Exhibit 99.1
Sovereign Specialty Chemicals Reports Operating Results for the Second
Quarter of 2004
CHICAGO--(BUSINESS WIRE)--Aug. 2, 2004--Sovereign Specialty
Chemicals, Inc. announced today its operating results for the three
months ended June 30, 2004. Net sales were $106.4 million compared to
$92.6 million for the three months ended June 30, 2003. Operating
income was $12.7 million in the second quarter of 2004 compared to
$9.1 million in the prior year. EBITDA (defined as operating income
plus depreciation and amortization) on an as-reported basis was $14.9
million in the current quarter compared to $11.3 million in the three
months ended June 30, 2003. The operating results for the three months
ended June 30, 2004 and 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 $12.8
million for the second quarter of 2004 compared to $9.6 million for
2003, while EBITDA was $15.0 million for the second quarter of 2004
compared to $11.8 million in 2003. Similarly, for the six months ended
June 30, 2004, operating income was $22.4 million compared to $16.8
million for 2003, and EBITDA for the six months ended June 30, 2004
was $27.1 million compared to $21.2 million for 2003.
In commenting on the results, Norman E. Wells, Jr., Sovereign's
CEO stated: "Sovereign had a solid quarter. Our performance was
highlighted by revenue and EBITDA growth in both segments when
compared to last year's second quarter. This growth, coupled with the
full impacts of our previously announced plant rationalizations and
manufacturing improvement initiatives resulted in significantly higher
operating income."
The company will host a conference call on August 3, 2004 at 10:00
am. (Chicago time) to discuss these results. Details for the
conference call are as follows:
Dial-in: (719) 457-2728, code 157262
Replay: (719) 457-0820, code 157262
The replay will be available until August 10, 2004.
Income Statement Summary
- ------------------------
(Dollars in Millions)
Three months ended Six months ended
June 30 June 30
(un-audited) (un-audited)
-------------------------- ----------------------------
2004 2003 2004 2003
------- ------ ------- -------
Net sales $106.4 100.0% $92.6 100.0% $202.2 100.0% $182.4 100.0%
Cost of goods
sold 74.8 70.3% 66.7 72.1% 142.9 70.7% 132.2 72.5%
------- ------ ----- ------ ------ ------ ------ ------
Gross profit 31.6 29.7% 25.9 27.9% 59.2 29.3% 50.2 27.5%
Selling,
general and
administrative
expenses 18.9 17.8% 16.8 18.1% 37.1 18.3% 34.3 18.8%
------- ------ ----- ------ ------ ------ ------ ------
Operating
income 12.7 11.9% 9.1 9.8% 22.2 11.0% 15.9 8.7%
Interest
expense, net (6.3) 5.9% (6.5) 7.0% (12.5) 6.2% (12.8) 7.0%
------- ------ ----- ------ ------ ------ ------ ------
Income before
income taxes 6.4 6.0% 2.6 2.7% 9.7 4.8% 3.1 1.7%
Income tax
expense 1.0 0.9% 1.2 1.3% 1.4 0.7% 1.6 0.9%
------- ------ ----- ------ ------ ------ ------ ------
Net Income $5.4 5.1% $1.4 1.5% $8.2 4.1% $1.5 0.8%
======= ====== ======= =======
Selected Balance Sheet and Cash Flow Information
- -------------------------------------------------
(Dollars in Millions)
June 30, 2004 Dec 31, 2003 June 30, 2003
---------------- ------------ --------------
(un-audited)
Cash and cash equivalents $9.9 $8.5 $6.2
Receivables 62.9 51.2 56.8
Inventories 31.6 26.6 31.8
Payables 38.6 31.3 36.5
Total debt $210.9 $210.8 $222.6
Three months Six months
ended June 30 ended June 30
(unaudited) (unaudited)
------------- ----------------
2004 2003 2004 2003
------- ----- -------- -------
Depreciation and amortization $2.2 $2.2 $4.7 $4.4
Capital expenditures 1.2 2.7 2.1 4.6
Reconciliation from Net Income to EBITDA, Adjusted EBITDA
- ---------------------------------------------------------
(Dollars in Millions) Three months Six months
ended June 30 ended June 30
(unaudited) (unaudited)
-------------- ---------------
2004 2003 2004 2003
------- ------ ------- -------
Net income $5.4 $1.4 $8.2 $1.5
Income tax expense 1.0 1.2 1.4 1.6
Interest expense 6.3 6.5 12.5 12.8
------- ------ ------- -------
Operating income $12.7 $9.1 22.2 15.9
Depreciation and Amortization 2.2 2.2 4.7 4.4
------- ------ ------- -------
EBITDA $14.9 $11.3 $26.9 20.3
Costs not expected to occur in the
future:
Plant closure, reorganization and other 0.1 0.5 0.2 0.9
------- ------ ------- -------
Adjusted EBITDA $15.0 $11.8 $27.1 21.2
Adjusted EBITDA as a percentage
of net sales 14.1% 12.7% 13.4% 11.6%
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