REMY

Remy International, Inc. (REMY)

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Remy International Inc. (REMY)

Q4 2013 Earnings Conference Call

February 13, 2014 09:00 AM ET

Executives

Monica Bolt – Vice President-Finance

John J. Pittas – President and Chief Executive Officer

Fred S. Knechtel – Senior Vice President, Treasurer and Chief Financial Officer

Analysts

Alan W. Weber – Robotti & Co. Advisors LLC

Sarkis Sherbetchyan – B. Riley & Co. LLC

Chuck Walter – Hoak

Faz Habib – DA Capital

Presentation

Operator

Ladies and gentlemen thank you for standing by. Welcome to the Remy International Fourth Quarter and Full Year Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time (Operator Instructions) As a reminder this conference is being recorded.

I would now like to turn the conference to our host Monica Bolt, VP and Finance. Please go ahead.

Monica Bolt

Good morning, and thank you for participating on our fourth quarter and full year 2013 earnings call. My name is Monica Bolt, Vice President of Finance. Joining us are President and Chief Executive Officer Jay Pittas, and our Chief Financial Officer, Fred Knechtel.

Yesterday, we released our fourth quarter and full year 2013 financial results. Jay and Fred will review both periods. A copy of our release, accompanying financial statement and presentation slides are available at our website under the caption Investors at remyinc.com. Log-in instructions for the webcast were included with the invitation to today's call.

The company's Safe Harbor statement is included in the earnings press release as well as shown on slide two of today's presentation. Please consider my reference to this statement as notification of the applicability of the Safe Harbor provision to today's call.

Now, we will hear from our President and Chief Executive Officer, Jay Pittas.

Jay Pittas

Thank you Monica. Good morning everyone, and thank you for joining us. 2013 was a successful year for Remy. We focused on winning new business, driving sustainable operational improvements and aggressively controlling spending while investing for growth in China and our Light Duty aftermarket. I am happy to report we made significant progress on all fronts.

For the fourth quarter, we reported net sales of $292 million, up 9% compared to $268 million last year. Our long-term goal is to have a well balanced portfolio of business. We strive for balance between OE and aftermarket and also between North America and the rest of the world. This quarter, 50% of sales were from the aftermarket and 36% were from outside North America. Sales in China were up 62% in the quarter over 2012.

Net income for the quarter was $17 million consistent with 2012. Fred will discuss our fourth quarter and calendar year financial results in more detail. 2013 was a very strong year for securing new business. Our success in the first three quarters continued with new business awards in the fourth quarter.

In the aftermarket, European net sales continue to expand in the quarter with a 12% increase of our fourth quarter of 2012. In the heavy-duty aftermarket our North American truck manufacturer added Remy value line offering to supplement our premium portfolio.

In our original equipment business, we signed a five-year long-term agreement for standard position with Daimler Trucks, North America. China first tractor group or YTO awarded heavy-duty alternator and starter business for their export and premium tractor applications.

We also continue to be successful in winning new business with three different comments-related joint ventures in China and Korea. Chongqing Yuan, or CQYA, a Chinese passenger vehicle manufacturer awarded as alternator and starter business and Hyundai awarded as a new engine program.

I will now turn the call over to Fred to review our fourth quarter and full year financial results.

Fred S. Knechtel

For the fourth quarter, net sales were $292 million, up 9% when compared to $268 million last year, and up 11% versus the prior quarter. Aftermarket net sales were $146 million, up 9% as compared to $134 million last year.

Original equipment sales were $146 million, up 9% compared to $134 million the prior year. The increase reflects additional light duty sales to Hyundai, Shanghai GM, Wuling, Dongfeng Peugeot, Citroen and Dongfeng Nissan, and a 26% increase in heavy duty sales to Caterpillar, Daimler, and Cummins.

Global light vehicle production was up 4% in the quarter and Remy’s global light duty unit volume was flat. Hyundai’s production was down 3% globally however, our unit sales to Hyundai were up 20% as we continue to increase our share within Hyundai. General Motors production decreased 3% while Remy unit decreased 12% reflecting the reduction of planned and previously announced roll-off of GM platforms with Remy content.

Fourth quarter global commercial vehicle production was up 2% versus last year, while Remy’s unit sales were up 30% for the quarter reflecting increased production at Caterpillar, Daimler, Packard and Cummins.

Adjusted EBITDA was $39 million compared to $40 million last year as a result of higher sales offset by investments to grow the business. The main drivers were $1 million higher from increased volume and favorable mix, partially offset by price reductions, $3 million lower due to increased investments for growth in China and improved coverage in and our Light Duty Aftermarket and $1 million higher due to global cost reductions from productivity, supply chain efficiency and discretionary spending.

Net income for the quarter were $17 million, the same as the fourth quarter of last year. Cash flow from operations was $45 million as compared to $27 million in 2012. For the full year, net sales were 1.2 – $1.12 billion down 1% when compared to $1.13 billion in 2012. Our sales were off marginally from last year with new OE programs and increased aftermarket sales offset by Light Duty OE sales and the continued softness of the North American commercial vehicle market.

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