WACO, Texas, Aug. 2, 2004 (BUSINESS WIRE) -- National Waterworks Inc., a U.S. distributor of water and wastewater transmission products, reported that net sales for the three months ended June 25, 2004, increased $87.3 million, or 26.4%, to $417.7 million from $330.4 million for the same period a year ago. The increase reflects the pass-through of price increases in principally all major product lines as well as a strong demand particularly evident in pipe products.
"The need for infrastructure improvement and the sustained strength of the construction market continues to drive our business despite the broad-based product cost increases we have incurred this year. The result is evident in our record net sales and operating profit reported for the second quarter. While the momentum is expected to slow in the second half of the year, we continue to see strong bid activity and maintain a positive outlook for the balance of 2004," said president and CEO Harry K. Hornish Jr.
Net income for quarter was $16.2 million compared to net income of $10.3 million for the year-ago period. The increase is primarily a result of the increase in net sales discussed above and the related $13.5 million increase in gross profit. Net interest expense decreased $1.6 million primarily due to lower applicable margins related to the August 2003 refinancing of a term loan under our senior credit facility. These increases to net income are offset by an increase in selling, general, and administrative expenses of $5.3 million related to the variable expenses associated with the net sales increase, and an increase in income tax expense of $4.0 million resulting from higher pretax earnings.
Our EBITDA (earnings before net interest, taxes, depreciation and amortization) for the 2004 quarter were $36.0 million, compared to $27.8 million for the three months ended June 27, 2003. A reconciliation of EBITDA to net income determined in accordance with GAAP is set forth in a table at the end of this press release.
Net sales for the six months ended June 25, 2004 increased $96.5 million, or 16.1%, to $697.2 million from $600.7 million for the six months ended June 27, 2003. The increase primarily reflects the pass through of price increases in principally all major product lines.
Net income for the six-month period was $21.9 million compared to net income of $13.0 million a year earlier. The increase is primarily a result of the increase in net sales discussed above and the related $16.5 million increase in gross profit. In addition, net interest expense decreased $2.7 million primarily due to lower applicable margins related to the August 2003 refinancing of the term loan under our senior credit facility.
These increases to net income are offset by an increase in selling, general, and administrative expenses of $4.7 million related to the variable expenses associated with the net sales increase, and an increase in income tax expense of $6.1 million resulting from higher pretax earnings. The 2003 period included the final $4.0 million impact (recognized as increased cost of goods sold) of the inventory revaluation adjustment related to the November 2002 acquisition of U.S. Filter Distribution Group, Inc., offset by the $1.4 million reduction in cost of goods from the adoption of EITF-02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor.
Our EBITDA for the 2004 six-month period was $54.5 million, compared to $42.5 million a year earlier; and our adjusted EBITDA was $54.5 million compared to $46.5 million a year earlier. Adjusted EBITDA for the six months ended June 27, 2003 does not give effect to the $4.0 million increase in cost of goods sold resulting from the purchase accounting inventory revaluation adjustment discussed above. A reconciliation of EBITDA and Adjusted EBITDA to net income determined in accordance with GAAP is set forth in a table at the end of this press release.
Cash and cash equivalents were $17.8 million at June 25, 2004. Since the company utilizes a last Friday of the month cut-off for all periods except December 31 year-end, the second quarter did not reflect the $3.75 million quarterly principal payment made on June 30, 2004 pursuant to the terms of our credit agreement. Total debt at June 25, 2004 was $436.3 million, as the revolving credit facility remained undrawn at June 25, 2004.
About National Waterworks, Inc.
National Waterworks Inc. distributes a full line of products including pipe, fittings, valves, meters, service and repair products, fire hydrants and other components that are used to transport clean water and wastewater between reservoirs and treatment plants and residential and commercial locations. Through a network of 133 branches in 36 states, it sells directly to municipalities and to contractors who serve municipalities and also perform residential, commercial and industrial waterworks projects.
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