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Rockwood Press Release
Rockwood Reports Strong First Quarter Results:
- Net sales up 26.3%.
- Adjusted EBITDA up 51.1%.
- As reported EPS from continuing operations of $0.48 vs. ($0.05).
- As adjusted EPS from continuing operations of $0.47 vs. ($0.02).
Princeton, NJ USA (April 29, 2010) – Rockwood Holdings, Inc. (NYSE: ROC), a global producer of specialty chemicals and advanced materials, today announced results for the first quarter of 2010.
Commenting on Rockwood’s performance, Seifi Ghasemi, Chairman and Chief Executive Officer, said, “When we announced our 2009 results in February, we made the following comments:
- Rockwood’s first quarter 2010 sales would rebound significantly from the levels of the first quarter of last year.
- Rockwood has significant profit potential in an upturn in economic activity.
- Rockwood has the potential to deliver Adjusted EBITDA margins approaching 20 percent when sales improve.
“Our strong first quarter results confirm all three statements. Our net sales are up 26.3 percent, and our Adjusted EBITDA improved by 51.1 percent compared to the first quarter of last year. More importantly, our Adjusted EBITDA margins were 19.8 percent, one of the highest we have achieved since becoming a public company. In addition, we generated $35.6 million of free cash in the first quarter.
“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. In addition, all of our segments increased their sales and profits in the first quarter of 2010 versus the same period last year.”
The highlights from continuing operations for the first quarter ended March 31, 2010 are as follows:
- Net sales were $833.9 million, up 26.3% compared to $660.0 million for the same period in the prior year.
- Adjusted EBITDA was $165.0 million, up 51.1% compared to $109.2 million for the same period in the prior year.
- On a constant-currency basis, net sales were up 20.0% and Adjusted EBITDA was up 43.4%.
- Net income attributable to Rockwood Holdings, Inc. for the first quarter of 2010 was $36.9 million, including income of $0.9 million related to after-tax net special items. Net loss attributable to Rockwood Holdings, Inc. for the first quarter of 2009 was $(3.8) million, including after-tax net special charges of $2.0 million.
- Diluted earnings per share for the first quarter of 2010 were $0.48, including income of $0.01 related to after-tax net special items. Excluding net special items, diluted earnings per share were $0.47 in the first quarter of 2010. Diluted loss per share for the first quarter of 2009 was $(0.05), including after-tax net special charges of $0.03. Excluding net special charges, diluted loss per share was $(0.02) in the first quarter of 2009.
Commenting on the outlook, Mr. Ghasemi said, “Although we are experiencing levels of business activity which are healthier than last year, it is difficult to assess the impact that replenishment of our customer inventories is having on sales. So we remain cautious about the level of business activity for the rest of the year. However, with our diverse portfolio of specialty businesses, our stable inorganic raw material base, our pricing discipline and continued focus on controlling costs, we expect to maintain strong profit margins as we move forward. We will, as always, remain focused on organic growth, generating cash and improving our leverage ratio.”
First quarter results, as compared with the same period a year ago, are summarized below:
Specialty Chemicals
Net sales and Adjusted EBITDA increased 28.5% and 46.7%, 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 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 14.1% and 43.2%, respectively.
- Net sales and Adjusted EBITDA were up primarily from higher volumes of oilfield and coatings and inks applications in our Clay-based Additives business and higher volumes primarily of coatings application products in our Color Pigments and Services business.
Titanium Dioxide Pigments
Net sales and Adjusted EBITDA increased 30.3% and 42.8%, respectively.
- Net sales and Adjusted EBITDA were up primarily from higher volumes in most applications.
Advanced Ceramics
Net sales and Adjusted EBITDA increased 41.9% and 107.9%, respectively.
- Net sales and Adjusted EBITDA were up primarily from higher volumes in all applications, particularly medical, electronics and mechanical systems.
- Adjusted EBITDA was also favorably impacted by productivity improvements.
Specialty Compounds
Net sales and Adjusted EBITDA increased 17.0% and 16.7%, respectively.
- Net sales and Adjusted EBITDA were up primarily from higher volumes in most applications, including wire and cable and consumer/industrial applications.
Corporate and Other
Corporate costs increased in the first quarter of 2010 primarily due to higher incentive compensation-related costs.
Other Items
Restructuring and other severance costs of $2.2 million were recorded in the first quarter of 2010 primarily in our Color Pigments and Services business.
Interest expense, net decreased $7.5 million in the first quarter of 2010 compared to the same period in the prior year. The first quarter of 2010 included non-cash gains of $2.1 million and the first quarter of 2009 included non-cash losses of $9.6 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, net increased $4.2 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 first quarter of 2010 was 32.3% and was favorably impacted by lower domestic tax losses for which we receive no tax benefit due to a valuation allowance.
Free cash flow was an inflow of $35.6 million for the first quarter of 2010. This amount consisted of net cash provided by operating activities of $64.7 million plus special items and other, net of $6.0 million, less capital expenditures, net of $35.1 million.
Net debt, which is total debt less cash and cash equivalents, was $2,121.1 million as of March 31, 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 quarter of 2010.
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, 2010 on Thursday, April 29, 2010 at 11:00 am Daylight Savings Time. The dial-in number to access the conference call in the U.S. is (800) 398-9367 and the international dial-in number is (612) 332-0228. No access code is needed for either call. A replay of the conference call will be available through June 16, 2010 at (800) 475-6701 in the U.S., access code: 150483, and internationally at (320) 365-3844, access code: 150483.
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 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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