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
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