Impco (NASDAQ:IMCO)
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IMPCO Technologies Announces Fiscal 2004 Earnings
CERRITOS, Calif., April 1 /PRNewswire-FirstCall/ -- IMPCO Technologies Inc.
(NASDAQ:IMCO), today announced earnings for the fiscal year ended December 31,
2004, indicating that it reported a net loss of $14.2 million, or $0.77 per
share, on revenues of $118.3 million and an operating loss of $6.3 million, as
compared to a net loss of $6.9 million, revenues of a $74.7 million and an
operating loss of $0.5 million for the prior fiscal year. The loss for the 2004
fiscal year includes a $6.8 million charge associated with the early retirement
of IMPCO's high-interest senior subordinated secured notes; net of the charge
for debt retirement costs, the company would have incurred a net loss of $7.4
million and operating income of $0.5 million. The retirement of the company's
subordinated debt is expected to reduce interest costs in 2005 by approximately
$4.0 million.
As a follow up to guidance previously given early in January 2005 for our
fourth fiscal quarter, the company reported that revenues in that period were
approximately $27.1 million in comparison to previous guidance of $27.5 to 28.5
million. Net loss for the quarter was $16.3 million in comparison to previous
guidance of $8.4 million. The difference of $7.9 million includes non-cash
charges of $6.7 million. These fourth quarter changes between previous
guidance and actual results relate primarily to normal year-end accounting
processes regarding assessments of the carrying value of certain assets,
including:
* A $2.2 million reduction in the company's deferred tax asset due to an
increase in the valuation allowance attributable to adjustments in our
forecasts for future economic performance.
* A $1.5 million impairment of goodwill and investments associated with
foreign operations where the company has made strategic decisions to
change its operations due to market conditions.
* An increase of $1.2 million in the reserve for obsolete inventory to
better reflect actual and anticipated product mix between fuel systems
and component sales.
* A $0.7 million increase in reserve for uncollectible accounts and
warranty reserves. The increase in warranty reserves relates primarily
to recent changes in product mix.
* A $0.6 million increase in reserves related to the company's strategic
decision to change its organization and ownership structure in Mexico
to better access the market.
* A non-cash adjustment of $0.5 million associated with the pay-off of
the Bison debt which was redeemed on December 29, 2004.
* A shortfall of $0.9 million in net income from our previous fourth
quarter guidance for BRC, of which $0.6 million was caused by an
increase in BRC's reserves for the Brazil joint venture, and
$0.3 million of which represents startup costs for a new facility for
conversion of OEM vehicles.
* Net cash-related charges of $0.7 million, of which $0.3 million
represents expenses to fund the company's employee deferred
compensation plan and other miscellaneous charges.
Mr. Costamagna, whose family is the major shareholder of the company and who
became IMPCO's Chief Executive Officer on January 1, 2005, said that, "While we
certainly are disappointed to report a loss for 2004 and to be late with the
filing of our Annual Report on Form 10-K, we believe our new management team
and the processes we are adopting ultimately will position the company to
comply with our reporting obligations while allowing us to focus careful
attention on the commercial and industrial aspects of our business. These steps
are essential to position the company for the future. We feel this is a
critical juncture in the company's history with new management and improving
internal control processes," stated Mr. Costamagna. He continued, "We believe
it is absolutely necessary and in the long-term interests of our shareholders
to improve our returns on investment by implementing financial processes that
will allow us to assess our business and economic resources more readily from
an industrial and commercial perspective. As CEO, I recognize that our
shareholders increasingly expect consistency in financial performance, and one
of my primary goals is to promote a corporate environment in which shareholders
find our financial statements clear and understandable, and our performance
attractive and predictable." Moreover, he said, "with the completion of the
acquisition of the remaining 50% equity interest of B.R.C., S.r.l., we expect
to report comparative improvements in financial results for the combined
operations of the company in 2005."
In concluding, Mr. Costamagna continued, "When I took charge as CEO, I felt
that it was absolutely necessary in the long-term interests of our shareholders
to position the company to respond aggressively to potential growth in the
newly revitalized alternative fuel sector. To prepare our company for growth,
I believe it is crucial to build on a foundation that includes a sound
financial base. In addition to a tremendous boost in investor confidence, this
move will improve our ability to apply our economic resources most efficiently
and to invest them most wisely for the future."
The company also disclosed that its assessment of its internal control over
financial reporting had identified three material weaknesses. These material
weaknesses include:
* Cycle counting of physical inventory. The key internal controls over
financial reporting related to cycle counting is to confirm the
quantities that are recorded in the inventory perpetual records since
1) the perpetual records are the source for recording inventory values
in the company's general ledger and then correspondingly in the
financial statements, and 2) if the process and counts are accurate,
the cycle counting process replaces the necessity to physically count
the inventory at period end. Accordingly the company undertook
alternative procedures in physical counts of a substantial portion of
the inventories subsequent to December 31, 2004 and performed a roll-
back reconciliation.
* Lack of segregation of duties in one of the company's foreign
locations. The key controls over financial reporting related to
segregation of duties is to provide for approval procedures and
accounting controls to prevent the opportunity for theft or
falsification of records. Upon detection, the company has instituted
alternative processes to provide for adequate segregation of duties in
this location.
* Lack of control over the computation of the realizable value of
deferred tax assets. The key controls over financial reporting
relating to valuation of the deferred tax assets relates to the need
for the company to maintain sufficient numbers of internal personnel,
or to maintain adequate coordination with outside advisors, to address
the adequacy of the value of the tax benefit relating to the company's
net operating loss carry forwards. The company has instituted a
process by which management will maintain adequate staffing or will
address more carefully the responsibilities delegated to outside
advisors.
As noted above in the description of the three reported material weaknesses in
internal controls over financial reporting, the company has taken immediate
corrective action to ensure adequate inventory cycle counting processes and has
also taken corrective action to ensure adequate segregation of duties in one of
its foreign locations. Further, the Company will address more carefully the
responsibilities delegated to outside advisors in the future.
Attached to this release are unaudited copies of IMPCO's condensed,
consolidated balance sheet and income statement as of and for the fiscal year
ended December 31, 2004.
Earnings Conference Call
IMPCO will host a conference call to discuss its unaudited financial results
for fiscal 2004 on Monday, April 4, 2005 at 8:00 a.m. P.S.T. (11:00 a.m.
E.S.T.). All shareholders and other interested parties are invited to dial
into the call, which may be accessed by calling (706) 679-3125. In order to
ensure participation, please dial in a few minutes prior to the scheduled time.
A recording of the call will be available for 24 hours and can be accessed by
calling (800) 642-1687 or (706) 645-9291, reference code # 5246202
Cautionary Statement about Forward Looking Information
The financial data presented in this release are unaudited and based upon
currently available information. Although management believes them to be
accurate, there can be no assurance that the information presented herein will
not change. Except for historical information, the statements, expectations
and assumptions contained in the foregoing press release are forward-looking
statements. Forward-looking statements in this release include, but are not
limited to, management's expectations regarding consolidated revenues in the
current and future periods; the likelihood that expected closing conditions
will be satisfied and the BRC acquisition will be consummated as and when
expected; the company's ability to realize upon existing plans and mitigate the
effects of known and unknown risks to future operations; and the ability
accurately to estimate the value of intangible assets. Such statements are
subject to a number of risks and uncertainties, and actual results could differ
materially from those discussed in any forward-looking statement. Factors that
could cause actual results to differ materially from such forward-looking
statements include, among other factors, the reaction of the securities markets
to changes in management and business strategy; our ability effectively to
integrate our management team as the transition continues; the combined
company's ability to meet OEM specifications; the success of our recently
announced programs with strategic partners; factors that impact growth in
international markets; and the level and success of the company's development
programs with OEMs. Readers also should consider the risk factors set forth
from time to time in the company's SEC reports, including but not limited to
those contained in the section entitled "Management's Discussion & Analysis of
Financial Condition and Results of Operation - Risk Factors" in its annual
report on Form 10-K for the fiscal year ended December 31, 2003. The company
does not undertake to update or revise any of its forward-looking statements
even if experience or future changes show that the indicated results or events
will not be realized.
About IMPCO Technologies
IMPCO is a leading source of advanced alternative fuel systems technology and
components for internal combustion engines. IMPCO products enable these engines
to function using environmentally friendly gaseous fuels such as propane,
natural gas and biogas. IMPCO products improve efficiency and performance
while reducing emissions. IMPCO is a major supplier to original equipment
manufacturers and the aftermarket in the bus and truck, industrial and power
generation markets, as well as to the automotive aftermarket. IMPCO supports
its global aftermarket through a network of more than 400 distributors and
dealers, and 12 regional offices.
For further information, please contact Dale Rasmussen, Vice President,
Investor Relations.
Phone: +1-206-315-8242
Fax: +1-206-315-8301
IMPCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 2003 and 2004
(In thousands except per share data)
Year Ended
December 31,
2003 2004
(Unaudited)
Revenue $74,740 $118,292
Costs and expenses:
Cost of revenue 51,780 91,554
Research and development expense 3,803 4,634
Selling, general and administrative
expense 19,638 20,331
Impairment loss of goodwill 1,328
Loss on extinguishment of debt 6,752
Total costs and expenses 75,221 124,599
Operating Income (481) (6,307)
Interest expense, net 4,039 5,509
Loss from operations before income taxes (4,520) (11,816)
Equity share in income of
unconsolidated affiliates 1,107 (943)
Income tax expense 668 2,325
Loss from operations before
minority interest (6,295) (13,198)
Minority interest in income of
consolidated subsidiaries 605 1,051
Net Loss $(6,900) $(14,249)
Net income per share:
Basic net income $(0.41) $(0.77)
Diluted net income $(0.41) $(0.77)
Number of shares used in
per share calculation:
Basic 16,643 18,608
Diluted 16,643 18,608
IMPCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
December 31, December 31,
2003 2004
(Unaudited)
ASSETS
Current assets $44,129 $43,977
Non-current assets 57,007 55,980
$101,136 $99,957
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities 21,990 28,847
Non-current liabilities 22,017 24,469
Shareholders Equity 57,129 46,641
$101,136 $99,957
DATASOURCE: IMPCO
CONTACT: Dale Rasmussen, Vice President, Investor Relations of IMPCO,
+1-206-315-8242, or fax, +1-206-315-8301