CLEVELAND, July 24 /PRNewswire/ -- Noveon, Inc. today reported selected
financial results for the second quarter of 2003.
(Logo: http://www.newscom.com/cgi-bin/prnh/20010523/CLW011LOGO-b )
Three Months Ended Six Months Ended
June 30 June 30
2003 2002 2003 2002
($M) Unaudited Unaudited
Sales $294.0 $280.9 $576.3 $540.3
Gross profit $85.8 $94.6 $167.5 $176.9
Operating income $30.7 $38.3 $56.4 $67.7
Net income $10.7 $15.8 $16.0 $24.3
Net income excluding
special items $11.6 $17.2 $18.9 $25.8
Net cash provided by
operating activities $40.4 $59.1 $40.7 $61.9
EBITDA $52.4 $57.6 $100.0 $107.8
EBITDA excluding special
items $53.4 $59.3 $103.0 $109.6
Free cash flow $28.5 $52.7 $50.0 $80.7
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 second quarter and first
six months 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.
Second Quarter Results
For the quarter ended June 30, 2003, Noveon reported sales of
$294.0 million, EBITDA of $52.4 million and net income of $10.7 million. For
the second quarter of 2002, Noveon reported sales of $280.9 million, EBITDA of
$57.6 million and net income of $15.8 million.
Noveon recorded restructuring charges in the quarter of $1.0 million
targeted at further reducing our overhead structure. EBITDA excluding special
items in the second quarter of 2003 was $53.4 million. Net income excluding
special items for the second quarter of 2003 was $11.6 million. EBITDA
excluding special items in the second quarter of 2002 was $59.3 million. Net
income excluding special items in the second quarter of 2002 was
$17.2 million.
Sales increased 5% in the quarter from the prior year reflecting the
stronger euro, acquisition-related revenue primarily in our food and beverage
and Performance Coatings product lines, and higher volumes across most of
Noveon's portfolio. All product lines, with the exception of certain product
lines within Performance Coatings and TempRite(R) CPVC due to a delayed start
to the building season, exhibited organic volume growth during the quarter
with our Personal Care and Estane(R) TPU product lines showing particular
strength. EBITDA excluding special items of $53.4 million decreased 10% from
the prior year as significantly higher raw material and utility costs and
lower Performance Coatings volumes more than offset higher volumes across many
of our product lines, continued manufacturing productivity, lower selling,
general and administrative expenses and the strength of the euro. Free cash
flow decreased to $28.5 million in 2003 from $52.7 million in 2002 due to a
$5.8 million increase in capital spending primarily as a result of the timing
of capacity-related projects, higher working capital associated with increased
sales, and lower EBITDA.
Steve Demetriou, Noveon president and chief executive officer, said, "In
the second quarter, we generated record sales despite the present business
environment. Our strong focus and commitment to new product development and
bolt-on acquisitions as well as the stronger euro are yielding benefits to
Noveon's top line. This was our fifth consecutive quarter of sales growth
over the prior year driven by organic volume growth in most of our product
lines led by Personal Care and Estane (R) TPU. These positives were offset by
significantly higher raw material costs and continued sluggishness in
Performance Coatings." Demetriou went on to say, "We continue to see the
benefits of our ongoing productivity initiatives, which have allowed us to add
growth resources, accelerate new product initiatives and expand globally. In
addition, we recently completed a successful refinancing of our senior term
debt. Due to favorable conditions in the capital markets and Noveon's
performance, we were able to reduce our borrowing margin by approximately 75
basis points which equates to an annual interest savings of $3.7 million. As
a result of these initiatives, we are well positioned to benefit from the
eventual economic recovery and the return of raw material costs to more normal
levels."
Consumer Specialties
Sales increased 16% to $86.5 million from $74.8 million compared with the
prior year second quarter in our Consumer Specialties Segment. Personal Care
product lines led segment sales growth with continued strong global volume of
Carbopol(R) acrylic thickener and successful new product introductions of Aqua
SF1, a liquid thickener, and Fixate(TM), a product used in hair care
applications. In addition, the impact of acquisitions and the stronger euro
also contributed to higher sales. EBITDA increased by 2% or $0.4 million to
$19.5 million in the second quarter of 2003 from $19.1 million in the second
quarter of 2002, as higher personal care, pharmaceutical and food and beverage
sales were offset by substantially higher raw material and utility costs and
tolling expenses related to acquisition integration within the food and
beverage product lines.
Specialty Materials
The Specialty Materials segment reported a sales increase of 5% to
$110.8 million from $105.8 million compared to the second quarter of the prior
year due to the impact of the stronger euro, higher Estane(R) TPU related
volume in Asia and North America, and record volume in TempRite(R) CPVC
Blazemaster(R) fire sprinkler applications; partially offset by lower
TempRite(R) CPVC volume in FlowGuard Gold(R) plumbing applications due to a
delayed start to the building season as well as the impact of continued low
industrial capital spending on our Corzan(R) industrial piping applications.
EBITDA decreased by 7% or $2.2 million to $28.7 million in the second quarter
of 2003 from $30.9 million in the second quarter of 2002 principally due to
higher raw material and utility costs, partially offset by lower manufacturing
and selling, general and administrative spending.
Performance Coatings
Performance Coatings sales declined 4% to $96.7 million from
$100.3 million compared to the second quarter of the prior year as the benefit
from acquisitions, the stronger euro, higher selling prices and a favorable
sales mix, were more than offset by lower volume due to reduced demand in
paints and coatings, engineered paper and textile finishing-related
applications, in addition to some lost business. EBITDA decreased by 25% or
$5.6 million to $17.1 million in the second quarter of 2003 from $22.7 million
in the second quarter of 2002 due to lower volume and substantially higher raw
material and utility costs, partially offset by lower manufacturing costs,
higher selling prices and the benefits from acquisitions.
Corporate
In the second quarter, corporate overhead expenses excluding depreciation
and amortization decreased by $1.5 million to $11.9 million in 2003 from
$13.4 million in 2002. The decrease is primarily the result of productivity
improvements and cost controls.
Six Months Results
For the six months ended June 30, 2003, Noveon reported sales of
$576.3 million, EBITDA of $100.0 million and net income of $16.0 million. For
the six months ended June 30, 2002, Noveon reported sales of $540.3 million,
EBITDA of $107.8 million and net income of $24.3 million.
During the first six months, Noveon recorded restructuring charges of
$3.0 million targeted at further reducing our overhead structure. EBITDA
excluding special items in the first half of 2003 was $103.0 million. Net
income excluding special items for the first half of 2003 was $18.9 million.
EBITDA excluding special items in the first half of 2002 was $109.6 million.
Net income excluding special items in the first half of 2002 was
$25.8 million.
Sales increased 7% from the prior year reflecting the stronger euro,
acquisition-related revenue primarily in our food and beverage and Performance
Coatings product lines and higher volumes across most of Noveon's portfolio.
All product lines, with the exception of certain lines within Performance
Coatings, polymer additives and TempRite(R) CPVC, exhibited organic volume
growth during the first half of 2003 with our Personal Care product lines
growing at double digit rates and Estane(R) TPU showing particular strength in
Asia and North America. EBITDA excluding special items of $103.0 million
decreased 6% from the prior year as significantly higher raw material and
utility costs and lower Performance Coatings volumes more than offset higher
volumes across many of our product lines, continued manufacturing
productivity, lower selling, general and administrative expenses and the
strength of the euro. Free cash flow decreased to $50.0 million in 2003 from
$80.7 million in 2002 due to a $17.4 million increase in capital spending
related to the timing of capacity-related projects, higher working capital
associated with higher sales and lower EBITDA.
Noveon will be hosting a conference call to discuss second quarter results
today, July 24, 2003 at 9:00 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 second quarter earnings call (confirmation
code 7460128). A replay of the call will be available through Tuesday, July
29 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 Six Months Ended
June 30, June 30,
2003 2002 2003 2002
(unaudited)
Sales $294.0 $280.9 $576.3 $540.3
Cost of sales 208.2 186.3 408.8 363.4
Gross profit 85.8 94.6 167.5 176.9
Selling and
administrative expenses 50.4 51.3 100.8 100.4
Amortization expense 3.7 3.3 7.3 7.0
Restructuring and
consolidation costs 1.0 1.7 3.0 1.8
Operating income 30.7 38.3 56.4 67.7
Interest expense-net 18.2 19.2 36.1 38.5
Other expense (income)-net 0.3 (0.1) 0.2 --
Income before income
taxes and cumulative
effect of accounting
change 12.2 19.2 20.1 29.2
Income tax expense 1.5 3.4 3.6 4.9
Income before cumulative
effect of accounting
change 10.7 15.8 16.5 24.3
Cumulative effect of
accounting change-net
of tax -- -- 0.5 --
Net income $10.7 $15.8 $16.0 $24.3
Noveon, Inc.
Condensed Consolidated Balance Sheet
(dollars in millions)
June 30, December 31,
2003 2002
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $81.4 $79.5
Accounts and notes receivable, net of allowances
($8.8 and $9.0 at June 30, 2003 and
December 31, 2002, respectively) 164.7 135.7
Inventories 146.4 144.1
Prepaid expenses and other current assets 8.4 7.2
Total current assets 400.9 366.5
Property, plant and equipment-net 679.9 670.7
Goodwill 405.9 365.5
Identifiable intangible assets-net 178.4 182.1
Receivable from Parent 1.4 1.2
Other assets 42.5 43.1
Total assets $1,709.0 $1,629.1
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Short-term bank debt $-- $0.4
Accounts payable 122.1 111.2
Accrued expenses 58.7 70.6
Income taxes payable 7.2 5.3
Current maturities of long-term debt 7.1 --
Total current liabilities 195.1 187.5
Long-term debt 846.8 847.1
Postretirement benefits other than pensions 5.8 5.8
Accrued pensions 37.7 34.9
Deferred income taxes 18.2 18.1
Accrued environmental 18.2 18.2
Other non-current liabilities 20.3 17.8
Stockholder's equity
Common stock -- --
Paid in capital 498.0 498.0
Retained earnings (deficit) 14.1 (1.9)
Accumulated other comprehensive income 54.8 3.6
Total stockholder's equity 566.9 499.7
Total liabilities and stockholder's equity $1,709.0 $1,629.1
Noveon, Inc.
Condensed Consolidated Statement of Cash Flows
(dollars in millions)
Six Months Ended
June 30,
2003 2002
(unaudited)
Operating activities
Net income $16.0 $24.3
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 43.8 40.1
Deferred income taxes 0.1 1.4
Debt issuance cost amortization in interest
expense 2.7 2.8
Cumulative effect of accounting change-net of tax 0.5 --
Change in assets and liabilities, net of effects
of acquisitions of businesses (22.4) (6.7)
Net cash provided by operating activities 40.7 61.9
Investing activities
Purchases of property, plant and equipment (29.6) (12.2)
Payments made in connection with acquisitions,
net of cash acquired (10.7) (20.5)
Net cash (used) by investing activities (40.3) (32.7)
Financing activities
Decrease in short-term debt (0.3) (0.3)
Payments on long-term borrowings -- (11.7)
Net cash (used) by financing activities (0.3) (12.0)
Effect of exchange rate changes on cash and cash
equivalents 1.8 1.7
Net increase in cash and cash equivalents 1.9 18.9
Cash and cash equivalents at beginning of period 79.5 120.0
Cash and cash equivalents at end of period $81.4 $138.9
Noveon, Inc.
Reconciliation of Net Cash Provided by Operating
Activities to EBITDA and Free Cash Flow
(dollars in millions)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
(unaudited)
Net cash provided by
operating activities $40.4 $59.1 $40.7 $61.9
Add interest expense
(excluding debt
issuance cost
amortization) 16.9 17.8 33.4 35.7
Current income tax
expense, net of
deferred income tax
expense 1.3 2.0 3.5 3.5
Changes in assets and
liabilities, net of
effects of acquisitions
of businesses (6.2) (21.3) 22.4 6.7
EBITDA $52.4 $57.6 $100.0 $107.8
EBITDA from above $52.4 $57.6 $100.0 $107.8
Purchases of property,
plant and equipment (13.1) (7.3) (29.6) (12.2)
Changes in accounts
receivable, inventory
and accounts payable (10.8) 2.4 (20.4) (14.9)
Free cash flow $28.5 $52.7 $50.0 $80.7
Noveon, Inc.
Condensed Consolidated Income Statement Reconciliation
of Results as Reported to Results Excluding Special Items
Three Months Ended June 30, 2003 and 2002
(dollars in millions)
2003 Excluding
Reported Special Special
Items Items
Sales $294.0 $ -- $294.0
Cost of sales 208.2 -- 208.2
Gross profit 85.8 -- 85.8
Selling and administrative
expenses 50.4 -- 50.4
Amortization expense 3.7 -- 3.7
Restructuring and consolidation
costs 1.0 (1.0) --
Operating income 30.7 1.0 31.7
Interest expense - net 18.2 -- 18.2
Other expense - net 0.3 -- 0.3
Income before income taxes 12.2 1.0 13.2
Income tax expense 1.5 0.1 1.6
Net income $10.7 $0.9 $11.6
2002 Excluding
Reported Special Special
Items Items
Sales $280.9 $-- $280.9
Cost of sales 186.3 -- 186.3
Gross profit 94.6 -- 94.6
Selling and administrative expenses 51.3 -- 51.3
Amortization expense 3.3 -- 3.3
Restructuring and consolidation
costs 1.7 (1.7) --
Operating income 38.3 1.7 40.0
Interest expense - net 19.2 -- 19.2
Other (income) - net (0.1) -- (0.1)
Income before income taxes 19.2 1.7 20.9
Income tax expense 3.4 0.3 3.7
Net income $15.8 $1.4 $17.2
Note: The special items include the restructuring and consolidation costs
in 2003 and 2002.
Noveon, Inc.
Condensed Consolidated Income Statement Reconciliation
of Results as Reported to Results Excluding Special Items
Six Months Ended June 30, 2003 and 2002
(dollars in millions)
2003 Excluding
Reported Special Special
Items Items
Sales $576.3 $ -- $576.3
Cost of sales 408.8 -- 408.8
Gross profit 167.5 -- 167.5
Selling and administrative
expenses 100.8 -- 100.8
Amortization expense 7.3 -- 7.3
Restructuring and consolidation
costs 3.0 (3.0) --
Operating income 56.4 3.0 59.4
Interest expense - net 36.1 -- 36.1
Other expense - net 0.2 -- 0.2
Income before income taxes
and cumulative effect of
accounting change 20.1 3.0 23.1
Income tax expense 3.6 0.6 4.2
Income before cumulative effect
of accounting change 16.5 2.4 18.9
Cumulative effect of accounting
change - net of tax 0.5 (0.5) --
Net income $16.0 $2.9 $18.9
2002 Excluding
Reported Special Special
Items Items
Sales $540.3 $ -- $540.3
Cost of sales 363.4 -- 363.4
Gross profit 176.9 -- 176.9
Selling and administrative
expenses 100.4 -- 100.4
Amortization expense 7.0 -- 7.0
Restructuring and consolidation
costs 1.8 (1.8) --
Operating income 67.7 1.8 69.5
Interest expense - net 38.5 -- 38.5
Income before income taxes 29.2 1.8 31.0
Income tax expense 4.9 0.3 5.2
Net income $24.3 $1.5 $ 25.8
Note: The special items include the restructuring and consolidation costs
in 2003 and 2002. Furthermore, the cumulative effect adjustment of
an accounting change in 2003 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 Six Months Ended
June 30, June 30,
2003 2002 2003 2002
(unaudited)
Net cash provided by
operating activities $40.4 $59.1 $40.7 $61.9
Add interest expense
(excluding debt issuance
cost amortization) 16.9 17.8 33.4 35.7
Current income tax
expense, net of deferred
income tax expense 1.3 2.0 3.5 3.5
Changes in assets and
liabilities, net of
effects of acquisitions
of businesses (6.2) (21.3) 22.4 6.7
Restructuring and
consolidation costs 1.0 1.7 3.0 1.8
EBITDA excluding special
items $53.4 $59.3 $103.0 $109.6
SOURCE Noveon, Inc.
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