Noble International Announces Record Second Quarter
Net Income and Posts Earnings of $0.40 per Diluted Share
WARREN, Mich., July 22 -- Noble International, Ltd. ("Noble" or the "Company") reported earnings of $0.40 per diluted share for the second quarter ending June 30, 2004, coming in at the upper end of its guidance. For the first half of 2004, Noble posted earnings of $0.76 per diluted share. For the second quarter and first half of 2003, Noble reported diluted EPS from continuing operations of $0.29 and $0.53, respectively. Noble's second quarter 2004 diluted EPS from continuing operations increased 38% despite an increase in its diluted share count of 1.7 million shares, an increase of 19%.
Second Quarter Results
Revenue for the second quarter rose to $87.4 million from $40.0 million in the second quarter of 2003. Gross margin increased to $9.8 million in the most recent quarter, up from $6.6 million in 2003. On a percentage basis, gross margin in the second quarter was 11.2% of sales versus 16.4% in the year-ago second quarter. The decline in the gross margin percentage was primarily due to an increase in the steel content of sales as a percentage of total revenue and is in line with management's expectations. Selling, general and administrative (SGA) expense in the second quarter of 2004 increased to $3.6 million from $2.7 million, declining as a percentage of sales to 4.2% from 6.7% a year ago.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter of 2004 totaled $8.9 million compared to $6.1 million a year ago. Pre-tax earnings from continuing operations for the second quarter of 2004 totaled $6.1 million, up 66% from $3.7 million in the year-ago second quarter. Income tax expense for the most recent quarter was $2.0 million versus $1.3 million in last year's second quarter. Net income from continuing operations for the quarter ended June 30, 2004 was $4.1 million versus $2.4 million from continuing operations in the second quarter of 2003.
First-Half Results
Revenue in the first half of 2004 more than doubled to $169 million from $79.7 million in the same period of 2003. Gross margin for the first six months of 2004 increased to $19.9 million from $12.6 million a year ago. Gross margin as a percentage of sales was 11.8% for the first half of 2004 compared to 15.8% in 2003. The decline in the gross margin percentage was primarily due to an increase in steel content sales that accounted for a greater proportion of revenue in 2004 compared to 2003. SGA expense was $7.9 million for the first half of 2004, up from $5.6 million a year ago, down as a percentage of sales to 4.7% from 7.1% in the first half of 2003.
EBITDA for the first half of 2004 was $17.4 million versus $10.9 million a year ago. Pretax income from continuing operations totaled $11.1 million versus $6.6 million in the first half of 2003, an increase of 70%. Net income from continuing operations was $7.4 million for the first six months of this year versus $4.3 million in the first half of 2003.
Management Commentary and Guidance
Noble's President and Chief Executive Officer, Christopher L. Morin, stated regarding the quarter, "The second quarter of 2004 was another strong quarter for Noble, driven by the continuing growth in our laser welding business. We achieved these results through a great deal of hard work by our entire team and concentrating on our core business. During the quarter we saw most of the vehicles on which we have content post higher numbers. Production of the Ford F-150 continues to be strong and during the quarter we began shipping in volume for DaimlerChrysler's new LX cars, the Chrysler 300 and the Dodge Magnum."
Mr. Morin continued, commenting on Noble's plans to drive future growth of the market, "During the first half of this year, Noble's management team closely reviewed our efforts to grow our Company and the entire laser welding market. Over the past year, we have shifted our approach to growing the market to one of concentrating on the development of new applications. We believe we are the only laser welder that is working to innovate by developing new laser-welded body structure applications. To that end, we will focus on developing and supplying "Auto Body Solutions for the 21st Century" to maintain our position as the largest and most capable supplier in the laser welding segment. We are developing new products that capitalize on our industry-leading position in quality, curvilinear laser welding and tubular product solutions."
Jay J. Hansen, Noble's Chief Financial Officer commented on the Company's financial performance during the quarter, stating, "As we enter the third quarter, we maintain a positive outlook for Noble's performance. By the end of the second quarter, we had essentially completed the physical integration of LWI into our facilities. The operational integration is proceeding in line with our expectations and we expect this acquisition to become more accretive over time. Our financial position is stronger than at any time in our Company's history. Due to our operating performance, our cash generation exceeds our need for capital and we ended the quarter with nearly $7.5 million in cash, combined with $35 million in availability on our credit facilities."
Management anticipates earnings of $1.38 to $1.42 per diluted share for 2004 subject to the impact of Statement of Financial Accounting Standards ("SFAS") 133 and related interpretations. Our projected net income and earnings per share for the full year of 2004 are unavailable due to our inability of the Company to forecast the impact of SFAS 133 on the conversion option included in our recent issuance of $40 million Convertible Notes. Management is providing this earnings estimate subject to the stated adjustments because they are the performance measures most comparable to net income that we can forecast reliably. We are unable to accurately forecast the future changes in the fair value of the conversion option because it is based on factors outside of the Company's control. Management plans to provide initial guidance for 2005 in conjunction with its release of results for the third quarter of 2004, which is anticipated in late October 2004.
Use of EBITDA as a financial measure
In addition to the results reported in accordance with accounting principles generally accepted in the United States ("GAAP") included throughout this news release, the Company has provided information regarding "EBITDA" (a non-GAAP financial measure). EBITDA, as adjusted, represents earnings from continuing operations before income tax, plus interest expense, depreciation, amortization and adjustments related to the impact of SFAS 133. EBITDA is not presented as, and should not be considered an alternative measure of operating results or cash flows from operations (as determined in accordance with generally accepted accounting principles), but are presented because they are widely accepted financial indicators of a company's ability to incur and service debt. While widely used, however, EBITDA is not identically calculated by companies presenting EBITDA and is, therefore, not necessarily an accurate means of comparison and may not be comparable to similarly titled measures disclosed by other companies.
Management believes that EBITDA is useful to both management and investors in their analysis of the Company's ability to service and repay its debt. Further, management uses EBITDA for planning and forecasting in future periods.
For a reconciliation of EBITDA to net income from continuing operations, see the attached financial information and supplemental data.
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.
For more information see http://www.nobleintl.com/. NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
Three Months Ended Six Months Ended
June 30 June 30
2003 2004 2003 2004
Net sales $40,037 $87,392 $79,661 $168,996
Cost of sales 33,478 77,608 67,087 149,057
Gross margin 6,559 9,784 12,574 19,939
Selling, general and
administrative expenses 2,669 3,640 5,638 7,892
Operating profit 3,890 6,144 6,936 12,047
Interest income 209 66 364 163
Interest expense (676) (891) (997) (2,007)
Gain on value of convertible
option derivative liability -- 595 -- 595
Other, net 272 217 270 344
Earnings from continuing
operations before income
taxes 3,695 6,131 6,573 11,142
Income tax expense 1,267 1,990 2,225 3,693
Earnings on common shares
from continuing operations 2,428 4,141 4,348 7,449
Discontinued operations:
(Loss) from discontinued
operations (300) -- (992) --
(Loss) on sale of
discontinued operations -- -- (677) --
Net earnings on common
shares $2,128 $4,141 $2,679 $7,449
Basic earnings (loss) per
common share:
Earnings per share from
continuing operations $0.31 $0.45 $0.56 $0.78
(Loss) from discontinued
operations (0.04) -- (0.13) --
(Loss) on sale of
discontinued operations -- -- (0.09) --
Basic earnings per common
share $0.28 $0.45 $0.35 $0.78
Diluted earnings (loss) per
common share
Earnings per share from
continuing operations $0.29 $0.40 $0.53 $0.76
(Loss) from discontinued
operations (0.03) -- (0.11) --
(Loss) on sale of
discontinued operations -- -- (0.08) --
Diluted earnings per common
share $0.26 $0.40 $0.34 $0.76
Dividends declared and paid $0.08 $0.10 $0.16 $0.20
Basic weighted average
common shares outstanding 7,723,710 9,116,063 7,723,296 9,015,707
Diluted weighted average
common shares outstanding 8,935,602 10,632,661 8,921,814 10,065,438
EBITDA from continuing
operations, as adjusted:
Earnings on common shares
from continuing operations $2,428 $4,141 $4,348 $7,449
Income tax expense 1,267 1,990 2,225 3,693
Depreciation 1,630 2,400 3,193 4,702
Amortization 50 101 100 155
Gain from change in
covertible option
derivative -- (595) -- (595)
Interest expense 676 891 997 2,007
EBITDA from continuing
operations, as adjusted $6,051 $8,928 $10,863 $17,411
Earnings on common shares
from continuing operations
prior to SFAS 133 Impact:
Earnings on common shares
from continuing operations $2,428 $4,141 $4,348 $7,449
Amortization of debt
discount -- 295 -- 295
Gain on value of
convertible option
derivative liability -- (595) -- (595)
Earnings on common shares
from continuing operations
prior to SFAS 133 Impact $2,428 $3,841 $4,348 $7,149
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)
December 31 June 30
2003 2004
ASSETS
Current Assets:
Cash and cash equivalents $715 $7,467
Accounts receivable, trade, net 34,030 58,629
Inventories 14,543 18,502
Other current assets 11,628 5,141
Total Current Assets 60,916 89,739
Property, Plant & Equipment, net 47,119 50,951
Other Assets:
Goodwill, net 11,839 19,870
Other intangible assets, net 183 2,105
Other assets, net 12,890 13,303
Total Other Assets 24,912 35,278
Assets Held for Sale 10,036 3,889
Total Assets $142,983 $179,857
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $29,517 $54,538
Accrued liabilities 4,967 7,374
Current maturities of long-term
debt 9,999 1,975
Other current liabilities 54 6,165
Total Current Liabilities 44,537 70,052
Long-Term Liabilities:
Deferred income taxes 3,860 3,855
Long-term debt, excluding current
maturities, net of discount 43,000 37,514
Total Long-Term Liabilities 46,860 41,369
Liabilities Held for Sale 775 --
Stockholders' Equity
Common stock 9 9
Additional paid-in capital 38,161 50,207
Retained earnings 12,490 18,130
Accumulated comprehensive income,
net 151 90
Total Stockholders' Equity 50,811 68,436
Total Liabilities & Stockholders' Equity $142,983 $179,857