Noble International Announces Second Quarter Financial Results
TROY, Mich., Aug. 6 /EMWNews/ -- Noble International, Ltd. (Nasdaq: NOBL) ("Noble" or the "Company") reported financial results for the second quarter ended June 30, 2008.
SECOND QUARTER HIGHLIGHTS: -- Diluted earnings per share of $0.35 versus $0.13 a year ago -- Net sales of $314.9 million, up 72.4% versus a year ago -- Operating profit of $11.9 million versus $6.3 million a year ago -- Free Cash Flow of $31.2 million versus $11.6 million a year ago -- Inventory levels were reduced by $13.7 million since March 31, 2008 -- Net debt levels were reduced by $26.5 million since March 31, 2008 For the second quarter of 2008, Noble reported net sales of $314.9 million and net earnings of $9.0 million, or $0.35 per diluted share. The results reflect the negative impact of a $1.0 million after-tax charge, or $0.03 per diluted share, related to severance for certain executives who departed the Company. These financial results compare with net sales of $182.7 million and net earnings of $1.8 million, or $0.13 per diluted share, for the second quarter of 2007. "In the second quarter, we realized the benefits of our geographic and customer diversification efforts," stated Thomas L. Saeli, Noble's Chief Executive Officer. "Despite the challenging North American operating environment which was exacerbated by the UAW strike of American Axle in April and May, we were still able to deliver solid earnings in the second quarter due to the strong performance of our overseas operations." Total North American light vehicle production in the second quarter of 2008 was down 14.2% versus the second quarter of 2007. Total "Detroit 3" North American light vehicle production was down 19.9% over the same time period. This negative market environment was primarily responsible for net sales in North America decreasing by $37.1 million, a 20.9% decrease versus the second quarter of 2007. However, the North American sales decrease was more than offset by $166.2 million of revenue at facilities acquired from ArcelorMittal ("the Arcelor Business") and a $3.2 million increase in sales at the Company's Australian operations. The North America segment reported operating profit of $1.5 million on $143.7 million of sales in the second quarter of 2008 versus operating profit of $8.3 million on sales of $177.5 million in the second quarter of 2007. The decrease in operating profit was primarily driven by the large reduction in light vehicle production in North America. Corporate and central costs contributed an operating loss of $4.4 million in the second quarter of 2008 versus an operating loss of $2.2 million in the second quarter of 2007. The larger loss was attributable in part to severance costs for certain departed executives as well as increased professional costs. The Europe/Rest of World segment reported operating profit of $14.8 million on $170.3 million of sales in the second quarter of 2008. In the first quarter of 2008, the Europe/Rest of World segment reported operating profit of $5.9 million on $145.3 million of sales. The increase in sales was driven by higher production volumes and an increase in steel and scrap pricing. The increase in operating profit was driven by margin on higher volumes, operational efficiencies, scrap pricing, timing of steel price increases and a reduction in professional fees. Noble's Chief Financial Officer, David J. Fallon commented, "Given the drastic reduction in North American light vehicle production, management across the Company focused on cost reductions, managing capital spending and reducing working capital. The results of these efforts are demonstrated by our strong Free Cash Flow figures for the second quarter." Free Cash Flow in the second quarter of 2008 was $31.2 million. These figures compare with Free Cash Flow of $11.6 million in the second quarter of 2007. The Free Cash Flow realized in the second quarter of 2008 was primarily utilized to pay down net indebtedness by $26.5 million and distribute approximately $1.9 million of dividends to common shareholders. In the second quarter, management implemented cost saving strategies primarily related to scrap, quality and labor which should yield $12.0 million of annual cost savings in 2009. In addition, the Company progressed on its rationalization efforts related to the closure of two North American facilities and the restructuring of two contract manufacturing operations in Europe. These initiatives, once completed, will result in approximately $11.0 million of cost savings in 2009. In light of the current and forecasted economic conditions, management will continue to assess the appropriateness of the Company's manufacturing footprint, and is ready to implement further restructuring efforts should they be necessary. In addition to the above cost reductions, management initiated other cash generating activities in the second quarter in response to the decreasing light vehicle production. Management spent significant time decreasing working capital levels and scrutinizing capital expenditure requirements. In the second quarter, the Company generated $15.9 million of cash from reducing its working capital needs, which included a $13.7 million reduction of inventory levels. Capital expenditures in the second quarter were $8.1 million, and the Company's year-to-date capital spending through the second quarter was $16.3 million. Management originally had estimated full year capital expenditures of $35 million but now anticipates a significantly lower figure. Noble's Chief Executive Officer, Thomas L. Saeli commented, "Despite the headwinds of the North American light vehicle production environment, we delivered strong results in the second quarter. The cost savings initiatives and working capital discipline we implemented in the past six months will make the Company much stronger when economic conditions provide for a better operating environment. That being said, there is still significant uncertainty regarding short term economic conditions and fuel prices and their impact on global light vehicle production. Given this uncertainty, we are choosing not to update our previous full year 2008 guidance that we will be profitable for the full year." CONFERENCE CALL INFORMATION Noble will host a conference call to discuss its operating results for the second quarter ended June 30, 2008 at 10 AM ET, Thursday, August 7, 2008. The dial-in numbers for the call are (800) 690-3108 or (404) 665-9934 and the conference ID number is 57728525. A replay of the conference call will be available through August 14, 2008 by dialing (800) 642-1687 or (706) 645-9291. The passcode for the replay is 57728525. USE OF NON-GAAP FINANCIAL INFORMATION In addition to the results reported in accordance with accounting principles generally accepted in the United States ("GAAP") included throughout this news release, the Company has provided information regarding EBITDA adjusted for other non-cash items ("Adjusted EBITDA") and "Free Cash Flow," both non-GAAP financial measures. Adjusted EBITDA represents earnings from continuing operations before income tax, plus interest expense, depreciation and amortization as well adjustments for other non-cash items. Free Cash Flow represents net cash provided by operating activities less purchases of property, plant and equipment. Adjusted EBITDA is not presented as, and should not be considered an alternative measure of operating results or cash flows from operations (as determined in accordance with generally accepted accounting principles), but are presented because they are widely accepted financial indicators of a company's operating performance. While widely used, however, Adjusted EBITDA is not identically calculated by companies presenting Adjusted EBITDA and is, therefore, not necessarily an accurate means of comparison and may not be comparable to similarly titled measures disclosed by other companies. Management believes that Adjusted EBITDA is useful to both management and investors in their analysis of the Company's operating performance. Further, management uses Adjusted EBITDA for planning and forecasting in future periods and Free Cash Flow is useful in analyzing the company's ability to service and repay its debt. For a reconciliation of Adjusted EBITDA to net income from continuing operations, see the attached financial information and supplemental data. SAFE HARBOR STATEMENT Noble International, Ltd. is a leading supplier of automotive parts, component assemblies and value-added services to the automotive industry. As an automotive supplier, Noble provides design, engineering, manufacturing, program management and other services to the automotive market. Noble delivers integrated component solutions, technological leadership and product innovation to original equipment manufacturers (OEMs) and Tier I automotive parts suppliers thereby helping its customers increase their productivity while controlling costs. For more information see http://www.nobleintl.com. Certain statements in this press release are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include but are not limited to statements addressing operating performance, events or developments that we believe or expect to occur in the future, including those that discuss strategies, goals, outlook or other non-historical matters, or which relate to future sales or earnings expectations, cost savings, awarded sales, volume growth, earnings or a general belief in our expectations of future operating results. These forward-looking statements are made on the basis of management's assumptions and estimations when made and speak only as of the date thereof. As a result, there can be no guarantee or assurance that these assumptions and expectations will in fact occur. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "may," "would," or "will" or variations of such words and similar expressions may identify such forward- looking statements. The forward-looking statements are subject to risks and uncertainties that may cause actual results to materially differ from those contained in the statements. Some, but not all of the risks, include our ability to obtain future sales; our ability to successfully integrate acquisitions; changes in worldwide economic and political conditions, including adverse effects from terrorism or related hostilities including increased costs, reduced production or other factors; costs related to legal and administrative matters; our ability to realize cost savings expected to offset price concessions; inefficiencies related to production and product launches that are greater than anticipated; changes in technology and technological risks; increased fuel costs; work stoppages and strikes at our facilities and that of our customers; the presence of downturns in customer markets where the Company's goods and services are sold; financial and business downturns of our customers or vendors; and other factors, uncertainties, challenges, and risks detailed in Noble's public filings with the Securities and Exchange Commission. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Noble does not intend or undertake any obligation to update any forward-looking statements.
NOBLE INTERNATIONAL, LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except share and per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Net sales $314,949 $182,657 $629,047 $342,728 Cost of sales 283,773 168,650 573,976 315,129 Gross margin 31,176 14,007 55,071 27,599 Selling, general and administrative expenses 19,247 7,743 40,117 15,256 Operating profit 11,929 6,264 14,954 12,343 Interest income 175 72 260 159 Interest expense (5,772) (3,200) (11,782) (6,147) Loss on extinguishment of debt (929) - (929) (3,285) Net loss on derivative instruments - (1,751) - (1,751) Other income, net 2,527 1,559 3,047 1,227 Income before income taxes, minority interest and equity loss 7,930 2,944 5,550 2,546 Income tax (benefit) expense (1,274) 736 (1,990) 129 Income before minority interest and equity loss 9,204 2,208 7,540 2,417 Minority interest, net of tax (235) (289) (527) (464) Equity loss, net of tax (6) (71) (34) (291) Net Income $8,963 $1,848 $6,979 $1,662 Basic earnings per common share $0.38 $0.13 $0.30 $0.12 Diluted earnings per common share $0.35 $0.13 $0.30 $0.12 Dividends declared and paid per share $0.08 $0.08 $0.16 $0.16 Basic weighted average shares outstanding 23,660,552 14,138,242 23,633,959 14,132,597 Diluted weighted average shares outstanding 28,502,440 14,157,972 26,655,584 14,156,886 Reconciliation of Adjusted EBITDA to income before income taxes: Income before income taxes, minority interest and equity loss $7,930 $2,944 $5,550 $2,546 Depreciation 12,001 4,518 23,748 8,648 Amortization 1,467 553 2,895 1,122 Stock compensation 18 313 230 343 Loss on extinguishment of debt 929 - 929 3,285 Net loss on derivative instruments - 1,751 - 1,751 Net interest expense 5,596 3,128 11,522 5,988 Adjusted EBITDA $27,941 $13,207 $44,874 $23,683 Reconciliation of Free Cash Flow to net cash provided by operating activities: Net cash provided by operating activities $39,282 $15,734 $63,946 $22,717 Less: Purchases of property, plant and equipment (8,071) (4,178) (16,314) (13,890) Free Cash Flow $31,211 $11,556 $47,632 $8,827 NOBLE INTERNATIONAL, LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands) June 30, December 31, 2008 2007 ASSETS Current Assets: Cash and cash equivalents $14,897 $3,332 Accounts receivable trade, net 181,690 160,664 Inventories, net 64,409 81,500 Unbilled customer tooling, net 6,909 8,825 Prepaid expenses 3,932 3,804 Income taxes receivable 4,705 5,842 Value added tax receivable 8,575 11,117 Deferred income taxes 3,544 3,781 Assets held for sale 2,248 - Other current assets 11,127 12,625 Total Current Assets 302,036 291,490 Property, Plant and Equipment, net 264,762 264,163 Other Assets: Goodwill 152,312 155,100 Other intangible assets, net 79,696 78,330 Other assets, net 15,935 14,608 Total Other Assets 247,943 248,038 Total Assets $814,741 $803,691 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $164,566 $152,868 Accrued liabilities 32,386 35,125 Value added tax payable 6,774 3,831 Current maturities of long-term debt 37,413 49,795 Contingent consideration 15,705 14,746 Income taxes payable 1,074 1,021 Total Current Liabilities 257,918 257,386 Long-Term Liabilities: Long-term debt, excluding current maturities 146,522 205,690 Convertible subordinated notes 86,216 36,216 Deferred income taxes 35,545 35,605 Other liabilities 10,180 10,018 Total Long-Term Liabilities 278,463 287,529 Minority Interest 6,168 5,641 Stockholders' Equity Common stock 16 16 Additional paid-in capital 223,177 222,057 Retained earnings 19,300 16,109 Accumulated other comprehensive income, net 29,699 14,953 Total Stockholders' Equity 272,192 253,135 Total Liabilities & Stockholders' Equity $814,741 $803,691 NOBLE INTERNATIONAL, LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six Months Ended June 30, 2008 2007 Cash flows from operating activities: Net income $6,979 $1,662 Adjustments to reconcile net loss to net cash provided by operating activities: Minority interest 527 464 Equity loss 34 291 Loss on extinguishment of debt 929 3,285 Net loss on derivative instruments - 1,751 Amortization of financing fees included in interest expense 1,001 258 Depreciation and amortization 26,643 9,768 Deferred income taxes (1,416) (156) Share-based compensation expense 230 392 Gain on sale of property, plant and equipment 51 (2) Changes in operating assets and liabilities, net of acquisitions and foreign exchange: Accounts receivable (14,762) (21,234) Inventories 20,560 (1,353) Prepaid and other assets 7,022 5,128 Accounts payable 7,967 20,985 Income taxes payable or receivable 1,313 691 Accrued liabilities 6,684 951 Excess tax benefit from share-based compensation arrangements 184 (164) Net cash provided by operating activities 63,946 22,717 Cash flows from investing activities: Purchases of property, plant and equipment (16,314) (13,890) Proceeds from sale of property, plant and equipment 1,230 220 Investment in joint ventures (814) (187) Additional direct costs paid for Pullman acquisition - (37) Net cash used in investing activities (15,898) (13,894) Cash flows from financing activities: Net (payments) borrowings on revolving credit facilities (23,192) 5,390 Repayments of borrowings under term loans (86,124) (7,070) Repayments under other debt agreements (3,829) (1,178) Proceeds from issuance of convertible subordinated debt 50,000 - Proceeds from issuance of subordinated debt 31,249 - Proceeds from issuance of common stock 187 1,163 Dividends paid on common stock (3,788) (2,262) Financing fees (937) (90) Excess tax benefit from share-based compensation arrangements 148 164 Net cash used in financing activities (36,286) (3,883) Effect of exchange rate changes on cash and cash equivalents (197) 28 Net increase (decrease) in cash and cash equivalents 11,565 4,968 Cash and cash equivalents at beginning of period 3,332 6,587 Cash and cash equivalents at end of period $14,897 $11,555
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