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Borden Chemical Achieves 11 Percent Growth in Sales & Operating Income for Second Quarter

Published on 2004-07-27. Author : SpecialChem

 

COLUMBUS, Ohio -- Borden Chemical reported strong growth of 11 percent in both sales and operating income for its second quarter ended June 30, 2004. Total sales for the period were $413 million versus $371 million for the previous year period, with the increase resulting largely from higher sales volumes and selling prices. Sales volumes for the quarter increased 8 percent, reflecting continuing improvement in domestic and international wood and industrial markets.

Operating income for the quarter was $22.3 million versus $20 million for the previous year period, driven by strong growth in sales volumes across major business segments.

Earnings before interest, taxes, depreciation and amortization (Segment EBITDA), adjusted for business realignment, impairments, non-operating expense and certain other operating expense items was $41 million, a 20 percent improvement over the second quarter 2003. (Segment EBITDA, previously termed Adjusted EBITDA, is considered by management to be a key measure of operating performance. Additional detail regarding this metric and a reconciliation of Segment EBITDA to generally accepted accounting principles, or GAAP, is included as part of this press release.)

"Our second quarter operating results continue our positive performance this year, with excellent growth in sales volumes, operating income and earnings as measured by Segment EBITDA," said Craig O. Morrison, president and chief executive officer. "Strong cash flow from operations of $21.5 million was 82 percent higher than during the same period last year, enabling us to pay down $8 million in debt and fund $12 million in capital expenditures.

"As we move into the third quarter, we are excited about the strong performance of our business and about our upcoming sale to Apollo Management, which is committed to continued growth for Borden Chemical."

On July 5, Borden Chemical entered into a definitive agreement for sale of the company to Apollo Management, LP. The sale is anticipated to close in the third quarter. As a result of the agreement, a previously filed registration statement with the Securities and Exchange Commission for an initial public offering of the company's common stock has been suspended.

On a net income basis, Borden Chemical incurred a loss for the second quarter period of $132 million, or 66 cents per share, compared with net income of $20.2 million, or 10 cents per share for the second quarter 2003. The second quarter loss includes the impact of charges related to the pending sale of the company to Apollo Management, LP, and the recently terminated initial public offering of common stock.

These charges include a non-cash charge of $137.1 million related to the company's ability to utilize net deferred tax assets on a go-forward basis. The change in ownership will result in statutory and structural limitations on the company's ability to use deferred tax assets, resulting in the charge. They also include one-time charges of $7.2 million related to the sale of the company and the previously planned stock offering.

Through the first six months of the year, Borden Chemical had sales of $798.4 million versus sales of $720 million for the same period in 2003. Operating income through six months was $43.1 million versus $27.2 million in 2003, while Segment EBITDA through six months was $75.9 million, versus $54.7 million for the same period in 2003. The company had a net loss of $127.1 million for the six-month period, including the second quarter tax charge, versus net income of $16.7 million for the same period last year.

BUSINESS SEGMENT RESULTS

North American Forest Products

North American Forest Products net sales increased $22.2 million, or 11 percent in the second quarter 2004 compared to the second quarter 2003, while Segment EBITDA increased $4.9 million, or 20 percent. The sales increase resulted from improved volumes reflecting strong demand for resins and continued strength in the board markets including housing, remodeling and furniture. The Segment EBITDA increase primarily reflects the sales volume improvement with purchasing productivity and foreign currency exchange also contributing to the increase.

North American Performance Resins

North American Performance Resins net sales increased $12.4 million, or 13 percent, in the first quarter of 2004 compared to 2003 due primarily to improved volumes and increased selling prices. Volume improvements in the foundry resins, electronics and industrial resin businesses were partially offset by volume declines in the laminate and melamine derivatives and oilfield products segments. Segment EBITDA decreased $255,000, or 2 percent, as the volume increases were more than offset by competitive pricing pressures, product mix and investments supporting geographic expansion and new product development.

International Operations

International net sales increased $7.7 million, or 10 percent, in the second quarter of 2004 compared to the same period in 2003. Improved volumes in Latin America and Europe were offset by adverse product mix in Europe, while the positive impact of foreign currency translation and the 2003 acquisition of Fentak Pty. Ltd. also were factors in the increase. Segment EBITDA increased $376,000, or 5 percent, reflecting improved volumes and benefits from a European restructuring that occurred last year.

Source: : Borden Chemical


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