- Sales of $361.6 million increased 0.7%, or 2.3% on constant
currency basis;
- Net income of $0.2 million with diluted EPS of $0.00; Adjusted
net income of $21.7 million with Adjusted diluted EPS of
$0.16;
- Adjusted EBITDA of $103.1 million increased 2.1%, or 3.3% on a
constant currency basis; Adjusted EBITDA margin of 26.2%;
- Term Loan and Asset Based Lending facilities repriced and
extended; and
- Liquidity of $236.3 million, including cash on hand of $107.7
million at March 31, 2020
PQ Group Holdings Inc. (NYSE:PQG) (“PQ” or the “Company”)
reported results for the first quarter ended March 31, 2020. Sales
of $361.6 million were up 0.7% versus the same period in 2019, or
2.3% on a constant currency basis, largely benefiting from volume
growth in Catalysts, Performance Materials and Refining Services.
Net income was $0.2 million with $0.00 diluted EPS, which includes
a loss impact of ($7.5 million) with ($0.06) diluted EPS related to
the Performance Materials asset swap transaction. Adjusted net
income was $21.7 million with $0.16 Adjusted diluted EPS. Adjusted
EBITDA was $103.1 million, up 2.1%, or 3.3% on a constant currency
basis, largely on higher sales volumes. Adjusted EBITDA margin was
26.2%.
“We had a solid start to the year, delivering volume growth from
three of our four business segments led by North America highway
safety in Performance Materials and continued polyolefin growth in
Catalysts,” commented Belgacem Chariag, PQ Chairman, President and
Chief Executive Officer. “As for the balance of the year, the
COVID-19 pandemic has created significant demand uncertainty. We
believe our aggressive response, business diversification and
financial flexibility position PQ well to navigate through this
crisis.”
Review of Segment Results
Refining Services
Sales of $100.7 million decreased 4.8% versus the same period in
2019, largely on pass-through of lower sulfur pricing which more
than offset higher demand for virgin sulfuric acid. Adjusted EBITDA
of $37.2 million was down 6.3% on higher raw material usage and
production costs.
Catalysts
Silica Catalyst sales of $24.9 million increased 56.6%, or 57.9%
on a constant currency basis, versus the same period in 2019,
largely driven by continued strong demand for polyolefin catalysts
and timing for methyl methacrylate sales. Zeolyst JV sales rose
9.6% on a normalized demand level for emission control catalysts.
Adjusted EBITDA of $22.7 million increased 25.4%, or 26.0% on a
constant currency basis, on higher sales volumes.
Performance Materials
Sales of $65.5 million increased 7.2%, or 9.5% on a constant
currency basis. Adjusted EBITDA of $13.5 million increased 28.6%,
or 29.5% on a constant currency basis versus the same period in
2019, due to increased demand for North American highway safety
products coupled with favorable weather conditions.
Performance Chemicals
Sales of $174.3 million decreased 3.4%, or 1.1% on a constant
currency basis, versus the same period in 2019 on slower global
demand for detergents and personal care products in Latin America.
Adjusted EBITDA of $40.5 million decreased 5.2%, or 2.8% on a
constant currency basis, due to lower sales volumes.
COVID-19 Update and 2020 Outlook
“Our highest priority is the health and safety of our employees
and their families,” said Chariag. “In addition, our focus has been
on serving our customers while ensuring that our plant operations
are in compliance with recommended preventive and safety
measures.”
PQ’s businesses and many of its vendors and customers have been
able to continue operations through the pandemic as essential
businesses under government regulations. While there have been some
modest production delays through the first quarter, PQ has not
experienced material operational issues in terms of facility
shutdowns or its supply chain.
“At the executive leadership and Board levels, we are
continuously monitoring the situation,” Chariag concluded. “While
we continue to believe in the favorable long-term demand drivers
for our businesses, the pandemic is expected to reduce demand in
the near- to mid-term. We will continue to navigate through this
crisis to mitigate the impacts on PQ and its employees, customers
and shareholders.”
Liquidity and Balance Sheet
At March 31, 2020, the Company had total debt outstanding of
$1,996.8 million. During the quarter ended March 31, 2020, the
Company amended its Term Loan Facility to reduce the applicable
interest rate and extend the maturity of the facility to February
2027 and amended its ABL Credit Agreement to reduce the applicable
interest rate, extend the maturity to March 2025 and increase the
aggregate amount of the revolving loan commitments available by
$50.0 million to $250.0 million.
With total available liquidity of $236.3 million, including cash
and cash equivalents of $107.7 million at March 31, 2020, PQ is
well positioned to meet anticipated future cash and business needs
during this period of uncertainty. With the recent amendments and
extensions of its Term Loan and ABL Credit Agreement, PQ has no
significant debt maturities prior to November 2022. Additionally,
PQ’s outstanding debt obligations do not contain material financial
covenants requiring it to maintain a leverage ratio below a
particular level.
PQ is undertaking additional steps to enhance its liquidity by
lowering discretionary costs and capital expenditures. Furthermore,
business optimization initiatives continue, including the potential
for asset monetization transactions. These actions will help to
mitigate the potential prolonged effects of a challenging demand
environment.
2020 Financial Outlook
Due to the uncertainty of COVID-19 related impact on near term
demand trends, we are withdrawing our previously announced annual
2020 financial outlook except for the below:
- Adjusted free cash flow in range of $130 million to $150
million, revised from a range of $155 million to $175 million
- Adjusted EBITDA margin in range of mid-20 percent
Conference Call and Webcast Details
On Tuesday, May 5, 2020, PQ management will review the results
during a conference call and audio-only webcast scheduled for 11:00
a.m. Eastern Time.
Conference Call: Investors may listen to the conference call
live via telephone by dialing 1 (877) 883-0383 (domestic) or 1
(412) 902-6506 (international) and use the participant code
4111683.
Webcast: An audio-only live webcast of the conference call and
presentation materials can be accessed at
http://investor.pqcorp.com.
A replay of the conference call/webcast will be made available
at http://investor.pqcorp.com/events-presentations.
Investor Contact:
Nahla A. Azmy
(610) 651-4561
Nahla.Azmy@pqcorp.com
About PQ Group Holdings Inc.
PQ Group Holdings Inc. and subsidiaries is a leading integrated
and innovative global provider of specialty catalysts, materials,
chemicals and services. We support customers globally through our
strategically located network of manufacturing facilities. We
believe that our products, which are predominantly inorganic, and
services contribute to improving the sustainability of the
environment.
We have four uniquely positioned specialty businesses:
Refining Services provides sulfuric acid recycling to the
North American refining industry; Catalysts serves the
packaging and engineering plastics and the global refining,
petrochemical and emissions control industries; Performance
Materials produces transportation reflective safety markings
for roads and airports; and Performance Chemicals supplies
diverse product end uses, including personal and industrial
cleaning products, fuel-efficient tires, surface coatings, and food
and beverage products.
We serve over 4,000 customers globally across many end uses and
operate over 70 manufacturing facilities which are strategically
located across six continents. For more information, see our
website at https://www.pqcorp.com.
Presentation of Non-GAAP Financial Measures
In addition to the results provided in accordance with U.S.
generally accepted accounting principles (“GAAP”) throughout this
press release, the Company has provided non-GAAP financial
measures—Adjusted EBITDA, Adjusted EBITDA margin, Adjusted free
cash flow, Adjusted net income, Adjusted EPS, Adjusted diluted EPS,
constant currency sales and constant currency Adjusted EBITDA—which
present results on a basis adjusted for certain items. The Company
uses these non-GAAP financial measures for business planning
purposes and in measuring its performance relative to that of its
competitors. The Company believes that these non-GAAP financial
measures are useful financial metrics to assess its operating
performance from period-to-period by excluding certain items that
the Company believes are not representative of its core business.
These non-GAAP financial measures are not intended to replace, and
should not be considered superior to, the presentation of the
Company’s financial results in accordance with GAAP. The use of the
terms Adjusted EBITDA, Adjusted EBITDA margin, Adjusted free cash
flow, Adjusted net income, Adjusted EPS, Adjusted diluted EPS,
constant currency sales and constant currency Adjusted EBITDA may
differ from similar measures reported by other companies and may
not be comparable to other similarly titled measures. Adjusted
EBITDA, Adjusted free cash flow, Adjusted net income, Adjusted EPS,
Adjusted diluted EPS, constant currency sales and constant currency
Adjusted EBITDA are reconciled from the respective measures under
GAAP in the appendix below.
In discussing our operating results, the term currency exchange
rates refers to the currency exchange rates we use to convert the
operating results for all countries where the functional currency
is not the U.S. dollar. We calculate constant currency sales and
constant currency Adjusted EBITDA by translating current period
results at the prior period’s currency exchange rates. When we
refer to constant currency sales and constant currency Adjusted
EBITDA, this means sales and Adjusted EBITDA without the impact of
the currency exchange rate fluctuations from period-to period.
The Company is not able to provide a reconciliation of the
Company’s non-GAAP financial guidance to the corresponding GAAP
measures without unreasonable effort because of the inherent
difficulty in forecasting and quantifying certain amounts necessary
for such a reconciliation such as certain non-cash, nonrecurring or
other items that are included in net income and EBITDA as well as
the related tax impacts of these items and asset dispositions /
acquisitions and changes in foreign currency exchange rates that
are included in cash flow, due to the uncertainty and variability
of the nature and amount of these future charges and costs.
Zeolyst Joint Venture
The Company’s zeolite catalysts product group operates through
its Zeolyst Joint Venture, which is accounted for as an equity
method investment in accordance with GAAP. The presentation of the
Zeolyst Joint Venture’s sales represents 50% of the sales of the
Zeolyst Joint Venture. The Company does not record sales by the
Zeolyst Joint Venture as revenue and such sales are not
consolidated within the Company’s results of operations. However,
the Company’s Adjusted EBITDA reflects the share of earnings of the
Zeolyst Joint Venture that have been recorded as equity in net
income from affiliated companies in the Company’s consolidated
statements of income for such periods and includes Zeolyst Joint
Venture adjustments on a proportionate basis based on the Company’s
50% ownership interest. Accordingly, the Company’s Adjusted EBITDA
margins are calculated including 50% of the sales of the Zeolyst
Joint Venture for the relevant periods in the denominator.
Note on Forward-Looking Statements
Some of the information contained in this press release
constitutes “forward-looking statements.” Forward-looking
statements can be identified by words such as “anticipates,”
“intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,”
“projects” and similar references to future periods.
Forward-looking statements are based on our current expectations
and assumptions regarding our business, the economy and other
future conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict. Examples of
forward-looking statements include, but are not limited to,
statements regarding our future results of operations, financial
condition, liquidity, prospects, growth, strategies, product and
service offerings, including the impact of the COVID-19 pandemic on
such items and our 2020 financial outlook. Our actual results may
differ materially from those contemplated by the forward-looking
statements. We caution you, therefore, against relying on any of
these forward-looking statements. They are neither statements of
historical fact nor guarantees or assurances of future performance.
Important factors that could cause actual results to differ
materially from those in the forward-looking statements include,
but are not limited to, regional, national or global political,
economic, business, competitive, market and regulatory conditions,
including the ongoing COVID-19 pandemic, tariffs and trade
disputes, currency exchange rates and other factors, including
those described in the sections titled “Risk Factors” and
“Management Discussion & Analysis of Financial Condition and
Results of Operations” in our filings with the SEC, which are
available on the SEC’s website at www.sec.gov. These
forward-looking statements speak only as of the date of this
release. Factors or events that could cause our actual results to
differ may emerge from time to time, and it is not possible for us
to predict all of them. We undertake no obligation to update any
forward-looking statement, whether as a result of new information,
future developments or otherwise, except as may be required by
applicable law.
PQ GROUP HOLDINGS INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(in millions, except share and
per share amounts)
Three months ended
March 31,
2020
2019
% Change
Sales
$
361.6
$
359.2
0.7
%
Cost of goods sold
273.0
278.3
(1.9
)%
Gross profit
88.6
80.9
9.5
%
Selling, general and administrative
expenses
43.3
40.7
6.4
%
Other operating expense, net
21.9
10.8
102.8
%
Operating income
23.4
29.4
(20.4
)%
Equity in net (income) from affiliated
companies
(8.4
)
(2.1
)
300.0
%
Interest expense, net
24.5
28.6
(14.3
)%
Debt extinguishment costs
2.5
—
—
%
Other (income) expense, net
2.9
(3.0
)
(196.7
)%
Income before income taxes and
noncontrolling interest
1.9
5.9
(67.8
)%
Provision for income taxes(1)
1.4
2.4
(41.7
)%
Effective tax rate
73.7
%
41.6
%
Net income
0.5
3.5
(85.7
)%
Less: Net income attributable to the
noncontrolling interest
0.3
0.3
—
%
Net income attributable to PQ Group
Holdings Inc.
$
0.2
$
3.2
(93.8
)%
Earnings per share:
Basic earnings per share
$
—
$
0.02
Diluted earnings per share
$
—
$
0.02
Weighted average shares outstanding:
Basic
135,240,897
133,946,308
Diluted
136,086,082
134,894,354
(1)
Net of a $1.9 million and $0.5
million provision for Global Intangible Low Taxed Income (“GILTI”)
for the three months ended March 31, 2020 and March 31, 2019,
respectively.
PQ GROUP HOLDINGS INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions, except share and
per share amounts)
March 31, 2020
December 31,
2019
ASSETS
Cash and cash equivalents
$
107.7
$
72.3
Accounts receivable, net
197.1
179.6
Inventories, net
265.0
280.9
Prepaid and other current assets
41.2
35.8
Total current assets
611.0
568.6
Investments in affiliated companies
479.2
472.9
Property, plant and equipment, net
1,147.9
1,186.8
Goodwill
1,248.7
1,259.8
Other intangible assets, net
652.3
676.4
Right-of-use lease assets
53.7
57.3
Other long-term assets
104.0
99.1
Total assets
$
4,296.8
$
4,320.9
LIABILITIES
Notes payable and current maturities of
long-term debt
$
8.5
$
7.8
Accounts payable
127.3
144.4
Operating lease liabilities—current
15.2
15.2
Accrued liabilities
95.3
102.2
Total current liabilities
246.3
269.6
Long-term debt, excluding current
portion
1,961.7
1,899.2
Deferred income taxes
215.0
218.0
Operating lease liabilities—noncurrent
38.1
40.2
Other long-term liabilities
94.6
108.6
Total liabilities
2,555.7
2,535.6
Commitments and contingencies
EQUITY
Common stock ($0.01 par); authorized
shares 450,000,000; issued shares 137,313,883 and 136,861,382 on
March 31, 2020 and December 31, 2019, respectively; outstanding
shares 136,596,198 and 136,464,961 on March 31, 2020 and December
31, 2019, respectively
1.4
1.4
Preferred stock ($0.01 par); authorized
shares 50,000,000; no shares issued or outstanding on March 31,
2020 and December 31, 2019
—
—
Additional paid-in capital
1,703.0
1,696.9
Retained earnings
103.2
103.0
Treasury stock, at cost; shares 717,685
and 396,421 on March 31, 2020 and December 31, 2019,
respectively
(10.4
)
(6.5
)
Accumulated other comprehensive loss
(58.8
)
(15.4
)
Total PQ Group Holdings Inc. equity
1,738.4
1,779.4
Noncontrolling interest
2.7
5.9
Total equity
1,741.1
1,785.3
Total liabilities and equity
$
4,296.8
$
4,320.9
PQ GROUP HOLDINGS INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Three months ended
March 31,
2020
2019
Cash flows from operating activities:
(in millions)
Net income
$
0.5
$
3.5
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation
33.5
33.2
Amortization
12.2
12.7
Amortization of deferred financing costs
and original issue discount
1.3
1.4
Foreign currency exchange (gain) loss
3.3
(2.7
)
Pension and postretirement healthcare
benefit expense
(0.1
)
1.2
Pension and postretirement healthcare
benefit funding
(3.2
)
(3.4
)
Deferred income tax (benefit)
provision
(1.5
)
1.2
Net loss on asset disposals
9.4
0.8
Stock compensation
5.9
3.4
Equity in net income from affiliated
companies
(8.4
)
(2.1
)
Dividends received from affiliated
companies
—
5.0
Net interest income on swaps designated as
net investment hedges
(1.8
)
(3.9
)
Other, net
(0.6
)
(3.6
)
Working capital changes that provided
(used) cash, excluding the effect of acquisitions and
dispositions:
Receivables
(26.1
)
1.1
Inventories
(9.7
)
(19.2
)
Prepaids and other current assets
(0.7
)
2.9
Accounts payable
(1.3
)
(3.9
)
Accrued liabilities
(8.2
)
(0.8
)
Net cash provided by operating
activities
4.5
26.8
Cash flows from investing activities:
Purchases of property, plant and
equipment
(28.1
)
(33.6
)
Proceeds from sale of assets
2.4
—
Proceeds from sale of investment
1.8
—
Net interest proceeds on swaps designated
as net investment hedges
1.8
3.9
Other, net
—
0.5
Net cash used in investing activities
(22.1
)
(29.2
)
Cash flows from financing activities:
Draw down of revolving credit
facilities
117.4
32.4
Repayments of revolving credit
facilities
(52.7
)
(28.9
)
Debt issuance costs
(3.0
)
—
Repayments of long-term debt
—
(5.0
)
Stock repurchases
(3.9
)
(1.3
)
Other, net
0.4
0.3
Net cash provided by (used in) financing
activities
58.2
(2.5
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(4.2
)
(0.7
)
Net change in cash, cash equivalents and
restricted cash
36.4
(5.6
)
Cash, cash equivalents and restricted cash
at beginning of period
73.9
59.7
Cash, cash equivalents and restricted cash
at end of period
$
110.3
$
54.1
Appendix Table A-1: Reconciliation of Net Income to Segment
Adjusted EBITDA
Three months ended
March 31,
2020
2019
(in millions)
Reconciliation of net income
attributable to PQ Group Holdings Inc. to Segment Adjusted
EBITDA
Net income attributable to PQ Group
Holdings Inc.
$
0.2
$
3.2
Provision for income taxes
1.4
2.4
Interest expense, net
24.5
28.6
Depreciation and amortization
45.7
45.9
EBITDA
71.8
80.1
Joint venture depreciation, amortization
and interest(a)
3.8
3.8
Amortization of investment in affiliate
step-up(b)
1.7
2.6
Debt extinguishment costs
2.5
—
Net loss on asset disposals(c)
9.4
0.8
Foreign currency exchange loss
(gain)(d)
3.3
(2.7
)
LIFO expense(e)
(0.3
)
10.2
Transaction and other related costs(f)
2.1
0.1
Equity-based compensation
5.9
3.4
Restructuring, integration and business
optimization expenses(g)
2.0
0.7
Defined benefit pension plan (benefit)
cost (h)
(0.2
)
1.0
Other(i)
1.1
1.0
Adjusted EBITDA
103.1
101.0
Unallocated corporate expenses
10.7
10.0
Segment Adjusted EBITDA
$
113.8
$
111.0
Descriptions to PQ Non-GAAP
Reconciliations
(a)
We use Adjusted EBITDA as a
performance measure to evaluate our financial results. Because our
Catalysts segment includes our 50% interest in the Zeolyst Joint
Venture, we include an adjustment for our 50% proportionate share
of depreciation, amortization and interest expense of the Zeolyst
Joint Venture.
(b)
Represents the amortization of
the fair value adjustments associated with the equity affiliate
investment in the Zeolyst Joint Venture as a result of the
combination of the businesses of PQ Holdings Inc. and Eco Services
Operations LLC in May 2016 (the “Business Combination”). We
determined the fair value of the equity affiliate investment and
the fair value step-up was then attributed to the underlying assets
of the Zeolyst Joint Venture. Amortization is primarily related to
the fair value adjustments associated with fixed assets and
intangible assets, including customer relationships and technical
know-how.
(c)
When asset disposals occur, we
remove the impact of net gain/loss of the disposed asset because
such impact primarily reflects the non-cash write-off of long-lived
assets no longer in use.
(d)
Reflects the exclusion of the
foreign currency transaction gains and losses in the statements of
income primarily related to the non-permanent intercompany debt
denominated in local currency translated to U.S. dollars.
(e)
Represents non-cash adjustments
to the Company’s LIFO reserves for certain inventories in the U.S.
that are valued using the LIFO method, which we believe provides a
means of comparison to other companies that may not use the same
basis of accounting for inventories.
(f)
Relates to certain transaction
costs, including debt financing, due diligence and other costs
related to transactions that are completed, pending or abandoned,
that we believe are not representative of our ongoing business
operations.
(g)
Includes the impact of
restructuring, integration and business optimization expenses which
are incremental costs that are not representative of our ongoing
business operations.
(h)
Represents adjustments for
defined benefit pension plan (benefit) costs in our statements of
income. More than two-thirds of our defined benefit pension plan
obligations are under defined benefit pension plans that are
frozen, and the remaining obligations primarily relate to plans
operated in certain of our non-U.S. locations that, pursuant to
jurisdictional requirements, cannot be frozen. As such, we do not
view such income or expenses as core to our ongoing business
operations.
(i)
Other costs consist of certain
expenses that are not core to our ongoing business operations,
including environmental remediation-related costs associated with
the legacy operations of our business prior to the Business
Combination, capital and franchise taxes, non-cash asset retirement
obligation accretion and the initial implementation of procedures
to comply with Section 404 of the Sarbanes-Oxley Act. Included in
this line-item are rounding discrepancies that may arise from
rounding from dollars (in thousands) to dollars (in millions).
Appendix Table A-2: Reconciliation of Net Income to Adjusted
Net Income(1)
Three months ended March
31,
2020
2019
Pre-tax
Tax expense (benefit)
After-tax
Pre-tax
Tax expense (benefit)
After-tax
(in millions)
Net income before non-controlling
interest
$
1.9
$
1.4
$
0.5
$
5.9
$
2.4
$
3.5
Less: Net income attributable to
non-controlling interest
0.3
—
0.3
0.3
—
0.3
Net income attributable to PQ Group
Holdings Inc.
1.6
1.4
0.2
5.6
2.4
3.2
Earnings per share:
Basic earnings per share
$
—
$
0.02
Diluted earnings per share
$
—
$
0.02
Net income attributable to PQ Group
Holdings Inc.
$
1.6
$
1.4
$
0.2
$
5.6
$
2.4
$
3.2
Amortization of investment in affiliate
step-up(b)
1.7
0.6
1.1
2.6
1.0
1.6
Debt extinguishment costs
2.5
0.9
1.6
—
—
—
Net loss on asset disposals(c)
9.4
2.3
7.1
0.8
0.3
0.5
Foreign currency exchange loss
(gain)(d)
3.3
2.3
1.0
(2.7
)
(0.7
)
(2.0
)
LIFO expense(e)
(0.3
)
(0.1
)
(0.2
)
10.2
3.7
6.5
Transaction and other related costs(f)
2.1
0.8
1.3
0.1
—
0.1
Equity-based compensation
5.9
2.1
3.8
3.4
1.2
2.2
Restructuring, integration and business
optimization expenses(g)
2.0
0.7
1.3
0.7
0.2
0.5
Defined benefit plan pension (benefit)
cost(h)
(0.2
)
(0.1
)
(0.1
)
1.0
0.4
0.6
Other(i)
1.1
0.4
0.7
1.0
0.4
0.6
Adjusted Net Income, including non-cash
GILTI tax
29.1
11.3
17.8
22.7
8.9
13.8
Impact of non-cash GILTI tax(2)
—
(3.9
)
3.9
—
(3.7
)
3.7
Adjusted Net Income(1)
$
29.1
$
7.4
$
21.7
$
22.7
$
5.2
$
17.5
Adjusted earnings per share:
Adjusted basic earnings per share
$
0.16
$
0.13
Adjusted diluted earnings per share
$
0.16
$
0.13
Weighted average shares outstanding:
Basic
135,240,897
133,946,308
Diluted
136,086,082
134,894,354
See Appendix Table A-1 for Descriptions to PQ Non-GAAP
Reconciliations in the table above.
(1)
We define adjusted net income as
net income attributable to PQ Group Holdings adjusted for
non-operating income or expense and the impact of certain non-cash
or other items that are included in net income that we do not
consider indicative of our ongoing operating performance. Adjusted
net income is presented as a key performance indicator as we
believe it will enhance a prospective investor’s understanding of
our results of operations and financial condition. Adjusted net
income may not be comparable with net income or adjusted net income
as defined by other companies.
(2)
Amount represents the impact to
tax expense in net income before non-controlling interest and the
related adjustments to net income associated with GILTI provisions
of the Tax Cuts and Jobs Act of 2017 (“TCJA”). As of January 1,
2018, GILTI results in taxation of “excess of foreign earnings,”
which is defined as amounts greater than a 10% rate of return on
applicable foreign tangible asset basis. The Company is required to
record incremental tax provision impact with respect to GILTI as a
result of having historical U.S. net operating loss (“NOL”) amounts
to offset the GILTI taxable income inclusion. This NOL utilization
precludes us from recognizing foreign tax credits (“FTCs”) which
would otherwise help offset the tax impacts of GILTI. No FTCs will
be recognized with respect to GILTI until our cumulative NOL
balance has been exhausted. Because the GILTI provision does not
impact our cash taxes (given available U.S. NOLs), and given that
we expect to recognize FTCs to offset GILTI impacts once the NOLs
are exhausted, we do not view this item as a component of core
operations.
Appendix Table A-3: Business Segment Sales and Adjusted
EBITDA
Three months ended
March 31,
2020
2019
% Change
Sales:
Refining Services
$
100.7
$
105.8
(4.8
)%
Silica Catalysts
24.9
15.9
56.6
%
Performance Materials
65.5
61.1
7.2
%
Performance Chemicals
174.3
180.5
(3.4
)%
Eliminations
(3.8
)
(4.1
)
Total sales
$
361.6
$
359.2
0.7
%
Zeolyst joint venture sales
$
32.3
$
29.5
9.6
%
Adjusted EBITDA:
Refining Services
$
37.2
$
39.7
(6.3
)%
Catalysts
22.7
18.1
25.4
%
Performance Materials
13.5
10.5
28.6
%
Performance Chemicals
40.5
42.7
(5.2
)%
Total Segment Adjusted EBITDA
$
113.8
$
111.0
2.5
%
Corporate
(10.7
)
(10.0
)
7.0
%
Total Adjusted EBITDA
$
103.1
$
101.0
2.1
%
Adjusted EBITDA Margin:
Refining Services
36.9
%
37.5
%
Catalysts(1)
39.7
%
40.0
%
Performance Materials
20.6
%
17.2
%
Performance Chemicals
23.2
%
23.7
%
Total Adjusted EBITDA Margin(1)
26.2
%
26.0
%
(1)
Adjusted EBITDA margin
calculation includes proportionate 50% share of sales from the
Zeolyst joint venture.
Appendix Table A-4: Constant Currency Sales and Adjusted
EBITDA
The tables below reflect the calculation of constant currency
sales and constant currency Adjusted EBITDA by segment for the
three months ended March 31, 2020.
Three months ended
March 31, 2020
Three months ended March 31,
2019
As Reported
FX
Constant Currency
As Reported
% Change
(in millions, except
percentages)
Sales:
Refining Services
$
100.7
$
—
$
100.7
$
105.8
(4.8
)%
Silica Catalysts
24.9
0.2
25.1
15.9
57.9
%
Performance Materials
65.5
1.4
66.9
61.1
9.5
%
Performance Chemicals
174.3
4.2
178.5
180.5
(1.1
)%
Eliminations
(3.8
)
(0.1
)
(3.9
)
(4.1
)
(4.9
)%
Total sales
$
361.6
$
5.7
$
367.3
$
359.2
2.3
%
Zeolyst joint venture sales
$
32.3
$
—
$
32.3
$
29.5
9.6
%
Adjusted EBITDA:
Refining Services
$
37.2
$
—
$
37.2
$
39.7
(6.3
)%
Catalysts
22.7
0.1
22.8
18.1
26.0
%
Performance Materials
13.5
0.1
13.6
10.5
29.5
%
Performance Chemicals
40.5
1.0
41.5
42.7
(2.8
)%
Total Segment Adjusted EBITDA
$
113.8
$
1.2
$
115.0
$
111.0
3.6
%
Corporate
(10.7
)
—
(10.7
)
(10.0
)
7.0
%
Total Adjusted EBITDA
$
103.1
$
1.2
$
104.3
$
101.0
3.3
%
Appendix Table A-5: Adjusted Free Cash Flow
Three months ended
March 31,
2020
2019
(in millions)
Net cash provided by operating
activities
$
4.5
$
26.8
Less:
Purchases of property, plant and
equipment(1)
(28.1
)
(33.6
)
Free cash flow
(23.6
)
(6.8
)
Adjustments to free cash flow:
Proceeds from sale of assets
2.4
—
Net interest proceeds on currency
swaps
1.8
3.9
Adjusted free cash flow(2)
$
(19.4
)
$
(2.9
)
Net cash used in investing
activities(3)
$
(22.1
)
$
(29.2
)
Net cash used in financing activities
$
58.2
$
(2.5
)
(1)
Excludes the Company’s
proportionate 50% share of capital expenditures from the Zeolyst
joint venture.
(2)
We define adjusted free cash flow
as net cash provided by operating activities less purchases of
property, plant and equipment, adjusted for proceeds from sale of
assets and net interest proceeds on swaps designated as net
investment hedges. Adjusted free cash flow is a non-GAAP financial
measure that we believe will enhance a prospective investor’s
understanding of our ability to generate additional cash from
operations, including the reduction in cash paid for interest
related to our cross-currency interest rate swaps, and is an
important financial measure for use in evaluating our financial
performance. Our presentation of adjusted free cash flow is not
intended to replace, and should not be considered superior to, the
presentation of our net cash provided by operating activities
determined in accordance with GAAP. Additionally, our definition of
adjusted free cash flow is limited, in that it does not represent
residual cash flows available for discretionary expenditures, due
to the fact that the measure does not deduct the payments required
for debt service and other contractual obligations or payments made
for business acquisitions. Therefore, we believe it is important to
view adjusted free cash flow as a measure that provides
supplemental information to our consolidated statements of cash
flows.
(3)
Net cash used in investing
activities includes purchases of property, plant and equipment,
proceeds from sale of assets and net interest proceeds on swaps
designated as net investment hedges, which are also included in our
computation of adjusted free cash flow.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200505005267/en/
Investor Contact: Nahla A. Azmy (610) 651-4561
Nahla.Azmy@pqcorp.com
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