CLEVELAND, Feb. 18 /PRNewswire/ -- Noveon, Inc. today reported selected
financial results for the fourth quarter and full year of 2003.
Three Months Ended Year Ended
December 31 December 31
2003 2002 2003 2002
($M) Unaudited Audited
Sales $280.8 $255.8 $1,135.9 $1,069.3
Gross profit $79.6 $76.5 $326.5 $342.5
Operating income $12.1 $20.0 $93.8 $120.9
Net income (loss) $(9.2) $(1.9) $12.5 $34.7
Net income excluding
special items $0.1 $1.3 $25.5 $40.3
EBITDA $35.9 $41.2 $184.1 $203.2
EBITDA excluding
special items $45.5 $44.4 $197.3 $209.3
Free cash flow $36.8 $33.0 $120.4 $159.2
In this press release, Noveon refers to various non-GAAP (generally
accepted accounting principles) financial measures including EBITDA, EBITDA
excluding special items and free cash flow. The methods used to compute these
measures are likely to differ from the methods used by other companies. These
non-GAAP measures should not be regarded as a replacement for corresponding
GAAP measures. Investors are encouraged to review the accompanying tables
reconciling the non-GAAP financial measures to comparable GAAP amounts.
"EBITDA" is defined as net income before cumulative effect of accounting
change, interest, taxes, depreciation and amortization. "Free cash flow" is
defined as EBITDA less capital expenditures plus or minus changes in accounts
receivable, inventory and accounts payable, net of the impact from
acquisitions. In addition, our reference to segment EBITDA excludes any
corporate overhead allocations. Management uses EBITDA and free cash flow as
performance metrics and believes these measures provide additional information
commonly used by our stakeholders with respect to both the performance of our
fundamental business activities, as well as our ability to meet our future
debt service, capital expenditures and working capital needs.
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Noveon has provided financial information for the fourth quarter and full
year 2003 and 2002 for the results of operations as reported, as well as for
results of operations as reported excluding special items of restructuring and
severance costs and the cumulative effect of an accounting change. Noveon
believes this information is useful to our stakeholders in understanding our
operating results and the ongoing performance of our underlying businesses
without the impact of these special items.
Fourth Quarter Results
For the quarter ended December 31, 2003, Noveon reported sales of $280.8
million, EBITDA of $35.9 million and a net loss of $9.2 million. For the
fourth quarter of 2002, Noveon reported sales of $255.8 million, EBITDA of
$41.2 million and a net loss of $1.9 million.
Noveon recorded restructuring and severance charges in the quarter of $9.6
million related to the announced consolidation of our Leominster,
Massachusetts polyurethane dispersion plant into our Avon Lake, Ohio facility
as well as other productivity initiatives targeted at further reducing our
overhead structure. EBITDA excluding special items in the fourth quarter of
2003 was $45.5 million. Net income excluding special items for the fourth
quarter of 2003 was $0.1 million. EBITDA excluding special items in the
fourth quarter of 2002 was $44.4 million. Net income excluding special items
in the fourth quarter of 2002 was $1.3 million.
Sales increased 10% in the quarter from the prior year with higher sales
across each segment, reflecting higher volumes led by our personal care,
TempRite(R) CPVC and Estane(R) TPU product lines, acquisition-related revenue
primarily in our Estane(R) TPU and Performance Coatings product lines, and the
stronger euro. EBITDA excluding special items increased 2% from the fourth
quarter of the prior year as higher personal care, TempRite(R) CPVC and
Estane(R) TPU volumes, benefits from acquisitions, continued productivity
initiatives and the strength of the euro more than offset significantly higher
raw material and utility costs. Free cash flow increased to $36.8 million in
2003 from $33.0 million in 2002 primarily driven by lower capital spending in
the quarter.
Steve Demetriou, Noveon president and chief executive officer, said, "In
the fourth quarter, we saw signs of a stronger business environment with
sequential sales growth over the third quarter. In addition, we experienced
our seventh consecutive quarter of sales growth over the prior year. Higher
volumes across most of the company resulting from our focus and commitment to
new product development, bolt-on acquisitions and the stronger euro, drove our
top line." Demetriou went on to say, "In 2003, significantly higher raw
material costs overshadowed an excellent year for Noveon, which was
highlighted by double digit volume growth in personal care, a resurgence in
Estane(R) TPU, and excellent results from our on-going productivity
initiatives. These results allowed us to add growth resources, accelerate new
product initiatives and expand globally, all of which position Noveon for
continued growth."
Consumer Specialties
Sales increased 8% to $78.5 million from $72.9 million compared with the
prior year fourth quarter in our Consumer Specialties segment. Personal care
product lines drove segment sales growth with double digit volume growth led
by Carbopol(R) acrylic thickener sales as well as the continued impact of the
successful new product introductions of Carbopol(R) Aqua SF1, a liquid
thickener, and Fixate(TM), a product used in hair care applications. In
addition, the stronger euro and the impact of acquisitions also contributed to
higher sales. Segment EBITDA increased 2% to $16.1 million in the fourth
quarter of 2003 from $15.8 million in the fourth quarter of 2002 as higher
personal care volumes, the stronger euro and the favorable impact of
acquisitions more than offset substantially higher raw material and utility
costs within the food and beverage product lines.
Specialty Materials
The Specialty Materials segment reported a sales increase of 14% to
$110.3 million in the fourth quarter of 2003 from $96.6 million in the fourth
quarter of the prior year due to the impact of higher volume in each product
line within the segment led by TempRite(R) CPVC and Estane(R) TPU.
TempRite(R) CPVC benefited from a volume shift to the fourth quarter due in
part to slower building activity experienced earlier in the year due to
weather-related factors. Estane(R) TPU benefited from continued growth in
Asia and higher demand in static control materials from electronics-related
customers. Sales were also positively impacted by the recent bolt-on
acquisition of an aliphatic TPU product line and the stronger euro, partially
offset by competitive pricing pressures. Segment EBITDA increased by 8% or
$2.1 million to $27.7 million in the fourth quarter of 2003 from $25.6 million
in the fourth quarter of 2002 principally due to higher volumes across the
segment and lower manufacturing costs, partially offset by higher raw material
and utility costs and competitive pricing pressure in TempRite(R) CPVC and
Estane(R) TPU product lines.
Performance Coatings
Performance Coatings' sales increased 7% to $92.0 in the fourth quarter
from $86.3 million in the fourth quarter of 2002 as the benefits of a graphic
arts overprint coatings product line acquisition made earlier in the year and
the strength of the euro more than offset a nominal volume decline in the
segment. EBITDA in the Segment decreased by 20% or $3.5 million to
$14.4 million in the fourth quarter of 2003 from $17.9 million in the fourth
quarter of 2002 due to substantially higher raw material and utility costs.
Corporate
In the fourth quarter, corporate overhead expenses excluding depreciation
and amortization decreased by $2.2 million to $12.7 million in 2003 from $14.9
million in 2002. This was the fifth consecutive quarter of reduced corporate
overhead spending.
Full Year 2003
For the full year ended December 31, 2003, Noveon reported sales of
$1,135.9 million, EBITDA of $184.1 million and net income of $12.5 million.
For the year ended December 31, 2002, Noveon reported sales of $1,069.3
million, EBITDA of $203.2 million and net income of $34.7 million.
During 2003, Noveon recorded restructuring charges of $13.2 million
related to the previously mentioned consolidation of our Leominster,
Massachusetts polyurethane dispersion plant into our Avon Lake, Ohio facility
as well as other productivity initiatives targeted at further reducing our
overhead structure. EBITDA excluding special items in 2003 was $197.3
million. Net income excluding special items in 2003 was $25.5 million.
EBITDA excluding special items in 2002 was $209.3 million. Net income
excluding special items in 2002 was $40.3 million.
Sales increased 6% from the prior year reflecting the stronger euro,
acquisition-related revenue in Performance Coatings, food and beverage, and
Estane(R) TPU product lines and higher volumes across most of Noveon's
portfolio including double digit growth in personal care product lines. These
sales gains were partially offset by continued volume declines in Performance
Coatings, albeit at a significantly slower pace in the fourth quarter, and
competitive pricing pressure in Estane(R) TPU, TempRite(R) CPVC and food and
beverage product lines. EBITDA excluding special items of $197.3 million
decreased 6% from the prior year as significantly higher raw material and
utility costs, lower Performance Coatings volumes, and competitive pricing
pressure more than offset higher volumes across many of our product lines,
continued manufacturing productivity, lower selling, general and
administrative expenses and the benefit of acquisitions. Free cash flow
decreased by $38.8 million in 2003 to $120.4 million due to lower EBITDA,
higher working capital associated with higher sales, and a $4.3 million
increase in capital spending.
Noveon will be hosting a conference call to discuss fourth quarter results
today, February 18, 2004 at 9:00AM ET. Domestic callers should dial 1 (800)
588-4973 and international callers should dial 1 (847) 413-2407 and ask to be
connected to the Noveon fourth quarter earnings call (confirmation code
8453133. A replay of the call will be available through Wednesday, February
25 by calling (domestic) 1 (888) 843-8996 or (international) 1 (630) 652-3044
with the above confirmation code.
Noveon is a leading global producer and marketer of technologically
advanced specialty chemicals for a broad range of consumer and industrial
applications with revenues in 2003 of $1.1 billion. Noveon is headquartered in
Cleveland, Ohio, with regional centers in Brussels, Belgium, and Hong Kong.
This release contains forward-looking statements that relate to future
events or performance. These statements reflect Noveon's current
expectations, and the Company does not undertake to update or revise these
forward-looking statements, even if experience or future changes make it clear
that any projected results express or implied in this or other Company
statements will not be realized. Furthermore, investors are cautioned that
these statements involve risks and uncertainties, many of which are beyond the
Company's control, which could cause actual results to differ materially from
the forward-looking statements. Important factors that may affect our
expectations, estimates or projections include:
-- the effects of the substantial debt we have incurred in connection with
our acquisition of the Performance Materials Segment of Goodrich and
our ability to refinance or repay that debt;
-- changes in customer requirements in markets or industries we serve;
-- general economic and market conditions;
-- competition within our industry;
-- our access to capital markets and any restrictions placed on us by any
current or future financing arrangements;
-- environmental and government regulations;
-- the effect of risks of investing in and conducting operations in
foreign countries, including political, social, economic, currency and
regulatory factors;
-- changes in the price and supply of major raw materials; and
-- the effect of fluctuations in currency exchange rates on our
international operations.
Further information about these risks can be found in the Company's
filings with the Securities and Exchange Commission.
Investors are cautioned not to place undue reliance on any forward-looking
statements contained herein, which speak only as of the date hereof. The
Company undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Noveon, Inc.
Consolidated Statement of Operations
(dollars in millions)
Three Months Ended Year Ended
December 31 December 31
2003 2002 2003 2002
(unaudited)
Sales $280.8 $255.8 $1,135.9 $1,069.3
Cost of sales 201.2 179.3 809.4 726.8
Gross profit 79.6 76.5 326.5 342.5
Selling and
administrative expenses 54.2 49.9 204.8 201.6
Amortization expense 3.7 3.4 14.7 13.9
Restructuring and
severance costs 9.6 3.2 13.2 6.1
Operating income 12.1 20.0 93.8 120.9
Interest expense-net 17.0 18.2 70.5 75.6
Other expense-net 0.5 2.2 1.1 2.4
Income (loss) before
income taxes and
cumulative effect of
accounting change (5.4) (0.4) 22.2 42.9
Income tax expense 3.8 1.5 9.2 8.2
Income (loss) before
cumulative effect of
accounting change (9.2) (1.9) 13.0 34.7
Cumulative effect of
accounting
change-net of tax -- -- 0.5 --
Net income (loss) $(9.2) $(1.9) $12.5 $34.7
Noveon, Inc.
Consolidated Balance Sheet
(dollars in millions)
December 31
2003 2002
ASSETS
Current assets
Cash and cash equivalents $ 115.6 $ 79.5
Accounts and notes receivable,
net of allowances ($7.5 and $9.0 at
December 31, 2003 and 2002, respectively) 149.8 135.7
Inventories 161.7 144.1
Deferred income taxes 11.5 7.0
Prepaid expenses and other current assets 7.9 7.2
Total current assets 446.5 373.5
Property, plant and equipment-net 682.9 670.7
Goodwill 414.2 365.5
Technology intangible assets-net 131.7 139.7
Other identifiable intangible assets-net 41.2 42.4
Receivable from Parent 1.4 1.2
Other assets 41.3 43.1
Total assets $1,759.2 $1,636.1
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Short-term bank debt $ -- $ 0.4
Accounts payable 130.1 111.2
Accrued expenses 73.1 70.6
Income taxes payable 6.7 5.3
Current maturities of long-term debt 15.8 --
Total current liabilities 225.7 187.5
Long-term debt 848.6 847.1
Postretirement benefits other than pensions 5.7 5.8
Accrued pensions 31.0 34.9
Deferred income taxes 29.6 25.1
Accrued environmental 18.2 18.2
Other non-current liabilities 15.4 17.8
Stockholder's equity
Common stock ($.01 par value,
1,000 shares authorized, 1
share issued and
outstanding at December 31,
2003 and 2002, respectively) -- --
Paid in capital 498.0 498.0
Retained earnings (deficit) 10.6 (1.9)
Accumulated other comprehensive income 76.4 3.6
Total stockholder's equity 585.0 499.7
Total liabilities and stockholder's equity $1,759.2 $1,636.1
Noveon, Inc.
Consolidated Statement of Cash Flows
(dollars in millions)
Years Ended
December 31
2003 2002
Operating activities
Net income (loss) $ 12.5 $ 34.7
Adjustments to reconcile net income
to net cash provided by operating
activities:
Restructuring and severance costs:
Expenses 13.2 6.1
Payments (6.0) (8.5)
Depreciation and amortization 91.4 84.7
Deferred income taxes (1.7) (0.6)
Debt issuance cost amortization
in interest expense 5.3 5.6
Cumulative effect of accounting
change-net of tax 0.5 --
Change in assets and liabilities,
net of effects of acquisitions of
businesses:
Receivables (4.3) 2.2
Inventories (5.7) 3.4
Other current assets (0.2) (2.6)
Accounts payable 12.0 9.2
Accrued expenses (0.1) (0.7)
Income taxes payable 2.3 5.4
Other non-current
assets and liabilities (1.4) 4.0
Net cash provided by operating activities 117.8 142.9
Investing activities
Purchases of property, plant and equipment (56.6) (52.3)
Payments made in connection with
acquisitions, net of cash acquired (32.1) (27.4)
Proceeds from sale of property and business -- --
Net cash (used) by investing activities (88.7) (79.7)
Financing activities
Decrease in short-term debt (0.4) (0.2)
Repayments of long-term debt -- (63.9)
Proceeds from sale of receivables, net -- 2.2
Debt issuance costs (1.8) (0.6)
Dividend to Parent -- (45.0)
Net cash (used) by financing activities (2.2) (107.5)
Effect of exchange rate
changes on cash and cash equivalents 9.2 3.8
Net increase (decrease) in
cash and cash equivalents 36.1 (40.5)
Cash and cash equivalents
at beginning of period 79.5 120.0
Cash and cash equivalents at end of period $115.6 $79.5
Noveon, Inc.
Reconciliation of Net Income (Loss) to EBITDA and Free Cash Flow
(dollars in millions)
Three Months Ended Year Ended
December 31 December 31
2003 2002 2003 2002
(unaudited)
Net income (loss) $(9.2) $(1.9) $12.5 $34.7
Cumulative effect of
accounting change
- net of tax -- -- 0.5 --
Income tax expense 3.8 1.5 9.2 8.2
Interest expense - net 17.0 18.2 70.5 75.6
Depreciation and
amortization expense 24.3 23.4 91.4 84.7
EBITDA $35.9 $41.2 $184.1 $203.2
Restructuring and
severance costs 9.6 3.2 13.2 6.1
EBITDA excluding
special items $45.5 $44.4 $197.3 $209.3
EBITDA from above $35.9 $41.2 $184.1 $203.2
Purchases of property,
plant and equipment (17.4) (24.6) (56.6) (52.3)
Changes in accounts
receivable,
inventory and
accounts payable 18.3 16.4 (7.1) 8.3
Free cash flow $36.8 $33.0 $120.4 $159.2
Noveon, Inc.
Consolidated Statement of Operations
Reconciliation of Results as Reported to Results Excluding Special Items
Three Months Ended December 31, 2003 and 2002
(dollars in millions)
2003
Excluding
Reported Special Items Special Items
Sales $280.8 $ -- $ 280.8
Cost of sales 201.2 -- 201.2
Gross profit 79.6 -- 79.6
Selling and
administrative expenses 54.2 -- 54.2
Amortization expense 3.7 -- 3.7
Restructuring and
severance costs 9.6 (9.6) --
Operating income 12.1 9.6 21.7
Interest expense - net 17.0 -- 17.0
Other expense - net 0.5 -- 0.5
Income (loss) before
income taxes (5.4) 9.6 4.2
Income tax expense 3.8 0.3 4.1
Net income (loss) $ (9.2) $9.3 $0.1
2002
Excluding
Reported Special Items Special Items
Sales $255.8 $ -- $ 255.8
Cost of sales 179.3 -- 179.3
Gross profit 76.5 -- 76.5
Selling and
administrative expenses 49.9 -- 49.9
Amortization expense 3.4 -- 3.4
Restructuring and
severance costs 3.2 (3.2) --
Operating income 20.0 3.2 23.2
Interest expense - net 18.2 -- 18.2
Other expense - net 2.2 -- 2.2
Income (loss) before
income taxes (0.4) 3.2 2.8
Income tax expense 1.5 -- 1.5
Net income (loss) $ (1.9) $ 3.2 $ 1.3
Note: The special items include the restructuring and severance costs in
2003 and 2002.
Noveon, Inc.
Consolidated Statement of Operations
Reconciliation of Results as Reported to Results Excluding Special Items
Year Ended December 31, 2003 and 2002
(dollars in millions)
2003
Excluding
Reported Special Items Special Items
Sales $1,135.9 $ -- $ 1,135.9
Cost of sales 809.4 -- 809.4
Gross profit 326.5 -- 326.5
Selling and
administrative expenses 204.8 -- 204.8
Amortization expense 14.7 -- 14.7
Restructuring and
severance costs 13.2 (13.2) --
Operating income 93.8 13.2 107.0
Interest expense - net 70.5 -- 70.5
Other expense - net 1.1 -- 1.1
Income before income
taxes and cumulative
effect of accounting
change 22.2 13.2 35.4
Income tax expense 9.2 0.7 9.9
Income before cumulative
effect of accounting
change 13.0 12.5 25.5
Cumulative effect of
accounting change
- net of tax 0.5 (0.5) --
Net income $ 12.5 $13.0 $25.5
2002
Excluding
Reported Special Items Special Items
Sales $1,069.3 $ -- $ 1,069.3
Cost of sales 726.8 -- 726.8
Gross profit 342.5 -- 342.5
Selling and
administrative expenses 201.6 -- 201.6
Amortization expense 13.9 -- 13.9
Restructuring and
severance costs 6.1 (6.1) --
Operating income 120.9 6.1 127.0
Interest expense - net 75.6 -- 75.6
Other expense - net 2.4 -- 2.4
Income before
income taxes 42.9 6.1 49.0
Income tax expense 8.2 0.5 8.7
Net income $ 34.7 $ 5.6 $ 40.3
Note: The special items include the restructuring and severance costs in
2003 and 2002. Furthermore, the cumulative effect adjustment of an
accounting change is also a special item included in 2003.
SOURCE Noveon, Inc.
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CONTACT:
Sean Stack of Noveon, Inc., +1-216-447-6494
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