Investor Relations

Ingevity reports third quarter 2017 financial results

  • Net sales of $264.1 million were up 4.6 percent versus the prior year quarter’s sales of $252.4 million
  • Net income of $38.4 million resulted in net income as a percentage of sales of 14.5 percent, compared to net loss of $4.9 million including restructuring costs related to the closure of the Brazil refinery, which resulted in net loss as a percentage of sales of 1.9 percent in the prior year quarter
  • Diluted earnings per share were $0.79; diluted adjusted earnings per share were $0.86
  • Adjusted EBITDA of $72.7 million were up 22 percent compared to third quarter 2016 adjusted EBITDA of $59.6 million
  • Adjusted EBITDA margin of 27.5 percent increased 390 basis points versus third quarter 2016
  • Company narrows fiscal year 2017 sales guidance to between $945 million and $955 million and narrows and raises adjusted EBITDA guidance to between $227 million and $232 million

The results and guidance in this release include Non-GAAP financial measures. Refer to the section entitled “Use of Non-GAAP Financial Measures” within this release.

Additionally, this release includes revisions to prior year periods’ financial results. Refer to the section entitled “Correction to Previously Issued Financial Statements.”

Wednesday, November 1, 2017 4:15 pm EDT

Dateline:

NORTH CHARLESTON, S.C.

Public Company Information:

NYSE:
NGVT

NORTH CHARLESTON, S.C.--(BUSINESS WIRE)--Ingevity Corporation (NYSE:NGVT) today reported third quarter net sales of $264.1 million and net income of $38.4 million, representing 14.5 percent of sales. Sales increased 4.6 percent versus $252.4 million in the prior year’s third quarter and net income increased $43.3 million versus a net loss of $4.9 million last year. Prior year net loss of $4.9 million was primarily driven by a third quarter after-tax restructuring charge of $32.2 million, or $0.76 per share, related to the closure of the Brazil refinery. The third quarter diluted earnings per share were $0.79. Diluted adjusted earnings per share were $0.86 excluding certain items of $0.07 per share. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $72.7 million were up 22 percent versus third quarter 2016 adjusted EBITDA of $59.6 million. Ingevity’s third quarter adjusted EBITDA margin of 27.5 percent was up 390 basis points from the prior year’s third quarter adjusted EBITDA margin of 23.6 percent.

“We posted an outstanding third quarter,” said Michael Wilson, Ingevity’s president and CEO. “Our strategic focus on high value-added product lines and our disciplined execution drove the year-over-year increase in revenues and earnings. We achieved a 22 percent increase in adjusted EBITDA versus the previous year’s quarter. And, as a result, we saw a sharp increase in our adjusted EBITDA margin to 27.5 percent, making this our most profitable quarter since our spinoff in May of last year.”

Performance Chemicals

Third quarter 2017 sales in the Performance Chemicals segment were $178.7 million, up $5.7 million, or 3.3 percent, versus the third quarter 2016. Segment operating profit was $33.4 million, up $11.7 million, or 53.9 percent, versus the prior year quarter segment operating profit. This translated into a segment operating margin of 18.7 percent versus 12.5 percent in the prior year. Segment EBITDA were $38.5 million, up $11.4 million, or 42 percent, versus the prior year quarter segment EBITDA. Segment EBITDA margin was 21.5 percent, up 580 basis points versus the prior year quarter.

“The continued rebound in U.S. drilling pushed sales to oilfield customers higher by 31 percent, and a later start to the paving season resulted in a 19 percent increase in sales to pavement applications versus the prior year’s quarter,” said Wilson. “Revenues in industrial specialties applications were 9 percent lower, as product availability to these markets was constrained to meet growing needs in higher value-added oilfield and pavement technologies applications.

“Despite modest revenue growth,” Wilson continued, “we achieved significantly higher segment EBITDA and segment EBITDA margin in Performance Chemicals. In addition to higher volumes, earnings were further augmented by improved pricing, higher plant productivity, lower raw materials costs and savings stemming from strategic initiatives we took last year to lower our cost structure.”

Performance Materials

Third quarter 2017 sales in the Performance Materials segment were $85.4 million, up $6 million, or 7.6 percent, versus the third quarter 2016. Segment operating profit was $29.3 million, up $1.5 million, or 5.4 percent, versus the prior year quarter segment operating profit. This translated to a segment operating margin of 34.3 percent versus 35.0 percent in the prior year period. Segment EBITDA were $34.2 million, up $1.7 million, or 5.2 percent, versus the prior year segment EBITDA. Segment EBITDA margin was 40 percent, down 90 basis points versus the prior year quarter.

“Sales of Ingevity’s ‘honeycomb’ scrubbers, used by the automotive industry to comply with U.S. Environmental Protection Agency (EPA) Tier 3 and California LEV III standards for gasoline vapor emission control, continued to show robust growth,” said Wilson. “This growth was partially offset by lower sales of pelletized activated carbon due to lower North American light vehicle production as the industry worked down inventory.”

Wilson said that despite the third quarter’s 11 percent decline in North American vehicle production (according to WardsAuto) the company’s Performance Materials segment grew revenue in that same period by about 8 percent based on the strength of continued adoption of more stringent gasoline vapor emission control regulations. The segment’s earnings growth in the third quarter was tempered by higher expansion costs at the Waynesboro, Ga., plant and higher export costs for products from the Zhuhai, China, facility.

Outlook

Ingevity narrowed its fiscal year 2017 guidance for sales from between $940 million and $955 million to $945 million and $955 million. The company also narrowed and raised its guidance for adjusted EBITDA from between $220 million and $230 million to between $227 million and $232 million.

“While the fourth quarter is typically slower due to the seasonality of some of our end-markets, we are confident that we’ll turn in a strong 2017 performance,” said Wilson. “At the mid-point of our guidance, year-over-year EBITDA growth would be 13.4 percent, and the EBITDA margin would accrete by almost 200 basis points.”

Ingevity: Purify, Protect and Enhance

Ingevity provides specialty chemicals and high-performance carbon materials and technologies that help customers solve complex problems. These products are used in a variety of demanding applications, including asphalt paving, oil exploration and production, agrochemicals, adhesives, lubricants, printing inks and automotive components that reduce gasoline vapor emissions. Through a team of talented and experienced people, Ingevity develops, manufactures and brings to market products and processes that purify, protect and enhance the world around us. Headquartered in North Charleston, S.C., Ingevity operates from 25 locations around the world and employs approximately 1,500 people. The company is traded on the New York Stock Exchange (NYSE: NGVT). For more information, visit www.ingevity.com.

Additional Information

The company will host a conference call on Thursday, Nov. 2, 2017, at 10 a.m. (Eastern Time) to discuss third quarter fiscal results. Those who wish to participate in this event should dial 800-230-1092 (inside the U.S.) or 612-332-0335 (outside the U.S.), at least 15 minutes prior to the start of the call. In addition, a slide deck for use during the conference call will be posted on the Investors section of Ingevity’s website shortly before the call begins. Replays will be available through Dec. 2, 2017, and can be accessed at 800-475-6701 (inside the U.S.) or 320-365-3844 (outside the U.S.), with access code 431407.

Correction to Previously Issued Financial Statements

During the quarters and year ended December 31, 2016, Ingevity identified various errors related to its previously issued annual and interim Consolidated Financial Statements. The impact of the revision to the previously issued financial statements for the three and nine months ended September 30, 2016 is reflected in the schedules to this press release.

Use of Non-GAAP Financial Measures

Ingevity has presented certain financial measures which have not been prepared in accordance with U.S. generally accepted accounting principles (GAAP). Definitions of our non-GAAP financial measures and a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP are included in the financial schedules accompanying this news release, under the section entitled "Non-GAAP Financial Measures."

A reconciliation of net income to adjusted EBITDA as projected for 2017 is not provided. Ingevity does not forecast net income as we cannot, without unreasonable effort, estimate or predict with certainty various components of net income. These components include additional costs associated with the separation from WestRock, further restructuring and other income or charges, and acquisition related charges in connection with the planned acquisition of Georgia Pacific's pine chemicals business as well as the related tax impacts of these items. Additionally, discrete tax items could drive variability in our projected effective tax rate. All of these components could significantly impact such financial measures. Further, in the future, other items with similar characteristics to those currently included in adjusted EBITDA, that have a similar impact on comparability of periods, and which are not known at this time, may exist and impact adjusted EBITDA.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements generally include the words “may,” “could,” “should,” “believes,” “plans,” “intends,” “targets,” “will,” “expects,” “suggests,” “anticipates,” “outlook,” “continues,” “forecast,” “prospect,” “potential” or similar expressions. Forward-looking statements may include, without limitation, expected financial positions, results of operations and cash flows; financing plans; business strategies and expectations; operating plans; synergies and the potential benefits of the acquisition of Georgia-Pacific’s pine chemicals business (the “acquisition”); the anticipated timing of the closing of the acquisition; capital and other expenditures; competitive positions; growth opportunities for existing products; benefits from new technology and cost-reduction initiatives, plans and objectives; and markets for securities. Like other businesses, Ingevity is subject to risks and uncertainties that could cause its actual results to differ materially from its expectations or that could cause other forward-looking statements to prove incorrect. Factors that could cause actual results to materially differ from those contained in the forward-looking statements, or that could cause other forward-looking statements to prove incorrect, include, without limitation, risks related to the satisfaction of the conditions to closing the acquisition (including the failure to obtain necessary regulatory approvals) in the anticipated timeframe or at all, risks that the expected benefits from the proposed acquisition will not be realized or will not be realized in the expected time period; the risk that the businesses will not be integrated successfully; significant transaction costs; unknown or understated liabilities; general economic and financial conditions; international sales and operations; currency exchange rates and currency devaluation; compliance with U.S. and foreign regulations; attracting and retaining key personnel; conditions in the automotive market or adoption of alternative technologies; worldwide air quality standards; government infrastructure spending; declining volumes in the printing inks market; the limited supply of crude tall oil (“CTO”); lack of access to sufficient CTO; access to and pricing of raw materials; competition from producers of substitute products and new technologies; a prolonged period of low energy prices; the provision of services by third parties at several facilities; natural disasters, such as hurricanes, winter or tropical storms, earthquakes, floods, fires; other unanticipated problems such as labor difficulties including renewal of collective bargaining agreements, equipment failure or unscheduled maintenance and repair; protection of intellectual property and proprietary information; information technology security risks; government policies and regulations, including, but not limited to, those affecting the environment, climate change, tax policies and the chemicals industry; and lawsuits arising out of environmental damage or personal injuries associated with chemical or other manufacturing processes. These and other important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements that may have been made in this document are and will be more particularly described in our filings with the U.S. Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2016 and our other periodic filings. Readers are cautioned not to place undue reliance on Ingevity’s projections and forward-looking statements, which speak only as the date thereof. Ingevity undertakes no obligation to publicly release any revision to the projections and forward-looking statements contained in this announcement, or to update them to reflect events or circumstances occurring after the date of this announcement.

 

INGEVITY CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

   

Three Months Ended
September 30,

Nine Months Ended
September 30,
In millions, except per share amounts 2017   2016 (1) 2017   2016 (1)
Net sales $ 264.1 $ 252.4 $ 742.9 $ 697.4
Cost of sales 170.9   172.0   489.2   479.3  
Gross profit 93.2   80.4   253.7   218.1  
Selling, general and administrative expenses 26.2 25.2 78.5 70.8
Research and technical expenses 4.8 3.9 14.6 13.2
Separation costs 0.2 2.5 0.7 13.6
Restructuring and other (income) charges, net 0.1 32.7 3.5 38.3
Acquisition costs 4.1 4.1
Other (income) expense, net (0.5 ) 1.8 0.9 (3.9 )
Interest expense, net 3.2   3.8   9.3   14.2  
Income before income taxes 55.1 10.5 142.1 71.9
Provision for income taxes 16.7   15.4   44.9   39.2  
Net income (loss) 38.4 (4.9 ) 97.2 32.7
Less: Net income (loss) attributable to noncontrolling interests 4.6   2.3   12.3   6.6  
Net income (loss) attributable to Ingevity stockholders $ 33.8   $ (7.2 ) $ 84.9   $ 26.1  
 
Earnings (loss) per common share attributable to Ingevity stockholders
Basic $ 0.80 $ (0.17 ) $ 2.01 $ 0.62
Diluted $ 0.79 $ (0.17 ) $ 2.00 $ 0.62
Average number of shares outstanding used in the

earnings (loss) per share computations (2)

Basic 42.1 42.1 42.1 42.1
Diluted 42.5 42.1 42.5 42.2

_________________

(1) Certain prior period amounts have been revised to reflect the impact of adjustments made to our financial statements to correct for various immaterial errors previously identified during the quarter and year ended December 31, 2016. See section entitled "Correction of Previously Issued Financial Statements" on "Financial Schedules - Page 5" of this press release.

(2) On May 15, 2016, WestRock distributed 42,102,000 shares of Ingevity's common stock to holders of its common stock. The computation of basic and diluted earnings per common share for all periods prior to May 15, 2016 was calculated using the number of shares distributed on May 15, 2016.

   
 

INGEVITY CORPORATION

Segment Operating Results

(Unaudited)

 
Three Months Ended
September 30,
Nine Months Ended
September 30,
In millions 2017  

2016 (1)

2017  

2016 (1)

Net sales
Performance Materials $ 85.4 $ 79.4 $ 258.3 $ 223.7
Performance Chemicals 178.7 173.0 484.6 473.7
Pavement Technologies product line 64.5 54.4 137.2 129.2
Oilfield Technologies product line 20.3 15.5 58.1 43.2
Industrial Specialties product line 93.9   103.1   289.3   301.3  
Total net sales $ 264.1 $ 252.4 $ 742.9 $ 697.4
 
Segment operating profit
Performance Materials $ 29.3 $ 27.8 $ 89.5 $ 84.7
Performance Chemicals 33.4   21.7   70.2   53.3  
Total segment operating profit 62.7   49.5   159.7   138.0  
 
Separation costs (2) (0.2 ) (2.5 ) (0.7 ) (13.6 )
Restructuring and other income (charges) (3) (0.1 ) (32.7 ) (3.5 ) (38.3 )
Acquisition costs (4) (4.1 )

(4.1 )

Interest expense, net (3.2 ) (3.8 ) (9.3 ) (14.2 )
Provision for income taxes (16.7 ) (15.4 ) (44.9 ) (39.2 )
Net (income) loss attributable to noncontrolling interests (4.6 ) (2.3 ) (12.3 ) (6.6 )
Net income (loss) attributable to the Ingevity stockholders $ 33.8   $ (7.2 ) $ 84.9   $ 26.1  
_________________

(1) Certain prior period amounts have been revised to reflect the impact of adjustments made to our financial statements to correct for various immaterial errors
previously identified during the quarter and year ended December 31, 2016. See section entitled "Correction of Previously Issued Financial Statements"
on "Financial Schedules - Page 5" of this press release.

(2) Represents transaction costs associated with separation of Ingevity from WestRock. These costs are primarily related to professional fees associated with
separation activities within the finance, tax and legal functions.

(3) For the three and nine months ended September 30, 2017 and September 30, 2016 the charges related to Performance Materials and Performance Chemicals
as shown in the table below:

Three Months Ended
September 30,
Nine Months Ended
September 30,
In millions 2017 2016 2017 2016
Performance Materials $ $ $ $ 0.8
Performance Chemicals 0.1   32.7   3.5   37.5  
Total $ 0.1   $ 32.7   $ 3.5   $ 38.3  
 
(4) Represents charges incurred in connection with the planned acquisition of Georgia Pacific's Pine Chemical Business.
 
 

INGEVITY CORPORATION

Condensed Consolidated Balance Sheets

   
In millions September 30, 2017 December 31, 2016
Assets (unaudited)
Cash and cash equivalents $ 70.2 $ 30.5
Accounts receivable, net 109.6 89.8
Inventories, net 154.5 151.2
Prepaid and other current assets 22.5   23.7
Current assets 356.8 295.2
Property, plant and equipment, net 431.9 422.8
Restricted investment 70.8 69.7
Other assets 50.3   45.1
Total assets $ 909.8   $ 832.8
Liabilities and Equity
Accounts payable $ 83.7 $ 79.2
Accrued expenses 20.5 19.3
Other current liabilities 46.7   38.4
Current liabilities 150.9 136.9
Long term debt including capital lease obligations 448.7 481.3
Deferred income taxes 64.3 69.8
Other liabilities 12.3   10.2
Total liabilities 676.2 698.2
Equity 233.6   134.6
Total liabilities and equity $ 909.8   $ 832.8
 
 

INGEVITY CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 
Nine Months Ended September 30,
In millions 2017   2016 (1)
Cash flows from operating activities: $ 133.6   $ 74.1  
Cash flows from investing activities:
Capital expenditures (36.2 ) (37.3 )
Restricted investment (1.1 ) (69.4 )
Net investment in equity securities (1.7 )
Other investing activities, net (3.0 )  
Net cash provided (used) by investing activities (42.0 ) (106.7 )
Cash flows from financing activities:
Net borrowings under our revolving credit facility (111.9 ) 140.5
Proceeds from long-term borrowings 75.0 300.0
Debt issuance costs (1.3 ) (3.6 )
Borrowings (repayments) of notes payable and other short-term borrowings, net (8.2 )
Taxes withheld for employee equity award vesting (0.9 )
Treasury share repurchases (2.6 )
Noncontrolling interest distributions (8.2 ) (3.6 )
Cash distributed to WestRock at separation (448.5 )
Transactions with WestRock, net   51.9  
Net cash provided (used) by financing activities (49.9 ) 28.5  
Increase (decrease) in cash and cash equivalents 41.7 (4.1 )
Effect of exchange rate changes on cash (1.7 ) (0.8 )
 
Change in cash, cash equivalents and restricted cash (2) 40.0 (4.9 )
At beginning of period (2) 30.5   32.0  
At end of period (2) $ 70.5   $ 27.1  
_______________
(1) Certain prior period amounts have been revised to reflect the impact of adjustments made to our financial statements to correct for various immaterial errors previously identified during the quarter and year ended December 31, 2016. See section entitled "Correction of Previously Issued Financial Statements" on "Financial Schedules - Page 5" of this press release.
(2) Includes restricted cash of $0.3 million and zero for the periods ended September 30, 2017 and 2016, respectively. Restricted cash is included within Prepaid and Other Current Assets within the Consolidated Balance Sheets.
 
 

Ingevity Corporation

Correction to Previously Issued Financial Statements

During 2016, Ingevity identified various errors related to its previously issued annual and interim Combined Financial Statements. Specifically, in the first quarter of 2016, the Company determined that $3.3 million of cumulative intercompany profit in inventory had not been eliminated in prior years. During the fourth quarter, the company also identified errors related to a $1.8 million understatement of accruals for services rendered in prior years, as well as errors related to the timing for which revenue has been previously recognized.

The cumulative impact of the errors identified in 2016 had resulted in the overstatement of pre-tax and net income of $1.6 million and $1.0 million in 2015 and $0.9 million and $0.6 million in 2014, and a cumulative impact to net parent investment of $2.5 million as of January 1, 2014. In addition, such errors resulted in the $9.4 million and $5.5 million overstatement of revenue in 2015 and 2014, respectively. Although Ingevity’s management has determined that the impact of such errors is immaterial to all previously issued financial statements, we revised the previously issued financial statements for the periods ended December 31, 2015 and 2014, as shown in our 2016 Annual Report, and those corrections are also reflected for the three and nine months ended September 30, 2016 in the tables below.

Impact of Corrections to the Condensed Consolidated Statements of Operations

   
Three Months Ended
September 30, 2016

Nine Months Ended
September 30,2016

In millions, unaudited increase/(decrease) increase/(decrease)
Net sales $ 0.4 $ (7.2 )
Cost of sales 1.0 (8.2 )
Gross profit (0.6 ) 1.0
Selling, general and administrative costs (0.6 ) (2.2 )
Income before income taxes 3.2
Provision for income taxes 0.1 1.3
Net income (loss) (0.1 ) 1.9
Net income (loss) attributable to Ingevity stockholders (0.1 ) 1.3
 

Impact of Corrections to the Segment Operating Results

 
Three Months Ended
September 30, 2016

Nine Months Ended
September 30,2016

In millions, unaudited increase/(decrease) increase/(decrease)
Net sales
Performance Materials $ 0.1 $ (0.9 )
Performance Chemicals 0.3   (6.3 )
Total net sales $ 0.4   $ (7.2 )
 
Segment operating profit
Performance Materials $ 0.2 $ 3.2
Performance Chemicals (0.2 )  
Total segment operating profit $   $ 3.2  
 

Impact of Corrections to the Condensed Consolidated Statements of Cash Flows

   
Nine Months Ended September 30, 2016
In millions, unaudited increase/(decrease)
Cash flows from operating activities: $ (0.5 )
Cash flows from financing activities:
Transactions with WestRock, net 0.5  
Net cash provided (used) by financing activities $ 0.5  
 
 

Ingevity Corporation

Non-GAAP Financial Measures

Ingevity has presented certain financial measures, defined below, which have not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and has provided a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP. These financial measures are not meant to be considered in isolation or as a substitute for the most directly comparable financial measure calculated in accordance with GAAP. The company believes these non-GAAP measures provide investors, potential investors, securities analysts and others with useful information to evaluate the performance of the business, because such measures, when viewed together with our financial results computed in accordance with GAAP, provide a more complete understanding of the factors and trends affecting our historical financial performance and projected future results.

Ingevity uses the following non-GAAP measures:

Adjusted earnings (loss) is defined as net income (loss) attributable to Ingevity stockholders plus restructuring and other (income) charges, separation costs, acquisition costs and the income tax expense (benefit) on those items.

Diluted adjusted earnings (loss) per share is defined as diluted earnings (loss) per common share attributable to Ingevity stockholders plus restructuring and other (income) charges per share, separation costs per share, acquisition costs per share and the income tax expense (benefit) per share on those items.

Adjusted EBITDA is defined as net income (loss) plus provision for income taxes, interest expense, depreciation and amortization, restructuring and other (income) charges, separation costs and acquisition costs.

Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Net Sales

Segment EBITDA is defined as segment operating profit plus depreciation and amortization.

Segment EBITDA Margin is defined as Segment EBITDA divided by Net Sales.

The Company also uses the above financial measures as the primary measures of profitability used by managers of the business and its segments. In addition, the Company believes Adjusted EBITDA, Adjusted EBITDA Margin, Segment EBITDA and Segment EBITDA Margin are useful measures because they exclude the effects of financing and investment activities as well as non-operating activities. These non-GAAP financial measures are not intended to replace the presentation of financial results in accordance with GAAP and investors should consider the limitations associated with these non-GAAP measures, including the potential lack of comparability of these measures from one company to another. Reconciliations of these non-GAAP financial measures are set forth within the following pages.

A reconciliation of net income to adjusted EBITDA as projected for 2017 is not provided. Ingevity does not forecast net income as we cannot, without unreasonable effort, estimate or predict with certainty various components of net income. These components include additional costs associated with the separation from WestRock, further restructuring and other income or charges, and acquisition related charges in connection with the planned acquisition of Georgia Pacific's pine chemical business as well as the related tax impacts of these items. Additionally, discrete tax items could drive variability in our projected effective tax rate. All of these components could significantly impact such financial measures. Further, in the future, other items with similar characteristics to those currently included in adjusted EBITDA, that have a similar impact on comparability of periods, and which are not known at this time, may exist and impact adjusted EBITDA.

 

INGEVITY CORPORATION

Reconciliation of Non-GAAP Financial Measures

 

Reconciliation of Net Income (Loss) (GAAP) to Adjusted Earnings (Loss) (Non-GAAP)

   
Three Months Ended
September 30,
Nine Months Ended
September 30,
In millions, except per share amounts; unaudited 2017   2016 (1) 2017   2016 (1)
Net income (loss) $ 38.4 $ (4.9 ) $ 97.2 $ 32.7
Less: Net income (loss) attributable to noncontrolling interests 4.6   2.3   12.3   6.6  
Net income (loss) attributable to Ingevity stockholders (GAAP) 33.8 (7.2 ) 84.9 26.1
Restructuring and other (income) charges (2) 0.1 32.7 3.5 38.3
Separation costs (3) 0.2 2.5 0.7 13.6
Acquisition costs(4) 4.1 4.1
Income tax effect on items above (1.6 ) (0.9 ) (2.4 ) (4.3 )
Adjusted earnings (loss) (Non-GAAP) $ 36.6   $ 27.1   $ 90.8   $ 73.7  
 
Diluted earnings (loss) per common share (GAAP) $ 0.79 $ (0.17 ) $ 2.00 $

0.62

Restructuring and other (income) charges 0.77 0.08 0.91
Separation costs 0.01 0.06 0.01 0.32
Acquisition costs 0.10 0.10
Income tax effect on items above (0.04 ) (0.02 ) (0.06 ) (0.10 )
Diluted adjusted earnings (loss) per share (Non-GAAP) $ 0.86   $ 0.64   $ 2.13   $

1.75

 
 

Average number of shares outstanding used in diluted adjusted after-tax earnings per share computations (5)

42.5 42.2 42.5 42.2

_______________

(1) Certain prior period amounts have been revised to reflect the impact of adjustments made to our financial statements to correct for various immaterial errors previously identified during the quarter and year ended December 31, 2016.
(2) Charges for the three months ended September 30, 2017 include $0.1 million in costs primarily associated with the exit of our Performance Chemicals' manufacturing operations in Palmeira, Santa Catarina, Brazil. Charges incurred for the nine months ended September 30, 2017 include $1.3 million in severance and other employee-related costs related to a reorganization as part of an effort to streamline our leadership team, flatten the organization and reduce costs. Additional charges include $2.2 million in miscellaneous costs primarily associated with the exit of our Performance Chemicals' manufacturing operations in Palmeira, Santa Catarina, Brazil. Charges incurred during 2016 relate to two restructuring activities that commenced in the first quarter of 2016. Charges for the three months ended September 30, 2016 were comprised of an asset impairment charge of $30.2 million, severance related charges of $2.0 million and miscellaneous exit costs of $0.5 million. Charges for the nine months ended September 30, 2016 were comprised of asset write-downs, including the asset impairment charge of $30.2 million, accelerated depreciation of $0.4 million, $7.2 million in severance related charges, and miscellaneous exist costs of $0.5 million.
(3) In connection with the separation from WestRock we have incurred pre-tax separation costs. These costs were primarily related to professional fees associated with separation activities within the finance, tax and legal functions.
(4) Charges primarily relate to legal and professional fees incurred associated with the planned acquisition of Georgia Pacific's Pine Chemicals Business.
(5) The average number of shares outstanding used in the three months ended September 30, 2016 diluted adjusted earnings (loss) per share computation (Non-GAAP) includes 121 thousand diluted shares. This number of shares differs from the average number of shares outstanding used in the diluted earnings (loss) per common share computation (GAAP) as we had a net loss attributable to Ingevity stockholders (GAAP) for the same period.
 
 

INGEVITY CORPORATION

Reconciliation of Non-GAAP Financial Measures

 

Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP)

 
Three Months Ended
September 30,
Nine Months Ended
September 30,
In millions, unaudited 2017   2016 (1) 2017   2016 (1)
Net income (loss) (GAAP) $ 38.4 $ (4.9 ) $ 97.2 $ 32.7
Provision for income taxes 16.7 15.4 44.9 39.2
Interest expense, net 3.2 3.8 9.3 14.2
Separation costs 0.2 2.5 0.7 13.6
Depreciation and amortization 10.0 10.1 30.4 28.4
Restructuring and other (income) charges 0.1 32.7 3.5 38.3
Acquisition costs 4.1     4.1    
Adjusted EBITDA (Non-GAAP) $ 72.7   $ 59.6   $ 190.1   $ 166.4  
 
Net sales $ 264.1 $ 252.4 $ 742.9 $ 697.4
Net income (loss) margin 14.5 % (1.9 )% 13.1 % 4.7 %
Adjusted EBITDA margin 27.5 % 23.6 % 25.6 % 23.9 %

_______________

(1) Certain prior period amounts have been revised to reflect the impact of adjustments made to our financial statements to correct for various immaterial errors previously identified during the quarter and year ended December 31, 2016.
 
 

INGEVITY CORPORATION

Reconciliation of Non-GAAP Financial Measures

 

Reconciliation of Segment Operating Profit (GAAP) to Segment EBITDA (Non-GAAP)

   
In millions, unaudited Three Months Ended
September 30,
Nine Months Ended
September 30,
Performance Materials 2017   2016 (1) 2017   2016 (1)
 
Segment operating profit (GAAP) $ 29.3 $ 27.8 $ 89.5 $ 84.7
Depreciation and amortization 4.9   4.7   14.9   11.6  
Segment EBITDA (Non-GAAP) $ 34.2   $ 32.5   $ 104.4   $ 96.3  
Inter-company foreign currency loss/(gain) (0.1 ) 1.7   1.2   0.1  
Segment EBITDA excluding inter-company foreign currency impacts (Non-GAAP) $ 34.1   $ 34.2   $ 105.6   $ 96.4  
 
Net sales $ 85.4 $ 79.4 $ 258.3 $ 223.7
Segment operating margin 34.3 % 35.0 % 34.6 % 37.9 %
Segment EBITDA margin 40.0 % 40.9 % 40.4 % 43.0 %
Segment EBITDA margin excluding inter-company foreign currency impacts 39.9 % 43.1 % 40.9 % 43.1 %
 
Performance Chemicals
Segment operating profit (GAAP) $ 33.4 $ 21.7 $ 70.2 $ 53.3
Depreciation and amortization 5.1   5.4   15.5   16.8  
Segment EBITDA (Non-GAAP) $ 38.5   $ 27.1   $ 85.7   $ 70.1  
 
Net sales $ 178.7 $ 173.0 $ 484.6 $ 473.7
Segment operating margin 18.7 % 12.5 % 14.5 % 11.3 %
Segment EBITDA margin 21.5 % 15.7 % 17.7 % 14.8 %
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(1) Certain prior period amounts have been revised to reflect the impact of adjustments made to our financial statements to correct for various immaterial errors previously identified during the quarter and year ended December 31, 2016.
 

Contact:

Ingevity Corporation
Jack Maurer, 843-746-8242
jack.maurer@ingevity.com
or
Investors:
Dan Gallagher, 843-740-2126
daniel.gallagher@ingevity.com

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