Noble International, Ltd. Announces Sale of Logistics Segment, 2002 Results and 2003 Guidance
WARREN, Mich., March 25 -- Noble International, Ltd. (the "Company") today announced that it had completed the sale of its logistics group consisting of Noble Logistics - Texas, Inc. and Noble Logistics - California, Inc. (collectively "Logistics") to SRS Texas Holdings, LLC and SRS California Holdings, LLC, respectively, for approximately $11.0 million in cash and notes as well as the assumption of substantially all of the trade payables and liabilities.
The Company made the strategic decision in the fourth quarter of 2002 to focus management's attention and the Company's resources on its core automotive operations. To this end, over the past 90 days the Company has divested its logistics and heavy equipment operations for combined proceeds in cash and notes of approximately $32.2 million, including approximately $7.2 million in tax benefits. The decision to focus on the core automotive business was driven by the following:
-- The Company is the North American industry leader in the production of laser welded blanks and the Company's resources are needed to maintain and enhance this position.
-- The automotive segment is growing, and is expected to continue over the next several years, as evidenced by the previously announced acquisition of over $900 million of lifecycle revenue, including over $300 million of value- added revenue, to be launched over the next three years.
-- The automotive segment is capital intensive and will require additional investment to meet the scheduled launches in 2003 and beyond. The proceeds from these divestitures, combined with anticipated operating cash flow, will provide the necessary capital for these investments.
-- These divestitures significantly enhance the Company's financial position by lowering its overall debt position. In addition to lowering the Company's interest cost, its decreased debt better positions the Company for any potential downturn in automotive sales over the next twelve months.
Commenting on the Company's strategic decision and the sale of the logistics segment, Christopher L. Morin, President and Chief Operating Officer stated, "The sale of the logistics group is the final step in a process which began in the fourth quarter of 2002 with the sale of the heavy equipment group. Now, we can focus management's attention, and the Company's resources, on our core automotive business. The automotive operation has experienced significant growth in the past and it is expected to continue this growth trend in years to come." Mr. Morin continued, "Specifically, over the next three years our automotive group will launch in excess of 22 parts on 12 new platforms which will require the financial and managerial resources of the Company. These new launches, which will result in additional lifecycle revenue of almost $1 billion, encompass production parts for Ford, GM, DCX, Saturn, BMW, Honda and Nissan."
2002 Results
2002 earnings from continuing operations were $4.6 million or $0.64 per share. Full year earnings for 2002 include certain one-time charges relating to litigation, real estate, bad debt and non-recurring operating expenses resulting from the Company's relocation of its major manufacturing facility and corporate headquarters, totaling approximately $2.9 million after tax, or $0.40 per share. When adjusted for these charges, the Company's earnings from continuing operations were $7.4 million, or $1.04 per share. Continuing operations for the fourth quarter of 2002 resulted in a loss of $0.6 million, or ($0.07) per share. The Company incurred $1.6 million after tax, or $0.21 per share, of one-time charges in the fourth quarter. When adjusted for these charges, the Company earned $0.14 per share in the fourth quarter. Since the Company's heavy equipment and logistics groups were sold or declared discontinued in 2002, these operations are included in discontinued operations. The Company's continuing operations consist of its automotive and distribution groups.
Fourth Quarter 2002
Revenue from continuing operations increased 39% to $35.1 million from $25.3 million for the same period in 2001. The increase in revenue was primarily attributable to a 39% increase in revenue from value-added services, as well as increased steel sales as the Company transitions from a toll processor to a full service provider. Net loss from continuing operations was $0.6 million, or ($0.07) per share, for the fourth quarter as compared to income of $2.0 million for the same period in 2001. When adjusted for one- time after-tax charges totaling $1.6 million, or $0.21 per share, net income decreased $0.9 million for the quarter, as compared to the fourth quarter of 2001. The decrease in net income from continuing operations was primarily the result of increased costs associated with current and future product launches within the Company's automotive group.
Full Year 2002
Revenue from continuing operations increased $50.1 million, or 67%, to $125.2 million from $75.1 million for the full year 2001. This increase was primarily the result of a 52% rise in revenue from value-added services in the Company's automotive group from higher demand and new product launches.
Net income from continuing operations declined $1.6 million to $4.6 million, or $0.64 per share, from $6.2 million in 2001. The decline is the direct result of $2.9 million of one-time after-tax charges relating to litigation, real estate, bad debt expense and non-recurring manufacturing expenses. When adjusted for these items, net income increased 19% to $7.4 million, or $1.04 per share, from $6.2 million in 2001. The increase, after adjusting for these items, was primarily the result of the Company's automotive groups' increased value-added revenue due to increased demand and new part launches, partially offset by costs relating to the development of new technology and current and future production launches.
Noble International, Ltd 2002 Results
Three Months Ended Twelve Months Ended
December 31, December 31,
(thousands, except per share
data) 2002 2001 2002 2001
Reported Earnings(Loss)
From Continuing Operations $(574) $1,988 $4,552 $6,199
Addback of Unusual Charges
Litigation, net of tax 726 - 726 -
Real Estate Write-down, net
of tax 562 - 562 -
Relocation Inefficiencies,
net of tax - - 780 -
Bad Debt Expense, net of
tax 330 - 792 -
One-time Charge Total, net of
tax $1,618 $ - $2,860 $ -
Adjusted Earnings from
Continuing Operations $1,044 $1,988 $7,412 $6,199
Adjusted Earnings per share
from Continuing Operations $0.14 $0.28 $1.04 $0.90
Reported Earnings(Loss)per
share from Continuing
Operations $(0.07) $0.28 $0.64 $0.90
Diluted weighted average
shares outstanding 7,705,535 7,758,138 7,158,982 7,776,451
One-Time Charges
During 2002 the Company incurred three significant one-time charges related to its continuing operations. First, the Company recorded a charge as a result of tax-related litigation related to the Company's acquisition of its laser welding operations in 1997. Through arbitration, the seller was awarded approximately $1.1 million. The Company recorded this charge in the fourth quarter of 2002. The Company plans to appeal the ruling.
Second, National Steel filed for bankruptcy protection in February 2002. The Company recorded approximately $1.2 million of bad debt expense during 2002, $0.5 million in the fourth quarter, relating to the pre-petition account receivable due the Company from National Steel. The Company has fully reserved the amount of the pre-petition account receivable.
Finally, the Company wrote down certain real estate assets that are currently held for sale. The Company recorded a charge of approximately $0.9 million in the fourth quarter in order to value these assets at the estimated current fair market value. These assets have been included in assets held for sale on the Company's balance sheet.
In addition, the Company estimates it incurred approximately $0.8 million, net of tax, in additional manufacturing expenses related to its relocation of its major automotive manufacturing facility during 2002.
Discontinued Operations
Late in the fourth quarter of 2002, the Company made the strategic decision to exit its non-core businesses and focus management's attention and the company's resources on its automotive operations. To this end, the Company sold its heavy equipment operations in December 2002 for $14.0 million in cash. The proceeds of the sale were used to reduce balances on the Company's credit facility.
On March 21, 2003, the Company completed the sale of its logistics group for approximately $11.0 million. Due to the decision to exit the logistics business in 2002, the Company recorded a $19.9 million charge in order to reduce the carrying value of the logistics group to reflect the anticipated sale price. This charge, and its associated tax benefit, will result in the Company recapturing taxes paid on capital gains and ordinary income from current and prior periods totaling approximately $7.2 million.
The operating results for these divisions for 2002 and prior years have been classified as discontinued operations on the Company's financial statements as assets and liabilities held for sale.
2003 Guidance
The Company estimates 2003 earnings for continuing operations of $0.80 to $0.95 per share including an after-tax restructuring charge of $0.5 million (or $0.06 per share), on revenue of $140 to $150 million. This guidance is based on an estimated 9.1 million fully diluted shares outstanding as compared to 7.2 million fully diluted shares outstanding for 2002, an increase of 26%.
In line with the Company's strategy commenced in the fourth quarter of 2002, and demonstrated through the sale of the Company's heavy equipment and logistics operations, the Company is concentrating on its core automotive business. To this end, the Company will record a $0.5 million after-tax, or $0.06 per share, restructuring charge in the first quarter of 2003 in order to right size the Company's overhead structure relative to the needs of its remaining core operations.
As reported in prior announcements, the Company's automotive group is expected to experience significant revenue growth over the next three years. Over this period, the automotive group anticipates launching 22 new parts on 12 platforms. The most notable launch is the 2003 launch of parts for the Ford F-150 series trucks. The F-150 series program will be the largest and most technologically advanced program to be launched in the Company's history.
The F-150 program will entail the automotive industry's first application of partially exposed blanks welded to non-exposed blanks. This application represents a significant advancement in the utilization of laser welded blanking technology. Concurrent with the launch of this program will be the introduction of a second new technology -- NobleWorks. NobleWorks will allow for real-time data acquisition and control of all critical process parameters involved with the production of laser welded blanks, including total part traceability.
Commenting on the 2003 outlook for the Company, Christopher L. Morin stated, "We have accomplished a great deal in a short period of time. We are fully committed to building and enhancing our laser welding business. The proceeds from our recent divestitures have provided the Company the ability to reduce outstanding debt and free capital to invest in the anticipated growth of the automotive group." Mr. Morin continued, "In addition, we are very excited about the application of NobleWorks in our manufacturing processes. This technology will provide the necessary data in order to reduce variability in process which will ultimately result in reduced manufacturing costs."
The lower end of the Company's guidance assumes North American automobile production decreases to approximately 15.5 million vehicles in 2003. This represents a decrease of 1.3 million vehicles as compared to the 2002 volume of 16.8 million vehicles. The potential causes of our decreased volume projection are a general weakness in the economy, a decrease in consumer confidence and spending and the conflict in Iraq. In addition, the Company has anticipated certain inefficiencies related to the 2003 launches of its new technologies and applications. The Company believes the magnitude of these launches, the complexity of the launches and the fact that they involve a new technology warrant the inclusion of these anticipated costs. Offsetting the impact of the anticipated lower vehicle volumes and costs related to these launches are benefits from an increased revenue base and the impact of cost reduction programs initiated at the beginning of 2003. The Company has already delayed or eliminated annualized costs of approximately $2.5 million.
Through the divestures of non-core businesses and its cash flow from operations, the Company anticipates a significant strengthening of its balance sheet. Total debt is expected to reduce from approximately $58.0 million at year end 2002 to approximately $44.0 million by year end 2003, even after investing approximately $11.0 million in cap-ex over the period. In addition, the Company's debt to total capitalization ratio is anticipated to decline from approximately 58% to 48%. With the expected increase in operating cash flow, the Company expects to continue to eliminate debt in 2004 and beyond.
SAFE HARBOR STATEMENT
Noble International, Ltd. is a leading supplier of automotive parts, component assemblies and value-added services to the automotive industry. As an automotive supplier, Noble provides design, engineering, manufacturing, complete program management and other services to the automotive market. Noble delivers integrated component solutions, technological leadership and product innovation to original equipment manufacturers (OEMs) and Tier I automotive parts suppliers thereby helping its customers increase their productivity while controlling costs.
Certain statements made by Noble International, Ltd. in this release and other periodic oral and written statements, including filings with the Securities and Exchange Commission, are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, as well as statements which address operating performance, events or developments that we believe or expect to occur in the future, including those that discuss strategies, goals, outlook or other non- historical matters, or which relate to future sales or earnings expectations, cost savings, awarded sales, volume growth, earnings or a general belief in our expectations of future operating results, are forward-looking statements. The forward-looking statements are made on the basis of management's assumptions and estimations. As a result, there can be no guarantee or assurance that these assumptions and expectations will in fact occur. The forward-looking statements are subject to risks and uncertainties that may cause actual results to materially differ from those contained in the statements. Some, but not all of the risks, include our ability to obtain future sales; our ability to successfully integrate acquisitions; changes in worldwide economic and political conditions, including adverse effects from terrorism or related hostilities including increased costs, reduced production or other factors; costs related to legal and administrative matters; our ability to realize cost savings expected to offset price concessions; inefficiencies related to production and product launches that are greater than anticipated; changes in technology and technological risks; increased fuel costs; work stoppages and strikes at our facilities and that of our customers; the presence of downturns in customer markets where the Company's goods and services are sold; financial and business downturns of our customers or vendors; and other factors, uncertainties, challenges, and risks detailed in Noble's public filings with the Securities and Exchange Commission. Noble does not intend or undertake any obligation to update any forward looking statements. For more information see www.nobleintl.com .
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
Net sales $35,118 $25,268 $125,228 $75,110
Cost of sales 30,383 19,967 104,859 57,268
Gross margin 4,735 5,301 20,369 17,842
Selling, general and
administrative expenses 3,155 2,229 10,673 9,553
Bad Debt Expense 516 53 1,216 53
Operating profit 1,064 3,019 8,480 8,236
Interest income 229 121 978 1,586
Interest expense (154) (339) (928) (2,277)
Expense related to Litigation (1,098) - (1,098) -
Other income (expense), net (916) 17 (935) 1,617
Earnings (loss) from
continuing operations
before income taxes and
extraordinary item (875) 2,818 6,497 9,162
Income tax expense (benefit) (301) 830 1,935 2,936
Earnings (loss) from
continuing operations before
extraordinary item (574) 1,988 4,562 6,226
Preferred stock dividends - - 10 27
Earnings (loss) on common
shares from continuing
operations (574) 1,988 4,552 6,199
(Loss) from discontinued
operations (17,970) (563) (17,896) (2,131)
Gain on sale of discontinued
operations 174 - 174 -
Earnings (loss) on common
shares before extraordinary
item (18,370) 1,425 (13,169) 4,068
Extraordinary item - Gain on
Acquisition - 1,567 315 1,567
Net earnings (loss) on common
shares $(18,370) $2,992 $(12,854) $5,635
Basic earnings (loss) per
common share:
Earnings (loss) from
continuing operations $(0.07) $0.30 $0.65 $0.94
(Loss) from discontinued
operations (2.33) (0.09) (2.56) (0.32)
Gain on sale of discontinued
operations 0.02 - 0.02 -
Extraordinary item - gain on
acquisition - 0.24 0.05 0.24
Basic earnings (loss) per
common share $(2.38) $0.45 $(1.84) $0.85
Diluted earnings (loss) per
common share:
Earnings (loss) from
continuing operations $(0.07) $0.28 $0.64 $0.90
(Loss) from discontinued
operations (2.33) (0.07) (2.50) (0.27)
Gain on sale of discontinued
operations 0.02 - 0.02 -
Extraordinary item - gain on
acquisition - 0.20 0.04 0.20
Diluted earnings (loss) per
common share $(2.38) $0.41 $(1.80) $0.82
Basic weighted average common
shares outstanding 7,705,535 6,605,313 6,995,153 6,626,212
Diluted weighted average
shares outstanding 7,705,535 7,758,138 7,158,982 7,776,451
EBITDA - Continuing Operations $938 $4,711 $13,398 $17,242
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
Years Ended December 31,
2001 2002
ASSETS
Current Assets:
Cash and cash equivalents $943 $1,154
Accounts receivable, trade, net 23,556 22,992
Inventories 8,990 9,363
Deferred tax asset 506 6,217
Income taxes refundable 492 250
Prepaid expenses 1,727 2,555
Total Current Assets 36,214 42,531
Property, Plant & Equipment, net 44,294 47,762
Other Assets:
Goodwill, net 15,690 15,690
Covenants not to compete, net 583 383
Other assets, net 9,898 10,487
Total Other Assets 26,171 26,560
Assets Held for Sale 50,260 13,098
Total Assets $156,939 $129,951
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $16,697 $19,830
Accrued liabilities 4,915 5,685
Current maturities of long-term
debt 51,025 8,414
Total Current Liabilities 72,637 33,929
Long-Term Liabilities:
Deferred income taxes 2,658 2,006
Convertible subordinated
debentures 16,110 16,037
Junior subordinated notes 3,439 -
Long-term debt, excluding current
maturities 750 33,234
Putable Common Stock 1,203 -
Redeemable preferred stock 250 -
Total Long-Term Liabilities 24,410 51,277
Liabilities Held for Sale 12,511 2,684
Stockholders' Equity
Common stock 7 9
Additional paid-in capital 22,985 32,874
Retained earnings 24,857 9,755
Accumulated comprehensive loss (468) (577)
Total Stockholders' Equity 47,381 42,061
Total Liabilities & Stockholders'
Equity $156,939 $129,951