▪ | Sales of $352.4 million for the fourth quarter and $1,567.1 million for the year; |
▪ | Net income of $19.1 million with diluted EPS of $0.14 and Adjusted net income of $18.0 million with Adjusted diluted EPS of $0.13 for the quarter; Net income of $79.5 million with diluted EPS of $0.59 and Adjusted net income of $125.2 million with Adjusted diluted EPS of $0.92 for the year; |
▪ | Adjusted EBITDA of $103.1 million for the quarter and $474.3 million for the year; Adjusted EBITDA margin of 27.3% for the year expanded 100 basis points; |
▪ | Net cash provided by operating activities of $267.7 million and Adjusted free cash flow of $166.2 million for the year; |
▪ | Repaid debt of $215 million and reduced leverage ratio to 3.9x at year-end; |
▪ | Launched transformation of the Performance Chemicals business focusing on future efficiency and growth |
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 1 |
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 2 |
▪ | Sales of $1,595 million to $1,625 million, reflecting lower sulfur prices and continued weak demand for Performance Chemicals through the first half of 2020 |
▪ | Adjusted EBITDA of $470 million to $480 million range |
▪ | Adjusted diluted EPS of approximately $0.85 to $1.02 |
▪ | Adjusted free cash flow in the range of $155 million to $175 million |
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 3 |
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 4 |
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 5 |
Three months ended December 31, | % | Years ended December 31, | % | |||||||||||||||||||
2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||||
(in millions, except percentages, share and per share amounts) | ||||||||||||||||||||||
Sales | $ | 352.4 | $ | 380.1 | (7.3 | )% | $ | 1,567.1 | $ | 1,608.2 | (2.6 | )% | ||||||||||
Cost of goods sold | 271.2 | 292.4 | (7.2 | )% | 1,176.6 | 1,226.5 | (4.1 | )% | ||||||||||||||
Gross profit | 81.2 | 87.7 | (7.4 | )% | 390.5 | 381.7 | 2.3 | % | ||||||||||||||
Selling, general and administrative expenses | 43.3 | 42.3 | 2.4 | % | 166.9 | 168.6 | (1.0 | )% | ||||||||||||||
Other operating expense, net | 7.4 | (12.2 | ) | (161.0 | )% | 35.8 | 29.5 | 21.4 | % | |||||||||||||
Operating income | 30.5 | 57.6 | (47.0 | )% | 187.8 | 183.6 | 2.3 | % | ||||||||||||||
Equity in net income from affiliated companies | (14.3 | ) | (6.5 | ) | 120.6 | % | (46.0 | ) | (37.6 | ) | 22.3 | % | ||||||||||
Interest expense, net | 26.6 | 29.1 | (8.4 | )% | 111.5 | 113.7 | (1.9 | )% | ||||||||||||||
Debt extinguishment costs | 1.6 | 1.1 | 45.5 | % | 3.4 | 7.8 | (56.4 | )% | ||||||||||||||
Other (income) expense, net | (4.0 | ) | (2.0 | ) | 97.8 | % | (2.1 | ) | 11.1 | (118.9 | )% | |||||||||||
Income before income taxes and noncontrolling interest | 20.6 | 35.9 | (42.6 | )% | 121.0 | 88.6 | 36.6 | % | ||||||||||||||
Provision for income taxes(1) | 1.2 | 7.4 | (83.2 | )% | 40.7 | 29.0 | 40.3 | % | ||||||||||||||
Effective tax rate | 6.0 | % | 20.6 % | 33.6 | % | 32.7 % | ||||||||||||||||
Net income | 19.4 | 28.5 | (31.9 | )% | 80.3 | 59.6 | 34.7 | % | ||||||||||||||
Less: Net income attributable to the noncontrolling interest | 0.3 | 0.3 | (11.7 | )% | 0.8 | 1.3 | (38.5 | )% | ||||||||||||||
Net income attributable to PQ Group Holdings Inc. | $ | 19.1 | $ | 28.2 | (32.1 | )% | $ | 79.5 | $ | 58.3 | 36.4 | % | ||||||||||
Net income per share: | ||||||||||||||||||||||
Basic income per share: | $ | 0.14 | $ | 0.21 | $ | 0.59 | $ | 0.44 | ||||||||||||||
Diluted income per share: | $ | 0.14 | $ | 0.21 | $ | 0.59 | $ | 0.43 | ||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||
Basic | 134,912,212 | 133,765,294 | 134,389,667 | 133,380,567 | ||||||||||||||||||
Diluted | 136,151,739 | 134,987,604 | 135,548,694 | 134,684,931 | ||||||||||||||||||
(1) | Net of a $4.6 million benefit and $9.2 million provision for Global Intangible Low-Taxed Income (“GILTI”) for the three months and year ended December 31, 2019, respectively. Net of a $5.8 million and $15.6 million provision for GILTI for the three months and year ended December 31, 2018, respectively, and a $4.5 million and $6.0 million provisional benefit adjustment for the impact of the U.S. Tax Cuts and Job Act of 2017 and the Dutch Tax Plan 2019 for the three months and year ended December 31, 2018, respectively. |
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 6 |
December 31, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 72.3 | $ | 57.9 | |||
Accounts receivables, net | 179.6 | 196.8 | |||||
Inventories, net | 280.9 | 264.7 | |||||
Prepaid and other current assets | 35.8 | 39.2 | |||||
Total current assets | 568.6 | 558.6 | |||||
Investments in affiliated companies | 472.9 | 468.2 | |||||
Property, plant and equipment, net | 1,186.8 | 1,209.0 | |||||
Goodwill | 1,259.8 | 1,254.9 | |||||
Other intangible assets, net | 676.4 | 728.4 | |||||
Right-of-use lease assets | 57.3 | — | |||||
Other long-term assets | 99.1 | 108.3 | |||||
Total assets | $ | 4,320.9 | $ | 4,327.4 | |||
LIABILITIES | |||||||
Notes payable and current maturities of long-term debt | $ | 7.8 | $ | 7.2 | |||
Accounts payable | 144.4 | 148.4 | |||||
Operating lease liabilities—current | 15.2 | — | |||||
Accrued liabilities | 102.2 | 100.0 | |||||
Total current liabilities | 269.6 | 255.6 | |||||
Long-term debt, excluding current portion | 1,899.2 | 2,106.7 | |||||
Deferred income taxes | 218.0 | 196.1 | |||||
Operating lease liabilities—noncurrent | 40.2 | — | |||||
Other long-term liabilities | 108.6 | 104.8 | |||||
Total liabilities | 2,535.6 | 2,663.2 | |||||
Commitments and contingencies | |||||||
EQUITY | |||||||
Common stock ($0.01 par); authorized shares 450,000,000; issued shares 136,861,382 and 135,758,269 on December 31, 2019 and 2018, respectively; outstanding shares 136,464,961 and 135,592,045 on December 31, 2019 and 2018, respectively | 1.4 | 1.4 | |||||
Preferred stock ($0.01 par); authorized shares 50,000,000; no shares issued or outstanding on December 31, 2019 and 2018, respectively | — | — | |||||
Additional paid-in capital | 1,696.9 | 1,674.7 | |||||
Retained earnings | 103.0 | 25.5 | |||||
Treasury stock, at cost; shares 396,421 and 166,224 on December 31, 2019 and 2018, respectively | (6.5 | ) | (2.9 | ) | |||
Accumulated other comprehensive loss | (15.4 | ) | (39.1 | ) | |||
Total PQ Group Holdings Inc. equity | 1,779.4 | 1,659.6 | |||||
Noncontrolling interest | 5.9 | 4.6 | |||||
Total equity | 1,785.3 | 1,664.2 | |||||
Total liabilities and equity | $ | 4,320.9 | $ | 4,327.4 | |||
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 7 |
Years ended December 31, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 80.3 | $ | 59.6 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 131.6 | 132.6 | ||||||
Amortization | 50.4 | 52.6 | ||||||
Amortization of inventory step-up | — | 1.6 | ||||||
Intangible asset impairment charge | 1.6 | — | ||||||
Amortization of deferred financing costs and original issue discount | 5.8 | 6.1 | ||||||
Debt extinguishment costs | 3.4 | 5.6 | ||||||
Foreign currency exchange loss | 2.8 | 13.8 | ||||||
Pension and postretirement healthcare benefit expense | 3.7 | 1.1 | ||||||
Pension and postretirement healthcare benefit funding | (9.7 | ) | (7.6 | ) | ||||
Deferred income tax provision | 18.3 | 3.4 | ||||||
Net (gain) loss on asset disposals | (13.1 | ) | 6.6 | |||||
Stock compensation | 18.2 | 19.5 | ||||||
Equity in net income from affiliated companies | (46.0 | ) | (37.6 | ) | ||||
Dividends received from affiliated companies | 40.1 | 40.2 | ||||||
Net interest income on swaps designated as net investment hedges | (8.5 | ) | (4.9 | ) | ||||
Gain on contract termination | — | (20.6 | ) | |||||
Other, net | (6.3 | ) | (1.5 | ) | ||||
Working capital changes that provided (used) cash, excluding the effect of acquisitions and dispositions: | ||||||||
Receivables | 14.5 | (10.5 | ) | |||||
Inventories | (18.9 | ) | (9.0 | ) | ||||
Prepaids and other current assets | 1.3 | (6.3 | ) | |||||
Accounts payable | (2.3 | ) | (0.1 | ) | ||||
Accrued liabilities | 0.5 | 4.0 | ||||||
Net cash provided by operating activities | 267.7 | 248.6 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property, plant and equipment | (127.6 | ) | (131.7 | ) | ||||
Investment in affiliated companies | — | (5.0 | ) | |||||
Business combinations, net of cash acquired | — | (1.0 | ) | |||||
Proceeds from sale of assets | 17.6 | 12.4 | ||||||
Proceeds from sale of product line | 27.7 | — | ||||||
Proceeds from settlement of swaps designated as net investment hedges | 38.1 | — | ||||||
Net interest proceeds on swaps designated as net investment hedges | 8.5 | 4.9 | ||||||
Other, net | 0.4 | 1.1 | ||||||
Net cash used in investing activities | (35.3 | ) | (119.3 | ) | ||||
Cash flows from financing activities: | ||||||||
Draw down of revolving credit facilities | 203.5 | 141.8 | ||||||
Repayments of revolving credit facilities | (202.8 | ) | (166.8 | ) | ||||
Issuance of long-term debt | — | 1,267.0 | ||||||
Debt issuance costs | — | (6.4 | ) | |||||
Repayments of long-term debt | (216.7 | ) | (1,369.7 | ) | ||||
Repurchases of common shares | (3.6 | ) | (2.8 | ) | ||||
Proceeds from stock options exercised | 4.0 | 0.1 | ||||||
Other, net | (0.5 | ) | (0.4 | ) | ||||
Net cash used in financing activities | (216.1 | ) | (137.2 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (2.1 | ) | 0.4 | |||||
Net change in cash, cash equivalents and restricted cash | 14.2 | (7.5 | ) | |||||
Cash, cash equivalents and restricted cash at beginning of period | 59.7 | 67.2 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 73.9 | $ | 59.7 | ||||
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 8 |
Three months ended December 31, | Years ended December 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in millions) | ||||||||||||||||
Reconciliation of net income attributable to PQ Group Holdings Inc. to Segment Adjusted EBITDA | ||||||||||||||||
Net income attributable to PQ Group Holdings Inc. | $ | 19.1 | $ | 28.2 | $ | 79.5 | $ | 58.3 | ||||||||
Provision for income taxes | 1.2 | 7.4 | 40.7 | 29.0 | ||||||||||||
Interest expense, net | 26.7 | 29.1 | 111.5 | 113.7 | ||||||||||||
Depreciation and amortization | 46.9 | 45.9 | 182.1 | 185.2 | ||||||||||||
EBITDA | 93.9 | 110.6 | 413.8 | 386.2 | ||||||||||||
Joint venture depreciation, amortization and interest(a) | 3.5 | 3.4 | 14.7 | 12.6 | ||||||||||||
Amortization of investment in affiliate step-up(b) | 1.7 | 1.6 | 7.5 | 6.6 | ||||||||||||
Amortization of inventory step-up(c) | — | — | — | 1.6 | ||||||||||||
Impairment of fixed assets, intangibles, and goodwill | 1.6 | — | 1.6 | — | ||||||||||||
Debt extinguishment costs | 1.6 | 1.1 | 3.4 | 7.8 | ||||||||||||
Net (gain) loss on asset disposals(d) | (5.3 | ) | (4.5 | ) | (13.1 | ) | 6.6 | |||||||||
Foreign currency exchange (gain) loss(e) | (2.6 | ) | (1.5 | ) | 2.8 | 13.8 | ||||||||||
LIFO expense(f) | 0.3 | 2.5 | 11.1 | 8.4 | ||||||||||||
Transaction and other related costs(g) | 1.8 | — | 3.6 | 0.9 | ||||||||||||
Equity-based compensation | 4.6 | 7.6 | 18.2 | 19.5 | ||||||||||||
Restructuring, integration and business optimization expenses(h) | 2.7 | 8.3 | 4.1 | 14.0 | ||||||||||||
Defined benefit plan pension cost(i) | 0.7 | (1.1 | ) | 3.1 | (0.8 | ) | ||||||||||
Gain on contract termination(j) | — | (20.6 | ) | — | (20.6 | ) | ||||||||||
Other(k) | (1.4 | ) | 1.7 | 3.5 | 7.4 | |||||||||||
Adjusted EBITDA | 103.1 | 109.1 | 474.3 | 464.0 | ||||||||||||
Unallocated corporate expenses | 12.1 | 9.7 | 40.1 | 37.0 | ||||||||||||
Segment Adjusted EBITDA | $ | 115.2 | $ | 118.8 | $ | 514.4 | $ | 501.0 | ||||||||
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 9 |
(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 (“Eco”) 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) | As a result of the Sovitec acquisition, there was a step-up in the fair value of inventory, which is amortized through cost of goods sold in the statement of income. |
(d) | 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. During the year ended December 31, 2019, the net gain on asset disposals includes the gains related to the sale of a non-core product line and sale of property. |
(e) | 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 and, for the year ended December 31, 2018, the Euro-denominated term loan (which was settled as part of the February 2018 term loan refinancing). |
(f) | 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. |
(g) | Represents the costs related to several transactions that are completed, pending or abandoned and that we believe are not representative of our ongoing business operations. |
(h) | Includes the impact of restructuring, integration and business optimization expenses which are incremental costs that are not representative of our ongoing business operations. |
(i) | Represents adjustments for defined benefit pension plan costs in our statement 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 expenses as core to our ongoing business operations. |
(j) | Represents a non-cash gain on the write-off of the remaining liability under a contractual supply arrangement. As part of the acquisition by Eco of substantially all of the assets of Solvay USA Inc’s sulfuric acid refining services business unit on December 1, 2014, we recognized a liability as part of business combination accounting related to our obligation to serve a customer under a pre-existing unfavorable supply agreement. In December 2018, the customer who was party to the agreement closed its facility, and as a result, we were relieved from our obligation to continue to supply the customer on the below market contract. Because the fair value of the unfavorable contract liability was recognized as part of the application of business combination accounting, and since the write-off of the remaining liability was non-cash in nature, we believe this gain is a special item that is not representative of our ongoing business operations. |
(k) | 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). |
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 10 |
Three months ended December 31, | ||||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||
Pre-tax | Tax expense (benefit) | After-tax | Pre-tax | Tax expense (benefit) | After-tax | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Net income before non-controlling interest | $ | 20.6 | $ | 1.2 | $ | 19.4 | $ | 35.9 | $ | 7.4 | $ | 28.5 | ||||||||||||
Less: Net income attributable to non-controlling interest | 0.3 | — | 0.3 | 0.3 | — | 0.3 | ||||||||||||||||||
Net income attributable to PQ Group Holdings Inc. | 20.3 | 1.2 | 19.1 | 35.6 | 7.4 | 28.2 | ||||||||||||||||||
Earnings per share: | ||||||||||||||||||||||||
Basic earnings per share | $ | 0.14 | $ | 0.21 | ||||||||||||||||||||
Diluted earnings per share | $ | 0.14 | $ | 0.21 | ||||||||||||||||||||
Net income attributable to PQ Group Holdings Inc. | 20.3 | 1.2 | 19.1 | 35.6 | 7.4 | 28.2 | ||||||||||||||||||
Amortization of investment in affiliate step-up(b) | 1.7 | 0.5 | 1.2 | 1.6 | 0.6 | 1.0 | ||||||||||||||||||
Impairment of intangible assets | 1.6 | 0.5 | 1.1 | — | — | — | ||||||||||||||||||
Debt extinguishment costs | 1.6 | 0.5 | 1.1 | 1.1 | 0.5 | 0.6 | ||||||||||||||||||
Net (gain) loss on asset disposals(d) | (5.3 | ) | (1.8 | ) | (3.5 | ) | (4.5 | ) | (1.8 | ) | (2.7 | ) | ||||||||||||
Foreign currency exchange gain(e) | (2.6 | ) | (0.9 | ) | (1.7 | ) | (1.5 | ) | 2.3 | (3.8 | ) | |||||||||||||
LIFO expense(f) | 0.3 | (0.1 | ) | 0.4 | 2.5 | 0.8 | 1.7 | |||||||||||||||||
Transaction and other related costs(h) | 1.8 | 0.5 | 1.3 | — | — | — | ||||||||||||||||||
Equity-based and other non-cash compensation | 4.6 | 1.3 | 3.3 | 7.6 | — | 7.6 | ||||||||||||||||||
Restructuring, integration and business optimization expenses(i) | 2.7 | 0.9 | 1.8 | 8.3 | 3.0 | 5.3 | ||||||||||||||||||
Defined benefit pension plan cost(j) | 0.7 | 0.2 | 0.5 | (1.1 | ) | (0.4 | ) | (0.7 | ) | |||||||||||||||
Gain on contract termination | — | — | — | (20.6 | ) | (7.6 | ) | (13.0 | ) | |||||||||||||||
Other(k) | (1.4 | ) | (0.4 | ) | (1.0 | ) | 1.7 | 0.4 | 1.3 | |||||||||||||||
Adjusted Net Income, includes non-cash GILTI tax | 26.0 | 2.4 | 23.6 | 30.6 | 5.2 | 25.5 | ||||||||||||||||||
Impact of non-cash GILTI tax(2) | — | 5.6 | (5.6 | ) | — | (2.2 | ) | 2.2 | ||||||||||||||||
Impact of tax reform(3) | — | — | — | — | 4.5 | (4.5 | ) | |||||||||||||||||
Adjusted Net Income(1) | $ | 26.0 | $ | 8.0 | $ | 18.0 | $ | 30.6 | $ | 7.5 | $ | 23.2 | ||||||||||||
Adjusted Net Income per share: | ||||||||||||||||||||||||
Basic income per share | $ | 0.13 | $ | 0.17 | ||||||||||||||||||||
Diluted income per share | $ | 0.13 | $ | 0.17 | ||||||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||
Basic | 134,912,212 | 133,765,294 | ||||||||||||||||||||||
Diluted | 136,151,739 | 134,987,604 |
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 11 |
Years ended December 31, | ||||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||
Pre-tax | Tax expense (benefit) | After-tax | Pre-tax | Tax expense (benefit) | After-tax | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Net income before non-controlling interest | $ | 121.0 | $ | 40.7 | $ | 80.3 | $ | 88.6 | $ | 29.0 | $ | 59.6 | ||||||||||||
Less: Net income attributable to non-controlling interest | 0.8 | — | 0.8 | 1.3 | — | 1.3 | ||||||||||||||||||
Net income attributable to PQ Group Holdings Inc. | 120.2 | 40.7 | 79.5 | 87.3 | 29.0 | 58.3 | ||||||||||||||||||
Earnings per share: | ||||||||||||||||||||||||
Basic earnings per share | $ | 0.59 | $ | 0.44 | ||||||||||||||||||||
Diluted earnings per share | $ | 0.59 | $ | 0.43 | ||||||||||||||||||||
Net income attributable to PQ Group Holdings Inc. | 120.2 | 40.7 | 79.5 | 87.3 | 29.0 | 58.3 | ||||||||||||||||||
Amortization of investment in affiliate step-up(b) | 7.5 | 2.5 | 5.0 | 6.6 | 2.5 | 4.1 | ||||||||||||||||||
Amortization of inventory step-up(c) | — | — | — | 1.6 | 0.6 | 1.0 | ||||||||||||||||||
Impairment of intangible assets | 1.6 | 0.5 | 1.1 | — | — | — | ||||||||||||||||||
Debt extinguishment costs | 3.4 | 1.1 | 2.3 | 7.8 | 2.9 | 4.9 | ||||||||||||||||||
Net (gain) loss on asset disposals(d) | (13.1 | ) | (3.4 | ) | (9.7 | ) | 6.6 | 2.4 | 4.2 | |||||||||||||||
Foreign currency exchange loss(e) | 2.8 | (1.5 | ) | 4.3 | 13.8 | 5.6 | 8.2 | |||||||||||||||||
LIFO expense(f) | 11.1 | 3.7 | 7.4 | 8.4 | 3.1 | 5.3 | ||||||||||||||||||
Transaction and other related costs(h) | 3.6 | 1.2 | 2.4 | 0.9 | 0.3 | 0.6 | ||||||||||||||||||
Equity-based and other non-cash compensation | 18.2 | 6.1 | 12.1 | 19.5 | 4.6 | 14.9 | ||||||||||||||||||
Restructuring, integration and business optimization expenses(i) | 4.1 | 1.4 | 2.7 | 14.0 | 5.2 | 8.8 | ||||||||||||||||||
Defined benefit plan pension cost(j) | 3.1 | 1.0 | 2.1 | (0.8 | ) | (0.3 | ) | (0.5 | ) | |||||||||||||||
Gain on contract termination(k) | — | — | — | (20.6 | ) | (7.6 | ) | (13.0 | ) | |||||||||||||||
Other(l) | 3.5 | 1.3 | 2.2 | 7.4 | 2.8 | 4.6 | ||||||||||||||||||
Adjusted Net Income, includes non-cash GILTI tax | 166.0 | 54.6 | 111.4 | 152.5 | 51.1 | 101.4 | ||||||||||||||||||
Impact of non-cash GILTI tax(2) | — | (13.8 | ) | 13.8 | — | (21.2 | ) | 21.2 | ||||||||||||||||
Impact of tax reform(3) | — | — | — | — | 6.0 | (6.0 | ) | |||||||||||||||||
Adjusted Net Income(1) | $ | 166.0 | $ | 40.8 | $ | 125.2 | $ | 152.5 | $ | 35.9 | $ | 116.6 | ||||||||||||
Adjusted Net Income per share: | ||||||||||||||||||||||||
Basic income per share | $ | 0.93 | $ | 0.87 | ||||||||||||||||||||
Diluted income per share | $ | 0.92 | $ | 0.87 | ||||||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||
Basic | 134,389,667 | 133,380,567 | ||||||||||||||||||||||
Diluted | 135,548,694 | 134,684,931 |
(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”). Beginning 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. |
(3) | Represents the provisional adjustment for the impact of the TCJA and the Dutch Tax Plan 2019 recorded in net income. |
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 12 |
Three months ended December 31, | Years ended December 31, | |||||||||||||||||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | |||||||||||||||||
Sales: | ||||||||||||||||||||||
Refining Services | $ | 105.7 | $ | 119.4 | (11.5 | )% | $ | 447.1 | $ | 455.6 | (1.9 | )% | ||||||||||
Silica Catalysts | 23.3 | 22.0 | 5.9 | % | 85.7 | 72.1 | 18.9 | % | ||||||||||||||
Performance Materials | 67.9 | 73.7 | (7.9 | )% | 363.0 | 378.3 | (4.0 | )% | ||||||||||||||
Performance Chemicals | 158.9 | 168.8 | (5.9 | )% | 685.1 | 717.3 | (4.5 | )% | ||||||||||||||
Eliminations | (3.4 | ) | (3.8 | ) | (13.8 | ) | (15.1 | ) | ||||||||||||||
Total sales | $ | 352.4 | $ | 380.1 | (7.3 | )% | $ | 1,567.1 | $ | 1,608.2 | (2.6 | )% | ||||||||||
Zeolyst joint venture sales | $ | 47.3 | $ | 36.5 | 29.6 | % | $ | 170.3 | $ | 156.7 | 8.7 | % | ||||||||||
Adjusted EBITDA: | ||||||||||||||||||||||
Refining Services | $ | 41.9 | $ | 50.1 | (16.4 | )% | $ | 175.6 | $ | 176.5 | (0.5 | )% | ||||||||||
Catalysts | 28.5 | 18.9 | 50.8 | % | 107.8 | 81.1 | 32.9 | % | ||||||||||||||
Performance Materials | 11.2 | 10.5 | 6.7 | % | 76.7 | 72.5 | 5.8 | % | ||||||||||||||
Performance Chemicals | 33.6 | 39.2 | (14.3 | )% | 154.3 | 170.9 | (9.7 | )% | ||||||||||||||
Total Segment Adjusted EBITDA | $ | 115.2 | $ | 118.7 | (2.9 | )% | $ | 514.4 | $ | 501.0 | 2.7 | % | ||||||||||
Corporate | (12.1 | ) | (9.6 | ) | 26.0 | % | (40.1 | ) | (37.0 | ) | 8.4 | % | ||||||||||
Total Adjusted EBITDA | $ | 103.1 | $ | 109.1 | (5.5 | )% | $ | 474.3 | $ | 464.0 | 2.2 | % | ||||||||||
Adjusted EBITDA Margin: | ||||||||||||||||||||||
Refining Services | 39.6 | % | 42.0 | % | 39.3 | % | 38.7 | % | ||||||||||||||
Catalysts(1) | 40.4 | % | 32.3 | % | 42.1 | % | 35.4 | % | ||||||||||||||
Performance Materials | 16.5 | % | 14.2 | % | 21.1 | % | 19.2 | % | ||||||||||||||
Performance Chemicals | 21.1 | % | 23.2 | % | 22.5 | % | 23.8 | % | ||||||||||||||
Total Adjusted EBITDA Margin(1) | 25.8 | % | 26.2 | % | 27.3 | % | 26.3 | % |
(1) | Adjusted EBITDA margin calculation includes proportionate 50% share of sales from the Zeolyst Joint Venture. |
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 13 |
Three months ended December 31, 2019 | Three Months Ended December 31, 2018 | ||||||||||||||||||
As Reported | FX | Constant Currency | As Reported | % Change | |||||||||||||||
(in millions, except percentages) | |||||||||||||||||||
Sales: | |||||||||||||||||||
Refining Services | $ | 105.7 | $ | — | $ | 105.7 | $ | 119.4 | (11.5 | )% | |||||||||
Silica Catalysts | 23.3 | — | 23.3 | 22.0 | 5.9 | % | |||||||||||||
Performance Materials | 67.9 | 1.1 | 69.0 | 73.7 | (6.4 | )% | |||||||||||||
Performance Chemicals | 158.9 | 1.4 | 160.3 | 168.8 | (5.1 | )% | |||||||||||||
Eliminations | (3.4 | ) | (0.1 | ) | (3.5 | ) | (3.8 | ) | (7.9 | )% | |||||||||
Total sales | $ | 352.4 | $ | 2.4 | $ | 354.8 | $ | 380.1 | (6.6 | )% | |||||||||
Zeolyst joint venture sales | $ | 47.3 | $ | — | $ | 47.3 | $ | 36.5 | 29.6 | % | |||||||||
Adjusted EBITDA: | |||||||||||||||||||
Refining Services | $ | 41.9 | $ | — | $ | 41.9 | $ | 50.1 | (16.4 | )% | |||||||||
Catalysts | 28.5 | — | 28.5 | 18.9 | 50.8 | % | |||||||||||||
Performance Materials | 11.2 | 0.2 | 11.4 | 10.5 | 8.6 | % | |||||||||||||
Performance Chemicals | 33.6 | 0.4 | 34.0 | 39.2 | (13.3 | )% | |||||||||||||
Total Segment Adjusted EBITDA | $ | 115.2 | $ | 0.6 | $ | 115.8 | $ | 118.7 | (2.4 | )% | |||||||||
Corporate | (12.1 | ) | — | (12.1 | ) | (9.6 | ) | 26.0 | % | ||||||||||
Total Adjusted EBITDA | $ | 103.1 | $ | 0.6 | $ | 103.7 | $ | 109.1 | (4.9 | )% | |||||||||
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 14 |
Year ended December 31, 2019 | Year ended December 31, 2018 | ||||||||||||||||||
As Reported | FX | Constant Currency | As Reported | % Change | |||||||||||||||
(in millions, except percentages) | |||||||||||||||||||
Sales: | |||||||||||||||||||
Refining Services | $ | 447.1 | $ | — | $ | 447.1 | $ | 455.6 | (1.9 | )% | |||||||||
Silica Catalysts | 85.7 | 1.3 | 87.0 | 72.1 | 20.7 | % | |||||||||||||
Performance Materials | 363.0 | 9.6 | 372.6 | 378.3 | (1.5 | )% | |||||||||||||
Performance Chemicals | 685.1 | 18.7 | 703.8 | 717.3 | (1.9 | )% | |||||||||||||
Eliminations | (13.8 | ) | (0.4 | ) | (14.2 | ) | (15.1 | ) | (6.0 | )% | |||||||||
Total sales | $ | 1,567.1 | $ | 29.2 | $ | 1,596.3 | $ | 1,608.2 | (0.7 | )% | |||||||||
Zeolyst joint venture sales | $ | 170.3 | $ | — | $ | 170.3 | $ | 156.7 | 8.7 | % | |||||||||
Adjusted EBITDA: | |||||||||||||||||||
Refining Services | $ | 175.6 | $ | — | $ | 175.6 | $ | 176.5 | (0.5 | )% | |||||||||
Catalysts | 107.8 | 0.9 | 108.7 | 81.1 | 34.0 | % | |||||||||||||
Performance Materials | 76.7 | 1.3 | 78.0 | 72.5 | 7.6 | % | |||||||||||||
Performance Chemicals | 154.3 | 4.9 | 159.2 | 170.9 | (6.8 | )% | |||||||||||||
Total Segment Adjusted EBITDA | $ | 514.4 | $ | 7.1 | $ | 521.5 | $ | 501.0 | 4.1 | % | |||||||||
Corporate | (40.1 | ) | (0.1 | ) | (40.2 | ) | (37.0 | ) | 8.6 | % | |||||||||
Total Adjusted EBITDA | $ | 474.3 | $ | 7.0 | $ | 481.3 | $ | 464.0 | 3.7 | % | |||||||||
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 15 |
Three months ended December 31, | Years ended December 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in millions) | ||||||||||||||||
Net cash provided by operating activities | $ | 85.8 | $ | 82.6 | $ | 267.7 | $ | 248.6 | ||||||||
Less: | ||||||||||||||||
Purchases of property, plant and equipment(1) | (35.9 | ) | (36.4 | ) | (127.6 | ) | (131.7 | ) | ||||||||
Free cash flow | 49.9 | 46.2 | 140.1 | 116.9 | ||||||||||||
Adjustments to free cash flow: | ||||||||||||||||
Proceeds from sale of assets | 17.6 | 12.4 | 17.6 | 12.4 | ||||||||||||
Net interest proceeds on currency swaps | 0.1 | 0.6 | 8.5 | 4.9 | ||||||||||||
Adjusted free cash flow(2) | $ | 67.6 | $ | 59.2 | $ | 166.2 | $ | 134.2 | ||||||||
Net cash provided by (used in) investing activities(3) | $ | 19.4 | $ | (23.5 | ) | $ | (35.3 | ) | $ | (119.3 | ) | |||||
Net cash used in financing activities | $ | (112.9 | ) | $ | (59.4 | ) | $ | (216.1 | ) | $ | (137.2 | ) |
(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. |
PQ Group Holdings Fourth Quarter and Year 2019 Earnings Release | Page 16 |