Targa Resources Corp. Reports Third Quarter 2019 Financial Results and Provides Preliminary 2020 Growth Capital Outlook

HOUSTON, Nov. 07, 2019 (GLOBE NEWSWIRE) — Targa Resources Corp. (NYSE: TRGP) (“TRC”, the “Company” or “Targa”) today reported third quarter 2019 results.


Third Quarter 2019 Financial Results

Third quarter 2019 net loss attributable to Targa Resources Corp. was $47.3 million compared to a net loss of $23.7 million for the third quarter of 2018.

The Company reported quarterly earnings before interest, income taxes, depreciation and amortization, and other non-cash items (“Adjusted EBITDA”) of $349.6 million for the third quarter of 2019 compared to $347.2 million for the third quarter of 2018 (see the section of this release entitled “Targa Resources Corp. ― Non-GAAP Financial Measures” for a discussion of Adjusted EBITDA, distributable cash flow, gross margin and operating margin, and reconciliations of such measures to their most directly comparable financial measures calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”)).

“Our Gathering and Processing and Downstream systems continued to perform very well, bolstered by the partial quarter contribution of our recently completed Grand Prix NGL Pipeline,” said Joe Bob Perkins, Chief Executive Officer of the Company. “With the recent completion of Grand Prix and other important growth projects, we are beginning to demonstrate the strategic benefits of our premier integrated midstream position and our cash flow profile is expected to strengthen meaningfully, positioning Targa well over the long-term.”

On October 16, 2019, TRC declared a quarterly dividend of $0.91 per share of its common stock for the three months ended September 30, 2019, or $3.64 per share on an annualized basis. Total cash dividends of approximately $211.8 million will be paid on November 15, 2019 on all outstanding shares of common stock to holders of record as of the close of business on November 1, 2019. Also, on October 16, 2019, TRC declared a quarterly cash dividend of $23.75 per share of its Series A Preferred Stock. Total cash dividends of approximately $22.9 million will be paid on November 14, 2019 on all outstanding shares of Series A Preferred Stock to holders of record as of the close of business on November 1, 2019.

The Company reported distributable cash flow for the third quarter of 2019 of $229.9 million compared to total common dividends to be paid of $211.8 million and total Series A Preferred Stock dividends to be paid of $22.9 million, resulting in dividend coverage of approximately 1.0 times.


Third Quarter 2019 – Sequential Quarter over Quarter Commentary

Third quarter 2019 Adjusted EBITDA of $349.6 million was 14 percent higher than the second quarter of 2019, driven by meaningful contributions from recently completed growth projects in Targa’s Gathering and Processing and Downstream segments. In the Gathering and Processing segment, strong volume performance in the Permian region and the Badlands, combined with lower operating expenses, was partially offset by lower natural gas liquids (“NGL”) price realizations. Sequentially lower realized NGL prices in the third quarter versus the second quarter were partially offset by realized hedge gains, which are presented in Other. Strong financial performance in the Downstream segment was led by Targa’s Grand Prix NGL Pipeline (“Grand Prix”), which commenced full operations into Mont Belvieu in August 2019. Grand Prix deliveries into Mont Belvieu averaged approximately 230 thousand barrels per day in September 2019 and are expected to further increase. Fractionation volumes in the third quarter were flat relative to the second quarter as the Company completed a scheduled turnaround and related maintenance, and Targa’s fractionation complex in Mont Belvieu has since returned to operating at a very high utilization rate. Higher sequential operating expenses in the Downstream segment were attributable to a full quarter of Train 6 operations and a partial quarter of full operations of Grand Prix.

The Company has forward natural gas basis swaps that do not qualify for hedge accounting treatment. As of September 30, 2019, the non-cash unrealized mark-to-market loss attributable to the change in fair value of the financial instruments was $101.2 million. This unrealized mark-to-market loss is attributable to unfavorable movements in forward natural gas basis prices and will be more than offset by locked-in gains to be realized in future periods from the underlying transportation arrangements.


Third Quarter 2019 – Capitalization and Liquidity

The Company’s total consolidated debt as of September 30, 2019 was $7,537.7 million including $435.0 million outstanding under TRC’s $670.0 million senior secured revolving credit facility. The consolidated debt included $7,102.7 million of Targa Resources Partners LP’s (“TRP” or the “Partnership”) debt, net of $40.7 million of debt issuance costs, with $830.0 million outstanding under TRP’s $2.2 billion senior secured revolving credit facility, $246.0 million outstanding under TRP’s accounts receivable securitization facility, $6,028.5 million of outstanding TRP senior notes, net of unamortized premiums, and $38.9 million of finance lease liabilities.

Total consolidated liquidity of the Company as of September 30, 2019, including $326.3 million of cash, was over $1.8 billion. As of September 30, 2019, TRC had available borrowing capacity under its senior secured revolving credit facility of $235.0 million. TRP had $830.0 million of borrowings and $73.8 million in letters of credit outstanding under its $2.2 billion senior secured revolving credit facility, resulting in available senior secured revolving credit facility capacity of $1,296.2 million.


Growth Projects Update

Since the beginning of 2019, the Company has completed and commenced operations on numerous major growth projects, aggregating to approximately $4.0 billion of growth capital projects placed in-service. In addition to Grand Prix being placed in-service during the third quarter, Targa also commenced operations on its 200 million cubic feet per day (“MMcf/d”) Little Missouri 4 Plant (“LM4  Plant”) in the Badlands, its 250 MMcf/d Pembrook Plant in Permian Midland and its 250 MMcf/d Falcon Plant in Permian Delaware, and also completed a dock rebuild at its LPG export facility in Galena Park.

The fourth quarter of 2019 will be the first full quarter of margin contribution from Grand Prix, the LM4 Plant, the Pembrook Plant, the Falcon Plant, and additional export services capacity at Galena Park.


2019 Financial and Operational Expectations and 2020 Preliminary Growth Capital Outlook

Targa affirms its previously disclosed full year financial and operational outlook for 2019, despite generally lower year-to-date commodity prices versus original assumptions. Through September 30, 2019, the Company spent $1,946.2 million on net growth capital expenditures, including net contributions to investments in unconsolidated affiliates. Targa’s estimated 2019 net growth capital expenditures continues to be approximately $2.4 billion. Based on current assumptions, Targa’s preliminary outlook for 2020 net growth capital expenditures is approximately $1.2 to $1.3 billion. The timing of moving forward with new Permian gas processing plants and fractionation Train 9 in Mont Belvieu is predicated on the Company’s outlook for estimated volume growth and activity levels, which would impact whether the Company is at the lower or higher end of its estimated net growth capital range as a result of the timing of capital spend.


Asset Sales

Targa continues to evaluate and execute asset sales to reduce leverage and focus on its core operations. During the third quarter of 2019, the Company closed on the sale of an equity-method investment for $70.3 million.

The Company has also engaged Jefferies LLC to evaluate the potential divestiture of its Permian crude gathering business, which includes crude gathering and storage assets in both the Permian Midland and Permian Delaware. The potential divestiture is predicated on third party valuations adequately capturing Targa’s forward growth expectations for the assets, and no assurance can be made that a sale will be consummated.


Conference Call

The Company will host a conference call for the investment community at 11:00 a.m. Eastern time (10:00 a.m. Central time) on November 7, 2019 to discuss third quarter 2019 results. The conference call can be accessed via webcast through the Events and Presentations section of Targa’s website at www.targaresources.com, by going directly to https://edge.media-server.com/mmc/p/ih4at2qd or by dialing 877-881-2598. The conference ID number for the dial-in is 4349515. Please dial in ten minutes prior to the scheduled start time. A webcast replay will be available at the link above approximately two hours after the conclusion of the event.


Targa Resources Corp. – Consolidated Financial Results of Operations

  Three Months Ended September 30,                     Nine Months Ended September 30,                  
  2019     2018     2019 vs. 2018     2019     2018     2019 vs. 2018  
     
  (In millions)  
Revenues:                                                              
Sales of commodities $ 1,594.2     $ 2,654.1     $ (1,059.9 )     (40 %)   $ 5,254.8     $ 6,981.4     $ (1,726.6 )     (25 %)
Fees from midstream services   308.3       332.3       (24.0 )     (7 %)     942.4       904.9       37.5       4 %
Total revenues   1,902.5       2,986.4       (1,083.9 )     (36 %)     6,197.2       7,886.3       (1,689.1 )     (21 %)
Product purchases   1,328.1       2,383.5       (1,055.4 )     (44 %)     4,415.7       6,229.7       (1,814.0 )     (29 %)
Gross margin (1)   574.4       602.9       (28.5 )     (5 %)     1,781.5       1,656.6       124.9       8 %
Operating expenses   200.2       194.9       5.3       3 %     600.8       538.7       62.1       12 %
Operating margin (1)   374.2       408.0       (33.8 )     (8 %)     1,180.7       1,117.9       62.8       6 %
Depreciation and amortization expense   244.3       206.3       38.0       18 %     718.9       607.1       111.8       18 %
General and administrative expense   69.9       63.2       6.7       11 %     223.5       176.9       46.6       26 %
Other operating (income) expense   18.4       61.8       (43.4 )     (70 %)     21.7       15.7       6.0       38 %
Income (loss) from operations   41.6       76.7       (35.1 )     (46 %)     216.6       318.2       (101.6 )     (32 %)
Interest expense, net   (89.1 )     (78.2 )     (10.9 )     (14 %)     (241.8 )     (124.2 )     (117.6 )     (95 %)
Equity earnings (loss)   10.0       3.0       7.0       233 %     15.9       6.4       9.5       148 %
Gain (loss) from financing activities                           (1.4 )     (2.0 )     0.6       30 %
Gain (loss) from sale of equity-method investment   65.8             65.8             65.8             65.8        
Change in contingent considerations         (16.6 )     16.6       100 %     (8.8 )     (12.1 )     3.3       27 %
Income tax (expense) benefit   3.8       3.9       (0.1 )     (3 %)     10.0       (37.7 )     47.7       127 %
Net income (loss)   32.1       (11.2 )     43.3     NM       56.3       148.6       (92.3 )     (62 %)
Less: Net income (loss) attributable to noncontrolling interests   79.4       12.5       66.9     NM       152.7       40.4       112.3       278 %
Net income (loss) attributable to Targa Resources Corp.   (47.3 )     (23.7 )     (23.6 )     (100 %)     (96.4 )     108.2       (204.6 )     (189 %)
Dividends on Series A Preferred Stock   22.9       22.9                   68.8       68.8              
Deemed dividends on Series A Preferred Stock   8.4       7.4       1.0       14 %     24.4       21.5       2.9       13 %
Net income (loss) attributable to common shareholders $ (78.6 )   $ (54.0 )   $ (24.6 )     (46 %)   $ (189.6 )   $ 17.9     $ (207.5 )   NM  
Financial data:                                                              
Adjusted EBITDA (1) $ 349.6     $ 347.2     $ 2.4           $ 970.3     $ 958.3     $ 12.0       1 %
Distributable cash flow (1)   229.9       287.2       (57.3 )     (20 %)     619.4       728.5       (109.1 )     (15 %)
Growth capital expenditures (2)   511.3       984.4       (473.1 )     (48 %)     2,203.4       2,230.0       (26.6 )     (1 %)
Maintenance capital expenditures (3)   31.0       33.3       (2.3 )     (7 %)     101.5       80.4       21.1       26 %

(1) Gross margin, operating margin, Adjusted EBITDA, and distributable cash flow are non-GAAP financial measures and are discussed under “Targa Resources Corp. – Non-GAAP Financial Measures.”
(2) Growth capital expenditures, net of contributions from noncontrolling interest, were $1,870.8 million and $1,824.0 million for the nine months ended September 30, 2019 and 2018. Net contributions to investments in unconsolidated affiliates were $75.4 million and $99.9 million for the nine months ended September 30, 2019 and 2018.
(3) Maintenance capital expenditures, net of contributions from noncontrolling interests, were $95.5 million and $78.8 million for the nine months ended September 30, 2019 and 2018.
NM Due to a low denominator, the noted percentage change is disproportionately high and as a result, considered not meaningful.

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

The decrease in commodity sales reflects lower NGL, natural gas, and condensate prices ($1,352.5 million), the unfavorable impact of mark-to-market hedges ($102.0 million) and lower petroleum products and condensate volumes ($62.2 million), partially offset by higher NGL, crude marketing and natural gas volumes ($373.3 million), the favorable impact of equity volume hedges ($59.5 million) and higher crude marketing prices ($20.1 million).

The decrease in fees from midstream services is largely due to lower gas gathering fees attributable to the Company’s non-cash take in-kind equity volumes, partially offset by an overall increase in gas gathered volumes. Subsequent to the Company’s January 2018 adoption of ASC 606, Revenue from Contracts with Customers, non-cash take in-kind volumes, which have exposure to commodity prices, received from a customer are presented as a component of fees from midstream services with a corresponding offset to product purchases and have no impact to the Company’s operating margin or gross margin.

The decrease in product purchases reflects decreased NGL, natural gas and condensate prices, partially offset by increases in volumes.

Lower 2019 operating margin and gross margin reflect decreased segment results for Gathering and Processing, offset by increased segment results for Logistics and Marketing. See “Review of Segment Performance” for additional information regarding changes in operating margin and gross margin on a segment basis. Operating margin and gross margin also include the effect of hedges as discussed in “Review of Segment Performance – Other.”

Depreciation and amortization expense increased primarily due to higher depreciation related to major growth projects placed in service, including additional processing plants and associated infrastructure in the Permian Basin and Grand Prix.

General and administrative expense increased primarily due to higher compensation and benefits costs as a result of increased staffing levels, partially offset by lower professional services and lower contract labor.

During the third quarter of 2019, the Company wrote down certain assets to their recoverable amounts. In the prior year, a loss on sale was recognized associated with the Company’s refined products and crude oil storage and terminaling facilities in Tacoma, WA, and Baltimore, MD.

Interest expense, net, increased due to higher average borrowings, partially offset by higher capitalized interest related to the Company’s major growth investments.

The increase in equity earnings is primarily due to higher earnings from GCX.

During the third quarter of 2019, the Company closed on the sale of an equity-method investment for $70.3 million that resulted in the recognition of a gain of $65.8 million.

During 2019, the Permian Acquisition contingent consideration earn-out period ended and resulted in a final payment in May. During 2018, the Company recorded an expense resulting primarily from an increase in fair value of the contingent consideration liability. The fair value change was primarily attributable to a shorter discount period.

The change in income tax benefit is primarily due to a lower annual effective tax rate and higher tax benefits related to share-based awards that vested during the quarter.

Net income attributable to noncontrolling interests was higher in 2019 due to earnings allocated to noncontrolling interest holders in Targa Badlands, Grand Prix and Train 6.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

The decrease in commodity sales reflects lower commodity prices ($2,640.8 million) and lower petroleum products volumes due to the sale of certain petroleum logistics storage and terminaling facilities in the fourth quarter of 2018 ($85.3 million), partially offset by higher NGL, crude marketing and natural gas volumes ($936.4 million) and the favorable impact of hedges ($65.8 million). Higher exports and crude gathering fees resulted in increased fees from midstream services.

The decrease in product purchases reflects decreased NGL, natural gas and condensate prices, partially offset by increases in volumes.

Higher 2019 operating margin and gross margin reflect increased segment results for Logistics and Marketing, offset by decreased segment results for Gathering and Processing. See “Review of Segment Performance” for additional information regarding changes in operating margin and gross margin on a segment basis. Operating margin and gross margin also include the effect of hedges as discussed in “Review of Segment Performance – Other.”

Depreciation and amortization expense increased primarily due to higher depreciation related to major growth projects placed in service, including additional processing plants and associated infrastructure in the Permian Basin and Grand Prix.

General and administrative expense increased primarily due to higher compensation and benefits costs as a result of increased staffing levels and higher system costs.

Interest expense, net, increased due to higher average borrowings, partially offset by higher capitalized interest related to the Company’s major growth investments. During 2018, the Company recognized non-cash interest income resulting from a decrease in the estimated redemption value of the mandatorily redeemable interests, primarily attributable to the February 2018 amendments to such arrangements.

The increase in equity earnings is primarily due to higher earnings from GCX.

During 2019, the Company closed on the sale of an equity-method investment for $70.3 million that resulted in the recognition of a gain of $65.8 million.

The change in income tax (expense) benefit was primarily due to lower net income before tax, a lower annual effective tax rate and higher tax benefits related to share-based payment awards that vested during the period.

Net income attributable to noncontrolling interests was higher in 2019 due to earnings allocated to noncontrolling interest holders in Targa Badlands, Grand Prix and Train 6.


Review of Segment Performance

The following discussion of segment performance includes inter-segment activities. The Company views segment operating margin and gross margin as important performance measures of the core profitability of its operations. These measures are key components of internal financial reporting and are reviewed for consistency and trend analysis. For a discussion of operating margin and gross margin, see “Targa Resources Corp. ― Non-GAAP Financial Measures ― Operating Margin” and “Targa Resources Corp. ― Non-GAAP Financial Measures ― Gross Margin.” Segment operating financial results and operating statistics include the effects of intersegment transactions. These intersegment transactions have been eliminated from the consolidated presentation.

The Company operates in two primary segments: (i) Gathering and Processing; and (ii) Logistics and Marketing.


Gathering and Processing Segment

The Gathering and Processing segment includes assets used in the gathering of natural gas produced from oil and gas wells and processing this raw natural gas into merchantable natural gas by extracting NGLs and removing impurities; and assets used for crude oil gathering and terminaling. The Gathering and Processing segment’s assets are located in the Permian Basin of West Texas and Southeast New Mexico (including the Midland and Delaware Basins); the Eagle Ford Shale in South Texas; the Barnett Shale in North Texas; the Anadarko, Ardmore, and Arkoma Basins in Oklahoma (including the SCOOP and STACK) and South Central Kansas; the Williston Basin in North Dakota and in the onshore and near offshore regions of the Louisiana Gulf Coast and the Gulf of Mexico.

The following table provides summary data regarding results of operations of this segment for the periods indicated:

  Three Months Ended
September 30,
                      Nine Months Ended
September 30,
                   
  2019     2018     2019 vs. 2018     2019     2018       2019 vs. 2018  
Gross margin $   328.8     $   373.7     $   (44.9 )     (12 %)   $   1,006.1     $   1,046.3     $   (40.2 )     (4 %)
Operating expenses     120.2         118.4         1.8       2 %       375.2         327.9         47.3       14 %
Operating margin $   208.6     $   255.3     $   (46.7 )     (18 %)   $   630.9     $   718.4     $   (87.5 )     (12 %)
Operating statistics (1):                                                                          
Plant natural gas inlet, MMcf/d (2),(3)                                                                          
Permian Midland (4)     1,546.7         1,161.7         385.0       33 %       1,438.7         1,100.8         337.9       31 %
Permian Delaware     629.4         470.5         158.9       34 %       552.2         432.5         119.7       28 %
Total Permian     2,176.1         1,632.2         543.9                 1,990.9         1,533.3         457.6          
                                                                           
SouthTX (5)     328.6         364.1         (35.5 )     (10 %)       335.3         397.8         (62.5 )     (16 %)
North Texas     228.2         247.6         (19.4 )     (8 %)       227.6         243.0         (15.4 )     (6 %)
SouthOK (6)     590.8         568.2         22.6       4 %       606.1         549.4         56.7       10 %
WestOK     329.2         353.9         (24.7 )     (7 %)       335.2         350.8         (15.6 )     (4 %)
Total Central     1,476.8         1,533.8         (57.0 )               1,504.2         1,541.0         (36.8 )        
                                                                           
Badlands (7), (8)     120.8         90.5         30.3       33 %       103.4         83.3         20.1       24 %
Total Field     3,773.7         3,256.5         517.2                 3,598.5         3,157.6         440.9          
                                                                           
Coastal     721.0         783.3         (62.3 )     (8 %)       765.1         724.5         40.6       6 %
                                                                           
Total     4,494.7         4,039.8         454.9       11 %       4,363.6         3,882.1         481.5       12 %
NGL production, MBbl/d (3)                                                                          
Permian Midland (4)     216.5         152.2         64.3       42 %       199.8         148.0         51.8       35 %
Permian Delaware     82.3         58.9         23.4       40 %       71.4         51.6         19.8       38 %
Total Permian     298.8         211.1         87.7                 271.2         199.6         71.6          
                                                                           
SouthTX (5)     41.5         49.0         (7.5 )     (15 %)       44.0         52.5         (8.5 )     (16 %)
North Texas     27.3         29.6         (2.3 )     (8 %)       26.9         28.1         (1.2 )     (4 %)
SouthOK (6)     69.5         61.2         8.3       14 %       65.4         53.8         11.6       22 %
WestOK     19.2         20.7         (1.5 )     (7 %)       22.4         19.9         2.5       13 %
Total Central     157.5         160.5         (3.0 )               158.7         154.3         4.4          
                                                                           
Badlands (8)     14.0         10.5         3.5       33 %       12.2         10.5         1.7       16 %
Total Field     470.3         382.1         88.2                 442.1         364.4         77.7          
                                                                           
Coastal     45.4         47.3         (1.9 )     (4 %)       47.0         42.8         4.2       10 %
                                                                           
Total     515.7         429.4         86.3       20 %       489.1         407.2         81.9       20 %
Crude oil gathered, Badlands, MBbl/d     164.3         161.7         2.6       2 %       167.0         139.9         27.1       19 %
Crude oil gathered, Permian, MBbl/d     95.2         75.1         20.1       27 %       86.1         63.8         22.3       35 %
Natural gas sales, BBtu/d (3)     2,056.6         1,817.6         239.0       13 %       2,011.2         1,821.1         190.1       10 %
NGL sales, MBbl/d     398.0         329.6         68.4       21 %       382.4         311.3         71.1       23 %
Condensate sales, MBbl/d     11.0         12.6         (1.6 )     (13 %)       12.2         12.8         (0.6 )     (5 %)
Average realized prices (9):                                                                          
Natural gas, $/MMBtu     1.02         1.93         (0.91 )     (47 %)       1.19         2.03         (0.84 )     (41 %)
NGL, $/gal     0.27         0.75         (0.48 )     (64 %)       0.35         0.67         (0.32 )     (48 %)
Condensate, $/Bbl     50.94         58.31         (7.37 )     (13 %)       49.79         58.49         (8.70 )     (15 %)

(1) Segment operating statistics include the effect of intersegment amounts, which have been eliminated from the consolidated presentation. For all volume statistics presented, the numerator is the total volume sold during the quarter and the denominator is the number of calendar days during the quarter.
(2) Plant natural gas inlet represents the Company’s undivided interest in the volume of natural gas passing through the meter located at the inlet of a natural gas processing plant, other than Badlands.
(3)  Plant natural gas inlet volumes and gross NGL production volumes include producer take-in-kind volumes, while natural gas sales and NGL sales exclude producer take-in-kind volumes.
(4) Permian Midland includes operations in WestTX, of which the Company owns 72.8%, and other plants that are owned 100% by us. Operating results for the WestTX undivided interest assets are presented on a pro-rata net basis in the Company’s reported financials.
(5) SouthTX includes the Raptor Plant, of which the Company owns a 50% interest through the Carnero Joint Venture. SouthTX also includes the Silver Oak II Plant, of which the Company owned a 100% interest until it was contributed to the Carnero Joint Venture in May 2018. The Carnero Joint Venture is a consolidated subsidiary and its financial results are presented on a gross basis in the Company’s reported financials.
(6) SouthOK includes the Centrahoma Joint Venture, of which the Company owns 60%, and other plants that are owned 100% by us. Centrahoma is a consolidated subsidiary and its financial results are presented on a gross basis in the Company’s reported financials.
(7) Badlands natural gas inlet represents the total wellhead gathered volume.
(8) As of April 3, 2019, Targa owns 55% of Targa Badlands through a joint venture (the “Badlands Joint Venture”), prior to which the Company owned a 100% interest. The Badlands Joint Venture is a consolidated subsidiary and its financial results are presented on a gross basis in the Company’s reported financials.
(9) Average realized prices exclude the impact of hedging activities presented in Other.

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

The decrease in gross margin was primarily due to lower commodity prices, partially offset by higher Permian and Badlands volumes. The impact of lower commodity prices in 2019 excludes the third quarter realized gain from the Company’s hedging activities presented in Other. NGL production, NGL sales and natural gas sales increased primarily due to higher inlet volumes and increased NGL recoveries. In the Permian, natural gas gathered volumes and NGL production increased due to incremental processing capacity available with the commencement of operations at the Johnson Plant in the fourth quarter of 2018, the Hopson Plant in the second quarter of 2019 and the Pembrook Plant in the third quarter of 2019, while total crude oil gathered volumes increased due to production from new wells. In the Badlands, natural gas gathered volumes and NGL production increased due to incremental processing capacity available with the commencement of operations at the Little Missouri 4 Plant in the third quarter of 2019, while total crude oil gathered volumes increased due to production from new wells.

Operating expenses were relatively flat with increased operating expenses in the Permian, due to gas plant and system expansions, partially offset by reductions in other regions.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

The decrease in gross margin was primarily due to lower commodity prices, partially offset by higher Permian and Badlands volumes. The impact of lower commodity prices in 2019 excludes the realized gain from the Company’s hedging activities presented in Other. NGL production, NGL sales and natural gas sales increased primarily due to higher inlet volumes and increased NGL recoveries. In the Permian, natural gas gathered volumes and NGL production increased due to incremental processing capacity available with the commencement of operations at the Johnson Plant in the fourth quarter of 2018, the Hopson Plant in the second quarter of 2019 and the Pembrook Plant in the third quarter of 2019. In the Badlands, natural gas gathered volumes and NGL production increased due to production from new wells and the incremental processing capacity available with the commencement of operations at the Little Missouri 4 Plant in the third quarter of 2019. Total crude oil gathered volumes increased in both the Permian region and the Badlands due to production from new wells.

The increase in operating expenses was primarily driven by gas plant and system expansions in the Permian region and the Badlands. Operating expenses in other areas were relatively flat.


Logistics and Marketing Segment

The Logistics and Marketing segment includes the activities and assets necessary to convert mixed NGLs into NGL products and also includes other assets and value-added services such as transporting, storing, fractionating, terminaling and marketing of NGLs and NGL products, including services to liquefied petroleum gas (“LPG”) exporters; storing and terminaling of refined petroleum products and crude oil and certain natural gas supply and marketing activities in support of the Company’s other businesses. The Logistics and Marketing segment also includes Grand Prix, which integrates the Company’s gathering and processing positions in the Permian Basin, Southern Oklahoma and North Texas with the Company’s downstream facilities in Mont Belvieu, Texas. The associated assets are generally connected to and supplied in part by the Company’s Gathering and Processing segment and, except for pipelines and smaller terminals, are located predominantly in Mont Belvieu and Galena Park, Texas, and in Lake Charles, Louisiana.

The following table provides summary data regarding results of operations of this segment for the periods indicated:

    Three Months Ended
September 30,
            Nine Months Ended
September 30,
                   
    2019     2018     2019 vs. 2018     2019     2018     2019 vs. 2018  
  (In millions)  
Gross margin   $   310.4     $   249.4     $   61.0       24 %   $   792.4     $   653.1     $   139.3       21 %
Operating expenses       81.5         75.9         5.6       7 %       227.4         211.4         16.0       8 %
Operating margin   $   228.9     $   173.5     $   55.4       32 %   $   565.0     $   441.7     $   123.3       28 %
Operating statistics MBbl/d (1):                                                                            
Fractionation volumes (2)       508.8         454.5         54.3       12 %       492.8         419.0         73.8       18 %
Export volumes (3)       239.2         208.2         31.0       15 %       228.1         200.2         27.9       14 %
Pipeline throughput (4)       131.8                 131.8               44.4                 44.4        
NGL sales       672.1         555.7         116.4       21 %       620.9         526.7         94.2       18 %
Average realized prices:                                                                            
NGL realized price, $/gal   $   0.43     $   0.88     $   (0.45 )     (51 %)   $   0.50     $   0.80     $   (0.30 )     (38 %)

(1) Segment operating statistics include intersegment amounts, which have been eliminated from the consolidated presentation. For all volume statistics presented, the numerator is the total volume sold during the period and the denominator is the number of calendar days during the period.
(2) Fractionation contracts include pricing terms composed of base fees and fuel and power components that vary with the cost of energy. As such, the Logistics and Marketing segment results include effects of variable energy costs that impact both gross margin and operating expenses. Fractionation volumes for 2019 reflect volumes delivered and fractionated, whereas fractionation volumes for 2018 reflect volumes delivered and settled under fractionation contracts.
(3) Export volumes represent the quantity of NGL products delivered to third-party customers at the Company’s Galena Park Marine Terminal that are destined for international markets.
(4) Pipeline throughput represents the total quantity of mixed NGLs delivered by Grand Prix to Mont Belvieu.

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

Logistics and Marketing gross margin increased due to higher NGL transportation, fractionation and services margin, higher marketing margin, and higher LPG export margin, partially offset by lower terminaling and storage throughput. NGL transportation, fractionation and services margin increased due to volumes delivered on Grand Prix, which began full service into Mont Belvieu during the third quarter of 2019, and higher fractionation volumes as a result of the commencement of operations of Train 6 in the second quarter of 2019. Fractionation and services margin was unfavorably impacted by fewer short-term high fee fractionation contracts in the third quarter of 2019 compared to the same period last year, and by a planned maintenance turnaround of the Company’s Cedar Bayou fractionator. Marketing margin increased due to optimization of gas and liquids arrangements. LPG export margin increased due to higher volumes. Terminaling and storage throughput decreased due to the sale of certain petroleum logistics terminals in the fourth quarter of 2018.

Operating expenses increased due to higher maintenance, higher fuel and power costs that are largely passed through to customers, and higher compensation and benefits primarily attributable to Grand Prix and Train 6 operations, partially offset by the sale of certain petroleum logistics terminals in the fourth quarter of 2018.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Logistics and Marketing gross margin increased due to higher NGL transportation, fractionation and services margin, higher LPG export margin, and higher marketing margin, partially offset by lower terminaling and storage throughput. NGL transportation, fractionation and services margin increased due to volumes delivered on Grand Prix, which began full service into Mont Belvieu during the third quarter of 2019, and higher fractionation volumes as a result of the commencement of operations of Train 6 in the second quarter of 2019. Fractionation and services margin was unfavorably impacted by fewer short-term high fee fractionation contracts in the third quarter of 2019 compared to the same period last year, and by a planned maintenance turnaround of the Company’s Cedar Bayou fractionator. LPG export margin increased due to higher volumes. Marketing margin increased due to optimization of gas and liquids arrangements. Terminaling and storage throughput decreased due to the sale of certain petroleum logistics terminals in the fourth quarter of 2018.

Operating expenses increased due to higher fuel and power costs that are largely passed through to customers, higher maintenance, and higher compensation and benefits and higher taxes primarily attributable to Grand Prix and Train 6 operations, partially offset by the sale of certain petroleum logistics terminals in the fourth quarter of 2018.


Other

    Three Months Ended September 30,             Nine Months Ended September 30,          
    2019     2018     2019 vs. 2018     2019     2018     2019 vs. 2018  
       
    (In millions)  
       
Gross margin   $ (63.3 )   $ (20.8 )   $ (42.5 )   $ (15.2 )   $ (42.2 )   $ 27.0  
Operating margin   $ (63.3 )   $ (20.8 )   $ (42.5 )   $ (15.2 )   $ (42.2 )   $ 27.0  

Other contains the results of commodity derivative activities related to Gathering and Processing hedges of equity volumes that are included in operating margin. The primary purpose of the Company’s commodity risk management activities is to mitigate a portion of the impact of commodity prices on the Company’s operating cash flow. The Company has entered into derivative instruments to hedge the commodity price associated with a portion of the Company’s expected natural gas, NGL and condensate equity volumes in the Company’s Gathering and Processing operations that result from percent of proceeds/liquids processing arrangements. Because the Company is essentially forward-selling a portion of the Company’s future plant equity volumes, these hedge positions will move favorably in periods of falling commodity prices and unfavorably in periods of rising commodity prices.

The Company has also entered into swaps and basis swaps that do not qualify for hedge accounting treatment. The mark-to-market gains/losses related to these derivative instruments represent unrealized, non-cash changes in the fair value of the instruments. For the three and nine months ended September 30, 2019, the unrealized mark-to-market losses are primarily attributable to unfavorable movements in natural gas forward basis prices and will be more than offset by locked-in gains to be realized in future periods from the underlying transportation arrangements.

The following table provides a breakdown of the change in Other operating margin:

    Three Months Ended September 30, 2019     Three Months Ended September 30, 2018  
       
    (In millions, except volumetric data and price amounts)  
    Volume

Settled
    Price

Spread (1)
    Gain

(Loss)
    Volume

Settled
    Price

Spread (1)
    Gain

(Loss)
 
Natural gas (BBtu)     18.8     $ 1.07     $ 20.1       15.7     $ 0.82     $ 12.9  
NGL (MMgal)     110.0       0.17       18.5       99.0       (0.27 )     (26.4 )
Crude oil (MBbl)     0.4       (1.76 )     (0.7 )     0.5       (15.81 )     (8.1 )
Non-hedge accounting (2)                     (101.2 )                     0.8  
                    $ (63.3 )                   $ (20.8 )
                                                 
    Nine Months Ended September 30, 2019     Nine Months Ended September 30, 2018  
       
    (In millions, except volumetric data and price amounts)  
    Volume

Settled
    Price

Spread (1)
    Gain

(Loss)
    Volume

Settled
    Price

Spread (1)
    Gain

(Loss)
 
Natural gas (BBtu)     47.0     $ 1.29     $ 60.6       48.6     $ 0.74     $ 35.8  
NGL (MMgal)     252.1       0.11       27.9       286.3       (0.17 )     (49.7 )
Crude oil (MBbl)     1.1       (2.28 )     (2.6 )     1.5       (13.10 )     (20.0 )
Non-hedge accounting (2)                     (101.1 )                     (8.3 )
                    $ (15.2 )                   $ (42.2 )

(1) The price spread is the differential between the contracted derivative instrument pricing and the price of the corresponding settled commodity transaction.
(2) Mark-to-market income (loss) associated with derivative contracts that are not designated as hedges for accounting purposes.


About Targa Resources Corp.

Targa Resources Corp. is a leading provider of midstream services and is one of the largest independent midstream energy companies in North America. The Company owns, operates, acquires and develops a diversified portfolio of complementary midstream energy assets. The Company is primarily engaged in the business of: gathering, compressing, treating, processing, transporting and selling natural gas; transporting, storing, fractionating, treating and selling NGLs and NGL products, including services to LPG exporters; and gathering, storing, terminaling and selling crude oil.

For more information, please visit the Company’s website at www.targaresources.com.


Targa Resources Corp. – Non-GAAP Financial Measures

This press release includes the Company’s non-GAAP financial measures: Adjusted EBITDA, distributable cash flow, gross margin and operating margin. The following tables provide reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures. The Company’s non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income, operating income, net cash flows provided by operating activities or any other GAAP measure of liquidity or financial performance.

Adjusted EBITDA

The Company defines Adjusted EBITDA as net income (loss) attributable to TRC before interest, income taxes, depreciation and amortization, and other items that the Company believes should be adjusted consistent with the Company’s core operating performance. The adjusting items are detailed in the Adjusted EBITDA reconciliation table and its footnotes. Adjusted EBITDA is used as a supplemental financial measure by the Company and by external users of its financial statements such as investors, commercial banks and others. The economic substance behind the Company’s use of Adjusted EBITDA is to measure the ability of its assets to generate cash sufficient to pay interest costs, support its indebtedness and pay dividends to its investors.

Adjusted EBITDA is a non-GAAP financial measure. The GAAP measure most directly comparable to Adjusted EBITDA is net income (loss) attributable to TRC. Adjusted EBITDA should not be considered as an alternative to GAAP net income. Adjusted EBITDA has important limitations as an analytical tool. Investors should not consider Adjusted EBITDA in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Because Adjusted EBITDA excludes some, but not all, items that affect net income and is defined differently by different companies in the Company’s industry, its definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

Management compensates for the limitations of Adjusted EBITDA as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating these insights into its decision-making processes.

Distributable Cash Flow

The Company defines distributable cash flow as Adjusted EBITDA less distributions to TRP preferred limited partners, cash interest expense on debt obligations, cash tax (expense) benefit and maintenance capital expenditures (net of any reimbursements of project costs).

Distributable cash flow is a significant performance metric used by the Company and by external users of the Company’s financial statements, such as investors, commercial banks and research analysts, to compare basic cash flows generated by it (prior to the establishment of any retained cash reserves by the Company’s board of directors) to the cash dividends the Company expects to pay its shareholders. Using this metric, management and external users of its financial statements can quickly compute the coverage ratio of estimated cash flows to cash dividends. Distributable cash flow is also an important financial measure for the Company’s shareholders since it serves as an indicator of the Company’s success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not the Company is generating cash flow at a level that can sustain or support an increase in its quarterly dividend rates.

Distributable cash flow is a non-GAAP financial measure. The GAAP measure most directly comparable to distributable cash flow is net income (loss) attributable to TRC. Distributable cash flow should not be considered as an alternative to GAAP net income (loss) available to common and preferred shareholders. It has important limitations as an analytical tool. Investors should not consider distributable cash flow in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Because distributable cash flow excludes some, but not all, items that affect net income and is defined differently by different companies in the Company’s industry, the Company’s definition of distributable cash flow may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

Management compensates for the limitations of distributable cash flow as an analytical tool by reviewing the comparable GAAP measure, understanding the differences between the measures and incorporating these insights into the Company’s decision-making processes.

The following table presents a reconciliation of net income attributable to TRC to Adjusted EBITDA and Distributable Cash Flow for the periods indicated:

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2019     2018     2019     2018  
       
    (In millions)  
Reconciliation of Net Income (Loss) attributable to TRC to Adjusted EBITDA and Distributable Cash Flow                                        
Net income (loss) attributable to TRC   $   (47.3 )   $   (23.7 )   $   (96.4 )   $   108.2  
Income attributable to TRP preferred limited partners       2.8         2.8         8.4         8.4  
Interest (income) expense, net (1)       89.1         78.2         241.8         124.2  
Income tax expense (benefit)       (3.8 )       (3.9 )       (10.0 )       37.7  
Depreciation and amortization expense       244.3         206.3         718.9         607.1  
(Gain) loss on sale or disposition of assets       0.5         61.1         3.6         14.3  
Write-down of assets       17.9                 17.9          
(Gain) loss from sale of equity-method investment       (65.8 )               (65.8 )        
(Gain) loss from financing activities (2)                       1.4         2.0  
Equity (earnings) loss       (10.0 )       (3.0 )       (15.9 )       (6.4 )
Distributions from unconsolidated affiliates and preferred partner interests, net       14.0         7.5         33.4         21.4  
Change in contingent considerations               16.6         8.8         12.1  
Compensation on equity grants       16.1         13.8         49.0         40.7  
Risk management activities       100.7         (0.8 )       100.8         8.3  
Noncontrolling interests adjustments (3)       (8.9 )       (7.7 )       (25.6 )       (19.7 )
TRC Adjusted EBITDA (4)   $   349.6     $   347.2     $   970.3     $   958.3  
Distributions to TRP preferred limited partners       (2.8 )       (2.8 )       (8.4 )       (8.4 )
Splitter Agreement (5)               43.1                 43.1  
Interest expense on debt obligations (6)       (88.0 )       (67.5 )       (247.0 )       (185.7 )
Maintenance capital expenditures       (31.0 )       (33.3 )       (101.5 )       (80.4 )
Noncontrolling interests adjustments of maintenance capital expenditures       2.1         0.5         6.0         1.6  
Distributable Cash Flow   $   229.9     $   287.2     $   619.4     $   728.5  

(1) Includes the change in estimated redemption value of the mandatorily redeemable preferred interests.
(2) Gains or losses on debt repurchases, amendments, exchanges or early debt extinguishments.
(3) Noncontrolling interest portion of depreciation and amortization expense.
(4) Beginning in the second quarter of 2019, the Company revised the Company’s reconciliation of Net Income (Loss) attributable to TRC to Adjusted EBITDA to exclude the Splitter Agreement adjustment previously included in the comparative periods presented herein. For all comparative periods presented, the Company’s Adjusted EBITDA measure previously included the Splitter Agreement adjustment, which represented the recognition of the annual cash payment received under the condensate splitter agreement ratably over four quarters. The effect of these revisions reduced TRC’s Adjusted EBITDA by $10.8 million and $32.3 million for the three and nine months ended September 30, 2018. There was no impact to Distributable Cash Flow.
(5) In Distributable Cash Flow, Splitter Agreement represents the annual cash payment in the period received.
(6) Excludes amortization of interest expense.



Gross Margin

The Company defines gross margin as revenues less product purchases. It is impacted by volumes and commodity prices as well as by the Company’s contract mix and commodity hedging program.

Gathering and Processing segment gross margin consists primarily of:

  • revenues from the sale of natural gas, condensate, crude oil and NGLs less producer payments and other natural gas and crude oil purchases; and
  • service fees related to natural gas and crude oil gathering, treating and processing.

Logistics and Marketing segment gross margin consists primarily of:

  • service fees (including the pass-through of energy costs included in fee rates);
  • system product gains and losses; and
  • NGL and natural gas sales, less NGL and natural gas purchases, transportation costs and the net inventory change.

The gross margin impacts of the Company’s equity volumes hedge settlements are reported in Other.

Operating Margin

The Company defines operating margin as gross margin less operating expenses. Operating margin is an important performance measure of the core profitability of the Company’s operations.

Management reviews business segment gross margin and operating margin monthly as a core internal management process. The Company believes that investors benefit from having access to the same financial measures that management uses in evaluating its operating results. Gross margin and operating margin provide useful information to investors because they are used as supplemental financial measures by management and by external users of the Company’s financial statements, including investors and commercial banks, to assess:

  • the financial performance of the Company’s assets without regard to financing methods, capital structure or historical cost basis;
  • the Company’s operating performance and return on capital as compared to other companies in the midstream energy sector, without regard to financing or capital structure; and
  • the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.

Gross margin and operating margin are non-GAAP measures. The GAAP measure most directly comparable to gross margin and operating margin is net income (loss) attributable to TRC. Gross margin and operating margin are not alternatives to GAAP net income and have important limitations as analytical tools. Investors should not consider gross margin and operating margin in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Because gross margin and operating margin exclude some, but not all, items that affect net income and are defined differently by different companies in the Company’s industry, the Company’s definitions of gross margin and operating margin may not be comparable with similarly titled measures of other companies, thereby diminishing their utility.

Management compensates for the limitations of gross margin and operating margin as analytical tools by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating these insights into its decision-making processes.

The following table presents a reconciliation of net income of the Company to operating margin and gross margin for the periods indicated:

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2019     2018     2019     2018  
       
    (In millions)  
Reconciliation of Net Income (Loss) attributable to TRC to Operating Margin and Gross Margin                                        
Net income (loss) attributable to TRC   $   (47.3 )   $   (23.7 )   $   (96.4 )   $   108.2  
Net income (loss) attributable to noncontrolling interests       79.4         12.5         152.7         40.4  
Net income (loss)       32.1         (11.2 )       56.3         148.6  
Depreciation and amortization expense       244.3         206.3         718.9         607.1  
General and administrative expense       69.9         63.2         223.5         176.9  
Interest (income) expense, net       89.1         78.2         241.8         124.2  
Income tax expense (benefit)       (3.8 )       (3.9 )       (10.0 )       37.7  
(Gain) loss on sale or disposition of assets       0.5         61.1         3.6         14.3  
Write-down of assets       17.9                 17.9          
(Gain) loss from sale of equity-method investment       (65.8 )               (65.8 )        
(Gain) loss from financing activities                       1.4         2.0  
Change in contingent considerations               16.6         8.8         12.1  
Other, net       (10.0 )       (2.3 )       (15.7 )       (5.0 )
Operating margin       374.2         408.0         1,180.7         1,117.9  
Operating expenses       200.2         194.9         600.8         538.7  
Gross margin   $   574.4     $   602.9     $   1,781.5     $   1,656.6  


Forward-Looking Statements

Certain statements in this release are “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. All statements, other than statements of historical facts, included in this release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future, are forward-looking statements. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties, factors and risks, many of which are outside the Company’s control, which could cause results to differ materially from those expected by management of the Company. Such risks and uncertainties include, but are not limited to, weather, political, economic and market conditions, including a decline in the price and market demand for natural gas, natural gas liquids and crude oil, the timing and success of business development efforts; and other uncertainties. These and other applicable uncertainties, factors and risks are described more fully in the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2018, and any subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The Company does not undertake an obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Contact the Company’s investor relations department by email at InvestorRelations@targaresources.com or by phone at (713) 584-1133.

Sanjay Lad
Senior Director, Finance & Investor Relations

Jennifer Kneale
Chief Financial Officer

GRAY ANNOUNCES NEW SHARE REPURCHASE AUTHORIZATION

ATLANTA, Nov. 07, 2019 (GLOBE NEWSWIRE) — Gray Television, Inc. (“Gray,” the “Company,” “we,” “us” or “our”) (NYSE: GTN and GTN.A) announced today that its Board of Directors has authorized the Company to repurchase up to $150 million of outstanding common stock (GTN) and/or Class A common stock (GTN.A) through December 31, 2022. 

Gray’s Executive Chairman and CEO Hilton H. Howell, Jr., explained, “Reducing our debt level remains a high priority for Gray, as demonstrated by our recent voluntary pre-payment of $100 million of the 2019 term loan outstanding under our senior credit facility.  At the same time, we believe that recent trading prices do not fully value the scale, quality, leadership and opportunities created through our merger with Raycom, which nearly doubled our size while increasing the depth and breadth of our business.  From time to time, these market dislocations may provide an opportunity for stock repurchases, all while keeping a close eye on steadily decreasing our leverage.”

Share repurchases would be implemented through purchases made from time to time in either the open market or private transactions.  The extent that the Company repurchases its shares, the number of shares and the timing of any repurchases will depend on general market conditions, regulatory requirements, alternative investment opportunities and other considerations.   Gray’s repurchase program does not require the Company to repurchase a minimum number of shares, and it may be modified, suspended or terminated at any time without prior notice.  The new authorization prohibits the Company from purchasing shares directly from the Company’s officers, directors, or the Gray Television, Inc. Capital Accumulation Plan (401K plan). 

The new stock repurchase authorization supersedes all prior authorizations, including the plan adopted in November 2016 permitting the Company to repurchase up to $75 million of its outstanding common stock prior to December 31, 2019.  

As of October 31, 2019, Gray has 96,633,773 shares of common stock outstanding and 6,881,192 shares of Class A common stock outstanding.  Shares repurchased will be held as treasury shares and may be used for general corporate purposes including, but not limited to, satisfying obligations under our employee benefit plans and long-term incentive plan.


About Gray Television:

Gray currently owns and/or operates television stations and leading digital properties in 93 television markets, including the number-one rated television station in 68 markets and the first or second highest rated television station in 87 markets.  Gray’s television stations cover approximately 24 percent of US television households and broadcast over 400 separate programming streams, including approximately 150 affiliates of the CBS/NBC/ABC/FOX networks.  Gray also owns video program production, marketing, and digital businesses including Raycom Sports, Tupelo-Raycom, and RTM Studios, the producer of PowerNation programs and content. For further information, please visit www.gray.tv.

Cautionary Statements Regarding Forward-Looking Statements

This press release contains statements that constitute “forward-looking statements” within the meaning of the federal securities laws.  These “forward-looking statements” are statements other than statements of historical fact and may relate to, among other things, the timing and amount of any stock repurchases, and our liquidity position.  Actual results are subject to a number of risks and uncertainties and may differ materially from the current expectations and beliefs discussed in this press release.  All information set forth in this release is as of the date hereof except as otherwise noted.  We do not intend, and undertake no duty, to update this information to reflect future events or circumstances.  Information about certain potential factors that could affect our business and financial results and cause actual results to differ materially from those expressed or implied in any forward-looking statements are included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2018 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019, each of which is on file with the Securities and Exchange Commission (“SEC”) and available at the SEC’s website at www.sec.gov.

#          #          #

Gray Contacts

Web site: www.gray.tv

Hilton H. Howell, Jr., Executive Chairman and Chief Executive Officer, 404-266-5512

Pat LaPlatney, President and Co-Chief Executive Officer, 334-206-1400

Jim Ryan, Executive Vice President and Chief Financial Officer, 404-504-9828

Kevin P. Latek, Executive Vice President, Chief Legal and Development Officer, 404-266-8333

NHI Announces Fourth Quarter 2019 Dividend

NHI Announces Fourth Quarter 2019 Dividend

MURFREESBORO, Tenn.–(BUSINESS WIRE)–
National Health Investors, Inc. (NYSE:NHI) announced today that it will pay its fourth quarter dividend of $1.05 per common share on January 31, 2020 to shareholders of record as of December 31, 2019.

About NHI

Incorporated in 1991, National Health Investors, Inc. (NYSE: NHI) is a real estate investment trust specializing in sale-leaseback, joint-venture, mortgage and mezzanine financing of need-driven and discretionary senior housing and medical investments. NHI’s portfolio consists of independent, assisted and memory care communities, entrance-fee retirement communities, skilled nursing facilities, medical office buildings and specialty hospitals. For more information, visit www.nhireit.com.

This press release includes 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.All statements regarding the Company’s, tenants’, operators’, borrowers’ or managers’ expected future financial position, results of operations, cash flows, funds from operations, dividend and dividend plans, financing opportunities and plans, capital market transactions, business strategy, budgets, projected costs, operating metrics, capital expenditures, competitive positions, acquisitions, investment opportunities, dispositions, acquisition integration, growth opportunities, expected lease income, continued qualification as a real estate investment trust (“REIT”), plans and objectives of management for future operations, continued performance improvements, ability to service and refinance our debt obligations, ability to finance growth opportunities, and similar statements including, without limitation, those containing words such as “may,” “will,” “believes,” “anticipates,” “expects,” “intends,” “estimates,” “plans,” and other similar expressions are forward-looking statements.Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements. Such risks and uncertainties include, among other things, the operating success of our tenants and borrowers for collection of our lease and interest income; the success of property development and construction activities, which may fail to achieve the operating results we expect; the risk that our tenants and borrowers may become subject to bankruptcy or insolvency proceedings; risks related to governmental regulations and payors, principally Medicare and Medicaid, and the effect that lower reimbursement rates would have on our tenants’ and borrowers’ business; the risk that the cash flows of our tenants and borrowers would be adversely affected by increased liability claims and liability insurance costs; risks related to environmental laws and the costs associated with liabilities related to hazardous substances; the risk that we may not be fully indemnified by our lessees and borrowers against future litigation; the success of our future acquisitions and investments; our ability to reinvest cash in real estate investments in a timely manner and on acceptable terms; the potential need to incur more debt in the future, which may not be available on terms acceptable to us; our ability to meet covenants related to our indebtedness which impose certain operational; the risk that the illiquidity of real estate investments could impede our ability to respond to adverse changes in the performance of our properties; risks associated with our investments in unconsolidated entities, including our lack of sole decision-making authority and our reliance on the financial condition of other interests; our dependence on revenues derived mainly from fixed rate investments in real estate assets, while a portion of our debt bears interest at variable rates; the risk that our assets may be subject to impairment charges; and our dependence on the ability to continue to qualify for taxation as a real estate investment trust. Many of these factors are beyond the control of the Company and its management.The Company assumes no obligation to update any of the foregoing or any other forward-looking statements, except as required by law, and these statements speak only as of the date on which they are made.Investors are urged to carefully review and consider the various disclosures made by NHI in its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in NHI’s Annual Report on Form 10-K for the most recently ended fiscal year. Copies of these filings are available at no cost on the SEC’s web site at http://www.sec.gov or on NHI’s web site at http://www.nhireit.com.

Roger R. Hopkins, Chief Accounting Officer

(615) 890-9100

KEYWORDS: Tennessee United States North America

INDUSTRY KEYWORDS: REIT General Health Hospitals Health Construction & Property

MEDIA:

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DISH Network Reports Third Quarter 2019 Financial Results

PR Newswire

ENGLEWOOD, Colo., Nov. 7, 2019 /PRNewswire/ — DISH Network Corporation (NASDAQ: DISH) today reported revenue totaling $3.17 billion for the quarter ending September 30, 2019, compared to $3.40 billion for the corresponding period in 2018.

(PRNewsfoto/DISH Network Corporation)

Net income attributable to DISH Network totaled $353 million for the third quarter 2019, compared to net income of $432 million from the year-ago quarter. Diluted earnings per share for the quarter ending September 30, 2019 were $0.66, compared with $0.82 during the same period in 2018.

The company closed the third quarter with 12.18 million total Pay-TV subscribers, including 9.49 million DISH TV subscribers and 2.69 million Sling TV subscribers.

Net pay-TV subscribers increased approximately 148,000 subscribers in the third quarter, compared to a decline of approximately 341,000 in the third quarter 2018.

Year-to-Date Review
DISH Network’s 2019 year-to-date revenue totaled $9.57 billion, compared to $10.31 billion in revenue from the same period last year. In the first nine months of 2019, net income attributable to DISH Network totaled $1.01 billion, compared with $1.24 billion during the same period last year.

Diluted earnings per share were $1.91 for the first nine months of 2019, compared with $2.35 during the same period in 2018.

Detailed financial data and other information are available in DISH Network’s Form 10-Q for the quarter ended September 30, 2019 filed today with the Securities and Exchange Commission.

DISH Network will host its third quarter 2019 financial results conference call today at noon ET. Participant conference numbers: (888) 220-8451 (U.S.) and (323) 794-2590, Conference ID: 1466450.

A webcast replay will be available today on DISH’s Investor Relations website, http://ir.dish.com, and will remain available for 48 hours.


About DISH

DISH Network Corporation is a connectivity company. Since 1980, it has served as a disruptive force, driving innovation and value on behalf of consumers. Through its subsidiaries, the company provides television entertainment and award-winning technology to millions of customers with its satellite DISH TV and streaming Sling TV services. Through its strategic spectrum portfolio and other assets, DISH is poised to enter the wireless market as a facilities-based provider of wireless services with a nationwide consumer offering and development of the first virtualized, standalone 5G broadband network in the U.S. DISH’s OnTech Smart Services brand offers in-home installation of connected home devices and entertainment solutions. DISH Media serves as the company’s advertising sales group delivering targeted advertising solutions. DISH Network Corporation (NASDAQ: DISH) is a Fortune 250 company.

For company information, visit about.dish.com
For more information on DISH TV, visit www.dish.com
For more information on Sling TV, visit www.sling.com
For more information on OnTech Smart Services, visit www.ontechsmartservices.com 
For more information on DISH Media, visit media.dish.com
Subscribe to DISH email alerts: http://about.dish.com/alerts
Follow @DISHNews on Twitter: http://www.twitter.com/DISHNews

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/dish-network-reports-third-quarter-2019-financial-results-300953468.html

SOURCE DISH Network Corporation

Senior Wireless Industry Leaders Marc Rouanne, Stephen Bye to Join DISH Wireless Executive Team

– Nokia vet Rouanne to serve as Chief Network Officer, will oversee network architecture, strategy, development

– Former C Spire, Sprint exec Bye appointed Chief Commercial Officer, to lead network application development, commercialization

PR Newswire

ENGLEWOOD, Colo., Nov. 7, 2019 /PRNewswire/ — DISH Network Corporation today announced that it has named wireless industry innovators Marc Rouanne and Stephen Bye to its executive wireless leadership team. Rouanne will serve as Chief Network Officer and Bye will serve as Chief Commercial Officer. Both will join DISH as executive vice presidents and report to DISH Co-Founder and Chairman Charlie Ergen.

Doors at DISH Wireless headquarters in Littleton, Colorado

“There isn’t a pattern for the kind of network we are building in the United States and we need the best people in the world to make our vision of a virtualized standalone 5G broadband network a reality,” said Ergen. “Marc and Stephen will help lead our work to redefine the American wireless landscape to the benefit of consumers.”

As Chief Network Officer, Rouanne will oversee the strategy and architecture of the network, its core, and its cloud and edge strategies.

He brings more than 20 years of international management experience in the telecommunications industry, having held executive positions including President of Mobile Networks and Chief Innovation and Operating Officer of Nokia and chairman of the board of Alcatel-Lucent. He is an advocate of opening the traditionally closed systems in wireless networks. Under his leadership, Nokia was the first large telecommunications vendor to join groups such as the Telecom Infra Project (TIP), xRAN Forum and the O-RAN Alliance.

“A visionary and advocate for software-defined and natively automated networks, Marc will be the ideal partner and leader as we design and build the nation’s first cloud-native 5G broadband network,” said Ergen. “He brings a proven track record in delivering transformational innovation.”

“I’ve been watching over the years as the DISH team has patiently assembled its incredible portfolio and refined its wireless vision,” said Rouanne. “This team is positioned to deliver a paradigm shift to the American wireless landscape and I’m proud to help make the vision a reality.”

Bye, most recently CEO of Connectivity Wireless, is a 28-year veteran of telecommunications and wireless who served as President of C-Spire and CTO of Sprint. He will lead the DISH wireless enterprise development team. The team’s mission is to define, develop and market commercial applications, as well as establish strategic enterprise partnerships that are able to harness the unique architecture of DISH’s software-defined 5G broadband network.

“Stephen shares our vision for the transformative power our 5G network will deliver to consumers and enterprises of all types,” said Ergen. “He will play a critical role in developing and commercializing innovative and disruptive applications built around our unique capabilities like network slicing, flexible capacity management and massive connectivity.”

“DISH is positioned to fundamentally redefine how we think about wireless at all levels, from the retail consumer to the largest enterprise and governmental use cases,” said Bye. “This greenfield network, the first in a generation, will be an engine of innovation for our economy.”

In addition to Rouanne and Bye, Ergen’s direct reports include DISH President and CEO Erik Carlson and the following executives:

  • Tom Cullen, EVP, Corporate Development, oversees the company’s long-term strategic interests including new ventures, partner development and spectrum strategy.
  • Jeff McSchooler, EVP, Wireless Operations, leads the team responsible for the physical construction and operation of DISH’s national 5G broadband wireless network.
  • Jeff Blum, SVP, Public Policy and Government Affairs, supervises state and federal government affairs in Washington, D.C.

Rouanne and Bye are expected to join DISH in December.

About Marc Rouanne:

To access a biography and downloadable photo of Marc Rouanne, click


here


.

About Stephen Bye:

To access a biography and downloadable photo of
 Stephen Bye, click here.


About DISH

DISH Network Corporation is a connectivity company. Since 1980, it has served as a disruptive force, driving innovation and value on behalf of consumers. Through its subsidiaries, the company provides television entertainment and award-winning technology to millions of customers with its satellite DISH TV and streaming Sling TV services. Through its strategic spectrum portfolio and other assets, DISH is poised to enter the wireless market as a facilities-based provider of wireless services with a nationwide consumer offering and development of the first virtualized, standalone 5G broadband network in the U.S. DISH’s OnTech Smart Services brand offers in-home installation of connected home devices and entertainment solutions. DISH Media serves as the company’s advertising sales group delivering targeted advertising solutions. DISH Network Corporation (NASDAQ: DISH) is a Fortune 250 company.

For company information, visit about.dish.com 
For more information on DISH TV, visit www.dish.com
For more information on Sling TV, visit www.sling.com
For more information on OnTech Smart Services, visit www.ontechsmartservices.com
For more information on DISH Media, visit media.dish.com
Subscribe to DISH email alerts: http://about.dish.com/alerts
Follow @DISHNews on Twitter: http://www.twitter.com/DISHNews

Marc Rouanne

Stephen Bye

DISH logo (PRNewsfoto/DISH)

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SOURCE DISH Network Corporation

Bavarian Nordic Announces Submission of European Marketing Authorisation Applications for Investigational Ebola Vaccine Regimen

COPENHAGEN, Denmark, November 7, 2019 – Bavarian Nordic A/S (OMX: BAVA, OTC: BVNRY) today announced that its partner Janssen Pharmaceutical Companies of Johnson & Johnson have submitted Marketing Authorisation Applications (MAAs) to the European Medicines Agency (EMA) seeking licensure for an investigational Ebola vaccine regimen for the prevention of Ebola Virus Disease (EVD) caused by Zaire ebolavirus. Two MAAs have been submitted in parallel supporting each vaccine in the two-dose regimen (Ad26.ZEBOV, MVA-BN® Filo). In September 2019, the EMA’s Committee for Medicinal Products for Human Use (CHMP) granted an Accelerated Assessment, which will shorten the review time for these applications.

The vaccine regimen includes Ad26.ZEBOV as the first dose, which is based on Janssen’s AdVac® technology, and MVA-BN® Filo as the second dose, which is based on Bavarian Nordic’s MVA-BN® technology and is administered approximately eight weeks later. The MAAs are supported by data from Phase 1, 2 and 3 clinical studies evaluating the safety and immunogenicity of the vaccine regimen in adults and children, preclinical studies, and immunobridging analyses. To date, more than 6,500 volunteers across the U.S., Europe and Africa have participated in over 10 clinical studies of the vaccine.

Janssen also has ongoing discussions with the U.S. Food and Drug Administration (FDA) to define the required data set for filing of the Ebola vaccine regimen under the FDA’s Animal Rule licensure pathway and is also working in collaboration with the World Health Organization (WHO) to enable registration of the Ebola vaccine regimen in African countries.

On October 31, 2019, Janssen announced it will provide up to 500,000 regimens of its investigational vaccine to the Democratic Republic of Congo (DRC) for use in a new clinical trial organized by the DRC government and global health stakeholders in an effort to contain the country’s Ebola outbreak.

“We congratulate Janssen on this important milestone in the development of a much-needed vaccine to fight Ebola, and we are proud to support the process to ensure a successful regulatory review,” said Paul Chaplin, President and CEO of Bavarian Nordic. “We are excited about the prospects of yet another approved product coming from our pipeline, building on our validated MVA-BN platform technology.”

Upon EMA approval of the MVA-BN Filo vaccine, Bavarian Nordic would be eligible to receive a milestone payment of USD 10 million under the license agreement with Janssen.

Background

In 2014, in response to the Ebola epidemic in West Africa, Johnson & Johnson accelerated the development of a preventive Ebola vaccine regimen with multiple global partners across the U.S., Europe and Africa. The regimen (Ad26.ZEBOV, MVA-BN-Filo) uses a combination of two vaccines based on AdVac® technology from Janssen, and MVA-BN® technology from Bavarian Nordic. The first dose primes the immune system, and the second aims to enhance the duration of the immune response. These vaccines both use a viral vector approach, where a virus is genetically modified so that it cannot replicate but is used to safely express key proteins of the target virus, in this case Ebola virus. To date, more than 6,500 individuals across the U.S., Europe and Africa have participated in multiple Janssen-sponsored and partner-led clinical studies. The available clinical data suggest that the vaccine regimen has a favorable safety profile, is well tolerated, and induces robust and durable immune responses against the Ebola virus Zaire strain. – the cause of the DRC outbreak.

Under the agreement with Janssen in 2014, Bavarian Nordic licensed MVA-BN Filo to Janssen and manufactured a significant amount of vaccines, currently stockpiled by Janssen.

The vaccine regimen was developed in a collaborative research program with the NIH and received direct funding and preclinical services from the National Institute of Allergy and Infectious Diseases, part of NIH, under Contract Numbers HHSN272200800056C, and HHSN272201000006I and HHSN272201200003I, respectively. Further funding for the Ebola vaccine regimen has been provided in part with Federal funds from the Office of the Assistant Secretary for Preparedness and Response, BARDA under Contract Numbers HHSO100201700013C and HHSO100201500008C.

About Bavarian Nordic

Bavarian Nordic is a fully integrated biotechnology company focused on the development of innovative therapies against infectious diseases and cancer. Using our live virus vaccine platform technology, MVA-BN®, we have created a diverse portfolio of proprietary and partnered product candidates intended to unlock the power of the immune system to improve public health with a focus on high unmet medical needs. In addition to our long-standing collaboration with the U.S. government on the development and supply of medical countermeasures, including the only FDA-approved, non-replicating smallpox vaccine, our infectious disease pipeline comprises a proprietary RSV program as well as vaccine candidates for Ebola, HPV, HBV and HIV, which are developed through a strategic partnership with Janssen. Additionally, we have developed a portfolio of active cancer immunotherapies, designed to alter the disease course by eliciting a robust and broad anti-cancer immune response while maintaining a favorable benefit-risk profile. For more information visit www.bavarian-nordic.com or follow us on Twitter @bavariannordic.

Forward-looking statements

This announcement includes forward-looking statements that involve risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. Forward-looking statements include statements concerning our plans, objectives, goals, future events, performance and/or other information that is not historical information. All such forward-looking statements are expressly qualified by these cautionary statements and any other cautionary statements which may accompany the forward-looking statements. We undertake no obligation to publicly update or revise forward-looking statements to reflect subsequent events or circumstances after the date made, except as required by law.

Contacts

Rolf Sass Sørensen
Vice President Investor Relations (EU)
Tel: +45 61 77 47 43

Graham Morrell
Paddock Circle Advisors (US)
graham@paddockcircle.com
Tel: +1 781 686 9600

Company Announcement no. 23 / 2019

Attachment

ACI President and CEO Philip Heasley to Retire at Year-End

ACI President and CEO Philip Heasley to Retire at Year-End

Payments pioneer led company for 15 years; Company positioned for continued success in evolving payments market

NAPLES, Fla.–(BUSINESS WIRE)–ACI Worldwide Inc. (NASDAQ: ACIW) (“ACI” or the “Company”), a leading global provider of real-time electronic payment and banking solutions, today announced that Philip Heasley has notified the Company’s Board of Directors that he will retire as President and Chief Executive Officer and as a member of the Board, effective as of December 31, 2019. As part of its ongoing succession planning activities, the Board has been working with executive search firm Russell Reynolds to assist it in identifying potential CEO candidates. In addition, to help provide for an orderly transition, Mr. Heasley has agreed to serve the Company in a consulting capacity for three months following his retirement.

“It has been a great privilege to lead ACI over the past 15 years,” Mr. Heasley said. “I am very proud of how we have strengthened our position as an innovative leader in this dynamic marketplace. The ACI operating model is fully in place and gaining traction among key customer segments globally. I believe this is an opportune time for me to step aside and let a new leader guide ACI into the future. I am proud of all we have accomplished together and am confident in our team’s ability to build on this momentum. ACI has a deep bench of talent and the entire organization remains focused and well-positioned to execute on our strategy and drive long-term shareholder value.”

“On behalf of the entire Board of Directors and all ACI team members, I thank Phil for his significant contributions to ACI and his many years of dedicated service,” said David Poe, Chairman of ACI’s Board. “During his tenure, Phil successfully advanced ACI’s position as a global leader in real-time electronic payments. Among Phil’s many accomplishments, he transformed ACI to include a successful cloud-based business. We wish Phil all the best in his retirement and are grateful that, through a consulting agreement, his experience and perspective will be available to the Company through the first quarter of next year.”

Mr. Poe continued, “The Board has a clear vision of the right person to lead the Company forward, and the Board’s search committee is conducting a thorough process that includes both internal and external candidates. ACI is fortunate to have a strong, experienced management team and talented payment professionals around the world who will continue to advance and support the Company’s strategy as we transition leadership.”

In a separate press release issued today, ACI Worldwide announced its financial results for the third quarter 2019. The press release is available on ACI’s Investor Relations website at https://investor.aciworldwide.com.

About ACI Worldwide

ACI Worldwide, the Universal Payments (UP) company, powers electronic payments for more than 5,100 organizations around the world. More than 1,000 of the largest financial institutions and intermediaries, as well as thousands of global merchants, rely on ACI to execute $14 trillion each day in payments and securities. In addition, myriad organizations utilize our electronic bill presentment and payment services. Through our comprehensive suite of software solutions delivered on customers’ premises or through ACI’s private cloud, we provide real-time, immediate payments capabilities and enable the industry’s most complete omni-channel payments experience. To learn more about ACI, please visit www.aciworldwide.com. You can also find us on Twitter @ACI_Worldwide.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. Generally, forward-looking statements do not relate strictly to historical or current facts and may include words or phrases such as “believes,” “will,” “expects,” “anticipates,” “intends,” and words and phrases of similar impact. The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements in this press release include, but are not limited to, statements regarding expectations that: (i) we will build on our momentum; (ii) we will execute on our strategy and build long-term shareholder value; and (iii) we will continue to advance and support our strategy as we transition leadership.

All of the foregoing forward-looking statements are expressly qualified by the risk factors discussed in our filings with the Securities and Exchange Commission. Such factors include, but are not limited to, increased competition, the success of our Universal Payments strategy, demand for our products, restrictions and other financial covenants in our debt agreements, consolidations and failures in the financial services industry, customer reluctance to switch to a new vendor, the accuracy of management’s backlog estimates, the maturity of certain products, failure to obtain renewals of customer contracts or to obtain such renewals on favorable terms, delay or cancellation of customer projects or inaccurate project completion estimates, volatility and disruption of the capital and credit markets and adverse changes in the global economy, our existing levels of debt, impairment of our goodwill or intangible assets, litigation, future acquisitions, strategic partnerships and investments, integration of and achieving benefits from the Speedpay acquisition, the complexity of our products and services and the risk that they may contain hidden defects or be subjected to security breaches or viruses, compliance of our products with applicable legislation, governmental regulations and industry standards, our ability to protect customer information from security breaches or attacks, our compliance with privacy regulations, our ability to adequately defend our intellectual property, exposure to credit or operating risks arising from certain payment funding methods, the cyclical nature of our revenue and earnings and the accuracy of forecasts due to the concentration of revenue-generating activity during the final weeks of each quarter, business interruptions or failure of our information technology and communication systems, our offshore software development activities, risks from operating internationally, including fluctuations in currency exchange rates, exposure to unknown tax liabilities, volatility in our stock price, and potential claims associated with our sale and transition of our CFS assets and liabilities. For a detailed discussion of these risk factors, parties that are relying on the forward-looking statements should review our filings with the Securities and Exchange Commission, including our most recently filed Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q.

John Kraft, Vice President, Investor Relations & Strategic Analysis

ACI Worldwide

239-403-4627

john.kraft@aciworldwide.com

Dan Ring, Vice President, Public Relations

ACI Worldwide

781-370-3694

dan.ring@aciworldwide.com

KEYWORDS: Florida United States North America

INDUSTRY KEYWORDS: Finance Banking Professional Services Technology Software

MEDIA:

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EPAM Reports Results for Third Quarter 2019

Third quarter revenues of $588.1 million, up 25.6% year-over-year

GAAP Diluted EPS of $1.16 for the third quarter

Non-GAAP Diluted EPS of $1.39 for the third quarter

PR Newswire

NEWTOWN, Pa., Nov. 7, 2019 /PRNewswire/ — EPAM Systems, Inc. (NYSE: EPAM), a leading global provider of digital platform engineering and software development services, today announced results for its third quarter ended September 30, 2019.

EPAM logo (PRNewsfoto/EPAM Systems, Inc.)

“Our clients are continually being challenged to deliver dynamic, human-centered experiences and platforms quickly and at scale,” said Arkadiy Dobkin, CEO & President, EPAM. “Our third quarter results demonstrate the continued demand for our services as we help our clients become adaptive enterprises to better address these market challenges.”

Third Quarter 2019 Highlights

  • Revenues increased to $588.1 million, a year-over-year increase of $119.9 million, or 25.6%, and on a constant currency basis, revenues were up 27.2% over the corresponding period last year;
  • GAAP income from operations was $80.6 million, an increase of $16.0 million, or 24.8%, compared to $64.6 million in the third quarter of 2018;
  • Non-GAAP income from operations was $99.7 million, an increase of $17.7 million, or 21.6%, compared to $82.1 million in the third quarter of 2018;
  • Diluted earnings per share (“EPS”) on a GAAP basis was $1.16, an increase of $0.01, or 0.9%, compared to $1.15 in the third quarter of 2018 based on a weighted average share count of 57.8 million fully diluted shares outstanding; and
  • Non-GAAP diluted EPS was $1.39, an increase of $0.22, or 18.8%, compared to $1.17 in the third quarter of 2018.

Cash Flow and Other Metrics

  • Cash provided by operating activities was $162.9 million for the first nine months of 2019, compared to $169.1 million provided by operating activities for the first nine months of 2018;
  • Cash, cash equivalents and restricted cash totaled $854.4 million as of September 30, 2019, an increase of $82.7 million, or 10.7%, from $771.7 million as of December 31, 2018; and
  • Total headcount was approximately 35,500 as of September 30, 2019. Included in this number were approximately 31,500 delivery professionals, an increase of 25.0% from September 30, 2018.

2019 Outlook – Full Year and Fourth Quarter


Full Year

  • Revenue growth for 2019 will continue to be at least 23%. The Company continues to expect that foreign currency translation will have a 1% unfavorable impact on full year reported revenues. The Company continues to expect revenue growth on a constant currency basis will be at least 24%;
  • The Company expects GAAP income from operations to continue to be in the range of 12.5% to 13.5% of revenues and non-GAAP income from operations to now be in the range of 16.5% to 17.5% of revenues;
  • The Company expects its GAAP effective tax rate to now be approximately 15% and its non-GAAP effective tax rate to now be approximately 22%; and
  • The Company expects GAAP diluted EPS will now be at least $4.43 for the full year, and non-GAAP diluted EPS will now be at least $5.35 for the full year. The Company continues to expect weighted average share count for the year of 57.7 million diluted shares outstanding.


Fourth Quarter

  • Revenues will be at least $616 million for the fourth quarter reflecting a year-over-year growth rate of 22%. The Company expects foreign currency translation to have a negligible impact on year-over-year revenue growth during the quarter. The Company expects year-over-year revenue growth on a constant currency basis to be 22%;
  • For the fourth quarter, the Company expects GAAP income from operations to be in the range of 13.5% to 14.5% of revenues and non-GAAP income from operations to be in the range of 16.5% to 17.5% of revenues;
  • The Company expects its GAAP effective tax rate to be approximately 21% and its non-GAAP effective tax rate to be approximately 23%; and
  • The Company expects GAAP diluted EPS will be at least $1.19 for the quarter, and non-GAAP diluted EPS will be at least $1.43 for the quarter. The Company expects weighted average share count for the quarter of 57.9 million diluted shares outstanding.

Conference Call Information

EPAM will host a conference call to discuss the results on Thursday, November 7, 2019 at 8:00 a.m. Eastern time. The live conference call will be available by dialing +1 (877) 407-0784 or +1 (201) 689-8560 (outside of the U.S.). A webcast of the conference call can be accessed at the Investor Relations section of the Company’s website at http://investors.epam.com. A replay will be available approximately one hour after the call by dialing +1 (844) 512-2921 or +1 (412) 317-6671 (outside of the U.S.) and entering the conference ID 13695316. The replay will be available until November 21, 2019.

About EPAM Systems

Since 1993, EPAM Systems, Inc. (NYSE: EPAM) has leveraged its software engineering expertise to become a leading global product development, digital platform engineering, and top digital and product design agency. Through its ‘Engineering DNA’ and innovative strategy, consulting, and design capabilities, EPAM works in collaboration with its customers to deliver next-gen solutions that turn complex business challenges into real business outcomes. EPAM’s global teams serve customers in over 25 countries across North America, Europe, Asia and Australia. EPAM is a recognized market leader in multiple categories among top global independent research agencies and was one of only four technology companies to appear on Forbes 25 Fastest Growing Public Tech Companies list every year of publication since 2013.

Learn more at http://www.epam.com/ and follow EPAM on Twitter @EPAMSYSTEMS and LinkedIn.

Non-GAAP Financial Measures

EPAM supplements results reported in accordance with United States generally accepted accounting principles, referred to as GAAP, with non-GAAP financial measures. Management believes these measures help illustrate underlying trends in EPAM’s business and uses the measures to establish budgets and operational goals, communicate internally and externally, for managing EPAM’s business and evaluating its performance. Management also believes these measures help investors compare EPAM’s operating performance with its results in prior periods. EPAM anticipates that it will continue to report both GAAP and certain non-GAAP financial measures in its financial results, including non-GAAP results that exclude stock-based compensation expenses, acquisition-related costs, amortization of purchased intangible assets, goodwill impairment, certain other one-time charges and benefits, changes in fair value of contingent consideration, foreign exchange gains and losses, the impact of U.S. tax reform, excess tax benefits related to stock-based compensation, and the related effect on income taxes of the pre-tax adjustments. Management also compares operating results on a basis of “constant currency,” which is also a non-GAAP financial measure. This measure excludes the effect of foreign currency exchange rate fluctuations by translating the current period revenues and expenses into U.S. dollars at the weighted average exchange rates of the prior period of comparison. Because EPAM’s reported non-GAAP financial measures are not calculated in accordance with GAAP, these measures are not comparable to GAAP and may not be comparable to similarly described non-GAAP measures reported by other companies within EPAM’s industry. Consequently, EPAM’s non-GAAP financial measures should not be evaluated in isolation or supplant comparable GAAP measures, but rather, should be considered together with the information in EPAM’s consolidated financial statements, which are prepared in accordance with GAAP.

Forward-Looking Statements

This press release includes statements which may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which are necessarily subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions and the factors discussed in the Company’s most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. EPAM undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.

 


EPAM
SYSTEMS, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


(Unaudited)


(In thousands, except per share data)


Three Months Ended


Nine Months Ended


September 30,


September 30,


2019


2018


2019


2018


Revenues


$     588,103


$     468,186


$ 1,661,023


$ 1,337,981


Operating expenses:

Cost of revenues (exclusive of depreciation and

amortization)

377,525

301,081

1,078,129

867,890

Selling, general and administrative expenses

118,886

93,226

332,434

276,140

Depreciation and amortization expense

11,127

9,319

32,355

26,457


Income from operations


80,565


64,560


218,105


167,494

Interest and other income, net

2,509

1,941

6,775

2,442

Foreign exchange (loss)/gain

(3,105)

(514)

(10,151)

1,069


Income before provision for/(benefit from) income taxes


79,969


65,987


214,729


171,005

Provision for/(benefit from) income taxes

12,967

369

28,196

(9,286)


Net income


$        67,002


$       65,618


$     186,533


$     180,291

Foreign currency translation adjustments, net of tax

(10,114)

(2,118)

(4,551)

(14,643)

Unrealized (loss)/gain on cash-flow hedging instruments, net of tax

 

(2,163)

 

(74)

 

2,474

 

(2,081)


Comprehensive income


$        54,725


$       63,426


$     184,456


$     163,567


Net income per share:

Basic

$            1.22

$            1.22

$            3.42

$            3.37

Diluted

$            1.16

$            1.15

$            3.24

$            3.19


 Shares used in calculation of net income per share:                                                                                                                         

Basic

54,878

53,852

54,604

53,485

Diluted

57,844

56,963

57,567

56,600

 

 


EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)


As of
September 30,



2019


As of
December 31,



2018


Assets

Current assets

Cash and cash equivalents

$

853,241

$

770,560

Accounts receivable, net of allowance of $1,519 and $1,557, respectively

339,112

297,685

Unbilled revenues

142,949

104,652

Prepaid expenses and other current assets

29,390

26,171

Total current assets

1,364,692

1,199,068

Property and equipment, net

115,321

102,646

Operating lease right-of-use assets

207,145

Intangible assets, net

56,537

57,065

Goodwill

186,299

166,832

Deferred tax assets

75,071

69,983

Other noncurrent assets

35,098

16,208


Total assets


$


2,040,163


$


1,611,802


Liabilities

Current liabilities

Accounts payable

$

6,896

$

7,444

Accrued expenses and other current liabilities

128,639

127,937

Due to employees

63,536

49,683

Deferred compensation due to employees

13,427

9,920

Taxes payable, current

47,548

67,845

Operating lease liabilities, current

51,424

Total current liabilities

311,470

262,829

Long-term debt

25,000

25,031

Taxes payable, noncurrent

43,738

43,685

Operating lease liabilities, noncurrent

153,980

Other noncurrent liabilities

13,858

17,661


Total liabilities


548,046


349,206


Commitments and contingencies


Stockholders’ equity  

Common stock, $0.001 par value; 160,000,000 authorized; 54,968,833 and 54,099,927

shares issued, 54,949,098 and 54,080,192 shares outstanding at September 30, 2019

and December 31, 2018, respectively

55

54

Additional paid-in capital

589,764

544,700

Retained earnings

946,066

759,533

Treasury stock

(177)

(177)

Accumulated other comprehensive loss

(43,591)

(41,514)


Total stockholders’ equity


1,492,117


1,262,596


Total liabilities and stockholders’ equity


$


2,040,163


$


1,611,802

 

 


EPAM SYSTEMS, INC. AND SUBSIDIARIES


Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Financial Measures (Unaudited)


(In thousands, except percent and per share amounts)

Reconciliation of revenue growth on a constant currency basis to revenue growth as reported under GAAP is presented in the table below:


Three Months Ended


Nine Months Ended


September 30, 2019


September 30, 2019


Revenue growth on a constant currency basis(1)


27.2 %


26.2 %

Foreign exchange rates impact

(1.6)%

(2.1)%


Revenue growth as reported


25.6 %


24.1 %

 (1) Constant currency revenue results are calculated by translating current period revenues in local currency into U.S. dollars at the weighted average exchange rates of the comparable prior period.

 

 

Reconciliation of various income statement amounts from GAAP to non-GAAP for the three and nine months ended September 30, 2019 and 2018:


Three Months Ended
September 30, 2019


 Nine Months Ended
September 30, 2019


GAAP 


Adjustments


Non-GAAP


GAAP


Adjustments


Non-GAAP

Cost of revenues (exclusive of

     depreciation and amortization)(2)                

$

377,525

$

(7,580 )

$

369,945

 

$

1,078,129

 

$

(27,841)

 

$

1,050,288

Selling, general and administrative
     

expenses(3)                                             

$

118,886

 

$

(9,037)

 

$

109,849

 

$

332,434

 

$

(28,264)

 

$

304,170

Income from operations(4)

$

80,565

$

19,171

$

99,736

$

218,105

$

63,398

$

281,503

Operating margin

13.7%

3.3%

17.0%

13.1%

3.8%

16.9%

Net income(5)

$

67,002

$

13,215

$

80,217

$

186,533

$

38,920

$

225,453

Diluted earnings per share

$

1.16

$

1.39

$

3.24

$

3.92


Three Months Ended
September 30, 2019


Nine Months Ended
September 30, 2019


GAAP 


Adjustments  


Non-GAAP


GAAP


Adjustments


Non-GAAP

Cost of revenues (exclusive of
     

depreciation and amortization)(2)            

$

301,081

$

(7,492 )

$

293,589

 

$

867,890

 

$

(22,835)

 

$

845,055

Selling, general and administrative
     

expenses(3)                                             

$

93,226

 

$

(7,993)

 

$

85,233

 

$

276,140

 

$

(25,917)

 

$

250,223

Income from operations(4)

$

64,560

$

17,493

$

82,053

$

167,494

$

54,552

$

222,046

Operating margin

13.8%

3.7%

17.5%

12.5%

4.1%

16.6%

Net income(5)

$

65,618

$

749

$

66,367

$

180,291

$

(4,605)

$

175,686

Diluted earnings per share

$

1.15

$

1.17

$

3.19

$

3.10

Items (2) through (5) above are detailed in the table below with the specific cross-reference noted in the appropriate item.

 

 


Three Months Ended
September 30,


Nine Months Ended
September 30,


2019


2018


2019


2018

Stock-based compensation expenses

$

7,580

$

7,492

$

27,841

$

22,835


Total adjustments to GAAP cost of revenues(2)


7,580


7,492


27,841


22,835

Stock-based compensation expenses

7,891

7,838

25,183

23,901

Other acquisition-related expenses

1,144

245

2,505

707

    One-time charges

2

(90)

576

1,309




Total adjustments to GAAP selling, general and
     





administrative expenses(3)


9,037


7,993


28,264


25,917

Amortization of purchased intangible assets

2,554

2,008

7,293

5,800


Total adjustments to GAAP income from operations(4)


19,171


17,493


63,398


54,552

Change in fair value of contingent consideration included in

Interest and other income, net

(900)

1,356

(900)

Foreign exchange loss/(gain)

3,105

514

10,151

(1,069)

Provision for/(benefit from) income taxes:

Tax effect on non-GAAP adjustments

(4,833)

(3,490)

(15,503)

(11,007)

Net discrete benefit related to U.S. tax reform

(6,801)

(29,984)

Excess tax benefits related to stock-based compensation

(4,228)

(6,067)

(20,482)

(16,197)


Total adjustments to GAAP net income(5)


$


13,215


$


749


$


38,920


$


(4,605)

 

 

    


EPAM SYSTEMS, INC. AND SUBSIDIARIES


Reconciliations of Guidance Non-GAAP Financial Measures to Comparable GAAP Financial Measures
(Unaudited)


(In percent, except per share amounts)

The below guidance constitutes forward-looking statements within the meaning of the federal securities laws and is based on a number of assumptions that are subject to change and many of which are outside the control of the Company. Actual results may differ materially from the Company’s expectations depending on factors discussed in the Company’s filings with the Securities and Exchange Commission.

Reconciliation of projected revenue growth on a constant currency basis to projected revenue growth on a GAAP basis is presented in the table below:


Fourth Quarter 2019


Full Year 2019


Revenue growth on a constant currency basis (at least) (6)


22%


24 %

Foreign exchange rates impact

0 %

(1)%


Revenue growth (at least)


22%


23 %

(6) Constant currency revenue results are calculated by translating current period projected revenues in local currency into U.S. dollars at the weighted average exchange rates of the comparable prior period.

 

 

Reconciliation of projected GAAP to non-GAAP income from operations as a percentage of revenues is presented in the table below:


Fourth Quarter 2019


Full Year 2019


GAAP income from operations as a percentage of revenues


13.5% to 14.5%


12.5% to 13.5%

Stock-based compensation expenses

2.4%

3.5%


Included in cost of revenues (exclusive of depreciation and amortization)


1.2 %


1.8 %


Included in selling, general and administrative expenses


1.2 %


1.7 %

Other acquisition-related expenses

0.1%

0.1%

Amortization of purchased intangible assets

0.5%

0.4%


Non-GAAP income from operations as a percentage of revenues


16.5% to 17.5%


16.5% to 17.5%

 

 

Reconciliation of projected GAAP to non-GAAP effective tax rate is presented in the table below:


Fourth Quarter 2019


Full Year 2019


GAAP effective tax rate (approximately)


21%


15%

Tax effect on non-GAAP adjustments

1.4 %

3.3 %

Excess tax benefits related to stock-based compensation

0.6 %

3.7 %


Non-GAAP effective tax rate (approximately)


23%


22%

 

Reconciliation of projected GAAP to non-GAAP diluted earnings per share is presented in the table below:


Fourth Quarter 2019


Full Year 2019


GAAP diluted earnings per share (at least)


$


1.19


$


4.43

Stock-based compensation expenses

0.25

1.19


Included in cost of revenues (exclusive of depreciation and amortization)


0.12


0.61


Included in selling, general and administrative expenses


0.13


0.58

Other acquisition-related expenses

0.02

0.06

Amortization of purchased intangible assets

0.05

0.17

One-time charges

0.01

Change in fair value of contingent consideration included in Interest

and other
income, net                                                                                                                                                                              

0.02

Foreign exchange loss

0.03

0.21

Provision for income taxes:

Tax effect on non-GAAP adjustments

(0.08)

(0.35)

Excess tax benefits related to stock-based compensation

(0.03)

(0.39)


Non-GAAP diluted earnings per share (at least) 


$


1.43


$


5.35

 

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/epam-reports-results-for-third-quarter-2019-300953615.html

SOURCE EPAM Systems, Inc.

Air Products Reports Fiscal 2019 GAAP EPS** of $7.94, Up 20 Percent, and Adjusted EPS* of $8.21, Up 10 Percent

PR Newswire

LEHIGH VALLEY, Pa., Nov. 7, 2019 /PRNewswire/ —

Fiscal 2019 (comparisons versus prior year):

  • GAAP EPS** of $7.94, up 20 percent; GAAP net income of $1,809 million, up 18 percent; and GAAP net income margin of 20.3 percent, up 310 basis points
  • Adjusted EPS* of $8.21, up 10 percent; adjusted EBITDA margin* of 38.9 percent, up 400 basis points

Q4 FY19 (comparisons versus prior year):

  • GAAP EPS** of $2.27, up 11 percent; GAAP net income of $519 million, up 13 percent; and GAAP net income margin of 22.7 percent, up 270 basis points
  • Adjusted EPS* of $2.27, up 14 percent; adjusted EBITDA margin* of 41.9 percent, up 610 basis points

Fiscal 2019 Highlights

  • 37th consecutive year of dividend increase
  • Continued to execute gasification strategy:
    • Confirmed final negotiations to form $11.5 billion joint venture to acquire the gasification/power/industrial gas assets at Jazan Economic City, Saudi Arabia
    • Closed on GE gasification technology acquisition
    • Announced new China gasification project with Debang
  • Continued to win and successfully execute base business projects around the world

Guidance

  • Fiscal 2020 full-year adjusted EPS guidance of $9.35 to $9.60 per share*, up 14 to 17 percent over prior year adjusted EPS*, including the expected contribution from the Jazan gas and power project; fiscal 2020 first quarter adjusted EPS guidance of $2.05 to $2.10 per share*, up 10 to 13 percent over fiscal 2019 first quarter adjusted EPS*
  • Expected fiscal year 2020 capital expenditures* of approximately $4 billion to $4.5 billion, including the expected spending for the Jazan gas and power project

*The identified results and guidance in this release, including in the highlights above, include references to non-GAAP financial measures. Additional information regarding these measures and a reconciliation of GAAP to non-GAAP historical results can be found below. In addition, as discussed below, it is not possible, without unreasonable efforts, to identify the timing or occurrence of events and transactions that could significantly impact future GAAP EPS or cash flow from investing activities if they were to occur.

**Earnings per share is from continuing operations and attributable to Air Products.

Air Products (NYSE: APD) today reported fiscal year 2019 results, including GAAP diluted EPS from continuing operations of $7.94, up 20 percent; GAAP net income of $1,809 million, up 18 percent, primarily driven by higher pricing, volumes and tax reform impacts; and GAAP net income margin of 20.3 percent, up 310 basis points, each versus prior year.

For the year, on a non-GAAP basis, adjusted diluted EPS from continuing operations of $8.21, up 10 percent; adjusted EBITDA of $3.5 billion, up 11 percent, primarily driven by the higher pricing and volumes; and adjusted EBITDA margin of 38.9 percent, up 400 basis points, each versus prior year.

Full-year sales of $8.9 billion were flat versus last year on two percent volume growth and three percent higher pricing, offset three percent by unfavorable currency and two percent from a contract modification to a tolling agreement in India, which impacts sales but not profits. Volume growth was primarily driven by new plants and supported by positive base volume, partially offset by lower activity from the Jazan ASU sale of equipment project as it nears completion, which reduced overall volume growth by two percent.

Fiscal Fourth Quarter Results (Q4FY19)

Air Products reported, for its fiscal fourth quarter ended September 30, 2019, GAAP diluted EPS from continuing operations of $2.27, up 11 percent; GAAP net income of $519 million, up 13 percent, primarily driven by higher pricing, volumes, and prior-year tax reform and pension settlement impacts; and GAAP net income margin of 22.7 percent, up 270 basis points, each versus prior year.

For the fiscal fourth quarter, on a non-GAAP basis, adjusted diluted EPS from continuing operations of $2.27, up 14 percent; adjusted EBITDA of $957 million, up 16 percent, primarily driven by positive volume and pricing; and adjusted EBITDA margin of 41.9 percent, up 610 basis points, each versus prior year.

Fourth quarter sales of $2.3 billion decreased one percent, as five percent higher volumes and three percent higher pricing were more than offset by four percent lower energy cost pass-through, three percent from the India contract modification referenced above, and two percent unfavorable currency. Volume growth was driven primarily by new plants, base business growth and a short-term contract in Asia, which was partially offset by lower activity from the Jazan sale of equipment project, which reduced overall volume growth by two percent.

Commenting on the results, Seifi Ghasemi, chairman, president and chief executive officer, said, “Our people have stayed focused on serving our customers and creating value for our shareholders, every day, and I want to thank them for their hard work, commitment and dedication. We are pursuing our strategic Five-Point Plan, including a focus on sustainability that is driving significant global growth opportunities in gasification, carbon capture, and hydrogen for mobility. We are generating significant cash, and also have the technical and operational strength, to execute on our base business while continuing to deploy capital into industrial gas megaprojects around the world.”

Fiscal Fourth Quarter Results by Business Segment (comparisons versus prior year)

  • Industrial Gases – Americas sales of $937 million decreased five percent, as three percent higher pricing was more than offset by five percent lower energy pass-through, two percent lower volumes, and one percent unfavorable currency. Operating income of $261 million increased four percent, primarily driven by higher pricing, and operating margin of 27.8 percent increased 230 basis points. Adjusted EBITDA of $412 million increased three percent, primarily driven by higher pricing, and adjusted EBITDA margin of 43.9 percent increased 350 basis points.
  • Industrial Gases – EMEA sales of $489 million decreased 12 percent. Volumes increased five percent and higher pricing contributed four percent. These results were more than offset by five percent lower energy pass-through, four percent unfavorable currency, and a 12 percent decrease from the India contract modification. Operating income of $121 million increased 14 percent, primarily driven by higher pricing, and operating margin of 24.7 percent increased 560 basis points; the India contract modification and lower energy pass-through improved operating margin by approximately 350 basis points. Adjusted EBITDA of $193 million increased 11 percent, primarily driven by higher pricing. Adjusted EBITDA margin of 39.5 percent increased 810 basis points; the India contract modification and lower energy pass-through improved adjusted EBITDA margin by approximately 600 basis points.
  • Industrial Gases – Asiasales of $732 million increased 16 percent. Volumes increased 16 percent, driven primarily by new plants, including the Lu’An gasification project, a short-term contract and base business growth. Pricing increased three percent, while currency had a negative three percent impact. Operating income of $231 million increased 28 percent on improved volumes, pricing and productivity, and operating margin of 31.6 percent increased 310 basis points. Adjusted EBITDA of $354 million increased 31 percent on improved volumes, pricing and productivity, and adjusted EBITDA margin of 48.3 percent increased 550 basis points.

Outlook

Ghasemi said, “Air Products cannot control the economic and geopolitical uncertainty in the world. But we do have control over the actions we take to remain profitable and adapt to the constantly changing world. Our strong, capable and flexible team is focused on delivering productivity and creating our own growth opportunities through gasification, carbon capture, hydrogen for mobility and other projects driven by the world’s need for cleaner energy and high-value products. A great example is the broader-scope joint venture at Jazan, a world-class project with world-class partners. We remain committed to continue growing adjusted earnings per share by more than 10 percent per year over the long term.”

Air Products’ full-year fiscal 2020 adjusted EPS guidance is $9.35 to $9.60 per share, up 14 to 17 percent over prior year adjusted EPS, including the expected contribution from the Jazan gas and power project. For the fiscal 2020 first quarter, Air Products’ adjusted EPS guidance is $2.05 to $2.10 per share, up 10 to 13 percent over the fiscal 2019 first quarter adjusted EPS.

Air Products expects capital expenditures of approximately $4 billion to $4.5 billion for full-year fiscal 2020, including the expected spending for the Jazan gas and power project.

Effective October 1, 2018, Air Products adopted the new revenue recognition standard, which had no material impact on the company’s financial statements.

Management has provided adjusted EPS guidance on a continuing operations basis, which excludes the impact of certain items that we believe are not representative of our underlying business performance, such as the incurrence of additional costs for cost reduction actions and impairment charges, or the recognition of gains on disclosed items. It is not possible, without unreasonable efforts, to predict the timing or occurrence of these events or the potential for other transactions that may impact future GAAP EPS or the effective tax rate. Furthermore, it is not possible to identify the potential significance of these events in advance, but any of these events, if they were to occur, could have a significant effect on our future GAAP EPS. Management therefore is unable to reconcile, without unreasonable effort, the Company’s forecasted range of adjusted EPS and effective tax rate to a comparable GAAP range.

Earnings Teleconference

Access the Q4 earnings teleconference scheduled for 10:00 a.m. Eastern Time on November 7, 2019 by calling 323-794-2598 and entering passcode 2097101, or access the Event Details page on Air Products’ Investor Relations web site.

About Air Products

Air Products (NYSE:APD) is a world-leading industrial gases company in operation for nearly 80 years. Focused on serving energy, environment and emerging markets, the Company provides essential industrial gases, related equipment and applications expertise to customers in dozens of industries, including refining, chemical, metals, electronics, manufacturing, and food and beverage. Air Products is also the global leader in the supply of liquefied natural gas process technology and equipment. The Company develops, engineers, builds, owns and operates some of the world’s largest industrial gas projects, including gasification projects that sustainably convert abundant natural resources into syngas for the production of high-value power, fuels and chemicals.

The Company had fiscal 2019 sales of $8.9 billion from operations in 50 countries and has a current market capitalization of about $50 billion. Approximately 16,000 passionate, talented and committed employees from diverse backgrounds are driven by Air Products’ higher purpose to create innovative solutions that benefit the environment, enhance sustainability and address the challenges facing customers, communities, and the world. For more information, visit www.airproducts.com.

NOTE: This release contains “forward-looking statements” within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about earnings guidance, business outlook and investment opportunities. These forward-looking statements are based on management’s expectations and assumptions as of the date of this release and are not guarantees of future performance. While forward-looking statements are made in good faith and based on assumptions, expectations and projections that management believes are reasonable based on currently available information, actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors, including, without limitation: changes in global or regional economic conditions, supply and demand dynamics in market segments we serve, or in the financial markets; risks associated with having extensive international operations, including political risks, risks associated with unanticipated government actions and risks of investing in developing markets; project delays, contract terminations or customer cancellations or postponement of projects and sales; future financial and operating performance of major customers and joint venture partners; our ability to develop, implement, and operate new technologies, or to execute the projects in our backlog; our ability to develop and operate large scale and technically complex projects, including gasification projects; tariffs, economic sanctions and regulatory activities in jurisdictions in which we and our affiliates and joint ventures operate; the impact of environmental, tax or other legislation, as well as regulations affecting our business and related compliance requirements, including regulations related to global climate change; changes in tax rates and other changes in tax law; the timing, impact and other uncertainties relating to acquisitions and divestitures, including our ability to integrate acquisitions and separate divested businesses, respectively; risks relating to cybersecurity incidents, including risks from the interruption, failure or compromise of our information systems; catastrophic events, such as natural disasters, acts of war, or terrorism; the impact of price fluctuations in oil and natural gas and disruptions in markets and the economy due to oil and natural gas price volatility; costs and outcomes of legal or regulatory proceedings and investigations; asset impairments due to economic conditions or specific events; significant fluctuations in interest rates and foreign currency exchange rates from those currently anticipated; damage to facilities, pipelines or delivery systems, including those we own or operate for third parties; availability and cost of raw materials; the success of productivity and operational improvement programs; and other risk factors described in the Company’s Form 10-K for its fiscal year ended September 30, 2018. Except as required by law, the Company disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect any change in the assumptions, beliefs, or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based.


AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries


CONSOLIDATED INCOME STATEMENTS


(Unaudited)

Three Months Ended

Twelve Months Ended

30 September

30 September

(Millions of dollars, except for share and per share data)

2019

2018

2019

2018


Sales

$2,283.2

$2,298.9

$8,918.9

$8,930.2

Cost of sales

1,490.8

1,565.8

5,975.5

6,189.5

Facility closure

29.0

Selling and administrative

181.9

186.0

750.0

760.8

Research and development

22.9

20.4

72.9

64.5

Cost reduction actions

25.5

Gain on exchange of equity affiliate investments

29.1

Other income (expense), net

15.6

7.0

49.3

50.2


Operating Income

603.2

533.7

2,144.4

1,965.6

Equity affiliates’ income

59.9

59.2

215.4

174.8

Interest expense

30.1

35.4

137.0

130.5

Other non-operating income (expense), net

16.9

(28.6)

66.7

5.1


Income From Continuing Operations Before Taxes

649.9

528.9

2,289.5

2,015.0

Income tax provision

131.2

69.2

480.1

524.3


Income From Continuing Operations

518.7

459.7

1,809.4

1,490.7

Income from discontinued operations, net of tax

42.2


Net Income

518.7

459.7

1,809.4

1,532.9

Net income attributable to noncontrolling interests of continuing
operations

15.5

6.8

49.4

35.1


Net Income Attributable to Air Products

$503.2

$452.9

$1,760.0

$1,497.8


Net Income Attributable to Air Products

Net income from continuing operations

$503.2

$452.9

$1,760.0

$1,455.6

Net income from discontinued operations

42.2


Net Income Attributable to Air Products

$503.2

$452.9

$1,760.0

$1,497.8


Basic Earnings Per Common Share Attributable to Air Products

Basic earnings per share from continuing operations

$2.28

$2.06

$7.99

$6.64

Basic earnings per share from discontinued operations

.19


Basic Earnings Per Common Share Attributable to Air Products

$2.28

$2.06

$7.99

$6.83


Diluted Earnings Per Common Share Attributable to Air Products

Diluted earnings per share from continuing operations

$2.27

$2.05

$7.94

$6.59

Diluted earnings per share from discontinued operations

.19


Diluted Earnings Per Common Share Attributable to Air Products

$2.27

$2.05

$7.94

$6.78


Weighted Average Common Shares – Basic (in millions)

220.7

219.6

220.3

219.3


Weighted Average Common Shares – Diluted (in millions)

222.1

220.9

221.6

220.8

 


AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries


CONSOLIDATED BALANCE SHEETS


(Unaudited)

30 September

30 September

(Millions of dollars)

2019

2018


Assets


Current Assets

Cash and cash items

$2,248.7

$2,791.3

Short-term investments

166.0

184.7

Trade receivables, net

1,260.2

1,207.2

Inventories

388.3

396.1

Prepaid expenses

77.4

129.6

Other receivables and current assets

477.7

373.3


Total Current Assets

4,618.3

5,082.2

Investment in net assets of and advances to equity affiliates

1,276.2

1,277.2

Plant and equipment, at cost

22,333.7

21,490.2

Less: accumulated depreciation

11,996.1

11,566.5

Plant and equipment, net

10,337.6

9,923.7

Goodwill, net

797.1

788.9

Intangible assets, net

419.5

438.5

Noncurrent capital lease receivables

890.0

1,013.3

Other noncurrent assets

604.1

654.5


Total Noncurrent Assets

14,324.5

14,096.1


Total Assets

$18,942.8

$19,178.3


Liabilities and Equity


Current Liabilities

Payables and accrued liabilities

$1,635.7

$1,817.8

Accrued income taxes

86.6

59.6

Short-term borrowings

58.2

54.3

Current portion of long-term debt

40.4

406.6


Total Current Liabilities

1,820.9

2,338.3

Long-term debt

2,907.3

2,967.4

Long-term debt – related party

320.1

384.3

Other noncurrent liabilities

1,712.4

1,536.9

Deferred income taxes

793.8

775.1


Total Noncurrent Liabilities

5,733.6

5,663.7


Total Liabilities

7,554.5

8,002.0


Air Products Shareholders’ Equity

11,053.6

10,857.5


Noncontrolling Interests

334.7

318.8


Total Equity

11,388.3

11,176.3


Total Liabilities and Equity

$18,942.8

$19,178.3

 


 AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries


CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)

Twelve Months Ended

30 September

(Millions of dollars)

2019

2018


Operating Activities

Net income

$1,809.4

$1,532.9

Less: Net income attributable to noncontrolling interests of continuing operations

49.4

35.1

Net income attributable to Air Products

1,760.0

1,497.8

Income from discontinued operations

(42.2)

Income from continuing operations attributable to Air Products

1,760.0

1,455.6

Adjustments to reconcile income to cash provided by operating activities:

Depreciation and amortization

1,082.8

970.7

Deferred income taxes

57.6

(55.4)

Tax reform repatriation

49.4

240.6

Facility closure

29.0

Undistributed earnings of unconsolidated affiliates

(75.8)

(59.8)

Gain on sale of assets and investments

(24.2)

(6.9)

Share-based compensation

41.2

38.8

Noncurrent capital lease receivables

94.6

97.4

Other adjustments

(19.4)

131.6

Working capital changes that provided (used) cash, excluding effects of acquisitions:

Trade receivables

(69.0)

(42.8)

Inventories

(3.0)

(64.2)

Other receivables

79.8

128.3

Payables and accrued liabilities

(41.8)

(277.7)

Other working capital

8.7

(9.0)


Cash Provided by Operating Activities

2,969.9

2,547.2


Investing Activities

Additions to plant and equipment

(1,989.7)

(1,568.4)

Acquisitions, less cash acquired

(123.2)

(345.4)

Investment in and advances to unconsolidated affiliates

(15.7)

Proceeds from sale of assets and investments

11.1

48.8

Purchases of investments

(172.1)

(530.3)

Proceeds from investments

190.5

748.2

Other investing activities

(14.3)

5.5


Cash Used for Investing Activities

(2,113.4)

(1,641.6)


Financing Activities

Long-term debt proceeds

.5

Payments on long-term debt

(428.6)

(418.7)

Net increase (decrease) in commercial paper and short-term borrowings

3.9

(78.5)

Dividends paid to shareholders

(994.0)

(897.8)

Proceeds from stock option exercises

68.1

76.2

Other financing activities

(19.9)

(41.5)


Cash Used for Financing Activities

(1,370.5)

(1,359.8)


Discontinued Operations

Cash used for operating activities

(12.8)

Cash provided by investing activities

18.6

Cash provided by financing activities


Cash Provided by Discontinued Operations

5.8


Effect of Exchange Rate Changes on Cash

(28.6)

(33.9)

Decrease in Cash and Cash Items

(542.6)

(482.3)

Cash and Cash items – Beginning of Year

2,791.3

3,273.6


Cash and Cash items – End of Period

$2,248.7

$2,791.3


Supplemental Cash Flow Information

Cash paid for taxes (net of refunds) – Continuing operations

$323.6

$364.6

 


AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries


SUMMARY BY BUSINESS SEGMENTS


(Unaudited)

(Millions of dollars)

Industrial

Gases –

Americas

Industrial

Gases –

EMEA

Industrial

Gases –

Asia

Industrial

Gases –

Global

Corporate

and other

Total


Three Months Ended 30 September 2019

Sales

$937.3

$489.3

$732.0

$81.1

$43.5

$2,283.2

Operating income (loss)

260.7

120.9

231.3

6.2

(15.9)

603.2

Depreciation and amortization

128.4

49.1

108.8

2.3

5.0

293.6

Equity affiliates’ income

22.7

23.2

13.5

.5

59.9


Three Months Ended 30 September 2018

Sales

$987.1

$554.7

$633.0

$100.3

$23.8

$2,298.9

Operating income (loss)

251.3

105.8

180.2

12.5

(40.2)

509.6

Depreciation and amortization

124.7

49.0

76.9

2.3

4.3

257.2

Equity affiliates’ income (loss)

22.4

19.4

13.6

(.2)

55.2

Industrial
Gases –
Americas

Industrial
Gases –
EMEA

Industrial
Gases –
Asia

Industrial
Gases –
Global

Corporate
and other

Total


Twelve Months Ended 30 September 2019

Sales

$3,873.5

$2,002.5

$2,663.6

$261.0

$118.3

$8,918.9

Operating income (loss)

997.7

472.4

864.2

(11.7)

(152.8)

2,169.8

Depreciation and amortization

505.2

189.5

361.5

8.6

18.0

1,082.8

Equity affiliates’ income

84.8

69.0

58.4

3.2

215.4


Twelve Months Ended 30 September 2018

Sales

$3,758.8

$2,193.3

$2,458.0

$436.1

$84.0

$8,930.2

Operating income (loss)

927.9

445.8

689.9

53.9

(176.0)

1,941.5

Depreciation and amortization

485.3

198.6

265.8

8.1

12.9

970.7

Equity affiliates’ income

82.0

61.1

58.3

1.9

203.3


Total Assets

30 September 2019

$5,832.2

$3,250.8

$6,240.6

$325.7

$3,293.5

$18,942.8

30 September 2018

5,904.0

3,280.4

5,899.5

240.1

3,854.3

19,178.3

Below is a reconciliation to operating income as reflected on our consolidated income statements:

Three Months Ended

Twelve Months Ended

30 September

30 September


Operating Income

2019

2018

2019

2018

Total

$603.2

$509.6

$2,169.8

$1,941.5

Change in inventory valuation method

24.1

24.1

Facility closure

(29.0)

Cost reduction actions

(25.5)

Gain on exchange of equity affiliate investments

29.1


Consolidated Operating Income

$603.2

$533.7

$2,144.4

$1,965.6

Below is a reconciliation to equity affiliates’ income as reflected on our consolidated income statements:

Three Months Ended

Twelve Months Ended

30 September

30 September


Equity Affiliates’ Income

2019

2018

2019

2018

Total

$59.9

$55.2

$215.4

$203.3

Tax reform repatriation – equity method investment

4.0

(28.5)


Consolidated Equity Affiliates’ Income

$59.9

$59.2

$215.4

$174.8

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Millions of dollars unless otherwise indicated, except for per share data)

The Company presents certain financial measures on a non-GAAP (“adjusted”) basis. On a consolidated basis, these measures include adjusted diluted earnings per share (“EPS”), adjusted EBITDA, and adjusted EBITDA margin. On a segment basis, these measures include adjusted EBITDA and adjusted EBITDA margin. In addition to these measures, which are presented above, we also include certain supplemental non-GAAP financial measures that are presented below to help the reader understand the impact that our non-GAAP adjustments have on the calculation of our adjusted diluted EPS. For each non-GAAP financial measure, we present below a reconciliation to the most directly comparable financial measure calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP).

The Company’s non-GAAP measures are not meant to be considered in isolation or as a substitute for the most directly comparable measure calculated in accordance with GAAP. The Company believes these non-GAAP measures provide investors, potential investors, securities analysts, and others with useful information to evaluate the performance of the business because such measures, when viewed together with financial results computed in accordance with GAAP, provide a more complete understanding of the factors and trends affecting the Company’s historical financial performance and projected future results.

In many cases, non-GAAP measures are determined by adjusting the most directly comparable GAAP measure to exclude certain disclosed items, or “non-GAAP adjustments,” that the Company believes are not representative of underlying business performance. For example, the Company previously excluded certain expenses associated with cost reduction actions, impairment charges, and gains on disclosed transactions. The reader should be aware that the Company may recognize similar losses or gains in the future. Readers should also consider the limitations associated with these non-GAAP measures, including the potential lack of comparability of these measures from one company to another.

The tax impact on our pre-tax non-GAAP adjustments reflects the expected current and deferred income tax impact of the transactions. These tax impacts are primarily driven by the statutory tax rate of the various relevant jurisdictions and the taxability of the adjustments in those jurisdictions.

The fiscal year 2019 non-GAAP adjustments are detailed below. For information related to non-GAAP adjustments in fiscal year 2018, refer to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated 6 November 2018.

Cost Reduction Actions
Our consolidated income statements for the twelve months ended 30 September 2019 include an expense of $25.5 ($18.8 after-tax, or $.08 per share) recorded during the third quarter for severance and other benefits associated with position eliminations. These actions are expected to drive cost synergies primarily within the Industrial Gases – EMEA and the Industrial Gases – Americas segments. The expense has been reflected as “Cost reduction actions” on the consolidated income statements and was excluded from segment operating income.

Gain on Exchange Of Equity Affiliate Investments
On 1 May 2019, we closed on a transaction involving two 50%-owned industrial gas joint ventures in China that we accounted for as equity method investments in our Industrial Gases – Asia segment. As part of the transaction, we acquired our joint venture partner’s 50% interest in WuXi Hi-Tech Gas Co., Ltd. (“WuXi”) in exchange for our 50% interest in High-Tech Gases (Beijing) Co., Ltd. (“High-Tech Gases”). The exchange resulted in a net gain of $29.1 ($.13 per share), of which $15.0 resulted from the revaluation of our previously held equity interest in WuXi to its acquisition date fair value and $14.1 resulted from the disposition of our interest in High-Tech Gases. The net gain has been reflected as “Gain on exchange of equity affiliate investments” on our consolidated income statements and was excluded from segment operating income for the twelve months ended 30 September 2019. There were no tax impacts on the exchange.

The acquisition of the remaining interest in WuXi was accounted for as a business combination. The results of this business have been consolidated within our Industrial Gases – Asia segment as of the acquisition date. The consolidated results subsequent to the acquisition were not material.

Pension Settlement Loss
Our consolidated income statements for the twelve months ended 30 September 2019 include a pension settlement loss of $5.0 ($3.8 after-tax, or $.02 per share). This expense was recorded during the second quarter to accelerate recognition of a portion of actuarial losses deferred in accumulated other comprehensive loss associated with the U.S. Supplementary Pension Plan. The loss is reflected on our consolidated income statements within “Other non-operating income (expense), net.”

Income Taxes

The United States enacted the U.S. Tax Cuts and Jobs Act (the “Tax Act”) on 22 December 2017. This legislation significantly changed existing U.S. tax laws, including a reduction in the federal corporate income tax rate from 35% to 21%, a deemed repatriation tax on unremitted foreign earnings, as well as other changes. Our income tax provision for the twelve months ended 30 September 2019 includes a net expense of $43.8 ($.20 per share) for the reversal of a $56.2 benefit recorded in the fourth quarter of fiscal year 2018 related to the U.S. taxation of deemed foreign dividends, partially offset by a benefit of $12.4 to reduce the total expected costs of the deemed repatriation tax.

While our accounting for the provisions of the Tax Act is not provisional, further adjustments to the deemed repatriation tax could result from future adjustments to U.S. or foreign tax examinations of the years impacted by the calculation, or from the issuance of additional federal or state guidance.

Facility Closure
In December 2018, one of our customers was subject to a government enforced shutdown due to environmental reasons. As a result, we recognized a charge of $29.0 ($22.1 after-tax, or $.10 per share) during the first quarter of fiscal year 2019 primarily related to the write-off of onsite assets. This charge is reflected as “Facility closure” on our consolidated income statements for the twelve months ended 30 September 2019 and has been excluded from segment results. Annual sales and operating income associated with this customer prior to the facility closure were not material to the Industrial Gases – Asia segment. We do not expect to recognize additional charges related to this shutdown.

CONSOLIDATED RESULTS

The tables below provide a reconciliation to the most directly comparable GAAP measure for each of the major components used to calculate diluted earnings per share (EPS), which the Company views as a key performance metric. We believe it is important for the reader to understand the per share impact of our non-GAAP adjustments as Management does not consider these impacts when evaluating underlying business performance.

Continuing Operations

Three Months Ended 30 September


Q4 2019 vs. Q4 2018

Operating
Income

Equity
Affiliates’
Income

Income Tax
Provision

Net
Income
Attributable
to Air
Products

Diluted
EPS

2019 GAAP

$603.2

$59.9

$131.2

$503.2

$2.27

2018 GAAP

533.7

59.2

69.2

452.9

2.05

Change GAAP

$50.3

$.22

% Change GAAP

11

%

11

%

2019 GAAP

$603.2

$59.9

$131.2

$503.2

$2.27

2019 Non-GAAP Measure (“Adjusted”)

$603.2

$59.9

$131.2

$503.2

$2.27

2018 GAAP

$533.7

$59.2

$69.2

$452.9

$2.05

Change in inventory valuation method

(24.1)

(6.6)

(17.5)

(.08)

Pension settlement loss(A)

10.5

33.2

.15

Tax reform repatriation

(4.0)

(28.1)

24.1

.11

Tax reform adjustment related to deemed foreign dividends

56.2

(56.2)

(.25)

Tax reform rate change and other

(2.2)

2.2

.01

Tax restructuring

(3.1)

3.1

.01

2018 Non-GAAP Measure (“Adjusted”)

$509.6

$55.2

$95.9

$441.8

$2.00

Change Non-GAAP Measure (“Adjusted”)

$61.4

$.27

% Change Non-GAAP Measure (“Adjusted”)

14

%

14

%

Continuing Operations

Twelve Months Ended 30 September


2019 vs. 2018

Operating

Income

Equity Affiliates’ Income

Income Tax Provision

Net
Income Attributable to Air Products

Diluted

EPS

2019 GAAP

$2,144.4

$215.4

$480.1

$1,760.0

$7.94

2018 GAAP

1,965.6

174.8

524.3

1,455.6

6.59

Change GAAP

$304.4

$1.35

% Change GAAP

21

%

20

%

2019 GAAP

$2,144.4

$215.4

$480.1

$1,760.0

$7.94

Facility closure

29.0

6.9

22.1

.10

Cost reduction actions

25.5

6.7

18.8

.08

Gain on exchange of equity affiliate investments

(29.1)

(29.1)

(.13)

Pension settlement loss(A)

1.2

3.8

.02

Tax reform repatriation

12.4

(12.4)

(.06)

Tax reform adjustment related to deemed foreign dividends

(56.2)

56.2

.26

2019 Non-GAAP Measure (“Adjusted”)

$2,169.8

$215.4

$451.1

$1,819.4

$8.21

2018 GAAP

$1,965.6

$174.8

$524.3

$1,455.6

$6.59

Change in inventory valuation method

(24.1)

(6.6)

(17.5)

(.08)

Pension settlement loss(A)

10.5

33.2

.15

Tax reform repatriation

28.5

(448.6)

477.1

2.16

Tax reform adjustment related to deemed foreign dividends

56.2

(56.2)

(.25)

Tax reform rate change and other

211.8

(211.8)

(.96)

Tax restructuring

35.7

(35.7)

(.16)

2018 Non-GAAP Measure (“Adjusted”)

$1,941.5

$203.3

$383.3

$1,644.7

$7.45

Change Non-GAAP Measure (“Adjusted”)

$174.7

$.76

% Change Non-GAAP Measure (“Adjusted”)

11

%

10

%


(A)

Reflected on the consolidated income statements within “Other non-operating income (expense), net.” Fiscal year 2019 includes a before-tax impact of $5.0 for the twelve months ended 30 September 2019. The fourth quarter and fiscal year 2018 includes a before-tax impact of $43.7.

ADJUSTED EBITDA

We define Adjusted EBITDA as net income less income (loss) from discontinued operations and excluding certain non‑GAAP adjustments, which the Company does not believe to be indicative of underlying business trends, before interest expense, other non‑operating income (expense), net, income tax provision, and depreciation and amortization expense. Adjusted EBITDA and adjusted EBITDA margin provide useful metrics for management to assess operating performance. Margin is calculated for each period by dividing each line item by consolidated sales for the respective period.

Below is a presentation of consolidated sales and a reconciliation of net income on a GAAP basis to adjusted EBITDA and net income margin on a GAAP basis to adjusted EBITDA margin:

Q1

Q2

Q3

Q4

Total


Sales

2019

$2,224.0

$2,187.7

$2,224.0

$2,283.2

$8,918.9

2018

2,216.6

2,155.7

2,259.0

2,298.9

8,930.2

 

Q1

Q2

Q3

Q4

FY2019

2019

$

Margin

$

Margin

$

Margin

$

Margin

$

Margin


Net income

$357.0

16.0

%

$433.5

19.8

%

$500.2

22.5

%

$518.7

22.7

%

$1,809.4

20.3

%

Less: Income from discontinued operations

%

%

%

%

%

Add: Interest expense

37.3

1.7

%

35.4

1.6

%

34.2

1.5

%

30.1

1.3

%

137.0

1.5

%

Less: Other non-operating income 
     (expense), net

18.5

.8

%

13.7

.6

%

17.6

.8

%

16.9

.7

%

66.7

.7

%

Add: Income tax provision

132.1

5.9

%

107.5

4.9

%

109.3

4.9

%

131.2

5.7

%

480.1

5.4

%

Add: Depreciation and amortization

258.0

11.6

%

262.1

12.0

%

269.1

12.1

%

293.6

12.9

%

1,082.8

12.1

%

Add: Facility closure

29.0

1.3

%

%

%

%

29.0

.3

%

Add: Cost reduction actions

%

%

25.5

1.2

%

%

25.5

.3

%

Less: Gain on exchange of equity affiliate 
     investments

%

%

29.1

1.3

%

%

29.1

.3

%


Adjusted EBITDA


$794.9


35.7


%


$824.8


37.7


%


$891.6


40.1


%


$956.7


41.9


%


$3,468.0


38.9


%

Q1

Q2

Q3

Q4

FY2018

2018

$

Margin

$

Margin

$

Margin

$

Margin

$

Margin


Net income

$161.7

7.3

%

$423.6

19.7

%

$487.9

21.6

%

$459.7

20.0

%

$1,532.9

17.2

%

Less: Income (Loss) from discontinued 
     operations

(1.0)

%

%

43.2

1.9

%

%

42.2

.5

%

Add: Interest expense

29.8

1.3

%

30.4

1.4

%

34.9

1.6

%

35.4

1.5

%

130.5

1.5

%

Less: Other non-operating income 
     (expense), net

9.8

.4

%

11.1

.5

%

12.8

.6

%

(28.6)

(1.3)

%

5.1

.1

%

Add: Income tax provision

291.8

13.2

%

56.2

2.6

%

107.1

4.7

%

69.2

3.0

%

524.3

5.9

%

Add: Depreciation and amortization

227.9

10.3

%

240.0

11.1

%

245.6

10.9

%

257.2

11.2

%

970.7

10.9

%

Less: Change in inventory valuation 
     method

%

%

%

24.1

1.0

%

24.1

.3

%

Add: Tax reform repatriation – equity 
     method investment

32.5

1.5

%

%

%

(4.0)

(.2)

%

28.5

.3

%


Adjusted EBITDA


$734.9


33.2


%


$739.1


34.3


%


$819.5


36.3


%


$822.0


35.8


%


$3,115.5


34.9


%

 

2019 vs. 2018

Q1

Q2

Q3

Q4

Total


Change GAAP

Net income $ change

$195.3

$9.9

$12.3

$59.0

$276.5

Net income % change

121

%

2

%

3

%

13

%

18

%

Net income margin change

870

bp

10

bp

90

bp

270

bp

310

bp


Change Non-GAAP

Adjusted EBITDA $ change

$60.0

$85.7

$72.1

$134.7

$352.5

Adjusted EBITDA % change

8

%

12

%

9

%

16

%

11

%

Adjusted EBITDA margin change

250

bp

340

bp

380

bp

610

bp

400

bp

Below is a reconciliation of operating income and operating margin by segment to adjusted EBITDA and adjusted EBITDA margin by segment for the three months ended 30 September 2019 and 2018:

Industrial
Gases–
Americas

Industrial
Gases–
EMEA

Industrial
Gases–
Asia

Industrial
Gases–
Global

Corporate
and other

Total



GAAP MEASURE


Three Months Ended 30 September 2019

Operating income (loss)

$260.7

$120.9

$231.3

$6.2

($15.9)

$603.2

Operating margin

27.8

%

24.7

%

31.6

%


Three Months Ended 30 September 2018

Operating income (loss)

$251.3

$105.8

$180.2

$12.5

($40.2)

$509.6

Operating margin

25.5

%

19.1

%

28.5

%

Operating income change

$9.4

$15.1

$51.1

Operating income % change

4

%

14

%

28

%

Operating margin change

230

bp

560

bp

310

bp



NON-GAAP MEASURE


Three Months Ended 30 September 2019

Operating income (loss)

$260.7

$120.9

$231.3

$6.2

($15.9)

$603.2

Add: Depreciation and amortization

128.4

49.1

108.8

2.3

5.0

293.6

Add: Equity affiliates’ income

22.7

23.2

13.5

.5

59.9

Adjusted EBITDA

$411.8

$193.2

$353.6

$9.0

($10.9)

$956.7

Adjusted EBITDA margin

43.9

%

39.5

%

48.3

%


Three Months Ended 30 September 2018

Operating income (loss)

$251.3

$105.8

$180.2

$12.5

($40.2)

$509.6

Add: Depreciation and amortization

124.7

49.0

76.9

2.3

4.3

257.2

Add: Equity affiliates’ income (loss)

22.4

19.4

13.6

(.2)

55.2

Adjusted EBITDA

$398.4

$174.2

$270.7

$14.6

($35.9)

$822.0

Adjusted EBITDA margin

40.4

%

31.4

%

42.8

%

Adjusted EBITDA change

$13.4

$19.0

$82.9

Adjusted EBITDA % change

3

%

11

%

31

%

Adjusted EBITDA margin change

350

bp

810

bp

550

bp

The following table reconciles operating income as reflected on our consolidated income statements to total operating income in the table above:

Three Months Ended

30 September


Operating Income

2019

2018

Consolidated operating income

$603.2

$533.7

Change in inventory valuation method

(24.1)


Total

$603.2

$509.6

The following table reconciles equity affiliates’ income as reflected on our consolidated income statements to total equity affiliates’ income in the table above:

Three Months Ended

30 September


Equity Affiliates’ Income

2019

2018

Consolidated equity affiliates’ income

$59.9

$59.2

Tax reform repatriation – equity method investment

(4.0)


Total

$59.9

$55.2

INCOME TAXES

The tax impact of our pre-tax non-GAAP adjustments reflects the expected current and deferred income tax expense associated with each adjustment and is primarily dependent upon the statutory tax rate of the various relevant jurisdictions and the taxability of the adjustments in those jurisdictions.

Effective Tax Rate

Three Months Ended
30 September

Twelve Months Ended
30 September

2019

2018

2019

2018

Income Tax Provision—GAAP

$131.2

$69.2

$480.1

$524.3

Income From Continuing Operations Before Taxes—GAAP

$649.9

$528.9

$2,289.5

$2,015.0

Effective Tax Rate—GAAP

20.2

%

13.1

%

21.0

%

26.0

%

Income Tax Provision—GAAP

$131.2

$69.2

$480.1

$524.3

Change in inventory valuation method

(6.6)

(6.6)

Facility closure

6.9

Cost reduction actions

6.7

Pension settlement loss

10.5

1.2

10.5

Tax reform repatriation

(28.1)

12.4

(448.6)

Tax reform adjustment related to deemed foreign dividends

56.2

(56.2)

56.2

Tax reform rate change and other

(2.2)

211.8

Tax restructuring

(3.1)

35.7

Income Tax Provision—Non-GAAP Measure (“Adjusted”)

$131.2

$95.9

$451.1

$383.3

Income From Continuing Operations Before Taxes—GAAP

$649.9

$528.9

$2,289.5

$2,015.0

Change in inventory valuation method

(24.1)

(24.1)

Facility closure

29.0

Cost reduction actions

25.5

Gain on exchange of equity affiliate investments

(29.1)

Pension settlement loss

43.7

5.0

43.7

Tax reform repatriation – equity method investment

(4.0)

28.5

Income From Continuing Operations Before Taxes—Non-GAAP
Measure (“Adjusted”)

$649.9

$544.5

$2,319.9

$2,063.1

Effective Tax Rate—Non-GAAP Measure (“Adjusted”)

20.2

%

17.6

%

19.4

%

18.6

%

CAPITAL EXPENDITURES

We define capital expenditures as cash flows for additions to plant and equipment, acquisitions (less cash acquired), and investment in and advances to unconsolidated affiliates. A reconciliation of cash used for investing activities to our reported capital expenditures is provided below:

Twelve Months Ended

30 September

2019

2018

Cash used for investing activities

$2,113.4

$1,641.6

Proceeds from sale of assets and investments

11.1

48.8

Purchases of investments

(172.1)

(530.3)

Proceeds from investments

190.5

748.2

Other investing activities

(14.3)

5.5

Capital expenditures

$2,128.6

$1,913.8

The components of our capital expenditures are detailed in the table below:

Twelve Months Ended

30 September

2019

2018

Additions to plant and equipment

$1,989.7

$1,568.4

Acquisitions, less cash acquired

123.2

345.4

Investment in and advances to unconsolidated affiliates

15.7

Capital expenditures

$2,128.6

$1,913.8

We expect capital expenditures for fiscal year 2020 to be approximately $4 billion to $4.5 billion, including the expected spending for the Jazan gas and power project.

It is not possible, without unreasonable efforts, to reconcile our forecasted capital expenditures to future cash used for investing activities because we are unable to identify the timing or occurrence of our future investment activity, which is driven by our assessment of competing opportunities at the time we enter into transactions. These decisions, either individually or in the aggregate, could have a significant effect on our cash used for investing activities.

OUTLOOK

Guidance is provided on an adjusted continuing operations basis and is compared to adjusted historical diluted EPS, which excludes the impact of certain items that we believe are not representative of our underlying business performance, such as the incurrence of additional costs for cost reduction actions and impairment charges, or the recognition of gains on disclosed items. It is not possible, without unreasonable efforts, to identify the timing or occurrence of these events or the potential for other transactions that may impact future GAAP EPS. Furthermore, it is not possible to identify the potential significance of these events in advance, but any of these events, if they were to occur, could have a significant effect on our future GAAP EPS. Accordingly, management is unable to reconcile, without unreasonable effort, the Company’s forecasted range of adjusted EPS on a continuing operations basis to a comparable GAAP range.


Diluted EPS

Q1

Full Year

2019 GAAP Diluted EPS

$1.57

$7.94

Facility closure

.10

.10

Cost reduction actions

.08

Gain on exchange of equity affiliate investments

(.13)

Pension settlement loss

.02

Tax reform repatriation

(.07)

(.06)

Tax reform adjustment related to deemed foreign dividends

.26

.26

2019 Adjusted Diluted EPS

$1.86

$8.21

2020 Adjusted Diluted EPS Outlook

2.05–2.10

9.35–9.60

Change

.19–.24

1.14–1.39

% Change

10%–13%

14%–17%

 

Cision View original content:http://www.prnewswire.com/news-releases/air-products-reports-fiscal-2019-gaap-eps-of-7-94–up-20-percent-and-adjusted-eps-of-8-21–up-10-percent-300953736.html

SOURCE Air Products

Triumph Group Reports Second Quarter Fiscal 2020 Results

Reports Organic Revenue Growth of 13%

Margin Expansion Across All Segments

Maintains Fiscal Year 2020 Guidance including Positive Free Cash Flow

PR Newswire

BERWYN, Pa., Nov. 7, 2019 /PRNewswire/ — Triumph Group, Inc. (NYSE: TGI) (“Triumph” or the “Company”) today reported financial results for its second quarter of fiscal year 2020, which ended September 30, 2019.


Second Quarter Fiscal 2020

  • Net sales of $772.1 million
  • Operating income of $61.0 million with operating margin of 8%; adjusted operating income of $59.1 million with adjusted operating margin of 8%
  • Net income of $42.7 million, or $0.85 per share; adjusted net income of $32.2 million, or $0.64 per diluted share
  • Cash flow used in operations of ($15.6) million, and free cash flow use of ($24.5) million


Outlook for Fiscal 2020

  • Net sales guidance of between $2.8 billion to $2.9 billion
  • GAAP earnings per diluted share of between $1.34 and $2.35
  • Adjusted earnings per diluted share of between $2.35 to $2.95
  • Positive free cash flow of between $0 to $50.0 million

“Triumph Group delivered solid second quarter results, demonstrating momentum as we head into the back half of the year,” stated Daniel J. Crowley, Triumph’s president and chief executive officer. “During our fiscal second quarter, all three of our business segments delivered year-over-year organic growth in net sales. We also drove significant margin expansion in Integrated Systems both sequentially and year-over-year as customers continued to demand our unique value proposition.  Product Support and Aerospace Structures also generated year-over-year organic improvement in operating margin.”

Mr. Crowley continued, “Our second quarter cash usage includes seasonal working capital build and we expect to be cash flow positive in the second half of the year.  Given our solid first half results and improving operational performance, we remain confident that Triumph is on track to deliver on our full-year commitments and guidance.” 

Mr. Crowley concluded, “Triumph is stronger, more focused and predictable as a result of our comprehensive portfolio and operational actions which we expect to generate increased value for our customers and shareholders.”


Second Quarter Fiscal Year 2020 Overview

After accounting for divestitures, sales for the second quarter of fiscal 2020 were up 12.8% organically from the comparable prior year period.  Growth was driven by increased volumes on engine and military rotorcraft components, aftermarket accessory services, legacy structures programs and new engineering services.

Second quarter operating income of $61.0 million included a $5.7 million adjustment for Union incentives, ($8.0) million for gain on previous divestitures, ($5.4) million for a legal settlement and $5.8 million of restructuring costs.  Net income for the second quarter of fiscal year 2020 was $42.7 million, or $0.85 per share.  On an adjusted basis, net income was $32.2 million, or $0.64 per diluted share. 

Triumph’s results included the following: 


($ millions except EPS)


   Pre-tax


  After-tax


Diluted EPS


Income from Continuing Operations – GAAP 


$           54.1


$        42.7


$         0.85

Gain on sale of assets and businesses

(8.0)

(6.3)

(0.12)

Curtailment gain & settlement, net

(14.4)

(11.4)

(0.22)

Legal settlement gain, net

(5.4)

(4.3)

(0.08)

Union incentives

5.7

4.5

0.09

Refinancing cost

3.0

2.4

0.05

Transformation related costs:

   Restructuring costs (cash)

5.8

4.6

0.09


Adjusted Income from Continuing Operations –
non-GAAP


$         40.8


$         32.2


$         0.64

The number of shares used in computing diluted earnings per share for the second quarter of 2020 was 50.5 million.

Backlog, excluding the impact of divestitures was flat at $3.7 billion compared to the prior year period and on a sequential basis.  This reflects growth in Integrated Systems offset by sunsetting legacy Aerospace Structures programs. 

For the six-months ended September 30, 2019, cash flow used in operations was ($11.3) million, reflecting continued investment in ramping programs and liquidation of approximately $40.0 million in prior period advances against current period deliveries.    


Outlook

As noted previously, the Boeing 737 MAX program historically has contributed a single-digit percentage of annual revenue. The Company continues to expect the FY20 revenue impact to be less than 2% of sales with similar impacts to operating income and cash. As such, the Company does not anticipate any changes to its guidance and maintains its guidance below.

Based on anticipated aircraft production rates and including the impacts of pending program transfers, the Company continues to expect that net sales for fiscal year 2020 will be approximately $2.8 billion to $2.9 billion.

The Company expects GAAP fiscal year 2020 earnings per diluted share to be $1.34 to $2.35 and adjusted earning per diluted share to be $2.35 to $2.95.      

The Company expects fiscal year 2020 cash provided from operations of $50.0 million to $110.0 million, and positive free cash flow of $0 to $50.0 million.

The Company’s current outlook reflects adjustments detailed in the attached tables but excludes the impact of any potential future divestitures. 


Conference Call

 

Triumph Group will hold a conference call today, November 7th, at 8:00 a.m. (ET) to discuss the second quarter fiscal year 2020 results. The conference call will be available live and archived on the Company’s website at http://www.triumphgroup.com.  A slide presentation will be included with the audio portion of the webcast, which presentation has been posted on the Company’s website at http://ir.triumphgroup.com/QuarterlyResults. An audio replay will be available from November 7th to November 15th by calling (855) 859-2056 (Domestic) or (404) 537-3406 (International), passcode #5489726.


About Triumph Group

 

Triumph Group, Inc., headquartered in Berwyn, Pennsylvania, designs, engineers, manufactures, repairs and overhauls a broad portfolio of aerospace and defense systems, components and structures. The company serves the global aviation industry, including original equipment manufacturers and the full spectrum of military and commercial aircraft operators.

More information about Triumph can be found on the Company’s website at www.triumphgroup.com.


Forward Looking Statements

Statements in this release which are not historical facts are forward-looking statements under the provisions of the Private Securities Litigation Reform Act of 1995, including statements of expectations of or assumptions about financial and operational performance, revenues, earnings per share, cash flow or use, cost savings and operational efficiencies and organizational restructurings.  All forward-looking statements involve risks and uncertainties which could affect the Company’s actual results and could cause its actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company.  Further information regarding the important factors that could cause actual results to differ from projected results can be found in Triumph Group’s reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2019.

FINANCIAL DATA (UNAUDITED) ON FOLLOWING PAGES

 


FINANCIAL DATA  (UNAUDITED)


TRIUMPH GROUP, INC. AND SUBSIDIARIES


(in thousands, except per share data)


Three Months Ended


Six Months Ended


September 30,


September 30,


CONDENSED STATEMENTS OF INCOME


2019


2018


2019


2018

Net sales

$     772,110

$    855,108

$    1,502,341

$    1,688,008

Cost of sales (excluding depreciation shown below)

622,236

724,474

1,204,469

1,494,688

Selling, general & administrative expenses

66,201

69,551

128,538

151,208

Depreciation & amortization expense

30,219

38,134

74,269

76,945

Restructuring expenses

5,782

11,832

8,746

15,879

Legal settlement, net

(5,400)

(5,400)

(Gain) loss on sale of assets and businesses

(7,965)

13,118

(4,829)

17,837

       Operating income (loss)

61,037

(2,001)

96,548

(68,549)

Interest expense and other

35,400

28,714

62,891

54,206

Non-service defined benefit income

(28,416)

(16,524)

(43,291)

(33,061)

Income tax expense

11,352

485

16,159

1,516

Net income (loss)

$      42,701

$     (14,676)

$        60,789

$        (91,210)

Earnings per share – basic:

Net income (loss)

$          0.85

$        (0.30)

$            1.22

$           (1.84)

Weighted average common shares outstanding – basic

49,987

49,628

49,927

49,590

Earnings per share – diluted:

Net income (loss)

$          0.85

$        (0.30)

$            1.21

$           (1.84)

Weighted average common shares outstanding – diluted

50,460

49,628

50,385

49,590

Dividends declared and paid per common share

$          0.04

$         0.04

$            0.08

$            0.08


-More-

 

 


(Continued)


FINANCIAL DATA (UNAUDITED)


TRIUMPH GROUP, INC. AND SUBSIDIARIES


(dollars in thousands, except per share data)


BALANCE SHEET


Unaudited 


Audited 


September 30,


March 31,


2019


2019


Assets

Cash and cash equivalents

$        24,852

$         92,807

Accounts receivable, net

342,306

373,590

Contract assets

300,670

326,667

Inventory, net 

454,402

413,560

Prepaid and other current assets

20,854

34,446

Current assets

1,143,084

1,241,070

Property and equipment, net

502,990

543,710

Goodwill

578,916

583,225

Intangible assets, net

405,982

430,954

Other, net

130,831

55,615

Total assets

$    2,761,803

$    2,854,574


Liabilities & Stockholders’ Deficit

Current portion of long-term debt

$          7,759

$          8,201

Accounts payable

418,706

433,783

Contract liabilities

276,967

293,719

Accrued expenses

221,966

239,572

Current liabilities

925,398

975,275

Long-term debt, less current portion

1,460,774

1,480,620

Accrued pension and post-retirement benefits, noncurrent

554,400

540,479

Deferred income taxes, noncurrent

21,116

6,964

Other noncurrent liabilities

390,939

424,549

Stockholders’ Deficit:

Common stock, $.001 par value, 100,000,000 shares

  authorized, 52,460,920 and 52,460,920 shares issued

52

52

Capital in excess of par value

858,030

867,545

Treasury stock, at cost, 2,386,397 and 2,573,652 shares

(145,496)

(159,154)

Accumulated other comprehensive loss

(565,901)

(487,684)

Accumulated deficit

(737,509)

(794,072)

   Total stockholders’ deficit

(590,824)

(573,313)

Total liabilities and stockholders’ deficit

$    2,761,803

$    2,854,574


-More-

 

 


(Continued)


FINANCIAL DATA (UNAUDITED)


TRIUMPH GROUP, INC. AND SUBSIDIARIES


(dollars in thousands)


CASH FLOWS


Six Months Ended


September 30,


2019


2018


Operating Activities

Net income (loss)

$        60,789

$        (91,210)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation & amortization

74,269

76,945

Amortization of acquired contract liabilities

(39,556)

(34,038)

Loss on divestitures & assets held for sale

(4,829)

17,837

Curtailment and settlement gain, net

(14,373)

Other amortization included in interest expense

6,955

4,852

Provision for doubtful accounts receivable

1,140

212

Provision for deferred income taxes

15,159

Employee stock compensation

5,290

5,728

Changes in assets & liabilities, excluding the effects of acquisitions/divestitures

Trade and other receivables

29,436

(4,722)

Contract assets

33,930

6,129

Inventories

(41,807)

(49,981)

Prepaid expenses and other current assets

16,209

5,918

Accounts payable, accrued expenses and contract liabilities

(121,112)

(101,460)

Accrued pension and other postretirement benefits

(32,114)

(37,021)

Other

21

3,632

Net cash used in operating activities

(10,593)

(197,179)


Investing Activities

Capital expenditures

(16,995)

(24,254)

(Payments on) Proceeds from sale of assets

(574)

41,037

Net cash (used in) provided by investing activities