Exhibit 99.1
Sovereign Specialty Chemicals Reports Operating Results for the Third
Quarter of 2003
CHICAGO--(BUSINESS WIRE)--Oct. 30, 2003--Sovereign Specialty
Chemicals, Inc. announced today its operating results for the three
months ended September 30, 2003. Net sales were $98.7 million compared
to $95.0 million for the three months ended September 30, 2002.
Operating income was $10.1 million in the third quarter of 2003
compared to $10.6 million in the prior year. EBITDA (defined as
operating income plus depreciation and amortization) on an as-reported
basis was $12.3 million in the current quarter compared to $12.8
million in the three months ended September 30, 2002. The operating
results for the three months ended September 30, 2003 include the
impact of costs not expected to occur in the future as detailed in the
reconciliation contained in this release. As adjusted for these costs,
operating income was $10.2 million for the third quarter of 2003
compared to $10.6 million for 2002, while EBITDA was $12.4 million for
the third quarter of 2003 compared to $12.8 million in 2002.
Similarly, for the nine months ended September 30, 2003, operating
income was $27.0 million compared to $27.1 million for 2002, and
EBITDA for the nine months ended September 30, 2003 was $33.6 million
compared to $34.1 million for 2002.
In commenting on the results, Norman E. Wells, Jr., Sovereign's
CEO stated: "Sovereign had a solid quarter despite the challenging
market conditions we continue to face. We achieved consolidated
top-line growth from the prior year as a result of continued gains in
our Construction segment, which were partially offset by continued
weakness in a number of domestic end use markets in our Commercial
segment. Sales were up 6.6 percent sequentially from $92.6 million in
the second quarter of 2003 and are up for the nine months ended
September 30, 2003 to $281.1 million from $276.7 million in 2002." Mr.
Wells further stated: " Year over year raw material cost increases
have more than offset operating cost improvements for the quarter and
year to date. Although our overall performance through the first nine
months of the year is marginally below that of 2002, we believe that
our ongoing initiatives to enhance productivity and efficiency and to
streamline key business processes will position the company to
capitalize on opportunities to improve performance as the commercial
domestic markets recover."
The company will host a conference call on October 31, 2003 at
1:00 p.m. (Chicago time) to discuss these results. Details for the
conference call are as follows:
Dial-in: (913) 981-5518, code 282591
Replay: (719) 457-0820, code 282591
The replay will be available until November 7, 2003.
Income Statement Summary
- ------------------------
(Dollars in Millions)
Three months ended Nine months ended
September 30 September 30
(unaudited) (unaudited)
------------------------ --------------------------
2003 2002 2003 2002
----------- ----------- ------------ ------------
Net sales $98.7 100.0% $95.0 100.0% $281.1 100.0% $276.7 100.0%
Cost of goods
sold 70.4 71.3% 66.1 69.6% 202.6 72.1% 196.8 71.1%
----- ----- ----- ----- ----- ----- ----- -----
Gross profit 28.3 28.7% 28.9 30.4% 78.5 27.9% 79.9 28.9%
Selling,
general and
administrative
expenses 18.2 18.4% 18.3 19.3% 52.5 18.7% 53.7 19.4%
----- ----- ----- ----- ----- ----- ----- -----
Operating
income 10.1 10.2% 10.6 11.2% 26.0 9.2% 26.2 9.5%
Interest
expense, net 6.3 6.4% 6.3 6.6% 19.1 6.8% 19.3 7.0%
----- ----- ----- ----- ----- ----- ----- -----
Income before
income taxes
and cumulative
effect of
change in
accounting
principle 3.8 3.9% 4.3 4.5% 6.8 2.4% 6.9 2.5%
Income tax
expense 1.5 1.5% 1.7 1.8% 3.1 1.1% 2.9 1.1%
----- ----- ----- ----- ----- ----- ----- -----
Income before
cumulative
effect of
change in
accounting
principle 2.3 2.3% 2.6 2.7% 3.7 1.3% 3.9 1.4%
Cumulative
effect of
change in
accounting
principle
related to
goodwill
write-off, net
of income tax
benefit --- --- --- --- --- --- (17.1)(6.2%)
----- ----- ----- ----- ----- ----- ----- -----
Net income
(loss) $2.3 2.3% $2.6 2.7% $3.7 1.3% ($13.1)(4.7%)
===== ===== ===== ===== -----
Selected Balance Sheet and Cash Flow Information
- ---------------------------------------------------------------------
(Dollars in Millions)
September 30, 2003 Dec 31, 2002 September 30, 2002
(unaudited) (unaudited)
--------------------------------------------------
Cash and cash
equivalents $6.7 $14.1 $7.9
Receivables 60.9 49.6 57.6
Inventories 31.2 28.2 34.6
Payables 37.9 31.6 34.2
Total debt $232.7
$224.6 $223.8
Three months ended Nine months ended
September 30 September 30
(unaudited) (unaudited)
-------------------------------------------------
2003 2002 2003 2002
-------------------------------------------------
Depreciation and
amortization $2.2 $2.2 $6.6 $7.1
Capital expenditures 2.2 1.9 6.8 4.4
Reconciliation From Net Income (Loss) to EBITDA, Adjusted EBITDA
- ----------------------------------------------------------------------
(Dollars in Millions) Three months ended Nine months ended
September 30 September 30
(unaudited) (unaudited)
-------------------- ------------------
2003 2002 2003 2002
---------- --------- -------- ---------
Net income (loss) $2.3 $2.6 $3.7 ($13.1)
Cumulative effect of change in
accounting principle, net of
income tax benefit --- --- --- 17.1
Income tax expense 1.5 1.7 3.1 2.9
Interest expense 6.3 6.3 19.1 19.3
---------- --------- -------- ---------
Operating income $10.1 $10.6 $26.0 $26.2
Depreciation and Amortization 2.2 2.2 6.6 7.1
---------- --------- -------- ---------
EBITDA $12.3 $12.8 $32.6 $33.3
Costs not expected to occur in
the future:
Plant closure,
reorganization and
other 0.1 --- 1.0 0.8
---------- --------- -------- ---------
Adjusted EBITDA $12.4 $12.8 $33.6 $34.1
Adjusted EBITDA as a percentage
of net sales 12.6% 13.4% 12.0% 12.4%
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.
CONTACT: Sovereign Specialty Chemicals, Inc.
Terry D. Smith, 312-223-7972