ICO, Inc. Announces Financial Results for Second Quarter Ended March 31, 2008
Wednesday May 7, 7:54 pm ET
HOUSTON, May 7 /PRNewswire-FirstCall/ -- ICO, Inc. (Nasdaq: ICOC - News), global producer of custom polymer powders and plastic film concentrates, today announced its results for the quarter ended March 31, 2008.
Second Quarter Highlights
-- Revenues of $112.1 million, an increase of $17.4 million or 18% from
the prior year
-- Volume growth of 2% compared to the second quarter of fiscal 2007
-- Operating income of $8.6 million, up 26% year-over-year
-- Net income per share of $.18 fully diluted
-- Company announces relocation of New Jersey plant to Pennsylvania
Second Quarter 2008 vs. Second Quarter 2007
Revenues for the three months ended March 31, 2008 were $112.1 million, an increase of $17.4 million or 18% compared to the same quarter of the previous year. The translation effect of stronger foreign currencies caused $8.5 million of the increase, while higher average selling prices and changes in product mix caused $4.6 million of the increase. A 2% increase in volumes sold caused $4.3 million of the growth.
As a result of the increase in revenues, gross profit increased $1.9 million or 11% to $19.3 million. The second quarter of fiscal year 2008 includes in impairment, restructuring and other costs (income) a net gain of $1.6 million as a result of an estimated insurance recovery related to the July 2007 fire that occurred in the Company's New Jersey facility. Operating income increased $1.8 million or 26% to $8.6 million. Income tax expense increased $1.9 million due to the increase in pre tax income as well as a reversal of a valuation allowance in the prior year quarter of $1.4 million related to previously reserved deferred tax assets. As a result, income from continuing operations decreased $0.5 million or 10% to $5.0 million, or $.18 per fully diluted share. During the second quarter of fiscal year 2007, an after tax gain of $1.5 million was recognized in discontinued operations. Consequently, net income decreased $2.0 million or 29% to $5.0 million.
Second Quarter 2008 vs. First Quarter 2008
Comparing the sequential quarterly results, revenues increased $1.3 million or 1%. Volumes sold increased 2% which led to an increase in revenues of $6.5 million, which was partially offset by a change in product mix which reduced revenues by $6.1 million. The translation effect of stronger foreign currencies increased revenues by $0.9 million. Operating income increased $2.2 million or 33% in part due to the estimated insurance recovery during the quarter as our gross margins remained flat. Net income increased $1.5 million or 42% as a result of the improvement in operating income.
"We just completed a quarter in which our operating income improved 26% year-over-year," stated A. John Knapp, Jr., the Company's President and CEO. "Our European region performed very well for the Company by improving operating income 40%. We also benefited in the quarter from the insurance recovery, of which a considerable portion related to compensation for business interruption expenses and lost profits as a result of the fire that occurred at our New Jersey facility in 2007. During the last quarter, in North America our industry encountered economic headwinds and uncertainty regarding future resin price trends. ICO is not immune to these factors. However, our product diversity and our geographic diversity, including our exposure to growing foreign markets, give us confidence in our long-term business."
Relocation of New Jersey Facility to Pennsylvania
The Company is pleased to announce that the New Jersey facility will be relocated to Allentown, Pennsylvania, approximately 35 miles west of its current location. The Company expects to begin production in the new facility within the next 120 days and expects to have all production moved from New Jersey to Pennsylvania within the next twelve months. The new facility in Pennsylvania will be state-of-the-art for the industry and will provide an upgrade to our capacity as well as increased operating efficiencies.
Balance Sheet and Liquidity
For the first six months of fiscal year 2008, shareholders' equity increased $16.9 million or 19%, primarily as a result of year-to-date net earnings and the effect of stronger foreign currencies compared to the U.S. Dollar. Our available borrowing capacity at March 31, 2008 was $57.0 million, an increase from December by $4.7 million. In April 2008, we entered into an interest rate swap on our existing $11.7 million term loan that matures in 2011, essentially locking in our interest rate at 4.32%, subject to changes in the Company's leverage ratio. Additionally, in May 2008, we executed an amendment to our existing domestic credit facility extending the maturity of the credit facility by one year to October 2012, and increasing our borrowing capacity by $5.0 million. During the second quarter, we generated cash flow from operating activities of $1.8 million. Our capital expenditures were $4.6 million during the quarter. Approximately $2.7 million of the $4.6 million of capital expenditures related to our facility relocation from New Jersey to Pennsylvania.
Conference Call on the Web
A live Internet broadcast of ICO, Inc.'s conference call regarding fiscal
2008 second quarter results can be accessed at 10:00 a.m. Central Standard
Time on Thursday, May 8, 2008 at
http://www.videonewswire.com/event.asp?id=47839, where the webcast replay will
be accessible for ninety days. The webcast replay will also be accessible on
the Company's website at http://www.icopolymers.com for a period of twelve
months. (Minimum requirements to listen to the broadcast are: The Windows
Media Player software, downloadable free from
http://www.microsoft.com/windows/windowsmedia/player/download/download.aspx
and at least a 28.8Kbps connection to the Internet.)
Investors are invited to participate in the conference by dialing 847-413-3238, passcode 21304085. A replay of the conference call will be available by dialing 630-652-3044, passcode 21304085.
About ICO, Inc.
With 19 locations in 10 countries, ICO produces custom polymer powders for rotational molding and other polymer related businesses, such as the textile, metal coating and masterbatch markets. ICO remains an industry leader in size reduction, compounding and other tolling services for plastic and non-plastic materials. ICO's Bayshore Industrial subsidiary produces specialty compounds, concentrates and additives primarily for the plastic film industry. Additional information about ICO, Inc. can be found on the Company's website at http://www.icopolymers.com.
This press release contains forward-looking statements, which are not statements of historical facts and involve certain risks, uncertainties and assumptions. These include, but are not limited to, restrictions imposed by the Company's outstanding indebtedness, changes in the cost and availability of resins (polymers) and other raw materials, demand for the Company's services and products, business cycles and other industry conditions, international risks, operational risks, currency translation risks, the Company's lack of asset diversification, the Company's ability to manage global inventory, develop technology and proprietary know-how, and attract and retain key personnel, as well as other factors detailed in the Company's form 10-K for the fiscal year ended September 30, 2007 and its other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.
ICO, Inc.
Consolidated Statement of Operations
(Unaudited and in thousands, except per share data and percentages)
Three Months Ended Six Months Ended
March 31, December 31, March 31,
--------------------- ---------- ----------------------
2008 2007 2007 2008 2007
---------- ---------- ---------- ---------- -----------
Product Sales $102,120 $84,893 $101,188 $203,308 $162,480
Toll Services 10,006 9,826 9,677 19,683 18,500
---------- ---------- ---------- ---------- -----------
Total Revenues 112,126 94,719 110,865 222,991 180,980
Cost of sales and
services (exclusive
of depreciation shown
separately below) 92,838 77,371 91,773 184,611 149,140
---------- ---------- ---------- ---------- -----------
Gross Profit(1) 19,288 17,348 19,092 38,380 31,840
Selling, general
and administrative
expense 10,387 9,274 10,603 20,990 17,713
Depreciation and
amortization 1,853 1,855 1,795 3,648 3,611
Impairment,
restructuring
and other costs
(income) (1,598) (654) 198 (1,400) (654)
---------- ---------- ---------- ---------- -----------
Operating income 8,646 6,873 6,496 15,142 11,170
Other income
(expense):
Interest expense,
net (1,096) (838) (1,023) (2,119) (1,502)
Other income
(expense) (68) 88 (133) (201) (167)
---------- ---------- ---------- ---------- -----------
Income from
continuing
operations before
income taxes 7,482 6,123 5,340 12,822 9,501
Provision for
income taxes 2,489 601 1,814 4,303 1,419
---------- ---------- ---------- ---------- -----------
Income from
continuing
operations 4,993 5,522 3,526 8,519 8,082
Income (loss) from
discontinued
operations, net of
income taxes - 1,475 (16) (16) 1,439
---------- ---------- ---------- ---------- -----------
Net income $4,993 $6,997 $3,510 $8,503 $9,521
Preferred Stock
dividends - (82) (1) (1) (390)
Net gain on redemption
of Preferred Stock - - - - 6,023
---------- ---------- ---------- ---------- -----------
Net income applicable
to Common Stock $4,993 $6,915 $3,509 $8,502 $15,154
========== ========== ========== ========== ===========
Basic income from
continuing operations
per common share $0.18 $0.21 $0.13 $0.31 $0.53
========== ========== ========== ========== ===========
Basic net income
per common share $0.18 $0.27 $0.13 $0.31 $0.59
========== ========== ========== ========== ===========
Diluted income from
continuing operations
per common share $0.18 $0.20 $0.13 $0.30 $0.29
========== ========== ========== ========== ===========
Diluted net income
per common share $0.18 $0.26 $0.13 $0.30 $0.34
========== ========== ========== ========== ===========
Basic weighted
average shares
outstanding 27,263,000 25,907,000 26,914,000 27,088,000 25,874,000
========== ========== ========== ========== ===========
Diluted weighted
average shares
outstanding 27,949,000 27,329,000 27,873,000 27,978,000 27,508,000
========== ========== ========== ========== ===========
Gross Margin (2) 17.2% 18.3% 17.2% 17.2% 17.6%
(1) Calculated as Total Revenues minus Cost of Sales and Services,
exclusive of Depreciation Expense.
(2) Calculated as Gross Profit divided by Total Revenues.
ICO, Inc.
Consolidated Balance Sheet
(Unaudited and in thousands, except share data and ratios)
March 31, September 30,
2008 2007
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $3,403 $8,561
Trade receivables 86,982 95,142
Inventories 74,934 60,420
Deferred income taxes 1,674 1,778
Prepaid and other current assets 9,065 9,924
---------- ----------
Total current assets 176,058 175,825
---------- ----------
Property, plant and equipment, net 62,838 57,396
Goodwill 9,414 9,228
Other assets 3,501 3,768
---------- ----------
Total assets $251,811 $246,217
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings under credit
facilities $26,421 $16,133
Current portion of long-term debt 16,137 11,611
Accounts payable 47,057 66,906
Accrued salaries and wages 6,265 7,313
Other current liabilities 14,011 16,004
---------- ----------
Total current liabilities 109,891 117,967
---------- ----------
Long-term debt, net of current portion 25,931 29,605
Deferred income taxes 4,750 4,820
Other long-term liabilities 3,326 2,783
---------- ----------
Total liabilities 143,898 155,175
---------- ----------
Commitments and contingencies - -
Stockholders' equity:
Convertible exchangeable preferred stock - 2
Undesignated preferred stock - -
Common stock 54,159 47,659
Additional paid-in capital 71,957 74,920
Accumulated other comprehensive income 10,249 5,416
Accumulated deficit (28,452) (36,955)
---------- ----------
Total stockholders' equity 107,913 91,042
---------- ----------
Total liabilities and stockholders'
equity $251,811 $246,217
========== ==========
OTHER BALANCE SHEET DATA
Working capital $66,167 $57,858
Current ratio 1.6 1.5
Total debt $68,489 $57,349
Debt-to-capitalization 38.8% 38.6%
ICO, Inc.
Supplemental Segment Information
(Unaudited and in thousands, except percentages)
Revenues
Three Months Ended % of % of
March 31: 2008 Total 2007 Total Change %
-------- -------- -------- ------ ------- ------
ICO Europe $54,181 48% $42,114 44% $12,067 29%
Bayshore Industrial 20,742 18% 19,901 21% 841 4%
ICO Asia Pacific 19,627 18% 18,483 20% 1,144 6%
ICO Polymers North
America 12,559 11% 10,797 11% 1,762 16%
ICO Brazil 5,017 5% 3,424 4% 1,593 47%
-------- -------- -------- ------ -------
Consolidated $112,126 100% $94,719 100% $17,407 18%
======== ======== ======== ====== =======
Six Months Ended % of % of
March 31: 2008 Total 2007 Total Change %
-------- -------- -------- ------ ------- ------
ICO Europe $100,494 45% $76,381 42% $24,113 32%
Bayshore Industrial 52,519 24% 43,781 24% 8,738 20%
ICO Asia Pacific 37,572 17% 34,096 19% 3,476 10%
ICO Polymers North
America 22,890 10% 20,403 11% 2,487 12%
ICO Brazil 9,516 4% 6,319 4% 3,197 51%
-------- -------- -------- ------ -------
Consolidated $222,991 100% $180,980 100% $42,011 23%
======== ======== ======== ====== =======
Operating income (loss)
Three Months Ended
March 31: 2008 2007 Change
------- ------- --------
ICO Europe $3,520 $2,508 $1,012
Bayshore Industrial 2,782 3,023 (241)
ICO Asia Pacific 761 1,128 (367)
ICO Polymers North
America 2,937 1,752 1,185
ICO Brazil 192 127 65
------- ------- --------
Total Operations 10,192 8,538 1,654
Unallocated General
Corporate Expense (1,546) (1,665) 119
------- ------- --------
Consolidated $8,646 $6,873 $1,773
======= ======= ========
Six Months Ended
March 31: 2008 2007 Change
------- ------- --------
ICO Europe $6,518 $3,183 $3,335
Bayshore Industrial 6,710 6,313 397
ICO Asia Pacific 1,623 1,846 (223)
ICO Polymers North
America 3,383 2,760 623
ICO Brazil 329 204 125
------- ------- --------
Total Operations 18,563 14,306 4,257
Unallocated General
Corporate Expense (3,421) (3,136) (285)
------- ------- --------
Consolidated $15,142 $11,170 $3,972
======= ======= ========
Operating income (loss)
as a percentage of revenues Three Months Ended Six Months Ended
March 31, March 31,
---------------------------------------------
2008 2007 Change 2008 2007 Change
------ ------ ------- ------ ------ -------
ICO Europe 6% 6% 0% 6% 4% 2%
Bayshore Industrial 13% 15% (2%) 13% 14% (1%)
ICO Asia Pacific 4% 6% (2%) 4% 5% (1%)
ICO Polymers North
America 23% 16% 7% 15% 14% 1%
ICO Brazil 4% 4% 0% 3% 3% 0%
Consolidated 8% 7% 1% 7% 6% 1%
ICO, Inc.
Supplemental Segment Information (cont'd.)
(Unaudited and in thousands, except percentages)
Revenues
Three Months Ended
----------------------------------------------------
March 31, December 31,
----------------- ---------------
% of % of
2008 Total 2007 Total Change %
-------- ------- -------- ------ ------- -----
ICO Europe $54,181 48% $46,313 42% $7,868 17%
Bayshore Industrial 20,742 18% 31,777 29% (11,035) (35%)
ICO Asia Pacific 19,627 18% 17,945 16% 1,682 9%
ICO Polymers North
America 12,559 11% 10,331 9% 2,228 22%
ICO Brazil 5,017 5% 4,499 4% 518 12%
-------- ------- -------- ------ -------
Consolidated $112,126 100% $110,865 100% $1,261 1%
======== ======= ======== ====== =======
Operating income
(loss)
Three Months Ended
---------------------------
March 31, December 31,
2008 2007 Change
------- ------- --------
ICO Europe $3,520 $2,998 $522
Bayshore Industrial 2,782 3,928 (1,146)
ICO Asia Pacific 761 862 (101)
ICO Polymers North
America 2,937 446 2,491
ICO Brazil 192 137 55
------- ------- --------
Total Operations 10,192 8,371 1,821
Unallocated General
Corporate Expense (1,546) (1,875) 329
------- ------- --------
Consolidated $8,646 $6,496 $2,150
======= ======= ========
Operating income Three Months Ended
(loss) as a percentage ---------------------------
of revenues March 31, December 31,
2008 2007 Change
------- ------- --------
ICO Europe 6% 6% 0%
Bayshore Industrial 13% 12% 1%
ICO Asia Pacific 4% 5% (1%)
ICO Polymers North
America 23% 4% 19%
ICO Brazil 4% 3% 1%
Consolidated 8% 6% 2%
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