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Versum Materials Reports First Quarter Fiscal 2017 Financial ResultsVersum Materials, Inc. (NYSE: VSM), a leading materials and equipment supplier to the semiconductor industry, today reported results for the fiscal first quarter ended December 31, 2016. Sales of $270.8 million for the fiscal first quarter ended December 31, 2016, were up 10% from the same quarter a year ago, driven by strong volume in both the Materials and Delivery Systems & Services (DS&S) segments. Net income for the fiscal first quarter ended December 31, 2016 was $50.8 million, or $0.47 per diluted share, down 22% from first quarter 2016, primarily attributable to interest expense of $11.5 million on debt issued in connection with the separation from Air Products & Chemicals, Inc. on October 1, 2016, $4.1 million of higher business separation, restructuring and cost reduction actions related to setting up the stand-alone company and a higher tax rate, resulting in Net Income Margin of 18.8%. Adjusted EBITDA of $93.2 million was up 2% versus prior year first quarter, resulting in an Adjusted EBITDA margin of 34.4%. "For our first quarter as a standalone company, we delivered robust top line growth as well as maintained our strong adjusted EBITDA margins." said Guillermo Novo, our President and Chief Executive Officer. "We remain focused on partnering with our customers and supporting them on their new technology ramps. While we have much work in the year ahead, with this solid start and business foundation, we are well positioned to execute on our strategy and deliver on our commitments to customers and shareholders." Table 1: First Quarter Fiscal 2017 Financial Highlights*
Sales for the fiscal first quarter ended December 31, 2016 were $270.8 million, versus $245.5 million in the same quarter a year ago. This represents an increase of 10% year on year, which was driven largely by higher volumes from product lines in both Advanced Materials and Process Materials within the Materials segment coupled with stronger equipment sales in the DS&S segment. This was partially offset by unfavorable price/mix in the Materials segment. Net Income for the fiscal first quarter ended December 31, 2016 was $50.8 million versus $65.2 million in the same quarter a year ago and included business separation, restructuring and cost reduction actions of $3.2 million and $(0.9) million, respectively. This 22% decrease was attributable to $11.5 million of interest expense during the fiscal first quarter ended December 31, 2016 compared to none in the same quarter a year ago, the higher business separation, restructuring and cost reduction actions and a higher tax rate. Adjusted EBITDA for the fiscal first quarter ended December 31, 2016 was $93.2 million versus $91.4 million in the same quarter a year ago, a 2% increase year on year. The major drivers of the improved performance were the strong volumes in both the Materials and DS&S segments, partially offset by expected higher operating and selling and administrative costs associated with the separation and unfavorable price/mix. Cash flow from operations was $89.8 million during the quarter, with cash used for capital spending of $9.6 million, including $2.8 million related for restructuring activities. Business Segment Results Versum Materials reports results for its two operating business segments, Materials and DS&S, and a Corporate segment.
Materials: Sales for the fiscal first quarter ended December 31, 2016 were $208.0 million, up 10% from the same quarter a year ago. The Materials segment higher results were largely attributed to 14% higher volumes from both the Advanced Materials and Process Materials products lines, partially offset by 4% due to unfavorable price/mix. Operating income for the fiscal first quarter ended December 31, 2016 was $72.9 million, up over 6% from the same quarter a year ago. Segment Adjusted EBITDA for the fiscal first quarter ended December 31, 2016 was $83.1 million, up over 4% from the same quarter a year ago. This improvement was driven by higher volumes which more than offset increased operating and selling and administrative costs and unfavorable price/mix. Delivery Systems & Services (DS&S): Sales for the fiscal first quarter ended December 31, 2016 were $61.9 million, up over 9% from the same quarter a year ago primarily driven by stronger equipment sales. Operating income for the fiscal first quarter ended December 31, 2016 was $12.4 million, down 22% from the same quarter a year ago. Segment Adjusted EBITDA of $12.7 million was down 23% largely driven by unfavorable product mix and higher costs, which more than offset higher sales volumes. Fiscal Year 2017 Outlook For fiscal year 2017, Versum Materials maintains its outlook for estimated sales of $990 to $1,050 million and Adjusted EBITDA of $330 to $350 million. The fiscal year 2017 Adjusted EBITDA outlook excludes approximately $20 to $25 million of estimated one-time stand-up costs related to the implementation of its own enterprise resource planning (ERP) system and relocation of certain administrative and research and development personnel to Versum Materials sites. 2017 Annual Shareholder Meeting The Board of Directors designated Tuesday, March 21, 2017, as the date of the Company's 2017 annual meeting of shareholders. The annual meeting will be held at the company's global headquarters in Tempe, AZ. The record date for the annual meeting is Friday, January 20, 2017. Conference Call and Webcast Details On Monday February 13, 2017 at 11:00 am Eastern Time, Versum Materials plans to host its conference call and webcast to discuss these results. Investors may listen to the conference call live via telephone by dialing (877) 883-0383 (domestic) or (412) 902-6506 (international) and use the participant code 5442157. An audio-only live webcast of the conference call and presentation materials can be accessed through the "Investors" section of our website at www.versummaterials.com. Presentation materials will be posted to the "Investors" section of the website prior to the call. A replay of the conference call/webcast will be available under "Events & Presentations" on the "Investors" section of the Versum Materials website. About Versum Materials Versum Materials, Inc. (NYSE: VSM) is a leading electronic materials company providing high-purity chemicals and gases, delivery systems, services and materials expertise to meet the evolving needs of the global semiconductor, display and LED industries. Derived from the Latin word for "toward," the name "Versum" communicates the company's deep commitment to helping customers move toward the future by collaborating, innovating and creating cutting-edge solutions. A global leader in technology, quality, safety and reliability, Versum Materials is one of the world's leading suppliers of next generation CMP slurries, ultra-thin dielectric and metal film precursors, formulated cleans and etching products, and delivery equipment that has revolutionized the semiconductor industry. Versum Materials, which began "regular way" trading October 3, 2016 on the NYSE as an independent company, has annual sales of approximately $1 billion, 1,900 employees and 10 major facilities in Asia and North America. It is headquartered in Tempe, Arizona. Prior to its separation on October 1, 2016, Versum Materials had operated for more than three decades as a division of Air Products and Chemicals, Inc. (NYSE: APD). For additional information, please visit www.versummaterials.com.
Investor Inquiries:
Media Inquiries: Non-GAAP Financial Measures This earnings press release includes "non-GAAP financial measures," including Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted EBITDA margin and Segment Adjusted EBITDA margin. We define Adjusted EBITDA as net income excluding certain disclosed items which we do not believe to be indicative of underlying business trends, including interest expense, income tax provision, depreciation and amortization expense, non-controlling interests, and business separation, restructuring and cost reduction actions. Versum Materials defines Segment Adjusted EBITDA as segment operating income excluding segment depreciation and amortization expense, and equity affiliates' income. Adjusted EBITDA margin and Segment Adjusted EBITDA margin are calculated by dividing Adjusted EBITDA and Segment Adjusted EBITDA, respectively, by sales. In the accompanying tables, Versum Materials has provided reconciliations of net income to Adjusted EBITDA (see Appendix Table A-2) and of segment operating income (loss) to Segment Adjusted EBITDA (see Appendix Table A-4), in each case the most directly comparable GAAP financial measure. We encourage investors to read these reconciliations. The presentation of these non-GAAP financial measures is intended to enhance the usefulness of financial information by providing measures which management uses internally to evaluate operating performance. We use these non-GAAP measures to assess our operating performance by excluding certain disclosed items that we believe are not representative of our underlying business. We use Adjusted EBITDA to calculate performance-based cash bonuses and determine whether certain performance-based options and restricted stock units vest (as such cash bonuses, options and restricted stock units are tied to Adjusted EBITDA). We use Segment Adjusted EBITDA as the primary measure used by our chief operating decision maker to evaluate the ongoing performance of our business segments. We believe non-GAAP financial measures provide investors with meaningful information to understand our underlying operating results and to analyze financial and business trends. These non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures, and have limitations which include but are not limited to the following: (a) Adjusted EBITDA excludes expenses related to business separation, restructuring and cost reduction actions which we do not consider to be representative of our underlying business operations, however, these disclosed items represent costs to Versum Materials; (b) Adjusted EBITDA is not intended to be a measure for management's discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements; (c) though not business operating costs, interest expense and income tax provision represent ongoing costs of Versum Materials; (d) depreciation, amortization, and impairment charges represent the wear and tear or reduction in value of the plant, equipment, and intangible assets which permit us to manufacture and market our products; and (e) other companies may define non-GAAP measures differently than we do, limiting their usefulness as comparative measures. A reader may find any one or all of these items important in evaluating our performance. Management compensates for the limitations of using non-GAAP financial measures by using them only to supplement our GAAP results and to provide a more complete understanding of the factors and trends affecting our business. In evaluating these non-GAAP financial measures, the reader should be aware that we may incur expenses similar to those eliminated in this presentation in the future. A reconciliation of net income to Adjusted EBITDA as forecasted for 2017 is not provided. Versum Materials does not forecast net income as it cannot, without unreasonable effort, estimate or predict with certainty various components of net income. These components include additional costs associated with the separation from Air Products, further restructuring and other income or charges to be incurred in 2017 as well as the related tax impacts of these items. Additionally, discrete tax items could drive variability in our forecasted effective tax rate. All of these components could significantly impact net income. Further, in the future, other items with similar characteristics to those currently included in Adjusted EBITDA that have a similar impact on comparability of periods, and which are not known at this time, may exist and impact Adjusted EBITDA. Forward-Looking Information: This press release contains, and management may make, certain "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may be identified by references to future periods, and include statements about the fiscal year 2017 outlook for Versum, expectations as to future sales, operating income and Adjusted EBITDA, future profitability, our future operating results on a segment basis, our ability to execute on our strategy and deliver on our commitments to customers and shareholders, estimates of the size of the market for our products, estimates of the success of other competing technologies that may become available, our future success as an independent public company, and other matters. The words "believe," "expect," "anticipate," "project," "estimate," "budget," "continue," "could," "intend," "may," "plan," "potential," "predict," "seek," "should," "will," "would," "objective," "forecast," "goal," "guidance," "outlook," "target" and similar expressions, among others, generally identify forward-looking statements, which are based on management's reasonable expectations and assumptions as of the date the statements were made. Actual results and the outcomes of future events may differ materially from those expressed or implied in the forward-looking statements because of a number of risks and uncertainties, including, without limitation, weakening of global or regional general economic conditions and product supply versus demand imbalances in the semiconductor industry could decrease the demand for our goods and services; our concentrated customer base; our ability to continue technological innovation to meet the evolving needs of our customers; our inability to protect and enforce intellectual property rights; operational, political and legal risks of our international operations; hazards associated with specialty chemical manufacturing could disrupt our operations or the operations of our suppliers or customers; changes in government regulations in the countries we operate; raw material shortages and price increases; sole source and limited source suppliers; fluctuation of currency exchange rates; increased competition; our ability to successfully complete the transition to an independent public company; increased costs as a separate public company; and other risk factors described in our filings with the Securities and Exchange Commission, including in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016, and in our periodic filings. Versum Materials disclaims any obligation or undertaking to disseminate any updates or revisions to the outlook and any forward-looking statements contained in this press release to reflect any subsequent change in assumptions, beliefs or expectations, or any change in circumstances occurring after the date of this presentation.
APPENDIX TABLE A-1: CONSOLIDATED AND SEGMENT SALES MAJOR FACTORS
APPENDIX TABLE A-2: RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
APPENDIX TABLE A-3: FISCAL YEAR 2016 SALES BY SEGMENT
APPENDIX TABLE A-4: FISCAL YEAR 2016 RECONCILIATIONS OF SEGMENT OPERATING INCOME TO SEGMENT ADJUSTED EBITDA
APPENDIX TABLE A-5: FISCAL YEAR 2016 CONSOLIDATED INCOME STATEMENT
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