Taminco Corporation Announces Third Quarter 2014 Results

ALLENTOWN, Pa., Nov. 6, 2014 /PRNewswire/ -- Taminco Corporation ("Taminco" or the "Company") TAM, the world's largest integrated producer of alkylamines and alkylamine derivatives for use in the manufacturing of everyday products, today announced results for its third quarter of 2014.  Unless otherwise noted, year ago comparisons refer to the three month period ended September 30, 2013.

Fiscal 2014 Third Quarter Highlights

• Volume increased 26% year over year to 181K tons
• Net Sales rose 22% year over year to $369 million
• Adjusted EBITDA grew 15% to $76 million for a 21% margin
• Reiterating full year Adjusted EBITDA guidance of $290-295 million on record Q3 2014 performance
• Announced definitive agreement to be acquired by Eastman Chemical Company

Record Third Quarter with 15% Adjusted EBITDA Growth

"Taminco achieved another quarter of strong performance, which was driven by robust demand in our Specialty Amines and Crop Protection businesses, and a continued recovery of our Functional Amines business from the first half of the year. Demand was high across all of our geographies and we outpaced the rate of underlying economic growth across our key regions," said Taminco Chief Executive Officer Laurent Lenoir.  "We remain well positioned to drive strong cash flow and Adjusted EBITDA growth in the fourth quarter and are reiterating our full year Adjusted EBITDA guidance of $290-295 million," Lenoir commented further.

For the quarter ended September 30, 2014, the Company generated net sales of $369 million, an increase of $67 million, or 22%, compared to $302 million in the corresponding period of 2013. The results were primarily driven by strong growth in Specialty Amines, in particular in personal & home care, water treatment and energy, and in Crop Protection. The third quarter also included 3 months of contribution from the Formic Acid Solutions business.

On a regional basis, for the quarter, 46% of our net sales were sold in North America, 38% in Europe, and 16% in the emerging markets (8% in Latin America and 8% in Asia). North America was up 16% year over year primarily due to higher volume in Specialty Amines. Our European business was up 23% year over year due to strong sales across all divisions and the contribution of the Formic Acid business. Emerging markets increased 18% from the prior year period due to strong sales in Latin America of Specialty Amines and Crop Protection.

Adjusted EBITDA for the three months ended September 30, 2014 was $76 million compared to $66 million in the period ended September 30, 2013. This was primarily due to strength in Specialty Amines, Crop Protection and the contribution of the Formic Acid Solutions business. Adjusted EBITDA margin was 21% for the quarter.

First Nine Months 2014 Comparison versus First Nine Months 2013

Net sales for the nine months ended September 30, 2014 grew by 15% to $1,058 million in comparison to the nine months ended September 30, 2013 driven primarily by strength in Specialty Amines and Crop Protection, including seven months of contribution from the Formic Acid Solutions business.  During the period, net sales grew by 34% in Specialty Amines and 8% in Crop Protection, and declined by 1% in Functional Amines.

Adjusted EBITDA for the nine months ended September 30, 2014 was $223 million or 21% of net sales, compared to $198 million in the period ended September 30, 2013.  The growth in Adjusted EBITDA of $25 million was due to an overall business improvement which was driven by Specialty Amines and Crop Protection sales and margins, supported in particular by surfactants, water treatment and energy applications.

Quarterly Segment Results

Functional Amines

Volume in the Functional Amines segment was 76 kT for the quarter ended September 30, 2014, an increase of 4% from the corresponding period of 2013. Net sales were $138 million for the quarter, an increase of 4% from the corresponding period of 2013. The increase in net sales was primarily due to positive momentum in energy and personal & home care markets and increased volumes of methylamines and salts. The agriculture market continued to improve in the third quarter after a slow start in 2014.  Adjusted EBITDA from the Functional Amines segment was $32 million for the three months ended September 30, 2014, which was unchanged compared to the corresponding period of 2013. Adjusted EBITDA margin was slightly impacted by regional and product mix effects.

Specialty Amines

Volume in the Specialty Amines segment was 90 kT for the quarter ended September 30, 2014, an increase of 58% from the corresponding period of 2013.  Net sales were $192 million for the quarter, an increase of 45% from the corresponding period of 2013. The increase was primarily due to the contribution of the Formic Acid Solutions business as well as strong demand in energy, personal & home care and water treatment, both in US and Europe. Adjusted EBITDA from the Specialty Amines segment was $32 million during the quarter, an increase of 39% from the corresponding period of 2013. The increase was primarily driven by the addition of the Formic Acid Solutions business as well as higher pricing and product mix effects.

Crop Protection

Volume in the Crop Protection segment was 15 kT for the quarter ended September 30, 2014, an increase of 7% from the corresponding period of 2013.  Net sales were $39 million for the quarter, an improvement of 5% from the corresponding period of 2013. This positive trend was primarily due to higher volume, in combination with regional and product mix effects, confirming the strong growth already achieved in the first half of the year. Adjusted EBITDA from the Crop Protection segment was $12 million for the quarter, an increase of 9% from the corresponding period in 2013. The increase was primarily driven by higher pricing and positive mix effects, supported in particular by fungicide applications.

Balance Sheet and Cash Flow

As of September 30, 2014, the Company had cash and cash equivalents of approximately $85 million on the balance sheet. 

The Company's total indebtedness as of September 30, 2014 consisted of $616 million in Term Loan Facilities, $400 million in Senior Secured Notes, and $6 million of capital lease obligations.  Net debt totaled $937 million as of September 30, 2014. The Company's net debt to Adjusted EBITDA is 3.2x on a pro forma basis. Leverage has only moderately increased from the prior year period, which was due to the Formic Acid Solutions acquisition.

The Company generated Recurring Free Cash Flow of $71 million for the nine months ended September 30, 2014.  The Company had $72 million of capital expenditures, driven by the methylamine expansion project and $49 million of interest payments on the Senior Secured Notes and Term Loan Facilities for the nine months ended September 30, 2014.  Free cash flow generation is expected to continue to be robust in the fourth quarter of this year.  Total tangible capital expenditures for FY '14 is expected to be $85 million and working capital is expected to improve further towards year-end.

Acquisition Update

As previously announced, on September 11, 2014, Taminco entered into an Agreement and Plan of Merger with Eastman Chemical Company ("Eastman") pursuant to which Eastman will acquire all of the issued and outstanding shares of Taminco for $26.00 per share in cash.  The transaction is subject to regulatory approvals and other customary closing conditions.  The Company expects the transaction to close before year-end.

Conference Call

As previously announced, the Company will host a conference call to discuss its third quarter 2014 results before the market open on Thursday, November 6, 2014 at 8:00 a.m. (Eastern Time).  In light of the company's definitive agreement to be acquired by Eastman Chemical Company, management will not be hosting a questions and answer session during the call.  A slide presentation for the call will be available on the Investors section of the Company's Website at www.taminco.com.  The conference call can be accessed live over the phone by dialing 1-877-407-0784, or for international callers, 1-201-689-8560. A replay will be available one hour after the call and can be accessed by dialing 1-877-870-5176, or for international callers, 1-858-384-5517. The passcode for the live call and the replay is 13587468. The replay will be available until November 21, 2014.

Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the Investor Relations section of the Company's website at www.taminco.com. The on-line replay will be available for a limited time beginning immediately following the call.

To learn more about Taminco, please visit the Company's Web site at www.taminco.com. Taminco uses its Web site as a channel of distribution of material company information. Financial and other material information regarding Taminco is routinely posted on the company's Web site and is readily accessible.

About Taminco Corporation

Taminco is a global specialty chemical company with a clear focus on niche markets and the world's largest integrated producer of alkylamines and alkylamine derivatives. Our products are used by customers in the manufacture of a diverse array of everyday products for the agriculture, water treatment, personal & home care, animal nutrition and oil & gas end-markets. Our products provide these goods with a variety of ancillary characteristics required for optimal performance. We currently employ about 1,000 people and operate in 20 countries with eight production facilities in the US, Europe and Asia.

Additional Information

In connection with the proposed transaction with Eastman, Taminco has filed and information statement with the Securities and Exchange Commission ("SEC").  Taminco stockholders are advised to read all relevant documents filed with the SEC, including the information statement, for additional important information about the proposed transaction.   The information statement and other relevant documents filed with the SEC will be available at no charge on the SEC's website at www.SEC.gov.  In addition, documents will also be available for free from Taminco by contacting Taminco's Investor Relations at investorrelations@taminco.com.

Forward-Looking Statements

Any statements made in this press release that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements within the meaning of the federal securities laws, and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. These statements often include words such as "anticipate," "expect," "suggests," "plan," "believe," "intend," "estimates," "targets," "projects," "should," "could," "would," "may," "will," "forecast," and other similar expressions. For more information concerning factors that could cause actual results to differ materially from those contained in the forward-looking statements please refer to the "Risk Factors" section of the Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission and subsequent filings by the Company.  This press release also contains forward-looking statements with respect to the proposed transaction with Eastman, including the anticipated close date for the transaction and the receipt and timing of necessary regulatory approvals.  We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time.  In addition, the integration of the Formic Acid acquisition is subject to a number of uncertainties and there can be no assurances that the Company's expectations with respect to the acquisition will be realized.  As you read and consider this press release, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. If we do update one or more forward-looking statements, there should be no inference that we will make additional updates with respect to those or other forward-looking statements.

 

 

NON-GAAP FINANCIAL MEASURES: ADJUSTED EBITDA, ADJUSTED EBITDA MARGIN AND RECURRING FREE CASH FLOW

We present Adjusted EBITDA, Adjusted EBITDA Margin, and Recurring Free Cash Flow to enhance a prospective investor's understanding of our results of operations, financial condition, and cash generating ability of the operating business. EBITDA consists of profit for the period before interest, taxes, depreciation and amortization. Adjusted EBITDA consists of EBITDA and eliminates (i) transaction costs, (ii) restructuring charges, (iii) foreign currency exchange gains/losses, (iv) non-cash equity in earnings/losses of unconsolidated affiliates net of cash dividends received, (v) stock option compensation, (vi) shutdown costs associated with plant expansion and (vii) Apollo management and director fees and expenses. Adjusted EBITDA for the three and six month periods ended June 30, 2014 and 2013 are calculated in the same manner.  Adjusted EBITDA Margin reflects Adjusted EBITDA as a percentage of Net Sales.   Recurring Free Cash Flow consists of net cash flow provided by operations and eliminates capital expenditures and adds back cash paid for transaction costs related to the Formic Acid acquisition and shutdown costs associated with plant expansion.  We believe that making such adjustments provides investors meaningful information to understand our operating results and ability to analyze financial and business trends on a period-to-period basis.

We believe Adjusted EBITDA, Adjusted EBITDA Margin, and Recurring Free Cash Flow are useful as supplemental measures in evaluating the performance of our operating businesses and provides greater transparency into our consolidated results of operations, financial position, and cash flows. Adjusted EBITDA, Adjusted EBITDA Margin, and Recurring Free Cash Flow are measures used by our management, including our chief operating decision maker, to perform such evaluations, and additionally, Adjusted EBITDA is a factor in measuring compliance with debt covenants relating to certain of our borrowing arrangements, including our Senior Secured Credit Facilities and the indenture governing our Notes.

You should not consider Adjusted EBITDA, Adjusted EBITDA Margin, or Recurring Free Cash Flow in isolation or as an alternative to (a) operating profit or profit for the period (as reported in accordance with U.S. GAAP), (b) cash flows from operating, investing and financing activities as a measure to meet our cash needs or (c) any other measures of performance under generally accepted accounting principles. You should exercise caution in comparing Adjusted EBITDA, Adjusted EBITDA Margin, or Recurring Free Cash Flow as reported by us to similar measures of other companies. In evaluating Adjusted EBITDA and Recurring Free Cash Flow, you should be aware that we are likely to incur expenses and cash outlays similar to the adjustments in this presentation in the future and that certain of these items could be considered recurring in nature. Our presentation of Adjusted EBITDA, Adjusted EBITDA Margin, and Recurring Free Cash Flow should not be construed as an inference that our future results will be unaffected by non-recurring items.

The following table provides reconciliations of net income to Adjusted EBITDA for the periods presented ($ in millions):

 

The following table provides a reconciliation of net cash flows provided by operating activities to Recurring Free Cash Flow for the period discussed ($ in millions):

 

 

SOURCE Taminco Corporation