Axiall Reports First-Quarter 2013 Results

Axiall Reports First-Quarter 2013 Results

ATLANTA--(BUSINESS WIRE)-- Axiall Corporation (NYS: AXLL) today announced financial results for the quarter ended March 31, 2013.

Axiall reported net sales of $1.1 billion for the first quarter of 2013, compared to net sales of $859.9 million reported for the first quarter of 2012. The company reported a Net loss attributable to Axiall of $3.5 million, or $0.06 per diluted share, for the first quarter of 2013, compared to Net income attributable to Axiall of $35.3 million, or $1.01 per diluted share, for the first quarter of 2012. Excluding the non-recurring items described in the table below from the calculation of Net income (loss) attributable to Axiall, the company reported Adjusted Net Income of $45.1 million, or Adjusted Earnings per Share of $0.75, for the first quarter of 2013, compared to Adjusted Net Income of $27.6 million, or Adjusted Earnings per Share of $0.79, for the first quarter of 2012. The company reported Adjusted EBITDA of $133.4 million in the first quarter of 2013, compared to Adjusted EBITDA of $75.4 million for the same quarter in the prior year.


As previously reported, the company and PPG's chemicals business merged on January 28, 2013. The financial results announced today include the results of the merged company since the date of the merger through March 31, 2013, but not in prior periods.

       
(millions, except per share data) Q1 2013 Q1 2012
Net income (loss) attributable to Axiall $ (3.5 ) $ 35.3
Pretax charges (benefits)
Cost of sales fair value of inventory - purchase accounting 10.2 -
Long -lived asset impairment charges (recoveries), net 2.6 (0.3 )
Transaction related costs and other, net 10.1 5.3
Gain on sale of assets - (17.4 )
Gain on acquisition of controlling interest (23.5 ) -
Loss on redemption and other debt costs   78.5     -  
Total pretax charge (benefit) 77.9 (12.4 )
Provision for (benefit from) income taxes related to these items   29.3     (4.7 )
After tax effect of above items   48.6     (7.7 )
Adjusted Net Income $ 45.1   $ 27.6  
 
Diluted earnings (loss) per share attributable to Axiall $ (0.06 ) $ 1.01
 
Adjusted Earnings per Share $ 0.75 $ 0.79
 
Adjusted EBITDA $ 133.4 $ 75.4
 

"During the first quarter, we completed our merger with PPG's chemicals business and began the process of combining our two organizations," said Paul Carrico, president and chief executive officer. "This week marks the successful completion of our first 100 days as Axiall, and I am proud of the attitude and level of engagement of everyone in the combined organization. We have made good progress on integrating the organization while maintaining a steady focus on safety, environmental stewardship, operational excellence and superior customer service.

"In our first 100 days, we already have seen how this merger enhances Axiall's scale and integration across the chlorovinyls chain and expands the benefits we expect to gain from low-cost natural gas in North America and growing global demand for our broadened product portfolio," Carrico said.

Chlorovinyls

In the Chlorovinyls segment, first quarter 2013 net sales were $614.5 million compared to $329.5 million during the first quarter of 2012. The increase in net sales was primarily driven by the sales contributed by the PPG chemicals business after the merger closed on January 28, 2013. This was partially offset by lower resin sales prices compared to the first quarter of 2012. The segment posted Adjusted EBITDA of $134.2 million in the first quarter of 2013, compared to Adjusted EBITDA of $45.6 million for the same quarter in the prior year. The $88.6 million increase in Adjusted EBITDA was primarily due to the contribution from the PPG chemicals business, partially offset by changes in the company's ethylene supply portfolio that increased its ethylene costs as compared to industry prices for ethylene, several small unplanned manufacturing outages and lower VCM sales as operations and sales recovered from a December 2012 fire at PHH Monomers LLC ("PHH"), which was a VCM joint venture between the company and PPG until the merger closed.

Building Products

In the Building Products segment, net sales were $162.2 million for the first quarter of 2013, compared to $187.2 million recorded for the same quarter in the prior year. The net sales decrease was driven by lower sales volume partially due to winter weather in the first quarter of 2013 being less favorable for building and construction activity in the geographical areas where the company's building products are primarily sold, as compared to the more favorable weather in those geographic areas in the first quarter of 2012. On a constant currency basis and adjusting for exiting the fence product line, net sales for the quarter were 11 percent lower compared to the first quarter of 2012. The segment's Adjusted EBITDA was negative $2.6 million for the first quarter of 2013, compared to $3.3 million of Adjusted EBITDA during the same quarter of the prior year. The $5.9 million decrease was primarily due to lower sales volumes.

Aromatics

In the Aromatics segment, net sales decreased to $284.5 million for the first quarter of 2013 from $343.2 million during the first quarter of 2012, due primarily to lower sales volumes for all products. During the first quarter of 2013, the segment recorded Adjusted EBITDA of $13.3 million, compared to Adjusted EBITDA of $37.9 million during the same quarter in 2012. The $24.6 million decrease was primarily due to an inventory holding gain in the first quarter of 2012 that was larger than the inventory holding gain in the first quarter of 2013, as well as higher sales volumes in the first quarter of 2012.

Merger with PPG's chemicals business

On January 28, 2013, the company completed its merger with the PPG chemicals business. The initial accounting for the transactions (including the preliminary allocation of the purchase price to acquired assets and assumed liabilities) is not complete given the limited amount of time since the closing date.

As part of the merger, the company acquired the 50 percent interest of PHH that it did not previously own. The company recognized a gain of $23.5 million as a result of remeasuring the equity interest it held in PHH before the merger.

During the first quarter of 2013, a fair value inventory purchase accounting adjustment related to the inventories acquired through the merger increased the cost of sales for the Chlorovinyls segment by approximately $10.2 million.

Conference Call

The company will discuss first-quarter financial results and business developments via conference call and webcast on Wednesday, May 8, at 10:00 a.m. Eastern time. To access the company's first-quarter conference call, please dial (866) 900-0513 (domestic) or (706) 679-9856 (international). Playbacks will be available from 1:00 p.m. Eastern time on Wednesday, May 8, until 11:59 p.m. Eastern time on Tuesday, May 21. Playback numbers are (855) 859-2056 or (800) 585-8367. The conference call ID number is 53317360.

About Axiall

Axiall Corporation is a leading integrated chemicals and building products company. It is an international manufacturer of chlor-alkali and derivatives, chlorovinyls and aromatics products including chlorine, caustic soda, vinyl chloride monomer, chlorinated solvents, calcium hypochlorite, ethylene dichloride, muriatic acid, phosgene derivatives, polyvinyl chloride, vinyl compounds, acetone, cumene and phenol. It also manufactures vinyl-based building and home improvement products that are marketed under Royal Building Products and Exterior Portfolio brands, including window and door profiles, mouldings, siding, pipe and pipe fittings, and decking. Axiall, headquartered in Atlanta, Georgia, has manufacturing facilities located throughout North America and in Asia to provide industry-leading materials and services to customers. For more information, visit www.axiall.com.

Cautionary Statements About Forward-Looking Information

This press release contains certain statements relating to future events and our intentions, beliefs, expectations, and predictions for the future. Any such statements other than statements of historical fact are forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Words or phrases such as "anticipate," "believe," "plan," "estimate," "project," "may," "will," "intend," "target," "expect," "would" or "could" (including the negative variations thereof) or similar terminology used in connection with any discussion of future plans, actions or events generally identify forward-looking statements. These statements relate to, among other things, our outlook for future periods, global demand for our products, pricing trends and market forces within the chemical and building products industries, expected benefits of the merger with the PPG chemicals business, integration plans, the expected cost advantage of natural gas in North America and the expected duration of any such cost advantage and other statements of expectations concerning matters that are not historical facts. These statements are based on the current expectations of our management. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements included in this press release. These risks and uncertainties include, among other things: (i) a material adverse change, event or occurrence affecting Axiall or the newly acquired chemicals business; (ii) the ability of Axiall to successfully integrate the businesses of the chemicals business formerly owned by PPG with which Axiall has merged, which may result in the combined company not operating as effectively and efficiently as expected; (iii) the possibility that the merger and related transactions may involve other unexpected costs, liabilities or delays; and (iv) uncertainties regarding future prices, industry capacity levels and demand for Axiall's products, raw materials and energy costs and availability, feedstock availability and prices, changes in governmental and environmental regulations, the adoption of new laws or regulations that may make it more difficult or expensive to operate Axiall's businesses or manufacture its products, Axiall's ability to generate sufficient cash flows from its business after the merger, future economic conditions in the specific industries to which its products are sold, and global economic conditions.

In light of these risks, uncertainties, assumptions, and factors, the forward-looking events discussed in this press release may not occur. Other unknown or unpredictable factors could also have a material adverse effect on Axiall's actual future results, performance, or achievements. For a further discussion of these and other risks and uncertainties applicable to Axiall and its business, see Axiall's Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and subsequent filings with the SEC. As a result of the foregoing, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Axiall does not undertake, and expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events, or changes in its expectations, except as required by law.

           

AXIALL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 
March 31, December 31,

(In millions, except share data)

2013 2012
Assets:
Cash and cash equivalents $ 69.2 $ 200.3

Receivables, net of allowance for doubtful accounts of $4.4 million at March 31, 2013 and $4.5 million at December 31, 2012

636.9 314.9
Inventories 443.6 288.4
Prepaid expenses and other 30.8 14.7
Deferred income taxes   1.3     21.1  
Total current assets 1,181.8 839.4
Property, plant and equipment, net 1,635.9 637.7
Goodwill 1,667.2 217.2
Intangible assets, net 1,253.7 43.4
Other assets, net   86.8     63.6  
Total assets $ 5,825.4   $ 1,801.3  
Liabilities and Equity:
Current portion of long-term debt $ 55.1 $ -
Accounts payable 344.2 211.2
Interest payable 9.5 18.9
Income taxes payable 6.4 15.1
Accrued compensation 34.3 44.7
Current deferred tax liability 5.4 -
Other accrued current liabilities   111.5     61.2  
Total current liabilities 566.4 351.1
Long-term debt 1,418.2 448.1
Lease financing obligation 110.0 112.3
Deferred income taxes 777.2 177.9
Pensions and other postretirement benefits 327.5 48.3
Other non-current liabilities   132.9     60.1  
Total liabilities   3,332.2     1,197.8  
 
Commitments and contingencies
 
Equity:
Preferred stock—$0.01 par value; 75,000,000 shares authorized; no shares issued - -

Common stock—$0.01 par value; shares authorized: 200,000,000 and 100,000,000 at March 31, 2013 and December 31, 2012, respectively; issued and outstanding: 69,801,675 and 34,546,767 at March 31, 2013 and December 31, 2012, respectively.

0.7 0.3
Additional paid-in capital 2,262.3 487.1
Retained earnings 128.8 138.0
Accumulated other comprehensive loss, net of tax   (29.6 )   (21.9 )
Total Axiall stockholders' equity 2,362.2 603.5
Noncontrolling interest   131.0     -  
Total equity   2,493.2     603.5  
Total liabilities and equity $ 5,825.4   $ 1,801.3  
   

AXIALL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 
Three Months Ended March 31,

(In millions, except per share data)

2013       2012
Net sales $ 1,061.2 $ 859.9
Operating costs and expenses:
Cost of sales 899.0 756.4
Selling, general and administrative expenses 78.3 47.7
Transaction related costs and other, net 10.1 5.3
Long-lived asset impairment charges (recoveries), net 2.6 (0.3 )
Gain on sale of assets   -     (17.4 )
Total operating costs and expenses   990.0     791.7  
Operating income 71.2 68.2
Loss on redemption and other debt costs (78.5 ) -
Interest expense, net (18.3 ) (14.4 )
Gain on acquisition of controlling interest 23.5 -
Foreign exchange gain (loss)   0.1     (0.1 )
Income (loss) before income taxes (2.0 ) 53.7
Provision for income taxes   0.8     18.4  
Consolidated net income (loss) (2.8 ) 35.3
Less net income attributable to noncontrolling interest   0.7     -  
Net income (loss) attributable to Axiall $ (3.5 ) $ 35.3  
 
Earnings (loss) per share attributable to Axiall:
Basic $ (0.06 ) $ 1.02
Diluted $ (0.06 ) $ 1.01
 
Weighted average common shares outstanding:
Basic 59.3 34.2
Diluted 59.3 34.4
 
Dividends per common share $ 0.08 $ -
   

AXIALL CORPORATION

CONDENSED CONSOLIDATED STAT


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