EXHIBIT 99.1
FOR IMMEDIATE RELEASE
- --------------------- Contact:
Thursday, October 30, 2003 Neal E. Murphy
Senior Vice President and Chief
Financial Officer
International Specialty Products Inc.
(973) 872-4200
INTERNATIONAL SPECIALTY HOLDINGS ANNOUNCES
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THIRD QUARTER 2003 RESULTS
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Wayne, NJ -- International Specialty Holdings Inc. (the "Company"), a
wholly-owned subsidiary of International Specialty Products Inc. ("ISP"),
reported today third quarter 2003 net income of $3.9 million compared with net
income of $8.3 million in the third quarter of 2002. The lower results were
attributable to investment losses in the quarter and lower operating income,
partially offset by lower other expense, net, and reduced interest expense.
Operating income was $32.2 million for the third quarter of 2003
compared with $35.7 million in the third quarter of 2002. Operating income for
the Specialty Chemicals segment improved 7% to $29.8 million compared with $27.8
million in last year's third quarter. The improved results for Specialty
Chemicals were primarily attributable to the personal care and pharmaceutical
product lines, mainly due to manufacturing efficiencies and the favorable impact
of the weaker U.S. dollar.
The Industrial Chemicals segment recorded an operating loss of $1.3
million in the third quarter of 2003 compared with operating income of $2.1
million in last year's third quarter. The Industrial Chemicals manufacturing
operations are principally based in Europe and costs for this business have been
adversely impacted by the stronger Euro. In addition, the results for the third
quarter of 2003 were impacted by lower pricing due to current industry
supply/demand imbalance.
Operating income for the Mineral Products segment was $3.5 million in
the third quarter of 2003, a decline of 38% from last year's third quarter
because of lower pricing and unfavorable manufacturing costs, primarily as a
result of higher energy costs.
Net sales for the third quarter of 2003 were $215.1 million compared
with $208.4 million in the same period last year. The 3% increase in sales
resulted from higher unit volumes in the Mineral Products segment and in the
pharmaceutical and food product lines, and the favorable impact of the weaker
U.S. dollar in Europe. These sales gains were partially offset by lower pricing
in Industrial Chemicals and lower unit volumes in the fine chemicals product
line.
Interest expense for the third quarter of 2003 was $18.8 million
compared with $20.6 million in the third quarter of 2002. The $1.8 million (9%)
decrease was primarily due to lower average borrowings and, to a lesser extent,
lower average interest rates. Investment losses in the third quarter of 2003
totaled $5.4 million compared with investment income of $1.4 million in the same
period last year. Other expense, net, for the quarter was $2.1 million compared
with $4.4 million in the third quarter of 2002, with the lower expense due
primarily to favorable foreign exchange.
At the end of September 2003, the total debt for the Company was
$910.5 million, cash and cash equivalents were $96.1 million and marketable
securities were $316.8 million. The Company's wholly-owned operating subsidiary,
ISP Chemco Inc., had total debt of $624.4 million and cash and cash equivalents
of $44.3 million as of the end of September 2003. Capital expenditures for the
third quarter of 2003 were $16.7 million. Depreciation and amortization expense
was $15.3 million for the third quarter of 2003.
FIRST NINE MONTHS RESULTS
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For the first nine months of 2003, the Company recorded net income of
$42.2 million compared with a net loss of $115.8 million in the first nine
months of 2002. First nine months 2003 results include a $1.0 million after-tax
cumulative effect of a change in accounting principle from the adoption of
Statement of Financial Accounting Standards No. 143, "Accounting for Asset
Retirement Obligations." The first nine months of 2002 included a $155.4 million
goodwill impairment charge, effective January 1, 2002, for the cumulative effect
of a change in accounting principle related to the adoption of Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."
Income before the cumulative effect of changes in accounting principles
was $43.2 million for the first nine months of 2003 compared with $39.6 million
in the first nine months of 2002. The first nine months of 2002 included a $7.2
million pre-tax charge for the early retirement of debt and $12.2 million of
pre-tax gains related to the sale of the Company's FineTech business and to the
termination and settlement of contracts, while this year's first nine months
includes a charge of $1.5 million for stock option payments related to ISP's
going private transaction in the first quarter.
Operating income for the first nine months of 2003 was $104.0 million
compared with $111.0 million for the same period in 2002. Excluding the gains
and charges in each period mentioned above, operating income on a comparable
basis was $105.5 million and $98.8 million for the first nine months of 2003 and
2002, respectively (see attached reconciliation of non-GAAP financial measures).
The higher operating income for the first nine months of 2003 includes improved
results in the Company's Specialty Chemicals segment, partially offset by losses
in the Industrial Chemicals segment and lower results in the Mineral Products
segment.
On a comparable basis, excluding the aforementioned gains and charges,
operating income for the Specialty Chemicals segment improved 31% to $97.8
million compared with $74.9 million in the first nine months of 2002. The
improved
results were primarily attributable to the personal care, pharmaceutical and
beverage product lines, mainly due to manufacturing efficiencies, lower
operating expenses, higher volumes and the favorable impact of the weaker U.S.
dollar.
The Industrial Chemicals segment recorded an operating loss of $5.3
million in the first nine months of 2003 compared with operating income of $5.2
million in the same period last year. The results were mainly attributable to
lower pricing and to the adverse impact of the stronger Euro and higher energy
costs, partially offset by manufacturing efficiencies.
Operating income for the Mineral Products segment was $12.2 million
in the first nine months of 2003, a decline of 34% from the same period last
year because of unfavorable manufacturing costs, primarily as a result of higher
energy costs and, to a lesser extent, unfavorable pricing.
Net sales for the first nine months of 2003 were $677.2 million
compared with $642.2 million in the same period last year. The 5.5% increase in
sales resulted from higher unit volumes in the Industrial Chemicals and Mineral
Products segments and in the pharmaceutical, food and beverage product lines and
the favorable impact of the weaker U.S. dollar in Europe. These sales gains were
partially offset by lower pricing in Industrial Chemicals, Mineral Products and
personal care and lower volumes in the fine chemicals and performance chemicals
product lines.
Interest expense for the first nine months of 2003 was $57.8 million
versus $64.6 million in the first nine months of 2002. The $6.8 million (11%)
decrease was due both to lower average interest rates and to lower average
borrowings. Investment income in the first nine months of 2003 was $21.5 million
compared with $26.8 million in the same period last year. Other expense, net,
for the first nine months was $2.1 million compared with $6.5 million in the
first nine months of 2002, with the lower expense due primarily to favorable
foreign exchange.
* * * * * *
International Specialty Holdings Inc. is a leading multinational
manufacturer of specialty chemicals and mineral products.
This press release contains "forward looking statements" within the
meaning of the federal securities laws with respect to the Company's financial
results and future operations and, as such, concerns matters that are not
historical facts. These statements are subject to risks and uncertainties that
could cause actual results to differ materially from those expressed in such
statements. Important factors that could cause such differences are discussed in
the Company's filings with the U.S. Securities and Exchange Commission and are
incorporated herein by reference.
INTERNATIONAL SPECIALTY HOLDINGS INC.
SALES AND EARNINGS (Unaudited)
(Millions)
Third Quarter Nine Months
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2002 2003 2002 (A) 2003
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Net sales................................... $ 208.4 $ 215.1 $ 642.2 $ 677.2
Cost of products sold....................... (132.1) (140.5) (416.1) (440.3)
Selling, general and administrative......... (40.5) (42.3) (126.6) (131.0)
Other operating gains and (charges), net.... - - 12.2 (1.5)
Amortization of intangible assets........... (0.1) (0.1) (0.7) (0.4)
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Operating income............................ 35.7 32.2 111.0 104.0
Interest expense............................ (20.6) (18.8) (64.6) (57.8)
Investment income (loss).................... 1.4 (5.4) 26.8 21.5
Charge for early retirement of debt......... - - (7.2) -
Other expense, net.......................... (4.4) (2.1) (6.5) (2.1)
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Income before income taxes and cumulative
effect of changes in accounting principles 12.1 5.9 59.5 65.6
Income taxes................................ (3.8) (2.0) (19.9) (22.4)
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Income before cumulative effect of changes
in accounting principles.................. 8.3 3.9 39.6 43.2
Cumulative effect of changes in accounting
principles, net of income tax benefit
of $0.6 in 2003......................... - - (155.4) (1.0)
----------- ---------- ----------- ----------
Net income (loss)........................... $ 8.3 $ 3.9 $ (115.8) $ 42.2
=========== ========== =========== ==========
(A) The Sales and Earnings summary for the first nine months of 2002 has been
restated to reflect the adoption of FASB Statement No. 145, "Rescission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and
Technical Corrections." In the first quarter of 2002, the Company recognized
an after-tax extraordinary charge of $4.7 million on the early retirement of
debt. As a result of the adoption of FASB Statement No. 145, effective
January 1, 2003, such loss on the early retirement of debt does not meet the
definition of an extraordinary item and, therefore, the Sales and Earnings
summary for the first nine months of 2002 was restated to reclassify the
pre-tax charge of $7.2 million to a separate line item of pre-tax income.
The tax benefit of $2.5 million related to this charge has been reclassified
and is included in "Income taxes."
INTERNATIONAL SPECIALTY HOLDINGS INC.
SALES AND EARNINGS (Unaudited) - (Continued)
(Millions)
Third Quarter Nine Months
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2002 2003 2002 2003
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Supplemental Business Segment Information:
Net sales (1):
Specialty Chemicals..................... $ 149.3 $ 153.5 $ 455.6 $ 470.4
Industrial Chemicals.................... 34.5 35.0 112.4 128.6
Mineral Products........................ 24.6 26.6 74.2 78.2
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Net sales.................................... $ 208.4 $ 215.1 $ 642.2 $ 677.2
========= ========= ========= =========
Operating income (1):
Specialty Chemicals..................... $ 27.8 $ 29.8 $ 87.1 $ 96.7
Industrial Chemicals.................... 2.1 (1.3) 5.2 (5.3)
Mineral Products........................ 5.6 3.5 18.4 12.2
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Total segment operating income.......... 35.5 32.0 110.7 103.6
Unallocated corporate office............ 0.2 0.2 0.3 0.4
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Operating income............................. $ 35.7 $ 32.2 $ 111.0 $ 104.0
========= ========= ========= =========
Depreciation and amortization of
intangible assets......................... $ 14.6 $ 15.3 $ 42.9 $ 45.3
Capital expenditures and acquisitions........ $ 11.9 $ 16.7 $ 42.6 $ 49.7
(1) Effective January 1, 2003, the Company changed the composition of its
reportable segments to be consistent with the current structure of the
Company's businesses. Over the last several years, the Company has
increased its focus on its higher margin consumer-oriented businesses.
Consistent with that business focus, the Company now reports three
business segments: Specialty Chemicals, Industrial Chemicals and Mineral
Products. The Company's Specialty Chemicals segment consists of the
personal care, pharmaceutical, food, beverage, performance chemicals and
fine chemicals product lines. Sales and operating income by business
segment for the third quarter and nine months ended September 29, 2002
have been restated to conform with the 2003 presentation.
INTERNATIONAL SPECIALTY HOLDINGS INC.
SALES AND EARNINGS (Unaudited) - (Continued)
(Millions)
Nine Months
---------------------
2002 2003
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Reconciliation of non-GAAP financial measures (1):
Operating income per GAAP.......................... $ 111.0 $ 104.0
Non-GAAP adjustments:
Less: Other operating (gains) charges(2)...... (12.2) 1.5
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Operating income, as adjusted...................... $ 98.8 $ 105.5
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Supplemental Business Segment Information:
Operating income:
Operating Income per GAAP-Specialty Chemicals.... $ 87.1 $ 96.7
Non-GAAP adjustments............................. (12.2) 1.1
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Operating Income-Specialty Chemicals as adjusted. $ 74.9 $ 97.8
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Operating Income per GAAP-Industrial Chemicals... $ 5.2 $ (5.3)
Non-GAAP adjustments............................. - 0.2
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Operating Income-Industrial Chemicals as adjusted $ 5.2 $ (5.1)
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Operating Income per GAAP-Mineral Products....... $ 18.4 $ 12.2
Non-GAAP adjustments............................. - 0.2
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Operating Income-Mineral Products as adjusted.... $ 18.4 $ 12.4
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Total segment operating income as adjusted....... $ 98.5 $ 105.1
Unallocated corporate office per GAAP............ 0.3 0.4
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Operating income, as adjusted.................... $ 98.8 $ 105.5
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(1) As used herein, "GAAP" refers to accounting principles generally
accepted in the United States of America. We use non-GAAP financial
measures to eliminate the effect of certain other operating gains and
charges on reported operating income. Management believes that these
financial measures are useful to investors and financial institutions
because such measures exclude transactions that are unusual due to
their nature or infrequency and therefore allow investors and financial
institutions to more readily compare the Company's performance from
period to period. Management uses this information in monitoring and
evaluating the Company's performance and the performance of individual
business segments.
(2) Non-GAAP adjustments in the first nine months of 2003 include an other
operating charge of $1.5 million for stock option payments related to
ISP's going private transaction. Non-GAAP adjustments in the first nine
months of 2002 included other operating gains of $12.2 million,
consisting of a gain of $2.8 million for a contract termination related
to the sale of the Company's FineTech business, a $5.5 million gain from
the sale of the FineTech business and a $3.9 million gain on a contract
settlement.