ABC Technologies Holdings Inc. (TSX: ABCT) (“ABC Technologies”, “ABC”, or the “Company”), a leading manufacturer and supplier of custom, highly engineered, technical plastics and lightweighting innovations to the North American light vehicle industry, today announced results for the three months ended September 30, 2021 (“Q1 Fiscal 2022”) and has declared a quarterly cash dividend of C$0.0375 per share. All amounts are shown in United States Dollars (“$”), unless otherwise noted.
Please click HERE for ABC’s First Quarter Fiscal Year 2022 MD&A or refer to the Company’s Interim Condensed Consolidated Financial Statements for the three months ended September 30, 2021 and the Company’s MD&A for same period on the Company’s profile at www.SEDAR.com.
Q1 Fiscal 2022 Highlights
ABC Technologies’ President and Chief Executive Officer, Todd Sheppelman, commented: “ABC continues to control the controllable and manage through the industry-wide global semiconductor crisis that is now in its third quarter of impacting global automotive production. While we are hopeful that this quarter just completed represents the worst of the OEM production curtailments, we still expect to see continued interruptions through the remainder of our Fiscal 2022. We are making concerted efforts to reduce costs where possible while maintaining the ability to ramp production back to normal levels and support our global customer base. As we navigate this challenging period, we know the retail customer demand environment continues to remain strong as economies around the world slowly return to normal and the supply of new vehicles on dealer lots continues to dwindle. We are excited for the opportunities that lay ahead for ABC and the auto industry as we continue to expect a number of strong years ahead once the supply chain disruptions subside.”
Q1 Fiscal 2022 Results of Operations
Sales were $163.4 million for Q1 Fiscal 2022 compared with $258.4 million for Q1 Fiscal 2021, a decrease of $95.0 million or 36.8%. Of the $95.0M decrease, tooling sales in Q1 Fiscal 2022 were $9.4M lower than Q1 Fiscal 2021. According to IHS Markit reports, industry production in North America decreased by 25.2% in Q1 Fiscal 2022 compared to Q1 Fiscal 2021. Lost production due to OEM plant closures due to semiconductor shortages resulted in a significant decrease in revenue compared to the comparable prior year period where production had approached near normal production levels after the initial COVID-19 lockdowns that had occurred in the period from March to May 2020. Sales for the Company were disproportionately affected more than the industry as a significant customer of the Company was affected by the semiconductor shortage to a greater extent than many of its peers.
Cost of sales was $162.4 million for Q1 Fiscal 2022 compared with $209.1 million for Q1 Fiscal 2021, a decrease of $46.7 million or 22.3%. As a percentage of sales, cost of sales was 99.4% for Q1 Fiscal 2022 compared with 80.9% for Q1 Fiscal 2021. Gross margin in Q1 Fiscal 2022 was lower as a result of increased raw material costs, primarily resin, and higher costs resulting from inefficiencies due to frequent plant closures, often with very little notice, from our OEM customers. Q1 Fiscal 2021 benefited from $4.8 million in Canada Emergency Wage Subsidy (“CEWS”) payments in the period, versus Q1 Fiscal 2022 where the Company was ineligible to receive CEWS.
Selling, general and administrative expenses were $28.3 million for Q1 Fiscal 2022 compared with $29.4 million for Q1 Fiscal 2021, a decrease of $1.2 million or 4.0%. As a percentage of sales, selling, general and administrative expenses were 17.3% for Q1 Fiscal 2022 compared with 11.4% for Q1 Fiscal 2021. Wages and salaries in Q1 Fiscal 2022 were $2.3 million higher than the comparable period as the Company invested in building staff competencies in advance of going public. In addition, Q1 Fiscal 2021 benefited from $1.0 million in CEWS payments that reduced wages expense in that period, while the Company was not eligible to receive CEWS in the current period. Share based compensation of $0.7 million is included in Q1 Fiscal 2022 versus $0 in the comparable prior year period, when the Company was a private company. More than offsetting these increases were reductions of foreign exchange losses of $3.4 million and $1.1 million in lower transaction, recruitment and bonus expenses in Q1 Fiscal 2022 compared to the prior year.
Net loss was $28.2 million for Q1 Fiscal 2022 compared with net income of $9.3 million for Q1 Fiscal 2021, a decrease of $37.5 million. Primary contributors to the change between periods was a $48.3 million reduction in gross margin in Q1 Fiscal 2022 due to the combination of lower revenue associated with the semiconductor shortages, higher input costs, primarily due to increased resin costs, and inefficient plant operations due to short notification by OEMs of their own plant closures, partially offset by a favorable $12.5 million swing in tax expense to recovery.
Adjusted EBITDA1 was $(11.3) million for Fiscal 2021 compared with $41.2 million for Fiscal 2020, a decrease of $52.6 million. Primary contributors to the decrease are a $37.5 million reduction in net income, $12.2 million due to the income tax swing from expense to recovery and $4.3 million due to reduced income from joint venture companies compared to the prior year period.
Adjusted Free Cash Flow1 was negative $59.5 million, a decline of $116.0 million versus Q1 Fiscal 2021, primarily as a result of higher operating cash flows and excluding one-time advisory, bonus and other costs.
Fiscal 2022 Guidance
With the production environment continuing to be extremely volatile, with unscheduled weekly production call-offs becoming a part of the normal operating environment for the time being, management believes it is still not prudent to provide financial guidance at this time. ABC will continually monitor the production schedules of customers and provide guidance in the future when these factors can be quantified appropriately.
Management remains confident in the go-forward performance potential of ABC and it maintains the view that following the current supply chain issues, ABC will be able to return to the superior absolute and relative margins it enjoyed prior to the COVID-19 pandemic.
Dividend
The Board of Directors today has declared a Q1 Fiscal 2022 quarterly cash dividend of C$0.0375 per share, payable on or about December 30, 2021 to shareholders of record on November 30, 2021.
Conference Call Information
ABC will host a conference call today, November 11, 2021 at 8:30am ET to discuss the results. Participants may listen to the call via audio streaming at www.abctechnologies.com/investors.
The dial-in number to participate in the call is:
Toll Free: 1-855-327-6837
Toll/International: 1-631-891-4304
A telephonic replay will be available approximately two hours after the call. The replay will be available until 11:59pm ET on Thursday, November 25, 2021.
Replay Information:
Toll Free: 1-844-512-2921
Toll/International: 1-412-317-6671
Replay Pin Number: 10016875
A webcast replay will be available approximately one hour after the conclusion of the call at www.abctechnologies.com/investors under the Events & Presentations section.
Non-IFRS Measures and Key Indicators
This news release uses certain non-IFRS financial measures and ratios. Management uses these non-IFRS financial measures for purposes of comparison to prior periods, to prepare annual operating budgets, and for the development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of ongoing operations and in analyzing our financial condition, business performance and trends. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS
measures by providing further understanding of our results of operations from management’s perspective. Accordingly, they should not be considered in isolation, nor as a substitute, for analysis of our financial information reported under IFRS. We use non-IFRS financial measures including Net Debt, EBITDA, Adjusted EBITDA, Adjusted Free Cash Flow and Adjusted Free Cash Flow Conversion to provide supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when using IFRS financial measures. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance as these measures are widely used by
investors, securities analysts and other interested parties.
“Net Debt” means (i) long-term debt less cash plus (ii) proportionate long-term debt held at joint ventures less proportionate cash held at joint ventures.
“EBITDA” means net earnings (loss) before interest expense, income tax expense (recovery), depreciation of property, plant and equipment, depreciation of right-of-use assets, and amortization of intangible assets.
“Adjusted EBITDA” means EBITDA plus: loss on disposal and write-down of assets, unrealized loss (gain) on derivative financial instruments, transactional, recruitment, and other bonuses, business transformation and related costs (which may include severance and restructuring expenses), less our share of income of joint ventures, plus the Company’s proportionate share of the EBITDA generated by our joint ventures, and share-based compensation expense. We also present Adjusted EBITDA excluding the impact of IFRS 16 by charging the lease payments applicable to those periods to expense as was the case prior to IFRS 16 – Leases (“IFRS 16”). The purpose of this is to allow direct comparability of these periods to Adjusted EBITDA performance in prior periods, which have been calculated under the previous accounting standards.
"Adjusted EBITDA Margin" means Adjusted EBITDA divided by sales adjusted to include the proportional share of joint venture sales attributable to ABC.
“Adjusted Free Cash Flow” means Net Cash Flows from Operating Activities less: purchases of property, plant and equipment, additions to intangible assets, lease payments, plus: proceeds from disposal of property, plant, and equipment; cash dividends received from joint ventures; and one time advisory, bonus and other costs.
Additional information about the Company, including the Company’s Management Discussion and Analysis of Operating Results and Financial Statements for the three months ended September 30, 2021 can be found at www.sedar.com.
_______________________ | |
1 |
The Company prepares its consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”). However, the Company considers certain non-IFRS financial measures including “Adjusted EBITDA”, “Adjusted EBITDA Margin”, and “Adjusted Free Cash Flow” as useful additional information in measuring the financial performance and condition of the Company. These measures, which the Company believes are widely used by investors, securities analysts and other interested parties in evaluating the Company’s performance, do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to financial measures determined in accordance with IFRS. For a reconciliation of non-IFRS measures used in this news release, including “Adjusted EBITDA”, “Adjusted EBITDA Margin”, and “Adjusted Free Cash Flow” to measures determined in accordance with IFRS that are their closest analogues, please see heading “Non-IFRS Measures and Key Indicators” below. |
2 |
Adjusted EBITDA is a non-IFRS measure. For a reconciliation of non-IFRS measures to measures determined in accordance with IFRS please see the heading “Non-IFRS Measures and Key Indicators” below. |
Fiscal Q1 2022 Financial Results
ABC Technologies Holdings Inc. (previously ABC Group Holdings Parent Inc.) |
||||
Consolidated Statement of Financial Position |
||||
(Expressed in thousands of United States dollars) |
||||
September 30, 2021 | June 30, 2021 | |||
Assets | (unaudited) | |||
Current assets | ||||
Cash | $ |
10,362 |
$ |
14,912 |
Trade and other receivables |
|
52,843 |
|
76,653 |
Inventories |
|
100,854 |
|
82,170 |
Prepaid expenses and other |
|
36,846 |
|
34,472 |
Total current assets |
|
200,905 |
|
208,207 |
Property, plant and equipment |
|
328,869 |
|
334,775 |
Right-of-use assets |
|
150,008 |
|
153,628 |
Intangible assets |
|
73,535 |
|
73,346 |
Deferred income taxes |
|
7,790 |
|
5,237 |
Investment in joint ventures |
|
45,803 |
|
47,412 |
Derivative financial assets |
|
4,914 |
|
10,053 |
Goodwill |
|
18,944 |
|
18,944 |
Other long-term assets |
|
5,012 |
|
4,027 |
Total non-current assets |
|
634,875 |
|
647,422 |
Total assets | $ |
835,780 |
$ |
855,629 |
Liabilities and equity | ||||
Current liabilities | ||||
Trade payables | $ |
89,300 |
$ |
118,723 |
Accrued liabilities and other payables |
|
67,256 |
|
71,339 |
Provisions |
|
17,890 |
|
16,063 |
Current portion of lease liabilities |
|
10,370 |
|
10,351 |
Total current liabilities |
|
184,816 |
|
216,476 |
Long-term debt |
|
336,837 |
|
280,000 |
Lease liabilities |
|
153,747 |
|
156,400 |
Deferred income taxes |
|
24,252 |
|
32,673 |
Derivative financial liabilities |
|
1,762 |
|
2,483 |
Other long-term liabilities |
|
2,050 |
|
2,393 |
Total non-current liabilities |
|
518,648 |
|
473,949 |
Total liabilities |
|
703,464 |
|
690,425 |
Equity | ||||
Capital stock |
|
3,107 |
|
2,991 |
Other reserves |
|
1,534 |
|
972 |
Retained earnings |
|
123,750 |
|
151,936 |
Foreign currency translation reserve and other |
|
(317) |
|
276 |
Cash flow hedge reserve, including cost of hedging |
|
4,242 |
|
9,029 |
Total equity |
|
132,316 |
|
165,204 |
Total liabilities and equity | $ |
835,780 |
$ |
855,629 |
ABC Technologies Holdings Inc. (previously ABC Group Holdings Parent Inc.) |
||||
Consolidated Statement of Comprehensive Income (Loss) |
||||
(Expressed in thousands of United States dollars) |
||||
For the three months ended September 30, |
||||
|
2021 |
|
2020 |
|
(Unaudited) | ||||
Sales | $ |
163,415 |
$ |
258,403 |
Cost of sales |
|
162,410 |
|
209,131 |
Gross profit |
|
1,005 |
|
49,272 |
Selling, general and administrative |
|
28,281 |
|
29,447 |
Loss (gain) on disposal and write-down of assets |
|
(24) |
|
593 |
Loss (gain) on derivative financial instruments |
|
461 |
|
(918) |
Share of loss (income) of joint ventures |
|
1,574 |
|
(2,712) |
Operating income (loss) |
|
(29,287) |
|
22,862 |
Interest expense, net |
|
7,366 |
|
9,840 |
Income (loss) before income tax |
|
(36,653) |
|
13,022 |
Income tax expense (recovery) | ||||
Current |
|
1,103 |
|
3,445 |
Deferred |
|
(9,570) |
|
256 |
Total income tax expense (recovery) |
|
(8,467) |
|
3,701 |
Net income (loss) | $ |
(28,186) |
$ |
9,321 |
Other comprehensive income (loss) | ||||
Items that may be recycled subsequently to net earnings (loss): | ||||
Foreign currency translation of foreign operations and other |
|
(593) |
|
1,024 |
Cash flow hedges, net of taxes |
|
(4,474) |
|
6,564 |
Cash flow hedges recycled to net earnings, net of taxes |
|
447 |
|
931 |
Other comprehensive income (loss) | $ |
(4,620) |
$ |
8,519 |
Total comprehensive income (loss) for the period | $ |
(32,806) |
$ |
17,840 |
Earnings (loss) per share - basic and diluted | $ |
(0.54) |
$ |
0.18 |
ABC Technologies Holdings Inc. (previously ABC Group Holdings Parent Inc.) |
||||
Consolidated Statement of Cash Flows |
||||
(Expressed in thousands of United States dollars) |
||||
For the three months ended September 30, |
||||
(Unaudited) |
|
2021 |
|
2020 |
Cash flows from (used in) operating activities | ||||
Net income (loss) | $ |
(28,186) |
$ |
9,321 |
Adjustments for: | ||||
Depreciation of property, plant and equipment |
|
11,967 |
|
11,395 |
Depreciation of right-of-use assets |
|
3,626 |
|
3,478 |
Amortization of intangible assets |
|
5,186 |
|
4,455 |
Loss on disposal and write-down of assets |
|
(24) |
|
593 |
Unrealized loss (gain) on derivative financial instruments |
|
417 |
|
(426) |
Interest expense |
|
7,366 |
|
9,840 |
Share of loss (income) of joint ventures |
|
1,574 |
|
(2,712) |
Income tax expense (recovery) |
|
(8,467) |
|
3,701 |
Share-based compensation expense |
|
713 |
|
- |
Changes in: |
||||
Trade and other receivables and prepaid expenses and other |
|
18,199 |
|
(28,706) |
Inventories |
|
(18,909) |
|
(3,696) |
Trade payables, accrued liabilities and other payables, and provisions |
|
(26,680) |
|
64,168 |
Cash generated from (used in) operating activities |
|
(33,218) |
|
71,411 |
Interest received |
|
129 |
|
47 |
Income taxes recovered (paid) |
|
(275) |
|
6,540 |
Interest paid on leases |
|
(3,387) |
|
(3,643) |
Interest paid on long-term debt and other |
|
(4,896) |
|
(3,978) |
Net cash flows from operating activities |
|
(41,647) |
|
70,377 |
Cash flows from (used in) investing activities | ||||
Purchases of property, plant and equipment |
|
(11,015) |
|
(8,633) |
Dividends received from joint ventures |
|
- |
|
722 |
Additions to intangible assets |
|
(5,375) |
|
(3,943) |
Net cash flows used in investing activities |
|
(16,390) |
|
(11,854) |
Cash flows from (used in) financing activities | ||||
Change in revolving credit facilities |
|
56,837 |
|
(85,000) |
Principal payments of lease liabilities |
|
(2,597) |
|
(2,047) |
Financing costs |
|
(580) |
|
(648) |
Net cash flows from (used in) financing activities |
|
53,660 |
|
(87,695) |
Net decrease in cash |
|
(4,377) |
|
(29,172) |
Net foreign exchange difference |
|
(173) |
|
121 |
Cash, beginning of period |
|
14,912 |
|
74,058 |
Cash, end of period |
|
10,362 |
|
45,007 |
Reconciliation of net loss to Adjusted EBITDA |
||||
For the three months ended September 30, |
||||
(USD '000) |
|
2021 |
|
2020 |
Reconciliation of net income (loss) to Adjusted EBITDA | ||||
Net income (loss) | $ |
(28,186) |
$ |
9,321 |
Adjustments: | ||||
Income tax expense (recovery) |
|
(8,467) |
|
3,701 |
Interest expense |
|
7,366 |
|
9,840 |
Depreciation of property, plant and equipment |
|
11,967 |
|
11,395 |
Depreciation of right-of-use assets |
|
3,626 |
|
3,478 |
Amortization of intangible assets |
|
5,186 |
|
4,455 |
EBITDA | $ |
(8,508) |
$ |
42,190 |
Loss on disposal and write-down of assets |
|
(24) |
|
593 |
Unrealized loss (gain) on derivative financial instruments |
|
417 |
|
(426) |
Transactional, recruitment and other bonuses |
|
11 |
|
1,083 |
Business transformation related costs1 |
|
1,164 |
|
1,983 |
Share of loss (income) of joint ventures |
|
1,574 |
|
(2,712) |
EBITDA from joint ventures2 |
|
(678) |
|
4,219 |
Share-based compensation expense |
|
713 |
|
- |
Lease payments |
|
(5,984) |
|
(5,690) |
Adjusted EBITDA | $ |
(11,315) |
$ |
41,240 |
1. Represents costs including consulting fees associated with enhancing business operations, organizational capability and related processes. These costs also include services provided by Cerberus Operations and Advisory LLC and some of ABC's directors in the amount of $nil for Q1 Fiscal 2022 (Q1 Fiscal 2021: 0.2 million). |
||
2. EBITDA from joint ventures represents earnings before interest, taxes, and depreciation for the joint venture segment. |
Reconciliation of net cash flows from (used in) operating activities to Adjusted Free Cash Flow
For the three months ended September 30, |
||||
(USD '000) |
|
2021 |
|
2020 |
Reconciliation of net cash flows from (used in) operating activities to Adjusted Free Cash Flow | ||||
Net cash flows from (used in) operating activities | $ |
(41,647) |
$ |
70,377 |
Purchases of property, plant and equipment |
|
(11,015) |
|
(8,633) |
Additions to intangible assets1 |
|
(5,375) |
|
(3,943) |
Principal payments of lease liabilities |
|
(2,597) |
|
(2,047) |
Dividends received from joint ventures |
|
- |
|
722 |
One-time advisory, bonus and other costs |
|
1,124 |
|
- |
Adjusted Free Cash Flow | $ |
(59,510) |
$ |
56,476 |
1. Represents capitalized development costs under IAS 38 Intangible Assets. |
Forward Looking Statements
Some of the information contained in this news release may constitute forward-looking information or contain statements expressing such forward-looking information ("forward-looking statements" and collectively with the forward-looking information expressed thereby, "forward-looking information"). We use words such as "may", "would", "could", "should", "will", "unlikely", "expect", "anticipate", "believe", "intend", "planning", "forecast", "outlook", "projection", "estimate", "target" and similar expressions suggesting future outcomes or events to identify forward-looking information.
Forward-looking information contained herein is based on management’s reasonable assumptions and beliefs in light of the information currently available to us and is presented as of the date of this news release. Such forward-looking information is intended to provide information about management's current expectations and plans and may not be appropriate for other purposes. While we believe we have a reasonable basis for presenting such forward-looking information, any forward-looking statements expressing it are not a guarantee of future performance or outcomes. Whether actual results and developments conform to our expectations and predictions is subject to a number of factors, risks, assumptions and uncertainties, many of which are beyond our control, and the effects of which can be difficult to predict, including, but not limited to:
Forward-looking information in this document includes, but are not limited to, statements relating to: any of the Company’s actions made in response to or in connection with the COVID-19 pandemic, including with respect to: employee health and safety; potential adjustments to our production plans to align with our customers' production plans, governmental orders and legal requirements, including the ability to meet customers' demands in the event of rapid ramping-up of production volumes following cessation of the COVID-19 pandemic-related slowdowns the ability to attract and retain the workforce required to maintain or grow the Company's operations in the context of the effects of the COVID-19 pandemic on the workforce in certain markets in which the Company operates; the timing of program launches, the growth of the Company and pursuit of, and belief in, its strategies and development and implementation of new product and business; continued investments in its business and technologies, the ability to finance future capital expenditures, and ability to fund anticipated working capital needs, debt obligations and other commitments; the Company’s views on its liquidity and operating cash flow and ability to deal with present or future economic conditions; the potential for fluctuation of operating results; and the payment of any dividends as well as other forward-looking statements.
In evaluating forward-looking statements or forward-looking information, we caution readers not to place undue reliance on any forward-looking statement or forward-looking information expressed herein, and readers should specifically consider the various factors which could cause actual events or results to differ materially from those indicated by such forward-looking statements, including the risk factors listed above as well as these and other risks and uncertainties as may be described in greater detail in the Company’s public filings made with the Canadian Securities Administrators and publicly available on the Company’s profile at www.sedar.com, or other factors that may fall outside any list of risks and uncertainties. We do not undertake to update any forward-looking information whether as a result of new information, future events or otherwise, or to update the reasons why actual results could differ from those reflected in the forward-looking statements except as required under applicable securities laws in Canada.
About ABC Technologies
ABC Technologies is a leading manufacturer and supplier of custom, highly engineered, technical plastics and lightweighting innovations to the North American light vehicle industry, serving more than 25 original equipment manufacturer customers globally through a strategically located footprint. ABC Technologies’ integrated service offering includes manufacturing, design, engineering, material compounding, machine, tooling and equipment building that are supported by an experienced engineering team of approximately 600 skilled professionals and 6,150 employees worldwide. The Company offers six product groups: HVAC Systems, Interior Systems, Exterior Systems, Fluid Management, Air Induction Systems, and Flexible & Other.
View source version on businesswire.com: https://www.businesswire.com/news/home/20211111005419/en/
Investor:
Nathan Barton
Investor Relations
[email protected]