NAPERVILLE, Ill., April 28, 2009 (GLOBE NEWSWIRE) -- Even with difficult economic pressures and negative currency impacts, Nalco (NYSE:NLC) delivered solid first quarter revenue, earnings, and free cash flow, aided by strong cost controls.
Organic sales dipped just 3.6 percent as part of a nominal sales decline to $868 million from prior-year first quarter sales of $1 billion. Currency translation effects reduced reported sales by 8.3 percent, with divestitures accounting for the remaining 1.2 percent decline.
The stronger U.S. dollar had a similarly negative impact on earnings. Earnings per share were 17 cents in the first quarter, on net income of $23 million, compared to 20 cents in the first quarter of 2008. Organic net income increased 18 percent.
EBITDA margins held flat as EBITDA declined 2.6 percent organically from the $156 million earned in the prior year quarter. Currency further reduced nominal first quarter 2009 EBITDA to $136 million. Earnings reflect $18 million in unfavorable volume variances in our plants, reflecting both the organic sales decline and production curtailments to reduce inventory levels.
Free Cash Flow for the period, $146 million, rose significantly from year-ago first quarter results of $43 million, benefitting from programs to reduce receivables and inventory. Results were ahead of full year 2008 Free Cash Flow of $142 million.
Sales were again led by Energy Services, which delivered 4.9 percent organic growth consisting of 10 percent improvement in oil field services, modest gains with Downstream customers and a decline in the Adomite well-service business that was less steep than rig count declines. Direct contribution of $80 million was just under the prior year quarter's $82 million, as currency impacts offset operational gains. Margins ended flat to last year.
Water Services growth in Latin America was more than offset by declines in North America, Asia and Europe, leading to an overall organic sales decrease of 4.5 percent. Manufacturing and mining sales were among the hardest hit sectors in Water Services, although plant closings hurt sales in several other markets as well. Growth efforts will be supported the remainder of the year by the mid-March introduction of 3D TRASAR(r) Boiler Technology, which drives energy, water, maintenance and other savings for customers. The Nalco Mobotec air protection technologies business led first quarter growth efforts in the segment, expanding 44 percent. The business is expected to continue to grow even while facing delays in some projects as air pollution control rules are adjusted in the United States. Water Services direct contribution of $70 million was down $18 million from the comparable 2008 period on lower sales, currency, and divestiture of the Finishing Technologies business. Direct contribution margins declined 0.7 percentage points.
A steep decline in paper end markets led to decreased Paper Services segment sales. Organic sales fell 16.9 percent, including a 25.7 percent decline in the hard-hit European paper market. Latin America, however, grew 6.8 percent even in tough market conditions. Direct contribution also was lower by $12 million to a total of $23 million on reduced sales and a 2.5 percentage point margin decline from the prior year. However, direct contribution margins improved sequentially from the fourth quarter of 2008, benefiting in part from recent restructuring activities.
Regionally, Latin America organic sales grew sharply across all segments, up 13.6 percent. Organic revenues dropped 3.2 percent in Asia, 3.6 percent in North America and 9.2 percent in Europe, Africa and the Middle East (EAME).
"Given what can only be described as extraordinarily challenging economic conditions, the business and our global team performed well. After a weak start to the year driven by extensive customer plant closures that reduced water treatment sales and production declines that hurt process-oriented revenues, we began seeing some improvement in Water Services end markets late in the quarter," said J. Erik Fyrwald, Chairman, President and Chief Executive Officer.
"Still, this likely will be a very challenging year and one with more volatility likely to come. We are pushing aggressively on productivity to help offset the impacts of weaker end markets. We generated very good progress on this front in the first quarter and remain on path -- at $27 million in the first quarter -- to exceed our $100 million savings commitment. Given that we had averaged $11 million in first quarter savings over the past three years, I am very pleased with these early results," Fyrwald added.
Working capital reductions were a key contributor to first quarter Free Cash Flow, and the Company expects to deliver further performance improvements into 2010. "As we improve our demand planning and order-to-cash processes, we will be better positioned to manage inventory, receivable and accounts payable positions going forward," Fyrwald said.
In late March, Nalco acquired Crossbow Water, a regional high-purity water and water pre-treatment company. The Crossbow acquisition expands the range of pre-treatment technologies and services that Nalco sales engineers can offer to customers, initially focused on the U.S. Midwest. Crossbow generated 2008 sales of $14 million.
Conference Call/Webcast
Nalco will discuss first-quarter results in a conference call and audio-only Webcast to be held on Wednesday, April 29 at 10 a.m. ET. Information on the conference call and Webcast is available on our Web site at www.nalco.com/investors.
About Nalco
Nalco is the world's leading water treatment and process improvement company, delivering significant environmental, social and economic performance benefits to our customers. We help our customers reduce energy, water and other natural resource consumption, enhance air quality, minimize environmental releases and improve productivity and end products while boosting the bottom line. Together our comprehensive solutions contribute to the sustainable development of customer operations. Nalco is a member of the Dow Jones Sustainability World Index. More than 11,500 Nalco employees operate in 130 countries supported by a comprehensive network of manufacturing facilities, sales offices and research centers to serve a broad range of end markets. In 2008, Nalco achieved sales of more than $4.2 billion. For more information visit www.nalco.com.
The Nalco Company logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1135
Several non-GAAP measures are discussed in today's press release. Management believes that discussion of these measures provides investors with additional insight into the ongoing operations of Nalco Holding Company. Non-GAAP measures are reconciled to the closest GAAP measure in schedules attached to this press release, which may also be found at www.nalco.com. EBITDA is a non-GAAP measure used in determining compliance with the Company's debt covenants. Reconciliation to net earnings is included in Attachment 5. Free Cash Flow is reconciled on Attachment 6 to Cash from Operations as shown on Nalco's Cash Flow Statement, and is defined as Cash from Operations less Capital Expenditures and Noncontrolling Interest charges. In addition, Nalco may discuss sales growth in terms of nominal (actual), organic (nominal less foreign currency and acquisition/divestiture/merger/joint venture/perimeter impacts), and real (organic growth less that portion of the growth which consists of price increases that simply pass along higher purchased material and freight costs). The non-GAAP measures should not be viewed as alternatives to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other companies.
This news release includes forward-looking statements, reflecting current analysis and expectations, based on what are believed to be reasonable assumptions. Forward-looking statements may involve known and unknown risks, uncertainties and other factors, which may cause the actual results to differ materially from those projected, stated or implied, depending on many factors, including, without limitation: ability to generate cash, ability to raise capital, ability to refinance, the result of the pursuit of strategic alternatives, ability to execute work process redesign and reduce costs, ability to execute price increases, business climate, business performance, economic and competitive uncertainties, higher manufacturing costs, reduced level of customer orders, changes in strategies, risks in developing new products and technologies, environmental and safety regulations and clean-up costs, foreign exchange rates, the impact of changes in the regulation or value of pension fund assets and liabilities, changes in generally accepted accounting principles, adverse legal and regulatory developments, including increases in the number or financial exposures of claims, lawsuits, settlements or judgments, or the inability to eliminate or reduce such financial exposures by collecting indemnity payments from insurers, the impact of increased accruals and reserves for such exposures, weather-related factors, and adverse changes in economic and political climates around the world, including terrorism and international hostilities, and other risk factors identified by the Company. Accordingly, there can be no assurance that the Company will meet future results, performance or achievements expressed or implied by such forward-looking statements. This paragraph is included to provide safe harbor for forward-looking statements, which are not generally required to be publicly revised as circumstances change, and which the Company does not intend to update.
Attachments
1. Condensed Consolidated Balance Sheets (Unaudited)
2. Condensed Consolidated Statements of Operations (Unaudited)
3. Condensed Consolidated Statements of Cash Flows (Unaudited)
4. Segment Information (Unaudited)
5. EBITDA (Unaudited)
6. Free Cash Flow (Unaudited)
7. Condensed Consolidated Statements of Operations - 2008 Results
Reclassified to Conform with 2009 Presentation (Unaudited)
8. Segment Information - 2008 Results Reclassified to Conform with
2009 Presentation (Unaudited)
Nalco Holding Company and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in millions)
(Unaudited)
March 31, Dec. 31,
2009 2008
-------- --------
Assets
Current assets:
Cash and cash equivalents $ 163.3 $ 61.8
Accounts receivable, less allowances of $20.0
in 2009 and $23.8 in 2008 661.2 774.0
Inventories:
Finished products 275.8 301.6
Materials and work in process 89.8 110.2
-------- --------
365.6 411.8
Prepaid expenses, taxes and other current assets 135.7 140.1
-------- --------
Total current assets 1,325.8 1,387.7
Property, plant, and equipment, net 685.5 703.7
Intangible assets:
Goodwill 1,696.1 1,700.1
Other intangibles, net 1,067.0 1,076.4
Other assets 174.4 174.1
-------- --------
Total assets $4,948.8 $5,042.0
======== ========
Liabilities and equity
Current liabilities:
Accounts payable $ 257.6 $ 299.2
Short-term debt 74.7 93.8
Other current liabilities 316.5 341.9
-------- --------
Total current liabilities 648.8 734.9
-------- --------
Other liabilities:
Long-term debt 3,115.6 3,129.6
Deferred income taxes 273.5 258.8
Accrued pension benefits 319.1 322.2
Other liabilities 199.5 183.8
Equity:
Nalco Holding Company shareholders' equity 374.5 393.3
Noncontrolling interest 17.8 19.4
-------- --------
Total equity 392.3 412.7
-------- --------
Total liabilities and equity $4,948.8 $5,042.0
======== ========
ATTACHMENT 1
Nalco Holding Company and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(dollars in millions, except per share data)
Three Three
Months Months
ended ended
March 31, March 31,
2009 2008
-------- --------
Net sales $ 868.4 $ 999.7
Operating costs and expenses:
Cost of product sold 488.6 563.6
Selling, administrative, and research expenses 277.8 309.6
Amortization of intangible assets 11.6 13.6
Restructuring expenses 0.3 1.0
-------- --------
Total operating costs and expenses 778.3 887.8
-------- --------
Operating earnings 90.1 111.9
Other income (expense), net 2.8 (3.0)
Interest income 1.3 2.5
Interest expense (57.9) (67.3)
-------- --------
Earnings before income taxes 36.3 44.1
Income tax provision 11.6 13.5
-------- --------
Net earnings 24.7 30.6
Less: Net earnings attributable
to noncontrolling interests 1.5 1.4
-------- --------
Net earnings attributable to
Nalco Holding Company $ 23.2 $ 29.2
======== ========
Net earnings per share attributable to Nalco
Holding Company common shareholders:
Basic $ 0.17 $ 0.20
======== ========
Diluted $ 0.17 $ 0.20
======== ========
Weighted-average shares outstanding (millions):
Basic 138.1 141.9
======== ========
Diluted 138.2 142.8
======== ========
Cash dividends declared per share $ 0.035 $ 0.035
======== ========
ATTACHMENT 2
Nalco Holding Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(dollars in millions)
Three Three
Months Months
ended ended
March 31, March 31,
2009 2008
-------- --------
Operating activities
Net earnings $ 24.7 $ 30.6
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 32.9 34.5
Amortization 11.6 13.6
Amortization of deferred financing costs and
accretion of senior discount notes 5.6 12.0
Other, net 11.1 10.0
Changes in operating assets and liabilities 80.8 (30.1)
-------- --------
Net cash provided by operating activities 166.7 70.6
-------- --------
Investing activities
Business purchases (23.7) (2.5)
Additions to property, plant, and equipment, net (18.8) (26.4)
Other 0.4 (3.1)
-------- --------
Net cash used for investing activities (42.1) (32.0)
-------- --------
Financing activities
Cash dividends (4.8) (4.9)
Changes in short-term debt, net (22.3) (56.0)
Proceeds from long-term debt 5.0 10.5
Purchases of treasury stock -- (7.6)
Other (0.1) (3.0)
-------- --------
Net cash used for financing activities (22.2) (61.0)
Effect of exchange rate changes on cash
and cash equivalents (0.9) 2.5
-------- --------
Increase (decrease) in cash and cash equivalents 101.5 (19.9)
Cash and cash equivalents at beginning of period 61.8 119.9
-------- --------
Cash and cash equivalents at end of period $ 163.3 $ 100.0
======== ========
ATTACHMENT 3
Nalco Holding Company and Subsidiaries
Segment Information (Unaudited)
(dollars in millions)
Net sales by reportable segment were as follows:
Three Three
Months Months
ended ended
March 31, March 31,
2009 2008
-------- --------
Water Services $ 373.5 $ 450.6
Paper Services 153.7 200.7
Energy Services 338.3 347.4
Other 2.9 1.0
-------- --------
Net sales $ 868.4 $ 999.7
======== ========
The following table presents direct contribution by reportable segment
and reconciles the total segment direct contribution to earnings
before income taxes:
Three Three
Months Months
ended ended
March 31, March 31,
2009 2008
-------- --------
Segment direct contribution:
Water Services $ 70.3 $ 87.9
Paper Services 22.9 34.9
Energy Services 80.2 82.0
Other* (23.5) (26.0)
-------- --------
Total segment direct contribution 149.9 178.8
Expenses not allocated to segments:
Administrative expenses 47.9 52.3
Amortization of intangible assets 11.6 13.6
Restructuring expenses 0.3 1.0
-------- --------
Operating earnings 90.1 111.9
Other income (expense), net 2.8 (3.0)
Interest income 1.3 2.5
Interest expense (57.9) (67.3)
-------- --------
Earnings before income taxes $ 36.3 $ 44.1
======== ========
* Includes certain costs not allocated to segments, but deducted in
arriving at direct contribution.
ATTACHMENT 4
Nalco Holding Company and Subsidiaries
EBITDA (Unaudited)
(dollars in millions)
Three Three
Months Months
ended ended
March 31, March 31,
2009 2008
-------- --------
Net earnings attributable to
Nalco Holding Company $ 23.2 $ 29.2
Income tax provision 11.6 13.5
Interest expense, net of interest income 56.6 64.8
Depreciation 32.9 34.5
Amortization 11.6 13.6
-------- --------
EBITDA $ 135.9 $ 155.6
======== ========
ATTACHMENT 5
Nalco Holding Company and Subsidiaries
Free Cash Flow (Unaudited)
(dollars in millions)
Three Three
Months Months
ended ended
March 31, March 31,
2009 2008
-------- --------
Net cash provided by operating activities $ 166.7 $ 70.6
Net earnings attributable to
noncontrolling interests (1.5) (1.4)
Additions to property, plant and equipment, net (18.8) (26.4)
-------- --------
Free cash flow $ 146.4 $ 42.8
======== ========
ATTACHMENT 6
Nalco Holding Company and Subsidiaries
Condensed Consolidated Statements of Operations
2008 Results Reclassified to Conform with 2009 Presentation
(Unaudited)
(dollars in millions, except per share data)
Three Three Three Three
Months Months Months Months Year
ended ended ended ended ended
March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
2008 2008 2008 2008 2008
-------- -------- -------- -------- --------
Net sales $ 999.7 $1,066.3 $1,115.5 $1,030.9 $4,212.4
Operating costs and
expenses:
Cost of product sold 563.6 594.5 641.5 578.7 2,378.3
Selling,
administrative, and
research expenses 309.6 332.6 318.5 289.3 1,250.0
Amortization of
intangible assets 13.6 15.9 14.0 13.3 56.8
Restructuring
expenses 1.0 1.4 10.4 20.6 33.4
Gain on divestiture -- -- (38.1) -- (38.1)
Impairment
of goodwill -- -- -- 544.2 544.2
-------- -------- -------- -------- --------
Total operating
costs and expenses 887.8 944.4 946.3 1,446.1 4,224.6
-------- -------- -------- -------- --------
Operating
earnings (loss) 111.9 121.9 169.2 (415.2) (12.2)
Other income
(expense), net (3.0) (4.3) (5.1) (5.0) (17.4)
Interest income 2.5 2.0 2.3 1.5 8.3
Interest expense (67.3) (64.7) (63.7) (63.1) (258.8)
-------- -------- -------- -------- --------
Earnings (loss)
before income taxes 44.1 54.9 102.7 (481.8) (280.1)
Income tax provision
(benefit) 13.5 9.0 43.9 (11.9) 54.5
-------- -------- -------- -------- --------
Net earnings (loss) 30.6 45.9 58.8 (469.9) (334.6)
Less: Net earnings
attributable to
noncontrolling
interests 1.4 1.7 1.4 3.5 8.0
-------- -------- -------- -------- --------
Net earnings (loss)
attributable to
Nalco Holding
Company $ 29.2 $ 44.2 $ 57.4 $ (473.4) $ (342.6)
======== ======== ======== ======== ========
Net earnings (loss)
per share
attributable to
Nalco Holding
Company common
shareholders:
Basic $ 0.20 $ 0.32 $ 0.41 $ (3.45) $ (2.44)
======== ======== ======== ======== ========
Diluted $ 0.20 $ 0.31 $ 0.41 $ (3.45) $ (2.44)
======== ======== ======== ======== ========
Weighted-average
shares outstanding
(millions):
Basic 141.9 141.4 139.9 137.4 140.1
======== ======== ======== ======== ========
Diluted 142.8 142.2 140.7 137.4 140.1
======== ======== ======== ======== ========
Cash dividends
declared per share $ 0.035 $ 0.035 $ 0.035 $ 0.035 $ 0.14
======== ======== ======== ======== ========
ATTACHMENT 7
Nalco Holding Company and Subsidiaries
Segment Information
2008 Results Reclassified to Conform with 2009 Presentation
(Unaudited)
(dollars in millions)
Three Three Three Three
Months Months Months Months Year
ended ended ended ended ended
March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
2008 2008 2008 2008 2008
-------- -------- -------- -------- --------
Water Services $ 450.6 $ 499.1 $ 514.7 $ 452.0 $1,916.4
Paper Services 200.7 202.1 203.0 170.7 776.5
Energy Services 347.4 364.1 396.2 404.7 1,512.4
Other 1.0 1.0 1.6 3.5 7.1
-------- -------- -------- -------- --------
Net sales $ 999.7 $1,066.3 $1,115.5 $1,030.9 $4,212.4
======== ======== ======== ======== ========
Segment direct
contribution:
Water Services $ 87.9 $ 104.6 $ 112.5 $ 106.0 $ 411.0
Paper Services 34.9 28.1 29.2 23.8 116.0
Energy Services 82.0 79.6 81.8 95.8 339.2
Other (26.0) (19.7) (16.3) (16.0) (78.0)
-------- -------- -------- -------- --------
Total segment
direct contribution 178.8 192.6 207.2 209.6 788.2
Expenses not
allocated to
segments:
Administrative
expenses 52.3 53.4 51.7 46.7 204.1
Amortization of
intangible assets 13.6 15.9 14.0 13.3 56.8
Restructuring
expenses 1.0 1.4 10.4 20.6 33.4
Gain on divestiture -- -- (38.1) -- (38.1)
Impairment of
goodwill -- -- -- 544.2 544.2
-------- -------- -------- -------- --------
Operating earnings
(loss) 111.9 121.9 169.2 (415.2) (12.2)
Other income
(expense), net (3.0) (4.3) (5.1) (5.0) (17.4)
Interest income 2.5 2.0 2.3 1.5 8.3
Interest expense (67.3) (64.7) (63.7) (63.1) (258.8)
-------- -------- -------- -------- --------
Earnings (loss)
before income taxes $ 44.1 $ 54.9 $ 102.7 $ (481.8) $ (280.1)
======== ======== ======== ======== ========
Note: Reclassifications made to 2008 results to conform with 2009
presentation included the following significant items:
* Results of the Integrated Channels group that had previously been
reported in the Other segment are now reported as part of
Water Services.
* The internal non-GAAP "capital charge" that had previously been
deducted from each segment's direct contribution has been
discontinued.
ATTACHMENT 8