CLEVELAND, Nov. 10 /PRNewswire/ -- Noveon, Inc. today reported selected
financial results for the third quarter of 2003.
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Three Months Ended Nine Months Ended
September 30 September 30
2003 2002 2003 2002
($M) Unaudited Unaudited
Sales $278.8 $273.2 $855.1 $813.5
Gross profit $79.3 $89.0 $246.9 $266.0
Operating income $25.3 $33.1 $81.7 $100.9
Net income $5.7 $12.3 $21.7 $36.6
Net income excluding
special items $6.1 $13.3 $25.1 $39.1
Net cash provided by
operating activities $20.8 $34.9 $61.5 $96.8
EBITDA $48.1 $54.3 $148.2 $162.0
EBITDA excluding
special items $48.6 $55.4 $151.8 $164.9
Free cash flow $33.1 $45.6 $83.2 $126.2
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 third quarter and first
nine months of 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 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.
Third Quarter Results
For the quarter ended September 30, 2003, Noveon reported sales of $278.8
million, EBITDA of $48.1 million and net income of $5.7 million. For the
third quarter of 2002, Noveon reported sales of $273.2 million, EBITDA of
$54.3 million and net income of $12.3 million.
Noveon recorded restructuring charges in the quarter of $0.5 million
targeted at further reducing our overhead structure. EBITDA excluding special
items in the third quarter of 2003 was $48.6 million. Net income excluding
special items for the third quarter of 2003 was $6.1 million. EBITDA
excluding special items in the third quarter of 2002 was $55.4 million. Net
income excluding special items in the third quarter of 2002 was $13.3 million.
Sales increased 2% in the quarter from the prior year with higher sales
across each segment, reflecting the stronger euro, acquisition-related revenue
primarily in our food and beverage and Performance Coatings product lines, and
higher volumes in our personal care and Estane(R) TPU product lines. EBITDA
excluding special items of $48.6 million decreased 12% from the prior year as
significantly higher raw material and utility costs, competitive pricing
pressure and lower Performance Coatings volumes more than offset higher
personal care and Estane(R) TPU volumes, continued manufacturing productivity
and lower selling, general and administrative expenses. Free cash flow
decreased to $33.1 million in 2003 from $45.6 million in 2002 due to lower
EBITDA and higher working capital associated with increased sales, partially
offset by lower capital spending in the quarter.
Steve Demetriou, Noveon president and chief executive officer, said, "In
the third quarter, we generated our sixth consecutive quarter of sales growth
over the prior year despite the stagnant manufacturing business environment
that persisted for most of the quarter. Noveon's strong focus and commitment
to new product development and bolt-on acquisitions, as well as the stronger
euro, drove our top line results. Particularly strong results in our personal
care product lines were offset by significantly higher raw material costs,
continued sluggishness in Performance Coatings, and a competitive pricing
environment." Demetriou went on to say, "We continue to see the benefits of
ongoing productivity initiatives which helped offset high raw materials,
allowing us to add growth resources, accelerate new product initiatives and
expand globally. These initiatives will position Noveon for continued
growth."
Consumer Specialties
Sales increased 6% to $80.8 million from $76.4 million compared with the
prior year third 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 decreased 2% to $18.8 million in the
third quarter of 2003 from $19.2 million in the third quarter of 2002 as
higher personal care, pharmaceutical and food and beverage sales were offset
by 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 1% to $102.8
million from $101.7 million compared to the third quarter of the prior year
due to the impact of higher Estane(R) TPU related volume and the stronger
euro, partially offset by competitive pricing pressure across the segment.
EBITDA decreased by 21% or $6.9 million to $25.5 million in the third quarter
of 2003 from $32.4 million in the third quarter of 2002 principally due to
higher raw material and utility costs and competitive pricing pressure across
the segment, partially offset by lower manufacturing costs and reduced
selling, general and administrative spending.
Performance Coatings
Performance Coatings sales of $95.2 million were essentially flat compared
to the third quarter of the prior year as the benefit from acquisitions, the
stronger euro and a favorable sales mix were offset by lower volume across the
segment. EBITDA decreased by 13% or $2.3 million to $15.8 million in the
third quarter of 2003 from $18.1 million in the third quarter of 2002 due to
lower volume and substantially higher raw material and utility costs,
partially offset by lower manufacturing costs and the benefit of acquisitions.
Corporate
In the third quarter, corporate overhead expenses excluding depreciation
and amortization decreased by $2.8 million to $11.5 million in 2003 from $14.3
million in 2002. The decrease is primarily the result of productivity
improvements, cost controls and reduced costs associated with our variable
incentive plans.
Nine Months Results
For the nine months ended September 30, 2003, Noveon reported sales of $855.1
million, EBITDA of $148.2 million and net income of $21.7 million. For the
nine months ended September 30, 2002, Noveon reported sales of $813.5 million,
EBITDA of $162.0 million and net income of $36.6 million.
For the nine-month period ended September 30, 2003, Noveon recorded
restructuring charges of $3.6 million targeted at further reducing our
overhead structure. EBITDA excluding special items in the first nine months
of 2003 was $151.8 million. Net income excluding special items for the nine
months of 2003 was $25.1 million. EBITDA excluding special items in the first
nine months of 2002 was $164.9 million. Net income excluding special items in
the first nine months of 2002 was $39.1 million.
Sales increased 5% 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 and polymer additives exhibited organic volume growth during the
first nine months of 2003, with our personal care product lines growing at
double digit rates and Estane(R) TPU showing particular strength in Asia.
EBITDA excluding special items of $151.8 million decreased 8% 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 $43.0 million in the
first nine months of 2003 to $83.2 million due to higher working capital
associated with higher sales, lower EBITDA and a $11.5 million increase in
capital spending related to the timing of capacity-related projects.
Noveon will be hosting a conference call to discuss third quarter results
today, November 10, 2003 at 11:00 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 third quarter earnings call (confirmation
code 7982098). A replay of the call will be available through Friday,
November 14 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 Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
(unaudited)
Sales $278.8 $273.2 $855.1 $813.5
Cost of sales 199.5 184.2 608.2 547.5
Gross profit 79.3 89.0 246.9 266.0
Selling and
administrative
expenses 49.9 51.3 150.6 151.7
Amortization expense 3.6 3.5 11.0 10.5
Restructuring and
consolidation costs 0.5 1.1 3.6 2.9
Operating income 25.3 33.1 81.7 100.9
Interest expense--net 17.3 18.9 53.5 57.4
Other expense--net 0.5 0.1 0.6 0.2
Income before income
taxes and cumulative
effect of accounting
change 7.5 14.1 27.6 43.3
Income tax expense 1.8 1.8 5.4 6.7
Income before cumulative
effect of accounting
change 5.7 12.3 22.2 36.6
Cumulative effect of
accounting change--
net of tax - - 0.5 -
Net income $5.7 $12.3 $21.7 $36.6
Noveon, Inc.
Condensed Consolidated Balance Sheet
(dollars in millions)
September 30, December 31,
2003 2002
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $86.4 $79.5
Accounts and notes receivable, net of
allowances ($7.6 and $9.0 at
September 30, 2003 and December 31, 2002,
respectively) 164.2 135.7
Inventories 149.8 144.1
Prepaid expenses and other current assets 6.4 7.2
Total current assets 406.8 366.5
Property, plant and equipment--net 667.0 670.7
Goodwill 403.2 365.5
Identifiable intangible assets--net 175.7 182.1
Receivable from Parent 1.4 1.2
Other assets 46.3 43.1
Total assets $1,700.4 $1,629.1
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Short-term bank debt $- $0.4
Accounts payable 119.6 111.2
Accrued expenses 53.5 70.6
Income taxes payable 8.5 5.3
Current maturities of long-term debt 12.2 -
Total current liabilities 193.8 187.5
Long-term debt 840.5 847.1
Postretirement benefits other than pensions 5.9 5.8
Accrued pensions 38.5 34.9
Deferred income taxes 18.0 18.1
Accrued environmental 18.2 18.2
Other non-current liabilities 16.9 17.8
Stockholder's equity
Common stock - -
Paid in capital 498.0 498.0
Retained earnings (deficit) 19.8 (1.9)
Accumulated other comprehensive income 50.8 3.6
Total stockholder's equity 568.6 499.7
Total liabilities and stockholder's equity $1,700.4 $1,629.1
Noveon, Inc.
Condensed Consolidated Statement of Cash Flows
(dollars in millions)
Nine Months Ended
September 30,
2003 2002
(unaudited)
Operating activities
Net income $21.7 $36.6
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 67.1 61.3
Deferred income taxes 0.1 2.2
Debt issuance cost amortization in
interest expense 4.0 4.2
Cumulative effect of accounting
change--net of tax 0.5 -
Change in assets and liabilities, net
of effects of acquisitions of businesses (31.9) (7.5)
Net cash provided by operating activities 61.5 96.8
Investing activities
Purchases of property, plant and equipment (39.2) (27.7)
Payments made in connection with acquisitions,
net of cash acquired (16.6) (20.6)
Net cash (used) by investing activities (55.8) (48.3)
Financing activities
Debt issuance costs (1.8) -
Decrease in short-term debt (0.3) (0.4)
Payments on long-term borrowings - (18.9)
Net cash (used) by financing activities (2.1) (19.3)
Effect of exchange rate changes on cash
and cash equivalents 3.3 2.7
Net increase in cash and cash equivalents 6.9 31.9
Cash and cash equivalents at beginning of period 79.5 120.0
Cash and cash equivalents at end of period $86.4 $151.9
Noveon, Inc.
Reconciliation of Net Cash Provided by Operating Activities to EBITDA
and Free Cash Flow
(dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
(unaudited)
Net cash provided by operating
activities $20.8 $34.9 $61.5 $96.8
Add interest expense (excluding
debt issuance cost
amortization) 16.0 17.5 49.5 53.2
Current income tax expense,
net of deferred
income tax expense 1.8 1.0 5.3 4.5
Changes in assets and
liabilities, net of effects
of acquisitions of businesses 9.5 0.9 31.9 7.5
EBITDA $48.1 $54.3 $148.2 $162.0
EBITDA from above $48.1 $54.3 $148.2 $162.0
Purchases of property,
plant and equipment (9.6) (15.5) (39.2) (27.7)
Changes in accounts receivable,
inventory and accounts
payable (5.4) 6.8 (25.8) (8.1)
Free cash flow $33.1 $45.6 $83.2 $126.2
Noveon, Inc.
Condensed Consolidated Income Statement Reconciliation
of Results as Reported to Results Excluding Special Items
Three Months Ended September 30, 2003 and 2002
(dollars in millions)
2003
Excluding
Reported Special Items Special Items
Sales $278.8 $ - $278.8
Cost of sales 199.5 - 199.5
Gross profit 79.3 - 79.3
Selling and administrative
expenses 49.9 - 49.9
Amortization expense 3.6 - 3.6
Restructuring and consolidation
costs 0.5 (0.5) -
Operating income 25.3 0.5 25.8
Interest expense - net 17.3 - 17.3
Other expense - net 0.5 - 0.5
Income before income taxes
and cumulative effect of
accounting change 7.5 0.5 8.0
Income tax expense 1.8 0.1 1.9
Income before cumulative effect
of accounting change 5.7 0.4 6.1
Cumulative effect of accounting
change - net of tax - - -
Net income $ 5.7 $0.4 $6.1
2002
Excluding
Reported Special Items Special Items
Sales $273.2 $- $273.2
Cost of sales 184.2 - 184.2
Gross profit 89.0 - 89.0
Selling and administrative
expenses 51.3 - 51.3
Amortization expense 3.5 - 3.5
Restructuring and consolidation
costs 1.1 (1.1) -
Operating income 33.1 1.1 34.2
Interest expense - net 18.9 - 18.9
Other expense - net 0.1 - 0.1
Income before income taxes
and cumulative effect of
accounting change 14.1 1.1 15.2
Income tax expense 1.8 0.1 1.9
Income before cumulative effect
of accounting change 12.3 1.0 13.3
Cumulative effect of accounting
change - net of tax - - -
Net income $12.3 $1.0 $ 13.3
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
Nine Months Ended September 30, 2003 and 2002
(dollars in millions)
2003
Excluding
Reported Special Items Special Items
Sales $855.1 $ - $855.1
Cost of sales 608.2 - 608.2
Gross profit 246.9 - 246.9
Selling and administrative
expenses 150.6 - 150.6
Amortization expense 11.0 - 11.0
Restructuring and consolidation
costs 3.6 (3.6) -
Operating income 81.7 3.6 85.3
Interest expense - net 53.5 - 53.5
Other expense - net 0.6 - 0.6
Income before income taxes
and cumulative effect
of accounting change 27.6 3.6 31.2
Income tax expense 5.4 0.7 6.1
Income before cumulative effect
of accounting change 22.2 2.9 25.1
Cumulative effect of accounting
change - net of tax 0.5 (0.5) -
Net income $21.7 $3.4 $25.1
2002
Excluding
Reported Special Items Special Items
Sales $813.5 $- $813.5
Cost of sales 547.5 - 547.5
Gross profit 266.0 - 266.0
Selling and administrative
expenses 151.7 - 151.7
Amortization expense 10.5 - 10.5
Restructuring and consolidation
costs 2.9 (2.9) -
Operating income 100.9 2.9 103.8
Interest expense - net 57.4 - 57.4
Other expense - net 0.2 - 0.2
Income before income taxes
and cumulative effect
of accounting change 43.3 2.9 46.2
Income tax expense 6.7 0.4 7.1
Income before cumulative effect
of accounting change 36.6 2.5 39.1
Cumulative effect of accounting
change - net of tax - - -
Net income $36.6 $2.5 $ 39.1
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 Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
(unaudited)
Net cash provided by
operating activities $20.8 $34.9 $61.5 $96.8
Add interest expense
(excluding debt issuance
cost amortization) 16.0 17.5 49.5 53.2
Current income tax expense,
net of deferred
income tax expense 1.8 1.0 5.3 4.5
Changes in assets and
liabilities, net of effects
of acquisitions of
businesses 9.5 0.9 31.9 7.5
Restructuring and
consolidation costs 0.5 1.1 3.6 2.9
EBITDA excluding special items $48.6 $55.4 $151.8 $164.9
SOURCE Noveon, Inc.
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CONTACT:
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