EXHIBIT 99.1
ERICO International Corporation
Announces Record Second Quarter Results
SOLON, Ohio(August 4, 2004) ERICO International Corporation today reported results for the second quarter ended June 30, 2004.
Net sales in the quarter were $92.1 million, up $11.7 million, or 14.6%, from the prior-year period. The increase in net sales was due primarily to higher sales volumes. In the second quarter of 2004, the Company achieved its highest historical second quarter sales.
Gross profit in the quarter was $33.6 million, up $4.6 million, or 15.9%, from the prior-year period. The increase in gross profit was due primarily to higher sales volumes.
Operating expenses in the quarter were $20.9 million, up $0.6 million, or 3.0%, from the prior-year period. Operating expenses, as a percent of sales, declined from 25.2% for the second quarter of 2003 to 22.7% for the second quarter of 2004.
The Company generated EBITDA (a non-GAAP financial measure the Company defines as earnings before, taxes, depreciation and amortization) of $16.5 million in the second quarter of 2004, up $3.7 million, or 28.9%, from the second quarter of 2003. In the second quarter, the Company achieved its highest historical quarterly EBITDA. (See below for a reconciliation of EBITDA to net cash provided by operating activities computed in accordance with generally accepted accounting principles.)
YEAR-TO-DATE RESULTS
Net sales for the six months ended June 30, 2004 were $175.6 million, up $25.8 million, or 17.2%, from the prior-year period. The increase in net sales was due primarily to higher sales volumes. In the first six months of 2004, the Company achieved its highest historical first half sales.
Gross profit in the first half of 2004 was $63.4 million, up $9.4 million, or 17.4%, from the prior-year period. The increase in gross profit was due primarily to higher sales volumes.
Operating expenses in the first half of 2004 were $42.3 million, up $2.0 million, or 5.0%, from the prior-year period. Operating expenses, as a percent of sales, declined from 26.9% for the first half of 2003 to 24.1% for the first half of 2004.
The Company generated EBITDA of $27.6 million for the six months ended June 30, 2004, up $4.4 million, or 19%, for the first half of 2004. In the first six months of 2004, the Company achieved its highest historical first half EBITDA.
CONFERENCE CALL
The Company will hold a conference call at 12:00 p.m. (Eastern) on August 4, 2004 to provide an overview of the Company’s second quarter. Those interested in hearing the conference call may listen via telephone by dialing 1-800-982-3654 (the ID for the call is 524830).
The Company manufactures 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
This press release contains forward-looking information. In some cases, you can identify forward-looking statements by terminology such as “may” and “will,” or the negative of such terms or similar terminology. Forward-looking statements appearing herein 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 based upon changes in global, political, business and regulatory factors, including acts of war or terrorism. The Company is also subject to risks and uncertainties described in the Company’s filings with the Securities and Exchange Commission. In particular, see “Risk Factors” in the Company’s prospectus filed with the SEC on July 16, 2004 and available atwww.sec.gov. This press release does not constitute an offer of any securities for sale.
ERICO International Corporation and Subsidiaries
Statements of Condensed Consolidated Income
(thousands of dollars)
(unaudited)
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
Net sales | $ | 92,112 | $ | 80,381 | $ | 175,562 | $ | 149,774 | ||||||||
Cost of products sold | 58,529 | 51,391 | 112,140 | 95,751 | ||||||||||||
Gross profit | 33,583 | 28,990 | 63,422 | 54,023 | ||||||||||||
Operating expenses | 20,915 | 20,327 | 42,265 | 40,320 | ||||||||||||
Interest expense, net | 3,857 | 3,511 | 7,347 | 6,261 | ||||||||||||
Foreign exchange gain, net | (817 | ) | (1,224 | ) | (393 | ) | (3,600 | ) | ||||||||
Other (income) expense, net | 57 | (66 | ) | 1,282 | (54 | ) | ||||||||||
Income before income taxes | 9,571 | 6,442 | 12,921 | 11,096 | ||||||||||||
Provision for income taxes | 3,749 | 2,289 | 5,077 | 3,939 | ||||||||||||
Net income | $ | 5,822 | $ | 4,153 | $ | 7,844 | $ | 7,157 | ||||||||
ERICO International Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(thousands of dollars)
June 30, | December 31, | |||||||
2004 | 2003 | |||||||
Assets | (unaudited) | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 3,215 | $ | 2,421 | ||||
Trade accounts receivable, net | 58,051 | 54,252 | ||||||
Inventories | 51,990 | 45,513 | ||||||
Other current assets | 9,622 | 7,745 | ||||||
Total current assets | 122,878 | 109,931 | ||||||
Property, plant and equipment, net | 55,141 | 60,630 | ||||||
Goodwill | 105,237 | 105,194 | ||||||
Trademarks and other intangible assets | 36,469 | 36,572 | ||||||
Other assets | 15,211 | 11,440 | ||||||
Total assets | $ | 334,936 | $ | 323,767 | ||||
Liabilities and stockholder’s net investment | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | 33,749 | $ | 29,607 | ||||
Accrued compensation | 8,711 | 9,216 | ||||||
Other accrued expenses | 27,584 | 25,956 | ||||||
Total current liabilities | 70,044 | 64,779 | ||||||
Long-term debt | 166,715 | 140,920 | ||||||
Deferred income taxes | 28,490 | 28,939 | ||||||
Other long-term liabilities | 16,138 | 16,699 | ||||||
Stockholder’s net investment: | ||||||||
Common stock, $1.00 par value, authorized 1,500,000 shares, issued and outstanding 1 share | — | — | ||||||
Parent company investment | 55,512 | 72,668 | ||||||
Accumulated other comprehensive loss | (1,963 | ) | (238 | ) | ||||
Total stockholder’s net investment | 53,549 | 72,430 | ||||||
Total liabilities and stockholder’s net investment | $ | 334,936 | $ | 323,767 | ||||
ERICO International Corporation and Subsidiaries
Statements of Condensed Consolidated Cash Flows
(thousands of dollars)
(unaudited)
For the six months | ||||||||
ended June 30, | ||||||||
2004 | 2003 | |||||||
Net cash provided by (used in) operating activities | $ | 6,398 | $ | (110 | ) | |||
Investing activities | ||||||||
Acquisition payments, net of cash acquired | — | (3,329 | ) | |||||
Capital expenditures | (1,000 | ) | (2,532 | ) | ||||
Net cash used in investing activities | (1,000 | ) | (5,861 | ) | ||||
Financing activities | ||||||||
Net transfers to parent company | (25,000 | ) | — | |||||
Net borrowing (payments) on revolving line of credit | (23,200 | ) | 7,785 | |||||
Borrowings from subordinated debt | 121,500 | — | ||||||
Principal payments on long-term debt | (72,950 | ) | (3,000 | ) | ||||
Financing fees paid | (4,970 | ) | — | |||||
Net cash (used in) provided by financing activities | (4,620 | ) | 4,785 | |||||
Effect of exchange rate changes on cash and cash equivalents | 16 | (55 | ) | |||||
Increase (decrease) in cash and cash equivalents | 794 | (1,241 | ) | |||||
Cash and cash equivalents at beginning of period | 2,421 | 3,374 | ||||||
Cash and cash equivalents at end of period | $ | 3,215 | $ | 2,133 | ||||
EBITDA is defined as net income plus income taxes, interest expense, net, and depreciation and amortization. EBITDA is presented in this manner because the Company believes it is a widely accepted financial indicator of a company’s ability to service and incur indebtedness. In addition, EBITDA is used in the Company’s financial debt covenants. Also, 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 accounting principles generally accepted in the United States. 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. Below is a reconciliation of EBITDA to net cash provided by operating activities:
For the three months | For the six months | |||||||||||||||
ended June 30, | ended June 30, | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
Net cash provided by (used in) operating activities | $ | 11,454 | $ | 7,753 | $ | 6,398 | $ | (110 | ) | |||||||
Interest expense, net | 3,857 | 3,511 | 7,347 | 6,261 | ||||||||||||
Income taxes | 3,749 | 2,289 | 5,077 | 3,939 | ||||||||||||
Foreign exchange | 817 | 1,224 | 393 | 3,600 | ||||||||||||
Deferred taxes | 253 | 66 | 458 | 799 | ||||||||||||
Amortization of financing fees and discount on senior subordinated notes included in interest expense, net | (224 | ) | (149 | ) | (399 | ) | (332 | ) | ||||||||
Net changes in operating assets and liabilities | (3,440 | ) | (1,887 | ) | 8,304 | 9,071 | ||||||||||
EBITDA | $ | 16,466 | $ | 12,807 | $ | 27,578 | $ | 23,228 | ||||||||
Contact: | Polly Bloom Investor Relations (440) 542-1304 |