Orion Engineered Carbons S.A. (NYSE: OEC), a global supplier of
specialty and high-performance carbon black, today announced
financial results for the second quarter ended June 30, 2020.
Second Quarter 2020
Highlights
- Continued focus on protecting employees, maintaining agile
production and managing costs
- Generated $85.7 million of operating cash flow despite
sharply lower volumes and profitability, reflecting a $77.3 million
working capital reduction, providing a countercyclical, stabilizing
impact on results
- Established $45 million in additional ancillary credit lines
under revolving credit facility, contributing to a $86 million
sequential increase in liquidity accessible at any net leverage
level to $333 million
- Net sales of $202.6 million compared to $399.0 million in
the second quarter of 2019 reflecting the COVID-19 induced global
economic downturn
- Net loss of $17.8 million and basic EPS of $(0.30) compared
to net income of $24.7 million and $0.41 in the second quarter of
2019
- Adjusted EBITDA1 of $15.2 million compared to $71.5 million
in the second quarter of 2019
- Adjusted Net Loss1 of $8.6 million and Adjusted EPS1 of
$(0.14) compared to Adjusted Net Income of $31.7 million and
Adjusted EPS of $0.53 in the second quarter of 2019
- Net leverage ratio of 2.97x LTM Adjusted EBITDA compared to
2.28x at year-end 2019
1 See below for a reconciliation of non-GAAP
financial measures to the most directly comparable U.S. GAAP
measures
“Against the backdrop of the pandemic, the Orion team did an
excellent job in working safely, supporting the communities we
serve, cutting costs, maintaining operational agility and further
enhancing liquidity. As a result, we are well positioned for the
eventual recovery in our end markets, which was evident in our
Rubber markets throughout the quarter and continued into July,
while most Specialty end markets remained largely subdued during
the quarter with a significant step-up in July. Our people have
done a tremendous job working through this unusual period and most
importantly operating our facilities safely with no
employee-to-employee contagion, and with great agility in the face
of rapidly shifting demand. In addition, our teams continued to
support the communities where we operate by donating their time and
equipment to those who are working on the front lines during the
global pandemic. I want to thank them for their continued focus and
dedication,” said Corning Painter, Chief Executive Officer.
Mr. Painter continued, “Our reported results reflected the
effects of a 42 percent reduction in volumes caused by the abrupt
reduction in global mobility induced by COVID-19, with Adjusted
EBITDA of $15.2 million. We continue to focus on safety, building
agility to serve our customers, reducing costs, and emerging
stronger from this. We believe the long-range outlook for
underlying carbon black demand remains strong and unchanged, but in
the short run, we may benefit from a tailwind if driving continues
to grow as a preferred mode of transportation during this period of
stringent physical distancing. Indeed, miles driven proved to be a
leading indicator of the nascent recovery of recent months."
Second Quarter 2020 Overview
ORION ENGINEERED
CARBONS
(In millions, except per share data or
stated otherwise)
Q2 2020
Q2 2019
Y/Y Change in %
Volume (kmt)
156.9
270.5
(42.0)%
Net sales
202.6
399.0
(49.2)%
Income/(loss) from operations (EBIT)
(12.9)
41.5
(131.1)%
Net income/(loss)
(17.8)
24.7
(171.8)%
Contribution Margin
74.3
143.4
(48.2)%
Contribution Margin per metric ton
473.6
530.3
(10.7)%
Adjusted EBITDA
15.2
71.5
(78.7)%
Basic EPS (1)
(0.30)
0.41
(0.71)
Adjusted EPS (2)
(0.14)
0.53
(0.67)
Notes: (1)
Basic EPS calculated using net
income/(loss) and weighted number of shares outstanding in the
respective quarter.
(2)
Adjusted EPS calculated using net
income/(loss) for the respective quarter 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
weighted number of shares outstanding in the respective
quarter.
Volumes declined by 42.0%, or 113.5 kmt, to 156.9 kmt, year over
year, with lower demand in both segments and in all regions, due to
the effects of COVID-19 on the overall global economy.
Net sales decreased by $196.4 million, or 49.2%, year over year,
to $202.6 million, driven primarily by lower volumes and, to a
lesser extent, the effects of passing on lower feedstock costs to
customers.
Loss from operations was $12.9 million compared to income from
operations of $41.5 million in the second quarter of 2019, due to
the effects of COVID-19 on the overall global economy and carbon
black demand.
Lower volume drove a net loss of $17.8 million, compared to net
income of $24.7 million in the second quarter of the prior
year.
Contribution Margin declined by $69.1 million, or 48.2%, to
$74.3 million, year over year, primarily driven by lower volumes,
partially offset by favorable base price increases in the Rubber
segment, in particular.
Adjusted EBITDA decreased by $56.3 million, or 78.7% to $15.2
million, year over year, primarily due to lower volume, partially
offset by lower fixed costs and base price increases in the Rubber
segment, in particular.
Quarterly Business Segment Results
SPECIALTY CARBON BLACK
(In millions, unless stated otherwise)
Q2 2020
Q2 2019
Y/Y Change in %
Volume (kmt)
49.5
69.9
(29.2)%
Net sales
94.4
139.3
(32.2)%
Gross profit
24.2
44.4
(45.5)%
Gross Profit per Metric Ton
489.4
635.7
(23.0)%
Adjusted EBITDA
16.5
31.0
(46.9)%
Adjusted EBITDA/metric ton
333.1
444.2
(25.0)%
Adjusted EBITDA Margin (%)
17.5
22.3
(480)bps
Specialty Carbon Black volumes decreased by 29.2%, year over
year, to 49.5 kmt. All regions were down.
Lower volumes drove net sales lower by $44.9 million, or 32.2%,
to $94.4 million, and gross profit lower by $20.2 million, or 45.5%
to $24.2 million, year over year.
Specialty Adjusted EBITDA decreased by $14.6 million, or 46.9%,
to $16.5 million, year over year, primarily due to lower volumes,
partially offset by mix. Adjusted EBITDA margin fell 480 basis
points to 17.5% compared to 22.3% in the second quarter of
2019.
RUBBER CARBON BLACK
(In millions, unless stated otherwise)
Q2 2020
Q2 2019
Y/Y Change in %
Volume (kmt)
107.5
200.6
(46.4)%
Net sales
108.3
259.7
(58.3)%
Gross profit
9.7
59.6
(83.7)%
Gross Profit per Metric Ton
90.7
297.3
(69.5)%
Adjusted EBITDA
(1.2)
40.5
(103.0)%
Adjusted EBITDA/metric ton
(11.5)
201.9
(105.7)%
Adjusted EBITDA Margin (%)
(1.1)
15.6
(1670)bps
Rubber Carbon Black volumes decreased by 93.1 kmt, or 46.4%,
year over year. All regions were down. Volumes were down primarily
due to COVID-19, but also reflect our commercial strategy as part
of 2019 contract negotiations to emphasize raising price over
volume.
Net sales decreased by $151.5 million, or 58.3%, to $108.3
million, year over year, primarily due to lower volumes and, to a
much lesser extent, the pass through of lower feedstock costs to
customers, partially offset by base price increases.
Gross profit decreased by $49.9 million, or 83.7%, to $9.7
million, year over year, driven by lower volumes, partially offset
by base price increases.
Rubber Adjusted EBITDA decreased by $41.7 million, or 103.0%, to
$(1.2) million, year over year, primarily driven by lower volume
and the unfavorable impact on margins of lower feedstock costs,
partially offset by lower freight costs and fixed costs. Adjusted
EBITDA margin was (1.1)% in the second quarter of 2020 compared to
15.6% in the second quarter of 2019.
Balance Sheet and Cash Flows
As of June 30, 2020, the Company had cash and cash equivalents
of $143.4 million, an increase of $79.6 million from December 31,
2019, reflecting a combination of strategic draws on select credit
facilities to bolster liquidity and cash flows from operations,
partially offset by capital expenditures. Net debt increased from
$609.1 million as of December 31, 2019 to $624.8 million as of June
30, 2020.
The following table shows our current net debt position as of
June 30, 2020 compared to December 31, 2019:
(In millions)
June 30, 2020
December 31, 2019
Term loans
$
629.8
$
635.0
Capitalized transaction costs
(long-term)
(4.0
)
(4.7
)
Long-term financial debt, net
$
625.8
$
630.3
Term loans (current)
$
8.0
$
8.1
Capitalized transaction costs
(current)
(1.4
)
(1.4
)
Short term local bank loans
130.3
29.8
Short-term financial debt, net
$
137.0
$
36.4
Cash and cash equivalents
$
(143.4
)
$
(63.7
)
add-back capitalized transaction costs
(long-term and current)
$
5.4
$
6.1
Net Debt 1)
$
624.8
$
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 $85.7
million, up $37.8 million year over year, due to a decrease of net
working capital of $77.3 million, primarily driven by lower
accounts receivables and inventory, offsetting the decrease in net
income.
Cash outflows from investing activities were $38.5 million,
essentially unchanged year over year.
Cash outflows from financing activities of $12.8 million reflect
a combination of voluntary repayments under select credit lines and
$2.0 million in scheduled debt repayments, down $4.3 million,
mainly due to suspended dividend.
Outlook
Mr. Painter continued, “We cannot predict the ultimate course of
COVID-19 or the ensuing pace and shape of the recovery in our end
markets. However, we can see that current trends, such as the
recovery in driving rates and auto sales from historic lows early
in the second quarter, are very positive for us. As economies
gradually reopen, we expect demand to continue to recover across
our specialty and rubber carbon black end markets."
"We have successfully navigated through the first phase of this
downturn and remain confident in our ability to deliver meaningful
results for our customers, our employees, the communities where we
operate and the shareholders whom we serve,” concluded Mr.
Painter.
Conference Call
As previously announced, Orion will hold a conference call
tomorrow, Wednesday, August 5th, 2020, at 8:30 a.m. (EDT). 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 August 12th, 2020:
U.S. Toll Free:
1-844-512-2921
International:
1-412-317-6671
Conference ID:
13705708
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)
Second Quarter
Six Months
(In thousands)
2020
2019
2020
2019
Net income/(loss)
$
(17,780
)
$
24,748
$
253
$
43,702
Add back income tax expense/(benefit)
(5,879
)
9,309
1,756
18,748
Add back equity in earnings of affiliated
companies, net of tax
(151
)
(153
)
(285
)
(290
)
Income/(loss) from operations before
income taxes and equity in earnings of affiliated companies
(23,810
)
33,904
1,724
62,160
Add back interest and other financial
expense, net
8,277
7,566
17,888
14,009
Reclassification of actuarial losses from
AOCI
2,654
—
5,052
—
Earnings/(loss) before income taxes and
finance income/costs
(12,879
)
41,470
24,664
76,169
Add back depreciation, amortization and
impairment of intangible assets and property, plant and
equipment
21,876
25,404
45,722
49,499
EBITDA
8,998
66,874
70,386
125,668
Equity in earnings of affiliated
companies, net of tax
151
153
285
290
Restructuring expenses/(income) (1)
—
1,034
—
1,123
Consulting fees related to Company
strategy (2)
—
589
—
1,505
Long term incentive plan
1,199
1,559
60
5,112
EPA-related expenses
977
690
3,566
1,408
Extraordinary expense items related to
COVID-19 (3)
2,725
—
2,725
—
Other adjustments (4)
1,188
629
2,061
989
Adjusted EBITDA
$
15,238
$
71,528
$
79,082
$
136,095
(1) Restructuring expenses for the three and six months ended
June 30, 2019 are related to our strategic realignment of our
worldwide Rubber footprint.
(2) Consulting fees related to the Orion strategy include
external consulting for establishing and executing Company
strategies relating to Rubber footprint realignment, conversion to
U.S. dollar and U.S. GAAP, as well as costs relating to our
assessment of 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 corona virus
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 six months ended June 30,
2020 mainly relate to legal fees associated with a dispute
concerning intellectual property of $0.6 million and $0.8 million,
respectively, and a non-income tax expense incurred during the
construction phase of an asset in an amount of $0.5 million and
$0.8 million, respectively. The asset under construction is
expected to qualify for certain non-income tax credits once
operational, since such credits were applied to the predecessor
machine. This tax disadvantage cannot be capitalized as part of the
project’s capital expenditure.
The following table reconciles Contribution
Margin and Contribution Margin per Metric Ton to gross profit:
Second Quarter
Six Months
(In millions, unless otherwise
indicated)
2020
2019
2020
2019
Net sales(1)
$
202.6
$
399.0
$
538.7
$
783.7
Variable costs(2)
(128.3
)
(255.6
)
(332.5
)
(504.0
)
Contribution Margin
74.3
143.4
206.2
279.7
Freight
11.6
20.2
30.8
41.4
Fixed Costs(3)
(52.0
)
(59.6
)
(112.8
)
(119.1
)
Gross profit (1)
$
33.9
$
104.0
$
124.1
$
202.0
Volume (in kmt)
156.9
270.5
392.0
533.3
Contribution Margin per Metric Ton
$
473.6
$
530.3
$
525.9
$
524.6
Gross Profit per Metric Ton
$
216.3
$
384.7
$
316.6
$
378.8
(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
Second Quarter
Six Months
(In thousands, except per share
amounts)
2020
2019
2020
2019
Net income/(loss)
$
(17,780
)
$
24,748
$
253
$
43,702
add back long term incentive plan
expenses
1,199
1,559
60
5,112
add back restructuring expenses, net
—
1,034
—
1,123
add back consulting fees related to
Company strategy
—
589
—
1,505
add back EPA-related expenses
977
690
3,566
1,408
add back extraordinary expense items
related COVID-19
2,725
—
2,725
—
add back other adjustment items
1,188
629
2,061
989
Reclassification of actuarial losses from
AOCI
2,654
—
5,052
—
add back amortization
1,843
2,435
3,688
4,883
add back foreign exchange rate impacts
2,099
2,273
7,308
834
add back amortization of transaction
costs
500
759
1,001
1,100
Tax effect on add back items at estimated
tax rate
(3,955
)
(2,990
)
(7,638
)
(5,086
)
Adjusted Net Income/(Loss)
$
(8,551
)
$
31,726
$
18,076
$
55,570
Total add back items
$
9,229
$
6,978
$
17,823
$
11,868
Impact add back items per share
$
0.16
$
0.12
$
0.30
$
0.20
Earnings per share (basic)
$
(0.30
)
$
0.41
$
—
$
0.73
Adjusted EPS
$
(0.14
)
$
0.53
$
0.30
$
0.93
Consolidated statements of operations
of Orion Engineered Carbons S.A.
for the three and six months ended June
30, 2020 and 2019 (Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
(In thousands, except per share
amounts)
2020
2019
2020
2019
Net sales
$
202,648
$
399,016
$
538,655
$
783,730
Cost of sales
168,704
294,978
414,518
581,723
Gross profit
33,944
104,038
124,137
202,007
Selling, general and administrative
expenses
38,547
52,117
83,066
107,694
Research and development costs
4,449
4,914
9,405
10,043
Other expenses, net
3,826
4,503
7,002
6,978
Restructuring expenses
—
1,034
—
1,123
Income/(loss) from operations
(12,879
)
41,470
24,664
76,169
Interest and other financial expense,
net
8,277
7,566
17,888
14,009
Reclassification of actuarial losses from
AOCI
2,654
—
5,052
—
Income/(loss) from continuing
operations before income tax expense and equity in earnings of
affiliated companies
(23,810
)
33,904
1,724
62,160
Income tax expense/(benefit)
(5,879
)
9,309
1,756
18,748
Equity in earnings of affiliated
companies, net of tax
151
153
285
290
Net income/(loss)
$
(17,780
)
$
24,748
$
253
$
43,702
Weighted-average shares outstanding (in
thousands of shares):
Basic
60,487
59,984
60,361
59,752
Diluted
61,263
61,125
61,307
61,119
Earnings/(loss) per share:
Basic
$
(0.30
)
$
0.41
$
—
$
0.73
Diluted
$
(0.29
)
$
0.40
$
—
$
0.72
Dividends per share
$
—
$
0.20
$
0.20
$
0.40
Consolidated statements of financial
position of Orion Engineered Carbons S.A.
as at June 30, 2020 and December 31,
2019 (Unaudited)
(In thousands, except share amounts)
June 30, 2020
December 31, 2019
Current assets
Cash and cash equivalents
$
143,374
$
63,726
Accounts receivable, net of expected
credit losses
of $6,379 and $6,632
145,305
212,565
Other current financial assets
9,434
11,347
Inventories, net
135,310
164,799
Income tax receivables
11,710
17,924
Prepaid expenses and other current
assets
34,782
37,358
Total current assets
479,914
507,718
Property, plant and equipment, net
556,689
534,054
Operating lease right-of-use assets
28,943
27,532
Goodwill
77,093
77,341
Intangible assets, net
47,081
50,596
Investment in equity method affiliates
4,944
5,232
Deferred income tax assets
54,796
48,720
Other financial assets
715
2,501
Other assets
3,086
3,701
Total non-current assets
773,346
749,676
Total assets
$
1,253,260
$
1,257,394
Current liabilities
Accounts payable
$
90,134
$
156,298
Current portion of long term debt and
other financial liabilities
136,969
36,410
Current portion of employee benefit plan
obligation
905
908
Accrued liabilities
36,122
44,931
Income taxes payable
15,339
14,154
Other current liabilities
35,639
32,509
Total current liabilities
315,108
285,211
Long-term debt, net
625,799
630,261
Employee benefit plan obligation
71,180
71,901
Deferred income tax liabilities
48,772
43,308
Other liabilities
41,583
40,701
Total non-current liabilities
787,333
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
64,128
65,562
Retained earnings
66,504
78,296
Accumulated other comprehensive loss
(56,621)
(34,362)
Total stockholders' equity
150,819
186,013
Total liabilities and stockholders'
equity
$
1,253,260
$
1,257,394
Consolidated Statements of Cash Flows
of Orion Engineered Carbons S.A. (Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
(In thousands)
2020
2019
2020
2019
Cash flows from operating
activities:
Net income/(loss)
$
(17,780
)
$
24,748
$
253
$
43,702
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
21,876
25,404
45,722
49,499
Amortization of debt issuance costs
500
555
1,001
1,090
Share-based incentive compensation
1,199
1,559
60
5,112
Deferred tax (benefit)/provision
(4,634
)
839
(6,499
)
(2,074
)
Foreign currency transactions
(988
)
(645
)
231
290
Reclassification of actuarial losses from
AOCI
2,654
—
5,052
—
Other operating non-cash items
548
3,264
908
4,292
Changes in operating assets and
liabilities, net of effects of businesses acquired:
(Increase)/decrease in trade
receivables
90,568
(6,550
)
59,471
(19,173
)
(Increase)/decrease in inventories
36,883
(847
)
25,201
7,099
Increase/(decrease) in trade payables
(50,133
)
2,996
(45,742
)
6,864
Increase/(decrease) in provisions
3,833
5,995
(7,532
)
(14,826
)
Increase/(decrease) in tax liabilities
(3,392
)
(4,084
)
8,624
(2,336
)
Increase/(decrease) in other assets and
liabilities that cannot be allocated to investing or financing
activities
4,576
(5,276
)
3,865
(5,410
)
Net cash provided by operating
activities
$
85,709
$
47,958
$
90,615
$
74,129
Cash flows from investing
activities:
Cash paid for the acquisition of
intangible assets and property, plant and equipment
$
(38,550
)
$
(38,370
)
$
(89,401
)
$
(60,857
)
Net cash used in investing
activities
$
(38,550
)
$
(38,370
)
$
(89,401
)
$
(60,857
)
Cash flows from financing
activities:
Payments for debt issue costs
$
—
$
(1,721
)
$
—
$
(1,721
)
Repayments of long-term debt
(2,015
)
(2,029
)
(4,022
)
(4,047
)
Cash inflows related to current financial
liabilities
41,538
41,605
151,351
78,687
Cash outflows related to current financial
liabilities
(52,359
)
(36,509
)
(52,359
)
(59,332
)
Dividends paid to shareholders
—
(12,042
)
(12,045
)
(23,946
)
Taxes paid for shares issued under net
settlement feature
—
(6,475
)
(1,202
)
(6,475
)
Net cash provided by/(used in)
financing activities
$
(12,836
)
$
(17,171
)
$
81,723
$
(16,834
)
Increase/(decrease) in cash, cash
equivalents and restricted cash
$
34,323
$
(7,583
)
$
82,937
$
(3,562
)
Cash, cash equivalents and restricted cash
at the beginning of the period
110,215
65,425
68,231
61,604
Effect of exchange rate changes on
cash
1,570
(146
)
(5,060
)
(346
)
Cash, cash equivalents and restricted
cash at the end of the period
$
146,108
$
57,696
$
146,108
$
57,696
Less restricted cash at the end of the
period
2,734
4,537
2,734
4,537
Cash and cash equivalents at the end of
the period
$
143,374
$
53,159
$
143,374
$
53,159
Cash paid for interest, net
$
(5,161
)
$
(3,142
)
$
(9,506
)
$
(9,166
)
Cash (paid)/refund for income taxes
$
(2,260
)
$
(9,116
)
$
(1
)
$
(17,880
)
Supplemental disclosure of non-cash
activity:
Liabilities for leasing - current
$
(1,441
)
$
1,782
$
(446
)
$
6,926
Liabilities for leasing - non-current
$
446
$
(1,632
)
$
1,688
$
23,955
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200804006037/en/
INVESTOR CONTACT: Wendy Wilson Investor Relations +1
281-974-0155
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