News Release |  |
Versum Materials Reports Fiscal Third Quarter 2019 Financial Results
Fiscal Third Quarter 2019 Financial Highlights
▪ | Sales of $324 million, Net Loss of $87 million, or diluted loss per share of $0.79 |
▪ | Results include a $140 million termination fee paid to Entegris, Inc. |
▪ | Adjusted Net Income of $59 million, or diluted EPS of $0.54 |
▪ | Adjusted EBITDA of $109 million, or Adjusted EBITDA Margin of 34% |
▪ | Merger agreement with Merck KGaA approved by stockholders |
The results in this press release include Non-GAAP financial measures. Refer to the section entitled “Non-GAAP Financial Measures.”
Tempe, Arizona, August 6, 2019 (Businesswire) - Versum Materials, Inc. (NYSE: VSM), a leading specialty materials and equipment supplier to the semiconductor industry, today reported results for the fiscal third quarter ended June 30, 2019.
Sales were $324.3 million, compared to $350.0 million in the prior year quarter. Net loss was $86.7 million, or $0.79 per diluted share, compared to net income of $0.58 per diluted share in the prior year, primarily due to the termination fee to Entegris and transaction related expenses. Adjusted Net Income was $59.1 million, or $0.54 per diluted share, compared to $0.63 in the prior year. Adjusted EBITDA was $108.7 million, compared to $116.9 million in the prior year.
Guillermo Novo, Versum Materials' President and Chief Executive Officer said, "Our results were relatively consistent with prior quarters, demonstrating stable demand for our materials and equipment and continued operating discipline. Our portfolio has delivered consistent gross margins through the cycle, and excluding one-time charges associated with the two merger transactions, we maintained strong EBITDA margins through operating and cost discipline. As we look to the future, our teams have secured significant POR wins which we believe will position us for accelerated growth when demand normalizes. Our investments in innovation, together with all of the capital investments that will be coming on stream, are expected to begin to pay off in the near future.”
Merger with Merck KGaA, Darmstadt, Germany
On June 17, 2019, the stockholders of Versum approved the merger with Merck KGaA, Darmstadt, Germany. The business combination is expected to create a leading electronic materials player focused on the semiconductor and display industries. The combined companies and their customers and employees are expected to benefit from increased scale, product portfolio, innovation and services depth, globally. Upon completion of the merger, Versum’s stockholders will have the right to receive $53.00 per share in cash, without interest and less any applicable withholding tax, for each share of common stock that they own immediately prior to the completion of the merger. The parties continue to work toward closing in the second half of 2019. The closing is subject to regulatory clearances and the satisfaction of other customary closing conditions. The applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 for U.S. antitrust purposes has expired, and the transaction has been cleared by antitrust authorities or the waiting period has expired in Austria, Germany, Ireland, Japan, Serbia, South Korea and Taiwan.
No Fiscal Year 2019 Outlook or Earnings Conference Call
In light of the announced transaction with Merck KGaA, Versum Materials will not provide or update annual financial guidance and will not hold a conference call to review quarterly earnings results.
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Business Segment Results
Materials
Sales were $214.3 million, compared to $218.5 million in the prior year as volume growth in the Materials segment was more than offset by negative price/mix and unfavorable currency impacts.
Operating income was $67.6 million, compared to $71.5 million in the prior year. Segment Adjusted EBITDA was $81.6 million, compared to $84.5 million in the prior year as overall volume growth and positive cost performance was more than offset by negative price/mix given the market weakness in memory and foundry.
Delivery Systems & Services (DS&S)
Sales were $109.4 million, compared to $130.7 million in the prior year impacted by softer industry capital spending and delays in customer shipments versus the record prior year quarter.
Operating income was $31.5 million, compared to $37.2 million in the prior year. Segment Adjusted EBITDA was $32.2 million, compared to $37.9 million in the prior year, driven by the softer equipment demand and unfavorable mix and currency impacts.
Table 1: Segment Sales
Three Months Ended June 30, | ||||||||||
2019 | 2018 | % Change | ||||||||
(In millions, except percentages) | ||||||||||
Materials | $ | 214.3 | $ | 218.5 | (2 | )% | ||||
DS&S | 109.4 | 130.7 | (16 | )% | ||||||
Corporate | 0.6 | 0.8 | (25 | )% | ||||||
Total Versum Materials Sales | $ | 324.3 | $ | 350.0 | (7 | )% | ||||
Table 2: Segment Operating Income to Segment Adjusted EBITDA
Three Months Ended June 30, | ||||||||||
2019 | 2018 | % Change | ||||||||
(In millions, except percentages) | ||||||||||
Materials | ||||||||||
Operating income(A) | $ | 67.6 | $ | 71.5 | (5 | )% | ||||
Add: Depreciation and amortization | 14.0 | 13.0 | 8 | % | ||||||
Segment Adjusted EBITDA(A) | $ | 81.6 | $ | 84.5 | (3 | )% | ||||
Segment Adjusted EBITDA Margin(B) | 38 | % | 39 | % | ||||||
DS&S | ||||||||||
Operating income | $ | 31.5 | $ | 37.2 | (15 | )% | ||||
Add: Depreciation and amortization | 0.7 | 0.7 | — | % | ||||||
Segment Adjusted EBITDA | $ | 32.2 | $ | 37.9 | (15 | )% | ||||
Segment Adjusted EBITDA Margin(B) | 29 | % | 29 | % | ||||||
Corporate | ||||||||||
Operating loss | $ | (5.2 | ) | $ | (5.7 | ) | (9 | )% | ||
Add: Depreciation and amortization | 0.1 | 0.2 | (50 | )% | ||||||
Segment Adjusted EBITDA | $ | (5.1 | ) | $ | (5.5 | ) | (7 | )% | ||
(A) The fiscal third quarter ended June 30, 2018 amounts have been recast to reflect the retrospective application of the company’s change in classification of the non-service components of net periodic pension cost.
(B) Segment Adjusted EBITDA margin is calculated by dividing Segment Adjusted EBITDA by sales.
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Table 3: Reconciliation of Segment Operating Income to Total Versum Materials Operating Income
Three Months Ended June 30, | ||||||||||
2019 | 2018 | % Change | ||||||||
(In millions, except percentages) | ||||||||||
Materials(A) | $ | 67.6 | $ | 71.5 | (5 | )% | ||||
DS&S | 31.5 | 37.2 | (15 | )% | ||||||
Corporate | (5.2 | ) | (5.7 | ) | (9 | )% | ||||
Total Segment Operating Income(A) | 93.9 | 103.0 | (9 | )% | ||||||
Less: Business separation, restructuring and cost reduction actions | 141.4 | 6.7 | NM | |||||||
Total Versum Materials Operating (Loss) Income(A) | $ | (47.5 | ) | $ | 96.3 | (149 | )% | |||
(A) - The fiscal third quarter ended June 30, 2018 amounts have been recast to reflect the retrospective application of the company’s change in classification of the non-service components of net periodic pension cost.
About Versum Materials
Versum Materials, Inc. (NYSE: VSM) is a leading global specialty materials company providing high-purity chemicals and gases, delivery systems, services and materials expertise to meet the evolving needs of the global semiconductor and display industries. Derived from the Latin word for “toward,” the name “Versum” communicates the company’s deep commitment to helping customers move toward the future by collaborating, innovating and creating cutting-edge solutions.
A global leader in technology, quality, safety and reliability, Versum Materials is one of the world’s leading suppliers of next-generation CMP slurries, ultra-thin dielectric and metal film precursors, formulated cleans and etching products, and delivery equipment that has revolutionized the semiconductor industry. Versum reported fiscal year 2018 annual sales of about US $1.4 billion, has approximately 2,300 employees and operates fifteen manufacturing and seven research and development facilities in Asia and North America. It is headquartered in Tempe, Arizona. Versum Materials had operated for more than three decades as a division of Air Products and Chemicals, Inc. (NYSE: APD).
For additional information, please visit http://www.versummaterials.com
Investor Inquiries:
Soohwan Kim, CFA, (602)-282-0957
Soohwan.Kim@versummaterials.com
Media Inquiries:
Tiffany Elle, (480)-282-6475
Tiffany.Elle@versummaterials.com
Non-GAAP Financial Measures
This earnings press release includes “non-GAAP financial measures,” including Adjusted Net Income, Adjusted Net Income Margin, Adjusted Diluted Earnings Per Share, Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted EBITDA margin, and Segment Adjusted EBITDA margin. Adjusted Net Income is net income excluding certain disclosed items which we do not believe to be indicative of underlying business trends, including business separation, restructuring and cost reduction actions, net of tax, the write-off of financing costs, net of tax, and the impact of the Tax Act. Adjusted Diluted Earnings Per Share uses Adjusted Net Income but otherwise uses the same calculation used in arriving at diluted earnings per share, the most directly comparable GAAP financial measure. Adjusted EBITDA is net income excluding certain disclosed items which we do not believe to be indicative of underlying business trends, including interest expense, the write-off of financing costs, non-service components of net periodic pension cost, income tax provision, depreciation and amortization expense, non-controlling interests, and business separation, restructuring and cost reduction actions. Segment Adjusted EBITDA is segment operating income excluding segment depreciation and amortization expense. Adjusted Net Income Margin, Adjusted EBITDA margin and Segment Adjusted EBITDA margin are calculated by dividing Adjusted Net Income, Adjusted EBITDA and Segment Adjusted EBITDA, respectively, by sales. In the accompanying tables, Versum Materials has provided reconciliations of net income to Adjusted EBITDA (see Appendix Table A-1), net income to Adjusted Net Income (see Appendix Table A-2), diluted EPS to Adjusted Diluted EPS (see Appendix A-3) and of segment operating income (loss) to
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Segment Adjusted EBITDA by Quarter (see Appendix Table A-5), in each case the most directly comparable GAAP financial measure. We encourage investors to read these reconciliations.
The presentation of these non-GAAP financial measures is intended to enhance the usefulness of financial information by providing measures which management uses internally to evaluate our operating performance. We use non-GAAP measures to assess our operating performance by excluding certain disclosed items that we believe are not representative of our underlying business. Management may use these non-GAAP measures to evaluate our performance period over period and relative to competitors in our industry, to analyze underlying trends in our business and to establish operational budgets and forecasts or for incentive compensation purposes. We use Adjusted EBITDA to calculate performance-based cash bonuses. We use Segment Adjusted EBITDA as the primary measure to evaluate the ongoing performance of our business segments.
We believe non-GAAP financial measures provide security analysts, investors and other interested parties with meaningful information to understand our underlying operating results and to analyze financial and business trends; enables better comparison to peer companies; and allows us to provide a long-term strategic view of the business going forward. These non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures, and have limitations which include but are not limited to the following: (a) Adjusted Net Income and Adjusted EBITDA exclude expenses related to business separation, restructuring and cost reduction actions and the write-off of financing costs, each of which we do not consider to be representative of our underlying business operations, however, these disclosed items represent costs to Versum Materials; (b) Adjusted EBITDA is not intended to be a measure of cash available for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements; (c) though not business operating costs, interest expense and income tax provision represent ongoing costs of Versum Materials; (d) depreciation and amortization charges represent the wear and tear or reduction in value of the plant, equipment, and intangible assets which permit us to manufacture and market our products; and (e) other companies may define non-GAAP measures differently than we do, limiting their usefulness as comparative measures. A reader may find any one or all of these items important in evaluating our performance. Management compensates for the limitations of using non-GAAP financial measures by using them only to supplement our GAAP results to provide a more complete understanding of the factors and trends affecting our business. In evaluating these non-GAAP financial measures, the reader should be aware that we may incur expenses similar to those eliminated in this presentation in the future.
Forward-Looking Information
This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by references to future periods and include statements about our financial outlook or guidance; statements about our expectations or predictions of future financial or business performance or conditions; statements about our anticipated growth, profitability and margins; our ability to compete successfully as a leading materials supplier to the semiconductor industry and obtain next generation node opportunities; and other matters. The words “believe,” “expect,” “anticipate,” “estimate,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “forecast,” “guidance,” “outlook,” “opportunity” and similar expressions, among others, generally identify forward-looking statements, which are based on management’s reasonable expectations and assumptions as of the date the statements were made. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including without limitation the following: Merck KGaA’s ability to successfully complete the proposed acquisition of Versum or realize the anticipated benefits of the proposed transaction in the expected time-frames or at all; Merck KGaA’s ability to successfully integrate Versum’s operations into those of Merck KGaA; such integration may be more difficult, time-consuming or costly than expected; the failure of any of the conditions to the proposed transaction to be satisfied; revenues following the proposed transaction may be lower than expected; operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) may be greater than expected following the proposed transaction; the retention of certain key employees at Versum; risks associated with the disruption of management’s attention from ongoing business operations due to the proposed transaction; the outcome of any legal proceedings related to the proposed transaction; the impact of the proposed transaction on Versum’s credit rating; the parties’ ability to meet expectations regarding the timing and completion of the proposed transaction; delays in obtaining any approvals required for the proposed transaction or an inability to obtain them on the terms proposed or on the anticipated schedule; the impact of indebtedness incurred by Merck KGaA in connection with the proposed transaction; the effects of the business combination of Versum and Merck KGaA, including the combined company’s future financial condition, operating results, strategy and plans; events beyond our control such as acts of terrorism; product supply versus demand imbalances in the semiconductor industry or in certain geographic markets may decrease the demand for our goods and services; our concentrated customer base; the dependence of our DS&S segment upon the capital expenditure cycles of our customers; our ability to continue technological innovation and successfully introduce new products to meet the evolving
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needs of our customers; our ability to protect and enforce our intellectual property rights and to avoid violating any third party intellectual property or technology rights; unexpected interruption of or shortages in our raw material supply; inability of sole source, limited source or qualified suppliers to deliver to us in a timely manner or at all; hazards associated with specialty chemical manufacturing, such as fires, explosions and accidents, could disrupt operations; increased competition and new product development by our competitors, changing customer needs and price increases in materials and components; operational, political and legal risks of our international operations; increased costs due to trade wars and the implementation of tariffs; the impact of changes in tax laws; the impact of changes in environmental and health and safety regulations, anticorruption enforcement, sanctions, import/export controls, tax and other legislation and regulations in the U.S. and other jurisdictions in which Versum Materials and its affiliates operate; our available cash and access to additional capital may be limited by substantial leverage and debt service obligations; possible liability for contamination, personal injury or third party impacts if hazardous materials are released into the environment; cyber security threats may compromise our data or disrupt our information technology applications or services; fluctuation of currency exchange rates; costs and outcomes of litigation or regulatory investigations; the timing, impact, and other uncertainties of future acquisitions or divestitures; and other risks, uncertainties and factors discussed in the company’s Form 10-Qs, Form 10-K and in the company’s other filings with the U.S. Securities and Exchange Commission available at www.sec.gov or in materials incorporated therein by reference or in Merck KGaA’s public reports which are available on the Merck KGaA, Darmstadt, Germany, website at www.emdgroup.com. Any forward-looking statement in this press release speaks only as of the date on which it is made. The company assumes no obligation to update or revise any forward-looking statements.
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Versum Materials, Inc.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | ||||||||||||||||
(In millions, except per share data and percentages) | |||||||||||||||||||||
Sales | $ | 324.3 | $ | 350.0 | (7 | )% | $ | 990.0 | $ | 1,021.5 | (3 | )% | |||||||||
Cost of sales (A),(B) | 185.6 | 200.3 | (7 | )% | 571.5 | 587.3 | (3 | )% | |||||||||||||
Selling and administrative (B) | 34.5 | 35.2 | (2 | )% | 102.6 | 107.0 | (4 | )% | |||||||||||||
Research and development | 11.9 | 12.4 | (4 | )% | 35.9 | 36.2 | (1 | )% | |||||||||||||
Business separation, restructuring and cost reduction actions | 141.4 | 6.7 | NM | 156.3 | 16.7 | NM | |||||||||||||||
Other (income) expense, net | (1.6 | ) | (0.9 | ) | 78 | % | (7.2 | ) | (0.9 | ) | NM | ||||||||||
Operating (Loss) Income (B) | (47.5 | ) | 96.3 | (149 | )% | 130.9 | 275.2 | (52 | )% | ||||||||||||
Interest expense | 13.0 | 12.5 | 4 | % | 39.0 | 35.7 | 9 | % | |||||||||||||
Write-off of financing costs | — | — | NM | — | 2.1 | NM | |||||||||||||||
Non-service components of net periodic pension cost(B) | 0.2 | 0.1 | 100 | % | 0.6 | 0.5 | 20 | % | |||||||||||||
(Loss) Income Before Taxes | (60.7 | ) | 83.7 | (173 | )% | 91.3 | 236.9 | (61 | )% | ||||||||||||
Income tax provision (A) | 24.5 | 19.6 | 25 | % | 62.3 | 88.8 | (30 | )% | |||||||||||||
Net (Loss) Income | (85.2 | ) | 64.1 | NM | 29.0 | 148.1 | (80 | )% | |||||||||||||
Less: Net (Loss) Income Attributable to Non-Controlling Interests | 1.5 | 0.8 | 88 | % | 4.2 | 4.5 | (7 | )% | |||||||||||||
Net (Loss) Income Attributable to Versum | $ | (86.7 | ) | $ | 63.3 | NM | $ | 24.8 | $ | 143.6 | (83 | )% | |||||||||
Net (loss) income attributable to Versum per common share: | |||||||||||||||||||||
Basic | $ | (0.79 | ) | $ | 0.58 | NM | $ | 0.23 | $ | 1.32 | (83 | )% | |||||||||
Diluted | $ | (0.79 | ) | $ | 0.58 | NM | $ | 0.23 | $ | 1.31 | (82 | )% | |||||||||
Shares used in computing per common share amounts: | |||||||||||||||||||||
Basic | 109.2 | 108.9 | — | % | 109.1 | 108.9 | — | % | |||||||||||||
Diluted | 109.2 | 109.8 | (1 | )% | 110.0 | 109.7 | — | % | |||||||||||||
(A) - The fiscal year to date ended June 30, 2018 amounts have been recast to reflect the retrospective application of the company’s election to change its inventory valuation method of accounting for its U.S. inventories from the LIFO method to the FIFO method, which resulted in a decrease in Cost of sales of $0.2 million for the fiscal year to date ended June 30, 2018 and an increase in the Income tax provision of $0.1 million for the fiscal year to date ended June 30, 2018.
(B) - The fiscal third quarter and year to date ended June 30, 2018 amounts have been recast to reflect the retrospective application of the company’s change in classification of the non-service components of net periodic pension cost. This resulted in a decrease in Cost of sales of $0.1 million and $0.4 million for the fiscal third quarter and year to date ended June 30, 2018, respectively, a decrease in Selling and administrative of $0.0 million and $0.1 million for the fiscal third quarter and year to date ended June 30, 2018, an increase to Operating Income of $0.1 million and $0.5 million for the fiscal third quarter and year to date ended June 30, 2018, respectively, and an increase to non-service components of net periodic pension costs of $0.1 million and $0.5 million for the fiscal third quarter and year to date ended June 30, 2018, respectively.
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Versum Materials, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, 2019 | September 30, 2018 | ||||||
(In millions) | |||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash items | $ | 272.2 | $ | 399.8 | |||
Trade receivables, net | 166.3 | 184.4 | |||||
Inventories | 206.3 | 177.1 | |||||
Contracts in progress, less progress billings | 50.7 | 20.3 | |||||
Prepaid expenses | 21.2 | 13.6 | |||||
Other current assets | 18.5 | 17.9 | |||||
Total Current Assets | 735.2 | 813.1 | |||||
Plant and equipment, net | 438.7 | 405.1 | |||||
Goodwill | 182.4 | 183.0 | |||||
Intangible assets, net | 59.3 | 63.5 | |||||
Other non-current assets | 43.1 | 40.6 | |||||
Total Non-Current Assets | 723.5 | 692.2 | |||||
Total Assets | $ | 1,458.7 | $ | 1,505.3 | |||
Liabilities and Stockholders’ Deficit | |||||||
Current Liabilities | |||||||
Payables and accrued liabilities | $ | 110.7 | $ | 138.6 | |||
Accrued income taxes | 53.1 | 43.3 | |||||
Current portion of long-term debt | 5.8 | 5.8 | |||||
Total Current Liabilities | 169.6 | 187.7 | |||||
Long-term debt | 971.2 | 974.2 | |||||
Noncurrent income tax payable | 30.9 | 37.3 | |||||
Deferred tax liabilities | 36.2 | 41.3 | |||||
Other non-current liabilities | 47.2 | 52.4 | |||||
Total Non-Current Liabilities | 1,085.5 | 1,105.2 | |||||
Total Liabilities | 1,255.1 | 1,292.9 | |||||
Stockholders’ Equity | |||||||
Common stock | 109.3 | 109.0 | |||||
Capital in excess of par | 11.5 | 6.1 | |||||
Retained earnings | 80.1 | 81.6 | |||||
Accumulated other comprehensive income (loss) | (28.7 | ) | (18.2 | ) | |||
Total Versum’s Stockholders’ Equity | 172.2 | 178.5 | |||||
Non-Controlling Interests | 31.4 | 33.9 | |||||
Total Stockholders' Equity | 203.6 | 212.4 | |||||
Total Liabilities and Stockholders’ Equity | $ | 1,458.7 | $ | 1,505.3 | |||
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Versum Materials, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended June 30, | |||||||
2019 | 2018 | ||||||
(In millions) | |||||||
Operating Activities | |||||||
Net income | $ | 29.0 | $ | 148.1 | |||
Less: Net income attributable to non-controlling interests | 4.2 | 4.5 | |||||
Net income attributable to Versum | 24.8 | 143.6 | |||||
Adjustments to reconcile income to cash provided by operating activities: | |||||||
Depreciation and amortization | 42.0 | 37.8 | |||||
Deferred income taxes | (10.6 | ) | (3.9 | ) | |||
Gain on sale of assets | (0.1 | ) | (0.3 | ) | |||
Share-based compensation | 7.9 | 7.4 | |||||
Other adjustments | 4.0 | 11.4 | |||||
Working capital changes that provided (used) cash: | |||||||
Trade receivables | 14.5 | (52.3 | ) | ||||
Inventories | (31.1 | ) | (14.6 | ) | |||
Contracts in progress, less progress billings | (30.7 | ) | (21.8 | ) | |||
Payables and accrued liabilities | (26.2 | ) | (7.7 | ) | |||
Accrued income taxes | (1.6 | ) | 35.9 | ||||
Other working capital | (3.3 | ) | 0.1 | ||||
Cash (Used) Provided by Operating Activities | (10.4 | ) | 135.6 | ||||
Investing Activities | |||||||
Additions to plant and equipment | (75.4 | ) | (90.0 | ) | |||
Proceeds from sale of assets | 1.0 | 1.1 | |||||
Cash Used by Investing Activities | (74.4 | ) | (88.9 | ) | |||
Financing Activities | |||||||
Payments on long-term debt | (4.3 | ) | (4.3 | ) | |||
Short-term borrowings | 0.3 | — | |||||
Payments on short-term borrowings | (0.3 | ) | — | ||||
Dividends paid to shareholders | (26.3 | ) | (17.4 | ) | |||
Dividends paid to non-controlling interests | (6.2 | ) | (6.1 | ) | |||
Other financing activity | (2.2 | ) | (3.2 | ) | |||
Cash Used for Financing Activities | (39.0 | ) | (31.0 | ) | |||
Effect of Exchange Rate Changes on Cash | (3.8 | ) | 2.4 | ||||
(Decrease) Increase in Cash and Cash Items | (127.6 | ) | 18.1 | ||||
Cash and Cash items - Beginning of Year | 399.8 | 271.4 | |||||
Cash and Cash items - End of Period | $ | 272.2 | $ | 289.5 | |||
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APPENDIX TABLE A-1: RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In millions, except percentages) | |||||||||||||||
Net (Loss) Income Attributable to Versum (A) | $ | (86.7 | ) | $ | 63.3 | $ | 24.8 | $ | 143.6 | ||||||
Add: Interest expense | 13.0 | 12.5 | 39.0 | 35.7 | |||||||||||
Add: Write-off of financing costs | — | — | — | 2.1 | |||||||||||
Add: Non-service components of net periodic pension cost (B) | 0.2 | 0.1 | 0.6 | 0.5 | |||||||||||
Add: Income tax provision (A) | 24.5 | 19.6 | 62.3 | 88.8 | |||||||||||
Add: Depreciation and amortization | 14.8 | 13.9 | 42.0 | 37.8 | |||||||||||
Add: Non-controlling interests | 1.5 | 0.8 | 4.2 | 4.5 | |||||||||||
Add: Business separation, restructuring and cost reduction actions | 141.4 | 6.7 | 156.3 | 16.7 | |||||||||||
Adjusted EBITDA (B) | $ | 108.7 | $ | 116.9 | $ | 329.2 | $ | 329.7 | |||||||
Adjusted EBITDA Margin | 34 | % | 33 | % | 33 | % | 32 | % | |||||||
(A) - The fiscal year to date ended June 30, 2018 amounts have been recast to reflect the retrospective application of the company’s election to change its inventory valuation method of accounting for its U.S. inventories from the LIFO method to the FIFO method, which resulted in an increase in Net Income Attributable to Versum of $0.1 million and an increase in the Income tax provision of $0.1 million for the fiscal year to date ended June 30, 2018.
(B) - The fiscal third quarter and year to date ended June 30, 2018 amounts have been recast to reflect the retrospective application of the company’s change in classification of the non-service components of net periodic pension cost, which resulted in an increase to non-service components of net periodic pension costs of $0.1 million and $0.5 million for the fiscal third quarter and year to date ended June 30, 2018, respectively.
APPENDIX TABLE A-2: RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In millions) | |||||||||||||||
Net (Loss) Income Attributable to Versum(A) | $ | (86.7 | ) | $ | 63.3 | $ | 24.8 | $ | 143.6 | ||||||
Add: Business separation, restructuring and cost reduction actions, net of tax(B) | 147.2 | 4.9 | 160.0 | 13.0 | |||||||||||
Add: Write-off of financing costs, net of tax(B) | — | — | — | 1.5 | |||||||||||
Add: Impact of Tax Act | (1.4 | ) | 0.7 | (3.1 | ) | 34.6 | |||||||||
Adjusted Net Income | $ | 59.1 | $ | 68.9 | $ | 181.7 | $ | 192.7 | |||||||
(A) - The fiscal year to date ended June 30, 2018 amounts have been recast to reflect the retrospective application of the company’s election to change its inventory valuation method of accounting for its U.S. inventories from the LIFO method to the FIFO method, which resulted in an increase in Net Income Attributable to Versum of $0.1 million.
(B) - See Appendix Table A-1 for amounts gross of tax.
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APPENDIX TABLE A-3: RECONCILIATON OF DILUTED EPS TO ADJUSTED DILUTED EPS
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Per share data) | |||||||||||||||
Diluted (Loss) Earnings Per Share | $ | (0.79 | ) | $ | 0.58 | $ | 0.23 | $ | 1.31 | ||||||
Add: Business separation, restructuring and cost reduction actions per diluted share, net of tax | 1.34 | 0.04 | 1.46 | 0.12 | |||||||||||
Add: Write-off of financing costs, net of tax | — | — | — | 0.01 | |||||||||||
Add: Impact of Tax Act | (0.01 | ) | 0.01 | (0.03 | ) | 0.32 | |||||||||
Adjusted Diluted Earnings Per Share | $ | 0.54 | $ | 0.63 | $ | 1.66 | $ | 1.76 | |||||||
APPENDIX TABLE A-4: SALES BY SEGMENT
For the Quarter Ended | |||||||||||||||
December 31, 2018 | March 31, 2019 | June 30, 2019 | Total | ||||||||||||
(In millions) | |||||||||||||||
Sales | |||||||||||||||
Materials | $ | 221.7 | $ | 216.5 | $ | 214.3 | $ | 652.5 | |||||||
DS&S | 117.2 | 109.1 | 109.4 | 335.7 | |||||||||||
Corporate | 0.6 | 0.6 | 0.6 | 1.8 | |||||||||||
Total Versum Sales | $ | 339.5 | $ | 326.2 | $ | 324.3 | $ | 990.0 | |||||||
For the Quarter Ended | |||||||||||||||||||
December 31, 2017 | March 31, 2018 | June 30, 2018 | September 30, 2018 | Total | |||||||||||||||
(In millions) | |||||||||||||||||||
Sales | |||||||||||||||||||
Materials | $ | 214.6 | $ | 218.9 | $ | 218.5 | $ | 233.6 | $ | 885.6 | |||||||||
DS&S | 115.3 | 121.1 | 130.7 | 116.6 | 483.7 | ||||||||||||||
Corporate | 0.9 | 0.7 | 0.8 | 0.6 | 3.0 | ||||||||||||||
Total Versum Sales | $ | 330.8 | $ | 340.7 | $ | 350.0 | $ | 350.8 | $ | 1,372.3 | |||||||||
Page | 10
APPENDIX TABLE A-5: SEGMENT OPERATING INCOME TO SEGMENT ADJUSTED EBITDA BY QUARTER
For the Quarter Ended | |||||||||||||||
OPERATING INCOME TO ADJ EBITDA | December 31, 2018 | March 31, 2019 | June 30, 2019 | Total | |||||||||||
(In millions, except percentages) | |||||||||||||||
Materials | |||||||||||||||
Operating income | $ | 67.6 | $ | 65.4 | $ | 67.6 | $ | 200.6 | |||||||
Add: Depreciation and amortization | 12.6 | 12.8 | 14.0 | 39.4 | |||||||||||
Segment Adjusted EBITDA | $ | 80.2 | $ | 78.2 | $ | 81.6 | $ | 240.0 | |||||||
Segment Adjusted EBITDA Margin(C) | 36 | % | 36 | % | 38 | % | 37 | % | |||||||
DS&S | |||||||||||||||
Operating income | $ | 34.7 | $ | 34.9 | $ | 31.5 | $ | 101.1 | |||||||
Add: Depreciation and amortization | 0.7 | 0.7 | 0.7 | 2.1 | |||||||||||
Segment Adjusted EBITDA | $ | 35.4 | $ | 35.6 | $ | 32.2 | $ | 103.2 | |||||||
Segment Adjusted EBITDA Margin(C) | 30 | % | 33 | % | 29 | % | 31 | % | |||||||
Corporate | |||||||||||||||
Operating loss | $ | (5.4 | ) | $ | (3.9 | ) | $ | (5.2 | ) | $ | (14.5 | ) | |||
Add: Depreciation and amortization | 0.2 | 0.2 | 0.1 | 0.5 | |||||||||||
Segment Adjusted EBITDA | $ | (5.2 | ) | $ | (3.7 | ) | $ | (5.1 | ) | $ | (14.0 | ) | |||
Total Versum Materials Adjusted EBITDA | $ | 110.4 | $ | 110.1 | $ | 108.7 | $ | 329.2 | |||||||
For the Quarter Ended | |||||||||||||||||||
OPERATING INCOME TO ADJ EBITDA | December 31, 2017 | March 31, 2018 | June 30, 2018 | September 30, 2018 | Total | ||||||||||||||
(In millions, except percentages) | |||||||||||||||||||
Materials | |||||||||||||||||||
Operating income(A),(B) | $ | 66.1 | $ | 71.7 | $ | 71.5 | $ | 77.7 | $ | 287.0 | |||||||||
Add: Depreciation and amortization | 11.0 | 11.6 | 13.0 | 12.1 | 47.7 | ||||||||||||||
Segment Adjusted EBITDA(A),(B) | $ | 77.1 | $ | 83.3 | $ | 84.5 | $ | 89.8 | $ | 334.7 | |||||||||
Segment Adjusted EBITDA Margin(C) | 36 | % | 38 | % | 39 | % | 38 | % | 38 | % | |||||||||
DS&S | |||||||||||||||||||
Operating income(B) | $ | 33.5 | $ | 32.9 | $ | 37.2 | $ | 32.0 | $ | 135.6 | |||||||||
Add: Depreciation and amortization | 0.3 | 0.4 | 0.7 | 0.7 | 2.1 | ||||||||||||||
Segment Adjusted EBITDA(B) | $ | 33.8 | $ | 33.3 | $ | 37.9 | $ | 32.7 | $ | 137.7 | |||||||||
Segment Adjusted EBITDA Margin(C) | 29 | % | 27 | % | 29 | % | 28 | % | 28 | % | |||||||||
Corporate | |||||||||||||||||||
Operating loss(B) | $ | (8.5 | ) | $ | (6.8 | ) | $ | (5.7 | ) | $ | (6.3 | ) | $ | (27.3 | ) | ||||
Add: Depreciation and amortization | 0.3 | 0.3 | 0.2 | 0.2 | 1.0 | ||||||||||||||
Segment Adjusted EBITDA | $ | (8.2 | ) | $ | (6.5 | ) | $ | (5.5 | ) | $ | (6.1 | ) | $ | (26.3 | ) | ||||
Total Versum Materials Adjusted EBITDA | $ | 102.7 | $ | 110.1 | $ | 116.9 | $ | 116.4 | $ | 446.1 | |||||||||
(A) - The fiscal first quarter ended December 31, 2018 amounts have been recast to reflect the retrospective application of the company’s election to change its inventory valuation method of accounting for its U.S. inventories from the LIFO method to the FIFO method. This resulted in an increase in operating income for the materials segment by $0.2 million for the fiscal first quarter ended December 31, 2018 and the year ended September 30, 2018.
(B) - The fiscal full year ended September 30, 2018 amounts have been recast to reflect the retrospective application of the company’s change in classification of the non-service components of net periodic pension cost. This resulted in an increase in operating income of $0.5 million, $0.1 million and $0.1 million for the Materials, DS&S and Corporate segments, respectively, for the fiscal year ended September 30, 2018. All quarters have been updated to reflect this change.
(C) - Segment Adjusted EBITDA margin is calculated by dividing Segment Adjusted EBITDA by sales.
Page | 11
APPENDIX TABLE A-6: CONSOLIDATED AND SEGMENT SALES MAJOR FACTORS
Versum Materials Total
Three Months Ended June 30, 2019 | Nine Months Ended June 30, 2019 | ||||
Sales | |||||
Volume | (2 | )% | — | % | |
Price/Mix | (3 | )% | (2 | )% | |
Currency | (2 | )% | (1 | )% | |
Versum Materials Sales Change | (7 | )% | (3 | )% | |
Materials Segment
Three Months Ended June 30, 2019 | Nine Months Ended June 30, 2019 | ||||
Sales | |||||
Volume | 5 | % | 4 | % | |
Price/Mix | (6 | )% | (3 | )% | |
Currency | (1 | )% | (1 | )% | |
Materials Sales Change | (2 | )% | — | % | |
DS&S Segment
Three Months Ended June 30, 2019 | Nine Months Ended June 30, 2019 | ||||
Sales | |||||
Volume | (13 | )% | (7 | )% | |
Currency | (3 | )% | (2 | )% | |
DS&S Sales Change | (16 | )% | (9 | )% | |
Page | 12