Accellent Inc. Announces Fourth Quarter and Full Year 2010 Results

WILMINGTON, Mass.--(BUSINESS WIRE)--Accellent Inc. (the “Company”), a wholly owned subsidiary of Accellent Holdings Corp. (“Accellent”), today announced results for its fiscal fourth quarter and full year ended December 31, 2010.

“Our fourth quarter 2010 Revenue and Adjusted EBITDA increased 19.3% and 11.5%, respectively, compared to the same period in 2009. Continued focus on improving our selling efforts and operational performance, combined with a comparison to a weak fourth quarter of 2009, provided a strong finish to 2010,” said Donald Spence, President and CEO of Accellent. “In addition, during the quarter we completed the refinancing of our senior subordinated debt, which will afford the company added flexibility to achieve its goals by extending its nearest long-term debt maturity to 2017.”

Fourth Quarter 2010 Financial Results

Net sales increased 19.3% to $132.1 million in the fourth quarter of 2010 compared with $110.8 million in the fourth quarter of 2009. Income from operations was $17.4 million in the fourth quarter of 2010 compared to $13.4 million in the fourth quarter of 2009. Our net loss was $15.4 million in the fourth quarter of 2010, compared with net income of $0.4 million in the fourth quarter of 2009. Our net loss in the fourth quarter of 2010 includes $14.9 million of costs associated with the Company’s refinancing of its senior subordinated debt during the fourth quarter of 2010.

Adjusted EBITDA for the fourth quarter of 2010 was $28.5 million, or 21.6% of net sales, compared to Adjusted EBITDA of $25.6 million, or 23.1% of net sales, in the fourth quarter of 2009.

Year Ended December 31, 2010 Financial Results

Net sales increased 5.9% to $507.0 million in 2010 compared with $478.8 million in 2009. Income from operations was $68.5 million in 2010, compared to $59.6 million in 2009. Our net loss was $24.5 million in 2010 compared with a net loss of $1.1 million in 2009. Our net loss in 2010 includes $20.9 million of costs associated with the Company’s refinancing transactions in 2010.

Adjusted EBITDA in 2010 was $110.1 million, or 21.7% of net sales, compared to Adjusted EBITDA of $109.8 million, or 22.9% of net sales, in 2009.

Reconciliations of non-GAAP financial measures to GAAP financial measures are provided in the financial information accompanying this press release.

Conference Call

Donald Spence, President and Chief Executive Officer, and Jeremy A. Friedman, Executive Vice President and Chief Financial Officer, will discuss our fourth quarter and full year 2010 financial results in a conference call scheduled for today, March 24, 2011 at 5 p.m. Eastern Daylight Time. The teleconference can be accessed live on the Internet through the Investor Relations section of the Accellent website at www.accellent.com or by calling [phone] pass code 44847959. Please visit the website or dial in 10 to 15 minutes prior to the beginning of the call to download and install any necessary audio software. A replay of the conference call will be available via www.accellent.com or by telephone at [phone] pass code 93038304 until March 31, 2011.

About Accellent

Accellent provides fully integrated outsourced manufacturing and engineering services to the medical device industry primarily in the cardiology, endoscopy and orthopaedic markets. Accellent has broad capabilities in precision component fabrication, finished device assembly, complete supply chain management capabilities and engineering services. These capabilities enhance customers’ speed to market and return on investment by enabling them to refocus internal resources more efficiently. For more information, please visit www.accellent.com.

Forward-Looking Statements

This press release includes “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended. All statements included herein, other than statements of historical fact, may constitute forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from the Company’s expectations are disclosed in the risk factors contained in the Company’s Form 10-K for the year ended December 31, 2009 filed with the Securities an Exchange Commission on March 31, 2010. All forward-looking statements are expressly qualified in their entirety by such risk factors.

Accellent Inc.
Condensed Consolidated Statements of Operations
(in thousands)
(unaudited)
	Three Months Ended December 31, 2009		Three Months Ended December 31, 2010
Net sales	$	110,767	$	132,136
Cost of sales (exclusive of amortization)		82,935		98,376
Gross profit		27,832		33,760
Operating expenses:
Selling, general and administrative expenses		9,597		12,280
Research and development expenses		11		435
Restructuring charges		884		(117)
Amortization of intangible assets		3,734		3,734
Loss on disposal of property and equipment		162		2
Total operating expenses		14,388		16,334
Income from operations		13,444		17,426
Interest expense, net		(13,404)		(18,900)
Loss on debt extinguishment		-		(14,877)
Other income, net		1,848		2,045
Income (loss) before income taxes		1,888		(14,306)
Provision for income taxes		1,516		1,084
Net income (loss)	$	372	$	(15,390)

Accellent Inc.
Reconciliation of Net Income (Loss) to EBITDA to Adjusted EBITDA
(in thousands)
(unaudited)
	Three Months Ended December 31, 2009			Three Months Ended December 31, 2010
Net income (loss)	$	372		$	(15,390	)
Interest expense, net		13,404			18,900
Provision for income taxes		1,516			1,084
Depreciation and amortization		9,527			9,391
EBITDA (1)	$	24,819		$	13,985
Restructuring charges		884			(117	)
Stock-based compensation – employees		(212	)		303
Stock-based compensation – non-employees		23			22
Employee severance and relocation		389			1,018
Chief executive recruiting costs		310			-
Currency transaction (gain)		(197	)		(920	)
Gain on derivative instruments		(1,516	)		(999	)
Loss on disposal of property and equipment		162			2
Franchise taxes		-			25
Plant closure costs and other		579			5
Loss on debt extinguishment		-			14,877
Management fees to stockholder		348			319
Adjusted EBITDA (1)	$	25,589		$	28,520

Accellent Inc.
Condensed Consolidated Statements of Operations
(in thousands)
(unaudited)
	Year Ended			Year Ended
	December 31, 2009			December 31, 2010
Net sales	$	478,793		$	506,954
Cost of sales (exclusive of amortization)		347,783			369,250
Gross profit		131,010			137,704
Operating expenses:
Selling, general and administrative expenses		47,725			52,002
Research and development expenses		2,064			2,393
Restructuring charges		5,727		(117		)
Amortization of intangible assets		14,939			14,939
Loss on disposal of property and equipment		966			15
Total operating expenses		71,421			69,232
Income from operations		59,589			68,472
Interest expense, net	(56,569		)	(73,939		)
Loss on debt extinguishment		-		(20,882		)
Other (expense) income, net	(514		)		6,211
Income (loss) before income taxes		2,506		(20,138		)
Provision for income taxes		3,576			4,365
Net loss	$	(1,070	)	$	(24,503	)

Accellent Inc.
Reconciliation of Net Loss to EBITDA to Adjusted EBITDA
(in thousands)
(unaudited)
	Year Ended			Year Ended
	December 31, 2009			December 31, 2010
Net loss	$	(1,070	)	$	(24,503	)
Interest expense, net		56,569			73,939
Provision for income taxes		3,576			4,365
Depreciation and amortization		37,128			37,358
EBITDA (1)	$	96,203		$	91,159
Restructuring charges		5,727			(117	)
Stock-based compensation – employees		617			695
Stock-based compensation – non-employees		93			90
Employee severance and relocation		1,968			1,942
Chief executive recruiting costs		310			—
Currency transaction loss (gain)		900			(1,467	)
Gain on derivative instruments		(425	)		(4,511	)
Loss on disposal of property and equipment		966			15
Franchise taxes		—			179
Plant closure costs and other		2,243			49
Loss on debt extinguishment		—			20,882
Management fees to stockholder		1,216			1,231
Adjusted EBITDA (1)	$	109,818		$	110,147

Accellent Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)
	December 31, 2009		December 31, 2010
Assets
Current assets:
Cash and cash equivalents	$	33,785	$	40,787
Accounts receivable, net		44,815		54,011
Inventory		55,571		66,028
Prepaid expenses and other current assets		4,008		2,650
Total current assets		138,179		163,476
Property, plant and equipment, net		117,976		121,037
Goodwill		629,854		629,854
Intangible assets, net		179,566		164,626
Deferred financing costs and other assets, net		13,400		19,083
Total assets	$	1,078,975	$	1,098,076
Liabilities and Stockholder’s equity
Current liabilities:
Current portion of long-term debt	$	7	$	9
Accounts payable		23,910		24,025
Accrued expenses and other current liabilities		31,749		46,682
Total current liabilities		55,666		70,716
Note payable and long-term debt		684,650		712,675
Other long-term liabilities		32,143		34,177
Total liabilities		772,459		817,568
Stockholder’s equity		306,516		280,508
Total liabilities and stockholder’s equity	$	1,078,975	$	1,098,076

(1) EBITDA and Adjusted EBITDA presented in this press release are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income (loss) or any other performance measures derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity.

EBITDA represents net income (loss) before net interest expense, provision for income taxes, depreciation and amortization. Adjusted EBITDA represents EBITDA further adjusted to give effect to certain non-cash items and other adjustments, all of which are defined in the indentures governing our debt. The adjustments include adjustments for restructuring charges and related plant closure costs, gains and losses on derivative instruments, gains and losses resulting from the disposal of property and equipment, currency transaction gains and losses, stock compensation charges, severance and relocation costs, franchise taxes, losses on debt extinguishment, and management fees.

We believe that the presentation of EBITDA and Adjusted EBITDA is appropriate to provide additional information to investors. We consider it an important supplemental measure of our performance and we believe that both are frequently used by securities analysts, investors and other interested parties in the evaluation of high yield issuers.