- Net sales of $264.1 million were up 4.6 percent versus the prior year quarter’s sales of $252.4 million
- Net income of $38.4 million resulted in net income as a percentage of sales of 14.5 percent, compared to net loss of $4.9 million including restructuring costs related to the closure of the Brazil refinery, which resulted in net loss as a percentage of sales of 1.9 percent in the prior year quarter
- Diluted earnings per share were $0.79; diluted adjusted earnings per share were $0.86
- Adjusted EBITDA of $72.7 million were up 22 percent compared to third quarter 2016 adjusted EBITDA of $59.6 million
- Adjusted EBITDA margin of 27.5 percent increased 390 basis points versus third quarter 2016
- Company narrows fiscal year 2017 sales guidance to between $945 million and $955 million and narrows and raises adjusted EBITDA guidance to between $227 million and $232 million
The results and guidance in this release include Non-GAAP financial measures. Refer to the section entitled “Use of Non-GAAP Financial Measures” within this release.
Additionally, this release includes revisions to prior year periods’ financial results. Refer to the section entitled “Correction to Previously Issued Financial Statements.”
Ingevity Corporation (NYSE:NGVT) today reported third quarter net sales
of $264.1 million and net income of $38.4 million, representing 14.5
percent of sales. Sales increased 4.6 percent versus $252.4 million in
the prior year’s third quarter and net income increased $43.3 million
versus a net loss of $4.9 million last year. Prior year net loss of $4.9
million was primarily driven by a third quarter after-tax restructuring
charge of $32.2 million, or $0.76 per share, related to the closure of
the Brazil refinery. The third quarter diluted earnings per share were
$0.79. Diluted adjusted earnings per share were $0.86 excluding certain
items of $0.07 per share. Adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) of $72.7 million were up 22
percent versus third quarter 2016 adjusted EBITDA of $59.6 million.
Ingevity’s third quarter adjusted EBITDA margin of 27.5 percent was up
390 basis points from the prior year’s third quarter adjusted EBITDA
margin of 23.6 percent.
“We posted an outstanding third quarter,” said Michael Wilson,
Ingevity’s president and CEO. “Our strategic focus on high value-added
product lines and our disciplined execution drove the year-over-year
increase in revenues and earnings. We achieved a 22 percent increase in
adjusted EBITDA versus the previous year’s quarter. And, as a result, we
saw a sharp increase in our adjusted EBITDA margin to 27.5 percent,
making this our most profitable quarter since our spinoff in May of last
year.”
Performance Chemicals
Third quarter 2017 sales in the Performance Chemicals segment were
$178.7 million, up $5.7 million, or 3.3 percent, versus the third
quarter 2016. Segment operating profit was $33.4 million, up $11.7
million, or 53.9 percent, versus the prior year quarter segment
operating profit. This translated into a segment operating margin of
18.7 percent versus 12.5 percent in the prior year. Segment EBITDA were
$38.5 million, up $11.4 million, or 42 percent, versus the prior year
quarter segment EBITDA. Segment EBITDA margin was 21.5 percent, up 580
basis points versus the prior year quarter.
“The continued rebound in U.S. drilling pushed sales to oilfield
customers higher by 31 percent, and a later start to the paving season
resulted in a 19 percent increase in sales to pavement applications
versus the prior year’s quarter,” said Wilson. “Revenues in industrial
specialties applications were 9 percent lower, as product availability
to these markets was constrained to meet growing needs in higher
value-added oilfield and pavement technologies applications.
“Despite modest revenue growth,” Wilson continued, “we achieved
significantly higher segment EBITDA and segment EBITDA margin in
Performance Chemicals. In addition to higher volumes, earnings were
further augmented by improved pricing, higher plant productivity, lower
raw materials costs and savings stemming from strategic initiatives we
took last year to lower our cost structure.”
Performance Materials
Third quarter 2017 sales in the Performance Materials segment were $85.4
million, up $6 million, or 7.6 percent, versus the third quarter 2016.
Segment operating profit was $29.3 million, up $1.5 million, or 5.4
percent, versus the prior year quarter segment operating profit. This
translated to a segment operating margin of 34.3 percent versus 35.0
percent in the prior year period. Segment EBITDA were $34.2 million, up
$1.7 million, or 5.2 percent, versus the prior year segment EBITDA.
Segment EBITDA margin was 40 percent, down 90 basis points versus the
prior year quarter.
“Sales of Ingevity’s ‘honeycomb’ scrubbers, used by the automotive
industry to comply with U.S. Environmental Protection Agency (EPA) Tier
3 and California LEV III standards for gasoline vapor emission control,
continued to show robust growth,” said Wilson. “This growth was
partially offset by lower sales of pelletized activated carbon due to
lower North American light vehicle production as the industry worked
down inventory.”
Wilson said that despite the third quarter’s 11 percent decline in North
American vehicle production (according to WardsAuto) the company’s
Performance Materials segment grew revenue in that same period by about
8 percent based on the strength of continued adoption of more stringent
gasoline vapor emission control regulations. The segment’s earnings
growth in the third quarter was tempered by higher expansion costs at
the Waynesboro, Ga., plant and higher export costs for products from the
Zhuhai, China, facility.
Outlook
Ingevity narrowed its fiscal year 2017 guidance for sales from between
$940 million and $955 million to $945 million and $955 million. The
company also narrowed and raised its guidance for adjusted EBITDA from
between $220 million and $230 million to between $227 million and $232
million.
“While the fourth quarter is typically slower due to the seasonality of
some of our end-markets, we are confident that we’ll turn in a strong
2017 performance,” said Wilson. “At the mid-point of our guidance,
year-over-year EBITDA growth would be 13.4 percent, and the EBITDA
margin would accrete by almost 200 basis points.”
Ingevity: Purify, Protect and Enhance
Ingevity provides specialty chemicals and high-performance carbon
materials and technologies that help customers solve complex problems.
These products are used in a variety of demanding applications,
including asphalt paving, oil exploration and production, agrochemicals,
adhesives, lubricants, printing inks and automotive components that
reduce gasoline vapor emissions. Through a team of talented and
experienced people, Ingevity develops, manufactures and brings to market
products and processes that purify, protect and enhance the world around
us. Headquartered in North Charleston, S.C., Ingevity operates from 25
locations around the world and employs approximately 1,500 people. The
company is traded on the New York Stock Exchange (NYSE: NGVT). For more
information, visit www.ingevity.com.
Additional Information
The company will host a conference call on Thursday, Nov. 2, 2017, at 10
a.m. (Eastern Time) to discuss third quarter fiscal results. Those who
wish to participate in this event should dial 800-230-1092 (inside the
U.S.) or 612-332-0335 (outside the U.S.), at least 15 minutes prior to
the start of the call. In addition, a slide deck for use during the
conference call will be posted on the Investors section of Ingevity’s
website shortly before the call begins. Replays will be available
through Dec. 2, 2017, and can be accessed at 800-475-6701 (inside the
U.S.) or 320-365-3844 (outside the U.S.), with access code 431407.
Correction to Previously Issued Financial Statements
During the quarters and year ended December 31, 2016, Ingevity
identified various errors related to its previously issued annual and
interim Consolidated Financial Statements. The impact of the revision to
the previously issued financial statements for the three and nine months
ended September 30, 2016 is reflected in the schedules to this press
release.
Use of Non-GAAP Financial Measures
Ingevity has presented certain financial measures which have not been
prepared in accordance with U.S. generally accepted accounting
principles (GAAP). Definitions of our non-GAAP financial measures and a
reconciliation to the most directly comparable financial measure
calculated in accordance with GAAP are included in the financial
schedules accompanying this news release, under the section entitled
"Non-GAAP Financial Measures."
A reconciliation of net income to adjusted EBITDA as projected for 2017
is not provided. Ingevity does not forecast net income as we cannot,
without unreasonable effort, estimate or predict with certainty various
components of net income. These components include additional costs
associated with the separation from WestRock, further restructuring and
other income or charges, and acquisition related charges in connection
with the planned acquisition of Georgia Pacific's pine chemicals
business as well as the related tax impacts of these items.
Additionally, discrete tax items could drive variability in our
projected effective tax rate. All of these components could
significantly impact such financial measures. Further, in the future,
other items with similar characteristics to those currently included in
adjusted EBITDA, that have a similar impact on comparability of periods,
and which are not known at this time, may exist and impact adjusted
EBITDA.
Forward-Looking Statements
This press release contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward looking statements generally include the words “may,” “could,”
“should,” “believes,” “plans,” “intends,” “targets,” “will,” “expects,”
“suggests,” “anticipates,” “outlook,” “continues,” “forecast,”
“prospect,” “potential” or similar expressions. Forward-looking
statements may include, without limitation, expected financial
positions, results of operations and cash flows; financing plans;
business strategies and expectations; operating plans; synergies and the
potential benefits of the acquisition of Georgia-Pacific’s pine
chemicals business (the “acquisition”); the anticipated timing of the
closing of the acquisition; capital and other expenditures; competitive
positions; growth opportunities for existing products; benefits from new
technology and cost-reduction initiatives, plans and objectives; and
markets for securities. Like other businesses, Ingevity is subject to
risks and uncertainties that could cause its actual results to differ
materially from its expectations or that could cause other
forward-looking statements to prove incorrect. Factors that could cause
actual results to materially differ from those contained in the
forward-looking statements, or that could cause other forward-looking
statements to prove incorrect, include, without limitation, risks
related to the satisfaction of the conditions to closing the acquisition
(including the failure to obtain necessary regulatory approvals) in the
anticipated timeframe or at all, risks that the expected benefits from
the proposed acquisition will not be realized or will not be realized in
the expected time period; the risk that the businesses will not be
integrated successfully; significant transaction costs; unknown or
understated liabilities; general economic and financial conditions;
international sales and operations; currency exchange rates and currency
devaluation; compliance with U.S. and foreign regulations; attracting
and retaining key personnel; conditions in the automotive market or
adoption of alternative technologies; worldwide air quality standards;
government infrastructure spending; declining volumes in the printing
inks market; the limited supply of crude tall oil (“CTO”); lack of
access to sufficient CTO; access to and pricing of raw materials;
competition from producers of substitute products and new technologies;
a prolonged period of low energy prices; the provision of services by
third parties at several facilities; natural disasters, such as
hurricanes, winter or tropical storms, earthquakes, floods, fires; other
unanticipated problems such as labor difficulties including renewal of
collective bargaining agreements, equipment failure or unscheduled
maintenance and repair; protection of intellectual property and
proprietary information; information technology security risks;
government policies and regulations, including, but not limited to,
those affecting the environment, climate change, tax policies and the
chemicals industry; and lawsuits arising out of environmental damage or
personal injuries associated with chemical or other manufacturing
processes. These and other important factors that could cause actual
results or events to differ materially from those expressed in
forward-looking statements that may have been made in this document are
and will be more particularly described in our filings with the U.S.
Securities and Exchange Commission, including our Form 10-K for the year
ended December 31, 2016 and our other periodic filings. Readers are
cautioned not to place undue reliance on Ingevity’s projections and
forward-looking statements, which speak only as the date thereof.
Ingevity undertakes no obligation to publicly release any revision to
the projections and forward-looking statements contained in this
announcement, or to update them to reflect events or circumstances
occurring after the date of this announcement.
|
|
|
INGEVITY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
In millions, except per share amounts
|
|
2017
|
|
2016
(1)
|
|
2017
|
|
2016
(1)
|
|
Net sales
|
|
$
|
264.1
|
|
|
$
|
252.4
|
|
|
$
|
742.9
|
|
|
$
|
697.4
|
|
|
Cost of sales
|
|
170.9
|
|
|
172.0
|
|
|
489.2
|
|
|
479.3
|
|
|
Gross profit
|
|
93.2
|
|
|
80.4
|
|
|
253.7
|
|
|
218.1
|
|
|
Selling, general and administrative expenses
|
|
26.2
|
|
|
25.2
|
|
|
78.5
|
|
|
70.8
|
|
|
Research and technical expenses
|
|
4.8
|
|
|
3.9
|
|
|
14.6
|
|
|
13.2
|
|
|
Separation costs
|
|
0.2
|
|
|
2.5
|
|
|
0.7
|
|
|
13.6
|
|
|
Restructuring and other (income) charges, net
|
|
0.1
|
|
|
32.7
|
|
|
3.5
|
|
|
38.3
|
|
|
Acquisition costs
|
|
4.1
|
|
|
—
|
|
|
4.1
|
|
|
—
|
|
|
Other (income) expense, net
|
|
(0.5
|
)
|
|
1.8
|
|
|
0.9
|
|
|
(3.9
|
)
|
|
Interest expense, net
|
|
3.2
|
|
|
3.8
|
|
|
9.3
|
|
|
14.2
|
|
|
Income before income taxes
|
|
55.1
|
|
|
10.5
|
|
|
142.1
|
|
|
71.9
|
|
|
Provision for income taxes
|
|
16.7
|
|
|
15.4
|
|
|
44.9
|
|
|
39.2
|
|
|
Net income (loss)
|
|
38.4
|
|
|
(4.9
|
)
|
|
97.2
|
|
|
32.7
|
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
4.6
|
|
|
2.3
|
|
|
12.3
|
|
|
6.6
|
|
|
Net income (loss) attributable to Ingevity stockholders
|
|
$
|
33.8
|
|
|
$
|
(7.2
|
)
|
|
$
|
84.9
|
|
|
$
|
26.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share attributable to Ingevity
stockholders
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.80
|
|
|
$
|
(0.17
|
)
|
|
$
|
2.01
|
|
|
$
|
0.62
|
|
|
Diluted
|
|
$
|
0.79
|
|
|
$
|
(0.17
|
)
|
|
$
|
2.00
|
|
|
$
|
0.62
|
|
|
Average number of shares outstanding used in the
earnings (loss) per share computations
(2)
|
|
|
|
|
|
|
|
|
|
Basic
|
|
42.1
|
|
|
42.1
|
|
|
42.1
|
|
|
42.1
|
|
|
Diluted
|
|
42.5
|
|
|
42.1
|
|
|
42.5
|
|
|
42.2
|
|
|
_________________
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
for various immaterial errors previously identified during the
quarter and year ended December 31, 2016. See section entitled
"Correction of Previously Issued Financial Statements" on
"Financial Schedules - Page 5" of this press release.
|
|
(2) On May 15, 2016, WestRock distributed 42,102,000 shares of
Ingevity's common stock to holders of its common stock. The
computation of basic and diluted earnings per common share for all
periods prior to May 15, 2016 was calculated using the number of
shares distributed on May 15, 2016.
|
|
|
|
|
|
|
|
|
INGEVITY CORPORATION
Segment Operating Results
(Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
In millions
|
2017
|
|
2016
(1)
|
|
2017
|
|
2016
(1)
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
Performance Materials
|
$
|
85.4
|
|
|
$
|
79.4
|
|
|
$
|
258.3
|
|
|
$
|
223.7
|
|
|
Performance Chemicals
|
178.7
|
|
|
173.0
|
|
|
484.6
|
|
|
473.7
|
|
|
Pavement Technologies product line
|
64.5
|
|
|
54.4
|
|
|
137.2
|
|
|
129.2
|
|
|
Oilfield Technologies product line
|
20.3
|
|
|
15.5
|
|
|
58.1
|
|
|
43.2
|
|
|
Industrial Specialties product line
|
93.9
|
|
|
103.1
|
|
|
289.3
|
|
|
301.3
|
|
|
Total net sales
|
$
|
264.1
|
|
|
$
|
252.4
|
|
|
$
|
742.9
|
|
|
$
|
697.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit
|
|
|
|
|
|
|
|
|
|
Performance Materials
|
$
|
29.3
|
|
|
$
|
27.8
|
|
|
$
|
89.5
|
|
|
$
|
84.7
|
|
|
Performance Chemicals
|
33.4
|
|
|
21.7
|
|
|
70.2
|
|
|
53.3
|
|
|
Total segment operating profit
|
62.7
|
|
|
49.5
|
|
|
159.7
|
|
|
138.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs (2)
|
(0.2
|
)
|
|
(2.5
|
)
|
|
(0.7
|
)
|
|
(13.6
|
)
|
|
Restructuring and other income (charges) (3)
|
(0.1
|
)
|
|
(32.7
|
)
|
|
(3.5
|
)
|
|
(38.3
|
)
|
|
Acquisition costs (4)
|
(4.1
|
)
|
|
—
|
|
|
(4.1
|
)
|
|
—
|
|
|
Interest expense, net
|
(3.2
|
)
|
|
(3.8
|
)
|
|
(9.3
|
)
|
|
(14.2
|
)
|
|
Provision for income taxes
|
(16.7
|
)
|
|
(15.4
|
)
|
|
(44.9
|
)
|
|
(39.2
|
)
|
|
Net (income) loss attributable to noncontrolling interests
|
(4.6
|
)
|
|
(2.3
|
)
|
|
(12.3
|
)
|
|
(6.6
|
)
|
|
Net income (loss) attributable to the Ingevity stockholders
|
$
|
33.8
|
|
|
$
|
(7.2
|
)
|
|
$
|
84.9
|
|
|
$
|
26.1
|
|
|
_________________
|
|
|
|
|
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
for various immaterial errors
previously identified during
the quarter and year ended December 31, 2016. See section entitled
"Correction of Previously Issued Financial Statements"
on
"Financial Schedules - Page 5" of this press release.
|
|
(2) Represents transaction costs associated with separation of
Ingevity from WestRock. These costs are primarily related to
professional fees associated with
separation activities
within the finance, tax and legal functions.
|
|
(3) For the three and nine months ended September 30, 2017 and
September 30, 2016 the charges related to Performance Materials
and Performance Chemicals
as shown in the table below:
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
In millions
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Performance Materials
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.8
|
|
|
Performance Chemicals
|
0.1
|
|
|
32.7
|
|
|
3.5
|
|
|
37.5
|
|
|
Total
|
$
|
0.1
|
|
|
$
|
32.7
|
|
|
$
|
3.5
|
|
|
$
|
38.3
|
|
|
|
|
|
(4) Represents charges incurred in connection with the planned
acquisition of Georgia Pacific's Pine Chemical Business.
|
|
|
|
|
|
|
INGEVITY CORPORATION
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
In millions
|
|
September 30, 2017
|
|
December 31, 2016
|
|
Assets
|
|
(unaudited)
|
|
|
|
Cash and cash equivalents
|
|
$
|
70.2
|
|
|
$
|
30.5
|
|
Accounts receivable, net
|
|
109.6
|
|
|
89.8
|
|
Inventories, net
|
|
154.5
|
|
|
151.2
|
|
Prepaid and other current assets
|
|
22.5
|
|
|
23.7
|
|
Current assets
|
|
356.8
|
|
|
295.2
|
|
Property, plant and equipment, net
|
|
431.9
|
|
|
422.8
|
|
Restricted investment
|
|
70.8
|
|
|
69.7
|
|
Other assets
|
|
50.3
|
|
|
45.1
|
|
Total assets
|
|
$
|
909.8
|
|
|
$
|
832.8
|
|
Liabilities and Equity
|
|
|
|
|
|
Accounts payable
|
|
$
|
83.7
|
|
|
$
|
79.2
|
|
Accrued expenses
|
|
20.5
|
|
|
19.3
|
|
Other current liabilities
|
|
46.7
|
|
|
38.4
|
|
Current liabilities
|
|
150.9
|
|
|
136.9
|
|
Long term debt including capital lease obligations
|
|
448.7
|
|
|
481.3
|
|
Deferred income taxes
|
|
64.3
|
|
|
69.8
|
|
Other liabilities
|
|
12.3
|
|
|
10.2
|
|
Total liabilities
|
|
676.2
|
|
|
698.2
|
|
Equity
|
|
233.6
|
|
|
134.6
|
|
Total liabilities and equity
|
|
$
|
909.8
|
|
|
$
|
832.8
|
|
|
|
|
|
|
|
|
|
|
|
|
INGEVITY CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
In millions
|
2017
|
|
2016
(1)
|
|
Cash flows from operating activities:
|
$
|
133.6
|
|
|
$
|
74.1
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Capital expenditures
|
(36.2
|
)
|
|
(37.3
|
)
|
|
Restricted investment
|
(1.1
|
)
|
|
(69.4
|
)
|
|
Net investment in equity securities
|
(1.7
|
)
|
|
—
|
|
|
Other investing activities, net
|
(3.0
|
)
|
|
—
|
|
|
Net cash provided (used) by investing activities
|
(42.0
|
)
|
|
(106.7
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
Net borrowings under our revolving credit facility
|
(111.9
|
)
|
|
140.5
|
|
|
Proceeds from long-term borrowings
|
75.0
|
|
|
300.0
|
|
|
Debt issuance costs
|
(1.3
|
)
|
|
(3.6
|
)
|
|
Borrowings (repayments) of notes payable and other short-term
borrowings, net
|
—
|
|
|
(8.2
|
)
|
|
Taxes withheld for employee equity award vesting
|
(0.9
|
)
|
|
—
|
|
|
Treasury share repurchases
|
(2.6
|
)
|
|
—
|
|
|
Noncontrolling interest distributions
|
(8.2
|
)
|
|
(3.6
|
)
|
|
Cash distributed to WestRock at separation
|
—
|
|
|
(448.5
|
)
|
|
Transactions with WestRock, net
|
—
|
|
|
51.9
|
|
|
Net cash provided (used) by financing activities
|
(49.9
|
)
|
|
28.5
|
|
|
Increase (decrease) in cash and cash equivalents
|
41.7
|
|
|
(4.1
|
)
|
|
Effect of exchange rate changes on cash
|
(1.7
|
)
|
|
(0.8
|
)
|
|
|
|
|
|
|
Change in cash, cash equivalents and restricted cash (2)
|
40.0
|
|
|
(4.9
|
)
|
|
At beginning of period (2)
|
30.5
|
|
|
32.0
|
|
|
At end of period (2)
|
$
|
70.5
|
|
|
$
|
27.1
|
|
|
_______________
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
for various immaterial errors previously identified during the
quarter and year ended December 31, 2016. See section entitled
"Correction of Previously Issued Financial Statements" on "Financial
Schedules - Page 5" of this press release.
|
|
(2) Includes restricted cash of $0.3 million and zero for the
periods ended September 30, 2017 and 2016, respectively. Restricted
cash is included within Prepaid and Other Current Assets within the
Consolidated Balance Sheets.
|
|
|
|
|
Ingevity Corporation
Correction to Previously Issued Financial Statements
During 2016, Ingevity identified various errors related to its
previously issued annual and interim Combined Financial Statements.
Specifically, in the first quarter of 2016, the Company determined that
$3.3 million of cumulative intercompany profit in inventory had not been
eliminated in prior years. During the fourth quarter, the company also
identified errors related to a $1.8 million understatement of accruals
for services rendered in prior years, as well as errors related to the
timing for which revenue has been previously recognized.
The cumulative impact of the errors identified in 2016 had resulted in
the overstatement of pre-tax and net income of $1.6 million and $1.0
million in 2015 and $0.9 million and $0.6 million in 2014, and a
cumulative impact to net parent investment of $2.5 million as of January
1, 2014. In addition, such errors resulted in the $9.4 million and $5.5
million overstatement of revenue in 2015 and 2014, respectively.
Although Ingevity’s management has determined that the impact of such
errors is immaterial to all previously issued financial statements, we
revised the previously issued financial statements for the periods ended
December 31, 2015 and 2014, as shown in our 2016 Annual Report, and
those corrections are also reflected for the three and nine months ended
September 30, 2016 in the tables below.
|
Impact of Corrections to the Condensed Consolidated Statements
of Operations
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2016
|
|
Nine Months Ended
September 30,2016
|
|
In millions, unaudited
|
|
increase/(decrease)
|
|
increase/(decrease)
|
|
Net sales
|
|
$
|
0.4
|
|
|
$
|
(7.2
|
)
|
|
Cost of sales
|
|
1.0
|
|
|
(8.2
|
)
|
|
Gross profit
|
|
(0.6
|
)
|
|
1.0
|
|
|
Selling, general and administrative costs
|
|
(0.6
|
)
|
|
(2.2
|
)
|
|
Income before income taxes
|
|
—
|
|
|
3.2
|
|
|
Provision for income taxes
|
|
0.1
|
|
|
1.3
|
|
|
Net income (loss)
|
|
(0.1
|
)
|
|
1.9
|
|
|
Net income (loss) attributable to Ingevity stockholders
|
|
(0.1
|
)
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
Impact of Corrections to the Segment Operating Results
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2016
|
|
Nine Months Ended
September 30,2016
|
|
In millions, unaudited
|
increase/(decrease)
|
|
increase/(decrease)
|
|
Net sales
|
|
|
|
|
Performance Materials
|
$
|
0.1
|
|
|
$
|
(0.9
|
)
|
|
Performance Chemicals
|
0.3
|
|
|
(6.3
|
)
|
|
Total net sales
|
$
|
0.4
|
|
|
$
|
(7.2
|
)
|
|
|
|
|
|
|
Segment operating profit
|
|
|
|
|
Performance Materials
|
$
|
0.2
|
|
|
$
|
3.2
|
|
|
Performance Chemicals
|
(0.2
|
)
|
|
—
|
|
|
Total segment operating profit
|
$
|
—
|
|
|
$
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Corrections to the Condensed Consolidated Statements
of Cash Flows
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2016
|
|
In millions, unaudited
|
|
|
increase/(decrease)
|
|
Cash flows from operating activities:
|
|
|
$
|
(0.5
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
Transactions with WestRock, net
|
|
|
0.5
|
|
|
Net cash provided (used) by financing activities
|
|
|
$
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ingevity Corporation
Non-GAAP Financial Measures
Ingevity has presented certain financial measures, defined below, which
have not been prepared in accordance with U.S. generally accepted
accounting principles (“GAAP”) and has provided a reconciliation to the
most directly comparable financial measure calculated in accordance with
GAAP. These financial measures are not meant to be considered in
isolation or as a substitute for the most directly comparable financial
measure calculated in accordance with GAAP. The company believes these
non-GAAP measures provide investors, potential investors, securities
analysts and others with useful information to evaluate the performance
of the business, because such measures, when viewed together with our
financial results computed in accordance with GAAP, provide a more
complete understanding of the factors and trends affecting our
historical financial performance and projected future results.
Ingevity uses the following non-GAAP measures:
Adjusted earnings (loss) is defined as net income (loss)
attributable to Ingevity stockholders plus restructuring and other
(income) charges, separation costs, acquisition costs and the income tax
expense (benefit) on those items.
Diluted adjusted earnings (loss) per share is defined as diluted
earnings (loss) per common share attributable to Ingevity stockholders
plus restructuring and other (income) charges per share, separation
costs per share, acquisition costs per share and the income tax expense
(benefit) per share on those items.
Adjusted EBITDA is defined as net income (loss) plus provision
for income taxes, interest expense, depreciation and amortization,
restructuring and other (income) charges, separation costs and
acquisition costs.
Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by
Net Sales
Segment EBITDA is defined as segment operating profit plus
depreciation and amortization.
Segment EBITDA Margin is defined as Segment EBITDA divided by Net
Sales.
The Company also uses the above financial measures as the primary
measures of profitability used by managers of the business and its
segments. In addition, the Company believes Adjusted EBITDA, Adjusted
EBITDA Margin, Segment EBITDA and Segment EBITDA Margin are useful
measures because they exclude the effects of financing and investment
activities as well as non-operating activities. These non-GAAP financial
measures are not intended to replace the presentation of financial
results in accordance with GAAP and investors should consider the
limitations associated with these non-GAAP measures, including the
potential lack of comparability of these measures from one company to
another. Reconciliations of these non-GAAP financial measures are set
forth within the following pages.
A reconciliation of net income to adjusted EBITDA as projected for 2017
is not provided. Ingevity does not forecast net income as we cannot,
without unreasonable effort, estimate or predict with certainty various
components of net income. These components include additional costs
associated with the separation from WestRock, further restructuring and
other income or charges, and acquisition related charges in connection
with the planned acquisition of Georgia Pacific's pine chemical business
as well as the related tax impacts of these items. Additionally,
discrete tax items could drive variability in our projected effective
tax rate. All of these components could significantly impact such
financial measures. Further, in the future, other items with similar
characteristics to those currently included in adjusted EBITDA, that
have a similar impact on comparability of periods, and which are not
known at this time, may exist and impact adjusted EBITDA.
|
|
|
INGEVITY CORPORATION
Reconciliation of Non-GAAP Financial Measures
Reconciliation of Net Income (Loss) (GAAP) to Adjusted Earnings
(Loss) (Non-GAAP)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
In millions, except per share amounts; unaudited
|
|
2017
|
|
2016
(1)
|
|
2017
|
|
2016
(1)
|
|
Net income (loss)
|
|
$
|
38.4
|
|
|
$
|
(4.9
|
)
|
|
$
|
97.2
|
|
|
$
|
32.7
|
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
4.6
|
|
|
2.3
|
|
|
12.3
|
|
|
6.6
|
|
|
Net income (loss) attributable to Ingevity stockholders (GAAP)
|
|
33.8
|
|
|
(7.2
|
)
|
|
84.9
|
|
|
26.1
|
|
|
Restructuring and other (income) charges (2)
|
|
0.1
|
|
|
32.7
|
|
|
3.5
|
|
|
38.3
|
|
|
Separation costs (3)
|
|
0.2
|
|
|
2.5
|
|
|
0.7
|
|
|
13.6
|
|
|
Acquisition costs(4)
|
|
4.1
|
|
|
—
|
|
|
4.1
|
|
|
—
|
|
|
Income tax effect on items above
|
|
(1.6
|
)
|
|
(0.9
|
)
|
|
(2.4
|
)
|
|
(4.3
|
)
|
|
Adjusted earnings (loss) (Non-GAAP)
|
|
$
|
36.6
|
|
|
$
|
27.1
|
|
|
$
|
90.8
|
|
|
$
|
73.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share (GAAP)
|
|
$
|
0.79
|
|
|
$
|
(0.17
|
)
|
|
$
|
2.00
|
|
|
$
|
0.62
|
|
|
Restructuring and other (income) charges
|
|
—
|
|
|
0.77
|
|
|
0.08
|
|
|
0.91
|
|
|
Separation costs
|
|
0.01
|
|
|
0.06
|
|
|
0.01
|
|
|
0.32
|
|
|
Acquisition costs
|
|
0.10
|
|
|
—
|
|
|
0.10
|
|
|
—
|
|
|
Income tax effect on items above
|
|
(0.04
|
)
|
|
(0.02
|
)
|
|
(0.06
|
)
|
|
(0.10
|
)
|
|
Diluted adjusted earnings (loss) per share (Non-GAAP)
|
|
$
|
0.86
|
|
|
$
|
0.64
|
|
|
$
|
2.13
|
|
|
$
|
1.75
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares outstanding used in diluted adjusted
after-tax earnings per share computations (5)
|
|
42.5
|
|
|
42.2
|
|
|
42.5
|
|
|
42.2
|
|
|
_______________
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
for various immaterial errors previously identified during the
quarter and year ended December 31, 2016.
|
|
(2) Charges for the three months ended September 30, 2017 include
$0.1 million in costs primarily associated with the exit of our
Performance Chemicals' manufacturing operations in Palmeira, Santa
Catarina, Brazil. Charges incurred for the nine months ended
September 30, 2017 include $1.3 million in severance and other
employee-related costs related to a reorganization as part of an
effort to streamline our leadership team, flatten the organization
and reduce costs. Additional charges include $2.2 million in
miscellaneous costs primarily associated with the exit of our
Performance Chemicals' manufacturing operations in Palmeira, Santa
Catarina, Brazil. Charges incurred during 2016 relate to two
restructuring activities that commenced in the first quarter of
2016. Charges for the three months ended September 30, 2016 were
comprised of an asset impairment charge of $30.2 million, severance
related charges of $2.0 million and miscellaneous exit costs of $0.5
million. Charges for the nine months ended September 30, 2016 were
comprised of asset write-downs, including the asset impairment
charge of $30.2 million, accelerated depreciation of $0.4 million,
$7.2 million in severance related charges, and miscellaneous exist
costs of $0.5 million.
|
|
(3) In connection with the separation from WestRock we have incurred
pre-tax separation costs. These costs were primarily related to
professional fees associated with separation activities within the
finance, tax and legal functions.
|
|
(4) Charges primarily relate to legal and professional fees incurred
associated with the planned acquisition of Georgia Pacific's Pine
Chemicals Business.
|
|
(5) The average number of shares outstanding used in the three
months ended September 30, 2016 diluted adjusted earnings (loss) per
share computation (Non-GAAP) includes 121 thousand diluted shares.
This number of shares differs from the average number of shares
outstanding used in the diluted earnings (loss) per common share
computation (GAAP) as we had a net loss attributable to Ingevity
stockholders (GAAP) for the same period.
|
|
|
|
|
|
INGEVITY CORPORATION
Reconciliation of Non-GAAP Financial Measures
Reconciliation of Net Income (GAAP) to Adjusted EBITDA
(Non-GAAP)
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
In millions, unaudited
|
2017
|
|
2016
(1)
|
|
2017
|
|
2016
(1)
|
|
Net income (loss) (GAAP)
|
$
|
38.4
|
|
|
$
|
(4.9
|
)
|
|
$
|
97.2
|
|
|
$
|
32.7
|
|
|
Provision for income taxes
|
16.7
|
|
|
15.4
|
|
|
44.9
|
|
|
39.2
|
|
|
Interest expense, net
|
3.2
|
|
|
3.8
|
|
|
9.3
|
|
|
14.2
|
|
|
Separation costs
|
0.2
|
|
|
2.5
|
|
|
0.7
|
|
|
13.6
|
|
|
Depreciation and amortization
|
10.0
|
|
|
10.1
|
|
|
30.4
|
|
|
28.4
|
|
|
Restructuring and other (income) charges
|
0.1
|
|
|
32.7
|
|
|
3.5
|
|
|
38.3
|
|
|
Acquisition costs
|
4.1
|
|
|
—
|
|
|
4.1
|
|
|
—
|
|
|
Adjusted EBITDA (Non-GAAP)
|
$
|
72.7
|
|
|
$
|
59.6
|
|
|
$
|
190.1
|
|
|
$
|
166.4
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
264.1
|
|
|
$
|
252.4
|
|
|
$
|
742.9
|
|
|
$
|
697.4
|
|
|
Net income (loss) margin
|
14.5
|
%
|
|
(1.9
|
)%
|
|
13.1
|
%
|
|
4.7
|
%
|
|
Adjusted EBITDA margin
|
27.5
|
%
|
|
23.6
|
%
|
|
25.6
|
%
|
|
23.9
|
%
|
|
_______________
|
|
(1) Certain prior period amounts have been revised to reflect the
impact of adjustments made to our financial statements to correct
for various immaterial errors previously identified during the
quarter and year ended December 31, 2016.
|
|
|
|
|
|
INGEVITY CORPORATION
Reconciliation of Non-GAAP Financial Measures
Reconciliation of Segment Operating Profit (GAAP) to Segment
EBITDA (Non-GAAP)
|
|
|
|
|
|
|
|
In millions, unaudited
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
Performance Materials
|
|
2017
|
|
2016
(1)
|
|
2017
|
|
2016
(1)
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (GAAP)
|
|
$
|
29.3
|
|
|
$
|
27.8
|
|
|
$
|
89.5
|
|
|
$
|
84.7
|
|
|
Depreciation and amortization
|
|
4.9
|
|
|
4.7
|
|
|
14.9
|
|
|
11.6
|
|
|
Segment EBITDA (Non-GAAP)
|
|
$
|
34.2
|
|
|
$
|
32.5
|
|
|
$
|
104.4
|
|
|
$
|
96.3
|
|
|
Inter-company foreign currency loss/(gain)
|
|
(0.1
|
)
|
|
1.7
|
|
|
1.2
|
|
|
0.1
|
|
|
Segment EBITDA excluding inter-company foreign currency impacts
(Non-GAAP)
|
|
$
|
34.1
|
|
|
$
|
34.2
|
|
|
$
|
105.6
|
|
|
$
|
96.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
85.4
|
|
|
$
|
79.4
|
|
|
$
|
258.3
|
|
|
$
|
223.7
|
|
|
Segment operating margin
|
|
34.3
|
%
|
|
35.0
|
%
|
|
34.6
|
%
|
|
37.9
|
%
|
|
Segment EBITDA margin
|
|
40.0
|
%
|
|
40.9
|
%
|
|
40.4
|
%
|
|
43.0
|
%
|
|
Segment EBITDA margin excluding inter-company foreign currency
impacts
|
|
39.9
|
%
|
|
43.1
|
%
|
|
40.9
|
%
|
|
43.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Performance Chemicals
|
|
|
|
|
|
|
|
|
|
Segment operating profit (GAAP)
|
|
$
|
33.4
|
|
|
$
|
21.7
|
|
|
$
|
70.2
|
|
|
$
|
53.3
|
|
|
Depreciation and amortization
|
|
5.1
|
|
|
5.4
|
|
|
15.5
|
|
|
16.8
|
|
|
Segment EBITDA (Non-GAAP)
|
|
$
|
38.5
|
|
|
$
|
27.1
|
|
|
$
|
85.7
|
|
|
$
|
70.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
178.7
|
|
|
$
|
173.0
|
|
|
$
|
484.6
|
|
|
$
|
473.7
|
|
|
Segment operating margin
|
|
18.7
|
%
|
|
12.5
|
%
|
|
14.5
|
%
|
|
11.3
|
%
|
|
Segment EBITDA margin
|
|
21.5
|
%
|
|
15.7
|
%
|
|
17.7
|
%
|
|
14.8
|
%
|
|
_______________
|
|
(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