Noble International Announces Fourth Quarter and Full Year Financial Results

TROY, Mich., March 27 /PRNewswire-FirstCall/ -- Noble International, Ltd.
(Nasdaq: NOBL) ("Noble" or the "Company") reported financial results for the
fourth quarter and year ended December 31, 2007 and updated expectations for
2008. The highlights are as follows:
FINANCIAL RESULTS
The Company posted record quarterly net sales of $317.4 million in the
fourth quarter of 2007, an increase of 129.7% compared to net sales of $138.2
million reported in the fourth quarter of 2006. For the fourth quarter of
2007, the Company posted a net loss of $5.0 million, or $0.21 per diluted
share compared to a net loss of $2.2 million, or $0.16 per diluted share in
the fourth quarter of 2006. The net loss for the fourth quarter of 2007
included the negative impact of the following one-time items:
-- $2.3 million of integration and transition services costs related to
the Company's acquisition of the tailored blank operations of
ArcelorMittal (the "Arcelor Business")
-- $1.5 million non-cash equity loss related to the Company's equity
investment in SET Enterprises, Inc. ("SET"). This equity loss
eliminates the Company's investment in SET. An income tax benefit has
not been recognized for this equity loss.
-- $1.1 million charge related to the resolution of a commercial issue
with a North American OEM
-- $0.9 million income tax expense related to the Company's treatment of
its planned repatriation of earnings from a foreign subsidiary
-- $0.9 million charge for an adjustment to the Company's self-insured
workers' compensation liability at its roll-forming facilities
-- $0.6 million severance charge related to a headcount reduction in the
Company's North American operations

These items negatively impacted diluted earnings per share in the fourth
quarter of 2007 by approximately $0.26. In addition, volume issues and
volatile production schedules in North America and Europe negatively impacted
the efficiency and resulting gross margins of our production facilities.
For the year ended December 31, 2007, the Company reported net sales of
$872.1 million, up 97.6% from $441.4 million of net sales reported for the
year ended December 31, 2006. Net loss for the 2007 fiscal year was $6.9
million, or $0.40 per share. The Company reported net earnings of $7.8
million, or $0.55 per diluted share, for the 2006 fiscal year.
FOURTH QUARTER FINANCIAL COMMENTARY
Net sales increased $179.2 million to $317.4 million in the fourth quarter
of 2007 from $138.2 million in the fourth quarter of 2006. The Arcelor
Business accounted for $143.0 million of this net sales increase. Net sales,
excluding the Arcelor Business, increased by $36.2 million, or 26.2%, over the
fourth quarter of 2006 despite "Detroit Three" light vehicle production
decreasing 1.6% over the same period. Roll-forming programs launched
throughout 2007 provided $31.0 million of the net sales increase. The
remaining $5.2 million of the net sales increase was primarily due to
increased steel pass-through pricing for several laser welding programs.
Gross margin increased $10.0 million to $18.6 million in the fourth
quarter of 2007 from $8.6 million in the fourth quarter of 2006. The Arcelor
Business acquisition accounted for $9.3 million of this increase in gross
margin. An additional $2.7 million of incremental gross margin was realized
from the roll-forming programs launched in 2007 partially offset by a $1.1
million charge related to the resolution of a commercial issue and $0.9
million of severance and other costs. As a result of the foregoing, gross
margin as a percentage of sales decreased from 6.2% in the fourth quarter of
2006 to 5.9% in the fourth quarter of 2007.
Selling, general and administrative ("SG&A") expenses increased $9.4
million to $18.2 million in the fourth quarter of 2007 from $8.8 million in
the fourth quarter of 2006. SG&A costs in the Arcelor Business accounted for
$7.3 million of this increase. The remaining $2.1 million increase was driven
primarily by a $0.9 million charge related to the Company's self-insured
workers' compensation liability at its roll-forming facilities and $0.6
million for professional services costs related to the Arcelor Business. As a
percentage of sales, SG&A costs decreased from 6.3% in the fourth quarter of
2006 to 5.7% in the fourth quarter of 2007.
As a result of the aforementioned items, Noble reported operating profit
of $0.3 million in the fourth quarter of 2007 compared to a $0.2 million
operating loss in the fourth quarter of 2006.
Net interest expense increased $2.7 million to $6.1 million in the fourth
quarter of 2007 from $3.4 million in the fourth quarter of 2006. Additional
debt incurred pursuant to the Arcelor Business acquisition drove $2.3 million
of this increase. The remaining $0.4 million increase is due to additional
debt required to support operations, including the roll-forming program
launches. In the fourth quarter of 2007, the Company recognized other income
of $0.7 million primarily related to $0.6 million of dividends and management
fees received from the Company's investment in SET and $0.3 million commission
income received from the Company's joint venture investment in Shanghai, China
offset by foreign currency transaction losses of $0.3 million. In the fourth
quarter of 2006, the Company recorded a $1.0 million gain from the recovery of
previously impaired note receivable.
The Company recorded an income tax benefit of $2.1 million in the fourth
quarter of 2007 compared to an income tax benefit of $1.2 million in the
fourth quarter of 2006. In 2007, the Company recorded a $0.9 million expense
in the fourth quarter related to the treatment of its planned repatriation of
earnings from a foreign subsidiary which was offset by tax benefits
attributable to lower overall tax rates in foreign jurisdictions and tax
planning related to the recently acquired Arcelor Business.
The Company recognized a $1.6 million equity loss in the fourth quarter of
2007, of which $1.5 million relates to the impairment of the Company's
investment in SET. The remaining $0.1 million loss relates to the Company's
share of net losses of its joint venture investments in China and India.
As a result of the foregoing, the Company recognized a net loss of $5.0
million in the fourth quarter of 2007 compared to a net loss of $2.2 million
in the fourth quarter of 2006.
FULL YEAR FINANCIAL COMMENTARY
Net sales increased $430.7 million to $872.1 million in 2007 from $441.4
million in 2006. This increase in net sales was driven primarily by the
acquisition of Pullman Industries, Inc. ("Pullman") in the fourth quarter of
2006 and the Arcelor Business in the third quarter of 2007. Incremental 2007
net sales from the Pullman and Arcelor Business acquisitions were $218.3
million and $190.3 million, respectively. The remaining $22.1 million
increase in 2007 net sales was driven primarily by $25.0 million of increased
steel pass-through pricing for several laser welding programs. The $2.9
million decrease in non-steel net sales was driven by lower North American
light vehicle production (1.4% decline) and lower sales at our Shelbyville,
Kentucky facility driven by the discontinuation of the Saturn Ion vehicle by
General Motors and the transfer of production of the Saturn Vue vehicle by
General Motors to another supplier in Mexico. These decreases in net sales
were offset by new programs including the Ford Edge program in our Stow, Ohio
and Tonawanda, New York facilities, the full year volume impact of the GM
Holden Commodore program in our Australia facility and the launch of the Dodge
Grand Caravan program in our Stow, Ohio facility.
Gross margin increased $19.0 million to $57.4 million in 2007 from $38.4
million in 2006. The increase in gross margin was driven primarily by the
Pullman acquisition in the fourth quarter of 2006 and the Arcelor Business
acquisition in the third quarter of 2007. Incremental 2007 gross margin from
the Pullman acquisition was $10.2 million, which was negatively impacted by
approximately $12.6 million of direct launch costs and launch-related
inefficiencies. The Arcelor Business accounted for $11.5 million of the
increase in gross margin. The remaining $2.7 million decline in gross margin
was driven primarily by the $2.9 million decrease in non-steel net sales from
2006 to 2007. As a result of the foregoing, gross margin as a percentage of
sales declined to 6.6% in fiscal 2007 compared to 8.7% in fiscal 2006.
SG&A increased $22.2 million to $44.3 million in 2007 from $22.1 million
in 2006. This increase in SG&A was driven primarily by the Pullman
acquisition in the fourth quarter of 2006 and the Arcelor Business acquisition
in the third quarter of 2007. Incremental 2007 SG&A from the Pullman and
Arcelor Business acquisitions were $9.7 million and $9.2 million,
respectively. The remaining $3.3 million increase in SG&A was driven
primarily by additional headcount to support growth ($2.2 million),
incremental audit, tax and legal fees to support the larger organization ($0.8
million) and fees associated with the bank covenant waiver process for our
North American credit facility ($0.3 million). As a percentage of sales, SG&A
increased to 5.1% in fiscal 2007 from 5.0% in fiscal 2006.
Interest income decreased $0.8 million to $0.4 million in 2007 from $1.2
million in 2006. Interest income in 2006 was driven by cash invested in the
first three quarters of 2006. In the fourth quarter of 2006, this cash was
used to consummate the Pullman acquisition. Interest income in 2007 primarily
relates to cash invested at our non-U.S. facilities. Interest expense
increased $10.6 million to $16.3 million in 2007 from $5.7 million in 2006.
The higher interest expense was primarily driven by incremental interest costs
related to additional debt incurred pursuant to the Pullman acquisition ($9.2
million) and the Arcelor Business acquisition ($3.0 million) offset by lower
amortization of fees and a debt discount in 2007 on the convertible
subordinated notes ($1.6 million).
The Company recognized a $3.0 million net loss on derivative instruments
in 2007 pursuant to two derivative transactions which were contingent upon the
Arcelor Business acquisition. Management determined that while the contingent
derivative instruments provided significant economic hedges, they did not
qualify for hedge accounting treatment. Accordingly, the Company recorded a
net loss on these derivative instruments of $3.0 million for the year ended
December 31, 2007. The Company recognized a $0.6 million net loss on
derivative instruments in 2006 based upon the change in the fair value of an
embedded derivative in its Convertible Subordinated Notes. This embedded
derivative was removed pursuant to an amendment in January 2007. The Company
recognized a non-cash loss on extinguishment of debt of $3.3 million in 2007
related to this amendment. In 2006, the Company recorded a $1.0 million gain
from the recovery of previously impaired note receivable.
Other, net increased $1.5 million to $2.0 million in 2007 from $0.5
million in 2006. Other, net in 2007 primarily included dividend income and
management fees from SET ($2.8 million), commission income from our China
joint venture in Shanghai ($0.3 million) offset by foreign currency losses
($1.1 million). Other, net in 2006 was comprised primarily of a $0.5 million
gain from the reversal of a contingent liability favorably resolved at our
Mexican operations.
The Company recorded an income tax benefit of $3.4 million in fiscal 2007
compared to an income tax expense of $3.9 million in the fourth quarter of
2006. The effective income tax rate was a benefit of 47.4% in 2007 compared
to an expense of 30.2% in 2006. The change in the 2007 tax rate compared to
2006 is primarily the result of recognizing the deferred income tax benefit of
current year losses in the United States and the tax rate impact of an
increase in foreign income which carries a lower overall effective tax rate
than United States income. In 2007, the change in the effective tax rate also
reflects the impact of federal tax credits on a smaller base of income (loss)
before income taxes versus the prior year.
The Company recognized a $2.1 million equity loss in 2007. The Company's
share of net losses at SET amounted to $2.0 million, of which $1.5 million
related to SET recording a goodwill impairment charge in the fourth quarter.
The remaining $0.1 million loss relates to the Company's share of net losses
of its joint venture investments in China and India.
As a result of the foregoing, the Company recognized a net loss of $6.9
million in 2007 compared to net income of $7.8 million in 2006.
MANAGEMENT COMMENTS
Noble's Chief Executive Officer, Thomas L. Saeli, commented, "Management
continued to execute the Company's long term strategy to compete successfully
in the global marketplace and position Noble successfully in high growth
markets, like China, South Asia and Eastern Europe. We are completely focused
on integrating our recent acquisitions and operating our business.
Integration issues coupled with lower volumes and choppy production schedules
challenged the Company's results in the fourth quarter. Although I recognize
the Company did not meet its financial targets in 2007, Noble has transformed
from a regional laser-welder to a global supplier with the critical mass to
provide our customers with structural solutions wherever in the world they may
need them. In 2008, our main objective is to continue to integrate our global
laser welding and roll-forming operations into One Noble and execute on the
operational aspects of our long term strategy."
"We are excited about ArcelorMittal's recent increased investment in Noble
and believe this should be viewed as a positive development for the Company
and its shareholders. Noble and ArcelorMittal's interests are now even more
aligned. Management believes ArcelorMittal's position as the #1 steel company
in the world will provide Noble with the best possible partner as we operate
globally. Management is embracing this deeper commitment by ArcelorMittal and
remains confident this partnership will afford the Company tremendous
opportunities to develop and grow in the future."
REVISED EXPECTATIONS FOR 2008
In 2007, total North American light vehicle production was 15.0 million
units representing the lowest level of production since 1996. The sub-prime
credit market fallout and a soft housing market have eroded consumer
confidence. In addition, the recent UAW labor agreements allow OEMs to manage
inventories through production restraint rather than consumer incentives. As
such, third-party forecasting services now estimate 2008 North American light
vehicle production at 14.3 million units. The 2008 guidance we issued last
November was based on a North American volume assumption of 15.3 million
units.
This drastic change in forecasted North American light vehicle production,
higher than anticipated integration and carve-out costs related to the Arcelor
Business acquisition, increased pricing pressure in Europe and the loss of a
key program at one of the Arcelor Business facilities have required the
Company to revise its 2008 expectations as follows:
Net sales $1,150 to $1,200 million
Gross margin percentage 8.3%
SG&A percentage 5.7%
Diluted earnings per share $0.45 to $0.55
Adjusted EBITDA $91.0 to $94.0 million
Capital expenditures $35.0 million
Free Cash Flow per share $1.50 to $1.60

The guidance for Free Cash Flow per share does not include any positive
benefits from potential reductions in working capital. Management believes
there are significant opportunities, primarily in its European operations, to
reduce working capital and generate additional positive Free Cash Flow in
2008.
The above guidance does not reflect certain one-time charges that will be
recorded in the first and second quarters of 2008 related to the Company's
recent financing transactions and the pending departure of Mr. Robert
Skandalaris as Chairman. Costs include, among other things, the cancellation
of an interest rate swap in North America, the acceleration of the
amortization of credit facility fees and severance costs. Management
anticipates these one-time charges will negatively impact earnings by
approximately $0.12 per share in the first and second quarters of 2008.
CONFERENCE CALL INFORMATION
Noble will host a conference call to discuss its operating results for the
fourth quarter and year ended December 31, 2007 at 10 AM ET, Friday, March 28,
2008. The dial-in numbers for the call are (800) 690-3108 or (973) 935-8753
and the conference ID number is 39748057. A replay of the conference call
will be available through April 4, 2008 by dialing (800) 642-1687 or (706)
645-9291. The passcode for the replay is 39748057.
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 cash from operations less capital expenditures.
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.
Certain statements made by Noble International, Ltd. in this presentation
and other periodic oral and written statements, including filings with the
Securities and Exchange Commission, are "forward-looking" statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements, as well as statements which address 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, are forward-looking statements.
The forward-looking statements are made on the basis of management's
assumptions and estimations. As a result, there can be no guarantee or
assurance that these assumptions and expectations will in fact occur. 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. Noble
does not intend or undertake any obligation to update any forward-looking
statements. For more information see www.nobleintl.com.

NOBLE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share and per share data)

Three Months Ended Twelve Months Ended
December 31 December 31
2007 2006 2007 2006

Net sales $317,422 $138,211 $872,096 $441,372
Cost of sales 298,858 129,641 814,687 402,941
Gross margin 18,564 8,570 57,409 38,431
Selling, general and
administrative expenses 18,232 8,764 44,326 22,090
Operating (loss) profit 332 (194) 13,083 16,341
Interest income 119 173 368 1,186
Interest expense (6,237) (3,525) (16,339) (5,684)
Net loss on derivative
instruments - (600) (3,047) (600)
Loss on extinguishment of
debt - - (3,285) -
Impairment recovery - 1,000 - 1,000
Other, net 718 213 2,024 532
(Loss) income before
income taxes, minority
interest
and equity loss (5,068) (2,933) (7,196) 12,775
Income tax (benefit)
expense (2,065) (1,189) (3,412) 3,857
(Loss) income before
minority interest and
equity loss (3,003) (1,744) (3,784) 8,918
Minority interest, net of
tax (344) (422) (1,001) (1,089)
Equity loss, net of tax (1,626) (50) (2,075) (50)
Net (loss) income $(4,973) $(2,216) $(6,860) $7,779

Basic (loss) earnings per
common share $(0.21) $(0.16) $(0.40) $0.55

Diluted (loss) earnings
per common share $(0.21) $(0.16) $(0.40) $0.55

Dividends declared and
paid per share $0.08 $0.08 $0.32 $0.31

Basic weighted average
common shares outstanding 23,599,311 14,089,751 17,282,974 14,071,304
Diluted weighted average
common shares outstanding 23,599,311 14,089,751 17,282,974 14,109,033

Reconciliation of Adjusted
EBITDA to (loss) income
before income taxes,
minority interest and
equity loss
(Loss) income before
income taxes, minority
interest and equity
loss $(5,068) $(2,933) $(7,196) $12,775
Depreciation 11,373 4,391 27,312 11,782
Amortization 1,431 469 3,346 660
Net interest expense 6,119 3,352 15,971 4,498
Stock compensation (198) 289 463 600
Net loss on derivative
instruments - 600 3,047 600
Loss on extinguishment
of debt - - 3,285 -
Impairment recovery - (1,000) - (1,000)
Adjusted EBITDA $13,657 $5,168 $46,228 $29,915

SOURCE Noble International, Ltd.

Scott A. Kehoe, Treasurer of Noble International, Ltd., +1-248-519-0700