EX-99.1 2 exhibit99-1.htm PRESS RELEASE AND FINANCIAL STATEMENTS Press Release and Financial Statements
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5333 Westheimer, Suite 600
Houston, Texas 77056
 
Company Contact: Jon C. Biro
Phone: 713-351-4100
Fax: 713-335-2222
www.icopolymers.com
    


ICO, Inc. Reports Fiscal Year Third Quarter Results
And Improving Outlook

HOUSTON, TEXAS, August 11, 2005 - ICO, Inc. (NASDAQ: ICOC), global producer of custom polymer powders and film concentrates, today announced its fiscal year third quarter financial results for the quarter ended June 30, 2005. Highlights included:


Unaudited Summary
Financial Information
($ in millions except per share data)
                 
   
Three Months Ended
      
Three Months
    
   
June 30,
      
Ended
    
   
2005
  
2004
  
Change
  
Mar. 31, 2005
  
Change
                     
Revenues
  
$75.8
  
$66.8
  
$9.0
  
$78.1
  
$(2.3)
Gross profit
  
12.7
  
12.0
  
.7
  
14.0
  
(1.3)
Gross margin
  
16.8%
  
17.9%
  
(1.1)%
  
17.9%
  
(1.1)% 
Operating income
 
1.3
  
1.3
  
-
  
2.2
  
(.9) 
                     
Income from continuing operations
  
-
  
.4
  
(.4)
1.0
(1.0) 
                     
Basic earnings per share from continuing operations
 
$.00
  
$.01
  
$(.01)
  
$.04
  
$(.04) 
 

Revenues increased $9.0 million or 13% to $75.8 million during the quarter ended June 30, 2005, compared to the same quarter last year. Higher selling prices primarily caused by higher resin prices and stronger foreign currencies led to the revenue increase. Offsetting these factors was the impact of lower sales and service volumes which declined 7% compared to last year, due to lower customer demand.

Gross profit improved to $12.7 million, up $.7 million or 6% from the same quarter last year despite the lower sales and service volumes during the quarter. This improvement was caused by effectively increasing product sales prices and managing raw material procurement. Lower sales and service volumes partially offset these improvements. Gross margins declined from 17.9% for the quarter ended June 30, 2004 to 16.8% for the quarter ended June 30, 2005. The reduction in gross margin was primarily caused by the increase in product selling prices and, in turn, higher product sales revenues, which increased primarily due to rising resin prices. Higher resin prices have historically resulted in higher product selling prices; however, gross profit may not increase, thus causing a reduction in gross margin. Additionally, the gross margin decline was due to lower product sales volumes offset by the beneficial impact of improved feedstock margins (the difference between product sales price and raw material cost).

Operating income declined slightly during the quarter, compared to the prior year, to $1.3 million. This was caused by the gross profit improvement, lower impairment, restructuring and other costs, offset by a $.9 million or an 11% increase in SG&A. The increase in SG&A was primarily caused by third party implementation costs associated with the Sarbanes-Oxley Act of 2002, Section 404 (“Sarbanes-Oxley”), which totaled $.5 million during the quarter. Compliance with Sarbanes-Oxley also increased professional accounting fees by $.3 million due to the expected higher cost of the fiscal year 2005 audit to be performed by the Company’s independent auditors. Lastly, foreign currencies caused approximately $.3 million of the SG&A expense increase. The following table summarizes certain SG&A expense changes:

 
Three Months Ended
June 30,
 
2005
  
2004
  
Change
Professional accounting fees
$  .6
  
$  .3
  
$  .3
Third party Sarbanes - Oxley     
 implementation expense
.5
  
 
-  
 
.5
Total
$1.1
  
$  .3
  
$ .8

Income from continuing operations was $19,000 compared to income of $397,000 in the third quarter of fiscal year 2004.

Net loss, including discontinued operations, improved $2.9 million compared with the third quarter of fiscal year 2004 primarily due to a pre-tax charge in the third quarter of fiscal 2004 related to discontinued operations of $5.0 million. Net loss for the quarter ended June 30, 2005 was $44,000 or $.00 per common share.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) from continuing operations was $3.2 million in the third quarter of fiscal 2005 (includes non-cash stock option expense of $.2 million). This compared to $3.2 million of EBITDA from continuing operations for the same quarter last year. The factors impacting operating income, explained above, were essentially the same reasons for the year-over-year EBITDA change. Management believes this measurement is a reasonable indicator of the amount of cash generated by the business available to pay for working capital growth, capital expenditures, interest, debt principal payments, dividends and taxes. A full reconciliation of EBITDA with U.S. GAAP figures is attached in the financial tables that follow.

For the nine months ending June 30, 2005, operating income improved $.6 million or 12% caused by higher gross profit, partially offset by higher SG&A expenses. The higher gross profit was caused by similar factors that influenced the year-over-year quarterly comparison. Gross margins declined from 18.9% for the nine months ending June 30, 2004 to 17.8% for the nine months ending June 30, 2005. This reduction was caused by the effect of higher resin prices on revenues, partially offset by the impact of improved feedstock margins. SG&A increased $3.0 million or 12% caused by stronger foreign currencies compared to the U.S. Dollar (an impact of approximately $.9 million), $.9 million of Sarbanes-Oxley implementation costs, higher audit fees of $.7 million due to the expected increase in audit fees to audit the Company’s internal controls system, higher compensation and benefits costs of $.5 million, and an increase in severance expenses of $.4 million. The following table summarizes certain SG&A expense changes:

   
Nine Months Ended
June 30,
   
2005
  
2004
  
Change
Professional accounting fees
  
$  1.4
  
$  .7
  
$  .7
Severance expense
  
.4
  
-
  
.4
Third party Sarbanes - Oxley 
     implementation expense
  
.9
  
-
  
.9
Total
  
$2.7
  
$  .7
  
$2.0

The Company’s President and CEO, Bob Parkey, stated “Our sales and service volumes softened during the third quarter compared with last year and compared to the second quarter. We believe the softening during the third quarter was driven by customers utilizing their resin inventories in anticipation of lower resin prices. Resin prices have recently been rising and we experienced a 10% volume improvement in June compared to May. Even considering the normal seasonal fiscal fourth quarter slowdown in Europe, we are expecting a reasonable level of volumes. We also believe most of our Sarbanes-Oxley implementation costs are now behind us and, therefore, we anticipate improved operating income, excluding charges, in the fourth quarter of fiscal year 2005 compared to the third quarter of fiscal year 2005 and the fourth quarter of last year.”

Total debt declined $7.7 million during the third quarter to $35.3 million. Cash increased during the quarter $2.6 million to $4.2 million as of June 30, 2005. These liquidity improvements were the result of cash generated from operations during the quarter, including a reduction in working capital and a $3.4 million U.S. tax refund received. Offsetting these cash inflows were capital expenditures of $1.4 million during the quarter. Available borrowing capacity under the Company’s existing credit arrangements was $29.8 million as of June 30, 2005, compared to $22.9 million as of March 31, 2005. During the third quarter, the Company redeemed $5.1 million of 10 3/8% Series B Senior Notes and gave notice on July 12, 2005 of its desire to redeem an additional $2.0 million on August 12, 2005.

Preferred Dividend

The Company’s Board of Directors has determined not to declare any dividend on its depositary shares, each representing ¼ of a share of its $6.75 convertible exchangeable preferred stock, for the quarter ending on September 30, 2005.

Conference Call on the Web

A live Internet broadcast of ICO, Inc.’s conference call regarding fiscal 2005 third quarter earnings can be accessed at 10:00 a.m. Central Time on Thursday, August 11, 2005 at www.firstcallevents.com, where the webcast replay will be archived. (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 719-457-2632, passcode 1897433. The webcast will be archived for 10 days. A recording of the conference will be available until August 21, 2005 by dialing 719-457-0820, passcode: 1897433.
 
About ICO, Inc.
 
With 17 locations in 9 countries, ICO Polymers produces custom polymer powders for rotational molding and other polymers segments, including textiles, metal coatings and masterbatch. 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 film industry.
 

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 polymers, demand for the Company's services and products, business cycles and other industry conditions, the Company’s lack of asset diversification, international risks, operational risks, and other factors detailed in the Company's form 10-K for the fiscal year ended September 30, 2004 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
      
Nine Months Ended
   
June 30,
  
March 31,
  
June 30,
   
2005
 
2004
 
2005
 
2005
 
2004
                     
Product Sales
 
$ 67,530
 
$ 57,799
 
$ 69,283
 
$ 199,054
 
$ 164,503
Toll Services
 
8,232
 
8,980
 
8,852
 
26,273
 
26,624
Total Revenues
 
75,762
 
66,779
 
78,135
 
225,327
 
191,127
Cost of sales and services
 
63,051
 
54,800
 
64,179
 
185,139
 
154,925
Gross Profit
 
12,711
 
11,979
 
13,956
 
40,188
 
36,202
Selling, general and administrative expense
  
9,227
 
8,311
 
9,546
 
27,529
 
24,572
Stock option compensation expense
  
243
 
192
 
190
 
640
 
434
Depreciation and amortization
 
1,934
 
1,969
 
2,016
 
5,986
 
5,955
Impairment, restructuring and other costs
 
-
 
180
 
22
 
343
 
168
Operating income
 
1,307
 
1,327
 
2,182
 
5,690
 
5,073
Other income (expense):
                   
Interest expense, net
 
(748)
  
(684)
  
(774)
  
(2,208)
  
(1,979)
Other income (expense)
 
(65)
  
(94)
  
(97)
  
(21)
  
177
Income from continuing operations before income taxes
 
494
 
549
 
1,311
 
3,461
 
3,271
Provision for income taxes
 
475
 
152
 
289
 
1,030
 
1,238
Income from continuing operations
 
19
 
397
 
1,022
 
2,431
 
2,033
Loss from discontinued operations, net of benefit for
                   
income taxes of ($37), ($1,803), ($73), ($206) and ($1,854), respectively
 
(63)
  
(3,350)
  
(143)
  
(383)
  
(3,442)
                     
Net income (loss)
 
$ (44)
  
$(2,953)
  
$ 879
 
$ 2,048
 
$ (1,409)
 
                    
Basic income from continuing operations per common share
 
$ 0.00
 
$ 0.01
 
$ 0.04
 
$ 0.10
 
$ 0.08
Basic net income (loss) per common share
 
$ 0.00
 
$ (0.12)
  
$ 0.03
 
$ 0.08
 
$ (0.06)
                     
Diluted income from continuing operations per common share
 
$ 0.00
 
$ 0.01
 
$ 0.03
 
$ 0.08
 
$ 0.07
Diluted net income (loss) per common share
 
$ 0.00
 
$ (0.10)
  
$ 0.03
 
$ 0.07
 
$ (0.05)
                     
Earnings from continuing operations before interest expense, taxes,
                   
depreciation and amortization (a)
  
$ 3,176
 
$ 3,202
 
$ 4,101
 
$ 11,655
 
$ 11,205
                     
Gross Margin
 
16.8%
  
17.9%
  
17.9%
  
17.8%
  
18.9%
                     
(a) See “Reconciliation of Selected Financial Data”
                    
 
 
 

ICO, Inc.
Reconciliation of Selected Financial Data
(Unaudited and in thousands)
                     
In this news release, the Company has presented the measurement EBITDA from continuing operations that is not calculated in accordance with Generally Accepted Accounting Principles ("GAAP"), but is derived from relevant items in the Company's GAAP financials. The reasons the Company believes this measurement is important to present and the risks associated with presenting this measurement are as follows:
                     
● The measurement EBITDA from continuing operations is used by the managers and the Board of Directors of the Company to evaluate the Company's performance including its ability to service debt and is an indication of the Company’s developing liquidity position. Furthermore, the Company’s management uses this measure to make operational decisions in the ordinary course of business.
● The Company decided to use this measure as the Company believes this measurement is a reasonable indicator of the amount of cash generated by the business available to pay for working capital growth, capital expenditures, interest, debt principal payments, dividends and taxes.
● The material limitation of the Non-GAAP measurement EBITDA from continuing operations, relates to this measure excluding certain items that affect the Company’s net income.
● The Company mitigates this limitation by the provision of the specific detailed description and computation of the measure and ensuring that this
● Non-GAAP measure is no more prominent in the Companys filings compared to GAAP measures of profitability.
Investors in the Companys securities often ask the Companys management about the Companys trend of EBITDA from continuing operations.
                     
                     
                     
   
Three Months Ended
      
Nine Months Ended
   
June 30,
  
March 31,
  
June 30,
   
2005
  
2004
  
2005
  
2005
  
2004
                     
Net income (loss)
  
$ (44)
 
$ (2,953)
 
$ 879
 
$ 2,048
 
$ (1,409)
Add to/(deduct from) net income (loss):
                    
Loss from discontinued operations
  
63
 
3,350
 
143
 
383
 
3,442
Provision for income taxes
 
475
 
152
 
289
 
1,030
 
1,238
Interest expense, net
  
748
 
684
 
774
 
2,208
 
1,979
Depreciation and amortization
  
1,934
 
1,969
 
2,016
 
5,986
 
5,955
                     
EBITDA from continuing operations
  
$ 3,176
 
$ 3,202
 
$ 4,101
 
$ 11,655
 
$ 11,205
 
 
 

ICO, Inc.
Consolidated Balance Sheets
(Unaudited and in thousands, except share data and ratios)
         
   
June 30,
 
September 30,
 
 
2005
 
2004
ASSETS
        
Current assets:
       
Cash and cash equivalents
 
$ 4,159
 
$ 1,931
Trade accounts receivables
 
58,467
 
53,134
Inventories
 
28,687
 
32,290
Deferred income taxes
 
2,815
 
2,425
Prepaid expenses and other
 
4,074
 
6,826
Total current assets
 
98,202
 
96,606
         
Property, plant and equipment, net
 
49,541
 
52,198
Goodwill
 
8,834
 
8,719
Other
 
1,280
 
947
Total assets
 
$ 157,857
 
$ 158,470
         
LIABILITIES, STOCKHOLDERS' EQUITY AND
        
ACCUMULATED OTHER COMPREHENSIVE LOSS
        
Current liabilities:
       
Borrowings under credit facilities
 
$ 8,055
 
$ 8,878
Current portion of long-term debt
 
5,687
 
3,775
Accounts payable
 
26,485
 
31,856
Accrued salaries and wages
 
3,700
 
4,847
Other accrued liabilities
 
12,330
 
13,041
Total current liabilities
 
56,257
 
62,397
         
Deferred income taxes
 
4,049
 
3,663
Long-term liabilities
 
1,648
 
1,769
Long-term debt, net of current portion
 
21,535
 
19,700
Total liabilities
 
83,489
 
87,529
         
Commitments and contingencies
 
-
 
-
Stockholders' equity:
       
Convertible preferred stock, without par value- 345,000 shares
       
authorized; 322,500 shares issued and outstanding with
       
a liquidation preference of $37,690 and $36,058, respectively
 
13
 
13
Undesignated preferred stock, without par value-
       
105,000 shares authorized; 0 shares issued and outstanding
 
-
 
-
Common stock, without par value- 50,000,000 shares
       
authorized; 25,455,569 and 25,338,766 shares issued
       
and outstanding, respectively
 
44,121
 
43,807
Additional paid-in capital
 
104,071
 
103,452
Accumulated other comprehensive loss
 
(1,303)
 
(1,749)
Accumulated deficit
 
(72,534)
 
(74,582)
Total stockholders' equity
 
74,368
 
70,941
Total liabilities and stockholders' equity
  
$ 157,857
 
$ 158,470
         
OTHER BALANCE SHEET DATA
        
Working capital
  
$ 41,945
 
$ 34,209
Current ratio
  
1.7
 
1.5
Total debt
 
$ 35,277
 
$ 32,353
Debt-to-capitalization
  
32.2%
  
31.3%
         
 
 
 

ICO, Inc.
Supplemental Segment Information
(Unaudited and in thousands, except percentages)
                           
Revenues
                          
Three Months Ended June 30:
  
2005
 
% of Total
 
 
2004
 
% of Total
 
Change
 
%
ICO Europe
  
$ 33,754
 
44%
    
$ 30,932
 
46%
  
$ 2,822
 
9%
ICO Courtenay - Australasia
  
12,228
 
16%
    
9,557
 
14%
  
2,671
 
28%
ICO Polymers North America
  
10,691
 
14%
    
10,120
 
15%
  
571
 
6%
ICO Brazil
  
2,009
 
3%
    
1,769
 
3%
  
240
 
14%
Total ICO Polymers
  
58,682
 
77%
    
52,378
 
78%
  
6,304
 
12%
Bayshore Industrial
  
17,080
 
23%
    
14,401
 
22%
  
2,679
 
19%
Consolidated
  
$ 75,762
 
100%
    
$ 66,779
 
100%
  
$ 8,983
 
13%
                           
                           
Nine Months Ended June 30:
  
2005
 
% of Total
 
 
2004
 
% of Total
 
Change
 
%
ICO Europe
  
$ 99,227
 
44%
    
$ 85,292
 
45%
  
$ 13,935
 
16%
ICO Courtenay - Australasia
  
34,564
 
15%
    
29,557
 
15%
  
5,007
 
17%
ICO Polymers North America
  
30,369
 
14%
    
27,602
 
14%
  
2,767
 
10%
ICO Brazil
  
6,017
 
3%
    
5,001
 
3%
  
1,016
 
20%
Total ICO Polymers
  
170,177
 
76%
    
147,452
 
77%
  
22,725
 
15%
Bayshore Industrial
  
55,150
 
24%
    
43,675
 
23%
  
11,475
 
26%
Consolidated
  
$ 225,327
 
100%
    
$ 191,127
 
100%
  
$ 34,200
 
18%
                           
                           
Operating income (loss)
                          
Three Months Ended June 30:
  
2005
 
2004
 
 
Change
 
          
ICO Europe
  
$ 646
 
$ 673
   
$ (27)
            
ICO Courtenay - Australasia
  
555
 
730
   
(175)
            
ICO Polymers North America
  
310
 
670
   
(360)
            
ICO Brazil
  
(192)
  
104
   
(296)
            
Total ICO Polymers
  
1,319
 
2,177
   
(858)
            
Bayshore Industrial
  
1,869
 
1,313
   
556
           
Total Operations
  
3,188
 
3,490
   
(302)
            
General Corporate Expense
  
(1,638)
  
(1,971)
    
333
           
Stock Option Expense and Other
  
(243)
  
(192)
    
(51)
            
Consolidated
  
$ 1,307
 
$ 1,327
   
$ (20)
            
                           
                           
Nine Months Ended June 30:
  
2005
 
2004
 
 
Change
            
ICO Europe
  
$ 3,560
 
$ 2,294
   
$ 1,266
           
ICO Courtenay - Australasia
  
1,877
 
3,070
   
(1,193)
            
ICO Polymers North America
  
514
 
1,735
   
(1,221)
            
ICO Brazil
  
(767)
  
67
   
(834)
            
Total ICO Polymers
  
5,184
 
7,166
   
(1,982)
            
Bayshore Industrial
  
6,377
 
3,938
   
2,439
           
Total Operations
  
11,561
 
11,104
   
457
           
General Corporate Expense
  
(5,264)
  
(5,597)
    
333
           
Stock Option Expense and Other
  
(607)
  
(434)
    
(173)
            
Consolidated
  
$ 5,690
 
$ 5,073
   
$ 617
           
                           
                           
Operating income (loss) as a percentage of revenues
  
Three Months Ended
  
Nine Months Ended
   
June 30,
  
June 30,
   
 
  
 
 
 
Increase/
 
 
 
 
 
Increase/
 
 
2005
 
2004
 
 
(Decrease)
  
2005 
  
2004 
  
(Decrease)
ICO Europe
  
2%
  
2%
    
0%
  
4%
  
3%
  
1%
ICO Courtenay - Australasia
  
5%
  
8%
    
(3%)
  
5%
  
10%
  
(5%)
ICO Polymers North America
  
3%
  
7%
    
(4%)
  
2%
  
6%
  
(4%)
ICO Brazil
  
(10%)
  
6%
    
(16%)
  
(13%)
  
1%
  
(14%)
Total ICO Polymers
  
2%
  
4%
    
(2%)
  
3%
  
5%
  
(2%)
Bayshore Industrial
  
11%
  
9%
    
2%
  
12%
  
9%
  
3%
Consolidated
  
2%
  
2%
    
0%
  
3%
  
3%
  
0%
 
 
 

ICO, Inc.
Supplemental Segment Information (cont'd.)
(Unaudited and in thousands, except percentages)
                         
Revenues
                        
   
Three Months Ended
   
June 30,
  
March 31,
        
   
2005
  
% of Total
  
2005
  
% of Total
  
Change
  
%
ICO Europe
  
$ 33,754
 
44%
  
$ 34,704
 
44%
  
$ (950)
  
(3%)
ICO Courtenay - Australasia
  
12,228
 
16%
  
11,596
 
15%
  
632
 
5%
ICO Polymers North America
  
10,691
 
14%
  
10,854
 
14%
  
(163)
  
(2%)
ICO Brazil
  
2,009
 
3%
  
1,771
 
2%
  
238
 
13%
Total ICO Polymers
  
58,682
 
77%
  
58,925
 
75%
  
(243)
  
(0%)
Bayshore Industrial
  
17,080
 
23%
  
19,210
 
25%
  
(2,130)
  
(11%)
Consolidated
  
$ 75,762
 
100%
  
$ 78,135
 
100%
  
$ (2,373)
  
(3%)
                         
                         
Operating income (loss)
                        
   
Three Months Ended
          
   
June 30,
 
March 31,
 
 
 
 
 
 
 
 
 
 
2005
 
2005
 
Change
            
ICO Europe
  
$ 646
 
$ 1,645
 
$ (999)
            
ICO Courtenay - Australasia
  
555
 
387
 
168
           
ICO Polymers North America
  
310
 
327
 
(17)
            
ICO Brazil
  
(192)
  
(547)
  
355
           
Total ICO Polymers
  
1,319
 
1,812
 
(493)
            
Bayshore Industrial
  
1,869
 
2,390
 
(521)
            
Total Operations
  
3,188
 
4,202
 
(1,014)
            
General Corporate Expense
  
(1,638)
  
(1,830)
  
192
           
Stock Option Expense and Other
  
(243)
  
(190)
  
(53)
            
Consolidated
  
$ 1,307
 
$ 2,182
 
$ (875)
            
                         
                         
Operating income (loss) as a percentage of revenues
  
Three Months Ended
          
   
June 30,
 
March 31,
 
Increase/
 
 
 
 
 
 
 
 
2005
 
2005
 
(Decrease)
 
          
ICO Europe
  
2%
  
5%
  
(3%)
            
ICO Courtenay - Australasia
  
5%
  
3%
  
2%
            
ICO Polymers North America
  
3%
  
3%
  
0%
            
ICO Brazil
  
(10%)
  
(31%)
  
21%
            
Total ICO Polymers
  
2%
  
3%
  
(1%)
            
Bayshore Industrial
  
11%
  
12%
  
(1%)
            
Consolidated
  
2%
  
3%
  
(1%)