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Rockwood Press Release
Rockwood Reports Third Quarter Results:
- Net sales up 15.4%
- Adjusted EBITDA up 12.2%
- As reported EPS from continuing operations of $(0.06) vs. $0.25
- As adjusted EPS from continuing operations of $0.45 vs. $0.34
Princeton, NJ USA (October 28, 2008) – Rockwood Holdings, Inc. (NYSE: ROC), a global producer of specialty chemicals and advanced materials, today announced a 15.4% increase in net sales and a 12.2% increase in Adjusted EBITDA for the third quarter of 2008, as compared to the same period last year.
Diluted loss per share from continuing operations for the third quarter of 2008 was $(0.06), including after-tax net non-recurring and other special charges of $0.51 primarily related to foreign exchange losses on intercompany financing activities, as well as mark-to-market valuation losses on interest rate hedges. Excluding net non-recurring and other special charges, diluted earnings per share from continuing operations were $0.45 in the third quarter of 2008. Diluted earnings per share from continuing operations for the third quarter of 2007 were $0.25, including after-tax net non-recurring and other special charges of $0.09 primarily related to mark-to-market valuation losses on interest rate hedges. Excluding net non-recurring and other special charges, diluted earnings per share from continuing operations were $0.34 in the third quarter of 2007.
Commenting on the quarter, Seifi Ghasemi, Chairman and Chief Executive Officer, said, “Despite the difficult economic environment, Rockwood’s fundamental strategic strengths have enabled us to post three quarters of good results this year. A strong portfolio of market-leading global businesses, our inorganic raw material base and focus on innovation, productivity and cost controls have enabled us to continue to grow our sales and Adjusted EBITDA, while generating Adjusted EBITDA margins in line with our goals.”
The highlights from continuing operations for the third quarter and nine months ended September 30, 2008 are as follows:
- Net sales were $880.8 million for the third quarter of 2008, up 15.4% compared to $763.1 million for the same period in the prior year. Net sales were $2,647.8 million for the nine months ended September 30, 2008, up 16.1% compared to $2,281.1 million for the same period in the prior year.
- Adjusted EBITDA was $163.2 million for the third quarter of 2008, up 12.2% compared to $145.5 million for the same period in the prior year. Adjusted EBITDA was $507.5 million for the nine months ended September 30, 2008, up 13.0% compared to $449.3 million for the same period in the prior year.
- On a constant-currency basis, net sales and Adjusted EBITDA were up 10.4% and 5.9%, respectively, for the third quarter of 2008, and were up 8.2% and 4.1%, respectively, for the nine months ended September 30, 2008.
- Net loss from continuing operations for the third quarter of 2008 was $(4.8) million, including after-tax net non-recurring and other special charges of $39.5 million. Net income from continuing operations for the third quarter of 2007 was $19.2 million, including after-tax net non-recurring and other special charges of $7.1 million.
- Net income from continuing operations for the nine months ended September 30, 2008 was $99.5 million, including after-tax net non-recurring and other special charges of $30.1 million. Net income from continuing operations for the nine months ended September 30, 2007 was $66.8 million, including after-tax net non-recurring and other special charges of $20.6 million.
- As previously announced, we completed the Titanium Dioxide Pigments venture with Kemira Oyj (“Kemira”) in September 2008 and the sale of our Pool and Spa Chemicals business in October 2008. The results of the Pool and Spa Chemicals business have been accounted for as a discontinued operation in the consolidated financial statements for all periods presented.
Third quarter results by segment, as compared with the same period a year ago, are summarized below:
Specialty Chemicals
Higher selling prices and increased volumes helped drive a 22.2% increase in net sales and a 35.4% increase in Adjusted EBITDA.
- Our Fine Chemicals business benefited primarily from higher selling prices as well as increased volumes of lithium products.
- Our Surface Treatment business benefited from higher selling prices, increased volumes, particularly in general industrial applications, and the impact from bolt-on acquisitions.
- In both businesses, improved results were partially offset by higher raw material costs.
Performance Additives
Net sales increased 9.6% primarily due to the acquisition of the global color pigments business of Elementis plc in August 2007. Adjusted EBITDA declined 29.9% primarily as a result of lower volumes of construction-related products.
- Higher raw material costs also had a negative impact on Adjusted EBITDA. These higher raw material costs were partially offset by increased selling prices.
Titanium Dioxide Pigments
Net sales increased 23.6% and Adjusted EBITDA increased 9.6%. However, net sales and Adjusted EBITDA declined excluding the impact of the venture with Kemira and the favorable impact of currency changes.
- Market conditions, including pricing pressure and current industry overcapacity, have continued to negatively impact this segment.
- Lower volumes for titanium dioxide products, primarily commodity grade, as well as higher energy costs, had a significant effect on results.
Advanced Ceramics
Net sales and Adjusted EBITDA increased 13.2% and 24.1%, respectively.
- Results were favorably impacted by increased volumes of medical products.
- Productivity improvements also favorably impacted Adjusted EBITDA.
Specialty Compounds
Net sales decreased 1.7%, while Adjusted EBITDA increased 1.3%.
- Net sales were down slightly due to lower volumes in wire and cable applications.
- Adjusted EBITDA increased slightly due to lower operating costs, partially offset by higher raw material costs.
Other Items
Interest expense decreased $0.7 million in the third quarter of 2008 compared to the same period in the prior year. The third quarter of 2008 and 2007 included losses of $10.0 million and $13.4 million, respectively, representing the movement in the mark-to-market valuation of our interest rate hedges. The remaining interest expense increase of $2.7 million was primarily due to increased debt levels related to the Titanium Dioxide Pigments venture with Kemira.
Income tax provision. The income tax provision in the third quarter of 2008 was $10.3 million on income from continuing operations before taxes and minority interest of $4.5 million. The effective tax rate in the third quarter of 2007 was 42.3%. The income tax provision in the third quarter of 2008 was impacted by domestic losses, primarily due to foreign exchange losses and mark-to-market losses on interest rate hedges. This was partially offset by the allocation of tax benefits to continuing operations.
Foreign exchange loss of $26.5 million for the third quarter of 2008 was due to the impact of the weaker euro as of September 30, 2008 versus June 30, 2008 primarily related to euro-denominated intercompany financing transactions.
Free cash flow was an inflow of $92.1 million for the nine months ended September 30, 2008. This amount consists of net cash provided by operating activities from continuing operations of $239.5 million plus non-recurring items and other, net of $7.2 million and proceeds on the sale of property, plant and equipment of $2.5 million, less capital expenditures of $157.1 million.
Net debt, which is total debt less cash and cash equivalents, was $2,423.6 million as of September 30, 2008 compared to $2,231.3 million as of December 31, 2007. The increase in net debt was primarily due to increased debt levels related to the Titanium Dioxide Pigments venture with Kemira, partially offset by the impact of currency changes.
Conference Call and Webcast We will host a conference call and webcast to discuss the results of operations for the third quarter ended September 30, 2008, on Tuesday, October 28, 2008 at 3 p.m. Daylight Savings Time. The dial-in number to access the conference call in the U.S. is (877) 209-0397 and the international dial-in number is (612) 332-0630. No access code is needed for either call. A replay of the conference call will be available through November 12, 2008 at (800) 475-6701 in the U.S., access code: 960105, and internationally at (320) 365-3844, access code: 960105.
A listen only, live webcast of the conference call will be available at www.rocksp.com. Materials for the call, including a PowerPoint file detailing the results, will be available for download on the site on the morning of the call. The webcast and PowerPoint file will be archived on Rockwood’s website.
Non-GAAP Financial Measures
This press release includes “non-GAAP financial measures,” such as, a discussion of Adjusted EBITDA, free cash flow, net income (loss)/diluted earnings (loss) per share from continuing operations excluding certain items. Adjusted EBITDA is not intended to be an alternative to net income (loss) as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. All presentations of consolidated Adjusted EBITDA are calculated using the definition set forth in the senior secured credit agreement as a basis and reflects management’s interpretations thereof. Adjusted EBITDA, which is referred to under the senior secured credit agreement as “Consolidated EBITDA,” is defined in the senior secured credit agreement as consolidated earnings (which, as defined in the senior secured credit agreement, equals income (loss) before the deduction of income taxes of Rockwood Specialties Group, Inc. and the Restricted Subsidiaries (as such term is defined in the senior secured credit agreement), excluding extraordinary items) plus certain items including interest expense, depreciation expense, amortization expense, extraordinary losses and non-recurring charges, losses on asset sales, less certain items including extraordinary gains and non-recurring gains, non-cash gains and gains on asset sales. We use Adjusted EBITDA on a consolidated basis to assess our operating performance, to calculate performance-based cash bonuses and determine whether certain performance-based options vest (as both such bonuses and options are tied to Adjusted EBITDA), and as a liquidity measure. In addition, we use Adjusted EBITDA to determine compliance with our debt covenants. We also use Adjusted EBITDA on a segment basis as the primary measure used by our chief operating decision maker to evaluate the ongoing performance of our business segments and reporting units. A reconciliation of Adjusted EBITDA to net income (loss) is contained in the press release. We strongly urge you to review the reconciliation. In addition, we discuss sales growth in terms of nominal (actual) and net change (nominal less constant currency impacts). Free cash flow is not intended to be an alternative to cash flows from operating activities as a measure of liquidity. Our presentation of free cash flow is defined as net cash from operating activities, plus non-recurring items and other, net and proceeds on the sale of property, plant and equipment (excludes sales of property, plant and equipment related to sales of businesses) less capital expenditures. Management believes that free cash flow is meaningful to investors because it provides an additional measure of liquidity. Neither net income (loss) from continuing operations excluding certain items nor diluted earnings per share from continuing operations excluding certain items is intended to be an alternative for net income (loss) or diluted earnings (loss) per share. Management believes that net income (loss) and diluted earnings (loss) per share from continuing operations excluding certain items is meaningful to investors because it provides a view of the Company with respect to ongoing operating results. Reconciliations of these non-GAAP financial measures are included herein. These non-GAAP measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other companies.
Rockwood Holdings, Inc. is a leading global specialty chemicals and advanced materials company. Rockwood has a worldwide employee base of approximately 10,000 people and annual net sales of approximately $3.0 billion. Rockwood focuses on global niche segments of the specialty chemicals, pigments and additives and advanced materials markets. For more information on Rockwood, please visit www.rocksp.com.
The information set forth in this press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 concerning the business, operations and financial condition of Rockwood Holdings, Inc. and its subsidiaries and affiliates ("Rockwood"). Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "predicts" and variations of such words or expressions are intended to identify forward-looking statements. Although Rockwood believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, there can be no assurance that its expectations will be realized. "Forward-looking statements" consist of all non-historical information, including any statements referring to the prospects and future performance of Rockwood. Actual results could differ materially from those projected in Rockwood's forward-looking statements due to numerous known and unknown risks and uncertainties, including, among other things, the "Risk Factors" described in Rockwood's 2007 Form 10-K on file with the Securities and Exchange Commission. Rockwood does not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.
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