Noble International Announces Third Quarter Earnings Of $0.30 per Diluted Share
WARREN, Mich., Oct. 20, 2004 -- Noble International, Ltd. ("Noble" or the "Company") reported earnings of $0.30 per diluted share for the third quarter ended September 30, 2004. For the first nine months of 2004, Noble posted earnings from continuing operations of $1.05 per diluted share. For the third quarter and first nine months of 2003, Noble reported diluted EPS from continuing operations of $0.32 and $0.85, respectively. Noble's third quarter 2004 diluted EPS from continuing operations includes an increase in its diluted share count of 1.6 million shares, an increase of 18% from the third quarter of 2003.
Third Quarter Results
Revenue for the third quarter rose to $75.1 million from $48.0 million in the third quarter of 2003. Gross margin increased to $7.8 million in the most recent quarter, up from $6.7 million in 2003. On a percentage basis, gross margin in the third quarter was 10.4% of sales versus 13.9% in the year-ago third quarter. The decline in the gross margin percentage was primarily due to higher steel content accounting for a larger percentage of total revenue, extended annual production shutdowns during July and generally lower vehicle production in September 2004 relative to the third quarter of 2003. Selling, general and administrative (SGA) expense in the third quarter of 2004 increased to $3.5 million from $2.8 million, declining as a percentage of sales to 4.7% from 5.8% a year ago.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter of 2004 totaled $6.6 million compared to $6.3 million a year ago. Other Income for the third quarter of 2004 included non-recurring charges of $0.3 million while in third quarter of 2003, Noble posted non-recurring income of $0.5 million.
Pre-tax earnings from continuing operations for the third quarter of 2004 totaled $5.7 million, including a non-cash gain of $2.0 million on the change in value of the convertible option derivative liability (net of debt discount amortization of $0.3 million related to the Company's 4% Convertible Notes issued 2004), up 50% from $3.8 million in the year-ago third quarter.
Income tax expense for the most recent quarter was $0.9 million versus $1.1 million in last year's third quarter. The tax rate for the third quarter of 2004 was 15% versus 29% due in large part to the non-cash, non tax-effected gain on the derivative liability and related debt discount amortization. Net income from continuing operations for the quarter ended September 30, 2004 was $4.9 million versus $2.7 million from continuing operations in the third quarter of 2003.
The Company's basic weighted average common share count for the third quarter of 2004 increased to 9.2 million shares from 7.8 million shares in the year-ago third quarter due primarily to the conversion of the 6% Convertible Subordinated Debentures (issued 1998) into approximately 1.1 million shares of common stock. The diluted share count for the third quarter of 2004 includes approximately 1.3 million shares from the Company's 4% Convertible Notes issued March 26, 2004.
Nine-Month Results
Revenue in the first nine months of 2004 climbed to $244.1 million from $127.7 million in the same period of 2003. Gross margin for the first nine months of 2004 increased to $27.7 million from $19.3 million a year ago. Gross margin as a percentage of sales was 11.4% for the first nine months of 2004 compared to 15.1% in 2003. The decline in the gross margin percentage was primarily due to steel content accounting for a greater proportion of revenue in 2004 compared to 2003. SGA expense was $11.4 million for the first nine months of 2004, up from $8.4 million a year ago, but down as a percentage of sales to 4.7% from 6.6% in the first nine months of 2003.
EBITDA for the first nine months of 2004 was $24.0 million versus $17.1 million a year ago. Pre-tax income from continuing operations totaled $16.9 million versus $10.4 million in the first nine months of 2003, an increase of 62%. Pre-tax income for the first nine months of 2004 included a non-cash gain of $2.3 million on the change in value of the derivative liability (net of related debt discount amortization of $0.6 million). Net income from continuing operations was $12.3 million for the first nine months of this year versus $7.1 million in the same period of 2003.
Management Commentary
Noble's President and Chief Executive Officer, Christopher L. Morin, stated regarding the quarter, "Our results for the third quarter of 2004 were very good and reflected our team's solid execution in an operating environment that was generally more difficult than the third quarter of 2003. In September 2004, some of our customers lowered production of certain vehicles to reduce inventory levels, resulting in North American production falling 4.5% for the month compared to September 2003. These production cuts disrupted build schedules and presented an operating challenge to our team. I am pleased that our team successfully met the challenges presented in the third quarter and am confident in our ability to meet these challenges in the future."
Jay J. Hansen, Noble's Chief Financial Officer, commented on the Company's financial performance during the quarter, stating, "Our financial performance for the third quarter was in line with our expectations despite lower North American automotive production than we previously estimated. The third quarter also presented a difficult year-over-year comparison due to other factors including a higher diluted share count and non-recurring items."
2004 Financial Guidance
Management reiterates its 2004 earnings guidance of $1.38 to $1.42 per diluted share, excluding the impact of the SFAS 133 derivative liability valuation, despite a drop in estimated North American light vehicle production of approximately 300,000 units to 15.9 million compared to our previous forecasts.
Conference Call Information
Noble will host a conference call to discuss third quarter results at 10 AM EDT, October 21, 2004. The dial-in number is 800-821-1449 or 973-409-9256. If you are unable to participate in the conference call, you may listen to a digital replay of the conference call through October 28, 2004 by dialing 877-519-4471 or 973-341-3080. The password for the replay is 5283489.
Impact of SFAS 133 on Reported Results
Management's financial guidance for 2004 and beyond is 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 to forecast the impact of SFAS 133 on the conversion option derivative liability 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. For a reconciliation of earnings per share excluding the effects of SFAS 133 to net income from continuing operations, see the attached financial information and supplemental data.
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.
Certain statements made by Noble International, Ltd. in this presentation 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 Statements Of Operations
(Unaudited, in thousands, except share and per share data)
Three Months Ended Nine Months Ended
September 30 September 30
2003 2004 2003 2004
Net sales $48,041 $75,101 $127,702 $244,097
Cost of sales 41,358 67,324 108,446 216,381
Gross margin 6,683 7,777 19,256 27,716
Selling, general and
administrative expenses 2,785 3,520 8,423 11,412
Operating profit 3,898 4,257 10,833 16,304
Interest income 140 99 504 262
Interest expense (740) (787) (1,737) (2,794)
Gain on value of convertible
option derivative liability -- 2,323 -- 2,918
Other, net 516 (172) 786 171
Earnings from continuing
operations before income
taxes 3,814 5,720 10,386 16,861
Income tax expense 1,099 859 3,324 4,552
Earnings on common shares
from continuing operations 2,715 4,861 7,062 12,309
Discontinued operations:
Gain (loss) from discontinued
operations 79 -- (913) (121)
Gain (loss) on sale of
discontinued operations -- -- (677) 121
Net earnings on common shares $2,794 $4,861 $5,472 $12,309
Basic earnings (loss) per common
share:
Earnings per share from
continuing operations $0.35 $0.52 $0.91 $1.25
Gain (loss) from
discontinued operations 0.01 -- (0.12) (0.01)
Gain (loss) on sale of
discontinued operations -- -- (0.09) 0.01
Basic earnings per common share $0.36 $0.52 $0.71 $1.25
Diluted earnings (loss) per
common share
Earnings per share from
continuing operations $0.32 $0.30 $0.85 $1.05
Gain (loss) from
discontinued operations 0.01 -- (0.10) (0.01)
Gain (loss) on sale of
discontinued operations -- -- (0.08) 0.01
Diluted earnings per common
share $0.33 $0.30 $0.67 $1.05
Dividends declared and paid $0.08 $0.10 $0.24 $0.30
Basic weighted average
common shares outstanding 7,779,872 9,240,779 7,744,315 9,095,003
Diluted weighted average
common shares outstanding 9,056,065 10,649,086 8,963,453 10,267,813
EBITDA from continuing
operations:
Earnings on common shares
from continuing operations $2,715 $4,861 $7,062 $12,309
Income tax expense 1,099 859 3,324 4,552
Depreciation 1,649 2,339 4,842 7,041
Amortization 50 102 150 257
Gain on value of convertible
option derivative liability -- (2,323) -- (2,918)
Interest expense 740 787 1,737 2,794
EBITDA from continuing
operations $6,253 $6,625 $17,115 $24,035
Earnings on common shares
from continuing operations
prior to SFAS 133 Impact:
Earnings on common shares
from continuing operations $2,715 $4,861 $7,062 $12,309
Amortization of debt discount -- 295 -- 590
Gain on value of convertible
option derivative liability -- (2,323) -- (2,918)
Earnings on common shares from
continuing operations prior to
SFAS 133 Impact $2,715 $2,833 $7,062 $9,981
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
Unaudited
December 31 September 30
2003 2004
ASSETS
Current Assets:
Cash and cash equivalents $715 $3,932
Accounts receivable, trade, net 34,030 64,742
Inventories 14,543 20,259
Other current assets 11,628 2,813
Total Current Assets 60,916 91,746
Property, Plant & Equipment, net 47,119 50,853
Other Assets:
Goodwill 11,839 20,200
Other intangible assets, net 183 2,003
Other assets, net 12,890 12,885
Total Other Assets 24,912 35,088
Assets Held for Sale 10,036 3,760
Total Assets $142,983 $181,447
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $29,517 $56,354
Accrued liabilities 4,967 4,510
Current maturities of long-term debt 9,999 440
Conversion option derivative liability -- 627
Other current liabilities 54 3,740
Total Current Liabilities 44,537 65,671
Long-Term Liabilities:
Deferred income taxes 3,860 3,864
Convertible subordinated debentures,
net of discount 7,026 37,046
Long-term debt, excluding current maturities,
net of discount 35,974 5
Total Long-Term Liabilities 46,860 40,915
Liabilities Held for Sale 775 --
Stockholders' Equity
Common stock 9 9
Additional paid-in capital 38,161 51,908
Retained earnings 12,490 22,061
Accumulated comprehensive income, net 151 883
Total Stockholders' Equity 50,811 74,861
Total Liabilities & Stockholders' Equity $142,983 $181,447