Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended March 31, 2015 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to . | ||
Commission File No. 001-13683
Remy International, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 47-1744351 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
600 Corporation Drive, Pendleton, IN 46064
(Address of principal executive offices, including zip code)
(765) 778-6499
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address or former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨ | Accelerated filer x | Non-accelerated filer ¨ | Smaller reporting company o |
(Do not check if a smaller reporting company) | |||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of April 30, 2015, there were 32,229,940 shares of the Registrant's common stock outstanding.
Table of contents
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Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 5. | ||
Item 6. | ||
1
PART I - Financial Information
Item 1. Financial Statements
Remy International, Inc.
Consolidated balance sheets
March 31, | December 31, | ||||||
(In thousands, except share information) | 2015 | 2014 | |||||
Assets: | (unaudited) | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 87,309 | $ | 84,885 | |||
Trade accounts receivable (less allowances of $2,000 and $1,519) | 232,486 | 210,356 | |||||
Other receivables | 13,758 | 16,692 | |||||
Inventories | 186,005 | 164,143 | |||||
Deferred income taxes | 33,069 | 42,308 | |||||
Prepaid expenses and other current assets | 15,673 | 11,865 | |||||
Total current assets | 568,300 | 530,249 | |||||
Property, plant and equipment | 228,203 | 226,073 | |||||
Less accumulated depreciation and amortization | (66,989 | ) | (61,615 | ) | |||
Property, plant and equipment, net | 161,214 | 164,458 | |||||
Deferred financing costs, net of amortization | 1,418 | 1,471 | |||||
Goodwill | 263,491 | 259,586 | |||||
Intangibles, net | 290,604 | 298,023 | |||||
Other noncurrent assets | 47,599 | 65,309 | |||||
Total assets | $ | 1,332,626 | $ | 1,319,096 | |||
Liabilities and Equity: | |||||||
Current liabilities: | |||||||
Short-term debt | $ | 4,810 | $ | 7,761 | |||
Current maturities of long-term debt | 3,500 | 3,509 | |||||
Accounts payable | 186,326 | 177,333 | |||||
Accrued interest | 105 | 94 | |||||
Accrued restructuring | 277 | 331 | |||||
Other current liabilities and accrued expenses | 109,010 | 128,509 | |||||
Total current liabilities | 304,028 | 317,537 | |||||
Long-term debt, net of current maturities | 322,994 | 298,295 | |||||
Postretirement benefits other than pensions | 1,422 | 1,484 | |||||
Accrued pension benefits | 33,597 | 34,267 | |||||
Deferred income taxes | 51,986 | 54,783 | |||||
Other noncurrent liabilities | 27,123 | 26,483 | |||||
Equity: | |||||||
Common stock, Par value of $0.0001; 32,236,050 shares outstanding at March 31, 2015, and 32,201,086 shares outstanding at December 31, 2014 | 3 | 3 | |||||
Treasury stock, at cost; 160,063 treasury shares at March 31, 2015, and no treasury shares at December 31, 2014 | (1,097 | ) | — | ||||
Additional paid-in capital | 597,101 | 595,627 | |||||
Retained earnings | 13,457 | — | |||||
Accumulated other comprehensive loss | (17,988 | ) | (9,383 | ) | |||
Total Remy International, Inc. stockholders' equity | 591,476 | 586,247 | |||||
Total liabilities and equity | $ | 1,332,626 | $ | 1,319,096 | |||
See accompanying notes to unaudited condensed consolidated financial statements.
2
Remy International, Inc.
Consolidated statements of operations
(Unaudited)
Three months ended March 31, | ||||||||
(In thousands, except per share amounts) | 2015 | 2014 | ||||||
Net sales | $ | 303,411 | $ | 306,005 | ||||
Cost of goods sold | 241,409 | 259,654 | ||||||
Gross profit | 62,002 | 46,351 | ||||||
Selling, general, and administrative expenses | 33,420 | 32,931 | ||||||
Restructuring and other charges | 73 | 314 | ||||||
Operating income | 28,509 | 13,106 | ||||||
Interest expense–net | 5,011 | 5,254 | ||||||
Income before income taxes | 23,498 | 7,852 | ||||||
Income tax expense | 6,928 | 2,908 | ||||||
Net income | 16,570 | 4,944 | ||||||
Basic earnings per share: | ||||||||
Earnings per share | $ | 0.52 | $ | 0.16 | ||||
Weighted average shares outstanding | 31,844 | 31,652 | ||||||
Diluted earnings per share: | ||||||||
Earnings per share | $ | 0.52 | $ | 0.16 | ||||
Weighted average shares outstanding | 31,946 | 31,823 | ||||||
Dividends declared per common share | $ | 0.10 | $ | 0.10 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
Remy International, Inc.
Consolidated statements of comprehensive income (loss)
(Unaudited)
Three months ended March 31, | ||||||||
(In thousands) | 2015 | 2014 | ||||||
Net income | $ | 16,570 | $ | 4,944 | ||||
Other comprehensive income (loss): | ||||||||
Foreign currency translation adjustments | (7,993 | ) | 797 | |||||
Currency forward contracts, net of tax | 817 | (1,522 | ) | |||||
Commodity contracts, net of tax | (920 | ) | (1,592 | ) | ||||
Interest rate swap contract, net of tax | (429 | ) | (281 | ) | ||||
Employee benefit plans, net of tax | (80 | ) | (363 | ) | ||||
Total other comprehensive income (loss), net of tax | (8,605 | ) | (2,961 | ) | ||||
Comprehensive income | $ | 7,965 | $ | 1,983 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
4
Remy International, Inc.
Consolidated statements of cash flows
(Unaudited)
Three months ended March 31, | |||||||||
(In thousands) | 2015 | 2014 | |||||||
Cash flows from operating activities: | |||||||||
Net income | $ | 16,570 | $ | 4,944 | |||||
Adjustments to reconcile net income to cash provided by (used in) operating activities: | |||||||||
Depreciation and amortization | 17,037 | 18,057 | |||||||
Stock-based compensation | 1,316 | 1,219 | |||||||
Deferred income taxes | 5,744 | (2,238 | ) | ||||||
Accrued pension and postretirement benefits, net | (539 | ) | (1,109 | ) | |||||
Restructuring and other charges | 73 | 314 | |||||||
Cash payments for restructuring charges | (127 | ) | (1,056 | ) | |||||
Other | 757 | 187 | |||||||
Changes in operating assets and liabilities, net of restructuring charges: | |||||||||
Accounts receivable | (15,539 | ) | (38,409 | ) | |||||
Inventories | (11,746 | ) | (5,449 | ) | |||||
Accounts payable | 6,455 | 19,582 | |||||||
Other current assets and liabilities, net | (25,028 | ) | (3,277 | ) | |||||
Other noncurrent assets and liabilities, net | 17,258 | (2,204 | ) | ||||||
Net cash provided by (used in) operating activities | 12,231 | (9,439 | ) | ||||||
Cash flows from investing activities: | |||||||||
Purchases of property, plant and equipment | (5,382 | ) | (6,513 | ) | |||||
Net proceeds on sale of assets | 10 | 39 | |||||||
Acquisition of Maval Manufacturing, Inc. | (22,000 | ) | — | ||||||
Acquisition of USA Industries, Inc., net of cash acquired of $109 | — | (40,391 | ) | ||||||
Net cash used in investing activities | (27,372 | ) | (46,865 | ) | |||||
Cash flows from financing activities: | |||||||||
Change in short-term debt | (2,915 | ) | 2,934 | ||||||
Proceeds from borrowings on Asset-Based Revolving Credit Facility | 79,250 | — | |||||||
Payments made on Asset-Based Revolving Credit Facility | (53,700 | ) | — | ||||||
Payments made on long-term debt, including capital leases | (874 | ) | (844 | ) | |||||
Dividend payments on common stock | (3,305 | ) | (3,397 | ) | |||||
Purchase of treasury stock | (1,097 | ) | (2,504 | ) | |||||
Parent company net investment | — | 357 | |||||||
Other | 1,610 | 1,142 | |||||||
Net cash provided by (used in) financing activities | 18,969 | (2,312 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (1,404 | ) | (441 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 2,424 | (59,057 | ) | ||||||
Cash and cash equivalents at beginning of period | 84,885 | 114,884 | |||||||
Cash and cash equivalents at end of period | $ | 87,309 | $ | 55,827 | |||||
Supplemental information: | |||||||||
Noncash investing and financing activities: | |||||||||
Purchases of property, plant and equipment in accounts payable | $ | 2,773 | $ | 1,634 | |||||
5
Remy International, Inc.
Notes to unaudited condensed consolidated financial statements
1. Description of the business
Business
Remy International, Inc. (together with its subsidiaries are collectively referred to as “we”, “our”, “us”, "Remy", or the “Company”) is a leading global vehicular parts designer, manufacturer, remanufacturer, marketer and distributor of aftermarket and original equipment electrical components for automobiles, light trucks, heavy-duty trucks and other vehicles. We sell our products worldwide primarily under the "Delco Remy", "Remy", "World Wide Automotive", "USA Industries", and "Maval" brand names and our customers' widely recognized private label brand names. Our products include new and remanufactured, light-duty and heavy-duty starters and alternators for both original equipment and aftermarket applications, hybrid power technology, and multi-line products, such as constant velocity ("CV") axles, disc brake calipers, and steering gears. These products are principally sold or distributed to original equipment manufacturers (“OEMs”) for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. We sell our products principally in North America, Europe, South America and Asia.
We are one of the largest producers in the world of remanufactured starters and alternators for the aftermarket. Our remanufacturing operations obtain failed products, commonly known as cores, from our customers as returns. These cores are an essential material needed for the remanufacturing operations. We have expanded our operations to become a low cost, global manufacturer and remanufacturer with a more balanced business mix between the aftermarket and the original equipment market, especially in the heavy duty OEM market.
Change in Ownership
On August 14, 2012, Fidelity National Special Opportunities, Inc., (now known as Fidelity National Financial Ventures, LLC., or "FNFV"), a wholly-owned subsidiary of Fidelity National Financial, Inc. ("FNF"), a leading provider of title insurance, mortgage services and restaurant and diversified services, increased its ownership position in Remy Holdings, Inc. ("Old Remy") (formerly known as Remy International, Inc.), above 50% (the "Acquisition"). As a result, FNF began consolidating Old Remy's financial results in the third quarter of 2012.
Spin-off and Merger Transactions
On September 7, 2014, we entered into agreements for a transaction (the "Transaction") with FNF. On December 31, 2014, the Transaction was completed pursuant to the merger agreement, which was approved by Old Remy's stockholders at a special meeting of stockholders held on the same date. The Transaction in effect resulted in the indirect distribution of the shares of common stock of Old Remy that were held by FNF to the holders of its FNFV tracking stock.
In the Transaction, FNFV contributed all of the 16,342,508 shares of Old Remy's common stock that FNFV owned and a small subsidiary, Fidelity National Technology Imaging ("Imaging"), into a newly-formed subsidiary ("New Remy"). New Remy was then distributed to FNFV shareholders. Immediately following the distribution of New Remy to FNFV shareholders, New Remy and Old Remy each engaged in stock-for-stock mergers with subsidiaries of a new publicly-traded holding company, New Remy Holdco Corp. ("New Holdco"). In the mergers, FNFV shareholders received a total of 16,615,359 shares of New Holdco common stock, or approximately 0.17879 shares for each share of FNFV tracking stock that they owned. The remaining stockholders of Old Remy (other than New Remy) received a total of 15,585,727 shares, or one share of New Holdco for each share of Old Remy they owned. Old Remy had 32.0 million shares of common stock outstanding and at the conclusion of the Transaction, New Holdco had 32.2 million shares of common stock outstanding. The Transaction should qualify as a tax-free reorganization to the stockholders under U.S. federal income tax purposes.
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This structure in effect resulted in New Holdco becoming the new public parent of Old Remy. Effective upon the closing of the Transaction on December 31, 2014, New Holdco changed its name to "Remy International, Inc." and its shares were listed, and on January 2, 2015 began trading, on NASDAQ under the trading symbol "REMY", which was the same trading symbol used by Old Remy. Old Remy changed its name from "Remy International, Inc." to "Remy Holdings, Inc."
During the three months ended March 31, 2015, Imaging received $1,400,000 from FNF as part of a working capital adjustment in accordance with the Merger Agreement, which was previously included in other receivables at December 31, 2014.
2. Summary of significant accounting policies
Interim condensed consolidated financial statements
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information. Accordingly, certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. These statements include all adjustments (consisting of normal recurring adjustments) that our management believes are necessary to present fairly our financial position, results of operations, and cash flows. We believe that the disclosures are adequate to make the information presented not misleading when read in conjunction with our audited consolidated financial statements and the notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2014.
Operating results for the interim periods presented in this report are not necessarily indicative of the results that may be expected for any future interim period or for the full year.
Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the year. Actual results could differ from these estimates.
Trade accounts receivable and allowance for doubtful accounts
Trade accounts receivable is stated at net realizable value, which approximates fair value. Substantially all of our trade accounts receivable are due from customers in the original equipment and aftermarket automotive industries, both domestically and internationally. Trade accounts receivable includes notes receivable of $38,927,000 and $38,541,000 as of March 31, 2015 and December 31, 2014, respectively. Trade accounts receivable is reduced by an allowance for amounts that are expected to become uncollectible in the future and for disputed items. We perform periodic credit evaluations of our customers' financial condition and generally do not require collateral. We maintain allowances for doubtful customer accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is developed based on several factors including customers' credit quality, historical write-off experience and any known specific issues or disputes which exist as of the balance sheet date. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
Warranty
We provide certain warranties relating to quality and performance of our products. An allowance for the estimated future cost of product warranties and other defective product returns is based on management's estimate of product failure rates and customer eligibility and is recorded as a component of cost of goods sold. If these factors differ from management's estimates, revisions to the estimated warranty liability may be required. The specific terms and conditions of the warranties vary depending upon the customer and the product sold.
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Earnings per share
Basic earnings per share is calculated by dividing net earnings by the weighted average shares outstanding during the period and assumed the additional 272,851 shares issued in respect of the contribution of Imaging were outstanding for the entire period under common control, or August 2012 through December 31, 2014. Diluted earnings per share is based on the weighted average number of shares outstanding plus the assumed issuance of common shares and related adjustment to net income attributable to common stockholders related to all potentially dilutive securities. For the three months ended March 31, 2015 and 2014, in applying the treasury stock method, equivalent shares of unvested restricted stock of 102,153 and 170,989 shares, respectively, were included in the weighted average shares outstanding in the diluted calculation. Anti-dilutive stock options of 368,281 and 325,788 were excluded from the calculation of dilutive earnings per share for the three month periods ended March 31, 2015 and 2014, respectively.
New accounting pronouncements
In April 2015, the FASB issued ASU 2015-03, Interest- Imputation of Interest (Simplifying the Presentation of Debt Issuance Costs). This update changes the presentation of debt issuance costs in financial statements. Under ASU 2015-03, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the debt issuance costs is reported as interest expense. This update is effective for annual and interim periods beginning after December 15, 2015, which will require us to adopt these provisions in the first quarter of 2016. Early application is permitted for financial statements that have not been previously issued. Entities would be permitted to apply this update retrospectively to all prior periods for which a balance sheet is presented. We are evaluating the effect this guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. This update is effective for annual and interim periods beginning after December 15, 2016, which will require us to adopt these provisions in the first quarter of 2017. Early application is not permitted. This update permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect this guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.
3. Fair value measurements
FASB ASC Topic 820, Fair Value Measurements and Disclosures, clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, FASB ASC Topic 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
An asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs.
Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques noted in FASB ASC Topic 820:
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A. | Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. |
B. | Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost). |
C. | Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models). |
Assets and liabilities remeasured and disclosed at fair value on a recurring basis as of March 31, 2015 and December 31, 2014, are set forth in the table below:
As of March 31, 2015 | As of December 31, 2014 | ||||||||||||||
(In thousands) | Asset/ (liability) | Level 2 | Valuation technique | Asset/ (liability) | Level 2 | Valuation technique | |||||||||
Interest rate swap contracts | $ | (4,343 | ) | $ | (4,343 | ) | C | $ | (2,848 | ) | $ | (2,848 | ) | C | |
Foreign exchange contracts | (5,970 | ) | (5,970 | ) | C | (7,339 | ) | (7,339 | ) | C | |||||
Commodity contracts | (4,811 | ) | (4,811 | ) | C | (4,088 | ) | (4,088 | ) | C | |||||
We calculate the fair value of our interest rate swap contracts, commodity contracts and foreign currency contracts using quoted interest rate curves, quoted commodity forward rates and quoted currency forward rates. For contracts which, when aggregated by counterparty, are in a liability position, the discount rates are adjusted by the credit spread that market participants would apply if buying these contracts from our counterparties.
In addition to items that are measured at fair value on a recurring basis, we also have assets and liabilities that are measured at fair value on a nonrecurring basis. As these assets and liabilities are not measured at fair value on a recurring basis, they are not included in the tables above. Assets and liabilities that are measured at fair value on a nonrecurring basis include long-lived assets (see Note 7) and certain assets acquired in business acquisitions (see Note 20). We have determined that the fair value measurements included in each of these assets and liabilities rely primarily on our assumptions as observable inputs are not available. As such, we have determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy.
4. Financial instruments
Foreign currency risk
We manufacture and sell our products primarily in North America, South America, Asia, Europe and Africa. As a result our financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets in which we manufacture and sell our products. We generally try to use natural hedges within our foreign currency activities, including the matching of revenues and costs, to minimize foreign currency risk. Where natural hedges are not in place, we consider managing certain aspects of our foreign currency activities through the use of foreign exchange contracts. We primarily utilize forward exchange contracts with maturities generally within eighteen months to hedge against currency rate fluctuations, and are designated as hedges.
As of March 31, 2015 and December 31, 2014, we had the following outstanding foreign currency contracts that were entered into to hedge forecasted purchases and revenues, respectively:
(In thousands) | Currency denomination | ||||||
March 31, | December 31, | ||||||
Foreign currency contract | 2015 | 2014 | |||||
South Korean Won | $ | 82,232 | $ | 82,907 | |||
Mexican Peso | $ | 70,477 | $ | 69,625 | |||
Brazilian Real | $ | 7,514 | $ | 12,318 | |||
Hungarian Forint | € | 12,434 | € | 12,646 | |||
Great Britain Pound | £ | 300 | £ | 300 | |||
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Accumulated unrealized net losses of $3,845,000 and $4,662,000 were recorded in accumulated other comprehensive income (loss) (AOCI) as of March 31, 2015 and December 31, 2014, respectively. As of March 31, 2015, losses of $4,168,000 are expected to be reclassified to the consolidated statement of operations within the next twelve months. Any ineffectiveness during the three months ended March 31, 2015 and 2014, respectively, was immaterial.
Interest rate risk
On March 27, 2013, we terminated our undesignated Term B Loan interest rate swap and transferred the value into a new undesignated interest rate swap agreement of $72,000,000 of the outstanding principal loan balance under which we swap a variable LIBOR rate with a floor of 1.25% to a fixed rate of 4.045% with an effective date of December 30, 2016 and expiration date of December 31, 2019. The notional value of this interest rate swap is $72,000,000, and is reduced by $187,500 quarterly from the effective date. Due to the significant value of the terminated swaps which were transferred into this new swap, this interest rate swap is an undesignated hedge and changes in the fair value are recorded as interest expense-net in the accompanying consolidated statements of operations.
On March 27, 2013, we also entered into a designated interest rate swap agreement for $72,000,000 of the outstanding principal balance of our long term debt. Under the terms of the new interest rate swap agreement, we swap a variable LIBOR rate with a floor of 1.25% to a fixed rate of 2.75% with an effective date of December 30, 2016 and expiration date of December 31, 2019. The notional value of this interest rate swap is $72,000,000, and is reduced by $187,500 quarterly from the effective date. This interest rate swap has been designated as a cash flow hedging instrument. Accumulated unrealized losses of $987,000 and $282,000, excluding the tax effect, were recorded in accumulated other comprehensive income (loss) (AOCI) as of March 31, 2015, and December 31, 2014, respectively. As of March 31, 2015, no gains are expected to be reclassified to the consolidated statement of operations within the next twelve months. Any ineffectiveness during the three month periods ended March 31, 2015 and 2014, respectively, was immaterial.
The interest rate swaps reduce our overall interest rate risk. However, due to the remaining outstanding borrowings on the Amended and Restated Term B Loan and other borrowing facilities that continue to have variable interest rates, management believes that interest rate risk to us could be material if there are significant adverse changes in interest rates.
Commodity price risk
Our production processes are dependent upon the supply of certain components whose raw materials are exposed to price fluctuations on the open market. The primary purpose of our commodity price forward contract activity is to manage the volatility associated with forecasted purchases. We monitor our commodity price risk exposures regularly to maximize the overall effectiveness of our commodity forward contracts. The principal raw material hedged is copper. Forward contracts are used to mitigate commodity price risk associated with raw materials, generally related to purchases forecast for up to twenty-four months in the future. Additionally, we purchase certain commodities during the normal course of business which result in physical delivery and are excluded from hedge accounting.
We had thirty-nine commodity price hedge contracts outstanding at March 31, 2015, and thirty-seven commodity price hedge contracts outstanding at December 31, 2014, with combined notional quantities of 9,472 and 8,196 metric tons of copper, respectively. These contracts mature within the next eighteen months. These contracts were designated as cash flow hedging instruments. Accumulated unrealized losses of $4,756,000 and $4,092,000, excluding the tax effect, were recorded in AOCI as of March 31, 2015 and December 31, 2014, respectively. As of March 31, 2015, pre-tax losses of $4,368,000 are expected to be reclassified to the accompanying consolidated statement of operations within the next 12 months. Any ineffectiveness during the three months ended March 31, 2015 and 2014, respectively, was immaterial.
Other
We present our derivative positions and any related material collateral under master netting agreements on a gross basis. We have entered into International Swaps and Derivatives Association agreements with each of its significant derivative counterparties. These agreements provide bilateral netting and offsetting of accounts that are in a liability position with those that are in an asset position. These agreements do not require us to maintain a minimum credit rating in order to be in compliance with the terms of the agreements and do not contain any margin call provisions or collateral requirements that could be triggered by derivative instruments in a net liability position. As of March 31, 2015, we have not posted any collateral to support derivatives in a liability position.
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For derivatives designated as cash flow hedges, changes in the time value are excluded from the assessment of hedge effectiveness. Unrealized gains and losses associated with ineffective hedges, determined using the change in fair value method, are recognized in the accompanying consolidated statements of operations. Derivative gains and losses included in AOCI for effective hedges are reclassified into the accompanying consolidated statements of operations upon recognition of the hedged transaction.
Any derivative instrument designated initially, but no longer effective as a hedge, or initially not effective as a hedge, is recorded at fair value and the related gains and losses are recognized in the accompanying consolidated statements of operations. Our undesignated hedges are primarily our interest rate swaps whose fair value at inception of the instrument due to the rollover of existing interest rate swaps resulted in ineffectiveness. The following table discloses the fair values and balance sheet locations of our derivative instruments:
Asset derivatives | Liability derivatives | |||||||||||||||
(In thousands) | Balance sheet location | March 31, 2015 | December 31, 2014 | Balance sheet location | March 31, 2015 | December 31, 2014 | ||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||
Commodity contracts | Prepaid expenses and other current assets | $ | — | $ | — | Other current liabilities and accrued expenses | $ | 4,388 | $ | 3,515 | ||||||
Commodity contracts | Other noncurrent assets | — | — | Other noncurrent liabilities | 423 | 573 | ||||||||||
Foreign currency contracts | Prepaid expenses and other current assets | 2,002 | 869 | Other current liabilities and accrued expenses | 7,549 | 7,316 | ||||||||||
Foreign currency contracts | Other noncurrent assets | 51 | — | Other noncurrent liabilities | 474 | 892 | ||||||||||
Interest rate swap contracts | Other noncurrent assets | — | — | Other noncurrent liabilities | 987 | 282 | ||||||||||
Total derivatives designated as hedging instruments | $ | 2,053 | $ | 869 | $ | 13,821 | $ | 12,578 | ||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||||
Interest rate swap contracts | Other noncurrent assets | $ | — | $ | — | Other noncurrent liabilities | $ | 3,356 | $ | 2,566 | ||||||
Total derivatives not designated as hedging instruments | $ | — | $ | — | $ | 3,356 | $ | 2,566 | ||||||||
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The following tables disclose the effect of our derivative instruments on the accompanying consolidated statement of operations for the three months ended March 31, 2015 (in thousands):
Derivatives designated as cash flow hedging instruments | Amount of gain (loss) recognized in OCI on derivatives (effective portion) | Location of gain (loss) reclassified from AOCI into income (effective portion) | Amount of gain (loss) reclassified from AOCI into income (effective portion) | Location of gain (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing) | Amount of gain (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing) | ||||||
Commodity contracts | $ | (1,923 | ) | Cost of goods sold | $ | (1,259 | ) | Cost of goods sold | $ | (19 | ) |
Foreign currency contracts | 33 | Cost of goods sold | (1,201 | ) | Cost of goods sold | — | |||||
Interest rate swap contracts | (705 | ) | Interest expense–net | — | Interest expense–net | — | |||||
$ | (2,595 | ) | $ | (2,460 | ) | $ | (19 | ) | |||
Derivatives not designated as hedging instruments | Location of gain (loss) recognized in income on derivatives | Amount of gain (loss) recognized in income on derivatives | ||
Interest rate swap | Interest expense–net | $ | (790 | ) |
The following tables disclose the effect of our derivative instruments on the accompanying consolidated statement of operations for the three months ended March 31, 2014 (in thousands):
Derivatives designated as cash flow hedging instruments | Amount of gain (loss) recognized in OCI on derivatives (effective portion) | Location of gain (loss) reclassified from AOCI into income (effective portion) | Amount of gain (loss) reclassified from AOCI into income (effective portion) | Location of gain (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing) | Amount of gain (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing) | ||||||
Commodity contracts | $ | (3,674 | ) | Cost of goods sold | $ | (1,062 | ) | Cost of goods sold | $ | (37 | ) |
Foreign currency contracts | (1,124 | ) | Cost of goods sold | 897 | Cost of goods sold | — | |||||
Interest rate swap contracts | (463 | ) | Interest expense–net | — | Interest expense–net | — | |||||
$ | (5,261 | ) | $ | (165 | ) | $ | (37 | ) | |||
Derivatives not designated as hedging instruments | Location of gain (loss) recognized in income on derivatives | Amount of gain (loss) recognized in income on derivatives | ||
Interest rate swap contracts | Interest expense–net | $ | (677 | ) |
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Concentrations of credit risk
Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of accounts receivable and cash investments. We require placement of cash in financial institutions evaluated as highly creditworthy. Our customer base includes global light and commercial vehicle manufacturers and a large number of retailers, distributors and installers of automotive aftermarket parts. Our credit evaluation process and the geographical dispersion of sales transactions help to mitigate credit risk concentration.
Accounts receivable factoring arrangements
We have entered into factoring agreements with various U.S. and European financial institutions to sell our accounts receivable under nonrecourse agreements. These are treated as a sale. The transactions are accounted for as a reduction in accounts receivable as the agreements transfer effective control over and risk related to the receivables to the buyers. We do not service any domestic accounts after the factoring has occurred. We do not have any servicing assets or liabilities. We utilize factoring arrangements as an integral part of financing for us. The cost of factoring such accounts receivable is reflected in the accompanying consolidated statements of operations as interest expense-net with other financing costs. The cost of factoring such accounts receivable for the three months ended March 31, 2015 and 2014 was $763,000 and $1,254,000, respectively. Gross amounts factored under these facilities as of March 31, 2015 and December 31, 2014 were $202,000,000 and $229,696,000, respectively. Any change in the availability of these factoring arrangements could have a material adverse effect on our financial condition.
5. Inventories
Net inventories consisted of the following:
March 31, | December 31, | ||||||
(In thousands) | 2015 | 2014 | |||||
Raw materials | $ | 59,242 | $ | 46,049 | |||
Core inventory | 36,003 | 36,034 | |||||
Work-in-process | 9,569 | 7,827 | |||||
Finished goods | 81,191 | 74,233 | |||||
$ | 186,005 | $ | 164,143 | ||||
Raw materials also include materials consumed in the manufacturing and remanufacturing process, but not directly incorporated into the finished products.
6. Property, plant and equipment
Depreciation and amortization expense of property, plant, and equipment for the three months ended March 31, 2015 and 2014 was $5,475,000 and $6,592,000, respectively.
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7. Goodwill and other intangible assets
The following table represents the carrying value of other intangible assets:
As of March 31, 2015 | As of December 31, 2014 | ||||||||||||||||||||||
(In thousands) | Carrying value | Accumulated amortization | Net | Carrying value | Accumulated amortization | Net | |||||||||||||||||
Definite-life intangibles: | |||||||||||||||||||||||
Intellectual property | $ | 28,328 | $ | 3,395 | $ | 24,933 | $ | 27,833 | $ | 2,980 | $ | 24,853 | |||||||||||
Customer relationships | 210,270 | 56,006 | 154,264 | 206,960 | 50,558 | 156,402 | |||||||||||||||||
Customer contract | 80,795 | 56,241 | 24,554 | 93,642 | 63,285 | 30,357 | |||||||||||||||||
Trade names | 500 | 8 | 492 | — | — | — | |||||||||||||||||
Lease intangible | 420 | 269 | 151 | 420 | 219 | 201 | |||||||||||||||||
Total | 320,313 | 115,919 | 204,394 | 328,855 | 117,042 | 211,813 | |||||||||||||||||
Indefinite-life intangibles: | |||||||||||||||||||||||
Trade names | 86,210 | — | 86,210 | 86,210 | — | 86,210 | |||||||||||||||||
Intangible assets, net | $ | 406,523 | $ | 115,919 | $ | 290,604 | $ | 415,065 | $ | 117,042 | $ | 298,023 | |||||||||||
Goodwill | $ | 263,491 | $ | — | $ | 263,491 | $ | 259,586 | $ | — | $ | 259,586 | |||||||||||
Definite-lived intangible assets are being amortized to reflect the pattern of economic benefit consumed.
We perform impairment testing annually or more frequently when events or circumstances indicate that the carrying amount of the above intangibles may be impaired.
On March 1, 2015, we completed our previously announced acquisition of substantially all assets of Maval Manufacturing, Inc. pursuant to the terms and conditions of a definitive agreement. See Note 20 for further information. As a result of the acquisition, we assigned preliminary values to all assets and liabilities acquired, including the customer relationships intangible of $3,310,000 with a useful life of 10 years, $500,000 to value the Maval trade name with a useful life of 5 years , and $3,905,000 to goodwill in the preliminary purchase price allocation during the three months ended March 31, 2015.
Trade names were valued based on the relief of royalty approach. This method allocates value based on what the Company would be willing to pay as a royalty to a third-party owner of the intellectual property or trade name in order to exploit the economic benefits. Customer relationships were valued using an excess earnings approach after considering a fair return on fixed assets, working capital, trade names, intellectual property, and assembled workforce.
During the three months ended March 31, 2015, we had intellectual property additions of $495,000 which were related to patent defense and filing costs. The weighted average useful life of these intellectual property intangibles was 15 years as of March 31, 2015.
8. Other noncurrent assets
Other noncurrent assets primarily consisted of core return rights of $21,264,000 and noncurrent deferred tax assets of $12,072,000 as of March 31, 2015. Other noncurrent assets primarily consisted of core return rights of $38,940,000 and noncurrent deferred tax assets of $12,028,000 as of December 31, 2014.
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9. Other current liabilities and accrued expenses
Other current liabilities and accrued expenses consisted of the following:
March 31, | December 31, | ||||||
(In thousands) | 2015 | 2014 | |||||
Accrued warranty | $ | 24,217 | $ | 22,583 | |||
Accrued wages and benefits | 16,295 | 18,784 | |||||
Current portion of customer obligations | 2,105 | 2,234 | |||||
Rebates, stocklifts, discounts and returns | 14,722 | 20,282 | |||||
Current deferred revenue | 842 | 865 | |||||
Other | 50,829 | 63,761 | |||||
$ | 109,010 | $ | 128,509 | ||||
Changes to our current and noncurrent accrued warranty were as follows:
Three months ended March 31, | ||||||||
(In thousands) | 2015 | 2014 | ||||||
Balance at beginning of period | $ | 26,012 | $ | 30,781 | ||||
Provision for warranty | 10,564 | 12,170 | ||||||
Payments and charges against the accrual | (9,225 | ) | (11,825 | ) | ||||
Increased warranty accruals due to business acquisitions (Note 20) | 360 | 1,363 | ||||||
Balance at end of period | $ | 27,711 | $ | 32,489 | ||||
10. Other noncurrent liabilities
Other noncurrent liabilities consisted of the following:
March 31, | December 31, | ||||||
(In thousands) | 2015 | 2014 | |||||
Noncurrent deferred revenue | $ | 3,778 | $ | 3,967 | |||
Other | 23,345 | 22,516 | |||||
$ | 27,123 | $ | 26,483 | ||||
11. | Restructuring and other charges |
Total restructuring and other charges of $73,000 were recorded for the three months ended March 31, 2015. These charges consisted of $15,000 of employee termination benefits and $58,000 of other exit costs. The charges were primarily related to the closure of our Mezokovesd, Hungary plant and restructuring actions in our North American operations.
Total restructuring and other charges of $314,000 were recorded during the three months ended March 31, 2014. These charges consisted of $228,000 of employee termination benefits and $86,000 of other exit costs. The charges were primarily related to the closure of our Mezokovesd, Hungary plant and restructuring actions in our Mexico operations.
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The following table summarizes the activity in our accrual for restructuring and other charges for the three month period ended March 31, (in thousands):
2015 | Termination benefits | Exit costs | Total | ||||||||
Accrual at December 31, 2014 | $ | 259 | $ | 72 | $ | 331 | |||||
Provision | 15 | 58 | 73 | ||||||||
Payments | (54 | ) | (73 | ) | (127 | ) | |||||
Accrued at March 31, 2015 | $ | 220 | $ | 57 | $ | 277 | |||||
2014 | Termination benefits | Exit costs | Total | ||||||||
Accrual at December 31, 2013 | $ | 981 | $ | 45 | $ | 1,026 | |||||
Provision | 228 | 86 | 314 | ||||||||
Payments | (950 | ) | (106 | ) | (1,056 | ) | |||||
Accrued at March 31, 2014 | $ | 259 | $ | 25 | $ | 284 | |||||
Significant components of restructuring and other charges were as follows (in thousands):
Total expected costs | Expense incurred in | Estimated future expense | |||||||||||||||||
Three months ended March 31, 2015 | Twelve months ended December 31, 2014 | Twelve months ended December 31, 2013 | |||||||||||||||||
2014 Activities | |||||||||||||||||||
Severance | $ | 1,215 | $ | 15 | $ | 1,066 | $ | — | $ | 134 | |||||||||
Exit costs | 959 | 9 | 950 | — | — | ||||||||||||||
$ | 2,174 | $ | 24 | $ | 2,016 | $ | — | $ | 134 | ||||||||||
2013 Activities | |||||||||||||||||||
Severance | $ | 1,976 | $ | — | $ | 220 | $ | 1,756 | $ | — | |||||||||
Exit costs | 696 | — | 4 | 692 | — | ||||||||||||||
$ | 2,672 | $ | — | $ | 224 | $ | 2,448 | $ | — | ||||||||||
2012 Activities | |||||||||||||||||||
Severance | $ | 4,533 | $ | — | $ | — | $ | 795 | $ | — | |||||||||
Exit costs | 1,710 | 49 | 267 | 823 | 160 | ||||||||||||||
Other charges | 1,687 | — | — | — | — | ||||||||||||||
$ | 7,930 | $ | 49 | $ | 267 | $ | 1,618 | $ | 160 | ||||||||||
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12. Debt
Borrowings under long-term debt arrangements, net of discounts, consisted of the following:
March 31, | December 31, | ||||||
(In thousands) | 2015 | 2014 | |||||
Asset-Based Revolving Credit Facility- Maturity date of September 5, 2018 | $ | 25,550 | $ | — | |||
Term B Loan, as Amended and Restated - Maturity date of March 5, 2020 | 292,905 | 293,637 | |||||
Total Senior Credit Facility and Notes | 318,455 | 293,637 | |||||
Capital leases and other obligations | 8,039 | 8,167 | |||||
Less current maturities | (3,500 | ) | (3,509 | ) | |||
Long-term debt less current maturities | $ | 322,994 | $ | 298,295 | |||
On December 31, 2014, in connection with the completion of the Transaction, Remy International, Inc. and certain subsidiaries entered into a Second Amendment to the ABL Revolver Credit Agreement (“ABL Second Amendment”) and a Second Amendment and Restatement of the Term B Loan Credit Agreement (“Term B Second Amendment”) (collectively, the “Amendments”).
The Amendments permitted the Transaction to occur, added New Remy Holdco Corp. and New Remy Corp. as guarantors of the obligations under the foregoing credit facilities, and made conforming changes to reflect the effects of the Transaction. There are no other changes that materially modify the foregoing credit facilities.
The ABL Second Amendment bears an interest rate to a defined Base Rate plus 0.50%-1.00% per year or, at our election, at an applicable LIBOR Rate plus 1.50%-2.00% per year and is paid monthly. The ABL Second Amendment maintains the current availability at $95,000,000, but may be increased, under certain circumstances, by $20,000,000. The ABL Second Amendment is secured by substantially all domestic accounts receivable and inventory. At March 31, 2015, the ABL Second Amendment balance was $25,550,000. Based upon the collateral supporting the ABL Second Amendment, the amount borrowed, and the outstanding letters of credit of $15,712,000, there was additional availability for borrowing of $50,665,000 on March 31, 2015. We will incur an unused commitment fee of 0.375% on the unused amount of commitments under the ABL Second Amendment.
The Term B Second Amendment bears an interest rate consisting of LIBOR (subject to a floor of 1.25%) plus 3.00% per year with an original issue discount of $750,000. The Term B Second Amendment also contains an option to increase the borrowing provided certain conditions are satisfied, including maintaining a maximum leverage ratio. The Term B Second Amendment is secured by a first priority lien on the stock of our subsidiaries and substantially all domestic assets other than accounts receivable and inventory pledged to the ABL Second Amendment. Principal payments in the amount of $750,000 are due at the end of each calendar quarter with termination and final payment no later than March 5, 2020. The Term B Second Amendment is subject to an excess cash calculation which may require the payment of additional principal on an annual basis. At March 31, 2015, the average borrowing rate, including the impact of the interest rate swaps, was 4.25%.
On March 5, 2013, we entered into a First Amendment to our existing ABL Revolver Credit Agreement ("ABL First Amendment") to extend the maturity date of the Asset-Based Revolving Credit Facility ("ABL") from December 17, 2015 to September 5, 2018 and reduce the borrowing rate. On March 5, 2013, we entered into a $300,000,000 Amended and Restated Term B Loan Credit Agreement ("Amended and Restated Term B Loan") to refinance the existing $286,978,000 Term B Loan, extend the maturity from December 17, 2016 to March 5, 2020, and reduce the borrowing rate.
As of March 31, 2015, the estimated fair value of our Term B Second Amendment was $295,634,000, which was $2,729,000 more than the carrying value. As of December 31, 2014, the estimated fair value of our Term B Loan was $290,693,000, which was $2,944,000 less than the carrying value. The Level 2 fair market values are based on established market prices as of March 31, 2015 and December 31, 2014. The fair value estimates do not necessarily reflect the values we could realize in the current markets. Because of their short-term nature or variable interest rate, we believe the carrying value for short-term debt and the revolving credit agreement closely approximates their fair value.
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All of our credit agreements contain various covenants and representations that are customary for transactions of this nature. We were in compliance with all covenants as of March 31, 2015. The credit agreements contain various restrictive covenants, which include, among other things: (i) a maximum leverage ratio; (ii) a minimum interest coverage ratio; (iii) mandatory prepayments upon certain asset sales and debt issuances; and (iv) limitations on the payment of dividends in excess of a specified amount. The term loan also includes events of default customary for a facility of this type, including a cross-default provision under which the lenders may declare the loan in default if we (i) fail to make a payment when due under any debt having a principal amount greater than $5.0 million or (ii) breach any other covenant in any such debt as a result of which the holders of such debt are permitted to accelerate its maturity.
Short-term debt
We have revolving credit facilities with three Korean banks with a total facility amount of approximately $11,765,000 of which $1,810,000 was borrowed at an average interest rate of 2.75% at March 31, 2015. In Hungary, there is one revolving credit facility with one bank for a total credit facility of $1,015,000 of which nothing was borrowed at March 31, 2015. In China there is a revolving credit facility with one bank for a total credit facility of $10,000,000 of which $3,000,000 was borrowed at an average interest rate of 2.04% at March 31, 2015.
Capital leases and other obligations
Capital leases have been capitalized using nominal interest rates ranging from 4.0% to 15.1% as determined by the dates we entered into the leases. We had assets under capital leases of approximately $2,675,000 at March 31, 2015 and approximately $2,810,000 at December 31, 2014, net of accumulated amortization.
On December 29, 2014, we entered into a leaseback financing arrangement with an independent third party involving the sale of a distribution facility with a net book value of approximately $11,454,000 at March 31, 2015 and $11,855,000 at December 31, 2014. We continue to maintain the facility on our books and have included the proceeds from the sale of the facility as a financing obligation totaling $5,800,000 bearing an implied interest rate of 6.5%.
13. Stockholders' equity
Common stock and preferred stock
In connection with the Transaction closing on December 31, 2014, we amended our Amended and Restated Certificate of Incorporation, which is substantially identical to Old Remy's Amended and Restated Certificate of Incorporation in effect immediately prior to the closing of the Transaction. The rights of stockholders after the closing of the Transaction, as a matter of state law and under the relevant organizational documents, are fundamentally the same as the rights of stockholders that were in effect immediately prior to the consummation of the Transaction.
Under the Amended and Restated Certificate of Incorporation, the Company is authorized to issue 280,000,000 shares, consisting of 240,000,000 shares of common stock, par value $0.0001 per share, and 40,000,000 shares of preferred stock, par value $0.0001 per share. As of March 31, 2015, there were 32,236,050 common stock shares outstanding and no preferred stock shares outstanding.
The holders of common stock are entitled to one vote on all matters properly submitted on which the common stockholders are entitled to vote.
Share Repurchase Program
On February 18, 2015, the Board of Directors approved a share repurchase program, effective February 23, 2015, under which we may repurchase up to $100,000,000 of our outstanding common stock shares. Purchases may be made from time to time in the open market at prevailing prices or in privately negotiated transactions through February 28, 2018. There were no purchases of our common stock under this program during the three months ended March 31, 2015.
Treasury stock
During the three months ended March 31, 2015, we withheld 47,772 shares at cost, or $1,097,000, to satisfy tax obligations for vesting of restricted stock shares granted to our employees under the Remy International, Inc. Omnibus
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Incentive Plan, or "Omnibus Incentive Plan". In addition, 112,291 shares were forfeited and returned to treasury stock during the three months ended March 31, 2015 for no value pursuant to the Omnibus Incentive Plan.
During the three months ended March 31, 2014, we withheld 114,291 shares at cost, or $2,504,000, to satisfy tax obligations for vesting of restricted stock shares granted to our employees under the Omnibus Incentive Plan. In addition, 74,892 shares were forfeited and returned to treasury stock during the three months ended March 31, 2014 for no value pursuant to the Omnibus Incentive Plan.
Dividend payments
On February 6, 2015, our Board of Directors declared a quarterly cash dividend of ten cents ($0.10) per share. The dividend was payable in cash on February 27, 2015 to stockholders of record as of the close of business on February 17, 2015. Cash dividends paid during the three months ended March 31, 2015 were $3,305,000, which also included accrued cash dividends paid on restricted stock vestings. As of March 31, 2015, a dividend payable of $74,000 was recorded for unvested restricted stock and is payable upon vesting.
On April 30, 2015, our Board of Directors declared a quarterly cash dividend of eleven cents ($0.11) per share, payable on May 29, 2015, to stockholders of record as of May 18, 2015.
14. Reclassifications out of accumulated other comprehensive income (loss)
The following table discloses the changes in each component of accumulated other comprehensive income, net of tax for the three months ended March 31, 2015 (in thousands):
Foreign currency translation adjustment | Unrealized gains (losses) on currency hedges | Unrealized gains (losses) on commodity hedges | Interest rate swaps | Employee benefit plan adjustment | Accumulated other comprehensive income (loss) | |||||||||||||||||||
Balances at December 31, 2014 | $ | 1,590 | $ | (4,662 | ) | $ | (1,955 | ) | $ | (172 | ) | $ | (4,184 | ) | $ | (9,383 | ) | |||||||
Other comprehensive income (loss) before reclassifications | (7,993 | ) | (82 | ) | (1,698 | ) | (429 | ) | (105 | ) | (10,307 | ) | ||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | 899 | 778 | — | 25 | 1,702 | ||||||||||||||||||
Balances at March 31, 2015 | $ | (6,403 | ) | $ | (3,845 | ) | $ | (2,875 | ) | $ | (601 | ) | $ | (4,264 | ) | $ | (17,988 | ) | ||||||
The following table discloses the changes in each component of accumulated other comprehensive income, net of tax for the three months ended March 31, 2014 (in thousands):
Foreign currency translation adjustment | Unrealized gains (losses) on currency hedges | Unrealized gains (losses) on commodity hedges | Interest rate swaps | Employee benefit plan adjustment | Accumulated other comprehensive income (loss) | |||||||||||||||||||
Balances at December 31, 2013 | $ | 9,441 | $ | 2,753 | $ | (1,776 | ) | $ | 886 | $ | 7,866 | $ | 19,170 | |||||||||||
Other comprehensive income (loss) before reclassifications | 797 | (886 | ) | (2,264 | ) | (281 | ) | (463 | ) | (3,097 | ) | |||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | (636 | ) | 672 | — | 100 | 136 | |||||||||||||||||
Balances at March 31, 2014 | $ | 10,238 | $ | 1,231 | $ | (3,368 | ) | $ | 605 | $ | 7,503 | $ | 16,209 | |||||||||||
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The following table discloses the effect of reclassifications of accumulated other comprehensive income on the accompanying consolidated statement of operations (in thousands):
Details about Accumulated Other Comprehensive Income (Loss) Components | Three months ended March 31, | Affected Line Item in the Statement Where Net Income is Presented | ||||||||
2015 | 2014 | |||||||||
Gains (losses) on cash flow hedges: | ||||||||||
Foreign currency contracts | $ | (1,201 | ) | $ | 897 | Cost of goods sold | ||||
Commodity contracts | (1,278 | ) | (1,099 | ) | Cost of goods sold | |||||
(2,479 | ) | (202 | ) | Total before tax | ||||||
802 | 166 | Tax benefit (expense) | ||||||||
$ | (1,677 | ) | $ | (36 | ) | Net of tax | ||||
Amortization of employee benefit plan costs: | ||||||||||
Prior service costs | $ | — | $ | — | Selling, general and administrative expenses | |||||
Net actuarial loss | (29 | ) | (164 | ) | Selling, general and administrative expenses | |||||
(29 | ) | (164 | ) | Total before tax | ||||||
4 | 64 | Tax benefit (expense) | ||||||||
$ | (25 | ) | $ | (100 | ) | Net of tax | ||||
Total reclassifications for the period | $ | (1,702 | ) | $ | (136 | ) | Net of tax | |||
15. Income taxes
We compute on a quarterly basis an estimated annual effective tax rate considering ordinary income and related income tax expense. Ordinary income refers to income (loss) before income tax expense excluding significant, unusual, or infrequently occurring items. The tax effect of an unusual or infrequently occurring item is recorded in the interim period in which it occurs. Other items included in income tax expense in the periods in which they occur include the cumulative effect of changes in tax laws or rates, foreign exchange gains and losses, adjustments to uncertain tax positions, and adjustments to our valuation allowance due to changes in judgment regarding the realizability of deferred tax assets in future years.
The effective income tax rate for the three months ended March 31, 2015, differs from the U.S. federal income tax rate primarily due to the effect of foreign taxable income and tax credits. The effective income tax rate for the three months ended March 31, 2014, differs from the U.S. federal income tax rate primarily due to the effect of foreign taxable income, valuation allowance utilization in certain foreign jurisdictions, and tax credits reported in the financial statements.
16. Employee benefit plans
The components of expense for our pension plans were as follows (in thousands):
Three months ended March 31, | ||||||||
Components of expense | 2015 | 2014 | ||||||
Service costs | $ | 325 | $ | 276 | ||||
Interest costs | 762 | 752 | ||||||
Expected return on plan assets | (761 | ) | (766 | ) | ||||
Recognized net actuarial loss (gain) | 53 | (144 | ) | |||||
Net periodic pension cost | $ | 379 | $ | 118 | ||||
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Cash flows
We contributed $907,000 and $828,000 to our pension plans during the three months ended March 31, 2015 and 2014, respectively. We expect to contribute a total of $2,041,000 to our U.S. pension plans and $595,000 to our international pension plans in 2015.
17. | Stock-based compensation |
Omnibus Incentive Plan
The Omnibus Incentive Plan, which is stockholder-approved, became effective on October 27, 2010, was amended on March 24, 2011 and permits our Compensation Committee of the Board of Directors to grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other cash or share based awards to our employees and non-employee directors. Actual participation, as well as the terms of the awards to those participants, is determined by the Compensation Committee. The maximum number of shares authorized that may be delivered pursuant to awards under the Omnibus Incentive Plan was 5,500,000. As of March 31, 2015, there were 2,837,168 shares available to be issued under the Omnibus Incentive Plan.
On February 23, 2015, executive officers and other key employees received restricted stock awards of 150,280 common shares with a weighted average grant date value of $23.01, based on the closing price of our common stock on the respective grant date as reported on the NASDAQ Stock Market. These awards are 50% time-based and 50% performance-based. The time-based restricted shares vest equally over a three-year period and one-third of the performance-based restricted shares will be available to vest for each of the calendar years 2015, 2016 and 2017 based on a target operating income for each of the years. Also on February 23, 2015, we granted an additional time-based restricted stock award of 22,816 common shares which will vest 100% on the first anniversary of the grant date. Additionally, executive officers and other key employees were granted 305,753 stock option awards which vest equally over a three-year period with a term of seven years and a weighted average exercise price of $23.01.
On March 6, 2015, an additional time-based restricted stock award of 15,000 common shares was granted with a grant date value of $22.62 based on the closing price of our common stock on the grant date as reported on the NASDAQ Stock Market. This award will vest 100% on the third anniversary of the grant date.
Also on February 23, 2015, our Board of Directors received restricted stock awards of 22,815 common shares and stock option awards of 46,418 common shares. One-half of the restricted stock shares and stock options granted to the Board of Directors vest at each anniversary of the grant date. Restricted stock granted to the Board of Directors were valued at $23.01, which was the closing price of our common stock on the grant date as reported on the NASDAQ Stock Market. Stock options granted to the Board of Directors have a term of seven years and an exercise price of $23.01.
We estimated the grant date fair value of all stock options granted during the three months ended March 31, 2015 using the Black-Scholes valuation model. The weighted average valuation per share was $4.85 based on the following assumptions: Risk-free interest rate: 1.41%, Dividend Yield: 1.74%, Expected Volatility: 28.00% and Expected Term: 4.5 years.
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Shares issued upon exercise of stock options were 2,919 and 2,397 during the three months ended March 31, 2015 and 2014, respectively.
Noncash compensation expense related to all types of awards was recognized for the three months ended March 31, 2015 and 2014 as follows:
Three months ended March 31, | ||||||||
(In thousands) | 2015 | 2014 | ||||||
Stock-based compensation expense | $ | 1,316 | $ | 1,219 | ||||
If factors change and we employ different assumptions, stock-based compensation expense may differ significantly from what we have recorded in the past. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that we grant additional equity awards to employees or we assume unvested equity awards in connection with acquisitions.
18. Business segment and geographical information
We manage our business and operate in a single reportable business segment.
We are a multi-national corporation with operations in many countries, including the United States, Canada, Mexico, Brazil, China, Hungary, South Korea, United Kingdom, Belgium and Tunisia. As a result, our financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets where we distribute our products. Our operating results are exposed to changes in exchange rates between the U.S. dollar and non-U.S. currencies. Exposure to variability in foreign currency exchange rates is managed primarily through the use of natural hedges, whereby funding obligations and assets are both denominated in the local currency, and through selective currency hedges. From time to time, we enter into exchange agreements to manage our exposure arising from fluctuating exchange rates related to specific transactions. Refer to Note 4. Sales are attributed to geographic locations based on the point of sale.
Information about our net sales by region was as follows:
Three months ended March 31, | ||||||||
(In thousands) | 2015 | 2014 | ||||||
Net sales to external customers: | ||||||||
United States | $ | 204,509 | $ | 204,618 | ||||
Europe | 19,763 | 23,075 | ||||||
Other Americas | 8,808 | 10,880 | ||||||
Asia | 70,331 | 67,432 | ||||||
Total net sales | $ | 303,411 | $ | 306,005 | ||||
19. Other commitments and contingencies
We are party to various legal actions and administrative proceedings and subject to various claims, including those relating to commercial transactions, product liability, safety, health, taxes, environmental and other matters. We believe that none of such actions, other than those discussed below, depart from customary litigation arising in the ordinary course of business. We review these matters on an ongoing basis and follow the provisions of FASB ASC Topic 450, Contingencies, when making accrual and disclosure decisions. For legal proceedings where it has been determined that a loss is both probable and reasonably estimable, a liability has been recorded in our accompanying consolidated financial statements. For legal proceedings where it has been determined that a loss is either probable but the amount or range of loss is not reasonably estimable, or reasonably possible, we provide disclosure with respect to the matter.
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Actual losses may materially differ from the amounts recorded and the ultimate outcomes of our pending cases are generally not yet determinable. At present we do not believe that the ultimate resolution of currently pending legal proceedings, either individually or in the aggregate, will have a material adverse effect on our financial condition. However, litigation matters are inherently uncertain, and we cannot currently quantify our ultimate liability for unresolved litigation matters. As a result, it is possible that such liability could materially affect our consolidated financial position or our results of operations or cash flows for an individual reporting period.
Remy Componentes S. de R.L. de C.V. vs. Corporativo Industrial y Empresarial Lorva, S.A. de C.V. ("Lorva")
In December 2012, Lorva, a former vendor, filed a judicial claim against Old Remy in the Fourth District federal court in San Luis Potosi, Mexico requesting the rescission of two alleged operational service contracts. We filed a timely response in the Fourth District Court in January 2013. The collection of evidence and witness testimony concluded in the civil case, and the parties filed their written closing argument briefs in the fourth quarter of 2013. In March 2014, the first instance sentence was issued by the Fourth District Court determining Lorva has the right to rescind both contracts and collect the benefit sought in the amount of approximately $17,380,000 for liquidated damages and outstanding invoices. In April 2014, we filed an appeal of this ruling in the Unitary Tribunal in San Luis Potosi, Mexico. On October 2, 2014, the Unitary Tribunal in San Luis Potosi, Mexico ruled on the appeal, reducing the March 2014 lower Fourth District Court award from $17,380,000 to payment of invoices and amounts due of $121,000 plus Lorva's costs and attorney fees. Both Lorva and Old Remy filed a timely appeal of this ruling in the 4th Collegiate Tribunal in San Luis Potosi, Mexico in October 2014. In February 2015, the 4th Collegiate Tribunal sent instructions to the Unitary Tribunal to consider the evidence presented that supports Remy's allegation that the contract is fraudulent and rule on that evidence. In March 2015, the Unitary Tribunal reissued the same judgment as in their prior October 2014 ruling, as a result, Remy filed an appeal with the 4th Collegiate Tribunal in April 2015. We believe it is probable that we should prevail on final appeal based on legal arguments and the facts of this case. As of March 31, 2015, we continue to maintain an immaterial accrual related to this matter.
Remy, Inc. vs. Tecnomatic S.p.A.
In March 2011, Tecnomatic filed a lawsuit against Remy International, Inc., its Mexican subsidiaries and two other entities alleging breach of contract and the misappropriation of trade secrets, and requested damages of $110,000,000. On September 11, 2014, we announced entry into a Settlement Agreement and Mutual General Release (the "Agreement") to settle all disputes that existed among us and Tecnomatic. In addition, we entered into a cross licensing arrangement of certain patents with Tecnomatic. The value of the patents received from Tecnomatic was approximately $13,930,000. Pursuant to the Agreement and the cross licensing arrangement, we paid to Tecnomatic a $16,000,000 cash payment in September 2014 and paid a $16,000,000 cash payment during the three months ended March 31, 2015.
20. Acquisition
Acquisition of Maval Manufacturing, Inc.
On February 19, 2015, we announced that we entered into a definitive agreement to acquire substantially all of the assets of Maval Manufacturing, Inc., a manufacturer, remanufacturer, and distributor of steering systems, components, and specialty products to the automotive service, original equipment power sports, and off-road specialty vehicle markets. The transaction closed effective March 1, 2015. In connection with the closing of the transaction, the assets were placed in Maval Industries, L.L.C. ("Maval"), a wholly-owned subsidiary of the Company. The results of operations of Maval have been included in our consolidated results of operations since the acquisition date.
Preliminary purchase price was $22,000,000, consisting of $18,340,000 in cash and $3,660,000 cash held in escrow. The initial purchase price allocation based on their fair values as of the acquisition date was as follows:
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Trade accounts receivable | $ | 8,011 | ||
Inventories | 14,065 | |||
Prepaid expenses and other current assets | 25 | |||
Property, plant and equipment | 1,764 | |||
Goodwill | 3,905 | |||
Intangible assets | 3,810 | |||
Other noncurrent assets | 22 | |||
Total assets acquired | $ | 31,602 | ||
Accounts payable | $ | 6,674 | ||
Other current liabilities and accrued expenses | 2,928 | |||
Total liabilities acquired | $ | 9,602 | ||
Net assets acquired | $ | 22,000 | ||
Goodwill of $3,905,000, which is deductible for tax purposes, has been recorded based on the amount of the purchase price that exceeds the fair value of the net assets acquired. The purchase price allocation is preliminary as of March 31, 2015 as we finalize our valuation of long lived assets and any contingent liabilities.
For the three months ended March 31, 2015, we recognized a finished goods inventory step-up of $587,000 and customer relationships and trade name amortization of $36,000, which was included in cost of goods sold in the accompanying consolidated statement of operations.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are 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, including statements regarding our expectations, hopes, intentions or strategies regarding the future. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. It is important to note that our actual results could vary materially from those forward-looking statements contained herein due to many factors, including, but not limited to: future financial results and liquidity, development of new products and services, the effect of competitive products or pricing, the effect of commodity and raw material prices, the impact of supply chain cost management initiatives, restructuring risks, customs duty claims, litigation uncertainties and warranty claims, conditions in the automotive industry, foreign currency fluctuations, costs related to re-sourcing and outsourcing products, the effect of economic conditions, and other risks identified in the “Special note regarding forward-looking statements”, “Risk Factors” and other sections of the Company's previously filed most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect the Company. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events and/or otherwise, except as may be required by law.
The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014.
Executive Overview
Our Business
We are a global market leader in the design, manufacture, remanufacture, marketing and distribution of non-discretionary, rotating electrical components for light and commercial vehicles for original equipment manufacturers, or OEMs, and the aftermarket. We sell our products worldwide primarily under our well-recognized “Delco Remy,” “Remy,” “World Wide Automotive”, “USA Industries” and “Maval” brand names, as well as our customers' well-recognized private label brand names.
Our principal products for both light and commercial vehicles include:
• | new starters and alternators; |
• | remanufactured starters and alternators; |
• | hybrid electric motors; and |
• | multi-line products (primarily remanufactured), including steering gears, constant velocity (CV) axles, and brake calipers. |
We sell our new starters, alternators and hybrid electric motors to U.S. and non-U.S. OEMs for factory installation on new vehicles. We sell remanufactured and new products to aftermarket customers, mainly retailers in North America, warehouse distributors in North America and Europe, and OEMs globally for the original equipment service ("OES"), market. We sell a small volume of remanufactured locomotive power assemblies in North America.
Financial Results
Net sales of $303.4 million for the first quarter of 2015 decreased 0.8% from $306.0 million for the same period in 2014 driven primarily by decreased volume and mix of $7.5 million, unfavorable foreign currency impacts of $6.6 million and negative pricing impact of $1.3 million. The net sales decrease was partially offset by a one time settlement of cores with a customer whose contract expired in January 2015, the net impact for this customer was an increase of $8.8 million in sales period over period. In addition, we had $4.0 million in sales of Maval Industries, L.L.C. ("Maval"), which we acquired in March of 2015. We had operating income of $28.5 million during the first quarter of 2015, an increase of $15.4 million compared to operating income of $13.1 million during the same period in 2014 primarily due to one time core settlements with customers of $22.0 million, partially offset by a decrease in volume and mix of $8.5 million and negative foreign currency impacts of $2.2 million.
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Acquisition of Maval Manufacturing, Inc.
On February 19, 2015, we announced that we entered into a definitive agreement to acquire substantially all assets of Maval Manufacturing, Inc., a manufacturer, remanufacturer, and distributor of steering systems, components, and specialty products to the automotive service, original equipment power sports, and off-road specialty vehicle markets. Maval adds a new product line that is complimentary to our existing portfolio of products. The transaction closed effective March 1, 2015. In connection with the closing of the transaction, the assets were placed in Maval Industries, L.L.C., a wholly-owned subsidiary of the Company. The results of operations of Maval have been included in our consolidated results of operations since the acquisition date. As of March 31, 2015, the preliminary purchase price was $22.0 million, consisting of $18.3 million in cash and $3.7 million cash held in escrow.
Recent Trends and Conditions
General economic conditions
According to IHS Global Insight, global light duty vehicle production was up 1% and global medium and heavy duty vehicle production was down 5% during the first quarter of 2015 as compared to the same period in 2014. The increase in light duty vehicle production was driven primarily by a 6% increase in China production, a 2% increase in North America production and flat production in Europe. These increases were offset by a 4% decline in Korea production and a 17% decline in South America production. The increase in global medium and heavy duty production was driven primarily by a 19% increase in North American production and a 5% increase in Europe production offset by a 10% decrease in Korea production, a 7% decline in South America production and a 23% decline in China. The global automotive industry remains susceptible to uncertain economic conditions that could adversely impact consumer demand for vehicles.
Weather can affect aftermarket sales of starters and alternators. Extreme cold can damage starters and extreme heat can increase alternator failures. In both cases, this extreme weather can stimulate sales of aftermarket starters and alternators. In early 2014, the Northeast United States experienced severe cold weather which we believe had a positive impact on our results of operations.
Pricing pressures from customers
Pressure from our customers to reduce prices is characteristic of the automotive supply industry. Due to the competitive nature of the business, revised terms with customers may impact our ongoing profitability. We anticipate the impact of our pricing to be in the range of 1% to 3% consistent with prior years. We have taken and expect to continue to take steps to improve operating efficiencies and minimize or resist price reductions. We intend to maintain a disciplined approach to customer program pricing and may choose to exit programs with certain customers to protect our margins and cash flow. As a result, we may choose to no longer continue programs with certain customers due to unacceptable competitive pricing or terms. To this end, we have chosen not to meet the demands of a major aftermarket customer due to the negative pricing and working capital impact. While these decisions impact net sales and operating income in the short term, we believe this operating discipline will help to maximize the long-term profitability of the Company. Sales to this customer were $87.7 million for the year ended December 31, 2014. Upon expiration of the contract in January 2015, we invoiced the customer $41.5 million for the sale of cores that were reflected in core right of return in other noncurrent assets as of December 31, 2014, partially offsetting the expected reduction in sales in 2015. We collected a majority of this amount during the first quarter of 2015. Despite this likely reduction, this action will have a positive impact on our net income and cash position in 2015.
Material and commodity price fluctuations
Overall commodity price fluctuation is an ongoing concern for our business and has been an operational and financial focus. We have pass-through pricing agreements with a number of our customers that reduce our exposure to metals price volatility. Where metals price volatility is not covered by customer agreements, we utilize hedging instruments where appropriate, particularly related to copper, and consider their cost and their effectiveness. Average copper prices were lower for the quarter ended March 31, 2015 than for the same period in 2014.
In our remanufacturing operations, our principal inputs are cores, approximately 90% of which we receive in exchange for remanufactured units. Cores are used starters, alternators, or other multi-line products that customers exchange
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when they purchase new products. If usable, we refurbish these cores into a remanufactured product that we sell to our aftermarket customers. When we are required to purchase cores rather than receiving them in exchange for remanufactured units, we are affected by market pricing of cores. The cost of cores fluctuates based on a number of factors, including supply and demand and the underlying value of the commodities that the cores contain.
Foreign currencies
During the first three months of 2015, approximately 33% of our net sales were transacted outside the United States. The functional currency of our foreign operations is generally the local currency, while our financial statements are presented in U.S. dollars. Foreign exchange has an unfavorable impact on net sales when the U.S. dollar is relatively strong as compared with foreign currencies and a favorable impact on net sales when the U.S. dollar is relatively weak as compared with foreign currencies. While we employ financial instruments to hedge certain exposures related to transactions from fluctuations in foreign currency exchange rates, these hedging actions do not entirely insulate us from currency effects and such programs may not always be available to us at economically reasonable costs. During the first three months of 2015, we experienced a $2.2 million negative impact from foreign currency effects on our reported earnings in U.S. dollars compared to the first three months of 2014, primarily resulting from the results denominated in other currencies, mainly the Mexican Peso, Brazilian Real and the Euro.
Operation efficiency efforts
In general, our long-term objectives are geared toward profitably growing our business, expanding our innovative technologies, winning new contracts, generating cash and strengthening our market position. On an ongoing basis, we evaluate our competitive position and determine what actions may be required to maintain and improve that position.
We believe that a continued focus on research, development and engineering activities is critical to maintaining our leadership position in the industry and meeting our long-term objectives. As a result, we continue our commitment to invest in facilities and infrastructure in order to support new business awards and achieve our long-term growth plans.
Although we believe that we have established a firm foundation for profitability, we continue to evaluate our global manufacturing and supply chain to further streamline our operations. We have completed the transfer of production from our Mezokovesd, Hungary plant to our other facilities in Hungary, Mexico and Korea and substantially completed the closure of our Mezokovesd, Hungary plant. In addition, during 2014, we consolidated our Mexico operations and announced the planned closure of our operations in New York, obtained from the USA Industries acquisition, to better manage our cost structure.
Non-U.S. GAAP measurements - Adjusted EBITDA
Adjusted EBITDA is not a measure of performance defined in accordance with accounting principles generally accepted in the United States (U.S. GAAP). We use adjusted EBITDA as a supplement to our U.S. GAAP results in evaluating our business. Other companies in our industry define adjusted EBITDA differently from us and, as a result, our measure is not comparable to similarly titled measures used by other companies in our industry.
We define adjusted EBITDA as net income attributable to common stockholders before interest expense–net, income tax expense, depreciation and amortization, stock-based compensation expense, restructuring, other charges and other impairment charges, certain purchase accounting finished goods inventory step-up costs, litigation settlements and related legal fees, Transaction related fees, and other adjustments as set forth in the reconciliations provided below. All periods presented conform to this definition.
Adjusted EBITDA is one of the key factors upon which we assess performance. As an analytical tool, adjusted EBITDA assists us in comparing our performance over various reporting periods on a consistent basis because it excludes items that we do not believe reflect our ongoing operating performance.
Adjusted EBITDA should not be considered as an alternative to net income as an indicator of our performance, as an alternative to net cash provided by operating activities as a measure of liquidity, or as an alternative to any other measure prescribed by U.S. GAAP. There are limitations to using non-U.S. GAAP measures such as adjusted EBITDA. Although we believe that adjusted EBITDA may make an evaluation of our operating performance more consistent because it removes items that do not reflect our ongoing operations, adjusted EBITDA excludes certain financial information that some may consider important in evaluating our performance.
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The following table sets forth a reconciliation of adjusted EBITDA to its most directly comparable U.S. GAAP measure, net income:
Three months ended March 31, | ||||||||
(In thousands) | 2015 | 2014 | ||||||
Net income | $ | 16,570 | $ | 4,944 | ||||
Adjustments: | ||||||||
Interest expense–net | 5,011 | 5,254 | ||||||
Income tax expense | 6,928 | 2,908 | ||||||
Depreciation and amortization | 17,037 | 18,057 | ||||||
Stock-based compensation expense | 1,316 | 1,219 | ||||||
Restructuring and other charges | 73 | 314 | ||||||
Litigation settlements and related legal fees | — | 737 | ||||||
Purchase accounting finished goods inventory step-up | 587 | 2,509 | ||||||
Other nonrecurring adjustments (a) | (21,903 | ) | (3 | ) | ||||
Total adjustments | 9,049 | 30,995 | ||||||
Adjusted EBITDA | $ | 25,619 | $ | 35,939 | ||||
(a) Represents the elimination of the $22.0 million net impact of one-time core settlements with customers in 2015 and (gain)/loss on sale of fixed assets in both periods.
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Results of operations
The following table presents our consolidated results of operations for the three months ended March 31, 2015 compared to the three months ended March 31, 2014:
Three months ended March 31, | Increase/ (Decrease) | % Increase/ (Decrease) | ||||||||||||
(In thousands) | 2015 | 2014 | ||||||||||||
Net sales | $ | 303,411 | $ | 306,005 | $ | (2,594 | ) | (0.8 | )% | |||||
Cost of goods sold | 241,409 | 259,654 | (18,245 | ) | (7.0 | )% | ||||||||
Gross profit | 62,002 | 46,351 | 15,651 | 33.8 | % | |||||||||
Selling, general, and administrative expenses | 33,420 | 32,931 | 489 | 1.5 | % | |||||||||
Restructuring and other charges | 73 | 314 | (241 | ) | (76.8 | )% | ||||||||
Operating income | 28,509 | 13,106 | 15,403 | 117.5 | % | |||||||||
Interest expense–net | 5,011 | 5,254 | (243 | ) | (4.6 | )% | ||||||||
Income before income taxes | 23,498 | 7,852 | 15,646 | 199.3 | % | |||||||||
Income tax expense | 6,928 | 2,908 | 4,020 | 138.2 | % | |||||||||
Net income | $ | 16,570 | $ | 4,944 | $ | 11,626 | 235.2 | % | ||||||
Net sales
Net sales decreased by $2.6 million, or (0.8)%, to $303.4 million for the three months ended March 31, 2015, from $306.0 million for the same period in 2014. The decrease in net sales was driven by decreased volume and mix of $7.5 million, a negative pricing impact of $1.3 million, and unfavorable foreign currency translation of $6.6 million. The net sales decrease was partially offset by a one time settlement of cores with a customer whose contract expired in January 2015, the net impact for this customer was an increase of $8.8 million in sales period over period. In addition, we had $4.0 million in sales of Maval, which we acquired in March of 2015.
Net sales of new starters and alternators to OEMs in the three months ended March 31, 2015 decreased in light vehicle products which was offset by an increase in commercial vehicle products. Net sales of light vehicle starters and alternators to OEMs were $85.4 million in the three months ended March 31, 2015, a $3.7 million, or 4.2%, decrease compared to $89.1 million in the same period in 2014. These reductions are mainly driven by the end of certain North American programs and softening demand in North America and China, offset by new programs and growth in Hyundai. Net sales of commercial vehicle starters and alternators were $47.2 million in the three months ended March 31, 2015, a $1.1 million, or 2.4%, increase compared to $46.1 million in the same period in 2014. We also sold $2.6 million of hybrid electric motors to OEMs in the three months ended March 31, 2015, as compared to $3.9 million in the same period in 2014.
Net sales of light vehicle rotating electrical products to aftermarket customers were $107.3 million in the three months ended March 31, 2015, a $4.0 million, or 3.9% increase from $103.3 million in the same period in 2014. The increase is primarily a result of $8.8 million of core sales in connection with the expiration of a contract described above, net of loss of business with that customer, offset by lower European sales due to foreign exchange. Net sales of starters and alternators for commercial vehicles to aftermarket customers were $44.3 million in the three months ended March 31, 2015, a decrease of $0.7 million, or 1.6% from $45.0 million in the same period in 2014.
Net sales of remanufactured locomotive power trains and multi-line products, which consist of a small volume of remanufactured steering gears, axles, and brake calipers that we sell in the United States and Europe to aftermarket customers, were $15.8 million in the three months ended March 31, 2015, a $0.8 million, or 5.3% increase from the same period in 2014 as sales of the Maval acquisition of $4.0 million and increased locomotive sales of $1.2 million offset reductions in European sales of multi-line products primarily due to foreign exchange.
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Cost of goods sold
Cost of goods sold primarily represents materials, labor and overhead production costs associated with our products and production facilities. Cost of goods sold was $241.4 million in the three months ended March 31, 2015 and $259.7 million in the three months ended March 31, 2014, a decrease of $18.2 million, or 7.0%. The decrease was mainly due to lower volumes excluding one time settlements of cores with customers. The core settlements in the first quarter of 2015 resulted in a 5.2% increase in margins during the quarter ended March 31, 2015. In addition, we also recorded $0.6 million related to the step-up of finished goods inventory associated with the Maval acquisition during the three months ended March 31, 2015, as compared to $2.5 million related to the USA Industries acquisition in the three months ended March 31, 2014. As a result, cost of goods sold as a percentage of net sales decreased during the three months ended March 31, 2015 to 79.6%, from 84.9% in 2014.
Gross profit
As a result of the above changes in net sales and cost of goods sold, gross profit as a percentage of net sales increased to 20.4% for the three months ended March 31, 2015 as compared to 15.1% for the three months ended March 31, 2014.
Selling, general and administrative expenses
For the three months ended March 31, 2015, selling, general and administrative expenses, or SG&A, was $33.4 million, which represents an increase of $0.5 million, or 1.5%, from selling, general and administrative expenses of $32.9 million for the three months ended March 31, 2014. The increase was primarily related to the additional selling, general and administrative expenses associated with the Maval acquisition.
Restructuring and other charges
Restructuring and other charges decreased by $0.2 million, to $0.1 million for the three months ended March 31, 2015 compared to $0.3 million for the same period in 2014. The restructuring charges for the three months ended March 31, 2015 related to ongoing restructuring actions in our Mezokovesd, Hungary facility. The restructuring charges during the three months ended March 31, 2014 related to the ongoing activities of the closure of our Mezokovesd, Hungary facility and other operational restructuring efforts in our Mexico operations.
Interest expense–net
Interest expense–net decreased by $0.2 million to $5.0 million for the three months ended March 31, 2015 from $5.3 million in the same period in 2014. The decrease was primarily driven by a $0.5 million decrease in interest expense associated with lower factored receivables, partially offset by unfavorable changes in the valuation of our undesignated interest rate swap contracts of $0.1 million and interest expense on our Asset-Based Revolving Credit Facility of $0.1 million.
Income tax expense
Income tax expense increased by $4.0 million to $6.9 million for the three months ended March 31, 2015 from $2.9 million for the same period in 2014. The increase is primarily driven by the increase in income before taxes of $15.6 million. Our effective tax rate was decreased in 2015 due to tax credits in the first quarter of 2015, as well as the impact of an increase in our valuation allowance for certain state tax assets in 2014.
Net income
Our net income for the three months ended March 31, 2015 was $16.6 million as compared to $4.9 million for the three months ended March 31, 2014, for the reasons described above.
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Liquidity and capital resources
Our primary sources of liquidity are cash flows generated from operations and the various borrowing and factoring arrangements described below, including our revolving credit facilities. We actively manage our working capital and associated cash requirements and continually seek more effective use of cash.
We believe that cash generated from operations, together with the amounts available under financing arrangements discussed below, as well as cash on hand, will be adequate to meet our liquidity requirements for at least the next twelve months. These requirements generally consist of working capital, capital expenditures, research and development programs, debt service, cash taxes and pension contributions. If we make a large acquisition or engage in certain other strategic transactions, we may need to enter into additional borrowing arrangements or obtain additional equity capital. No assurance can be given that such funds would be available to us at such time.
As of March 31, 2015, we had cash and cash equivalents on hand of $87.3 million of which $81.3 million was held by our subsidiaries outside of the U.S. Cash held by these subsidiaries is used to fund foreign operational activities and future investments. If these funds were repatriated to the U.S., we would be required to provide for U.S. federal and state income tax, foreign income tax, and foreign withholding taxes. We have not provided for such taxes as it is our intention that those funds are permanently reinvested outside the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations.
Total liquidity as of March 31, 2015, including cash on hand, availability under the ABL Second Amendment, and availability under short-term debt credit facilities, was $155.9 million.
Cash flows
The following table shows the components of our cash flows for the periods presented:
Three months ended March 31, | |||||||
(In thousands) | 2015 | 2014 | |||||
Net cash provided by (used in): | |||||||
Operating activities before changes in operating assets and liabilities | $ | 40,831 | $ | 20,318 | |||
Changes in operating assets and liabilities | (28,600 | ) | (29,757 | ) | |||
Operating activities | 12,231 | (9,439 | ) | ||||
Investing activities | (27,372 | ) | (46,865 | ) | |||
Financing activities | 18,969 | (2,312 | ) | ||||
Cash flows-Operating activities
Cash provided by operating activities was $12.2 million versus cash used in operations of $9.4 million for the three months ended March 31, 2015 and 2014, respectively. The increase in operating cash flows from 2014 was primarily a result of the higher net income as discussed above.
Operating cash flows were increased primarily due to the collection of $40.5 million related to a core settlement in connection with a contract expiration in the three months ended March 31, 2015. We experienced a decrease in operating cash outflows for expenditures on inventory replenishment of approximately $7.5 million in 2015 to due to the decreased sales levels. Operating cash flows increased by approximately $11.3 million as a result of extended vendor payment terms, as well as mix of purchases increasing our days payable outstanding during the three months ended March 31, 2015. Cash payments for restructuring charges were $0.9 million lower in the three months ended March 31, 2015 due to the nature and timing of restructuring actions. Additionally, we made $2.6 million less payments on warranty claims in the three months ended March 31, 2015 as compared to the payments made in the same period in 2014. During the quarter ended March 31, 2015, we made a final $16.0 million payment related to the Tecnomatic litigation settlement.
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Cash paid for interest for the three months ended March 31, 2015 was $4.5 million as compared to $4.9 million for the three months ended March 31, 2014, a decrease of $0.4 million. Cash payments were lower primarily due to lower accounts receivable factoring during 2015.
Cash paid for taxes for the three months ended March 31, 2015 was $2.9 million, compared to $4.9 million for the three months ended March 31, 2014, an decrease of $2.0 million. The reason for the increase was primarily due to lower foreign cash payments as a result of lower foreign income and tax credits in 2015.
Cash flows-Investing activities
Cash used in investing activities for the three months ended March 31, 2015 was $27.4 million representing a $19.5 million decrease over the $46.9 million cash used in investing activities for the three months ended March 31, 2014. During first quarter of 2015, we completed our acquisition of Maval for $22.0 million in cash. During the first quarter of 2014, we completed our acquisition of USA Industries for approximately $40.4 million, net of cash acquired.
Cash flows-Financing activities
Cash provided by financing activities for the three months ended March 31, 2015 was $19.0 million, compared to cash used in financing activities of $2.3 million for the three months ended March 31, 2014. During the three months ended March 31, 2015, we paid $3.3 million in quarterly cash dividends to our common stockholders, as declared by our Board of Directors, which was consistent with quarterly cash dividends paid in the prior year period. We also repurchased $1.1 million of our common stock to satisfy tax withholding obligations of participants under our stock-based compensation programs during the three months ended March 31, 2015, as compared to $2.5 million during the three months ended March 31, 2014. In connection with the vesting of restricted stock grants during the first quarter of 2015, we also recognized an excess tax benefit of $0.2 million, compared to a $1.1 million excess tax benefit recorded in the same period in 2014. During the quarter ended March 31, 2014, we had Parent company net investments of $0.4 million.
During the three months ended March 31, 2015, we borrowed $79.3 million and also repaid $53.7 million on our Asset-Based Revolving Credit Facility. These borrowings were for funding for general corporate working capital purposes including a $16.0 million payment related to a previously announced litigation settlement. In addition, we funded the acquisition of Maval through borrowings under the Asset-Based Revolving Credit Facility. The change in short-term debt during the three months ended March 31, 2015 was due to borrowings on our revolving credit facilities. In March 2014, we entered into a revolving credit facility in China with one bank for $10.0 million of which $3.0 million was borrowed and remained outstanding at March 31, 2015. We repaid $2.9 million against our revolving credit facility in China during the quarter ended March 31, 2015.
Financing arrangements
Our primary financing facilities are an Asset-Based Revolving Credit Facility (the "ABL Facility") and a Term B Loan (the "Term B Loan").
Asset-Based Revolving Credit Facility
The ABL Facility bears an interest rate to a defined Base Rate plus 0.50%-1.00% per year or, at our election, at an applicable LIBOR Rate plus 1.50%-2.00% per year and is paid monthly. The ABL Facility maintains the current availability at $95,000,000, but may be increased, with the consent of lenders, by $20,000,000. The ABL Facility is secured by substantially all domestic accounts receivable and inventory. At March 31, 2015, the ABL Facility balance was $25,550,000. Based upon the collateral supporting the ABL Facility, the amount borrowed, and the outstanding letters of credit of $15,712,000, there was additional availability for borrowing of $50,665,000. We will incur an unused commitment fee of 0.375% on the unused amount of commitments under the ABL Facility. The ABL Facility expires September 5, 2018.
Term B Loan
The Term B Loan bears an interest rate consisting of LIBOR (subject to a floor of 1.25%) plus 3.00% per year with an original issue discount of $750,000. The Term B Loan also contains an option to increase the borrowing provided certain conditions are satisfied, including maintaining a maximum leverage ratio. The Term B Loan is secured by a first priority lien on the stock of our subsidiaries and substantially all domestic assets other than accounts receivable and
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inventory pledged to the ABL Facility. The outstanding principal balance of the Term B Loan was $293.25 million as of March 31, 2015. Principal payments in the amount of $750,000 are due at the end of each calendar quarter with termination and final payment no later than March 5, 2020. The Term B Loan is subject to an excess cash calculation which may require the payment of additional principal on an annual basis. At March 31, 2015, the average borrowing rate, including the impact of the interest rate swaps, was 4.25%.
Both the ABL Facility and the Term B Loan contain various covenants and representations that are customary for transactions of this nature. We are in compliance with all covenants as of March 31, 2015. The credit agreements contain various restrictive covenants, which include, among other things: (i) a maximum leverage ratio; (ii) a minimum interest coverage ratio; (iii) mandatory prepayments upon certain asset sales and debt issuances; and (iv) limitations on the payment of dividends in excess of a specified amount. The credit agreements also includes events of default customary for a facilities of these types, including a cross-default provision under which the lenders may declare the loan in default if we (i) fail to make a payment when due under any debt having a principal amount greater than $5 million or (ii) breach any other covenant in any such debt as a result of which the holders of such debt are permitted to accelerate its maturity.
See Note 12 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report for a description of and for more details on the ABL Facility and the Term B Loan.
Under normal working capital utilization of liquidity, portions of the amounts drawn under our credit facilities typically are paid back throughout the month as cash from customers is received. We could then draw upon such facilities again for working capital purposes in the same or succeeding months.
Non-U.S. borrowing arrangements
At March 31, 2015, our subsidiaries outside the U.S. also had various uncommitted credit facilities, of which $18.0 million was not utilized. We expect that these additional facilities will be drawn on from time to time for normal working capital purposes and to fund capital expenditures in support of operations and planned expansions in certain regions. See Note 12 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report for a description of our short term debt.
Factoring agreements
We have also entered into factoring agreements with various U.S., Korean and European financial institutions to sell our accounts receivable under nonrecourse agreements. These transactions are accounted for as a reduction in accounts receivable because the agreements transfer effective control over, and risk related to, the receivables to the buyers. We do not service any factored accounts after the factoring has occurred. We utilize factoring arrangements as an integral part of our financing. See Note 4 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report for a description of our factoring arrangements.
Share Repurchase Program
On February 18, 2015, our Board of Directors approved a share repurchase program, effective February 23, 2015, under which we may repurchase up to $100,000,000 of our outstanding common stock shares. Purchases may be made from time to time in the open market at prevailing prices or in privately negotiated transactions through February 28, 2018. There were no purchases of our common stock under this program during the three months ended March 31, 2015.
Contractual obligations
There were no material changes in our contractual obligations during the three months ended March 31, 2015 from what was previously described in our Annual Report on Form 10-K for the year ended December 31, 2014 other than related to the borrowings against our ABL Facility discussed above and leases described below.
In connection with the Maval acquisition, we acquired operating leases for two facilities in Twinsburg, Ohio, which require future cash payments of $1.5 million over the remaining lease terms through 2018.
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Contingencies
Information concerning contingencies are contained in Note 19 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report is incorporated herein by reference.
Off-Balance sheet arrangements
We do not have any material off-balance sheet arrangements.
Accounting pronouncements
For a discussion of certain adopted or pending accounting pronouncements, see Note 2 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report, which is incorporated herein by reference.
Critical accounting policies and estimates
Our accounting policies require management to make significant estimates and assumptions using information available at the time the estimates are made. Actual amounts could differ significantly from these estimates. See Note 2 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report for a summary of the significant accounting policies and methods used in the preparation of our unaudited condensed consolidated financial statements. A detailed description of our significant accounting policies is included in Note 2 to our audited consolidated financial statements included in our Annual Report for Form 10-K for the year ended December 31, 2014. There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2015.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to the quantitative and qualitative information about our market risks from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the U.S. Securities and Exchange Commission on March 2, 2015.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the supervision and participation of our President and Chief Executive Officer (principal executive officer) and our Senior Vice President and Chief Financial Officer (principal financial officer), has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) as of March 31, 2015. Based on that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of March 31, 2015.
Changes in Internal Controls
There have not been any changes in our internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) during the quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During the quarter ended March 31, 2015, the Company completed the acquisition of Maval and is currently integrating Maval into its operations, compliance programs, and internal control processes. As permitted by SEC rules and regulations, the Company has excluded Maval from management's evaluation of internal control over financial reporting as of March 31, 2015.
PART II - Other Information
Item 1. Legal Proceedings
The information concerning the legal proceedings involving the Company contained in Note 19 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report is incorporated herein by reference.
Item 1A. Risk Factors
We face a number of significant risks and uncertainties in connection with our operations. Our business, results of operations and financial condition could be materially adversely affected by these risk factors. There have been no material changes to Risk Factors previously reported in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the U.S. Securities and Exchange Commission on March 2, 2015.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We withheld the following shares of common stock to satisfy tax withholding obligations during the quarter ended March 31, 2015 from the distributions described below. These shares may be deemed to be “issuer purchases” of shares that are required to be disclosed pursuant to this Item.
Period | Total number of shares purchased (1) | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs (2) | Maximum number (or approximate dollar value) of shares that may yet by purchased under the plans or programs (2) | ||||||||||
1/1/2015 - 1/31/2015 | — | $ | — | — | $ | — | ||||||||
2/1/2015 - 2/28/2015 | 39,509 | 22.97 | — | 100,000,000 | ||||||||||
3/1/2015 - 3/31/2015 | 8,263 | 22.95 | — | 100,000,000 | ||||||||||
Total | 47,772 | $ | 22.97 | — | $ | 100,000,000 | ||||||||
(1) | Shares purchased during the three months ended March 31, 2015 were in connection with employee payroll tax withholding for restricted stock vesting distributions. |
(2) | On February 18, 2015, the Board of Directors approved a share repurchase program, effective February 23, 2015, under which we may repurchase up to $100,000,000 of our outstanding common stock shares. Purchases may be made from time to time in the open market at prevailing prices or in privately negotiated transactions through February 28, 2018. There were no purchases of our common stock under this program during the three months ended March 31, 2015. |
Item 5. Other Information
On April 30, 2015, the Company filed with the Secretary of State of the State of Delaware a certificate of correction (the “Certificate of Correction”) correcting a typographical error in its Amended and Restated Certificate of Incorporation. The Certificate of Correction became effective upon filing.
A copy of the Certificate of Correction, as filed with the Secretary of State of the State of Delaware on April 30, 2015, is attached as Exhibit 3.1 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.
On April 30, 2015, the Company filed with the Secretary of State of the State of Delaware a Restated Certificate of Incorporation (the “Restated Certificate”). The Restated Certificate restates the Company’s Amended and Restated Certificate of Incorporation to reflect the changes in the Certificate of Correction and the Certificate of Amendment, filed with the Secretary of State of the State of Delaware on December 31, 2014, changing the name of the Company from “New Remy Holdco Corp.” to “Remy International, Inc.” The Restated Certificate became effective upon filing.
A copy of the Restated Certificate, as filed with the Secretary of State of the State of Delaware on April 30, 2015, is attached as Exhibit 3.2 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.
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Item 6. Exhibits
Exhibit Index
Incorporated by reference | |||||
Exhibit Number | Description | Form | Exhibit | Filing Date | Filed herewith |
3.1 | Certificate of Correction of Amended and Restated Certificate of Incorporation | X | |||
3.2 | Restated Certificate of Incorporation | X | |||
3.3 | Second Amended and Restated Bylaws, as currently in effect | 8-K | EX-3.3 | 2/4/2015 | |
4.1 | Specimen common stock certificate | X | |||
10.1 | Support Agreement, dated as of February 3, 2015, by and among H Partners Group and Remy International, Inc. | 8-K | EX-10.1 | 2/4/2015 | |
*10.2 | Employment Agreement, effective as of February 20, 2015, by and between Remy International, Inc. and Albert E. VanDenBergh | 8-K | EX-10.1 | 1/23/2015 | |
*10.3 | Employment Agreement, effective as of May 1, 2015, by and between Remy International, Inc. and Victor A. Polen | 8-K | EX-10.1 | 5/1/2015 | |
*10.4 | Employment Agreement, effective as of April 1, 2015, by and between Remy International, Inc. and David G. Krall | X | |||
*10.5 | 2015 Form of Notice of Restricted Stock Grant for Directors and Restricted Stock Award Agreement under the Remy International, Inc. Omnibus Incentive Plan | X | |||
*10.6 | 2015 Form of Notice of Stock Option Grant for Directors and Stock Option Agreement under the Remy International, Inc. Omnibus Incentive Plan | X | |||
*10.7 | 2015 Form of Notice of Restricted Stock Grant for Employees and Restricted Stock Award Agreement under the Remy International, Inc. Omnibus Incentive Plan | X | |||
*10.8 | 2015 Form of Notice of Stock Option Grant for Employees and Stock Option Agreement under the Remy International, Inc. Omnibus Incentive Plan | X | |||
*10.9 | Form of First Amendment to Remy International, Inc. Omnibus Incentive Plan Restricted Stock Award Agreements for Employees | X | |||
31.1 | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | |||
31.2 | Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | |||
32.1 | Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 | X | |||
32.2 | Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 | X | |||
101.INS | XBRL Instance Document | X | |||
101.SCH | XBRL Taxonomy Extension Schema Document | X | |||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | |||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | |||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X | |||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | |||
* Indicates a management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Remy International, Inc. | ||
(Registrant) | ||
Date: May 6, 2015 | By: /s/ Albert E. VanDenBergh | |
Albert E. VanDenBergh | ||
Senior Vice President and Chief Financial Officer | ||
(Principal Financial Officer) | ||
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