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TheStreet Open House

Chemtura Reports Fourth Quarter And Full Year 2012 Financial Results

Stocks in this article: CHMT

Regulatory News:

Chemtura Corporation, (NYSE / Euronext Paris: CHMT) (the “Company,” “Chemtura,” “We,” “Us” or “Our”) today announced financial results for the fourth quarter ended December 31, 2012. We also filed with the Securities and Exchange Commission our Annual Report on Form 10-K for the year ended December 31, 2012. For the fourth quarter of 2012, Chemtura reported net sales of $622 million and net earnings from continuing operations attributable to Chemtura on a GAAP basis of $27 million, or $0.27 per share.

Fourth Quarter 2012 Financial Results

The discussion below includes financial information on both a GAAP and non-GAAP managed basis. We present managed basis financial information as management uses this information internally to evaluate and direct the performance of our operations and believes that managed basis financial information provides useful information to investors. A reconciliation of GAAP and managed basis financial information is provided in the supplemental schedules included in this release.

The following is a summary of fourth quarter and full year 2012 financial results from continuing operations attributable to Chemtura on a GAAP basis :

(In millions, except per share data)   Fourth Quarter   Year Ended
    2012   2011   % change 2012   2011   % change
Net sales   $ 622   $ 578   8% $ 2,629   $ 2,606   1%
Operating income   $ 32   $ 53   (40%) $ 211   $ 196   8%
Net earnings   $ 27   $ 24   13% $ 134   $ 94   43%
Net earnings - per share   $ 0.27   $ 0.24   13% $ 1.35   $ 0.94   44%
         

The following is a summary of fourth quarter and full year 2012 financial results from continuing operations attributable to Chemtura on a managed basis:

(In millions, except per share data)   Fourth Quarter   Year Ended
    2012   2011   % change 2012   2011   % change
Net sales   $ 622   $ 578   8% $ 2,629   $ 2,606   1%
Operating income   $ 35   $ 42   (17%) $ 224   $ 190   18%
Net earnings   $ 15   $ 19   (21%) $ 115   $ 91   26%
Net earnings - per share   $ 0.15   $ 0.19   (21%) $ 1.16   $ 0.91   27%
Adjusted EBITDA   $ 75   $ 74   1% $ 367   $ 336   9%
         

Non-Operating Activities Reflected in Our Fourth Quarter Financial Results

  • On November 9, 2012, we entered into an asset purchase agreement with SK Blue Holdings, Ltd. (“SK”), an affiliate of SK Capital Partners III, L.P. to sell substantially all the assets of our antioxidant and UV stabilizers ("Antioxidant") business for $200 million. The assets to be sold include, among others, trade receivables, inventory, our equity interest in two joint ventures, certain dedicated plants in the U.S., France and Germany, and certain dedicated assets in shared facilities. SK also agreed to assume certain liabilities related to the Antioxidant business. We will retain assets that are shared with our other business components that exist in certain locations globally.
  • On January 25, 2013, we entered into an Amended and Restated Asset Purchase and Contribution Agreement with SK and Addivant USA Holdings Corp. (“Addivant”) whereby SK and Addivant agreed, in addition to purchasing substantially all the assets of our Antioxidant business, to assume certain additional pension and environmental liabilities totaling approximately $93 million. The agreement provides for an update of the actuarial valuation of net pension liabilities to be performed prior to closing with any change in valuation resulting in an equalizing adjustment to the value of the seller note or cash. Based on the January 25, 2013 terms, the consideration payable at closing of $107 million will consist of $97 million in cash, $9 million in preferred stock to be issued by Addivant and a seller note of $1 million. The transaction is subject to customary closing conditions and adjustments for working capital changes. The transaction is anticipated to close in the first quarter of 2013.As a result of entering into this transaction, we recorded an additional impairment loss of $11 million in the fourth quarter of 2012 and determined that discontinued operations treatment applied. The assets and liabilities included in the Antioxidant sale have been presented as assets and liabilities of discontinued operations and earnings and direct costs associated with the Antioxidant business have been presented as (loss) earnings from discontinued operations, net of tax in the tables attached to this release for the current and comparative periods.Certain functional and other expenses that are managed company-wide are allocated to our segments. The portion of such costs allocated to the Antioxidant business do not transfer directly under the transaction and will be subject to a process of elimination after the sale. As such, in historic periods these costs are shown as part of continuing operations in the corporate segment and not included under (loss) earnings from discontinued operations, net of tax. These costs approximate $1 million and $3 million for the quarters ended December 31, 2012 and 2011, respectively and $13 million and $15 million for the years ended December 31, 2012 and 2011, respectively.
  • On October 31, 2012, we incurred an additional $125 million of debt under our senior secured term facility agreement due 2016 (the “Term Loan”) having exercised the accordion feature under this loan agreement for the purpose of funding potential investment opportunities and general corporate purposes. Accordingly, we wrote-off previously capitalized debt issuance costs and costs associated with exercising the accordion feature of $1 million, which are classified as loss on early extinguishment of debt. Additionally, we incurred additional interest of $2 million associated with the additional Term Loan advance.
  • We continue to explore opportunities to rationalize our legal entity structure. During the fourth quarter we dissolved several of our European subsidiaries that we no longer required. These actions resulted in a $21 million gain due to the release of the cumulative foreign currency translation adjustment associated with these entities. We have presented this gain under other income, net.
  • We recognized a correction of our cumulative non-cash stock compensation expense of $6 million, $5 million of which was recorded in selling, general and administrative (“SG&A”) expense and $1 million in cost of goods sold (“COGS”).

CEO Remarks

“The fourth quarter completed a year of significant progress in which we delivered improvement each quarter with a modest year-over-year improvement in Adjusted EBITDA,” commented Craig A. Rogerson, Chairman, President and CEO of Chemtura. “Chemtura AgroSolutions and Consumer Products both performed strongly in one of their seasonally weaker quarters, delivering significant improvement over the fourth quarter of 2011. Our Industrial segments however faced tougher business conditions.”

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