Arch Chemicals Reports Full-Year 2003 Earnings from Continuing Operations of $0.67 Per Share.Business Editors NORWALK Norwalk (nôr`wôk'). 1 City (1990 pop. 94,279), Los Angeles co., S Calif.; settled in the 1850s, inc. 1957. With the arrival (1875) of the Southern Pacific RR, it became a center for the dairy and logging industries, but , Conn.--(BUSINESS WIRE)--Feb. 10, 2004 ARCH CHEMICALS Founded in 1999, Arch Chemicals (NYSE: ARJ) is a biocides company with over a billion dollars in annual sales. It consists of four divisions:
Antonym: dec. . (NYSE NYSE See: New York Stock Exchange : ARJ A compression program for backup archiving from ARJ Software, Inc., Norwood, MA (www.arjsoftware.com). Introduced in the early 1990s and created by Robert Jung (the RJ in ARJ), ARJ never achieved the popularity of PKZIP, although it is considered a worthy competitor. See JAR. ) Highlights: -- Treatment sales for the fourth quarter increased approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 36 percent over the prior year's quarter. -- Sales for the full-year 2003 increased approximately 11 percent over full-year 2002. -- For the full-year 2004, sales are expected to grow by eight to ten percent and earnings per share are expected to increase in excess of 50 percent. ARCH CHEMICALS, INC. (NYSE: ARJ) announced full year sales of $1,009.1 million in 2003 compared to $905.6 million in 2002. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $39.1 million in 2003 compared to operating income of $25.0 million in 2002. Earnings per share from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the were $0.67 for 2003 on $15.1 million of income compared to $0.28 per share on earnings of $6.3 million in 2002. Full year earnings per share were $1.21 for 2003 on $27.4 million of net income compared to $0.13 per share on $3.0 million of net income in 2002. Included in operating results is restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). income of $0.6 million or $0.02 per share for 2003. 2002 includes restructuring expense of $7.6 million or $0.20 per share. "In 2003 we were able to seize seize v. To exhibit symptoms of seizure activity, usually with convulsions. upon significant growth opportunities in our core businesses and in reducing our costs," said Chairman, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Michael Michael, archangel Michael (mī`kəl) [Heb.,=who is like God?], archangel prominent in Christian, Jewish, and Muslim traditions. In the Bible and early Jewish literature, Michael is one of the angels of God's presence. E. Campbell Campbell, city, United States Campbell, city (1990 pop. 36,048), Santa Clara co., W Calif., in the fertile Santa Clara valley; founded 1885, inc. 1952. . "We particularly benefited from improved performance by our HTH (chat) HTH - Hope This Helps. Often used sarcastically, see HAND. Water Products business and strong demand for biocides used in marine paints, antidandruff shampoos and building products. In addition, we achieved substantial growth in our Wolman(R) E and Tanalith(R) E alternative wood preservatives wood preservative substances used as dressing for lumber to protect it against mold, insects, pests, fire, etc. Animals housed in pens made of wood which has been treated with wood preservatives may be poisoned by these compounds if they chew the wood. as well as higher demand for our advanced new products in Microelectronic The miniaturization of electronic circuits. See chip. Materials." Fourth quarter sales increased approximately 21 percent to $220.1 million in 2003 compared to $182.1 million in 2002. The increase in sales was equally attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the acquisition of Aquachlor, higher volumes and the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. effect of foreign currency rates. Results from continuing operations for the fourth quarter were a $0.09 loss per share on a loss of $2.1 million for 2003, compared to a loss of $0.19 per share on a loss of $4.4 million for 2002. Included in the fourth quarter of 2003 is $1.2 million of restructuring income due to reductions in restructuring reserves or earnings of $0.03 per share. Also included in the fourth quarter 2003 results is an insurance settlement of approximately $3 million for reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. of past and expected future repairs and maintenance expense for storm damage at one of the Company's manufacturing facilities. The following compares segment sales and operating income (loss) for the fourth quarters of 2003 and 2002 (including equity in earnings of affiliated companies Affiliated Companies A situation that occurs when one company owns a minority interest (less than 50%) in another company. Also refers to companies that are related to each other in some way. Notes: An affiliated company is sometimes referred to as a subsidiary. and excluding restructuring and certain unallocated expenses of the corporate headquarters): Treatment Products Treatment Products reported sales of $143.8 million and operating income of $0.5 million compared with sales and an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $105.4 million and $5.8 million, respectively, in 2002. HTH Water Products HTH water products reported sales of $39.2 million and an operating loss of $11.6 million for 2003 compared to sales and an operating loss of $17.7 million and $17.7 million, respectively, in 2002. Sales more than doubled due to the acquisition of Aquachlor (approximately $13 million), higher North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. branded (HTH(R) Poolife(TM)) calcium hypochlorite calcium hypochlorite n. A white crystalline solid used as a bactericide, fungicide, and bleaching agent. volumes, higher branded chlorinated chlorinated /chlo·ri·nat·ed/ (klor´i-nat?ed) treated or charged with chlorine. chlorinated charged with chlorine. chlorinated acids some, e.g. isocyanurates volumes and favorable foreign currency rates. Operating results improved due to the higher sales, lower manufacturing and product sourcing costs and favorable foreign currency rates. 2002 also included a charge for the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of the assets associated with a cancelled can·cel v. can·celed also can·celled, can·cel·ing also can·cel·ling, can·cels also can·cels v.tr. 1. To cross out with lines or other markings. See Synonyms at erase. 2. expansion of the J3 plant of approximately $2 million. Personal Care and Industrial Biocides Personal care and industrial biocides reported sales of $36.4 million and operating income of $7.4 million compared to sales and operating income of $30.8 million and $7.6 million, respectively, in 2002. Sales were approximately 18 percent higher than 2002 due to continued strong demand for all product lines, in particular higher volumes in biocides used in building products to deter mold mold, name for certain multicellular organisms of the various classes of the kingdom Fungi, characteristically having bodies composed of a cottony mycelium. The colors of molds are caused by the spores, which are borne on the mycelium. and mildew mildew, name for certain fungi and protists, for the diseases they cause in various crops, and for the discoloration (and sometimes the weakening and disintegration) they cause in such materials as leather, fabrics, and paper. growth. Operating income was comparable to 2002, as the higher sales were offset by higher selling and administration costs to support growth initiatives. Wood Protection and Industrial Coatings An industrial coating is a paint or coating defined by its protective, rather than its aesthetic properties, although it can provide both. The most common use of industrial coatings is for corrosion control of steel or concrete. Wood protection and industrial coatings reported sales of $68.2 million and operating income of $4.7 million compared to sales and operating income of $56.9 million and $4.3 million, respectively, in 2002. Sales increased approximately 20 percent over the prior year due principally to the favorable effect of foreign currency rates (approximately 12 percent) and increased sales of Wolman(R) E and Tanalith(R) E (CCA-alternative products), partially offset by lower coatings volumes. Operating income increased approximately nine percent over the prior year due to the higher sales, lower legal costs and favorable foreign currency, partially offset by increased selling and administration costs for customer conversion costs associated with CCA-alternative preservatives preservatives, n.pl food additives that hinder spoilage by reducing the growth of microorganisms. Include nitrates and nitrites, benzoates and sulfites, and many others. . Fourth quarter 2003 included a gain on the sale of warehouses of $0.5 million and 2002 included a favorable legal decision in a 1994 raw material spillage lawsuit lawsuit: see procedure; tort. of approximately $1.9 million. Microelectronic Materials Microelectronic Materials reported sales of $36.6 million and operating income of $1.6 million for 2003 compared to sales of $36.4 million and operating income of $2.8 million in 2002. Sales were comparable to 2002 due to increased Asian and European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. sales volumes, offset by lower North American sales and lower pricing in the ancillaries business. Operating income decreased due to unfavorable foreign currency rates and lower margins from reduced pricing, partially offset by improved operating results of the Company's FUJIFILM Fujifilm Holdings Corporation or Fujifilm (富士フイルム株式会社 Arch joint venture and the reimbursement of a product litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. claim previously reserved in the third quarter of 2003. Performance Products Performance Products reported sales of $39.7 million and operating income of $1.4 million compared with sales and operating income of $40.3 million and $2.6 million, respectively, in 2002. Performance urethanes sales increased approximately 10 percent over the prior year due to higher polyol The name polyols refers to chemical compounds containing multiple hydroxyl groups. In two technological disciplines polyols have special meaning: food science and polymer chemistry. For information as it pertains to food ingredients, please see the article on sugar alcohols. volumes and higher Latin Lat·in n. 1. a. The Indo-European language of the ancient Latins and Romans and the most important cultural language of western Europe until the end of the 17th century. b. American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of sales due to increased economic and political stability in the region. Operating results increased due to an insurance settlement of approximately $3 million in 2003 mostly offset by increased bad debt expense and higher raw material and energy costs. Hydrazine hydrazine (hī`drəzēn'), chemical compound, formula NH2NH2, m.p. 1.4°C;, b.p. 113.5°C;, specific gravity 1.011 at 15°C;. It is very soluble in water and soluble in alcohol. sales decreased approximately 31 percent due to lower propellant pro·pel·lant also pro·pel·lent n. 1. Something, such as an explosive charge or a rocket fuel, that propels or provides thrust. 2. volumes as a result of reduced requirements from government campaigns and lower hydrate hydrate (hī`drāt), chemical compound that contains water. A common hydrate is the familiar blue vitriol, a crystalline form of cupric sulfate. Chemically, it is cupric sulfate pentahydrate, CuSO4·5H2O. volumes, partly offset by favorable hydrate pricing. Operating income was lower than prior year primarily due to the lower sales. Other Items During the fourth quarter the Company adjusted its full year effective tax rate on continuing operations from 36 percent to 33 percent. Loss on the sale of discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. for the fourth quarter 2003 represents a curtailment Curtailment The act of contracting or reducing operations of a company in the hope of bringing it financial or operational stability. This management technique is often used when a company has grown too fast and is unable to effectively manage its operations. loss of $0.5 million, net of tax, related to the pension plan of former Hickson Hickson is a surname, and may refer to
2004 Outlook HTH water products segment expects continued growth in the HTH(R) Poolife(TM) brand sold to the professional pool dealer market. Continued strong demand for the biocides used in marine antifouling paint Noun 1. antifouling paint - a paint used to protect against the accumulation of barnacles etc. on underwater surfaces paint, pigment - a substance used as a coating to protect or decorate a surface (especially a mixture of pigment suspended in a liquid); dries to and antidandruff markets are expected in our personal care and industrial biocides segment. Wood protection is expected to continue to benefit from the conversion to CCA-alternative products. As a result, the Company anticipates that sales for the full year will increase by approximately eight to ten percent. Earnings per share are expected to range from $1.00 to $1.25 per share. Depreciation and amortization is estimated to be approximately $53 million. Capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. is anticipated to be in the $25 to $30 million range. Pension expense and related funding are both expected to increase by approximately $5 million and $7 million, respectively, in 2004. For the first quarter, the Company anticipates its Performance Products segment's results to be adversely impacted by rising raw material costs. As a result, earnings per share for the first quarter of 2004 are expected to be in the $0.05 to $0.10 per share range. "Thanks to our strategic focus on growth opportunities in our core businesses, our aggressive cost-reduction initiatives and our strong cash flow generation, Arch is well poised to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. an improved global economic environment," Mr. Campbell said. "In the year ahead, by sticking to these basics, we are confident that we can further improve our shareholder value by delivering strong top line and bottom line results while providing an attractive dividend." Note: All references to earnings per share above reflect diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of . About Arch Headquartered in Norwalk, CT, Arch Chemicals, Inc. is a global specialty chemicals A Specialty chemical is a chemical produced for a specialized use. They are produced in lower volume than bulk chemicals, of which petrochemicals, made from oil feedstocks, are the most common. However, both are produced in a chemical plant. company with $1 billion in annual sales. Together with its subsidiaries, Arch has 3,000 employees and manufacturing facilities in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. , Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , Asia and Africa.
Arch and its subsidiaries have leadership positions in three segments --
Treatment Products, Microelectronic Materials and Performance Products
-- where they serve leading customers with forward-looking for·ward-look·ingadj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. solutions to meet their chemical needs. For more information, visit the Company's Web site at http://www.archchemicals.com. -- Listen in live to Arch Chemicals' fourth quarter 2003 earnings conference call on Tuesday Tuesday: see week. , February February: see month. 10, 2004 at 11:00 a.m. (ET) at http://www.archchemicals.com. -- If members of the public wish to access Arch's live earnings call in a listen-only mode, dial: (800) 299-7635, passcode 32047605, in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. or (617) 786-2901, passcode 32047605, outside the United States. -- A telephone replay will be available from 1:00 p.m. on Tuesday, February 10, 2004 until 6:00 p.m. (ET) on Tuesday, February 17, 2004. The replay number is (888) 286-8010, passcode 53370322; from outside the United States, please call (617) 801-6888, passcode 53370322. Except for historical information contained herein, the information set forth in this communication contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that are based on management's beliefs, certain assumptions made by management and management's current expectations, estimates and projections about the markets and economy in which Arch and its various businesses operate. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "opines Opines are low molecular weight compounds found in plant crown gall tumors produced by the parasitic bacterium Agrobacterium. Opine biosynthesis is catalyzed by specific enzymes encoded by genes contained in a small segment of DNA (known as the T-DNA, for 'transfer DNA') ," "plans," "predicts," "projects," "should," "targets," "will," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Future Factors"), which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expected or forecasted in such forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise. Future Factors which could cause actual results to differ materially from those discussed include but are not limited to: general economic and business and market conditions; lack of economic recovery in 2004 in the U.S.; lack of moderate growth or recession in European economies; increases in interest rates; economic conditions in Asia; worsening wors·en tr. & intr.v. wors·ened, wors·en·ing, wors·ens To make or become worse. Noun 1. worsening - process of changing to an inferior state decline in quality, deterioration, declension economic and political conditions in Venezuela Venezuela (vĕnəzwā`lə, Span. vānāswā`lä), officially the Bolivarian Republic of Venezuela, republic (2005 est. pop. 25,375,000), 352,143 sq mi (912,050 sq km), N South America. ; strengthening of the U.S. dollar against foreign currencies; customer acceptance of new products; efficacy efficacy /ef·fi·ca·cy/ (ef´i-kah-se) 1. the ability of an intervention to produce the desired beneficial effect in expert hands and under ideal circumstances. 2. of new technology; changes in U.S. laws and regulations; increased competitive and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. customer pressure; the Company's ability to maintain chemical price increases; higher-than-expected raw material costs for certain chemical product lines; increased foreign competition in the calcium hypochlorite markets; lack of continued recovery in the semiconductor industry; unfavorable court, arbitration arbitration Process of resolving a dispute or a grievance outside a court system by presenting it for decision to an impartial third party. Both sides in the dispute usually must agree in advance to the choice of arbitrator and certify that they will abide by the or jury decisions; the supply/demand balance for the Company's products, including the impact of excess industry capacity; failure to achieve targeted cost-reduction programs; unsuccessful entry into new markets for electronic chemicals; capital expenditures in excess of those scheduled; environmental costs in excess of those projected; the occurrence of unexpected manufacturing interruptions/outages at customer or company plants; reduction in expected government contract orders and/or the failure to renew or extend the U.S. government contract for hydrazine propellants; unfavorable weather conditions for swimming pool use; inability to expand sales in the professional pool dealer market; and gains or losses on derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. .
Arch Chemicals, Inc.
Condensed Consolidated Statements of Income (a, b)
(In millions, except per share amounts)
----------------------------------------------------------------------
Three Months Years
Ended Ended
December December
31, 31,
2003 2002 2003 2002
----------------------------------------------------------------------
Sales $220.1 $182.1 $1,009.1 $905.6
Cost of Goods Sold (c) 161.4 129.4 721.8 640.8
Selling and Administration 58.7 53.3 239.9 217.4
Research and Development 6.2 5.7 23.6 23.0
Equity In (Earnings) of Affiliated
Companies (4.2) (2.7) (11.7) (6.4)
Other (Gains) and Losses (d) (0.5) - (3.0) (1.8)
Restructuring (Income) Expense (e) (1.2) - (0.6) 7.6
----------------------------------------------------------------------
Income (Loss) from Continuing
Operations Before Interest, Taxes
and Cumulative Effect of
Accounting Change (0.3) (3.6) 39.1 25.0
Interest Expense, net 3.9 3.8 16.5 16.0
----------------------------------------------------------------------
Income (Loss) from Continuing
Operations Before Taxes and
Cumulative Effect of Accounting
Change (4.2) (7.4) 22.6 9.0
Income Tax Provision (Benefit) (2.1) (3.0) 7.5 2.7
----------------------------------------------------------------------
Income (Loss) from Continuing
Operations Before Cumulative
Effect of Accounting Change (2.1) (4.4) 15.1 6.3
Income (Loss) from Discontinued
Operations, net of tax (f) - 1.2 (1.8) (1.8)
Gain (Loss) on Sales of Discontinued
Operations, net of tax (g) (0.5) - 14.5 (1.5)
Cumulative Effect of Accounting
Change, net of tax (h) - - (0.4) -
----------------------------------------------------------------------
Net Income (Loss) $(2.6) $(3.2) $27.4 $3.0
======================================================================
Basic Income (Loss) Per Share:
Continuing Operations Before
Cumulative Effect of Accounting
Change $(0.09) $(0.19) $0.67 $0.28
Discontinued Operations (f) - 0.04 (0.08) (0.08)
Sales of Discontinued
Operations (g) (0.02) - 0.64 (0.07)
Cumulative Effect of Accounting
Change (h) - - (0.02) -
----------------------------------------------------------------------
Basic Income (Loss) Per Share $(0.11) $(0.15) $1.21 $0.13
======================================================================
Diluted Income (Loss) Per Share:
Continuing Operations Before
Cumulative Effect of Accounting
Change $(0.09) $(0.19) $0.67 $0.28
Discontinued Operations (f) - 0.04 (0.08) (0.08)
Sales of Discontinued
Operations (g) (0.02) - 0.64 (0.07)
Cumulative Effect of Accounting
Change (h) - - (0.02) -
----------------------------------------------------------------------
Diluted Income (Loss) Per Share $(0.11) $(0.15) $1.21 $0.13
======================================================================
Weighted Average Common Stock
Outstanding - Basic 22.6 22.5 22.6 22.5
Weighted Average Common Stock
Outstanding - Diluted 22.6 22.5 22.6 22.6
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Adjusted EBITDA (i) $9.1 $9.2 $90.8 $89.1
----------------------------------------------------------------------
(a) Unaudited
(b) As a result of the sale of the sulfuric acid business, the
Company has restated prior period results to include the results of
operations of the sulfuric acid business in discontinued operations in
accordance with SFAS 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets."
(c) The fourth quarter and full year includes an insurance settlement
of $3.3 million for the reimbursement of past and future repairs of
one of the Company's manufacturing locations.
(d) Fourth quarter 2003 represents the pretax gain of the sale of
treatment products warehouses. Full year 2003 also includes the pretax
gain on the sale of excess land of $2.5 million. 2002 represents the
pretax gain on the sales of excess land of $1.8 million.
(e) Restructuring for the fourth quarter 2003 represents a
reduction of prior year's restructuring reserves of $1.2 million. The
full-year also includes severance costs of $2.5 million for headcount
reductions, offset by a reduction of the prior years' restructuring
reserves of $1.9 million. Restructuring for 2002 includes
employee-related costs for headcount reductions and expenses related
to the consolidation of several treatment products operations.
(f) Represents the results of operations of the sulfuric acid
business and the Hickson organics business, net of tax, through the
date of sale of the businesses.
(g) Fourth quarter 2003 represents an after-tax curtailment loss
related to the pension plan of former Hickson employees due to the
sale of the Hickson organics Castleford operations. Full year 2003
represents an after-tax gain of $16.5 million on the sale of the
sulfuric acid business and an after-tax loss of $2.0 million on the
sale of the Hickson organics Castleford operations. 2002 represents
the after-tax loss on the sale of the organics operation located in
Danville, Virginia.
(h) Reflects the adoption of SFAS No. 143, "Accounting for Asset
Retirement Obligations."
(i) Represents earnings before interest, taxes, depreciation and
amortization, excludes restructuring, cumulative effect of accounting
change and unremitted earnings of 50% or less owned affiliates and
includes the operating results of the Hickson organics division and
the sulfuric acid business. A table reconciling Adjusted EBITDA to the
GAAP measure that the Company believes to be most directly comparable,
income (loss) from continuing operations before cumulative effect of
accounting change, is included in an accompanying schedule to this
press release.
Arch Chemicals, Inc.
Condensed Consolidated Balance Sheets
(In millions, except per share amounts)
--------------------------------------------------------
December December
31, 31,
2003 (a) 2002 (c)
--------------------------------------------------------
Assets:
Cash & Cash Equivalents $64.8 $12.2
Accounts Receivable, Net (b) 124.9 95.5
Short-Term Investment (b) 43.3 17.9
Inventories, Net 141.6 144.7
Other Current Assets 27.9 33.2
Assets Held For Sale (c) - 53.7
--------------------------------------------------------
Total Current Assets 402.5 357.2
Investments and Advances
- Affiliated Companies
at Equity 38.2 28.5
Property, Plant and
Equipment, Net 281.4 302.7
Goodwill 137.3 135.9
Other Intangibles 61.1 63.7
Other Assets 54.0 51.1
--------------------------------------------------------
Total Assets $974.5 $939.1
--------------------------------------------------------
Liabilities and Shareholders'
Equity:
Short-Term Borrowings $0.7 $2.4
Accounts Payable 139.9 131.4
Accrued Liabilities 88.5 88.6
Liabilities Associated with
Assets Held For
Sale (c) - 15.7
--------------------------------------------------------
Total Current Liabilities 229.1 238.1
Long-Term Debt 218.5 220.8
Other Liabilities 191.1 150.2
--------------------------------------------------------
Total Liabilities 638.7 609.1
Commitments and Contingencies
Shareholders' Equity:
Common Stock, Par Value
$1 Per Share, Authorized
100.0 Shares:
22.5 Shares Issued and
Outstanding (22.4 in
2002) 22.5 22.4
Additional Paid-in
Capital 398.2 410.2
Retained Earnings
(Deficit) 13.4 (9.5)
Accumulated Other
Comprehensive Loss (d) (98.3) (93.1)
--------------------------------------------------------
Total Shareholders'
Equity 335.8 330.0
--------------------------------------------------------
Total Liabilities and
Shareholders' Equity $974.5 $939.1
--------------------------------------------------------
(a) Unaudited.
(b) The Company sells certain accounts receivable through an
accounts receivable securitization program entered into in March 2002.
See Form 10-K for additional information. As a result, accounts
receivable have been reduced, the Company's undivided interest in such
receivables has been reflected as a short-term investment and proceeds
from the sales were used to pay down debt. As of December 31, 2003,
the Company had not sold any participation interests in accounts
receivable.
(c) As a result of the sale of the sulfuric acid business, the
Company has restated its financial statements to reflect the sulfuric
acid business as an asset held for sale in accordance with SFAS 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." The
Company sold substantially all the net assets of the sulfuric acid
business and the Hickson organics business in the third quarter of
2003.
(d) Includes a cumulative minimum pension liability adjustment,
net of tax, of $80.5 and $61.3 million for 2003 and 2002,
respectively.
Arch Chemicals, Inc.
Condensed Consolidated Statements of Cash Flows (a)
(In millions)
------------------------------------------------------------------
Years Ended December 31, 2003 2002
------------------------------------------------------------------
Operating Activities:
Net Income $27.4 $3.0
Adjustments to Reconcile Net Income to Net Cash
and Cash Equivalents Provided by
Operating Activities:
Loss from Discontinued Operations 1.8 1.8
(Gain) Loss on Sales of Discontinued Operations (14.5) 1.5
Cumulative Effect of Accounting Change 0.4 -
Equity in Earnings of Affiliates (11.7) (6.4)
Depreciation and Amortization 52.7 52.9
Deferred Taxes 1.3 (1.4)
Other (Gains) and Losses (3.0) (1.8)
Restructuring (Income) Expense (0.6) 7.6
Restructuring Payments (4.5) (6.6)
Changes in Assets and Liabilities, Net of
Purchase and Sale of Businesses:
Accounts Receivable Securitization Program (33.5) 33.5
Receivables (8.5) 22.5
Inventories 17.3 (7.7)
Other Current Assets 1.9 0.4
Accounts Payable and Accrued Liabilities 0.7 11.9
Noncurrent Liabilities (1.0) (1.5)
Other Operating Activities 7.9 4.9
------------------------------------------------------------------
Net Operating Activities from Continuing
Operations 34.1 114.6
Change in Net Assets Held for Sale (13.5) (1.2)
------------------------------------------------------------------
Net Operating Activities 20.6 113.4
------------------------------------------------------------------
Investing Activities:
Capital Expenditures (20.3) (31.4)
Business Acquired in Purchase Transaction, Net of
Cash Acquired (2.5) -
Proceeds From Sales of Businesses 61.2 25.0
Proceeds From Sales of Property, Plant and
Equipment 2.8 2.3
Other Investing Activities 2.1 0.4
------------------------------------------------------------------
Net Investing Activities 43.3 (3.7)
------------------------------------------------------------------
Financing Activities:
Long-Term Debt Borrowings (Repayments), net (0.7) (69.7)
Short-Term Borrowings (Repayments), net (1.7) (227.3)
Issuance of Unsecured Senior Notes - 211.0
Dividends Paid (18.0) (17.9)
Other Financing Activities 6.5 0.9
------------------------------------------------------------------
Net Financing Activities (13.9) (103.0)
------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents 2.6 1.5
------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 52.6 8.2
Cash and Cash Equivalents, Beginning of Year 12.2 4.0
------------------------------------------------------------------
Cash and Cash Equivalents, End of Year $64.8 $12.2
------------------------------------------------------------------
(a) Unaudited. As a result of the sale of the sulfuric acid
business, the Company has restated its financial statements to reflect
the sulfuric acid business as an asset held for sale in accordance
with SFAS 144, "Accounting for the Impairment or Disposal of Long-
Lived Assets." The Company sold substantially all the net assets of
the sulfuric acid business and the Hickson organics business in the
third quarter of 2003.
Arch Chemicals, Inc.
Segment Information (a)
(In millions)
----------------------------------------------------------------------
2003
----------------------------------------------------------------------
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
----------------------------------------------------------------------
Sales:
Treatment Products:
- HTH Water Products $52.6 $122.5 $75.4 $39.2 $289.7
- Personal Care and
Industrial Biocides 38.3 37.5 37.1 36.4 149.3
- Wood Protection and
Industrial Coatings 59.9 72.1 68.1 68.2 268.3
----------------------------------------------------------------------
Total Treatment Products 150.8 232.1 180.6 143.8 707.3
Microelectronic Materials 34.9 37.6 36.5 36.6 145.6
Performance Products:
- Performance Urethanes 30.2 28.7 31.5 31.8 122.2
- Hydrazine 8.4 10.1 7.6 7.9 34.0
----------------------------------------------------------------------
Total Performance
Products 38.6 38.8 39.1 39.7 156.2
----------------------------------------------------------------------
Total Sales $224.3 $308.5 $256.2 $220.1 $1,009.1
----------------------------------------------------------------------
Operating Income (Loss) (b):
Treatment Products:
- HTH Water Products $3.4 $18.1 $(0.8) $(11.6) $9.1
- Personal Care and
Industrial Biocides 7.8 7.1 7.2 7.4 29.5
- Wood Protection and
Industrial Coatings 2.2 4.1 4.1 4.7 15.1
----------------------------------------------------------------------
Total Treatment Products 13.4 29.3 10.5 0.5 53.7
Microelectronic Materials (0.5) - 0.6 1.6 1.7
Performance Products:
- Performance
Urethanes (c) (2.4) (1.5) (2.0) 0.5 (5.4)
- Hydrazine 0.1 0.8 0.3 0.9 2.1
----------------------------------------------------------------------
Total Performance
Products (2.3) (0.7) (1.7) 1.4 (3.3)
----------------------------------------------------------------------
10.6 28.6 9.4 3.5 52.1
General Corporate
Expenses (d) (3.2) (3.5) (1.9) (5.0) (13.6)
----------------------------------------------------------------------
Total Operating (Loss)
Income before
Restructuring 7.4 25.1 7.5 (1.5) 38.5
Restructuring Income
(Expense) 0.8 (1.4) - 1.2 0.6
----------------------------------------------------------------------
Total Operating Income
(Loss) $8.2 $23.7 $7.5 $(0.3) $39.1
----------------------------------------------------------------------
2002
----------------------------------------------------------------------
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
----------------------------------------------------------------------
Sales:
Treatment Products:
- HTH Water Products $48.5 $114.8 $62.1 $17.7 $243.1
- Personal Care and
Industrial Biocides 29.4 32.0 32.3 30.8 124.5
- Wood Protection and
Industrial Coatings 52.7 61.9 61.7 56.9 233.2
----------------------------------------------------------------------
Total Treatment Products 130.6 208.7 156.1 105.4 600.8
Microelectronic Materials 32.2 35.8 38.2 36.4 142.6
Performance Products:
- Performance Urethanes 31.5 31.1 28.7 28.9 120.2
- Hydrazine 8.9 11.1 10.6 11.4 42.0
----------------------------------------------------------------------
Total Performance
Products 40.4 42.2 39.3 40.3 162.2
----------------------------------------------------------------------
Total Sales $203.2 $286.7 $233.6 $182.1 $905.6
----------------------------------------------------------------------
Operating Income (Loss) (b):
Treatment Products:
- HTH Water Products $4.7 $15.3 $(3.3) $(17.7) $(1.0)
- Personal Care and
Industrial Biocides 6.3 7.2 7.8 7.6 28.9
- Wood Protection and
Industrial Coatings 2.3 6.1 4.1 4.3 16.8
----------------------------------------------------------------------
Total Treatment Products 13.3 28.6 8.6 (5.8) 44.7
Microelectronic Materials (4.3) (2.4) 1.2 2.8 (2.7)
Performance Products:
- Performance Urethanes (1.6) 0.3 0.5 (0.1) (0.9)
- Hydrazine 1.2 1.7 - 2.7 5.6
----------------------------------------------------------------------
Total Performance
Products (0.4) 2.0 0.5 2.6 4.7
----------------------------------------------------------------------
8.6 28.2 10.3 (0.4) 46.7
General Corporate
Expenses (d) (3.9) (3.3) (3.7) (3.2) (14.1)
----------------------------------------------------------------------
Total Operating Income
(Loss) before
Restructuring 4.7 24.9 6.6 (3.6) 32.6
Restructuring Income
(Expense) (7.6) - - - (7.6)
----------------------------------------------------------------------
Total Operating Income
(Loss) $(2.9) $24.9 $6.6 $(3.6) $25.0
----------------------------------------------------------------------
(a) Unaudited. Restated to reflect new reporting segments.
(b) Includes equity in earnings (losses) of affiliated companies.
(c) The fourth quarter and full year includes an insurance settlement
of $3.3 million for the reimbursement of past and future repairs of
one of the Company's manufacturing locations.
(d) Includes certain general expenses of the corporate headquarters
that are not allocated to the business segments, including costs
associated with the Company's accounts receivable securitization
program. The third quarter and full year 2003 also includes the gain
on the sale of land of $2.5 million.
Arch Chemicals, Inc.
Reconciliation of GAAP to Non-GAAP Information (Unaudited):
(In millions)
----------------------------------------------------------------------
Three Years
Months Ended Ended
December 31, December 31,
2003 2002 2003 2002
----------------------------------------------------------------------
Adjusted EBITDA:
Income (Loss) from Continuing
Operations Before Cumulative
Effect of Accounting Change $(2.1) $(4.4) $15.1 $6.3
Add (deduct):
Interest Expense, net 3.9 3.8 16.5 16.0
Income Tax Provision (Benefit) (2.1) (3.0) 7.5 2.7
Depreciation and Amortization 13.6 12.6 52.7 52.9
Dividends from Affiliated
Companies 1.2 0.2 6.7 3.3
Equity In (Earnings) of
Affiliated Companies (4.2) (2.7) (11.7) (6.4)
Restructuring (Income) Expense (1.2) - (0.6) 7.6
Discontinued Operations
Adjusted EBITDA (a) - 2.7 4.6 6.7
----------------------------------------------------------------------
Adjusted EBITDA $9.1 $9.2 $90.8 $89.1
======================================================================
(a)Discontinued operations
adjusted EBITDA is calculated
as follows:
Income (Loss) from
Discontinued Operations, net
of tax $- $1.2 $(1.8) $(1.8)
Add (deduct):
Restructuring (Income)
Expense - - (0.1) 1.9
Impairment - - 4.0 -
Reserve for Hickson & Welch
Estimated Losses (b) - - - 1.4
Hickson and Welch Losses
offset against reserve - - - (1.4)
Retention Charges - - - 0.4
Interest Expense, net - 0.5 0.8 2.0
Income Tax Provision - 0.1 0.3 0.4
Depreciation - 0.9 1.4 3.8
----------------------------------------------------------------------
Discontinued Operations
Adjusted EBITDA $- $2.7 $4.6 $6.7
======================================================================
(b)In accordance with APB No. 16, the Company estimated the net
future results of operations through the third quarter 2002.
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