Exhibit 99.1
ERICO International Corporation
Announces Third Quarter 2004 Results,
Including Record Quarterly Sales
SOLON, OH(November 3, 2004) ERICO International Corporation (bond ticker CADDY) today reported results for its third quarter and nine months ended September 30, 2004.
Net sales in the third quarter of 2004 were $92.4 million, an increase of $10.1 million, or 12.2%, compared with third quarter 2003 sales of $82.3 million. The sales level of $92.4 million was the highest quarterly sales ever achieved by ERICO. The increase in net sales was due primarily to the favorable effect of foreign currency exchange rates and increased selling prices as the Company attempted to pass on the majority of increased raw material costs to its customers.
Gross profit in the third quarter of 2004 was $32.9 million, up $1.8 million, or 5.8%, from the third quarter 2003 gross profit of $31.1 million. The increase in gross profit was due primarily to the higher sales level achieved by the Company.
Operating expenses in the third quarter of 2004 were $22.4 million, up $1.8 million, or 8.7%, from third quarter 2003 operating expenses of $20.6 million. As a percentage of net sales, operating expenses decreased to 24.2% in the third quarter of 2004 from 25.0% for the third quarter of 2003.
The Company’s net cash provided by operating activities in the third quarter of 2004 was $3.5 million, compared with $5.6 million in the third quarter of 2003. The Company generated EBITDA of $13.3 million in the third quarter of 2004, compared with EBITDA of $13.5 million in the third quarter of 2003, a decrease of $0.2 million, or 1.4%. See below for the Company’s definition of EBITDA and a reconciliation of EBITDA to net cash provided by operating activities computed in accordance with accounting principles generally accepted in the United States (“GAAP”).
YEAR-TO-DATE RESULTS
Net sales for the nine months ended September 30, 2004 were $268.0 million, up $35.9 million, or 15.4%, from sales of $232.1 million for the nine months ended September 30, 2003, setting a new record for sales during the first nine months of a year. The increase in net sales was due to a combination of favorable foreign currency exchange rates, increased pricing and higher sales volume.
Gross profit in the first nine months of 2004 was $96.4 million, up $11.3 million, or 13.2%, from gross profit of $85.1 million for the nine months ended September 30, 2003. The increase in gross profit was due primarily to higher sales volume.
Operating expenses in the first nine months of 2004 were $64.7 million, up $3.8 million, or 6.1%, from operating expenses of $60.9 million in the first nine months of 2003. As a percentage of net sales, operating expenses declined to 24.1% in the first nine months of 2004 from 26.3% for the first nine months of 2003.
The Company’s net cash provided by operating activities was $9.9 million in the nine months ended September 30, 2004 compared with $5.5 million in the nine months ended September 30, 2003. The Company generated EBITDA of $40.9 million in the nine months ended September 30, 2004, up $4.2 million, or 11.3%, from EBITDA of $36.7 for the nine months ended September 30, 2003. With this performance, the Company set a new record for EBITDA generation in the first nine months of a year.
CONFERENCE CALL
The Company will hold a conference call at 10:00 a.m. (Eastern) on November 3, 2004 to provide an overview of the Company’s operating results for the third quarter and nine months ended September 30, 2004. Those interested in hearing the conference call may listen via telephone by dialing 1-866-814-8476 (the ID for the call is 581953).
ERICO is a leading designer, manufacturer and marketer of precision-engineered specialty metal products serving global niche product markets in a diverse range of electrical, commercial and industrial construction, utility and rail applications. The Company is headquartered in Solon, Ohio, USA, with a network of sales locations serving more than 25 countries and with manufacturing and distribution facilities worldwide. For more information, visit www.erico.com.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
Statements in this press release that are not historical facts, including statements accompanied by words such as “intend,” “may” and “will,” or the negative of such terms or comparable terminology, are forward-looking statements. Forward-looking statements appearing herein may include statements concerning plans and goals, and are based on current expectations. Actual results may differ materially from those projected in the forward-looking statements as a result of, among other things, changes in global, political, business and regulatory factors, including acts of war or terrorism; changes in raw material prices; the application of environmental laws to the Company’s business; adverse events in the Company’s international markets; and the development of design innovations by competitors of the Company. The Company is also subject to risks and uncertainties described in the Company’s filings with the Securities and Exchange Commission (“SEC”). In particular, see “Risk Factors” in the Company’s filings with the SEC, including the prospectus filed with the SEC on July 16, 2004 and available at www.sec.gov. The Company does not undertake any ongoing obligation, other than that applied by law, to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release.
ERICO International Corporation and Subsidiaries
Condensed Consolidated Income Statements (Unaudited)
(Dollars in Thousands)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30 | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
Net sales | $ | 92,398 | $ | 82,339 | $ | 267,960 | $ | 232,113 | ||||||||
Cost of sales | 59,468 | 51,219 | 171,608 | 146,970 | ||||||||||||
Gross profit | 32,930 | 31,120 | 96,352 | 85,143 | ||||||||||||
Operating expenses | 22,395 | 20,606 | 64,660 | 60,926 | ||||||||||||
Operating income | 10,535 | 10,514 | 31,692 | 24,217 | ||||||||||||
Interest expense, net | 3,927 | 3,294 | 11,274 | 9,555 | ||||||||||||
Foreign exchange loss (gain) net | 212 | (35 | ) | (181 | ) | (3,635 | ) | |||||||||
Other expense (income), net | 461 | (42 | ) | 1,743 | (96 | ) | ||||||||||
Income before income taxes | 5,935 | 7,297 | 18,856 | 18,393 | ||||||||||||
Provision for income taxes | 2,349 | 2,590 | 7,426 | 6,529 | ||||||||||||
Net income | $ | 3,586 | $ | 4,707 | $ | 11,430 | $ | 11,864 | ||||||||
ERICO International Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in Thousands, Except Per Share Amounts)
September 30, | December 31, | |||||||
2004 | 2003 | |||||||
Assets | (Unaudited) | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,738 | $ | 2,421 | ||||
Trade accounts receivable, net | 59,698 | 54,252 | ||||||
Inventories, net | 57,795 | 45,513 | ||||||
Other current assets | 8,162 | 7,745 | ||||||
Total current assets | 127,393 | 109,931 | ||||||
Property, plant and equipment, net | 53,705 | 60,630 | ||||||
Goodwill | 105,237 | 105,194 | ||||||
Other intangible assets, net | 36,776 | 36,572 | ||||||
Other assets | 15,505 | 11,440 | ||||||
Total assets | $ | 338,616 | $ | 323,767 | ||||
Liabilities and stockholder’s net investment | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | 30,237 | $ | 29,607 | ||||
Accrued compensation | 12,784 | 9,216 | ||||||
Accrued expenses and other current liabilities | 28,808 | 25,956 | ||||||
Total current liabilities | 71,829 | 64,779 | ||||||
Long-term debt | 164,075 | 140,920 | ||||||
Deferred income taxes | 28,269 | 28,939 | ||||||
Other long-term liabilities | 16,029 | 16,699 | ||||||
Stockholder’s net investment: | ||||||||
Common stock, par value $1.00 per share, 1,500,000 shares authorized, 1 share issued and outstanding | — | — | ||||||
Parent company investment | 59,098 | 72,668 | ||||||
Accumulated other comprehensive loss | (684 | ) | (238 | ) | ||||
Total stockholder’s net investment | 58,414 | 72,430 | ||||||
Total liabilities and stockholder’s net investment | $ | 338,616 | $ | 323,767 | ||||
ERICO International Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
Nine Months Ended | ||||||||
September 30, | ||||||||
2004 | 2003 | |||||||
Operating activities | ||||||||
Net income | $ | 11,430 | $ | 11,864 | ||||
Depreciation and amortization | 9,049 | 8,800 | ||||||
Other operating activities | (10,558 | ) | (15,171 | ) | ||||
Net cash provided by operating activities | 9,921 | 5,493 | ||||||
Investing activities | ||||||||
Acquisition payments, net of cash acquired | — | (3,329 | ) | |||||
Capital expenditures | (2,024 | ) | (4,619 | ) | ||||
Other investing activities | (463 | ) | (165 | ) | ||||
Net cash used in investing activities | (2,487 | ) | (8,113 | ) | ||||
Financing activities | ||||||||
Net transfers to parent company | (25,000 | ) | — | |||||
Net (payments) borrowing on revolving line of credit | (26,100 | ) | 6,745 | |||||
Proceeds from issuance of subordinated debt | 121,500 | — | ||||||
Principal payments on long-term debt | (72,950 | ) | (4,500 | ) | ||||
Financing fees paid | (5,582 | ) | — | |||||
Net cash (used in) provided by financing activities | (8,132 | ) | 2,245 | |||||
Effect of exchange rate changes on cash and cash equivalents | 15 | (103 | ) | |||||
Decrease in cash and cash equivalents | (683 | ) | (478 | ) | ||||
Cash and cash equivalents at beginning of period | 2,421 | 3,374 | ||||||
Cash and cash equivalents at end of period | $ | 1,738 | $ | 2,896 | ||||
The Company defines EBITDA, a non-GAAP financial measure, as net income plus income taxes, interest expense, net, depreciation, amortization and certain other non-cash, non-recurring items. The Company has chosen to present EBITDA because the Company believes it is a widely accepted financial indicator of a company’s ability to service and incur indebtedness and because EBITDA is used in the Company’s financial debt covenants. Additionally, management uses EBITDA, among other financial measures, for planning and forecasting purposes. However, EBITDA should not be considered as an alternative to net cash provided by operating activities as a measure of liquidity in accordance with GAAP. Since EBITDA is not calculated identically by all companies, the Company’s method of computation may not be comparable to those disclosed by other companies. Following is a reconciliation of EBITDA to net cash provided by operating activities, which the Company believes is the most directly comparable GAAP measure of a company’s ability to service and incur indebtedness:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
Net cash provided by operating activities | $ | 3,523 | $ | 5,603 | $ | 9,921 | $ | 5,493 | ||||||||
Interest expense, net | 3,927 | 3,294 | 11,274 | 9,555 | ||||||||||||
Provision for income taxes | 2,349 | 2,590 | 7,426 | 6,529 | ||||||||||||
Foreign exchange (loss) gain, net | (212 | ) | 35 | 181 | 3,635 | |||||||||||
Deferred taxes | 232 | 261 | 690 | 1,060 | ||||||||||||
Amortization of financing fees and discount on senior subordinated notes included in interest expense, net | (287 | ) | (165 | ) | (686 | ) | (497 | ) | ||||||||
Net changes in operating assets and liabilities | 3,805 | 1,902 | 12,109 | 10,973 | ||||||||||||
EBITDA | $ | 13,337 | $ | 13,520 | $ | 40,915 | $ | 36,748 | ||||||||
Contact: | Polly Bloom | |
Investor Relations | ||
(440) 542-1304 |