Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Dec. 31, 2016 | Jan. 27, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Versum Materials, Inc. | |
Entity Central Index Key | 1,660,690 | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2016 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 108,736,979 |
CONSOLIDATED INCOME STATEMENTS
CONSOLIDATED INCOME STATEMENTS (Unaudited) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Statement [Abstract] | ||
Sales | $ 270.8 | $ 245.5 |
Cost of sales | 150.9 | 132.4 |
Selling and administrative | 30.2 | 23.6 |
Research and development | 10.3 | 10.9 |
Business separation, restructuring and cost reduction actions | 3.2 | (0.9) |
Other (income) expense, net | (2.9) | (1.1) |
Operating Income | 79.1 | 80.6 |
Equity affiliates’ income | 0 | 0.2 |
Interest expense | 11.5 | 0 |
Income Before Income Taxes | 67.6 | 80.8 |
Income tax provision | 15.3 | 13.4 |
Net Income | 52.3 | 67.4 |
Less: Net Income Attributable to Non-controlling Interests | 1.5 | 2.2 |
Net Income Attributable to Versum | $ 50.8 | $ 65.2 |
Net income attributable to Versum per common share: | ||
Basic (usd per share) | $ 0.47 | $ 0.60 |
Diluted (usd per share) | $ 0.47 | $ 0.60 |
Shares used in computing per common share amounts: | ||
Basic (shares) | 108.7 | 108.7 |
Diluted (shares) | 109.2 | 108.7 |
CONSOLIDATED COMPREHENSIVE INCO
CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Statement of Comprehensive Income [Abstract] | ||
Net Income | $ 52.3 | $ 67.4 |
Other Comprehensive Income (Loss), net of tax | ||
Translation adjustments, net | (30.1) | 4 |
Pension activity, net of tax of $1.5 and $0 | (5.5) | 0 |
Total Other Comprehensive Income (Loss) | (35.6) | 4 |
Comprehensive Income | 16.7 | 71.4 |
Net Income Attributable to Non-controlling Interests | 1.5 | 2.2 |
Other Comprehensive Income (Loss) Attributable to Non-controlling Interests | (1) | 0.2 |
Comprehensive Income Attributable to Versum | $ 16.2 | $ 69 |
CONSOLIDATED COMPREHENSIVE INC4
CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS (Unaudited) (Parentheticals) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Statement of Comprehensive Income [Abstract] | ||
Pension activity, tax | $ 1.5 | $ 0 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Millions | Dec. 31, 2016 | Sep. 30, 2016 |
Current Assets | ||
Cash and cash items | $ 178.7 | $ 105.6 |
Restricted cash | 0 | 69.6 |
Trade receivables, net | 133 | 130 |
Inventories | 124.7 | 127.4 |
Contracts in progress, less progress billings | 16.8 | 19.2 |
Prepaid expenses | 9.4 | 3.8 |
Other current assets | 31.1 | 12.4 |
Total Current Assets | 493.7 | 468 |
Plant and equipment: | ||
Plant and equipment, at cost | 889.8 | 884.7 |
Less: accumulated depreciation | 595.1 | 588.2 |
Plant and equipment, net | 294.7 | 296.5 |
Goodwill | 172.6 | 180.1 |
Intangible assets, net | 72.6 | 74.8 |
Other noncurrent assets | 53.9 | 24.4 |
Total Noncurrent Assets | 593.8 | 575.8 |
Total Assets | 1,087.5 | 1,043.8 |
Current Liabilities | ||
Payables and accrued liabilities | 120.5 | 85.8 |
Accrued income taxes | 32.4 | 12.7 |
Current portion of long-term debt | 5.8 | 5.8 |
Total Current Liabilities | 158.7 | 104.3 |
Long-term debt | 979.4 | 980.3 |
Deferred tax liabilities | 31.2 | 42.8 |
Other noncurrent liabilities | 52.4 | 19.8 |
Total Noncurrent Liabilities | 1,063 | 1,042.9 |
Total Liabilities | 1,221.7 | 1,147.2 |
Commitments and Contingencies - See Note 16 | ||
Stockholders’ Deficit | ||
Air Products’ net investment | 0 | (127.3) |
Common stock (par value $1 per share; 250,000,000 shares authorized; outstanding 108,736,979) | 108.7 | 0 |
Capital in excess of par | 8.6 | 0 |
Accumulated deficit | (241.3) | 0 |
Accumulated other comprehensive loss | (44.6) | (10) |
Total Versum’s Stockholders’ Deficit | (168.6) | (137.3) |
Non-controlling Interests | 34.4 | 33.9 |
Total Stockholders’ Deficit | (134.2) | (103.4) |
Total Liabilities and Stockholders’ Deficit | $ 1,087.5 | $ 1,043.8 |
CONSOLIDATED BALANCE SHEETS (U6
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parentheticals) | Dec. 31, 2016$ / sharesshares |
Statement of Financial Position [Abstract] | |
Common stock, par value (usd per share) | $ / shares | $ 1 |
Common stock, shares authorized (shares) | 250,000,000 |
Common stock, shares outstanding (shares) | 108,736,979 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Operating Activities | ||
Net income | $ 52.3 | $ 67.4 |
Less: Net Income Attributable to Non-controlling Interests | 1.5 | 2.2 |
Net Income Attributable to Versum | 50.8 | 65.2 |
Adjustments to reconcile income to cash provided by operating activities: | ||
Depreciation and amortization | 10.9 | 11.5 |
Deferred income taxes | 1.7 | 0.8 |
Undistributed earnings of unconsolidated affiliates | 0 | (0.2) |
Gain on sale of assets | (0.2) | (0.7) |
Share-based compensation | 1.6 | 1.2 |
Gain on sale of long-lived assets associated with restructuring | 0 | (1.4) |
Other adjustments | (1.1) | 5.5 |
Working capital changes that provided (used) cash: | ||
Trade receivables | (8.6) | 6.4 |
Inventories | (1.3) | 1.4 |
Contracts in progress, less progress billings | 2.4 | 0.3 |
Payables and accrued liabilities | 19.2 | (7.7) |
Accrued income taxes | 10.2 | 2 |
Other working capital | 4.2 | 2.8 |
Cash Provided by Operating Activities | 89.8 | 87.1 |
Investing Activities | ||
Additions to plant and equipment | (9.6) | (7.5) |
Proceeds from sale of assets and investments | 0.8 | 17.7 |
Cash (Used) Provided by Investing Activities | (8.8) | 10.2 |
Financing Activities | ||
Payments on long-term debt | (1.4) | 0 |
Debt issuance costs | (1.7) | 0 |
Net transfers to Air Products | 0 | (71.8) |
Dividends paid to non-controlling interests | 0 | (2.2) |
Other financing activity | 0.1 | 0 |
Cash Used for Financing Activities | (3) | (74) |
Effect of Exchange Rate Changes on Cash | (4.9) | 0 |
Increase in Cash and Cash Items | 73.1 | 23.3 |
Cash and Cash items-Beginning of Year | 105.6 | 17.8 |
Cash and Cash items-End of Period | $ 178.7 | $ 41.1 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Millions | Total | Common Stock | Capital in Excess of Par | Accumulated Deficit | Air Products’ Net Investment | Accumulated Other Comprehensive Income (Loss) | Total Versum’s Stockholders’ Equity (Deficit) | Non-controlling Interests |
Stockholders' equity, beginning balance at Sep. 30, 2015 | $ 740.7 | $ 741.5 | $ (32.8) | $ 708.7 | $ 32 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 67.4 | 65.2 | 65.2 | 2.2 | ||||
Net transfers to Air Products | (71.8) | (71.8) | (71.8) | |||||
Other comprehensive income (loss) | 4 | 3.8 | 3.8 | 0.2 | ||||
Share-based compensation | 1.2 | 1.2 | 1.2 | |||||
Dividends to non-controlling interests | (2.2) | (2.2) | ||||||
Stockholders' equity, ending balance at Dec. 31, 2015 | 739.3 | 736.1 | (29) | 707.1 | 32.2 | |||
Stockholders' equity, beginning balance at Sep. 30, 2016 | (103.4) | (127.3) | (10) | (137.3) | 33.9 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 52.3 | $ 50.8 | 50.8 | 1.5 | ||||
Net transfers to Air Products | (158.5) | (292.1) | 135.4 | (1.8) | (158.5) | |||
Reclassification of Air Products' net investment to additional paid in capital | $ 8.1 | (8.1) | ||||||
Issuance of common stock at separation | 108.7 | $ 108.7 | 108.7 | |||||
Other comprehensive income (loss) | (33.8) | (32.8) | (32.8) | (1) | ||||
Share-based compensation | 0.5 | 0.5 | 0.5 | |||||
Stockholders' equity, ending balance at Dec. 31, 2016 | $ (134.2) | $ 108.7 | $ 8.6 | $ (241.3) | $ 0 | $ (44.6) | $ (168.6) | $ 34.4 |
Basis of Presentation and Major
Basis of Presentation and Major Accounting Policies | 3 Months Ended |
Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Major Accounting Policies | BASIS OF PRESENTATION AND MAJOR ACCOUNTING POLICIES On September 16, 2015, the Air Products and Chemicals, Inc. (“Air Products”) Board of Directors announced its intention to separate (the “Separation”) Air Products’ Materials Technologies business, into a newly formed company, Versum Materials, LLC. In September 2016, Versum Materials, LLC was converted from a limited liability company to a Delaware corporation, Versum Materials, Inc. On October 1, 2016, Air Products completed the Separation by distributing to its stockholders one share of common stock of Versum for every two shares of Air Products common stock in a distribution intended to be tax-free to Air Products stockholders (the “Distribution”). As a result of the Distribution, Versum is now an independent public company and its common stock is listed under the symbol “VSM” on the New York Stock Exchange. We are a global business that provides innovative solutions for specific customer applications within niche markets based upon expertise in specialty materials. Our business employs applications technology to provide solutions to the semiconductor industry through chemical synthesis, analytical technology, process engineering, and surface science. We are comprised of two primary operating segments, Materials and Delivery Systems and Services, under which we manage our operations and assess performance, and a Corporate segment. Basis of Presentation Prior to the Separation the financial statements and information was prepared on a standalone basis and were derived from Air Products’ consolidated financial statements and accounting records where Versum was a division of Air Products. These financial statements reflect the historical basis and carrying values established when the Company was part of Air Products. Subsequent to the Separation, the accompanying Consolidated Financial Statements are presented on a consolidated basis and include all of the accounts and operations of Versum and its majority-owned subsidiaries. The financial statements reflect the financial position, results of operations and cash flows of Versum in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information. The financial statements presented herein are unaudited and should be read in conjunction with the Annual Combined Financial Statements presented in the Company's Annual Report on Form 10-K for our fiscal year ended September 30, 2016 . Such financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented; all adjustments of a normal, recurring nature have been included to provide a fair statement of the results for the reporting periods presented. All significant intercompany accounts and transactions have been eliminated. The results of operations for the three months ended December 31, 2016 are not necessarily indicative of the results of operations for the full year. Prior to the Separation, Air Products provided us with centrally managed services and corporate functions. Accordingly, certain shared costs including but not limited to administrative expenses for information technology, general services, human resources, legal, accounting and other services, had been allocated to us and were reflected as expenses in the financial statements. Expenses had been allocated on the basis of direct usage when identifiable, with the remainder allocated on the basis of fixed costs, revenue, operating income or headcount. We consider the expense allocation methodology and results to be reasonable and consistently applied for all periods presented prior to the Separation. Subsequent to the Separation, Versum has performed most of these functions using its own resources or purchased services. However, the remainder of these functions will continue to be provided by Air Products under various agreements. See Note 3 , Related Party Transactions and Transactions with Air Products , for further description of the agreements between Versum and Air Products. For periods prior to October 1, 2016, the annual combined balance sheets of Versum included Air Products’ assets and liabilities that were specifically identifiable or were otherwise transferred to us, including subsidiaries and affiliates in which Air Products had a controlling financial interest. Also included within our financial statements were the results of certain product lines which had historically been managed by us but were retained by Air Products after the Separation. Air Products performed cash management and other treasury-related functions on a centralized basis for nearly all of its legal entities. Substantially all cash generated by our business was remitted to Air Products prior to the Separation and therefore accounted for through Air Products’ net investment in the financial statements. Accordingly, Air Products had not allocated any centrally managed cash and cash items to us in the financial statements prior to the Separation. Air Products’ debt and related interest expense had not been allocated to us for any of the periods prior to the Separation since we are not the legal obligor of the debt, and Air Products’ borrowings were not directly attributable to us. There were no other financing arrangements between us and Air Products during the periods presented. For periods prior to the Separation, Versum’s income tax expense was calculated using the separate return method as if Versum was a separate taxpayer. The majority of the accrued U.S. federal, state, and foreign income tax balances were treated as settled with Air Products as of the end of each year. After the Separation, income tax expense and income tax balances represent Versum’s federal, state and foreign income taxes as an independent company. Accounting Policies The policies used in preparing the Consolidated Financial Statements are the same as those used in our Annual Report on Form 10-K for our fiscal year ended September 30, 2016 . There have been no significant changes to these accounting policies during the three months ended December 31, 2016 . Estimates and Assumptions The Consolidated Financial Statements have been prepared in conformity with GAAP, using management’s best estimates and judgments where appropriate. These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ materially from these estimates and judgments. |
New Accounting Guidance
New Accounting Guidance | 3 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
New Accounting Guidance | NEW ACCOUNTING GUIDANCE Accounting Guidance Implemented Share-Based Compensation In March 2016, the Financial Accounting Standards Board (“FASB”) issued an update to simplify the accounting for employee share-based payments, including the income tax impacts, the classification on the statement of cash flows, and forfeitures. The amendments are effective for fiscal year 2018, with early adoption permitted. As of the first quarter of fiscal year 2017, we have adopted this guidance. New Accounting Guidance to be Implemented Goodwill Impairment In January 2017, the FASB issued guidance simplifying the test for goodwill impairment, which removes Step 2 from the goodwill impairment test. The guidance is effective for annual periods beginning after December 15, 2021, including interim periods within those periods, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting this guidance. Business Combinations In January 2017, the FASB issued guidance on the definition of a business in business combinations. The guidance clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company is currently evaluating the impact of adopting this guidance. Revenue Recognition In May 2014, the FASB issued guidance based on the principle that revenue is recognized in an amount expected to be collected and to which the entity expects to be entitled in exchange for the transfer of goods or services. In August 2015, the FASB deferred the effective date by one year, while providing the option to early adopt the standard on the original effective date. Accordingly, we will have the option to adopt the standard in either fiscal year 2018 or 2019. In December 2016 there were further updates to the original guidance that did not revise the effective date. The guidance can be adopted either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We are currently evaluating the adoption alternatives and impact that this standard and respective updates will have on our Consolidated Financial Statements. Going Concern In August 2014, the FASB issued guidance regarding management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern within one year of the issuance of the financial statements. If substantial doubt exists, additional disclosures would be required. This guidance will be effective beginning in the fourth quarter of fiscal year 2017, with early adoption permitted. This guidance is not expected to have a significant impact on our Consolidated Financial Statements. Measurement of Inventory In July 2015, the FASB issued guidance to simplify the measurement of inventory recorded using either the FIFO or average cost basis by changing the subsequent measurement guidance from lower of cost or market to the lower of cost or net realizable value. Inventory measured using LIFO is not impacted. The guidance is effective for us beginning in fiscal year 2018 and will be applied prospectively, with early adoption permitted. This guidance is not expected to have a significant impact on our Consolidated Financial Statements. Leases In February 2016, the FASB issued guidance which requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, including operating leases, with a term in excess of 12 months. The guidance also expands the quantitative and qualitative disclosure requirements. The guidance is effective in fiscal year 2020, with early adoption permitted, and must be applied using a modified retrospective approach. We are currently evaluating the impact of adopting this new guidance on our Consolidated Financial Statements. The Company is currently the lessee under various agreements for distribution equipment and vehicles that are currently accounted for as operating leases. The new guidance requires the lessee to record operating leases on the balance sheet with a right-of-use asset and corresponding liability for future payment obligations. Cash Flow Statement Classification In August 2016, the FASB issued guidance to reduce diversity in practice on how certain cash receipts and cash payments are classified in the statement of cash flows. The guidance is effective beginning fiscal year 2019, with early adoption permitted, and should be applied retrospectively. We are currently evaluating the impact of adopting this new guidance on our Consolidated Financial Statements. |
Related Party Transactions and
Related Party Transactions and Transactions with Air Products | 3 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions and Transactions with Air Products | RELATED PARTY TRANSACTIONS AND TRANSACTIONS WITH AIR PRODUCTS Allocation of Expenses Prior to the Separation, Air Products provided us with centrally managed services and corporate functions. Accordingly, certain shared costs including but not limited to administrative expenses for information technology, general services, human resources, legal, accounting and other services, had been allocated to us and are primarily reflected as expenses in the Corporate segment in the Consolidated Financial Statements. Expenses had been allocated on the basis of direct usage when identifiable, with the remainder allocated on the basis of fixed costs, revenue, operating income, or headcount. We consider the expense allocation methodology and results to be reasonable and consistently applied for all periods presented. Total costs allocated to us in the consolidated income statements are summarized below: Three Months Ended December 31, 2016 2015 (In millions) Cost of sales $ — $ 0.8 Selling and administrative — 4.0 Research and development — 0.3 Business restructuring and cost reduction actions — 0.1 Total Allocated Costs $ — $ 5.2 These allocated costs are reflected in “Air Products’ net investment” and in the consolidated statements of cash flows as a financing activity in “Net transfers (to) from Air Products.” It is impracticable to quantify the amount of expenses that Versum would have incurred on a stand-alone basis for periods prior to the Separation. Prior to the Separation, certain of our employees participated in share-based compensation and retirement benefit plans that are sponsored and administered by Air Products or its affiliates. The costs of these plans associated with our employees are included in the Consolidated Financial Statements, but excluded from the table of allocated costs above. Our consolidated balance sheet at September 30, 2016 does not include the share-based compensation instrument. Agreements with Air Products In connection with the Separation and Distribution, Versum and its affiliates entered into various agreements with Air Products and its affiliates contemplated by the Separation Agreement, including the following agreements: Transition Services Agreement. Under the Transition Services Agreement, Air Products provides certain transition services to us and we provide certain transition services to Air Products. Each party provides these services for a limited time, generally for no longer than 12 to 24 months following the October 1, 2016 Distribution date, for specified fees, which are at cost for services provided by third parties and at cost plus approximately 5% percent for services provided by either us or Air Products, as applicable. Tax Matters Agreement. The Tax Matters Agreement generally governs Air Products’ and Versum’s respective rights, responsibilities and obligations with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the contribution, the Distribution or certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes for any tax period ending on or before the Distribution date, as well as tax periods beginning after the Distribution date. In addition, the Tax Matters Agreement imposes certain restrictions on us and our subsidiaries (including restrictions on share issuances, business combinations, sales of assets and similar transactions) designed to preserve the tax-free status of the contribution, the Distribution and certain related transactions. The Tax Matters Agreement includes special rules that allocate tax liabilities in the event the contribution, the Distribution, or certain related transactions fail to qualify as tax-free for U.S. federal income tax purposes. In general, Versum is liable for taxes incurred by Air Products that may arise if Versum takes, or fails to take, as the case may be, certain actions that may result in the contribution, the Distribution or certain related transactions failing to qualify as tax-free for U.S. federal income tax purposes. Employee Matters Agreement . The Employee Matters Agreement governs the compensation and employee benefit obligations with respect to our current and former employees and those of Air Products. The Employee Matters Agreement allocates liabilities and responsibilities relating to employee compensation and benefits plans and programs and other related matters in connection with the Distribution including, without limitation, the treatment of outstanding Air Products’ equity awards, other outstanding incentive compensation awards, deferred compensation obligations and retirement and welfare benefit obligations. |
Business Separation, Restructur
Business Separation, Restructuring, and Cost Reduction Actions | 3 Months Ended |
Dec. 31, 2016 | |
Restructuring and Related Activities [Abstract] | |
Business Separation, Restructuring, and Cost Reduction Actions | BUSINESS SEPARATION, RESTRUCTURING AND COST REDUCTION ACTIONS The charges we record for business restructuring and cost reduction actions have been excluded from segment operating income. During the three months ended December 31, 2016 , we recognized a net charge of $3.2 million . The net charge primarily consisted of additional costs as a result of the relocation of certain research and development activities and our headquarters and set up of the stand-alone organization. During the three months ended December 31, 2015 , we recognized a net gain of $0.9 million . The net gain included a charge of $0.5 million for severance and other benefits related to the elimination of approximately 20 positions as part of cost reduction activities. In addition, we recognized a $1.4 million gain on the sale of assets that were previously written down to carrying value of zero . The majority of these actions pertain to the Materials segment. The following table summarizes the carrying amount of the accrual for the business realignment and reorganization at December 31, 2016 and 2015 : Severance and Other Benefits Asset Actions/Other Total (In millions) Balance, September 30, 2016 $ 0.6 $ — $ 0.6 Current Period Charge 0.2 — 0.2 Cash Payments (0.7 ) — (0.7 ) Balance, December 31, 2016 $ 0.1 $ — $ 0.1 |
Sale of Equity Affiliate
Sale of Equity Affiliate | 3 Months Ended |
Dec. 31, 2016 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Sale of Equity Affiliate | SALE OF EQUITY AFFILIATE In December 2015, we sold our investment in our equity affiliate, Daido Air Products Electronics, Inc., for $15.9 million , which resulted in a before-tax gain of $0.7 million during 2016. The carrying value at the time of sale included a $12.8 million investment in net assets of and advances to equity affiliates and a $2.4 million foreign currency translation loss that had been deferred in accumulated other comprehensive loss. In addition, the income tax provision, before the valuation allowance, for 2016 included an expense of $5.3 million as a result of the sale. In 2015, we recorded $1.0 million of equity affiliates’ income related to this investment. |
Inventories
Inventories | 3 Months Ended |
Dec. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Inventories | INVENTORIES The components of inventories are as follows: December 31, 2016 September 30, 2016 (In millions) Inventories at FIFO cost Finished goods $ 81.5 $ 94.0 Work in process 8.1 12.3 Raw materials, supplies and other 43.1 29.4 132.7 135.7 Less: Excess of FIFO cost over LIFO cost (8.0 ) (8.3 ) Inventories $ 124.7 $ 127.4 First-in, first- out (FIFO) cost approximates replacement cost. |
Goodwill
Goodwill | 3 Months Ended |
Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | GOODWILL Changes to the carrying amount of goodwill by segment are as follows: Materials Delivery Systems and Services Total (In millions) Balance at September 30, 2016 $ 162.6 $ 17.5 $ 180.1 Currency translation adjustment (7.0 ) (0.5 ) (7.5 ) Balance at December 31, 2016 $ 155.6 $ 17.0 $ 172.6 Goodwill is subject to impairment testing in the fourth quarter of each fiscal year and whenever events and changes in circumstances indicate that the carrying value of goodwill might not be recoverable. There were no events or circumstances indicating that goodwill might be impaired at December 31, 2016 . |
Debt
Debt | 3 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Debt | DEBT Components of Debt December 31, 2016 September 30, 2016 (In millions) Term loan facility under Credit Agreement $ 573.6 $ 575.0 Revolving facility under Credit Agreement — — 5.500% Senior Notes due 2024 425.0 425.0 Total debt 998.6 1,000.0 Less debt discount 2.8 2.8 Less deferred debt costs 10.6 11.1 Less current portion of long-term debt 5.8 5.8 Debt payable after one year $ 979.4 $ 980.3 Credit Agreement On September 30, 2016, Versum entered into a credit agreement (the “Credit Agreement”) providing for a senior secured first lien term loan B facility of $575 million (the “Term Facility”) and a senior secured first lien revolving credit facility of $200 million (the “Revolving Facility” and, together with the Term Facility, the “Senior Credit Facilities”). The Senior Credit Facilities are guaranteed by Versum’s material direct and indirect wholly-owned domestic restricted subsidiaries and secured by substantially all of the assets of Versum and its subsidiary guarantors. Borrowings under the Term Facility bear interest at a rate of either LIBOR (adjusted for statutory reserve requirements), subject to a minimum floor of 0.75% , plus a margin of 2.50% or an alternate base rate , subject to a minimum floor of 1.75% , plus a margin of 1.50% (effective rate of 3.50% as of December 31, 2016 ). The Term Facility matures on September 30, 2023 , and will amortize in equal quarterly installments in aggregate annual amounts equal to 1.00% of the original principal amount of the Term Facility, with the balance payable on September 30, 2023 . Borrowings under the Revolving Facility bear interest initially at a rate of either LIBOR (adjusted for statutory reserve requirements) plus a margin of 2.00% or an alternate base rate plus a margin of 1.00% , and after delivery of the financial statements for the first full fiscal quarter, subject to a 0.25% margin reduction based on achieving a first lien net leverage ratio of 1.00 :1.00 for the prior four-quarter period. A commitment fee of 0.375% initially, subject to a reduction to 0.25% based on achieving a first lien net leverage ratio of 1.00 :1.00 for the prior four-quarter period after delivery of the financial statements for the first full fiscal quarter, on the unused portion of the Revolving Facility is payable quarterly in arrears. Letter of credit fees are payable on outstanding letters of credit under the Revolving Facility, and fronting fees equal to a percentage to be agreed with each issuing bank (not to exceed 0.125% ) are payable to the issuing banks. The Revolving Facility matures on September 30, 2021 . A maximum first lien net leverage ratio covenant (total debt net of cash on hand to total adjusted EBITDA) of 3.25 :1.00 will apply if we draw upon the Revolving Facility. As of December 31, 2016 , we had availability of $200 million under Revolving Facility. The Credit Agreement provides that, commencing with Versum’s fiscal year ending on September 30, 2017, a percentage of excess cash flow ranging from 0% to 50% , depending on the first lien net leverage ratio, is required to be used to prepay the Term Facility. Senior Notes On September 30, 2016, Versum issued $425 million of 5.5% Senior Notes due 2024 . The Notes are unsecured senior obligations of Versum, guaranteed by each of Versum’s subsidiaries that is a guarantor under the Senior Credit Facilities. The Notes bear interest at a rate of 5.5% per annum payable semiannually on March 15 and September 15 of each year, commencing on March 15, 2017. The Notes will mature on September 30, 2024 . Versum may, at its option, redeem some or all of the Notes during such times and at such prices as described in the Indenture, plus accrued and unpaid interest, if any, to the date of redemption. The agreements governing our indebtedness contain a number of affirmative and negative covenants. We were in compliance with all of our covenants at December 31, 2016 . |
Income Taxes
Income Taxes | 3 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES As discussed in Note 1, the Separation of Versum from Air Products was completed on October 1, 2016. In connection with the Separation and as a result of the change from the separate return method under the carve-out financial statements, Versum adjusted certain current and deferred tax accounts, including a net decrease in deferred tax liabilities of approximately $22.7 million and a net increase in tax payable of approximately $11.0 million . Versum records U.S. income and foreign withholding taxes on the undistributed earnings of our foreign subsidiaries and corporate joint ventures unless those earnings are indefinitely reinvested. In conjunction with the Separation, Versum changed its indefinite reinvestment assertion on certain earnings of foreign subsidiaries. As a result, foreign withholding tax cost of $1.1 million was recognized. |
Financial Instruments
Financial Instruments | 3 Months Ended |
Dec. 31, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Financial Instruments | FINANCIAL INSTRUMENTS We enter into forward exchange contracts to hedge the cash flow exposure on intercompany loans. During the three months ended December 31, 2016 , this portfolio of forward exchange contracts consisted primarily of Korean Won and U.S. dollars as well as Euros and U.S. Dollars. The maximum remaining term of any forward exchange contract currently outstanding and designated as a cash flow hedge at December 31, 2016 is 9 months. At December 31, 2016 , the total notional principal amount of our outstanding hedge contracts was $85.3 million . As of December 31, 2016 there were no derivatives not designated as hedging instruments. The table below summarizes the fair values of our derivatives designated as hedging instruments and balance sheet location of these outstanding derivatives: December 31, 2016 Balance Sheet Location Amount Balance Sheet Location Amount (In millions) Forward exchange contracts Other current assets $ 0.8 Payables and accrued liabilities $ 3.8 Refer to Note 11 , Fair Value , which defines fair value, describes the method for measuring fair value, and provides additional disclosures regarding fair value measurements. The table below summarizes the gain or loss related to our forward contract cash flow hedges and forward contracts not designated as hedging instruments: Three Months Ended December 31, 2016 (In millions) Cash Flow Hedges, net of tax: Net loss recognized in OCI (effective portion) $ (3.4 ) Net loss reclassified from OCI to other (income) expense, net (effective portion) 3.4 Derivatives Not Designated as Hedging Instruments : Net loss recognized in other (income) expense, net (A) $ 0.2 (A) The impact of the non-designated hedges noted above was largely offset by gains and losses resulting from the impact of changes in exchange rates on recognized assets and liabilities denominated in nonfunctional currencies. There were no non-designated hedges outstanding at December 31, 2016 . The amount of cash flow hedges’ unrealized gains and losses at December 31, 2016 that are expected to be reclassified to earnings in the next twelve months is not material. The cash flows related to all derivative contracts are reported in the operating activities section of the consolidated statements of cash flows. |
Fair Value
Fair Value | 3 Months Ended |
Dec. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value | FAIR VALUE Fair value is defined as an exit price, i.e., the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - Inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability. Level 3 - Inputs that are unobservable for the asset or liability based on our own assumptions (about the assumptions market participants would use in pricing the asset or liability). The methods and assumptions used to measure the fair value of financial instruments are as follows: Derivatives The fair value of our forward exchange contracts are quantified using the income approach and are based on estimates using standard pricing models. These models take into account the value of future cash flows as of the balance sheet date, discounted to a present value using discount factors that match both the time to maturity and currency of the underlying instruments. The computation of the fair values of these instruments is generally performed by the Company. These standard pricing models utilize inputs which are derived from or corroborated by observable market data such as interest rate yield curves and currency spot and forward rates. Therefore, the fair value of our derivatives is classified as a level 2 measurement. Refer to Note 10 , Financial Instruments , for a description of derivative instruments, including details on the balance sheet line classifications. Long-term Debt The fair value of our senior notes is based primarily on quoted market prices reported on or near the respective balance sheet date and is therefore level 1. The fair value of our term loan facility debt is based on estimates using standard pricing models that take into account the value of future cash flows as of the balance sheet date, discounted to a present value using market based assumptions including published interest rates. This standard valuation model utilizes observable market data therefore, the fair value of our debt is classified as a level 2 measurement. The carrying values and fair values of our derivatives and debt are as follows: December 31, 2016 Fair Value Carrying Value (In millions) Assets Forward Exchange Contracts $ 0.8 $ 0.8 Liabilities Forward Exchange Contracts $ 3.8 $ 3.8 Long-term Debt Senior Notes $ 436.7 $ 425.0 Term Loan Facility 577.9 573.6 Total Long-term Debt $ 1,014.6 $ 998.6 The carrying amounts reported in the consolidated balance sheet for cash and cash items, trade receivables, payables and accrued liabilities, and accrued income taxes approximate fair value due to the short-term nature of these instruments. Accordingly, these items have been excluded from the above table. |
Retirement Benefits
Retirement Benefits | 3 Months Ended |
Dec. 31, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Retirement Benefits | RETIREMENT BENEFITS For periods prior to October 1, 2016, Air Products offered various long-term benefits to our employees through defined benefit pension plans and defined contribution plans. Prior to the Separation on October 1, 2016, participation of our employees in these plans is reflected in the Consolidated Financial Statements as though we participated in a multi-employer plan with Air Products. Defined Benefit Pensions In 2017, certain international pension plans were legally split from Air Products. Our plans provide certain international employees in Germany, Korea and Taiwan who previously participated in the Air Products plans the same defined benefit pension benefits that had previously been provided by Air Products. In connection with the Separation, Versum assumed defined benefit pension plan assets of approximately $3 million and a benefit obligation of approximately $27 million . The net benefit obligation of $24 million is reflected on our consolidated balance sheet as of December 31, 2016 . Actuarial assumptions used for the Versum plans are the same as those used by Air Products. The components of net periodic pension costs for Versum’s defined benefit pension plans are as follows: Three Months Ended December 31, 2016 (In millions) Service cost $ 0.6 Interest cost 0.1 Actuarial loss amortization 0.1 Net periodic pension cost $ 0.8 Defined Contribution Plan Prior to the Separation, Air Products sponsored several defined contribution plans which covered substantially all U.S. employees and certain non-U.S. employees. Versum received an allocation of the total cost of defined contribution plans from Air Products. Upon Separation, our employees’ balances were transferred to a new Versum defined contribution plan. The following table summarizes our defined contribution expense: Three Months Ended December 31, 2016 2015 (In millions) Defined contribution expense $ 1.9 $ 1.4 |
Share Based Compensation
Share Based Compensation | 3 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | SHARE-BASED COMPENSATION In accordance with the Employee Matters Agreement entered into between Versum and Air Products on September 29, 2016 in connection with the Separation, all share-based compensation awards previously granted to Versum employees under Air Products’ Long-Term Incentive Plan that were outstanding on October 1, 2016, other than restricted stock, were adjusted and converted into Versum equity with substantially the same terms and conditions as the original Air Products awards. To preserve the aggregate intrinsic value of these share-based compensation awards, as measured immediately before and immediately after the Separation, each holder of Air Products share-based compensation awards generally received an adjusted award denominated in Versum equity as follows: (a) Air Products stock options were converted into options to purchase Versum common stock, with the number and exercise price adjusted to maintain economic value; (b) Air Products time-based restricted stock units were converted to Versum time-based restricted stock units, with the number adjusted to maintain economic value; (c) Air Products performance shares in the form of market-based restricted stock units were converted to Versum market-based restricted stock units, with the number adjusted to maintain economic value; and (d) holders of Air Products restricted stock received one-half of a fully vested share of Versum common stock for every share of Air Products restricted stock held at the time of the Separation, as if such holder held fully vested Air Products common stock on the record date. The converted awards will continue to vest over the original vesting period defined at the grant date. Versum was allocated share-based compensation expense associated with its employees based on these adjusted and converted share-based compensation awards. As a result of the conversion, we have the following outstanding share-based compensation awards: (a) stock options; (b) time-based restricted stock units; and (c) market-based restricted stock units. In addition, during the three months ended December 31, 2016 , under the Versum Long-Term Incentive Plan we made a one-time Founders grant of time-based restricted stock units and we made fiscal 2017 annual awards of market-based restricted stock units, consisting of performance-based restricted stock units and performance-based market stock units. Under all programs, the terms of the awards are fixed at the grant date. We issue new shares upon the payout of restricted stock units and the exercise of stock options. As of December 31, 2016 , there were 3.3 million shares available for future grant under the Versum Long-Term Incentive Plan. Share-based compensation awards cost recognized in the consolidated income statement is summarized below: Three Months Ended December 31, 2016 (In millions) Before-Tax Share-Based Compensation Award Cost $ 1.6 Income Tax Benefit 0.5 After-Tax Share-Based Compensation Award Cost $ 1.1 Before-tax share-based compensation award cost is primarily included in selling and administrative expense on our consolidated income statements. Total before-tax share-based compensation award cost by type of program was as follows: Three Months Ended December 31, 2016 (In millions) Restricted stock units $ 1.5 Stock options 0.1 Before-Tax Share-Based Compensation Cost $ 1.6 Restricted Stock Units Converted share-based compensation awards . As a result of the conversion in connection with the Separation described above, Versum executive officers and employees have outstanding time-based restricted stock units and market-based restricted stock units. These converted restricted stock units entitle the recipient to one share of common stock and accumulated dividends upon vesting. The payout of the converted market-based restricted stock units is conditioned on continued employment during a three year deferral period subject to payout upon death, disability, or retirement. The earn out amount of these awards is based on a formula to be determined by the Versum Compensation Committee. The converted time-based restricted stock units vest four years after the grant date subject to payout upon death, disability or retirement. Upon involuntary termination without cause, a pro rata portion of restricted stock units will vest. Dividend equivalents are paid in cash and equal the dividends that would have accrued on a share of stock from the grant date to the vesting date. New share-based compensation awards During the three months ended December 31, 2016 , under the Versum Long-Term Incentive Plan we made a one-time Founders grant of 424,247 time-based restricted stock units at a weighted-average grant-date fair value of $22.53 per unit. One third of the Founders RSUs vest on October 1, 2018, one third vest on October 1, 2019, and one third vest on October 1, 2020, subject to the holder’s continued employment with the Company. In addition, during the three months ended December 31, 2016 , under its Long-Term Incentive Plan Versum granted 304,520 market-based restricted stock units, consisting of performance-based restricted stock units and performance-based market stock units. The performance-based restricted stock units are earned at the end of a performance period beginning October 1, 2016 and ending September 30, 2019, conditioned on the level of Versum’s total shareholder return in relation to a defined peer group over the three -year performance period. The performance-based market stock units are earned based on the percentage change in the price of Versum’s common stock over the performance period beginning October 1, 2016 and ending September 30, 2019. Subject to the recipient’s continued employment, these restricted stock units generally vest on the date that the Versum Committee certifies the payout determination under the performance goals, which date must be within 90 days after the end of the performance period. Vesting is subject to certain exceptions in the event of involuntary termination by Versum, death, disability or retirement. Under GAAP, both the performance-based restricted stock units and performance-based market stock units are considered market-based awards. Upon vesting, each restricted stock unit represents the right to receive one share of our common stock. Dividend equivalent rights accrue for these awards, but do not vest unless the underlying awards vest. The market-based restricted stock units awarded during the three months ended December 31, 2016 had an estimated grant-date fair value of $29.68 per unit for the performance-based restricted stock units and $28.37 for the performance-based market stock units. The fair value of market-based restricted stock units was estimated using a Monte Carlo simulation model as these equity awards are tied to a market condition. The model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the grant and calculates the fair value of the awards. We generally expense the grant-date fair value of these awards on a straight-line basis over the vesting period; however, expense recognition is accelerated for retirement eligible individuals who meet the requirements for vesting upon retirement. The calculation of the fair value of market-based restricted stock units used the following assumptions: Three Months Ended December 31, 2016 (In percentages) Expected volatility 28.7 % Risk-free interest rate 1.4 % A summary of restricted stock unit activity is presented below: Shares Weighted Average Grant-Date Fair Value (In millions, except weighted average) Outstanding, September 30, 2016 — $ — Converted on October 1, 2016 0.5 22.85 Granted 0.7 25.30 Paid out (0.1 ) 15.55 Forfeited/adjustments — — Outstanding at December 31, 2016 1.1 $ 25.18 No cash payments were made for restricted stock units for the three months ended December 31, 2016 . As of December 31, 2016 , there was $21.0 million of unrecognized compensation cost related to restricted stock units. The cost is expected to be recognized over a weighted average period of 3.2 years . The total fair value of restricted stock units paid out during the three months ended December 31, 2016 , including shares vested in prior periods, was $1.5 million . Stock Options We may grant awards of options to purchase common stock to executive officers and selected employees. All of our outstanding stock options are a result of the conversion in connection with the Separation as described above. The exercise price of stock options equals the market price of our stock on the date of the grant. Options generally vest incrementally over three years, and remain exercisable for ten years from the date of grant. During the three months ended December 31, 2016 , no stock options were granted. A summary of stock option activity is presented below: Shares Weighted Average Exercise Price (In millions, except weighted average) Outstanding, September 30, 2016 — $ — Converted on October 1, 2016 0.5 18.37 Granted — — Exercised — — Forfeited — — Outstanding at December 31, 2016 0.5 $ 18.36 Weighted Average Remaining Contractual Terms (In years) Aggregate Intrinsic Value (In millions, except years) Outstanding at December 31, 2016 6.1 $ 5.1 Exercisable at December 31, 2016 6.0 5.1 The aggregate intrinsic value represents the amount by which our closing stock price of $28.07 as of December 31, 2016 exceeds the exercise price multiplied by the number of in-the-money options outstanding or exercisable. Compensation cost is generally recognized over the stated vesting period consistent with the terms of the arrangement (i.e., either on a straight-line or graded-vesting basis). Expense recognition is accelerated for retirement-eligible individuals who would meet the requirements for vesting of awards upon their retirement. As of December 31, 2016 , there was $0.1 million of unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted average period of 0.9 years. No stock options were exercised during the three months ended December 31, 2016 . |
Accumulated Other Comprehensive
Accumulated Other Comprehensives Income (Loss) | 3 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The table below summarizes changes in accumulated other comprehensive loss (AOCL), net of tax: Net loss on derivatives qualifying as hedges Foreign currency translation adjustments Pension and postretirement benefits Total (In millions) Balance at September 30, 2016 $ (0.2 ) $ (9.8 ) $ — $ (10.0 ) Other comprehensive loss before reclassifications (3.4 ) (33.9 ) — (37.3 ) Net transfers from Air Products — 3.8 (5.6 ) (1.8 ) Amounts reclassified from AOCL 3.4 — 0.1 3.5 Net current period other comprehensive loss — (30.1 ) (5.5 ) (35.6 ) Other comprehensive loss attributable to non-controlling interest — (1.0 ) — (1.0 ) Balance at December 31, 2016 $ (0.2 ) $ (38.9 ) $ (5.5 ) $ (44.6 ) The table below summarizes the reclassifications out of accumulated other comprehensive loss and the affected line item on the consolidated income statements: Three Months Ended December 31, 2016 (In millions) Loss on Cash Flow Hedges, net of tax (A) $ 3.4 Pension and Postretirement Benefits, net of tax (B) 0.1 (A) The impact is reflected in Other (income) expense. Refer to Note 10 , Financial Instruments , for further information. (B) The components include actuarial loss amortization and is reflected in net periodic benefit cost. Refer to Note 12 , Retirement Benefits , for further information. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended December 31, 2016 2015 (In millions, except per share data) Numerator Net Income Attributable to Versum $ 50.8 $ 65.2 Denominator Weighted average number of common shares - Basic 108.7 108.7 Effect of dilutive securities Employee stock option and other award plans 0.5 — Weighted average number of common shares - Diluted 109.2 108.7 Earnings Per Common Share Attributable to Versum Net Income Attributable to Versum - Basic $ 0.47 $ 0.60 Net Income Attributable to Versum - Diluted 0.47 0.60 The computation of basic and diluted earnings per common share is calculated assuming the number of shares of Versum common stock outstanding on October 1, 2016 had been outstanding at the beginning of each period presented. For periods prior to the Separation, it is assumed that there are no dilutive equity instruments as there were no equity awards in Versum outstanding prior to the Separation. See Note 1 for further discussion of the Separation. For the three months ended December 31, 2016 , outstanding share-based awards of 0.2 million shares were anti-dilutive and therefore excluded from the computation of diluted earnings per share. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Litigation In the normal course of business, Versum may be involved in various legal proceedings, including commercial, environmental, health, safety, and product liability matters. Although litigation with respect to these matters is routine and incidental to the conduct of our business, such litigation may result in large monetary awards for compensatory and punitive damages. Versum does not currently believe that there are any legal proceedings, individually or in the aggregate, that are reasonably possible to have a material impact on its financial condition, results of operations, or cash flows. While Versum cannot predict the outcome of any litigation, environmental, or regulatory matter or the potential for future litigation or regulatory action, we have evaluated all litigation, environmental and regulatory proceedings, claims and assessments in which Versum is involved, and do not believe that any of these matters, individually or in the aggregate, will result in losses that are materially in excess of amounts already recognized, if any. Refer to Note 17 of "Notes to the Consolidated Financial Statements" in Item 8 of Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, 2016, for additional information regarding commitments and contingencies. |
Segment Information
Segment Information | 3 Months Ended |
Dec. 31, 2016 | |
Segment Reporting [Abstract] | |
Segment Information | SEGMENT INFORMATION We are comprised of two primary operating segments, Materials and Delivery Systems and Services, under which we manage our operations and assess performance, and a Corporate segment. Our segments are differentiated by the types of products sold. Segment Three Months Ended December 31, 2016 2015 (In millions) Sales Materials $ 208.0 $ 188.8 Delivery Systems and Services 61.9 56.7 Corporate 0.9 — Total $ 270.8 $ 245.5 Operating Income (Loss) Materials $ 72.9 $ 68.5 Delivery Systems and Services 12.4 15.9 Corporate (3.0 ) (4.7 ) Segment Total $ 82.3 $ 79.7 Business separation, restructuring and cost reduction actions (3.2 ) 0.9 Total $ 79.1 $ 80.6 December 31, 2016 September 30, 2016 (In millions) Total Assets Materials $ 725.0 $ 733.4 Delivery Systems and Services 96.5 104.0 Corporate 266.0 206.4 Total $ 1,087.5 $ 1,043.8 |
Basis of Presentation and Maj26
Basis of Presentation and Major Accounting Policies (Policies) | 3 Months Ended |
Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation Prior to the Separation the financial statements and information was prepared on a standalone basis and were derived from Air Products’ consolidated financial statements and accounting records where Versum was a division of Air Products. These financial statements reflect the historical basis and carrying values established when the Company was part of Air Products. Subsequent to the Separation, the accompanying Consolidated Financial Statements are presented on a consolidated basis and include all of the accounts and operations of Versum and its majority-owned subsidiaries. The financial statements reflect the financial position, results of operations and cash flows of Versum in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information. |
Consolidation | For periods prior to October 1, 2016, the annual combined balance sheets of Versum included Air Products’ assets and liabilities that were specifically identifiable or were otherwise transferred to us, including subsidiaries and affiliates in which Air Products had a controlling financial interest. Also included within our financial statements were the results of certain product lines which had historically been managed by us but were retained by Air Products after the Separation. Air Products performed cash management and other treasury-related functions on a centralized basis for nearly all of its legal entities. Substantially all cash generated by our business was remitted to Air Products prior to the Separation and therefore accounted for through Air Products’ net investment in the financial statements. Accordingly, Air Products had not allocated any centrally managed cash and cash items to us in the financial statements prior to the Separation. Air Products’ debt and related interest expense had not been allocated to us for any of the periods prior to the Separation since we are not the legal obligor of the debt, and Air Products’ borrowings were not directly attributable to us. There were no other financing arrangements between us and Air Products during the periods presented. The financial statements presented herein are unaudited and should be read in conjunction with the Annual Combined Financial Statements presented in the Company's Annual Report on Form 10-K for our fiscal year ended September 30, 2016 . Such financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented; all adjustments of a normal, recurring nature have been included to provide a fair statement of the results for the reporting periods presented. All significant intercompany accounts and transactions have been eliminated. |
Income Tax | For periods prior to the Separation, Versum’s income tax expense was calculated using the separate return method as if Versum was a separate taxpayer. The majority of the accrued U.S. federal, state, and foreign income tax balances were treated as settled with Air Products as of the end of each year. After the Separation, income tax expense and income tax balances represent Versum’s federal, state and foreign income taxes as an independent company. |
Estimates and Assumptions | Estimates and Assumptions The Consolidated Financial Statements have been prepared in conformity with GAAP, using management’s best estimates and judgments where appropriate. These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ materially from these estimates and judgments. |
Allocation of Shared Costs | Prior to the Separation, Air Products provided us with centrally managed services and corporate functions. Accordingly, certain shared costs including but not limited to administrative expenses for information technology, general services, human resources, legal, accounting and other services, had been allocated to us and were reflected as expenses in the financial statements. Expenses had been allocated on the basis of direct usage when identifiable, with the remainder allocated on the basis of fixed costs, revenue, operating income or headcount. We consider the expense allocation methodology and results to be reasonable and consistently applied for all periods presented prior to the Separation. Subsequent to the Separation, Versum has performed most of these functions using its own resources or purchased services. However, the remainder of these functions will continue to be provided by Air Products under various agreements. |
New Accounting Guidance | NEW ACCOUNTING GUIDANCE Accounting Guidance Implemented Share-Based Compensation In March 2016, the Financial Accounting Standards Board (“FASB”) issued an update to simplify the accounting for employee share-based payments, including the income tax impacts, the classification on the statement of cash flows, and forfeitures. The amendments are effective for fiscal year 2018, with early adoption permitted. As of the first quarter of fiscal year 2017, we have adopted this guidance. New Accounting Guidance to be Implemented Goodwill Impairment In January 2017, the FASB issued guidance simplifying the test for goodwill impairment, which removes Step 2 from the goodwill impairment test. The guidance is effective for annual periods beginning after December 15, 2021, including interim periods within those periods, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting this guidance. Business Combinations In January 2017, the FASB issued guidance on the definition of a business in business combinations. The guidance clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company is currently evaluating the impact of adopting this guidance. Revenue Recognition In May 2014, the FASB issued guidance based on the principle that revenue is recognized in an amount expected to be collected and to which the entity expects to be entitled in exchange for the transfer of goods or services. In August 2015, the FASB deferred the effective date by one year, while providing the option to early adopt the standard on the original effective date. Accordingly, we will have the option to adopt the standard in either fiscal year 2018 or 2019. In December 2016 there were further updates to the original guidance that did not revise the effective date. The guidance can be adopted either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We are currently evaluating the adoption alternatives and impact that this standard and respective updates will have on our Consolidated Financial Statements. Going Concern In August 2014, the FASB issued guidance regarding management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern within one year of the issuance of the financial statements. If substantial doubt exists, additional disclosures would be required. This guidance will be effective beginning in the fourth quarter of fiscal year 2017, with early adoption permitted. This guidance is not expected to have a significant impact on our Consolidated Financial Statements. Measurement of Inventory In July 2015, the FASB issued guidance to simplify the measurement of inventory recorded using either the FIFO or average cost basis by changing the subsequent measurement guidance from lower of cost or market to the lower of cost or net realizable value. Inventory measured using LIFO is not impacted. The guidance is effective for us beginning in fiscal year 2018 and will be applied prospectively, with early adoption permitted. This guidance is not expected to have a significant impact on our Consolidated Financial Statements. Leases In February 2016, the FASB issued guidance which requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, including operating leases, with a term in excess of 12 months. The guidance also expands the quantitative and qualitative disclosure requirements. The guidance is effective in fiscal year 2020, with early adoption permitted, and must be applied using a modified retrospective approach. We are currently evaluating the impact of adopting this new guidance on our Consolidated Financial Statements. The Company is currently the lessee under various agreements for distribution equipment and vehicles that are currently accounted for as operating leases. The new guidance requires the lessee to record operating leases on the balance sheet with a right-of-use asset and corresponding liability for future payment obligations. Cash Flow Statement Classification In August 2016, the FASB issued guidance to reduce diversity in practice on how certain cash receipts and cash payments are classified in the statement of cash flows. The guidance is effective beginning fiscal year 2019, with early adoption permitted, and should be applied retrospectively. We are currently evaluating the impact of adopting this new guidance on our Consolidated Financial Statements. |
Fair Value | FAIR VALUE Fair value is defined as an exit price, i.e., the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - Inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability. Level 3 - Inputs that are unobservable for the asset or liability based on our own assumptions (about the assumptions market participants would use in pricing the asset or liability). The methods and assumptions used to measure the fair value of financial instruments are as follows: Derivatives The fair value of our forward exchange contracts are quantified using the income approach and are based on estimates using standard pricing models. These models take into account the value of future cash flows as of the balance sheet date, discounted to a present value using discount factors that match both the time to maturity and currency of the underlying instruments. The computation of the fair values of these instruments is generally performed by the Company. These standard pricing models utilize inputs which are derived from or corroborated by observable market data such as interest rate yield curves and currency spot and forward rates. Therefore, the fair value of our derivatives is classified as a level 2 measurement. Refer to Note 10 , Financial Instruments , for a description of derivative instruments, including details on the balance sheet line classifications. Long-term Debt The fair value of our senior notes is based primarily on quoted market prices reported on or near the respective balance sheet date and is therefore level 1. The fair value of our term loan facility debt is based on estimates using standard pricing models that take into account the value of future cash flows as of the balance sheet date, discounted to a present value using market based assumptions including published interest rates. This standard valuation model utilizes observable market data therefore, the fair value of our debt is classified as a level 2 measurement. |
Related Party Transactions an27
Related Party Transactions and Transactions with Air Products (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Schedule of Total Costs Allocated | Total costs allocated to us in the consolidated income statements are summarized below: Three Months Ended December 31, 2016 2015 (In millions) Cost of sales $ — $ 0.8 Selling and administrative — 4.0 Research and development — 0.3 Business restructuring and cost reduction actions — 0.1 Total Allocated Costs $ — $ 5.2 |
Business Separation, Restruct28
Business Separation, Restructuring, and Cost Reduction Actions (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Restructuring and Related Activities [Abstract] | |
Summary of the Carrying Amount of the Accrual for the Business Alignment and Reorganization | The following table summarizes the carrying amount of the accrual for the business realignment and reorganization at December 31, 2016 and 2015 : Severance and Other Benefits Asset Actions/Other Total (In millions) Balance, September 30, 2016 $ 0.6 $ — $ 0.6 Current Period Charge 0.2 — 0.2 Cash Payments (0.7 ) — (0.7 ) Balance, December 31, 2016 $ 0.1 $ — $ 0.1 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Components of Inventories | The components of inventories are as follows: December 31, 2016 September 30, 2016 (In millions) Inventories at FIFO cost Finished goods $ 81.5 $ 94.0 Work in process 8.1 12.3 Raw materials, supplies and other 43.1 29.4 132.7 135.7 Less: Excess of FIFO cost over LIFO cost (8.0 ) (8.3 ) Inventories $ 124.7 $ 127.4 |
Goodwill (Tables)
Goodwill (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Changes to the Carrying Amount of Goodwill by Segment | Changes to the carrying amount of goodwill by segment are as follows: Materials Delivery Systems and Services Total (In millions) Balance at September 30, 2016 $ 162.6 $ 17.5 $ 180.1 Currency translation adjustment (7.0 ) (0.5 ) (7.5 ) Balance at December 31, 2016 $ 155.6 $ 17.0 $ 172.6 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Components of Debt | Components of Debt December 31, 2016 September 30, 2016 (In millions) Term loan facility under Credit Agreement $ 573.6 $ 575.0 Revolving facility under Credit Agreement — — 5.500% Senior Notes due 2024 425.0 425.0 Total debt 998.6 1,000.0 Less debt discount 2.8 2.8 Less deferred debt costs 10.6 11.1 Less current portion of long-term debt 5.8 5.8 Debt payable after one year $ 979.4 $ 980.3 |
Financial Instruments (Tables)
Financial Instruments (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Summary of the Fair Value and Balance Sheet Location of Outstanding Derivatives | The table below summarizes the fair values of our derivatives designated as hedging instruments and balance sheet location of these outstanding derivatives: December 31, 2016 Balance Sheet Location Amount Balance Sheet Location Amount (In millions) Forward exchange contracts Other current assets $ 0.8 Payables and accrued liabilities $ 3.8 |
Summary of Gain or Loss Related to Forward Contract Cash Flow Hedges and Forward Contracts Not Designated as Hedging Instrument | The table below summarizes the gain or loss related to our forward contract cash flow hedges and forward contracts not designated as hedging instruments: Three Months Ended December 31, 2016 (In millions) Cash Flow Hedges, net of tax: Net loss recognized in OCI (effective portion) $ (3.4 ) Net loss reclassified from OCI to other (income) expense, net (effective portion) 3.4 Derivatives Not Designated as Hedging Instruments : Net loss recognized in other (income) expense, net (A) $ 0.2 (A) The impact of the non-designated hedges noted above was largely offset by gains and losses resulting from the impact of changes in exchange rates on recognized assets and liabilities denominated in nonfunctional currencies. There were no non-designated hedges outstanding at December 31, 2016 . |
Fair Value (Tables)
Fair Value (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Carrying Values and Fair Values of Derivatives and Debt | The carrying values and fair values of our derivatives and debt are as follows: December 31, 2016 Fair Value Carrying Value (In millions) Assets Forward Exchange Contracts $ 0.8 $ 0.8 Liabilities Forward Exchange Contracts $ 3.8 $ 3.8 Long-term Debt Senior Notes $ 436.7 $ 425.0 Term Loan Facility 577.9 573.6 Total Long-term Debt $ 1,014.6 $ 998.6 |
Retirement Benefits (Tables)
Retirement Benefits (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Components of Net Period Pension Costs | The components of net periodic pension costs for Versum’s defined benefit pension plans are as follows: Three Months Ended December 31, 2016 (In millions) Service cost $ 0.6 Interest cost 0.1 Actuarial loss amortization 0.1 Net periodic pension cost $ 0.8 |
Defined Contribution Expense | The following table summarizes our defined contribution expense: Three Months Ended December 31, 2016 2015 (In millions) Defined contribution expense $ 1.9 $ 1.4 |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-based Compensation Cost Recognized | Share-based compensation awards cost recognized in the consolidated income statement is summarized below: Three Months Ended December 31, 2016 (In millions) Before-Tax Share-Based Compensation Award Cost $ 1.6 Income Tax Benefit 0.5 After-Tax Share-Based Compensation Award Cost $ 1.1 |
Share-based Compensation Cost by Type of Program | Total before-tax share-based compensation award cost by type of program was as follows: Three Months Ended December 31, 2016 (In millions) Restricted stock units $ 1.5 Stock options 0.1 Before-Tax Share-Based Compensation Cost $ 1.6 |
Assumptions Used in the Calculation of the Fair Value of Market-based Deferred Stock Units | The calculation of the fair value of market-based restricted stock units used the following assumptions: Three Months Ended December 31, 2016 (In percentages) Expected volatility 28.7 % Risk-free interest rate 1.4 % |
Summary of Restricted Stock Unit Activity | A summary of restricted stock unit activity is presented below: Shares Weighted Average Grant-Date Fair Value (In millions, except weighted average) Outstanding, September 30, 2016 — $ — Converted on October 1, 2016 0.5 22.85 Granted 0.7 25.30 Paid out (0.1 ) 15.55 Forfeited/adjustments — — Outstanding at December 31, 2016 1.1 $ 25.18 |
Summary of Stock Option Activity | A summary of stock option activity is presented below: Shares Weighted Average Exercise Price (In millions, except weighted average) Outstanding, September 30, 2016 — $ — Converted on October 1, 2016 0.5 18.37 Granted — — Exercised — — Forfeited — — Outstanding at December 31, 2016 0.5 $ 18.36 Weighted Average Remaining Contractual Terms (In years) Aggregate Intrinsic Value (In millions, except years) Outstanding at December 31, 2016 6.1 $ 5.1 Exercisable at December 31, 2016 6.0 5.1 |
Accumulated Other Comprehensi36
Accumulated Other Comprehensives Income (Loss) (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Changes in Accumulated Other Comprehensive Loss | The table below summarizes changes in accumulated other comprehensive loss (AOCL), net of tax: Net loss on derivatives qualifying as hedges Foreign currency translation adjustments Pension and postretirement benefits Total (In millions) Balance at September 30, 2016 $ (0.2 ) $ (9.8 ) $ — $ (10.0 ) Other comprehensive loss before reclassifications (3.4 ) (33.9 ) — (37.3 ) Net transfers from Air Products — 3.8 (5.6 ) (1.8 ) Amounts reclassified from AOCL 3.4 — 0.1 3.5 Net current period other comprehensive loss — (30.1 ) (5.5 ) (35.6 ) Other comprehensive loss attributable to non-controlling interest — (1.0 ) — (1.0 ) Balance at December 31, 2016 $ (0.2 ) $ (38.9 ) $ (5.5 ) $ (44.6 ) |
Reclassification out of Accumulated Other Comprehensive Loss | The table below summarizes the reclassifications out of accumulated other comprehensive loss and the affected line item on the consolidated income statements: Three Months Ended December 31, 2016 (In millions) Loss on Cash Flow Hedges, net of tax (A) $ 3.4 Pension and Postretirement Benefits, net of tax (B) 0.1 (A) The impact is reflected in Other (income) expense. Refer to Note 10 , Financial Instruments , for further information. (B) The components include actuarial loss amortization and is reflected in net periodic benefit cost. Refer to Note 12 , Retirement Benefits , for further information. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |
Computation of Basic and Diluted Earnings Per Share | The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended December 31, 2016 2015 (In millions, except per share data) Numerator Net Income Attributable to Versum $ 50.8 $ 65.2 Denominator Weighted average number of common shares - Basic 108.7 108.7 Effect of dilutive securities Employee stock option and other award plans 0.5 — Weighted average number of common shares - Diluted 109.2 108.7 Earnings Per Common Share Attributable to Versum Net Income Attributable to Versum - Basic $ 0.47 $ 0.60 Net Income Attributable to Versum - Diluted 0.47 0.60 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Segment Reporting [Abstract] | |
Segment Reporting | Three Months Ended December 31, 2016 2015 (In millions) Sales Materials $ 208.0 $ 188.8 Delivery Systems and Services 61.9 56.7 Corporate 0.9 — Total $ 270.8 $ 245.5 Operating Income (Loss) Materials $ 72.9 $ 68.5 Delivery Systems and Services 12.4 15.9 Corporate (3.0 ) (4.7 ) Segment Total $ 82.3 $ 79.7 Business separation, restructuring and cost reduction actions (3.2 ) 0.9 Total $ 79.1 $ 80.6 |
Assets | December 31, 2016 September 30, 2016 (In millions) Total Assets Materials $ 725.0 $ 733.4 Delivery Systems and Services 96.5 104.0 Corporate 266.0 206.4 Total $ 1,087.5 $ 1,043.8 |
Basis of Presentation and Maj39
Basis of Presentation and Major Accounting Policies (Details) | Oct. 01, 2016 | Dec. 31, 2016segment |
Product Information [Line Items] | ||
Number of primary operating segments | 2 | |
Air Products | ||
Product Information [Line Items] | ||
Stock split conversion ratio | 0.5 |
Related Party Transactions an40
Related Party Transactions and Transactions with Air Products (Details) - USD ($) $ in Millions | Oct. 01, 2016 | Dec. 31, 2016 | Dec. 31, 2015 |
Related Party Transaction [Line Items] | |||
Amount of additional fees due over cost (as percent) | 5.00% | ||
Minimum | |||
Related Party Transaction [Line Items] | |||
Transition services agreement term | 12 months | ||
Maximum | |||
Related Party Transaction [Line Items] | |||
Transition services agreement term | 24 months | ||
Air Products | |||
Related Party Transaction [Line Items] | |||
Total Allocated Costs | $ 0 | $ 5.2 | |
Air Products | Cost of sales | |||
Related Party Transaction [Line Items] | |||
Total Allocated Costs | 0 | 0.8 | |
Air Products | Selling and administrative | |||
Related Party Transaction [Line Items] | |||
Total Allocated Costs | 0 | 4 | |
Air Products | Research and development | |||
Related Party Transaction [Line Items] | |||
Total Allocated Costs | 0 | 0.3 | |
Air Products | Business restructuring and cost reduction actions | |||
Related Party Transaction [Line Items] | |||
Total Allocated Costs | $ 0 | $ 0.1 |
Business Separation, Restruct41
Business Separation, Restructuring, and Cost Reduction Actions (Narrative) (Details) | 3 Months Ended | |
Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($)position | |
Restructuring Cost and Reserve [Line Items] | ||
Net restructuring charge (gain) | $ 3,200,000 | $ (900,000) |
Number of positions eliminated | position | 20 | |
Carrying value of assets | $ 0 | |
Severance | ||
Restructuring Cost and Reserve [Line Items] | ||
Net restructuring charge (gain) | 500,000 | |
Asset actions | ||
Restructuring Cost and Reserve [Line Items] | ||
Net restructuring charge (gain) | $ (1,400,000) |
Business Separation, Restruct42
Business Separation, Restructuring, and Cost Reduction Actions (Details) $ in Millions | 3 Months Ended |
Dec. 31, 2016USD ($) | |
Restructuring Reserve [Roll Forward] | |
Restructuring reserve, beginning balance | $ 0.6 |
Current Period Charge | 0.2 |
Cash Payments | (0.7) |
Restructuring reserve, ending balance | 0.1 |
Severance and Other Benefits | |
Restructuring Reserve [Roll Forward] | |
Restructuring reserve, beginning balance | 0.6 |
Current Period Charge | 0.2 |
Cash Payments | (0.7) |
Restructuring reserve, ending balance | 0.1 |
Asset Actions/Other | |
Restructuring Reserve [Roll Forward] | |
Restructuring reserve, beginning balance | 0 |
Current Period Charge | 0 |
Cash Payments | 0 |
Restructuring reserve, ending balance | $ 0 |
Sale of Equity Affiliate (Detai
Sale of Equity Affiliate (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Schedule of Equity Method Investments [Line Items] | |||||
Income tax provision | $ 15.3 | $ 13.4 | |||
Equity affiliates’ income | $ 0 | 0.2 | |||
Daido Air Products Electronics, Inc. | Disposed of by Sale | |||||
Schedule of Equity Method Investments [Line Items] | |||||
Proceeds from sale of equity method investment | $ 15.9 | ||||
Realized gain on sale of equity method investment | $ 0.7 | ||||
Investment in net assets of and advances to equity affiliates | 12.8 | 12.8 | |||
Foreign currency translation loss | $ 2.4 | $ 2.4 | |||
Income tax provision | $ 5.3 | ||||
Equity affiliates’ income | $ 1 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Millions | Dec. 31, 2016 | Sep. 30, 2016 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 81.5 | $ 94 |
Work in process | 8.1 | 12.3 |
Raw materials, supplies and other | 43.1 | 29.4 |
Inventories at FIFO cost | 132.7 | 135.7 |
Less: Excess of FIFO cost over LIFO cost | (8) | (8.3) |
Inventories | $ 124.7 | $ 127.4 |
Goodwill (Details)
Goodwill (Details) $ in Millions | 3 Months Ended |
Dec. 31, 2016USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 180.1 |
Currency translation adjustment | (7.5) |
Goodwill, ending balance | 172.6 |
Materials | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 162.6 |
Currency translation adjustment | (7) |
Goodwill, ending balance | 155.6 |
Delivery Systems and Services | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 17.5 |
Currency translation adjustment | (0.5) |
Goodwill, ending balance | $ 17 |
Debt - Components of Long Term
Debt - Components of Long Term Debt (Details) - USD ($) $ in Millions | Dec. 31, 2016 | Sep. 30, 2016 |
Debt Instrument [Line Items] | ||
Total debt | $ 998.6 | $ 1,000 |
Less debt discount | 2.8 | 2.8 |
Less deferred debt costs | 10.6 | 11.1 |
Less current portion of long-term debt | 5.8 | 5.8 |
Debt payable after one year | 979.4 | 980.3 |
Term loan facility under credit agreement | ||
Debt Instrument [Line Items] | ||
Total debt | 573.6 | 575 |
Line of Credit | Revolving facility under Credit Agreement | ||
Debt Instrument [Line Items] | ||
Total debt | 0 | 0 |
Senior Notes | 5.500% Senior Notes due 2024 | ||
Debt Instrument [Line Items] | ||
Total debt | $ 425 | $ 425 |
Debt (Narrative) (Details)
Debt (Narrative) (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2016 |
Term Loan Facility | ||
Debt Instrument [Line Items] | ||
Debt instrument, face amount | $ 575,000,000 | |
Effective interest rate (as percent) | 3.50% | |
Term facility, percent original principal annual amortization (as percent) | 1.00% | |
Term Loan Facility | Minimum | ||
Debt Instrument [Line Items] | ||
Prepayment amount of excess cash flows, percentage | 0.00% | |
Term Loan Facility | Maximum | ||
Debt Instrument [Line Items] | ||
Prepayment amount of excess cash flows, percentage | 50.00% | |
Term Loan Facility | LIBOR | ||
Debt Instrument [Line Items] | ||
Minimum floor (as percent) | 0.75% | |
Basis spread on variable rate (as percent) | 2.50% | |
Term Loan Facility | Base Rate | ||
Debt Instrument [Line Items] | ||
Minimum floor (as percent) | 1.75% | |
Basis spread on variable rate (as percent) | 1.50% | |
Line of Credit | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 200,000,000 | |
Commitment fee percentage (as percent) | 0.375% | |
Fronting fee percentage (as percent) | 0.125% | |
Maximum net leverage ratio | 3.25 | |
Remaining borrowing capacity | $ 200,000,000 | |
Line of Credit | Revolving Credit Facility | Prior Four Quarter Period | ||
Debt Instrument [Line Items] | ||
Net leverage ratio | 1 | |
Line of Credit | Revolving Credit Facility | Prior Four Quarter Period After Delivery of Financial Statements | ||
Debt Instrument [Line Items] | ||
Net leverage ratio | 1 | |
Line of Credit | Revolving Credit Facility | LIBOR | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate (as percent) | 2.00% | |
Basis spread on variable rate, reduction (as percent) | 0.25% | |
Line of Credit | Revolving Credit Facility | LIBOR | Prior Four Quarter Period After Delivery of Financial Statements | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate, reduction (as percent) | 0.25% | |
Line of Credit | Revolving Credit Facility | Base Rate | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate (as percent) | 1.00% | |
Senior Notes | 5.5% Senior Notes due 2024 | ||
Debt Instrument [Line Items] | ||
Debt instrument, face amount | $ 425,000,000 | |
Interest rate (as percent) | 5.50% | 5.50% |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) $ in Millions | Dec. 31, 2016 | Oct. 01, 2016 | Sep. 30, 2016 |
Income Tax Disclosure [Abstract] | |||
Deferred tax liabilities | $ (22.7) | ||
Income taxes payable | $ 32.4 | 11 | $ 12.7 |
Undistributed foreign earnings, tax | $ 1.1 |
Financial Instruments (Details)
Financial Instruments (Details) - Cash Flow Hedge - Derivative Designated as Hedging Instruments - Forward exchange contracts $ in Millions | 3 Months Ended |
Dec. 31, 2016USD ($) | |
Derivative [Line Items] | |
Maximum remaining term | 9 months |
Notional amount | $ 85.3 |
Financial Instruments - Fair Va
Financial Instruments - Fair Value and Balance Sheet Location of Outstanding Derivatives (Details) - Forward exchange contracts - Fair Value - Level 2 $ in Millions | Dec. 31, 2016USD ($) |
Derivatives, Fair Value [Line Items] | |
Derivative Asset | $ 0.8 |
Derivative Liability | $ 3.8 |
Financial Instruments - Gain or
Financial Instruments - Gain or Loss Related to Forward Contracts (Details) - Forward exchange contracts | 3 Months Ended |
Dec. 31, 2016USD ($) | |
Derivative Designated as Hedging Instruments | Cash Flow Hedges, net of tax | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Net loss recognized in OCI (effective portion) | $ (3,400,000) |
Notional amount | 85,300,000 |
Derivative Designated as Hedging Instruments | Cash Flow Hedges, net of tax | Other income (expense) | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Net loss reclassified from OCI to other (income) expense, net (effective portion) | 3,400,000 |
Derivatives Not Designated as Hedging Instruments | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Notional amount | 0 |
Derivatives Not Designated as Hedging Instruments | Other income (expense) | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Net loss recognized in other (income) expense, net | $ 200,000 |
Fair Value (Details)
Fair Value (Details) $ in Millions | Dec. 31, 2016USD ($) |
Fair Value | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |
Total Long-term Debt | $ 1,014.6 |
Carrying Value | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |
Total Long-term Debt | 998.6 |
Level 2 | Fair Value | Term Loan Facility | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |
Total Long-term Debt | 577.9 |
Level 2 | Carrying Value | Term Loan Facility | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |
Total Long-term Debt | 573.6 |
Level 2 | Forward Exchange Contracts | Fair Value | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |
Assets, Forward Exchange Contracts | 0.8 |
Liabilities, Forward Exchange Contracts | 3.8 |
Level 2 | Forward Exchange Contracts | Carrying Value | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |
Assets, Forward Exchange Contracts | 0.8 |
Liabilities, Forward Exchange Contracts | 3.8 |
Level 1 | Fair Value | Senior Notes | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |
Total Long-term Debt | 436.7 |
Level 1 | Carrying Value | Senior Notes | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |
Total Long-term Debt | $ 425 |
Retirement Benefits (Details)
Retirement Benefits (Details) - Pension Plan $ in Millions | Dec. 31, 2016USD ($) |
Defined Benefit Plan Disclosure [Line Items] | |
Plan assets assumed upon separation | $ 3 |
Benefit obligation | 27 |
Net benefit obligation | $ 24 |
Retirement Benefits - Net Perio
Retirement Benefits - Net Periodic Pension Cost (Details) - Pension Plan $ in Millions | 3 Months Ended |
Dec. 31, 2016USD ($) | |
Defined Benefit Plan Disclosure [Line Items] | |
Service cost | $ 0.6 |
Interest cost | 0.1 |
Actuarial loss amortization | 0.1 |
Net periodic pension cost | $ 0.8 |
Retirement Benefits - Defined B
Retirement Benefits - Defined Benefit Contribution (Details) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Compensation and Retirement Disclosure [Abstract] | ||
Defined contribution expense | $ 1.9 | $ 1.4 |
Share-Based Compensation (Detai
Share-Based Compensation (Details) | Oct. 01, 2016 | Dec. 31, 2016USD ($)$ / sharesshares |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock options granted (in shares) | 0 | |
Closing stock price (in dollars per share) | $ / shares | $ 28.07 | |
Unrecognized compensation cost related to non-vested stock options | $ | $ 100,000 | |
Stock options exercised (in shares) | 0 | |
Restricted stock units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Service period | 3 years | |
Vesting period | 4 years | |
Shares granted (in shares) | 700,000 | |
Weighted average grant-date fair value (in dollars per share) | $ / shares | $ 25.30 | |
Unrecognized compensation cost related to restricted stock units | $ | $ 21,000,000 | |
Share-based compensation costs paid | $ | $ 0 | |
Weighted average period to recognize compensation costs | 3 years 2 months 12 days | |
Fair value of stock paid | $ | $ 1,500,000 | |
Stock options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period | 3 years | |
Weighted average period to recognize compensation costs | 10 months 24 days | |
Exercise period | 10 years | |
Long-Term Incentive Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares available for grant (in shares) | 3,300,000 | |
Long-Term Incentive Plan | Restricted stock units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares granted (in shares) | 424,247 | |
Weighted average grant-date fair value (in dollars per share) | $ / shares | $ 22.53 | |
Long-Term Incentive Plan | Restricted stock units | Vesting period 1, October 1, 2018 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting percentage (as percent) | 33.33% | |
Long-Term Incentive Plan | Restricted stock units | Vesting period 2, October 1, 2019 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting percentage (as percent) | 33.33% | |
Long-Term Incentive Plan | Restricted stock units | Vesting period 3, October 1, 2020 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting percentage (as percent) | 33.33% | |
Long-Term Incentive Plan | Performance-based stock units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Service period | 3 years | |
Shares granted (in shares) | 304,520 | |
Payout determination period | 90 days | |
Long-Term Incentive Plan | Performance-based restricted stock units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Weighted average grant-date fair value (in dollars per share) | $ / shares | $ 29.68 | |
Long-Term Incentive Plan | Performance-based market stock units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Weighted average grant-date fair value (in dollars per share) | $ / shares | $ 28.37 | |
Air Products | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock split conversion ratio | 0.5 |
Share-Based Compensation - Comp
Share-Based Compensation - Compensation Awards Cost Recognized (Details) $ in Millions | 3 Months Ended |
Dec. 31, 2016USD ($) | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Before-Tax Share-Based Compensation Award Cost | $ 1.6 |
Income Tax Benefit | 0.5 |
After-Tax Share-Based Compensation Award Cost | $ 1.1 |
Share-Based Compensation - Befo
Share-Based Compensation - Before-tax Share-Based Compensation Award (Details) $ in Millions | 3 Months Ended |
Dec. 31, 2016USD ($) | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Before-Tax Share-Based Compensation Cost | $ 1.6 |
Restricted stock units | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Before-Tax Share-Based Compensation Cost | 1.5 |
Stock options | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Before-Tax Share-Based Compensation Cost | $ 0.1 |
Share-Based Compensation - Assu
Share-Based Compensation - Assumptions used in Calculation of Fair Value of Market-based Restricted Stock Units (Details) - Restricted stock units | 3 Months Ended |
Dec. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected volatility | 28.70% |
Risk-free interest rate | 1.40% |
Share-Based Compensation - Summ
Share-Based Compensation - Summary of Restricted Stock Unit Activity (Details) - Restricted stock units shares in Millions | 3 Months Ended |
Dec. 31, 2016$ / sharesshares | |
Shares | |
Outstanding, September 30, 2016 (in shares) | shares | 0 |
Converted on October 1, 2016 (in shares) | shares | 0.5 |
Granted (in shares) | shares | 0.7 |
Paid out (in shares) | shares | (0.1) |
Forfeited/adjustments (in shares) | shares | 0 |
Outstanding at December 31, 2016 (in shares) | shares | 1.1 |
Weighted Average Grant-Date Fair Value | |
Outstanding, September 30, 2016 (in dollars per share) | $ / shares | $ 0 |
Converted on October 1, 2016 (in dollars per share) | $ / shares | 22.85 |
Granted (in dollars per share) | $ / shares | 25.30 |
Paid out (in dollars per share) | $ / shares | 15.55 |
Forfeited/adjustments (in dollars per share) | $ / shares | 0 |
Outstanding at December 31, 2016 (in dollars per share) | $ / shares | $ 25.18 |
Share-Based Compensation - Su61
Share-Based Compensation - Summary of Stock Option Activity (Details) $ / shares in Units, $ in Millions | 3 Months Ended |
Dec. 31, 2016USD ($)$ / sharesshares | |
Shares | |
Outstanding, September 30, 2016 (in shares) | shares | 0 |
Converted on October 1, 2016 (in shares) | shares | 500,000 |
Granted (in shares) | shares | 0 |
Exercised (in shares) | shares | 0 |
Forfeited (in shares) | shares | 0 |
Outstanding at December 31, 2016 (in shares) | shares | 500,000 |
Weighted Average Exercise Price | |
Outstanding, September 30, 2016 (in dollars per share) | $ / shares | $ 0 |
Converted on October 1, 2016 (in dollars per share) | $ / shares | 18.37 |
Granted (in dollars per share) | $ / shares | 0 |
Exercised (in dollars per share) | $ / shares | 0 |
Forfeited (in dollars per share) | $ / shares | 0 |
Outstanding at December 31, 2016 (in dollars per share) | $ / shares | $ 18.36 |
Weighted average remaining contractual terms, options outstanding | 6 years 1 month 6 days |
Aggregate intrinsic value, options outstanding | $ | $ 5.1 |
Weighted average remaining contractual terms, options exercisable | 6 years |
Aggregate intrinsic value, options exercisable | $ | $ 5.1 |
Accumulated Other Comprehensi62
Accumulated Other Comprehensives Income (Loss) - Changes in Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Stockholders' equity, beginning balance | $ (10) | |
Other comprehensive loss before reclassifications | (37.3) | |
Net transfers from Air Products | (1.8) | |
Amounts reclassified from AOCL | 3.5 | |
Total Other Comprehensive Income (Loss) | (35.6) | $ 4 |
Other comprehensive loss attributable to non-controlling interest | (1) | $ 0.2 |
Stockholders' equity, ending balance | (44.6) | |
Net loss on derivatives qualifying as hedges | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Stockholders' equity, beginning balance | (0.2) | |
Other comprehensive loss before reclassifications | (3.4) | |
Net transfers from Air Products | 0 | |
Amounts reclassified from AOCL | 3.4 | |
Total Other Comprehensive Income (Loss) | 0 | |
Other comprehensive loss attributable to non-controlling interest | 0 | |
Stockholders' equity, ending balance | (0.2) | |
Foreign currency translation adjustments | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Stockholders' equity, beginning balance | (9.8) | |
Other comprehensive loss before reclassifications | (33.9) | |
Net transfers from Air Products | 3.8 | |
Amounts reclassified from AOCL | 0 | |
Total Other Comprehensive Income (Loss) | (30.1) | |
Other comprehensive loss attributable to non-controlling interest | (1) | |
Stockholders' equity, ending balance | (38.9) | |
Pension and postretirement benefits | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Stockholders' equity, beginning balance | 0 | |
Other comprehensive loss before reclassifications | 0 | |
Net transfers from Air Products | (5.6) | |
Amounts reclassified from AOCL | 0.1 | |
Total Other Comprehensive Income (Loss) | (5.5) | |
Other comprehensive loss attributable to non-controlling interest | 0 | |
Stockholders' equity, ending balance | $ (5.5) |
Accumulated Other Comprehensi63
Accumulated Other Comprehensives Income (Loss) - Reclassifications Out of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Loss on Cash Flow Hedges, net of tax(A) | $ (2.9) | $ (1.1) |
Reclassification from Accumulated Other Comprehensive Loss | 3.5 | |
Loss on Cash Flow Hedges, net of tax | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Reclassification from Accumulated Other Comprehensive Loss | 3.4 | |
Pension and Postretirement Benefits, net of tax | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Reclassification from Accumulated Other Comprehensive Loss | 0.1 | |
Reclassification out of Accumulated Other Comprehensive Income | Loss on Cash Flow Hedges, net of tax | Forward exchange contracts | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Loss on Cash Flow Hedges, net of tax(A) | $ (3.4) |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Numerator | ||
Net Income Attributable to Versum | $ 50.8 | $ 65.2 |
Denominator | ||
Weighted average number of common shares - Basic (shares) | 108.7 | 108.7 |
Effect of dilutive securities | ||
Employee stock option and other award plans (shares) | 0.5 | 0 |
Weighted average number of common shares - Diluted (shares) | 109.2 | 108.7 |
Net Income Attributable to Versum - Basic (usd per share) | $ 0.47 | $ 0.60 |
Net Income Attributable to Versum - Diluted (usd per share) | $ 0.47 | $ 0.60 |
Share-based awards | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive shares excluded from the computation of earnings per share (shares) | 0.2 |
Segment Information (Narrative)
Segment Information (Narrative) (Details) | 3 Months Ended |
Dec. 31, 2016segment | |
Segment Reporting [Abstract] | |
Number of primary operating segments | 2 |
Segment Information - Segments
Segment Information - Segments (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2016 | |
Segment Reporting Information [Line Items] | |||
Sales | $ 270.8 | $ 245.5 | |
Operating Income (Loss) | 79.1 | 80.6 | |
Business separation, restructuring and cost reduction actions | (3.2) | 0.9 | |
Total Assets | 1,087.5 | $ 1,043.8 | |
Operating Segments | |||
Segment Reporting Information [Line Items] | |||
Operating Income (Loss) | 82.3 | 79.7 | |
Operating Segments | Materials | |||
Segment Reporting Information [Line Items] | |||
Sales | 208 | 188.8 | |
Operating Income (Loss) | 72.9 | 68.5 | |
Total Assets | 725 | 733.4 | |
Operating Segments | Delivery Systems and Services | |||
Segment Reporting Information [Line Items] | |||
Sales | 61.9 | 56.7 | |
Operating Income (Loss) | 12.4 | 15.9 | |
Total Assets | 96.5 | 104 | |
Operating Segments | Corporate | |||
Segment Reporting Information [Line Items] | |||
Sales | 0.9 | 0 | |
Operating Income (Loss) | (3) | (4.7) | |
Total Assets | 266 | $ 206.4 | |
Segment Reconciling Items | |||
Segment Reporting Information [Line Items] | |||
Business separation, restructuring and cost reduction actions | $ (3.2) | $ 0.9 |