Highlights:
- Earnings per share from continuing operations were $1.73 for
the second quarter of 2010, compared to $1.23 for the prior year
quarter.
- Biocides Products sales increased 16 percent and operating
income increased by 49 percent from the prior year quarter.
- Third quarter earnings per share from continuing operations are
expected to be in the $0.30 to $0.40 range.
- The Company increases its full-year 2010 earnings guidance to
$2.25 to $2.40 per share.
Arch Chemicals, Inc. (NYSE:ARJ) announced sales for the second
quarter of 2010 of $441.4 million, compared to $377.0 million for
the second quarter of 2009. Earnings per share from continuing
operations for 2010 were $1.73 per share on $43.5 million of
income, compared to $1.23 per share on $30.7 million of income in
2009.
Quarterly segment operating income was $69.1 million in 2010
compared to $49.0 million in 2009.
Commenting on the Company's second quarter 2010 results, Arch
Chemicals' Chairman, President and CEO Michael E. Campbell said: "I
am extremely pleased with our record earnings performance. The
significant year-over-year improvement in sales and operating
results was driven by strong demand in all of our core Biocides
businesses, particularly HTH water products, personal care and
industrial biocides. Our water products business benefited from
favorable weather patterns in much of North America as well as from
replenishment strategies at several of our major mass retail
accounts in the U.S. Again this quarter, our personal care and
industrial biocides businesses experienced robust demand across
most market segments, particularly in antidandruff shampoos and
building products. And although the U.S. housing and construction
market remains weak, our wood protection business recorded better
top-line and bottom-line results as a result of increased demand
and lower raw material costs." Mr. Campbell added: "Cost controls
and working capital management continue to be a top priority for
our businesses and contributed to our excellent results during the
quarter."
The following compares segment sales and operating income (loss)
for the second quarters of 2010 and 2009 (including equity in
earnings of affiliated companies and excluding restructuring and
impairment):
Segment operating results for prior periods have been adjusted
as the Company has reallocated certain historical centralized
service costs, which were previously allocated to the industrial
coatings business, to the Company's other businesses.
Biocides
Products
Biocides Products reported sales of $394.1 million and operating
income of $78.9 million in 2010 compared with sales of $338.7
million and operating income of $52.8 million in 2009.
HTH Water Products
HTH water products reported sales of $241.0 million and
operating income of $59.5 million for 2010 compared to sales of
$202.5 million and operating income of $45.1 million for 2009.
Sales increased $38.5 million, or 19 percent, due to higher
volumes and favorable foreign exchange. The increased volumes
principally related to the U.S., and to a lesser extent, Europe and
Canada. The higher U.S. volumes were attributable to the mass
retail segment as a result of different replenishment strategies at
major retail customers to align their inventory levels with
seasonal consumer demand and increased shipments to other accounts
and new customers. The different replenishment strategies
employed by these mass retail accounts favorably impacted the
quarter by concentrating sales in the second quarter and shifting
the timing of a portion of the pool season sales from the first and
third quarters. In addition, favorable weather patterns,
principally in the Northeast and Midwest U.S. and in Canada,
positively impacted demand for the Company's branded products.
Operating income for the quarter was $14.4 million higher than
prior year principally due to the improved North American
volumes.
Personal Care and Industrial
Biocides
Personal care and industrial biocides reported sales of $84.8
million and operating income of $17.3 million compared to sales and
operating income of $73.5 million and $7.2 million, respectively,
in 2009.
Sales increased $11.3 million, or 15 percent, as higher
volumes were partially offset by lower pricing across most market
sectors. The higher volumes were primarily due to improved
demand, particularly for biocides used in antidandruff products and
biocides used in building products, as the global construction
markets saw modest improvement from the second quarter of
2009.
Operating income increased $10.1 million as the higher volumes,
lower plant costs and favorable sales mix more than offset the
lower pricing.
Wood Protection
Wood protection reported sales of $68.3 million and operating
income of $2.1 million compared to sales and operating income of
$62.7 million and $0.5 million, respectively, in 2009.
Sales increased $5.6 million, or nine percent, due to higher
volumes. Favorable foreign exchange was offset by lower
pricing. The higher volumes were driven by modestly increased
demand for wood preservatives across all regions, as well as new
accounts. The lower pricing was driven by competitive
pressures for some products and the impact of product mix.
Operating income improved $1.6 million due to lower raw material
costs and higher volumes, which more than offset the impact of
lower pricing, unfavorable foreign exchange and higher
legal-related costs.
Performance
Products
Performance Products reported sales of $47.3 million and
operating income of $1.0 million compared with sales and operating
income of $38.3 million and $1.2 million, respectively, in
2009.
Performance urethanes sales increased $8.8 million, or 26
percent, due to higher pricing, driven by increased raw material
costs. Volumes were consistent with 2009 as higher demand for
propylene glycol products, due to the addition of new accounts, was
offset by the conclusion of a long-term contract manufacturing
arrangement at the end of 2009. Operating income was
consistent with 2009 as the improved pricing more than offset the
higher raw material costs. This improvement in operating
income was offset by the effect of the conclusion of the long-term
contract manufacturing arrangement at the end of 2009.
Hydrazine sales and operating income were consistent with
2009.
General Corporate
Expenses
Unallocated corporate expenses increased principally due to
higher compensation-related costs and higher U.K. pension
costs. In addition, 2009 benefited from favorable foreign
exchange gains associated with loans with the Company's foreign
subsidiaries.
2010 Outlook
The Company has raised its full-year 2010 sales and earnings
guidance. Full-year sales are now expected to be approximately
nine to eleven percent higher than 2009 and earnings from
continuing operations for the full-year 2010 are now anticipated to
be in the $2.25 to $2.40 per share range, compared to the Company's
previous guidance towards the high end of the $1.90 to $2.10 per
share range. This increased guidance reflects the Company's
strong first half results, including its peak seasonal earnings
period. Depreciation and amortization forecasts remain in the $40
to $45 million range and capital spending in the $30 to $35 million
range. The effective tax rate from continuing operations is
now estimated to be in the 32 to 33 percent range, compared to its
previous guidance in the 34 to 35 percent range.
For the third quarter, the Company anticipates earnings per
share from continuing operations to be in the $0.30 to $0.40 per
share range, compared to earnings per share from continuing
operations of $0.41 during the third quarter of 2009, which
excluded a charge related to executive severance of $0.03 per
share. Operating income from the Biocides Products segment is
forecast to be comparable to the year-ago period, while the
Performance Products segment is expected to report lower
results. Improved operating results for the personal care and
industrial biocides businesses from higher volumes and a modest
improvement in wood protection results due to lower raw material
costs are expected to be offset by lower HTH water products profits
due to the timing of sales for mass retail accounts and increased
operating expenses. The Company also expects slightly higher
general corporate expenses to offset lower income tax expense
compared to the prior year.
Commenting on the Company's 2010 outlook, Mr. Campbell said, "I
am very encouraged by the strong global demand improvement we
experienced for our biocides products in the first half, and our
expectation is that these positive trends will continue. As a
result, we have raised our sales and earnings forecasts for
2010. Arch's strategic focus on our biocides portfolio and
enhanced emphasis on innovation, combined with our presence in the
world's fastest-growing regions, position us for sustainable,
profitable growth. We remain committed to enhancing
shareholder value by increasing margins, maximizing cash
generation, optimizing our portfolio and maintaining an attractive
dividend."
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 over $1
billion. Arch and its subsidiaries provide innovative,
chemistry-based and related solutions to selectively destroy and
control the growth of harmful microbes. The Company's
concentration is in water treatment, hair and skin care products,
wood treatment, preservation and protection applications such as
for paints and building products, and health and hygiene
applications. Arch Chemicals operates in two segments:
Biocides 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' second quarter 2010 earnings
conference call on Wednesday, August 4, 2010 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: (877) 723-9518, passcode 7324316,
in the United States, or (719) 325-4803, passcode 7324316, outside
the United States.
- A telephone replay will be available from 1:00 p.m. on
Wednesday, August 4, 2010 until 11:00 p.m. (ET) on Wednesday,
August 11, 2010. The replay number is (888) 203-1112, passcode
7324316; from outside the United States, please call (719)
457-0820, passcode 7324316.
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; no improvement or weakening in U.S., European and Asian
economies; increases in interest rates; 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; loss of key customers; the Company's ability to maintain
chemical price increases or achieve targeted price increases;
higher-than-expected raw material and energy costs and availability
for certain chemical product lines; unexpected changes in the
antidumping duties on certain products; 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; 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
Ended June 30, |
Six Months Ended
June 30, |
|
2010 |
2009 |
2010 |
2009 |
Sales |
$ 441.4 |
$ 377.0 |
$ 740.1 |
$ 639.2 |
Cost of Goods
Sold |
290.9 |
256.8 |
503.3 |
438.3 |
Selling and
Administration |
76.4 |
66.4 |
145.3 |
131.9 |
Research and
Development |
5.1 |
4.9 |
9.6 |
9.1 |
Interest Expense,
Net |
3.1 |
2.4 |
6.1 |
6.3 |
Income from Continuing Operations
Before Equity in Earnings of Affiliated Companies and
Taxes |
65.9 |
46.5 |
75.8 |
53.6 |
Equity in Earnings of Affiliated
Companies |
0.1 |
0.1 |
0.3 |
0.2 |
Income Tax
Expense |
22.5 |
15.9 |
25.9 |
18.3 |
Income from
Continuing Operations |
$ 43.5 |
$ 30.7 |
$ 50.2 |
$ 35.5 |
Income (Loss) from Discontinued
Operations, Net of Tax (b) |
-- |
0.2 |
(0.5) |
(1.4) |
Gain on Sale of Discontinued
Operations, Net of Tax (c) |
-- |
-- |
5.6 |
-- |
Net
Income |
$ 43.5 |
$ 30.9 |
$ 55.3 |
$ 34.1 |
|
|
|
|
|
Basic Income (Loss) Per
Share: |
|
|
|
|
Continuing
Operations |
$ 1.73 |
$ 1.24 |
$ 2.00 |
$ 1.43 |
Income (Loss) from Discontinued
Operations, Net of Tax (b) |
-- |
-- |
(0.02) |
(0.06) |
Gain on Sale of
Discontinued Operations, Net of Tax (c) |
-- |
-- |
0.22 |
-- |
Basic Income (Loss) Per
Share |
$ 1.73 |
$ 1.24 |
$ 2.20 |
$ 1.37 |
|
|
|
|
|
Diluted Income (Loss) Per
Share: |
|
|
|
|
Continuing
Operations |
$ 1.73 |
$ 1.23 |
$ 2.00 |
$ 1.42 |
Income (Loss) from Discontinued
Operations, Net of Tax (b) |
-- |
-- |
(0.02) |
(0.06) |
Gain on Sale of
Discontinued Operations, Net of Tax (c) |
-- |
-- |
0.22 |
-- |
Diluted Income (Loss) Per
Share |
$ 1.73 |
$ 1.23 |
$ 2.20 |
$ 1.36 |
|
|
|
|
|
Weighted Average Common Stock
Outstanding - Basic |
25.1 |
25.0 |
25.1 |
24.9 |
Weighted Average Common Stock
Outstanding - Diluted |
25.2 |
25.1 |
25.2 |
25.0 |
|
|
|
|
|
(a) Unaudited. As a
result of the sale of the industrial coatings business, the Company
has adjusted prior period results to include the results of
operations of this business as discontinued
operations. |
(b) Represents the
results of operations, net of tax, for the industrial coatings
business through the date of sale, March 31, 2010. |
(c) Represents the gain
on the sale of the industrial coatings business, net of
tax. |
|
|
Arch Chemicals,
Inc. |
Condensed Consolidated
Balance Sheets |
(In millions, except per
share amounts) |
|
|
|
|
June 30, 2010
(a) |
December 31, 2009
(b) |
|
|
|
Assets: |
|
|
Cash and Cash
Equivalents |
$ 75.8 |
$ 70.1 |
Accounts Receivable, Net
(c) |
122.9 |
126.3 |
Securitization-Related Receivable
(c) |
86.9 |
76.0 |
Inventories, Net |
163.3 |
145.9 |
Other Current
Assets |
16.4 |
14.4 |
Assets Held For
Sale |
-- |
125.1 |
Total Current
Assets |
465.3 |
557.8 |
Investments and Advances -
Affiliated Companies at Equity |
2.2 |
2.0 |
Property, Plant and Equipment,
Net |
168.4 |
176.1 |
Goodwill |
203.2 |
205.8 |
Other Intangibles |
146.6 |
156.1 |
Other
Assets |
105.4 |
112.7 |
Total Assets |
$ 1,091.1 |
$ 1,210.5 |
|
|
|
Liabilities and Shareholders'
Equity: |
|
|
Short-Term
Borrowings |
$ 7.3 |
$ 11.1 |
Current Portion of Long-Term
Debt |
111.1 |
21.9 |
Accounts Payable |
147.5 |
116.9 |
Accrued
Liabilities |
81.2 |
75.8 |
Liabilities
Associated with Assets Held For Sale |
-- |
57.7 |
Total Current
Liabilities |
347.1 |
283.4 |
Long-Term Debt |
78.0 |
257.7 |
Other
Liabilities |
248.3 |
264.5 |
Total Liabilities |
673.4 |
805.6 |
Commitments and
Contingencies |
|
|
Shareholders'
Equity: |
|
|
Common Stock, Par Value $1 Per
Share, Authorized 100.0 Shares: 25.0 Shares Issued and Outstanding
(25.0 in 2009) |
25.0 |
25.0 |
Additional Paid-in
Capital |
463.9 |
461.4 |
Retained Earnings |
136.5 |
91.2 |
Accumulated Other
Comprehensive Loss |
(207.7) |
(172.7) |
Total
Shareholders' Equity |
417.7 |
404.9 |
Total Liabilities and
Shareholders' Equity |
$ 1,091.1 |
$ 1,210.5 |
|
|
|
(a) Unaudited. |
|
|
(b) As a result of the
sale of the industrial coatings business, the Company has adjusted
its historical financial statements to reflect this business as an
asset held for sale. |
(c) 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 amounts not yet collected from customers have been
reflected as a securitization-related receivable. |
|
|
Arch Chemicals, Inc. |
|
|
Condensed Consolidated Statements of
Cash Flows (a) |
|
|
(in millions) |
|
|
|
|
|
Six Months Ended June
30, |
2010 |
2009 |
Operating Activities: |
|
|
Net Income |
$ 55.3 |
$ 34.1 |
Adjustments to Reconcile Net Income
to Net Cash and Cash Equivalents Provided by Operating
Activities: |
|
|
Loss from Discontinued
Operations |
0.5 |
1.4 |
Gain on Sale of Discontinued
Operations |
(5.6) |
-- |
Equity in Earnings of Affiliated
Companies |
(0.3) |
(0.2) |
Depreciation and
Amortization |
20.2 |
20.7 |
Deferred Taxes |
4.8 |
(5.6) |
Restructuring Payments |
(0.1) |
(0.1) |
Changes in Assets and Liabilities,
Net of Purchase and Sale of Businesses: |
|
|
Accounts Receivable
Securitization Program |
59.7 |
72.9 |
Receivables |
(70.6) |
(56.5) |
Inventories |
(19.5) |
(11.8) |
Other Current
Assets |
(6.1) |
(1.3) |
Accounts Payable and Accrued
Liabilities |
39.2 |
14.7 |
Noncurrent
Liabilities |
(4.1) |
4.5 |
Other Operating
Activities |
2.7 |
2.3 |
Net Operating Activities from
Continuing Operations |
76.1 |
75.1 |
Cash Flows of Discontinued
Operations |
(2.4) |
5.1 |
Net Operating
Activities |
73.7 |
80.2 |
Investing Activities: |
|
|
Capital Expenditures |
(9.2) |
(9.5) |
Businesses Acquired in Purchase
Transaction |
-- |
0.3 |
Proceeds from Sale of a
Business |
48.9 |
0.5 |
Cash Flows of Discontinued
Operations |
(0.4) |
(1.6) |
Net Investing
Activities |
39.3 |
(10.3) |
Financing Activities: |
|
|
Long-Term Debt
Borrowings |
64.0 |
122.5 |
Long-Term Debt
Repayments |
(154.4) |
(177.0) |
Short-Term (Repayments) Borrowings,
Net |
(3.6) |
(0.9) |
Dividends Paid |
(10.0) |
(10.0) |
Other Financing
Activities |
0.9 |
(2.3) |
Cash Flows of Discontinued
Operations |
-- |
-- |
Net Financing
Activities |
(103.1) |
(67.7) |
Effect of Exchange Rate Changes
on Cash and Cash Equivalents |
(4.2) |
(1.1) |
Net Increase in Cash
and Cash Equivalents |
5.7 |
1.1 |
Cash and Cash Equivalents,
Beginning of Year |
70.1 |
50.8 |
Cash and Cash Equivalents, End
of Period |
$ 75.8 |
$ 51.9 |
|
|
|
(a) Unaudited. As a
result of the sale of the industrial coatings business, the Company
has adjusted prior period results to include the results of
operations of this business as discontinued
operations. |
|
|
Arch Chemicals,
Inc. |
Segment Information
(a) |
(In
millions) |
|
Three Months
Ended June 30, |
Six Months Ended
June 30, |
|
2010 |
2009 |
2010 |
2009 |
Sales: |
|
|
|
|
Biocides
Products: |
|
|
|
|
- HTH Water
Products |
$ 241.0 |
$ 202.5 |
$ 357.0 |
$ 305.2 |
- Personal Care and Industrial
Biocides |
84.8 |
73.5 |
165.7 |
141.6 |
- Wood
Protection |
68.3 |
62.7 |
126.0 |
109.4 |
Total Biocides
Products |
394.1 |
338.7 |
648.7 |
556.2 |
Performance
Products: |
|
|
|
|
- Performance
Urethanes |
43.1 |
34.3 |
82.8 |
75.3 |
-
Hydrazine |
4.2 |
4.0 |
8.6 |
7.7 |
Total Performance
Products |
47.3 |
38.3 |
91.4 |
83.0 |
Total
Sales |
$ 441.4 |
$ 377.0 |
$ 740.1 |
$ 639.2 |
Operating Income (Loss)
(b): |
|
|
|
|
Biocides
Products: |
|
|
|
|
- HTH Water
Products |
$ 59.5 |
$ 45.1 |
$ 63.7 |
$ 54.4 |
- Personal Care and Industrial
Biocides |
17.3 |
7.2 |
35.8 |
18.3 |
- Wood
Protection |
2.1 |
0.5 |
1.2 |
(2.8) |
Total Biocides
Products |
78.9 |
52.8 |
100.7 |
69.9 |
Performance
Products: |
|
|
|
|
- Performance
Urethanes |
0.4 |
0.7 |
(2.2) |
2.6 |
-
Hydrazine |
0.6 |
0.5 |
1.4 |
1.2 |
Total Performance
Products |
1.0 |
1.2 |
(0.8) |
3.8 |
|
79.9 |
54.0 |
99.9 |
73.7 |
General Corporate
Expenses (c) |
(10.8) |
(5.0) |
(17.7) |
(13.6) |
Total Segment Operating Income
including Equity in Earnings of Affiliated Companies |
69.1 |
49.0 |
82.2 |
60.1 |
Equity in
Earnings of Affiliated Companies |
(0.1) |
(0.1) |
(0.3) |
(0.2) |
Total Operating
Income |
69.0 |
48.9 |
81.9 |
59.9 |
Interest Expense,
net |
(3.1) |
(2.4) |
(6.1) |
(6.3) |
Income from
Continuing Operations before Equity in Earnings of Affiliated
Companies and Taxes |
$ 65.9 |
$ 46.5 |
$ 75.8 |
$ 53.6 |
|
|
|
|
|
(a) Unaudited. Prior
period results have been adjusted to reflect the sale of the
industrial coatings business, including a reallocation of certain
centralized service costs, which were previously allocated to the
industrial coatings business, to the Company's other
businesses. |
(b) Includes equity in
earnings of affiliated companies. |
(c) 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. |
|
|
Arch Chemicals,
Inc. |
Reconciliation of GAAP to
Non-GAAP Information |
(In millions, except per
share amounts) |
|
The following table
reconciles income and diluted income per share from continuing
operations for the three months ended September 30, 2009 to income
and diluted income per share from continuing operations before
executive severance. The table is being provided in order to
provide comparability to the Company's earnings guidance for the
three months ended September 30, 2010. |
|
|
|
Three Months
Ended September 30, 2009 |
|
Income |
EPS |
Income from Continuing
Operations |
$ 9.7 |
$ 0.38 |
Add: Executive severance, net
of tax |
0.7 |
0.03 |
Income from Continuing
Operations before executive severance |
$ 10.4 |
$ 0.41 |
CONTACT: Arch Chemicals, Inc.
Investor Contact:
Mark E. Faford
(203) 229-3820
mefaford@archchemicals.com
Press Contact:
Dale N. Walter
(203) 229-3033
dnwalter@archchemicals.com
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