Gross profit in the Wheels segment decreased due to extended plant shutdowns and unabsorbed overhead related to lower industry demand partially offset by over $10 million in savings related to restructuring and other cost reduction initiatives, as well as foreign exchange. Gross profit in 2007 for the Wheels segment benefited from $5.7 million in insurance proceeds and other items related to the reduction in the employee workforce. Gross profit in the Components segment also declined versus the prior year, due to lower industry demand partially offset by approximately $2.1 million in benefits from restructuring initiatives. Gross profit in the Components segment in the fourth quarter of 2008 was also impacted by a $3.1 million loss related to a sale of assets.
The company had an operating loss of $68.7 million in the fourth quarter of 2008 compared to operating income of $6.7 million in the prior year period. Operating expenses in the fourth quarter 2008 included $64.8 million in non-cash goodwill and other intangible impairment and $4.3 million in one-time research and development expenses recognized in the current year. Excluding these charges, the company experienced a decrease in operating expenses in the quarter totaling $3.2 million related to on-going expense and salary reduction initiatives.
The company reported a net loss of $125.8 million, or ($3.51) per diluted share, during the fourth quarter of 2008 including non-cash goodwill and other intangible impairment, tax valuation charges and restructuring charges totaling $103.2 million, or ($2.88) per diluted share. This compares to a net loss of $10.4 million, or ($0.29) per diluted share, in the prior year.
Restructuring Initiatives
In response to the extended downturn in the commercial vehicle market, the company announced a phased restructuring plan on September 22, 2008, to reduce its fixed costs and increase efficiencies.
The first phase of the restructuring included an 18 percent reduction in the salaried workforce, a 9 percent reduction in the hourly workforce, the consolidation of warehouse facilities and the creation of an aftermarket division. The Phase I restructuring initiatives yielded approximately $4.8 million in costs savings in the fourth quarter of 2008 and are expected to generate $22 million to $25 million in cost savings in 2009.
On December 15, 2008, the company announced a second phase of restructuring initiatives which included the consolidation of the company’s aluminum wheel facilities and the redeployment of equipment in its component businesses. The company incurred a restructuring charge of $0.9 million in the fourth quarter of 2008, of which $0.6 million will impact cash in 2009. In 2009, the company expects to incur $1.3 million in additional expenses, $8.3 million in accelerated depreciation and $10.0 million in capital expenditures related to this phase of restructuring. It is expected that Phase II restructuring will save the company an estimated $3 million to $5 million in 2009 and generate annual cost savings of $12 million to $15 million in 2010.
Combined, the Phase I and Phase II restructuring initiatives are expected to generate approximately $25 million to $30 million in cost savings in 2009.
“At Accuride, we’re prepared to face what may be one of the lowest truck build years in recent history and, for that reason, at this time, we will not provide guidance for 2009,” added Lasky. “Although the downturn took a toll on our 2008 results, we have not been complacent. Rather, we proactively reduced fixed costs while streamlining our operations and gaining efficiencies which in total are expected to provide between $25 million and $30 million in cost savings in the coming year. However, we aren’t totally playing defense. We continue to introduce new products and pursue a greater share of the aftermarket business.”
“Finally, improving our financial flexibility has been a critical element for successfully executing all of our improvement programs. To that end, we recently completed an amendment to our credit facility that should provide ample liquidity through the downturn in the industry. While we have further work ahead to improve our overall cost position, the majority of the structural changes to our product mix and asset base are likely behind us. Our aim is to emerge from the current downturn a stronger, more efficient competitor with ample capacity to profitably serve our customers’ peak demand levels.”
