- Sales of $126.6 million and net loss of $2.8 million with
diluted loss per share of $0.02; Adjusted net income of $6.1
million with Adjusted diluted EPS of $0.04;
- Adjusted EBITDA of $42.3 million impacted by $9 million related
to historic winter storm Uri; Adjusted EBITDA margin of 27.2%;
- Reiterating full year 2021 financial outlook;
- On track for closing the sale of Performance Chemicals planned
for the second half of 2021;
- Provided strategic objectives, 5-year growth outlook and
rebranding as ecovyst in recent investor conference; and
- Actions taken to improve share trading liquidity through recent
secondary offering.
Financial results are on a continuing operations basis, which
excludes the Performance Materials and Performance Chemicals
businesses from all quarterly and yearly results presented, unless
otherwise indicated.
Financial results and outlook include non-GAAP financial
measures. These non-GAAP measures are more fully described and are
reconciled from the respective measures determined under GAAP in
“Presentation of Non-GAAP Financial Measures” and the attached
appendix.
PQ Group Holdings Inc. (NYSE:PQG) (“PQ” or the “Company”) today
reported results from continuing operations1 for the first quarter
ended March 31, 2021.
Sales of $126.6 million increased 0.8% compared with the same
period in 2020. Higher sales, led by Silica Catalysts, were
mitigated by a $6 million impact to the Refining Services business
from the severe weather. Net loss was $2.8 million with $0.02
diluted loss per share and Adjusted net income was $6.1 million
with $0.04 Adjusted diluted EPS. Adjusted EBITDA of $42.3 million
was down 13% from the same period in the prior year, largely due to
the $9 million storm impact, which reduced sales volumes and
increased one-time repair costs. The Company estimates that the
storm negatively impacted sales and Adjusted EBITDA by
approximately 5% and 18%, respectively.
“Performance during the first quarter was strong. Absent the
storm, our results would have exceeded the first quarter of last
year, which was prior to the effects of the pandemic,” said
Belgacem Chariag, PQ Chairman, President and Chief Executive
Officer. “We are benefiting from the economic recovery across
multiple end uses and improving demand for our products and
services. We remain on plan to deliver our 2021 full year guidance
for double digit sales and Adjusted EBITDA growth.”
1 Continuing operations include the Company’s Refining Services
and Catalysts businesses.
Review of Segment Results
In a continuation of the fourth quarter trends, the Company is
experiencing improving demand fundamentals for its products and
services. Alkylation, construction and mining demand is improving
as the economy recovers. The polyethylene market growth is expected
to continue with consumption for films and packaging remaining
strong. Demand for fuels and emissions control products is
anticipated to return to pre-pandemic levels in the second half of
the year.
Refining Services
Sales of $100.2 million were in line with the prior year level
of $100.7 million. Lower storm related volumes were partially
mitigated by take-or-pay contracts and pass through of higher
sulfur pricing. Adjusted EBITDA of $33.0 million decreased 11.3%
from the same period in 2020, largely due to the $9 million storm
impact, which reduced sales volumes and increased one-time repair
costs.
Beginning in the second quarter, regeneration services are
expected to rise over the course of the year as gasoline demand
recovers to more than 90% of 2019 levels driven by pandemic
mitigation, rising employment and increases in vehicle miles
traveled. Demand volumes for specialty and high purity virgin
sulfuric acid products are also expected to grow as mining
applications remains robust, and the construction, industrial and
automotive sectors are recovering to near 2019 levels.
Catalysts
Sales of $26.4 million increased 6.0% from the same period in
2020 as double digit demand for polyethylene catalyst more than
offset lower demand for custom catalysts. Zeolyst JV sales of $29.0
million declined $3.3 million as higher sales of catalyst materials
for renewable fuels were more than offset by lower sales of
hydrocracking and specialty catalysts. Adjusted EBITDA of $18.5
million decreased $4.2 million due to lower volumes and unfavorable
fixed cost absorption from reductions of inventory.
With improving recovery trends in traditional fuels coupled with
incremental growth in renewable fuels, demand for emissions control
catalysts is expected to rise through the balance of this year.
Polyethylene catalysts demand continues to be strong, driven by
films and packaging for food and hygiene products. Rising refinery
utilization rates are expected to increase demand for hydrocracking
catalysts moving into the second half of 2021.
Cash Flows and Balance Sheet
At March 31, 2021, the Company had total available liquidity of
$160.8 million, including cash and cash equivalents of $55.2
million. The Company is still finalizing its cash flow disclosures
related to reporting Performance Chemicals as a discontinued
operation, and will provide a statement of cash flows as part of
the Form 10-Q for the quarter ended March 31, 2021.
The Company expects to use after-tax cash proceeds from the sale
of Performance Chemicals, along with a portion of cash balances, to
restructure its debt, which is expected to result in a debt
reduction of $450 million to $550 million. In addition, the Company
plans to return capital to shareholders through a special dividend
of $2.50 to $3.25 per share. The special dividend is subject to
board approval and declaration.
2021 Financial Outlook from Continuing Operations
Based on the expected recovery in demand for many of its end
uses to pre-pandemic levels, the Company is reiterating its 2021
guidance from continuing operations. This reflects the Refining
Services and Catalysts businesses and excludes Performance
Chemicals2 as below:
- Sales of $555 million to $565 million3
- Adjusted EBITDA of $215 million to $225 million
- Adjusted free cash flow of $75 million to $85 million4
(2) With the announced sale of Performance Chemicals, PQ is
reporting this business as a discontinued operation. (3) GAAP sales
only; Excludes proportionate 50 percent share of Zeolyst Joint
Venture sales target of $140 million to $150 million. (4) Adjusted
free cash flow forecast assumes a September 30, 2021 close on the
sale of Performance Chemicals.
Conference Call and Webcast Details
On Thursday, May 6, 2021, PQ management will review the results
during a conference call and audio-only webcast scheduled for 11:00
a.m. Eastern Time.
Conference Call: Investors may listen to the conference call
live via telephone by dialing 1 (800) 459-5346 (domestic) or 1
(203) 518-9544 (international) and use the participant code
PQGQ121.
Webcast: An audio-only live webcast of the conference call and
presentation materials can be accessed at
http://investor.pqcorp.com.
A replay of the conference call/webcast will be made available
at http://investor.pqcorp.com/events-presentations.
Investor Contact: Nahla A. Azmy (610) 651-4561
Nahla.Azmy@pqcorp.com
About PQ Group Holdings Inc.
PQ Group Holdings Inc. and subsidiaries is a leading integrated
and innovative global provider of specialty catalysts and services.
We support customers globally through our strategically located
network of manufacturing facilities. We believe that our products,
which are predominantly inorganic, and services contribute to
improving the sustainability of the environment.
We have two uniquely positioned specialty businesses:
Refining Services provides sulfuric acid recycling to the
North American refining industry and Catalysts serves the
packaging and engineering plastics and the global refining,
petrochemical and emissions control industries.
For more information, see our website at
https://www.pqcorp.com.
Presentation of Non-GAAP Financial Measures
In addition to the results provided in accordance with U.S.
generally accepted accounting principles (“GAAP”) throughout this
press release, the company has provided non-GAAP financial measures
— Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income,
Adjusted EPS, and Adjusted diluted EPS (collectively, “Non-GAAP
Financial Measures”) — which present results on a basis adjusted
for certain items. The company uses these Non-GAAP Financial
Measures for business planning purposes and in measuring its
performance relative to that of its competitors. The company
believes that these Non-GAAP Financial Measures are useful
financial metrics to assess its operating performance from
period-to-period by excluding certain items that the company
believes are not representative of its core business. These
Non-GAAP Financial Measures are not intended to replace, and should
not be considered superior to, the presentation of the company’s
financial results in accordance with GAAP. The use of the Non-GAAP
Financial Measures terms may differ from similar measures reported
by other companies and may not be comparable to other similarly
titled measures. These Non-GAAP Financial Measures are reconciled
from the respective measures under GAAP in the appendix below.
The company is not able to provide a reconciliation of the
company’s non-GAAP financial guidance to the corresponding GAAP
measures without unreasonable effort because of the inherent
difficulty in forecasting and quantifying certain amounts necessary
for such a reconciliation such as certain non-cash, nonrecurring or
other items that are included in net income and EBITDA as well as
the related tax impacts of these items and asset dispositions /
acquisitions and changes in foreign currency exchange rates that
are included in cash flow, due to the uncertainty and variability
of the nature and amount of these future charges and costs.
Zeolyst Joint Venture
The company’s zeolite catalysts product group operates through
its Zeolyst Joint Venture, which is accounted for as an equity
method investment in accordance with GAAP. The presentation of the
Zeolyst Joint Venture’s sales represents 50% of the sales of the
Zeolyst Joint Venture. The company does not record sales by the
Zeolyst Joint Venture as revenue and such sales are not
consolidated within the company’s results of operations. However,
the company’s Adjusted EBITDA reflects the share of earnings of the
Zeolyst Joint Venture that have been recorded as equity in net
income from affiliated companies in the company’s consolidated
statements of income for such periods and includes Zeolyst Joint
Venture adjustments on a proportionate basis based on the company’s
50% ownership interest. Accordingly, the company’s Adjusted EBITDA
margins are calculated including 50% of the sales of the Zeolyst
Joint Venture for the relevant periods in the denominator.
Note on Forward-Looking Statements
Some of the information contained in this press release
constitutes “forward-looking statements.” Forward-looking
statements can be identified by words such as “anticipates,”
“intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,”
“projects” and similar references to future periods.
Forward-looking statements are based on our current expectations
and assumptions regarding our business, the economy and other
future conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict. Examples of
forward-looking statements include, but are not limited to,
statements regarding the sale of the Performance Chemicals business
segment, including the intended use of proceeds therefrom, our
future results of operations, financial condition, liquidity,
prospects, growth, strategies, capital allocation program, product
and service offerings, including the impact of the COVID-19
pandemic on such items, expected demand trends and our 2021
financial outlook. Our actual results may differ materially from
those contemplated by the forward-looking statements. We caution
you, therefore, against relying on any of these forward-looking
statements. They are neither statements of historical fact nor
guarantees or assurances of future performance. Important factors
that could cause actual results to differ materially from those in
the forward-looking statements include, but are not limited to, our
ability to close on the sale of the Performance Chemicals business
segment on our anticipated timeline, or at all, regional, national
or global political, economic, business, competitive, market and
regulatory conditions, including the ongoing COVID-19 pandemic,
tariffs and trade disputes, currency exchange rates and other
factors, including those described in the sections titled “Risk
Factors” and “Management Discussion & Analysis of Financial
Condition and Results of Operations” in our filings with the SEC,
which are available on the SEC’s website at www.sec.gov. These
forward-looking statements speak only as of the date of this
release. Factors or events that could cause our actual results to
differ may emerge from time to time, and it is not possible for us
to predict all of them. We undertake no obligation to update any
forward-looking statement, whether as a result of new information,
future developments or otherwise, except as may be required by
applicable law.
PQ GROUP HOLDINGS INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(in millions, except share and
per share amounts)
Three months ended
March 31,
2021
2020
% Change
Sales
$
126.6
$
125.6
0.8
%
Cost of goods sold
96.5
87.9
9.8
%
Gross profit
30.1
37.7
(20.2)
%
Selling, general and administrative
expenses
22.1
22.3
(0.9)
%
Other operating expense, net
5.5
3.5
57.1
%
Operating income
2.5
11.9
(79.0)
%
Equity in net (income) from affiliated
companies
(5.2)
(8.3)
(37.3)
%
Interest expense, net
10.5
15.3
(31.4)
%
Debt extinguishment costs
—
2.5
(100.0)
%
Other expense, net
5.2
7.5
(30.7)
%
Loss before income taxes and
noncontrolling interest
(8.0)
(5.1)
56.9
%
Benefit for income taxes
(5.2)
(1.7)
205.9
%
Effective tax rate
65.4
%
33.2
%
Net loss from continuing operations
(2.8)
(3.4)
(17.6)
%
Net income from discontinued
operations
0.7
3.9
(82.1)
%
Net (loss) income
(2.1)
0.5
(520.0)
%
Less: Net income attributable to the
noncontrolling interest - discontinued operations
0.1
0.3
(66.7)
%
Net (loss) income attributable to PQ Group
Holdings Inc
$
(2.2)
$
0.2
(1,200.0)
%
Loss from continuing operations
$
(2.8)
$
(3.3)
Income from discontinued operations
$
0.6
$
3.6
Net (loss) income attributable to PQ Group
Holdings Inc
$
(2.2)
$
0.2
Earnings per share:
Basic loss per share - continuing
operations
$
(0.02)
$
(0.02)
Diluted loss per share - continuing
operations
$
(0.02)
$
(0.02)
Weighted average shares outstanding:
Basic
136,006,082
135,240,897
Diluted
136,006,082
136,086,082
PQ GROUP HOLDINGS INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions, except share and
per share amounts)
March 31, 2021
December 31,
2020
ASSETS
Cash and cash equivalents
$
55.2
$
114.0
Accounts receivable, net
57.0
46.2
Inventories, net
48.9
52.8
Prepaid and other current assets
16.8
11.7
Current assets held for sale
191.4
204.0
Total current assets
369.3
428.7
Investments in affiliated companies
455.3
458.1
Property, plant and equipment, net
598.0
597.0
Goodwill
429.5
391.6
Other intangible assets, net
134.7
137.4
Right-of-use lease assets
31.7
28.9
Other long-term assets
15.0
12.5
Long-term assets held for sale
1,126.0
1,144.2
Total assets
$
3,159.5
$
3,198.4
LIABILITIES
Current maturities of long-term debt
$
—
$
—
Accounts payable
42.0
38.1
Operating lease liabilities—current
7.5
6.7
Accrued liabilities
47.1
45.5
Current liabilities held for sale
96.1
111.6
Total current liabilities
192.7
201.9
Long-term debt, excluding current
portion
1,401.6
1,400.4
Deferred income taxes
123.6
125.7
Operating lease liabilities—noncurrent
24.1
22.0
Other long-term liabilities
15.2
15.6
Long-term liabilities held for sale
123.0
155.6
Total liabilities
1,880.2
1,921.2
Commitments and contingencies
EQUITY
Common stock ($0.01 par); authorized
shares 450,000,000; issued shares 137,815,163 and 137,102,143 on
March 31, 2021 and December 31, 2020, respectively; outstanding
shares 136,932,950 and 136,318,557 on March 31, 2021 and December
31, 2020, respectively
1.4
1.4
Preferred stock ($0.01 par); authorized
shares 50,000,000; no shares issued or outstanding on March 31,
2021 and December 31, 2020
—
—
Additional paid-in capital
1,484.8
1,477.9
Accumulated deficit
(178.0)
(175.8)
Treasury stock, at cost; shares 882,213
and 783,586 on March 31, 2021 and December 31, 2020,
respectively
(12.6)
(11.1)
Accumulated other comprehensive loss
(15.6)
(15.3)
Total PQ Group Holdings Inc. equity
1,280.0
1,277.1
Noncontrolling interest
(0.7)
0.1
Total equity
1,279.3
1,277.2
Total liabilities and equity
$
3,159.5
$
3,198.4
Appendix Table A-1: Reconciliation of
Net Loss to Segment Adjusted EBITDA
Three months ended
March 31,
2021
2020
(in millions)
Reconciliation of net loss from
continuing operations to Segment Adjusted EBITDA
Net loss from continuing operations
$
(2.8)
$
(3.3)
Benefit for income taxes
(5.2)
(1.7)
Interest expense, net
10.5
15.3
Depreciation and amortization
19.5
18.7
EBITDA
22.0
29.0
Joint venture depreciation, amortization
and interest(a)
3.6
3.7
Amortization of investment in affiliate
step-up(b)
1.7
1.7
Debt extinguishment costs
—
2.5
Net loss on asset disposals(c)
0.8
0.2
Foreign currency exchange loss(d)
5.1
7.1
LIFO benefit(e)
(0.3)
(1.7)
Transaction and other related costs(f)
0.5
0.8
Equity-based compensation
6.3
4.3
Restructuring, integration and business
optimization expenses(g)
2.3
0.3
Defined benefit pension plan
benefit(h)
(0.6)
(0.1)
Other(i)
0.9
0.8
Adjusted EBITDA
42.3
48.6
Unallocated corporate expenses
9.2
11.3
Segment Adjusted EBITDA
$
51.5
$
59.9
Descriptions to PQ Non-GAAP Reconciliations
- We use Adjusted EBITDA as a performance measure to evaluate our
financial results. Because our Catalysts segment includes our 50%
interest in the Zeolyst Joint Venture, we include an adjustment for
our 50% proportionate share of depreciation, amortization and
interest expense of the Zeolyst Joint Venture.
- Represents the amortization of the fair value adjustments
associated with the equity affiliate investment in the Zeolyst
Joint Venture as a result of the combination of the businesses of
PQ Holdings Inc. and Eco Services Operations LLC in May 2016 (the
“Business Combination”). We determined the fair value of the equity
affiliate investment and the fair value step-up was then attributed
to the underlying assets of the Zeolyst Joint Venture. Amortization
is primarily related to the fair value adjustments associated with
fixed assets and intangible assets, including customer
relationships and technical know-how.
- When asset disposals occur, we remove the impact of net
gain/loss of the disposed asset because such impact primarily
reflects the non-cash write-off of long-lived assets no longer in
use.
- Reflects the exclusion of the foreign currency transaction
gains and losses in the statements of income primarily related to
the non-permanent intercompany debt denominated in local currency
translated to U.S. dollars.
- Represents non-cash adjustments to the company’s LIFO reserves
for certain inventories in the U.S. that are valued using the LIFO
method, which we believe provides a means of comparison to other
companies that may not use the same basis of accounting for
inventories.
- Relates to certain transaction costs, including debt financing,
due diligence and other costs related to transactions that are
completed, pending or abandoned, that we believe are not
representative of our ongoing business operations.
- Includes the impact of restructuring, integration and business
optimization expenses which are incremental costs that are not
representative of our ongoing business operations.
- Represents adjustments for defined benefit pension plan
(benefit) costs in our statements of income. All of our defined
benefit pension plan obligations are under defined benefit pension
plans that are frozen. As such, we do not view such income or
expenses as core to our ongoing business operations.
- Other costs consist of certain expenses that are not core to
our ongoing business operations, including environmental
remediation-related costs associated with the legacy operations of
our business prior to the Business Combination, capital and
franchise taxes. Included in this line-item are rounding
discrepancies that may arise from rounding from dollars (in
thousands) to dollars (in millions).
Appendix Table A-2: Reconciliation of
Net Income to Adjusted Net Income(1)
Three months ended March
31,
2021
2020
Pre-tax
Tax expense (benefit)
After-tax
Pre-tax
Tax expense (benefit)
After-tax
(in millions)
Net loss before non-controlling
interest
$
(8.0)
$
(5.2)
$
(2.8)
$
(5.1)
$
(1.7)
$
(3.4)
Less: Net income attributable to
non-controlling interest
—
—
—
—
—
—
Net loss from continuing operations
(8.0)
(5.2)
(2.8)
(5.1)
(1.7)
(3.4)
Earnings per share:
Basic loss per share - continuing
operations
$
(0.02)
$
(0.02)
Diluted loss per share - continuing
operations
$
(0.02)
$
(0.02)
Net loss from continuing operations
$
(8.0)
$
(5.2)
$
(2.8)
$
(5.1)
$
(1.7)
$
(3.4)
Amortization of investment in affiliate
step-up(b)
1.7
0.6
1.1
1.7
0.6
1.1
Debt extinguishment costs
—
—
—
2.5
0.8
1.7
Net loss on asset disposals(c)
0.8
0.2
0.6
0.2
0.1
0.1
Foreign currency exchange loss(d)
5.1
1.4
3.7
7.1
2.3
4.8
LIFO benefit(e)
(0.3)
(0.1)
(0.2)
(1.7)
(0.6)
(1.1)
Transaction and other related costs(f)
0.5
0.1
0.4
0.8
0.3
0.5
Equity-based compensation
6.3
1.8
4.5
4.3
1.4
2.9
Restructuring, integration and business
optimization expenses(g)
2.3
0.7
1.6
0.3
0.1
0.2
Defined benefit plan pension
benefit(h)
(0.6)
(0.2)
(0.4)
(0.1)
—
(0.1)
Other(i)
0.9
0.4
0.5
0.8
0.2
0.6
Adjusted Net Income, including Intraperiod
allocation
8.7
(0.3)
9.0
10.8
3.5
7.3
Intraperiod allocation for restating
discontinued operations(2)
—
2.9
(2.9)
—
—
—
Adjusted Net Income(1)
$
8.7
$
2.6
$
6.1
$
10.8
$
3.5
$
7.3
Adjusted earnings per share:
Adjusted basic earnings per share
$
0.04
$
0.05
Adjusted diluted earnings per share
$
0.04
$
0.05
Weighted average shares outstanding:
Basic
136,006,082
135,240,897
Diluted
137,447,564
136,086,082
See Appendix Table A-1 for Descriptions to PQ Non-GAAP
Reconciliations in the table above.
- We define adjusted net income as net income attributable to PQ
Group Holdings adjusted for non-operating income or expense and the
impact of certain non-cash or other items that are included in net
income that we do not consider indicative of our ongoing operating
performance. Adjusted net income is presented as a key performance
indicator as we believe it will enhance a prospective investor’s
understanding of our results of operations and financial condition.
Adjusted net income may not be comparable with net income or
adjusted net income as defined by other companies.
- Due to reporting the Performance Chemicals business as held for
sale in discontinued operations, the estimated tax rate used to
value deferred tax assets (“DTAs”) and deferred tax liabilities
(“DTLs”) needs to be adjusted to remove the Performance Chemicals
rate. Given it is a direct result of the sale of discontinued
operations and the need to adjust the estimated tax rate arose
because of discontinued operations, the impact of revaluing the
reporting entity’s DTAs and DTLs are reflected in continuing
operations. Due to this revaluation being solely as a result of the
Performance Chemicals divestiture and a non-cash item, it is
treated as an addback.
Appendix Table A-3: Business Segment
Sales and Adjusted EBITDA
Three months ended
March 31,
2021
2020
% Change
Sales:
Refining Services
$
100.2
$
100.7
(0.5)
%
Silica Catalysts
26.4
24.9
6.0
%
Total sales
$
126.6
$
125.6
0.8
%
Zeolyst joint venture sales
$
29.0
$
32.3
(10.2)
%
Adjusted EBITDA:
Refining Services
$
33.0
$
37.2
(11.3)
%
Catalysts
18.5
22.7
(18.5)
%
Total Segment Adjusted EBITDA
$
51.5
$
59.9
(14.0)
%
Corporate
(9.2)
(11.3)
18.6
%
Total Adjusted EBITDA
$
42.3
$
48.6
(13.0)
%
Adjusted EBITDA Margin:
Refining Services
32.9
%
36.9
%
Catalysts(1)
33.4
%
39.7
%
Total Adjusted EBITDA Margin(1)
27.2
%
30.8
%
- Adjusted EBITDA margin calculation includes proportionate 50%
share of sales from the Zeolyst Joint Venture.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210506005413/en/
Investor: Nahla A. Azmy (610) 651-4561
Nahla.Azmy@pqcorp.com
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