Goodman Global (NYSE:GGL)
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Goodman Global, Inc. (NYSE:GGL) today announced results for the first
quarter of 2007. The Company reported net sales of $380.3 million, net
income of $4.6 million and earnings per share of $0.07 for the three
months ended March 31, 2007. Net income and earnings per share included
a $0.4 million and $0.01 gain, respectively, from the sale of a building
and associated land used in the Company-operated distribution network.
“Our business performed well during the first
quarter,” said Charles Carroll, President and
Chief Executive Officer. “With outstanding
teamwork throughout our organization, we were able to temper the impact
of slow industry conditions on sales and operations and improve factory
productivity beyond our initial expectations.”
He went on to say, “Our efforts were aided by
a pick-up in demand late in the quarter, as our stepped-up investment in
dealer recruitment delivered some sales momentum.”
First quarter 2007 net sales of $380.3 million were impacted by mild
winter weather and the continued decline in residential new
construction. This was almost completely offset by the benefits of the
continuing mix shift to higher-efficiency cooling products, the Company’s
2006 price increases and a sales pick-up from dealer recruitment
activities. As a result, net sales for the period were nearly equal to
the prior year’s first quarter net sales of
$380.7 million.
The Company generated net income of $4.6 million in the 2007 first
quarter, compared with $8.4 million for the first quarter of 2006. Net
income for the first quarter of 2007 included, net of tax, a $0.4
million gain from the sale of a building and associated land used in the
Company-operated distribution network. Net income for the first quarter
of 2006 included, net of tax, a $0.4 million non-recurring expense for
monitoring fees related to the Apollo transaction. The decrease in net
income was primarily the result of lower volumes, increased commodities
costs net of realized price increases and higher depreciation expense,
offset somewhat by the impact of the continuing mix shift to
higher-efficiency cooling products, improved productivity, lower
interest expense and a lower tax provision.
Earnings per share, diluted, for the first quarter of 2007 was $0.07,
compared with $0.05 for the comparable period of 2006. Earnings per
share for the first quarter of 2007 included a $0.01 gain from the sale
of a building and associated land. First quarter 2006 earnings per share
available to common shareholders included the impact of monitoring fees
related to the Apollo transaction and were reduced by the dividend on
the Company’s Series A Preferred Stock. As a
result of the Company’s IPO in April 2006,
the monitoring fee-related agreement was terminated and the Series A
Preferred Stock redeemed. Adjusted to exclude the non-recurring expense
and to treat the redemption of the preferred stock as though it had
occurred at the beginning of the year, pro-forma adjusted earnings per
share for the first quarter of 2006 was $0.12.
For the first quarter of 2007, the Company reported EBITDA of $32.2
million, compared with $40.5 million for the first quarter of 2006.
EBITDA for the first quarter of 2007 included the $0.6 million gain from
the sale of a building and associated land, and EBITDA for the first
quarter of 2006 included a $0.6 million non-recurring expense for
monitoring fees related to the Apollo transaction. Adjusted for these
items, 2007 first quarter EBITDA was $31.6 million and 2006 first
quarter EBITDA was $41.1 million.
See “Non-GAAP Financial Measures”
for definitions of EBITDA and adjusted EBITDA and management’s
purposes in presenting these and other non-GAAP financial measures.
Goodman concluded the quarter with total debt of $837.2 million, a
$157.3 million reduction from March 31, 2006 total debt of $994.5
million. The debt decrease was achieved through strong operating cash
flow, and by utilizing a portion of the proceeds from the Company’s
April 2006 IPO and applying the net proceeds from the recent property
sale.
Outlook
“I am encouraged by the success of our sales
growth activities and the improvements our operations continue to
deliver,” said Mr. Carroll. “We
are reaffirming our full-year forecast for EBITDA of between $255
million and $265 million and diluted earnings per share of between $1.30
and $1.40, excluding the gain from the property sale. Despite slow
residential new construction and rising commodity costs, I believe our
solid value offering and focused business model will lead to strong
sales growth and operating leverage in 2007, and I expect another year
of double-digit growth in EBITDA and share earnings,”
he concluded.
Conference Call
The Company will host a conference call on Thursday, April 26, 2007 at
11:00 a.m. Eastern to review first quarter performance. The call may be
accessed by telephone or the Internet. To access the call by telephone,
dial 800-561-2731 and use the pass code 84930580. International callers
should dial 617-614-3528 and use the same pass code. An Internet link to
the call may be found on the Company’s Web
site, www.goodmanglobal.com,
in the “Management Presentations”
section.
A replay of the call will be available starting approximately one hour
after the conclusion of the call and continuing until May 10, 2007. The
replay may be accessed by dialing 888-286-8010 and using the pass code
46748815. International callers should dial 617-801-6888 and use the
same pass code. An Internet link to a replay of the call will also be
posted on the Company’s Web site, www.goodmanglobal.com.
Informational exhibits related to the Company’s
performance will be available on the Goodman Web site in the “Management
Presentations” section and may be referred to
during the conference call.
Initial Public Offering
On April 11, 2006, the Company completed the initial public offering of
the Company’s common stock. The Company
offered 20.9 million shares, and selling shareholders sold an additional
6.1 million shares, including the exercise of the underwriters’
over-allotment option. Goodman received proceeds of approximately $354.5
million after underwriting discounts and before expenses. The proceeds
were used to redeem all of the outstanding Series A Preferred Stock,
including accrued dividends; to pay Apollo for termination of the
management agreement; and to redeem a portion of the Company’s
floating rate notes.
Acquisition by Apollo
On Dec. 23, 2004, the Company was acquired under an Asset Purchase
Agreement by an affiliate of Apollo Management, L.P., Company senior
management and certain trusts associated with members of the Goodman
family.
Non-GAAP Financial Measures
In addition to reporting financial results that are determined in
accordance with GAAP, Goodman also reports EBITDA, adjusted EBITDA,
adjusted net income, adjusted earnings per share and pro-forma adjusted
earnings per share, all of which are non-GAAP measures. Management
believes that the presentation of these non-GAAP financial measures
enables investors to better understand the Company’s
underlying operational and financial performance and facilitates
comparison of results between periods by eliminating the effects of
unusual and non-recurring events that are not part of Goodman’s
core operations. These measures should be considered in addition to, not
as substitutes for, GAAP measures. They should not be considered as an
alternative to operating income, net income or earnings per share,
determined in accordance with GAAP; as an indicator of Goodman’s
operating performance; as an alternative to cash flows from operating
activities, determined in accordance with GAAP; or as a measure of
liquidity.
EBITDA, or earnings before interest, taxes, depreciation and
amortization, is calculated as net income plus interest, taxes,
depreciation and amortization. Adjusted EBITDA, adjusted net income and
adjusted earnings per share are calculated to exclude the income and
expenses of one-time and non-recurring events. These include, primarily,
costs associated with the December 2004 Apollo transaction and the April
2006 IPO. Pro-forma adjusted earnings per share is calculated as though
the IPO had been completed by the beginning of 2006 and a portion of the
proceeds used at that time to redeem all of the outstanding Series A
Preferred Stock, including accrued dividends.
EBITDA is commonly used in the financial community, and Goodman presents
EBITDA to enhance the understanding of its operating performance.
Goodman uses EBITDA as one criterion for evaluating its performance
relative to that of its peers. The Company’s
credit agreement and bond indentures have certain covenants that use
ratios utilizing a measure called adjusted EBITDA. In addition, EBITDA
may be used to determine incentive compensation for employees.
Goodman believes that EBITDA is an operating performance measure, not a
liquidity measure, and that EBITDA provides investors and analysts with
a measure of operating results unaffected by differences in capital
structures, capital investment cycles and ages of related assets among
otherwise comparable companies. However, EBITDA is not a measurement of
financial performance under accounting principles generally accepted in
the United States, and Goodman’s EBITDA may
not be comparable to similarly titled measures of other companies.
The supplementary adjustments to EBITDA, net income and earnings per
share to derive adjusted EBITDA, adjusted net income, adjusted earnings
per share and pro-forma adjusted earnings per share may not be in
accordance with current SEC practices or the rules and regulations
adopted by the SEC that apply to periodic reports filed under the
Securities Exchange Act of 1934. Accordingly, the SEC may require that
these measures be presented differently in filings made with the SEC
than as presented in this release, or not be presented at all.
Safe Harbor for Forward-Looking and Cautionary Statements
Certain statements in this press release are “forward-looking
statements” within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. These statements involve a number of risks, uncertainties
and other factors that could cause actual results, performance or
achievements of Goodman to be materially different from any future
results, performance or achievements expressed or implied by these
forward-looking statements.
The words “believe,”
“expect,” “anticipate,”
“intend,” “estimate,”
and other expressions that are predictions of or indicate future events
and trends and that do not relate to historical matters identify
forward-looking statements. Forward-looking statements also include
statements about the following subjects: changes in weather patterns and
seasonal fluctuations; changes to the 13 SEER federally mandated minimum
efficiency standard; the maturation of Goodman’s
new company-operated distribution centers; increased competition and
technological changes and advances; increases in the cost of raw
materials and components; Goodman’s relations
with its independent distributors; and damage or injury caused by Goodman’s
products. Goodman undertakes no obligation to publicly update or revise
any forward-looking statement, whether as a result of new information,
future events, changed circumstances or otherwise. These forward-looking
statements are subject to numerous risks and uncertainties, including,
but not limited to, the impact of general economic conditions in the
regions in which Goodman does business; general industry conditions,
including competition and product, raw material and energy prices; the
realization of expected tax benefits; changes in exchange rates and
currency values; capital expenditure requirements; access to capital
markets and the risks and uncertainties described under “Risk
Factors” contained in Goodman’s
Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
About Goodman
Houston-based Goodman Global, Inc. is the second-largest domestic unit
manufacturer of heating, ventilation and air conditioning products for
residential and light-commercial use. Goodman’s
products are predominantly marketed under the Goodman®,
Amana® and Quietflex®
brand names, and are sold through company-operated and independent
distribution networks with approximately 800 total distribution points
throughout North America. For more information about Goodman, visit www.goodmanglobal.com.
Amana® is a
trademark of Maytag Corporation and is used under license to Goodman
Company, L.P. All rights reserved.
GOODMAN GLOBAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
2007
2006
(in thousands,
except share and per share amounts)
Sales, net
$ 380,274
$ 380,688
Costs and expenses:
Cost of good sold
303,262
294,636
Selling, general and administrative expenses
45,926
45,659
Depreciation and amortization expense
8,311
7,453
Operating profit
22,775
32,940
Interest expense, net
16,907
19,741
Other income, net
(1,127)
(157)
Earnings before taxes
6,995
13,356
Provision for income taxes
2,364
4,942
Net income
$ 4,631
$ 8,414
Preferred stock dividends
--
5,892
Net income available to common shareholders
$ 4,631
$ 2,522
Net income per share available to common shareholders, diluted
$ 0.07
$ 0.05
Average outstanding common shares, diluted
70,703,098
49,624,273
GOODMAN GLOBAL, INC.
RECONCILIATION OF NET INCOME TO
EBITDA(1) AND ADJUSTED EBITDA(1)
(Unaudited)
Three Months Ended March 31,
2007
2006
(in thousands)
Net income
$ 4,631
$ 8,414
Add:
Provision for income taxes
2,364
4,942
Interest expense, net
16,907
19,741
Depreciation and amortization expense
8,311
7,453
EBITDA
$ 32,213
$ 40,550
Adjustments:
Monitoring fees
--
552
Gain on sale of property
(642)
--
Adjusted EBITDA
$ 31,571
$ 41,102
(1) EBITDA and Adjusted EBITDA are non-GAAP financial measures.
For more information regarding EBITDA and non-GAAP financial
measures, generally, see “Non-GAAP
Financial Measures.”
GOODMAN GLOBAL, INC.
RECONCILIATION OF NET INCOME TO
ADJUSTED NET INCOME(2)
(Unaudited)
Three Months Ended March 31,
2007
2006
(in thousands,
except share and per share amounts)
Net income
$ 4,631
$ 8,414
Adjustments, net of tax:
Monitoring fees
--
348
Gain on sale of property
(398)
--
Adjusted net income
$ 4,233
$ 8,762
Preferred stock dividends
--
5,892
Adjusted net income available to common shareholders
$ 4,233
$ 2,870
Adjusted net income per share available to common shareholders,
diluted
$ 0.06
$ 0.06
Pro-forma adjusted net income per share, diluted
$ 0.06
$ 0.12
Average outstanding common shares, diluted
70,703,098
49,624,273
Pro-forma average outstanding common shares, diluted
70,703,098
70,541,920
(2) Adjusted net income is a non-GAAP financial measure. For more
information regarding adjusted net income and non-GAAP financial
measures, generally, see "Non-GAAP Financial Measures."
GOODMAN GLOBAL, INC.
SELECTED BALANCE SHEET AMOUNTS
(Unaudited)
Periods Ended March 31,
2007
2006
(in thousands)
Cash and cash equivalents (including restricted cash)
$ 10,710
$ 9,063
Accounts receivable, net
232,584
218,621
Inventories
349,108
369,294
Trade accounts payable
139,272
160,514
Accrued liabilities
116,717
152,523
Total debt
837,175
994,500
GOODMAN GLOBAL, INC.
SELECTED CASH FLOW AMOUNTS
(Unaudited)
Three Months Ended March 31,
2007
2006
(in thousands)
Changes in operating working capital, net of effects of acquisitions:
Accounts receivable, net
$ (32,498)
$ 1,502
Inventories
(3,049)
(65,999)
Accounts payable and accrued liabilities
24,614
7,731
Changes in operating working capital
$ (10,933)
$ (56,766)
Free cash flow:
Net cash provided by operating activities
$ 2,425
$ (38,966)
Purchases of property, plant and equipment
(10,282)
(11,709)
Proceeds from sale of property, plant and equipment
5,273
13
Free cash flow
$ (2,584)
$ (50,662)