Accellent Inc. Announces Fourth Quarter and Full Year 2010 Results

WILMINGTON, Mass.--()--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 (866) 761-0749 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 (888) 286-8010 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.

Contacts

Accellent Inc.
Jeremy Friedman, 978-570-6900
Executive Vice President and Chief Financial Officer
Jeremy.friedman@accellent.com

Contacts

Accellent Inc.
Jeremy Friedman, 978-570-6900
Executive Vice President and Chief Financial Officer
Jeremy.friedman@accellent.com