Arch Chemicals Reports Second Quarter 2008 Earnings and Revises Full-Year Guidance

Highlights:

-- Second quarter sales were $469.6 million and earnings were
$1.33 per share.

-- Total operating income for the water products and personal
care and industrial biocides businesses increased nine percent
from the prior year quarter.

-- The Company revises its full-year 2008 earnings guidance to
$2.20 to $2.30 per share from $2.55 to $2.65 resulting from
continued higher raw material costs and lower demand driven by
the weakening U.S. economy.
NORWALK, Conn.--(Business Wire)--
ARCH CHEMICALS, INC. (NYSE: ARJ) announced sales of $469.6 million
for the second quarter of 2008, a four percent increase compared to
$449.5 million reported in 2007. Earnings per share from continuing
operations for 2008 were $1.33 on $33.2 million of income. Earnings
per share from continuing operations were $0.91 for 2007 on $22.4
million of income, which included pre-tax restructuring and asset
impairment charges of $15.6 million. Excluding these items, earnings
from continuing operations were $1.39 per share on $34.3 million of
income for 2007.

Segment operating income of $55.7 million for the second quarter
of 2008 was comparable to 2007.

Commenting on second quarter performance, Michael E. Campbell,
Arch Chemicals' Chairman, President and CEO, stated, "I am pleased
with our results this quarter, which were driven principally by our
water products, personal care and industrial biocides businesses. Our
core Treatment Products segment achieved higher year-over-year sales
and earnings, despite unprecedented high raw material, transportation
and energy costs. Our nonstrategic performance urethanes business,
however, could not offset record-high propylene and ethylene raw
material costs, resulting in a significant year-over-year decline in
earnings. We raised prices in the second quarter to offset these
higher costs and expect to realize the full benefit in the second half
of this year."

The following compares segment sales and operating income (loss)
for the second quarters of 2008 and 2007 (including equity in earnings
of affiliated companies and excluding restructuring and impairment):

Treatment Products

Treatment Products reported sales of $411.4 million and operating
income of $63.4 million compared with sales of $389.5 million and
operating income of $61.5 million in 2007.

HTH Water Products

HTH water products reported sales of $191.6 million and operating
income of $43.4 million compared to sales of $190.9 million and
operating income of $42.0 million for 2007.

Sales were comparable to the second quarter of 2007, as favorable
foreign exchange was offset by lower volumes in the European and
Canadian markets, as a result of unfavorable weather patterns.
Improved volumes in the domestic mass market due to favorable weather
comparisons were offset by lower volumes in the repacker and
professional pool dealer market. Higher pricing in South Africa was
offset by lower pricing in Canada.

Operating income improved $1.4 million due to the benefit of lower
antidumping duties and favorable foreign exchange. This was partially
offset by higher raw material costs, increased costs for freight and
distribution and an unscheduled plant outage in South America.

Personal Care and Industrial Biocides

Personal care and industrial biocides reported sales of $87.6
million and operating income of $16.0 million compared to sales and
operating income of $82.7 million and $12.5 million, respectively, in
2007.

Sales increased $4.9 million or approximately six percent,
principally due to favorable foreign exchange and higher volumes. The
higher volumes were due to increased demand for biocides used in
antidandruff products, partly due to timing, and marine antifouling
paints, partially offset by lower demand for industrial biocides used
in building products.

Operating income increased $3.5 million, primarily due to the
improved sales volumes and the benefit from the Company's
margin-improvement programs, which included improvements in customer
mix and the sourcing of the BIT molecule from third-party suppliers in
the industrial biocides business.

Wood Protection and Industrial Coatings

Wood protection and industrial coatings reported sales of $132.2
million and operating income of $4.0 million compared to sales and
operating income of $115.9 million and $7.0 million, respectively, in
2007.

Sales increased $16.3 million, or approximately 14 percent, due to
the acquisition of the Company's Australian joint venture ($18.7
million or approximately 16 percent). Excluding the acquisition, sales
decreased by $2.4 million, or approximately two percent, as
unfavorable volumes were mostly offset by favorable foreign exchange.
In the wood protection business, lower volumes in the North American
residential sector were due to the downturn in the U.S. construction
market that began impacting the business in the second quarter of
2007. In the industrial coatings business, lower volumes in several
Western European markets, resulting from poor economic conditions,
were partially offset by increased demand in the Eastern European
market.

Operating results were $3.0 million lower than the prior year as
the positive contribution of the acquisition and favorable foreign
exchange were more than offset by lower volumes and higher raw
material costs for both businesses.

Performance Products

Performance Products reported sales of $58.2 million and an
operating loss of $1.8 million compared with sales and operating
income of $60.0 million and $4.8 million, respectively, in 2007.

Performance urethanes sales decreased $2.4 million. Lower volumes
in the polyol and glycol markets, principally due to the slowing U.S.
economy, were partially offset by improved pricing for polyol and
glycol products. Operating results decreased $6.7 million as the
improved pricing was more than offset by record raw material costs,
principally propylene and ethylene, driven by crude oil prices, and
lower volumes.

Hydrazine sales and operating income were comparable to the second
quarter of 2007.

General Corporate Expenses

General corporate expenses decreased principally due to lower
compensation-related expense and, to a lesser extent, lower pension
expense and environmental remediation costs.

2008 Outlook

The Company is revising its earnings forecast for the full year
2008 due to higher than expected raw material costs and lower demand
from the weakening U.S. economy. These conditions are principally
affecting the performance urethanes business, with significant
increases in oil-based propylene and ethylene raw material costs in
the first half, and the wood protection business, from continued lower
demand in the U.S. for our residential products due to depressed
housing and construction markets. Earnings per share for the full year
are now expected to be in the $2.20 to $2.30 per share range compared
to the Company's earlier guidance of $2.55 to $2.65. The revised
estimate for the second half of the year for performance urethanes
assumes that polyol volumes will decrease by ten percent from current
levels, and that the cost of propylene will remain at current record
levels in the third quarter and decrease by an average of
approximately ten percent in the fourth quarter. Current price
increases are expected to more than offset these significant raw
material costs and return this business to profitability in the second
half.

Full-year sales are expected to increase by approximately five to
six percent. Depreciation and amortization are estimated to be
approximately $48 million. Capital spending is anticipated to be in
the $50 to $55 million range. The effective tax rate is estimated to
be 36 percent to 37 percent.

The Company anticipates earnings per share from continuing
operations in the third quarter of 2008 to be in the $0.35 to $0.45
range, compared to earnings per share from continuing operations of
$0.25 during the third quarter of 2007 (which excludes a charge of
$0.16 per share resulting from an income tax rate change in the United
Kingdom and restructuring costs). 2007 results also included $0.20 per
share of higher compensation-related expense resulting from the
mark-to-market impact of the increased stock price during the quarter
associated with the Company's performance-based stock awards and
deferred compensation plans. Excluded from the guidance above is a
$1.3 million pre-tax charge, or approximately $0.03 per share, related
to a pension settlement to be recognized in the third quarter of 2008,
associated with severance recorded in 2007.

Commenting on the Company's outlook, Mr. Campbell said: "To
mitigate ongoing pressures from the challenging macroeconomic
environment, we are raising our selling prices wherever possible, and
we will continue to implement cost-reduction initiatives. Our intense
focus on our biocides businesses, our presence in the world's
fastest-growing regions, and our profit margin improvement programs
will sustain Arch through these challenging times, and are the keys to
our long-term, profitable growth."

Note: All references to earnings per share above reflect diluted
earnings per share.

About Arch

Headquartered in Norwalk, Connecticut (USA), Arch Chemicals, Inc.
is a global Biocides company with annual sales of approximately $1.5
billion. Arch and its subsidiaries provide innovative, chemistry-based
solutions to control the growth of harmful microbes. The Company's
concentration is in water, hair and skin care products, treated wood,
paints and coatings, building products and health and hygiene
applications. Arch Chemicals operates in two segments: Treatment
Products and Performance Products. Together with its subsidiaries,
Arch has approximately 3,000 employees and manufacturing and
customer-support facilities in North and South America, Europe, Asia,
Australia and Africa. For more information, visit the Company's Web
site at http://www.archchemicals.com.

-- Listen in live to Arch Chemicals' second quarter 2008 earnings
conference call on Thursday, July 31, 2008 at 10:00 a.m. (ET)
at http://www.archchemicals.com.

-- If members of the public wish to access Arch's live earnings
call in a listen-only mode, dial: (800) 753-9057, passcode
6028248, in the United States, or (913) 312-1406, passcode
6028248, outside the United States.

-- A telephone replay will be available from 1:00 p.m. on
Thursday, July 31, 2008 until 6:00 p.m. (ET) on Thursday,
August 7, 2008. The replay number is (888) 203-1112, passcode
6028248; from outside the United States, please call (719)
457-0820, passcode 6028248.

Except for historical information contained herein, the
information set forth in this communication contains forward-looking
statements that are based on management's beliefs, certain assumptions
made by management and management's current expectations, outlook,
estimates and projections about the markets and economy in which the
Company and its various businesses operate. Words such as
"anticipates," "believes," "estimates," "expects," "forecasts,"
"intends," "opines," "plans," "predicts," "projects," "should,"
"targets" and variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements
are not guarantees of future performance and involve certain risks,
uncertainties and assumptions ("Future Factors"), which are difficult
to predict. Therefore, actual outcomes and results may differ
materially from what is expected or forecasted in such forward-looking
statements. The Company undertakes no obligation to update publicly
any forward-looking statements, whether as a result of future events,
new information or otherwise. Future Factors which could cause actual
results to differ materially from those discussed include but are not
limited to: general economic and business and market conditions; lack
of growth in U.S. and European economies; increases in interest rates;
economic conditions in Asia; changes in foreign currencies against the
U.S. dollar; customer acceptance of new products; efficacy of new
technology; changes in U.S. or foreign laws and regulations; increased
competitive and/or customer pressure; the Company's ability to
maintain chemical price increases; higher-than-expected raw material
and energy costs and availability for certain chemical product lines;
a change in the antidumping duties on certain products; price
increases due to changes in Chinese taxes related to exports from
China; increased foreign competition in the calcium hypochlorite
markets; inability to obtain transportation for our chemicals;
unfavorable court decisions, including unfavorable decisions in
appeals of antidumping rulings, arbitration or jury decisions or tax
matters; the supply/demand balance for the Company's products,
including the impact of excess industry capacity; failure to achieve
targeted cost-reduction programs; capital expenditures in excess of
those scheduled, such as the China plant; environmental costs in
excess of those projected; the occurrence of unexpected manufacturing
interruptions/outages at customer or Company plants; a decision by the
Company not to start up the hydrates manufacturing facility;
unfavorable weather conditions for swimming pool use; inability to
expand sales in the professional pool dealer market; the impact of
global weather changes; changes in the Company's stock price; and
gains or losses on derivative instruments.

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Arch Chemicals, Inc.
Condensed Consolidated Statements of Income (a)
(In millions, except per share amounts)

Three Months Six Months
Ended June Ended June 30,
30,
2008 2007 2008 2007
----------------------------------------------------------------------

Sales $469.6 $449.5 $816.7 $766.9
Cost of Goods Sold (b) 332.9 313.4 586.3 539.9
Selling and Administration 74.6 76.0 150.7 148.1
Research and Development 6.4 5.0 11.9 9.7
Other (Gains) and Losses (c) - - - (12.8)
Restructuring Expense (d) - 6.6 - 6.6
Impairment Charge (d) - 8.6 - 8.6
Interest Expense, Net 2.7 3.8 6.0 8.3
----------------------------------------------------------------------
Income from Continuing Operations Before
Equity in Earnings of Affiliated
Companies and Taxes 53.0 36.1 61.8 58.5
Equity in Earnings of Affiliated
Companies - 0.2 0.1 0.2
Income Tax Provision 19.8 13.9 23.0 22.2
----------------------------------------------------------------------
Income from Continuing Operations 33.2 22.4 38.9 36.5
Income from Discontinued Operations, Net
of Tax (e) - 0.4 - 0.9
----------------------------------------------------------------------
Net Income $ 33.2 $ 22.8 $ 38.9 $ 37.4
======================================================================

Basic Income Per Share:
Continuing Operations $ 1.34 $ 0.91 $ 1.57 $ 1.50
Income from Discontinued Operations, Net
of Tax (e) - 0.02 - 0.04
----------------------------------------------------------------------
Basic Income Per Share $ 1.34 $ 0.93 $ 1.57 $ 1.54
======================================================================

Diluted Income Per Share:
Continuing Operations $ 1.33 $ 0.91 $ 1.56 $ 1.49
Income from Discontinued Operations, Net
of Tax (e) - 0.02 - 0.04
----------------------------------------------------------------------
Diluted Income Per Share $ 1.33 $ 0.93 $ 1.56 $ 1.53
======================================================================

Weighted Average Common Shares
Outstanding - Basic 24.8 24.4 24.8 24.3
Weighted Average Common Shares Outstanding
- Diluted 25.0 24.6 24.9 24.5
----------------------------------------------------------------------

(a) Unaudited. As a result of the sale of the performance urethanes
business in Venezuela, the Company has adjusted prior period results
to include the results of operations as discontinued operations in
accordance with SFAS 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets."
(b) The three months and six months ended June 30, 2007 include $0.4
million of inventory disposal costs associated with the Company's
decision to discontinue manufacturing its BIT molecule ("BIT
restructuring").
(c) Represents a gain for the completion of a contract with the U.S.
Government.
(d) Represents severance, the write-down of manufacturing assets and
other related costs associated with the BIT restructuring.
(e) Represents the results of operations, net of tax, for the
performance urethanes business in Venezuela through the date of sale
in September 2007.
*T

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Arch Chemicals, Inc.
Condensed Consolidated Balance Sheets
(In millions, except per share amounts)

June 30, December 31,
2008 (a) 2007
----------------------------------------------------------------------

Assets:
Cash & Cash Equivalents $ 54.3 $ 73.7
Accounts Receivable, Net (b) 212.7 182.7
Short-Term Investment (b) 58.5 64.1
Inventories, Net 232.6 207.1
Other Current Assets 28.8 31.6
----------------------------------------------------------------------
Total Current Assets 586.9 559.2
Investments and Advances - Affiliated
Companies at Equity 1.8 1.9
Property, Plant and Equipment, Net 215.2 201.4
Goodwill 201.8 206.8
Other Intangibles 154.0 149.6
Other Assets 67.7 75.3
----------------------------------------------------------------------
Total Assets $1,227.4 $1,194.2
----------------------------------------------------------------------

Liabilities and Shareholders' Equity:

Short-Term Borrowings $ 44.6 $ 29.1
Current Portion of Long-Term Debt 62.0 0.3
Accounts Payable 224.7 199.5
Accrued Liabilities 97.7 108.0
----------------------------------------------------------------------
Total Current Liabilities 429.0 336.9
Long-Term Debt 76.0 178.8
Other Liabilities 199.6 204.1
----------------------------------------------------------------------
Total Liabilities 704.6 719.8
Commitments and Contingencies
Shareholders' Equity:
Common Stock, Par Value $1 Per Share,
Authorized 100.0 Shares: 24.8 Shares
Issued and Outstanding (24.7 in 2007) 24.8 24.7
Additional Paid-in Capital 454.6 451.6
Retained Earnings 76.0 47.0
Accumulated Other Comprehensive Loss (32.6) (48.9)
----------------------------------------------------------------------
Total Shareholders' Equity 522.8 474.4
----------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $1,227.4 $1,194.2
----------------------------------------------------------------------

(a) Unaudited.

(b) The Company sold certain accounts receivable through an accounts
receivable securitization program, see Form 10-K for additional
information. As a result, accounts receivable have been reduced, and
the Company's retained interest in such receivables has been
reflected as a short-term investment. As of June 30, 2008, the
Company had sold $74.6 million of participation interests in $133.1
million of accounts receivable and, as of December 31, 2007, the
Company had not sold any participation interests in such accounts
receivable.
*T

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Arch Chemicals, Inc.
Condensed Consolidated Statements of Cash Flows (a)
(In millions)

Six Months Ended June 30, 2008 2007
----------------------------------------------------------------------
Operating Activities:
Net Income $ 38.9 $ 37.4
Adjustments to Reconcile Net Income to Net Cash and
Cash Equivalents Provided
by Operating Activities:
Income from Discontinued Operations - (0.9)
Equity in Earnings of Affiliates (0.1) (0.2)
Depreciation and Amortization 22.6 22.4
Deferred Taxes 5.5 (3.9)
Impairment - 8.6
Restructuring Expense (Payments), Net (0.6) 4.8
Other (Gains) And Losses - (12.8)
Changes in Assets and Liabilities, Net of Purchase
and Sale of Businesses:
Accounts Receivable Securitization Program 74.6 74.1
Receivables (94.2) (78.4)
Inventories (21.9) (29.1)
Other Current Assets 0.8 (4.1)
Accounts Payable and Accrued Liabilities 8.8 25.6
Noncurrent Liabilities (1.0) 7.7
Other Operating Activities 1.3 10.9
----------------------------------------------------------------------
Net Operating Activities from Continuing
Operations 34.7 62.1
Cash Flows of Discontinued Operations - 1.2
----------------------------------------------------------------------
Net Operating Activities 34.7 63.3
----------------------------------------------------------------------
Investing Activities:
Capital Expenditures (24.7) (17.6)
Business Acquired in Purchase Transaction, Net of
Cash Acquired (0.2) (0.2)
Proceeds from Sale of a Business 3.0 -
Proceeds from Sale of Land and Property 0.7 2.8
Other Investing Activities - (2.0)
Cash Flows of Discontinued Operations - -
----------------------------------------------------------------------
Net Investing Activities (21.2) (17.0)
----------------------------------------------------------------------
Financing Activities:
Long-Term Debt Borrowings 60.0 150.0
Long-Term Debt Repayments (101.2) (209.4)
Short-Term Borrowings (Repayments), Net 15.2 5.6
Dividends Paid (9.9) (9.7)
Cash Flows of Discontinued Operations - (0.8)
Proceeds from Stock Options Exercised and Other
Financing Activities 1.0 8.0
----------------------------------------------------------------------
Net Financing Activities (34.9) (56.3)
----------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents 2.0 0.4
----------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (19.4) (9.6)
Cash and Cash Equivalents, Beginning of Year 73.7 82.4
----------------------------------------------------------------------
Cash and Cash Equivalents, End of Period $ 54.3 $ 72.8
----------------------------------------------------------------------

(a) Unaudited.
*T

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Arch Chemicals, Inc.
Segment Information (a)
(In millions)

Three Months Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
----------------------------------------------------------------------
Sales:
Treatment Products:
- HTH Water Products $191.6 $190.9 $289.4 $286.5
- Personal Care and Industrial
Biocides 87.6 82.7 168.0 159.6
- Wood Protection and Industrial
Coatings 132.2 115.9 247.6 207.0
----------------------------------------------------------------------
Total Treatment Products 411.4 389.5 705.0 653.1
Performance Products:
- Performance Urethanes 52.8 55.2 101.8 104.3
- Hydrazine 5.4 4.8 9.9 9.5
----------------------------------------------------------------------
Total Performance Products 58.2 60.0 111.7 113.8
----------------------------------------------------------------------
Total Sales $469.6 $449.5 $816.7 $766.9
----------------------------------------------------------------------

Segment Operating Income (Loss) (b):
Treatment Products:
- HTH Water Products $ 43.4 $ 42.0 $ 49.4 $ 46.5
- Personal Care and Industrial
Biocides (c) 16.0 12.5 31.9 26.7
- Wood Protection and Industrial
Coatings 4.0 7.0 3.7 8.3
----------------------------------------------------------------------
Total Treatment Products 63.4 61.5 85.0 81.5
Performance Products:
- Performance Urethanes (2.0) 4.7 (2.3) 6.7
- Hydrazine (d) 0.2 0.1 0.2 13.2
----------------------------------------------------------------------
Total Performance Products (1.8) 4.8 (2.1) 19.9
----------------------------------------------------------------------
61.6 66.3 82.9 101.4
General Corporate Expenses (e) (5.9) (10.6) (15.0) (18.8)
----------------------------------------------------------------------
Total Segment Operating Income
Including Equity in Earnings of
Affiliated Companies 55.7 55.7 67.9 82.6
Equity in Earnings of Affiliated
Companies - (0.2) (0.1) (0.2)
Restructuring and Impairment (f) - (15.6) - (15.6)
----------------------------------------------------------------------
Total Operating Income 55.7 39.9 67.8 66.8
Interest Expense, Net (2.7) (3.8) (6.0) (8.3)
----------------------------------------------------------------------
Income from Continuing Operations
Before Equity in Earnings of
Affiliated Companies and Taxes $ 53.0 $ 36.1 $ 61.8 $ 58.5
----------------------------------------------------------------------

(a) Unaudited.

(b) Includes equity in earnings of affiliated companies and excludes
restructuring and impairment.

(c) Second quarter and year-to-date 2007 include $0.4 million of
inventory disposal costs associated with the Company's decision to
discontinue manufacturing its BIT molecule ("BIT restructuring").

(d) Year-to-date 2007 includes a $12.8 million gain for the completion
of a contract with the U.S Government.

(e) Includes certain general expenses of the corporate headquarters
that are not allocated to the business segments, including costs
associated with the Company's accounts receivable securitization
program and certain pension expenses.

(f) 2007 includes severance, the write-down of manufacturing assets
and other related costs principally associated with the BIT
restructuring.
*T

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Arch Chemicals, Inc.
Reconciliation of GAAP to Non-GAAP Information
(In millions, except per share amounts)
*T

The following table reconciles income and diluted income per share
from continuing operations for the three months ended June 30, 2007 to
income and diluted income per share from continuing operations before
restructuring and impairment for the three months ended June 30, 2007
to provide comparability for the three months ended June 30, 2008.

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----------------------------------------------------------------------
Three Months
Ended June 30, 2007
----------------------------------------------------------------------

Income EPS
---------- -----------

Income from Continuing Operations $ 22.4 $ 0.91
Add: Restructuring and Impairment, net of tax 11.9 0.48
----------------------------------------------------------------------

Income from Continuing Operations before
Restructuring and Impairment $ 34.3 $ 1.39
======================================================================
*T

The following table reconciles the estimate of diluted income per
share from continuing operations for the 2008 third quarter and full
year 2008 to the estimate of diluted income per share from continuing
operations for the 2008 third quarter and full year 2008 before a
pension settlement associated with severance which was recorded in
2007. The table is being provided in order to reconcile the Company's
earnings guidance for the third quarter and full year to GAAP.

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----------------------------------------------------------------------
Three Months Year Ended
Ended
September 30, December 31,
2008 2008
----------------------------------------------------------------------

Diluted Income Per Share:

Income from Continuing Operations $0.32 - $0.42 $2.17 - $2.27
Add: Pension settlement, net of tax 0.03 0.03
----------------------------------------------------------------------
Income from Continuing Operations before
pension settlement $0.35 - $0.45 $2.20 - $2.30
======================================================================
*T

The following table reconciles income and diluted income per share
from continuing operations for the 2007 third quarter to income and
diluted income per share from continuing operations for the 2007 third
quarter before restructuring and the impact of the change in the U.K.
tax rate on the Company's pension plans in the U.K. The table is being
provided in order to provide comparability to the Company's earnings
guidance for the 2008 third quarter.

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----------------------------------------------------------------------
Three Months
Ended
September
30, 2007
----------------------------------------------------------------------

Income EPS
------ -----

Income from Continuing Operations $2.3 $0.09
Add: Restructuring, net of tax 0.8 0.04
Add: Impact of U.K tax rate change on U.K. pension plans 3.0 0.12
----------------------------------------------------------------------

Income from Continuing Operations before restructuring
and the impact of the U.K. tax rate change on U.K.
pension plans $6.1 $0.25
======================================================================
*T

Arch Chemicals, Inc.
Investors:
Mark E. Faford, 203-229-2654
mefaford@archchemicals.com
or
Press:
Dale N. Walter, 203-229-3033
dnwalter@archchemicals.com

Copyright Business Wire 2008