Arch Chemicals, Inc. (NYSE: ARJ)
Highlights:
- 2008 earnings were $1.49 per
share, which includes $1.00 per share of special items. Excluding
special items, earnings were $2.49 per share. Special items
primarily related to a $24.6 million, or $0.99 per share, goodwill
impairment charge for the Company�s industrial coatings
business.
- The acquisition of Advantis
Technologies provided a positive contribution.
- HTH water products, personal
care and industrial biocides achieved record profitability in
2008.
- For the full-year 2009, sales
are expected to grow by two to four percent and earnings from
continuing operations are expected to be in the $1.85 to $2.05 per
share range.
ARCH CHEMICALS, INC. (NYSE: ARJ) announced full-year
sales of $1,492.1 million in 2008, compared to $1,487.6 million
reported in 2007. Earnings per share from continuing operations for
the full-year 2008 were $1.49 per share on $37.0 million of income.
Included in the 2008 operating results is $25.0 million of special
items, or $1.00 per share. Excluding these special items, earnings
per share from continuing operations grew to $2.49 on $62.0 million
of income for 2008 compared to earnings per share for 2007 of
$2.30, which excluded $0.30 per share of special items. The special
items in 2008 primarily consist of a goodwill impairment charge for
the Company�s industrial coatings business ($24.6 million, or $0.99
per share).
Segment operating income was $113.7 million in 2008 compared to
$115.8 million in 2007. Included in the 2008 segment operating
income are gains which increased operating income by $1.8 million.
Included in the 2007 segment operating income was a gain of $12.8
million related to the completion of a contract with the U.S.
government. Excluding these gains, segment operating income was
$111.9 million in 2008 compared to $103.0 million in 2007, an
increase of nine percent.
�Despite the deterioration in global economies, we are very
pleased with our 2008 operating results, particularly our strong
finish to the year,� said Arch Chemicals� Chairman, President and
CEO Michael E. Campbell. �Our water products, personal care and
industrial biocides businesses again delivered record
profitability. This strong performance reflects the value of our
strategic focus on our core biocides businesses. In addition, the
operating income from the performance urethanes business exceeded
our expectations as we were able to maintain pricing in the face of
a decline in raw material costs.�
The following compares segment sales and operating income (loss)
for the fourth quarters of 2008 and 2007 (including equity in
earnings of affiliated companies and excluding restructuring and
impairment):
Treatment Products
Treatment Products reported sales of $260.5 million and
operating income of $14.2 million compared with sales of $282.5
million and operating income of $25.2 million in 2007.
HTH Water Products
HTH water products reported sales of $100.3 million and an
operating loss of $0.8 million for 2008 compared to sales of $87.7
million and operating income of $11.8 million for 2007. Included in
the operating results for 2007 was a benefit of approximately $14
million related to the favorable antidumping duty ruling for the
review period of December 16, 2004 to May 31, 2006, while the 2008
benefit was recorded in the third quarter of 2008.
Sales increased $12.6 million, or approximately 14 percent,
primarily due to the acquisition of the water treatment chemicals
business of Advantis Technologies ($21.8 million or approximately
25 percent). Excluding the acquisition, sales decreased by $9.2
million, or approximately 11 percent, as unfavorable foreign
exchange and lower volumes more than offset global price increases.
Lower volumes occurred in North America, due to lower demand in the
dealer segment, and in Latin America, due to a slow start to the
pool season. These lower volumes more than offset higher volumes in
South Africa.
Operating results decreased $12.6 million. Excluding the
antidumping duty ruling benefit, operating results increased in
2008 as price increases and the positive contribution of the
acquisition more than offset the lower sales volumes and higher raw
material, freight and distribution costs.
Personal Care and Industrial Biocides
Personal care and industrial biocides reported sales of $68.8
million and operating income of $17.9 million compared to sales and
operating income of $77.2 million and $12.4 million, respectively,
in 2007.
Sales decreased $8.4 million, or approximately 11 percent,
principally due to lower volumes for biocides used in building
products, due to the downturn in the global construction market,
and decreased demand for biocides used in health and hygiene
products. The lower volumes were partially offset by higher pricing
for health and hygiene products.
Operating income increased $5.5 million as improved pricing,
lower operating expenses, principally due to the timing of
toxicology and regulatory spending, and favorable foreign exchange
more than offset higher raw material costs and lower volumes.
Included in the operating results for 2008 is income from the sale
of rights to certain intellectual property of $0.9 million.
Wood Protection and Industrial Coatings
Wood protection and industrial coatings reported sales of $91.4
million and an operating loss of $2.9 million compared to sales and
operating income of $117.6 million and $1.0 million, respectively,
in 2007.
Sales decreased $26.2 million, or approximately 22 percent, as
lower volumes and unfavorable foreign exchange more than offset
improved pricing. In the wood protection business, lower volumes in
the North American and European residential sectors, due to the
downturn in global construction markets, were partially offset by
higher global prices. In the industrial coatings business, lower
volumes in western Europe, resulting from poor economic conditions,
were partially offset by increased prices.
Operating results decreased $3.9 million over the prior year as
lower volumes and higher raw material costs, principally in the
wood protection business, more than offset improved pricing.
Performance Products
Performance Products reported sales of $47.0 million and
operating income of $13.6 million compared with sales and operating
income of $61.7 million and $2.2 million, respectively, in
2007.
Performance urethanes sales decreased approximately 25 percent
over the prior year due to lower polyol and glycol volumes,
principally due to the slowing U.S. economy. These lower volumes
were partially offset by higher pricing. Included in 2008 operating
income is a gain of $1.1 million related to a Brazilian state
import tax claim. Excluding this gain, operating income increased
by $9.7 million principally due to lower raw material costs, as
propylene settled at a six-year low, and price increases more than
offset the lower volumes.
Hydrazine sales and operating income were comparable to
2007.
General Corporate Expenses
General corporate expenses increased $3.4 million principally
due to unfavorable foreign exchange associated with certain
dollar-denominated loans of its foreign subsidiaries.
Impairment
During the fourth quarter of 2008, the Company recorded a
non-cash goodwill impairment charge of $24.6 million, which
eliminated the remaining carrying amount of goodwill related to the
industrial coatings business. In addition, the Company recorded a
$1.2 million non-cash impairment charge for certain manufacturing
assets in the wood protection and industrial coatings
businesses.
Other
During the fourth quarter, the Company entered into an equity
swap contract to hedge its exposure to the mark-to-market impact of
its stock price on compensation expense�of its�share-based
compensation�programs. Prior to entering�into the swap, the
Company's fourth quarter results benefited approximately $0.10 per
share due to the decrease in the stock price from the�end�of the
third quarter�until the effective date of the hedge.
2009 Outlook
The Company expects full-year 2009 sales to increase by
approximately two to four percent, as the contribution from the
acquisition of the water treatment chemicals business of Advantis
Technologies and higher pricing should be partially offset by
unfavorable foreign exchange. Earnings per share from continuing
operations are forecast to be in the $1.85 to $2.05 range.
Depreciation and amortization is estimated to be approximately $50
million. Capital spending is anticipated to be in the $35 to $40
million range. The effective tax rate is estimated to be in the 37
to 38 percent range.
The Company�s 2009 outlook assumes continued weakness in global
economies throughout the year as well as headwinds from unfavorable
foreign exchange due to the strengthening of the U.S. dollar. The
HTH water products business is expected to report higher profits
due to the positive contribution from the acquisition of the
Advantis Technologies water treatment chemicals business, including
related synergies, as well as improved pricing. This guidance
assumes an antidumping duty rate of approximately 1 percent in 2009
and an estimated pre-tax benefit of approximately $3 million for
the current administrative period under review. The Company expects
lower operating results for personal care and industrial biocides.
This is due to decreased demand for industrial biocides
applications as a result of the depressed building products and
automotive markets. Additionally, the business will be impacted by
increased spending for regulatory and toxicology compliance and
additional costs for the Company�s new manufacturing facilities in
China. Wood protection and industrial coatings results are forecast
to be lower due to the continued weakness in the global housing and
construction markets. This weakness will more than offset
anticipated lower raw material costs. Performance products results
are expected to be below 2008 due to lower pricing in response to
competitive activities in the polyol and glycol markets as a result
of the decrease in raw material costs, principally propylene and
ethylene in the fourth quarter of 2008, and continued lower demand
for flexible polyols as a result of market conditions. General
corporate expenses are expected to be higher due to higher pension
expense and the absence of a royalty stream that ended in 2008. In
addition, the Company anticipates higher interest expense.
For the first quarter, the Company anticipates a loss per share
from continuing operations to be in the $(0.15) to $(0.05) per
share range, compared to earnings per share from continuing
operations of $0.23 during the first quarter of 2008. The�expected
decrease in first quarter�results is principally due to lower
results for the industrial biocides and personal care�business due
to lower demand, additional costs for the Company�s new
manufacturing facilities in China and lower results for the wood
protection and industrial coatings businesses from continued
weakness in the global construction and housing markets. In
addition, the Company anticipates higher interest expense related
to the borrowings from the�recent acquisition and higher pension
expense. These�are expected to be partially offset by modestly
higher performance products results due to lower raw material
costs.
�While we expect the current global recession to continue
throughout 2009, our relentless commitment to improve profit
margins, reduce costs, optimize our portfolio to focus on our core
biocides businesses and maximize cash generation will help deliver
long-term shareholder value, including maintaining an attractive
dividend,� said Mr. Campbell.
Note: All references to earnings per share above reflect diluted
earnings per share.
About Arch
Headquartered in Norwalk, Connecticut (USA), Arch Chemicals,
Inc. is a global Biocides company with annual sales of
approximately $1.5 billion. Arch and its subsidiaries provide
innovative, chemistry-based solutions to control the growth of
harmful microbes. The Company�s concentration is in water
treatment, hair and skin care products, treated wood, paints and
coatings, building products and health and hygiene applications.
Arch Chemicals operates in two segments: Treatment Products and
Performance Products. Together with its subsidiaries, Arch has
approximately 3,000 employees and manufacturing and
customer-support facilities in North and South America, Europe,
Asia, Australia and Africa. For more information, visit the
Company�s Web site at http://www.archchemicals.com.
- Listen in live to Arch
Chemicals� fourth quarter 2008 earnings conference call on
Wednesday, February 4, 2009 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: (888)
690-2881, passcode 6234103, in the United States, or (913)
312-0676, passcode 6234103, outside the United States.
- A telephone replay will be
available from 1:00 p.m. on Wednesday, February 4, 2009 until 6:00
p.m. (ET) on Wednesday, February 11, 2009. The replay number is
(888) 203-1112, passcode 6234103; from outside the United States,
please call (719) 457-0820, passcode 6234103.
Except for historical information contained herein, the
information set forth in this communication contains
forward-looking statements that are based on management's beliefs,
certain assumptions made by management and management's current
expectations, outlook, estimates and projections about the markets
and economy in which the Company and its various businesses
operate. Words such as "anticipates," "believes," "estimates,"
"expects," "forecasts," "intends," "opines," "plans," "predicts,"
"projects," "should," "targets" 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; continued weakening in U.S. and European economies;
increases in interest rates; changes in economic conditions in
Asia; changes in foreign currencies against the U.S. dollar;
customer acceptance of new products; efficacy of new technology;
changes in U.S. or foreign laws and regulations; increased
competitive and/or customer pressure; the Company's ability to
maintain chemical price increases; higher-than-expected raw
material and energy costs and availability for certain chemical
product lines; a change in the antidumping duties on certain
products; price increases due to changes in Chinese taxes related
to exports from China; increased foreign competition in the calcium
hypochlorite markets; inability to obtain transportation for our
chemicals; unfavorable court decisions, including unfavorable
decisions in appeals of antidumping rulings, arbitration or 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;
capital expenditures in excess of those scheduled, such as the
China plant; environmental costs in excess of those projected; the
occurrence of unexpected manufacturing interruptions/outages at
customer or Company plants; a decision by the Company not to start
up the hydrates manufacturing facility; unfavorable weather
conditions for swimming pool use; inability to expand sales in the
professional pool dealer market; the impact of global weather
changes; changes in the Company�s stock price; ability to obtain
financing at attractive rates; financial market disruptions that
impact our customers or suppliers; and gains or losses on
derivative instruments.
Arch Chemicals, Inc.
Condensed Consolidated Statements
of Income (a)
(In millions, except per share
amounts)
�
Three Months �
Twelve Months Ended December
31, Ended December 31, � �
2008 �
2007 �
2008 �
2007 � �
Sales $ 307.5
$ 344.2 $ 1,492.1 $
1,487.6 Cost of Goods Sold (b) 218.3
242.5 1,063.3 1,055.7 Selling and
Administration (c) 69.9 77.1 295.5
309.7 Research and Development 4.8 5.3
21.8 20.1 Other (Gains) and Losses (d)
(1.8 ) - (1.8 ) (12.8
) Restructuring Expense (e) - 0.6
1.3 8.1 Impairment Charge (f) 25.8
(0.7 ) 25.8 7.9 Interest Expense,
Net (g) � �
3.5 � � �
1.9 � � �
10.7 � � �
13.3 �
(Loss) Income from Continuing
Operations Before Equity in Earnings of Affiliated Companies and
Taxes
(13.0 ) 17.5 75.5 85.6 Equity
in Earnings of Affiliated Companies 0.2 0.2
0.4 0.5 Income Tax Provision (h) � �
6.1 � � �
7.2 � � �
38.9 � � �
36.8 �
(Loss) Income from Continuing Operations (18.9
) 10.5 37.0 49.3 Income from
Discontinued Operations, Net of Tax (i) - -
- 0.9 Loss on Sale of Discontinued Operations, Net
of Tax (j) � �
- � � �
- � � �
- � � �
(14.9 ) Net (Loss) Income �
$
(18.9 ) �
$ 10.5 � �
$
37.0 � �
$ 35.3 � �
Basic (Loss) Income Per
Share: Continuing Operations $ (0.75
) $ 0.42 $ 1.49 $
2.01 Income from Discontinued Operations, Net of Tax
(i) - - - 0.04 Loss on Sale of
Discontinued Operations, Net of Tax (j) � �
- � � �
- � � �
- � � �
(0.61 ) Basic (Loss)
Income Per Share �
$ (0.75 ) �
$
0.42 � �
$ 1.49 � �
$ 1.44 � �
Diluted (Loss) Income Per Share: Continuing
Operations $ (0.75 ) $ 0.42
$ 1.49 $ 2.00 Income from
Discontinued Operations, Net of Tax (i) - -
- 0.03 Loss on Sale of Discontinued Operations,
Net of Tax (j) � �
- � � �
- � � �
- � � �
(0.60 ) Diluted (Loss) Income Per Share �
$ (0.75 ) �
$ 0.42 � �
$
1.49 � �
$ 1.43 � �
Weighted Average Common
Stock Outstanding - Basic 24.8 24.7 24.8
24.5 Weighted Average Common Stock Outstanding -
Diluted � �
24.8 � � �
24.9 � � �
24.9 � �
�
24.7 � �
(a) Unaudited.
�
(b) The twelve months ended
December 31, 2008 include an $11.5 million benefit related to the
favorable antidumping duty ruling for the period of review from
June 1, 2006 through May 31, 2007. The three and twelve months
ended December 31, 2007 include a benefit of $16.9 million related
to the favorable antidumping duty ruling for the period of review
from December 16, 2004 through May 31, 2006. The twelve months
ended December 31, 2007 included $0.4 million of inventory disposal
costs associated with the Company's decision to discontinue
manufacturing its BIT molecule ("BIT restructuring").
�
(c) The three and twelve months
ended December 31, 2007 include $6.3 million of costs as a result
of the favorable antidumping duty ruling.
�
(d) The three and twelve months
ended December 31, 2008 represents the reversal of penalties and
interest related to a Brazilian state import tax claim recorded in
2004 of $1.4 million due to the expiration of the statute of
limitations and a $0.4 million gain from a revised estimate of
shutdown costs related to the completion of a contract with the
U.S. Government in 2007. 2007 represents a gain for the completion
of a contract with the U.S. Government.
�
(e) The twelve months ended
December 31, 2008 represents a charge related to a pension
settlement associated with severance recorded in 2007. The three
and twelve months ended December 31, 2007 includes severance and
other related costs principally associated with the BIT
restructuring.
�
(f) The three and twelve months
ended December 31, 2008 represent a $24.6 million goodwill
impairment charge for the industrial coatings business and a $1.2
million impairment charge of certain manufacturing assets for the
wood protection and industrial coatings businesses. Impairment for
the twelve months ended December 31, 2007 represents the write-down
of manufacturing assets associated with the BIT restructuring.
Impairment for the three months ended December 31, 2007 represents
a valuation adjustment on the assets held for sale associated with
the BIT restructuring.
�
(g) The twelve months ended
December 31, 2008 include $1.2 million of interest income related
to the favorable antidumping ruling for the period of review from
June 1, 2006 through May 31, 2007. The three and twelve months
ended December 31, 2007 include $1.5 million of interest income
related to the favorable antidumping ruling for the period of
review from December 16, 2004 through May 31, 2006.
�
(h) The twelve months ended
December 31, 2007, include a $3.0 million charge for a change in
the U.K. tax rate related to pension adjustments previously
recorded in equity. In addition, the three and twelve months ended
December 31, 2007, include a $1.8 million benefit for the change in
the Italian tax rate on deferred tax items originally set up in
purchase accounting.
�
(i) Represents the results of
operations, net of tax, for the performance urethanes business in
Venezuela through the date of sale in September 2007.
�
(j) Represents the loss on sale
of the performance urethanes business in Venezuela.
Arch Chemicals, Inc.
Reconciliation of GAAP to Non-GAAP
Information (a)
(In millions, except per share
amounts)
�
The following table reconciles
income and diluted income per share from continuing operations to
income and diluted income per share from continuing operations
before restructuring, impairment and other (gains) and losses. The
table is being provided in order to provide comparability to prior
periods and the Company's earnings guidance for the three and
twelve months ended December 31, 2008.
�
Three Months �
Twelve Months � �
Ended December
31, 2008 �
Ended December 31, 2008 � �
Income �
EPS
Income �
EPS �
(Loss)
Income from Continuing Operations $ (18.9
) $ (0.75 ) $ 37.0
$ 1.49 Add: Impairment Charge, net of tax (b)
25.3 1.02 25.3 1.02 Add:
Restructuring, net of tax (c) - - 0.8
0.03 Less: Other (Gains) and Losses, net of tax (d) �
�
(1.1 ) � �
(0.05 ) �
(1.1
) � �
(0.05 ) �
Income from Continuing
Operations before Impairment, Restructuring and Other (Gains) and
Losses �
$ 5.3 � �
$ 0.22 �
$ 62.0 � �
$ 2.49 � �
The following table reconciles
income and diluted income per share from continuing operations to
income and diluted income per share from continuing operations
before the restructuring and impairment, the impact of the change
in the U.K. tax rate related to the Company's pension plans in the
U.K., the impact of the change in the Italian tax rate on deferred
tax items set up in purchase accounting and the gain on the
completion of a contract. The table is being provided in order to
provide comparability to 2008 results for the three and twelve
months ended December 31, 2008.
Three Months Twelve Months � �
Ended December 31,
2007 �
Ended December 31, 2007 �
Income �
EPS
Income �
EPS �
Income
from Continuing Operations $ 10.5 $
0.42 $ 49.3 $ 2.00 Add:
Restructuring and Impairment, net of tax (e) 1.4
0.06 14.1 0.57 Add: Impact of U.K. and
Italian tax rate changes (f) (1.8 ) (0.07
) 1.2 0.05 Less: Gain on completion of
contract with the U.S. Government, net of tax (g) � �
-
� � �
- � �
(7.8 ) � �
(0.32 ) �
Income from Continuing Operations before Restructuring,
Impairment, Impact of U.K. and Italian tax rate changes, and Gain
on the completion of a contract �
$ 10.1 � �
$ 0.41 �
$ 56.8 � �
$
2.30 � �
(a) Unaudited.
�
(b) Represents a $24.6 million
goodwill impairment charge for the industrial coatings business and
a $1.2 million pre-tax impairment charge of certain manufacturing
assets for the wood protection and industrial coatings
businesses.
�
(c) Represents a charge related
to a pension settlement associated with severance recorded in
2007.
�
(d) Represents a $1.4 million
pre-tax gain from the reversal of penalties and interest related to
a Brazilian state import tax claim recorded in 2004 due to the
expiration of the statute of limitations and a $0.4 million pre-tax
gain from a revised estimate of shutdown costs related to the
completion of a contract with the U.S. Government in 2007.
�
(e) Includes severance, the
write-down of manufacturing assets and other related costs
principally associated with the BIT restructuring.
�
(f) The twelve months ended
December 31, 2007 include a $3.0 million charge for a change in the
U.K. tax rate related to pension adjustments previously recorded in
equity. In addition, the three and twelve months ended December 31,
2007 include a $1.8 million benefit for the change in the Italian
tax rate on deferred tax items originally set up in purchase
accounting.
�
(g) Represents a gain for the
completion of a contract with the U.S. Government.
Arch Chemicals, Inc.
Condensed Consolidated Balance
Sheets (a)
(In millions, except per share
amounts)
� �
December 31, �
2008 �
2007 �
Assets: Cash & Cash Equivalents $
50.8 $ 73.7 Accounts Receivable, Net
(b) 184.2 176.7 Short-Term Investment (b)
56.0 64.1 Inventories, Net 216.1
207.1 Other Current Assets � �
19.6 � � �
31.6 �
Total Current Assets 526.7 553.2
Investments and Advances - Affiliated Companies at Equity
1.5 1.9 Property, Plant and Equipment, Net
212.2 201.4 Goodwill 199.6 206.8
Other Intangibles 183.0 149.6 Other
Assets � �
109.4 � � �
75.3 �
Total Assets
�
$ 1,232.4 � �
$ 1,188.2 � �
Liabilities and Shareholders' Equity: Short-Term
Borrowings $ 18.5 $ 29.1 Current
Portion of Long-Term Debt 62.0 0.3 Accounts
Payable 180.1 193.5 Accrued Liabilities �
�
75.9 � � �
108.0 �
Total Current Liabilities
336.5 330.9 Long-Term Debt 252.5
178.8 Other Liabilities � �
281.5 � � �
204.1 �
Total Liabilities 870.5 713.8
Commitments and Contingencies Shareholders' Equity:
Common Stock, Par Value $1 Per Share, Authorized 100.0
Shares: 24.8 Shares Issued and Outstanding (24.7 in
2007) 24.8 24.7 Additional Paid-in Capital
457.2 451.6 Retained Earnings 64.1
47.0 Accumulated Other Comprehensive Loss � �
(184.2 ) � �
(48.9 ) Total
Shareholders' Equity � �
361.9 � � �
474.4 �
Total Liabilities and Shareholders' Equity �
$
1,232.4 � �
$ 1,188.2 � �
(a)
Unaudited. �
(b) The Company sold certain
accounts receivable through an accounts receivable securitization
program (see Form 10-K for additional information). As a result,
accounts receivable have been reduced, and the Company's retained
interest in such receivables has been reflected as a short-term
investment. At both December 31, 2008 and 2007, the Company had not
sold any participation interests in such accounts
receivable.
Arch Chemicals, Inc.
Condensed Consolidated Statements
of Cash Flows (a)
(In millions)
� �
Twelve Months Ended December 31, �
2008 �
2007 Operating Activities: Net Income $
37.0 $ 35.3
Adjustments to Reconcile Net
Income to Net Cash and Cash Equivalents Provided by Operating
Activities:
Income from Discontinued Operations - (0.9
) Loss on Sale of Discontinued Operations -
14.9 Equity in Earnings of Affiliates (0.4
) (0.5 ) Depreciation and Amortization
45.5 45.0 Deferred Taxes 18.2
8.0 Impairment 25.8 7.9
Restructuring Expense (Payments), Net (0.8 )
1.4 Other (Gains) And Losses (1.8 )
(12.8 )
Changes in Assets and
Liabilities, Net of Purchase and Sales of Businesses:
Accounts Receivable Securitization Program - -
Receivables (12.4 ) (5.9 )
Inventories (17.9 ) (17.1 )
Other Current Assets 1.3 (4.6 )
Accounts Payable and Accrued Liabilities (31.2
) 4.7 Noncurrent Liabilities (b) (10.4
) (32.1 ) Other Operating Activities �
�
(7.5 ) � �
10.9 �
Net Operating
Activities from Continuing Operations 45.4 54.2
Cash Flows of Discontinued Operations � �
- � � �
(1.6 ) Net Operating Activities � �
45.4 � � �
52.6 �
Investing Activities:
Capital Expenditures (53.3 ) (41.6
) Businesses Acquired in Purchase Transactions, Net of
Cash Acquired (125.5 ) (14.3 )
Proceeds from Sale of a Business 3.7 11.6
Proceeds from Sale of Land and Property 0.7
2.8 Other Investing Activities - (0.9
) Cash Flows of Discontinued Operations � �
-
� � �
- �
Net Investing Activities � �
(174.4
) � �
(42.4 ) Financing Activities:
Long-Term Debt Borrowings 150.0 150.0
Long-Term Debt Repayments (14.6 )
(184.8 ) Short-Term Borrowings (Repayments),
Net (7.0 ) 15.4 Dividends Paid
(19.9 ) (19.6 ) Cash Flows of
Discontinued Operations - (0.8 )
Proceeds from Stock Options Exercised and Other Financing
Activities � �
1.3 � � �
17.4 �
Net Financing
Activities � �
109.8 � � �
(22.4 )
Effect of Exchange Rate Changes on Cash and Cash Equivalents
� �
(3.7 ) � �
3.5 �
Net Decrease in Cash
and Cash Equivalents (22.9 ) (8.7 )
Cash and Cash Equivalents, Beginning of Year � �
73.7
� � �
82.4 �
Cash and Cash Equivalents, End of Year �
$ 50.8 � �
$ 73.7 � �
(a)
Unaudited. �
(b) 2007 includes a $36.4 million voluntary
contribution for the Company's U.S. pension plans.
Arch Chemicals, Inc.
Segment Information (a)
(In millions) � � �
2008 �
First �
Second �
Third �
Fourth �
Total � �
Quarter �
Quarter �
Quarter �
Quarter �
Year Sales: Treatment Products: - HTH Water
Products $ 97.8 $ 191.6 $
111.9 $ 100.3 $ 501.6 -
Personal Care and Industrial Biocides 80.4 87.6
78.8 68.8 315.6 - Wood Protection and
Industrial Coatings � �
115.4 � � �
132.2 � � �
120.2 � � �
91.4 � � �
459.2 �
Total
Treatment Products 293.6 411.4 310.9
260.5 1,276.4 Performance Products: -
Performance Urethanes 49.0 52.8 52.5
42.7 197.0 - Hydrazine � �
4.5 � � �
5.4 � � �
4.5 � � �
4.3 � � �
18.7 �
Total Performance Products � �
53.5 � � �
58.2
� � �
57.0 � � �
47.0 � � �
215.7 �
Total
Sales �
$ 347.1 � �
$ 469.6 � �
$ 367.9 � �
$ 307.5 � �
$
1,492.1 � �
Segment Operating Income (Loss) (b):
Treatment Products: - HTH Water Products (c, d)
$ 6.0 $ 43.4 $ 17.3
$ (0.8 ) $ 65.9 - Personal
Care and Industrial Biocides 15.9 16.0
12.3 17.9 62.1 - Wood Protection and
Industrial Coatings � �
(0.3 ) � �
4.0 � �
�
1.6 � � �
(2.9 ) � �
2.4 �
Total
Treatment Products 21.6 63.4 31.2
14.2 130.4 Performance Products: -
Performance Urethanes (d) (0.3 ) (2.0
) 5.7 12.7 16.1 - Hydrazine (e)
� �
- � � �
0.2 � � �
- � � �
0.9 � � �
1.1 �
Total Performance Products � �
(0.3
) � �
(1.8 ) � �
5.7 � � �
13.6
� � �
17.2 �
21.3 61.6 36.9 27.8
147.6 General Corporate Expenses (f) � �
(9.1
) � �
(5.9 ) � �
(7.6 ) � �
(11.3 ) � �
(33.9 )
Total Segment Operating Income
(Loss), including Equity in Earnings of Affiliated
Companies
12.2 55.7 29.3 16.5 113.7 �
Restructuring and Impairment (g) - -
(1.3 ) (25.8 ) (27.1 )
Equity In Earnings of Affiliated Companies � �
(0.1
) � �
- � � �
(0.1 ) � �
(0.2
) � �
(0.4 ) Total Operating Income
(Loss) 12.1 55.7 27.9 (9.5 )
86.2 Interest Expense, net (h) � �
(3.3
) � �
(2.7 ) � �
(1.2 ) � �
(3.5 ) � �
(10.7 )
Total Income (Loss) from
Continuing Operations before Equity in Earnings of Affiliated
Companies and Taxes
�
$ 8.8 � �
$ 53.0 � �
$
26.7 � �
$ (13.0 ) �
$
75.5 � � � �
2007 First Second
Third Fourth Total � �
Quarter �
Quarter �
Quarter �
Quarter �
Year
Sales: Treatment Products: - HTH Water
Products $ 95.6
$
190.9
$ 108.6 $ 87.7 $ 482.8
- Personal Care and Industrial Biocides 76.9
82.7 84.2 77.2 321.0 - Wood
Protection and Industrial Coatings � �
91.1 � � �
115.9 � � �
124.5 � � �
117.6 � � �
449.1 �
Total Treatment Products 263.6
389.5 317.3 282.5 1,252.9
Performance Products: - Performance Urethanes
49.1 55.2 55.2 57.3 216.8 -
Hydrazine � �
4.7 � � �
4.8 � � �
4.0 � �
�
4.4 � � �
17.9 �
Total Performance Products
� �
53.8 � � �
60.0 � � �
59.2 � � �
61.7 � � �
234.7 �
Total Sales �
$
317.4 � �
$ 449.5 � �
$ 376.5 �
�
$ 344.2 � �
$ 1,487.6 � �
Segment
Operating Income (Loss) (b): Treatment Products: -
HTH Water Products (c) $ 4.5 $ 42.0
$ 6.4 $ 11.8 $ 64.7 -
Personal Care and Industrial Biocides (i) 14.2
12.5 15.1 12.4 54.2 - Wood
Protection and Industrial Coatings � �
1.3 � � �
7.0 � � �
4.6 � � �
1.0 � � �
13.9 �
Total Treatment Products 20.0 61.5 26.1
25.2 132.8 Performance Products: -
Performance Urethanes 2.0 4.7 3.3
1.9 11.9 - Hydrazine (e) � �
13.1 � � �
0.1 � � �
- � � �
0.3 � � �
13.5 �
Total Performance Products � �
15.1 � � �
4.8
� � �
3.3 � � �
2.2 � � �
25.4 �
35.1
66.3 29.4 27.4 158.2 General
Corporate Expenses (f) � �
(8.2 ) � �
(10.6 ) � �
(15.7 ) � �
(7.9
) � �
(42.4 )
Total Segment Operating Income
(Loss) including Equity in Earnings of Affiliated Companies
26.9 55.7 13.7 19.5 115.8 �
Restructuring and Impairment (j) - (15.6
) (0.9 ) 0.1 (16.4 )
Equity In Earnings of Affiliated Companies � �
- � �
�
(0.2 ) � �
(0.1 ) � �
(0.2
) � �
(0.5 ) Total Operating Income
(Loss) 26.9 39.9 12.7 19.4
98.9 Interest Expense, net (h) � �
(4.5
) � �
(3.8 ) � �
(3.1 ) � �
(1.9 ) � �
(13.3 )
Total Income (Loss) from
Continuing Operations before Equity in Earnings of Affiliated
Companies and Taxes
�
$ 22.4 � �
$ 36.1 � �
$
9.6 � �
$ 17.5 � �
$ 85.6 � �
(a) Unaudited.
�
(b) Includes equity in earnings
of affiliated companies and excludes restructuring and
impairment.
�
(c) Third quarter and
year-to-date 2008 include a benefit related to the antidumping duty
ruling for the period of review from June 1, 2006 through May 31,
2007 of $11.5 million. Fourth quarter and year-to-date 2007 include
a benefit related to the antidumping duty ruling for the period of
review from December 16, 2004 through May 31, 2006 of $14.1
million.
�
(d) Fourth quarter and
year-to-date 2008 include the reversal of penalties and interest
related to a Brazilian state import tax claim recorded in 2004 of
$0.3 million and $1.1 million for HTH Water Products and
Performance Urethanes, respectively, due to the expiration of the
statute of limitations.
�
(e) Fourth quarter and
year-to-date 2008 include a $0.4 million gain from a revised
estimate of shutdown costs related to the completion of a contract
with the U.S. Government in 2007. First quarter and year-to-date
2007 includes a $12.8 million gain for the completion of a contract
with the U.S. Government.
�
(f) 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 and certain
pension expenses.
�
(g) Fourth quarter and
year-to-date 2008 include a $24.6 million goodwill impairment
charge for the industrial coatings business and a $1.2 million
impairment charge of certain manufacturing assets for the wood
protection and industrial coatings businesses. Third quarter and
year-to-date 2008 include a charge related to a pension settlement
associated with severance recorded in 2007.
�
(h) Third quarter and
year-to-date 2008 include $1.2 million of interest income related
to the favorable antidumping ruling for the period of review from
June 1, 2006 through May 31, 2007. Fourth quarter and year-to-date
2007 include $1.5 million of interest income related to the
favorable antidumping ruling for the December 16, 2004 through May
31, 2006 review period.
�
(i) Second quarter and
year-to-date 2007 exclude $0.4 million of inventory disposal costs
associated with the Company's decision to discontinue manufacturing
its BIT molecule ("BIT restructuring").
�
(j) 2007 includes severance,
the write-down of manufacturing assets and other related costs
principally associated with the BIT restructuring.
Grafico Azioni Arch Chemicals (NYSE:ARJ)
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