EXETER, Pa. — Keystone Automotive Operations has announced financial results for the fourth quarter and 2008 fiscal year ended Jan. 3.
For the fiscal year ended Jan. 3, sales were $566.3 million, a decrease of $48.6 million, or 7.9 percent, compared to $614.9 million in the prior fiscal year. The company said this decrease in sales was driven by a combination of factors, including a decrease in consumer spending on discretionary items due to general economic uncertainty, a year-over-year decline in truck and SUV sales and the decline in available consumer credit in the marketplace.
Gross profit for fiscal year 2008 was $176.5 million, a decrease of $11.2 million, or 5.9 percent, from the prior fiscal year due to lower net sales offset slightly by higher selling margins. Gross margin increased to 31.2 percent from 30.5 percent in the prior fiscal year.
Operating loss for the 2008 fiscal year was $210.6 million, compared to $10 million income from operations in the prior year period. The $220.6 million decrease was driven primarily by a $209.2 million increase in non-cash goodwill impairment charges and by the decrease in gross profit. Excluding these non-cash goodwill impairment charges from both years, the 2008 fiscal year operating income would have been $8.4 million compared to $19.8 million in the prior year period.
The company recorded a net loss of $206 million for the year versus a net loss of $27.1 million in the prior fiscal year. Partially offsetting the decrease of $220.6 million in operating income cited above was a $3.9 million decrease in net interest expense and a $31.6 million increase in income tax benefits. The 2007 full year results were further impacted by a $6.1 million write-off of deferred financing costs associated with the company’s refinancing in January 2007.
For the 2008 fiscal year, net cash provided by operating activities declined to $3.4 million compared to $21.3 million dollars for the prior fiscal year. The net decrease in cash from operations year-over-year was driven by a decrease in net income after adjustment for non-cash charges and a decrease in the reduction for net assets employed in the business.
Cash on hand increased by $17.4 million to $27.3 million compared to the fiscal 2007 year end balance of $9.9 million. At Jan. 3, and subsequently at Feb. 28, the company had $66 million and $81.9 million, respectively, in cash and borrowing capacity under its revolving credit facility.
During the second half of fiscal year 2008, the company focused on reducing working capital requirements. As a result, accounts receivable and inventory were reduced by $11.5 million and $18.4 million respectively over prior year levels. During this difficult economic environment, the company continued to monitor and effectively mitigate credit risk exposure of its receivables portfolio and also decreased its slower-moving inventory.
Keystone Automotive Operations has implemented a number of cost reduction initiatives since the beginning of fiscal year 2009, including closing three call centers and one retail store, and reducing its workforce. The estimated annual savings from these initiatives is expected to be approximately $11 million.
"With consumers short of discretionary dollars and new car and SUV sales continuing to decline, our business continues to face significant challenges," said Ed Orzetti, chief executive officer of Keystone Automotive Operations. "We have taken a number of actions to deal with the current and near-term environment. In October 2008, we purchased the operating assets of Arrow Speed Warehouse. The incremental revenue from Arrow Speed mitigated what would otherwise have been a more significant decrease in sales as a result of current economic conditions. Thanks to a more disciplined pricing management approach, we have managed to maintain our gross margins during 2008. We are focused on doing the right things for the business while managing our expenses appropriately so that we remain well-positioned in the marketplace, and poised for a rebound when market conditions improve."
