Exhibit 99.1
Sovereign Specialty Chemicals Reports Operating Results for the Fourth
Quarter of 2003
CHICAGO--(BUSINESS WIRE)--Feb. 27, 2004--Sovereign Specialty
Chemicals, Inc. announced today its operating results for the three
months ended December 31, 2003. Net sales were $90.5 million compared
to $84.4 million for the three months ended December 31, 2002.
Operating income was $6.8 million in the fourth quarter of 2003
compared to $(0.8) million in the prior year. EBITDA (defined as
operating income plus depreciation and amortization) on an as-reported
basis was $9.5 million in the current quarter compared to $1.2 million
in the three months ended December 31, 2002. The operating results for
the three months ended December 31, 2003 and 2002 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 $7.1 million for the fourth quarter of 2003
compared to $4.1 million for 2002, while EBITDA was $9.8 million for
the fourth quarter of 2003 compared to $6.1 million in 2002.
Similarly, for the year ended December 31, 2003, operating income
adjusted for cost not expected to occur in the future, was $34.1
million compared to $31.1 million for 2002, and EBITDA for the year
ended December 31, 2003 was $43.4 million compared to $40.2 million
for 2002.
In commenting on the results, Norman E. Wells, Jr., Sovereign's
CEO stated: "Sovereign had a solid quarter amidst improving, yet still
challenging market conditions. Our performance was highlighted by
revenue growth in both segments when compared to last year's fourth
quarter. This growth, coupled with the impact of our previously
announced plant rationalizations and manufacturing improvement
initiatives resulted in significantly higher operating income."
The company will host a conference call on March 1, 2004 at 9:00
a.m. (Chicago time) to discuss these results. Details for the
conference call are as follows:
Dial-in: (913) 981-5519, code 224364
Replay: (719) 457-0820, code 224364
The replay will be available until March 8, 2004.
Income Statement Summary
- -------------------------
(Dollars in Millions)
Three months ended
December 31
(un-audited)
-----------------------------------
2003 2002
------ ------
Net sales 90.5 100.0% $84.4 100.0%
Cost of goods sold 65.8 72.7% 63.0 74.6%
--------- ------- -------- -------
Gross profit 24.7 27.3% 21.4 25.4%
Selling, general and
administrative expenses 17.9 19.7% 22.2 26.3%
--------- ------- -------- -------
Operating income 6.8 7.6% (0.8) -0.9%
Interest expense, net (6.3) 6.9% (6.2) -7.3%
--------- ------- -------- -------
Income(loss) before income taxes
and cumulative effect of change in
accounting principle 0.6 0.6% (7.0) 6.4%
Income tax expense (benefit) 8.5 9.4% (2.6) -3.1%
--------- ------- -------- -------
Income before cumulative effect of
change in accounting principle (7.9) -8.8% (4.4) 9.5%
Cumulative effect of change in
accounting principle, net of
income tax benefit --- --- --- ---
--------- ------- -------- -------
Net income (loss) (7.9) -8.8% (4.4) 9.5%
========= ========
Year ended
December 31
----------------------------------
2003 2002
------ ------
Net sales $371.6 100.0% $361.1 100.0%
Cost of goods sold 268.4 72.2% 259.7 71.9%
--------- ------- -------- -------
Gross profit 103.2 27.8% 101.4 28.1%
Selling, general and
administrative expenses 70.4 18.9% 76.0 21.0%
--------- ------- -------- -------
Operating income 32.8 8.8% 25.4 7.0%
Interest expense, net (25.4) 6.8% (25.5) -7.1%
--------- ------- -------- -------
Income(loss) before income taxes
and cumulative effect of change in
accounting principle 7.4 2.0% (0.1) 14.1%
Income tax expense (benefit) 11.6 3.1% 0.3 0.1%
--------- ------- -------- -------
Income before cumulative effect of
change in accounting principle (4.2) -1.1% (0.4) 14.0%
Cumulative effect of change in
accounting principle, net of
income tax benefit --- --- (17.1) ---
--------- ------- -------- -------
Net income (loss) (4.2) -1.1% (17.5) 14.0%
========= ========
Reconciliation From Net Income (Loss) to EBITDA, Adjusted EBITDA
- ----------------------------------------------------------------
(Dollars in Millions) Three months Year
ended ended
December 31 December 31
(unaudited) (unaudited)
---------------- ----------------
2003 2002 2003 2002
-------- ------- ------- --------
Net income (loss) ($7.9) ($4.4) ($4.2) ($17.5)
Cumulative effect of change in
accounting principle, net of
income tax benefit --- --- --- 17.1
Income tax expense (benefit) 8.5 (2.6) 11.6 0.3
Interest expense 6.3 6.2 25.4 25.5
-------- ------- ------- --------
Operating income $6.8 ($0.8) $32.8 $25.4
Depreciation and Amortization 2.7 2.0 9.3 9.1
-------- ------- ------- --------
EBITDA $9.5 $1.2 $42.1 $34.5
Costs not expected to
occur in the future:
Plant closure, reorganization
and other 0.3 4.9 1.3 5.7
-------- ------- ------- --------
Adjusted EBITDA $9.8 $6.1 $43.4 $40.2
Adjusted EBITDA as a percentage of
net sales 10.8% 7.2% 11.7% 11.1%
Selected Balance Sheet and Cash Flow Information
- -------------------------------------------------
(Dollars in Millions)
December 31, Dec 31, September 30,
2003 2002 2002
-------------- ------------ -------------
(un-audited)
Cash and cash equivalents $8.5 $14.1 $6.7
Receivables 51.2 49.6 60.9
Inventories 26.6 28.2 31.2
Payables 31.3 31.6 37.9
Total debt $210.8 $223.8 $224.6
Three months ended Year ended
December 31 December 31
(unaudited)
---------------------- -----------------
2003 2002 2003 2002
----------- ---------- -------- --------
Depreciation and amortization $2.7 $2.0 $9.3 $9.1
Capital expenditures 1.4 2.2 8.2 6.6
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
approximately 900 employees working in over 20 manufacturing and sales
facilities worldwide to support thousands of customers. In 2003,
Sovereign's revenues were $371.6 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.
The non-GAAP measures, EBITDA and adjusted EBITDA data is
presented because management uses EBITDA as a performance metric and
we understand that such data are used by investors and other
stakeholders to assess the performance of our fundamental business
activities, our ability to service our indebtedness, working capital
needs and capital expenditures. 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, 2003 and exhibit 99.1 to that report.
CONTACT: Sovereign Specialty Chemicals, Inc.
Terry D. Smith, 312-223-7972