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Rockwood Press Release
Rockwood Reports Strong Third Quarter Results:
- Net sales up 9.5%.
- Adjusted EBITDA up 11.9%.
- As reported EPS from continuing operations of of $0.52 vs. $0.14.
- As adjusted EPS from continuing operations of $0.55 vs. $0.19.
- Free cash flow of $129.7 million.
Princeton, NJ USA (Octiber 26, 2010) – Rockwood Holdings, Inc. (NYSE: ROC), a global producer of specialty chemicals and advanced materials, today reported earnings per share from continuing operations of $0.52 for the third quarter of 2010 as compared to $0.14 for the same period in the prior year. Rockwood’s as adjusted earnings per share from continuing operations increased to $0.55 in the third quarter of 2010 from $0.19 for the same period in the prior year. In addition, Rockwood reported Adjusted EBITDA of $169.1 million for the third quarter of 2010 as compared to $151.1 million for the same period in the prior year.
“Our third quarter results reflect continued strong global demand for Rockwood’s specialty chemicals and advanced materials and strong volume growth in all markets, except those related to construction in the United States,” Seifi Ghasemi, Chairman & CEO, said. “On a constant currency basis, Rockwood’s sales increased 16.1 percent compared to last year’s third quarter and Adjusted EBITDA increased 19.2 percent compared to the same period last year. Most importantly, our Adjusted EBITDA margins were 19.6 percent, reflecting our ongoing focus on cost control and disciplined approach to pricing. Strong free cash flow during the quarter generated $129.7 million of cash after paying interest on our debt, capital expenditures and taxes. In the first nine months of 2010, we have generated $252.0 million of free cash enabling us to significantly improve our balance sheet.”
The highlights from continuing operations for the third quarter and nine months ended September 30, 2010 are as follows:
- Net sales were $860.9 million for the third quarter of 2010, up 9.5% compared to $786.2 million for the same period in the prior year. Net sales were $2,569.3 million for the nine months ended September 30, 2010, up 18.0% compared to $2,176.6 million for the same period in the prior year.
- Adjusted EBITDA was $169.1 million for the third quarter of 2010, up 11.9% compared to $151.1 million for the same period in the prior year. Adjusted EBITDA was $506.3 million for the nine months ended September 30, 2010, up 31.3% compared to $385.6 million for the same period in the prior year.
- On a constant-currency basis, net sales and Adjusted EBITDA were up 16.1% and 19.2%, respectively, for the third quarter of 2010, and were up 19.9% and 33.9%, respectively, for the nine months ended September 30, 2010.
- Net income attributable to Rockwood Holdings, Inc. for the third quarter of 2010 was $40.5 million, including after-tax net special charges of $2.1 million. Net income attributable to Rockwood Holdings, Inc. for the third quarter of 2009 was $10.2 million, including after-tax net special charges of $3.8 million.
Net income attributable to Rockwood Holdings, Inc. for the nine months ended September 30, 2010 was $129.8 million, including income of $5.7 million related to after-tax net special items. Net income attributable to Rockwood Holdings, Inc. for the nine months ended September 30, 2009 was $7.0 million, including after-tax net special charges of $14.6 million.
- Diluted earnings per share for the third quarter of 2010 were $0.52, including after-tax net special charges of $0.03. Excluding net special charges, diluted earnings per share were $0.55 in the third quarter of 2010. Diluted earnings per share for the third quarter of 2009 were $0.14, including after-tax net special charges of $0.05. Excluding net special charges, diluted earnings per share were $0.19 in the third quarter of 2009.
Diluted earnings per share for the nine months ended September 30, 2010 were $1.67, including income of $0.07 related to after-tax net special items. Excluding net special items, diluted earnings per share were $1.60 for the nine months ended September 30, 2010. Diluted earnings per share for the nine months ended September 30, 2009 were $0.09, including after-tax net special charges of $0.20. Excluding net special charges, diluted earnings per share were $0.29 for the nine months ended September 30, 2009.
Commenting on the outlook, Mr. Ghasemi said, “We continue to be positive about the demand for our specialty chemicals and advanced materials. Therefore, we are optimistic about our results for the remainder of 2010. We currently expect continued positive demand growth into 2011.”
Third quarter results, as compared with the same period a year ago, are summarized below:
Specialty Chemicals
Net sales and Adjusted EBITDA increased 8.5% and 4.0%, respectively.
- In our Fine Chemicals business, significantly higher volumes of lithium products were partially offset by lower selling prices of potash and lithium carbonate and higher raw material costs.
- In our Surface Treatment business, higher volumes in all markets, particularly in automotive and general industrial applications, and lower raw material costs had a favorable impact on our results.
Performance Additives
Net sales and Adjusted EBITDA increased 3.1% and 20.5%, respectively.
- Net sales and Adjusted EBITDA were up primarily from higher volumes of oilfield and other applications in our Clay-based Additives business and a favorable product mix and increased selling prices in our Color Pigments and Services business. This was partially offset by higher raw material costs and lower construction volumes in the United States.
Titanium Dioxide Pigments
Net sales and Adjusted EBITDA increased 8.6% and 39.0%, respectively.
- Net sales and Adjusted EBITDA were up primarily from higher selling prices, as well as increased volumes in all applications and a favorable product mix. This was partially offset by higher raw material and production costs.
Advanced Ceramics
Net sales and Adjusted EBITDA increased 20.6% and 28.3%, respectively.
- Net sales and Adjusted EBITDA were up from higher volumes in all product applications, primarily medical, automotive and electronic applications, partially offset by higher maintenance costs and lower selling prices.
Specialty Compounds
Net sales and Adjusted EBITDA increased 16.6% and 6.8%, respectively.
- Net sales and Adjusted EBITDA were up from higher selling prices, as well as increased volumes in most applications, primarily in wire and cable.
- Adjusted EBITDA was negatively impacted by higher raw material costs.
Corporate and Other
Corporate costs increased in the third quarter of 2010 primarily due to variable compensation-related costs.
Other Items
- Interest expense, net decreased $15.0 million in the third quarter of 2010 compared to the same period in the prior year. The third quarter of 2010 and 2009 included non-cash gains and losses of $1.2 million and $(1.3) million, respectively, representing the movement in the mark-to-market valuation of our interest rate hedges. Excluding the impact of these gains and losses, interest expense, net decreased $12.5 million primarily due to the termination of interest rate swaps in November 2009 and debt repayments.
- Loss on early extinguishment of debt. In the third quarter of 2010, we recorded a loss on early extinguishment of debt of $1.6 million related to the write-off of deferred financing costs associated with the voluntary prepayment of $200.2 million of our senior secured term loans in July 2010.
- Income taxes. The effective tax rate for the third quarter of 2010 was 32.2% and was negatively impacted by domestic tax losses that were not tax effected due to a valuation allowance and unfavorable foreign tax rate changes.
- Free cash flow was an inflow of $129.7 million for the third quarter of 2010. This amount consisted of net cash provided by operating activities of $171.5 million plus special items and other, net of $2.2 million, less capital expenditures, net of $44.0 million. We had $283.1 million of cash and cash equivalents as of September 30, 2010.
- Net debt, which is total debt less cash and cash equivalents, was $1,912.5 million as of September 30, 2010 compared to $2,227.8 million as of December 31, 2009. The decrease in net debt was primarily due to the cash generated from operations in the first nine months of 2010. For the twelve-month period ended September 30, 2010, our net debt to Adjusted EBITDA ratio was 2.89.
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, 2010 on Tuesday, October 26, 2010 at 10:00 am Daylight Savings Time. The dial-in number to access the conference call in the U.S. is (800) 230-1074 and the international dial-in number is (612) 234-9960. No access code is needed for either call. A replay of the conference call will be available through November 12, 2010 at (800) 475-6701 in the U.S., access code: 169651, and internationally at (320) 365-3844, access code: 169651.
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 and net income/diluted earnings per share from continuing operations attributable to Rockwood Holdings, Inc. excluding certain items. Adjusted EBITDA is not intended to be an alternative to net income attributable to Rockwood Holdings, Inc. 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 Company’s 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 and restricted stock units vest (as such bonuses, options and restricted stock units 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 net income attributable to Rockwood Holdings, Inc. to Adjusted EBITDA is contained in this 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 from continuing operations, plus special items and other, net less capital expenditures, net (includes proceeds on the sale of property, plant and equipment and excludes sales of property, plant and equipment related to sales of businesses). Management believes that free cash flow is meaningful to investors because it provides an additional measure of liquidity. Neither net income from continuing operations attributable to Rockwood Holdings, Inc. excluding certain items nor diluted earnings per share from continuing operations attributable to Rockwood Holdings, Inc. excluding certain items is intended to be an alternative for net income or diluted earnings per share. Management believes that net income and diluted earnings per share from continuing operations attributable to Rockwood Holdings, Inc. 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 9,800 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 2009 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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