2Q 2020 Earnings Presentation July 31, 2020
Forward Looking Statements This presentation contains certain statements that may be deemed “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, that address activities, events or developments that our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements may be identified by words like "expect," "anticipate," "estimate," “outlook”, "project," "strategy," "intend," "plan," "target," "goal," "may," "will," "should" and "believe" or other variations or similar terminology. Although we believe forward- looking statements are based upon reasonable assumptions, such statements involve known and unknown risks, uncertainties and other factors, many of which are beyond our control and difficult to predict, which may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: general economic and financial conditions in the U.S. and globally, including the impact of the coronavirus (COVID-19) pandemic and any resurgences; the scope and duration of the pandemic and pace of recovery; the timing of the development and distribution of an effective vaccine or treatment for COVID-19; governmental, business and individuals’ actions in response to the pandemic, including our business continuity and cash optimization plans that have and may be implemented; the impact of social and economic restrictions and other containment measures taken to combat virus transmission; the effect on our customers’ demand for our products and our suppliers’ ability to manufacture and deliver our raw materials, including implications of reduced refinery utilization in the U.S.; our ability to sell and provide our goods and services, including as a result of travel and other COVID-19-related restrictions; the ability of our customers to pay for our products; and any closures of our and our customers’ offices and facilities; risk associated with employees working remotely or operating with a reduced workforce; risks associated with our indebtedness including compliance with financial and restrictive covenants, and our ability to access capital on reasonable terms, at a reasonable cost or at all due to economic conditions resulting from COVID-19 or otherwise; the impact of scheduled turnarounds and significant unplanned downtime and interruptions of production or logistics operations as a result of mechanical issues or other unanticipated events such as fires, severe weather conditions, natural disasters and pandemics including the coronavirus; price fluctuations, cost increases and supply of raw materials; our operations and growth projects requiring substantial capital; growth rates and cyclicality of the industries we serve including global changes in supply and demand; failure to develop and commercialize new products or technologies; loss of significant customer relationships; adverse trade and tax policies; extensive environmental, health and safety laws that apply to our operations; hazards associated with chemical manufacturing, storage and transportation; litigation associated with chemical manufacturing and our business operations generally; inability to acquire and integrate businesses, assets, products or technologies; protection of our intellectual property and proprietary information; prolonged work stoppages as a result of labor difficulties or otherwise; cybersecurity and data privacy incidents; failure to maintain effective internal controls; disruptions in transportation and logistics; our inability to achieve some or all of the anticipated benefits of our spin-off including uncertainty regarding qualification for expected tax treatment; fluctuations in our stock price; and changes in laws or regulations applicable to our business. You are cautioned not to place undue reliance on these forward- looking statements, which speak only as of the date of this presentation. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements. We identify the principal risks and uncertainties that affect our performance in our filings with the Securities and Exchange Commission (SEC), including the risk factors in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, as updated in subsequent reports filed with the SEC. Non-GAAP Financial Measures This presentation includes certain non-GAAP financial measures intended to supplement, not to act as substitutes for, comparable GAAP measures. Reconciliations of non- GAAP financial measures to GAAP financial measures are provided in this presentation, except with respect to forward-looking non-GAAP measures, where such reconciliation is not available without unreasonable effort. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided. Non-GAAP measures in this presentation may be calculated in a way that is not comparable to similarly-titled measures reported by other companies. 2 2Q 2020 Earnings Presentation – July 31, 2020
Overview Focus on Safe, Stable and Sustainable Operations • 2Q20 Results Reflect Strength of Vertical Integration and Low-Cost Position • Mitigating COVID-19 Impacts – Health and Safety of Our Employees is Top Priority – Maintaining Operations and Adjusting Output to Changes in Mix and Demand – Disciplined Cost Management and Reduced Capital Expenditures – Focusing on Flawless Execution of 3Q20 Planned Plant Turnaround • Near-Term Industry Expectations: – Challenging Nylon Demand Environment Expected to Continue; Optimizing Mix Across End Uses, Applications and Geographies – Typical Ammonium Sulfate Seasonality Expected to Drive 3Q20 Sequential Domestic Pricing Decline and Higher Export Mix – Expect Favorable Acetone Industry Supply and Demand Balance to Continue • Remain Confident in Financial Position – As of 2Q20, ~$73M of Cash on Hand With ~$36M of Additional Capacity Available Under Revolving Credit Facility – Expect Positive Free Cash Flow in 2020 See Appendix in this presentation for a discussion of Free Cash Flow, which is a non-GAAP measure 3 2Q 2020 Earnings Presentation – July 31, 2020
2Q 2020 Financial Summary Results Reflect Vertical Integration and Global Low-Cost Position Comments 2Q 2019 2Q 2020 ($ Millions, Except Per Share Amounts) • Sales Down (33%): Volume (19%), Price (14%) Sales $345.2 $233.0 – Market Pricing (3%), Raw Material Pass Through (11%) • Unfavorable Impact of Lower Volume and Market Pricing EBITDA $35.9 $30.7 • Favorable Impact of Lower Raws (Natural Gas and Sulfur), Productivity from Nat Gas Boilers and Cost Management 10.4% 13.2% Margin % • 2Q19 Includes ($12.6M) Pottsville Restructuring Charge • 2Q20 Effective Tax Rate 16.6% vs. 25.6% in 2Q19 Driven by the $15.3 $11.4 Impact of Changes in Geographical Sales Mix on State Tax Net Income and Additional Research Tax Credits Diluted EPS $0.53 $0.41 • 2Q20 Share Count 28.1 Million vs. 29.1 Million in 2Q19 • Cash Flow From Operations $9M, Down ($16M) vs. Prior Year Free Cash Flow ($6.4) ($8.7) • Capex $18M, Down ($14M) vs. Prior Year See Appendix in this presentation for a reconciliation of EBITDA, EBITDA Margin, and Free Cash Flow, which are non-GAAP measures; Free cash flow = net cash provided by operating activities less capital expenditures 4 2Q 2020 Earnings Presentation – July 31, 2020
2Q 2020 EBITDA Bridge Productivity Actions and Lower Raws Partially Mitigating Market Pricing and Volume Headwinds ($M) $4 • Raws ~$8M (lower natural gas and sulfur) Targeting $15-$20M reduction YoY for full year • Market Pricing $13 2020 in addition to the (~$12M) $19 benefits of natural gas boilers $36 ‒ CPL/Nylon ‒ Ammonium $31 Sulfate $11 $2 ‒ Acetone • Lower sales volume ‒ Other $4 Intermediates • Prior year impacts of • Benefits of nat gas insurance boilers proceeds and • SG&A, other indirect phenol force spend majeure offset • Plant productivity 2Q19 Price - Raws Spread Volume/Other Planned Plant PES Supplier Productivity/Cost 2Q19 Pottsville 2Q20 Turnaround Shutdown Savings Restructuring Charge See Appendix in this presentation for a reconciliation of EBITDA, which is a non-GAAP measure 5 2Q 2020 Earnings Presentation – July 31, 2020
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