- Net sales of $248.7 million and net income of $25.8 million resulted in net income as a percentage of sales of 10.4 percent, compared to net sales of $262.2 million and net income of $27.1 million which resulted in net income as a percentage of sales of 10.3 percent in the prior year quarter.
- Diluted earnings per share were $0.56; diluted adjusted earnings per share were $0.66
- Adjusted EBITDA of $58.4 million essentially level with second quarter 2015 pro forma adjusted EBITDA of $58.2 million
- Adjusted EBITDA margin of 23.5 percent improved 130 basis points versus pro forma second quarter 2015
- Company adjusts fiscal year 2016 guidance to sales between $880 million and $910 million and adjusted EBITDA between $180 million and $195 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.
Ingevity Corporation (NYSE:NGVT) today reported second quarter net sales
of $248.7 million and net income of $25.8 million, both down 5 percent
versus the prior year’s second quarter when the business operated as the
specialty chemicals division of MeadWestvaco Corporation, now WestRock
Company. Second quarter diluted earnings per share were $0.56. Excluding
restructuring and other costs of $0.02 per share and separation costs of
$0.08 per share, diluted adjusted earnings per share were $0.66.
Adjusted earnings before interest, taxes, depreciation and amortization
(EBITDA) of $58.4 million were essentially level with second quarter
2015 pro forma adjusted EBITDA of $58.2 million.
“In our first quarter as an independent company, Ingevity delivered
earnings that were solidly in line with our expectations,” said Michael
Wilson, Ingevity’s president and CEO. “Despite lower sales versus the
prior year period, we achieved adjusted EBITDA essentially level with
the prior year quarter and higher margins.” Ingevity’s second quarter
adjusted EBITDA margin of 23.5 percent was up from the prior year’s
second quarter pro forma adjusted EBITDA margin of 22.2 percent,
representing an improvement of 130 basis points.
“Our Performance Materials segment set another quarterly record for
sales driven by increasingly stringent regulations for automotive
gasoline vapor emissions, enhanced by strong vehicle sales, particularly
in the U.S.,” said Wilson. “In addition, sales of pavement technology
products within the Performance Chemicals segment set a second quarter
record due to adoption of our innovative technology and strong customer
partnerships. However, Performance Chemicals segment sales were down
significantly versus the prior year quarter as a result of continued
volume and pricing pressure in industrial specialties and oilfield
applications.”
Company-wide cost reduction and productivity initiatives launched in the
first quarter, aimed at lowering selling, general and administrative
(SG&A) costs, manufacturing and supply chain costs, and minimizing
standalone costs, have benefited results by $15 million through the
first half of the year.
Sequentially, versus the first quarter of 2016, second quarter sales
were up 22 percent and adjusted EBITDA was up 29 percent, reflecting
growth in Performance Materials and the strong seasonality of the
Performance Chemicals segment’s pavement technologies applications.
Sales in the segment’s industrial specialties and oilfield applications
were slightly higher than the first quarter of 2016.
Second Quarter 2016 Reportable Segment Financial Results
Performance Materials: Segment sales in the
second quarter 2016 were $74.5 million, up $11 million, or 17 percent,
versus the second quarter 2015. This all-time quarterly record was a
result of strength across all applications. Segment operating profit was
$26.3 million, up $5 million, or 22 percent, versus prior year quarter.
Segment EBITDA were $30 million, up $7 million, or 28 percent, versus
the prior year pro forma segment EBITDA. In automotive markets,
increased regulation, combined with the continued strength of U.S. light
vehicle sales, drove strong revenue growth.
Performance Chemicals: Segment sales in the
second quarter 2016 were $174.2 million, down $24 million, or 12
percent, versus the second quarter 2015. A reduction in volumes,
predominantly in the industrial specialties applications, was the key
contributor to the decrease. Segment operating profit was $22.8 million,
down $8 million, or 26 percent, versus prior year quarter. Segment
EBITDA were $28.4 million, down $6 million, or 18 percent, versus the
prior year quarter pro forma segment EBITDA based on volume and pricing
declines which were partially offset by foreign currency exchange
benefits and reduced spending at the segment’s manufacturing facilities.
Despite continued pressure from both direct competitors and substitute
materials, and while down 17 percent versus the prior year’s period,
sales in the company’s industrial specialties applications rose 2
percent sequentially. Sales to oilfield applications – down 27 percent
versus the prior year quarter – also rose sequentially by 9 percent.
Record-setting sales in the pavement technologies applications were up 5
percent versus the prior year’s period, up 8 percent for the half year,
and were up sequentially as expected given the seasonality of the
business.
Outlook
Ingevity adjusted its fiscal year 2016 guidance to sales of between $880
million and $910 million and adjusted EBITDA of between $180 million and
$195 million. The previous guidance had been for sales of between $870
million and $910 million and adjusted EBITDA of between $175 million and
$195 million.
The second half of the year is expected to be impacted by planned
outages at Ingevity’s manufacturing facilities, some of which are quite
significant in duration and scope. This will result in plant downtime,
lower fixed cost absorption and increased maintenance spending. Pressure
in industrial specialties and oilfield applications is anticipated to
continue. The company is also expected to experience normal seasonal
impacts, including the end of the paving season which results in
significantly lower profitability in the fourth quarter.
These headwinds will likely be countered by continued growth in the
Performance Materials segment and continued adoption of innovative
pavement chemistries within the Performance Chemicals segment. Lastly,
cost reduction initiatives remain on track to deliver $25 million to $30
million for the full year.
“Our first quarterly earnings report as a publicly traded company
reflects the diversity and strength of our business,” said Wilson. “With
the spinoff from WestRock behind us, we are highly focused on driving
profitable growth while capturing efficiencies across the company.”
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, Aug. 4, 2016, at 10
a.m. (Eastern Time) to discuss second quarter fiscal results. Those who
wish to participate in this event should dial 800-230-1059 (inside the
U.S.) or 612-333-4911 (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 Sept. 4, 2016, and can be accessed at 800-475-6701 (inside the
U.S.) or 320-365-3844 (outside the U.S.), with access code 397579.
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; 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, 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; 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; 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; 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
Registration Statement and 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.
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."
|
INGEVITY CORPORATION
Consolidated and Combined Statements of Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30
|
|
Six Months Ended
June 30
|
|
In millions, except per share amounts
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Net sales
|
|
$
|
248.7
|
|
|
$
|
262.2
|
|
|
$
|
452.6
|
|
|
$
|
501.4
|
|
|
Cost of sales
|
|
172.6
|
|
|
177.1
|
|
|
316.5
|
|
|
347.2
|
|
|
Gross profit
|
|
76.1
|
|
|
85.1
|
|
|
136.1
|
|
|
154.2
|
|
|
Selling, general and administrative expenses
|
|
28.9
|
|
|
32.1
|
|
|
56.5
|
|
|
60.3
|
|
|
Separation costs
|
|
4.7
|
|
|
4.8
|
|
|
11.1
|
|
|
6.3
|
|
|
Interest expense, net
|
|
5.0
|
|
|
4.4
|
|
|
10.4
|
|
|
8.5
|
|
|
Other (income) expense, net
|
|
(0.9
|
)
|
|
0.2
|
|
|
(0.1
|
)
|
|
(0.9
|
)
|
|
Income before income taxes
|
|
38.4
|
|
|
43.6
|
|
|
58.2
|
|
|
80.0
|
|
|
Provision for income taxes
|
|
12.6
|
|
|
16.5
|
|
|
22.6
|
|
|
28.7
|
|
|
Net income (loss)
|
|
25.8
|
|
|
27.1
|
|
|
35.6
|
|
|
51.3
|
|
|
Less: Net income (loss) attributable to noncontrolling interests,
net of taxes
|
|
2.1
|
|
|
1.2
|
|
|
3.7
|
|
|
2.4
|
|
|
Net income (loss) attributable to Ingevity stockholders
|
|
$
|
23.7
|
|
|
$
|
25.9
|
|
|
$
|
31.9
|
|
|
$
|
48.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share attributable to Ingevity
stockholders
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
0.56
|
|
|
$
|
0.62
|
|
|
$
|
0.76
|
|
|
$
|
1.16
|
|
|
Average number of shares outstanding used in the
earnings (loss) per share computations
(1)
|
|
42.1
|
|
|
42.1
|
|
|
42.1
|
|
|
42.1
|
|
|
_________________
|
|
(1) On May 15, 2016, WestRock distributed 42,102 thousand 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
June 30
|
|
Six Months Ended
June 30
|
|
In millions
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
Performance Chemicals
|
|
$
|
174.2
|
|
|
$
|
198.4
|
|
|
$
|
307.3
|
|
|
$
|
373.4
|
|
|
Performance Materials
|
|
74.5
|
|
|
63.8
|
|
|
145.3
|
|
|
128.0
|
|
|
Total net sales
|
|
$
|
248.7
|
|
|
$
|
262.2
|
|
|
$
|
452.6
|
|
|
$
|
501.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit
|
|
|
|
|
|
|
|
|
|
Performance Chemicals
|
|
22.8
|
|
|
30.8
|
|
|
31.4
|
|
|
49.9
|
|
|
Performance Materials
|
|
26.3
|
|
|
21.6
|
|
|
53.9
|
|
|
44.2
|
|
|
Total segment operating profit
|
|
49.1
|
|
|
52.4
|
|
|
85.3
|
|
|
94.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs (1)
|
|
(4.7
|
)
|
|
(4.8
|
)
|
|
(11.1
|
)
|
|
(6.3
|
)
|
|
Restructuring and other income (charges) (2)
|
|
(1.0
|
)
|
|
0.4
|
|
|
(5.6
|
)
|
|
0.7
|
|
|
Interest expense, net
|
|
(5.0
|
)
|
|
(4.4
|
)
|
|
(10.4
|
)
|
|
(8.5
|
)
|
|
Provision for income taxes
|
|
(12.6
|
)
|
|
(16.5
|
)
|
|
(22.6
|
)
|
|
(28.7
|
)
|
|
Net (income) loss attributable to noncontrolling interests
|
|
(2.1
|
)
|
|
(1.2
|
)
|
|
(3.7
|
)
|
|
(2.4
|
)
|
|
Net income attributable to the Ingevity stockholders
|
|
$
|
23.7
|
|
|
$
|
25.9
|
|
|
$
|
31.9
|
|
|
$
|
48.9
|
|
|
_________________
|
|
|
|
|
|
|
|
|
|
(1) 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.
|
|
(2) For the three and six months ended June 30, 2016 and June 30,
2015 the charges related to Performance Chemicals and
Performance Materials as shown in the table below:
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30
|
|
|
|
|
|
Six Months Ended
June 30
|
|
In millions
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
2016
|
|
2015
|
|
Performance Chemicals
|
|
|
|
|
|
|
$
|
1.0
|
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
4.8
|
|
|
$
|
—
|
|
|
Performance Materials
|
|
|
|
|
|
|
—
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
0.8
|
|
|
(0.7
|
)
|
|
Total
|
|
|
|
|
|
|
$
|
1.0
|
|
|
|
$
|
(0.4
|
)
|
|
|
|
|
|
$
|
5.6
|
|
|
$
|
(0.7
|
)
|
|
INGEVITY CORPORATION
Condensed Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
|
In millions
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
55.7
|
|
|
$
|
32.0
|
|
Accounts receivable, net
|
|
|
116.7
|
|
|
96.2
|
|
Inventories, net
|
|
|
156.8
|
|
|
151.0
|
|
Prepaid and other current assets
|
|
|
23.5
|
|
|
20.2
|
|
Current assets
|
|
|
352.7
|
|
|
299.4
|
|
Property, plant and equipment, net
|
|
|
442.8
|
|
|
437.5
|
|
Restricted investment
|
|
|
69.1
|
|
|
—
|
|
Other assets
|
|
|
43.0
|
|
|
44.9
|
|
Total assets
|
|
|
$
|
907.6
|
|
|
$
|
781.8
|
|
Liabilities and Equity
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
88.8
|
|
|
$
|
64.8
|
|
Accrued expenses
|
|
|
15.5
|
|
|
12.2
|
|
Other current liabilities
|
|
|
21.9
|
|
|
20.2
|
|
Current liabilities
|
|
|
126.2
|
|
|
97.2
|
|
Long term debt including capital lease obligations
|
|
|
566.6
|
|
|
80.1
|
|
Deferred income taxes
|
|
|
69.0
|
|
|
75.7
|
|
Other liabilities
|
|
|
9.2
|
|
|
7.1
|
|
Total liabilities
|
|
|
771.0
|
|
|
260.1
|
|
Equity
|
|
|
136.6
|
|
|
521.7
|
|
Total liabilities and equity
|
|
|
$
|
907.6
|
|
|
$
|
781.8
|
|
INGEVITY CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
In millions
|
|
2016
|
|
|
2015
|
|
Cash flows from operating activities:
|
|
$
|
36.7
|
|
|
|
$
|
8.5
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Capital expenditures
|
|
(22.2
|
)
|
|
|
(37.1
|
)
|
|
Payments for acquired businesses, net of cash acquired
|
|
—
|
|
|
|
0.6
|
|
|
Restricted investment
|
|
(69.1
|
)
|
|
|
—
|
|
|
Net cash provided (used) by investing activities
|
|
(91.3
|
)
|
|
|
(36.5
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Net borrowings under our revolving credit facility
|
|
190.0
|
|
|
|
—
|
|
|
Proceeds from long-term borrowings
|
|
300.0
|
|
|
|
—
|
|
|
Debt issuance costs
|
|
(3.5
|
)
|
|
|
—
|
|
|
Borrowings (repayments) of notes payable and other short-term
borrowings, net
|
|
(9.4
|
)
|
|
|
12.2
|
|
|
Noncontrolling interest distributions
|
|
(1.7
|
)
|
|
|
(1.8
|
)
|
|
Cash distributed to WestRock at separation
|
|
(448.5
|
)
|
|
|
—
|
|
|
Transactions with WestRock, net
|
|
51.4
|
|
|
|
12.7
|
|
|
Net cash provided (used) by financing activities
|
|
78.3
|
|
|
|
23.1
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
23.7
|
|
|
|
(4.9
|
)
|
|
Effect of exchange rate changes on cash
|
|
—
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
23.7
|
|
|
|
(4.6
|
)
|
|
At beginning of period
|
|
32.0
|
|
|
|
19.9
|
|
|
At end of period
|
|
$
|
55.7
|
|
|
|
$
|
15.3
|
|
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, inclusive of pro forma
adjustments:
Adjusted earnings (loss) is defined as net income (loss)
attributable to Ingevity stockholders plus restructuring and other
(income) charges, separation 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, 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,
separation costs and restructuring and other (income) charges.
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. 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.
Unaudited Pro Forma Adjustments
The non-GAAP financial measures noted above, adjusted for the Unaudited
Pro Forma Adjustments, apply only to our quarterly periods within and
fiscal year ended December 31, 2015. The Unaudited Pro Forma Adjustments
are from the Unaudited Pro Forma Combined Financial Statements which
were derived from the historical Combined Financial Statements of
Ingevity, prepared in accordance with U.S. generally accepted accounting
principles. These Unaudited Pro Forma Combined Financial Statements
include adjustments required by SEC Staff Accounting Bulletin Topic
1:B-3 and Article 11 of SEC Regulation S-X. For more information on the
pro forma adjustments see the section entitled: "Notes to the Unaudited
Pro Forma Adjustments" included within this Exhibit.
A reconciliation of Net Income to Adjusted EBITDA as projected for 2016
is not provided because we do not forecast Net Income as we cannot,
without unreasonable effort, estimate or predict with certainty various
components of Net Income. These components include additional separation
costs associated with the Separation and further restructuring and other
income (charges) incurred in 2016 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
June 30
|
|
Six Months Ended
June 30
|
|
In millions, except per share amounts
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Net income (loss) attributable to Ingevity stockholders (GAAP)
|
|
$
|
23.7
|
|
|
$
|
25.9
|
|
|
$
|
31.9
|
|
|
$
|
48.9
|
|
|
Restructuring and other (income) charges (A)
|
|
1.0
|
|
|
(0.4
|
)
|
|
5.6
|
|
|
(0.7
|
)
|
|
Separation costs (B)
|
|
4.7
|
|
|
4.8
|
|
|
11.1
|
|
|
6.3
|
|
|
Income tax effect on items above
|
|
(1.5
|
)
|
|
(1.0
|
)
|
|
(3.4
|
)
|
|
(1.2
|
)
|
|
Adjusted earnings (loss) (Non-GAAP)
|
|
$
|
27.9
|
|
|
$
|
29.3
|
|
|
$
|
45.2
|
|
|
$
|
53.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share (GAAP)
|
|
$
|
0.56
|
|
|
$
|
0.62
|
|
|
$
|
0.76
|
|
|
$
|
1.16
|
|
|
Restructuring and other (income) charges
|
|
0.03
|
|
|
(0.01
|
)
|
|
0.13
|
|
|
(0.02
|
)
|
|
Separation costs
|
|
0.11
|
|
|
0.11
|
|
|
0.26
|
|
|
0.15
|
|
|
Income tax effect on items above
|
|
(0.04
|
)
|
|
(0.02
|
)
|
|
(0.08
|
)
|
|
(0.03
|
)
|
|
Diluted adjusted earnings (loss) per share (Non-GAAP)
|
|
$
|
0.66
|
|
|
$
|
0.70
|
|
|
$
|
1.07
|
|
|
$
|
1.26
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares outstanding used in
diluted adjusted after-tax earnings per share computations
|
|
42.1
|
|
|
42.1
|
|
|
42.1
|
|
|
42.1
|
|
|
_______________
|
|
(A) Charges incurred during 2016 relate to two restructuring
activities that commenced in the first quarter of 2016.
Charges for the three months ended June 30, 2016 were comprised of
accelerated depreciation of $0.3 million and
miscellaneous exit costs of $0.7 million. Charges to the six
months ended June 30, 2016 were comprised of asset
write-downs, including accelerated depreciation of $0.4 million
and $5.2 million in severance related charges.
Income for the three and six months ended June 30, 2015 related to
additional proceeds from the sale of our Performance
Materials’ air purification business from 2014.
|
|
(B) 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.
|
|
|
|
Reconciliation of 2015 Pro Forma - Adjusted Earnings (Non-GAAP)
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2015
|
|
Six Months Ended June 30, 2015
|
|
|
|
|
|
Pro Forma
Adjust
|
|
Pro
Forma
|
|
|
|
Pro Forma
Adjust
|
|
Pro
Forma
|
|
In millions, except per share amounts
|
|
|
|
|
|
|
|
Net income (loss) attributable to Ingevity stockholders (GAAP)
|
|
$
|
25.9
|
|
|
1.6
|
|
(A)
|
$
|
27.5
|
|
|
$
|
48.9
|
|
|
(0.3
|
)
|
(A)
|
$
|
48.6
|
|
|
Restructuring and other (income) charges
|
|
(0.4
|
)
|
|
—
|
|
|
(0.4
|
)
|
|
(0.7
|
)
|
|
—
|
|
|
(0.7
|
)
|
|
Separation costs
|
|
4.8
|
|
|
(4.8
|
)
|
|
—
|
|
|
6.3
|
|
|
(6.3
|
)
|
|
—
|
|
|
Income tax effect on items above
|
|
(1.0
|
)
|
|
1.1
|
|
|
0.1
|
|
|
(1.2
|
)
|
|
1.5
|
|
|
0.3
|
|
|
Adjusted earnings (loss) (Non-GAAP)
|
|
$
|
29.3
|
|
|
|
|
$
|
27.2
|
|
|
$
|
53.3
|
|
|
|
|
$
|
48.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share (GAAP)
|
|
$
|
0.62
|
|
|
0.04
|
|
|
$
|
0.66
|
|
|
$
|
1.16
|
|
|
(0.01
|
)
|
|
$
|
1.15
|
|
|
Restructuring and other (income) charges
|
|
(0.01
|
)
|
|
—
|
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
—
|
|
|
(0.02
|
)
|
|
Separation costs
|
|
0.11
|
|
|
(0.11
|
)
|
|
—
|
|
|
0.15
|
|
|
(0.15
|
)
|
|
—
|
|
|
Income tax effect on items above
|
|
(0.02
|
)
|
|
0.02
|
|
|
—
|
|
|
(0.03
|
)
|
|
0.04
|
|
|
0.01
|
|
|
Diluted adjusted earnings (loss) per share
(Non-GAAP)
|
|
$
|
0.70
|
|
|
|
|
$
|
0.65
|
|
|
$
|
1.26
|
|
|
|
|
$
|
1.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares outstanding used in
diluted adjusted after-tax earnings per share computations
|
|
42.1
|
|
|
|
|
42.1
|
|
|
42.1
|
|
|
|
|
42.1
|
|
|
_______________
|
|
(A) Represents the cumulative after-tax pro forma adjustments as
further described within the section entitled:
"Notes to the Unaudited Pro Forma Adjustments".
|
|
INGEVITY CORPORATION
Reconciliation of Non-GAAP Financial Measures
Reconciliation of Net Income (GAAP) to Adjusted EBITDA
(Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30
|
|
|
|
|
|
Six Months Ended
June 30
|
|
In millions
|
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
Net income (loss) (GAAP)
|
|
|
|
|
|
|
$
|
25.8
|
|
|
|
|
$
|
27.1
|
|
|
|
|
|
|
$
|
35.6
|
|
|
|
|
$
|
51.3
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
12.6
|
|
|
|
|
16.5
|
|
|
|
|
|
|
22.6
|
|
|
|
|
28.7
|
|
|
Interest expense
|
|
|
|
|
|
|
5.0
|
|
|
|
|
4.4
|
|
|
|
|
|
|
10.4
|
|
|
|
|
8.5
|
|
|
Separation costs
|
|
|
|
|
|
|
4.7
|
|
|
|
|
4.8
|
|
|
|
|
|
|
11.1
|
|
|
|
|
6.3
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
9.3
|
|
|
|
|
8.4
|
|
|
|
|
|
|
18.3
|
|
|
|
|
16.9
|
|
|
Restructuring and other (income) charges
|
|
|
|
|
|
|
1.0
|
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
5.6
|
|
|
|
|
(0.7
|
)
|
|
Adjusted EBITDA (Non-GAAP)
|
|
|
|
|
|
|
$
|
58.4
|
|
|
|
|
$
|
60.8
|
|
|
|
|
|
|
$
|
103.6
|
|
|
|
|
$
|
111.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
$
|
248.7
|
|
|
|
|
$
|
262.2
|
|
|
|
|
|
|
$
|
452.6
|
|
|
|
|
$
|
501.4
|
|
|
Net income (loss) margin
|
|
|
|
|
|
|
10.4
|
%
|
|
|
|
10.3
|
%
|
|
|
|
|
|
7.9
|
%
|
|
|
|
10.2
|
%
|
|
Adjusted EBITDA margin
|
|
|
|
|
|
|
23.5
|
%
|
|
|
|
23.2
|
%
|
|
|
|
|
|
22.9
|
%
|
|
|
|
22.1
|
%
|
|
Reconciliation of 2015 Pro Forma - Adjusted EBITDA (Non-GAAP)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2015
|
|
Six Months Ended
June 30, 2015
|
|
|
|
|
|
Pro Forma
Adjust
|
|
Pro Forma
|
|
|
|
Pro Forma
Adjust
|
|
Pro Forma
|
|
In millions
|
|
|
|
|
|
|
|
Net income (loss) (GAAP)
|
|
$
|
27.1
|
|
|
1.6
|
|
(A)
|
$
|
28.7
|
|
|
$
|
51.3
|
|
|
(0.3
|
)
|
(A)
|
$
|
51.0
|
|
|
Provision for income taxes
|
|
16.5
|
|
|
0.2
|
|
(B)
|
16.7
|
|
|
28.7
|
|
|
0.4
|
|
(B)
|
29.1
|
|
|
Interest expense
|
|
4.4
|
|
|
0.4
|
|
(C)
|
4.8
|
|
|
8.5
|
|
|
1.0
|
|
(C)
|
9.5
|
|
|
Separation costs
|
|
4.8
|
|
|
(4.8
|
)
|
(D)
|
—
|
|
|
6.3
|
|
|
(6.3
|
)
|
(D)
|
—
|
|
|
Depreciation and amortization
|
|
8.4
|
|
|
|
|
8.4
|
|
|
16.9
|
|
|
|
|
16.9
|
|
|
Restructuring and other (income) charges
|
|
(0.4
|
)
|
|
|
|
(0.4
|
)
|
|
(0.7
|
)
|
|
|
|
(0.7
|
)
|
|
Adjusted EBITDA (Non-GAAP)
|
|
$
|
60.8
|
|
|
|
(E)
|
$
|
58.2
|
|
|
$
|
111.0
|
|
|
|
(E)
|
$
|
105.8
|
|
|
|
|
Net sales
|
|
|
|
|
|
$
|
262.2
|
|
|
|
|
|
|
$
|
501.4
|
|
|
Net income (loss) margin
|
|
|
|
|
|
10.9
|
%
|
|
|
|
|
|
10.2
|
%
|
|
Adjusted EBITDA margin
|
|
|
|
|
|
22.2
|
%
|
|
|
|
|
|
21.1
|
%
|
|
_______________
|
|
(A) Represents the cumulative after-tax pro forma adjustments as
further described within the section entitled:
"Notes to the Unaudited Pro Forma Adjustments".
|
|
(B) Refer to the corresponding letter note within the "Notes to
the Unaudited Pro Forma Adjustments" for a description of this
adjustment.
|
|
(C) Refer to the corresponding letter note within the "Notes to
the Unaudited Pro Forma Adjustments"for a description of this
adjustment.
|
|
(D) Refer to the corresponding letter note within the "Notes to
the Unaudited Pro Forma Adjustments"for a description of this
adjustment.
|
|
(E) Ingevity would have incurred incremental costs as an
independent public company, including costs to replace services
previously provided by WestRock as well as other stand-alone
costs. In total, Ingevity management estimates that these
costs would have ranged from $0.5 million to $1 million before-tax
quarterly, over and above amounts currently included in
the Unaudited Pro Forma Combined Statement of Operations.
|
|
INGEVITY CORPORATION
Reconciliation of Non-GAAP Financial Measures
Reconciliation of Segment Operating Profit (GAAP) to Segment
EBITDA (Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
|
|
|
|
|
|
Three Months Ended
June 30
|
|
|
|
Six Months Ended
June 30
|
|
Performance Chemicals
|
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (GAAP)
|
|
|
|
|
|
|
$
|
22.8
|
|
|
|
|
$
|
30.8
|
|
|
|
|
$
|
31.4
|
|
|
|
|
$
|
49.9
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
5.6
|
|
|
|
|
5.8
|
|
|
|
|
11.4
|
|
|
|
|
11.6
|
|
|
Segment EBITDA (Non-GAAP)
|
|
|
|
|
|
|
$
|
28.4
|
|
|
|
|
$
|
36.6
|
|
|
|
|
$
|
42.8
|
|
|
|
|
$
|
61.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
$
|
174.2
|
|
|
|
|
$
|
198.4
|
|
|
|
|
$
|
307.3
|
|
|
|
|
$
|
373.4
|
|
|
Segment operating margin
|
|
|
|
|
|
|
13.1
|
%
|
|
|
|
15.5
|
%
|
|
|
|
10.2
|
%
|
|
|
|
13.4
|
%
|
|
Segment EBITDA margin
|
|
|
|
|
|
|
16.3
|
%
|
|
|
|
18.4
|
%
|
|
|
|
13.9
|
%
|
|
|
|
16.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Materials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (GAAP)
|
|
|
|
|
|
|
$
|
26.3
|
|
|
|
|
$
|
21.6
|
|
|
|
|
$
|
53.9
|
|
|
|
|
$
|
44.2
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
3.7
|
|
|
|
|
2.6
|
|
|
|
|
6.9
|
|
|
|
|
5.3
|
|
|
Segment EBITDA (Non-GAAP)
|
|
|
|
|
|
|
$
|
30.0
|
|
|
|
|
$
|
24.2
|
|
|
|
|
$
|
60.8
|
|
|
|
|
$
|
49.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
$
|
74.5
|
|
|
|
|
$
|
63.8
|
|
|
|
|
$
|
145.3
|
|
|
|
|
$
|
128.0
|
|
|
Segment operating margin
|
|
|
|
|
|
|
35.3
|
%
|
|
|
|
33.9
|
%
|
|
|
|
37.1
|
%
|
|
|
|
34.5
|
%
|
|
Segment EBITDA margin
|
|
|
|
|
|
|
40.3
|
%
|
|
|
|
37.9
|
%
|
|
|
|
41.8
|
%
|
|
|
|
38.7
|
%
|
|
Reconciliation of 2015 Pro Forma - Segment EBITDA (Non-GAAP)
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2015
|
|
Six Months Ended June 30, 2015
|
|
In millions
|
|
|
|
Pro Forma
Adjust
|
|
Pro Forma
|
|
|
|
Pro Forma
Adjust
|
|
Pro Forma
|
|
Performance Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (GAAP)
|
|
$
|
30.8
|
|
|
$
|
(1.9
|
)
|
(A)
|
$
|
28.9
|
|
|
$
|
49.9
|
|
|
$
|
(3.8
|
)
|
(A)
|
$
|
46.1
|
|
|
Depreciation and amortization
|
|
5.8
|
|
|
|
|
5.8
|
|
|
11.6
|
|
|
|
|
11.6
|
|
|
Segment EBITDA (Non-GAAP)
|
|
$
|
36.6
|
|
|
|
|
$
|
34.7
|
|
|
$
|
61.5
|
|
|
|
|
$
|
57.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
$
|
198.4
|
|
|
|
|
|
|
$
|
373.4
|
|
|
Segment operating margin
|
|
|
|
|
|
14.6
|
%
|
|
|
|
|
|
12.3
|
%
|
|
Segment EBITDA margin
|
|
|
|
|
|
17.5
|
%
|
|
|
|
|
|
15.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Materials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (GAAP)
|
|
$
|
21.6
|
|
|
$
|
(0.7
|
)
|
(A)
|
$
|
20.9
|
|
|
$
|
44.2
|
|
|
$
|
(1.4
|
)
|
(A)
|
$
|
42.8
|
|
|
Depreciation and amortization
|
|
2.6
|
|
|
|
|
2.6
|
|
|
5.3
|
|
|
|
|
5.3
|
|
|
Segment EBITDA (Non-GAAP)
|
|
$
|
24.2
|
|
|
|
|
$
|
23.5
|
|
|
$
|
49.5
|
|
|
|
|
$
|
48.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
$
|
63.8
|
|
|
|
|
|
|
$
|
128.0
|
|
|
Segment operating margin
|
|
|
|
|
|
32.8
|
%
|
|
|
|
|
|
33.4
|
%
|
|
Segment EBITDA margin
|
|
|
|
|
|
36.8
|
%
|
|
|
|
|
|
37.6
|
%
|
|
_______________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) Refer to the corresponding letter note within the "Notes to
the Unaudited Pro Forma Adjustments"
for a description of this adjustment.
|
Notes to the Unaudited Pro Forma Adjustments
For more information regarding the Ingevity’s unaudited pro forma
combined statements of operations for the year ended December 31, 2015,
see “Unaudited Pro Forma Combined Financial Statements” in the
Ingevity’s registration statement on Form 10 and amendments thereto (the
“Form 10”), copies of which may be obtained by visiting the web site of
the Securities and Exchange Commission, or the SEC, at www.sec.gov. The
"Unaudited Pro Forma Combined Statement of Operations" included within
Ingevity's registration statement on Form 10 is presented for the fiscal
year ended December 31, 2015 and gives effect as if the pro forma
adjustments had occurred on January 1, the first day of fiscal year
2015. Presented below is a quarterly impact of each respective pro forma
adjustments for the fiscal year ended December 31, 2015.
(A) We have entered into agreements to obtain audit and certain
compliance functions as a stand-alone public company as well as
compensation agreements with certain members of our executive team.
Prior to the completion of the separation, we estimated that we would
also enter into agreements to obtain insurance coverage according to
quotations we had received based on our individual loss history, credit
profile and selected insurance coverage. These expenses represent
recurring costs in excess of the amounts historically allocated to
Ingevity.
In addition, at the completion of the separation we entered into a new
raw material supply agreement with WestRock for the purchase of black
liquor soap skimmings (“BLSS”) and crude tall oil (“CTO”). We
historically obtained BLSS and CTO from WestRock under previously
existing supply agreements. We evaluated the new agreement and its
impact on our pro forma income statement. The pro forma adjustment also
included incremental costs of less than $1 million for the full year
2015 associated with this new agreement calculated by applying the new
agreement’s pricing terms to the actual purchased volumes in 2015.
The 2015 pro forma adjustment by segment by quarter is included in the
below table:
|
|
|
|
|
|
|
|
2015
|
|
In millions
|
|
|
|
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
|
YTD
|
|
Performance Chemicals
|
|
|
|
|
|
|
1.9
|
|
|
|
1.9
|
|
|
|
2.1
|
|
|
|
2.0
|
|
|
|
7.9
|
|
Performance Materials
|
|
|
|
|
|
|
0.7
|
|
|
|
0.7
|
|
|
|
0.7
|
|
|
|
0.6
|
|
|
|
2.7
|
|
Total
|
|
|
|
|
|
|
$
|
2.6
|
|
|
|
$
|
2.6
|
|
|
|
$
|
2.8
|
|
|
|
$
|
2.6
|
|
|
|
$
|
10.6
|
(B) Represents the tax effect of proforma adjustments for each
respective period.
(C) Represents adjustments to interest expense and amortization of debt
issuance costs related to our target pro forma long-term indebtedness.
The 2015 pro forma adjustment by quarter is included in the below table:
|
|
|
|
|
|
|
|
2015
|
|
In millions
|
|
|
|
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
|
YTD
|
|
Interest expense
|
|
|
|
|
|
|
$
|
0.6
|
|
|
|
$
|
0.4
|
|
|
|
$
|
(0.4
|
)
|
|
|
$
|
(1.7
|
)
|
|
|
$
|
(1.1
|
)
|
(D) Represents the elimination of expenses directly related to
transaction costs incurred during 2015 in connection with the separation
from WestRock, primarily related to professional fees associated with
separation activities within the finance, tax and legal functions. The
2015 pro forma adjustment by quarter is included in the below table:
|
|
|
|
|
|
|
|
2015
|
|
In millions
|
|
|
|
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
|
YTD
|
|
Separation costs
|
|
|
|
|
|
|
$
|
(1.5
|
)
|
|
|
$
|
(4.8
|
)
|
|
|
$
|
(5.5
|
)
|
|
|
$
|
(5.4
|
)
|
|
|
$
|
(17.2
|
)
|
Ingevity Corporation
Jack Maurer, 843-746-8242
jack.maurer@ingevity.com
or
Investors:
Dan Gallagher, 843-740-2126
daniel.gallagher@ingevity.com