Q2 2011 Investor Call Presentation

8/4/2019 Q2 2011 Investor Call Presentation

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Chemtura Corporation

Earnings Conference Call – Second Quarter 2011

August 4, 2011



AUGUST 4, 2011CHEMTURA EARNINGS CONFERENCE CALL – SECOND QUARTER 2011

Forward Looking Statement

This document includes forward-looking statements within the meaning of Section 27(a) of the Securities Act of 1933, as amended, andSection 21(e) of the Securities and Exchange Act of 1934, as amended. These forward-looking statements are identified by terms and phrasessuch as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will” andsimilar expressions and include references to assumptions and relate to our future prospects, developments and business strategies.

Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include,

but are not limited to:

The cyclical nature of the global chemicals industry;

Increases in the price of raw materials or energy and our ability to recover cost increases through increased selling prices for ourproducts;

Disruptions in the availability of raw materials or energy;

Our ability to implement our growth strategies in rapidly growing markets;

Our ability to obtain the requisite regulatory and other approvals to implement the plan to build a new multi-purpose manufacturingfacility in Nantong, China;

Declines in general economic conditions;

The effects of competition;

The ability to comply with product registration requirements of regulatory authorities including the FDA and European Union REAChlegislation;

The effect of adverse weather conditions;

The ability to grow profitability in our Chemtura AgroSolutions segment;

Demand for Chemtura AgroSolutions segment products being affected by governmental policies;

Current and future litigation, governmental investigations, prosecutions and administrative claims;

Cautionary Statement Regarding Forward-Looking Statement




Forward Looking Statement (continued)

Environmental, health and safety regulation matters;

Federal regulations aimed at increasing security at certain chemical production plants;

Significant international operations and interests;

Our ability to maintain adequate internal controls over financial reporting;

Exchange rate and other currency risks;

Our dependence upon a trained, dedicated sales force;

Operating risks at our production facilities;

Our ability to protect our patents or other intellectual property rights;

Whether our patents may provide full protection against competing manufacturers;

Our ability to remain technologically innovative and to offer improved products and services in a cost-effective manner;

The risks to our joint venture investments resulting from lack of sole decision making authority;

Our unfunded and underfunded defined benefit pension plans and post-retirement welfare benefit plans;

Risks associated with possible climate change legislation, regulation and international accords;

The ability to support the carrying value of the goodwill and long-lived assets related to our businesses; and

Other risks and uncertainties detailed in Item 1A. Risk Factors in our filings with the Securities and Exchange Commission.

These statements are based on our estimates and assumptions and on currently available information. Our forward-looking statements includeinformation concerning possible or assumed future results of operations, and our actual results may differ significantly from the resultsdiscussed. Forward-looking information is intended to reflect opinions as of the date this presentation was issued. We undertake no duty toupdate any forward-looking statements to conform the statements to actual results or changes in our operations.

See Chemtura’s SEC Filings For More Information




Managed Basis Financial Measures

See Appendix for Reconciliation

The information presented in this presentation and in the attached financial tables includes financial measures that are not calculated orpresented in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). Our managed basis financial measuresconsist of adjusted results of operations that exclude certain expenses, gains and losses that may not be indicative of our core operations.Excluded items include costs associated with the bankruptcy reorganization; facility closures, severance and related costs; antitrust costs;gains and losses on sale of business; increased depreciation due to the change in useful life of assets; unusual and non-recurring settlements;accelerated recognition of asset retirement obligations and impairment charges. They also include the computation of Adjusted EBITDA. Inaddition to the managed basis financial measures discussed above, we have applied a managed basis effective income tax rate to ourmanaged basis income before taxes. Our managed basis tax rate of 28% in 2011 represents a refined estimated tax rate for our coreoperations to simplify comparison of underlying operating performance used throughout 2011. Our managed basis tax rate of 35% in 2010represents a uniform tax rate used throughout our bankruptcy period to standardize period over period comparisons. Reconciliations of thesemanaged basis financial measures to their most directly comparable GAAP financial measures are provided in the attached financial tables.We believe that such managed basis financial measures provide useful information to investors and may assist them in evaluating our

underlying performance and identifying operating trends. In addition, management uses these managed basis financial measures internallyto allocate resources and evaluate the performance of our operations. While we believe that such measures are useful in evaluating ourperformance, investors should not consider them to be a substitute for financial measures prepared in accordance with GAAP. In addition,these managed basis financial measures may differ from similarly titled managed basis financial measures used by other companies and maynot provide a comparable view of our performance relative to other companies in similar industries.



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Speakers

Craig RogersonChairman, President and Chief Executive Officer

Stephen ForsythExecutive Vice President and Chief Financial Officer

Laurence OrtonVice President, Finance and Investor Relations




Second Quarter 2011 Earnings Summary

NOTES: Adjusted EBITDA = Managed Basis Operating Income + Depreciation + Amortization + Stock-based

compensation expense . Managed Basis Tax Rate is 28% for second quarter 2011.

Managed Basis (dollars in million)

Net Sales increased by $109 million due to

$55 million in price increases, sales volumeincreases of $38 million and favorable FX of$21 million partially offset by $5 milliondue to the divestiture of the natural sodiumsulfonates and oxidized petrolatum productlines.

Operating profit was $88 million comparedwith second quarter 2010 operating profitof $79 million. The increase was primarilydue to higher selling prices, increased salesvolume and favorable FX, partially offset byhigher input costs and SGA&R increases.

Adjusted EBITDA increased $16 million insecond quarter 2011. Adjusted EBITDA forthe last twelve months increased from $345million as of March 31, 2011, to $361million as of June 30, 2011.

Commentary2Q 2011 2Q 2010

Net Sales 876$ 767$

Operating Income 88$ 79$

Operating Income as a % of Sales 10% 10%

Net Income Attributable to Chemtura 51$ 40$

Adjusted EBITDA 130$ 114$

Adjusted EBITDA as a % for Sales 15% 15%




Second Quarter 2011 Managed Basis Adjustments

Operating Net

($ in millions) Income/(Loss) Income/(Loss)

GAAP 87 69

Managed Basis Adjustments:

Accelerated recognition of asset retirement obligations (1) (1)Changes in estimates related to expected allowable claims 1 1

Reorganization items, net - 6

Impairment charges 1 1

Adjustment to apply a Managed Basis effective tax rate - (25)

Managed Basis 88 51

Adjusted EBITDA Reconciliation

Managed Basis Operating Income 88$

Managed Basis Depreciation and Amortization 34

Stock-based compensation expense 8

Adjusted EBITDA 130




Second Quarter 2011 – Net Sales Bridge

Managed Basis - (Dollars in million)

(5)

767

55

38

21 876

500

550

600

650

700

750

800

850

900

2Q 2010 Actual Selling Price Volume / Mix F/X Acq & Divest 2Q 2011 Actual

$

M i l l i o n s




Second Quarter 2011 – EBITDA Bridge

Managed Basis - (Dollars in million)

(33)

(8)(4) (13)

1 130

114

55

117

0

20

40

60

80

100

120

140

160

180

2Q 2010 Actual Selling Price Raw Materials Volume / Mix Mfg costs Distr ibution

Costs

F/X SGA&R Other 2Q 2011 Actual

$

M i l l i o n s



AUGUST 4, 20110 CHEMTURA EARNINGS CONFERENCE CALL – SECOND QUARTER 20110

Industrial Performance Products

Managed Basis – Second Quarter 2011 vs. Second Quarter 2010

Net sales increased 18% or $57 milliondriven primarily by increased sales volume,higher selling prices and favorable FX,partially offset by the sale of the sodiumsulfonate business.

Adjusted EBITDA increased by $1 millionprimarily due to the increased sales volume

and higher selling prices, offset by higherraw materials, manufacturing andinvestment in SGA&R.

Commentary($ Millions) 2Q 2011 2Q 2010

Net Sales 370 313

Operating Income 39 38


Adjusted EBITDA 48 47


Adjusted EBITDA 1

Price 19

Raw Materials (16)

Volume/Mix 12

Mfg Costs (6)

Distribution costs (1) Acq & Divest (1)

FX 1

SGA&R/Other (7)

Year-Over-Year




Industrial Engineered Products


Net sales increased 30% or $57 millionprimarily due to higher selling prices inresponse to higher raw material costs andto support significant ongoing investmentto ensure sustainable and reliable supplyas demand for bromine and its derivativescontinue to grow globally.

Adjusted EBITDA increased $26 million oversecond quarter of 2010, primarily due to thehigher selling prices, partially offset byhigher input costs

Commentary($ Millions) 2 Q 2 0 1 1 2 Q 2 0 1 0

Net S a les 2 4 4 1 8 7

Op era tin g In co me 4 1 1 3


A d ju s ted E BITDA 5 2 2 6


A d ju s ted E BITDA 2 6

Price 41

Raw Materials (14)

Volume/Mix 1

Mfg Costs (4) Distribution costs (1)

FX 4

SGA&R/Other (1)

Year -Over -Year




Consumer Products


Consumer Products’ net sales declined by11% or $19 million due to lower volume andselling prices. Volume reflected lowerdemand in the mass market channel, acombination of mixed weather, inventoriesbeing managed by customers at lowerlevels than 2010 and the loss of a customerfor this season. Competitive pressures

during the line reviews for 2011 resulted inlower prices in this channel this seasonthan in 2010.

Adjusted EBITDA declined $13 millionprimarily due to the lower sales volume/mixand lower selling prices partially offset by

lower SGA&R and favorable FX translation.

Commentary

($ Millions) 2 Q 2 0 1 1 2 Q 2 0 1 0

Net S a les 1 5 2 1 7 1

Op era tin g In co m e / (los s ) 2 2 3 7


A d ju s ted E BITDA 2 6 3 9


A d ju s ted E BITDA (1 3 )

Price (5)

Raw Materials (1)

Volume/Mix (9)

Mfg Costs (3) FX 2

SGA&R/Other 3

Year -Over -Year




Chemtura AgroSolutions


Chemtura AgroSolutions net sales increased15% or $14 million driven by strongrecovery in Europe, continued goodperformance in North America and positiveearly season momentum in Latin America.

Adjusted EBITDA improved $7 million due tohigher sales volume, the benefit on

manufacturing absorption and priceincreases partially offset by increasedSG&R largely due to an increase in theallowance for doubtful accounts.

Commentary

($ Millions) 2Q 2011 2Q 2010

Net Sales 110 96 Operating Income / (loss) 12 7


Adjusted EBITDA 16 9


Adjusted EBITDA 7

Price 1

Raw Materials (1)

Volume/Mix 7

Mfg Costs 5

Distribution costs (1)

SGA&R/Other (4)

Year-Over-Year




Capitalization

Use of ABL revolver supports

seasonal working capitalrequirements

Improvement in EBITDA / cashinterest expense ratio

Leverage level in line with industrynorms

No debt maturities until 2015

Debt Capitalization

(1) See GAAP reconciliation in Appendix for components of Adjusted EBITDA.

* Company re-capitalized upon emergence from Chapter 11 reorganization in November 2010.

June 30th, 2011

($ in Millions)

Cash $143

ABL Revolver $91

$295 Million Senior Secured Term Loan due 2016 $292

$455 Million 7 7/8% Senior Notes due 2018 $452

Other Long Term Debt $4

Total Long Term Debt $839

Credit Statistics June 30th, 2011

($ in Millions) Pro Forma

LTM 2011 Adjusted EBITDA(1) $361

*Pro-Forma LTM 2011 Cash Interest Expense $57-$60

Debt/LTM 2011 Adjusted EBITDA 2.3X

LTM 2011 Adjusted EBITDA / Pro-Forma LTM Cash Interest Expense 6.1X




2011 Modeling Assumptions

Depreciation & Amortization $142 million (Managed Basis)

$152 million (GAAP)

Capital Expenditure $140-$150 million

Stock Based Compensation (Expense) approximately $32 million

(Non-cash stock compensation expense in 2011 is driven by awards under terms of Plan of Reorganization, 2011 LTIP)

Pension & OPEB (Expense) $14 million

Pension & OPEB (Cash) $95 million(1)

Interest Expense (Book) $60-63 million

Interest Expense (Cash) $57-60 million

Shares Outstanding (Basic) Assume 101 million

(Includes 3.8 million shares reserved but not yet issued under the Disputed Claims Reserves under the Plan of Reorganization)

To Assist In Modeling – May Be Subject To Change

(1) Includes $49 million payment made to UK subsidiary in the second quarter of 2011.




GAAP Reconciliation

Reconciliation of Net Loss to Adjusted EBITDA

($ in Millions) LTM 2011 2010 2009 2008

Net Loss from continuing operations (278)$ (572)$ (226)$ (955)$

Depreciation and amortization 152 175 162 221

Impairment charges 60 57 39 986

Interest expense 94 191 70 78

Loss on extinguishment of debt 75 88 - -

Income tax expense / (benefit) 3 22 10 (29)

106 (39) 55 301

Facility closures, severance and related cost (2) 1 3 23Antitrust costs - - 10 12

(Gain) / Loss on sale of businesses (2) (2) - 25

Changes in estimates related to expected allowable claims (37) 35 73 -

Reorganization Items, net 269 303 97 -

Non cash stock-based compensation 24 8 - -

Other (Income) / Expense (4) 6 17 (9)Other Operating Adjustments 7 8 2 (6)

Adjusted EBITDA 361 320 257 346

Year Ended December 31,

(1) Other operating adjustments consist primarily of expenses related to accelerated asset retirement obligations as a result of restructuring initiatives or impairment of long lived assets.




GAAP Reconciliation - Segments

Reconciliation of Segment Operating Income to Adjusted EBITDA

(1) Other operating adjustments consist primarily of expenses related to accelerated asset retirement obligations as a result of restructuring initiatives or impairment of long lived assets.

($ in Millions) Q2 2011 LTM 2011 2 0 1 0 2 0 0 9 2 0 0 8

INDUSTRIAL PERFORMANCE PRODUCTS

Segment Operat ing Income ( Loss) 39 125 119 91 105

Depreciation and amortization 8 35 35 41 44Stock-based compensation expense 1 3 1 - -

Other Operating Adjustments(1) - - - 1 3

Adjusted EB ITDA 48 163 155 133 152

INDUSTRIAL ENGINEERED PRODUCTS


Depreciation and amortization 11 56 79 57 76Stock-based compensation expense - 2 1 - -

Other Operating Adjustments(1)

(1) (1) 2 - -


CONSUMER PERFORMANCE PRODUCTS


Depreciation and amortization 3 10 11 13 11Stock-based compensation expense 1 1.00 - - -


- - (1) - -


CHEMTURA AGROSOLUTIONS


Depreciation and amortization 3 10 9 8 7Stock-based compensation expense 1 1 - - -


- 3 3 - -


Y e a r E n d e d

Documents

Q2 2011 Investor Call Presentation