EX-99.1 2 l19056aexv99w1.htm EX-99.1 PRESS RELEASE DATED MARCH 10, 2006 EX-99.1
 

(ERICO LOGO)
Exhibit 99.1
ERICO International Corporation
Announces Fourth Quarter and Full Year 2005 Results
SOLON, OH – March 10, 2006 — ERICO International Corporation (bond ticker CADDY) today reported results for its fourth quarter and year ended December 31, 2005.
Net sales in the fourth quarter of 2005 were $96.2 million, an increase of $11.5 million, or 13.7%, compared with fourth quarter 2004 net sales of $84.7 million. The increase in net sales was due primarily to increased selling prices and higher sales volumes. This performance is a new record for fourth quarter net sales.
Gross profit in the fourth quarter of 2005 was $33.9 million, up $5.5 million, or 19.4%, from the fourth quarter 2004 gross profit of $28.4 million. The increase in gross profit was due primarily to increased selling prices and higher sales volumes.
Operating expenses in the fourth quarter of 2005 were $25.3 million, up $2.2 million, or 9.5%, from fourth quarter 2004 operating expenses of $23.1 million. As a percentage of net sales, operating expenses decreased to 26.3% in the fourth quarter of 2005 from 27.3% for the fourth quarter of 2004, primarily due to higher sales levels and ongoing control of expenses.
The Company’s net cash provided by operating activities in the fourth quarter of 2005 was $24.0 million, compared with $12.7 million in the fourth quarter of 2004. The Company generated EBITDA of $11.5 million in the fourth quarter of 2005, compared with EBITDA of $10.1 million in the fourth quarter of 2004, an increase of $1.4 million, or 13.7%. See below for the Company’s definition of EBITDA and a reconciliation of EBITDA to net cash provided by operating activities computed in accordance with accounting principles generally accepted in the United States (“GAAP”).
RESULTS FOR THE YEAR ENDED DECEMBER 31, 2005
Net sales for the year ended December 31, 2005 were $390.7 million, up $38.1 million, or 10.8%, from net sales of $352.6 million for the year ended December 31, 2004, setting a new record for annual net sales. The increase in net sales was due primarily to increased selling prices and higher sales volumes.
Gross profit for the year ended December 31, 2005 was $140.0 million, up $15.3 million, or 12.2%, from gross profit of $124.7 million for the year ended December 31, 2004. The increase in gross profit was due primarily to increased selling prices and higher sales volumes.
Operating expenses for the year ended December 31, 2005 were $93.4 million, up $5.6 million, or 6.4%, from operating expenses of $87.8 million for the year ended December 31, 2004. As a percentage of net sales, operating expenses declined to 23.9% for the year ended December 31, 2005 from 24.9% for the year ended December 31, 2004, primarily due to higher sales levels and ongoing control of expenses.
The Company’s net cash provided by operating activities was $47.1 million for the year ended December 31, 2005 compared with $22.7 million for the year ended December 31, 2004. The Company generated EBITDA of $58.5 million for the year ended December 31, 2005, up $7.4 million, or 14.6%, from EBITDA of $51.1 million for the year ended December 31, 2004. With this performance, the Company set a new record for annual EBITDA generation.

 

 

(ERICO LOGO)
ERICO is a leading designer, manufacturer and marketer of precision-engineered specialty metal products serving global niche product markets in a diverse range of electrical, construction, utility and rail applications. The Company is headquartered in Solon, Ohio, USA, with a network of sales locations serving more than 25 countries and with manufacturing and distribution facilities worldwide. ERICO’s well-known brand names include: CADDY® fixings, fasteners and supports; CADWELD® welded electrical connections; CRITEC® surge protection devices; ERICO® rail bonds and specialty products; ERIFLEX® low-voltage components; ERITECH® electrical products; and LENTON® concrete reinforcement. Visit ERICO online at www.erico.com.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
Statements in this release that are not historical facts are forward-looking statements, as that term is defined by the federal securities laws, and can be identified by the use of terminology such as “believe,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “continue,” “positioned,” “strategy” and similar expressions. These statements are only the Company’s predictions and not guarantees of future performance. The Company’s actual results may differ materially from those contained in the forward-looking statements in this release as a result of risks, uncertainties and contingencies that include, without limitation, general economic conditions in the markets in which the Company operates, industry related and other factors such as the availability of sufficient amounts of raw materials, particularly steel and copper, and the Company’s ability to acquire these raw materials on an economic basis; risks associated with foreign operations, including fluctuations in exchange rates of foreign currencies; competitive pressures on pricing; operational issues at the Company’s facilities; availability of financing to fund operations at anticipated rates and terms; prolonged work stoppages; governmental or regulatory policies; product warranty, product liability and product recall costs; rapid increases in health care costs; the Company’s acquisition activities; the Company’s substantial debt and leverage and ability to service its debt; the restrictive covenants contained in the agreements governing the Company’s indebtedness; the Company’s ability to realize revenue growth; the Company’s ability to implement initiatives designed to increase operating efficiencies and improve results; the loss of major customers; acts of war or terrorism; and other risks and uncertainties set forth under “Risk Factors” in the Company’s SEC filings, including its Annual Report on Form 10-K filed with the SEC on March 10, 2006 and available at www.sec.gov. The Company undertakes no obligation, except as required by law, to update these statements.

 

 

(ERICO LOGO)
ERICO International Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Dollars in Thousands)
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2005     2004     2005     2004  
    (Unaudited)                  
Net sales
   $ 96,222     $ 84,658     $ 390,735     $ 352,618  
Cost of sales
     62,330       56,262       250,738       227,870  
 
                        
Gross profit
     33,892       28,396       139,997       124,748  
Operating expenses
     25,303       23,103       93,361       87,770  
 
                        
Operating income
     8,589       5,293       46,636       36,978  
Interest expense, net
     3,765       3,809       15,208       15,083  
Foreign exchange loss (gain) net
     129       (1,712 )     791       (1,893 )
Other expense
     —       —       —       1,736  
 
                        
Income before income taxes
     4,695       3,196       30,637       22,052  
Provision for income taxes
     956       1,258       10,274       8,684  
 
                        
Net income
   $ 3,739     $ 1,938     $ 20,363     $ 13,368  
 
                        

 

 

(ERICO LOGO)
ERICO International Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in Thousands, Except Per Share Data)
                 
    December 31,     December 31,  
    2005     2004  
     
Assets
                
 
Current assets:
                
Cash and cash equivalents
   $ 19,561     $ 2,321  
Trade accounts receivable, net
     54,802       50,485  
Inventories, net
     46,710       59,600  
Other current assets
     6,758       8,909  
     
Total current assets
     127,831       121,315  
 
                
Property, plant and equipment, net
     42,799       52,522  
Goodwill
     95,524       101,303  
Other intangible assets, net
     36,802       36,905  
Other assets
     8,315       10,676  
     
Total assets
   $ 311,271     $ 322,721  
     
 
                
Liabilities and stockholder’s net investment
                
Current liabilities:
                
Trade accounts payable
   $ 29,157     $ 26,422  
Accrued compensation
     15,699       13,446  
Dividend payable
     11,000       15,000  
Other current liabilities
     20,344       21,874  
     
Total current liabilities
     76,200       76,742  
 
                
Long-term debt
     141,675       152,175  
Deferred income taxes
     26,561       28,894  
Other long-term liabilities
     13,852       16,785  
 
                
Stockholder’s net investment:
                
Common stock, par value $1.00 per share, 1,500,000 shares authorized, 1 share issued and outstanding
     —       —  
Parent company investment
     56,202       46,699  
Accumulated other comprehensive (loss) income
     (3,219 )     1,426  
     
Total stockholder’s net investment
     52,983       48,125  
     
Total liabilities and stockholder’s net investment
   $ 311,271     $ 322,721  
     

 

 

(ERICO LOGO)
ERICO International Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Dollars in Thousands)
                 
    Year Ended December 31,  
    2005     2004  
Operating activities
                
Net income
   $ 20,363     $ 13,368  
Depreciation and amortization
     12,663       12,184  
Other operating activities
     14,104       (2,887 )
 
            
Net cash provided by operating activities
     47,130       22,665  
 
                
Investing activities
                
Capital expenditures
     (3,649 )     (3,571 )
Other investing activities
     (572 )     (93 )
 
            
Net cash used in investing activities
     (4,221 )     (3,664 )
 
                
Financing activities
                
Net transfers from parent company
     140       663  
Dividends paid
     (15,000 )     (25,000 )
Net payments on revolving line of credit
     —       (38,000 )
Proceeds from issuance of subordinated debt
     —       121,500  
Principal payments on long-term debt
     (10,500 )     (72,950 )
Financing fees paid
     —       (5,583 )
 
            
Net cash used in financing activities
     (25,360 )     (19,370 )
Effect of exchange rate changes on cash and cash equivalents
     (309 )     269  
 
            
Increase (decrease) in cash and cash equivalents
     17,240       (100 )
Cash and cash equivalents at beginning of period
     2,321       2,421  
 
            
Cash and cash equivalents at end of period
   $ 19,561     $ 2,321  
 
            

 

 

(ERICO LOGO)
The Company defines EBITDA, a non-GAAP financial measure, as net income plus income taxes, interest expense, net, depreciation, amortization and certain other non-cash, non-recurring items. The Company has chosen to present EBITDA because the Company believes it is a widely accepted financial indicator of a company’s ability to service and incur indebtedness and because EBITDA is used in the Company’s financial debt covenants. Additionally, management uses EBITDA, among other financial measures, for planning and forecasting purposes. However, EBITDA should not be considered as an alternative to net cash provided by operating activities as a measure of liquidity in accordance with GAAP. Since EBITDA is not calculated identically by all companies, the Company’s method of computation may not be comparable to those disclosed by other companies. Following is a reconciliation of EBITDA to net cash provided by operating activities, which the Company believes is the most directly comparable GAAP measure of a company’s ability to service and incur indebtedness:
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2005     2004     2005     2004  
Net cash provided by operating activities
   $ 23,995     $ 12,744     $ 47,130     $ 22,665  
Interest expense, net
     3,765       3,809       15,208       15,083  
Provision for income taxes
     956       1,258       10,274       8,684  
Foreign exchange (loss) gain, net
     (129 )     1,712       (791 )     1,893  
(Provision) benefit for deferred income taxes
     (127 )     (5,062 )     1,218       (4,372 )
Amortization of financing fees and discount on senior subordinated notes included in interest expense, net
     (222 )     (224 )     (891 )     (910 )
Net changes in operating assets and liabilities
     (16,709 )     (4,097 )     (13,640 )     8,012  
 
                        
EBITDA
   $ 11,529     $ 10,140     $ 58,508     $ 51,055  
 
                        
     
Contact:
  Polly Bloom
 
  Investor Relations
 
  (440) 542-1304