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Rockwood Press Release
Rockwood Reports Fourth Quarter and Full Year Results:
- Q4 Net sales of $786.3 million.
- Q4 Adjusted EBITDA of $154.9 million.
- As reported EPS from continuing operations of $0.15 vs. $(9.91) for Q4.
- As adjusted EPS from continuing operations of $0.20 vs. $0.19 for Q4.
- 2009 Net sales of $2,962.9 million; Adjusted EBITDA of $540.5 million.
Princeton, NJ USA (February 17, 2010) – Rockwood Holdings, Inc. (NYSE: ROC), a global producer of specialty chemicals and advanced materials, today announced results for the fourth quarter and full year of 2009.
Commenting on Rockwood’s performance, Seifi Ghasemi, Chairman and Chief Executive Officer, said, “In the fourth quarter, both our net sales and Adjusted EBITDA were higher than in the comparable quarter of 2008. We did see a slight improvement in business conditions, but our Adjusted EBITDA was up by 17.9% mainly due to our continued focus on controlling our costs. Our Adjusted EBITDA was 19.7% of net sales and we generated significant free cash in the quarter.”
Commenting on the full year, he said, “At the start of 2009 and throughout the recession, we indicated that Rockwood had the business portfolio, flexibility and determination to deal with the economic conditions, so that we would maintain our margins above 18% despite the significant loss of sales. In addition, we have always emphasized Rockwood’s ability to generate significant free cash. In 2009, although our sales decreased 12.3% versus 2008, our Adjusted EBITDA margin was 18.2% compared to 18.9% in 2008. In addition, we were able to generate $299 million of free cash, after paying interest, taxes and funding capital expenditures.”
The highlights from continuing operations for the fourth quarter and year ended December 31, 2009 are as follows:
- Net sales were $786.3 million for the fourth quarter of 2009, up 7.4% compared to $732.3 million for the same period in the prior year. Net sales were $2,962.9 million for the year ended December 31, 2009, down 12.3% compared to $3,380.1 million for the same period in the prior year.
- Adjusted EBITDA was $154.9 million for the fourth quarter of 2009, up 17.9% compared to $131.4 million for the same period in the prior year. Adjusted EBITDA was $540.5 million for the year ended December 31, 2009, down 15.4% compared to $638.9 million for the same period in the prior year.
- On a constant-currency basis, net sales were down 0.9% and Adjusted EBITDA was up 8.9% for the fourth quarter of 2009, and were down 8.9% and 12.8%, respectively, for the year ended December 31, 2009.
- Net income from continuing operations attributable to Rockwood Holdings, Inc. for the fourth quarter of 2009 was $11.3 million, including after-tax net special charges of $3.9 million. Net loss from continuing operations attributable to Rockwood Holdings, Inc. for the fourth quarter of 2008 was $734.1 million, including after-tax net special charges of $748.4 million primarily related to goodwill impairment charges recorded within several businesses.
Net income from continuing operations attributable to Rockwood Holdings, Inc. for the year ended December 31, 2009 was $18.3 million, including after-tax net special charges of $18.5 million. Net loss from continuing operations attributable to Rockwood Holdings, Inc. for the year ended December 31, 2008 was $634.6 million, including after-tax net special charges of $778.5 million primarily related to the goodwill impairment charges recorded in the fourth quarter of 2008.
- Diluted earnings per share from continuing operations for the fourth quarter of 2009 were $0.15, including after-tax net special charges of $0.05. Excluding net special charges, diluted earnings per share were $0.20 in the fourth quarter of 2009. Diluted loss per share from continuing operations for the fourth quarter of 2008 was $9.91, including after-tax net special charges of $10.10. Excluding net special charges, diluted earnings per share from continuing operations were $0.19 in the fourth quarter of 2008.
Diluted earnings per share from continuing operations for the year ended December 31, 2009 were $0.24, including after-tax net special charges of $0.25. Excluding net special charges, diluted earnings per share from continuing operations were $0.49 for the year ended December 31, 2009. Diluted loss per share from continuing operations for the year ended December 31, 2008 was $8.58, including after-tax net special charges of $10.47. Excluding net special charges, diluted earnings per share from continuing operations were $1.89 for the year ended December 31, 2008.
Commenting on the outlook, Mr. Ghasemi said “As we enter the new year, it appears overall business activity is far healthier than it was a year ago, but we are not back to the levels of 2008. In this uncertain climate, we intend to continue to focus on controlling costs, maintaining margins, generating free cash and meeting the needs of our customers.”
Fourth quarter results, as compared with the same period a year ago, are summarized below:
Specialty Chemicals
Net sales increased 2.9%, while Adjusted EBITDA decreased 2.5%. Excluding the favorable impact of currency changes, net sales and Adjusted EBITDA decreased 5.3% and 8.5%, respectively.
- In our Fine Chemicals business, lower selling prices of potash were partially offset by lower raw material costs.
- In our Surface Treatment business, higher selling prices and lower raw material costs were partially offset by lower volumes, particularly in general industrial applications
Performance Additives
Net sales decreased 3.1%, while Adjusted EBITDA increased 214.5%.
- Adjusted EBITDA was positively impacted by lower raw material costs and cost control measures.
- Results were negatively impacted primarily by lower volumes of construction-related products in our Color Pigments and Services business and lower selling prices in our Timber Treatment Chemicals business.
Titanium Dioxide Pigments
Net sales and Adjusted EBITDA increased 20.5% and 38.4%, respectively.
- Higher demand for titanium dioxide and functional additives had a favorable effect on results.
- Adjusted EBITDA was also positively impacted by productivity improvements, lower raw material costs and a favorable product mix.
Advanced Ceramics
Net sales and Adjusted EBITDA increased 17.4% and 12.9%, respectively.
- Higher volumes in most applications and the impact of a bolt-on acquisition were partially offset by higher raw material costs.
Specialty Compounds
Net sales and Adjusted EBITDA increased 4.9% and 16.4%, respectively.
- Net sales and Adjusted EBITDA were up primarily from higher volumes in consumer/industrial applications, partially offset by lower selling prices.
Corporate and Other
Corporate costs were lower in the fourth quarter of 2008 primarily due to the reversal of certain compensation accruals in the fourth quarter of 2008.
Other Items
Restructuring and other severance costs of $4.8 million were recorded in the fourth quarter of 2009 primarily related to headcount reductions and facility closures.
Interest expense decreased $43.8 million in the fourth quarter of 2009 compared to the same period in the prior year. The fourth quarter of 2009 included non-cash gains of $2.6 million and the fourth quarter of 2008 included non-cash losses of $44.7 million, representing the movement in the mark-to-market valuation of our interest rate hedges. Excluding the impact of these gains and losses, interest expense increased $3.5 million primarily due to higher interest rates related to the amendment of our senior secured credit facility in June 2009, partially offset by debt repayments.
Foreign exchange gain of $0.6 million for the fourth quarter of 2009 was primarily related to euro- and pound-denominated cash and inter-company loans. Foreign exchange loss of $20.1 million for the fourth quarter of 2008 was primarily due to the impact of the weaker pound sterling as of December 31, 2008 versus September 30, 2008 in connection with non-operating euro-denominated transactions.
Income taxes. The effective tax rate for the fourth quarter of 2009 was 42.9% and was favorably impacted by a $1.3 million tax benefit related to foreign currency changes, as well as $1.1 million in domestic tax benefits allocated from other comprehensive income.
Impairment charges. In the fourth quarter of 2008, we recorded a non-cash charge of $809.5 million to write-down the carrying value of goodwill within several businesses. The write-down had no impact on Adjusted EBITDA or the financial covenant calculations.
Net loss attributable to noncontrolling interest in the fourth quarter of 2008 primarily relates to the goodwill impairment charge recorded in the Titanium Dioxide Pigments venture.
Gain on early extinguishment of debt, net. In the fourth quarter of 2008, we redeemed €11.0 million of our senior subordinated notes due in 2014 and recorded a gain of $4.0 million.
Gain on sale of discontinued operations, net of tax in the fourth quarter of 2008 primarily relates to the sale of our Pool and Spa Chemicals business in October 2008.
Free cash flow was an inflow of $97.4 million for the fourth quarter of 2009. This amount consisted of net cash provided by operating activities of $92.5 million plus special items and other, net of $42.2 million, less capital expenditures, net of $37.3 million. Free cash flow was an inflow of $299.0 million for the year ended December 31, 2009.
Net debt, which is total debt less cash and cash equivalents, was $2,227.8 million as of December 31, 2009 compared to $2,342.5 million as of December 31, 2008. The decrease in net debt was primarily due to the cash flow generated from our operations in 2009.
Conference Call and Webcast
We will host a conference call and webcast to discuss the results of operations for the fourth quarter and full year ended December 31, 2009 on Wednesday, February 17, 2010 at 11:00 am Eastern Standard Time. The dial-in number to access the conference call in the U.S. is (800) 230-1096 and the international dial-in number is (612) 332-1213. No access code is needed for either call. A replay of the conference call will be available through March 3, 2010 at (800) 475-6701 in the U.S., access code: 143234, and internationally at (320) 365-3844, access code: 143234.
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 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 (loss) 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. 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 2008 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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