Exhibit 99.1
ERICO International Corporation
SOLON, OH- May 12, 2005 — ERICO International Corporation (bond ticker CADDY) today reported results for its first quarter ended March 31, 2005.
Net sales in the first quarter of 2005 were $89.9 million, an increase of $6.5 million, or 7.8%, compared with first quarter 2004 sales of $83.4 million. The increase in net sales was due primarily to higher sales volume and increased selling prices. This performance is a new record for first quarter sales.
Gross profit in the first quarter of 2005 was $30.9 million, up $1.1 million, or 3.7%, from the first quarter 2004 gross profit of $29.8 million.
Operating expenses in the first quarter of 2005 were $21.6 million, up $0.3 million, or 1.3%, from first quarter 2004 operating expenses of $21.3 million. As a percentage of net sales, operating expenses decreased to 24.0% in the first quarter of 2005 from 25.6% for the first quarter of 2004. The decrease in operating expenses as a percent of sales in the first quarter of 2005 was due to the higher sales level along with management’s continued focus on controlling expenses.
The Company’s net cash used by operating activities in the first quarter of 2005 was $7.9 million, compared with $5.0 million used in the first quarter of 2004. The Company generated EBITDA of $12.9 million in the first quarter of 2005, compared with EBITDA of $11.1 million in the first quarter of 2004, an increase of $1.8 million, or 16.3%. These results represent a new record for EBITDA generation by the Company in the first quarter of a fiscal year. 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”).
CONFERENCE CALL
The Company will hold a conference call at 10:00 a.m. (Eastern) on Thursday, May 12, 2005 to provide an overview of the Company’s operating results for the first quarter ended March 31, 2005. Those interested in hearing the conference call may listen via telephone by dialing 1-888-639-6218 (the ID for the call is 695979).
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, visitwww.erico.com.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
Statements in this release that are not historical facts are forward-looking statements, as that term is defined by the federal securities laws, and can be identified by the use of terminology such as “believe,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “continue,” “positioned,” “strategy” and similar expressions. These statements are only the Company’s predictions and not guarantees of future performance. The Company’s actual results may differ materially from those contained in the forward-looking statements in this release as a result of risks, uncertainties and contingencies that include, without limitation, general economic conditions in the markets in which the Company operates, industry related and other factors such as the availability of sufficient amounts of raw materials, particularly steel and copper, and the Company’s ability to acquire these raw materials on an economic basis; risks associated with foreign operations, including fluctuations in exchange rates of foreign currencies; competitive pressures on pricing; operational issues at the Company’s facilities; availability of financing to fund operations at anticipated rates and terms; prolonged work stoppages; governmental or regulatory policies; product warranty, product liability and product recall costs; rapid increases in health care costs; the Company’s acquisition activities; the Company’s substantial debt and leverage and ability to service its debt; the restrictive covenants contained in the agreements governing the Company’s indebtedness; the Company’s ability to realize revenue growth; the Company’s ability to implement initiatives designed to increase operating efficiencies and improve results; the loss of major customers; acts of war or terrorism; and other risks and uncertainties set forth under “Risk Factors” in the Company’s SEC filings, including its Annual Report on Form 10-K filed with the SEC on March 9, 2005 and available at www.sec.gov. The Company undertakes no obligation, except as required by law, to update these statements.
ERICO International Corporation and Subsidiaries
Condensed Consolidated Income Statements
(Dollars in Thousands)
Three Months Ended | ||||||||
March 31, | ||||||||
2005 | 2004 | |||||||
(Unaudited) | ||||||||
Net sales | $ | 89,950 | $ | 83,450 | ||||
Cost of sales | 59,001 | 53,611 | ||||||
Gross profit | 30,949 | 29,839 | ||||||
Operating expenses | 21,619 | 21,339 | ||||||
Operating income | 9,330 | 8,500 | ||||||
Interest expense, net | 3,880 | 3,490 | ||||||
Foreign exchange loss, net | 191 | 424 | ||||||
Other expense | — | 1,236 | ||||||
Income before income taxes | 5,259 | 3,350 | ||||||
Provision for income taxes | 2,049 | 1,328 | ||||||
Net income | $ | 3,210 | $ | 2,022 | ||||
ERICO International Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in Thousands, Except Per Share Amounts)
March 31, | December 31, | |||||||
2005 | 2004 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 3,292 | $ | 2,321 | ||||
Trade accounts receivable, net | 55,655 | 50,485 | ||||||
Inventories, net | 61,182 | 59,600 | ||||||
Other current assets | 7,570 | 8,909 | ||||||
Total current assets | 127,699 | 121,315 | ||||||
Property, plant and equipment, net | 49,126 | 52,522 | ||||||
Goodwill | 101,403 | 101,303 | ||||||
Other intangible assets, net | 36,915 | 36,905 | ||||||
Other assets | 10,547 | 10,676 | ||||||
Total assets | $ | 325,690 | $ | 322,721 | ||||
Liabilities and stockholder’s net investment | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | 30,565 | $ | 26,422 | ||||
Accrued compensation | 8,212 | 13,446 | ||||||
Dividend payable | — | 15,000 | ||||||
Other current liabilities | 15,174 | 21,874 | ||||||
Total current liabilities | 53,951 | 76,742 | ||||||
Long-term debt | 177,139 | 152,175 | ||||||
Deferred income taxes | 28,674 | 28,894 | ||||||
Other long-term liabilities | 16,219 | 16,785 | ||||||
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 | 49,909 | 46,699 | ||||||
Accumulated other comprehensive (loss) income | (202 | ) | 1,426 | |||||
Total stockholder’s net investment | 49,707 | 48,125 | ||||||
Total liabilities and stockholder’s net investment | $ | 325,690 | $ | 322,721 | ||||
ERICO International Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
Three Months Ended March 31, | ||||||||
2005 | 2004 | |||||||
Operating activities | ||||||||
Net income | $ | 3,210 | $ | 2,022 | ||||
Depreciation and amortization | 3,784 | 3,036 | ||||||
Other operating activities | (14,895 | ) | (10,070 | ) | ||||
Net cash used in operating activities | (7,901 | ) | (5,012 | ) | ||||
Investing activities | ||||||||
Capital expenditures | (699 | ) | (171 | ) | ||||
Other investing activities | (398 | ) | (44 | ) | ||||
Net cash used in investing activities | (1,097 | ) | (215 | ) | ||||
Financing activities | ||||||||
Dividends paid | (15,000 | ) | (25,000 | ) | ||||
Net borrowings (payments) on revolving line of credit | 24,964 | (14,605 | ) | |||||
Proceeds from issuance of subordinated debt | — | 121,500 | ||||||
Principal payments on long-term debt | — | (72,950 | ) | |||||
Financing fees paid | — | (4,316 | ) | |||||
Net cash provided by financing activities | 9,964 | 4,629 | ||||||
Effect of exchange rate changes on cash and cash equivalents | 5 | (4 | ) | |||||
Increase (decrease) in cash and cash equivalents | 971 | (602 | ) | |||||
Cash and cash equivalents at beginning of period | 2,321 | 2,421 | ||||||
Cash and cash equivalents at end of period | $ | 3,292 | $ | 1,819 | ||||
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 | ||||||||
March 31, | ||||||||
2005 | 2004 | |||||||
Net cash used in operating activities | $ | (7,901 | ) | $ | (5,012 | ) | ||
Interest expense, net | 3,880 | 3,490 | ||||||
Provision for income taxes | 2,049 | 1,328 | ||||||
Foreign exchange loss, net | (191 | ) | (424 | ) | ||||
Deferred taxes | 219 | 205 | ||||||
Amortization of financing fees and discount on senior subordinated notes included in interest expense, net | (223 | ) | (175 | ) | ||||
Net changes in operating assets and liabilities | 15,090 | 11,700 | ||||||
EBITDA | $ | 12,923 | $ | 11,112 | ||||
Contact: | Polly Bloom | |
Investor Relations | ||
(440) 542-1304 |