Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Nexeo Solutions, Inc. | a2016q48k.htm |
| EX-99.1 - EXHIBIT 99.1 - Nexeo Solutions, Inc. | a20161207ex991.htm |
Nexeo Solutions, Inc.
Fourth Quarter and Fiscal Year 2016
Earnings Conference Call
Please stand byelipsis
We will begin momentarily
Welcome to Nexeo’s
Fourth Quarter and Fiscal Year 2016
Earnings Conference Call and Presentation
December 8, 2016
9:00 AM Central Time
10:00 AM Eastern Time
2
3
Agenda and Management Introductions
1 INTRODUCTIONS AND SAFE HARBOR
2 BUSINESS COMMENTARY
3 FINANCIAL PERFORMANCE
4 OUTLOOK AND Q&A
Michael Everett
VP, Treasurer, FP&A, Investor Relations
David Bradley
President & Chief Executive Officer
Ross Crane
Executive VP & Chief Financial Officer
David Bradley
President & Chief Executive Officer
5 CLOSING REMARKS Michael EverettVP, Treasurer, FP&A, Investor Relations
Non-GAAP Financial Measures and Safe Harbor
4
Non-GAAP Financial Measures
Certain financial measures presented herein, including EBITDA, Adjusted EBITDA, Adjusted Gross Profit and Net Debt were derived based on methodologies other
than in accordance with generally accepted accounting principles (GAAP). We have included these measures because we believe they are indicative of our
operating performance, are used by investors and analysts to evaluate us and can facilitate comparisons across periods. As presented by us, these measures may
not be comparable to similarly titled measures reported by other companies. EBITDA, Adjusted EBITDA, Adjusted Gross Profit and Net Debt should be considered
in addition to, not as substitutes for, financial measures presented in accordance with GAAP. For a reconciliation of EBITDA, Adjusted EBITDA, Adjusted Gross
Profit and Net Debt to the most comparable GAAP measure, see the appendix slides.
Safe Harbor
Forward Looking Statements: This presentation contains statements related to Nexeo Solutions, Inc.’s (“Nexeo” or the “Company”) future plans and expectations
and, as such, includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are those statements that are based upon
management’s current plans and expectations as opposed to historical and current facts and are often identified in this presentation by use of words including but
not limited to “may,” “believe,” “will,” “project,” “expect,” “estimate,” “anticipate,” and “plan.” Although the forward-looking statements contained in this
presentation reflect management’s current assumptions based upon information currently available to management and based upon that which management
believes to be reasonable assumptions, the Company cannot be certain that actual results will be consistent with these forward-looking statements. Forward-
looking statements necessarily involve significant known and unknown risks, assumptions and uncertainties that may cause the Company’s actual results,
performance prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks
and uncertainties include, among other things: the Company’s ability to achieve projected cost savings; consolidation of the Company’s competitors; increased
costs of products the Company purchases and its ability to pass on cost increases to its customers; disruptions to the supply of chemicals and plastics that the
Company distributes or in the operations of the Company’s customers; the Company’s significant working capital requirements and the risks associated with
maintaining large inventories; any disruptions to the Company’s Enterprise Resource Planning (“ERP”) system; the Company’s ability to meet the demands of the
Company’s customers on a timely basis; risks and costs related with operating as a stand-alone company; risks related to the Company’s supplier and customer
contracts; risks related to the Company’s substantial indebtedness; changes in state, federal or foreign laws affecting the industries in which the Company
operates; the Company’s ability to comply with any new and existing environmental and other laws and regulations; and general business and economic trends in
the United States and other countries, including uncertainty as to changes and trends. Our future results will depend upon various other risks and uncertainties,
including the risks and uncertainties discussed in our SEC filings, including in the sections entitled “Risk Factors” in such SEC filings. These and other important
factors may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or
implied by these forward-looking statements.
Ongoing Disclosure: The Company does not intend to provide all information enclosed herein on an ongoing basis.
Business Commentary
David Bradley
President and Chief Executive Officer
5
Fiscal Year 2016 Highlights
6
square4 Revenue down 14% driven by
continued stagnant pricing
environment and weak industrial
demand
square4 Gross profit down 7%
‒ Adjusted Gross Profit˟ down 3%
square4 Gross profit margin increased 90 bps
‒ Adjusted Gross Profit˟ margin
increased 130 bps
square4 SG&A improved 9%
square4 Net income impacted by transaction
costs and purchase price accounting
square4 Adjusted EBITDA˟ of $174 million
decreased 1.6%
(1) Successor FY16 includes $16 million for step up in inventory and additional depreciation expense related to the transaction
(2) Successor FY16 includes $2 million for additional depreciation and amortization expense related to the transaction
(3) Predecessor FY15 includes $8 million of other income related to the CSD escrow settlement
˟Non-GAAP measures; See appendix slides for reconciliation to the most comparable GAAP measure
Prior Year
Successor Predecessor Predecessor
Fiscal Year
Ended
Sep-30-2016
Oct-01-2015
Through
Jun-08-2016
Fiscal Year
Ended
Sep-30-2015
FY16 FY16 FY15
Sales and operating revenues 1,065.7$ 2,340.1$ 3,949.1$
Cost of sales and operating expenses(1) 957.3 2,068.2 3,541.1
Gross profit 108.4 271.9 408.0
Selling, general and administrative expenses(2) 91.7 208.9 329.5
Transaction related costs 21.3 33.4 0.1
Change in fair value related to contingent
consideration
(11.2) - -
Operating income 6.6 29.6 78.4
Other income(3) 0.5 2.9 11.4
Interest expense, net (14.3) (42.2) (64.7)
Income from continuing operations before
income taxes
(7.2) (9.7) 25.1
Income tax expense 1.2 4.2 3.9
Net income (loss) from continuing operations (8.4) (13.9) 21.2
Net income (loss) from discontinued
operations, net of tax
- 0.1 (0.8)
Net income (loss) (8.4)$ (13.8)$ 20.4$
Net (loss) per basic and diluted share (0.24)$
Adjusted EBITDA˟(3) 60.9 112.8 176.5
Adjusted EBITDA˟ % of sales 5.7% 4.8% 4.5%
Dollars in millions (except per share data)
Current Year
Adjusted EBITDA˟ Margin (1)
Conversion Ratio (2)
Fiscal Year 2016 Highlights
7
(1) Adjusted EBITDA˟ margin calculated as Adjusted EBITDA˟ divided by total sales revenue
(2) Conversion ratio calculated as Adjusted EBITDA˟ divided by Adjusted Gross Profit˟; FY16 Adjusted Gross Profit˟ excludes step up in inventory and additional depreciation expense
of $16 million
˟Non-GAAP measures; See appendix slides for reconciliation to the most comparable GAAP measure
square4 Fiscal year 2016 net loss of $8 million for the
successor and $14 million for the predecessor
square4 Adjusted EBITDA˟ Margin(1) improved 60 bps
square4 Operating cash flow from continued operations of
$73 million, including cash outflow associated with
transaction expenses of $40 million
square4 Cash capex spending of $19 million, net of asset
sales
square4 Conversion ratio(2) improved 50 bps
square4 Record safety OSHA recordable rate of 0.57
‒ well below industry average of 1.9
square4 Record On-Time-Delivery rate of 96%
‒ a 300 bps improvement
square4 Record private fleet utilization of 66%
$150 $152 $177 $174
3.7%
3.4%
4.5%
5.1%
0%
1%
2%
3%
4%
5%
6%
7%
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
FY13 FY14 FY15 FY16
M
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$150 $152 $177 $174
41.9%
37.8%
43.3% 43.8%
15%
20%
25%
30%
35%
40%
45%
50%
55%
60%
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
FY13 FY14 FY15 FY16
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Financial Performance
Ross Crane
Chief Financial Officer
8
P&L Summary: Quarterly Comparison
9
(1) Successor period includes $4.3 million for step up in inventory and additional depreciation expense
(2) Successor period includes $4.3 million for step up in inventory and additional depreciation expense
(3) Successor period includes $1.4 million for additional depreciation and amortization expense related to the transaction
˟Non-GAAP measures; See appendix slides for reconciliation to the most comparable GAAP measure
(Dollars in millions) Successor Predecessor
Three Months
Ended
Sep-30-2016
Three Months
Ended
Sep-30-2015
4Q-FY16 4Q-FY15 $ %
Sales and operating revenues
Chemicals 383.9$ 452.2 (68.3) (15)%
Plastics 436.8 446.5 (9.7) (2)%
Other 30.7 31.1 (0.4) (1)%
Total sales and operating revenues 851.4 929.8 (78.4) (8)%
Gross profit
Chemicals (1) 46.1 56.3 (10.2) (18)%
Margin 12.0% 12.5%
Plastics (2) 36.9 41.8 (4.9) (12)%
Margin 8.4% 9.4%
Other 6.6 7.4 (0.8) (11)%
Total gross profit 89.6 105.5 (15.9) (15)%
Total gross profit margin 10.5% 11.3%
SG&A (3) 72.5 81.0 (8.5) (10)%
Transaction related costs 3.3 - 3.3 NM
Change in fair value related to contingent consideration (8.9) - (8.9) NM
Operating income 22.7 24.5 (1.8) (7)%
Other income 0.5 2.3 (1.8) (78)%
Interest expense, net (12.0) (15.9) 3.9 (25)%
Income from continuing operations before income taxes 11.2 10.9 0.3 3%
Income tax expense 2.5 1.2 1.3 108%
Net income (loss) 8.7$ 9.7$ (1.0) (10)%
Basic EPS 0.11$
Diluted EPS 0.11$
Adjusted EBITDA˟ 46.4$ 54.4$ (8.0) (15)%
Adjusted EBITDA˟ % of sales 5.4% 5.9%
(50) bps
(100) bps
(50) bps
(80) bps
Variance
YoY
$127.7
$38.6 $47.5
Q4-FY15 Q3-FY16 Q4-FY16
Cash
($ millions)
$926.8
$830.6 $813.3
Q4-FY15 Q3-FY16 Q4-FY16
Total Debt
($ millions)
$799.1 $792.0
$765.8
Q4-FY15 Q3-FY16 Q4-FY16
Net Debt
($ millions)
$507.2
$483.8
$464.8
12.8%
13.9% 13.6%
Q4-FY15 Q3-FY16 Q4-FY16
Working Capital
($ millions)
Working Capital Working Capital % LTM Sales
Key Balance Sheet Metrics
10
(1) Total debt and Net Debt include unamortized debt issuance costs in accordance with the adoption of ASU No. 2015-03 and ASU No. 2015-15
(2) Net Debt is a non-GAAP measure and is defined as long-term debt and capital lease obligations, net of discount and deferred financing costs, plus short-term
borrowings and current portion of long-term debt and capital lease obligations less cash and cash equivalents; See appendix slides for a reconciliation of Net Debt to
the most comparable GAAP measure
(3) Working capital is calculated as accounts receivable plus inventory less accounts payable
(4) Q3-YF16 working capital includes a fair value adjustment increasing inventory by $6.9 million
(5) Leverage is calculated as Net Debt divided by Adjusted EBITDA from continuing operations
(4)
(1)
4.4x4.4x4.5xLeverage(5)
(2)
(3)
Closing Remarks
David Bradley
President and Chief Executive Officer
11
Guidance Outlook and Assumptions
12
Fiscal year 2017 Guidance Outlook
square4 Modest increase in revenue and gross profit
square4 Adjusted EBITDA expected to grow ~10%
Fiscal year 2017 Assumptions
square4 Minimal to moderate improvement in
macro dynamics
square4 Modest volatility in crude oil prices
Item 2016 2017
Revenue $3,406 M
Gross Profit $380 M
SG&A $301 M
FY Capex˟ $19 M
Cash Tax $6 M
D&A $58 M
Cash Interest $50 M
FY Adjusted EBITDA $174 M ~10%
˟Net of asset sales
QUESTION & ANSWER SESSION
To ask a question live over the phone, please press * then the
number 1 on your telephone keypad to queue our operator.
If your question has been answered or you wish to remove
yourself from the queue, please press #.
13
THANK YOU FOR ATTENDING.
We look forward to hosting you next quarter!
Closing Remarks
Please feel free to contact
Nexeo’s Investor Relations Personnel at:
Investor.relations@nexeosolutions.com
281-297-0856
14
APPENDIX
15
Adjusted Gross Profit Reconciliation
16
(1) On June 9, 2016, the Board of Directors approved a change in fiscal year end of the Company from December 31 to September 30. The periods above reflect a September 30
fiscal year end of the Successor.
(2) Includes 22 days of the acquired business' operating activities following the closing of the business combination on June 9, 2016.
Nexeo Solutions, Inc.
Adjusted Gross Profit Reconciliation
(in millions)
Q1 FY
2016(
Q2 FY
2016(
April 1
through
June 8,
2016(
October 1
through
June 8,
2016)
Q1 FY
2016(1)
Q2 FY
2016(1)
Q3 FY
2016(1)(2)
Q4 FY
2016(
Fiscal Year
Ended
September 30,
2016(
Gross Profit
Chemicals $ 47.3 $ 50.1 $ 38.8 $ 136.2 $ - $ - $ 9.6 $ 46.1 $ 55.7
Plastics 40.6 44.8 32.2 117.6 - - 6.7 36.9 43.6
Other 7.3 6.4 4.4 18.1 - - 2.5 6.6 9.1
Total Gross Profit 95.2 101.3 75.4 271.9 - - 18.8 89.6 108.4
Chemicals step up in inventory and additional
depreciation expense - - - - - - 3.3 4.3 7.6
Plastics step up in inventory and additional
depreciation expense - - - - - - 4.0 4.3 8.3
Adjusted Gross Profit
Chemicals 47.3 50.1 38.8 136.2 - - 12.9 50.4 63.3
Plastics 40.6 44.8 32.2 117.6 - - 10.7 41.2 51.9
Other 7.3 6.4 4.4 18.1 - - 2.5 6.6 9.1
Total Adjusted Gross Profit $95.2 $101.3 $75.4 $271.9 $ - $ - $26.1 $98.2 $124.3
Predecessor Successor
Adjusted EBITDA Reconciliation
17
(1) One-time management adjustments associated with integration, restructuring and transformational activities not directly related to the business combination.
(2) Includes the impact of net realized and unrealized foreign exchange gains and losses related to transactions in currencies other than the functional currency of the respective
legal entity for the purpose of evaluating the Company’s performance and facilitate more meaningful comparisons of performance to other fiscal periods.
(3) Management, monitoring, consulting, reimbursable fees and leverage fees, per the agreement with TPG Capital, L.P. In connection with the business combination, this
agreement was terminated.
(4) Includes one-time adjustments for professional and transaction costs related to potential acquisitions and other one-time items related to the business combination.
(5) On June 9, 2016, the Board of Directors approved a change in fiscal year end of the Company from December 31 to September 30. The periods above reflect a September 30
fiscal year end of the Successor.
(6) Includes 22 days of the acquired business' operating activities following the closing of the business combination on June 9, 2016.
Nexeo Solutions, Inc.
Adjusted Gross Profit Reconciliation
(in millions)
Q1 FY
2016(
Q2 FY
2016(
April 1
through
June 8,
2016(
October 1
through
June 8,
2016)
Q1 FY
2016(5)
Q2 FY
2016(5)
Q3 FY
2016(5)(6)
Q4 FY
2016(
Fiscal Year
Ended
September 30,
2016(
Net income (loss) $ 4.3 $ 2.1 $ (20.2) $ (13.8) $ (0.1) $ (1.5) $ (15.5) $ 8.7 $ (8.4)
Net income from discontinued operations — (0.1) — (0.1) — — — — —
Interes t expense, net 15.6 15.4 11.2 42.2 (0.2) (0.4) 2.9 12.0 14.3
Income tax expense (benefi t) 1.3 1.8 1.1 4.2 — — (1.3) 2.5 1.2
Depreciation and amorti zation 13.6 13.8 10.3 37.7 — — 4.3 16.3 20.6
EBITDA from continuing operations 34.8 33.0 2.4 70.2 (0.3) (1.9) (9.6) 39.5 27.7
Change in fa i r value of contingent cons ideration
obl igations — — — — — — — (11.2) (11.2)
Management add-backs (1) 1.6 1.3 1.9 4.8 — 0.1 0.6 3.4 4.1
Foreign exchange (ga ins) losses , net (2) 0.5 (0.3) 1.3 1.5 — — 0.4 0.7 1.1
Management fees (3) 0.9 0.8 0.5 2.2 — — — — —
Compensation expense related to management
equi ty plan (non-cash) 0.3 0.3 0.1 0.7 — — 0.3 1.2 1.5
Ga in on sa le of Frankl in Park — — — — — — — 2.6 2.6
Inventory s tep up — — — — — — 6.9 6.9 13.8
Transaction and other one-time costs (4) 1.0 6.3 26.1 33.4 0.3 1.8 15.9 3.3 21.3
Adjusted EBITDA from continuing operations $ 39.1 $ 41.4 $ 32.3 $ 112.8 $ - $ - $ 14.5 $ 46.4 $ 60.9
Predecessor Successor
LTM Adjusted EBITDA Reconciliation
18
(1) One-time management adjustments associated with integration, restructuring and transformational activities not directly related to the business combination.
(2) Special one-time compensation incentive approved by the Compensation Committee for fiscal year 2015 performance.
(3) Includes the impact of net realized and unrealized foreign exchange gains and losses related to transactions in currencies other than the functional currency of the
respective legal entity for the purpose of evaluating company performance and facilitate more meaningful comparisons of performance to other fiscal periods.
(4) Management, monitoring, consulting, reimbursable fees and leverage fees, per the agreement with TPG Capital, L.P. In connection with the business combination, this
agreement was terminated.
(5) Includes one-time adjustments for professional and transaction costs related to potential acquisitions and other one-time items related to the business combination.
(6) Reflects certain expenses incurred to terminate activity and relationships associated with these operations.
Nexeo Solutions, Inc.
Adjusted EBITDA Reconciliation
(in millions)
9/ 30/ 2013
LTM
9/ 30/ 2014
LTM
9/ 30/ 2015
LTM
12/ 31/ 2015
LTM
3/ 31/ 2016
LTM
6/ 30/ 2016
LTM
9/ 30/ 2016
LTM
Net income (loss) attributable to Nexeo Solutions, Inc. (6.3)$ 4.9$ 20.4$ 32.2$ 34.9$ (21.2)$ (22.2)$
Net loss attributable to noncontroll ing interest 1.7 1.3 - - - - -
Net (income) loss from discontinued operations (18.4) 0.8 - (0.1) (0.1) (0.1)
Interest expense, net 57.7 63.6 64.7 63.9 63.1 60.4 56.5
Income tax expense 4.7 7.3 3.9 6.1 6.1 4.1 5.4
Depreciation and amortization 38.7 53.4 52.6 53.3 53.6 55.1 58.3
EBITDA from continuing operations 96.5$ 112.1$ 142.4$ 155.5$ 157.6$ 98.3$ 97.9$
Management add-backs (1) 29.2 22.4 16.2 11.3 8.4 8.4 8.9
Change in FV of contingent consideration obligations - - - - - - (11.2)
FY 2015 special one-time compensation incentives (2) - - 8.9 8.9 8.9 8.9 -
Foreign exchange (gains) losses, net (3) 1.3 1.2 2.2 1.5 1.9 3.2 2.6
Management fees (4) 5.5 5.1 4.7 4.2 4.1 3.3 2.2
Compensation expense related to management equity plan (non-cash) 1.4 1.0 1.2 1.2 1.2 1.3 2.2
Gain on sale of Franklin Park facil ity - - - - 2.6
Inventory step up - - - 6.9 13.8
Transaction and other one-time items (5) 16.3 9.9 0.9 1.2 7.2 51.4 54.7
Adjusted EBITDA from continuing operations 150.1$ 151.7$ 176.5$ 183.8$ 189.3$ 181.7$ 173.7$
Adjustments associated with discontinued operations:
Pretax gain on Composites Sale - 15.5 - - - - -
Adjusted EBITDA from discontinued operations (6) 15.4 5.9 (1.0) (0.2) - - -
Adjusted EBITDA 165.5$ 173.1$ 175.5$ 183.6$ 189.3$ 181.7$ 173.7$
Net Debt Reconciliation
19
Nexeo Solutions, Inc.
Net Debt Reconciliation
(in millions)
Predecessor Successor Successor
Sep-30-15 Jun-30-16 Sep-30-16
Q4-FY15 Q3-FY16 Q4-FY16
Long-term debt and capital lease obligations,
less current portion, net
854.4$ 780.6$ 765.6$
Short-term borrowings and current portion of
long-term debt and capital lease obligations
72.4 50.0 47.7
Total Debt 926.8 830.6 813.3
Cash and cash equivalents 127.7 38.6 47.5
Net Debt 799.1$ 792.0$ 765.8$