Net Sales, Net Loss Up for Hayes Lemmerz in Q2

Hayes Lemmerz reported on September 6 that its sales for the fiscal second quarter ended July 31, 2007 were US$570.3 million, up 19 per cent from $480.8 million in the corresponding quarter of 2006. The sales increase came from strong international steel and aluminium wheel sales, metals cost recovery and favourable currency fluctuations, the company said.

For the fiscal second quarter, the company reported adjusted EBITDA of $48.5 million, up $6.6 million from $41.9 million a year earlier, and a loss from operations of $4.8 million, compared with year earlier earnings from operations of $7.4 million. “We continue our strategy of restructuring our business, executing our operating plan, and extending the lead in our global wheel business,” said Curtis J. Clawson, president, CEO and chairman of the board.

As part of the company’s ongoing restructuring efforts, Hayes Lemmerz reached “important milestones” in the second quarter that it believes significantly improve its long-term outlook, while imposing one-time transaction costs. “We greatly strengthened our balance sheet by raising $193.1 million through an equity rights offering and a direct equity investment, and paying down $130.8 million of long term debt,” said Clawson. The balance sheet restructuring, which included the rights offering, new senior credit facilities totalling approximately $495 million, and 130 million euros of 8.25 per cent senior unsecured notes issued by a European subsidiary, “improved our liquidity by $80 million, will generate interest cost savings of approximately $24 million annually, and extends all significant debt maturities until 2013 or later.”

Hayes Lemmerz also reports it is continuing to focus on its core capabilities. On June 29 it sold its MGG subsidiary in Europe, whose three facilities in Belgium and the Netherlands produce aluminium components, and accounted for about $140 million of sales annually. On July 5, the company completed the sale of its aluminium components facility in Wabash, Indiana, which contributed about $60 million of annual sales. Hayes Lemmerz realised $15 million net cash from the sale of the two operations, while booking a $40 million non-cash charge related to the sales.

Curtis Clawson noted that Hayes Lemmerz “continues to execute its operating plan by winning new business from international automakers whose business is growing, and continues to rely less on the ‘big three’ US automakers.” Hayes Lemmerz expects 44 per cent of its sales in 2007 will come from leading-cost regions, and 50 to 55 per cent in 2008, compared with only 35 per cent in 2004, he said.

“We are continuing to extend the lead in wheels with international expansion in leading-cost regions,” said Clawson. “Continuing to invest in leading-cost international markets is reflected in our improving profitability,” he continued; earnings from global wheel operations were almost double for the first half of 2007 compared with the first half of 2005.

Including impairment charges, Hayes Lemmerz reported a loss from continuing operations of $61.2 million, including a $21.2 million charge related to early extinguishment of debt, compared with a loss from operations of $28.9 million in the year earlier quarter. The company also reported a $25.9 million loss from discontinued operations compared to a profit from discontinued operations of $2.0 million a year earlier, resulting in a net loss of $87.1 million in the recent second quarter, compared with a year earlier loss of $26.9 million.

Free cash flow for the second quarter, excluding the effects of the company’s accounts receivables securitisation program, was negative $13.8 million, essentially the same as in the second quarter of second 2006.

The company also reaffirmed its earnings guidance for the full fiscal year 2007, which was updated May 15, 2007. Hayes Lemmerz expects revenue of approximately $2.2 billion for the fiscal year ending January 31, 2008. Adjusted EBITDA is expected to be in the range of $200 million to $210 million. Positive free cash flow (excluding securitisation impact) is expected. Capital expenditures for the fiscal year are expected to be between $90 million to $95 million.