OEC Orion SA

Orion Engineered Carbons S.A. (NYSE: OEC), a global supplier of specialty and high-performance carbon black, today announced financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 Highlights

• Continued focus on protecting employees, maintaining agile production and managing costs.
• Benefited from a pronounced sequential demand surge.
• Net sales of $282.0 million compared to $370.2 million in the third quarter of 2019 reflecting the impact of passing through lower feedstock costs and of the COVID-19 induced global economic downturn.
• Net income of $9.0 million and basic EPS of $0.15 compared to net income of $24.3 million and $0.40 in the third quarter of 2019.
• Adjusted EBITDA1 of $55.0 million compared to $68.1 million in the third quarter of 2019.
• Adjusted Net Income1 of $20.6 million and Adjusted EPS1 of $0.34 compared to Adjusted Net Income of $31.1 million and Adjusted EPS of $0.52 in the third quarter of 2019.

1 See below for a reconciliation of non-GAAP financial measures to the most directly comparable U.S. GAAP measures

“Our business and financial results made a sharp recovery from the historic low volumes in the prior quarter and demonstrate the resilience of our business. I commend the Orion team on managing the recent surge in demand while maintaining a safe working environment amid the ongoing global pandemic. Our rubber business recovered to 91 percent of prior year levels, with improved pricing. Our specialty business achieved a remarkable rebound in the quarter with volume level tracking at 97 percent of prior year levels, with positive pricing being offset by mix,” said Corning Painter, Chief Executive Officer.

Mr. Painter continued, “This quarter we celebrated 125 years of innovation at our facility in Cologne, which is the largest specialty carbon black plant in the world. While the current economic downturn is our first opportunity since going public to demonstrate our resiliency, this plant has been through much more challenging situations over the years and is another indication of the durability of our business. As demand continues to recover, we will continue to focus on increasing shareholder value by serving our customers, increasing efficiency, advancing our sustainability goals, supporting the communities we serve and positioning the company to emerge stronger from the current downturn.”

Third Quarter 2020 Overview

ORION ENGINEERED CARBONS

(In millions, except per share data or stated otherwise)

Q3 2020

Q3 2019

Y/Y Change in %

Volume (kmt)

237.0

256.4

(7.6)%

Net sales

282.0

370.2

(23.8)%

Income from operations (EBIT)

24.1

38.4

(37.1)%

Net income

9.0

24.3

(62.9)%

Contribution Margin

118.2

135.4

(12.7)%

Contribution Margin per metric ton

498.6

527.9

(5.6)%

Adjusted EBITDA

55.0

68.1

(19.2)%

Basic EPS (1)

0.15

0.40

(0.25)

Adjusted EPS (2)

0.34

0.52

(0.18)

Notes:

(1)

Basic EPS calculated using net income and weighted number of shares outstanding in the respective quarter.

(2)

Adjusted EPS is calculated by dividing Adjusted Net Income by the weighted average number of shares outstanding in the respective quarter. Adjusted Net income excludes certain non-cash items such as foreign exchange rate impacts and long term incentive plan expenses, and non-recurring items which we do not believe are indicative of our core operating performance such as restructuring and EPA-related expenses. The reconciliation of Adjusted EPS is provided in the Reconciliation of Non-GAAP Financial Measures of the Press Release.

Volumes declined by 7.6% year over year, with lower demand in both segments and in all regions, primarily driven by the global economic downturn, and rose 51.0% sequentially, as end markets partially recovered.

Net sales declined by $88.2 million, or 23.8%, year over year, to $282.0 million, driven primarily by the effects of passing on lower feedstock costs to customers and, to a lesser extent, lower volumes.

Income from operations was $24.1 million compared to income from operations of $38.4 million in the third quarter of 2019, primarily driven by lower end market demand due to the global economic downturn.

Lower volume drove a decline in net income to $9.0 million, compared to net income of $24.3 million in the third quarter of the prior year.

Contribution Margin declined by $17.2 million, or 12.7%, to $118.2 million, year over year, primarily driven by less volume, unfavorable mix and the effects of passing through lower feedstock costs, partially offset by base price increases.

Adjusted EBITDA declined by $13.1 million, or 19.2%, to $55.0 million, year over year, primarily due to lower volume and less favorable mix, partially offset by base price increases primarily in the Rubber segment.

Quarterly Business Segment Results

SPECIALTY CARBON BLACK

(In millions, unless stated otherwise)

Q3 2020

Q3 2019

Y/Y Change in %

Volume (kmt)

58.8

60.4

(2.6)%

Net sales

103.6

122.8

(15.6)%

Gross profit

37.1

41.4

(10.3)%

Gross Profit per Metric Ton

631.6

685.4

(7.8)%

Adjusted EBITDA

26.5

30.0

(11.6)%

Adjusted EBITDA/metric ton

450.5

496.3

(9.2)%

Adjusted EBITDA Margin (%)

25.5

24.4

110bps

Specialty Carbon Black volumes declined by 2.6%, year over year, primarily in North America and EMEA, and rose 18.8%, sequentially, as end markets partially recovered.

The pass through of lower feedstock costs and lower volumes drove net sales down by $19.2 million, or 15.6%, to $103.6 million, and gross profit down by $4.2 million, or 10.3%, to $37.1 million, year over year.

Specialty Adjusted EBITDA declined by $3.5 million, or 11.6%, to $26.5 million, year over year, primarily due to lower volumes and overhead absorption, partially offset by foreign currency translation. Adjusted EBITDA margin rose 110 basis points to 25.5% compared to 24.4% in the third quarter of 2019.

RUBBER CARBON BLACK

(In millions, unless stated otherwise)

Q3 2020

Q3 2019

Y/Y Change in %

Volume (kmt)

178.2

196.0

(9.1)%

Net sales

178.4

247.4

(27.9)%

Gross profit

42.1

57.3

(26.7)%

Gross Profit per Metric Ton

236.0

292.5

(19.3)%

Adjusted EBITDA

28.5

38.1

(25.1)%

Adjusted EBITDA/metric ton

160.0

194.3

(17.7)%

Adjusted EBITDA Margin (%)

16.0

15.4

60bps

Rubber Carbon Black volumes declined by 9.1%, year over year. Volumes were down in all regions, primarily driven by the COVID-19 induced global economic downturn which impacted demand from tire customers. The year over year volume decline also partially reflected the impact of our commercial strategy during 2019 contract negotiations which emphasized raising price over volume. Volume rose 65.9% sequentially, reflecting partial end market recovery.

Net sales declined by $69.0 million, or 27.9%, to $178.4 million, year over year, primarily driven by the pass through of lower feedstock costs to customers and, to a lesser extent, the broad-based volume slowdown across all regions and markets, partially offset by base price increases.

Gross profit declined by $15.3 million, or 26.7%, to $42.1 million, year over year, driven by lower volumes and the impact of passing through lower feedstock costs, partially offset by base price increases.

Rubber Adjusted EBITDA declined by $9.6 million, or 25.1%, to $28.5 million, year over year, primarily driven by lower volume, the impact of passing through lower feedstock costs and unfavorable mix, partially offset by price increases. Adjusted EBITDA margin was 16.0% in the third quarter of 2020 compared to 15.4% in the third quarter of 2019.

Balance Sheet and Cash Flows

As of September 30, 2020, the Company had cash and cash equivalents of $97.5 million, an increase of $33.8 million from December 31, 2019, primarily reflecting strategic draws on select credit facilities to bolster liquidity. Net debt increased from $609.1 million as of December 31, 2019 to $671.3 million as of September 30, 2020.

The following table shows our current net debt position as of September 30, 2020 compared to December 31, 2019:

(In millions)

 

September 30, 2020

 

December 31, 2019

 

 

 

 

 

Term loans

 

$

643.9

 

 

$

635.0

 

Capitalized transaction costs (long-term)

 

 

(3.9

)

 

 

(4.7

)

Long-term financial debt, net

 

$

640.0

 

 

$

630.3

 

Term loans (current)

 

$

8.3

 

 

$

8.1

 

Capitalized transaction costs (current)

 

 

(1.4

)

 

 

(1.4

)

Short term local bank loans

 

 

116.7

 

 

 

29.8

 

Short-term financial debt, net

 

$

123.5

 

 

$

36.4

 

Cash and cash equivalents

 

$

(97.5

)

 

$

(63.7

)

add-back capitalized transaction costs (long-term and current)

 

$

5.3

 

 

$

6.1

 

Net Debt 1)

 

$

671.3

 

 

$

609.1

 

1) Long-term financial debt, net plus short-term financial debt, net less cash and cash equivalents and add back of capitalized transaction costs. Capitalized transaction costs as well as non-current debt from financial derivatives and other non-current liabilities are disregarded in computing net indebtedness under our lending agreements.

Cash Flow

Cash inflows from operating activities amounted to $1.7 million, down $66.8 million year over year, primarily driven by a combination of lower net income and higher working capital.

Cash outflows from investing activities were $30.9 million, down $3.5 million, year over year, primarily driven by the timing of EPA-related capital expenditures.

Cash outflows from financing activities of $20.9 million declined $8.6 million, year over year, largely reflecting lower repayments of borrowings under select credit lines and the suspension of our dividend earlier in the year.

Outlook

“While we can't predict the course or duration of the global pandemic and a meaningful decline in economic activity would curtail our guidance, we project fourth quarter Adjusted EBITDA in the range of $44 million to $54 million, reflecting a continuation of recent trends, despite typical end of year seasonality dynamics. Overall, the third quarter demand surge and current fourth quarter order book patterns are encouraging and confirm that, if the global economy recovers, our businesses should participate and reflect substantial operating leverage. In this uncertain environment, our focus will remain on safety, protecting our employees, staying agile to serve our customers and continuing to position the company to deliver long term value to our shareholders," Mr. Painter concluded.

Conference Call

As previously announced, Orion will hold a conference call tomorrow, Friday, November 6, 2020, at 8:30 a.m. (EST). The dial-in details for the live conference call are as follow:

 

 

 

U.S. Toll Free:

 

1-877-407-4018

International:

 

1-201-689-8471

A replay of the conference call may be accessed by phone at the following numbers through November 13, 2020:

 

 

 

U.S. Toll Free:

 

1-844-512-2921

International:

 

1-412-317-6671

Conference ID:

 

13711354

Additionally, an archived webcast of the conference call will be available on the Investor Relations section of the Company’s website at: www.orioncarbons.com.

To learn more about Orion, visit the Company’s website at www.orioncarbons.com, where we regularly post information including notification of events, news, financial performance, investor presentations and webcasts, non-GAAP reconciliations, SEC filings and other information regarding our company, its businesses and the markets it serves.

About Orion Engineered Carbons

Orion is a worldwide supplier of carbon black. We produce a broad range of carbon blacks that include high-performance specialty gas blacks, acetylene blacks, furnace blacks, lamp blacks, thermal blacks and other carbon blacks that tint, colorize and enhance the performance of polymers, plastics, paints and coatings, inks and toners, textile fibers, adhesives and sealants, tires, and mechanical rubber goods such as automotive belts and hoses. Orion operates 14 global production sites and has approximately 1,425 employees worldwide. For more information, please visit our website www.orioncarbons.com.

Forward Looking Statements

This document contains and refers to certain forward-looking statements with respect to our financial condition, results of operations and business, including those in the “Outlook” and “Quarterly Business Segment Results” sections above. These statements constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among others, statements concerning the potential exposure to market risks, statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions and statements that are not limited to statements of historical or present facts or conditions. You should not place undue reliance on forward looking statements. Forward-looking statements are typically identified by words such as “anticipate,” "assume," “assure,” “believe,” “confident,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “objectives,” “outlook,” “probably,” “project,” “will,” “seek,” “target” “to be,” and other words of similar meaning.

These forward-looking statements include, without limitation, statements about the following matters: • our strategies for (i) mitigating the impacts of the global outbreak of the coronavirus, (ii) strengthening our position in specialty carbon blacks and rubber carbon blacks, (iii) increasing our rubber carbon black margins and (iv) strengthening the competitiveness of our operations; • the ability to pay dividends at historical dividend levels or at all; • cash flow projections; • the installation of pollution control technology in our U.S. manufacturing facilities pursuant to the EPA consent decree; • the outcome of any in-progress, pending or possible litigation or regulatory proceedings; and • our expectation that the markets we serve will continue to grow.

All these forward-looking statements are based on estimates and assumptions that, although believed to be reasonable, are inherently uncertain. Therefore, undue reliance should not be placed upon any forward-looking statements. There are important factors that could cause actual results to differ materially from those contemplated by such forward-looking statements. These factors include, among others: • the effects of the COVID-19 pandemic on our business and results of operations; • negative or uncertain worldwide economic conditions;• volatility and cyclicality in the industries in which we operate; • operational risks inherent in chemicals manufacturing, including disruptions as a result of severe weather conditions and natural disasters; • our dependence on major customers and suppliers; • our ability to compete in the industries and markets in which we operate; • our ability to address changes in the nature of future transportation and mobility concepts which may impact our customers and our business; • our ability to develop new products and technologies successfully and the availability of substitutes for our products; • our ability to implement our business strategies; • volatility in the costs and availability of raw materials (including but not limited to any and all effects from restrictions imposed by the MARPOL convention and respective International Maritime Organization (IMO) regulations in particular to reduce sulfur oxides (SOx) emissions from ships) and energy; • our ability to respond to changes in feedstock prices and quality; • our ability to realize benefits from investments, joint ventures, acquisitions or alliances; • our ability to realize benefits from planned plant capacity expansions and site development projects and the potential delays to such expansions and projects; • information technology systems failures, network disruptions and breaches of data security; • our relationships with our workforce, including negotiations with labor unions, strikes and work stoppages; • our ability to recruit or retain key management and personnel; • our exposure to political or country risks inherent in doing business in some countries; • geopolitical events in the European Union, and in particular the ultimate future relations between the European Union and the United Kingdom resulting from the “Brexit” which may impact the Euro; • environmental, health and safety regulations, including nanomaterial and greenhouse gas emissions regulations, and the related costs of maintaining compliance and addressing liabilities; • possible future investigations and enforcement actions by governmental or supranational agencies; • our operations as a company in the chemical sector, including the related risks of leaks, fires and toxic releases; • market and regulatory changes that may affect our ability to sell or otherwise benefit from co-generated energy; • litigation or legal proceedings, including product liability and environmental claims; • our ability to protect our intellectual property rights and know-how; • our ability to generate the funds required to service our debt and finance our operations; • fluctuations in foreign currency exchange and interest rates; • the availability and efficiency of hedging; • changes in international and local economic conditions, including with regard to the Euro, dislocations in credit and capital markets and inflation or deflation; • potential impairments or write-offs of certain assets; • required increases in our pension fund contributions; • the adequacy of our insurance coverage; • changes in our jurisdictional earnings mix or in the tax laws or accepted interpretations of tax laws in those jurisdictions; • our indemnities to and from Evonik; • challenges to our decisions and assumptions in assessing and complying with our tax obligations; and • potential difficulty in obtaining or enforcing judgments or bringing actions against us in the United States.

You should not place undue reliance on forward-looking statements. We present certain financial measures that are not prepared in accordance with U.S. GAAP or the accounting standards of any other jurisdiction and may not be comparable to other similarly titled measures of other companies. These non-U.S. GAAP measures are Contribution Margin, Contribution Margin per Metric Ton, Adjusted EBITDA, Adjusted EPS, Net Working Capital and Capital Expenditures. Adjusted EBITDA, Adjusted EPS, Contribution Margins and Net Working Capital are not measures of performance under U.S. GAAP and should not be considered in isolation or construed as substitutes for net sales, consolidated profit (loss) for the period, operating result (EBIT), gross profit or other U.S. GAAP measures as an indicator of our operations in accordance with U.S. GAAP. For a reconciliation of these non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP measures, see Appendix.

Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include those factors detailed under the captions “Note Regarding Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and in Note R. to our audited consolidated financial statements regarding contingent liabilities, including litigation. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement - including those in the “2020 Outlook” and “Quarterly Business Segment Results” sections above - as a result of new information, future events or other information, other than as required by applicable law.

Reconciliation of Non-GAAP Financial Measures

In this release we refer to Adjusted EBITDA, Contribution Margin, Adjusted Net Income/(Loss) and Adjusted EPS, which are financial measures that have not been prepared in accordance with U.S. GAAP or the accounting standards of any other jurisdiction and may not be comparable to other similarly titled measures of other companies. We refer to these measures as “non-GAAP” financial measures. Adjusted EBITDA is defined as operating result (EBIT) before depreciation and amortization, adjusted for acquisition related expenses, restructuring expenses, consulting fees related to group strategy, share of profit or loss of joint venture and certain other items. Adjusted EBITDA is used by our management to evaluate our operating performance and make decisions regarding allocation of capital because it excludes the effects of certain items that have less bearing on the performance of our underlying core business. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) although Adjusted EBITDA excludes the impact of depreciation and amortization, the assets being depreciated and amortized may have to be replaced in the future and thus the cost of replacing assets or acquiring new assets, which will affect our operating results over time, is not reflected; (b) Adjusted EBITDA does not reflect interest or certain other costs that we will continue to incur over time and will adversely affect our profit or loss, which is the ultimate measure of our financial performance and (c) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently. Because of these and other limitations, you should consider Adjusted EBITDA alongside our other U.S. GAAP-based financial performance measures, such as consolidated profit or loss for the period.

Contribution Margin is calculated by subtracting variable costs (such as raw materials, packaging, utilities and distribution costs) from our net sales. We believe that Contribution Margin and Contribution Margin per Metric Ton are useful because we see these measures as indicating the portion of net sales that is not consumed by such variable costs and therefore contributes to the coverage of all other costs and profits.

Adjusted Net Income/(Loss) is defined as profit or loss for the period adjusted for acquisition related expenses, restructuring expenses, consulting fees related to group strategy, certain other items (such as amortization expenses related to intangible assets acquired from our predecessor and foreign currency revaluation impacts) and assumed taxes and Adjusted EPS is defined as Adjusted Net Income divided by the weighted number of shares outstanding. Adjusted Net Income/(Loss) and Adjusted EPS provide guidance with respect to our underlying business performance without regard to the effects of (a) foreign currency fluctuations, (b) the amortization of intangible assets which other companies may record as goodwill having an indefinite lifetime and thus no amortization and (c) our start-up and initial public offering costs. Other companies may use a similarly titled financial measure that is calculated differently from the way we calculate Adjusted Net Income/(Loss) and Adjusted EPS.

We define Net Working Capital as the total of inventories and current trade receivables, less trade payables. Net Working Capital is as well a non-GAAP financial measure, and other companies may use a similarly titled financial measure that is calculated differently from the way we calculate Net Working Capital.

We have not provided a reconciliation of forward-looking Adjusted EBITDA to the most comparable GAAP measure of net income. Providing net income guidance is potentially misleading and not practical given the difficulty of projecting event-driven transactions and other non-core operating items that are included in net income. Reconciliations of this non-GAAP measure with the most comparable GAAP measure for historic periods are indicative of the reconciliation that will be presented upon completion of the periods covered by the non-GAAP guidance.

The following tables present a reconciliation of each of Adjusted EBITDA and Adjusted EPS to the most directly comparable GAAP measure:

Reconciliation of profit or (loss)

Third Quarter

 

Nine Months

(In thousands)

2020

 

2019

 

2020

 

2019

 

 

Net income

$

8,997

 

 

$

24,253

 

 

$

9,250

 

 

$

67,955

 

Add back income tax expense

 

2,250

 

 

 

7,767

 

 

 

4,006

 

 

 

26,515

 

Add back equity in earnings of affiliated companies, net of tax

 

(141

)

 

 

(134

)

 

 

(426

)

 

 

(424

)

Income from operations before income taxes and equity in earnings of affiliated companies

 

11,106

 

 

 

31,886

 

 

 

12,830

 

 

 

94,046

 

Add back interest and other financial expense, net

 

10,769

 

 

 

6,500

 

 

 

28,657

 

 

 

20,509

 

Reclassification of actuarial losses from AOCI

 

2,272

 

 

 

—

 

 

 

7,325

 

 

 

—

 

Earnings before income taxes and finance income/costs

 

24,147

 

 

 

38,386

 

 

 

48,811

 

 

 

114,555

 

Add back depreciation, amortization and impairment of intangible assets and property, plant and equipment

 

23,999

 

 

 

21,991

 

 

 

69,721

 

 

 

71,490

 

EBITDA

 

48,147

 

 

 

60,377

 

 

 

118,532

 

 

 

186,045

 

Equity in earnings of affiliated companies, net of tax

 

141

 

 

 

134

 

 

 

426

 

 

 

424

 

Restructuring expenses (1)

 

—

 

 

 

2,710

 

 

 

—

 

 

 

3,833

 

Consulting fees related to Company strategy (2)

 

—

 

 

 

(674

)

 

 

—

 

 

 

831

 

Long term incentive plan

 

1,182

 

 

 

2,025

 

 

 

1,242

 

 

 

7,137

 

EPA-related expenses

 

1,487

 

 

 

1,549

 

 

 

5,053

 

 

 

2,957

 

Extraordinary expense items related to COVID-19 (3)

 

822

 

 

 

—

 

 

 

3,548

 

 

 

—

 

Other adjustments (4)

 

3,222

 

 

 

1,933

 

 

 

5,283

 

 

 

2,922

 

Adjusted EBITDA

$

55,002

 

 

$

68,054

 

 

$

134,084

 

 

$

204,149

 

(1) Restructuring expenses for the three and nine months ended September 30, 2019 are related to the strategic realignment of our global Rubber manufacturing footprint.

(2) Consulting fees related to the Orion strategy include external consulting for establishing and executing Company strategies relating to realigning the manufacturing footprint of our Rubber business, the conversion of our financial statements to U.S. dollar and U.S. GAAP, and costs related to assessing feasibility for inclusion in certain U.S. indices.

(3) Extraordinary expense items related to COVID-19 are costs incurred to address impacts associated with the global coronavirus pandemic. These items include select production costs, expenses related to providing personal protection equipment and costs related to protective measures carried out at our facilities to ensure the safety of our employees, among other expenditures.

(4) Other adjustments in the three and nine months ended September 30, 2020 mainly relate to legal fees associated with a dispute concerning intellectual property of $1.0 million and $1.9 million, respectively; severance costs of $1.8 million and $1.7 million, respectively; and hurricane related costs of $0.8 million and $0.8 million, respectively. These costs were offset by a non-income tax expense related settlement in the amount of $1.7 million.

The following table reconciles Contribution Margin and Contribution Margin per Metric Ton to gross profit:

 

Third Quarter

 

Nine Months

(In millions, unless otherwise indicated)

2020

 

2019

 

2020

 

2019

Net sales(1)

$

282.0

 

 

$

370.2

 

 

$

820.7

 

 

$

1,153.9

 

Variable costs(2)

 

(163.8

)

 

 

(234.8

)

 

 

(496.4

)

 

 

(738.8

)

Contribution Margin

 

118.2

 

 

 

135.4

 

 

 

324.3

 

 

 

415.1

 

Freight

 

17.9

 

 

 

19.6

 

 

 

48.7

 

 

 

61.0

 

Fixed Costs(3)

 

(56.9

)

 

 

(56.3

)

 

 

(169.8

)

 

 

(175.4

)

Gross profit (1)

$

79.2

 

 

$

98.7

 

 

$

203.3

 

 

$

300.7

 

Volume (in kmt)

 

237.0

 

 

 

256.4

 

 

 

629.1

 

 

 

789.7

 

Contribution Margin per Metric Ton

$

498.6

 

 

$

527.9

 

 

$

515.6

 

 

$

525.6

 

Gross Profit per Metric Ton

$

334.1

 

 

$

385.0

 

 

$

323.2

 

 

$

380.8

 

(1) Separate line item in Condensed Consolidated Financial Statements. (2) Includes costs such as raw materials, packaging, utilities and distribution. (3) Includes costs such as depreciation, amortization and impairment of intangible assets and property, plant and equipment, personnel and other production related costs.

Adjusted EPS

Third Quarter

 

Nine Months

(In thousands, except per share amounts)

2020

 

2019

 

2020

 

2019

Net income

$

8,997

 

 

$

24,253

 

 

$

9,250

 

 

$

67,955

 

add back long term incentive plan expenses

 

1,182

 

 

 

2,025

 

 

 

1,242

 

 

 

7,137

 

add back restructuring expenses, net

 

—

 

 

 

2,710

 

 

 

—

 

 

 

3,833

 

add back consulting fees related to Company strategy

 

—

 

 

 

(674

)

 

 

—

 

 

 

831

 

add back EPA-related expenses

 

1,487

 

 

 

1,549

 

 

 

5,053

 

 

 

2,957

 

add back extraordinary expense items related COVID-19

 

822

 

 

 

—

 

 

 

3,548

 

 

 

—

 

add back other adjustment items

 

3,222

 

 

 

1,933

 

 

 

5,283

 

 

 

2,922

 

Reclassification of actuarial losses from AOCI

 

2,272

 

 

 

—

 

 

 

7,325

 

 

 

—

 

add back amortization

 

1,958

 

 

 

1,308

 

 

 

5,646

 

 

 

6,191

 

add back foreign exchange rate impacts

 

5,072

 

 

 

373

 

 

 

12,380

 

 

 

1,207

 

add back amortization of transaction costs

 

530

 

 

 

512

 

 

 

1,531

 

 

 

1,602

 

Tax effect on add back items at estimated tax rate

 

(4,964

)

 

 

(2,918

)

 

 

(12,602

)

 

 

(8,004

)

Adjusted Net Income

$

20,579

 

 

$

31,071

 

 

$

38,655

 

 

$

86,631

 

 

 

 

 

 

 

 

 

Total add back items

$

11,582

 

 

$

6,818

 

 

$

29,405

 

 

$

18,676

 

Impact add back items per share

$

0.19

 

 

$

0.12

 

 

$

0.49

 

 

$

0.32

 

Earnings per share (basic)

$

0.15

 

 

$

0.40

 

 

$

0.15

 

 

$

1.13

 

Adjusted EPS

$

0.34

 

 

$

0.52

 

 

$

0.64

 

 

$

1.45

 

Consolidated statements of operations of Orion Engineered Carbons S.A.

for the three and nine months ended September 30, 2020 and 2019 (Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(In thousands, except per share amounts)

2020

 

2019

 

2020

 

2019

Net sales

$

282,036

 

$

370,195

 

$

820,691

 

$

1,153,925

Cost of sales

 

202,854

 

 

271,481

 

 

617,372

 

 

853,204

Gross profit

 

79,182

 

 

98,714

 

 

203,319

 

 

300,721

Selling, general and administrative expenses

 

43,155

 

 

49,636

 

 

126,221

 

 

157,330

Research and development costs

 

7,352

 

 

4,793

 

 

16,757

 

 

14,836

Other expenses, net

 

4,527

 

 

3,189

 

 

11,529

 

 

10,167

Restructuring expenses

 

—

 

 

2,710

 

 

—

 

 

3,833

Income from operations

 

24,147

 

 

38,386

 

 

48,811

 

 

114,555

Interest and other financial expense, net

 

10,769

 

 

6,500

 

 

28,657

 

 

20,509

Reclassification of actuarial losses from AOCI

 

2,272

 

 

—

 

 

7,325

 

 

—

Income from operations before income tax expense and equity in earnings of affiliated companies

 

11,106

 

 

31,886

 

 

12,830

 

 

94,046

Income tax expense/(benefit)

 

2,250

 

 

7,767

 

 

4,006

 

 

26,515

Equity in earnings of affiliated companies, net of tax

 

141

 

 

134

 

 

426

 

 

424

Net income

$

8,997

 

$

24,253

 

$

9,250

 

$

67,955

 

 

 

 

 

 

 

 

Weighted-average shares outstanding (in thousands of shares):

 

 

 

 

 

 

 

Basic

 

60,487

 

 

60,212

 

 

60,408

 

 

59,907

Diluted

 

61,259

 

 

61,453

 

 

61,296

 

 

61,231

Earnings/(loss) per share:

 

 

 

 

 

 

 

Basic

$

0.15

 

$

0.40

 

$

0.15

 

$

1.13

Diluted

$

0.15

 

$

0.39

 

$

0.15

 

$

1.11

 

 

 

 

 

 

 

 

Dividends per share

$

—

 

$

0.20

 

$

0.20

 

$

0.60

Consolidated statements of financial position of Orion Engineered Carbons S.A.

as at September 30, 2020 and December 31, 2019 (Unaudited)

 

(In thousands, except share amounts)

September 30, 2020

December 31, 2019

Current assets

 

 

Cash and cash equivalents

$

97,536

$

63,726

Accounts receivable, net of expected credit losses

 

 

of $7,955 and $6,632

 

215,407

 

212,565

Other current financial assets

 

3,200

 

11,347

Inventories, net

 

125,313

 

164,799

Income tax receivables

 

10,061

 

17,924

Prepaid expenses and other current assets

 

39,091

 

37,358

Total current assets

 

490,606

 

507,718

Property, plant and equipment, net

 

577,776

 

534,054

Operating lease right-of-use assets

 

82,681

 

27,532

Goodwill

 

80,604

 

77,341

Intangible assets, net

 

47,056

 

50,596

Investment in equity method affiliates

 

5,311

 

5,232

Deferred income tax assets

 

60,120

 

48,720

Other financial assets

 

706

 

2,501

Other assets

 

2,971

 

3,701

Total non-current assets

 

857,225

 

749,676

Total assets

$

1,347,831

$

1,257,394

Current liabilities

 

 

Accounts payable

$

105,590

 

$

156,298

 

Current portion of long term debt and other financial liabilities

 

123,483

 

 

36,410

 

Current portion of employee benefit plan obligation

 

947

 

 

908

 

Accrued liabilities

 

39,620

 

 

44,931

 

Income taxes payable

 

19,645

 

 

14,154

 

Other current liabilities

 

39,148

 

 

32,509

 

Total current liabilities

 

328,433

 

 

285,211

 

Long-term debt, net

 

640,027

 

 

630,261

 

Employee benefit plan obligation

 

74,562

 

 

71,901

 

Deferred income tax liabilities

 

49,686

 

 

43,308

 

Other liabilities

 

97,953

 

 

40,701

 

Total non-current liabilities

 

862,228

 

 

786,171

 

 

 

 

Stockholders' equity

 

 

Common stock

 

 

Authorized: 65,035,579 and 65,035,579 shares with no par value

 

 

Issued – 60,992,259 and 60,729,289 shares with no par value

 

 

Outstanding – 60,487,117 and 60,224,147 shares

 

85,323

 

 

85,032

 

Less 505,142 and 505,142 shares of common treasury stock, at cost

 

(8,515

)

 

(8,515

)

Additional paid-in capital

 

65,311

 

 

65,562

 

Retained earnings

 

75,501

 

 

78,296

 

Accumulated other comprehensive loss

 

(60,449

)

 

(34,362

)

Total stockholders' equity

 

157,170

 

 

186,013

 

Total liabilities and stockholders' equity

$

1,347,831

 

$

1,257,394

 

Consolidated Statements of Cash Flows of Orion Engineered Carbons S.A. (Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(In thousands)

 

2020

 

2019

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

8,997

 

 

$

24,253

 

 

$

9,250

 

 

$

67,955

 

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation of property, plant and equipment and amortization of intangible assets

 

 

23,999

 

 

 

21,991

 

 

 

69,721

 

 

 

71,490

 

Amortization of debt issuance costs

 

 

530

 

 

 

512

 

 

 

1,531

 

 

 

1,602

 

Share-based incentive compensation

 

 

1,182

 

 

 

2,025

 

 

 

1,242

 

 

 

7,137

 

Deferred tax (benefit)/provision

 

 

(4,725

)

 

 

3,847

 

 

 

(11,224

)

 

 

1,773

 

Foreign currency transactions

 

 

(2,013

)

 

 

2,230

 

 

 

(1,782

)

 

 

2,520

 

Reclassification of actuarial losses from AOCI

 

 

2,272

 

 

 

—

 

 

 

7,325

 

 

 

—

 

Other operating non-cash items

 

 

(790

)

 

 

862

 

 

 

118

 

 

 

5,154

 

Changes in operating assets and liabilities, net of effects of businesses acquired:

 

 

 

 

 

 

 

 

(Increase)/decrease in trade receivables

 

 

(66,152

)

 

 

21,323

 

 

 

(6,682

)

 

 

2,150

 

(Increase)/decrease in inventories

 

 

14,375

 

 

 

(2,210

)

 

 

39,576

 

 

 

4,889

 

Increase/(decrease) in trade payables

 

 

14,080

 

 

 

(13,902

)

 

 

(31,662

)

 

 

(7,038

)

Increase/(decrease) in provisions

 

 

2,633

 

 

 

3,301

 

 

 

(4,899

)

 

 

(11,525

)

Increase/(decrease) in tax liabilities

 

 

7,674

 

 

 

6,150

 

 

 

16,298

 

 

 

3,814

 

Increase/(decrease) in other assets and liabilities that cannot be allocated to investing or financing activities

 

 

(324

)

 

 

(1,844

)

 

 

3,541

 

 

 

(7,254

)

Net cash provided by operating activities

 

$

1,738

 

 

$

68,538

 

 

$

92,352

 

 

$

142,667

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Cash paid for the acquisition of intangible assets and property, plant and equipment

 

$

(30,942

)

 

$

(34,452

)

 

$

(120,343

)

 

$

(95,309

)

Net cash used in investing activities

 

$

(30,942

)

 

$

(34,452

)

 

$

(120,343

)

 

$

(95,309

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments for debt issue costs

 

$

—

 

 

$

—

 

 

$

—

 

 

$

(1,721

)

Repayments of long-term debt

 

 

(2,055

)

 

 

(1,987

)

 

 

(6,077

)

 

 

(6,034

)

Cash inflows related to current financial liabilities

 

 

39,690

 

 

 

9,724

 

 

 

191,041

 

 

 

88,411

 

Cash outflows related to current financial liabilities

 

 

(58,500

)

 

 

(25,169

)

 

 

(110,859

)

 

 

(84,501

)

Dividends paid to shareholders

 

 

—

 

 

 

(12,043

)

 

 

(12,045

)

 

 

(35,989

)

Taxes paid for shares issued under net settlement feature

 

 

—

 

 

 

—

 

 

 

(1,202

)

 

 

(6,475

)

Net cash provided by/(used in) financing activities

 

$

(20,866

)

 

$

(29,475

)

 

$

60,858

 

 

$

(46,309

)

Increase/(decrease) in cash, cash equivalents and restricted cash

 

$

(50,070

)

 

$

4,611

 

 

$

32,867

 

 

$

1,049

 

Cash, cash equivalents and restricted cash at the beginning of the period

 

 

146,108

 

 

 

57,696

 

 

 

68,231

 

 

 

61,604

 

Effect of exchange rate changes on cash

 

 

4,357

 

 

 

(1,999

)

 

 

(703

)

 

 

(2,345

)

Cash, cash equivalents and restricted cash at the end of the period

 

$

100,395

 

 

$

60,308

 

 

$

100,395

 

 

$

60,308

 

Less restricted cash at the end of the period

 

 

2,859

 

 

 

4,356

 

 

 

2,859

 

 

 

4,356

 

Cash and cash equivalents at the end of the period

 

$

97,536

 

 

$

55,952

 

 

$

97,536

 

 

$

55,952

 

 

 

 

 

 

 

 

 

 

Cash paid for interest, net

 

$

(5,246

)

 

$

(6,527

)

 

$

(14,752

)

 

$

(15,693

)

Cash (paid)/refund for income taxes

 

$

1,068

 

 

$

1,705

 

 

$

1,067

 

 

$

(16,175

)

Supplemental disclosure of non-cash activity:

 

 

 

 

 

 

 

 

Liabilities for leasing - current

 

$

3,862

 

 

$

(1,148

)

 

$

5,826

 

 

$

5,778

 

Liabilities for leasing - non-current

 

$

51,191

 

 

$

1,113

 

 

$

57,834

 

 

$

25,068

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20201105006127/en/

INVESTOR CONTACT: Wendy Wilson Investor Relations +1 281-974-0155