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International Specialty Holdings Announces Fourth Quarter 2003 Results
WAYNE, N.J., Feb. 26 /PRNewswire-FirstCall/ -- International Specialty Holdings
Inc. (the "Company"), a wholly-owned subsidiary of International Specialty
Products Inc. ("ISP"), reported today fourth quarter 2003 net income of $0.2
million compared with net income of $11.1 million in the fourth quarter of 2002.
The lower results were attributable to investment losses in the quarter,
partially offset by higher operating income and reduced interest expense.
Operating income in the fourth quarter of 2003 includes a $2.1 million charge
for the write-off of production assets related to a discontinued product in the
Industrial Chemicals business segment, while fourth quarter 2002 operating
income included a $7.6 million charge for the write-off of deferred costs
related to the Company's Linden, New Jersey property.
Operating income in the fourth quarter of 2003 was $24.8 million compared with
$16.6 million in the same period in 2002. Excluding the charges in each period
mentioned above, operating income increased 11% to $26.9 million from $24.2
million in the fourth quarter of 2002 (see attached reconciliation of non-GAAP
financial measures).
Operating income for the Specialty Chemicals segment improved 40% to $29.2
million in the fourth quarter of 2003 compared with $20.8 million in the fourth
quarter of 2002. The improved results for Specialty Chemicals were primarily
attributable to the personal care, pharmaceutical and beverage product lines,
mainly due to manufacturing efficiencies, lower operating expenses, higher
volumes and the favorable impact of the weaker U.S. dollar.
The Industrial Chemicals segment recorded an operating loss of $6.1 million in
the fourth quarter of 2003. Excluding the $2.1 million charge for the write-off
of fixed assets mentioned above, the operating loss would be $4.0 million
compared with operating income of $0.7 million in the fourth quarter of 2002.
The Industrial Chemicals manufacturing operations are principally based in
Europe and costs for this business have been adversely impacted by the stronger
Euro. In addition, the results for the fourth quarter of 2003 were impacted by
lower pricing due to current industry supply/demand imbalance.
Operating income for the Mineral Products segment was $1.6 million in the fourth
quarter of 2003 compared with $2.5 million in last year's fourth quarter. The
decline was due to lower pricing and unfavorable manufacturing costs, primarily
as a result of higher energy costs.
Net sales for the fourth quarter of 2003 were $215.7 million compared with
$203.1 million in the same period last year. The 6% increase in sales resulted
from higher unit volumes in the Mineral Products segment and in the personal
care, pharmaceutical and food product lines, and the favorable impact of the
weaker U.S. dollar. These sales gains were partially offset by lower pricing in
Industrial Chemicals and Mineral Products and lower unit volumes in the fine
chemicals product line.
Interest expense for the fourth quarter of 2003 was $18.0 million compared with
$20.3 million in the fourth quarter of 2002. The $2.3 million (11%) decrease was
primarily due to lower average borrowings and, to a lesser extent, lower average
interest rates. Investment losses in the fourth quarter of 2003 totaled $6.6
million compared with investment income of $21.4 million in the same period in
2002, with the unfavorable results due to realized losses, partially offset by
higher unrealized gains.
FULL YEAR RESULTS
For the year 2003, the Company recorded net income of $42.4 million compared
with a net loss of $104.7 million in 2002. The results for 2003 include a $1.0
million after-tax cumulative effect of a change in accounting principle from the
adoption of Statement of Financial Accounting Standards No. 143, "Accounting for
Asset Retirement Obligations." The results for 2002 included a $155.4 million
goodwill impairment charge, effective January 1, 2002, for the cumulative effect
of a change in accounting principle related to the adoption of Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."
Income before the cumulative effect of changes in accounting principles was
$43.4 million in 2003 compared with $50.7 million in 2002. The results for 2003
include $3.6 million of other operating charges, including a $2.1 million charge
for the write-off of production assets related to a discontinued product in the
Industrial Chemicals business segment and a $1.5 million charge for stock option
payments related to ISP's going private transaction in the first quarter of
2003. The results for 2002 included $12.2 million of other operating gains
related to the sale of the Company's FineTech business and to the termination
and settlement of contracts and a $7.6 million other operating charge for the
write-off of deferred costs related to the Company's Linden, New Jersey
property. The year 2002 also included a $7.2 million pre-tax charge for the
early retirement of debt.
Operating income for the year 2003 was $128.8 million compared with $127.6
million in 2002. Excluding the operating gains and charges in each period
discussed above, operating income on a comparable basis was $132.4 million and
$123.0 million for 2003 and 2002, respectively (see attached reconciliation of
non-GAAP financial measures). The higher operating income for the year 2003
includes improved results in the Company's Specialty Chemicals segment,
partially offset by losses in the Industrial Chemicals segment and lower results
in the Mineral Products segment.
On a comparable basis, excluding the aforementioned gains and charges pertaining
to Specialty Chemicals, operating income for the segment improved 33% to $127.0
million compared with $95.7 million in 2002. The improved results were primarily
attributable to the personal care, pharmaceutical and beverage product lines,
mainly due to manufacturing efficiencies, lower operating expenses, higher
volumes and the favorable impact of the weaker U.S. dollar.
The Industrial Chemicals segment recorded an operating loss of $11.5 million in
2003. Excluding the $2.1 million charge for the write-off of fixed assets
mentioned above, the operating loss would be $9.4 million compared with
operating income of $5.9 million last year. The results were mainly attributable
to lower pricing, higher operating expenses and to the adverse impact of the
stronger Euro and higher energy costs.
Operating income for the Mineral Products segment was $13.9 million in 2003
compared with $20.9 million in 2002. The 34% decline was due to unfavorable
manufacturing costs, primarily as a result of higher energy costs and, to a
lesser extent, unfavorable pricing, partially offset by highervolumes.
Net sales for 2003 were $892.9 million compared with $845.3 million in 2002. The
6% increase in sales resulted from higher unit volumes in the Industrial
Chemicals and Mineral Products segments and in the pharmaceutical, food,
beverage and personal care product lines and the favorable impact of the weaker
U.S. dollar. These sales gains were partially offset by lower pricing in
Industrial Chemicals, Mineral Products and personal care and lower volumes in
the fine chemicals and performance chemicals product lines.
Interest expense for 2003 was $75.8 million compared with $84.9 million in 2002.
The $9.1 million (11%) decrease was due primarily to lower average borrowings
and, to a lesser extent, lower average interest rates. Investment income in 2003
was $14.9 million compared with $48.1 million in 2002, with the lower income
attributable to realized losses in 2003, partially offset by higher unrealized
gains. Other expense, net, for 2003 was $2.4 million compared with $6.8 million
last year, with the lower expense due primarily to favorable foreign exchange.
At the end of December 2003, the total debt for the Company was $823.3 million
and cash and marketable securities were $326.1 million. The Company's
wholly-owned operating subsidiary, ISP Chemco Inc., had total debt of $623.3
million and cash and cash equivalents of $56.4 million as of the end of December
2003. Capital expenditures and acquisitions for the fourth quarter and full year
2003 were $19.9 million and $69.6 million, respectively. Depreciation and
amortization expense was $15.8 million and $61.2 million for the fourth quarter
and full year 2003, respectively.
International Specialty Holdings Inc. is a leading multinational manufacturer of
specialty chemicals and mineral products.
This press release contains "forward looking statements" within the meaning of
the federal securities laws with respect to the Company's financial results and
future operations and, as such, concerns matters that are not historical facts.
These statements are subject to risks and uncertainties that could cause actual
results to differ materially from those expressed in such statements. Important
factors that could cause such differences are discussed in the Company's filings
with the U.S. Securities and Exchange Commission and are incorporated herein by
reference.
INTERNATIONAL SPECIALTY HOLDINGS INC.
SALES AND EARNINGS (Unaudited)
(Millions)
Fourth Quarter Twelve Months
2002 2003 2002(A) 2003
Net sales $203.1 $215.7 $845.3 $892.9
Cost of products sold (135.3) (143.6) (551.4) (583.9)
Selling, general and administrative (44.3) (45.1) (170.9) (176.0)
Other operating gains and (charges), net (6.8) (2.1) 5.4 (3.6)
Amortization of intangible assets (0.1) (0.1) (0.8) (0.6)
Operating income 16.6 24.8 127.6 128.8
Interest expense (20.3) (18.0) (84.9) (75.8)
Investment income (loss) 21.4 (6.6) 48.1 14.9
Charge for early retirement of debt -- -- (7.2) --
Other expense, net (0.4) (0.3) (6.8) (2.4)
Income (loss) before income taxes and
cumulative effect of changes in
accounting principles 17.3 (0.1) 76.8 65.5
Income tax (provision) benefit (6.2) 0.3 (26.1) (22.1)
Income before cumulative effect of
changes in accounting principles 11.1 0.2 50.7 43.4
Cumulative effectof changes in
accounting principles, net of
income tax benefit of $0.6 in 2003 -- -- (155.4) (1.0)
Net income (loss) $11.1 $0.2 $(104.7) $42.4
(A) The Sales and Earnings summary for the year2002 has been restated to
reflect the adoption of FASB Statement No. 145, "Rescission of FASB
No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical
Corrections." In the first quarter of 2002, the Company recognized
an after-tax extraordinary charge of $4.7 million on the early
retirement of debt. As a result of the adoption of FASB Statement
No. 145, effective January 1, 2003, such loss on the early retirement
of debt does not meet the definition of an extraordinary item and,
therefore, the Sales and Earnings summary for the year 2002 was
restated to reclassify the pre-tax charge of $7.2 million to a
separate line item of pre-tax income. The tax benefit of $2.5 million
related to this charge has been reclassified and is included in
"Income taxes."
INTERNATIONAL SPECIALTY HOLDINGS INC.
SALES AND EARNINGS (Unaudited) - (Continued)
(Millions)
Fourth Quarter Twelve Months
2002 2003 2002 2003
Supplemental Business Segment Information:
Net sales (1):
Specialty Chemicals $145.2 $153.0 $600.8 $623.4
Industrial Chemicals 37.0 36.9 149.4 165.5
Mineral Products 20.9 25.8 95.1 104.0
Net sales $203.1 $215.7 $845.3 $892.9
Operating income (1):
Specialty Chemicals $20.8 $29.2 $107.9 $125.9
Industrial Chemicals 0.7 (6.1) 5.9 (11.5)
Mineral Products 2.5 1.6 20.9 13.9
Total segment operating income 24.0 24.7 134.7 128.3
Unallocated corporate office 0.2 0.1 0.5 0.5
Write-off of deferred costs (7.6) -- (7.6) --
Operating income $16.6 $24.8 $127.6 $128.8
Depreciation and amortization of
intangible assets $15.4 $15.8 $58.3 $61.2
Capital expenditures and acquisitions $19.4 $19.9 $61.9 $69.6
(1) Effective January 1, 2003, the Company changed the composition of
its reportable segments to be consistent with the current structure
of the Company's businesses. Over the last several years, the
Company has increased its focuson its higher margin consumer-
oriented businesses. Consistent with that business focus, the
Company now reports three business segments: Specialty Chemicals,
Industrial Chemicals and Mineral Products. The Company's Specialty
Chemicals segment consists of the personal care, pharmaceutical,
food, beverage, performance chemicals and fine chemicals product
lines. Sales and operating income by business segment for the fourth
quarter and twelve months ended December 31, 2002 have been restated
to conform with the 2003 presentation.
INTERNATIONAL SPECIALTY HOLDINGS INC.
SALES AND EARNINGS (Unaudited) - (Continued)
(Millions)
Fourth Quarter Twelve Months
2002 2003 2002 2003
Reconciliation of non-GAAP
financial measures (1):
Operating income per GAAP $16.6 $24.8 $127.6 $128.8
Non-GAAP adjustments:
Less: Other operating (gains)
charges(2) 7.6 2.1 (4.6) 3.6
Operating income, as adjusted $24.2 $26.9 $123.0 $132.4
Supplemental Business
Segment Information:
Operating income:
Operating Income per
GAAP-Specialty Chemicals $20.8 $29.2 $107.9 $125.9
Non-GAAP adjustments -- -- (12.2) 1.1
Operating Income-Specialty
Chemicals as adjusted. $20.8 $29.2 $95.7 $ 127.0
Operating Income (Loss)
per GAAP-Industrial
Chemicals $0.7 $(6.1) $5.9 $(11.5)
Non-GAAP adjustments -- 2.1 -- 2.3
Operating Income (Loss)-Industrial
Chemicals as adjusted $0.7 $(4.0) $5.9 $(9.2)
Operating Income per GAAP-Mineral
Products $2.5 $1.6 $20.9 $13.9
Non-GAAP adjustments -- -- -- 0.2
Operating Income-Mineral Products
as adjusted $2.5 $1.6 $20.9 $14.1
Total segment operating income
as adjusted $24.0 $26.8 $122.5 $131.9
Unallocated corporate office
per GAAP 0.2 0.1 0.5 0.5
Operating income, as adjusted $24.2 $26.9 $123.0 $132.4
(1) As used herein, "GAAP" refers to accounting principles generally
accepted in the United States of America. We use non-GAAP financial
measures to eliminate the effect of certain other operating gains
and charges on reported operating income. Management believes that
these financial measures are useful to bondholders and financial
institutions because such measures exclude transactions that are
unusual due to their nature or infrequency and therefore allow
bondholders and financial institutions to more readily compare the
Company's performance from period to period. Management uses this
information in monitoring and evaluating the Company's performance
and the performance of individual business segments.
(2) Non-GAAP adjustments in the fourth quarter of 2003 represent a
$2.1 million other operating charge for the write-off of production
assets related to a discontinued product in the Industrial Chemicals
segment. The non-GAAP adjustment for the fourth quarter of 2002
represented a $7.6 million write-off of deferred costs related to
the Company's Linden, New Jersey property. This charge was not
allocated to the Company's current operating business segments
because the Linden property is a nonoperating property held for use.
In addition to the non-GAAP adjustments discussed above, non-GAAP
adjustments for the year 2003 include an other operating charge of
$1.5 million for stock option payments related to ISP's going
private transaction. Non-GAAP adjustments in 2002 also included
other operating gains of $12.2 million, consisting of a gain of $2.8
million for a contract termination related to the sale of the
Company's FineTech business, a $5.5 million gain from the sale of
the FineTech business and a $3.9 million gain on a contract
settlement.
DATASOURCE: International Specialty Products Inc.
CONTACT: Neal E. Murphy,Senior Vice President and Chief Financial
Officer of International Specialty Products Inc., +1-973-872-4200
Web site: http://www.ispcorp.com/