EX-99.1 2 exhibit99-1.htm EXHIBIT 99.1 - PRESS RELEASE DATED 12-7-05 Exhibit 99.1 - Press Release dated 12-7-05
icologo
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 Fourth Quarter
and Fiscal Year 2005 Results

HOUSTON, TEXAS, December 7, 2005 - ICO, Inc. (NASDAQ: ICOC), global producer of custom polymer powders and plastic film concentrates, today announced its fiscal year fourth quarter and year-end financial results for the period ended September 30, 2005. Highlights included:
 
§  
15% growth in revenues and a 107% increase in pre-tax income during fiscal year 2005
§  
$.20 basic income from continuing operations per common share for the full year and $.10 basic income from continuing operations per common share for the fourth quarter of fiscal year 2005
§  
Outlook continues to be positive


Unaudited Summary
Financial Information
($ in millions, except per share data)
 
 
Year Ended
  
Quarter Ended
  
Quarter Ended
 
September 30,
  
September 30,
  
June 30,
 
2005
  
2004
  
Change
  
2005
  
2004
  
Change
  
2005
  
Change
                               
Revenues
$296.6
  
$257.5
  
$39.1
  
$71.3
  
$66.4
  
$4.9
  
$75.8
  
$(4.5)
Gross profit
53.5
  
47.9
  
5.6
  
13.3
  
11.7
  
1.6
  
12.7
  
0.6
Gross margin
18.0%
  
18.6%
  
(.6)%
  
18.6%
  
17.5%
  
1.1%
  
16.8%
  
1.8%
Operating income
8.2
  
5.2
  
3.0
  
2.5
  
0.1
  
2.4
  
1.3
  
1.2
                               
Net income from continuing operations
5.0
  
3.9
  
1.1
  
2.6
  
1.9
  
0.7
  
0.0
  
2.6
                               
Basic income from continuing operations per share
$.20
$.15
$.05
  
$.10
  
$.07
  
$.03
  
$.00
  
$.10
                               
Diluted income from continuing operations per share
$.17
  
$.14
  
$.03
  
$.09
  
$.06
  
$.03
  
$.00
  
$.09

Revenues increased $39.1 million, or 15%, to $296.6 million during fiscal year 2005 compared to fiscal year 2004. Higher selling prices primarily caused by higher resin prices and stronger foreign currencies caused the revenue increase. Gross profit improved to $53.5 million in fiscal year 2005, up $5.6 million, or 12%, from fiscal year 2004. This improvement was caused by effectively increasing product sales prices and managing raw material procurement. Lower sales and service volumes partially offset these improvements.
 
 
 
Selling, general and administrative costs increased $3.2 million in fiscal year 2005 caused by stronger foreign currencies ($1.0 million), higher professional accounting fees ($1.1 million), and higher third-party consulting costs related to the Company’s Sarbanes-Oxley 404 implementation ($.9 million). The Company was required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) during fiscal year 2005 which drove the increase in third-party consulting and professional accounting fees. The following table summarizes certain SG&A expense changes:


 
Year Ended
  
Quarter Ended
  
Quarter Ended
 
September 30,
  
September 30,
  
June 30,
 
2005
  
2004
  
Change
  
2005
  
2004
  
Change
  
2005
  
Change
                               
Professional accounting fees
$2.1
  
$1.0
  
$1.1
  
$.7
  
$.3
  
$.4
  
$.6
  
$.1 
Third-party Sarbanes-Oxley implementation expense
1.0
  
.1
  
.9
  
$.1
  
-
  
.1
  
.5
  
(.4)
Total
$3.1
  
$1.1
  
$2.0
  
$.8
  
$.3
  
$.5
  
$1.1
  
$(.3)
                               

Led by the improvement in gross profit, operating income increased 58%, or $3.0 million, in fiscal 2005, compared to the prior year, to $8.2 million. Fiscal year 2005 income from continuing operations before income taxes was $5.2 million, versus income of $2.5 million in fiscal year 2004, an increase of $2.7 million or 107%. Net income (including discontinued operations) improved $4.2 million, compared with fiscal year 2004, due to the increase in income from continuing operations before taxes, an increase in tax expense in FY 2005 (compared to a benefit in fiscal year 2004), and an after tax charge in fiscal 2004 related to discontinued operations of $3.3 million. Income from continuing operations for the year ended September 30, 2005 was $5.0 million or $.20 per common share.

For the three months ending September 30, 2005, operating income improved $2.4 million, compared to the prior year quarter, to $2.5 million. The dramatic improvement in operating income was caused by an increase in gross profit of $1.6 million, or 14%, due to higher gross margins caused by an improvement in feedstock margins (the difference between product sales revenue and raw material cost of sales) and lower production expenses. Additionally, impairment, restructuring and other costs declined $.5 million, compared to the fourth quarter of last year. Due to the utilization of deferred tax assets and related reversal of valuation allowances in the fourth quarter of fiscal 2005, the Company recognized a benefit for income taxes of $.8 million. Income from continuing operations was $2.6 million during the quarter, or $.10 per common share.

The Company’s President and CEO, Mr. A. John Knapp, Jr., stated “The resin price environment we currently operate in requires a substantial amount of attention. We did a great job last year and during the fourth quarter of monitoring our inventory positions closely and managing our selling prices accordingly. Our fiscal 2005 results reflect the hard work of the entire ICO organization. Thus far, customer demand and profitability during the early part of fiscal year 2006 have been very strong and we currently believe that first quarter fiscal year 2006 pre-tax profitability, excluding charges, will significantly exceed the first and fourth quarters of fiscal year 2005.”

The Company’s liquidity position continued to improve during the fourth quarter of fiscal year 2005. At September 30, 2005, the Company’s available borrowing capacity was $34.5 million, an improvement from $22.4 million as of September 30, 2004. This improvement was mostly due to the expansion of existing credit facilities and the addition of long-term loans closed during the fiscal year. In November, the Company gave notice to redeem the remaining $3.0 million of 10 3/8% Series B Senior Notes on December 16, 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 December 31, 2005.

Conference Call on the Web

A live Internet broadcast of ICO, Inc.’s conference call regarding fiscal 2005 fourth quarter and year-end results can be accessed at 9:00 a.m. Central Standard Time on Thursday, December 8, 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 719-457-2628, passcode 4634933. The webcast will be archived for 10 days. A recording of the conference will be available until December 18, 2005 by dialing 719-457-0820, passcode: 4634933.
 
About ICO, Inc.
 
With 18 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 plastic 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
  
Twelve Months Ended
   
September 30,
 
June 30,
 
September 30,
 
 
2005
 
2004
 
2005
 
2005
 
2004
                     
Product Sales
 
$ 63,764
 
$ 57,197
 
$ 67,530
 
$ 262,818
 
$ 221,700
Toll Services
 
7,515
 
9,201
 
8,232
 
33,788
 
35,825
Total Revenues
 
71,279
 
66,398
 
75,762
 
296,606
 
257,525
Cost of sales and services
 
58,001
 
54,746
 
63,051
 
243,140
 
209,671
Gross Profit
 
13,278
 
11,652
 
12,711
 
53,466
 
47,854
Selling, general and administrative expense
  
8,799
 
8,537
 
9,227
 
36,328
 
33,109
Stock option compensation expense
  
33
 
245
 
243
 
673
 
679
Depreciation and amortization
 
1,786
 
2,041
 
1,934
 
7,772
 
7,996
Impairment, restructuring and other costs
 
145
 
686
 
-
 
488
 
854
Operating income
 
2,515
 
143
 
1,307
 
8,205
 
5,216
Other income (expense):
                   
Interest expense, net
 
(628)
  
(684)
  
(748)
  
(2,836)
  
(2,663)
Other income (expense)
 
(128)
  
(212)
  
(65)
  
(149)
  
(35)
Income (loss) from continuing operations before income taxes
 
1,759
 
(753)
  
494
 
5,220
 
2,518
Provision (benefit) for income taxes
 
(812)
  
(2,608)
  
475
 
218
 
(1,370)
Income from continuing operations
 
2,571
 
1,855
 
19
 
5,002
 
3,888
Loss from discontinued operations, net of benefit for
                   
income taxes of ($62), ($101), ($37),($268), ($1,955), respectively
 
(114)
  
(189)
  
(63)
  
(497)
  
(3,631)
 
                    
Net income (loss)
 
$ 2,457
 
$ 1,666
 
$ (44)
  
$ 4,505
 
$ 257
                     
 
                    
Basic income from continuing operations
 
$ 0.10
 
$ 0.07
 
$ -
 
$ 0.20
 
$ 0.15
Basic net income (loss) per common share
 
$ 0.10
 
$ 0.07
 
$ -
 
$ 0.18
 
$ 0.01
 
                    
                     
Diluted income from continuing operations
 
$ 0.09
 
$ 0.06
 
$ -
 
$ 0.17
 
$ 0.14
Diluted net income (loss) per common share
 
$ 0.08
 
$ 0.06
 
$ -
 
$ 0.15
 
$ 0.01
                     
Earnings from continuing operations before interest expense, taxes, depreciation and
                   
 amortization (a) 
  
$ 4,173
 
$ 1,972
 
$ 3,176
 
$ 15,828
 
$ 13,177
                     
Gross Margin
 
18.6%
  
17.5%
  
16.8%
  
18.0%
  
18.6%
                     
(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 one of the measures 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
  
Twelve Months Ended
   
September 30,
 
June 30,
 
September 30,
 
 
2005
 
2004
 
2005
 
2005
 
2004
                     
Net income (loss)
  
$ 2,457
 
$ 1,666
 
$ (44)
  
$ 4,505
 
$ 257
Add to/(deduct from) net income (loss):
                    
Loss from discontinued operations
  
114
 
189
 
63
 
497
 
3,631
Provision (benefit) for income taxes
  
(812)
  
(2,608)
  
475
 
218
 
(1,370)
Interest expense, net
  
628
 
684
 
748
 
2,836
 
2,663
Depreciation and amortization
  
1,786
 
2,041
 
1,934
 
7,772
 
7,996
                     
EBITDA from continuing operations
  
$ 4,173
 
$ 1,972
 
$ 3,176
 
$ 15,828
 
$ 13,177
                     
 
 
 
 
 

ICO, Inc.
Consolidated Balance Sheet
(Unaudited and in thousands, except share data and ratios)
         
   
September 30,
 
September 30,
 
 
2005
 
2004
ASSETS
       
Current assets:
       
Cash and cash equivalents
 
$ 3,234
 
$ 1,931
Trade receivables
 
57,132
 
53,134
Inventories
 
35,006
 
32,290
Deferred income taxes
 
2,579
 
2,425
Prepaid and other current assets
 
5,542
 
6,826
Total current assets
 
103,493
 
96,606
         
Property, plant and equipment, net
 
49,274
 
52,198
Goodwill
 
8,831
 
8,719
Other assets
 
2,657
 
947
Total assets
 
$ 164,255
 
$ 158,470
         
LIABILITIES, STOCKHOLDERS' EQUITY AND
       
ACCUMULATED OTHER COMPREHENSIVE LOSS
       
Current liabilities:
       
Borrowings under credit facilities
 
$ 8,989
 
$ 8,878
Current portion of long-term debt
 
5,657
 
3,775
Accounts payable
 
31,387
 
31,856
Accrued salaries and wages
 
4,181
 
4,847
Other current liabilities
 
11,897
 
13,041
Total current liabilities
 
62,111
 
62,397
         
Deferred income taxes
 
4,383
 
3,663
Other long-term liabilities
 
1,678
 
1,769
Long-term debt, net of current portion
 
18,993
 
19,700
Total liabilities
 
87,165
 
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 $38,234 and $36,058, respectively
 
13
 
13
Undesignated preferred stock, without par value-
       
105,000 shares authorized; No shares issued and outstanding
 
-
 
-
Common stock, without par value- 50,000,000 shares
       
authorized; 25,544,997 and 25,338,766 shares issued
       
and outstanding, respectively
 
44,265
 
43,807
Additional paid-in capital
 
104,134
 
103,452
Accumulated other comprehensive loss
 
(1,245)
 
(1,749)
Accumulated deficit
 
(70,077)
 
(74,582)
Total stockholders' equity
 
77,090
 
70,941
Total liabilities and stockholders' equity
  
$ 164,255
 
$ 158,470
         
OTHER BALANCE SHEET DATA
        
Working capital
  
$ 41,382
 
$ 34,209
Current ratio
  
1.7
 
1.5
Total debt
 
$ 33,639
 
$ 32,353
Debt-to-capitalization
  
30.4%
 
31.3%
 
 
 

ICO, Inc.
Supplemental Segment Information
(Unaudited and in thousands, except percentages)
                               
Revenues
                              
Year Ended September 30:
  
2005
 
% of Total
 
 
2004
 
% of Total
 
 
Change
 
%
  
ICO Europe
  
$ 126,986
 
43%
    
$ 112,554
 
44%
    
$ 14,432
 
13%
  
ICO Courtenay - Australasia
  
47,670
 
16%
    
40,640
 
16%
    
7,030
 
17%
  
ICO Polymers North America
  
40,589
 
14%
    
36,773
 
14%
    
3,816
 
10%
  
ICO Brazil
  
8,283
 
3%
    
7,273
 
3%
    
1,010
 
14%
  
Total ICO Polymers
  
223,528
 
76%
    
197,240
 
77%
    
26,288
 
13%
  
Bayshore Industrial
  
73,078
 
24%
    
60,285
 
23%
    
12,793
 
21%
  
Consolidated
  
$ 296,606
 
100%
    
$ 257,525
 
100%
    
$ 39,081
 
15%
  
                               
                               
Three Months Ended September 30:
  
2005
 
% of Total
 
 
2004
 
% of Total
 
 
Change
 
%
  
ICO Europe
  
$ 27,759
 
39%
    
$ 27,262
 
41%
    
$ 497
 
2%
  
ICO Courtenay - Australasia
  
13,106
 
19%
    
11,083
 
17%
    
2,023
 
18%
  
ICO Polymers North America
  
10,220
 
14%
    
9,171
 
14%
    
1,049
 
11%
  
ICO Brazil
  
2,266
 
3%
    
2,272
 
3%
    
(6)
  
0%
  
Total ICO Polymers
  
53,351
 
75%
    
49,788
 
75%
    
3,563
 
7%
  
Bayshore Industrial
  
17,928
 
25%
    
16,610
 
25%
    
1,318
 
8%
  
Consolidated
  
$ 71,279
 
100%
    
$ 66,398
 
100%
    
$ 4,881
 
7%
  
                               
                               
Operating income (loss)
                              
Year Ended September 30:
  
2005
 
2004
 
 
Change
 
              
ICO Europe
  
$ 4,201
 
$ 2,400
   
$ 1,801
               
ICO Courtenay - Australasia
  
2,910
 
3,999
   
(1,089)
                
ICO Polymers North America
  
771
 
1,444
   
(673)
                
ICO Brazil
  
(951)
  
118
   
(1,069)
                
Total ICO Polymers
  
6,931
 
7,961
   
(1,030)
                
Bayshore Industrial
  
8,881
 
5,511
   
3,370
               
Total Operations
  
15,812
 
13,472
   
2,340
               
General Corporate Expense*
  
(7,607)
  
(8,256)
    
649
               
Consolidated
  
$ 8,205
 
$ 5,216
   
$ 2,989
               
 
* General corporate expense includes stock option compensation expense of $673 and $679 for the year ended September 30, 2005 and 2004, respectively.
                               
Three Months Ended September 30:
  
2005
 
2004
 
 
Change
                
ICO Europe
  
$ 641
 
$ 106
   
$ 535
               
ICO Courtenay - Australasia
  
1,033
 
929
   
104
               
ICO Polymers North America
  
257
 
(291)
    
548
               
ICO Brazil
  
(184)
  
51
   
(235)
                
Total ICO Polymers
  
1,747
 
795
   
952
               
Bayshore Industrial
  
2,504
 
1,573
   
931
               
Total Operations
  
4,251
 
2,368
   
1,883
               
General Corporate Expense*
  
(1,736)
  
(2,225)
    
489
               
Consolidated
  
$ 2,515
 
$ 143
   
$ 2,372
               
 
* General corporate expense includes stock option compensation expense of $33 and $245 for the three months ended September 30, 2005 and 2004, respectively.
                               
Operating income (loss) as a percentage of revenues
  
Three Months Ended
  
Year Ended
  
   
September 30,
  
September 30,
  
   
2005
 
2004
 
 
Increase/
 
2005
 
 
2004
 
Increase/
 
 
 
 
 
 
 
 
(Decrease)
 
 
 
 
 
 
(Decrease)
  
ICO Europe
  
2%
  
0%
    
2%
  
3%
    
2%
  
1%
  
ICO Courtenay - Australasia
  
8%
  
8%
    
0%
  
6%
    
10%
  
(4%)
  
ICO Polymers North America
  
3%
  
(3%)
    
6%
  
2%
    
4%
  
(2%)
  
ICO Brazil
  
(8%)
  
2%
    
(10%)
  
(11%)
    
2%
  
(13%)
  
Total ICO Polymers
  
3%
  
2%
    
1%
  
3%
    
4%
  
(1%)
  
Bayshore Industrial
  
14%
  
9%
    
5%
  
12%
    
9%
  
3%
  
Consolidated
  
4%
  
0%
    
4%
  
3%
    
2%
  
1%
  
 
 
 
 
 

ICO, Inc.
Supplemental Segment Information (cont'd.)
(Unaudited and in thousands, except percentages)
                           
Revenues
                          
   
Three Months Ended
        
   
September 30,
    
June 30,
        
   
2005
 
% of Total
 
 
2005
 
% of Total
 
Change
 
%
ICO Europe
  
$ 27,759
 
39%
    
$ 33,754
 
44%
  
$ (5,995)
  
(18%)
ICO Courtenay - Australasia
  
13,106
 
19%
    
12,228
 
16%
  
878
 
7%
ICO Polymers North America
  
10,220
 
14%
    
10,691
 
14%
  
(471)
  
(4%)
ICO Brazil
  
2,266
 
3%
    
2,009
 
3%
  
257
 
13%
Total ICO Polymers
  
53,351
 
75%
    
58,682
 
77%
  
(5,331)
  
(9%)
Bayshore Industrial
  
17,928
 
25%
    
17,080
 
23%
  
848
 
5%
Consolidated
  
$ 71,279
 
100%
    
$ 75,762
 
100%
  
$ (4,483)
  
(6%)
                           
                           
Operating income (loss)
                          
   
Three Months Ended
            
   
September 30,
 
June 30,
 
 
 
 
 
 
 
 
 
 
 
2005
 
2005
 
 
Change
            
ICO Europe
  
$ 641
 
$ 646
   
$ (5)
            
ICO Courtenay - Australasia
  
1,033
 
555
   
478
           
ICO Polymers North America
  
257
 
310
   
(53)
            
ICO Brazil
  
(184)
  
(192)
    
8
           
Total ICO Polymers
  
1,747
 
1,319
   
428
           
Bayshore Industrial
  
2,504
 
1,869
   
635
           
Total Operations
  
4,251
 
3,188
   
1,063
           
General Corporate Expense*
  
(1,736)
  
(1,881)
    
145
           
Consolidated
  
$ 2,515
 
$ 1,307
   
$ 1,208
           
 
* General corporate expense includes stock option compensation expense of $33 and $243 for the three months ended September 30, 2005 and June 30, 2005, respectively.
  
                           
                           
                           
Operating income (loss) as a percentage of revenues
  
Three Months Ended
            
   
September 30,
 
June 30,
 
 
Increase/
 
 
 
 
 
 
 
 
2005
 
2005
 
 
(Decrease)
            
ICO Europe
  
2%
  
2%
    
0%
            
ICO Courtenay - Australasia
  
8%
  
5%
    
3%
            
ICO Polymers North America
  
3%
  
3%
    
0%
            
ICO Brazil
  
(8%)
  
(10%)
    
2%
            
Total ICO Polymers
  
3%
  
2%
    
1%
            
Bayshore Industrial
  
14%
  
11%
    
3%
            
Consolidated
  
4%
  
2%
    
2%