CLEVELAND, May 7 /PRNewswire-FirstCall/ -- Noveon, Inc. today reported
selected financial results for the first quarter of 2003.
(Photo: http://www.newscom.com/cgi-bin/prnh/20010523/CLW011LOGO-b )
Three Months Ended
March 31
2003 2002
($M) Unaudited
Sales $282.3 $259.4
Gross profit $81.8 $82.4
Operating income $25.8 $29.4
Net income $5.3 $8.5
Net income excluding special items $7.4 $8.6
Net cash provided by operating activities $0.3 $2.8
EBITDA $47.7 $50.1
EBITDA excluding special items $49.7 $50.2
Free cash flow $21.6 $27.9
In this press release Noveon refers to various non-GAAP (generally
accepted accounting principles) financial measures including EBITDA and free
cash flow. There are tables that provide reconciliations of the reported GAAP
amounts to the various non-GAAP amounts referred to herein. EBITDA is defined
as income from continuing operations before 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.
Management believes EBITDA and free cash flow 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.
Noveon has provided financial information for the first quarter of 2003
and 2002 for the reported results of operations and the reported results
excluding special items of restructuring and consolidation 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.
For the quarter ended March 31, 2003, Noveon reported sales of
$282.3 million, EBITDA of $47.7 million and net income of $5.3 million. For
the first quarter of 2002, Noveon reported sales of $259.4 million, EBITDA of
$50.1 million and net income of $8.5 million.
In the quarter, Noveon recorded restructuring charges of $2.0 million
targeted at further reducing our overhead structure. In addition, we recorded
the cumulative effect of a change in accounting principle of $0.5 million
related to SFAS No. 143, "Accounting for Asset Retirement Obligations".
EBITDA excluding special items in the first quarter of 2003 was
$49.7 million. Net income excluding special items for the first quarter of
2003 was $7.4 million net of tax effect. EBITDA excluding special items in
the first quarter of 2002 was $50.2 million. Net income excluding special
items in the first quarter of 2002 was $8.6 million.
Sales increased 9% from the prior year reflecting the stronger Euro,
acquisition related revenue, primarily in our food and beverage and coatings
businesses, and higher volumes across most of Noveon's portfolio. All product
lines, with the exception of rubber chemicals and certain lines within
performance coatings, exhibited organic volume growth during the quarter with
our personal care, Estane(R) TPU and TempRite(R) CPVC product lines showing
particular strength. EBITDA excluding special items decreased 1.0% from the
prior year as significantly higher raw material and utility costs more than
offset higher volumes, continued manufacturing productivity and the strength
of the Euro. Free cash flow decreased from $27.9 million in 2002 to
$21.6 million in 2003 due to an $11.6 million increase in capital spending
primarily due to the timing of capacity-related projects, partially offset by
improved working capital productivity.
Steve Demetriou, Noveon president and chief executive officer, said, "We
are pleased with our first quarter results despite the present business
environment and continued raw material increases. Our strong focus and
commitment to new product development and bolt-on acquisitions are yielding
benefits to Noveon's top line. We generated our fourth consecutive quarter of
sales growth over the prior year and are encouraged that we achieved organic
volume growth in most of our product lines led by double digit growth in
personal care and strong volume growth in TempRite(R) CPVC and Estane(R) TPU.
In addition, our global resourcing initiatives are paying off with strong
sales growth in Asia and Latin America. The combination of sales growth and
our continued relentless focus on productivity improvements have allowed us to
largely mitigate the unprecedented run-up in raw material costs during the
quarter."
Consumer Specialties
Noveon's Consumer Specialties segment reported a sales increase of 24%
from $66.9 million to $82.9 million compared with the prior year first
quarter. Personal care product lines continue to lead segment sales growth
with continued strong volume of Carbopol(R) acrylic thickener and successful
new product introductions. In addition, the impact of acquisitions, the
stronger Euro and higher volumes in pharmaceuticals and food and beverage also
contributed to higher sales. EBITDA increased by 15% or $2.3 million from
$15.7 million in the first quarter of 2002 to $18.0 million in the first
quarter of 2003, principally due to higher personal care and pharmaceutical
sales; partially offset by higher raw material and utility costs within the
food and beverage product lines and tolling expenses related to acquisition
integration.
Specialty Materials
The Specialty Materials segment reported a sales increase of 7% from
$98.1 million to $104.7 million compared to the first quarter of the prior
year due to higher volume in TempRite(R) CPVC plumbing and fire sprinkler
applications and Estane(R) TPU product lines along with the impact of the
stronger Euro; partially offset by competitive pricing pressure within our
Estane(R) TPU product lines and lower volumes in polymer additives' rubber
chemical and antioxidant product lines. EBITDA decreased by 3% or
$1.0 million from $29.6 million in the first quarter of 2002 to $28.6 million
in the first quarter of 2003 principally due to higher raw material and
utility costs.
Performance Coatings
Performance Coatings sales increased slightly from $94.4 million to
$94.7 million compared to the first quarter of the prior year as the benefit
from acquisitions and the stronger Euro offset lower volume in specialty
coatings and textile finishing applications. EBITDA decreased by 20% or
$4.1 million from $20.1 million in the first quarter of 2002 to $16.0 million
in the first quarter of 2003 due to substantially higher raw material and
utility costs and lower volume; partially offset by lower manufacturing costs,
the benefits from acquisitions and the strength of the Euro.
Corporate
In the first quarter, corporate overhead expenses excluding depreciation
and amortization decreased by $2.3 million from $15.2 million in 2002 to
$12.9 million in 2003. The decrease is primarily the result of productivity
improvements and cost controls.
Noveon will be hosting a conference call to discuss first quarter results
today, May 7, 2003 at 10:00 AM 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 first quarter earnings call (confirmation
code 7073324). A replay of the call will be available through Monday, May 12
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 2002 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 the Company'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.
Condensed Consolidated Income Statement
(dollars in millions)
Three Months Ended
March 31,
2003 2002
(unaudited)
Sales $282.3 $259.4
Cost of sales 200.5 177.0
Gross profit 81.8 82.4
Selling and administrative expenses 50.4 49.1
Amortization expense 3.6 3.8
Restructuring and consolidation costs 2.0 0.1
Operating income 25.8 29.4
Interest expense - net 18.0 19.3
Other (income) expense - net (0.1) 0.2
Income before income taxes and cumulative
effect of accounting change 7.9 9.9
Income tax expense 2.1 1.4
Income before cumulative effect of accounting change 5.8 8.5
Cumulative effect of accounting change-net of tax 0.5 -
Net income $5.3 $8.5
Noveon, Inc.
Condensed Consolidated Balance Sheet
(dollars in millions)
March 31, December 31,
2003 2002
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $70.7 $79.5
Accounts and notes receivable, net of
allowances ($9.2 and $9.0 at March 31,
2003 and December 31, 2002, respectively) 159.4 135.7
Inventories 142.8 144.1
Prepaid expenses and other current assets 10.8 7.2
Total current assets 383.7 366.5
Property, plant and equipment - net 669.3 670.7
Goodwill 374.8 365.5
Identifiable intangible assets - net 180.1 182.1
Receivable from Parent 1.2 1.2
Other assets 42.3 43.1
Total assets $1,651.4 $1,629.1
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Short-term bank debt $0.1 $0.4
Accounts payable 124.0 111.2
Accrued expenses 52.2 70.6
Income taxes payable 6.8 5.3
Current maturities of long-term debt 6.7 -
Total current liabilities 189.8 187.5
Long-term debt 859.1 847.1
Postretirement benefits other than pensions 5.7 5.8
Accrued pensions 35.6 34.9
Deferred income taxes 17.8 18.1
Accrued environmental 18.2 18.2
Other non-current liabilities 20.0 17.8
Stockholder's equity
Common stock - -
Paid in capital 498.0 498.0
Retained earnings (deficit) 3.4 (1.9)
Accumulated other comprehensive income 3.8 3.6
Total stockholder's equity 505.2 499.7
Total liabilities and stockholder's equity $1,651.4 $1,629.1
Noveon, Inc.
Condensed Consolidated Statement of Cash Flows
(dollars in millions)
Three Months Ended
March 31,
2003 2002
(unaudited)
Operating activities
Net income $5.3 $8.5
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of accounting
change - net of tax 0.5 -
Depreciation and amortization 21.8 20.9
Deferred income taxes (0.1) -
Debt issuance cost amortization in interest
expense 1.4 1.4
Change in assets and liabilities, net of
effects of acquisitions of businesses (28.6) (28.0)
Net cash provided by operating activities 0.3 2.8
Investing activities
Purchases of property, plant and equipment (16.5) (4.9)
Payments made in connection with acquisitions,
net of cash acquired (10.7) -
Net cash (used) by investing activities (27.2) (4.9)
Financing activities
(Decrease) increase in short-term debt (0.3) 0.1
Net proceeds from borrowings on revolving
credit facility 18.5 -
Payments on long-term borrowings - (7.2)
Net cash provided (used) by financing activities 18.2 (7.1)
Effect of exchange rate changes on cash and cash
equivalents (0.1) (0.1)
Net (decrease) in cash and cash equivalents (8.8) (9.3)
Cash and cash equivalents at beginning of period 79.5 120.0
Cash and cash equivalents at end of period $70.7 $110.7
Noveon, Inc.
Reconciliation of Net Cash Provided by Operating Activities to EBITDA and Free
Cash Flow
(dollars in millions)
Three Months Ended
March 31,
2003 2002
(unaudited)
Net cash provided by operating activities $0.3 $2.8
Add interest expense (excluding debt issuance
cost amortization) 16.6 17.9
Current income tax expense, net of deferred
income tax expense 2.2 1.4
Change in assets and liabilities, net of
effects of acquisitions of businesses 28.6 28.0
EBITDA $47.7 $ 50.1
EBITDA from above $47.7 $ 50.1
Purchases of property, plant and equipment (16.5) (4.9)
Change in accounts receivable, inventory and
accounts payable (9.6) (17.3)
Free cash flow $21.6 $27.9
Noveon, Inc.
Condensed Consolidated Income Statement Reconciliation
of Results as Reported to Results Excluding Special Items
Three Months Ended March 31, 2003 and 2002
(unaudited) (dollars in millions)
2003
Reported Special Items Excluding
Special Items
Sales $282.3 $ - $282.3
Cost of sales 200.5 - 200.5
Gross profit 81.8 - 81.8
Selling and administrative
expenses 50.4 - 50.4
Amortization expense 3.6 - 3.6
Restructuring and consolidation
costs 2.0 (2.0) -
Operating income 25.8 2.0 27.8
Interest expense - net 18.0 - 18.0
Other (income) expense - net (0.1) - (0.1)
Income before income taxes and
cumulative effect of accounting
change 7.9 2.0 9.9
Income tax expense 2.1 0.4 2.5
Income before cumulative effect
of accounting change 5.8 1.6 7.4
Cumulative effect of accounting
change - net of tax 0.5 (0.5) -
Net income $ 5.3 $2.1 $7.4
2002
Reported Special Items Excluding
Special Items
Sales $259.4 $- $259.4
Cost of sales 177.0 - 177.0
Gross profit 82.4 - 82.4
Selling and administrative
expenses 49.1 - 49.1
Amortization expense 3.8 - 3.8
Restructuring and consolidation
costs 0.1 (0.1) -
Operating income 29.4 0.1 29.5
Interest expense - net 19.3 - 19.3
Other (income) expense - net 0.2 - 0.2
Income before income taxes and
cumulative effect of accounting
change 9.9 0.1 10.0
Income tax expense 1.4 - 1.4
Income before cumulative effect
of accounting change 8.5 0.1 8.6
Cumulative effect of accounting
change - net of tax - - -
Net income $8.5 $0.1 $8.6
Note: The special items include the restructuring and consolidation costs
in 2003 and 2002. Furthermore, the cumulative effect adjustment of an
accounting change is also a special item included in 2003.
Noveon, Inc.
Reconciliation of Net Cash Provided by Operating Activities to
EBITDA Excluding Special Items
(dollars in millions)
Three Months Ended
March 31,
2003 2002
(unaudited)
Net cash provided by operating activities $0.3 $2.8
Add interest expense (excluding debt issuance
cost amortization) 16.6 17.9
Current tax expense 2.2 1.4
Change in assets and liabilities, net of
effects of acquisitions of businesses 28.6 28.0
Restructuring and consolidation costs 2.0 0.1
EBITDA excluding special items $49.7 $ 50.2
SOURCE Noveon, Inc.
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CONTACT:
Sean Stack of Noveon, Inc., +1-216-447-6494
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