EXHIBIT 99.1
[SOVEREIGN SPECIALTY CHEMICALS LETTERHEAD]
FOR FURTHER INFORMATION,
CONTACT: Terry D. Smith
Sovereign Specialty Chemicals, Inc.
(312) 223-7972
SOVEREIGN SPECIALTY CHEMICALS REPORTS
OPERATING RESULTS FOR THE FIRST QUARTER OF 2003
CHICAGO, IL, May 5, 2003 -- Sovereign Specialty Chemicals, Inc.
announced today its operating results for the three months ended March
31, 2003. Net sales were $89.8 million compared to $86.7 million for
the three months ended March 31, 2002. Operating income was $6.8
million in the first quarter of 2003 compared to $5.9 million in the
prior year. EBITDA (defined as operating income plus depreciation and
amortization) on an as-reported basis was $9.0 million in the current
quarter compared to $8.4 million in the three months ended March 31,
2002. Operating income and EBITDA for the three months ended March 31,
2003 and March 31, 2002 include the impact of costs not expected to
occur in the future. These costs are detailed on the reconciliation on
page two of this release. Operating income and EBITDA adjusted for
these costs were $7.2 million and $9.4 million respectively for first
quarter 2003; and $6.3 million and $8.8 million respectively for the
first quarter of 2002.
In commenting on the results, Norman E. Wells, Jr., Sovereign's CEO
stated: "Sovereign had a solid quarter even though our revenue growth
was tempered by continued weakness in a few of our domestic end use
markets. Nevertheless, sales were up 3.6% over the first quarter of
2002 and up 6.4% sequentially from $84.4 million in the fourth quarter
of 2002. Operating income increased 15.3% year over year resulting, in
large part, from actions taken in a number of areas to enhance overall
productivity and efficiency and to streamline key business processes."
Mr. Wells continued, "While receivables and inventory balances
increased slightly from the December 31, 2002 levels, we have
maintained a significant reduction from the March 31, 2002 levels
despite increased sales. In addition, we are continuing to focus on
operational initiatives that we believe will result in improved
financial performance."
The company will host a conference call on May 7, 2003 at 2:00 p.m.
(Chicago time) to discuss these results. Details for the conference
call are as follows:
Dial-in: (913) 981-5520, code 271418
Replay: (719) 457-0820, code 271418
The replay will be available until May 14, 2003.
Income Statement Summary
- ------------------------
(Dollars in Millions)
Three months ended March 31
(unaudited)
2003 2002
------- -------
Net sales $ 89.8 $ 86.7
Cost of goods sold 65.5 63.1
------- -------
Gross profit 24.3 23.6
Selling, general and administrative expenses 17.5 17.7
------- -------
Operating income (loss) 6.8 5.9
Interest expense, net (6.3) (6.4)
------- -------
Income (loss) before income taxes and cumulative
effect of change in accounting principle 0.5 (0.5)
Income tax expense (benefit) 0.4 (0.2)
------- -------
Income (loss) before cumulative effect of change
in accounting principle 0.1 (0.3)
Cumulative effect of change in accounting
principle related to goodwill write-off, net of
income tax benefit --- (17.1)
------- -------
Net income (loss) $ 0.1 $(17.4)
======= =======
Selected Balance Sheet and Cash Flow Information
- ------------------------------------------------
(Dollars in Millions)
Mar 31, Dec 31, Mar 31,
2003 2002 2002
---- ---- ----
(unaudited) (unaudited)
Cash and cash equivalents $8.5 $14.1 $3.7
Receivables 54.6 49.6 58.4
Inventories 30.9 28.2 38.7
Payables 36.5 31.6 31.7
Total debt 226.7 223.8 245.2
Three months ended March 31
(unaudited)
2003 2002
---- ----
Depreciation and amortization 2.2 2.5
Capital expenditures 1.9 0.6
Reconciliation from Net Income (loss) to EBITDA
- -----------------------------------------------
(Dollars in Millions)
Three months
Three months ended March 31 ended
(unaudited) December 31, 2002
----------- (unaudited)
-----------
2003 2002
---- ----
Net income (loss) $ 0.1 $(17.4) $ (4.4)
Cumulative effect of change in accounting
principle, net of income tax benefit --- 17.1 ---
Income tax expense (benefit) 0.4 (0.2) (2.6)
Interest expense 6.3 6.4 6.2
------ ------- ------
Operating Income $6.8 $5.9 $(0.8)
Depreciation and Amortization 2.2 2.5 2.0
------ ------- ------
EBITDA $9.0 $8.4 $1.2
Costs not expected to occur in the future:
Plant closure, reorganization and other 0.4 0.4 5.3
------ ------- ------
Adjusted EBITDA $9.4 $8.8 $6.5
Sovereign Specialty Chemicals, Inc. is a leading developer and
supplier of high-performance specialty adhesives, coatings and
sealants serving two primary business segments: Commercial and
Construction. Since 1996, Sovereign has grown rapidly -- through the
strategic acquisition of established niche leaders -- to become the
largest privately owned adhesives manufacturer in the United States
and one of the largest adhesives manufacturers in the world, public or
private. Headquartered in Chicago, Illinois, USA, Sovereign comprises
over 900 employees working in 20 manufacturing and sales facilities
worldwide to support thousands of customers. In 2002, Sovereign's
revenues were $361 million.
Sovereign's controlling investor is AEA Investors Inc., one of the
most experienced private equity investment firms in the world. AEA's
group of investors includes a global network of important business
leaders, family groups, endowment funds, and select institutions.
EBITDA data is presented because we understand that such data are used
by investors to determine our historical ability to service our
indebtedness. Nevertheless, this measure should not be considered in
isolation or as a substitute for net income, cash flows from operating
activities or other cash flow statement data prepared in accordance
with generally accepted accounting principles or as a measure of
profitability or liquidity. In addition, the EBITDA measure included
in this press release may not be comparable to similarly titled
measures reported by other companies.
Any forward-looking statements made in this release involve potential
risks and uncertainties and are based on management's beliefs,
information currently available to management and a number of
management assumptions concerning future events. Actual results may
vary materially due to changes in sales volumes, raw material and
energy costs, foreign currency exchange rates, global economic demand,
selling prices, competitive pressures, and changes in technology.
Additional factors that may cause our actual results to vary are
detailed in Sovereign's filings with the SEC, including the Form 10-K
for the year ended December 31, 2002 and exhibit 99.1 to that report.