Noble International Reports Fourth Quarter and Full Year 2005 Results
EPS of $0.41 in the fourth quarter and $1.55 for the full year, excluding Impairment Charges and prior to impact of the 3 for 2 stock split
WARREN, Mich., Feb. 22 -- Noble International, Ltd. ("Noble" or the "Company") posted earnings for the fourth quarter ended December 31, 2005 of $0.41 per diluted share, excluding impairment charges and prior to adjusting for the three-for-two stock split effective February 3, 2006. Noble reported earnings of $0.33 per diluted share in the fourth quarter of 2004 prior to the impact of the split. On a split-adjusted basis and excluding impairment charges, Noble reported earnings of $0.28 per diluted share in the fourth quarter of 2005 compared to $0.22 in the fourth quarter of 2004.
For the full year 2005, Noble reported diluted earnings per share ("EPS") excluding impairment charges and prior to the impact of the stock split of $1.55. Full year EPS for 2004 was $1.45 excluding impairment charges and prior to the impact of the stock split. On a split-adjusted basis and excluding impairment charges, Noble's full year EPS for 2005 was $1.03.
Twelve Months
Three Months Ended Ended
December 31 December 31
2004 2005 2004 2005
Diluted EPS showing impact of
impairment charges and after stock
split:
Diluted EPS $0.22 $(0.29) $0.96 $0.36
Impact of impairment charges - 0.57 0.01 0.67
Diluted EPS prior to impact of
impairment charges $0.22 $0.28 $0.97 $1.03
Diluted EPS showing impact of
impairment charges and prior to
stock split:
Diluted EPS $0.33 $(0.43) $1.44 $0.54
Impact of impairment charges - 0.84 0.01 1.01
Diluted EPS prior to impact of
impairment charges $0.33 $0.41 $1.45 $1.55
Impairment Charges
During the fourth quarter of 2005, Noble recorded a $7.9 million (or approximately $0.84 per diluted share prior to the impact of the split) non-cash, non-tax effected impairment charge related to an equity investment in a minority automotive supplier. The investment originated with the Noble's sale of its metal forming and stamping assets to the minority supplier in 2001. Including the impairment charge, Noble reported a loss in the fourth quarter of 2005 of $0.43 per diluted share prior to the impact of the stock split. Including the $7.9 million impairment charge in the fourth quarter and $2.2 million in impairment charges in the third quarter related to other non- core assets, Noble reported diluted EPS of $0.54 per share prior to the impact of the stock split for the year ended December 31, 2005.
Three- For-Two Stock Split Impact on EPS
Adjusting for the impact of the three-for-two stock split, Noble reported earnings excluding impairment charges of $0.28 per diluted share in the fourth quarter of 2005. Including the impairment charges of $0.57 on a split-adjusted basis, Noble reported a loss of $0.29 per diluted share in the fourth quarter. In the fourth quarter of 2004, Noble's split-adjusted EPS was $0.22 per diluted share.
For the full year 2005, the split-adjusted, diluted EPS prior to impairment charges was $1.03. Including impairment charges of $0.67 on a split-adjusted basis, diluted EPS for 2005 was $0.36. Noble's 2004 split- adjusted, diluted EPS was $0.96 including impairment charges.
Fourth Quarter Results
Revenue in the fourth quarter of 2005 was $96.4 million compared to $88.5 million last year. New vehicle programs, the addition of the Silao, Mexico facility and a product mix shift toward larger blanks with a higher steel content contributed to revenue growth during the most recent quarter compared to the same quarter last year.
Gross profit in the fourth quarter of 2005 was $10.1 million compared to $10.2 million in the fourth quarter of 2004. Gross margin in the fourth quarter of 2005 was 10.5% of net sales compared to 11.5% in the fourth quarter of 2004. The decline in gross profit and gross margin was primarily due to launch costs of three new or expanded facilities prior to new programs entering production in those facilities. Other factors impacting gross margin in the fourth quarter of 2005 compared to the fourth quarter of 2004 included the continuation of a shift in product mix to larger laser-welded blanks ("LWBs") that resulted in a higher proportion of steel content in the revenue mix compared to last year.
Selling, general and administrative expenses ("SG&A") increased to $5.0 million in the fourth quarter of 2005 from $4.5 million in the fourth quarter of 2004. SG&A as a percentage of net sales was 5.2% in the fourth quarter of 2005 compared to 5.0% in the fourth quarter of 2004. SG&A rose in part due to increased spending to support growth, including costs to add and expand staffing in production facilities prior to the start of production.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") in the fourth quarter of 2005 were $7.8 million versus $8.3 million in the year-ago fourth quarter. The decline in EBITDA was primarily due to incurring costs to expand facilities and support growth in advance of starting production on new programs.
Net interest and other expense for the fourth quarter of 2005 was $8.3 million, which included a non-cash, non-tax effected asset impairment charge of $7.9 million. Last year's net interest and other expense was $1.0 million in the fourth quarter, which included a loss of $0.5 million due to a change in the value of the convertible option derivative liability on Noble's 4% Convertible Notes.
Noble's pre-tax income for the fourth quarter of 2005, excluding the $7.9 million impairment charge, was $4.7 million. On a comparable basis, excluding the $0.5 million non-cash, non-tax effected gain on the change in value of the option derivative, Noble's fourth quarter 2004 pre-tax income was $5.3 million. Including the impairment charge, Noble reported a pre-tax loss of $3.2 million in the fourth quarter of 2005, versus pre-tax income of $4.8 million in the year-ago fourth quarter, which included the non-tax effected loss of $0.5 million on the change in the value of the convertible option derivative liability.
Noble's net income for the fourth quarter of 2005 was $3.9 million, excluding the impairment charge, compared to $3.5 million in the fourth quarter of 2004, excluding the loss on the value of the option derivative. The net loss in the fourth quarter of 2005 was $4.0 million including impairment charges, versus net income of $3.1 million in 2004, which includes the loss on the derivative liability.
Full-Year Results
Net sales for 2005 rose to $363.8 million from $332.6 million in 2004. Net sales growth for 2005 is attributable to newer vehicle programs, the addition of the Silao, Mexico facility as well as growth in steel content in total sales resulting from the mix change to larger blanks with a higher steel content.
Gross margin for 2005 was $37.8 million compared to $37.9 million in 2004. As a percentage of net sales, the gross margin for 2005 was 10.4% versus 11.4% a year ago. The decline in the gross margin percentage was due primarily to an increase in steel content as a proportion of the total sales mix, facility expansion and staffing costs and other expenses related to the launch of new business in the third and fourth quarters. Contributing to gross margin pressure earlier in the year were lower production volumes on some higher- volume vehicles for which the Company is a supplier, higher freight costs and lower scrap steel pricing.
SG&A for 2005 increased slightly to $16.0 million, or 4.4% of net sales, from $15.9 million, or 4.8% of net sales in 2004. Operating profit for 2005 declined slightly to $21.8 million from $22.1 million in 2004.
EBITDA for 2005 was $33.3 million compared to $32.2 million in 2004. Net interest and other expense during 2005 was $11.2 million, which included the non-cash impairment charges of $10.1 million, compared to net expense of $0.4 million in 2004. Last year's other income included a non-cash gain of $2.5 million on the change in fair value of the option derivative liability.
Pre-tax income for 2005, excluding impairment charges, totaled $20.8 million versus $19.2 million for 2004, which excluded the non-cash gain of $2.5 million on the change in value of the convertible option derivative liability. Net earnings from continuing operations for 2005, excluding impairment charges, totaled $14.5 million versus $13.0 million, excluding the non-cash gain from the derivative liability, in 2004.
Expansion and Growth Update
During the fourth quarter, Noble completed the expansion of the Silao, Mexico facility and reached a joint venture agreement with Sumitomo Corporation ("Sumitomo") providing for the sale of a 49% interest in the Silao facility to Sumitomo. Construction of Noble's permanent facility in Adelaide, Australia was completed with some lower-volume production beginning during the fourth quarter. Higher-volume programs are scheduled to launch in Australia in the third quarter of 2006.
Noble completed work on its new facility in Stow, Ohio, the Company's sixth production facility, during the fourth quarter. Production of LWBs for the Dodge Durango was awarded to Noble in the third quarter of 2005. Noble began production of LWBs for the Durango on an interim basis in its Warren, Michigan, facility soon after receiving the award. The Company began transferring production to its Stow, Ohio facility during the first quarter of 2006. During the fourth quarter, Noble was awarded three more LWB programs, in addition to another program awarded during the third quarter of 2005. The Company expects three of the four additional programs to enter production by the end of 2006, with the fourth scheduled to launch in 2007.
Management Commentary and Guidance
Christopher L. Morin, Noble's Chief Executive Officer, commented, "As we ended 2005, we completed our latest round of facility expansions to meet the growing demand for our laser-welded flat blanks and tubular products. As planned, we incurred significant expenses preparing for growth, including setting up or expanding, and staffing three new manufacturing facilities. However, the new business we were awarded in 2005 shows that our growth strategy is working."
The fourth quarter of 2005 was important for Noble as we announced our first production order for a laser-welded structural tube. This program enters production during the second half of 2006 and has generated a great deal of interest among our customers. Laser-welded structural tubes are one of the most important 21st Century Auto Body Solutions(SM) we offer. We expect to announce more orders later this year."
Despite the continued challenging environment in the automotive industry, we expect to see continuing earnings growth in 2006 and beyond. The investment in people and capital during 2005 will allow us to facilitate and better manage this growth."
Noble's Chief Financial Officer, David J. Fallon, commented on the Company's 2005 financial results, "We finished 2005 with the Company in strong financial condition as we successfully met operating challenges in the automotive industry while funding growth initiatives and posting higher earnings compared to 2004. At the end of the year, we had $22 million in cash to fund further growth while investing $16 million in capital expenditures during the year to support our current initiatives. We were able to accomplish this despite an industry environment that continues to be a challenge for the entire sector while we added or expanded three production facilities."
Commenting on Noble's outlook, Mr. Fallon continued, "Our outlook for 2006 is for continuing growth in our business and earnings. We expect our 2006 operating earnings, adjusted for the recent three-for-two stock split, to be in a range of $1.11 to $1.16 per diluted share. This is consistent with our previous guidance of $1.67 to $1.74 per diluted share on a pre-split basis. We expect the peak impact of the launch expenses of the new Ohio facility and newly awarded business there along with the launch of laser welding in Mexico and the launch in Australia to impact the first quarter of 2006. In addition, the timing of new programs entering production has changed, moving later in the year and first quarter customer build schedules have been softer than we projected in late 2005. We estimate that due to these factors, our first quarter 2006 earnings are likely to be $0.05 - $0.07 per share lower than our split-adjusted earnings of $0.27 per share in the first quarter of 2005.
We expect this comparison to be positive in the second quarter of 2006 with EPS about $0.04 - $0.05 higher than the post-split second quarter 2005 EPS of $0.27. This assumption for the quarter, as well as our guidance for the full year, is based on current vehicle production forecasts and launch schedules. If these projections hold, we expect to achieve full year earnings per share consistent with our preliminary guidance."
Financial Guidance
Management expects 2006 operating earnings to be between $1.11 - $1.16 per diluted share, adjusted for the recent stock split. Revenue for the year is expected to be in the range of $415 - $425 million with EBITDA in the range of $39 - $43 million and capital expenditures of $13 - $15 million.
Conference Call Information
Noble will host a conference call to discuss its operating results for the fourth quarter and year ended December 31, 2005 at 10 AM ET, Thursday, February 23, 2006. The dial-in numbers for the call are 800-821-1449 or 973-409-9256. A replay of the conference call will be available through March 2 by dialing 877-519-4471 or 973-341-3080. The passcode for the replay is 6594327.
Use of Non-GAAP Financial Information
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 represents earnings from continuing operations before income tax, plus interest expense, depreciation, amortization, and other non-cash charges.
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.
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share and per share data)
Three Months Ended Twelve Months Ended
December 31 December 31
2004 2005 2004 2005
Net sales $88,514 $96,375 $332,611 $363,820
Cost of sales 78,300 86,236 294,680 326,017
Gross margin 10,214 10,139 37,931 37,803
Selling, general and
administrative expenses 4,455 5,011 15,867 16,005
Operating profit 5,759 5,128 22,064 21,798
Interest income 90 227 351 634
Interest expense (752) (730) (3,547) (2,868)
Gain on value of
convertible option
derivative liability (460) - 2,458 -
Impairment charges - (7,900) (129) (10,140)
Other, net 171 85 472 1,221
Earnings (loss) from
continuing operations
before income taxes 4,808 (3,190) 21,669 10,645
Income tax expense 1,756 870 6,308 5,586
Earnings (loss) on common
shares from continuing
operations before
minority interest 3,052 (4,060) 15,361 5,059
Minority interest - 34 - 34
Earnings (loss) from
continuing operations 3,052 (4,026) 15,361 5,093
Discontinued operations:
(Loss) from discontinued
operations - - (121) -
Gain on sale of
discontinued operations - - 121 -
Net earnings (loss) on
common shares $3,052 $(4,026) $15,361 $5,093
Basic earnings (loss) per
common share:
Earnings (loss) per share
from continuing
operations $0.22 $(0.29) $1.05 $0.37
(Loss) from discontinued
operations - - (0.01) -
Gain on sale of
discontinued operations - - 0.01 -
Basic earnings (loss) per
common share $0.22 $(0.29) $1.05 $0.37
Diluted earnings (loss)
per common share
Earnings (loss) per share
from continuing
operations $0.22 $(0.29) $0.96 $0.36
(Loss) from discontinued
operations - - (0.01) -
Gain on sale of
discontinued operations - - 0.01 -
Diluted earnings (loss)
per common share $0.22 $(0.29) $0.96 $0.36
Dividends declared and
paid $0.07 $0.07 $0.27 $0.27
Basic weighted average
common shares outstanding 13,876,949 14,004,015 13,697,253 13,946,801
Diluted weighted average
common shares outstanding 13,996,751 14,004,015 15,512,417 14,045,159
Diluted EPS showing impact
of impairment charges and
after 3 for 2 stock
split:
Diluted EPS $0.22 $(0.29) $0.96 $0.36
Impact of impairment
charges - 0.57 0.01 0.67
Diluted EPS prior to
impact of impairment
charges $0.22 $0.28 $0.97 $1.03
Diluted EPS showing impact
of impairment charges and
prior to 3 for 2 stock
split:
Diluted EPS $0.33 $(0.43) $1.44 $0.54
Impact of impairment
charges - 0.84 0.01 1.01
Diluted EPS prior to
impact of impairment
charges $0.33 $0.41 $1.45 $1.55
EBITDA from continuing
operations:
Earnings (loss) from
continuing operations
before income taxes $4,808 $(3,190) $21,669 $10,645
Depreciation 2,324 2,451 9,366 10,063
Amortization 85 100 342 255
Impairment charges - 7,900 129 10,140
Gain on value of
convertible option
derivative liability 460 - (2,458) -
Net interest expense 663 503 3,196 2,234
EBITDA from continuing
operations $8,340 $7,764 $32,244 $33,337
Earnings on common shares
prior to gain on
derivative liability and
impairment charges:
Earnings (loss) on common
shares from continuing
operations $3,052 $(4,026) $15,361 $5,093
Impairment charges (net
of tax) - 7,900 84 9,419
Gain on value of
convertible option
derivative liability 460 - (2,458) -
Earnings on common shares
from continuing
operations prior to gain
on derivative liability
and impairment charges $3,512 $3,874 $12,987 $14,512
NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
Unaudited
December 31 December 31
2004 2005
ASSETS
Current Assets:
Cash and cash equivalents $17,551 $21,978
Accounts receivable trade, net 51,895 78,659
Inventories, net 20,588 21,952
Other current assets 5,074 5,044
Total Current Assets 95,108 127,633
Property, Plant & Equipment, net 49,759 57,253
Other Assets:
Goodwill 20,287 20,972
Other intangible assets, net 1,967 2,303
Other assets, net 11,597 1,158
Total Other Assets 33,851 24,433
Assets Held for Sale 3,760 -
Total Assets $182,478 $209,319
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $52,736 $69,797
Accrued liabilities 3,229 5,853
Current maturities of long-term
debt 254 10
Income taxes payable 2,311 666
Total Current Liabilities 58,530 76,326
Long-Term Liabilities:
Deferred income taxes 5,994 5,308
Long term Debt, excluding current
maturities - 2,176
Convertible subordinated
debentures, net of discount 38,371 39,094
Total Long-Term Liabilities 44,365 46,578
Minority Interest in net assets - 3,551
Stockholders' Equity
Common stock 9 9
Additional paid-in capital 53,782 54,988
Retained earnings 24,184 25,551
Accumulated other comprehensive
income, net 1,608 2,316
Total Stockholders' Equity 79,583 82,864
Total Liabilities & Stockholders'
Equity $182,478 $209,319