Sovereign Specialty Chemicals Reports Operating Results for the Third Quarter of 2004

Business Wire, Nov 11, 2004

CHICAGO -- Sovereign Specialty Chemicals, Inc. announced today its operating results for the three months ended Sept 30, 2004. Net sales were $106.6 million compared to $98.7 million for the three months ended September 30, 2003. Operating income was $12.1 million in the third quarter of 2004 compared to $10.1 million in the prior year. EBITDA (defined as operating income plus depreciation and amortization) on an as-reported basis was $14.3 million in the current quarter compared to $12.3 million in the three months ended September 30, 2003. The operating results for the three months ended September 30, 2004 and 2003 include the impact of costs not expected to occur in the future as detailed in the reconciliation contained in this release. As adjusted for these costs, operating income was $12.1 million for the third quarter of 2004 compared to $10.2 million for 2003, while EBITDA was $14.4 million for the third quarter of 2004 compared to $12.4 million in 2003. Similarly, for the nine months ended September 30, 2004, operating income was $34.5 million compared to $27.0 million for 2003, and EBITDA for the nine months ended September 30, 2004 was $41.4 million compared to $33.6 million for 2003.

In commenting on the results, Norman E. Wells, Jr., Sovereign's CEO stated: "Sovereign had a solid quarter. Our performance was highlighted by revenue and EBITDA growth in both segments when compared to last year's third quarter."

The company will host a conference call on November 12, 2004 at 9:00 am. (Chicago time) to discuss these results. Details for the conference call are as follows:

Dial-in: (913) 981-5559, code 557738

Replay: (719) 457-0820, code 557738

The replay will be available until November 19, 2004.

Income Statement Summary
------------------------
(Dollars in Millions)

                    Three months ended        Nine months ended
                      September 30              September 30
                      (un-audited)              (un-audited)
                ------------------------------------------------------
                  2004         2003          2004          2003
                 ------       ------        ------        ------
Net sales       $106.6 100.0% $98.7 100.0% $308.8 100.0% $281.1 100.0%
Cost of goods
 sold             75.5  70.9%  70.4  71.3%  218.5  70.7%  202.6  72.1%
                ------ ------ ----- ------ ------ ------ ------ ------
Gross profit      31.1  29.1%  28.3  28.7%   90.3  29.3%   78.5  27.9%
Selling, general
 and
 administrative
 expenses         19.0  17.8%  18.2  18.4%   56.1  18.2%   52.5  18.7%
                ------ ------ ----- ------ ------ ------ ------ ------
Operating income  12.1  11.3%  10.1  10.2%   34.2  11.1%   26.0   9.2%
Interest expense,
 net              (6.0)  5.6%  (6.3)  6.4%  (18.4)  6.0%  (19.1)  6.8%
                ------ ------ ----- ------ ------ ------ ------ ------
Income before
 income taxes      6.1   5.7%   3.8   3.8%   15.8   5.1%    6.8   2.4%
Income tax
 expense           0.3   0.3%   1.5   1.5%    1.8   0.6%    3.1   1.1%
                ------- ----- ------ ----- ------- ----- ------- -----
Net Income        $5.8   5.4%  $2.3   2.3%  $14.0   4.5%   $3.7   1.3%
                =======       ======       =======       =======



Selected Balance Sheet and Cash Flow Information
------------------------------------------------
(Dollars in Millions)
                             Sept. 30,       Dec. 31,     Sept. 30,
                                2004           2003          2003
                                                         (un-audited)
                             -----------------------------------------
Cash and cash equivalents       $11.5           $8.5          $6.7
Receivables                      64.1           51.2          60.9
Inventories                      31.7           26.6          31.2
Payables                         39.5           31.3          37.9
Total debt                     $208.1         $210.8        $224.6




                       Three months ended     Nine months ended
                          September 30          September 30
                          (unaudited)            (unaudited)
                   ---------------------------------------------------
                         2004       2003       2004        2003
                   ---------------------------------------------------
Depreciation
 and amortization        $2.2       $2.2       $6.9        $6.6
Capital expenditures      1.8        2.2        3.9         6.8






Reconciliation from Net Income to EBITDA, Adjusted EBITDA
---------------------------------------------------------
(Dollars in Millions)          Three months ended    Nine months ended
                                   September 30         September 30
                                   (unaudited)          (unaudited)
                              ----------------------------------------
                                   2004      2003      2004      2003
                              ----------------------------------------
Net income                         $5.8      $2.3     $14.0      $3.7
Income tax expense                  0.3       1.5       1.8       3.1
Interest expense                    6.1       6.3      18.4      19.1
                              ----------------------------------------
Operating income                  $12.1     $10.1      34.2      26.0
Depreciation and Amortization       2.2       2.2       7.0       6.6
                              ----------------------------------------
EBITDA                            $14.3     $12.3     $41.2      32.6
Costs not expected to occur in
 the future:
     Plant closure,
     reorganization and other       0.1       0.1       0.2       1.0
                              ----------------------------------------
Adjusted EBITDA                   $14.4     $12.4     $41.4      33.6
Adjusted EBITDA as a
 percentage of net sales           13.5%     12.6%     13.4%     12.0%