- Net sales of $260.3 million were up more than 6 percent versus the prior year quarter’s sales of $245.4 million
- Net income of $35.8 million resulted in net income as a percentage of sales of 13.8 percent, compared to net income of $25.9 million which resulted in net income as a percentage of sales of 10.6 percent in the prior year quarter
- Diluted earnings per share were $0.76; diluted adjusted earnings per share were $0.78
- Adjusted EBITDA of $67.2 million were up almost 15 percent compared to second quarter 2016 adjusted EBITDA of $58.5 million
- Adjusted EBITDA margin of 25.8 percent increased 200 basis points versus second quarter 2016
- Company raises fiscal year 2017 sales guidance to between $940 million and $955 million and adjusted EBITDA guidance to between $220 million and $230 million
The results and guidance in this release include Non-GAAP financial measures. Refer to the section entitled “Use of Non-GAAP Financial Measures” within this release.
Additionally, this release includes revisions to prior year periods’ financial results. Refer to the section entitled “Correction to Previously Issued Financial Statements.”
Ingevity Corporation (NYSE:NGVT) today reported second quarter net sales
of $260.3 million and net income of $35.8 million, representing 13.8
percent of sales. Sales increased 6.1 percent versus $245.4 million in
the prior year’s second quarter and net income increased 38.2 percent
versus $25.9 million last year. The second quarter diluted earnings per
share were $0.76. Diluted adjusted earnings per share were $0.78
excluding restructuring and other costs of $0.02 per share. Adjusted
earnings before interest, taxes, depreciation and amortization (EBITDA)
of $67.2 million were up 14.9 percent versus second quarter 2016
adjusted EBITDA of $58.5 million. Ingevity’s second quarter adjusted
EBITDA margin of 25.8 percent was up 200 basis points from the prior
year’s second quarter adjusted EBITDA margin of 23.8 percent.
“We delivered strong financial results in the second quarter,” said
Michael Wilson, Ingevity’s president and CEO. “Halfway through the year,
our Performance Materials segment is realizing the growth we anticipated
in the global automotive market. In addition, we’re achieving better
than expected results in our Performance Chemicals segment due to our
strong execution and improving market fundamentals.”
Wilson said that revenues and earnings were driven predominantly by
volume gains. Earnings were further augmented by a lower cost structure
put in place via strategic initiatives over the past 18 months, in
addition to lower raw material costs – particularly for crude tall oil
(CTO) – and manufacturing efficiencies. These positive impacts were
partially offset by higher selling, general and administrative (SG&A)
costs and negative foreign currency exchange impacts.
Performance Chemicals
Second quarter 2017 sales in the Performance Chemicals segment were
$170.8 million, down $0.4 million, or 0.2 percent, versus the second
quarter 2016. Segment operating profit was $26.4 million, up $3.4
million, or 14.8 percent, versus the prior year quarter segment
operating profit. Segment EBITDA were $31.5 million, up $2.9 million, or
10.1 percent, versus the prior year quarter segment EBITDA.
“Despite flat revenue, we grew segment EBITDA in our Performance
Chemicals segment by double digits due to higher oilfield volumes, lower
costs and higher manufacturing efficiency. This reflects continuing
strength in the markets for higher value, derivatized products,” Wilson
said. “Sales to oilfield customers, which were driven by increased
drilling in the U.S., were offset by lower sales to industrial
specialties applications. Sales to pavement application customers in the
quarter were in line with a particularly strong quarter in 2016.”
Performance Materials
Second quarter 2017 sales in the Performance Materials segment were
$89.5 million, up $15.3 million, or 20.6 percent, versus the second
quarter 2016. Segment operating profit was $30.7 million, up $4.5
million, or 17.2 percent, versus the prior year quarter segment
operating profit. This translated to a segment operating margin of 34.3
percent versus 35.3 percent in the prior year period. Segment EBITDA
were $35.7 million, up $5.8 million, or 19.4 percent, versus the prior
year segment EBITDA.
“Adoption of Ingevity’s solutions for U. S. Environmental Protection
Agency (EPA) Tier 3 and California LEV III standards for gasoline vapor
emission control helped drive a 20.6 percent increase in segment sales
and a 19.4 percent increase in adjusted EBITDA,” said Wilson. “These
include our ‘honeycomb’ scrubbers made at our Purifications Cellutions
joint venture and our activated carbon sheets.”
Wilson said that earnings in the Performance Materials segment were also
aided by the scale-up and increased utilization at the company’s Zhuhai,
China, facility, and were partially offset by higher plant spending in
support of higher volumes. The segment’s EBITDA margin of 39.9 percent
was down slightly year over year as earnings on higher net sales were
negatively impacted by foreign exchange translation losses during the
quarter. Excluding these inter-company foreign exchange impacts, segment
EBITDA margins were 42.3 percent versus 40.7 percent in the prior year
period.
Outlook
Ingevity raised its fiscal year 2017 guidance for sales from between
$930 million and $950 million to $940 million and $955 million. The
company also raised its guidance for adjusted EBITDA from between $215
million and $225 million to between $220 million and $230 million.
“Six months in, we have much better visibility into our full-year
performance,” said Wilson. “The growth in our Performance Materials
business and the strong execution of the turnaround in Performance
Chemicals support our confidence in reaching our revised year-end
targets.”
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, August 3, 2017, 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 612-234-9959
(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 September 3, 2017, and
can be accessed at 800-475-6701 (inside the U.S.) or 320-365-3844
(outside the U.S.), with access code 426265.
Correction to Previously Issued Financial Statements
During
the quarters and year ended December 31, 2016, Ingevity identified
various errors related to its previously issued annual and interim
Consolidated Financial Statements. The impact of the revision to the
previously issued financial statements for the three and six months
ended June 30, 2016 is reflected in the schedules to this press release.
Use of Non-GAAP Financial Measures
Ingevity has presented
certain financial measures which have not been prepared in accordance
with U.S. generally accepted accounting principles (GAAP). Definitions
of our non-GAAP financial measures and a reconciliation to the most
directly comparable financial measure calculated in accordance with GAAP
are included in the financial schedules accompanying this news release,
under the section entitled “Non-GAAP Financial Measures.”
A reconciliation of net income to adjusted EBITDA as projected for 2017
is not provided. Ingevity does not forecast net income as 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 or adoption of
alternative technologies; worldwide air quality standards; government
infrastructure spending; declining volumes in the printing inks market;
the limited supply of crude tall oil (“CTO”); lack of access to
sufficient CTO; access to and pricing of raw materials; competition from
producers of substitute products and new technologies; a prolonged
period of low energy prices; the provision of services by third parties
at several facilities; natural disasters, such as hurricanes, winter or
tropical storms, earthquakes, floods, fires; other unanticipated
problems such as labor difficulties including renewal of collective
bargaining agreements, equipment failure or unscheduled maintenance and
repair; protection of intellectual property and proprietary information;
information technology security risks; government policies and
regulations, including, but not limited to, those affecting the
environment, climate change, tax policies and the chemicals industry;
and lawsuits arising out of environmental damage or personal injuries
associated with chemical or other manufacturing processes. These and
other important factors that could cause actual results or events to
differ materially from those expressed in forward-looking statements
that may have been made in this document are and will be more
particularly described in our filings with the U.S. Securities and
Exchange Commission, including our Form 10-K for the year ended December
31, 2016 and our other periodic filings. Readers are cautioned not to
place undue reliance on Ingevity’s projections and forward-looking
statements, which speak only as the date thereof. Ingevity undertakes no
obligation to publicly release any revision to the projections and
forward-looking statements contained in this announcement, or to update
them to reflect events or circumstances occurring after the date of this
announcement.
|
|
|
INGEVITY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
In millions, except per share amounts
|
|
|
2017
|
|
|
2016
(1)
|
|
|
2017
|
|
|
2016
(1)
|
|
Net sales
|
|
|
$
|
260.3
|
|
|
$
|
245.4
|
|
|
|
$
|
478.8
|
|
|
$
|
445.0
|
|
|
Cost of sales
|
|
|
|
170.5
|
|
|
|
170.7
|
|
|
|
|
318.3
|
|
|
|
307.3
|
|
|
Gross profit
|
|
|
|
89.8
|
|
|
|
74.7
|
|
|
|
|
160.5
|
|
|
|
137.7
|
|
|
Selling, general and administrative expenses
|
|
|
|
26.3
|
|
|
|
22.8
|
|
|
|
|
52.3
|
|
|
|
45.6
|
|
|
Research and technical expenses
|
|
|
|
4.7
|
|
|
|
4.6
|
|
|
|
|
9.8
|
|
|
|
9.3
|
|
|
Separation costs
|
|
|
|
0.2
|
|
|
|
4.7
|
|
|
|
|
0.5
|
|
|
|
11.1
|
|
|
Restructuring and other (income) charges, net
|
|
|
|
1.1
|
|
|
|
1.0
|
|
|
|
|
3.4
|
|
|
|
5.6
|
|
|
Other (income) expense, net
|
|
|
|
1.7
|
|
|
|
(1.9
|
)
|
|
|
|
1.4
|
|
|
|
(5.7
|
)
|
|
Interest expense, net
|
|
|
|
2.8
|
|
|
|
5.0
|
|
|
|
|
6.1
|
|
|
|
10.4
|
|
|
Income before income taxes
|
|
|
|
53.0
|
|
|
|
38.5
|
|
|
|
|
87.0
|
|
|
|
61.4
|
|
|
Provision for income taxes
|
|
|
|
17.2
|
|
|
|
12.6
|
|
|
|
|
28.2
|
|
|
|
23.8
|
|
|
Net income (loss)
|
|
|
|
35.8
|
|
|
|
25.9
|
|
|
|
|
58.8
|
|
|
|
37.6
|
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
|
3.7
|
|
|
|
1.8
|
|
|
|
|
7.7
|
|
|
|
4.3
|
|
|
Net income (loss) attributable to Ingevity stockholders
|
|
|
$
|
32.1
|
|
|
$
|
24.1
|
|
|
|
$
|
51.1
|
|
|
$
|
33.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share attributable to Ingevity
stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.76
|
|
|
$
|
0.57
|
|
|
|
$
|
1.21
|
|
|
$
|
0.79
|
|
|
Diluted
|
|
|
$
|
0.76
|
|
|
$
|
0.57
|
|
|
|
$
|
1.21
|
|
|
$
|
0.79
|
|
|
Average number of shares outstanding used in the earnings
(loss) per share computations
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
42.1
|
|
|
|
42.1
|
|
|
|
|
42.1
|
|
|
|
42.1
|
|
|
Diluted
|
|
|
|
42.4
|
|
|
|
42.1
|
|
|
|
|
42.4
|
|
|
|
42.1
|
|
|
_________________
|
|
|
|
|
|
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
for various immaterial errors previously identified during the
quarter and year ended December 31, 2016. See section entitled
“Correction of Previously Issued Financial Statements” on
“Financial Schedules - Page 5” of this press release.
|
|
(2) 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
|
|
|
2017
|
|
|
2016
(1)
|
|
|
2017
|
|
|
2016
(1)
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Materials
|
|
|
$
|
89.5
|
|
|
|
$
|
74.2
|
|
|
|
$
|
172.9
|
|
|
|
$
|
144.3
|
|
|
Performance Chemicals
|
|
|
|
170.8
|
|
|
|
|
171.2
|
|
|
|
|
305.9
|
|
|
|
|
300.7
|
|
|
Total net sales
|
|
|
$
|
260.3
|
|
|
|
$
|
245.4
|
|
|
|
$
|
478.8
|
|
|
|
$
|
445.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Materials
|
|
|
$
|
30.7
|
|
|
|
$
|
26.2
|
|
|
|
$
|
60.2
|
|
|
|
$
|
56.9
|
|
|
Performance Chemicals
|
|
|
|
26.4
|
|
|
|
|
23.0
|
|
|
|
|
36.8
|
|
|
|
|
31.6
|
|
|
Total segment operating profit
|
|
|
|
57.1
|
|
|
|
|
49.2
|
|
|
|
|
97.0
|
|
|
|
|
88.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs (2)
|
|
|
|
(0.2
|
)
|
|
|
|
(4.7
|
)
|
|
|
|
(0.5
|
)
|
|
|
|
(11.1
|
)
|
|
Restructuring and other income (charges) (3)
|
|
|
|
(1.1
|
)
|
|
|
|
(1.0
|
)
|
|
|
|
(3.4
|
)
|
|
|
|
(5.6
|
)
|
|
Interest expense, net
|
|
|
|
(2.9
|
)
|
|
|
|
(5.0
|
)
|
|
|
|
(6.1
|
)
|
|
|
|
(10.4
|
)
|
|
Provision for income taxes
|
|
|
|
(17.2
|
)
|
|
|
|
(12.6
|
)
|
|
|
|
(28.2
|
)
|
|
|
|
(23.8
|
)
|
|
Net (income) loss attributable to noncontrolling interests
|
|
|
|
(3.6
|
)
|
|
|
|
(1.8
|
)
|
|
|
|
(7.7
|
)
|
|
|
|
(4.3
|
)
|
|
Net income (loss) attributable to the Ingevity stockholders
|
|
|
$
|
32.1
|
|
|
|
$
|
24.1
|
|
|
|
$
|
51.1
|
|
|
|
$
|
33.3
|
|
|
_________________
|
|
|
|
|
|
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
for various immaterial errors previously identified during the
quarter and year ended December 31, 2016. See section entitled
“Correction of Previously Issued Financial Statements” on
“Financial Schedules - Page 5” of this press release.
|
|
(2) Represents transaction costs associated with separation of
Ingevity from WestRock. These costs are primarily related to
professional fees associated with separation activities within the
finance, tax and legal functions.
|
|
(3) For the three and six months ended June 30, 2017 and June 30,
2016 the charges related to Performance Materials and Performance
Chemicals as shown in the table below:
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
In millions
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Performance Materials
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
0.8
|
|
|
Performance Chemicals
|
|
|
|
1.1
|
|
|
|
|
1.0
|
|
|
|
|
3.4
|
|
|
|
|
4.8
|
|
|
Total
|
|
|
$
|
1.1
|
|
|
|
$
|
1.0
|
|
|
|
$
|
3.4
|
|
|
|
$
|
5.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INGEVITY CORPORATION
Condensed Consolidated Balance Sheets
|
|
|
|
In millions
|
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
Assets
|
|
|
(unaudited)
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
40.6
|
|
|
$
|
30.5
|
|
Accounts receivable, net
|
|
|
|
113.1
|
|
|
|
89.8
|
|
Inventories, net
|
|
|
|
154.6
|
|
|
|
151.2
|
|
Prepaid and other current assets
|
|
|
|
24.0
|
|
|
|
23.7
|
|
Current assets
|
|
|
|
332.3
|
|
|
|
295.2
|
|
Property, plant and equipment, net
|
|
|
|
424.1
|
|
|
|
422.8
|
|
Restricted investment
|
|
|
|
70.4
|
|
|
|
69.7
|
|
Other assets
|
|
|
|
47.3
|
|
|
|
45.1
|
|
Total assets
|
|
|
$
|
874.1
|
|
|
$
|
832.8
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
75.9
|
|
|
$
|
79.2
|
|
Accrued expenses
|
|
|
|
18.5
|
|
|
|
19.3
|
|
Other current liabilities
|
|
|
|
39.1
|
|
|
|
38.4
|
|
Current liabilities
|
|
|
|
133.5
|
|
|
|
136.9
|
|
Long term debt including capital lease obligations
|
|
|
|
463.5
|
|
|
|
481.3
|
|
Deferred income taxes
|
|
|
|
69.6
|
|
|
|
69.8
|
|
Other liabilities
|
|
|
|
11.4
|
|
|
|
10.2
|
|
Total liabilities
|
|
|
|
678.0
|
|
|
|
698.2
|
|
Equity
|
|
|
|
196.1
|
|
|
|
134.6
|
|
Total liabilities and equity
|
|
|
$
|
874.1
|
|
|
$
|
832.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INGEVITY CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
In millions
|
|
|
2017
|
|
|
2016
(1)
|
|
Cash flows from operating activities:
|
|
|
$
|
52.7
|
|
|
|
$
|
36.2
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
(21.8
|
)
|
|
|
|
(22.2
|
)
|
|
Restricted investment
|
|
|
|
(0.7
|
)
|
|
|
|
(69.1
|
)
|
|
Net investment in equity securities
|
|
|
|
(2.0
|
)
|
|
|
|
—
|
|
|
Other investing activities, net
|
|
|
|
(3.0
|
)
|
|
|
|
—
|
|
|
Net cash provided (used) by investing activities
|
|
|
|
(27.5
|
)
|
|
|
|
(91.3
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Net borrowings under our revolving credit facility
|
|
|
|
(9.1
|
)
|
|
|
|
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
|
)
|
|
Taxes withheld for employee equity award vesting
|
|
|
|
(0.5
|
)
|
|
|
—
|
|
|
Treasury share repurchases
|
|
|
|
(0.7
|
)
|
|
|
—
|
|
|
Noncontrolling interest distributions
|
|
|
|
(4.8
|
)
|
|
|
|
(1.7
|
)
|
|
Cash distributed to WestRock at separation
|
|
|
|
—
|
|
|
|
|
(448.5
|
)
|
|
Transactions with WestRock, net
|
|
|
|
—
|
|
|
|
|
51.9
|
|
|
Net cash provided (used) by financing activities
|
|
|
|
(15.1
|
)
|
|
|
|
78.8
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
|
10.1
|
|
|
|
|
23.7
|
|
|
Effect of exchange rate changes on cash
|
|
|
|
0.4
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash, cash equivalents and restricted cash (2)
|
|
|
|
10.5
|
|
|
|
|
23.7
|
|
|
At beginning of period (2)
|
|
|
|
30.5
|
|
|
|
|
32.0
|
|
|
At end of period (2)
|
|
|
$
|
41.0
|
|
|
|
$
|
55.7
|
|
|
_______________
|
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
for various immaterial errors previously identified during the
quarter and year ended December 31, 2016. See section entitled
“Correction of Previously Issued Financial Statements” on
“Financial Schedules - Page 5” of this press release.
|
|
(2) Includes restricted cash of $0.5 million and zero for the
periods ended June 30, 2017 and 2016, respectively. Restricted
cash is included within Prepaid and Other Current Assets within
the Consolidated Balance Sheets.
|
|
|
|
Ingevity Corporation
Correction to Previously Issued Financial Statements
During 2016, Ingevity identified various errors related to its
previously issued annual and interim Combined Financial Statements.
Specifically, in the first quarter of 2016, the Company determined that
$3.3 million of cumulative intercompany profit in inventory had not been
eliminated in prior years. During the fourth quarter, the company also
identified errors related to a $1.8 million understatement of accruals
for services rendered in prior years, as well as errors related to the
timing for which revenue has been previously recognized.
The cumulative impact of the errors identified in 2016 had resulted in
the overstatement of pre-tax and net income of $1.6 million and $1.0
million in 2015 and $0.9 million and $0.6 million in 2014, and a
cumulative impact to net parent investment of $2.5 million as of January
1, 2014. In addition, such errors resulted in the $9.4 million and $5.5
million overstatement of revenue in 2015 and 2014, respectively.
Although Ingevity’s management has determined that the impact of such
errors is immaterial to all previously issued financial statements, we
revised the previously issued financial statements for the periods ended
December 31, 2015 and 2014, as shown in our 2016 Annual Report, and
those corrections are also reflected for the three and six months ended
June 30, 2016 in the tables below.
|
Impact of Corrections to the Condensed Consolidated Statements
of Operations
|
|
|
|
|
|
|
Three Months Ended
June 30, 2016
|
|
|
Six Months Ended
June 30,2016
|
|
In millions, unaudited
|
|
|
increase/(decrease)
|
|
|
increase/(decrease)
|
|
Net sales
|
|
|
$
|
(3.3
|
)
|
|
|
$
|
(7.6
|
)
|
|
Cost of sales
|
|
|
|
(1.9
|
)
|
|
|
|
(9.2
|
)
|
|
Gross profit
|
|
|
|
(1.4
|
)
|
|
|
|
1.6
|
|
|
Selling, general and administrative costs
|
|
|
|
(1.5
|
)
|
|
|
|
(1.6
|
)
|
|
Income before income taxes
|
|
|
|
0.1
|
|
|
|
|
3.2
|
|
|
Provision for income taxes
|
|
|
|
—
|
|
|
|
|
1.2
|
|
|
Net income (loss)
|
|
|
|
0.1
|
|
|
|
|
2.0
|
|
|
Net income (loss) attributable to Ingevity stockholders
|
|
|
|
0.4
|
|
|
|
|
1.4
|
|
|
|
|
Impact of Corrections to the Segment Operating Results
|
|
|
|
|
|
|
Three Months Ended
June 30, 2016
|
|
|
Six Months Ended
June 30,2016
|
|
In millions, unaudited
|
|
|
increase/(decrease)
|
|
|
increase/(decrease)
|
|
Net sales
|
|
|
|
|
|
|
|
Performance Materials
|
|
|
$
|
(0.3
|
)
|
|
|
$
|
(1.0
|
)
|
|
Performance Chemicals
|
|
|
|
(3.0
|
)
|
|
|
|
(6.6
|
)
|
|
Total net sales
|
|
|
$
|
(3.3
|
)
|
|
|
$
|
(7.6
|
)
|
|
|
|
|
|
|
|
|
|
Segment operating profit
|
|
|
|
|
|
|
|
Performance Materials
|
|
|
$
|
(0.1
|
)
|
|
|
$
|
3.0
|
|
|
Performance Chemicals
|
|
|
|
0.2
|
|
|
|
|
0.2
|
|
|
Total segment operating profit
|
|
|
$
|
0.1
|
|
|
|
$
|
3.2
|
|
|
|
|
Impact of Corrections to the Condensed Consolidated Statements
of Cash Flows
|
|
|
|
|
|
|
Six Months Ended
June 30, 2016
|
|
In millions, unaudited
|
|
|
increase/(decrease)
|
|
Cash flows from operating activities:
|
|
|
$
|
(0.5
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
Transactions with WestRock, net
|
|
|
|
0.5
|
|
|
Net cash provided (used) by financing activities
|
|
|
$
|
0.5
|
|
|
|
|
|
|
|
|
Ingevity Corporation
Non-GAAP Financial Measures
Ingevity has presented certain financial measures, defined below, which
have not been prepared in accordance with U.S. generally accepted
accounting principles (“GAAP”) and has provided a reconciliation to the
most directly comparable financial measure calculated in accordance with
GAAP. These financial measures are not meant to be considered in
isolation or as a substitute for the most directly comparable financial
measure calculated in accordance with GAAP. The company believes these
non-GAAP measures provide investors, potential investors, securities
analysts and others with useful information to evaluate the performance
of the business, because such measures, when viewed together with our
financial results computed in accordance with GAAP, provide a more
complete understanding of the factors and trends affecting our
historical financial performance and projected future results.
Ingevity uses the following non-GAAP measures:
Adjusted earnings (loss) is defined as net income (loss)
attributable to Ingevity stockholders plus restructuring and other
(income) charges, separation costs, 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.
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
June 30,
|
|
|
Six Months Ended
June 30,
|
|
In millions, except per share amounts; unaudited
|
|
|
2017
|
|
|
2016
(1)
|
|
|
2017
|
|
|
2016
(1)
|
|
Net income (loss)
|
|
|
$
|
35.8
|
|
|
|
$
|
25.9
|
|
|
|
$
|
58.8
|
|
|
|
$
|
37.6
|
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
|
3.7
|
|
|
|
|
1.8
|
|
|
|
|
7.7
|
|
|
|
|
4.3
|
|
|
Net income (loss) attributable to Ingevity stockholders (GAAP)
|
|
|
|
32.1
|
|
|
|
|
24.1
|
|
|
|
|
51.1
|
|
|
|
|
33.3
|
|
|
Restructuring and other (income) charges (2)
|
|
|
|
1.1
|
|
|
|
|
1.0
|
|
|
|
|
3.4
|
|
|
|
|
5.6
|
|
|
Separation costs (3)
|
|
|
|
0.2
|
|
|
|
|
4.7
|
|
|
|
|
0.5
|
|
|
|
|
11.1
|
|
|
Income tax effect on items above
|
|
|
|
(0.1
|
)
|
|
|
|
(1.5
|
)
|
|
|
|
(0.8
|
)
|
|
|
|
(3.4
|
)
|
|
Adjusted earnings (loss) (Non-GAAP)
|
|
|
$
|
33.3
|
|
|
|
$
|
28.3
|
|
|
|
$
|
54.2
|
|
|
|
$
|
46.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share (GAAP)
|
|
|
$
|
0.76
|
|
|
|
$
|
0.57
|
|
|
|
$
|
1.21
|
|
|
|
$
|
0.79
|
|
|
Restructuring and other (income) charges
|
|
|
|
0.02
|
|
|
|
|
0.03
|
|
|
|
|
0.08
|
|
|
|
|
0.13
|
|
|
Separation costs
|
|
|
|
—
|
|
|
|
|
0.11
|
|
|
|
|
0.01
|
|
|
|
|
0.26
|
|
|
Income tax effect on items above
|
|
|
|
—
|
|
|
|
|
(0.04
|
)
|
|
|
|
(0.02
|
)
|
|
|
|
(0.08
|
)
|
|
Diluted adjusted earnings (loss) per share (Non-GAAP)
|
|
|
$
|
0.78
|
|
|
|
$
|
0.67
|
|
|
|
$
|
1.28
|
|
|
|
$
|
1.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares outstanding used in diluted adjusted
after-tax earnings per share computations
|
|
|
|
42.4
|
|
|
|
|
42.1
|
|
|
|
|
42.4
|
|
|
|
|
42.1
|
|
|
_______________
|
|
|
|
|
|
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
for various immaterial errors previously identified during the
quarter and year ended December 31, 2016.
|
|
(2) Charges for the three months ended June 30, 2017 include $1.1
million in costs primarily associated with the exit of our
Performance Chemicals’ manufacturing operations in Palmeira, Santa
Catarina, Brazil. Charges incurred for the six months ended June
30, 2017 include $1.3 million in severance and other
employee-related costs related to a reorganization as part of an
effort to streamline our leadership team, flatten the organization
and reduce costs. Additional charges include $2.1 million in
miscellaneous costs primarily associated with the exit of our
Performance Chemicals’ manufacturing operations in Palmeira, Santa
Catarina, Brazil. Charges incurred during 2016 relate to two
restructuring activities that commenced in the first quarter of
2016. Charges for the three months ended 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.
|
|
(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 Net Income (GAAP) to Adjusted EBITDA
(Non-GAAP)
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
In millions, unaudited
|
|
|
2017
|
|
|
2016
(1)
|
|
|
2017
|
|
|
2016
(1)
|
|
Net income (loss) (GAAP)
|
|
|
$
|
35.8
|
|
|
|
$
|
25.9
|
|
|
|
$
|
58.8
|
|
|
|
$
|
37.6
|
|
|
Provision for income taxes
|
|
|
|
17.2
|
|
|
|
|
12.6
|
|
|
|
|
28.2
|
|
|
|
|
23.8
|
|
|
Interest expense, net
|
|
|
|
2.8
|
|
|
|
|
5.0
|
|
|
|
|
6.1
|
|
|
|
|
10.4
|
|
|
Separation costs
|
|
|
|
0.2
|
|
|
|
|
4.7
|
|
|
|
|
0.5
|
|
|
|
|
11.1
|
|
|
Depreciation and amortization
|
|
|
|
10.1
|
|
|
|
|
9.3
|
|
|
|
|
20.4
|
|
|
|
|
18.3
|
|
|
Restructuring and other (income) charges
|
|
|
|
1.1
|
|
|
|
|
1.0
|
|
|
|
|
3.4
|
|
|
|
|
5.6
|
|
|
Adjusted EBITDA (Non-GAAP)
|
|
|
$
|
67.2
|
|
|
|
$
|
58.5
|
|
|
|
$
|
117.4
|
|
|
|
$
|
106.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
260.3
|
|
|
|
$
|
245.4
|
|
|
|
$
|
478.8
|
|
|
|
$
|
445.0
|
|
|
Net income (loss) margin
|
|
|
|
13.8
|
%
|
|
|
|
10.6
|
%
|
|
|
|
12.3
|
%
|
|
|
|
8.4
|
%
|
|
Adjusted EBITDA margin
|
|
|
|
25.8
|
%
|
|
|
|
23.8
|
%
|
|
|
|
24.5
|
%
|
|
|
|
24.0
|
%
|
|
_______________
|
|
|
|
|
|
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
for various immaterial errors previously identified during the
quarter and year ended December 31, 2016.
|
|
|
|
|
|
INGEVITY CORPORATION
Reconciliation of Non-GAAP Financial Measures
Reconciliation of Segment Operating Profit (GAAP) to Segment
EBITDA (Non-GAAP)
|
|
|
|
In millions, unaudited
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
Performance Materials
|
|
|
2017
|
|
|
2016
(1)
|
|
|
2017
|
|
|
2016
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (GAAP)
|
|
|
$
|
30.7
|
|
|
|
$
|
26.2
|
|
|
|
$
|
60.2
|
|
|
|
$
|
56.9
|
|
|
Depreciation and amortization
|
|
|
|
5.0
|
|
|
|
|
3.7
|
|
|
|
|
10.0
|
|
|
|
|
6.9
|
|
|
Segment EBITDA (Non-GAAP)
|
|
|
$
|
35.7
|
|
|
|
$
|
29.9
|
|
|
|
$
|
70.2
|
|
|
|
$
|
63.8
|
|
|
Inter-company foreign currency loss/(gain)
|
|
|
|
2.2
|
|
|
|
|
0.3
|
|
|
|
|
1.3
|
|
|
|
|
(1.6
|
)
|
|
Segment EBITDA excluding inter-company foreign currency impacts
(Non-GAAP)
|
|
|
$
|
37.9
|
|
|
|
$
|
30.2
|
|
|
|
$
|
71.5
|
|
|
|
$
|
62.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
89.5
|
|
|
|
$
|
74.2
|
|
|
|
$
|
172.9
|
|
|
|
$
|
144.3
|
|
|
Segment operating margin
|
|
|
|
34.3
|
%
|
|
|
|
35.3
|
%
|
|
|
|
34.8
|
%
|
|
|
|
39.4
|
%
|
|
Segment EBITDA margin
|
|
|
|
39.9
|
%
|
|
|
|
40.3
|
%
|
|
|
|
40.6
|
%
|
|
|
|
44.2
|
%
|
|
Segment EBITDA margin excluding inter-company foreign currency
impacts
|
|
|
|
42.3
|
%
|
|
|
|
40.7
|
%
|
|
|
|
41.4
|
%
|
|
|
|
43.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (GAAP)
|
|
|
$
|
26.4
|
|
|
|
$
|
23.0
|
|
|
|
$
|
36.8
|
|
|
|
$
|
31.6
|
|
|
Depreciation and amortization
|
|
|
|
5.1
|
|
|
|
|
5.6
|
|
|
|
|
10.4
|
|
|
|
|
11.4
|
|
|
Segment EBITDA (Non-GAAP)
|
|
|
$
|
31.5
|
|
|
|
$
|
28.6
|
|
|
|
$
|
47.2
|
|
|
|
$
|
43.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
170.8
|
|
|
|
$
|
171.2
|
|
|
|
$
|
305.9
|
|
|
|
$
|
300.7
|
|
|
Segment operating margin
|
|
|
|
15.5
|
%
|
|
|
|
13.4
|
%
|
|
|
|
12.0
|
%
|
|
|
|
10.5
|
%
|
|
Segment EBITDA margin
|
|
|
|
18.4
|
%
|
|
|
|
16.7
|
%
|
|
|
|
15.4
|
%
|
|
|
|
14.3
|
%
|
|
_______________
|
|
|
|
|
|
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
for various immaterial errors previously identified during the
quarter and year ended December 31, 2016.
|
|
|
Ingevity Corporation
Jack Maurer, 843-746-8242
jack.maurer@ingevity.com
or
Investors:
Dan Gallagher, 843-740-2126
daniel.gallagher@ingevity.com