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Rockwood Press Release
Rockwood Reports Increased First Quarter Sales and Earnings:
- Net sales up 14.2%
- Adjusted EBITDA up 14.6%
- As reported EPS from continuing operations of $0.36 vs. $0.33
- As adjusted EPS from continuing operations of $0.58 vs. $0.37
Princeton, NJ USA (April 30, 2008) – Rockwood Holdings, Inc. (NYSE: ROC), a global producer of specialty chemicals and advanced materials, today announced a 14.2% increase in net sales and a 14.6% increase in Adjusted EBITDA for the first quarter of 2008, as compared to the same period last year.
Diluted earnings per share from continuing operations for the first quarter of 2008 were $0.36, including after-tax net non-recurring and other special charges of $0.22 primarily related to mark-to-market valuation losses on the Company’s interest rate hedging instruments. Diluted earnings per share from continuing operations for the first quarter of 2007 were $0.33, including after-tax net non-recurring and other special charges of $0.04. Excluding net non-recurring and other special charges, diluted earnings per share from continuing operations were $0.58 and $0.37 in the first quarter of 2008 and 2007, respectively.
Seifi Ghasemi, Chairman and Chief Executive Officer, said “Our diversified exposure to end markets, our geographic balance and our continued focus on innovation and productivity enabled us to grow sales and earnings despite the significant slowdown in construction-related businesses in the United States. In particular, our Specialty Chemicals and Advanced Ceramics businesses posted strong quarters.”
The highlights of the first quarter are as follows:
- Net sales were $854.0 million for the first quarter of 2008, up 14.2% compared to $747.7 million for the same period in the prior year.
- Adjusted EBITDA was $168.4 million for the first quarter of 2008, up 14.6% compared to $147.0 million for the same period in the prior year.
- On a constant-currency basis, net sales increased 5.5% and Adjusted EBITDA increased 4.6% for the first quarter of 2008.
- Net income from continuing operations for the first quarter of 2008 was $27.7 million, including after-tax net non-recurring and other special charges of $16.7 million. Net income from continuing operations for the first quarter of 2007 was $25.0 million, including after-tax net non-recurring and other special charges of $2.6 million.
- Results from continuing operations in the first quarter of 2007 exclude the Electronics business and the Groupe Novasep segment that were sold in 2007.
Looking ahead, Mr. Ghasemi said, “Our first quarter has provided a good start to the year and was in line with our expectations. Despite an uncertain economic outlook, we have not altered our goals. We continue to focus on growing our top line by our target of 8 percent while maintaining our Adjusted EBITDA margins at 2007 levels and aiming to achieve double-digit growth in adjusted earnings per share. We continue to monitor the global economic environment and its impact on our business. However, we continue to rely on our market and geographic diversity, the strength of our specialty businesses and our focus on innovation and productivity to achieve our goals.”
First quarter results by segment, as compared with the same period a year ago, are summarized below:
Specialty Chemicals
Higher selling prices and increased volumes drove a 16.3% increase in net sales and a 17.9% increase in Adjusted EBITDA.
- Our Surface Treatment business benefited from a bolt-on acquisition made in December 2007, increased volumes, particularly in European automotive applications, and higher selling prices.
- Our Fine Chemicals business benefited primarily from higher selling prices as well as increased volumes of lithium products.
- In both businesses, improved results were partially offset by higher raw material costs.
Performance Additives
Net sales increased 14.5% primarily from the acquisition of the global color pigments business of Elementis plc, although Adjusted EBITDA declined 4.3% primarily as a result of lower volumes of construction-related products.
- Increased selling prices in the Color Pigments and Services and Clay-based Additives businesses favorably impacted results.
- Higher raw material costs, primarily for iron-oxide and quaternary amine, had a negative impact on Adjusted EBITDA.
Titanium Dioxide Pigments
An increase in net sales of 8.4% and Adjusted EBITDA of 6.7% was due to the favorable impact of currency changes.
- Offsetting these increases were lower volumes and selling prices for titanium dioxide products and higher energy costs.
Advanced Ceramics
Net sales and Adjusted EBITDA increased 26.3% and 33.7%, respectively, due in part from increased volumes in medical applications and the impact of a bolt-on acquisition made in April 2007.
- Productivity improvements also favorably impacted Adjusted EBITDA.
Specialty Compounds
Lower volumes in wire and cable and medical applications led to a slight decline in net sales. Adjusted EBITDA increased 7.4% due to lower operating costs relating to the closure of a U.K. facility in December 2007.
- Higher raw material costs, primarily for polyvinyl chloride resin, had a negative impact on Adjusted EBITDA.
Other
- Interest expense increased $19.0 million compared to the same period in the prior year. The first quarter of 2008 and 2007 included losses of $30.8 million and $2.8 million, respectively, representing the movement in the mark-to-market valuation of our interest rate hedging instruments. The remaining interest expense decrease of $9.0 million was primarily due to lower debt levels, including the redemption in May 2007 of the 2011 Notes in the aggregate amount of $273.4 million.
- Foreign exchange gains increased $15.0 million due to the impact of the stronger euro as of March 31, 2008 versus December 31, 2007 related to non-operating euro-denominated transactions.
- Income tax provision:The effective tax rate in the first quarter of 2008 was lower than the effective tax rate in the first quarter of 2007 primarily stemming from lower average statutory rates in Europe and the Company’s geographic earnings mix.
- Free cash flow was an outflow of $27.4 million for the first quarter of 2008. This amount consists of net cash provided by operating activities of $27.2 million plus non-recurring items and other, net of $0.9 million and proceeds on the sale of property, plant and equipment of $0.6 million, less capital expenditures of $56.1 million.
- Net debt, which is total debt less cash and cash equivalents, was $2,346.1 million as of March 31, 2008.
Free Cash Flow
Our free cash flow was $174.3 million for the year ended December 31, 2007. This amount consists of net cash provided by operating activities of $368.5 million plus proceeds on the sale of property, plant and equipment of $1.6 million and non-recurring items of $5.4 million, less capital expenditures of $201.2 million. Net debt, which is total debt less cash and cash equivalents, was $2,231.3 million and $2,811.0 million as of December 31, 2007 and 2006, respectively.
Conference Call and Webcast
We will host a conference call and webcast to discuss the results of operations for the first quarter ended March 31, 2008, on Wednesday, April 30, 2008 at 11 a.m. Eastern Time. The dial-in number to access via conference call in the U.S. is (800) 700-7353 and the international dial-in number is (612) 234-9959. No access code is needed for either call. A replay of the conference call will be available through May 14, 2008 at (800) 475-6701 in the U.S., access code: 915250, and internationally at (320) 365-3844, access code: 915250.
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/diluted earnings 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 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 proceeds on the sale of property, plant and equipment (excludes sales of property, plant and equipment related to sales of businesses) and non-recurring items and other, net, less capital expenditures. Management believes that free cash flow is meaningful to investors because it provides an additional measure of liquidity. Neither net income 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 or diluted earnings per share. Management believes that net income and diluted earnings 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 9,500 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 2006 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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