Accellent Inc. Announces Fourth Quarter 2011 Results

WILMINGTON, Mass.--(BUSINESS WIRE)--Accellent Inc. (the “Company” or “Accellent”), a wholly owned subsidiary of Accellent Holdings Corp., today announced results for its fiscal fourth quarter ended December 31, 2011.

Fourth Quarter 2011 Financial Results

Net sales decreased 4.6% to $126.0 million in the fourth quarter of 2011 compared with $132.1 million in the fourth quarter of 2010. Income from operations was $13.6 million in the fourth quarter of 2011, compared with $17.4 million in the fourth quarter of 2010. Net loss was $3.4 million in the fourth quarter of 2011, compared with a net loss of $15.4 million in the fourth quarter of 2010. The 2010 fourth quarter net loss included a $14.9 million loss on debt extinguishment.

Adjusted EBITDA for the fourth quarter of 2011 was $24.9 million, or 19.7% of net sales, compared to Adjusted EBITDA of $28.5 million, or 21.6% of net sales, in the fourth quarter of 2010.

“Demand from our customers slowed in the fourth quarter, though I am pleased that our full year revenue was nearly 5% higher than in 2010. Unfortunately lower revenue combined with higher costs negatively impacted our profitability in the fourth quarter. However, we are committed to improving our financial results going forward and to driving improvements in all aspects of our business.” said Donald Spence, President and CEO of Accellent.

Year Ended December 31, 2011 Financial Results

Net sales increased 4.9% to $531.8 million in 2011 compared with $507.0 million in 2010. Income from operations was $59.5 million in 2011 compared with $68.5 million in 2010. Net loss was $14.9 million in 2011 compared with a net loss of $24.5 million in 2010. The 2010 net loss included a $20.9 million loss on debt extinguishment.

Adjusted EBITDA for 2011 was $103.4 million, or 19.4% of net sales compared to Adjusted EBITDA of $110.1 million, or 21.7% of net sales in 2010.

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 financial results in a conference call scheduled for today, March 22, 2012 at 5 p.m. Eastern Standard 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 49531140. 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 81935136 until March 29, 2012.

About Accellent

Accellent Holdings Corp., through its wholly owned subsidiary Accellent, Inc., provides fully integrated outsourced manufacturing and engineering services to the medical device industry primarily in the cardiology, endoscopy and orthopedic 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, 2010 filed with the Securities and Exchange Commission on March 25, 2011. All forward-looking statements are expressly qualified in their entirety by such risk factors.

ACCELLENT INC.
Unaudited Condensed Consolidated Statements of Operations
(in thousands)
	Three Months Ended						Year Ended
	December 31, 2010			December 31, 2011			December 31, 2010			December 31, 2011
Net sales	$	132,136		$	126,042		$	506,954		$	531,782
Cost of sales (exclusive of amortization)		98,376			97,262			369,250			400,848
Gross profit		33,760			28,780			137,704			130,934
Operating expenses:
Selling, general and administrative expenses		12,280			11,384			52,002			54,288
Research and development expenses		435			441			2,393			2,522
Amortization of intangible assets		3,734			3,734			14,939			14,939
Restructuring charges		(117	)		348			(117	)		348
Loss (gain) on disposal of property and equipment		2			(758	)		15			(706	)
Total operating expenses		16,334			15,149			69,232			71,391
Income from operations		17,426			13,631			68,472			59,543
Other (expense) income, net:
Interest expense, net		(18,900	)		(17,221	)		(73,939	)		(68,883	)
Loss on debt extinguishment		(14,877	)		-			(20,882	)		-
Other income, net		2,045			1,433			6,211			30
Total other (expense) income, net		(31,732	)		(15,788	)		(88,610	)		(68,853	)
Loss before income taxes		(14,306	)		(2,157	)		(20,138	)		(9,310	)
Provision for income taxes		1,084			1,223			4,365			5,629
Net loss	$	(15,390	)	$	(3,380	)	$	(24,503	)	$	(14,939	)

ACCELLENT INC.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
	December 31, 2010		December 31, 2011
Assets
Current assets:
Cash	$	40,787	$	38,858
Accounts receivable, net		54,011		54,763
Inventory		66,028		65,962
Prepaid expenses and other current assets		2,650		4,481
Total current assets		163,476		164,064
Property, plant and equipment, net		121,037		126,992
Goodwill		629,854		629,854
Other intangible assets, net		164,626		149,687
Deferred financing costs and other assets, net		19,083		16,825
Total assets	$	1,098,076	$	1,087,422
Liabilities and Stockholder's equity
Current liabilities
Current portion of long-term debt	$	9	$	22
Accounts payable		24,025		22,580
Accrued expenses and other current liabilities		46,682		46,487
Total current liabilities		70,716		69,089
Long term debt		712,675		712,967
Other long-term liabilities		34,177		38,466
Total liabilities		817,568		820,522
Stockholder's equity		280,508		266,900
Total liabilities and stockholder's equity	$	1,098,076	$	1,087,422

ACCELLENT INC.
Reconciliation of Net Loss to EBITDA to Adjusted EBITDA
(in thousands)
	Three Months Ended						Year Ended
	December 31, 2010			December 31, 2011			December 31, 2010			December 31, 2011
Net loss	$	(15,390	)	$	(3,380	)	$	(24,503	)	$	(14,939	)
Interest expense, net		18,900			17,221			73,939			68,883
Provision for income taxes		1,084			1,223			4,365			5,629
Depreciation and amortization		9,391			9,936			37,358			38,740
EBITDA (1)	$	13,985		$	25,000		$	91,159		$	98,313
Adjustments:
Restructuring charges		(117	)		348			(117	)		348
Stock-based compensation – employees		303			260			695			1,021
Stock-based compensation – non-employees		22			22			90			90
Employee severance and relocation		1,018			395			1,942			1,701
Executive recruiting costs		-			-			-			307
Plant closure costs and other		5			158			49			158
Currency (gain) loss		(920	)		(1,377	)		(1,467	)		97
Gain on derivative instruments		(999	)		-			(4,511	)		-
Loss (gain) on disposal of property and equipment		2			(758	)		15			(706	)
Franchise and other taxes		25			472			179			769
Loss on debt extinguishment		14,877			-			20,882			-
Management fees to stockholder		319			335			1,231			1,292
Adjusted EBITDA (1)	$	28,520		$	24,855		$	110,147		$	103,390

(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 and 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, stock compensation charges, severance and relocation costs, executive recruiting costs, currency gains and losses, gains and losses on derivative instruments, gains and losses resulting from the disposal of property and equipment, certain non-income based taxes, losses on debt extinguishment, and management fees.

We believe that the presentation of EBITDA and Adjusted EBITDA is appropriate to provide as additional information for 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.