Goodman Global, Inc. (NYSE:GGL): 4th Quarter 2006 Year Net sales of
$392.4 million Net sales of $1,794.8 million Net income of $11.2
million Net income of $64.2 million Earnings per share of $0.16
Earnings per share of $0.88 EBITDA of $44.3 million Pro-forma
adjusted earnings per share of $1.10 Adjusted EBITDA of $225.5
million Goodman Global, Inc. (NYSE:GGL) today announced results for
the fourth quarter and year ended Dec. 31, 2006. For the fourth
quarter of 2006, the Company reported earnings per share of $0.16
and net sales of $392.4 million. For the year ended Dec. 31, 2006,
the Company reported adjusted pro-forma earnings per share of
$1.10, a 34 percent increase from the prior year�s comparable $0.82
per share. Before adjustments, 2005 earnings per share were $0.05.
Net sales for 2006 were $1.79 billion, a 15 percent increase over
2005 net sales of $1.57 billion. Fourth Quarter Results Net sales
of $392.4 million nearly matched last year�s fourth-quarter sales
of $396.7 million. Fourth quarter 2006 sales were impacted by mild
seasonal weather and a slowing residential new construction market.
This led to lower sales of cooling and heating products compared to
last year�s fourth quarter, in which strong demand resulted from an
extended cooling season, the initial build-up to the industry�s
January 2006 conversion to a higher energy-efficiency standard and
a robust residential new construction market. Overall 2006
fourth-quarter sales benefited from the continued mix shift to
higher-efficiency cooling products and the Company�s 2006 price
increases. For the fourth quarter of 2006, the Company generated
net income of $11.2 million, compared with $5.1 million for the
fourth quarter of 2005. Net income for the fourth quarter of 2005
was reduced by, net of tax, a $6.3 million impairment charge
related to a non-renewed sales contract, a $1.2 million reversal of
derivative gains recorded in a prior period, and $0.3 million for
monitoring fees related to the 2004 acquisition by Apollo. (See
section entitled �Acquisition by Apollo.�) Excluding the impact of
these unusual and non-recurring items, fourth-quarter 2005 adjusted
net income was $13.0 million. Diluted earnings per share were $0.16
for the fourth quarter of 2006, compared to a loss of $0.02 in
diluted earnings per share available to Common shareholders in the
prior year�s fourth quarter. Excluding the net impact of the 2005
unusual and non-recurring items, fourth-quarter 2005 adjusted
earnings per share were $0.15. In April 2006, Goodman completed the
initial public offering of its common stock. Following the IPO, a
portion of the proceeds was used to redeem all outstanding shares
of Series A Preferred Stock, including accrued dividends. Adjusting
earnings per share as though the IPO had been completed at the
beginning of 2005 and the preferred stock redeemed at that time,
fourth-quarter 2006 earnings per share were $0.16, $0.03 less than
fourth-quarter 2005 pro-forma adjusted earnings per share of $0.19.
(See section entitled �Non-GAAP Financial Measures� for use of
adjusted net income, adjusted earnings per share and pro-forma
adjusted earnings per share.) Goodman reported fourth-quarter 2006
EBITDA of $44.3 million, compared with fourth-quarter 2005 EBITDA
of $44.2 million. EBITDA for the fourth quarter of 2005 included
non-recurring expenses of $2.5 million related to the reversal of
derivative gains recorded in a prior period and monitoring fees.
Excluding these non-recurring items, fourth-quarter 2005 adjusted
EBITDA was $46.7 million. (See section entitled �Non-GAAP Financial
Measures� for definitions of EBITDA and adjusted EBITDA.) �We
delivered a strong finish to a very good year. We came close to
matching our own industry-leading fourth-quarter 2005 sales
performance, and, as a result, produced the best sales results in
the industry, again,� remarked Charles A. Carroll, president and
chief executive officer. �Our continued growth in market share was
complemented by contributions from a favorable mix shift in cooling
products and our 2006 price increases. These provided a substantial
offset to the impacts of the decline in residential new
construction and the mild early-winter weather,� he continued.
�During the quarter, we added several innovative new products to
our furnace line, built around features that offer consumers
improved comfort and more value, and continued our aggressive
dealer recruitment program. These further strengthen our position
with distributors, dealers and consumers,� he said. 2006 Results
Net sales for the year ended Dec. 31, 2006 were $1.79 billion, a 15
percent increase compared with $1.57 billion of net sales for the
prior year. Throughout 2006, the Company�s sales growth
consistently exceeded the industry in all major product categories:
split systems, furnaces, air handlers, coils, PTAC and flexible
ducting. Net income for the year 2006 was $64.2 million, compared
to $24.9 million for the prior year. For 2006, net income included,
net of tax, IPO-related expenses of $12.7 million and monitoring
fees of $0.4 million. Net income for 2005 included $31.9 million,
net of tax, in unusual and non-recurring expenses. These consisted
of a $24.3 million non-cash, inventory-related charge associated
with the December 2004 acquisition by Apollo; a $6.3 million charge
for a non-renewed sales contract; and $1.2 million in monitoring
fees. Excluding the effects of the non-recurring events and the
monitoring fees, adjusted net income for 2006 was $77.2 million, a
36 percent increase compared to adjusted net income of $56.8
million for 2005. The 2006 results also included benefits from a
lower applicable tax rate, which added $4.2 million to adjusted net
income and $0.06 to diluted earnings per share. This included a
$1.2 million benefit related to prior year�s taxes. Diluted
earnings per share available to Common shareholders were $0.88 for
the year ended Dec. 31, 2006, and $0.05 for the prior year.
Excluding IPO-related expenses, acquisition-related charges and
monitoring fees, adjusted earnings per share increased 52 percent
to $1.08, compared with adjusted earnings per share of $0.71 for
2005. Further adjusting earnings per share as though the IPO had
been completed at the beginning of 2005 and the preferred stock
redeemed at that time, 2006 pro-forma adjusted earnings per share
for 2006 increased 34 percent to $1.10 from pro-forma adjusted
earnings per share of $0.82 for the year 2005. For the year 2006,
Goodman reported EBITDA of $208.8 million, compared with EBITDA of
$152.6 million for the year 2005. EBITDA for 2006 included $16.1
million of IPO-related expenses and $0.6 million of monitoring
fees. EBITDA for 2005 included a $39.6 million non-recurring,
non-cash, inventory-related charge associated with the December
2004 acquisition by Apollo, and $2.0 million of monitoring fees.
Excluding these non-recurring unusual items, adjusted EBITDA for
2006 increased 16 percent, to $225.5 million, compared with an
adjusted EBITDA of $194.2 million for 2005. The Company�s provision
for income taxes for 2006 included a $1.2 million benefit related
to the prior year�s taxes. Excluding this benefit, the 2006
provision for taxes was at a 36.0% effective rate, compared to a
38.5% effective rate in 2005. The reduction in rate is the result
of tax planning implemented in 2006. In addition, Goodman continued
to benefit from reduced cash tax payments as a result of the 2004
acquisition by Apollo. The Company expects to continue to benefit
from the future deductibility of the majority of the step-up in tax
basis resulting from the Apollo transaction. Outlook �Overall, the
Company performed very well in 2006,� said Mr. Carroll. �We
delivered on our commitments, though we had to contend with sharp
increases in commodity costs, the factory and logistics transitions
associated with the new energy-efficiency standard, and a rapid
decline in residential new construction demand. With teamwork
across our organization, we were able to manage these challenges
and capitalize on opportunities in our markets and operations to
produce record sales, earnings and profitability for 2006.� �We
expect to improve on this in 2007,� he continued, �with another
year of sales growth and increased operating leverage. We expect
these to lead to full-year EBITDA of between $255 million and $265
million, and fully diluted earnings per share of between $1.30 and
$1.40. These represent a potential year-to-year increase in EBITDA
of between 13 percent and 18 percent and in earnings per share of
between 18 percent and 27 percent. We anticipate a slow start to
the year due to the challenging residential new construction market
and the initial mild winter weather. Thereafter, we expect
improving sales and earnings growth as we leverage our market
opportunities and cost management capabilities and benefit from the
anticipated moderation in commodity costs to deliver superior
earnings and cash flow from our business,� he concluded. Conference
Call Management will host its fourth-quarter 2006 earnings
conference call on Thursday, March 1, at 11:00 a.m. Eastern. The
call may be accessed by telephone or via the Internet. To access
the call by telephone, dial 800-510-0146 and use the pass code
78761165. International callers should dial 617-614-3449 and use
the same pass code. An Internet link to the call may be found on
the Company�s Web site, www.goodmanglobal.com, in the �Management
Presentations� section. A replay of the call will be available
starting approximately one hour after the conclusion of the call
and continuing until March 15, 2007. The replay may be accessed by
dialing 888-286-8010 and using the pass code 70309181.
International callers should dial 617-801-6888 and use the same
pass code. An Internet link to a replay of the call will also be
posted on the Company�s Web Site, www.goodmanglobal.com.
Informational exhibits related to the Company�s performance will be
available on the Goodman Web site in the �Management Presentations�
section and may be referred to during the conference call. Initial
Public Offering On April 11, 2006, the Company completed the
initial public offering of the Common Stock of Goodman Global, Inc.
The Company offered approximately 20.9 million shares, and selling
shareholders sold an additional 6.1 million shares, including the
exercise of the �greenshoe.� Goodman received proceeds of
approximately $354.5 million after underwriting discounts and
before expenses. The proceeds were used to redeem all of the
outstanding Series A Preferred Stock, including accrued dividends;
to pay Apollo for termination of the management agreement; and to
redeem a portion of the Company�s floating rate notes. As a result
of the IPO, average fully diluted shares outstanding for 2006 were
65.2 million. Non-GAAP Financial Measures In addition to reporting
financial results that are determined in accordance with GAAP,
Goodman also reports EBITDA, adjusted EBITDA, adjusted net income,
adjusted earnings per share and pro-forma adjusted earnings per
share, all of which are non-GAAP measures. Management believes that
the presentation of these non-GAAP financial measures enables
investors to better understand the Company�s underlying operational
and financial performance and facilitates comparison of results
between periods by eliminating the effects of unusual and
non-recurring events that are not part of Goodman�s core
operations. These measures should be considered in addition to, not
as a substitute for, GAAP measures. They should not be considered
as an alternative to operating income, net income or earnings per
share, determined in accordance with GAAP; as an indicator of
Goodman�s operating performance; as an alternative to cash flows
from operating activities, determined in accordance with GAAP; or
as a measure of liquidity. EBITDA, or earnings before interest,
taxes, and depreciation and amortization, is calculated as net
income plus interest, taxes, depreciation and amortization.
Adjusted EBITDA, adjusted net income and adjusted earnings per
share are calculated to exclude the income and expenses of one-time
and non-recurring events. These include, primarily, costs
associated with the December 2004 Apollo transaction and the April
2006 IPO. Pro-forma adjusted earnings per share is calculated as
though the IPO had been completed by the beginning of 2005 and a
portion of the proceeds used at that time to redeem all of the
outstanding Series A Preferred Stock, including accrued dividends.
EBITDA is commonly used in the financial community, and Goodman
presents EBITDA to enhance the understanding of its operating
performance. Goodman uses EBITDA as one criterion for evaluating
its performance relative to that of its peers. The Company�s credit
agreement and bond indentures have certain covenants that use
ratios utilizing a measure called adjusted EBITDA. In addition,
EBITDA may be used to determine incentive compensation for
employees. Goodman believes that EBITDA is an operating performance
measure, not a liquidity measure, and that EBITDA provides
investors and analysts with a measure of operating results
unaffected by differences in capital structures, capital investment
cycles and ages of related assets among otherwise comparable
companies. However, EBITDA is not a measurement of financial
performance under accounting principles generally accepted in the
United States, and Goodman�s EBITDA may not be comparable to
similarly titled measures of other companies. The supplementary
adjustments to EBITDA, net income and earnings per share to derive
adjusted EBITDA, adjusted net income, adjusted earnings per share
and pro-forma adjusted earnings per share may not be in accordance
with current SEC practices or the rules and regulations adopted by
the SEC that apply to periodic reports filed under the Securities
Exchange Act of 1934. Accordingly, the SEC may require that these
measures be presented differently in filings made with the SEC than
as presented in this release, or not be presented at all. The most
directly comparable GAAP measure to EBITDA and adjusted EBITDA is
net income. Included in this release are a reconciliation of net
income to EBITDA and adjusted EBITDA, of net income to adjusted net
income, and of earnings per share to adjusted earnings per share
and pro-forma adjusted earnings per share for the three- and
twelve-month periods ended Dec. 31, 2006 and 2005. Acquisition by
Apollo On Dec. 23, 2004, the Company was acquired under an Asset
Purchase Agreement by an affiliate of Apollo Management, L.P.,
Company senior management and certain trusts associated with
members of the Goodman family. About Goodman Houston-based Goodman
Global, Inc. is a leading manufacturer of heating, ventilation and
air conditioning products for residential and light-commercial use.
Goodman�s products are predominantly marketed under the Goodman�,
Amana� and Quietflex� brand names, and are sold through a
company-operated and independent distribution network with more
than 750 total distribution points throughout North America. For
more information about Goodman, visit www.goodmanglobal.com.
Forward-Looking and Cautionary Statements Certain statements in
this press release are �forward-looking statements� within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. The words �may,�
�will,� �should,� �expect,� �intend,� �estimate,� �anticipate,�
�believe,� �plan,� �predict,� or similar expressions identify
forward-looking statements. Although forward-looking statements
reflect the good faith beliefs of Goodman�s management, these
statements involve a number of known and unknown risks,
uncertainties and other factors that could cause actual results,
performance or achievements of Goodman to be materially different
from any future results, performance or achievements expressed or
implied by these forward-looking statements. The following
important factors could affect future results: changes in weather
patterns and seasonal fluctuations; changes to the 13 SEER
federally mandated minimum efficiency standard; the maturation of
Goodman�s new company-operated distribution centers; increased
competition and technological changes and advances; significant
increases in the cost of raw materials and components; Goodman�s
relations with its independent distributors; and damage or injury
caused by Goodman�s products. Goodman undertakes no obligation to
publicly update or revise any forward-looking statement, whether as
a result of new information, future events, changed circumstances
or otherwise. These forward-looking statements are subject to
numerous risks and uncertainties, including, but not limited to,
the impact of general economic conditions in the regions in which
Goodman does business; general industry conditions, including
competition and product, raw material and energy prices; the
realization of expected tax benefits; changes in exchange rates and
currency values; capital expenditure requirements; access to
capital markets; and the risks and uncertainties described under
�Risk factors� contained in Goodman�s Registration Statement on
Form S-1 filed with the Securities and Exchange Commission. Amana�
is a trademark of Maytag Corporation and is used under license to
Goodman Company, L.P. All rights reserved. GOODMAN GLOBAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) � Three Months
Ended Dec. 31, � 2006� � 2005� (in thousands, except per share) �
Sales, net $ 392,384� $ 396,693� Cost of goods sold 300,695�
304,119� Selling, general and administrative expenses 47,712�
48,675� Depreciation and amortization expense � 8,795� � 17,484� �
Operating income 35,182� 26,415� Interest expense, net 17,997�
18,185� Other income, net � (311) � (270) � Income before income
taxes 17,496� 8,500� Provision for income taxes � 6,299� � 3,421� �
Net income $ 11,197� $ 5,079� � Less: Preferred dividends � --� �
5,882� � Net income available to common shareholders $ 11,197� $
(803) � Earnings per share available to common shareholders,
diluted $ 0.16� $ (0.02) � Average outstanding common shares,
diluted � 70,526� � 47,972� � � Twelve Months Ended Dec. 31, �
2006� � 2005� (in thousands, except per share) � Sales, net $
1,794,753� $ 1,565,406� Cost of goods sold 1,380,772� 1,243,407�
Selling, general and administrative expenses 205,894� 170,078�
Depreciation and amortization expense � 32,641� � 37,717� �
Operating income 175,446� 114,204� Interest expense, net 77,825�
74,213� Other income, net � (734) � (706) � Income before income
taxes 98,355� 40,697� Provision for income taxes � 34,188� �
15,817� � Net income $ 64,167� $ 24,880� � Less: Preferred
dividends � 6,622� � 22,512� � Net income available to common
shareholders $ 57,545� $ 2,368� � Earnings per share available to
common shareholders, diluted $ 0.88� $ 0.05� � Average outstanding
common shares, diluted � 65,225� � 48,182� GOODMAN GLOBAL, INC.
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME(a) (Unaudited)
� Three Months Ended Dec. 31, � 2006� � 2005� (in thousands, except
per share) � Net income $ 11,197� $ 5,079� � Adjustments, net of
tax: Apollo management and monitoring fees --� 308� Charge for
non-renewed sales contract --� 6,335� Reversal of gain on
commodities derivatives � --� � 1,230� � Adjusted net income $
11,197� $ 12,952� � Less: Preferred dividends � --� � 5,882� �
Adjusted net income available to common shareholders $ 11,197� $
7,070� � Earnings per share available to common shareholders,
diluted $ 0.16� $ (0.02) Adjusted earnings per share, diluted $
0.16� $ 0.15� Pro-forma adjusted earnings per share, diluted $
0.16� $ 0.19� � Average outstanding common shares, diluted �
70,526� � 47,972� Pro-forma average outstanding common shares,
diluted � 70,526� � 68,890� � � Twelve Months Ended Dec. 31, �
2006� � 2005� (in thousands, except per share) � Net income (loss)
$ 64,167� $ 24,880� � Adjustments, net of tax: Apollo management
and monitoring fees 353� 1,232� IPO-related expenses 12,706� --�
Inventory valuation step-up --� 24,345� Charge for non-renewed
sales contract � --� � 6,335� � Adjusted net income $ 77,226� $
56,792� � Less: Preferred dividends � 6,622� � 22,512� � Adjusted
net income available to common shareholders $ 70,604� $ 34,280� �
Earnings per share available to common shareholders, diluted $
0.88� $ 0.05� Adjusted earnings per share, diluted $ 1.08� $ 0.71�
Pro-forma adjusted earnings per share, diluted $ 1.10� $ 0.82� �
Average outstanding common shares, diluted � 65,225� � 48,182�
Pro-forma average outstanding common shares, diluted � 70,454� �
69,100� � (a) Adjusted net income is a non-GAAP financial measure.
For more information regarding adjusted net income and non-GAAP
financial measures, generally, see �Non-GAAP Financial Measures.�
GOODMAN GLOBAL, INC. RECONCILIATION OF NET INCOME TO EBITDA(b) AND
ADJUSTED EBITDA(b) (Unaudited) � Three Months Ended Dec. 31, �
2006� � 2005� (in thousands) � Net income $ 11,197� $ 5,079� Add:
Provision for income taxes 6,299� 3,421� Interest expense, net
17,997� 18,185� Depreciation and amortization expense � 8,795� �
17,484� � EBITDA $ 44,288� $ 44,169� � Add: Monitoring fees --�
500� Reversal of gain on commodities derivatives � --� � 2,000� �
Adjusted EBITDA $ 44,288� $ 46,669� � � Twelve Months Ended Dec.
31, � 2006� � � 2005� (in thousands) � Net income $ 64,167� $
24,880� Add: Provision for income taxes 34,188� 15,817� Interest
expense, net 77,825� 74,213� Depreciation and amortization expense
� 32,641� � � 37,717� � EBITDA $ 208,821� � $ 152,627� � Add:
Monitoring fees 552� 2,003� IPO-related expense 16,099� --�
Inventory valuation step-up � --� � � 39,586� � � Adjusted EBITDA $
225,472� � $ 194,216� � (b) EBITDA and Adjusted EBITDA are non-GAAP
financial measures. For more information regarding EBITDA and
non-GAAP financial measures, generally, see �Non-GAAP Financial
Measures.� GOODMAN GLOBAL, INC. SELECTED BALANCE SHEET DATA
(Unaudited) � Period Ended Dec. 31, � 2006� � 2005� (in thousands)
� Cash and cash equivalents $ 14,169� $ 26,379� Accounts
receivable, net 200,086� 220,123� Inventories 346,059� 303,295�
Trade accounts payable 121,689� 156,870� Accrued liabilities
138,254� 163,409� Total debt 838,050� 961,375� GOODMAN GLOBAL, INC.
SELECTED CASH FLOW DATA (Unaudited) � Twelve Months Ended Dec. 31,
� 2006� � 2005� (in thousands) � Changes in operating working
capital, net of effects of acquisition: Accounts receivable $
20,038� $ (63,842) Inventories (42,764) (41,919) Accounts payable
and accrued expenses � (34,019) � 115,332� Changes in operating
working capital $ (56,745) $ 9,571� � Free cash flow: Net cash
provided by operating activities $ 53,724� $ 105,519� Purchases of
property, plant and equipment (39,383) (28,806) Proceeds from sale
of property, plant and equipment � 40� � 3,810� Free cash flow $
14,381� $ 80,523�
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