4Q 2017 Earnings Presentation February 23, 2018
Forward Looking Statements 2 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, 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; growth rates and cyclicality of the industries we serve; 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, and natural disasters; price fluctuations and supply of raw materials; our operations requiring substantial capital; 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, store 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; cybersecurity incidents; failure to maintain effective internal controls; our inability to achieve some or all of the anticipated benefits of the spin-off from Honeywell including uncertainty regarding qualification for expected tax treatment and indebtedness incurred in connection with the spin-off; fluctuations in our stock price; and tax reform or other changes in laws or regulations applicable to our business. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements. We identify the principal risks and uncertainties that affect our performance in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2016. 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 the appendix of the presentation. 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. 4Q 2017 Earnings Presentation – February 23, 2018
Overview 3 • Strong 2017 Results: Sales $1.5B, Net Income $147M, Cash Flow from Operations $135M • Robust Operations While Achieving Record Safety Performance; 4Q17 Planned Plant Turnaround Completed On Time and On Budget • 1Q18 Weather-Related Production Issue Resolved As Expected – ~$30M Unfavorable Impact to Pre-Tax Income • 2017 Saw Improved Conditions Across Nylon and Intermediates While Agriculture Fundamentals Were Challenging – Expect Similar Industry Conditions in 2018 • Tax Reform Significantly Benefits Income and Cash Flow 4Q 2017 Earnings Presentation – February 23, 2018
4Q 2017 Financial Summary 4 Strong Operational Performance and Improved Market Conditions Comments 4Q 2016 4Q 2017 ($ Millions, Except Per Share Amounts) • Sales Up 43%: Volume +25%, Price +18% – Sales $259.3 $370.4 Market Pricing +2%, Raw Material Pass Through +16% • Strong Operational Performance, Improved Market Conditions • 4Q16 Includes (~$44M) Impact of Unplanned Outages EBITDA ($29.6) $38.8 • 4Q17 Planned Turnaround Completed As Expected (~$20M) (11.4%) 10.5% Margin % • 4Q17 Favorable ~$4M LIFO Reserve Adjustment Net Income • ($24.7) $72.4 2017 Includes ~$53M One-Time Net Tax Benefit EPS (Diluted) • ($0.81) $2.31 EPS Up $1.41 vs. Prior Year ex- One-Time Net Tax Benefit • Cash Flow From Operations $36M, Down ($11M) vs. Prior Year Free Cash Flow • $20.1 $16.9 Working Capital Increase Due To 4Q16 Unplanned Outages • Capex $19M, Down ($8M) vs. Prior Year See Appendix in this presentation for a reconciliation of EBITDA, EBITDA Margin, Net Income and EPS ex- One-Time Net Tax Benefit, and Free Cash Flow, which are non-GAAP measures; Free cash flow = net cash provided by operating activities less capital expenditures 4Q 2017 Earnings Presentation – February 23, 2018
4Q17 One-Time Net Tax Benefit 5 Re-Measurement of Net Deferred Tax Liability Reduces Future Cash Tax Obligation Reported Net Tax Benefit Ex-Tax Benefit ($ Millions, Except Per Share Amounts) $23 - $23 Income Before Taxes Income Tax Expense ($49) ($53) $4 (Benefit) $72 ($53) $19 Net Income $2.31 ($1.71) $0.60 EPS (Diluted) See Appendix in this presentation for a reconciliation of Net Income and EPS ex- One-Time Net Tax Benefit, which are non-GAAP measures 4Q 2017 Earnings Presentation – February 23, 2018
Full Year 2017 Financial Summary 6 Strong Volume, Earnings and Cash Flow Performance Comments FY 2016 FY 2017 ($ Millions, Except Per Share Amounts) • Sales Up 24%: Volume +9%, Price +15% – Sales Market Pricing +3%, Raw Material Pass Through +12% $1,191.5 $1,475.2 • Strong Operational Performance, Improved Market Conditions EBITDA • $96.0 $200.8 2016 Includes (~$44M) Unfavorable Impact of Unplanned Outages, Partially Offset by ~$15.5M One-Time Benefit 8.1% 13.6% Margin % • 2017 Includes ~$53M One-Time Net Tax Benefit Net Income $34.1 $146.7 • Pre-Tax Interest Expense Up $6M vs. Prior Year • EPS Up $1.88 or 168% vs. Prior Year ex- One-Time Net Tax EPS (Diluted) $1.12 $4.72 Benefit • Cash Flow From Operations $135M, Up $21M vs. Prior Year Free Cash Flow $29.7 $48.2 • Capex $86M, Up $2M vs. Prior Year See Appendix in this presentation for a reconciliation of EBITDA, EBITDA Margin, Net Income and EPS ex- One-Time Net Tax Benefit, and Free Cash Flow, which are non-GAAP measures; Free cash flow = net cash provided by operating activities less capital expenditures 4Q 2017 Earnings Presentation – February 23, 2018
Nylon Industry Outlook 7 Industry Conditions Improved But Remain Dynamic Key Industry Spreads (1) Nylon 4Q17 YoY 4Q17 vs. 3Q17 • Stricter environmental controls Global Composite BNZ-CPL 44% 10% in China drive lower utilization, What We’re 40% 28% Asia BNZ-CPL higher costs and plant downtime Asia CPL-Resin 1% (17%) Seeing • Industry spreads fluctuating near 1500 marginal producer cost 1200 Spread ($/MT) • North America supply/demand 900 remains in balance following 600 industry outages What We’re • Continued dynamic China 300 Expecting supply environment 0 • Steady nylon end market Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 demand growth Global Composite BNZ-CPL Spread (1) Sources: Tecnon OrbiChem and PCI Wood Mackenzie Asia = Caprolactam Asia Import Contract (Taiwan & S. Korea) Asia BNZ-CPL Spread Global Composite = Weighted Avg Spreads From U.S., Europe, China, Other Asia Asia CPL-Resin Spread 4Q 2017 Earnings Presentation – February 23, 2018
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