Business News
ICO, Inc. Announces Financial Results for First Quarter Ended December 31, 2008
Thursday 05. February 2009 - ICO, Inc. (NASDAQ:ICOC), global producer of custom polymer powders and plastic film concentrates, today announced its results for the quarter ended December 31, 2008.
First Quarter Highlights
— Revenues of $79.4 million, a decrease of $31.5 million or 28% from the
prior year
— Volumes declined 21% compared to the prior year due to global economic
downturn and unfavorable resin price environment
— Operating loss of $0.4 million, compared with operating income of $6.5
million in the prior year
— Net loss per share of $.04
— Total debt outstanding decreased $7.1 million, or 14%, sequentially
— Cash flow from operating activities by continuing operations of $13.5
million, up from cash outflow of $11.4 million in the prior year
— Cash on hand of $11.0 million, up $5.4 million or 96% from September
30, 2008
First Quarter 2009 vs. First Quarter 2008
Revenues for the three months ended December 31, 2008 were $79.4 million, a decrease of $31.5 million or 28% compared to the same quarter of the previous year. The global economic downturn and the unfavorable resin price environment during the quarter were the primary causes of lower demand in all of our segments, which in turn caused a significant decrease in revenues. The unfavorable resin price environment was characterized by resin prices reaching historically high levels in the fourth quarter of fiscal year 2008, followed by a rapid and dramatic decline during the first quarter of fiscal year 2009. Downward resin price trends typically lead our customers to de-stock their inventory, which has the effect of reducing their demand for our products and services. Our total volumes sold decreased 21% during the first fiscal quarter, negatively impacting revenues by $18.3 million. The translation effect of the stronger U.S. Dollar was responsible for $9.2 million of the revenue decline, and the changes in prices and product mix negatively impacted revenues by an additional $4.0 million.
As a result of the lower volumes sold and the unfavorable resin price environment, gross margins declined from 17.2% to 12.7% compared to the same quarter of the previous year, and gross profit declined from $19.1 million to $10.1 million over the same period.
During the first quarter of fiscal year 2009, selling, general and administrative expenses (“SG&A”) declined $1.5 million or 14% to $9.1 million as a result of the translation effect of the stronger U.S. Dollar, lower external professional fees and lower compensation costs. During the first quarter of fiscal year 2009, we recognized $0.6 million of bad debt expense. We also recognized a net benefit in impairment, restructuring and other costs (income) of $0.3 million primarily as a result of an insurance reimbursement related to financial losses resulting from the loss of power in September 2008 from Hurricane Ike at our Bayshore Industrial facility.
Year-over-year operating income declined from income of $6.5 million to a loss of $0.4 million as a result of the lower volumes sold and the effect of the unfavorable resin price environment. Interest expense declined $0.4 million due to lower average borrowings. We also recognized a foreign currency loss of $0.3 million due to significant fluctuations in currencies during the quarter. Net loss for the quarter was $1.1 million, down from net income of $3.5 million in the prior year period. Net loss per share was $.04, compared with net income per share of $.13 in the prior year period.
First Quarter 2009 vs. Fourth Quarter 2008
Comparing the sequential quarterly results, revenues decreased $28.6 million or 27%. A 12% reduction in volumes sold negatively impacted revenues by $14.4 million. The translation effect of the stronger U.S. Dollar contributed to $10.4 million of the reduction in revenues. Lower average selling prices as a result of lower resin prices had a $3.8 million negative impact on revenues. The sequential volume reduction was caused by a reduction in customer demand resulting from the global economic slowdown, the effect of the unfavorable resin price environment, as well as seasonal factors, as we usually experience reduced demand during our first fiscal quarter due to the holiday period in December.
The decline in volumes and the unfavorable resin price environment led to a sequential reduction in gross profit of $6.2 million, or 38%. SG&A declined $0.7 million primarily due to the translation effect of the stronger U.S. Dollar. Income from continuing operations declined $3.3 million.
“During the first quarter of fiscal year 2009, we altered our focus from offense to defense, protecting both our cash flow and the value of our Company,” stated A. John Knapp, Jr., President and CEO. “The decline in resin prices during the quarter and the global economic slowdown impacted our results for the first quarter. However, we lowered our inventory position in the quarter, and with resin prices appearing to have stabilized, we believe we are positioned to meet the challenges ahead. During the first quarter we generated cash flow from operating activities by continuing operations of $13.5 million less capital expenditures of $1.4 million, which allowed us to decrease our net debt (total debt less cash) by $12.5 million from September 30, 2008.”
Balance Sheet and Liquidity
Total debt outstanding as of December 31, 2008 was $42.8 million, a decline of $7.1 million from September 30, 2008. Our cash balance at quarter-end was $11.0 million, a sequential increase of $5.4 million, or 96%. These improvements were accomplished in part by positive cash flow from operating activities by continuing operations of $13.5 million during the quarter, less net capital expenditures of $1.4 million. Approximately $0.6 million of the capital expenditures related to our facility relocation from New Jersey to Pennsylvania, which is now substantially complete. Our available global borrowing capacity at December 31, 2008 was $55.3 million.