AccessMyLibrary provides FREE access to millions of articles from top publications available through your library.
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good morning and welcome to the Aftermarket Technology Corp. conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions following the presentation. Questions at that time will be taken from a pre-approved list of security analysts, money managers, and institutional holders only. It is now my pleasure to turn the call over to your host, Mary Ryan. Madam, you may begin.
MARY RYAN, VP, COMMUNICATIONS AND IR, AFTERMARKET TECHNOLOGY CORP: Thank you and good morning. Before we go the substance of our call, I'd like to point out that many of our comments today are considered to be forward-looking statements under the Federal Securities Laws. As such, you are reminded that the forward-looking statements are subject to numerous risks and uncertainties that could cause future results to differ materially from those stated on place by our comments today. Those risks and uncertainties are fully described in our SEC Filings. There will be references to non-GAAP financial measures during the call. A reconciliation to the most directly comparable GAAP numbers can be found on our Website at www.goatc.com. Look in IR at SEC Filings, then reports and SEC Filings, and then scroll down to the reconciliation of non-GAAP to GAAP. At this time, I'd like to turn the call over to our President and CEO, Don Johnson.
DON JOHNSON, PRESIDENT & CEO, AFTERMARKET TECHNOLOGY CORP: Thank you Mary. Good morning and thank you for joining us today. Last night, we were pleased to release second quarter results of $0.30 adjusted earnings per diluted share. These results were in the higher end of our guidance. Let me set the stage by sharing the contributing factors to our second quarter performance with a brief overview of each of our businesses. In our Drivetrain segment, we executed what can only be described as ex-financial growth regard to sales, increasing 165% from second quarter of last year. We achieved $19m in revenue from Honda, up from $13m in the first quarter of this year. Nearly half of the increase in the second quarter was achieved in June, as we added a new product line supplied to Honda. We are pleased to achieve both the significant ramp-up in business, and at the same time deliver industry-leading quality levels to continued joint teamwork with Honda. Continuing with the Drivetrain segment, we achieved expected levels of business from both Chrysler and Ford. But our GM volume was short due to investment in our North Carolina plant to improve the plant's materials level and processes to produce true quality on GM units. As it's already across to all customers, is the key element of our strategy for continued market leadership in providing remanufactured drivetrain products to the automotive industry.
We believe our quality positions as well for increased future business with both client and new customers. During the quarter, our Logistics segment continued to benefit from overall strength driven by increased volumes with our AT&T wireless business. As mentioned in earnings announcement, we achieved $24.6m in sales. Additionally, Bill Conley, our Logistics President and his business development team continue to aggressively pursue new opportunities. Our team won another $8m in new business, bringing the total first half total to $19m in new business annual revenue once it's fully implemented. During the second half of 2004, we should realize about one-third of this new business revenue to accelerate launches currently planned with our customers. Included in the $8m of new business signed, I'm particularly pleased to announce that we won new team of services, boxing of handsets and related materials with an existing customer, and we added a new customer, and up and coming OEM wireless products Company based in Asia, for whom we will perform packaging and distribution services in the US. These wins validate our Logistics services business model, and the recognized value we provide to our customers.
We expect our business development team to capture additional wins in the second half of this year. Our remaining segment, the rollout of our Independent Aftermarket business continues at a slower pace than originally expected with second quarter sales flat compared to first quarter of this year. We discussed in our previous calls the introduction and education of individual retail outlets to our products is a slow process. Operating losses in this segment were slightly below first quarter losses, but higher than expected due to this flat sales performance during the quarter. We continue to drive this business, we are focused on increasing sales growth to our new relationships and filling out by product lines. For example, in the last 30 days, we just completed our product line to one of our major warehouse distributor customers. We've also worked diligently during the quarter to set up second half changes in the business model to reshape the supply chain for cost reduction and improved performance.
As we finalize our plan changes to improve the Independent Aftermarket performance, we will employ newer actions and the expected results. Switching gears from the second quarter performance for each business unit and in keeping with our tradition of (inaudible), we continue on track to meet or exceed our $26m in planned cost reductions for the year. We've achieved $13m in cost reduction in the first half with plans in place to achieve the balance in the second half. To conceive the second quarter summary, I'm sure that many of you are interested in an update of our acquisition plan. Although I have no specific news, I'm allowed to share with you at this time, during the quarter we (inaudible) opportunities focusing on drivetrain targets, as our Logistics segment continues to pursue significant organic growth opportunities. As we look to the third quarter, we expect adjusted EPS to be approximately $0.37 to $0.41. We expect third quarter adjusted income from operations to be in the range of $13.9m to $15.2m, which represents 65%to 81% increase from the third quarter, 2003.
Logistics segment should continue strong with our base business plus new business ramp-ups. In Drivetrain, we see increasing volumes with Honda driven by successes from our joint quality work, reasonable strength in the Ford business, and cost reduction utilization partially offset by weaker Chrysler volume due to anticipated seasonal inventory adjustments, and although improved, continued operating losses in the Independent Aftermarket, as we change our business model and continue our work with key customers.
Finally, based on the sales opportunity in the pipeline, we expect more wins in our key markets and in new segments we are pursuing in both drivetrain and the logistics businesses. Through the year, although we see continued strength to the portfolio of sustained Honda volumes, full year cost reduction utilizations still expected to exceed our $26m target and growth expected from the rollout of newly awarded contracts in our businesses. The continued losses in the Independent Aftermarket which are now expected to total approximately $5m for the year coupled with additional costs to achieve our …