Exhibit 99.1
Press Release
| 
|
Contacts:
Investors: | | William Kuser | | 203-573-2213 |
Media: | | Mary Ann Dunnell | | 203-573-3034 |
Chemtura Reports Second Quarter and Six Month 2006 Results
MIDDLEBURY, CT – August 2, 2006 - Chemtura Corporation (NYSE: CEM; the “Company”) reported today earnings from continuing operations for the second quarter of 2006 of $2.5 million, or $0.01 per diluted share and non-GAAP earnings from continuing operations of $50.2 million or $0.21 per diluted share. Earnings from continuing operations includes $2.6 million ($1.7 million after-tax) related to the incremental stock-based compensation expense for the quarter ended June 30, 2006, associated with the adoption of FASB Statement No. 123R, “Share Based Payment,” on January 1, 2006.
Non-GAAP earnings from continuing operations for the second quarter of 2006 exclude pre-tax charges of $29.3 million for antitrust costs resulting primarily from settlement offers made to certain rubber chemicals claimants and legal fees associated with the antitrust investigations and civil lawsuits, a $19.5 million loss on early extinguishment of debt related to the retirement of the Company’s Senior Floating Rate Notes due 2010, a $12.5 million loss on the sale of the Industrial Water Additives business, a $5.6 million asset impairment charge related to the impairment of retained long-lived assets related to the Industrial Water Additives business, $4.7 million for merger costs related to the merger with Great Lakes Chemical Corporation on July 1, 2005 (“the Merger”), and $2.9 million for additional depreciation due to the change in the useful life of certain assets at one of the Company’s manufacturing facilities. Also excluded from non-GAAP earnings are pre-tax credits of $3.3 million for facility closures, severance and related costs due to the reversal of reserves primarily related to the Company’s Tarrytown, NY facility that were no longer deemed necessary and $4.0 million of interest income on a favorable tax settlement.
The following is a summary of the second quarter and six month results on a GAAP basis:
| | Second quarter | | Six months | |
(In millions) | | 2006 | | 2005 | | %
change | | 2006 | | 2005 | | %
change | |
Net sales (a) | | $ | 1,016.3 | | $ | 602.3 | | 69 | % | $ | 1,932.1 | | $ | 1,192.1 | | 62 | % |
Operating profit (b) | | $ | 68.1 | | $ | 45.5 | | 50 | % | $ | 114.5 | | $ | 106.8 | | 7 | % |
Earnings from continuing operations (b) | | $ | 2.5 | | $ | 10.2 | | (75 | )% | $ | 15.7 | | $ | 28.4 | | (45 | )% |
Diluted earnings per share from continuing operations | | $ | 0.01 | | $ | 0.09 | | (89 | )% | $ | 0.07 | | $ | 0.24 | | (71 | )% |
The following is a summary of the second quarter and six month 2006 results on a non-GAAP basis as compared with the second quarter and six month 2005 results on a pro forma and non-GAAP basis. The pro forma basis reflects the impact of the Merger as if it occurred on January 1, 2005, which has been set forth in the supplemental disclosures attached to this press release:
| | Second quarter | | Six months | |
(In millions) | | 2006 | | Pro forma
2005 | | %
change | | 2006 | | Pro forma
2005 | | %
change | |
Net sales (a) | | $ | 1,016.3 | | $ | 1,093.7 | | (7 | )% | $ | 1,932.1 | | $ | 2,103.9 | | (8 | )% |
Non-GAAP operating profit (b) | | $ | 107.3 | | $ | 126.4 | | (15 | )% | $ | 179.9 | | $ | 211.4 | | (15 | )% |
Non-GAAP earnings from continuing operations (b) | | $ | 50.2 | | $ | 61.2 | | (18 | )% | $ | 77.0 | | $ | 94.3 | | (18 | )% |
Non-GAAP diluted earnings per share from continuing operations | | $ | 0.21 | | $ | 0.26 | | (19 | )% | $ | 0.32 | | $ | 0.40 | | (20 | )% |
(a) Includes $7.9 million and $48.3 million for the second quarter and first six months of 2005, respectively, relating to the Polymer Processing Equipment business that was deconsolidated in April 2005.
(b) Includes $2.6 million ($1.7 million after-tax) and $4.2 million ($2.6 million after-tax) for the second quarter and first six months of 2006, respectively, which represents the effects of implementing FASB Statement 123R for stock-based compensation.
“Actions we have taken have driven successive profit and cash flow improvement in each of the last two quarters. Some of our business platforms are exceeding expectations, but a few are still underperforming. We will continue to grow profitability in our stronger businesses and are vigorously addressing the challenges in underperforming units,” said Robert L. Wood, president, chairman and chief executive officer.
Actual and Pro Forma Net Sales, Pro Forma Adjusted Non-GAAP Operating Profit and Pro Forma Adjusted Earnings from Continuing Operations
Second Quarter Results
Second quarter 2006 net sales of $1,016.3 million were $414.0 million above second quarter 2005 net sales of $602.3 million. The increase was primarily due to $477.8 million in additional sales resulting from the Merger, partially offset by the exclusion of $7.9 million of sales due to the deconsolidation of the Company’s Polymer Processing Equipment business in April 2005. Second quarter 2006 net sales were $77.4 million or 7 percent less than second quarter 2005 pro forma net sales of $1,093.7 million. Of this decrease $100.8 million was attributable to lower volume, $12.5 million due to the divestiture of the Industrial Water Additives business in May 2006, $7.9 million due to the deconsolidation of the Polymer Processing Equipment business unit in April 2005, $2.8 million due to the net effect of other acquisitions and divestitures, and $3.9 million due to unfavorable foreign currency impact, partially offset by a $50.5 million increase in selling prices.
Operating profit for the second quarter of 2006 was $68.1 million as compared to $45.5 million for the second quarter of 2005. On a non-GAAP basis, second quarter 2006 operating profit of $107.3 million was $19.1 million or 15% lower than second quarter 2005 pro forma non-GAAP
2
operating profit of $126.4 million. The 15% decrease is comprised of raw material and energy cost increases of $19.5 million, lower volumes of $35.7 million, $13.5 million of unfavorable manufacturing costs resulting from lower production volumes, $5.0 million of higher freight costs, $3.3 million of other strategic and corporate initiative costs, $2.4 million of unfavorable foreign currency translation, $2.3 million related to the incremental effect of stock option expense, $1.5 million of inventory write-offs, and other net increases in operating costs, which were partially offset by selling price increases of $50.5 million and synergy cost savings of $22.6 million.
Second quarter 2005 GAAP earnings from continuing operations were $10.2 million or $0.09 per diluted share. Pro forma non-GAAP earnings from continuing operations for the second quarter of 2005 were $61.2 million or $0.26 per diluted share. Pro forma non-GAAP earnings from continuing operations for the second quarter of 2005 excludes pre-tax charges of $24.2 million for facility closures, severance and related costs, which included a charge of $20.3 million related to the closure of the Company’s Tarrytown, NY facility, $3.3 million for antitrust costs and $8.7 million of merger costs resulting from the Merger.
Six Month Results
Net sales for the six months ended June 30, 2006 of $1,932.1 million were $740.0 million above net sales for the comparable period of 2005 of $1,192.1 million. The increase was primarily due to $855.6 million in additional sales resulting from the Merger, partially offset by the exclusion of $48.3 million of sales due to the deconsolidation of the Company’s Polymer Processing Equipment business in April 2005. Six month 2006 net sales were $171.8 million or 8 percent less than six month 2005 pro forma net sales of $2,103.9 million. Of this decrease $179.3 million was attributable to lower volume, $12.5 million due to declines in volume and selling prices resulting from supply agreements related to the divestiture of the Industrial Water Additives business in May 2006, $48.3 million due to the deconsolidation of the Polymer Processing Equipment business unit in April 2005, $7.5 million due to the net effect of other acquisitions and divestitures, and $28.0 million due to unfavorable foreign currency impact, partially offset by a $103.8 million increase in selling prices.
Operating profit for the six months ended June 30, 2006 was $114.5 million as compared to $106.8 million for the six months ended June 30, 2005. On a non-GAAP basis, six month 2006 operating profit of $179.9 million was $31.4 million or 15% lower than six month 2005 pro forma non-GAAP operating profit of $211.4 million. The 15% decrease is comprised of raw material and energy cost increases of $47.9 million, lower volumes of $57.7 million, $32.4 million of unfavorable manufacturing costs resulting from lower production volumes, $6.9 million of unfavorable foreign currency translation, $6.8 million of other strategic and corporate initiative costs, $6.1 million of higher freight costs, $4.2 million related to the incremental effect of stock option expense, $1.9 million of inventory write-offs, and other net increases in operating costs, which were partially offset by selling price increases of $103.8 million and synergy cost savings of $40.4 million.
GAAP earnings from continuing operations for the six months ended June 30, 2006 were $15.7 million, or $0.07 per diluted share, compared to GAAP earnings from continuing operations of $28.4 million, or $0.24 per diluted share, for the six months ended June 30, 2005. Non-GAAP earnings from continuing operations for the first six months of 2006 of $77.0 million, or $0.32 per diluted share, exclude pre-tax charges of $42.1 million for antitrust costs resulting primarily from settlement offers made to certain rubber chemicals, plastic additives and urethanes claimants and
3
legal fees associated with the antitrust investigations and civil lawsuits, a $19.5 million loss on early extinguishment of debt related to the retirement of the Company’s Senior Floating Rate Notes due 2010, a $12.5 million loss on the sale of the Industrial Water Additives business, a $5.6 million asset impairment charge related to the impairment of retained long-lived assets related to the Industrial Water Additives business, $14.8 million for merger costs resulting from the Merger, and $5.8 million for additional depreciation due to the change in the useful life of certain assets at one of the Company’s manufacturing facilities. Also excluded from non-GAAP earnings are pre-tax credits of $2.8 million for facility closures, severance and related costs, a $4.3 million favorable settlement of a contractual matter, and $4.0 million of interest income on a favorable tax settlement.
Pro forma non-GAAP earnings from continuing operations for the first six months of 2005 of $94.3 million or $0.40 per diluted share exclude pre-tax charges of $25.3 million for facility closures, severance and related costs, which included a charge of $20.3 million related to the closure of the Company’s Tarrytown, NY facility, $6.5 million for antitrust costs and $8.7 million of merger costs resulting from the Merger, partially offset by a pre-tax credit of $7.2 million for insurance recoveries related to a fire at the Company’s Conyers, Georgia facility.
The Company reported income tax expense for the first six months of 2006 of $13.5 million. The tax expense was impacted by a number of discrete items for the six month period primarily driven by the disposition of the Industrial Water Additives business, offset by favorable settlements of certain tax examinations, reduction of valuation allowance on deferred tax assets and tax legislative changes.
The effective rate of tax for the first six months of 2006 was 46%. Excluding discrete items, the effective rate of tax for the first six months of 2006 would have been 38.7%. The effective rate of tax for 2006 is forecast to be approximately 40%, which reflects the impact of discrete items over a twelve month period. The non-GAAP effective rate of tax for 2006, which excludes nondeductible antitrust costs, is forecast to be approximately 35%.
Non-GAAP operating profit, non-GAAP earnings from continuing operations and non-GAAP earnings per share from continuing operations are considered non-GAAP financial measures. A reconciliation of the Company’s GAAP operating profit to non-GAAP and pro forma operating profit and of the Company’s GAAP earnings from continuing operations to non-GAAP and pro forma earnings from continuing operations is set forth in the supplemental disclosure attached to this press release.
Second Quarter Earnings Q&A Teleconference
The Company’s second quarter earnings conference call will be held on August 3, 2006 at 8:00 a.m. EDT. Interested parties are asked to dial in approximately 10 minutes prior to the start time at (703) 925-2608. Replay of the call will be available for two weeks starting at 11:30 a.m. on August 3, 2006. To access the replay, call (320) 365-3844 and enter access code 836374.
Live internet access to the conference call and informational slides will be available through the Investor Relations section of the Company’s Web site, www.chemtura.com.
Chemtura Corporation, with pro forma 2005 sales of $3.9 billion, is a global manufacturer and marketer of specialty chemicals, crop protection and pool, spa and home care products. Additional information concerning Chemtura is available at www.chemtura.com.
4
###
Supplemental Historical Pro Forma and Non-GAAP Financial Information
Included in the Appendix to this press release are supplemental financial tables containing unaudited pro forma and non-GAAP adjusted Consolidated Statements of Earnings and Segment Operating Profit. The attached schedules reflect adjustments to previously furnished information for changes in depreciation and amortization related to the Company’s fair value adjustment of Great Lakes’ property, plant and equipment and intangible assets. The schedules also reflect certain additional reclassifications to conform the former Great Lakes presentation to the Company’s presentation.
Unaudited Pro Forma Financial Information
The attached unaudited pro forma results of operations for the second quarter and six months of 2005 give effect to the Merger using the purchase method as if the Merger had been consummated as of January 1, 2005. The pro forma unaudited results of operations combine the historical results of operations of the Company and Great Lakes with the following adjustments:
(1) Pension – Represents a reduction in pension expense, principally due to the elimination of the impact of amortization of historical gains and losses from Great Lakes’ historical net periodic benefit cost.
(2) Interest – Represents the impact on interest expense of amortization of the fair value adjustment to Great Lakes’ long-term debt.
(3) Purchase accounting depreciation – Represents the impact on depreciation expense of the fair value adjustment and change in the remaining useful life of Great Lakes’ property, plant and equipment.
(4) Amortization – Represents the impact on amortization expense of the fair value adjustment and change in remaining useful life of Great Lakes’ intangible assets.
(5) Inventory accounting – Represents the impact of conforming Great Lakes’ inventory capitalization policy to a consistently applied method utilized by the Company.
(6) Merger costs – Represents the reversal of costs incurred by Great Lakes in connection with the Merger.
The unaudited pro forma results of operations do not give effect to synergies and cost savings. The pro forma results of operations do not purport to be indicative of what the actual results of operations would have been had the Merger been completed on the dates assumed or the results of operations that may be achieved in the future.
Conformed Great Lakes
The financial information presented as Conformed Great Lakes in the Appendix reflects reclassifications of historical Great Lakes financial information to conform to the Company’s presentation.
Non-GAAP Financial Measures
The information presented in this press release and in the attached financial tables includes financial measures that are not calculated or presented in accordance with Generally Accepted Accounting Principles in the United States (GAAP). These non-GAAP financial measures consist of adjusted results of operations of the Company that exclude certain expenses, gains and losses that may not be indicative of the core operations of the Company. Excluded items include facility closures, severance and related costs, antitrust costs, Merger costs, asset impairments, increased depreciation due to the change in useful life of assets, unusual and non-recurring catastrophic events or settlements, loss on early extinguishment of debt,
5
and gains and losses on disposition of business units. In addition to the non-GAAP financial measures discussed above, the Company has applied a non-GAAP effective income tax rate to our non-GAAP income before taxes. This rate incorporates an assumed mix of foreign earnings and taxes, permanent book-tax differences, various tax planning strategies and other assumptions. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are provided in the attached financial tables. The Company believes that such non-GAAP financial measures provide useful information to investors and may assist them in evaluating the Company’s underlying performance and identifying operating trends. In addition, management uses these non-GAAP financial measures internally to allocate resources and evaluate the performance of the Company’s operations. While the Company believes that such measures are useful in evaluating the Company’s performance, investors should not consider them to be a substitute for financial measures prepared in accordance with GAAP. In addition, these non-GAAP financial measures may differ from similarly titled non-GAAP financial measures used by other companies and do not provide a comparable view of the Company’s performance relative to other companies in similar industries.
Forward-Looking Statement
Certain statements made in this release are forward-looking statements that involve risks and uncertainties, including, but not limited to, general economic conditions; significant international operations and interests; the outcome and timing of antitrust investigations and related civil lawsuits to which Chemtura is subject; the ability to obtain increases in selling prices; the ability to retain sales volumes in the event of increasing selling prices; the ability to absorb fixed cost overhead in the event of lower volumes; pension and other post-retirement benefit plan assumptions; energy and raw material prices, availability and quality; production capacity; changes in interest rates and foreign currency exchange rates; changes in technology, market demand and customer requirements; the enactment of more stringent environmental laws and regulations; the ability to realize expected cost savings under Chemtura’s cost-reduction initiatives; the ability to successfully execute our portfolio divesture plan; the amount of any additional earn-out payments from General Electric Company from the sale of the OrganoSilicones business; the ability to reduce Chemtura’s debt levels; the ability to successfully integrate the Crompton and Great Lakes businesses, operations and information systems and achieve anticipated benefits from the Merger, including costs savings and synergies; and other risks and uncertainties detailed in filings with the Securities and Exchange Commission by Chemtura or its predecessor companies. These statements are based on Chemtura’s estimates and assumptions and on currently available information. The forward-looking statements include information concerning our possible or assumed future results of operations. Chemtura’s actual results may differ significantly from the results discussed. Forward-looking information is intended to reflect opinions as of the date this release was issued and such information will not necessarily be updated by Chemtura.
6
CHEMTURA CORPORATION
Index of Financial Statements and Schedules
| | | Page |
Financial Statements | | |
| | | |
| Condensed Consolidated Statements of Earnings (Unaudited) - Quarter and six months ended June 30, 2006 and 2005 | | 8 |
| | | |
| Condensed Consolidated Balance Sheets - June 30, 2006 (Unaudited) and December 31, 2005 | | 9 |
| | | |
| Condensed Consolidated Statements of Cash Flows (Unaudited) - Six months ended June 30, 2006 and 2005 | | 10 |
| | | |
| Segment Sales and Operating Profit (Unaudited) - Quarter ended and six months ended June 30, 2006 and 2005 | | 11 |
| | | |
Supplemental Schedules | | |
| | | |
| Major Factors Affecting Pro Forma Operating Results (Unaudited) - Quarter ended June 30, 2006 and 2005 | | 12 |
| | | |
| Non-GAAP Condensed Consolidated Statements of Earnings (Unaudited) - Quarter and six months ended June 30, 2006 and 2005 | | 13 |
| | | |
| Non-GAAP Condensed Consolidated Statement of Earnings (Unaudited) - Quarter ended June 30, 2006 | | 14 |
| | | |
| Non-GAAP Condensed Consolidated Statement of Earnings (Unaudited) - Six months ended June 30, 2006 | | 15 |
| | | |
| Non-GAAP Condensed Consolidated Statement of Earnings (Unaudited) - Quarter ended June 30, 2005 | | 16 |
| | | |
| Non-GAAP Condensed Consolidated Statement of Earnings (Unaudited) - Six months ended June 30, 2005 | | 17 |
| | | |
| Non-GAAP Segment Sales and Operating Profit (Unaudited) - Quarter and six months ended June 30, 2006 and 2005 | | 18 |
| | | |
| Non-GAAP Segment Sales and Operating Profit (Unaudited) - Quarter ended June 30, 2006 | | 19 |
| | | |
| Non-GAAP Segment Sales and Operating Profit (Unaudited) - Six months ended June 30, 2006 | | 20 |
| | | |
| Non-GAAP Segment Sales and Operating Profit (Unaudited) - Quarter ended June 30, 2005 | | 21 |
| | | |
| Non-GAAP Segment Sales and Operating Profit (Unaudited) - Six months ended June 30, 2005 | | 22 |
7
CHEMTURA CORPORATION
Condensed Consolidated Statements of Earnings (Unaudited)
(In thousands, except per share data)
| | Quarter Ended June 30, | | Six Months Ended June 30, | |
| | 2006 | | 2005 | | 2006 | | 2005 | |
Net sales | | $ | 1,016,323 | | $ | 602,329 | | $ | 1,932,084 | | $ | 1,192,059 | |
| | | | | | | | | |
Cost of products sold (*) | | 750,210 | | 422,258 | | 1,425,047 | | 842,732 | |
Selling, general and administrative (*) | | 98,528 | | 60,546 | | 203,491 | | 124,545 | |
Depreciation and amortization | | 45,607 | | 27,737 | | 97,318 | | 57,863 | |
Research and development | | 17,724 | | 10,472 | | 32,522 | | 20,983 | |
Equity income | | (197 | ) | (86 | ) | (471 | ) | (174 | ) |
Facility closures, severance and related costs | | (3,280 | ) | 23,917 | | (2,776 | ) | 24,075 | |
Antitrust costs | | 29,275 | | 3,338 | | 42,083 | | 6,504 | |
Merger costs | | 4,745 | | 8,686 | | 14,790 | | 8,686 | |
Impairment of long-lived assets | | 5,610 | | — | | 5,610 | | — | |
| | | | | | | | | |
Operating profit | | 68,101 | | 45,461 | | 114,470 | | 106,845 | |
Interest expense | | 29,397 | | 24,309 | | 58,470 | | 48,715 | |
Loss on early extinguishment of debt | | 19,549 | | — | | 19,549 | | — | |
Other expense, net (*) | | 9,859 | | 2,745 | | 7,219 | | 7,011 | |
| | | | | | | | | |
Earnings from continuing operations before income taxes | | 9,296 | | 18,407 | | 29,232 | | 51,119 | |
Income tax expense | | 6,789 | | 8,233 | | 13,520 | | 22,716 | |
| | | | | | | | | |
Earnings from continuing operations | | 2,507 | | 10,174 | | 15,712 | | 28,403 | |
Earnings from discontinued operations | | — | | 450 | | — | | 2,656 | |
Loss on sale of discontinued operations | | — | | (27,622 | ) | — | | (27,622 | ) |
| | | | | | | | | |
Net earnings (loss) | | $ | 2,507 | | $ | (16,998 | ) | $ | 15,712 | | $ | 3,437 | |
| | | | | | | | | |
Basic earnings (loss) per common share: | | | | | | | | | |
Earnings from continuing operations | | $ | 0.01 | | $ | 0.09 | | $ | 0.07 | | $ | 0.24 | |
Earnings from discontinued operations | | — | | — | | — | | 0.02 | |
Loss on sale of discontinued operations | | — | | (0.23 | ) | — | | (0.23 | ) |
Net earnings (loss) | | $ | 0.01 | | $ | (0.14 | ) | $ | 0.07 | | $ | 0.03 | |
| | | | | | | | | |
Diluted earnings (loss) per common share: | | | | | | | | | |
Earnings from continuing operations | | $ | 0.01 | | $ | 0.09 | | $ | 0.07 | | $ | 0.24 | |
Earnings from discontinued operations | | — | | — | | — | | 0.02 | |
Loss on sale of discontinued operations | | — | | (0.23 | ) | — | | (0.23 | ) |
Net earnings (loss) | | $ | 0.01 | | $ | (0.14 | ) | $ | 0.07 | | $ | 0.03 | |
| | | | | | | | | |
Weighted average shares outstanding - basic | | 240,489 | | 117,769 | | 240,308 | | 117,267 | |
| | | | | | | | | |
Weighted average shares outstanding - diluted | | 241,311 | | 121,523 | | 241,252 | | 120,237 | |
(*) Certain amounts relating to operations have been reclassified from other expense, net to cost of products sold and selling, general and administrative expense in 2005 to be comparable to the 2006 presentation.
8
CHEMTURA CORPORATION
Condensed Consolidated Balance Sheets
(In thousands of dollars)
| | June 30, 2006 | | December 31,
2005 | |
| | (Unaudited) | | | |
ASSETS | | | | | |
| | | | | |
CURRENT ASSETS | | | | | |
Cash and cash equivalents | | $ | 209,231 | | $ | 138,556 | |
Accounts receivable | | 423,084 | | 547,857 | |
Inventories | | 692,304 | | 661,617 | |
Other current assets | | 202,197 | | 193,570 | |
Total current assets | | 1,526,816 | | 1,541,600 | |
| | | | | |
NON-CURRENT ASSETS | | | | | |
Property, plant and equipment, net | | 1,154,161 | | 1,192,335 | |
Cost in excess of acquired net assets | | 1,213,962 | | 1,211,459 | |
Intangible assets, net | | 579,873 | | 620,677 | |
Other assets | | 409,564 | | 419,932 | |
| | | | | |
| | $ | 4,884,376 | | $ | 4,986,003 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | |
| | | | | |
CURRENT LIABILITIES | | | | | |
Short-term borrowings | | $ | 14,878 | | $ | 60,168 | |
Accounts payable | | 313,785 | | 310,485 | |
Accrued expenses | | 450,792 | | 444,336 | |
Income taxes payable | | 131,158 | | 160,700 | |
Total current liabilities | | 910,613 | | 975,689 | |
| | | | | |
NON-CURRENT LIABILITIES | | | | | |
Long-term debt | | 1,254,022 | | 1,309,603 | |
Pension and post-retirement health care liabilities | | 576,446 | | 618,539 | |
Other liabilities | | 283,268 | | 306,775 | |
| | | | | |
STOCKHOLDERS’ EQUITY | | | | | |
Common stock | | 2,521 | | 2,515 | |
Additional paid-in capital | | 2,997,816 | | 2,950,649 | |
Accumulated deficit | | (878,190 | ) | (869,873 | ) |
Accumulated other comprehensive loss | | (95,278 | ) | (141,052 | ) |
Treasury stock at cost | | (166,842 | ) | (166,842 | ) |
Total stockholders’ equity | | 1,860,027 | | 1,775,397 | |
| | | | | |
| | $ | 4,884,376 | | $ | 4,986,003 | |
9
CHEMTURA CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands of dollars)
| | Six Months Ended June 30, | |
Increase (decrease) to cash | | 2006 | | 2005 | |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net earnings | | $ | 15,712 | | $ | 3,437 | |
Adjustments to reconcile net earnings to net cash provided by (used in) operations: | | | | | |
Loss on sale of Industrial Water Additives business | | 12,475 | | — | |
Loss on sale of discontinued operations | | — | | 27,622 | |
Impairment of long-lived assets | | 5,610 | | — | |
Loss on early extinguishment of debt | | 19,549 | | — | |
Depreciation and amortization | | 97,318 | | 60,643 | |
Equity income | | (3,445 | ) | (174 | ) |
Changes in assets and liabilities, net: | | | | | |
Accounts receivable | | (107,791 | ) | (77,192 | ) |
Accounts receivable - securitization | | 252,068 | | 25,483 | |
Inventories | | (22,336 | ) | (32,709 | ) |
Accounts payable | | (476 | ) | (16,206 | ) |
Deposit for civil antitrust settlement | | — | | (58,500 | ) |
Pension and post-retirement health care liabilities | | (52,284 | ) | (28,018 | ) |
Other | | (45,334 | ) | (42,738 | ) |
Net cash provided by (used in) operations | | 171,066 | | (138,352 | ) |
| | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Net proceeds from divestments | | 116,668 | | 74,100 | |
Net payments for acquisitions | | (6,734 | ) | — | |
Merger transaction costs paid | | (8,315 | ) | (5,918 | ) |
Capital expenditures | | (48,458 | ) | (31,800 | ) |
Other investing activities | | 406 | | (56 | ) |
Net cash provided by investing activities | | 53,567 | | 36,326 | |
| | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Payments on credit facility | | (388,608 | ) | — | |
Proceeds on long-term borrowings | | 497,261 | | — | |
Payments on long-term borrowings | | (164,750 | ) | (10,000 | ) |
Payments on short-term borrowings | | (48,211 | ) | (651 | ) |
Premium paid on early extinguishment of debt | | (15,882 | ) | — | |
Payments for debt issuance costs | | (5,470 | ) | (726 | ) |
Dividends paid | | (24,034 | ) | (11,692 | ) |
Repayment of life insurance policy loan | | (9,854 | ) | — | |
Proceeds from exercise of stock options | | 2,979 | | 17,087 | |
Other financing activities | | (1,820 | ) | 480 | |
Net cash used in financing activities | | (158,389 | ) | (5,502 | ) |
| | | | | |
CASH | | | | | |
Effect of exchange rates on cash | | 4,431 | | (2,134 | ) |
| | | | | |
Change in cash | | 70,675 | | (109,662 | ) |
Cash at beginning of period | | 138,556 | | 158,700 | |
| | | | | |
Cash at end of period | | $ | 209,231 | | $ | 49,038 | |
Note: The 2005 Condensed Consolidated Statements of Cash Flows have not been adjusted to reflect discontinued operations and thus includes the cash flows of the Refined Products business, which was sold in June 2005.
10
CHEMTURA CORPORATION
Segment Sales and Operating Profit (Unaudited)
(In thousands of dollars)
| | Quarter Ended June 30, | | Six Months Ended June 30, | |
| | 2006 | | 2005 | | 2006 | | 2005 | |
NET SALES | | | | | | | | | |
| | | | | | | | | |
Plastic Additives | | $ | 409,087 | | $ | 209,982 | | $ | 806,671 | | $ | 418,269 | |
Polymers | | 124,550 | | 138,503 | | 251,888 | | 269,321 | |
Specialty Additives | | 143,893 | | 154,922 | | 286,417 | | 287,241 | |
Crop Protection | | 100,812 | | 90,977 | | 189,422 | | 168,890 | |
Consumer Products | | 203,180 | | — | | 317,607 | | — | |
Polymer Processing Equipment | | — | | 7,945 | | — | | 48,338 | |
Other | | 34,801 | | — | | 80,079 | | — | |
Total net sales | | 1,016,323 | | 602,329 | | 1,932,084 | | 1,192,059 | |
| | | | | | | | | |
OPERATING PROFIT | | | | | | | | | |
| | | | | | | | | |
Plastic Additives | | $ | 40,686 | | $ | 15,163 | | $ | 72,956 | | $ | 32,085 | |
Polymers | | 16,991 | | 27,707 | | 34,400 | | 51,356 | |
Specialty Additives | | 16,740 | | 30,194 | | 32,549 | | 56,538 | |
Crop Protection | | 22,110 | | 25,205 | | 45,711 | | 44,702 | |
Consumer Products | | 34,428 | | — | | 46,721 | | — | |
Polymer Processing Equipment | | — | | (2,533 | ) | — | | (3,003 | ) |
Other | | 3,304 | | — | | 8,886 | | — | |
| | 134,259 | | 95,736 | | 241,223 | | 181,678 | |
| | | | | | | | | |
General corporate expense, including amortization | | (29,808 | ) | (14,334 | ) | (67,046 | ) | (35,568 | ) |
Facility closures, severance and related costs | | 3,280 | | (23,917 | ) | 2,776 | | (24,075 | ) |
Antitrust costs | | (29,275 | ) | (3,338 | ) | (42,083 | ) | (6,504 | ) |
Merger costs | | (4,745 | ) | (8,686 | ) | (14,790 | ) | (8,686 | ) |
Impairment of long-lived assets | | (5,610 | ) | — | | (5,610 | ) | — | |
Total operating profit | | $ | 68,101 | | $ | 45,461 | | $ | 114,470 | | $ | 106,845 | |
11
CHEMTURA CORPORATION | | SUPPLEMENTARY SCHEDULE |
Major Factors Affecting Pro Forma Net Sales and Operating Results (Unaudited) | | |
Quarter and six months ended June 30, 2006 versus 2005 | | |
(In millions of dollars) | | |
The following table summarizes the major factors contributing to the second quarter and six month changes in operating results versus the prior year pro forma operating results:
| | Quarter Ended June 30, | | Six Months Ended June 30, | |
| | | | Pre-tax | | | | Pre-tax | |
| | | | Earnings | | | | Earnings | |
| | | | (Loss) from | | | | (Loss) from | |
| | Net | | Continuing | | Net | | Continuing | |
| | Sales | | Operations | | Sales | | Operations | |
2005 * | | $ | 1,093.7 | | $ | 58.0 | | $ | 2,103.9 | | $ | 111.8 | |
| | | | | | | | | |
2005 Conyers fire insurance recoveries | | — | | — | | — | | (7.2 | ) |
2005 Facility closures, severance and related costs | | — | | 24.2 | | — | | 25.3 | |
2005 Antitrust costs | | — | | 3.3 | | — | | 6.5 | |
2005 Merger costs | | — | | 8.7 | | — | | 8.7 | |
| | 1,093.7 | | 94.2 | | 2,103.9 | | 145.1 | |
| | | | | | | | | |
Higher selling prices | | 50.5 | | 50.5 | | 103.8 | | 103.8 | |
Reduced unit volume/mix | | (100.8 | ) | (35.7 | ) | (179.3 | ) | (57.7 | ) |
Foreign currency impact | | (3.9 | ) | (2.4 | ) | (28.0 | ) | (6.9 | ) |
Polymer Processing Equipment | | (7.9 | ) | 6.0 | | (48.3 | ) | 6.6 | |
Industrial Water Additives divested business | | (12.5 | ) | (3.0 | ) | (12.5 | ) | (3.0 | ) |
Other acquisitions/divestitures | | (2.8 | ) | 2.1 | | (7.5 | ) | 1.8 | |
Cost savings | | — | | 22.6 | | — | | 40.4 | |
Higher raw materials/energy costs | | — | | (19.5 | ) | — | | (47.9 | ) |
Unfavorable manufacturing productivity/absorption | | — | | (13.5 | ) | — | | (32.4 | ) |
Higher freight costs | | — | | (5.0 | ) | — | | (6.1 | ) |
Other strategic and corporate initiatives | | — | | (3.3 | ) | — | | (6.8 | ) |
Stock option expense | | — | | (2.6 | ) | — | | (4.2 | ) |
Higher A/R securitization fees | | — | | (1.8 | ) | — | | (1.0 | ) |
Inventory write-offs | | — | | (1.5 | ) | — | | (1.9 | ) |
2005 interest income from tax settlement | | — | | (2.2 | ) | — | | (2.2 | ) |
Higher interest expense | | — | | (0.4 | ) | — | | (0.3 | ) |
Other | | — | | (8.0 | ) | — | | (8.9 | ) |
| | 1,016.3 | | 76.5 | | 1,932.1 | | 118.4 | |
| | | | | | | | | |
2006 Change in useful life of assets | | — | | (2.9 | ) | — | | (5.8 | ) |
2006 Facility closures, severance and related costs | | — | | 3.3 | | — | | 2.8 | |
2006 Antitrust costs | | — | | (29.3 | ) | — | | (42.1 | ) |
2006 Merger expense | | — | | (4.7 | ) | — | | (14.8 | ) |
2006 Impairment of long-lived assets | | — | | (5.6 | ) | — | | (5.6 | ) |
2006 Early extinguishement of debt | | — | | (19.5 | ) | — | | (19.5 | ) |
2006 Favorable settlement of contractual matter | | — | | — | | — | | 4.3 | |
2006 Interest income from tax settlement | | — | | 4.0 | | — | | 4.0 | |
2006 Loss on divested business | | — | | (12.5 | ) | — | | (12.5 | ) |
| | | | | | | | | |
2006 | | $ | 1,016.3 | | $ | 9.3 | | $ | 1,932.1 | | $ | 29.2 | |
* Represents the pro forma net sales and pre-tax earnings from continuing operations, giving effect to the Merger with Great Lakes as if it had been consummated as of the beginning of January 1, 2005.
12
CHEMTURA CORPORATION
Pro Forma Non-GAAP Condensed Consolidated Statement of Earnings (Unaudited)
(In thousands, except per share data)
| | Quarter Ended June 30, | | Six Months Ended June 30, | |
| | 2006 | | 2005 | | 2006 | | 2005 | |
Net sales | | $ | 1,016,323 | | $ | 1,093,738 | | $ | 1,932,084 | | $ | 2,103,893 | |
| | | | | | | | | |
Cost of products sold (*) | | 750,210 | | 787,981 | | 1,425,047 | | 1,522,833 | |
Selling, general and administrative (*) | | 98,528 | | 113,208 | | 203,491 | | 234,914 | |
Depreciation and amortization | | 42,722 | | 49,682 | | 91,548 | | 101,491 | |
Research and development | | 17,724 | | 16,987 | | 32,522 | | 34,180 | |
Equity income | | (197 | ) | (544 | ) | (471 | ) | (912 | ) |
| | | | | | | | | |
Operating profit | | 107,336 | | 126,424 | | 179,947 | | 211,387 | |
Interest expense | | 29,397 | | 28,952 | | 58,470 | | 58,125 | |
Other expense, net (*) | | 1,356 | | 3,251 | | 3,017 | | 8,175 | |
| | | | | | | | | |
Earnings from continuing operations before income taxes | | 76,583 | | 94,221 | | 118,460 | | 145,087 | |
Income tax expense | | 26,384 | | 32,977 | | 41,461 | | 50,780 | |
| | | | | | | | | |
Earnings from continuing operations | | $ | 50,199 | | $ | 61,244 | | $ | 76,999 | | $ | 94,307 | |
| | | | | | | | | |
Diluted earnings from continuing operations | | $ | 0.21 | | $ | 0.26 | | $ | 0.32 | | $ | 0.40 | |
| | | | | | | | | |
Weighted average shares outstanding - diluted | | 241,311 | | 239,008 | | 241,252 | | 236,821 | |
(*) Certain amounts relating to operations have been reclassified from other expense, net to cost of products sold and selling, general and administrative expense in 2005 to be comparable to the 2006 presentation.
13
CHEMTURA CORPORATION
Non-GAAP Condensed Consolidated Statement of Earnings (Unaudited)
(In thousands, except per share data)
| | | | | | Non-GAAP | |
| | Quarter Ended | | | | Quarter Ended | |
| | June 30, | | Non-GAAP | | June 30, | |
| | 2006 | | Adjustments | | 2006 | |
Net sales | | $ | 1,016,323 | | $ | — | | $ | 1,016,323 | |
| | | | | | | |
Cost of products sold | | 750,210 | | — | | 750,210 | |
Selling, general and administrative | | 98,528 | | — | | 98,528 | |
Depreciation and amortization | | 45,607 | | (2,885 | ) | 42,722 | |
Research and development | | 17,724 | | — | | 17,724 | |
Equity income | | (197 | ) | — | | (197 | ) |
Facility closures, severance and related costs | | (3,280 | ) | 3,280 | | — | |
Antitrust costs | | 29,275 | | (29,275 | ) | — | |
Merger costs | | 4,745 | | (4,745 | ) | — | |
Impairment of long-lived assets | | 5,610 | | (5,610 | ) | — | |
| | | | | | | |
Operating profit | | 68,101 | | 39,235 | | 107,336 | |
Interest expense | | 29,397 | | — | | 29,397 | |
Loss on early extinguishment of debt | | 19,549 | | (19,549 | ) | — | |
Other expense, net | | 9,859 | | (8,503 | ) | 1,356 | |
| | | | | | | |
Earnings from continuing operations before income taxes | | 9,296 | | 67,287 | | 76,583 | |
Income tax expense | | 6,789 | | 19,595 | | 26,384 | |
| | | | | | | |
Earnings from continuing operations | | $ | 2,507 | | $ | 47,692 | | $ | 50,199 | |
| | | | | | | |
Diluted earnings from continuing operations | | | | | | $ | 0.21 | |
| | | | | | | |
Diluted weighted average shares outstanding | | | | | | 241,311 | |
Non-GAAP Adjustments consist of the following:
| | Non-GAAP | |
Change in useful life of assets property, plant and equipment | | $ | 2,885 | |
Facility closures, severance and related costs | | (3,280 | ) |
Antitrust costs | | 29,275 | |
Merger costs | | 4,745 | |
Asset impairment | | 5,610 | |
Loss on early extinguishment of debt | | 19,549 | |
Interest income on tax settlement | | (3,972 | ) |
Loss on sale of Industrial Waters | | 12,475 | |
Pre-Tax | | 67,287 | |
| | | |
Adjustment to apply a non-GAAP effective tax rate | | 19,595 | |
After-Tax | | $ | 47,692 | |
14
CHEMTURA CORPORATION
Non-GAAP Condensed Consolidated Statement of Earnings (Unaudited)
(In thousands, except per share data)
| | | | | | Non-GAAP | |
| | Six Months | | | | Six Months | |
| | Ended | | Non-GAAP | | Ended | |
| | June 30, 2006 | | Adjustments | | June 30, 2006 | |
Net sales | | $ | 1,932,084 | | $ | — | | $ | 1,932,084 | |
| | | | | | | |
Cost of products sold | | 1,425,047 | | — | | 1,425,047 | |
Selling, general and administrative | | 203,491 | | — | | 203,491 | |
Depreciation and amortization | | 97,318 | | (5,770 | ) | 91,548 | |
Research and development | | 32,522 | | — | | 32,522 | |
Equity income | | (471 | ) | — | | (471 | ) |
Facility closures, severance and related costs | | (2,776 | ) | 2,776 | | — | |
Antitrust costs | | 42,083 | | (42,083 | ) | — | |
Merger costs | | 14,790 | | (14,790 | ) | — | |
Impairment of long-lived assets | | 5,610 | | (5,610 | ) | — | |
| | | | | | | |
Operating profit | | 114,470 | | 65,477 | | 179,947 | |
Interest expense | | 58,470 | | — | | 58,470 | |
Loss on early extinguishment of debt | | 19,549 | | (19,549 | ) | — | |
Other expense, net | | 7,219 | | (4,202 | ) | 3,017 | |
| | | | | | | |
Earnings from continuing operations before income taxes | | 29,232 | | 89,228 | | 118,460 | |
Income tax expense | | 13,520 | | 27,941 | | 41,461 | |
| | | | | | | |
Earnings from continuing operations | | $ | 15,712 | | $ | 61,287 | | $ | 76,999 | |
| | | | | | | |
Diluted earnings from continuing operations | | | | | | $ | 0.32 | |
| | | | | | | |
Diluted weighted average shares outstanding | | | | | | 241,252 | |
Non-GAAP Adjustments consist of the following:
| | Non-GAAP | |
Change in useful life of assets property, plant and equipment | | $ | 5,770 | |
Facility closures, severance and related costs | | (2,776 | ) |
Antitrust costs | | 42,083 | |
Merger costs | | 14,790 | |
Asset impairment | | 5,610 | |
Loss on early extinguishment of debt | | 19,549 | |
Favorable settlement of contractual matter | | (4,300 | ) |
Interest income on tax settlement | | (3,973 | ) |
Loss on sale of Industrial Waters | | 12,475 | |
Pre-Tax | | 89,228 | |
| | | |
Adjustment to apply a non-GAAP effective tax rate | | 27,941 | |
After-Tax | | $ | 61,287 | |
15
CHEMTURA CORPORATION
Pro Forma Non-GAAP Condensed Consolidated Statement of Earnings (Unaudited)
(In thousands, except per share data)
| | | | | | | | | | | | Pro Forma | |
| | | | Conformed | | | | Pro Forma | | | | Non-GAAP | |
| | Chemtura | | Great Lakes | | | | Combined | | | | Combined | |
| | Quarter Ended | | Quarter Ended | | | | Quarter Ended | | | | Quarter Ended | |
| | June 30, | | June 30, | | Pro Forma | | June 30, | | Non-GAAP | | June 30, | |
| | 2005 | | 2005 | | Adjustments | | 2005 | | Adjustments | | 2005 | |
Net sales | | $ | 602,329 | | $ | 491,409 | | $ | — | | $ | 1,093,738 | | $ | — | | $ | 1,093,738 | |
| | | | | | | | | | | | | |
Cost of products sold | | 422,258 | | 366,430 | | (707 | ) | 787,981 | | — | | 787,981 | |
Selling, general and administrative | | 60,546 | | 52,902 | | (240 | ) | 113,208 | | — | | 113,208 | |
Depreciation and amortization | | 27,737 | | 19,978 | | 1,967 | | 49,682 | | — | | 49,682 | |
Research and development | | 10,472 | | 6,567 | | (52 | ) | 16,987 | | — | | 16,987 | |
Equity income | | (86 | ) | (458 | ) | — | | (544 | ) | — | | (544 | ) |
Facility closures, severance and related costs | | 23,917 | | 246 | | — | | 24,163 | | (24,163 | ) | — | |
Antitrust costs | | 3,338 | | — | | — | | 3,338 | | (3,338 | ) | — | |
Merger costs | | 8,686 | | 135,880 | | (135,880 | ) | 8,686 | | (8,686 | ) | — | |
| | | | | | | | | | | | | |
Operating profit (loss) | | 45,461 | | (90,136 | ) | 134,912 | | 90,237 | | 36,187 | | 126,424 | |
Interest expense | | 24,309 | | 6,845 | | (2,202 | ) | 28,952 | | — | | 28,952 | |
Other expense, net | | 2,745 | | 506 | | — | | 3,251 | | — | | 3,251 | |
| | | | | | | | | | | | | |
Earnings (loss) from continuing operations before income taxes | | 18,407 | | (97,487 | ) | 137,114 | | 58,034 | | 36,187 | | 94,221 | |
Income tax expense (benefit) | | 8,233 | | (9,451 | ) | 27,345 | | 26,127 | | 6,850 | | 32,977 | |
| | | | | | | | | | | | | |
Earnings (loss) from continuing operations | | $ | 10,174 | | $ | (88,036 | ) | $ | 109,769 | | $ | 31,907 | | $ | 29,337 | | $ | 61,244 | |
| | | | | | | | | | | | | |
Diluted earnings from continuing operations | | | | | | | | $ | 0.13 | | | | $ | 0.26 | |
| | | | | | | | | | | | | |
Diluted weighted average shares outstanding | | | | | | | | 239,008 | | | | 239,008 | |
Pro Forma Adjustments consist of the following:
| | Pro Forma | | | | | | | | | | | | | |
Pension | | $ | 975 | | | | | | | | | | | | | |
Interest | | 2,202 | | | | | | | | | | | | | |
Purchase accounting depreciation | | 2,637 | | | | | | | | | | | | | |
Amortization | | (4,604 | ) | | | | | | | | | | | | |
Purchase accounting inventory fair value impact | | 24 | | | | | | | | | | | | | |
Merger costs | | 135,880 | | | | | | | | | | | | | |
Pre-Tax | | 137,114 | | | | | | | | | | | | | |
Adjustment to apply a pro forma effective tax rate | | 27,345 | | | | | | | | | | | | | |
After-Tax | | $ | 109,769 | | | | | | | | | | | | | |
Non-GAAP Adjustments consist of the following:
| | Non-GAAP | | | | | | | | | | | | | |
Facility closures, severance and related costs | | $ | 24,163 | | | | | | | | | | | | | |
Antitrust costs | | 3,338 | | | | | | | | | | | | | |
Merger costs | | 8,686 | | | | | | | | | | | | | |
Pre-Tax | | 36,187 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Adjustment to apply a non-GAAP effective tax rate | | 6,850 | | | | | | | | | | | | | |
After-Tax | | $ | 29,337 | | | | | | | | | | | | | |
16
CHEMTURA CORPORATION
Pro Forma Non-GAAP Condensed Consolidated Statement of Earnings (Unaudited)
(In thousands, except per share data)
| | | | | | | | | | | | Pro Forma | |
| | | | Conformed | | | | Pro Forma | | | | Non-GAAP | |
| | Chemtura | | Great Lakes | | | | Combined | | | | Combined | |
| | Six Months | | Six Months | | | | Six Months | | | | Six Months | |
| | Ended | | Ended | | Pro Forma | | Ended | | Non-GAAP | | Ended | |
| | June 30, 2005 | | June 30, 2005 | | Adjustments | | June 30, 2005 | | Adjustments | | June 30, 2005 | |
Net sales | | $ | 1,192,059 | | $ | 911,834 | | $ | — | | $ | 2,103,893 | | $ | — | | $ | 2,103,893 | |
| | | | | | | | | | | | | |
Cost of products sold | | 842,732 | | 673,401 | | (463 | ) | 1,515,670 | | 7,163 | | 1,522,833 | |
Selling, general and administrative | | 124,545 | | 110,849 | | (480 | ) | 234,914 | | — | | 234,914 | |
Depreciation and amortization | | 57,863 | | 39,748 | | 3,880 | | 101,491 | | — | | 101,491 | |
Research and development | | 20,983 | | 13,301 | | (104 | ) | 34,180 | | — | | 34,180 | |
Equity income | | (174 | ) | (738 | ) | — | | (912 | ) | — | | (912 | ) |
Facility closures, severance and related costs | | 24,075 | | 1,228 | | — | | 25,303 | | (25,303 | ) | — | |
Antitrust costs | | 6,504 | | — | | — | | 6,504 | | (6,504 | ) | — | |
Merger costs | | 8,686 | | 138,429 | | (138,429 | ) | 8,686 | | (8,686 | ) | — | |
| | | | | | | | | | | | | |
Operating profit (loss) | | 106,845 | | (64,384 | ) | 135,596 | | 178,057 | | 33,330 | | 211,387 | |
Interest expense | | 48,715 | | 13,814 | | (4,404 | ) | 58,125 | | — | | 58,125 | |
Other expense, net | | 7,011 | | 1,164 | | — | | 8,175 | | — | | 8,175 | |
| | | | | | | | | | | | | |
Earnings (loss) from continuing operations before income taxes | | 51,119 | | (79,362 | ) | 140,000 | | 111,757 | | 33,330 | | 145,087 | |
Income tax expense (benefit) | | 22,716 | | (3,833 | ) | 27,461 | | 46,344 | | 4,436 | | 50,780 | |
| | | | | | | | | | | | | |
Earnings (loss) from continuing operations | | $ | 28,403 | | $ | (75,529 | ) | $ | 112,539 | | $ | 65,413 | | $ | 28,894 | | $ | 94,307 | |
| | | | | | | | | | | | | |
Diluted earnings from continuing operations | | | | | | | | $ | 0.28 | | | | $ | 0.40 | |
| | | | | | | | | | | | | |
Diluted weighted average shares outstanding | | | | | | | | 236,821 | | | | 236,821 | |
Pro Forma Adjustments consist of the following:
| | Pro Forma | | | | | | | | | | | |
Pension | | $ | 1,950 | | | | | | | | | | | |
Interest | | 4,404 | | | | | | | | | | | |
Purchase accounting depreciation | | 5,274 | | | | | | | | | | | |
Amortization | | (9,154 | ) | | | | | | | | | | |
Purchase accounting inventory fair value impact | | (903 | ) | | | | | | | | | | |
Merger costs | | 138,429 | | | | | | | | | | | |
Pre-Tax | | 140,000 | | | | | | | | | | | |
Adjustment to apply a pro forma effective tax rate | | 27,461 | | | | | | | | | | | |
After-Tax | | $ | 112,539 | | | | | | | | | | | |
Non-GAAP Adjustments consist of the following:
| | Non-GAAP | | | | | | | | | | | |
Facility closures, severance and related costs | | $ | 25,303 | | | | | | | | | | | |
Antitrust costs | | 6,504 | | | | | | | | | | | |
Merger costs | | 8,686 | | | | | | | | | | | |
Conyers fire insurance recoveries | | (7,163 | )(a) | | | | | | | | | | |
Pre-Tax | | 33,330 | | | | | | | | | | | |
| | | | | | | | | | | | | |
Adjustment to apply a non-GAAP effective tax rate | | 4,436 | | | | | | | | | | | |
After-Tax | | $ | 28,894 | | | | | | | | | | | |
(a) Represents insurance recoveries related to a fire at the Company’s Conyers, Georgia facility.
17
CHEMTURA CORPORATION | SUPPLEMENTARY SCHEDULE | |
Non-GAAP Segment Net Sales and Operating Profit (Unaudited) |
(In thousands of dollars) |
| | | | Pro Forma | | | | Pro Forma | |
| | Quarter | | Quarter | | Six Months | | Six Months | |
| | Ended | | Ended | | Ended | | Ended | |
| | June 30, 2006 | | June 30, 2005 | | June 30, 2006 | | June 30, 2005 | |
NET SALES | | | | | | | | | |
| | | | | | | | | |
Plastic Additives | | $ | 409,087 | | $ | 423,172 | | $ | 806,671 | | $ | 851,002 | |
Polymers | | 124,550 | | 138,503 | | 251,888 | | 269,321 | |
Specialty Additives | | 143,893 | | 165,774 | | 286,417 | | 307,384 | |
Crop Protection | | 100,812 | | 103,524 | | 189,422 | | 192,054 | |
Consumer Products | | 203,180 | | 206,084 | | 317,607 | | 345,954 | |
Polymer Processing Equipment (a) | | — | | 7,945 | | — | | 48,338 | |
Other | | 34,801 | | 48,736 | | 80,079 | | 89,840 | |
Total net sales | | $ | 1,016,323 | | $ | 1,093,738 | | $ | 1,932,084 | | $ | 2,103,893 | |
| | | | | | | | | |
OPERATING PROFIT (LOSS) | | | | | | | | | |
| | | | | | | | | |
Plastic Additives | | $ | 40,686 | | $ | 32,218 | | $ | 72,956 | | $ | 75,610 | |
Polymers | | 16,991 | | 27,707 | | 34,400 | | 51,356 | |
Specialty Additives | | 16,740 | | 31,829 | | 32,549 | | 59,324 | |
Crop Protection | | 22,110 | | 28,712 | | 45,711 | | 52,080 | |
Consumer Products | | 34,428 | | 26,113 | | 46,721 | | 28,184 | |
Polymer Processing Equipment (a) | | — | | (2,533 | ) | — | | (3,003 | ) |
Other | | 3,304 | | 7,584 | | 8,886 | | 11,582 | |
| | | | | | | | | |
| | 134,259 | | 151,630 | | 241,223 | | 275,133 | |
| | | | | | | | | |
General corporate expense | | (26,923 | ) | (25,206 | ) | (61,276 | ) | (63,746 | ) |
| | | | | | | | | |
Total operating profit | | $ | 107,336 | | $ | 126,424 | | $ | 179,947 | | $ | 211,387 | |
(a) As a result of the April 29, 2005 contribution of the assets of the Polymer Processing Equipment segment in exchange for a non-controlling interest in the Davis-Standard LLC venture, Polymer Processing Equipment ceased to be a reporting segment of the Company. The Company is recording its proportionate share of the venture's earnings in Other expense, net.
18
CHEMTURA CORPORATION | | |
Non-GAAP Segment Net Sales and Operating Profit (Unaudited) |
(In thousands of dollars) |
| | | | | | Non-GAAP | |
| | Quarter Ended | | | | Quarter Ended | |
| | June 30, | | Non-GAAP | | June 30, | |
| | 2006 | | Adjustments | | 2006 | |
NET SALES | | | | | | | |
| | | | | | | |
Plastic Additives | | $ | 409,087 | | $ | — | | $ | 409,087 | |
Polymers | | 124,550 | | — | | 124,550 | |
Specialty Additives | | 143,893 | | — | | 143,893 | |
Crop Protection | | 100,812 | | — | | 100,812 | |
Consumer Products | | 203,180 | | — | | 203,180 | |
Polymer Processing Equipment | | — | | — | | — | |
Other | | 34,801 | | — | | 34,801 | |
| | $ | 1,016,323 | | $ | — | | $ | 1,016,323 | |
| | | | | | | |
OPERATING PROFIT | | | | | | | |
| | | | | | | |
Plastic Additives | | $ | 40,686 | | $ | — | | $ | 40,686 | |
Polymers | | 16,991 | | — | | 16,991 | |
Specialty Additives | | 16,740 | | — | | 16,740 | |
Crop Protection | | 22,110 | | — | | 22,110 | |
Consumer Products | | 34,428 | | — | | 34,428 | |
Polymer Processing Equipment | | — | | — | | — | |
Other | | 3,304 | | — | | 3,304 | |
| | 134,259 | | — | | 134,259 | |
| | | | | | | |
General corporate expense | | (29,808 | ) | 2,885 | | (26,923 | ) |
Facility closures, severance and related costs | | 3,280 | | (3,280 | ) | — | |
Antitrust costs | | (29,275 | ) | 29,275 | | — | |
Merger costs | | (4,745 | ) | 4,745 | | — | |
Impairment of long-lived assets | | (5,610 | ) | 5,610 | | — | |
| | | | | | | |
Total operating profit | | $ | 68,101 | | $ | 39,235 | | $ | 107,336 | |
| | | | | | | | | | | | | |
Non-GAAP Adjustments consist of the following:
| | Operating | | | | | |
| | Profit | | | | | |
Change in useful life of assets property, plant and equipment | | $ | 2,885 | | | | | |
Facility closures, severance and related costs | | (3,280 | ) | | | | |
Antitrust costs | | 29,275 | | | | | |
Merger costs | | 4,745 | | | | | |
Impairment of long-lived assets | | 5,610 | | | | | |
| | $ | 39,235 | | | | | |
19
CHEMTURA CORPORATION | | |
Non-GAAP Segment Net Sales and Operating Profit (Unaudited) |
(In thousands of dollars) |
| | | | | | Non-GAAP | |
| | Six Months | | | | Six Months | |
| | Ended | | Non-GAAP | | Ended | |
| | June 30, 2006 | | Adjustments | | June 30, 2006 | |
NET SALES | | | | | | | |
| | | | | | | |
Plastic Additives | | $ | 806,671 | | $ | — | | $ | 806,671 | |
Polymers | | 251,888 | | — | | 251,888 | |
Specialty Additives | | 286,417 | | — | | 286,417 | |
Crop Protection | | 189,422 | | — | | 189,422 | |
Consumer Products | | 317,607 | | — | | 317,607 | |
Polymer Processing Equipment | | — | | — | | — | |
Other | | 80,079 | | — | | 80,079 | |
| | $ | 1,932,084 | | $ | — | | $ | 1,932,084 | |
| | | | | | | |
OPERATING PROFIT | | | | | | | |
| | | | | | | |
Plastic Additives | | $ | 72,956 | | $ | — | | $ | 72,956 | |
Polymers | | 34,400 | | — | | 34,400 | |
Specialty Additives | | 32,549 | | — | | 32,549 | |
Crop Protection | | 45,711 | | — | | 45,711 | |
Consumer Products | | 46,721 | | — | | 46,721 | |
Polymer Processing Equipment | | — | | — | | — | |
Other | | 8,886 | | — | | 8,886 | |
| | 241,223 | | — | | 241,223 | |
| | | | | | | |
General corporate expense | | (67,046 | ) | 5,770 | | (61,276 | ) |
Facility closures, severance and related costs | | 2,776 | | (2,776 | ) | — | |
Antitrust costs | | (42,083 | ) | 42,083 | | — | |
Merger costs | | (14,790 | ) | 14,790 | | — | |
Impairment of long-lived assets | | (5,610 | ) | 5,610 | | — | |
| | | | | | | |
Total operating profit | | $ | 114,470 | | $ | 65,477 | | $ | 179,947 | |
| | | | | | | | | | | | | |
Non-GAAP Adjustments consist of the following:
| | Operating | | | | | |
| | Profit | | | | | |
Change in useful life of assets property, plant and equipment | | $ | 5,770 | | | | | |
Facility closures, severance and related costs | | (2,776 | ) | | | | |
Antitrust costs | | 42,083 | | | | | |
Merger costs | | 14,790 | | | | | |
Impairment of long-lived assets | | 5,610 | | | | | |
| | $ | 65,477 | | | | | |
20
CHEMTURA CORPORATION
Pro Forma Non-GAAP Segment Net Sales and Operating Profit (Unaudited)
(In thousands of dollars)
| | | | | | | | | | | | Pro Forma | |
| | | | Conformed | | | | Pro Forma | | | | Non-GAAP | |
| | | | Great Lakes | | | | Combined | | | | Combined | |
| | Quarter Ended | | Quarter Ended | | | | Quarter Ended | | | | Quarter Ended | |
| | June 30, | | June 30, | | Pro Forma | | June 30, | | Non-GAAP | | June 30, | |
| | 2005 | | 2005 | | Adjustments | | 2005 | | Adjustments | | 2005 | |
NET SALES | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Plastic Additives | | $ | 209,982 | | $ | 213,190 | | $ | — | | $ | 423,172 | | $ | — | | $ | 423,172 | |
Polymers | | 138,503 | | — | | — | | 138,503 | | — | | 138,503 | |
Specialty Additives | | 154,922 | | 10,852 | | — | | 165,774 | | — | | 165,774 | |
Crop Protection | | 90,977 | | 12,547 | | — | | 103,524 | | — | | 103,524 | |
Consumer Products | | — | | 206,084 | | — | | 206,084 | | — | | 206,084 | |
Polymer Processing Equipment | | 7,945 | | — | | — | | 7,945 | | — | | 7,945 | |
Other | | — | | 48,736 | | — | | 48,736 | | — | | 48,736 | |
| | $ | 602,329 | | $ | 491,409 | | $ | — | | $ | 1,093,738 | | $ | — | | $ | 1,093,738 | |
| | | | | | | | | | | | | |
OPERATING PROFIT | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Plastic Additives | | $ | 15,163 | | $ | 14,709 | | $ | 2,346 | | $ | 32,218 | | $ | — | | $ | 32,218 | |
Polymers | | 27,707 | | — | | — | | 27,707 | | — | | 27,707 | |
Specialty Additives | | 30,194 | | 1,459 | | 176 | | 31,829 | | — | | 31,829 | |
Crop Protection | | 25,205 | | 3,426 | | 81 | | 28,712 | | — | | 28,712 | |
Consumer Products | | — | | 26,054 | | 59 | | 26,113 | | — | | 26,113 | |
Polymer Processing Equipment | | (2,533 | ) | — | | — | | (2,533 | ) | — | | (2,533 | ) |
Other | | — | | 6,693 | | 891 | | 7,584 | | — | | 7,584 | |
| | | | | | | | | | | | | |
| | 95,736 | | 52,341 | | 3,553 | | 151,630 | | — | | 151,630 | |
| | | | | | | | | | | | | |
General corporate expense | | (14,334 | ) | (6,351 | ) | (4,521 | ) | (25,206 | ) | — | | (25,206 | ) |
Facility closures, severance and related costs | | (23,917 | ) | (246 | ) | — | | (24,163 | ) | 24,163 | | — | |
Antitrust costs | | (3,338 | ) | — | | — | | (3,338 | ) | 3,338 | | — | |
Merger costs | | (8,686 | ) | (135,880 | ) | 135,880 | | (8,686 | ) | 8,686 | | — | |
| | | | | | | | | | | | | |
Total operating profit (loss) | | $ | 45,461 | | $ | (90,136 | ) | $ | 134,912 | | $ | 90,237 | | $ | 36,187 | | $ | 126,424 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Pro Forma Adjustments consist of the following:
| | Operating | | | | | | | | | | | |
| | Profit | | | | | | | | | | | |
Pension | | $ | 975 | | | | | | | | | | | |
Purchase Accounting Depreciation | | 2,637 | | | | | | | | | | | |
Amortization | | (4,604 | ) | | | | | | | | | | |
Inventory Accounting | | 24 | | | | | | | | | | | |
Merger Costs | | 135,880 | | | | | | | | | | | |
| | $ | 134,912 | | | | | | | | | | | |
Non-GAAP Adjustments consist of the following:
| | Operating | | | | | | | | | | | |
| | Profit | | | | | | | | | | | |
Facility closures, severance and related costs | | $ | 24,163 | | | | | | | | | | | |
Antitrust costs | | 3,338 | | | | | | | | | | | |
Merger Costs | | 8,686 | | | | | | | | | | | |
| | $ | 36,187 | | | | | | | | | | | |
21
CHEMTURA CORPORATION
Pro Forma Non-GAAP Segment Net Sales and Operating Profit (Unaudited)
(In thousands of dollars)
| | | | | | | | | | | | Pro Forma | |
| | | | Conformed | | | | Pro Forma | | | | Non-GAAP | |
| | | | Great Lakes | | | | Combined | | | | Combined | |
| | Six Months | | Six Months | | | | Six Months | | | | Six Months | |
| | Ended | | Ended | | Pro Forma | | Ended | | Non-GAAP | | Ended | |
| | June 30, 2005 | | June 30, 2005 | | Adjustments | | June 30, 2005 | | Adjustments | | June 30, 2005 | |
NET SALES | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Plastic Additives | | $ | 418,269 | | $ | 432,733 | | $ | — | | $ | 851,002 | | $ | — | | $ | 851,002 | |
Polymers | | 269,321 | | — | | — | | 269,321 | | — | | 269,321 | |
Specialty Additives | | 287,241 | | 20,143 | | — | | 307,384 | | — | | 307,384 | |
Crop Protection | | 168,890 | | 23,164 | | — | | 192,054 | | — | | 192,054 | |
Consumer Products | | — | | 345,954 | | — | | 345,954 | | — | | 345,954 | |
Polymer Processing Equipment | | 48,338 | | — | | — | | 48,338 | | — | | 48,338 | |
Other | | — | | 89,840 | | — | | 89,840 | | — | | 89,840 | |
| | $ | 1,192,059 | | $ | 911,834 | | $ | — | | $ | 2,103,893 | | $ | — | | $ | 2,103,893 | |
| | | | | | | | | | | | | |
OPERATING PROFIT | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Plastic Additives | | $ | 32,085 | | $ | 34,902 | | $ | 8,623 | | $ | 75,610 | | $ | — | | $ | 75,610 | |
Polymers | | 51,356 | | — | | — | | 51,356 | | — | | 51,356 | |
Specialty Additives | | 56,538 | | 2,478 | | 308 | | 59,324 | | — | | 59,324 | |
Crop Protection | | 44,702 | | 7,216 | | 162 | | 52,080 | | — | | 52,080 | |
Consumer Products | | — | | 31,642 | | (4,295 | ) | 27,347 | | 837 | | 28,184 | |
Polymer Processing Equipment | | (3,003 | ) | — | | — | | (3,003 | ) | — | | (3,003 | ) |
Other | | — | | 10,225 | | 1,357 | | 11,582 | | — | | 11,582 | |
| | | | | | | | | | | | | |
| | 181,678 | | 86,463 | | 6,155 | | 274,296 | | 837 | | 275,133 | |
| | | | | | | | | | | | | |
General corporate expense | | (35,568 | ) | (11,190 | ) | (8,988 | ) | (55,746 | ) | (8,000 | ) | (63,746 | ) |
Facility closures, severance and related costs | | (24,075 | ) | (1,228 | ) | — | | (25,303 | ) | 25,303 | | — | |
Antitrust costs | | (6,504 | ) | — | | — | | (6,504 | ) | 6,504 | | — | |
Merger costs | | (8,686 | ) | (138,429 | ) | 138,429 | | (8,686 | ) | 8,686 | | — | |
| | | | | | | | | | | | | |
Total operating profit (loss) | | $ | 106,845 | | $ | (64,384 | ) | $ | 135,596 | | $ | 178,057 | | $ | 33,330 | | $ | 211,387 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Pro Forma Adjustments consist of the following:
| | Operating | | | | | | | | | | | |
| | Profit | | | | | | | | | | | |
Pension | | $ | 1,950 | | | | | | | | | | | |
Purchase Accounting Depreciation | | 5,274 | | | | | | | | | | | |
Amortization | | (9,154 | ) | | | | | | | | | | |
Inventory Accounting | | (903 | ) | | | | | | | | | | |
Merger Costs | | 138,429 | | | | | | | | | | | |
| | $ | 135,596 | | | | | | | | | | | |
Non-GAAP Adjustments consist of the following:
| | Operating | | | | | | | | | | | |
| | Profit | | | | | | | | | | | |
Facility closures, severance and related costs | | $ | 25,303 | | | | | | | | | | | |
Antitrust costs | | 6,504 | | | | | | | | | | | |
Merger Costs | | 8,686 | | | | | | | | | | | |
Conyers Fire Costs | | (7,163 | ) | | | | | | | | | | |
| | $ | 33,330 | | | | | | | | | | | |
22
