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International Specialty Holdings Announces Record Third Quarter
2004 Sales And Operating Income
WAYNE, N.J., Nov. 4 /PRNewswire-FirstCall/ -- International Specialty Holdings
Inc. (the "Company"), a wholly-owned subsidiary of International Specialty
Products Inc. ("ISP"), reported today third quarter 2004 net income of $7.9
million compared with net income of $3.0 million in the third quarter of 2003.
The improved results for the third quarter of 2004 were attributable to
significantly higher operating income.
Results for the third quarter of 2004 set Company records for third quarter net
sales and operating income. Operating income for the third quarter of 2004 was
$39.0 million, an increase of 26% compared with $31.0 million in the third
quarter of 2003. The higher operating income was mainly attributable to
improved results in the Company's Specialty Chemicals and Mineral Products
business segments. In addition, the Synthetic Elastomers business segment
posted operating income of $0.7 million in the third quarter of 2004 compared
with an operating loss of $1.2 million in the third quarter of 2003. In this
connection, ISP acquired the Synthetic Elastomers business in July 2003, and
the Company's results of operations include this business from the date of its
acquisition.
Third quarter 2004 operating income for the Specialty Chemicals segment
increased 13% to $33.8 million compared with $29.8 million in last year's third
quarter. The improved results were attributable to higher unit volumes in the
personal care product line and favorable mix and manufacturing efficiencies
achieved in the fine chemicals product line. Operating income in the third
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 $0.7 million in
the third quarter of 2004 compared with an operating loss of $1.3 million in
last year's third quarter. The results were attributable to favorable unit
volumes and pricing, partially offset by the adverse impact of the stronger
Euro on European-based manufacturing costs.
Operating income for the Mineral Products segment was $5.5 million in the third
quarter of 2004 compared with $3.5 million in last year's third quarter. The
57% improvement from last year's third quarter was due to higher unit volumes
and favorable pricing, partially offset by increased manufacturing costs and
higher freight and distribution expenses.
Net sales for the third quarter of 2004 of $295.6 million represented the
highest third quarter sales in the Company's history and were 36% higher than
sales of $217.8 million in the same period last year. The increase in sales
resulted primarily from the Synthetic Elastomers business, in addition to
higher unit volumes in all other business segments. Specialty Chemicals sales
also benefited from the three acquisitions made during the first quarter of
2004 and the favorable impact of the weaker U.S. dollar, primarily in Europe.
Interest expense for the third quarter of 2004 was $19.8 million compared with
$18.9 million in the third quarter of 2003. Investment losses in the third
quarter of 2004 were $5.3 million compared with $5.4 million in the same period
last year. Other expense, net, for the quarter was $1.8 million compared with
$2.0 million in the third quarter of 2003.
FIRST NINE MONTHS RESULTS
For the first nine months of 2004, the Company recorded net income of $46.6
million compared with net income of $41.4 million in the first nine months of
2003. The improved results for the first nine months of 2004 were attributable
to record high operating income, partially offset by investment losses. Net
income for the first nine months of 2003 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 nine months of 2004 set Company records for net sales and
operating income. Operating income for the first nine months of 2004 was $138.1
million compared with $102.8 million in the first nine months 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
32% to $138.1 million from $104.3 million in the first nine months of 2003 (see
attached reconciliation of non-GAAP financial measures). The improved operating
income was mainly attributable to significantly higher results in the Company's
Specialty Chemicals segment. In addition, the Synthetic Elastomers segment
posted operating income of $5.3 million in the first nine months of 2004
compared with an operating loss of $1.2 million in the third quarter of 2003
after the date of its acquisition. The first nine months of 2004 and 2003 have
been restated to include the results of operations of the Synthetic Elastomers
business.
On a comparable basis, excluding the aforementioned charge in last year's first
nine months, operating income for the Specialty Chemicals segment increased 24%
to $121.6 million compared with $97.8 million last year. The improved results
were primarily attributable to the personal care and performance chemicals
product lines, mainly due to higher unit volumes, and also favorable mix and
manufacturing efficiencies achieved in the fine chemicals product line.
Operating income in the first nine months 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 $2.3 million in
the first nine months of 2004 compared with an operating loss of $5.3 million
in last year's first nine months. The lower operating loss was attributable to
higher unit volumes and manufacturing efficiencies, partially offset by the
adverse impact of the stronger Euro on European-based manufacturing costs.
Operating income for the Mineral Products segment was $13.6 million in the
first nine months of 2004 compared with $12.2 million in the same period last
year. The 11% improvement from last year's first nine months was primarily due
to the impact of higher unit volumes and favorable pricing, partially offset by
increased manufacturing costs and higher freight and distribution expenses.
Record net sales for the first nine months of 2004 were $898.2 million compared
with $679.9 million in the same period last year. The 32% increase in sales
resulted primarily from the Synthetic Elastomers business, in addition to
higher unit volumes in all other business segments. Specialty Chemicals sales
also benefited from the three acquisitions made during the first quarter of
2004 and the favorable impact of the weaker U.S. dollar, primarily in Europe.
Interest expense for the first nine months of 2004 was $58.3 million compared
with $57.8 million in the first nine months of 2003. Investment losses in the
first nine months of 2004 were $2.4 million compared with investment income of
$21.5 million in the same period last year. Investment losses in the first nine
months of 2004 include 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 nine months of 2004 was
$6.6 million compared with $2.1 million in the first nine months of 2003, with
the higher expense due primarily to unfavorable foreign exchange.
At the end of the third quarter of 2004, the total debt for the Company was
$887.6 million and cash and marketable securities were $385.2 million. The
Company's wholly-owned operating subsidiary, ISP Chemco Inc., had total debt of
$668.0 million and cash and cash equivalents of $35.2 million as of the end of
the third quarter of 2004. The Company's capital expenditures and acquisitions
for the third quarter and first nine months of 2004 were $21.0 million and
$85.1 million, respectively, and depreciation and amortization expense was
$17.1 million and $50.4 million, respectively.
International Specialty Holdings Inc. is a leading multinational manufacturer
of specialty chemicals, synthetic elastomers 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)
Third Quarter Ended Nine Months Ended
October 3, September 28, October 3, September 28,
2004 2003(A) 2004(A) 2003
Net sales $295.6 $217.8 $898.2 $679.9
Cost of products sold (206.2) (143.7) (607.3) (443.5)
Selling, general
and administrative (50.1) (43.0) (152.0) (131.7)
Other operating
charges -- -- -- (1.5)
Amortization of
intangible assets (0.3) (0.1) (0.8) (0.4)
Operating income 39.0 31.0 138.1 102.8
Interest expense (19.8) (18.9) (58.3) (57.8)
Investment
income (loss) (5.3) (5.4) (2.4) 21.5
Other expense, net (1.8) (2.0) (6.6) (2.1)
Income before
income taxes
and cumulative
effect of change
in accounting
principle 12.1 4.7 70.8 64.4
Income taxes (4.2) (1.7) (24.2) (22.0)
Income before
cumulative
effect of
change in
accounting
principle 7.9 3.0 46.6 42.4
Cumulative
effect of
change in
accounting
principle, net
of income
tax benefit
of $0.6 -- -- -- (1.0)
Net income $7.9 $3.0 $46.6 $41.4
(A) Effective July 28, 2003, the Company's parent company, ISP, acquired
certain assets of the synthetic elastomers business of Ameripol Synpol
Corporation. Effective August 30, 2004, ISP contributed the synthetic
elastomers business to the capital of the Company. Accordingly, the
Company's results of operations include the results of the synthetic
elastomers business from the date of its acquisition by ISP. The third
quarter of 2003 and the first nine months of 2003 and 2004 have been
restated to include the results of operations of the synthetic
elastomers business from July 28, 2003. For the third quarter and
first nine months of 2003, the synthetic elastomers business recorded
sales of $2.7 million and a net loss of $0.9 million, while sales and
net income for the first nine months of 2004 were $116.8 million and
$3.2 million, respectively.
INTERNATIONAL SPECIALTY HOLDINGS INC.
SALES AND EARNINGS DATA (Unaudited) - (Continued)
(Millions)
Third Quarter Ended Nine Months Ended
October 3, September 28, October 3, September 28,
2004 2003 2004 2003
Supplemental Business
Segment Information:
Net sales:
Specialty Chemicals $168.7 $153.5 $533.0 $470.4
Industrial Chemicals 50.5 35.0 148.3 128.5
Synthetic Elastomers 42.8 2.7 116.8 2.7
Mineral Products 33.6 26.6 100.1 78.3
Net sales $295.6 $217.8 $898.2 $679.9
Operating income (loss):
Specialty Chemicals $33.8 $29.8 $121.6 $96.7
Industrial Chemicals (0.7) (1.2) (2.3) (5.3)
Synthetic Elastomers 0.7 (1.2) 5.3 (1.2)
Mineral Products 5.5 3.5 13.6 12.2
Total segment
operating income 39.3 30.9 138.2 102.4
Unallocated
corporate office (0.3) 0.1 (0.1) 0.4
Operating income $39.0 $31.0 $138.1 $102.8
Depreciation and
amortization of
intangible assets $17.1 $15.5 $50.4 $45.6
Capital expenditures
and acquisitions $21.0 $22.7 $85.1 $55.7
INTERNATIONAL SPECIALTY HOLDINGS INC.
SALES AND EARNINGS DATA (Unaudited) - (Continued)
(Millions)
Nine Months Ended
October 3, September 28,
2004 2003
Reconciliation of non-GAAP financial measures (1):
Operating income per GAAP $138.1 $102.8
Non-GAAP adjustments:
Add: Other operating charges(2) -- 1.5
Operating income, as adjusted $138.1 $104.3
Supplemental Business Segment Information:
Operating income (loss):
Operating income per GAAP-Specialty Chemicals $121.6 $96.7
Non-GAAP adjustments -- 1.1
Operating income-Specialty Chemicals as
adjusted $121.6 $97.8
Operating loss per GAAP-Industrial Chemicals $(2.3) $(5.3)
Non-GAAP adjustments -- 0.2
Operating loss-Industrial Chemicals as
adjusted $(2.3) $(5.1)
Operating income (loss) per GAAP-Synthetic
Elastomers $5.3 $(1.2)
Non-GAAP adjustments -- --
Operating income (loss)-Synthetic Elastomers
as adjusted $5.3 $(1.2)
Operating income per GAAP-Mineral Products $13.6 $12.2
Non-GAAP adjustments -- 0.2
Operating income-Mineral Products as adjusted $13.6 $12.4
Total segment operating income as adjusted $138.2 $103.9
Unallocated corporate office per GAAP (0.1) 0.4
Operating income, as adjusted $138.1 $104.3
(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 nine 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 Holdings Inc.
CONTACT: Kenneth M. McHugh, Vice President and Controller of
International Specialty Products Inc., +1-973-872-4200
Web site: http://www.ispcorp.com/