Arch Chemicals Reports Third Quarter 2004 Results.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. -- 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:
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: --Sales Increased Approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 24 Percent over the Prior Year's Quarter. --Third Quarter Earnings 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 $0.25 Per Share Compared to $0.09 in the Prior Year's Quarter. --The Company Has Signed a Definitive Agreement to Sell the Majority of the Operations of Its Microelectronic The miniaturization of electronic circuits. See chip. Materials Business. ARCH CHEMICALS, INC. (NYSE: ARJ) announced third quarter 2004 sales of $316.7 million compared to $256.2 million in 2003. 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 $14.3 million in 2004 compared to operating income of $7.5 million in 2003, while earnings per share from continuing operations were $0.25 for the third quarter 2004 on $5.8 million of income, compared to $0.09 income per share on earnings of $2.1 million in 2003. "I am again encouraged by our improved year-over-year performance, which was principally driven by double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. increases in sales and earnings in our personal care and industrial biocides businesses, as well as our wood protection operations," 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. . "These increases helped offset a decline in pool chemical sales due to cool, wet weather, and persistently high raw material costs that impacted several of our businesses. Also," Mr. Campbell added, "I'm I'm Contraction of I am. Our Living Language Speakers of some scattered varieties of American English sometimes use I'm instead of I've or I have in present perfect constructions, as in very pleased to have reached agreement last week to sell the majority of our Microelectronic Materials operations to Fuji Fuji (f  `jē), city (1990 pop. 222,490), Shizuoka prefecture, S central Honshu, Japan, on Suruga Bay. Photo Film Co., Ltd. for
approximately $160 million. This divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). marks a significant
milestone “Milemarker” redirects here. For the American indie rock band, see Milemarker (band).A milestone or kilometre sign is one of a series of numbered markers placed along a road at regular intervals, typically at the side of the road or in a median. in the transformation of our portfolio. It supports our strategy to concentrate resources on our key growth platform, Treatment Products. We view these businesses as less cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. and R&D-oriented than the Microelectronic Materials business. We believe this transaction serves the best interests of our stakeholders Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. -- our shareholders, customers and employees." The following compares segment sales and operating income for the third quarters of 2004 and 2003 (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 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). and certain unallocated expenses of the corporate headquarters): Treatment Products Treatment Products reported sales of $234.7 million and operating income of $17.8 million compared with sales and operating income of $180.6 million and $10.5 million, respectively, in 2003. HTH (chat) HTH - Hope This Helps. Often used sarcastically, see HAND. Water Products HTH water products reported sales of $83.0 million 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 $6.7 million for 2004 compared to sales and an operating loss of $75.4 million and $0.8 million, respectively, in 2003. Sales increased $7.6 million, or approximately 10 percent, principally due to the acquisitions of Avecia's pool and spa business and Aquachlor ($12.9 million). Excluding the impact of acquisitions, sales decreased approximately seven percent due to lower European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. and North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. residential swimming pool volumes, which were slightly offset by favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. foreign currency rates. The lower sales in 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). resulted
from unfavorable weather conditions throughout Europe and increased
competition in France. The lower North American sales resulted from
unfavorable weather conditions that led to lower pool maintenance
products and accessory accessory, in criminal law, a person who, though not present at the commission of a crime, becomes a participator in the crime either before or after the fact of commission. volumes and lower 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 (Pace(R)) pricing, partially offset by higher non-branded calcium hypochlorite calcium hypochlorite n. A white crystalline solid used as a bactericide, fungicide, and bleaching agent. volumes. Operating loss increased by $5.9 million as favorable foreign currency rates were more than offset by lower sales excluding acquisitions, higher raw material costs, increased selling and advertising expenses for pool dealer integration initiatives and the modest negative contribution from the acquisition of Avecia's pool and spa business. Personal Care and Industrial Biocides Personal care and industrial biocides reported sales of $65.5 million and operating income of $17.2 million compared to sales and operating income of $37.1 million and $7.2 million, respectively, in 2003. Sales increased $28.4 million, or approximately 77 percent, due to the acquisition of Avecia's protection and hygiene hygiene, science of preserving and promoting the health of both the individual and the community. It has many aspects: personal hygiene (proper living habits, cleanliness of body and clothing, healthful diet, a balanced regimen of rest and exercise); domestic hygiene business ($21.3 million), increased international volumes for personal care intermediate products and continued strong demand for biocides used in building products, antidandruff shampoos and marine antifouling paints 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 . Excluding the impact of the acquisition, sales increased approximately 19 percent from the year-ago period. Operating income increased by $10.0 million as a result of the higher sales, the positive contribution from the acquisition and lower legal expenses, which were partially offset by higher selling and administration costs to support growth initiatives. In addition, this quarter's operating results benefited ($3.1 million) from the recognition of the balance of a $6.1 million settlement of a favorable judgment obtained earlier this year against a former owner of an acquired company and from a gain on the sale of a building ($0.6 million). 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 $86.2 million and operating income of $7.3 million compared to sales and operating income of $68.1 million and $4.1 million, respectively, in 2003. Sales increased approximately 27 percent over the prior year, principally due to favorable product mix, as higher volumes of CCA-alternative products (Wolman(R) E and Tanalith(R) E) and moldecides more than offset lower volumes of traditional CCA (1) (Common Cryptographic Architecture) Cryptography software from IBM for MVS and DOS applications. (2) (Compatible Communications A products. Sales also increased from the addition of new customers in the wood protection business and higher industrial coatings sales due to favorable foreign exchange. The improvement in product mix is a result of the transition to a new generation of 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. for use in the residential market, driven by the voluntary withdrawal in the U.S. by wood treatment manufacturers of their CCA registrations for non-industrial uses as of December December: see month. 31, 2003. Operating income increased by $3.2 million over the prior year due to the higher sales, lower CCA legal costs and favorable foreign currency, partially offset by higher raw material costs. Microelectronic Materials Microelectronic Materials reported sales of $39.9 million and operating income of $5.0 million compared to sales of $36.5 million and operating income of $0.6 million for 2003. Sales were approximately nine percent higher than 2003 principally due to higher photoresists demand in all regions, partially offset by pricing pressure in certain ancillary Subordinate; aiding. A legal proceeding that is not the primary dispute but which aids the judgment rendered in or the outcome of the main action. A descriptive term that denotes a legal claim, the existence of which is dependent upon or reasonably linked to a main claim. and polyimides product lines. Operating income increased by $4.4 million as a result of the higher sales and improved operating results from the Company's FUJIFILM Fujifilm Holdings Corporation or Fujifilm (富士フイルム株式会社 Arch joint venture, partially offset by the unfavorable effects of foreign exchange. Performance Products Performance Products reported sales of $42.1 million and an operating loss of $3.1 million compared with sales and an operating loss of $39.1 million and $1.7 million, respectively, in 2003. Performance urethanes sales increased approximately 19 percent over the prior year as a result of higher North American volumes due to stronger demand and improved pricing for glycol glycol (glī`kōl), dihydric alcohol in which the two hydroxyl groups are bonded to different carbon atoms; the general formula for a glycol is (CH2)n(OH)2. and specialty 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. products. Operating results improved slightly as the higher sales and lower selling and administration expenses resulting from cost-reduction initiatives were offset by higher raw material and energy costs as well as a charge for a Brazilian import tax claim. The results for 2003 included a provision for bad debt expense related to the economic instability instability /in·sta·bil·i·ty/ (-stah-bil´i-te) lack of steadiness or stability. detrusor instability 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. . 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 by $3.1 million, or approximately 41 percent. The lower sales were 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. revenues as a result of the expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of a long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. propellants supply contract with the U.S. government on April 30, 2004, partly offset by increased demand for Ultra Pure(TM) Hydrazine. Operating income was lower than prior year due to the lower hydrazine propellant revenues. Other Items U.S. Government Contract: As previously reported, the U.S. Government Accountability Office The Government Accountability Office (GAO) is the audit, evaluation, and investigative arm of the United States Congress, and thus an agency in the Legislative Branch of the United States Government. (GAO) has sustained Arch's formal protest of the Defense Energy Support Center's (DESC desc description DESC descending DESC Defense Energy Support Center DESC Defense Electronics Supply Center DESC District Explorer Scout Commissioner (UK) DESC Detroit Executive Service Corps (Michigan) ) recent decision to award the government's next 10-year hydrazine propellant supply contract to a competing firm. The contract involves supplying propellants for use by NASA NASA: see National Aeronautics and Space Administration. NASA in full National Aeronautics and Space Administration Independent U.S. in the Space Shuttle space shuttle, reusable U.S. space vehicle. Developed by the National Aeronautics and Space Administration (NASA), it consists of a winged orbiter, two solid-rocket boosters, and an external tank. and by the Air Force in government satellites and launch rockets The following a list of rockets. Launch systems Known as "space rockets", these vehicle families have had launch attempts.
As a result of the GAO's action, the DESC has notified the Company that it has taken corrective action A corrective action is a change implemented to address a weakness identified in a management system. Normally corrective actions are instigated in response to a customer complaint, abnormal levels if internal nonconformity, nonconformities identified during an internal audit or by re-opening the bidding process. The bid schedule has again been revised by the DESC, with the closing date for price proposals extended until December 10, 2004. The DESC has informed the Company that it anticipates completing its contract-award decision soon thereafter. Sale of Microelectronic Materials Business: On October October: see month. 25, the Company announced that it has signed a definitive agreement to sell the majority of the operations of its Microelectronic Materials business to Fuji Photo Film Co., Ltd. for approximately $160 million. The transaction, which is expected to close by year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. , is subject to regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approvals and other customary closing conditions. The transaction sales price is subject to a final post-closing working capital adjustment. The proceeds from the divestiture will be principally used to pay down debt. The Microelectronic Materials businesses to be sold had sales of approximately $135 million in 2003, earnings before interest and taxes In financial and business accounting, earnings before interest and taxes (EBIT) is a measure of a firm's profitability that excludes interest and income tax expenses.[1] EBIT = Operating Revenue – Operating Expenses + Non-operating Income of $1.9 million (including the allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of corporate charges), depreciation and amortization of $11.6 million and 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. of $2.9 million. Equity in earnings and cash dividends from the Company's FUJIFILM Arch Co., Ltd. joint venture were $6.1 million and $2.0 million, respectively, in 2003. For the nine months ended September September: see month. 30, 2004, the Microelectronic Materials businesses to be sold had sales of approximately $110 million, earnings before interest and taxes of $9.2 million (including the allocation of corporate charges), depreciation and amortization of $7.5 million and capital spending of $1.1 million. Equity in earnings and cash dividends from the Company's FUJIFILM Arch Co., Ltd. joint venture were $10.3 million and $4.4 million, respectively. 2004 Outlook The Company's guidance assumes a full quarter of results from our Microelectronic businesses and prior to reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of its results as a discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: business. After reclassification of these businesses as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , the effective tax rate from continuing operations will increase due to the absence of the favorable tax impact for equity earnings from the FUJIFILM-Arch joint venture. For the full-year 2004, sales are expected to increase approximately 22 to 24 percent over 2003. Earnings from continuing operations before restructuring are expected to be at the low end of our previous guidance of $1.15 to $1.25 per share range. This guidance reflects the $2.1 million charge for a Brazilian import tax claim recorded in the third quarter, as well as continuing increases in raw material and energy costs. Depreciation and amortization is estimated to be approximately $60 million. Capital spending is anticipated to be in the $20 to $25 million range, compared to the Company's previous guidance of $25 to $30 million range. Traditionally, Arch's fourth quarter is the weakest due to the seasonality of its Treatment Products businesses, principally HTH water products. The Company anticipates the loss from continuing operations in the fourth quarter 2004 to be in the $0.20 to $0.30 per share range, compared to a loss of $0.09, which included restructuring income of $0.03 per share, for the prior-year quarter. This guidance includes the adverse impact caused by the continuing increases in raw material costs, particularly copper in the wood protection business, propylene propylene /pro·pyl·ene/ (pro´pi-len) a gaseous hydrocarbon, CH3CHdbondCH2. propylene glycol a colorless viscous liquid used as a humectant and solvent in pharmaceutical preparations. in the performance urethanes business and chlorine chlorine (klōr`ēn, klôr`–) [Gr.,=green], gaseous chemical element; symbol Cl; at. no. 17; at. wt. 35.453; m.p. −100.98°C;; b.p. −34.6°C;; density 3.2 grams per liter at STP; valence −1, +1, +3, +5, +7. in the HTH water products business. Furthermore, in light of the DESC's decision to re-bid the next long-term hydrazine propellant supply contract, the Company continues to assume that there will be no impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. and, as a result, depreciation and certain other costs will continue. The impact on pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta earnings is approximately $1.5 million for the fourth quarter of 2004. 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, Connecticut Connecticut, state, United States Connecticut (kənĕt`ĭkət), southernmost of the New England states of the NE United States. It is bordered by Massachusetts (N), Rhode Island (E), Long Island Sound (S), and New York (W). , 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 more than $1 billion in annual sales. Arch and its subsidiaries have leadership positions in three business segments -- Treatment Products, Microelectronic Materials and Performance Products -- and they serve leading customers in these markets with forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. solutions to meet their chemical needs. Together with its subsidiaries, Arch has approximately 3,300 employees and manufacturing and customer-support facilities in North and 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, Asia and Africa. For more information, visit the Company's Web site at http://www.archchemicals.com. --Listen in live to Arch Chemicals' third quarter 2004 earnings conference call on Tuesday Tuesday: see week. , November November: see month. 2, 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: (866) 800-8651, access # 94922225, 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) 614-2704, access # 94922225, outside the United States. --A telephone replay will be available from 1:00 p.m. on Tuesday, November 2, 2004 until 6:00 p.m. (ET) on Tuesday, November 9, 2004. The replay number is (888) 286-8010, access # 39615426; from outside the United States, please call (617) 801-6888, access # 39615426. 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; strengthening of the U.S. dollar against the foreign currencies; customer acceptance of new products; efficacy 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 , jury decisions or tax matters; 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 be awarded a new 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)
(In millions, except per share amounts)
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Three Months Nine Months
Ended September 30, Ended September 30,
2004 2003 2004 2003
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Sales $316.7 $256.2 $998.2 $789.0
Cost of Goods Sold 231.4 182.8 712.7 560.4
Selling and Administration 68.3 66.0 209.7 181.2
Research and Development 6.2 5.8 19.3 17.4
Equity In (Earnings) of
Affiliated Companies (5.0) (3.4) (13.3) (7.5)
Other (Gains) and Losses (b) 1.5 (2.5) 1.2 (2.5)
Restructuring (c) - - 1.7 0.6
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Income from Continuing
Operations Before Interest,
Taxes and Cumulative Effect
of Accounting Change 14.3 7.5 66.9 39.4
Interest Expense, net 5.3 4.2 14.6 12.6
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Income from Continuing
Operations Before Taxes and
Cumulative Effect of
Accounting Change 9.0 3.3 52.3 26.8
Income Tax Provision 3.2 1.2 18.3 9.6
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Income from Continuing
Operations Before Cumulative
Effect of Accounting Change 5.8 2.1 34.0 17.2
Income (Loss) from Discontinued
Operations, net of tax (d) - 0.6 - (1.8)
Gain (Loss) on Sale of
Discontinued Operations, net
of tax (e) (0.2) 15.0 (0.2) 15.0
Cumulative Effect of Accounting
Change, net of tax (f) - - - (0.4)
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Net Income $5.6 $17.7 $33.8 $30.0
======================================================================
Basic Income Per Share:
Continuing Operations Before
Cumulative Effect of
Accounting Change $0.25 $0.09 $1.47 $0.76
Income (Loss) from
Discontinued Operations (d) - 0.03 - (0.08)
Gain (Loss) on Sale of
Discontinued Operations (e) (0.01) 0.66 (0.01) 0.66
Cumulative Effect of
Accounting Change (f) - - - (0.02)
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Basic Income Per Share $0.24 $0.78 $1.46 $1.32
======================================================================
Diluted Income Per Share:
Continuing Operations Before
Cumulative Effect of
Accounting Change $0.25 $0.09 $1.45 $0.76
Income (Loss) from
Discontinued Operations (d) - 0.03 - (0.08)
Gain (Loss) on Sale of
Discontinued Operations (e) (0.01) 0.66 (0.01) 0.66
Cumulative Effect of
Accounting Change (f) - - - (0.02)
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Diluted Income Per Share $0.24 $0.78 $1.44 $1.32
======================================================================
Weighted Average Common Stock
Outstanding - Basic 23.4 22.6 23.1 22.6
Weighted Average Common Stock
Outstanding - Diluted 23.7 22.7 23.4 22.6
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Adjusted EBITDA (g) $24.3 $18.1 $109.5 $81.7
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(a) Unaudited.
(b) The third quarter 2004 includes a charge of $2.1 million for a
Brazilian state import tax claim principally in the performance
urethanes business offset by a pretax gain on the sale of a
building in the personal care business of $0.6 million. Full year
2004 also includes the pretax gain on the sale of excess property
related to the microelectronic materials business. 2003 represents
the pretax gain on the sale of excess land of $2.5 million.
(c) 2004 restructuring includes employee-related costs for the
hydrazine business of $2.1 million, offset by a reduction of the
prior years' restructuring reserves of $0.4 million. 2003
restructuring represents severance costs of $2.5 million for
headcount reductions related to the performance products segment
($1.1 million associated with a revision of the 2002
organizational restructuring program) offset by a reduction of the
prior years' restructuring reserve of $1.9 million.
(d) Represents the results of operations of the sulfuric acid business
and the Hickson organics business, net of tax.
(e) 2004 is principally a post-closing working capital adjustment
related to the sale of the Hickson organics business. 2003
represents an after-tax gain of $16.5 million on the sale of the
sulfuric acid business and an after-tax loss of $1.5 million on
the sale of the Hickson organics business.
(f) Reflects the adoption of SFAS No. 143, "Accounting for Asset
Retirement Obligations."
(g) Represents earnings before interest, taxes, depreciation and
amortization, excludes restructuring, other non-cash adjustments,
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 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)
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September 30, December 31,
2004 (a) 2003
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Assets:
Cash & Cash Equivalents $38.7 $64.8
Accounts Receivable, Net (b) 152.1 124.9
Short-Term Investment (b) 14.1 43.3
Inventories, Net 172.8 141.6
Other Current Assets 26.1 27.9
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Total Current Assets 403.8 402.5
Investments and Advances - Affiliated
Companies at Equity 41.0 38.2
Property, Plant and Equipment, Net 290.5 281.4
Goodwill 204.4 137.3
Other Intangibles 154.0 61.1
Other Assets 55.2 55.9
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Total Assets $1,148.9 $976.4
----------------------------------------------------------------------
Liabilities and Shareholders' Equity:
Short-Term Borrowings $19.4 $0.7
Accounts Payable 164.1 139.9
Accrued Liabilities 99.5 88.5
----------------------------------------------------------------------
Total Current Liabilities 283.0 229.1
Long-Term Debt 291.2 218.5
Other Liabilities 202.9 191.1
----------------------------------------------------------------------
Total Liabilities 777.1 638.7
Commitments and Contingencies
Shareholders' Equity:
Common Stock, Par Value $1 Per Share,
Authorized 100.0 Shares: 23.4 Shares
Issued and Outstanding (22.5 in 2003) 23.4 22.5
Additional Paid-in Capital 416.6 398.2
Retained Earnings 33.4 13.4
Accumulated Other Comprehensive Loss (101.6) (96.4)
----------------------------------------------------------------------
Total Shareholders' Equity 371.8 337.7
----------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $1,148.9 $976.4
----------------------------------------------------------------------
(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, and the Company's undivided interest
in such receivables has been reflected as a short-term investment.
As of September 30, 2004, the Company had sold $49.2 million of
participation interests in $63.3 million of accounts receivable.
As of December 31, 2003, the Company had not sold any
participation interests in accounts receivable.
Arch Chemicals, Inc.
Condensed Consolidated Statements of Cash Flows (a)
(In millions)
----------------------------------------------------------------------
Nine Months Ended September 30, 2004 2003
----------------------------------------------------------------------
Operating Activities:
Net Income $33.8 $30.0
Adjustments to Reconcile Net Income to Net Cash and Cash
Equivalents Provided by (Used in) Operating Activities:
Loss from Discontinued Operations - 1.8
(Gain) loss on sale of discontinued operations 0.2 (15.0)
Cumulative Effect of Accounting Change - 0.4
Equity in Earnings of Affiliates (13.3) (7.5)
Other (Gains) Losses 1.2 (2.5)
Depreciation and Amortization 43.3 39.1
Deferred Taxes 6.1 -
Restructuring 1.7 0.6
Restructuring Payments (3.3) (4.0)
Changes in Assets and Liabilities, Net of Purchase and
Sale of Businesses:
Accounts Receivable Securitization Program 49.2 (33.5)
Receivables (18.5) (30.0)
Inventories (4.6) 16.4
Other Current Assets (0.2) 1.4
Accounts Payable and Accrued Liabilities 11.4 (1.3)
Noncurrent Liabilities 0.9 1.6
Other Operating Activities 9.9 6.3
----------------------------------------------------------------------
Net Operating Activities from Continuing Operations 117.8 3.8
Change in Net Assets Held for Sale - (13.5)
----------------------------------------------------------------------
Net Operating Activities 117.8 (9.7)
----------------------------------------------------------------------
Investing Activities:
Capital Expenditures (13.5) (12.4)
Business Acquired in Purchase Transaction, net of cash
acquired (215.9) (2.5)
Proceeds from sales of business - 61.5
Proceeds from sales of land 1.2 2.0
Other Investing Activities (0.2) 1.6
----------------------------------------------------------------------
Net Investing Activities (228.4) 50.2
----------------------------------------------------------------------
Financing Activities:
Long-Term Debt Borrowings 207.0 15.0
Long-Term Debt Repayments (132.5) (15.8)
Short-Term Borrowings (Repayments) 18.6 1.2
Dividends Paid (13.8) (13.5)
Other Financing Activities 3.6 6.7
----------------------------------------------------------------------
Net Financing Activities 82.9 (6.4)
----------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents 1.6 1.2
----------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (26.1) 35.3
Cash and Cash Equivalents, Beginning of Year 64.8 12.2
----------------------------------------------------------------------
Cash and Cash Equivalents, End of Period $38.7 $47.5
----------------------------------------------------------------------
(a) Unaudited.
Arch Chemicals, Inc.
Segment Information (a)
(In millions)
----------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
----------------------------------------------------------------------
Sales:
Treatment Products:
- HTH Water Products (b) $83.0 $75.4 $315.5 $250.5
- Personal Care and Industrial
Biocides (b) 65.5 37.1 172.9 112.9
- Wood Protection and Industrial
Coatings 86.2 68.1 267.8 200.1
----------------------------------------------------------------------
Total Treatment Products 234.7 180.6 756.2 563.5
Microelectronic Materials 39.9 36.5 119.1 109.0
Performance Products:
- Performance Urethanes 37.6 31.5 103.6 90.4
- Hydrazine 4.5 7.6 19.3 26.1
----------------------------------------------------------------------
Total Performance Products 42.1 39.1 122.9 116.5
----------------------------------------------------------------------
Total Sales $316.7 $256.2 $998.2 $789.0
----------------------------------------------------------------------
Operating Income (Loss) (c):
Treatment Products:
- HTH Water Products (b, d) $(6.7) $(0.8) $24.1 $20.7
- Personal Care and Industrial
Biocides (b, e, f) 17.2 7.2 38.8 22.1
- Wood Protection and Industrial
Coatings 7.3 4.1 21.4 10.4
----------------------------------------------------------------------
Total Treatment Products 17.8 10.5 84.3 53.2
Microelectronic Materials (e) 5.0 0.6 8.3 0.1
Performance Products:
- Performance Urethanes (d) (1.8) (2.0) (6.9) (5.9)
- Hydrazine (d) (1.3) 0.3 (1.1) 1.2
----------------------------------------------------------------------
Total Performance Products (3.1) (1.7) (8.0) (4.7)
----------------------------------------------------------------------
19.7 9.4 84.6 48.6
General Corporate Expenses (g) (5.4) (1.9) (16.0) (8.6)
----------------------------------------------------------------------
Total Segment Operating Income
before Restructuring 14.3 7.5 68.6 40.0
Restructuring - - (1.7) (0.6)
----------------------------------------------------------------------
Total Operating Income $14.3 $7.5 $66.9 $39.4
----------------------------------------------------------------------
(a) Unaudited.
(b) Includes the results of the acquired pool & spa and protection &
hygiene businesses from the date of acquisition on April 2, 2004.
(c) Includes equity in earnings (losses) of affiliated companies.
(d) The third quarter and full year includes a charge for a Brazilian
state import tax claim of $0.4 million, $1.6 million and $0.1
million for the water products, performance urethanes and
hydrazine businesses, respectively.
(e) Third quarter 2004 includes a gain on the sale of building of $0.6
million for the personal care business. Full year 2004 also
includes the gain on the sale of excess land in the
microelectronic materials business of $0.3 million.
(f) Third quarter 2004 includes a $3.1 million settlement from a
favorable judgment obtained earlier this year against a former
owner of an acquired company and full year 2004 includes $6.1
million.
(g) 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. Third quarter 2003 also includes the gain on sale of land
of $2.5 million.
Arch Chemicals, Inc.
Reconciliation of GAAP to Non-GAAP Information (Unaudited):
(In millions, except per share amounts)
----------------------------------------------------------------------
Three Months Nine Months
Ended Ended
September 30, September 30,
2004 2003 2004 2003
----------------------------------------------------------------------
Adjusted EBITDA:
Income from Continuing Operations Before
Cumulative Effect of Accounting Change $5.8 $2.1 $34.0 $17.2
Add (deduct):
Interest Expense, net 5.3 4.2 14.6 12.6
Income Tax Provision 3.2 1.2 18.3 9.6
Depreciation and Amortization 15.0 13.0 43.3 39.1
Dividends from Affiliated Companies - 0.3 9.8 5.5
Equity In (Earnings) of Affiliated
Companies (5.0) (3.4) (13.3) (7.5)
Restructuring - - 1.7 0.6
Purchase Accounting Adjustments - - 1.1 -
Discontinued Operations EBITDA (a) - 0.7 - 4.6
----------------------------------------------------------------------
Adjusted EBITDA $24.3 $18.1 $109.5 $81.7
======================================================================
(a) Discontinued Operations EBITDA is calculated as follows:
Income (Loss) from Discontinued
Operations, net of tax - $0.6 - $(1.8)
Add (deduct):
Restructuring - - - (0.1)
Impairment - - - 4.0
Interest Expense, net - 0.2 - 0.8
Income Tax Provision - (0.1) - 0.3
Depreciation - - - 1.4
------------------------------------------------------------------
Discontinued Operations EBITDA $- $0.7 $- $4.6
==================================================================
----------------------------------------------------------------------
Year ended
December 31,
2004
----------------------------------------------------------------------
The following table reconciles diluted income per share from
continuing operations before cumulative effect of accounting change to
diluted income per share from continuing operations before cumulative
effect of accounting change and restructuring for the full year 2004
outlook:
Diluted Income Per Share:
Income from Continuing Operations Before Cumulative
Effect of Accounting Change $1.11 $1.21
Add: Restructuring, net of tax 0.04 0.04
----------------------------------------------------------------------
Diluted Income Per Share from Continuing Operations
Before Cumulative Effect of Accounting Change and
Restructuring $1.15 $1.25
======================================================================
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