HAYZ Hayes Lemmerz International (MM)

Hayes Lemmerz Announces Strategic Actions to Fuel Long-Term Growth and Improve Financial Profile Provides Update on Fiscal Year 2004 Guidance and Fiscal Year 2005 Outlook NORTHVILLE, Mich., March 3 /PRNewswire-FirstCall/ -- Hayes Lemmerz International, Inc. (NASDAQ:HAYZ) announced today strategic actions designed to fuel long-term growth, support its international expansion, strengthen its competitive capabilities and improve its financial profile. The actions reflect the Company's ongoing commitment to grow as a low-cost global automotive supplier through outstanding customer satisfaction. "The Company is committed to improving profitability over the long term for our shareholders and today's announcements are integral to fulfilling this plan," said Curtis Clawson, President, Chief Executive Officer and Chairman of the Board of Hayes Lemmerz. "This past year, we have continued to aggressively implement our strategy of growing in low-cost countries to serve our customers as they continue to expand in markets outside of the U.S. and Western Europe. By focusing on customer service, in both new and established markets, and by implementing the strategic decisions announced today, we believe that the Company will build value for our shareholders." The Company announced today plans to: -- Issue approximately $150 million of Euro denominated, senior unsecured notes in a private placement, as described in a press release issued earlier today; -- Establish an accounts receivable securitization program to finance the U.S. equivalent of up to $25 million of the Company's international accounts receivable; and -- Close its aluminum wheel manufacturing facility in La Mirada, California and transfer the production at this facility to the Company's Huntington, Indiana facility. The Company also announced updated guidance for fiscal year 2004 and updated its outlook for fiscal year 2005. Specific details of today's announcements include the following: Senior Notes Offering As described in a press release issued earlier today, the Company intends to offer approximately $150 million of Euro denominated, senior unsecured notes. The notes offering will be contingent upon obtaining the amendment to the Credit Agreement described below. International Accounts Receivable Securitization Program In order to accelerate cash flow and enhance liquidity in international locations, the Company has received a commitment from a European financial institution to establish an accounts receivable securitization program to finance the U.S. equivalent of up to $25 million of its international accounts receivable. This program will complete the $100 million accounts receivable program previously announced by the Company. The program is expected to be similar to the $75 million accounts receivable securitization facility that the Company established in the U.S. in December 2004. The Company noted that, although it expects to finalize the securitization program in the first half of 2005, there can be no assurance as to whether or when the program will be completed. Credit Agreement Amendment The Company will seek the approval of the lenders under its $450 million Senior Secured Term Loan and its $100 million Senior Secured Revolving Credit Loan of an amendment to its Credit Agreement to permit the Company to use approximately 50% of the net proceeds from the proposed divestiture of its Commercial Highway Hub and Drum business for capital expenditures; permit the Company to offer the new senior unsecured notes and retain a portion of the proceeds from the notes offering for working capital purposes; and modify certain financial covenants contained in the Credit Agreement. The Company said that, although it expects approval of the proposed amendment, no assurance can be given that the lenders will approve the proposed amendment. Ongoing Strategy The Company reiterated its strategy of focusing on actions to maximize shareholder value. "Our long-term goal has always been to maximize our shareholder value. We will continue to pursue aggressive cost reductions, investments in the right geographic markets, and focus our resources on our core strengths where we have a competitive advantage. And, we must always consider other strategic options that will maximize long-term value creation and be in the best interest of our shareholders," said Mr. Clawson. Consistent with its long-term strategy, the Company announced today that it intends to close its aluminum wheel manufacturing facility in La Mirada, California, and transfer that plant's production to the Company's facility in Huntington, Indiana, which is located closer to its customers. The La Mirada facility currently employs approximately 120 people. "Although we regret the impact this decision will have on our La Mirada employees and their families, this closure will better align our available capacity with the market, and make our overall cost structure more competitive," said Mr. Clawson. As previously reported, the Company is pursuing the sale of its Commercial Highway Hub and Drum business. The Company may also consider the divestiture of other non-core businesses. The Company's capital expenditures for fiscal year 2004 and fiscal year 2005 include significant investments in low-cost countries, such as previously announced expansions in Mexico, Turkey, Thailand, Brazil and the Czech Republic. By 2009, the Company projects that over 60% of its aluminum wheel capacity will be in low-cost countries. The Company also has other projects under consideration which will further capitalize on this strategic advantage. "We have a thriving international wheel business with a very diverse customer base. We are very proud of the great strides taken by our international colleagues," said Mr. Clawson. Updated Guidance for Fiscal Year 2004 and Outlook for Fiscal Year 2005 The Company revised its guidance for fiscal year 2004, which ended January 31, 2005. The Company now expects to report total Adjusted EBITDA of approximately $225 million and expects free-cash flow to be about break-even. The Company's previous revenue guidance of approximately $2.2 billion and capital expenditure guidance of approximately $154 million remain unchanged. (See attachment for reconciliation of Adjusted EBITDA.) The revised guidance reflects lower U.S. production volumes; valuation adjustments of certain non-production inventories; higher than expected one- time costs associated with establishing and testing its internal controls as required by the Sarbanes-Oxley Act; costs related to the Company's implementation of SAP throughout its U.S. operations, which is expected to result in improved operational efficiency; and despite good overall productivity for 2004, the Company had lower operating efficiencies at two of its U.S. manufacturing facilities. The Company also said that, as of January 31, 2005: -- Amounts financed under its U.S. accounts receivable securitization facility were $57 million; -- Total debt was approximately $645 million; and -- Excluding letters of credit of approximately $19 million, the Company had no cash draws on its revolving line of credit. The Company also revised its outlook for fiscal year 2005, ending January 31, 2006. The Company expects total revenue to be approximately $2.3 billion to $2.4 billion and Adjusted EBITDA to be approximately $220 million to $235 million, while free cash flow is expected to be slightly negative. The Company's estimated Adjusted EBITDA is reduced from its prior guidance for fiscal year 2005, primarily because of expected lower North American customer production requirements in the first quarter of the fiscal year. The Company noted a number of positive factors that point to a stronger second half of 2005 for the business. These include recent successful negotiations with major customers on steel recovery costs; anticipated higher OEM volumes later in the year; and the launch of significant new customer programs. "While reduced North American OEM volumes have made 2004 a challenging year for the Company and the industry, we firmly believe that our focus on low-cost, high-growth markets distinguishes us from our competitors," said Mr. Clawson. "The actions announced today are designed to fund our international growth strategy without compromising our financial position. Our international strategy has already proven to be very successful. Recently, we acquired and are expanding an aluminum wheel production facility in Mexico, launched a new joint venture in Turkey and are expanding operations in Thailand, Brazil and the Czech Republic. Each of these projects will better serve our customers in the geographies where they are growing. There are many more opportunities on the horizon and we look forward to taking advantage of them in the months and years to come." The Company will release its fiscal year 2004 financial results on Friday, April 15, 2005, and host its conference call at 9:30 a.m. (ET). Call in information for the year-end earnings conference call will be announced shortly. Hayes Lemmerz International, Inc. is a world leading global supplier of automotive and commercial highway wheels, brakes, powertrain, suspension, structural and other lightweight components. The Company has 43 facilities and over 11,000 employees worldwide. This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations and beliefs concerning future events that involve risks and uncertainties which could cause actual results to differ materially from those currently anticipated. All statements other than statements of historical facts included in this release are forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include the factors set forth in our periodic reports filed with the SEC. Consequently, all of the forward-looking statements made in this press release are qualified by these and other factors, risks, and uncertainties. The notes referred to in this press release will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This press release shall not constitute an offer to sell or a solicitation of an offer to purchase any of the notes nor shall there be any sale of the notes in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Hayes Lemmerz International, Inc. Revised Guidance as of March 3, 2005 (all $ in millions, unless stated otherwise) Revised FY 2004(1) Revised FY 2005 Sales $2.2 billion $2.3 - $2.4 billion Earnings from operations ~ $24 $0 - $35 Depreciation & amortization ~ 177 180 - 175 EBITDA ~ $201 $180 - $210 Asset impairments/restructuring/other ~ 24 40 - 25 Adjusted EBITDA (2) ~ $225 $220 - $235 Capital Expenditures $154 ~$145 (including Mexican low-pressure facility) Free Cash Flow break-even slightly negative (with A/R (with A/R Securitization) Securitization) (1) The Company's reported results of operations for fiscal year 2004 will reflect a change in year end for its foreign subsidiaries to January 31. Historically, the Company's foreign subsidiaries have had a fiscal year end of December 31 and the Company has reported on that 12-month period with respect to its foreign operations in its consolidated financial statements. (2) EBITDA, a measure used by management to measure operating performance, is defined as earnings from operations plus depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted to exclude: (i) asset impairment losses and other restructuring charges; (ii) reorganization items; and (iii) other items. We reference these non-GAAP financial measures as a management group frequently in our decision making because they provide supplemental information that facilitates internal comparisons to historical operating performance of prior periods and external comparisons to competitors' historical operating performance. Institutional investors generally look to Adjusted EBITDA in measuring performance, among other things. We use Adjusted EBITDA to facilitate quantification of planned business activities and enhance subsequent follow-up with comparisons of actual to planned Adjusted EBITDA. In addition, incentive compensation for management is based on Adjusted EBITDA. Fiscal year 2004 Adjusted EBITDA includes approximately $11-$12 million attributable to the Company's Commercial Highway Hub and Drum business. We are disclosing these non-GAAP financial measures in order to provide transparency to investors. Adjusted EBITDA is not a recognized term under GAAP and does not purport to be an alternative to earnings from operations as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies use identical calculations, these presentations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management's discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Contacts: * Marika P. Diamond Hayes Lemmerz International, Inc. (734)737-5162 DATASOURCE: Hayes Lemmerz International, Inc. CONTACT: Marika P. Diamond of Hayes Lemmerz International, Inc., +1-734-737-5162 Web site: http://www.hayes-lemmerz.com/

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