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Catalent, Inc. reports second quarter fiscal 2021 results

  • Q2’21 net revenue of $910.8 million increased 26% as-reported, or 24% in constant currency, compared to Q2’20. Organic, constant currency net revenue grew 17%, compared to Q2’20.
  • Q2’21 net earnings of $88.4 million increased 94%, or 88% in constant currency, compared to Q2’20.
  • Q2’21 Adjusted EBITDA of $223.5 million increased 31% as-reported, or 28% in constant currency, compared to Q2’20.
  • Q2’21 Biologics segment net revenue of $403.9 million increased more than 75%, compared to Q2’20.
  • Increasing guidance to reflect projected net revenue growth of 23-28% and Adjusted EBITDA growth of 26-33%, compared to projected net revenue growth in previous guidance of 16-22% and Adjusted EBITDA growth of 17-26%.

SOMERSET, N.J. — (BUSINESS WIRE) — Catalent, Inc. (NYSE: CTLT), the leading global provider of advanced delivery technologies, development, and manufacturing solutions for drugs, biologics, cell and gene therapies, and consumer health products, today announced financial results for the second quarter of fiscal 2021, which ended December 31, 2020.

“Our second quarter results reflect robust organic growth in our Biologics segment, and our increased guidance reflects our expectation of continued strong results for these offerings for the remainder of our fiscal year. Additional capacity in our drug product and drug substance offerings will come on line in the second half of our fiscal year to help fight the pandemic and serve other critical patient needs,” said John Chiminski, Chair and Chief Executive Officer of Catalent, Inc.

Second Quarter 2021 Consolidated Results

Net revenue of $910.8 million increased 26% as reported, or 24% in constant currency, from the $721.4 million reported for the second quarter a year ago. Overall organic revenue growth (i.e., excluding the effect of acquisitions) was 17%.

Net earnings were $88.4 million. Accounting for the net earnings attributable to holders of Catalent’s Series A convertible preferred stock, net earnings attributable to common shareholders were $76.6 million, or $0.46 per basic share, compared to net earnings attributable to common shareholders of $34.3 million, or $0.23 per basic share, in the second quarter a year ago.

EBITDA from operations, as referenced in the GAAP to non-GAAP reconciliation provided later in this release, was $205.9 million, an increase of $50.6 million from $155.3 million in the second quarter a year ago. Second quarter fiscal 2021 Adjusted EBITDA (see the GAAP to non-GAAP reconciliation provided later in this release) was $223.5 million, or 24.5% of net revenue, compared to $171.0 million, or 23.7% of net revenue, in the second quarter a year ago. This represents an increase of 30.7% as reported, and an increase of 27.8% on a constant-currency basis.

Adjusted Net Income (see the GAAP to non-GAAP reconciliation) was $114.4 million, or $0.63 per diluted share, compared to Adjusted Net Income of $72.0 million, or $0.45 per diluted share, in the second quarter a year ago.

Second Quarter 2021 Segment Review

Biologics

Net revenue from the Biologics segment was $403.9 million for the second quarter of fiscal 2021, an increase of 79% as reported and 76% in constant currency, compared to the second quarter a year ago. Segment EBITDA (see the GAAP to non-GAAP reconciliation provided later in this release) in the second quarter of fiscal 2021 was $135.5 million, an increase of 115% as reported and 109% in constant currency compared to the second quarter a year ago. Segment EBITDA margin was 33.5% in the second quarter of fiscal 2021 compared to 28.0% in the second quarter of the prior year.

Excluding the effect of acquisitions, net revenue increased 65% and segment EBITDA increased 104% compared to the three months ended December 31, 2019.

The Biologics segment represented 44% of Catalent’s total net revenue in the second quarter of fiscal 2021.

Softgel and Oral Technologies

Net revenue from the Softgel and Oral Technologies segment was $246.6 million for the second quarter of fiscal 2021, a decrease of 8% as reported or 10% in constant currency, compared to the second quarter a year ago. Segment EBITDA was $45.6 million in the second quarter of fiscal 2021, a decrease of 29% as reported, or 31% in constant currency, compared to the second quarter a year ago. Segment EBITDA margin was 18.5% in the second quarter of fiscal 2021 compared to 24.1% in the second quarter of the prior year.

The Softgel and Oral Technologies segment represented 27% of Catalent’s total net revenue in the second quarter of fiscal 2021.

Oral and Specialty Delivery

Net revenue from the Oral and Specialty Delivery segment was $169.9 million for the second quarter of fiscal 2021, an increase of 19% as reported and 17% in constant currency, over the second quarter a year ago. Segment EBITDA in the second quarter of fiscal 2021 was $44.2 million, an increase of 34% as reported, or 31% in constant currency, compared to the second quarter a year ago. Segment EBITDA margin was 26.0% in the second quarter of fiscal 2021 compared to 23.1% in the second quarter of the prior year.

Excluding the effect of acquisitions, net revenue increased 2% and segment EBITDA increased 9% compared to the three months ended December 31, 2019.

The Oral and Specialty Delivery segment represented 19% of Catalent’s total net revenue in the second quarter of fiscal 2021.

Clinical Supply Services

Net revenue from the Clinical Supply Services segment was $93.5 million for the second quarter of fiscal 2021, an increase of 6% as reported and 4% in constant currency, compared to the second quarter a year ago. Segment EBITDA in the second quarter of fiscal 2021 was $25.3 million, an increase of 5% as reported, or 2% in constant currency, compared to the second quarter a year ago. Segment EBITDA margin was 27.1% in the second quarter of fiscal 2021 compared to 27.3% in the second quarter of the prior year.

The Clinical Supply Services segment represented 10% of Catalent’s total net revenue in the second quarter of fiscal 2021.

Balance Sheet and Liquidity

As of December 31, 2020, Catalent had $3.1 billion in total debt, and $2.2 billion in total debt net of cash and short-term investments, compared to $2.1 billion in total net debt as of September 30, 2020. The current debt structure does not include any significant maturity until 2026.

Catalent’s net leverage ratio (see the GAAP to non-GAAP reconciliation provided later in this release) as of December 31, 2020 was 2.6x, compared to 2.6x at September 30, 2020 and 4.2x at December 31, 2019.

Fiscal Year 2021 Outlook

Catalent is raising its previously issued guidance to reflect second quarter performance and to account for higher net underlying demand, including increased demand related to COVID-19 treatments and vaccines, partially offset by lower demand in some offerings attributable to the effects of the pandemic.

The revised guidance assumes no major unforeseen change to either the current status of the COVID-19 pandemic generally or its effect on Catalent’s operations and business. The revised guidance does not assume the receipt of any vaccine or treatment order from any of our customers beyond what either has been received to date or is deemed required under executed take-or-pay arrangements. The revised guidance ranges are wider than the ranges we have forecasted in the previous few fiscal years due to the continuing uncertainty in both revenues and costs across our businesses engendered by the COVID-19 pandemic. The revised guidance projects:

  • Net revenue for fiscal 2021 in the range of $3.80 billion to $3.95 billion, compared to the previous range of $3.58 billion to $3.78 billion;
  • Adjusted EBITDA for fiscal 2021 in the range of $950 million to $1,000 million, compared to the previous range of $880 million to $950 million;
  • Adjusted Net Income for fiscal 2021 in the range of $475 million to $525 million, compared to the previous range of $410 million to $470 million; and
  • A fully diluted share count in the range of 180 million to 182 million shares on a weighted-average basis, which includes the outstanding Series A Convertible Preferred Stock as-if converted, compared to the previous range of 178 million to 180 million shares.

Earnings Webcast

The Company’s management will host a webcast to discuss the results at 8:15 a.m. ET today. Catalent invites all interested parties to listen to the webcast, which will be accessible through Catalent’s website at http://investor.catalent.com. A supplemental slide presentation will also be available in the “Investors” section of Catalent’s website prior to the start of the webcast. The webcast replay, along with the supplemental slides, will be available for 90 days in the “Investors” section of Catalent’s website at www.catalent.com.

About Catalent, Inc.

Catalent, Inc. (NYSE: CTLT), an S&P 500® company, is the leading global provider of advanced delivery technologies, development, and manufacturing solutions for drugs, biologics, cell and gene therapies, and consumer health products. With over 85 years serving the industry, Catalent has proven expertise in bringing more customer products to market faster, enhancing product performance and ensuring reliable clinical and commercial product supply. Catalent employs more than 14,000 people, including approximately 2,500 scientists, at more than 45 facilities across four continents and in fiscal year 2020 generated over $3 billion in annual revenue. Catalent is headquartered in Somerset, N.J. For more information, please visit www.catalent.com.

Non-GAAP Financial Measures

Use of EBITDA from operations, Adjusted EBITDA, Adjusted Net Income and Segment EBITDA

Management measures operating performance based on consolidated earnings from operations before interest expense, expense (benefit) for income taxes, and depreciation and amortization, adjusted for the income or loss attributable to non-controlling interests (“EBITDA from operations”). EBITDA from operations is not defined under U.S. GAAP, is not a measure of operating income, operating performance, or liquidity presented in accordance with U.S. GAAP, and is subject to important limitations.

Catalent believes that the presentation of EBITDA from operations enhances an investor’s understanding of its financial performance. Catalent believes this measure is a useful financial metric to assess its operating performance across periods by excluding certain items that it believes are not representative of its core business and uses this measure for business planning purposes.

In addition, given the significant investments that Catalent has made in the past in property, plant and equipment, depreciation and amortization expenses represent a meaningful portion of its cost structure. Catalent believes that EBITDA from operations will provide investors with a useful tool for assessing the comparability between periods of its ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures because it eliminates depreciation and amortization expense. Catalent presents EBITDA from operations in order to provide supplemental information that it considers relevant for the readers of its consolidated financial statements, and such information is not meant to replace or supersede U.S. GAAP measures. Catalent’s definition of EBITDA from operations may not be the same as similarly titled measures used by other companies.

Catalent evaluates the performance of its segments based on segment earnings before non-controlling interest, other (income) expense, impairments, restructuring costs, interest expense, income tax expense (benefit), and depreciation and amortization (“segment EBITDA”). Moreover, under Catalent’s credit agreement, its ability to engage in certain activities, such as incurring certain additional indebtedness, making certain investments and paying certain dividends, is tied to ratios based on Adjusted EBITDA, which is not defined under U.S. GAAP, is not a measure of operating income, operating performance, or liquidity presented in accordance with U.S. GAAP, and is subject to important limitations. Adjusted EBITDA is the covenant compliance measure used in the credit agreement governing debt incurrence and restricted payments. Because not all companies use identical calculations, Catalent’s presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

Management also measures operating performance based on Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per share. Adjusted Net Income (Loss) is not defined under U.S. GAAP, is not a measure of operating income, operating performance, or liquidity presented in accordance with U.S. GAAP and is subject to important limitations. Catalent believes that the presentation of Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per share enhances an investor’s understanding of its financial performance. Catalent believes these measures are a useful financial metric to assess its operating performance across periods by excluding certain items that it believes are not representative of its core business and Catalent uses these measures for business planning purposes. Catalent defines Adjusted Net Income (Loss) as net earnings (loss) adjusted for amortization attributable to purchase accounting and adjustments for other cash and non-cash items included in the table below, partially offset by its estimate of the tax effects of such cash and non-cash items. Catalent believes that Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per share provides investors with a useful tool for assessing the comparability between periods of its ability to generate cash from operations available to its stockholders. Catalent’s definition of Adjusted Net Income (Loss) may not be the same as similarly titled measures used by other companies.

The most directly comparable U.S. GAAP measure to EBITDA from operations, Adjusted EBITDA and Adjusted Net Income (Loss) is net earnings (loss). Included in this release is a reconciliation of net earnings (loss) to EBITDA from operations, Adjusted EBITDA and Adjusted Net Income.

Catalent does not provide a reconciliation of forward-looking non-GAAP financial measures to their comparable U.S. GAAP financial measures because it could not do so without unreasonable effort due to the unavailability of the information needed to calculate reconciling items and due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP financial measures in future periods. When planning, forecasting, and analyzing future periods, Catalent does so primarily on a non-GAAP basis without preparing a U.S. GAAP analysis as that would require estimates for various cash and non-cash reconciling items that would be difficult to predict with reasonable accuracy. For example, equity compensation expense would be difficult to estimate because it depends on Catalent’s future hiring and retention needs, as well as the future fair market value of its common stock, all of which are difficult to predict and subject to constant change. It is equally difficult to anticipate the need for or magnitude of a presently unforeseen one-time restructuring expense or the values of end-of-period foreign currency exchange rates. As a result, Catalent does not believe that a U.S. GAAP reconciliation would provide meaningful supplemental information about its outlook.

Use of Constant Currency

As changes in exchange rates are an important factor in understanding period-to-period comparisons, Catalent believes the presentation of results on a constant-currency basis in addition to reported results helps improve investors’ ability to understand its operating results and evaluate its performance in comparison to prior periods. Constant-currency information compares results between periods as if exchange rates had remained constant period over period. Catalent uses results on a constant-currency basis as one measure to evaluate its performance. Catalent calculates constant currency by calculating current-year results using prior-year foreign currency exchange rates. Catalent generally refers to such amounts calculated on a constant-currency basis as excluding the impact of foreign exchange or being on a constant-currency basis. These results should be considered in addition to, not as a substitute for, results reported in accordance with U.S. GAAP. Results on a constant-currency basis, as Catalent presents them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with U.S. GAAP.

Forward-Looking Statements

This release contains both historical and forward-looking statements. All statements other than statements of historical fact, are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally can be identified by the use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “plan,” “project,” “foresee,” “likely,” “may,” “will,” “would,” or other words or phrases with similar meanings. Similarly, statements that describe Catalent’s objectives, plans, or goals are, or may be, forward-looking statements. These statements are based on current expectations of future events. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from Catalent’s expectations and projections. Some of the factors that could cause actual results to differ include, but are not limited to, the following: the current or future effects of the COVID-19 pandemic on Catalent’s and its clients’ businesses; participation in a highly competitive market and increased competition that may adversely affect Catalent’s business; demand for its offerings, which depends in part on its customers’ research and development and the clinical and market success of their products; product and other liability risks that could adversely affect Catalent’s results of operations, financial condition, liquidity and cash flows; failure to comply with existing and future regulatory requirements; failure to provide quality offerings to customers could have an adverse effect on Catalent’s business and subject it to regulatory actions and costly litigation; problems providing the highly exacting and complex services or support required; global economic, political and regulatory risks to Catalent’s operations; inability to enhance existing or introduce new technology or service offerings in a timely manner; inadequate patents, copyrights, trademarks and other forms of intellectual property protections; fluctuations in the costs, availability, and suitability of the components of the products Catalent manufactures, including active pharmaceutical ingredients, excipients, purchased components and raw materials; changes in market access or healthcare reimbursement in the United States or internationally; fluctuations in the exchange rate of the U.S. dollar against other currencies, including as a result of the U.K.’s exit from the European Union; adverse tax legislative or regulatory initiatives or challenges or adjustments to Catalent’s tax positions; loss of key personnel; risks generally associated with information systems; inability to complete any future acquisitions or other transactions that may complement or expand its business or divest of non-strategic businesses or assets and difficulties in successfully integrating acquired businesses and realizing anticipated benefits of such acquisitions; risks associated with timely and successfully completing, and correctly anticipating the future demand predicted for, capital expansion projects at existing facilities, offerings and customers’ products that may infringe on the intellectual property rights of third parties; environmental, health and safety laws and regulations, which could increase costs and restrict operations; labor and employment laws and regulations or labor difficulties, which could increase costs or result in operational disruptions; additional cash contributions required to fund Catalent’s existing pension plans; substantial leverage that may limit its ability to raise additional capital to fund operations and react to changes in the economy or in the industry; and exposure to interest-rate risk to the extent of its variable-rate debt preventing it from meeting its obligations under its indebtedness. For a more detailed discussion of these and other factors, see the information under the caption “Risk Factors” in Catalent’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020, filed August 31, 2020. All forward-looking statements speak only as of the date of this release or as of the date they are made, and Catalent does not undertake to update any forward-looking statement as a result of new information or future events or developments except to the extent required by law.

More products. Better treatments. Reliably supplied.™

Catalent, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited; dollars and shares in millions, except per share data)

Three Months Ended
December 31,

FX Impact

Constant Currency

Increase/(Decrease)

2020

2019

Change $

Change %

Net revenue

$

910.8

$

721.4

$

17.9

$

171.5

24

%

Cost of sales

612.6

489.2

10.9

112.5

23

%

Gross margin

298.2

232.2

7.0

59.0

25

%

Selling, general, and administrative expenses

165.5

141.0

1.4

23.1

16

%

Impairment charges and (gain) loss on sale of assets

0.6

1.7

—

(1.1)

(65)

%

Restructuring and other

5.5

0.5

0.1

4.9

980

%

Operating earnings

126.6

89.0

5.5

32.1

36

%

Interest expense, net

25.9

34.9

0.2

(9.2)

(26)

%

Other (income) expense, net

(8.3)

(4.4)

1.8

(5.7)

130

%

Earnings before income taxes

109.0

58.5

3.5

47.0

80

%

Income tax expense

20.6

13.0

0.7

6.9

53

%

Net earnings

$

88.4

$

45.5

$

2.8

$

40.1

88

%

Less: Net earnings attributable to preferred shareholders

(11.8)

(11.2)

—

—

—

%

Net earnings attributable to common shareholders

$

76.6

$

34.3

$

—

$

—

—

%

Weighted average shares outstanding – basic

167.1

146.1

Weighted average diluted shares outstanding – diluted

169.3

147.7

Earnings per share:

Basic

Net earnings

$

0.46

$

0.23

Diluted

Net earnings

$

0.45

$

0.23

Catalent, Inc. and Subsidiaries

Selected Segment Financial Data

(Unaudited; dollars in millions)

Three Months Ended
December 31,

FX Impact

Constant Currency

Increase/(Decrease)

2020

2019

Change $

Change %

Biologics

Net revenue

$

403.9

$

225.2

$

7.9

$

170.8

76

%

Segment EBITDA

135.5

63.0

3.9

68.6

109

%

Softgel and Oral Technologies

Net revenue

246.6

267.9

5.2

(26.5)

(10)

%

Segment EBITDA

45.6

64.5

1.0

(19.9)

(31)

%

Oral and Specialty Delivery

Net revenue

169.9

143.2

2.7

24.0

17

%

Segment EBITDA

44.2

33.1

0.9

10.2

31

%

Clinical Supply Services

Net revenue

93.5

87.9

2.0

3.6

4

%

Segment EBITDA

25.3

24.0

0.9

0.4

2

%

Inter-segment revenue elimination

(3.1)

(2.8)

0.1

(0.4)

(14)

%

Unallocated costs

(44.7)

(29.3)

(2.1)

(13.3)

(45)

%

Combined totals

Net revenue

$

910.8

$

721.4

$

17.9

$

171.5

24

%

EBITDA from operations

$

205.9

$

155.3

$

4.6

$

46.0

30

%

Contacts

Investor Contact:

Catalent, Inc.

Paul Surdez

732-537-6325

investors@catalent.com

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Categories
Healthcare

Catalent, Inc. reports first quarter fiscal 2021 results

  •  Q1’21 net revenue of $845.7 million increased 27% as-reported, or 26% in constant currency, compared to Q1’20. On an organic basis, constant currency net revenue in Q1’21 grew 20% compared to Q1’20.
  •  Q1’21 Adjusted EBITDA of $174.4 million increased 37% as-reported, or 35% in constant currency, compared to Q1’20.
  • Q1’21 Biologics segment net revenue of $377.1 million doubled compared to Q1’20.
  • Net debt leverage of 2.6x as of September 30; more than $1 billion in cash and cash equivalents on-hand at September 30.
  • Increased guidance reflects revenue growth of 16-22% and adjusted EBITDA growth of 17-26%, compared to previous guidance of revenue growth of 12-16% and adjusted EBITDA growth of 12-19%.

SOMERSET, N.J.–(BUSINESS WIRE)–Catalent, Inc. (NYSE: CTLT), the leading global provider of advanced delivery technologies, development, and manufacturing solutions for drugs, biologics, cell and gene therapies, and consumer health products, today announced financial results for the first quarter of fiscal 2021, which ended September 30, 2020.

“Catalent’s strong start to fiscal 2021 was driven by robust growth in our Biologics segment, which doubled its revenue year-over-year and represented 44% of Catalent’s total revenue in the first quarter. Ongoing elevated demand across our drug product, drug substance and cell and gene therapy offerings, as well as new demand related to potential COVID-19 vaccines and treatments, were partially offset by headwinds in our Softgel and Oral Technologies and Oral and Specialty Delivery segments,” said John Chimi in nski, Chair and Chief Executive Officer of Catalent, Inc. He added, “We have accelerated our growth-related capital expenditures to meet the near-term needs of customers and patients, and to position Catalent for long-term value creation.”

First Quarter 2021 Consolidated Results

First quarter 2021 net revenue of $845.7 million increased 27% as reported, or 26% in constant currency, from the $664.7 million reported for the first quarter a year ago. Overall organic growth was 20%.

First quarter 2021 net earnings were $82.4 million. Accounting for the net earnings attributable to preferred shareholders on Catalent’s Series A convertible preferred stock, net earnings attributable to common shareholders were $68.8 million, or $0.42 per basic share, compared to a net loss attributable to common shareholders of $8.0 million, or a loss of $0.05 per basic share, in the first quarter a year ago.

First quarter 2021 EBITDA from operations, as referenced in the GAAP to non-GAAP reconciliation provided later in this release, was $161.8 million, an increase of $71.7 million from $90.1 million in the first quarter a year ago. First quarter 2021 Adjusted EBITDA (see the GAAP to non-GAAP reconciliation provided later in this release) was $174.4 million, or 20.6% of net revenue, compared to $127.1 million, or 19.1% of net revenue, in the first quarter a year ago. This represents an increase of 37.2% as reported, and an increase of 35.5% on a constant-currency basis.

First quarter 2021 Adjusted Net Income (see the GAAP to non-GAAP reconciliation) was $78.1 million, or $0.43 per diluted share, compared to Adjusted Net Income of $40.5 million, or $0.26 per diluted share, in the first quarter a year ago.

First Quarter 2021 Segment Review

Biologics

Net revenue from the Biologics segment was $377.1 million for the first quarter of fiscal 2021, an increase of 100% as reported and 98% in constant currency, compared to the first quarter a year ago. Segment EBITDA in the first quarter of fiscal 2021 was $106.5 million, an increase of 197% as reported and 194% in constant currency compared to the first quarter a year ago. Segment EBITDA margin was 28.2% in the first quarter of fiscal 2021 compared to 19.0% in the first quarter of the prior year.

Excluding the effect of acquisitions, net revenue increased 83% and segment EBITDA increased 179% compared to the three months ended September 30, 2019.

The Biologics segment represented 44% of Catalent’s total net revenue in the first quarter of fiscal 2021.

Softgel and Oral Technologies

Net revenue from the Softgel and Oral Technologies segment was $221.1 million for the first quarter of fiscal 2021, a decrease of 16% as reported or 17% in constant currency, compared to the first quarter a year ago. Segment EBITDA was $37.8 million in the first quarter of fiscal 2021, a decrease of 18% as reported, or 20% in constant currency, compared to the first quarter a year ago. Segment EBITDA margin was 17.1% in the first quarter of fiscal 2021 compared to 17.6% in the first quarter of the prior year.

After excluding the impact of the October 2019 divestiture of the segment’s consumer health manufacturing site in Australia, net revenue decreased 12% and segment EBITDA decreased 21% compared to the three months ended September 30, 2019.

The Softgel and Oral Technologies segment represented 26% of Catalent’s total net revenue in the first quarter of fiscal 2021.

Oral and Specialty Delivery

Net revenue from the Oral and Specialty Delivery segment was $158.3 million for the first quarter of fiscal 2021, an increase of 19% as reported and 17% in constant currency, over the first quarter a year ago. Segment EBITDA in the first quarter of fiscal 2021 was $21.4 million, a decrease of 23% as reported, or 26% in constant currency, compared to the first quarter a year ago. Segment EBITDA margin was 13.5% in the first quarter of fiscal 2021 compared to 20.9% in the first quarter of the prior year.

Excluding the effect of acquisitions, net revenue decreased 1% and segment EBITDA decreased 61% compared to the three months ended September 30, 2019.

The Oral and Specialty Delivery segment represented 19% of Catalent’s total net revenue in the first quarter of fiscal 2021.

Clinical Supply Services

Net revenue from the Clinical Supply Services segment was $92.7 million for the first quarter of fiscal 2021, an increase of 10% as reported and 8% in constant currency, compared to the first quarter a year ago. Segment EBITDA in the first quarter of fiscal 2021 was $25.0 million, an increase of 16% as reported, or 13% in constant currency, compared to the first quarter a year ago. Segment EBITDA margin was 27.0% in the first quarter of fiscal 2021 compared to 25.5% in the first quarter of the prior year.

The Clinical Supply Services segment represented 11% of Catalent’s total net revenue in the first quarter of fiscal 2021.

Backlog for the Clinical Supply Services segment, defined as estimated future service revenues from work not yet completed under signed contracts, was $428 million as of September 30, 2020, compared to backlog of $425 million as of June 30, 2020 and $374 million as of September 30, 2019. The segment recorded net new business wins of $99 million during the first quarter of fiscal 2021, an increase of 6.4% compared to the net new business wins recorded in the first quarter of the prior year.

Balance Sheet and Liquidity

As of September 30, 2020, Catalent had $3.1 billion in total debt, and $2.1 billion in total debt net of cash and short-term investments, compared to $2.1 billion in total net debt as of June 30, 2020 . The current debt structure does not include any significant maturity until 2026.

Catalent’s net leverage ratio as of September 30, 2020 was 2.6x, compared to 2.8x at June 30, 2020 and 4.3x at September 30, 2019.

Fiscal Year 2021 Outlook

Catalent is raising its previously issued guidance to reflect first quarter performance and to account for higher net underlying demand, including increased demand related to COVID-19 treatments and vaccines, partially offset by lower demand attributed to the effects of the pandemic in some offerings.

The revised guidance continues to assume no major change to either the current status of the COVID-19 pandemic generally or its effect on Catalent’s operations and business. Also, as with the earlier guidance, the revised guidance does not assume the receipt by any of our customers of any marketing approval, on an emergency basis or otherwise, for their COVID-19 vaccine candidates (but does include the projected revenue from take-or-pay arrangements in executed contracts). The guidance ranges set forth below are broader than in recent years due to the increased uncertainty introduced by the COVID-19 pandemic. The revised guidance projects:

  • Net revenue in the range of $3.58 billion to $3.78 billion, compared to the previous range of $3.45 billion to $3.60 billion;
  • Adjusted EBITDA in the range of $880 million to $950 million, compared to the previous range of $840 million to $890 million;
  • Adjusted Net Income in the range of $410 million to $470 million, compared to the previous range of $390 million to $435 million; and
  • A fully diluted share count in the range of 178 million to 180 million shares on a weighted-average basis, counting the Series A convertible preferred shares as-if converted, unchanged from previous guidance.

Earnings Webcast

The Company’s management will host a webcast to discuss the results at 8:15 a.m. ET today. Catalent invites all interested parties to listen to the webcast, which will be accessible through Catalent’s website at http://investor.catalent.com. A supplemental slide presentation will also be available in the “Investors” section of Catalent’s website prior to the start of the webcast. The webcast replay, along with the supplemental slides, will be available for 90 days in the “Investors” section of Catalent’s website at www.catalent.com.

About Catalent, Inc.

Catalent, Inc. (NYSE: CTLT), an S&P 500® company, is the leading global provider of advanced delivery technologies, development, and manufacturing solutions for drugs, biologics, cell and gene therapies, and consumer health products. With over 85 years serving the industry, Catalent has proven expertise in bringing more customer products to market faster, enhancing product performance and ensuring reliable clinical and commercial product supply. Catalent employs more than 14,000 people, including approximately 2,400 scientists, at more than 40 facilities across four continents and in fiscal 2020 generated over $3 billion in annual revenue. Catalent is headquartered in Somerset, N.J. For more information, please visit www.catalent.com.

Non-GAAP Financial Measures

Use of EBITDA from operations, Adjusted EBITDA, Adjusted Net Income and Segment EBITDA

Management measures operating performance based on consolidated earnings from operations before interest expense, expense/(benefit) for income taxes, and depreciation and amortization, adjusted for the income or loss attributable to non-controlling interests (“EBITDA from operations”). EBITDA from operations is not defined under U.S. GAAP, is not a measure of operating income, operating performance, or liquidity presented in accordance with U.S. GAAP, and is subject to important limitations.

Catalent believes that the presentation of EBITDA from operations enhances an investor’s understanding of its financial performance. Catalent believes this measure is a useful financial metric to assess its operating performance across periods by excluding certain items that it believes are not representative of its core business and uses this measure for business planning purposes.

In addition, given the significant investments that Catalent has made in the past in property, plant and equipment, depreciation and amortization expenses represent a meaningful portion of its cost structure. Catalent believes that EBITDA from operations will provide investors with a useful tool for assessing the comparability between periods of its ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures because it eliminates depreciation and amortization expense. Catalent presents EBITDA from operations in order to provide supplemental information that it considers relevant for the readers of its consolidated financial statements, and such information is not meant to replace or supersede U.S. GAAP measures. Catalent’s definition of EBITDA from operations may not be the same as similarly titled measures used by other companies.

Catalent evaluates the performance of its segments based on segment earnings before non-controlling interest, other (income)/expense, impairments, restructuring costs, interest expense, income tax expense/(benefit), and depreciation and amortization (“segment EBITDA”). Moreover, under Catalent’s credit agreement, its ability to engage in certain activities, such as incurring certain additional indebtedness, making certain investments and paying certain dividends, is tied to ratios based on Adjusted EBITDA, which is not defined under U.S. GAAP, is not a measure of operating income, operating performance, or liquidity presented in accordance with U.S. GAAP, and is subject to important limitations. Adjusted EBITDA is the covenant compliance measure used in the credit agreement governing debt incurrence and restricted payments. Because not all companies use identical calculations, Catalent’s presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

Management also measures operating performance based on Adjusted Net Income/(Loss) and Adjusted Net Income/(Loss) per share. Adjusted Net Income/(Loss) is not defined under U.S. GAAP, is not a measure of operating income, operating performance, or liquidity presented in accordance with U.S. GAAP and is subject to important limitations. Catalent believes that the presentation of Adjusted Net Income/(Loss) and Adjusted Net Income/(Loss) per share enhances an investor’s understanding of its financial performance. Catalent believes these measures are a useful financial metric to assess its operating performance across periods by excluding certain items that it believes are not representative of its core business and Catalent uses these measures for business planning purposes. Catalent defines Adjusted Net Income/(Loss) as net earnings/(loss) adjusted for amortization attributable to purchase accounting and adjustments for other cash and non-cash items included in the table below, partially offset by its estimate of the tax effects of such cash and non-cash items. Catalent believes that Adjusted Net Income/(Loss) and Adjusted Net Income/(Loss) per share provides investors with a useful tool for assessing the comparability between periods of its ability to generate cash from operations available to its stockholders. Catalent’s definition of Adjusted Net Income/(Loss) may not be the same as similarly titled measures used by other companies.

The most directly comparable U.S. GAAP measure to EBITDA from operations is operating earnings/(loss). The most directly comparable U.S. GAAP measure to Adjusted EBITDA and Adjusted Net Income/(Loss) is net earnings/(loss). Included in this release is a reconciliation of operating earnings/(loss) to EBITDA from operations and a reconciliation of net earnings/(loss) to Adjusted EBITDA and Adjusted Net Income.

Catalent does not provide a reconciliation of forward-looking non-GAAP financial measures to their comparable U.S. GAAP financial measures because it could not do so without unreasonable effort due to the unavailability of the information needed to calculate reconciling items and due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP financial measures in future periods. When planning, forecasting, and analyzing future periods, Catalent does so primarily on a non-GAAP basis without preparing a U.S. GAAP analysis as that would require estimates for various cash and non-cash reconciling items that would be difficult to predict with reasonable accuracy. For example, equity compensation expense would be difficult to estimate because it depends on Catalent’s future hiring and retention needs, as well as the future fair market value of its common stock, all of which are difficult to predict and subject to constant change. It is equally difficult to anticipate the need for or magnitude of a presently unforeseen one-time restructuring expense or the values of end-of-period foreign currency exchange rates. As a result, Catalent does not believe that a U.S. GAAP reconciliation would provide meaningful supplemental information about its outlook.

Use of Constant Currency

As changes in exchange rates are an important factor in understanding period-to-period comparisons, Catalent believes the presentation of results on a constant-currency basis in addition to reported results helps improve investors’ ability to understand its operating results and evaluate its performance in comparison to prior periods. Constant-currency information compares results between periods as if exchange rates had remained constant period over period. Catalent uses results on a constant-currency basis as one measure to evaluate its performance. Catalent calculates constant currency by calculating current-year results using prior-year foreign currency exchange rates. Catalent generally refers to such amounts calculated on a constant-currency basis as excluding the impact of foreign exchange or being on a constant-currency basis. These results should be considered in addition to, not as a substitute for, results reported in accordance with U.S. GAAP. Results on a constant-currency basis, as Catalent presents them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with U.S. GAAP.

Forward-Looking Statements

This release contains both historical and forward-looking statements. All statements other than statements of historical fact, are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally can be identified by the use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “plan,” “project,” “foresee,” “likely,” “may,” “will,” “would,” or other words or phrases with similar meanings. Similarly, statements that describe Catalent’s objectives, plans, or goals are, or may be, forward-looking statements. These statements are based on current expectations of future events. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from Catalent’s expectations and projections. Some of the factors that could cause actual results to differ include, but are not limited to, the following: the current or future effects of the COVID-19 pandemic on Catalent’s and its clients’ businesses; participation in a highly competitive market and increased competition that may adversely affect Catalent’s business; demand for its offerings, which depends in part on its customers’ research and development and the clinical and market success of their products; product and other liability risks that could adversely affect Catalent’s results of operations, financial condition, liquidity and cash flows; failure to comply with existing and future regulatory requirements; failure to provide quality offerings to customers could have an adverse effect on Catalent’s business and subject it to regulatory actions and costly litigation; problems providing the highly exacting and complex services or support required; global economic, political and regulatory risks to Catalent’s operations; inability to enhance existing or introduce new technology or service offerings in a timely manner; inadequate patents, copyrights, trademarks and other forms of intellectual property protections; fluctuations in the costs, availability, and suitability of the components of the products Catalent manufactures, including active pharmaceutical ingredients, excipients, purchased components and raw materials; changes in market access or healthcare reimbursement in the United States or internationally; fluctuations in the exchange rate of the U.S. dollar against other currencies, including as a result of the U.K.’s exit from the European Union; adverse tax legislative or regulatory initiatives or challenges or adjustments to Catalent’s tax positions; loss of key personnel; risks generally associated with information systems; inability to complete any future acquisitions or other transactions that may complement or expand its business or divest of non-strategic businesses or assets and difficulties in successfully integrating acquired businesses and realizing anticipated benefits of such acquisitions; risks associated with timely and successfully completing, and correctly anticipating the future demand predicted for, capital expansion projects at existing facilities, offerings and customers’ products that may infringe on the intellectual property rights of third parties; environmental, health and safety laws and regulations, which could increase costs and restrict operations; labor and employment laws and regulations or labor difficulties, which could increase costs or result in operational disruptions; additional cash contributions required to fund Catalent’s existing pension plans; substantial leverage that may limit its ability to raise additional capital to fund operations and react to changes in the economy or in the industry; and exposure to interest-rate risk to the extent of its variable-rate debt preventing it from meeting its obligations under its indebtedness. For a more detailed discussion of these and other factors, see the information under the caption “Risk Factors” in Catalent’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020, filed August 31, 2020. All forward-looking statements speak only as of the date of this release or as of the date they are made, and Catalent does not undertake to update any forward-looking statement as a result of new information or future events or developments except to the extent required by law.

More products. Better treatments. Reliably supplied.™

Catalent, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited; dollars and shares in millions, except per share data)

Three Months Ended
September 30,

FX Impact

Constant Currency

Increase/(Decrease)

2020

2019

Change $

Change %

Net revenue

$

845.7

$

664.7

$

9.7

$

171.3

26

%

Cost of sales

596.8

487.0

5.8

104.0

21

%

Gross margin

248.9

177.7

3.9

67.3

38

%

Selling, general, and administrative expenses

164.7

142.8

0.9

21.0

15

%

Impairment charges and (gain)/loss on sale of assets

1.8

(0.2)

—

2.0

(1,000)

%

Restructuring and other

0.9

0.7

0.1

0.1

14

%

Operating earnings

81.5

34.4

2.9

44.2

128

%

Interest expense, net

25.3

36.3

0.2

(11.2)

(31)

%

Other (income)/expense, net

(11.2)

4.9

1.5

(17.6)

(359)

%

Earnings/(loss) before income taxes

67.4

(6.8)

1.2

73.0

(1,074)

%

Income tax expense

(15.0)

(6.9)

(0.1)

(8.0)

116

%

Net earnings

$

82.4

$

0.1

$

1.3

$

81.0

81,000

%

Less: Net earnings attributable to preferred shareholders

(13.6)

(8.1)

—

—

—

%

Net earnings/(loss) attributable to common shareholders

$

68.8

$

(8.0)

$

—

$

—

—

%

Weighted average shares outstanding

164.1

145.7

Weighted average diluted shares outstanding

166.5

145.7

Earnings/(loss) per share:

Basic

Net earnings/(loss)

$

0.42

$

(0.05)

Diluted

Net earnings/(loss)

$

0.41

$

(0.05)

Contacts

Investor Contact:

Catalent, Inc.

Paul Surdez

732-537-6325

investors@catalent.com

Read full story here

Categories
Business

Elmer Bancorp, Inc. announces third quarter 2020 financial results

ELMER, N.J.–(BUSINESS WIRE)–ELMER BANCORP, INC. (“Elmer Bancorp” or the “Company”) (OTC Pink: ELMA), the parent company of The First National Bank of Elmer (the “Bank”), announces its operating results for the three and nine months ended September 30, 2020.

For the three months ended September 30, 2020, Elmer Bancorp reported net income of $183,000, or $0.16 per common share compared to $556,000, or $0.49 per common share for the quarter ended September 30, 2019. For the nine months ended September 30, 2020 net income totaled $1.147 million, or $1.00 per common share compared to $1.486 million, or $1.30 per common share for the nine months ended September 30, 2019.

Net income for both the three and nine-month periods ended September 30, 2020 was significantly impacted by increases in the provision for loan losses. For the three months ended September 30, 2020, provisions for loan losses totaled $335,000 compared to $23,000 for the three months ended September 30, 2019, an increase of $312,000. For the nine-month period ended September 30, 2020, provisions for loan losses totaled $571,000 compared to $198,000 for the nine months ended September 30, 2019, an increase of $373,000. These increases in the loan loss provision were necessary due to the uncertainties in the economy and the ability of businesses to recover from the effects of the coronavirus pandemic. Management continues to remain cautious in the current operating environment by increasing the loan loss provisions and adding to the allowance for losses. As a result, at September 30, 2020, the allowance for loan losses was 1.52% of total core loans (excluding Paycheck Protection Program loans (PPP)) compared to 1.39% of total loans at December 31, 2019.

Net interest income for the three months ended September 30, 2020 totaled $2.716 million, compared to $2.776 million for the three months ended September 30, 2019. For the nine months ended September 30, 2020, net interest income totaled $8.311 million compared to $8.365 million for the nine-month period of 2019. An increase in interest income on loans resulting from core loan growth year-over-year and interest income related to the addition of $32.0 million in SBA PPP loans was more than offset by a reduction in interest income on investments, primarily interest on overnight investments resulting from the significant drop in interest rates in 2020.

Non-interest income for the three months ended September 30, 2020 was $50,000 lower than the same three-month period last year and $62,000 lower than the nine-month period last year. Significant declines in service charges on deposit accounts, primarily overdraft fees and losses on the sale of other real estate were partially offset by an increase in the cash surrender value of Bank Owned Life Insurance (“BOLI”) as the Company increased it’s investment in BOLI year-over-year. In addition, fee income on the placement of mortgages increased year-over-year. Non-interest expenses were higher for both the three and nine months ended September 30, 2020 versus the prior year periods by $112,000 and $19,000, respectively. Higher employment costs, legal and professional services and data processing expenses were partially offset by lower occupancy costs (building maintenance and repairs and snow removal costs) and lower write-downs on other real estate.

Elmer Bancorp’s total assets at September 30, 2020 totaled $326.6 million compared to $285.4 million at September 30, 2019. Total core assets (excluding PPP related assets) totaled $294.9 million, an increase of $9.5 million over September 30, 2019 and $9.1 million higher than December 31, 2019. Loans totaled $289.1 million at September 30, 2020. Total core loans (excluding PPP loans) at September 30, 2020 were $257.4 million, $21.0 million higher than September 30, 2019 and $14.1 million higher than December 31, 2019. The growth in loans was attributable to increases in commercial real estate loans, construction loans and residential mortgage loans.

Deposits saw a significant increase primarily resulting from the PPP loan program and other government stimulus programs. At September 30, 2020, total deposits were $296.8 million, an increase of $39.6 million over the December 31, 2019 total of $257.2 million. Increases in non-interest-bearing demand deposits, money market accounts and savings deposits contributed to the increase in deposit levels.

Stockholders’ equity at September 30, 2020 totaled $28.1 million compared to $26.8 million at December 31, 2019. Book value per share at September 30, 2020 was $24.46 per common share compared to $23.32 at December 31, 2019 and $23.24 at September 30, 2019. The Company and the Bank met all capital requirements at September 30, 2020.

Brian W. Jones, President and Chief Executive Officer, stated, “As we come to the close of another quarter in 2020, we continue to navigate through these economically troubled times by providing continued support for our loyal customer base whether it be through forbearance agreements, assisting in the process of applying for, or the forgiveness of, SBA PPP loans, or by providing new extensions of credit. While our earnings performance for the third quarter and the year-to-date 2020 was significantly impacted by increased loan loss provisions and the lower interest rate environment, we remain a strong institution. We are pleased that we have been able to maintain positive growth trends in both our core loan portfolio and deposit base. In addition, the Board of Directors declared a $0.16 per common share dividend on October 1, 2020, payable on November 2, 2020 to stockholders of record as of the close of business on October 16, 2020. Yet, as the coronavirus pandemic continues, there remains much uncertainty in the months ahead regarding future economic conditions and the overall effect the pandemic will have on the capital of many financial institutions. As we continue to remain cautious, we anticipate future increases in the provision for loan losses to bolster our allowance for possible loan losses related to the COVID-19 pandemic. The continued support of our loyal customer base, stockholders and employees is very much appreciated and we wish you all good health.”

The First National Bank of Elmer, a nationally chartered bank headquartered in Elmer, New Jersey, has a long history of serving the community since its beginnings in 1903. We are a community bank focused on providing deposit and loan products to retail customers and to small and mid-sized businesses from our six full-service branch offices located in Cumberland, Gloucester and Salem Counties, New Jersey, including our main office located at 10 South Main Street in Elmer, New Jersey. Deposits at The First National Bank of Elmer are insured up to the legally maximum amount by the Federal Deposit Insurance Corporation (FDIC).

For more information about Elmer Bank and its products and services, please visit our website at www.elmerbank.com or call toll free 1-877-358-8141.

Forward-Looking Statements

This press release and other statements made from time to time by the Company’s management contain express and implied statements relating to our future financial condition, results of operations, credit quality, corporate objectives, and other financial and business matters, which are considered forward-looking statements. These forward-looking statements are necessarily speculative and speak only as of the date made, and are subject to numerous assumptions, risks and uncertainties, all of which may change over time. Actual results could differ materially from those expected or implied by such forward-looking statements. Risks and uncertainties which could cause our actual results to differ materially and adversely from such forward-looking statements include economic conditions affecting the financial industry: changes in interest rates and shape of the yield curve, credit risk associated with our lending activities, risks relating to our market area, significant real estate collateral and the real estate market, operating, legal and regulatory risk, fiscal and monetary policy, economic, political and competitive forces affecting our business, our ability to identify and address cyber-security risks, and management’s analysis of these risks and factors being incorrect, and/or the strategies developed to address them being unsuccessful. Any statements made that are not historical facts should be considered forward-looking statements. You should not place undue reliance on any forward-looking statements. We undertake no obligation to update forward-looking statements or to make any public announcement when we consider forward-looking statements to no longer be accurate because of new information of future events, except as may be required by applicable law or regulation.

ELMER BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(unaudited)

Nine Months Ended

Three Months Ended

9/30/2020

9/30/2019

9/30/2020

6/30/2020

9/30/2019
Statement of Income Data: (dollars in thousands, except per share data)
Interest income

$

9,019

$

9,193

$

2,941

$

3,075

$

3,030
Interest expense

708

804

225

232

254
Net interest income

8,311

8,389

2,716

2,843

2,776
Provision for loan losses

571

198

335

143

23
Net interest income after provision for loan losses

7,740

8,191

2,381

2,700

2,753
Non-interest income

686

724

220

220

270
Non-interest expense

6,878

6,860

2,368

2,250

2,257
Income before income tax expense

1,548

2,055

233

670

766
Income tax expense

401

569

50

178

210
Net income

$

1,147

$

1,486

$

183

$

492

$

556
Earnings per share:
Basic

$

1.00

$

1.30

$

0.16

$

0.43

$

0.49
Diluted

$

1.00

$

1.30

$

0.16

$

0.43

$

0.49
Weighted average shares outstanding (y-t-d)

1,148,271

1,147,230

1,148,271

1,148,066

1,147,230
Statement of Condition Data (Period End):

9/30/2020

9/30/2019

12/31/2019

6/30/2020
Total investments

$

9,145

$

12,577

$

12,215

$

9,950
Total gross loans

$

289,147

$

236,386

$

243,309

$

283,869
Allowance for loan losses

$

3,922

$

3,432

$

3,391

$

3,589
Total assets

$

326,600

$

285,382

$

285,843

$

326,859
Total deposits

$

296,828

$

257,105

$

257,192

$

296,767
Total stockholders’ equity

$

28,092

$

26,664

$

26,762

$

27,902
Book value per share

$

24.46

$

23.24

$

23.32

$

24.29

Contacts

Matthew A. Swift

Senior Vice President

Chief Financial Officer and

Chief Operating Officer

1-856-358-7000

Categories
Business

AdvanSix announces third quarter 2020 financial results

Strong volume growth, cash flow generation, cost management and capital discipline

Sales of $282 million, down (9%) versus prior year – Volume up 5%, Pass-through pricing (13%)

EPS Loss of ($0.02) – includes $20 million pre-tax income impact of planned plant turnaround

Cash Flow from Operations of $36 million, up $2 million versus prior year

PARSIPPANY, N.J.–(BUSINESS WIRE)–AdvanSix (NYSE: ASIX) today announced its financial results for the third quarter ending September 30, 2020. Overall, the Company generated higher cash flow in the third quarter while mitigating the ongoing impacts of COVID-19 and executing its planned plant turnaround.

Third Quarter 2020 Results

  • Sales down approximately 9% versus prior year, as 5% higher volume was more than offset by 13% lower raw material pass-through pricing and 1% unfavorable impact of market-based pricing
  • Net Loss of ($0.7) million, a decrease of $8.6 million versus the prior year
  • EBITDA of $15.8 million, a decrease of $9.1 million versus the prior year
  • 3Q20 planned plant turnaround successfully completed – approximately $20 million unfavorable pre-tax income impact (compared to approximately $5 million unfavorable impact in 3Q19)
  • Cash Flow from Operations of $35.5 million, an increase of $2.4 million versus the prior year
  • Capital Expenditures of $16.0 million, $19.2 million favorable versus the prior year
  • Free Cash Flow of $19.6 million, an increase of $21.6 million versus the prior year
  • As of 3Q20, approximately $17 million of cash on hand with approximately $111 million of additional capacity available under the revolving credit facility

“Our diverse product portfolio and global low-cost position continue to serve us well as we navigate through the current environment,” said Erin Kane, president and CEO of AdvanSix. “We have seen nylon volume returning to pre-COVID levels and we continue to optimize our mix across end uses, applications and geographies through the recovery. The performance of the remainder of our portfolio, including ammonium sulfate, acetone and other high-value intermediates, remains resilient complementing ongoing benefits from our focused cost management and high-return capital investments. We generated higher cash flow in the quarter, as anticipated, supported by efficient working capital performance and reduced capital expenditures.”

Summary third quarter 2020 financial results for the Company are included below:

($ in Thousands, Except Earnings Per Share)

3Q 2020

3Q 2019

Sales

$281,910

$310,633

Net Income (Loss)

(692)

7,921

Diluted Earnings (Loss) Per Share

($0.02)

$0.28

EBITDA (1)

15,806

24,949

EBITDA Margin % (1)

5.6%

8.0%

Cash Flow from Operations

35,533

33,173

Free Cash Flow (1)(2)

19,572

(2,012)

(1) See “Non-GAAP Measures” included in this press release for non-GAAP reconciliations

(2) Net cash provided by operating activities less capital expenditures

Sales of $281.9 million decreased approximately 9% versus the prior year. Raw material pass-through pricing was unfavorable by 13% following a net cost decrease in benzene and propylene (inputs to cumene which is a key feedstock to our products). Market-based pricing was unfavorable by 1% compared to the prior year reflecting challenging end market conditions in our nylon and caprolactam product lines and lower sales prices in ammonium sulfate, partially offset by improved industry dynamics in chemical intermediates, particularly acetone. Sales volume in the quarter increased 5% driven by increases in nylon and higher domestic granular ammonium sulfate sales.

Sales by product line represented the following approximate percentage of our total sales:

3Q 2020

3Q 2019

Nylon

26%

25%

Caprolactam

18%

26%

Ammonium Sulfate Fertilizers

22%

20%

Chemical Intermediates

34%

29%

EBITDA of $15.8 million in the quarter decreased $9.1 million versus the prior year primarily due to the unfavorable impact of planned plant turnarounds, unfavorable sales mix and lower market-based pricing, partially offset by productivity and disciplined cost management, and the favorable impact of lower raw material costs including natural gas and sulfur.

Earnings per share decreased $0.30 versus the prior year to a loss of ($0.02) in the quarter driven by the factors discussed above.

Cash flow from operations of $35.5 million in the quarter increased $2.4 million versus the prior year primarily due to the favorable impact of changes in working capital, partially offset by lower net income. Capital expenditures of $16.0 million in the quarter decreased $19.2 million versus the prior year following the completion of several high-return growth and cost savings investments.

COVID-19 Response Summary

As previously discussed, the U.S. Department of Homeland Security designated our industry as “essential critical infrastructure” during the response to COVID-19 for both public health and safety as well as community well-being. During the third quarter, we continued to execute our business continuity and mitigation plans with a focus on health and safety including, among other actions, on-site medical personnel to actively monitor employees and contractors, thermal screening, social distancing measures, telecommuting, upgraded personal protective equipment, face coverings at all facilities, and exposure management protocols.

Outlook

  • Targeting strong caprolactam plant utilization and optimizing nylon mix across end uses, applications and geographies
  • Expect stable ammonium sulfate fertilizer environment to continue through 2020/2021 planting season
  • Expect favorable acetone industry supply and demand balance to continue
  • Continued disciplined cost management – expect $20 to $25 million full year 2020 cost reduction
  • Capital Expenditures expected to be approximately $85 million in 2020 (down approximately $65 million versus 2019); Expect Capital Expenditures to be $80 to $90 million in 2021
  • Expect a reduction in net debt and leverage levels in 4Q20 with robust cash generation supported by working capital improvements and cash tax benefits associated with the CARES Act
  • Expect pre-tax income impact of planned plant turnarounds to be $25 to $30 million in 2021 (versus approximately $32 million in 2020)

“During this dynamic time, we continue to strengthen our ability to deliver long-term shareholder return. We are focused on executing for the remainder of 2020 and driving best possible outcomes for the business. Looking ahead to 2021, our priorities are focused on continued operational excellence and improving through-cycle profitability, enhancing our portfolio resiliency through differentiated product growth and mix optimization, and being strong and disciplined stewards of capital,” added Kane.

Conference Call Information

AdvanSix will discuss its results during its investor conference call today starting at 9:00 a.m. ET. To participate on the conference call, dial (844) 855-9494 (domestic) or (412) 858-4602 (international) approximately 10 minutes before the 9:00 a.m. ET start, and tell the operator that you are dialing in for AdvanSix’s third quarter 2020 earnings call. The live webcast of the investor call as well as related presentation materials can be accessed at http://investors.advansix.com. Investors can hear a replay of the conference call from 12 noon ET on October 30 until 12 noon ET on November 6 by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international). The access code is 10148290.

About AdvanSix

AdvanSix is a leading manufacturer of Nylon 6, a polymer resin which is a synthetic material used by our customers to produce fibers, filaments, engineered plastics and films that, in turn, are used in such end-products as carpets, automotive and electronic components, sports apparel, food packaging and other industrial applications. As a result of our backward integration and the configuration of our manufacturing facilities, we also sell caprolactam, ammonium sulfate fertilizer, acetone and other intermediate chemicals, all of which are produced within unit operations across our integrated manufacturing value chain. More information on AdvanSix can be found at http://www.advansix.com.

Forward Looking Statements

This release contains certain statements that may be deemed “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, that address activities, events or developments that our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements may be identified by words such as “expect,” “anticipate,” “estimate,” “outlook,” “project,” “strategy,” “intend,” “plan,” “target,” “goal,” “may,” “will,” “should” and “believe” and other variations or similar terminology and expressions. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown risks, uncertainties and other factors, many of which are beyond our control and difficult to predict, which may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: general economic and financial conditions in the U.S. and globally, including the impact of the coronavirus (COVID-19) pandemic and any resurgences; the scope and duration of the pandemic and pace of recovery; the timing of the development and distribution of an effective vaccine or treatment for COVID-19; governmental, business and individuals’ actions in response to the pandemic, including our business continuity and cash optimization plans that have been, and may in the future be, implemented; the impact of social and economic restrictions and other containment measures taken to combat virus transmission; the effect on our customers’ demand for our products and our suppliers’ ability to manufacture and deliver our raw materials, including implications of reduced refinery utilization in the U.S.; our ability to sell and provide our goods and services, including as a result of travel and other COVID-19-related restrictions; the ability of our customers to pay for our products; and any closures of our and our customers’ offices and facilities; risks associated with increased phishing, compromised business emails and other cybersecurity attacks and disruptions to our technology infrastructure; risks associated with employees working remotely or operating with a reduced workforce; risks associated with our indebtedness including compliance with financial and restrictive covenants, and our ability to access capital on reasonable terms, at a reasonable cost or at all due to economic conditions resulting from COVID-19 or otherwise; the impact of scheduled turnarounds and significant unplanned downtime and interruptions of production or logistics operations as a result of mechanical issues or other unanticipated events such as fires, severe weather conditions, natural disasters and pandemics including the COVID-19 pandemic; price fluctuations, cost increases and supply of raw materials; our operations and growth projects requiring substantial capital; growth rates and cyclicality of the industries we serve including global changes in supply and demand; failure to develop and commercialize new products or technologies; loss of significant customer relationships; adverse trade and tax policies; extensive environmental, health and safety laws that apply to our operations; hazards associated with chemical manufacturing, storage and transportation; litigation associated with chemical manufacturing and our business operations generally; inability to acquire and integrate businesses, assets, products or technologies; protection of our intellectual property and proprietary information; prolonged work stoppages as a result of labor difficulties or otherwise; cybersecurity, data privacy incidents and disruptions to our technology infrastructure; failure to maintain effective internal controls; disruptions in transportation and logistics; our inability to achieve some or all of the anticipated benefits of our spin-off including uncertainty regarding qualification for expected tax treatment; fluctuations in our stock price; and changes in laws or regulations applicable to our business. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements. We identify the principal risks and uncertainties that affect our performance in our filings with the Securities and Exchange Commission (SEC), including the risk factors in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, as updated in subsequent reports filed with the SEC.

Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures intended to supplement, not to act as substitutes for, comparable GAAP measures. Reconciliations of non-GAAP financial measures to GAAP financial measures are provided in this press release. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided. Non-GAAP measures in this press release may be calculated in a way that is not comparable to similarly-titled measures reported by other companies.

AdvanSix Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands, except share and per share amounts)

September 30, 2020

December 31, 2019

ASSETS

Current assets:

Cash and cash equivalents

$

16,686

$

7,050

Accounts and other receivables – net

97,101

104,613

Inventories – net

173,873

171,710

Taxes receivable

13,807

2,047

Other current assets

7,096

5,117

Total current assets

308,563

290,537

Property, plant and equipment – net

765,125

755,881

Operating lease right-of-use assets

110,360

135,985

Goodwill

15,005

15,005

Other assets

36,079

38,561

Total assets

$

1,235,132

$

1,235,969

LIABILITIES

Current liabilities:

Accounts payable

$

179,652

$

205,911

Accrued liabilities

35,610

28,114

Operating lease liabilities – short-term

31,724

38,005

Deferred income and customer advances

6,176

19,696

Total current liabilities

253,162

291,726

Deferred income taxes

121,445

110,071

Operating lease liabilities – long-term

79,085

98,347

Line of credit – long-term

313,000

297,000

Postretirement benefit obligations

36,783

32,410

Other liabilities

10,623

5,537

Total liabilities

814,098

835,091

STOCKHOLDERS’ EQUITY

Common stock, par value $0.01; 200,000,000 shares authorized;

31,622,910 shares issued and 28,030,271 outstanding at September 30,

2020; 31,423,898 shares issued and 27,914,777 outstanding at

December 31, 2019

316

314

Preferred stock, par value $0.01; 50,000,000 shares authorized and 0

shares issued and outstanding at September 30, 2020 and

December 31, 2019

—

—

Treasury stock at par (3,592,639 shares at September 30, 2020;

3,509,121 shares at December 31, 2019)

(36)

(35)

Additional paid-in capital

183,356

180,884

Retained earnings

248,479

229,166

Accumulated other comprehensive loss

(11,081)

(9,451)

Total stockholders’ equity

421,034

400,878

Total liabilities and stockholders’ equity

$

1,235,132

$

1,235,969

AdvanSix Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(Dollars in thousands, except share and per share amounts)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Sales

$

281,910

$

310,633

$

817,644

$

970,743

Costs, expenses and other:

Costs of goods sold

265,758

280,123

736,504

850,131

Selling, general and administrative expenses

16,177

19,261

50,827

58,683

Interest expense, net

1,981

1,293

5,827

3,727

Other non-operating expense (income), net

(334)

522

216

1,144

Total costs, expenses and other

283,582

301,199

793,374

913,685

Income (loss) before taxes

(1,672)

9,434

24,270

57,058

Income tax expense (benefit)

(980)

1,513

4,957

13,617

Net income (loss)

$

(692)

$

7,921

$

19,313

$

43,441

Earnings (loss) per common share

Basic

$

(0.02)

$

0.29

$

0.69

$

1.54

Diluted

$

(0.02)

$

0.28

$

0.69

$

1.49

Weighted average common shares outstanding

Basic

28,079,937

27,608,985

28,037,651

28,192,760

Diluted

28,079,937

28,581,451

28,092,712

29,164,024

AdvanSix Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Cash flows from operating activities:

Net income (loss)

$

(692)

$

7,921

$

19,313

$

43,441

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation and amortization

15,497

14,222

45,061

42,094

Loss on disposal of assets

95

3,066

143

4,967

Deferred income taxes

1,389

(960)

11,895

9,149

Stock based compensation

603

2,001

3,503

7,575

Accretion of deferred financing fees

141

106

412

320

Restructuring charges

—

—

—

12,623

Changes in assets and liabilities:

Accounts and other receivables

(22,385)

16,399

7,445

51,170

Inventories

9,851

(24,245)

(2,163)

(26,739)

Taxes receivable

(3,634)

1,994

(11,760)

(34)

Accounts payable

31,285

17,742

(9,939)

(12,844)

Accrued liabilities

1,840

(2,699)

7,776

(4,470)

Deferred income and customer advances

913

(1,236)

(13,520)

(20,608)

Other assets and liabilities

630

(1,138)

5,920

(6,108)

Net cash provided by operating activities

35,533

33,173

64,086

100,536

Cash flows from investing activities:

Expenditures for property, plant and equipment

(15,961)

(35,185)

(67,563)

(106,386)

Other investing activities

(373)

(918)

(898)

(2,203)

Net cash used for investing activities

(16,334)

(36,103)

(68,461)

(108,589)

Cash flows from financing activities:

Borrowings from line of credit

49,000

106,500

268,500

316,750

Payments of line of credit

(124,000)

(95,500)

(252,500)

(250,750)

Payment of line of credit facility fees

—

—

(425)

—

Principal payments of finance leases

(176)

(2,279)

(534)

(4,656)

Purchase of treasury stock

—

(12,800)

(1,032)

(53,067)

Issuance of common stock

—

—

2

16

Net cash provided by (used for) financing activities

(75,176)

(4,079)

14,011

8,293

Net change in cash and cash equivalents

(55,977)

(7,009)

9,636

240

Cash and cash equivalents at beginning of period

72,663

17,057

7,050

9,808

Cash and cash equivalents at the end of period

$

16,686

$

10,048

$

16,686

$

10,048

Supplemental non-cash investing activities:

Capital expenditures included in accounts payable

$

5,802

$

27,344

AdvanSix Inc.

Non-GAAP Measures

(Dollars in thousands)

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Net cash provided by operating activities

$

35,533

$

33,173

$

64,086

$

100,536

Expenditures for property, plant and equipment

(15,961)

(35,185)

(67,563)

(106,386)

Free cash flow (1)

$

19,572

$

(2,012)

$

(3,477)

$

(5,850)

(1) Free cash flow is a non-GAAP measure defined as Net cash provided by operating activities less Expenditures for property, plant and equipment

The Company believes that this metric is useful to investors and management as a measure to evaluate our ability to generate cash flow from business operations and the impact that this cash flow has on our liquidity.

Reconciliation of Net Income to EBITDA

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Net income (loss)

$

(692)

$

7,921

$

19,313

$

43,441

Interest expense, net

1,981

1,293

5,827

3,727

Income tax expense (benefit)

(980)

1,513

4,957

13,617

Depreciation and amortization

15,497

14,222

45,061

42,094

EBITDA (2)

$

15,806

$

24,949

$

75,158

$

102,879

One-time Pottsville restructuring charges (3)

—

—

—

12,623

EBITDA excluding one-time Pottsville

restructuring charges

$

15,806

$

24,949

$

75,158

$

115,502

Sales

$

281,910

$

310,633

$

817,644

$

970,743

EBITDA margin (4)

5.6%

8.0%

9.2%

10.6%

EBITDA margin excluding one-time

Pottsville restructuring charges

5.6%

8.0%

9.2%

11.9%

(2) EBITDA is a non-GAAP measure defined as Net Income before Interest, Income Taxes, Depreciation and Amortization

(3) Prior year one-time Pottsville restructuring charges reflect the closure of the Company’s Pottsville, Pennsylvania films plant

(4) EBITDA margin is defined as EBITDA divided by Sales

The Company believes the non-GAAP financial measures presented in this release provide meaningful supplemental information as they are used by the Company’s management to evaluate the Company’s operating performance, enhance a reader’s understanding of the financial performance of the Company, and facilitate a better comparison among fiscal periods and performance relative to its competitors, as these non-GAAP measures exclude items that are not considered core to the Company’s operations.

AdvanSix Inc.

Appendix

(Pre-tax income impact, Dollars in millions)

Planned Plant Turnaround Schedule (5)

1Q

2Q

3Q

4Q

FY

2017

—

~$10

~$4

~$20

~$34

2018

~$2

~$10

~$30

—

~$42

2019

—

~$5

~$5

~$25

~$35

2020E

~$2

~$7

~$20

~$3

~$32

2021E

—

$11-$13

—

$14-$17

$25-$30
(5) Primarily reflects the impact of fixed cost absorption, maintenance expense, and the purchase of feedstocks which are normally manufactured by the Company.

Contacts

Media
Debra Lewis

(973) 526-1767

debra.lewis@advansix.com

Investors
Adam Kressel

(973) 526-1700

adam.kressel@advansix.com

Categories
Business

NRG Energy, Inc. to report Third Quarter 2020 financial results November 5, 2020

PRINCETON, N.J.–(BUSINESS WIRE)–$NRG #earnings–NRG Energy, Inc. (NYSE:NRG) plans to report Third Quarter 2020 financial results on Thursday, November 5, 2020. Management will present the results during a conference call and webcast at 9:00 a.m. Eastern.

A live webcast of the conference call, including presentation materials, can be accessed through NRG’s website at http://www.nrg.com and clicking on “Presentations & Webcasts” in the “Investors” section found at the top of the home page. The webcast will be archived on the site for those unable to listen in real time.

About NRG Energy

At NRG, we’re bringing the power of energy to people and organizations by putting customers at the center of everything we do. We generate electricity and provide energy solutions and natural gas to more than 3.7 million residential, small business, and commercial and industrial customers through our diverse portfolio of retail brands. A Fortune 500 company, operating in the United States and Canada, NRG delivers innovative solutions while advocating for competitive energy markets and customer choice, and by working towards a sustainable energy future. More information is available at www.nrg.com. Connect with NRG on Facebook, LinkedIn and follow us on Twitter @nrgenergy, @nrginsight.

Contacts

Investors:
Kevin L. Cole, CFA

609.524.4526

investor.relations@nrg.com

Media:
Candice Adams

609.524.5428

candice.adams@nrg.com

Categories
Business

AdvanSix to release third quarter financial results and hold investor conference call on October 30

PARSIPPANY, N.J.–(BUSINESS WIRE)–AdvanSix (NYSE: ASIX) will issue its third quarter 2020 financial results before the opening of the New York Stock Exchange on Friday, October 30. The company will also hold a conference call with investors at 9:00 a.m. ET that day.

Conference Call Details

To participate on the conference call, dial (844) 855-9494 (domestic) or (412) 858-4602 (international) approximately 10 minutes before the 9:00 a.m. ET start, and tell the operator that you are dialing in for AdvanSix’s third quarter 2020 earnings call. A replay of the conference call will be available from 12 noon ET on October 30 until 12 noon ET on November 6. You can listen to the replay by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international). The access code is 10148290.

Presentation Materials / Webcast Details

A real-time audio webcast of the presentation can be accessed at http://investors.advansix.com. Related materials will be posted prior to the presentation at that site, and a replay of the webcast will be available on the AdvanSix investor website for 90 days following the presentation.

About AdvanSix

AdvanSix is a leading manufacturer of Nylon 6, a polymer resin which is a synthetic material used by our customers to produce fibers, filaments, engineered plastics and films that, in turn, are used in such end-products as carpets, automotive and electronic components, sports apparel, food packaging and other industrial applications. As a result of our backward integration and the configuration of our manufacturing facilities, we also sell caprolactam, ammonium sulfate fertilizer, acetone and other intermediate chemicals, all of which are produced within unit operations across our integrated manufacturing value chain. More information on AdvanSix can be found at http://www.advansix.com.

Contacts

Media
Debra Lewis

(973) 526-1767

debra.lewis@advansix.com

Investors
Adam Kressel

(973) 526-1700

adam.kressel@advansix.com

, , {item content}, September 30, 2020

Categories
Healthcare

Legend Biotech reports second quarter 2020 financial results

SOMERSET, N.J.–(BUSINESS WIRE)–Legend Biotech Corporation (NASDAQ: LEGN) (Legend Biotech), a global clinical-stage biopharmaceutical company engaged in the discovery and development of novel cell therapies for oncology and other indications, today reported financial results for the quarter ended June 30, 2020.

“Legend Biotech continues to execute on our corporate strategy, advancing the development of our lead product candidate, ciltacabtagene autoleucel (cilta-cel), in collaboration with Janssen Biotech, Inc. as well as our other pipeline programs,” said Frank Zhang, Ph.D., Chief Executive Officer and Chairman of the Board of Legend Biotech. “We look forward to presenting data from the CARTITUDE-1 study at a major medical conference in the second half of 2020.”

Second Quarter 2020 & Recent Highlights

  • Collaborative Research and License Agreement with Noile-Immune Biotech. On April 27, 2020, Legend Biotech entered into a collaborative research and license agreement with Noile-Immune Biotech Inc. pursuant to which Legend Biotech obtained a license to develop and commercialize next-generation CAR-T and/or TCR-T cell therapies incorporating Noile-Immune’s PRIME (proliferation-inducing and migration-enhancing) technology for up to two targets for all indications.
  • Updated Results from Janssen sponsored Phase 1b/2 CARTITUDE-1 study. On May 13, 2020, Legend Biotech announced positive follow up data (median of 11.5 months) from the Phase 1b portion of the CARTITUDE-1 study evaluating cilta-cel1 (JNJ-4528) in heavily pretreated patients with relapsed or refractory multiple myeloma (RRMM).
  • Appointment of Three New Directors. In May 2020, Dr. Corazon (Corsee) Dating Sanders, Dr. Darren Ji, and Mr. Philip Yau joined Legend Biotech’s Board of Directors.
  • Successful Initial Public Offering. On June 9, 2020, Legend Biotech successfully completed its initial public offering for total gross proceeds of approximately $487.3 million.
  • Appointment of Dr. Frank Zhang as CEO. On August 1, 2020, the Board of Directors of Legend Biotech appointed Dr. Frank Zhang to serve as Chief Executive Officer, succeeding Dr. Yuan Xu upon her resignation.
  • First Breakthrough Therapy Designation from China CDE. On August 5, 2020, Legend Biotech announced that the China Center for Drug Evaluation (“CDE”), National Medical Products Administration recommended Breakthrough Therapy Designation (“BTD”) for cilta-cel for the treatment of adults with relapsed/refractory multiple myeloma. The designation was granted on August 13, 2020, making cilta-cel the first investigational product to obtain BTD in China.

Key Upcoming Milestones

  • Legend Biotech, in collaboration with Janssen Biotech, Inc., anticipates the presentation of data from the CARTITUDE-1 study at a major medical conference in the second half of 2020.
  • Janssen Biotech, Inc., Legend Biotech’s collaboration partner, expects to initiate the BLA filing for cilta-cel to the U.S. FDA by the end of 2020 and also expects that a marketing authorization application will be submitted to the European Medicines Agency (“EMA”) in early 2021.
  • Legend Biotech expects to use the data from CARTIFAN-1 in support of a regulatory submission for approval in China in 2021.
  • Legend Biotech intends to submit an IND application for LB1901 in relapsed or refractory T cell Lymphoma (“TCL”) in the second half of 2020.

The extent to which the COVID-19 may impact our business and clinical trials is highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak and social distancing regulations, travel restrictions, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

Financial Results for the Quarter Ended June 30, 2020

Cash and Cash Equivalents:

As of June 30, 2020, Legend Biotech had approximately $562.4 million of cash and cash equivalents and approximately $75.6 million in time deposits.

Revenue

Revenue for the three months ended June 30, 2020 was $11.6 million compared to $10.1 million for the three months ended June 30, 2019. This increase of $1.5 million was primarily due to additional milestone payments from Janssen Biotech, Inc. that were achieved in late 2019, which resulted in additional consideration being allocated to steering committee service for the three month ended June 30, 2020. Revenue for the three months ended June 30, 2020 and June 30, 2019 consisted of recognition of upfront and milestone payments allocated to steering committee service pursuant to the license and collaboration agreement with Janssen Biotech, Inc. Legend Biotech has not generated any revenue from product sales to date.

Research and Development Expenses

Research and development expenses for the three months ended June 30, 2020 were $53.6 million compared to $32.6 million for the three months ended June 30, 2019. This increase of $21.0 million was primarily due to a higher number of clinical trials, a higher number of patients enrolled in those trials and a higher number of research and development product candidates in the three months ended June 30, 2020.

Administrative Expenses

Administrative expenses for the three months ended June 30, 2020 were $4.5 million compared to $1.6 million for the three months ended June 30, 2019. This increase of $2.9 million was primarily due to Legend Biotech’s expansion of supporting administrative functions to aid continued research and development activities.

Selling and Distribution Expenses

Selling and distribution expenses for the three months ended June 30, 2020 were $9.6 million compared to $5.0 million for the three months ended June 30, 2019. This increase of $4.6 million was primarily due to increased costs associated with commercial preparation activities for cilta-cel.

Other Income and Gains

Other income and gains for the three months ended June 30, 2020 was $1.3 million compared to $1.2 million for the three months ended June 30, 2019.

Fair Value Loss of Convertible Redeemable Preferred Shares

For the three months ended June 30, 2020, Legend Biotech reported a one-time non-cash charge of $80.0 million caused by changes of fair value of Series A convertible redeemable preferred shares (Series A Preferred Shares). Upon listing on the Nasdaq Global Market, all outstanding Series A Preferred Shares were converted into ordinary shares of Legend Biotech and all accrued but unpaid dividends were settled in the form of ordinary shares of Legend Biotech.

Loss for the Period

For the three months ended June 30, 2020, net loss was $134.9 million, or $0.63 per share, compared to a net loss of $28.8 million, or $0.14 per share, for the three months ended June 30, 2019.

About Legend Biotech

Legend Biotech is a global clinical-stage biopharmaceutical company engaged in the discovery and development of novel cell therapies for oncology and other indications. Our team of over 700 employees across the United States, China and Europe, along with our differentiated technology, global development, and manufacturing strategies and expertise, provide us with the strong potential to discover, develop, and manufacture best-in-class cell therapies for patients in need.

We are engaged in a strategic collaboration with Janssen Biotech, Inc. to develop and commercialize our lead product candidate, ciltacabtagene autoleucel, an investigational BCMA-targeted CAR-T cell therapy for patients living with multiple myeloma. This candidate is currently being studied in registrational clinical trials.

Cautionary Note Regarding Forward-Looking Statements

Statements in this press release about future expectations, plans and prospects, as well as any other statements regarding matters that are not historical facts, constitute “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements relating to Legend Biotech’s strategies and objectives; the anticipated timing of, and ability to progress, clinical trials; the ability to make, and the timing of, regulatory submissions in the United States, Europe and Asia, including the BLA filing for cilta-cel to the U.S. FDA, the submission of a marketing authorization application for cilta-cel to the EMA, and the submission of an IND LB1901 in relapsed or refractory TCL; the ability to generate, analyze and present data from clinical trials; patient enrollment; and the potential benefits of our product candidates. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including the factors discussed in the “Risk Factors” section of the prospectus filed with the Securities and Exchange Commission on June 8, 2020. Any forward-looking statements contained in this press release speak only as of the date hereof, and Legend Biotech specifically disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. Readers should not rely upon the information on this page as current or accurate after its publication date.

LEGEND BIOTECH CORPORATION

UNAUDITED INTERIM CONDENSED

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

Three months ended

June 30

Six months ended

June 30

(in thousands, US$, except share and per share data)

2020

(unaudited)

2019

(unaudited)

2020

(unaudited)

2019

(unaudited)

REVENUE

11,600

10,087

23,146

20,140

Other income and gains

1,265

1,221

3,796

4,073

Research and development expenses

(53,567)

(32,640)

(101,570)

(53,929)

Administrative expenses

(4,508)

(1,607)

(7,938)

(2,712)

Selling and distribution expenses

(9,557)

(5,030)

(16,102)

(7,786)

Other expenses

(37)

(478)

(82)

(625)

Fair value loss of convertible redeemable preferred shares

(79,984)

—

(79,984)

—

Finance costs

(88)

(19)

(4,079)

(57)

LOSS BEFORE TAX

(134,876)

(28,466)

(182,813)

(40,896)

Income tax (expense)/credit

—

(336)

3,709

(336)

LOSS FOR THE PERIOD

(134,876)

(28,802)

(179,104)

(41,232)

Attributable to:

Equity holders of the parent

(134,876)

(28,802)

(179,104)

(41,232)

LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

Ordinary shares—basic

(0.63)

(0.14)

(0.86)

(0.21)

Ordinary shares—diluted

(0.63)

(0.14)

(0.86)

(0.21)

Ordinary shares used in loss per share computation:

Ordinary shares—basic

215,551,887

200,000,000

207,775,944

200,000,000

Ordinary shares—diluted

215,551,887

200,000,000

207,775,944

200,000,000

LEGEND BIOTECH CORPORATION

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT JUNE 30, 2020 AND DECEMBER 31, 2019

June 30, 2020

(Unaudited)

December 31,

2019

(in thousands, US$)

NON-CURRENT ASSETS

Property, plant and equipment

88,589

70,079

Advance payments for property, plant and equipment

2,121

665

Right-of-use assets

7,786

9,348

Intangible assets

978

519

Total non-current assets

99,474

80,611

CURRENT ASSETS

Inventories

1,668

1,157

Trade receivables

—

29,991

Prepayments, other receivables and other assets

33,517

16,777

Pledged short-term deposits

256

256

Time deposits

75,559

75,559

Cash and cash equivalents

562,391

83,364

Total current assets

673,391

207,104

Total assets

772,865

287,715

CURRENT LIABILITIES

Trade and notes payables

6,976

9,586

Other payables and accruals

60,429

70,854

Lease liabilities

1,314

1,027

Contract liabilities

46,312

46,294

Total current liabilities

115,031

127,761

NON-CURRENT LIABILITIES

Contract liabilities

254,714

277,765

Lease liabilities

2,119

5,058

Total non-current liabilities

256,833

282,823

Total liabilities

371,864

410,584

EQUITY

Share capital

26

20

Reserves/(deficits)

400,975

(122,889)

Total ordinary shareholders’ equity/(deficit)

401,001

(122,869)

Total equity/(deficit)

401,001

(122,869)

Total liabilities and equity

772,865

287,715

LEGEND BIOTECH CORPORATION

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

Three months ended June 30

Six months ended

June 30

(in thousands, US$)

2020

(Unaudited)

2019

(Unaudited)

2020

(Unaudited)

2019

(Unaudited)

LOSS BEFORE TAX

(134,876)

(28,466)

(182,813)

(40,896)

CASH FLOWS USED IN OPERATING ACTIVITIES

(56,885)

(38,766)

(102,681)

(43,025)

CASH FLOWS USED IN INVESTING ACTIVITIES

(9,212)

(36,031)

(26,711)

(150,909)

CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES

459,803

(7,177)

608,558

21,500

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

393,706

(81,974)

479,166

(172,434)

Effect of foreign exchange rate changes, net

(112)

(16)

(139)

(11)

Cash and cash equivalents at beginning of the period

168,797

119,711

83,364

210,166

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD.

562,391

37,721

562,391

37,721

ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS

Cash and bank balances

638,206

149,032

638,206

149,032

Less: Pledged short-term deposits

256

250

256

250

Time deposits

75,559

111,061

75,559

111,061

Cash and cash equivalents as stated in the statement of financial position

562,391

37,721

562,391

37,721

Cash and cash equivalents as stated in the statement of cash flows

562,391

37,721

562,391

37,721

1tacabtagene autoleucel (cilta-cel) refers to both JNJ-4528 (the identifier for the investigational product being studied outside of China) and LCAR-B38M CAR-T cell (the identifier for the investigational product being studied in China), both of which identify the same CAR-T cell therapy.

Contacts

Media and Investor Relations:

Jessie Yeung, Head of Corporate Finance and Investor

Relations, Legend Biotech jessie.yeung@legendbiotech.com or

investor@legendbiotech.com

Categories
Business

Movado Group, Inc. announces second quarter results

~ Second Quarter Net Sales of $88.5 million ~

~ Second Quarter Loss Per Share of ($0.28), or ($0.07) Excluding Restructuring Plan and Other Items ~

~ Ends Second Quarter with Cash of $170 million ~

~ Announces Licensing Partnership with Calvin Klein ~

PARAMUS, N.J.–(BUSINESS WIRE)–Movado Group, Inc. (NYSE: MOV) today announced second quarter and six-month results for the period ended July 31, 2020.

Efraim Grinberg, Chairman and Chief Executive Officer, stated, “We remain focused on ensuring the safety and health of our employees, customers and the communities where we operate. In a quarter that was significantly impacted globally by the COVID-19 pandemic, I am proud of our team’s ability to build on our multi-year investments in our digital center of excellence and adapt to support our ongoing mission to put consumers first, allowing them to connect with our great brands, designs and platforms wherever and whenever they choose to shop. These efforts allowed us to capture strong online demand where our Movado brand generated a 130% increase in our own and third party ecommerce sales. In North America, we reopened our outlet stores in June and were encouraged by the improved sequential performance in July, despite reduced stores hours. We are also seeing encouraging demand in our domestic department store channel. In China, we had a 16% increase in sales for the quarter with trends continuing to accelerate and we had positive top line growth in France and Germany, despite our customers being closed for nearly half of the quarter.”

Mr. Grinberg continued, “The aggressive actions we took at the height of the pandemic have positioned us well to continue to navigate the current environment. We have implemented initiatives that are expected to generate $90 million in cost savings in this fiscal year and have strengthened our financial health as evidenced by our cash balance of $170 million after repaying $37 million on our revolver at quarter end. As we look to the remainder of the year, we continue to expect improving sales trends in the second half relative to the first half with improved profitability and we will continue to be disciplined and agile in managing the business given the continued uncertainty. The actions we have taken, combined with our strong liquidity, enable us to leverage our powerful portfolio of brands which will be further strengthened by the exciting new licensing partnership announced today to design and develop Calvin Klein timepieces and jewelry. As a result, we have confidence that we will emerge from this extraordinary period a stronger company that is even better positioned to deliver long-term shareholder value.”

Non-GAAP Items (See attached table for GAAP and Non-GAAP measures)

Second quarter fiscal 2021 results of operations included the following items:

  • Operating expenses include a $0.7 million pre-tax charge, or $0.5 million after tax, representing $0.02 per diluted share, associated with the amortization of acquired intangible assets related to the acquisition of Olivia Burton;
  • $0.3 million pre-tax charge, or $0.2 million after tax, representing $0.01 per diluted share, associated with the amortization of acquired intangible assets and deferred compensation related to the acquisition of MVMT;
  • $7.4 million pre-tax charge, or $5.0 million after tax, representing $0.22 per diluted share, related to corporate initiatives primarily in response to the COVID-19 pandemic; and
  • Other non-operating income includes a $1.3 million pre-tax gain, or $0.8 million after tax, representing $0.04 per diluted share, associated with the sale of a non-operating asset in Switzerland.

Second quarter Fiscal 2020 results of operations included the following items:

  • Operating expenses include a $0.7 million pre-tax charge, or $0.6 million after tax, representing $0.02 per diluted share, associated with the amortization of acquired intangible assets related to Olivia Burton;
  • $1.1 million pre-tax charge, or $0.9 million after tax, representing $0.04 per diluted share, associated with the amortization of acquired intangible assets and deferred compensation related to the acquisition of MVMT;
  • $0.3 million pre-tax gain, or $0.2 million after tax, representing $0.01 per diluted share, associated with the change in estimate of the remaining accrual for the fiscal 2018 cost saving initiatives; and
  • Other non-operating income includes a $13.6 million pre-tax benefit, or $10.4 million after tax, representing $0.44 per diluted share, associated with the remeasurement of the contingent consideration liability associated with the MVMT acquisition.

Second Quarter Fiscal 2021 (See attached table for GAAP and Non-GAAP measures)

  • Net sales decreased 43.9% to $88.5 million compared to $157.8 million in the second quarter of fiscal 2020 primarily due to the impact of the COVID-19 pandemic. Net sales on a constant dollar basis also decreased 43.9%.
  • Gross profit was $45.4 million, or 51.2% of sales, compared to $85.3 million, or 54.1% of sales, in the second quarter last year. The decrease in gross margin percentage was primarily the result of unfavorable changes in channel and product mix, decreased leverage on fixed costs due to decreased sales, and U.S. special tariff headwinds.
  • Operating expenses were $54.3 million compared to $76.6 million in the prior year period. For the second quarter of fiscal 2021, adjusted operating expenses were $45.9 million, which excludes the operating expense charges mentioned above in the Non-GAAP Items section. For the second quarter of fiscal 2020, adjusted operating expenses were $75.1 million, which excludes the operating expense charges mentioned above in the Non-GAAP Items section. The decrease in adjusted operating expenses was primarily due to the Company’s initiative to minimize all non-essential operating expenses such as certain marketing, selling and payroll related expenses.
  • Operating loss was $8.9 million compared to operating income of $8.8 million in the second quarter of fiscal 2020. Adjusted operating loss for the second quarter of fiscal 2021 was $0.6 million, which excludes the fiscal 2021 charges listed above in the Non-GAAP Items section, compared to adjusted operating income for the second quarter of fiscal 2020 of $10.3 million, which excludes the fiscal 2020 charges listed above in the Non-GAAP Items section.
  • The Company recorded a tax benefit of $1.6 million compared to a tax provision of $4.7 million in the second quarter of fiscal 2020. The Company recorded an adjusted tax provision in the second quarter of fiscal 2021 of $0.6 million compared to an adjusted tax provision of $1.8 million for the second quarter of fiscal 2020.
  • Net loss was $6.6 million, or $0.28 per diluted share, compared to net income of $17.5 million, or $0.75 per diluted share, in the second quarter of fiscal 2020 . Adjusted net loss for the fiscal 2021 period was $1.7 million, or $0.07 per diluted share, which excludes the second quarter fiscal 2021 net charges listed above in the Non-GAAP Items section after the associated tax effects. This compares to adjusted net income in the second quarter of fiscal 2020 of $8.3 million, or $0.36 per diluted share, which excludes the second quarter fiscal 2020 net charges listed above in the Non-GAAP Items section after the associated tax effects.

First Half Fiscal 2021 (See attached table for GAAP and Non-GAAP measures)

  • Net sales were $158.2 million compared to $304.4 million in the first six months of fiscal 2020, a decrease of 48.0% primarily due to the COVID-19 pandemic. Net sales on a constant dollar basis decreased 47.8%.
  • Gross profit was $77.2 million, or 48.8% of sales, compared to $164.2 million, or 54.0% of sales in the same period last year. Adjusted gross profit for the first six months of fiscal 2021, which excludes $3.5 million in corporate initiative charges related to the impact to the business of the COVID-19 pandemic, was $80.8 million, or 51.0% of net sales. Adjusted gross profit for the first six months of fiscal 2020, which excludes $0.1 million in adjustments associated with the amortization of acquisition accounting adjustments related to the MVMT acquisition, was $164.4 million, or 54.0% of net sales. The decrease in adjusted gross margin percentage was primarily the result of decreased leverage on fixed costs due to decreased sales, unfavorable changes in channel and product mix, unfavorable foreign currency exchange rates and U.S. special tariff headwinds.
  • Operating expenses were $268.3 million as compared to $150.5 million in the first six months of last fiscal year. For the first six months of fiscal 2021, adjusted operating expenses were $99.0 million, which excludes $155.9 million in adjustments related to the impairment of goodwill and certain intangible assets, $11.1 million in corporate initiative charges related to the impact to the business from the COVID-19 pandemic, $1.4 million of expenses associated with the amortization of acquired intangible assets related to Olivia Burton and $1.0 million in adjustments associated with the amortization of acquired intangible assets and deferred compensation related to the MVMT acquisition. For the first six months of fiscal 2020, adjusted operating expenses were $146.9 million, which excludes $1.4 million of expenses associated with the amortization of acquired intangible assets related to Olivia Burton and $2.5 million in adjustments associated with the amortization of acquired intangible assets, accounting adjustments and deferred compensation related to the MVMT acquisition, partially offset by $0.3 million in adjustments associated with the change in estimate of the remaining accrual for the fiscal 2018 cost saving initiatives. The decrease in adjusted operating expenses was primarily due to the Company’s initiative to minimize all non-essential operating expenses such as certain marketing, selling and payroll related expenses.
  • Operating loss was $191.1 million compared to operating income of $13.8 million in the first six months of fiscal 2020. Adjusted operating loss for the first six months of fiscal 2021 was $18.2 million, which excludes the fiscal 2021 charges listed in the immediately preceding bullet, compared to adjusted operating income of $17.4 million in the first six months of fiscal 2020 which excludes the fiscal 2020 net charges listed in the immediately preceding bullet.
  • The Company recorded a tax benefit in the first six months of fiscal 2021 of $33.9 million as compared to a tax provision of $5.6 million in the first six months of last year. Based upon adjusted pre-tax income, the adjusted tax benefit was $4.3 million in the first half of fiscal 2021 compared to an adjusted tax provision of $3.1 million in the first half of fiscal 2020.
  • Net loss was $156.6 million, or $6.75 per diluted share, compared to net income of $21.4 million, or $0.92 per diluted share, in the first six months of fiscal 2020. Adjusted net loss for the first half of fiscal 2021 was $14.7 million, or $0.63 per diluted shares, which excludes $131.1 million, net of $24.9 million of tax, in adjustments related to the impairment of goodwill and certain intangible assets, $10.0 million, net of $4.6 million of tax, in corporate initiative charges related to the impact to the business from the COVID-19 pandemic, $1.1 million, net of $0.3 million of tax, of expenses associated with the amortization of acquired intangible assets related to Olivia Burton and $0.6 million, net of $0.4 million of tax, in adjustments associated with the amortization of acquired intangible assets and deferred compensation related to the MVMT acquisition, and $0.8 million, net of $0.5 million of tax, associated with a gain on the sale of a non-operating asset in Switzerland. This compares to adjusted net income for the first half of fiscal 2020 of $13.9 million, or $0.60 per diluted share, which excludes $1.1 million, net of $0.3 million of tax, of expenses associated with the amortization of acquired intangible assets related to Olivia Burton; $2.0 million, net of $0.6 million of tax, of expenses related to the amortization of acquired intangible assets, accounting adjustments and deferred compensation related to MVMT; $10.4 million, net of $3.3 million of tax, of gains associated with the remeasurement of the contingent consideration liability associated with the MVMT acquisition; and $0.2 million, net of $0.1 million of tax, of gains associated with the change in estimate of the remaining accrual for the fiscal 2018 cost saving initiatives.

Fiscal 2021 Outlook

Given the dynamic nature of the COVID-19 crisis and lack of visibility, the potential financial impact to the business cannot be reasonably estimated. The Company is not providing fiscal 2021 guidance.

Conference Call

The Company’s management will host a conference call and audio webcast to discuss its results today, August 27, 2020 at 9:00 a.m. Eastern Time. The conference call may be accessed by dialing (877) 407-0784. Additionally, a live webcast of the call can be accessed at www.movadogroup.com. The webcast will be archived on the Company’s website approximately one hour after the conclusion of the call. Additionally, a telephonic re-play of the call will be available at 12:00 p.m. ET on August 27, 2020 until 11:59 p.m. ET on September 10, 2020 and can be accessed by dialing (844) 512-2921 and entering replay pin number 13708469.

Movado Group, Inc. designs, sources, and distributes MOVADO®, MVMT®, OLIVIA BURTON®, EBEL®, CONCORD®, COACH®, TOMMY HILFIGER®, HUGO BOSS®, LACOSTE®, SCUDERIA FERRARI®, REBECCA MINKOFF® and URI MINKOFF® watches worldwide, and operates Movado company stores in the United States and Canada.

In this release, the Company presents certain financial measures that are not calculated according to generally accepted accounting principles in the United States (“GAAP”). Specifically, the Company is presenting adjusted gross profit, adjusted gross margin, adjusted operating expenses and adjusted operating income, which are gross profit, gross margin, operating expenses and operating income, respectively, under GAAP, adjusted to eliminate the amortization of acquisition accounting adjustments related to the Olivia Burton and MVMT acquisitions, corporate initiatives and the impairment of goodwill and certain intangible assets. The Company is also presenting adjusted tax provision, which is the tax provision under GAAP, adjusted to eliminate the impact of charges for the Olivia Burton and MVMT acquisitions, corporate initiatives, the impairment of goodwill and certain intangible assets and the gain on sale of a non-operating asset. The Company believes these adjusted measures are useful because they give investors information about the Company’s financial performance without the effect of certain items that the Company believes are not characteristic of its usual operations. The Company is also presenting adjusted net income, adjusted earnings per share and adjusted effective tax rate, which are net income, earnings per share and effective tax rate, respectively, under GAAP, adjusted to eliminate the after-tax impact of amortization of acquisition accounting adjustments related to the Olivia Burton and MVMT acquisitions, corporate initiatives, the impairment of goodwill and certain intangibles and the gain on sale of a non-operating asset. The Company believes that adjusted net income, adjusted earnings per share and adjusted effective tax rate are useful measures of performance because they give investors information about the Company’s financial performance without the effect of certain items that the Company believes are not characteristic of its usual operations. Additionally, the Company is presenting constant currency information to provide a framework to assess how its business performed excluding the effects of foreign currency exchange rate fluctuations in the current period. Comparisons of financial results on a constant dollar basis are calculated by translating each foreign currency at the same US dollar exchange rate as in effect for the prior-year period for both periods being compared. The Company believes this information is useful to investors to facilitate comparisons of operating results. These non-GAAP financial measures are designed to complement the GAAP financial information presented in this release. The non-GAAP financial measures presented should not be considered in isolation from or as a substitute for the comparable GAAP financial measures, and the methods of their calculation may differ substantially from similarly titled measures used by other companies.

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company has tried, whenever possible, to identify these forward-looking statements using words such as “expects,” “anticipates,” “believes,” “targets,” “goals,” “projects,” “intends,” “plans,” “seeks,” “estimates,” “may,” “will,” “should” and variations of such words and similar expressions. Similarly, statements in this press release that describe the Company’s business strategy, outlook, objectives, plans, intentions or goals are also forward-looking statements. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the Company’s actual results, performance or achievements and levels of future dividends to differ materially from those expressed in, or implied by, these statements. These risks and uncertainties may include, but are not limited to general economic and business conditions which may impact disposable income of consumers in the United States and the other significant markets (including Europe) where the Company’s products are sold, uncertainty regarding such economic and business conditions, trends in consumer debt levels and bad debt write-offs, general uncertainty related to possible terrorist attacks, natural disasters, pandemics, including the effect of the COVID-19 pandemic and other diseases on travel and traffic in our retail stores and the stores of our wholesale customers, supply disruptions and delivery delays from our Chinese and other suppliers as a result of the COVID-19 pandemic, adverse impact on the Company’s wholesale customers and customer traffic in the Company’s stores as a result of increased uncertainty and economic disruption caused by the COVID-19 pandemic, the stability of the European Union (including the impact of the United Kingdom’s process to exit from the European Union), the stability of the United Kingdom after its exit from the European Union, and defaults on or downgrades of sovereign debt and the impact of any of those events on consumer spending, changes in consumer preferences and popularity of particular designs, new product development and introduction, decrease in mall traffic and increase in e-commerce, the ability of the Company to successfully implement its business strategies, competitive products and pricing, the impact of “smart” watches and other wearable tech products on the traditional watch market, seasonality, availability of alternative sources of supply in the case of the loss of any significant supplier or any supplier’s inability to fulfill the Company’s orders, the loss of or curtailed sales to significant customers, the Company’s dependence on key employees and officers, the ability to successfully integrate the operations of acquired businesses without disruption to other business activities, the possible impairment of acquired intangible assets including goodwill if the carrying value of any reporting unit were to exceed its fair value, volatility in reported earnings resulting from changes in the estimated fair value of contingent acquisition consideration, the continuation of the company’s major warehouse and distribution centers, the continuation of licensing arrangements with third parties, losses possible from pending or future litigation, the ability to secure and protect trademarks, patents and other intellectual property rights, the ability to lease new stores on suitable terms in desired markets and to complete construction on a timely basis, the ability of the Company to successfully manage its expenses on a continuing basis, information systems failure or breaches of network security, the continued availability to the Company of financing and credit on favorable terms, business disruptions, and general risks associated with doing business outside the United States including, without limitation, import duties, tariffs (including retaliatory tariffs), quotas, political and economic stability, changes to existing laws or regulations, and success of hedging strategies with respect to currency exchange rate fluctuations, and the other factors discussed in the Company’s Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. These statements reflect the Company’s current beliefs and are based upon information currently available to it. Be advised that developments subsequent to this press release are likely to cause these statements to become outdated with the passage of time. The Company assumes no duty to update its forward looking statements and this release shall not be construed to indicate the assumption by the Company of any duty to update its outlook in the future.

(Tables to follow)

MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

Three Months Ended

Six Months Ended

July 31,

July 31,

2020

2019

2020

2019

Net sales

$

88,538

$

157,816

$

158,204

$

304,365

Cost of sales

43,182

72,477

80,955

140,153

Gross profit

45,356

85,339

77,249

164,212

Operating expenses

54,272

76,563

112,409

150,462

Impairment of goodwill and intangible assets

–

–

155,919

–

Total operating expenses

54,272

76,563

268,328

150,462

Operating (loss)/income

(8,916

)

8,776

(191,079

)

13,750

Non-operating (expense)/income:
Gain on sale of a non-operating asset

1,317

–

1,317

–

Change in contingent consideration

–

13,627

–

13,627

Interest expense

(590

)

(225

)

(861

)

(449

)
Interest income

8

24

23

45

(Loss)/Income before income taxes

(8,181

)

22,202

(190,600

)

26,973

(Benefit)/Provision for income taxes

(1,559

)

4,741

(33,889

)

5,588

Net (loss)/income

(6,622

)

17,461

(156,711

)

21,385

Less: Net loss attributable to noncontrolling interests

(7

)

(44

)

(103

)

(45

)
Net (loss)/income attributable to Movado Group, Inc.

$

(6,615

)

$

17,505

$

(156,608

)

$

21,430

Diluted Income Per Share Information
Net (loss)/income attributable to Movado Group, Inc.

$

(0.28

)

$

0.75

$

(6.75

)

$

0.92

Weighted diluted average shares outstanding

23,240

23,292

23,191

23,370

MOVADO GROUP, INC.
GAAP AND NON-GAAP MEASURES
(In thousands, except for percentage data)
(Unaudited)

As Reported

Three Months Ended

July 31,

% Change

2020

2019

Total net sales, as reported

$

88,538

$

157,816

-43.9

%
Total net sales, constant dollar basis

$

88,461

$

157,816

-43.9

%

As Reported

Six Months Ended

July 31,

% Change

2020

2019
Total net sales, as reported

$

158,204

$

304,365

-48.0

%
Total net sales, constant dollar basis

$

158,813

$

304,365

-47.8

%
MOVADO GROUP, INC.
GAAP AND NON-GAAP MEASURES
(In thousands, except per share data)
(Unaudited)

Net Sales

Gross Profit

Operating

(Loss)/Income

Pre-tax

(Loss)/Income

(Benefit)/Provision

for Income Taxes

Net

(Loss)/Income

Attributable to

Movado Group,

Inc.

Diluted EPS
Three Months Ended July 31, 2020
As Reported (GAAP)

$

88,538

$

45,356

$

(8,916

)

$

(8,181

)

$

(1,559

)

$

(6,615

)

$

(0.28

)
Olivia Burton Costs (1)

–

–

671

671

139

532

$

0.02

MVMT Costs (2)

–

–

284

284

108

176

$

0.01

Gain On Sale of a Non-Operating Asset (3)

–

–

–

(1,317

)

(474

)

(843

)

$

(0.04

)
Corporate Initiatives (4)

–

–

7,368

7,368

2,353

5,015

$

0.22

Adjusted Results (Non-GAAP)

$

88,538

$

45,356

$

(593

)

$

(1,175

)

$

567

$

(1,735

)

$

(0.07

)
Three Months Ended July 31, 2019
As Reported (GAAP)

$

157,816

$

85,339

$

8,776

$

22,202

$

4,741

$

17,505

$

0.75

Olivia Burton Costs (1)

–

–

690

690

131

559

0.02

MVMT Costs (2)

–

–

1,125

1,125

270

855

0.04

Change In Contingent Consideration (5)

–

–

–

(13,627

)

(3,270

)

(10,357

)

(0.44

)
Cost Savings Initiatives (6)

–

–

(320

)

(320

)

(77

)

(243

)

(0.01

)
Adjusted Results (Non-GAAP)

$

157,816

$

85,339

$

10,271

$

10,070

$

1,795

$

8,319

$

0.36

Net Sales Gross Profit Operating
(Loss)/Income 		Pre-tax
(Loss)/Income 		(Benefit)/Provision
for Income Taxes		 Net
(Loss)/Income
Attributable to
Movado Group,
Inc.		 Diluted EPS
Six Months Ended July 31, 2020
As Reported (GAAP)

$

158,204

$

77,249

$

(191,079

)

$

(190,600

)

$

(33,889

)

$

(156,608

)

$

(6.75

)
Olivia Burton Costs (1)

–

–

1,356

1,356

258

1,098

$

0.05

MVMT Costs (2)

–

–

981

981

373

608

$

0.03

Goodwill and Intangible Asset Impairment (7)

–

–

155,919

155,919

24,867

131,052

$

5.65

Gain On Sale of a Non-Operating Asset (3)

–

–

–

(1,317

)

(474

)

(843

)

$

(0.04

)
Corporate Initiatives (4)

–

3,508

14,608

14,608

4,592

10,016

$

0.43

Adjusted Results (Non-GAAP)

$

158,204

$

80,757

$

(18,215

)

$

(19,053

)

$

(4,273

)

$

(14,677

)

$

(0.63

)
Six Months Ended July 31, 2019
As Reported (GAAP)

$

304,365

$

164,212

$

13,750

$

26,973

$

5,588

$

21,430

$

0.92

Olivia Burton Costs (1)

–

–

1,402

1,402

266

1,136

0.05

MVMT Costs (2)

–

140

2,598

2,598

624

1,974

0.08

Change In Contingent Consideration (5)

–

–

–

(13,627

)

(3,270

)

(10,357

)

(0.44

)
Cost Savings Initiatives (6)

–

–

(320

)

(320

)

(77

)

(243

)

(0.01

)
Adjusted Results (Non-GAAP)

$

304,365

$

164,352

$

17,430

$

17,026

$

3,131

$

13,940

$

0.60

Contacts

ICR, Inc.

Rachel Schacter/Allison Malkin

203-682-8200

Read full story here

Categories
Business

Dun & Bradstreet reports second quarter 2020 financial results

SHORT HILLS, N.J.–(BUSINESS WIRE)–Dun & Bradstreet Holdings, Inc. (NYSE: DNB), a leading global provider of business decisioning data and analytics, today announced unaudited financial results for the second quarter ended June 30, 2020. A reconciliation of U.S. generally accepted accounting principles (“GAAP”) to non-GAAP financial measures has been provided in this press release, including the accompanying tables. An explanation of these measures is also included below under the heading “Use of Non-GAAP Financial Measures.”

  • Revenue of $420.6 million, up 5.4%, and up 5.6% on a constant currency basis; which includes the net impact of lower deferred revenue purchase accounting adjustments of $35.9 million.
  • Net loss of $207.1 million, or diluted loss per share of $0.66, and adjusted net income of $81.6 million, or adjusted diluted earnings per share of $0.26.
  • Adjusted EBITDA of $176.1 million, up 18.5%, and adjusted EBITDA margin of 41.9%, an increase of 470 basis points; which includes the net impact of lower deferred revenue purchase accounting adjustments of $35.9 million.
  • Completed initial public offering and concurrent private placement of $400.0 million in July, raising net proceeds of $2.2 billion.

Dun & Bradstreet Chairman Bill Foley said, “Our recent IPO was a significant milestone for the company, and another step forward as part of our longer journey of transformation. We are excited about the opportunities that lie ahead at Dun & Bradstreet as we work to drive long-term value and sustained growth.”

Dun & Bradstreet CEO Anthony Jabbour said, “Our performance for the quarter was in line with expectations and we continue to make significant progress in our transformation that ultimately supports our long-term strategic goals. Despite a challenging macro-economic environment, our core business fundamentals remained strong and we continue to be uniquely positioned to support our customers through these difficult times.”

Second Quarter 2020 Segment Results

North America

North America revenue was $354.3 million, a decrease of 1.8% as reported and on a constant currency basis. Finance and Risk revenue was $193.6 million, a decrease of 3.6%, and a decrease of 3.5% on a constant currency basis driven by structural changes we made within our legacy Credibility solutions and the impact of COVID-19 on usage volumes. Sales and Marketing revenue was $160.7 million, an increase of 0.4% as reported and on a constant currency basis. North America adjusted EBITDA was $170.1 million, a decrease of 2.8%, with adjusted EBITDA margin of 48.0%, a decrease of 50 basis points.

International

International revenue was $68.4 million, a decrease of 9.9%, and a decrease of 8.9% on a constant currency basis. Finance and Risk revenue was $55.9 million, a decrease of 12.4%, and a decrease of 11.3% on a constant currency basis primarily driven by lower non-recurring revenues in the Worldwide Network along with the impact of COVID-19 on usage volumes. Sales and Marketing revenue was $12.5 million, an increase of 3.5% and an increase of 3.6% on a constant currency basis. International adjusted EBITDA was $20.2 million, a decrease of 26.7%, with adjusted EBITDA margin of 29.5%, a decrease of 670 basis points.

Balance Sheet

As of June 30, 2020, we had cash and cash equivalents of $99.8 million and total debt of $4,061 million. As of June 30, 2020, we had available capacity of $312.5 million on our revolving credit facility.

On July 6, 2020, Dun & Bradstreet completed its initial public offering at an offering price of $22.00 per share. The Company issued 90.0 million shares, including the additional 11.7 million shares purchased by the underwriters resulting from the exercise of their overallotment option. In addition, the Company issued 18.5 million shares in connection with the $400 million concurrent private placement which resulted in net proceeds of $2.2 billion after deducting underwriting discounts and IPO related expenses. Dun & Bradstreet used a portion of the net proceeds to redeem all of its outstanding Series A Preferred Stock and repay $300.0 million of its 10.250% Senior Unsecured Notes outstanding due 2027.

Business Outlook

Dun & Bradstreet’s full year 2020 outlook is as follows:

  • Revenue is expected to be in the range of $1,729 million to $1,759 million.
  • Adjusted EBITDA is expected to be in the range of $704 million to $724 million.
  • Revenue and adjusted EBITDA include a ($21) million impact from deferred revenue purchase accounting, in both the low and high ends of the range.
  • Adjusted EPS is expected to be in the range of $0.89 to $0.93.
  • Adjusted EPS includes a $(0.04) impact from deferred revenue purchase accounting, in both the low and high ends of the range.

The foregoing forward-looking statements reflect Dun & Bradstreet’s expectations as of today’s date and Revenue assumes constant foreign currency rates. Given the number of risk factors, uncertainties and assumptions discussed below, actual results may differ materially. Dun & Bradstreet does not intend to update its forward-looking statements until its next quarterly results announcement, other than in publicly available statements.

Earnings Conference Call and Audio Webcast

Dun & Bradstreet will host a conference call to discuss the second quarter 2020 financial results on August 6, 2020 at 8:30 a.m. ET. The conference call can be accessed live over the phone by dialing 833-350-1376, or for international callers 647-689-6655. A replay will be available from 11:30 a.m. ET on August 6, 2020, through August 13, 2020, by dialing 800-585-8367, or for international callers 416-621-4642. The replay passcode will be 7189713.

The call will also be webcast live from Dun & Bradstreet’s investor relations website at https://investor.dnb.com. Following the completion of the call, a recorded replay of the webcast will be available on the website.

About Dun & Bradstreet

Dun & Bradstreet, a leading global provider of business decisioning data and analytics, enables companies around the world to improve their business performance. Dun & Bradstreet’s Data Cloud fuels solutions and delivers insights that empower customers to accelerate revenue, lower cost, mitigate risk, and transform their businesses. Since 1841, companies of every size have relied on Dun & Bradstreet to help them manage risk and reveal opportunity. For more information on Dun & Bradstreet, please visit www.dnb.com.

Use of Non-GAAP Financial Measures

In addition to reporting GAAP results, we evaluate performance and report our results on the non-GAAP financial measures discussed below. We believe that the presentation of these non-GAAP measures provides useful information to investors and rating agencies regarding our results, operating trends and performance between periods. These non-GAAP financial measures include adjusted revenue, adjusted earnings before interest, taxes, depreciation and amortization (‘‘adjusted EBITDA’’), adjusted EBITDA margin and adjusted net income. Adjusted results are non-GAAP measures that adjust for the impact due to purchase accounting application and divestitures, restructuring charges, equity-based compensation, acquisition and divestiture-related costs (such as costs for bankers, legal fees, due diligence, retention payments and contingent consideration adjustments) and other non-core gains and charges that are not in the normal course of our business (such as gains and losses on sales of businesses, impairment charges, effect of significant changes in tax laws and material tax and legal settlements). We exclude amortization of recognized intangible assets resulting from the application of purchase accounting because it is non-cash and not indicative of our ongoing and underlying operating performance. Recognized intangible assets arise from acquisitions, or primarily the Take-Private Transaction. We believe that recognized intangible assets by their nature are fundamentally different from other depreciating assets that are replaced on a predictable operating cycle. Unlike other depreciating assets, such as developed and purchased software licenses or property and equipment, there is no replacement cost once these recognized intangible assets expire and the assets are not replaced. Additionally, our costs to operate, maintain and extend the life of acquired intangible assets and purchased intellectual property are reflected in our operating costs as personnel, data fee, facilities, overhead and similar items. Management believes it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. Amortization of recognized intangible assets will recur in future periods until such assets have been fully amortized. In addition, we isolate the effects of changes in foreign exchange rates on our revenue growth because we believe it is useful for investors to be able to compare revenue from one period to another, both after and before the effects of foreign exchange rate changes. The change in revenue performance attributable to foreign currency rates is determined by converting both our prior and current periods’ foreign currency revenue by a constant rate. As a result, we monitor our adjusted revenue growth both after and before the effects of foreign exchange rate changes. We believe that these supplemental non-GAAP financial measures provide management and other users with additional meaningful financial information that should be considered when assessing our ongoing performance and comparability of our operating results from period to period. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the factors management uses in planning for and forecasting future periods. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to our reported results prepared in accordance with GAAP.

Our non-GAAP or adjusted financial measures reflect adjustments based on the following items, as well as the related income tax.

Adjusted Revenue

We define adjusted revenue as revenue adjusted to include revenue for the period from January 8 to February 7, 2019 (‘‘International lag adjustment’’) for the Predecessor related to the lag reporting for our International operations. On a GAAP basis, we report International results on a one-month lag, and for 2019 the Predecessor period for International is December 1, 2018 through January 7, 2019. The Successor period for International is February 8, 2019 (commencing on the closing date of the Take-Private Transaction) through November 30, 2019 for the Successor period from January 1, 2019 to December 31, 2019. The International lag adjustment is to facilitate comparability of 2019 periods to 2020 periods.

Adjusted EBITDA and Adjusted EBITDA Margin

We define adjusted EBITDA as net income (loss) attributable to Dun & Bradstreet Holdings, Inc. (Successor) / The Dun & Bradstreet Corporation (Predecessor) excluding the following items:

  • depreciation and amortization;
  • interest expense and income;
  • income tax benefit or provision;
  • other expenses or income;
  • equity in net income of affiliates;
  • net income attributable to non-controlling interests;
  • dividends allocated to preferred stockholders;
  • revenue and expense adjustments to include results for the period from January 8 to February 7, 2019, for the Predecessor related to the International lag adjustment (see above discussion);
  • other incremental or reduced expenses from the application of purchase accounting (e.g. commission asset amortization);
  • equity-based compensation;
  • restructuring charges;
  • merger and acquisition-related operating costs;
  • transition costs primarily consisting of non-recurring incentive expenses associated with our synergy program;
  • legal reserve and costs associated with significant legal and regulatory matters; and
  • asset impairment.

We calculate adjusted EBITDA margin by dividing adjusted EBITDA by adjusted revenue.

Adjusted Net Income

We define adjusted net income as net income (loss) attributable to Dun & Bradstreet Holdings, Inc. (Successor) / The Dun & Bradstreet Corporation (Predecessor) adjusted for the following items:

  • revenue and expense adjustments to include results for the period from January 8 to February 7, 2019, for the Predecessor related to the International lag adjustment (see above discussion);
  • incremental amortization resulting from the application of purchase accounting. We exclude amortization of recognized intangible assets resulting from the application of purchase accounting because it is non-cash and is not indicative of our ongoing and underlying operating performance. The Company believes that recognized intangible assets by their nature are fundamentally different from other depreciating assets that are replaced on a predictable operating cycle. Unlike other depreciating assets, such as developed and purchased software licenses or property and equipment, there is no replacement cost once these recognized intangible assets expire and the assets are not replaced. Additionally, the Company’s costs to operate, maintain and extend the life of acquired intangible assets and purchased intellectual property are reflected in the Company’s operating costs as personnel, data fee, facilities, overhead and similar items;
  • other incremental or reduced expenses from the application of purchase accounting (e.g. commission asset amortization);
  • equity-based compensation;
  • restructuring charges;
  • merger and acquisition-related operating costs;
  • transition costs primarily consisting of non-recurring incentive expenses associated with our synergy program;
  • legal reserve and costs associated with significant legal and regulatory matters;
  • change in fair value of the make-whole derivative liability associated with the Series A Preferred Stock;
  • asset impairment;
  • non-recurring pension charges, related to pension settlement charge and actuarial loss amortization eliminated as a result of the Take-Private Transaction;
  • dividends allocated to preferred stockholders;
  • merger, acquisition and divestiture-related non-operating costs;
  • debt refinancing and extinguishment costs; and
  • tax effect of the non-GAAP adjustments and the impact resulting from the enactment of the CARES Act.

Adjusted Net Earnings per Diluted Share

We calculate adjusted net earnings per diluted share by dividing adjusted net income (loss) by the weighted average number of common shares outstanding for the period plus the dilutive effect of common shares potentially issuable in connection with awards outstanding under our stock incentive plan. For consistency purposes, we assume the stock split effected on June 23, 2020 at the beginning of each of the Predecessor periods.

Forward-Looking Statements

The statements contained in this release that are not purely historical are forward-looking statements, including statements regarding expectations, hopes, intentions or strategies regarding the future. Forward-looking statements are based on Dun & Bradstreet’s management’s beliefs, as well as assumptions made by, and information currently available to, them. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods, or by the inclusion of forecasts or projections. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. It is not possible to predict or identify all risk factors. Consequently, the risks and uncertainties listed below should not be considered a complete discussion of all of our potential trends, risks and uncertainties. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

The risks and uncertainties that forward-looking statements are subject to include, but are not limited to: (i) an outbreak of disease, global or localized health pandemic or epidemic, or the fear of such an event (such as the COVID-19 global pandemic), including the global economic uncertainty and measures taken in response; (ii) the short- and long-term effects of the COVID-19 global pandemic, including the pace of recovery or any future resurgence; (iii) our ability to implement and execute our strategic plans to transform the business; (iv) our ability to develop or sell solutions in a timely manner or maintain client relationships; (v) competition for our solutions; (vi) harm to our brand and reputation; (vii) unfavorable global economic conditions; (viii) risks associated with operating and expanding internationally; (ix) failure to prevent cybersecurity incidents or the perception that confidential information is not secure; (x) failure in the integrity of our data or systems; (xi) system failures and personnel disruptions, which could delay the delivery of our solutions to our clients; (xii) loss of access to data sources; (xiii) failure of our software vendors and network and cloud providers to perform as expected or if our relationship is terminated; (xiv) loss or diminution of one or more of our key clients, business partners or government contracts; (xv) dependence on strategic alliances, joint ventures and acquisitions to grow our business; (xvi) our ability to protect our intellectual property adequately or cost-effectively; (xvii) claims for intellectual property infringement; (xviii) interruptions, delays or outages to subscription or payment processing platforms; (xix) risks related to acquiring and integrating businesses and divestitures of existing businesses; (xx) our ability to retain members of the senior leadership team and attract and retain skilled employees; (xxi) compliance with governmental laws and regulations; (xxii) risks associated with our structure and status as a “controlled company;” and (xxiii) the other factors described under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Cautionary Note Regarding Forward-Looking Statements” and other sections of our final prospectus dated June 30, 2020 and filed with the Securities and Exchange Commission on July 2, 2020, in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and the Company’s subsequent filings with the Securities and Exchange Commission.

Dun & Bradstreet Holdings, Inc.

Condensed Consolidated Statement of Operations (Unaudited)

(Amounts in millions, except per share data)

Three-Month Period

Six-Month Period

Successor

Predecessor

Three Months Ended June 30, 2020

Three Months Ended June 30, 2019

Six Months Ended June 30, 2020

Period from January 1 to June 30, 2019

Period from January 1 to February 7, 2019

Revenue

$

420.6

$

398.9

$

815.9

$

573.0

$

178.7

Operating expenses

139.2

127.8

278.1

192.2

56.7

Selling and administrative expenses

143.4

126.0

269.3

339.6

122.4

Depreciation and amortization

132.6

136.8

266.9

217.3

11.1

Restructuring charge

6.8

17.4

11.3

35.9

0.1

Operating costs

422.0

408.0

825.6

785.0

190.3

Operating income (loss)

(1.4

)

(9.1

)

(9.7

)

(212.0

)

(11.6

)

Interest income

0.2

0.6

0.5

1.6

0.3

Interest expense

(78.0

)

(86.0

)

(161.0

)

(135.0

)

(5.5

)

Other income (expense) – net

(122.7

)

8.1

(32.7

)

12.3

(86.0

)

Non-operating income (expense) – net

(200.5

)

(77.3

)

(193.2

)

(121.1

)

(91.2

)

Income (loss) before provision (benefit) for income taxes and equity in net income of affiliates

(201.9

)

(86.4

)

(202.9

)

(333.1

)

(102.8

)

Less: provision (benefit) for income taxes

(27.5

)

(23.1

)

(101.8

)

(60.1

)

(27.5

)

Equity in net income of affiliates

0.6

2.8

1.2

2.9

0.5

Net income (loss)

(173.8

)

(60.5

)

(99.9

)

(270.1

)

(74.8

)

Less: net (income) loss attributable to the non-controlling interest

(1.2

)

(1.5

)

(1.6

)

(1.9

)

(0.8

)

Less: Dividends allocated to preferred stockholders

(32.1

)

(32.0

)

(64.1

)

(49.9

)

—

Net income (loss) attributable to Dun & Bradstreet Holdings, Inc. (Successor) / The Dun & Bradstreet Corporation (Predecessor)

(207.1

)

(94.0

)

(165.6

)

(321.9

)

(75.6

)

Basic earnings (loss) per share of common stock:

Net income (loss) attributable to Dun & Bradstreet Holdings, Inc. (Successor) / The Dun & Bradstreet Corporation (Predecessor)

$

(0.66

)

$

(0.30

)

$

(0.53

)

$

(1.02

)

$

(2.04

)

Diluted earnings (loss) per share of common stock:

Net income (loss) attributable to Dun & Bradstreet Holdings, Inc. (Successor) / The Dun & Bradstreet Corporation (Predecessor)

$

(0.66

)

$

(0.30

)

$

(0.53

)

$

(1.02

)

$

(2.04

)

Weighted average number of shares outstanding-basic

314.5

314.5

314.5

314.5

37.2

Weighted average number of shares outstanding-diluted

314.5

314.5

314.5

314.5

37.2

Dun & Bradstreet Holdings, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(Amounts in millions, except share data and per share data)

June 30,
2020

December 31,
2019

Assets

Current assets

Cash and cash equivalents

$

99.8

$

98.6

Accounts receivable, net of allowance of $10.1 at June 30, 2020 and $7.3 at December 31, 2019 (Note 3)

246.2

269.3

Other receivables

7.9

10.0

Prepaid taxes

91.8

4.0

Other prepaids

36.8

31.4

Other current assets

6.5

4.6

Total current assets

489.0

417.9

Non-current assets

Property, plant and equipment, net of accumulated depreciation of $12.0 at June 30, 2020 and $7.5 at December 31, 2019

28.1

29.4

Computer software, net of accumulated amortization of $85.5 at June 30, 2020 and $52.9 at December 31, 2019

391.8

379.8

Goodwill

2,848.0

2,840.1

Deferred income tax

13.7

12.6

Other intangibles

5,022.3

5,251.4

Deferred costs

61.5

47.0

Other non-current assets

130.7

134.6

Total non-current assets

8,496.1

8,694.9

Total assets

$

8,985.1

$

9,112.8

Liabilities

Current liabilities

Accounts payable

$

59.9

$

55.0

Accrued payroll

59.8

137.9

Accrued income tax

23.2

7.8

Short-term debt

325.3

81.9

Cumulative Series A Preferred Stock redemption liability

1,067.9

—

Make-whole derivative liability

205.2

172.4

Other accrued and current liabilities

191.5

167.3

Deferred revenue

520.8

467.5

Total current liabilities

2,453.6

1,089.8

Long-term pension and postretirement benefits

185.7

206.6

Long-term debt

3,620.8

3,818.9

Liabilities for unrecognized tax benefits

17.1

16.8

Deferred income tax

1,187.8

1,233.5

Other non-current liabilities

131.1

137.7

Total liabilities

7,596.1

6,503.3

Commitments and contingencies

Cumulative Series A Preferred Stock $0.001 par value per share,1,050,000 shares authorized and issued at June 30, 2020 and December 31, 2019; Liquidation Preference of $1,067.9 at June 30, 2020 and December 31, 2019

—

1,031.8

Equity

Successor Common Stock, $0.0001 par value per share, authorized—2,000,000,000 shares; issued— 314,494,968 shares

—

—

Capital surplus

2,043.9

2,116.9

Accumulated deficit

(675.0)

(573.5)

Accumulated other comprehensive loss

(37.8)

(23.5)

Total stockholder equity

1,331.1

1,519.9

Non-controlling interest

57.9

57.8

Total equity

1,389.0

1,577.7

Total liabilities and stockholder equity

$

8,985.1

$

9,112.8

Contacts

Media:

Lisette Kwong

973-921-6263

KwongL@dnb.com

Investors:

Debra McCann

973-921-6008

IR@dnb.com

Read full story here

Categories
Business

Zoetis announces second quarter 2020 results

  • Reports Flat Revenue of $1.5 Billion, and Net Income of $377 Million, or $0.79 per Diluted Share, Increasing 2% and 3%, Respectively, on a Reported Basis for Second Quarter 2020
  • Reports Adjusted Net Income of $427 Million, or Adjusted Diluted EPS of $0.89 for Second Quarter 2020
  • Delivers 4% Operational Growth in Revenue and 4% Operational Growth in Adjusted Net Income for Second Quarter 2020
  • Raises and Narrows Full Year 2020 Revenue Guidance to $6.300 – $6.475 Billion and Diluted EPS of $3.14 – $3.32 on a Reported Basis, or $3.52 – $3.68 on an Adjusted Basis

PARSIPPANY, N.J.–(BUSINESS WIRE)–$ZTS #animalhealth—Zoetis Inc. (NYSE: ZTS) today reported its financial results for the second quarter of 2020 and raised and narrowed its guidance for full year 2020 to reflect the company’s current view of the estimated full-year impact of the COVID-19 pandemic and foreign currency headwinds.

The company reported revenue of $1.5 billion for the second quarter of 2020, which is flat compared with the second quarter of 2019. Net income for the second quarter of 2020 was $377 million, or $0.79 per diluted share, an increase of 2% and 3%, respectively, on a reported basis.

Adjusted net income1 for the second quarter of 2020 was $427 million, or $0.89 per diluted share, a decrease of 2%, on a reported basis. Adjusted net income for the second quarter of 2020 excludes the net impact of $50 million for purchase accounting adjustments, acquisition-related costs and certain significant items.

On an operational2 basis, revenue for the second quarter of 2020 increased 4%, excluding the impact of foreign currency. Adjusted net income for the second quarter of 2020 increased 4% operationally, excluding the impact of foreign currency.

EXECUTIVE COMMENTARY

“As an essential business supporting the global food supply and the care of people’s pets during the pandemic, Zoetis demonstrated greater resiliency than expected in the second quarter, with 4% operational growth in revenue and 4% operational growth in adjusted net income,” said Kristin Peck, Chief Executive Officer of Zoetis. “Our strong companion animal portfolio, based on our internal innovations, helped offset some of the deeper challenges in the livestock market today.”

“Looking ahead, we expect our overall revenue growth for the remainder of the year to be driven largely by companion animal products, especially parasiticides and our key dermatology portfolio, and we are raising our guidance to reflect our current outlook for the year. We will continue to invest in products that will strengthen the innovations and digital solutions that are needed by our customers across the continuum of care – from prediction and prevention to detection and treatment of diseases,” said Peck.

QUARTERLY HIGHLIGHTS

Zoetis organizes and manages its commercial operations across two segments: United States (U.S.) and International. Within these segments, the company delivers a diverse portfolio of products for companion animals and livestock, tailored to local trends and customer needs. In the second quarter of 2020:

  • Revenue in the U.S. segment was $823 million, an increase of 6% compared with the second quarter of 2019. Sales of companion animal products increased 19% driven primarily by growth in the Simparica® franchise, including the continued launch of Simparica Trio®, the company’s new triple combination parasiticide for dogs. Also contributing to growth was the company’s key dermatology portfolio across both the Cytopoint® and Apoquel® brands. Additionally, companion animal sales benefited from the recent acquisitions of Platinum Performance and its nutritional product formulas, as well as a number of regional diagnostic reference labs. Sales of livestock products decreased 18% in the quarter. Disruptions in the food supply chain including reduced producer processing capacity and continued channel migration from dining out to preparing food at home impacted producer profitability and resulted in a decline across each of the cattle, swine and poultry portfolios. The decline in the cattle portfolio was also the result of continued unfavorable market conditions in beef and dairy, while swine product sales were negatively impacted by increased competition.
  • Revenue in the International segment was $708 million, a decrease of 5% on a reported basis and an increase of 3% operationally compared with the second quarter of 2019. Sales of companion animal products declined 3% on a reported basis and grew 2% on an operational basis. Growth resulted from increased sales of the company’s key dermatology portfolio across both the Apoquel and Cytopoint brands, as well as the Simparica franchise, including the launch of Simparica Trio in Canada and certain markets in the EU. Sales of companion animal products in China continued to grow rapidly driven by strong underlying market dynamics. Growth in companion animal products was partially offset by the impact of COVID-19 and social distancing measures in certain EU markets and in Latin America, including Brazil, that resulted in decreased veterinary clinic traffic. Sales of livestock products declined 5% on a reported basis and grew 4% operationally. Sales of swine products grew as a result of expanding herd production in key accounts and increased biosecurity measures in the wake of African Swine Fever in China. The timing of seasonal vaccination protocols in key salmon markets and the recently launched parasiticide Alpha Flux® were the primary drivers of growth in fish. Growth in our poultry portfolio was the result of increased sales of medicated feed additives and sales of biodevices. Sales of cattle products declined in the quarter due to the impact of COVID-19 in certain markets as well as the discontinuation of non-core products in Brazil.

INVESTMENTS IN GROWTH

Zoetis diversifies and grows its business through the introduction of new products, lifecycle innovations, business development initiatives, and entries into new markets and technologies. The company is increasingly focused on developing integrated solutions for pet owners, veterinarians and farmers that span the continuum of animal care – helping to predict, prevent, detect and treat diseases.

Since our last quarterly earnings announcement, Zoetis continued to bring leading products into new markets. In Brazil, Zoetis received approval for Vanguard® B Oral, a vaccine that aids in preventing kennel cough in dogs, as well as Excenel® RTU EZ (ceftiofur hydrochloride), an anti-infective that treats respiratory diseases in cattle and swine. Additionally, Fostera® Gold PCV MH was approved in Australia. This vaccine provides livestock farmers with greater options and flexibility to reduce the clinical symptoms in pigs associated with porcine circovirus (PCV2) and Mycoplasma hyopneumoniae (M. hyo). Fostera Gold PCV Metastim was also approved in Australia to reduce the clinical symptoms associated with PCV2.

In addition to new product approvals and lifecycle innovations, Zoetis continues to support future growth through business development activities. In July, the company acquired Fish Vet Group as a strategic addition to its Pharmaq business, which develops and commercializes fish vaccines and offers services in vaccination and diagnostics for aquaculture. Adding Fish Vet Group grows the geographic reach and enhances the diagnostics expertise and testing services for fish farmers in major aquaculture markets.

FINANCIAL GUIDANCE

Zoetis is raising and narrowing its full year 2020 guidance, which includes:

  • Revenue between $6.300 billion and $6.475 billion
  • Reported diluted EPS between $3.14 and $3.32
  • Adjusted diluted EPS between $3.52 and $3.68

This guidance reflects foreign exchange rates as of mid-July. Additional details on guidance are included in the financial tables and will be discussed on the company’s conference call this morning.

WEBCAST & CONFERENCE CALL DETAILS

Zoetis will host a webcast and conference call at 8:30 a.m. (ET) today, during which company executives will review second quarter 2020 results, discuss financial guidance and respond to questions from financial analysts. Investors and the public may access the live webcast by visiting the Zoetis website at http://investor.zoetis.com/events-presentations. A replay of the webcast will be archived and made available on Aug. 6, 2020.

About Zoetis

Zoetis is the leading animal health company, dedicated to supporting its customers and their businesses. Building on more than 65 years of experience in animal health, Zoetis discovers, develops, manufactures and commercializes medicines, vaccines and diagnostic products, which are complemented by biodevices, genetic tests and precision livestock farming. Zoetis serves veterinarians, livestock producers and people who raise and care for farm and companion animals with sales of its products in more than 100 countries. In 2019, the company generated annual revenue of $6.3 billion with approximately 10,600 employees. For more information, visit www.zoetis.com.

1 Adjusted net income and its components and adjusted diluted earnings per share (non-GAAP financial measures) are defined as reported net income attributable to Zoetis and reported diluted earnings per share, excluding purchase accounting adjustments, acquisition-related costs and certain significant items.

2 Operational revenue growth (a non-GAAP financial measure) is defined as growth excluding the impact of foreign exchange.

DISCLOSURE NOTICES

Forward-Looking Statements: This press release contains forward-looking statements, which reflect the current views of Zoetis with respect to: business plans or prospects; future operating or financial performance, future guidance, future operating models; expectations regarding products, product approvals or products under development; expected timing of product launches; the potential impact of the coronavirus (COVID-19) pandemic on our business, suppliers, customers and employees; expectations regarding the performance of acquired companies and our ability to integrate new businesses; expectations regarding the financial impact of acquisitions; future use of cash and dividend payments; tax rate and tax regimes; changes in the tax regimes and laws in other jurisdictions; and other future events. These statements are not guarantees of future performance or actions. Forward-looking statements are subject to risks and uncertainties. If one or more of these risks or uncertainties materialize, or if management’s underlying assumptions prove to be incorrect, actual results may differ materially from those contemplated by a forward-looking statement. Forward-looking statements speak only as of the date on which they are made. Zoetis expressly disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, including in the sections thereof captioned “Forward-Looking Statements and Factors That May Affect Future Results” and “Item 1A. Risk Factors,” in our Quarterly Reports on Form 10-Q and in our Current Reports on Form 8-K. Such risks and uncertainties may be amplified by the coronavirus (COVID-19) pandemic and its potential impact on the global economy and our business. These filings and subsequent filings are available online at www.sec.gov, www.zoetis.com, or on request from Zoetis.

Use of Non-GAAP Financial Measures: We use non-GAAP financial measures, such as adjusted net income, adjusted diluted earnings per share and operational results (which exclude the impact of foreign exchange), to assess and analyze our results and trends and to make financial and operational decisions. We believe these non-GAAP financial measures are also useful to investors because they provide greater transparency regarding our operating performance. The non-GAAP financial measures included in this press release should not be considered alternatives to measurements required by GAAP, such as net income, operating income, and earnings per share, and should not be considered measures of liquidity. These non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies. Reconciliation of non-GAAP financial measures and GAAP financial measures are included in the tables accompanying this press release and are posted on our website at www.zoetis.com.

Internet Posting of Information: We routinely post information that may be important to investors in the ‘Investors’ section of our website at www.zoetis.com, on our Facebook page at http://www.facebook.com/zoetis and on Twitter@zoetis. We encourage investors and potential investors to consult our website regularly and to follow us on Facebook and Twitter for important information about us.

ZTS-IR

ZTS-FIN

ZOETIS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME(a)

(UNAUDITED)

(millions of dollars, except per share data)

Quarter Ended

Six Months Ended

June 30,

June 30,

2020

2019

% Change

2020

2019

% Change

Revenue

$

1,548

$

1,547

—

$

3,082

$

3,002

3

Costs and expenses:

Cost of sales

451

465

(3)

910

983

(7)

Selling, general and administrative expenses

393

406

(3)

782

775

1

Research and development expenses

111

111

—

218

213

2

Amortization of intangible assets

40

39

3

80

77

4

Restructuring charges and certain acquisition-related costs

8

22

(64)

17

27

(37)

Interest expense, net of capitalized interest

58

55

5

111

111

—

Other (income)/deductions—net

5

(6)

*

(15)

(20)

(25)

Income before provision for taxes on income

482

455

6

979

836

17

Provision for taxes on income

106

84

26

180

153

18

Net income before allocation to noncontrolling interests

376

371

1

799

683

17

Less: Net loss attributable to noncontrolling interests

(1)

—

*

(1)

—

*

Net income attributable to Zoetis

$

377

$

371

2

$

800

$

683

17

Earnings per share—basic

$

0.79

$

0.77

3

$

1.68

$

1.43

17

Earnings per share—diluted

$

0.79

$

0.77

3

$

1.67

$

1.41

18

Weighted-average shares used to calculate earnings per share

Basic

475.3

478.8

475.4

479.2

Diluted

478.1

482.3

478.6

482.7

(a)

The condensed consolidated statements of income present the quarter and six months ended June 30, 2020 and June 30, 2019. Subsidiaries operating outside the United States are included for the quarter and six months ended May 31, 2020 and May 31, 2019.
* Calculation not meaningful.

ZOETIS INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

CERTAIN LINE ITEMS

(UNAUDITED)

(millions of dollars, except per share data)

Quarter Ended June 30, 2020

GAAP

Reported(a)

Purchase

Accounting

Adjustments

Acquisition-

Related

Costs(1)

Certain

Significant

Items(2)

Non-GAAP

Adjusted(b)

Cost of sales

$

451

$

(2)

$

—

$

(1)

$

448

Gross profit

1,097

2

—

1

1,100

Selling, general and administrative expenses

393

(17)

—

(4)

372

Research and development expenses

111

(1)

—

—

110

Amortization of intangible assets

40

(33)

—

—

7

Restructuring charges and certain acquisition-related costs

8

—

(7)

(1)

—

Other (income)/deductions–net

5

—

—

—

5

Income before provision for taxes on income

482

53

7

6

548

Provision for taxes on income

106

14

1

1

122

Net income attributable to Zoetis

377

39

6

5

427

Earnings per common share attributable to Zoetis–diluted

0.79

0.08

0.01

0.01

0.89

Quarter Ended June 30, 2019

GAAP

Reported(a)

Purchase

Accounting

Adjustments

Acquisition-

Related

Costs(1)

Certain

Significant

Items(2)

Non-GAAP

Adjusted(b)

Cost of sales

$

465

$

(5)

$

—

$

(3)

$

457

Gross profit

1,082

5

—

3

1,090

Selling, general and administrative expenses

406

(18)

—

—

388

Research and development expenses

111

(1)

—

—

110

Amortization of intangible assets

39

(34)

—

—

5

Restructuring charges and certain acquisition-related costs

22

—

(22)

—

—

Other (income)/deductions–net

(6)

—

—

—

(6)

Income before provision for taxes on income

455

58

22

3

538

Provision for taxes on income

84

13

4

1

102

Net income attributable to Zoetis

371

45

18

2

436

Earnings per common share attributable to Zoetis–diluted

0.77

0.09

0.04

—

0.90

(a)

The condensed consolidated statements of income present the quarter and six months ended June 30, 2020 and June 30, 2019. Subsidiaries operating outside the United States are included for the second quarter ended May 31, 2020 and May 31, 2019.

(b)

Non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS. Despite the importance of these measures to management in goal setting and performance measurement, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net income and its components and diluted EPS) may not be comparable to the calculation of similar measures of other companies. Non-GAAP adjusted net income and its components, and non-GAAP adjusted diluted EPS are presented solely to permit investors to more fully understand how management assesses performance.
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted Information for notes (1) and (2).

ZOETIS INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

CERTAIN LINE ITEMS – Continued

(UNAUDITED)

(millions of dollars, except per share data)

Six Months Ended June 30, 2020

GAAP

Reported(a)

Purchase

Accounting

Adjustments

Acquisition-

Related

Costs(1)

Certain

Significant

Items(2)

Non-GAAP

Adjusted(b)

Cost of sales

$

910

$

(4)

$

—

$

(3)

$

903

Gross profit

2,172

4

—

3

2,179

Selling, general and administrative expenses

782

(35)

—

(6)

741

Research and development expenses

218

(1)

—

—

217

Amortization of intangible assets

80

(67)

—

—

13

Restructuring charges and certain acquisition-related costs

17

—

(14)

(3)

—

Other (income)/deductions–net

(15)

—

—

17

2

Income before provision for taxes on income

979

107

14

(5)

1,095

Provision for taxes on income

180

36

—

(2)

214

Net income attributable to Zoetis

800

71

14

(3)

882

Earnings per common share attributable to Zoetis–diluted

1.67

0.15

0.03

(0.01)

1.84

Six Months Ended June 30, 2019

GAAP

Reported(a)

Purchase

Accounting

Adjustments

Acquisition-

Related

Costs(1)

Certain

Significant

Items(2)

Non-GAAP

Adjusted(b)

Cost of sales

$

983

$

(19)

$

—

$

(73)

$

891

Gross profit

2,019

19

—

73

2,111

Selling, general and administrative expenses

775

(36)

—

—

739

Research and development expenses

213

(1)

—

—

212

Amortization of intangible assets

77

(68)

—

—

9

Restructuring charges and certain acquisition-related costs

27

—

(27)

—

—

Other (income)/deductions–net

(20)

—

—

—

(20)

Income before provision for taxes on income

836

124

27

73

1,060

Provision for taxes on income

153

33

5

9

200

Net income attributable to Zoetis

683

91

22

64

860

Earnings per common share attributable to Zoetis–diluted

1.41

0.19

0.05

0.13

1.78

(a)

The condensed consolidated statements of income present the quarter and six months ended June 30, 2020 and June 30, 2019. Subsidiaries operating outside the United States are included for the second quarter ended May 31, 2020 and May 31, 2019.

(b)

Non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS. Despite the importance of these measures to management in goal setting and performance measurement, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net income and its components and diluted EPS) may not be comparable to the calculation of similar measures of other companies. Non-GAAP adjusted net income and its components, and non-GAAP adjusted diluted EPS are presented solely to permit investors to more fully understand how management assesses performance.
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted Information for notes (1) and (2).

ZOETIS INC.

NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

CERTAIN LINE ITEMS

(UNAUDITED)

(millions of dollars)

(1) Acquisition-related costs include the following:

Quarter Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Integration costs(a)

$

6

$

8

$

12

$

9

Restructuring charges(b)

1

14

2

18

Total acquisition-related costs—pre-tax

7

22

14

27

Income taxes(c)

1

4

—

5

Total acquisition-related costs—net of tax

$

6

$

18

$

14

$

22

(a)

Integration costs represent external, incremental costs directly related to integrating acquired businesses and primarily include expenditures for consulting and the integration of systems and processes. Included in Restructuring charges and certain acquisition-related costs.

(b)

Represents employee termination costs, included in Restructuring charges and certain acquisition-related costs.

(c)

Included in Provision for taxes on income. Income taxes include the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. For the six months ended June 30, 2020, also includes a tax charge related to a remeasurement of deferred taxes resulting from the integration of acquired businesses.

(2) Certain significant items include the following:

Quarter Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Operational efficiency initiative(a)

$

—

$

—

$

(17)

$

—

Supply network strategy(b)

1

3

3

5

Other restructuring charges and cost-reduction/productivity initiatives(c)

1

—

3

—

Other(d)

4

—

6

68

Total certain significant items—pre-tax

6

3

(5)

73

Income taxes(e)

1

1

(2)

9

Total certain significant items—net of tax

$

5

$

2

$

(3)

$

64

(a)

Represents a net gain resulting from net cash proceeds received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites, included in Other (income)/deductions-net.

(b)

Represents consulting fees, included in Cost of sales, related to cost-reduction and productivity initiatives.

(c)

Represents employee termination costs incurred as a result of the CEO transition, included in Restructuring charges and certain acquisition-related costs.

(d)

For the quarter and six months ended June 30, 2020, primarily represents the modification of share-based compensation related to CEO transition costs, included in Selling, general and administrative expenses. For the six months ended June 30, 2019, represents a change in estimate related to inventory costing, included in Cost of sales.

(e)

Included in Provision for taxes on income. Income taxes include the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pretax amounts and applying that jurisdiction’s applicable tax rate.

Contacts

Media Contacts:

Bill Price

1-973-443-2742 (o)

william.price@zoetis.com

Kristen Seely

1-973-443-2777 (o)

kristen.seely@zoetis.com

Investor Contacts:

Steve Frank

1-973-822-7141 (o)

steve.frank@zoetis.com

Keith Gaub

1-973-822-7154 (o)

keith.gaub@zoetis.com

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