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International Specialty Holdings Announces Second Quarter 2004
Results
WAYNE, N.J., Aug. 3 /PRNewswire-FirstCall/ -- International Specialty Holdings
Inc. (the "Company"), a wholly-owned subsidiary of International Specialty
Products Inc. ("ISP"), reported today second quarter 2004 net income of $6.9
million compared with net income of $16.7 million in the second quarter of
2003. The lower results for the second quarter of 2004 were attributable to
investment losses partially offset by significantly higher operating income.
Operating income for the second quarter of 2004 was $45.4 million, an increase
of 22% compared with $37.1 million in the second quarter of 2003. The higher
operating income includes improved results in the Company's Specialty Chemicals
and Mineral Products business segments, partially offset by losses in the
Industrial Chemicals segment.
Operating income for the Specialty Chemicals segment improved 23% to $41.6
million compared with $33.7 million last year. The improved results were
primarily attributable to the personal care and performance chemicals product
lines, mainly due to higher unit volumes. Operating income in the second
quarter of 2004 was also favorably impacted by the weaker U.S. dollar and by
the contribution to income from the three specialty chemical niche acquisitions
made during the first quarter of 2004.
The Industrial Chemicals segment recorded an operating loss of $1.8 million in
the second quarter of 2004 compared with an operating loss of $1.4 million in
last year's second quarter. The results were attributable to the adverse impact
of the stronger Euro on European-based manufacturing costs, partially offset by
an improved product mix and manufacturing efficiencies.
Operating income for the Mineral Products business segment was $5.6 million in
the second quarter of 2004 compared with $4.7 million in last year's second
quarter. The 19% improvement from last year's second quarter was due to higher
unit volumes, partially offset by increased operating expenses.
Net sales for the second quarter of 2004 of $261.7 million represented the
highest second quarter sales in the Company's history and were 14% higher than
sales of $229.5 million in the same period last year. The increase in sales
resulted primarily from higher unit volumes in all business segments and from
the contribution to Specialty Chemicals sales from the three acquisitions made
during the first quarter of 2004. The favorable impact of the weaker U.S.
dollar, primarily in Europe, also benefited sales.
Interest expense for the second quarter of 2004 was $18.7 million compared with
$19.1 million in the second quarter of 2003. Investment losses in the second
quarter of 2004 were $13.4 million compared with investment income of $6.0
million in the same period last year. The investment loss in the second quarter
of 2004 includes a $5.5 million other than temporary impairment charge related
to an available-for-sale equity security held in the Company's investment
portfolio. Other expense, net, for the quarter was $2.8 million compared with
other income, net, of $1.3 million in the second quarter of 2003, with the
higher expense due primarily to unfavorable foreign exchange.
FIRST HALF RESULTS
For the first half of 2004, the Company recorded net income of $35.7 million
compared with net income of $38.3 million in the first half of 2003. The
improved results for the first half of 2004 were attributable to record high
operating income, partially offset by lower investment income. First half 2003
results included a $1.0 million after-tax charge for the cumulative effect of a
change in accounting principle from the adoption of Statement of Financial
Accounting Standards No. 143, "Accounting for Asset Retirement Obligations."
Results for the first half of 2004 set Company records for net sales and
operating income. Operating income for the first half of 2004 was $94.4 million
compared with $71.8 million in the first half of 2003, which included a charge
of $1.5 million for stock option payments related to ISP's going private
transaction. Excluding such charge, operating income increased 29% to $94.4
million from $73.3 million in the first half of 2003 (see attached
reconciliation of non-GAAP financial measures). The higher operating income was
attributable to significantly higher results in the Company's Specialty
Chemicals business segment and lower losses in the Industrial Chemicals
segment, partially offset by lower results in the Mineral Products segment.
On a comparable basis, excluding the aforementioned charge in last year's first
half, operating income for the Specialty Chemicals segment improved 29% to
$87.8 million compared with $68.0 million last year. The improved results were
primarily attributable to the personal care, performance chemicals,
pharmaceutical and beverage product lines, mainly due to higher unit volumes
partially offset by higher manufacturing costs. Operating income in the first
half of 2004 was also favorably impacted by the weaker U.S. dollar and by the
contribution to income from the three acquisitions made during the first
quarter of 2004.
The Industrial Chemicals segment recorded an operating loss of $1.6 million in
the first half of 2004 compared with an operating loss of $4.1 million in last
year's first half. The lower operating losses were attributable to an improved
product mix and manufacturing efficiencies, partially offset by the adverse
impact of the stronger Euro on European-based manufacturing costs.
Operating income for the Mineral Products business segment was $8.1 million in
the first half of 2004 compared with $8.7 million in the same period last year.
The decline from last year's first half was primarily due to higher operating
and manufacturing expenses, largely offset by the favorable impact of higher
unit volumes.
Record net sales for the first half of 2004 were $528.6 million compared with
$462.1 million in the same period last year. The 14% increase in sales resulted
primarily from higher unit volumes in all business segments and from the
contribution to Specialty Chemicals sales from the three acquisitions made
during the first quarter of 2004. The favorable impact of the weaker U.S.
dollar, primarily in Europe, also benefited sales.
Interest expense for the first half of 2004 was $38.5 million compared with
$39.0 million in the first half of 2003. Investment income in the first half of
2004 was $2.9 million compared with $26.9 million in the same period last year.
Investment income in the first half of 2004 includes a $5.5 million other than
temporary impairment charge related to an available-for-sale equity security
held in the Company's investment portfolio. Other expense, net, for the first
half of 2004 was $4.7 million compared with $0.1 million in the first half of
2003, with the higher expense due primarily to unfavorable foreign exchange.
At the end of the second quarter of 2004, the total debt for the Company was
$886.1 million and cash and marketable securities were $383.5 million. The
Company's wholly-owned operating subsidiary, ISP Chemco Inc., had total debt of
$688.1 million and cash and cash equivalents of $25.2 million as of the end of
the second quarter of 2004. Capital expenditures and acquisitions for the
second quarter and first half of 2004 were $18.0 million and $58.3 million,
respectively, and depreciation and amortization expense was $16.5 million and
$32.3 million, 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 DATA (Unaudited)
(Millions)
Second Quarter Six Months
2004 2003 2004 2003
Net sales $261.7 $229.5 $528.6 $462.1
Cost of products sold (166.8) (147.2) (335.6) (299.8)
Selling, general and
administrative (49.1) (45.0) (98.1) (88.7)
Other operating charges -- -- -- (1.5)
Amortization of intangible
assets (0.4) (0.2) (0.5) (0.3)
Operating income 45.4 37.1 94.4 71.8
Interest expense (18.7) (19.1) (38.5) (39.0)
Investment income (loss) (13.4) 6.0 2.9 26.9
Other income (expense), net (2.8) 1.3 (4.7) (0.1)
Income before income taxes
and cumulative effect of
change in accounting
principle 10.5 25.3 54.1 59.6
Income taxes (3.6) (8.6) (18.4) (20.3)
Income before cumulative
effect of change in
accounting principle 6.9 16.7 35.7 39.3
Cumulative effect of change
in accounting principle, net
of income tax benefit
of $0.6 -- -- -- (1.0)
Net income $6.9 $16.7 $35.7 $38.3
INTERNATIONAL SPECIALTY HOLDINGS INC.
SALES AND EARNINGS DATA (Unaudited) - (Continued)
(Millions)
Second Quarter Six Months
2004 2003 2004 2003
Supplemental Business
Segment Information:
Net sales:
Specialty Chemicals $178.1 $159.0 $364.3 $316.9
Industrial Chemicals 49.1 44.4 97.8 93.5
Mineral Products 34.5 26.1 66.5 51.7
Net sales $261.7 $229.5 $528.6 $462.1
Operating income:
Specialty Chemicals $41.6 $33.7 $87.8 $66.9
Industrial Chemicals (1.8) (1.4) (1.6) (4.1)
Mineral Products 5.6 4.7 8.1 8.7
Total segment operating
income 45.4 37.0 94.3 71.5
Unallocated corporate
office -- 0.1 0.1 0.3
Operating income $45.4 $37.1 $94.4 $71.8
Depreciation and amortization
of intangible assets $16.5 $15.1 $32.3 $30.1
Capital expenditures and
acquisitions $18.0 $23.4 $58.3 $33.0
INTERNATIONAL SPECIALTY HOLDINGS INC.
SALES AND EARNINGS DATA (Unaudited) - (Continued)
(Millions)
Six Months
2004 2003
Reconciliation of non-GAAP financial measures (1):
Operating income per GAAP $94.4 $71.8
Non-GAAP adjustments:
Add: Other operating charges(2) -- 1.5
Operating income, as adjusted $94.4 $73.3
Supplemental Business Segment Information:
Operating income:
Operating income per GAAP-Specialty Chemicals $87.8 $66.9
Non-GAAP adjustments -- 1.1
Operating income-Specialty Chemicals as adjusted $87.8 $68.0
Operating loss per GAAP-Industrial Chemicals $(1.6) $(4.1)
Non-GAAP adjustments -- 0.2
Operating loss-Industrial Chemicals as adjusted $(1.6) $(3.9)
Operating income per GAAP-Mineral Products $8.1 $8.7
Non-GAAP adjustments -- 0.2
Operating income-Mineral Products as adjusted $8.1 $8.9
Total segment operating income as adjusted $94.3 $73.0
Unallocated corporate office per GAAP 0.1 0.3
Operating income, as adjusted $94.4 $73.3
(1) As used herein, "GAAP" refers to U.S. generally accepted accounting
principles. 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 for the first six months of 2003 represent an
other operating charge of $1.5 million for stock option payments
related to ISP's going private transaction.
DATASOURCE: International Specialty Products Inc.
CONTACT: Kenneth M. McHugh, Vice President and Controller of
International Specialty Products Inc., +1-973-872-4200
Web site: http://www.ispcorp.com/