Accuride Corporation – a leading supplier of components to the North American commercial vehicle industry – reported strong financial results for the second quarter ended June 30, reporting increased year-over-year profitability.
Second Quarter 2015 Results
Second quarter 2015 net sales were $185.4 million, compared with $181.6 million in the same period in 2014, an increase of 2.1 percent, primarily reflecting the impact of stronger industry conditions in the company’s wheels segment during the quarter. Accuride’s operating income was $14.2 million for the quarter, compared to operating income of $12.3 million in the second quarter of 2014. The company reported income from continuing operations of $6.1 million, or $0.13 per share, during the quarter, compared to income from continuing operations of $5.1 million, or $0.11 per share, in 2014. Second quarter adjusted EBITDA increased by 11.5 percent year-over-year to $25.9 million, or 14.0 percent of net sales, compared to $23.2 million, or 12.8 percent of net sales, in the same quarter of 2014. As of June 30, 2015, Accuride had $30.8 million of cash plus $59.4 million in availability under its ABL Credit Facility, for total liquidity of $90.2 million.
Industry Conditions
North American commercial vehicle industry conditions remained robust in the second quarter, with truck and trailer production continuing to increase at a healthy pace. Class 8, Class 5-7 and trailer production grew by 20.3 percent, 0.5 percent and 13.4 percent, respectively, over 2014. Class 8 and trailer net orders continued to moderate in the quarter, but full-year production is expected to remain strong. The Class 8 backlog remains high at 42 percent above year-ago levels, while the trailer backlog is 33 percent above last year. As a result, few Class 8 OEM production slots remain open for the remainder of the year, and many trailer makers are completely sold out for 2015. Demand in the medium duty segment is steady, with backlogs standing 11 percent above year-ago levels. Fleets are generally optimistic about current industry conditions, despite some driver-shortage constraints. U.S. freight tonnage is forecasted to steadily increase over the next several years, which will continue to drive future demand for trucks and trailers.
Second quarter business segment results
Accuride Wheels
Accuride Wheels segment net sales were $114.4 million, up $13.2 million, or 13.1 percent, from the same period in 2014, primarily due to stronger OEM demand and market share gains in the aftermarket. Wheels’ adjusted EBITDA was $26.1 million, an increase of $5.2 million, or 24.6 percent, from the second quarter of 2014. Accuride flexed up its expanded aluminum wheel production capacity to accommodate the increase in volume.
Gunite
Gunite segment net sales of $47.0 million were down $1.3 million, or 2.7 percent, from the second quarter of 2014, due primarily to lower pricing related to reduced raw material costs that are passed through to our customers. Gunite’s adjusted EBITDA increased by $0.4 million to $8.7 million from $8.3 million in the second quarter of 2014. As previously announced, Gunite secured and began serving a multi-year contract as primary aftermarket brake drum supplier to Daimler Trucks North America. The company continues to see increased interest in Gunite’s products, as recent independent tests validated that Gunite’s 3600A X brake drum delivers 15 percent longer life than the nearest North American competitor and twice the drum life of offshore competitors.
Brillion Iron Works
Brillion Iron Works’ second quarter net sales were $24.0 million, down $8.1 million, or 25.2 percent, from the second quarter of 2014 on lower customer volumes. Brillion’s adjusted EBITDA was a negative $0.3 million, a decrease of $1.9 million, from the second quarter of 2014. The company currently expects Brillion’s 2015 net sales will be 15 percent to 20 percent lower year-over-year, as compared to its previous guidance of flat top-line growth. This primarily reflects the impact of global commodity prices on demand in Brillion's oil and gas, agricultural and mining end markets.
Liquidity and Debt
As of June 30, total debt was $316.8 million, consisting of $306.8 million of the company's outstanding 9.5 percent senior secured notes, net of discount, and a $10.0 million draw on our ABL Credit Facility. As of June 30, Accuride had $30.8 million of cash plus $59.4 million in availability under its ABL Credit Facility, for total liquidity of $90.2 million.
Business and Market Outlook
"Accuride achieved record profitability in the quarter as the result of aftermarket share gains for aluminum wheels, and world-class operating performance and cost containment by Wheels and Gunite," Accuride president and CEO Rick Dauch said. "Looking ahead to the second half of 2015, we are confident in our outlook for continued strong performance from our Wheels and Gunite businesses. Conditions in the North American commercial vehicle industry remain robust, with healthy order backlogs and OEM tractor and trailer build schedules pointing to a near-record year for the industry. In addition, we are experiencing strong demand for aluminum wheels and Gunite drums in the aftermarket. Customers are actively interested in the quality and test-proven superior durability of our Made-in-the-USA Gunite brake drums. Both trends enable us to maintain our full-year earnings guidance, despite weaker end-market demand at Brillion. In our drive to boost profitability, Accuride continues to actively explore potential opportunities to expand our business globally, and opportunistically refinance our debt."
