FOURTH QUARTER
- Net sales of $210.9 million and net income of $11.7 million resulted in net income as a percentage of sales of 5.5 percent, compared to net sales of $209.1 million and net income of $9.9 million which resulted in net income as a percentage of sales of 4.7 percent in the prior year quarter
- Diluted earnings per share were $0.22; diluted adjusted earnings per share were $0.34
- Adjusted EBITDA of $36.0 million were up 18.0 percent versus fourth quarter 2015 pro forma adjusted EBITDA of $30.5 million
- Adjusted EBITDA margin of 17.1 percent improved 250 basis points versus pro forma fourth quarter 2015
FULL YEAR
- Net sales of $908.3 million and net income of $44.4 million resulted in net income as a percentage of sales of 4.9 percent, compared to net sales of $958.3 million and net income of $84.3 million which resulted in net income as a percentage of sales of 8.8 percent in the prior year
- Diluted earnings per share were $0.83 and reflect the previously disclosed closure of two manufacturing facilities in Brazil; diluted adjusted earnings per share were $2.08
- Adjusted EBITDA of $202.4 million were up 6.4 percent versus 2015 pro forma adjusted EBITDA of $190.3 million
- Adjusted EBITDA margin of 22.3 percent improved 240 basis points versus pro forma 2015
2017 OUTLOOK
- Company announces fiscal year 2017 guidance of sales between $930 million and $950 million and adjusted EBITDA between $215 million and $225 million
- Board of directors authorizes $100 million share repurchase program
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.”
Ingevity Corporation (NYSE: NGVT) today reported preliminary fourth
quarter net sales of $210.9 million and net income of $11.7 million,
representing 5.5 percent of sales. Sales were essentially level with
$209.1 million in the prior year’s fourth quarter and net income
increased 18.2 percent versus $9.9 million last year. The fourth quarter
diluted earnings per share were $0.22. Excluding, net of tax, separation
costs of $0.05 per share and restructuring and other costs of $0.07 per
share, diluted adjusted earnings per share were $0.34. Adjusted earnings
before interest, taxes, depreciation and amortization (EBITDA) of $36.0
million were up 18.0 percent versus fourth quarter 2015 pro forma
adjusted EBITDA of $30.5 million. Ingevity’s fourth quarter adjusted
EBITDA margin of 17.1 percent was up 250 basis points from the prior
year’s fourth quarter pro forma adjusted EBITDA margin of 14.6 percent.
For the full year, net sales were $908.3 million and net income was
$44.4 million, representing 4.9 percent of sales. Sales were down 5.2
percent versus $958.3 million in the prior year and net income decreased
47.3 percent versus $84.3 million last year. The diluted earnings per
share for 2016 were $0.83. Excluding, net of tax, restructuring and
other costs of $0.95 per share and separation costs of $0.30 per share,
diluted adjusted earnings per share were $2.08. Adjusted EBITDA of
$202.4 million were up 6.4 percent versus 2015 pro forma adjusted EBITDA
of $190.3 million. Ingevity’s 2016 adjusted EBITDA margin of 22.3
percent was up 240 basis points from the prior year’s pro forma adjusted
EBITDA margin of 19.9 percent.
“In what is seasonally a slower quarter, Ingevity’s revenues were in
line with our expectations,” said Michael Wilson, Ingevity’s president
and CEO. “Despite sales that were essentially level with the prior
year’s quarter, we delivered an 18.0 percent increase in adjusted
EBITDA. This was driven by improved product mix, lower raw material and
energy costs, and the benefits from our cost reduction efforts.” He said
that the company exceeded its 12-month company-wide cost reduction
target and decreased costs by more than $30 million in the year.
Wilson said the company’s Performance Materials segment saw strong
volume growth in sales of its activated carbon products for use in
automotive gasoline vapor emission control. “Strong demand drove an 18.7
percent increase in Performance Materials revenues, and coupled with
higher productivity, resulted in a 39.9 percent increase in segment
EBITDA on a pro forma basis,” Wilson said.
He added that challenging market conditions impacted the company’s
Performance Chemicals segment in the quarter. “Revenues for our pavement
technologies products were up versus the prior year’s fourth quarter.
However, our industrial specialties and oilfield applications businesses
were again negatively affected by continued pricing pressure.”
Looking at the full year 2016, Wilson said that it was a “remarkable”
year for the company. “We successfully executed the spinoff from
WestRock and delivered solid financial results increasing both adjusted
EBITDA and adjusted EBITDA margins despite revenues that were down more
than 5 percent. We ramped up capacity to meet rapidly growing demand in
Performance Materials. We won new business to combat volume and pricing
pressure in Performance Chemicals. And we benefitted from superb
execution of our cost reduction program. We expect to leverage this new
cost structure for enhanced earnings as market conditions improve in our
Performance Chemicals segment.”
The company generated $71.2 million of free cash flow and ended the year
with a strong balance sheet. Excluding the effects of the Wickliffe IDB
trust and associated restricted cash, the company ended the year with a
net debt to adjusted EBITDA ratio of less than 2x.
Fourth Quarter 2016 Reportable Segment Financial Results
Performance Materials: Segment sales in the
fourth quarter 2016 were $77.3 million, up $12.2 million, or 18.7
percent, versus the fourth quarter 2015. Segment operating profit was
$22.2 million, up $6.0 million, or 37.0 percent, versus the prior year
quarter pro forma segment operating profit. Segment EBITDA were $27.0
million, up $7.7 million, or 39.9 percent, versus the prior year pro
forma segment EBITDA. Volumes, particularly in automotive applications,
combined with increased plant efficiency, were the primary drivers to
the strong revenue and earnings growth.
For the full year 2016, segment sales were $301.0 million, up $44.6
million, or 17.4 percent, versus 2015. Segment operating profit was
$106.9 million, up $29.9 million, or 38.8 percent, versus the prior year
pro forma segment operating profit. Segment EBITDA were $123.3 million,
up $35.1 million, or 39.8 percent, versus the prior year pro forma
segment EBITDA.
Performance Chemicals: Segment sales in the
fourth quarter 2016 were $133.6 million, down $10.4 million, or 7.2
percent, versus the fourth quarter 2015. Segment operating profit was
$3.4 million, down $1.9 million, or 35.8 percent, versus the prior year
quarter pro forma segment operating profit. Segment EBITDA were $9.0
million, down $2.2 million, or 19.6 percent, versus the prior year
quarter pro forma segment EBITDA. Higher volumes and raw materials and
energy savings were more than offset by product price and mix weakness
in the company’s industrial specialties applications.
For the full year 2016, segment sales were $607.3 million, down $94.6
million, or 13.5 percent, versus 2015. Segment operating profit was
$56.7 million, down $22.0 million, or 28.0 percent, versus the prior
year pro forma segment operating profit. Segment EBITDA were $79.1
million, down $23.0 million, or 22.5 percent, versus the prior year pro
forma segment EBITDA.
Outlook
Ingevity announced its fiscal year 2017 guidance for sales between $930
million and $950 million and adjusted EBITDA between $215 million and
$225 million.
The company expects that continued adoption of more stringent gasoline
vapor emission regulations – particularly in North America – will drive
strong revenue growth in the Performance Materials segment. In
Performance Chemicals, the company expects continued price pressure in
industrial specialties applications, offset partially by modest volume
growth. Increased drilling, along with growth in new products, is
anticipated to begin to improve sales to the oilfield industry. Sales to
pavement technologies customers is also expected to grow, primarily
driven by continued adoption of Evotherm® warm mix asphalt technology in
the U.S. The company expects lower raw material costs, especially for
crude tall oil, or CTO.
In addition, Ingevity’s board of directors authorized the company’s
management to repurchase up to $100 million of the company’s outstanding
common stock. “Our first share repurchase authorization reflects our
belief not only in the cash generation prospects for the future, but
also in the need to deliver value to our shareholders,” said John
Fortson, Ingevity’s executive vice president, chief financial officer
and treasurer. “At a minimum, we intend to more than offset dilution
from equity compensation awards.”
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, Feb. 23, 2017, at
10 a.m. (Eastern Time) to discuss fourth quarter fiscal results. Those
who wish to participate in this event should dial 800-230-1059 (inside
the U.S.) or 612-234-9959 (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 March 23, 2017, and can be accessed at 800-475-6701 (inside the
U.S.) or 320-365-3844 (outside the U.S.), with access code 414403.
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 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 $1.0 million and $0.6 million in 2014, and a
cumulative impact to net parent investment of $2.0 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, the
company will revise the previously issued financial statements for the
periods ended December 31, 2015 and 2014 in connection with the filing
of its 2016 Form 10-K and those corrections will also be reflected in
the company’s future Form 10-Q filings. Additionally, the company is
still evaluating the control deficiencies resulting from these errors.
The impact of the revision to the previously issued financial statements
for the quarter and year ended December 31, 2015 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 it 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 incurred in 2017 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; 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; 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 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.
|
|
|
|
|
|
|
|
|
|
|
INGEVITY CORPORATION
Condensed Statements of
Operations
(Unaudited)
|
|
|
|
|
|
|
Three Months Ended
December 31
|
|
Twelve Months Ended
December 31
|
|
In millions, except per share amounts
|
|
|
2016
|
|
2015
(1)
|
|
2016
|
|
2015
(1)
|
|
Net sales
|
|
|
$
|
210.9
|
|
|
$
|
209.1
|
|
|
$
|
908.3
|
|
|
$
|
958.3
|
|
|
Cost of sales
|
|
|
154.6
|
|
|
159.8
|
|
|
633.9
|
|
|
682.9
|
|
|
Gross profit
|
|
|
56.3
|
|
|
49.3
|
|
|
274.4
|
|
|
275.4
|
|
|
Selling, general and administrative expenses
|
|
|
30.0
|
|
|
24.9
|
|
|
114.0
|
|
|
110.1
|
|
|
Separation costs
|
|
|
3.9
|
|
|
5.4
|
|
|
17.5
|
|
|
17.2
|
|
|
Restructuring and other (income) charges, net
|
|
|
2.9
|
|
|
(6.4
|
)
|
|
41.2
|
|
|
(7.5
|
)
|
|
Other (income) expense, net
|
|
|
0.7
|
|
|
0.3
|
|
|
(3.2
|
)
|
|
(1.0
|
)
|
|
Interest expense
|
|
|
4.2
|
|
|
6.5
|
|
|
19.3
|
|
|
20.1
|
|
|
Interest income
|
|
|
(0.5
|
)
|
|
—
|
|
|
(1.4
|
)
|
|
—
|
|
|
Income before income taxes
|
|
|
15.1
|
|
|
18.6
|
|
|
87.0
|
|
|
136.5
|
|
|
Provision for income taxes
|
|
|
3.4
|
|
|
8.7
|
|
|
42.6
|
|
|
52.2
|
|
|
Net income (loss)
|
|
|
11.7
|
|
|
9.9
|
|
|
44.4
|
|
|
84.3
|
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
2.6
|
|
|
1.3
|
|
|
9.2
|
|
|
4.6
|
|
|
Net income (loss) attributable to Ingevity stockholders
|
|
|
$
|
9.1
|
|
|
$
|
8.6
|
|
|
$
|
35.2
|
|
|
$
|
79.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share attributable to Ingevity
stockholders
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.22
|
|
|
$
|
0.21
|
|
|
$
|
0.83
|
|
|
$
|
1.89
|
|
|
Diluted
|
|
|
$
|
0.22
|
|
|
$
|
0.21
|
|
|
$
|
0.83
|
|
|
$
|
1.89
|
|
|
Average number of shares outstanding used in the earnings
(loss) per share computations
(2)
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
42.1
|
|
|
42.1
|
|
|
42.1
|
|
|
42.1
|
|
|
Diluted
|
|
|
42.3
|
|
|
42.1
|
|
|
42.3
|
|
|
42.1
|
|
|
_________________
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
the timing of previously recorded out-of-period adjustments. 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 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
December 31
|
|
Twelve Months Ended
December 31
|
|
In millions
|
|
|
2016
|
|
2015
(1)
|
|
2016
|
|
2015
(1)
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
Performance Materials
|
|
|
$
|
77.3
|
|
|
$
|
65.1
|
|
|
$
|
301.0
|
|
|
$
|
256.4
|
|
|
Performance Chemicals
|
|
|
133.6
|
|
|
144.0
|
|
|
607.3
|
|
|
701.9
|
|
|
Total net sales
|
|
|
$
|
210.9
|
|
|
$
|
209.1
|
|
|
$
|
908.3
|
|
|
$
|
958.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit
|
|
|
|
|
|
|
|
|
|
|
Performance Materials
|
|
|
22.2
|
|
|
16.8
|
|
|
106.9
|
|
|
79.7
|
|
|
Performance Chemicals
|
|
|
3.4
|
|
|
7.3
|
|
|
56.7
|
|
|
86.6
|
|
|
Total segment operating profit
|
|
|
25.6
|
|
|
24.1
|
|
|
163.6
|
|
|
166.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs (2)
|
|
|
(3.9
|
)
|
|
(5.4
|
)
|
|
(17.5
|
)
|
|
(17.2
|
)
|
|
Restructuring and other income (charges) (3)
|
|
|
(2.9
|
)
|
|
6.4
|
|
|
(41.2
|
)
|
|
7.5
|
|
|
Interest expense
|
|
|
(4.2
|
)
|
|
(6.5
|
)
|
|
(19.3
|
)
|
|
(20.1
|
)
|
|
Interest income
|
|
|
0.5
|
|
|
—
|
|
|
1.4
|
|
|
—
|
|
|
Provision for income taxes
|
|
|
(3.4
|
)
|
|
(8.7
|
)
|
|
(42.6
|
)
|
|
(52.2
|
)
|
|
Net (income) loss attributable to noncontrolling interests
|
|
|
(2.6
|
)
|
|
(1.3
|
)
|
|
(9.2
|
)
|
|
(4.6
|
)
|
|
Net income (loss) attributable to the Ingevity stockholders
|
|
|
$
|
9.1
|
|
|
$
|
8.6
|
|
|
$
|
35.2
|
|
|
$
|
79.7
|
|
|
______________
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
the timing of previously recorded out-of-period adjustments. 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 twelve months ended December 31, 2016 and
December 31, 2015 the charges related to Performance Materials and
Performance Chemicals as shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31
|
|
|
Twelve Months Ended
December 31
|
|
In millions
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Performance Materials
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
$
|
(10.4
|
)
|
|
|
$
|
0.8
|
|
|
|
$
|
(11.5
|
)
|
|
Performance Chemicals
|
|
|
|
|
|
|
|
2.9
|
|
|
|
4.0
|
|
|
|
40.4
|
|
|
|
4.0
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
2.9
|
|
|
|
$
|
(6.4
|
)
|
|
|
$
|
41.2
|
|
|
|
$
|
(7.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INGEVITY CORPORATION
Condensed Balance Sheets
|
|
|
|
In millions
|
|
|
December 31, 2016
|
|
December 31, 2015
(1)
|
|
Assets
|
|
|
(unaudited)
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
30.5
|
|
|
$
|
32.0
|
|
Accounts receivable, net
|
|
|
89.8
|
|
|
95.2
|
|
Inventories, net
|
|
|
151.2
|
|
|
148.9
|
|
Prepaid and other current assets
|
|
|
23.7
|
|
|
20.2
|
|
Current assets
|
|
|
295.2
|
|
|
296.3
|
|
Property, plant and equipment, net
|
|
|
422.7
|
|
|
437.5
|
|
Restricted investment
|
|
|
69.7
|
|
|
—
|
|
Other assets
|
|
|
45.2
|
|
|
44.9
|
|
Total assets
|
|
|
$
|
832.8
|
|
|
$
|
778.7
|
|
Liabilities and Equity
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
79.2
|
|
|
$
|
64.8
|
|
Accrued expenses
|
|
|
19.3
|
|
|
14.8
|
|
Other current liabilities
|
|
|
38.4
|
|
|
20.2
|
|
Current liabilities
|
|
|
136.9
|
|
|
99.8
|
|
Long term debt including capital lease obligations
|
|
|
481.3
|
|
|
80.0
|
|
Deferred income taxes
|
|
|
69.8
|
|
|
74.3
|
|
Other liabilities
|
|
|
10.2
|
|
|
7.2
|
|
Total liabilities
|
|
|
698.2
|
|
|
261.3
|
|
Equity
|
|
|
134.6
|
|
|
517.4
|
|
Total liabilities and equity
|
|
|
$
|
832.8
|
|
|
$
|
778.7
|
|
_________________
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
the timing of previously recorded out-of-period adjustments. See
section entitled "Correction of Previously Issued Financial
Statements" on "Financial Schedules - Page 5" of this press
release.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INGEVITY CORPORATION
Condensed Statements of Cash
Flows
(Unaudited)
|
|
|
|
|
|
|
Twelve Months Ended December 31,
|
|
In millions
|
|
|
2016
|
|
2015
(1)
|
|
Cash flows from operating activities:
|
|
|
$
|
127.9
|
|
|
$
|
72.2
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(56.7
|
)
|
|
(100.9
|
)
|
|
Proceeds from sale of subsidiary
|
|
|
—
|
|
|
11.0
|
|
|
Restricted investment
|
|
|
(69.7
|
)
|
|
—
|
|
|
Other investing activities, net
|
|
|
—
|
|
|
0.6
|
|
|
Net cash provided (used) by investing activities
|
|
|
(126.4
|
)
|
|
(89.3
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Net borrowings under our revolving credit facility
|
|
|
111.9
|
|
|
—
|
|
|
Proceeds from long-term borrowings
|
|
|
300.0
|
|
|
—
|
|
|
Payments on long-term borrowings
|
|
|
—
|
|
|
(5.8
|
)
|
|
Debt issuance costs
|
|
|
(3.6
|
)
|
|
—
|
|
|
Borrowings (repayments) of notes payable and other short-term
borrowings, net
|
|
|
(9.4
|
)
|
|
7.1
|
|
|
Taxes withheld for employee RSU vesting
|
|
|
(0.3
|
)
|
|
—
|
|
|
Noncontrolling interest distributions
|
|
|
(5.4
|
)
|
|
(3.4
|
)
|
|
Cash distributed to WestRock at separation
|
|
|
(448.5
|
)
|
|
—
|
|
|
Transactions with WestRock, net
|
|
|
51.9
|
|
|
29.1
|
|
|
Net cash provided (used) by financing activities
|
|
|
(3.4
|
)
|
|
27.0
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(1.9
|
)
|
|
9.9
|
|
|
Effect of exchange rate changes on cash
|
|
|
0.4
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
(1.5
|
)
|
|
12.1
|
|
|
At beginning of period
|
|
|
32.0
|
|
|
19.9
|
|
|
At end of period
|
|
|
$
|
30.5
|
|
|
$
|
32.0
|
|
|
_________________
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
the timing of previously recorded out-of-period adjustments. See
section entitled "Correction of Previously Issued Financial
Statements" on "Financial Schedules - Page 5" of this press
release.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ingevity Corporation
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 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 $1.0 million and $0.6 million in 2014, and a
cumulative impact to net parent investment of $2.0 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, the
company will revise the previously issued financial statements for the
periods ended December 31, 2015 and 2014 in connection with the filing
of its 2016 Form 10-K and those corrections will also be reflected in
the company’s future Form 10-Q filings. Additionally, the company is
still evaluating the control deficiencies resulting from these errors.
The impact of the revision to the previously issued financial statements
for the quarter and year ended December 31, 2015 is reflected in the
tables below.
|
|
|
|
|
Impact of Corrections to the Condensed Statements of Operations
|
|
|
|
In millions, unaudited
|
|
|
|
Three Months Ended
December 31, 2015
|
|
|
Twelve Months Ended
December 31, 2015
|
|
|
|
|
|
increase/(decrease)
|
|
|
increase/(decrease)
|
|
Net sales
|
|
|
|
$
|
(0.7
|
)
|
|
|
$
|
(9.4
|
)
|
|
Cost of sales
|
|
|
|
(1.1
|
)
|
|
|
(4.1
|
)
|
|
Income before income taxes
|
|
|
|
1.0
|
|
|
|
(1.6
|
)
|
|
Provision for income taxes
|
|
|
|
0.4
|
|
|
|
(0.6
|
)
|
|
Net income (loss)
|
|
|
|
0.6
|
|
|
|
(1.0
|
)
|
|
Net income (loss) attributable to Ingevity stockholders
|
|
|
|
0.6
|
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
|
|
|
Impact of Corrections to the Segment Operating Results
|
|
|
|
In millions, unaudited
|
|
|
|
Three Months Ended
December 31, 2015
|
|
|
Twelve Months Ended
December 31, 2015
|
|
|
|
|
|
increase/(decrease)
|
|
|
increase/(decrease)
|
|
Net sales
|
|
|
|
|
|
|
|
|
Performance Materials
|
|
|
|
$
|
0.4
|
|
|
|
$
|
(0.2
|
)
|
|
Performance Chemicals
|
|
|
|
(1.1
|
)
|
|
|
(9.2
|
)
|
|
Total net sales
|
|
|
|
$
|
(0.7
|
)
|
|
|
$
|
(9.4
|
)
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit
|
|
|
|
|
|
|
|
|
Performance Materials
|
|
|
|
$
|
0.2
|
|
|
|
$
|
(1.4
|
)
|
|
Performance Chemicals
|
|
|
|
0.8
|
|
|
|
(0.2
|
)
|
|
Total segment operating profit
|
|
|
|
$
|
1.0
|
|
|
|
$
|
(1.6
|
)
|
|
|
|
|
|
|
|
|
|
Impact of Corrections to the Condensed Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
In millions, unaudited
|
|
|
|
|
|
|
|
increase/(decrease)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
|
|
|
|
|
$
|
(1.0
|
)
|
|
Inventories, net
|
|
|
|
|
|
|
|
(2.1
|
)
|
|
Current assets
|
|
|
|
|
|
|
|
$
|
(3.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
|
|
|
|
|
|
$
|
2.6
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
2.6
|
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
(1.4
|
)
|
|
Total liabilities
|
|
|
|
|
|
|
|
1.2
|
|
|
Equity
|
|
|
|
|
|
|
|
(4.3
|
)
|
|
Total liabilities and equity
|
|
|
|
|
|
|
|
$
|
(3.1
|
)
|
|
|
|
|
|
|
|
|
|
Impact of Corrections to the Condensed Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
December 31, 2015
|
|
In millions
|
|
|
|
|
|
|
|
increase/(decrease)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
$
|
1.0
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Transactions with WestRock, net
|
|
|
|
|
|
|
|
(1.0
|
)
|
|
Net cash provided (used) by financing activities
|
|
|
|
|
|
|
|
$
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. 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.
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 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 incurred in 2017 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
December 31
|
|
Twelve Months Ended
December 31
|
|
In millions, except per share amounts; unaudited
|
|
|
2016
|
|
2015
(1)
|
|
2016
|
|
2015
(1)
|
|
Net income (loss)
|
|
|
$
|
11.7
|
|
|
$
|
9.9
|
|
|
$
|
44.4
|
|
|
$
|
84.3
|
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
2.6
|
|
|
1.3
|
|
|
9.2
|
|
|
4.6
|
|
|
Net income (loss) attributable to Ingevity stockholders (GAAP)
|
|
|
9.1
|
|
|
8.6
|
|
|
35.2
|
|
|
79.7
|
|
|
Restructuring and other (income) charges (2)
|
|
|
2.9
|
|
|
(6.4
|
)
|
|
41.2
|
|
|
(7.5
|
)
|
|
Separation costs (3)
|
|
|
3.9
|
|
|
5.4
|
|
|
17.5
|
|
|
17.2
|
|
|
Income tax effect on items above
|
|
|
(1.6
|
)
|
|
2.4
|
|
|
(5.9
|
)
|
|
0.1
|
|
|
Adjusted earnings (loss) (Non-GAAP)
|
|
|
$
|
14.3
|
|
|
$
|
10.0
|
|
|
$
|
88.0
|
|
|
$
|
89.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share (GAAP)
|
|
|
$
|
0.22
|
|
|
$
|
0.21
|
|
|
$
|
0.83
|
|
|
$
|
1.89
|
|
|
Restructuring and other (income) charges
|
|
|
0.07
|
|
|
(0.15
|
)
|
|
0.98
|
|
|
(0.18
|
)
|
|
Separation costs
|
|
|
0.09
|
|
|
0.13
|
|
|
0.41
|
|
|
0.41
|
|
|
Income tax effect on items above
|
|
|
(0.04
|
)
|
|
0.05
|
|
|
(0.14
|
)
|
|
—
|
|
|
Diluted adjusted earnings (loss) per share (Non-GAAP)
|
|
|
$
|
0.34
|
|
|
$
|
0.24
|
|
|
$
|
2.08
|
|
|
$
|
2.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares outstanding used in diluted adjusted
after-tax earnings per share computations
|
|
|
42.3
|
|
|
42.1
|
|
|
42.3
|
|
|
42.1
|
|
|
_______________
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
the timing of previously recorded out-of-period adjustments.
|
|
(2) Charges incurred during 2016 primarily related to restructuring
activities within our Brazilian Performance Chemicals operations.
Charges for the three months ended December 31, 2016 were comprised
of miscellaneous exit costs of $2.9 million. Charges for the year
ended December 31, 2016 were comprised of asset write-downs,
including the asset impairment charge of $30.2 million, accelerated
depreciation of $0.4 million, $7.0 million in severance related
charges, and miscellaneous exit costs of $3.6 million.
|
|
Income for the three months and year ended December 31, 2015 related
to additional proceeds from the sale of our Performance Materials’
air purification business from 2014.
|
|
(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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INGEVITY CORPORATION
Reconciliation of Non-GAAP
Financial Measures
|
|
|
|
Reconciliation of 2015 Pro Forma - Adjusted Earnings (Non-GAAP)
|
|
|
|
|
|
|
Three Months Ended December 31, 2015
(1)
|
|
Twelve Months Ended December 31, 2015
(1)
|
|
|
|
|
|
|
Pro Forma
Adjust
|
|
|
Pro Forma
|
|
|
|
Pro Forma
Adjust
|
|
|
Pro Forma
|
|
In millions, except per share amounts; unaudited
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
$
|
9.9
|
|
|
4.6
|
|
|
|
$
|
14.5
|
|
|
$
|
84.3
|
|
|
7.2
|
|
|
|
$
|
91.5
|
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
1.3
|
|
|
|
|
|
1.3
|
|
|
4.6
|
|
|
|
|
|
4.6
|
|
|
Net income (loss) attributable to Ingevity stockholders (GAAP)
|
|
|
8.6
|
|
|
4.6
|
|
(2)
|
|
13.2
|
|
|
79.7
|
|
|
7.2
|
|
(2)
|
|
86.9
|
|
|
Restructuring and other (income) charges
|
|
|
(6.4
|
)
|
|
—
|
|
|
|
(6.4
|
)
|
|
(7.5
|
)
|
|
—
|
|
|
|
(7.5
|
)
|
|
Separation costs
|
|
|
5.4
|
|
|
(5.4
|
)
|
|
|
—
|
|
|
17.2
|
|
|
(17.2
|
)
|
|
|
—
|
|
|
Income tax effect on items above
|
|
|
2.4
|
|
|
1.2
|
|
|
|
3.6
|
|
|
0.1
|
|
|
4.0
|
|
|
|
4.1
|
|
|
Adjusted earnings (loss) (Non-GAAP)
|
|
|
$
|
10.0
|
|
|
|
|
|
$
|
10.4
|
|
|
$
|
89.5
|
|
|
|
|
|
$
|
83.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share (GAAP)
|
|
|
$
|
0.21
|
|
|
0.11
|
|
|
|
$
|
0.32
|
|
|
$
|
1.89
|
|
|
0.17
|
|
|
|
$
|
2.06
|
|
|
Restructuring and other (income) charges
|
|
|
(0.15
|
)
|
|
—
|
|
|
|
(0.15
|
)
|
|
(0.18
|
)
|
|
—
|
|
|
|
(0.18
|
)
|
|
Separation costs
|
|
|
0.13
|
|
|
(0.13
|
)
|
|
|
—
|
|
|
0.41
|
|
|
(0.41
|
)
|
|
|
—
|
|
|
Income tax effect on items above
|
|
|
0.05
|
|
|
0.03
|
|
|
|
0.08
|
|
|
—
|
|
|
0.10
|
|
|
|
0.10
|
|
|
Diluted adjusted earnings (loss) per share
(Non-GAAP)
|
|
|
$
|
0.24
|
|
|
|
|
|
$
|
0.25
|
|
|
$
|
2.12
|
|
|
|
|
|
$
|
1.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares outstanding used in diluted adjusted
after-tax earnings per share computations
|
|
|
42.1
|
|
|
|
|
|
42.1
|
|
|
42.1
|
|
|
|
|
|
42.1
|
|
|
_______________
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
the timing of previously recorded out-of-period adjustments.
|
|
(2) 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
December 31
|
|
Twelve Months Ended
December 31
|
|
In millions, unaudited
|
|
|
2016
|
|
2015
(1)
|
|
2016
|
|
2015
(1)
|
|
Net income (loss) (GAAP)
|
|
|
$
|
11.7
|
|
|
$
|
9.9
|
|
|
$
|
44.4
|
|
|
$
|
84.3
|
|
|
Provision for income taxes
|
|
|
3.4
|
|
|
8.7
|
|
|
42.6
|
|
|
52.2
|
|
|
Interest expense
|
|
|
4.2
|
|
|
6.5
|
|
|
19.3
|
|
|
20.1
|
|
|
Interest income
|
|
|
(0.5
|
)
|
|
—
|
|
|
(1.4
|
)
|
|
—
|
|
|
Separation costs
|
|
|
3.9
|
|
|
5.4
|
|
|
17.5
|
|
|
17.2
|
|
|
Depreciation and amortization
|
|
|
10.4
|
|
|
9.0
|
|
|
38.8
|
|
|
34.6
|
|
|
Restructuring and other (income) charges
|
|
|
2.9
|
|
|
(6.4
|
)
|
|
41.2
|
|
|
(7.5
|
)
|
|
Adjusted EBITDA (Non-GAAP)
|
|
|
$
|
36.0
|
|
|
$
|
33.1
|
|
|
$
|
202.4
|
|
|
$
|
200.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
210.9
|
|
|
$
|
209.1
|
|
|
$
|
908.3
|
|
|
$
|
958.3
|
|
|
Net income (loss) margin
|
|
|
5.5
|
%
|
|
4.7
|
%
|
|
4.9
|
%
|
|
8.8
|
%
|
|
Adjusted EBITDA margin
|
|
|
17.1
|
%
|
|
15.8
|
%
|
|
22.3
|
%
|
|
21.0
|
%
|
|
_______________
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
the timing of previously recorded out-of-period adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INGEVITY CORPORATION
Reconciliation of Non-GAAP
Financial Measures
|
|
|
|
Reconciliation of 2015 Pro Forma - Adjusted EBITDA (Non-GAAP)
|
|
|
|
|
|
|
Three Months Ended December 31, 2015
(1)
|
|
Twelve Months Ended December 31, 2015
(1)
|
|
|
|
|
|
|
Pro Forma
Adjust
|
|
|
Pro Forma
|
|
|
|
Pro Forma
Adjust
|
|
|
Pro Forma
|
|
In millions, unaudited
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) (GAAP)
|
|
|
$
|
9.9
|
|
|
4.6
|
|
(2)
|
|
$
|
14.5
|
|
|
$
|
84.3
|
|
|
7.2
|
|
(2)
|
|
$
|
91.5
|
|
|
Provision for income taxes
|
|
|
8.7
|
|
|
(0.1
|
)
|
(3)
|
|
8.6
|
|
|
52.2
|
|
|
0.5
|
|
(3)
|
|
52.7
|
|
|
Interest expense
|
|
|
6.5
|
|
|
(1.7
|
)
|
(4)
|
|
4.8
|
|
|
20.1
|
|
|
(1.1
|
)
|
(4)
|
|
19.0
|
|
|
Interest income
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
Separation costs
|
|
|
5.4
|
|
|
(5.4
|
)
|
(5)
|
|
—
|
|
|
17.2
|
|
|
(17.2
|
)
|
(5)
|
|
—
|
|
|
Depreciation and amortization
|
|
|
9.0
|
|
|
|
|
|
9.0
|
|
|
34.6
|
|
|
|
|
|
34.6
|
|
|
Restructuring and other (income) charges
|
|
|
(6.4
|
)
|
|
|
|
|
(6.4
|
)
|
|
(7.5
|
)
|
|
|
|
|
(7.5
|
)
|
|
Adjusted EBITDA (Non-GAAP)
|
|
|
$
|
33.1
|
|
|
|
(6)
|
|
$
|
30.5
|
|
|
$
|
200.9
|
|
|
|
(6)
|
|
$
|
190.3
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
$
|
209.1
|
|
|
|
|
|
|
|
$
|
958.3
|
|
|
Net income (loss) margin
|
|
|
|
|
|
|
|
6.9
|
%
|
|
|
|
|
|
|
9.5
|
%
|
|
Adjusted EBITDA margin
|
|
|
|
|
|
|
|
14.6
|
%
|
|
|
|
|
|
|
19.9
|
%
|
|
_______________
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
the timing of previously recorded out-of-period adjustments.
|
|
(2) Represents the cumulative after-tax pro forma adjustments as
further described within the section entitled: "Notes to the
Unaudited Pro Forma Adjustments."
|
|
(3) Refer to Note B within the "Notes to the Unaudited Pro Forma
Adjustments" for a description of this adjustment.
|
|
(4) Refer to Note C within the "Notes to the Unaudited Pro Forma
Adjustments"for a description of this adjustment.
|
|
(5) Refer to Note D within the "Notes to the Unaudited Pro Forma
Adjustments"for a description of this adjustment.
|
|
(6) 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, unaudited
|
|
|
Three Months Ended
December 31
|
|
Twelve Months Ended
December 31
|
|
Performance Materials
|
|
|
2016
|
|
2015
(1)
|
|
2016
|
|
2015
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (GAAP)
|
|
|
$
|
22.2
|
|
|
$
|
16.8
|
|
|
$
|
106.9
|
|
|
$
|
79.7
|
|
|
Depreciation and amortization
|
|
|
4.8
|
|
|
3.1
|
|
|
16.4
|
|
|
11.2
|
|
|
Segment EBITDA (Non-GAAP)
|
|
|
$
|
27.0
|
|
|
$
|
19.9
|
|
|
$
|
123.3
|
|
|
$
|
90.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
77.3
|
|
|
$
|
65.1
|
|
|
$
|
301.0
|
|
|
$
|
256.4
|
|
|
Segment operating margin
|
|
|
28.7
|
%
|
|
25.8
|
%
|
|
35.5
|
%
|
|
31.1
|
%
|
|
Segment EBITDA margin
|
|
|
34.9
|
%
|
|
30.6
|
%
|
|
41.0
|
%
|
|
35.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Chemicals
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (GAAP)
|
|
|
$
|
3.4
|
|
|
$
|
7.3
|
|
|
$
|
56.7
|
|
|
$
|
86.6
|
|
|
Depreciation and amortization
|
|
|
5.6
|
|
|
5.9
|
|
|
22.4
|
|
|
23.4
|
|
|
Segment EBITDA (Non-GAAP)
|
|
|
$
|
9.0
|
|
|
$
|
13.2
|
|
|
$
|
79.1
|
|
|
$
|
110.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
133.6
|
|
|
$
|
144.0
|
|
|
$
|
607.3
|
|
|
$
|
701.9
|
|
|
Segment operating margin
|
|
|
2.5
|
%
|
|
5.1
|
%
|
|
9.3
|
%
|
|
12.3
|
%
|
|
Segment EBITDA margin
|
|
|
6.7
|
%
|
|
9.2
|
%
|
|
13.0
|
%
|
|
15.7
|
%
|
|
_________________
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
the timing of previously recorded out-of-period adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INGEVITY CORPORATION
Reconciliation of Non-GAAP
Financial Measures
|
|
|
|
Reconciliation of 2015 Pro Forma - Segment EBITDA (Non-GAAP)
|
|
|
|
|
|
|
Three Months Ended December 31, 2015
(1)
|
|
Twelve Months Ended December 31, 2015
(1)
|
|
In millions, unaudited
|
|
|
|
|
Pro Forma
Adjust
|
|
|
Pro Forma
|
|
|
|
Pro Forma
Adjust
|
|
|
Pro Forma
|
|
Performance Materials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (GAAP)
|
|
|
$
|
16.8
|
|
|
$
|
(0.6
|
)
|
(2)
|
|
$
|
16.2
|
|
|
$
|
79.7
|
|
|
$
|
(2.7
|
)
|
(2)
|
|
$
|
77.0
|
|
|
Depreciation and amortization
|
|
|
3.1
|
|
|
|
|
|
3.1
|
|
|
11.2
|
|
|
|
|
|
11.2
|
|
|
Segment EBITDA (Non-GAAP)
|
|
|
$
|
19.9
|
|
|
|
|
|
$
|
19.3
|
|
|
$
|
90.9
|
|
|
|
|
|
$
|
88.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
$
|
65.1
|
|
|
|
|
|
|
|
$
|
256.4
|
|
|
Segment operating margin
|
|
|
|
|
|
|
|
24.9
|
%
|
|
|
|
|
|
|
30.0
|
%
|
|
Segment EBITDA margin
|
|
|
|
|
|
|
|
29.6
|
%
|
|
|
|
|
|
|
34.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (GAAP)
|
|
|
$
|
7.3
|
|
|
$
|
(2.0
|
)
|
(2)
|
|
$
|
5.3
|
|
|
$
|
86.6
|
|
|
$
|
(7.9
|
)
|
(2)
|
|
$
|
78.7
|
|
|
Depreciation and amortization
|
|
|
5.9
|
|
|
|
|
|
5.9
|
|
|
23.4
|
|
|
|
|
|
23.4
|
|
|
Segment EBITDA (Non-GAAP)
|
|
|
$
|
13.2
|
|
|
|
|
|
$
|
11.2
|
|
|
$
|
110.0
|
|
|
|
|
|
$
|
102.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
$
|
144.0
|
|
|
|
|
|
|
|
$
|
701.9
|
|
|
Segment operating margin
|
|
|
|
|
|
|
|
3.7
|
%
|
|
|
|
|
|
|
11.2
|
%
|
|
Segment EBITDA margin
|
|
|
|
|
|
|
|
7.8
|
%
|
|
|
|
|
|
|
14.5
|
%
|
|
_______________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
the timing of previously recorded out-of-period adjustments.
|
|
(2) Refer to the corresponding letter note within the "Notes to
the Unaudited Pro Forma Adjustments" for a description of this
adjustment.
|
|
|
|
|
|
|
|
|
|
|
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INGEVITY CORPORATION
Reconciliation of Non-GAAP Financial
Measures
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 $1 million for the full year
2015 associated with this new agreement calculated by applying the new
agreement’s pricing terms to the actual purchased volumes in 2015.
The 2015 pro forma adjustment by segment by quarter is included in the
below table:
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2015
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In millions
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Q1
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Q2
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Q3
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Q4
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YTD
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Performance Chemicals
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1.9
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1.9
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2.1
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2.0
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7.9
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Performance Materials
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0.7
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0.7
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0.7
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0.6
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2.7
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Total
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$
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2.6
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$
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2.6
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$
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2.8
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$
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2.6
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$
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10.6
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(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:
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2015
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In millions
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Q1
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Q2
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Q3
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Q4
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YTD
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Interest expense
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$
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0.6
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$
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0.4
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$
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(0.4
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$
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(1.7
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$
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(1.1
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(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:
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2015
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In millions
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Q1
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Q2
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Q3
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Q4
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YTD
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Separation costs
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$
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(1.5
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$
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(4.8
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$
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(5.5
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$
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(5.4
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$
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(17.2
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Ingevity Corporation
Jack Maurer, 843-746-8242
jack.maurer@ingevity.com
or
Investors:
Dan Gallagher, 843-740-2126
daniel.gallagher@ingevity.com