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Rockwood Press Release
Rockwood Reports Strong Second Quarter Results:
- Net sales up 19.7%.
- Adjusted EBITDA up 37.4%.
- As reported EPS from continuing operations of of $0.68 vs. $0.01.
- As adjusted EPS from continuing operations of $0.59 vs. $0.13.
Princeton, NJ USA (July 27, 2010) – Rockwood Holdings, Inc. (NYSE: ROC), a global producer of specialty chemicals and advanced materials, today reported earnings per share from continuing operations of $0.68 for the second quarter of 2010 as compared to $0.01 for the same period in the prior year. Rockwood’s as adjusted earnings per share from continuing operations increased to $0.59 in the second quarter of 2010 from $0.13 for the same period in the prior year. In addition, Rockwood reported Adjusted EBITDA of $172.2 million for the second quarter of 2010 as compared to $125.3 million for the same period in the prior year.
Commenting on Rockwood’s performance, Seifi Ghasemi, Chairman & CEO, said, “The significant improvement in Rockwood’s quarterly sales and earnings reflects the strong demand for our specialty products across all geographies and in almost every end market we serve. In addition, the results re-confirm Rockwood’s ability to generate significant profit improvement in a positive market environment as well as our ability to increase our Adjusted EBITDA margins; from 17.2% of net sales in the second quarter of last year to 19.7% this quarter. During the quarter, we generated $87 million of free cash after paying interest on our debt, capital expenditures and cash taxes.
“These results once again demonstrate the strength of Rockwood’s diverse portfolio of specialty businesses. Our inorganic raw material costs remain stable, and we continue to benefit from our disciplined approach to pricing and rigorous cost control. Our lithium and advanced materials businesses continue to see significant organic growth and improved margins.”
The highlights from continuing operations for the second quarter and six months ended June 30, 2010 are as follows:
- Net sales were $874.5 million for the second quarter of 2010, up 19.7% compared to $730.4 million for the same period in the prior year. Net sales were $1,708.4 million for the six months ended June 30, 2010, up 22.9% compared to $1,390.4 million for the same period in the prior year.
- Adjusted EBITDA was $172.2 million for the second quarter of 2010, up 37.4% compared to $125.3 million for the same period in the prior year. Adjusted EBITDA was $337.2 million for the six months ended June 30, 2010, up 43.8% compared to $234.5 million for the same period in the prior year.
- On a constant-currency basis, net sales and Adjusted EBITDA were up 24.0% and 43.3%, respectively, for the second quarter of 2010, and were up 22.1% and 43.3%, respectively, for the six months ended June 30, 2010.
- Net income attributable to Rockwood Holdings, Inc. for the second quarter of 2010 was $52.4 million, including income of $6.9 million related to after-tax net special items. Net income attributable to Rockwood Holdings, Inc. for the second quarter of 2009 was $0.6 million, including after-tax net special charges of $8.8 million.
Net income attributable to Rockwood Holdings, Inc. for the six months ended June 30, 2010 was $89.3 million, including income of $7.8 million related to after-tax net special items. Net loss attributable to Rockwood Holdings, Inc. for the six months ended June 30, 2009 was $3.2 million, including after-tax net special charges of $10.8 million.
- Diluted earnings per share for the second quarter of 2010 were $0.68, including income of $0.09 related to after-tax net special items. Excluding net special items, diluted earnings per share were $0.59 in the second quarter of 2010. Diluted earnings per share for the second quarter of 2009 were $0.01, including after-tax net special charges of $0.12. Excluding net special charges, diluted earnings per share were $0.13 in the second quarter of 2009.
Diluted earnings per share for the six months ended June 30, 2010 were $1.15, including income of $0.10 related to after-tax net special items. Excluding net special items, diluted earnings per share were $1.05 for the six months ended June 30, 2010. Diluted loss per share for the six months ended June 30, 2009 was $0.04, including after-tax net special charges of $0.14. Excluding net special charges, diluted earnings per share were $0.10 for the six months ended June 30, 2009.
Commenting on the outlook, Mr. Ghasemi said, “Although demand for our products remained strong throughout the second quarter and continues as we begin the third quarter, we are operating with a cautious outlook as we cannot predict the performance of the overall economy. However, we are confident that our strategic strengths, our strong market position, our pricing discipline and our inorganic raw material base will enable us to maintain excellent profit margins and strong cash flow in the second half. We will continue our focus on growing our portfolio of specialty products, generating strong cash flow and improving our leverage ratio.”
Second quarter results, as compared with the same period a year ago, are summarized below:
Specialty Chemicals
Net sales and Adjusted EBITDA increased 21.6% and 27.7%, respectively.
- In our Fine Chemicals business, higher volumes of lithium products and metal sulfide applications were partially offset by lower selling prices of potash and lithium carbonate.
- In our Surface Treatment business, higher volumes in all markets, particularly in automotive, general industrial and coil/cold forming applications, and lower raw material costs had a favorable impact on our results.
Performance Additives
Net sales and Adjusted EBITDA increased 10.7% and 65.9%, respectively.
- Net sales and Adjusted EBITDA were up primarily from higher volumes of coatings and inks and oilfield applications in our Clay-based Additives business and higher volumes of specialty and coatings products in our Color Pigments and Services business.
Titanium Dioxide Pigments
Net sales and Adjusted EBITDA increased 15.8% and 51.8%, respectively.
- Net sales and Adjusted EBITDA were up primarily from higher volumes in all applications, as well as higher selling prices, partially offset by lower production volumes due to scheduled maintenance work.
Advanced Ceramics
Net sales and Adjusted EBITDA increased 33.5% and 55.6%, respectively.
- Net sales and Adjusted EBITDA were up from higher volumes in all product applications, including medical, automotive, electronic and other industrial applications.
Specialty Compounds
Net sales and Adjusted EBITDA increased 28.3% and 13.5%, respectively.
- Net sales and Adjusted EBITDA were up primarily from higher volumes in most applications, primarily in wire and cable.
- Adjusted EBITDA was negatively impacted by higher raw material costs, primarily PVC resin and plasticizer costs.
Corporate and Other
Corporate costs increased in the second quarter of 2010 primarily due to higher incentive compensation-related costs.
Other Items
- Interest expense, net increased $7.8 million in the second quarter of 2010 compared to the same period in the prior year. The second quarter of 2010 and 2009 included non-cash gains of $5.6 million and $12.2 million, respectively, representing the movement in the mark-to-market valuation of our interest rate hedges. Excluding the impact of these gains, interest expense, net increased $1.2 million primarily due to higher interest rates related to the amendment of our senior secured credit facility in June 2009, partially offset by the termination of interest rate swaps in November 2009 and debt repayments.
- Income taxes. The effective tax rate for the second quarter of 2010 was 21.7% and was favorably impacted by domestic income that was not tax effected due to a valuation allowance and the favorable settlement of certain tax positions. Our normalized effective tax rate was approximately 30% for the second quarter of 2010.
- Free cash flow was an inflow of $86.7 million for the second quarter of 2010. This amount consisted of net cash provided by operating activities of $114.4 million plus special items and other, net of $8.5 million, less capital expenditures, net of $36.2 million.
- Net debt, which is total debt less cash and cash equivalents, was $1,933.4 million as of June 30, 2010 compared to $2,227.8 million as of December 31, 2009. The decrease in net debt was primarily due to the cash flow generated from operations in the first half of 2010.
Conference Call and Webcast
We will host a conference call and webcast to discuss the results of operations for the second quarter ended June 30, 2010 on Tuesday, July 27, 2010 at 11:00 am 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) 332-0637. No access code is needed for either call. A replay of the conference call will be available through September 13, 2010 at (800) 475-6701 in the U.S., access code: 161256, and internationally at (320) 365-3844, access code: 161256.
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 (loss)/diluted earnings (loss) 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 (loss) from continuing operations attributable to Rockwood Holdings, Inc. excluding certain items nor diluted earnings (loss) per share from continuing operations attributable to Rockwood Holdings, Inc. 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 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. Management believes that our normalized effective tax rate is meaningful to investors because it provides an additional measure of our tax rate by excluding the impact of certain special items. 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 9,700 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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