- Net sales of $311.2 million were up more than 17.8 percent versus the prior year quarter’s sales of $264.1 million
- Net income of $51.7 million was up almost 35 percent versus net income in the prior year quarter of $38.4 million; net income as a percentage of sales was 16.6 percent, compared to net income as a percentage of sales of 14.5 percent in the prior year quarter; diluted earnings per share were $1.16
- Adjusted EBITDA of $90.7 million were up 24.8 percent compared to third quarter 2017 adjusted EBITDA of $72.7 million; diluted adjusted earnings per share were $1.16
- Adjusted EBITDA margin of 29.1 percent increased 160 basis points versus third quarter 2017
- Strong results primarily driven by continued across-the-board demand growth, price and mix improvements, excellent operating performance and the acquisition of Georgia-Pacific's pine chemicals business
- Company raises mid-point and narrows range for fiscal year 2018 adjusted EBITDA guidance and maintains guidance on revenues
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.
NORTH CHARLESTON, S.C.--(BUSINESS WIRE)--Ingevity Corporation (NYSE:NGVT) today reported third quarter net sales
of $311.2 million, representing an increase of 17.8 percent versus
$264.1 million in the prior year’s third quarter. Net income was $51.7
million, an increase of 34.6 percent versus $38.4 million in net income
in the previous year’s quarter. The third quarter diluted earnings per
share were $1.16. Adjusted earnings before interest, taxes, depreciation
and amortization (EBITDA) of $90.7 million were up 24.8 percent versus
third quarter 2017 adjusted EBITDA of $72.7 million. Diluted adjusted
earnings per share were $1.16. Ingevity’s third quarter adjusted EBITDA
margin of 29.1 percent was up 160 basis points from the prior year’s
third quarter adjusted EBITDA margin of 27.5 percent.
“As anticipated, we turned in a strong performance in the third
quarter,” said Michael Wilson, Ingevity’s president and CEO. “We
benefitted from demand growth across the board. In addition, our
businesses and manufacturing operations are executing according to plan
and expectations.”
Growth in adjusted EBITDA was driven by higher volumes, improved price
and mix, and lower raw materials and production costs. These were
partially offset by increased freight and selling, general and
administrative (SG&A) costs, including legal and mergers and
acquisitions (M&A) costs.
Performance Chemicals
Third quarter 2018 sales in the Performance Chemicals segment were
$214.9 million, up $36.2 million, or 20.3 percent, versus the third
quarter 2017. Segment operating profit was $39.7 million, up $6.3
million, or 18.9 percent, versus the prior year quarter segment
operating profit. Segment operating margin was 18.5 percent, down 20
basis points compared to prior year. Segment EBITDA were $49.1 million,
up $10.6 million, or 27.5 percent, versus the prior year quarter segment
EBITDA. Segment EBITDA margin rose 130 basis points to 22.8 percent.
“Our sales to oilfield applications continued to show significant growth
based on increased U.S. drilling and production,” said Wilson. “Our
pavement technologies sales overall were solid as we saw very strong
growth in Europe. Paving in the U.S. was moderately disrupted by weather
conditions. Sales to industrial specialties applications increased in
the quarter as success in many of our key niche applications – such as
adhesives, dispersants, lubricants, and rubber additives – more than
offset declines in publication inks.”
Wilson said that the company has efficiently integrated its acquisition
of Georgia-Pacific’s pine chemicals business into its commercial and
manufacturing network and it is contributing significantly to both the
top and bottom lines. Synergy capture for the acquisition is ahead of
schedule.
Performance Materials
Third quarter 2018 sales in the Performance Materials segment were $96.3
million, up $10.9 million, or 12.8 percent, versus the third quarter
2017. Segment operating profit was $36.3 million, up $7.0 million, or
23.9 percent, versus the prior year quarter segment operating profit.
Segment operating margin rose 340 basis points to 37.7 percent. Segment
EBITDA were $41.6 million, up $7.4 million, or 21.6 percent, versus the
prior year segment EBITDA. Segment EBITDA margin rose 320 basis points
to 43.2 percent.
“We drove increased revenues in Performance Materials based on continued
adoption of our ‘honeycomb’ solutions which are used to meet U.S.
Environmental Protection Agency (EPA) Tier 3 and California LEV III
gasoline vapor emission regulations,” said Wilson. “Our profitability
continues to grow as a result of our technology leadership in this
application and very strong output and efficiency from our manufacturing
facilities.”
Outlook
Ingevity raised the mid-point and narrowed the range for its fiscal year
2018 guidance for adjusted EBITDA from between $302 million and $314
million to between $306 million and $314 million. It maintained its
guidance for sales of between $1.10 billion and $1.13 billion.
“We expect to finish the year strongly and in line with our
expectations,” Wilson said. “In all, we anticipate that 2018’s results
will reflect another great year for Ingevity.”
Ingevity: Purify, Protect and Enhance
Ingevity provides
specialty chemicals and high-performance carbon materials and
technologies that purify, protect and enhance the world around us.
Through a team of talented and experienced people, Ingevity develops,
manufactures and brings to market products and processes 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, publication inks and
automotive components that reduce gasoline vapor
emissions. Headquartered in North Charleston, South Carolina, Ingevity
operates from 25 locations around the world and employs approximately
1,600 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, Oct. 25, 2018, at 11 a.m. (Eastern Time) to discuss
third quarter fiscal results. Those who wish to participate in this
event should dial 800-230-1096 (inside the U.S.) or 612-332-0107
(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 Nov. 25, 2018, and can be
accessed at 800-475-6701 (inside the U.S.) or 320-365-3844 (outside the
U.S.), with access code 455080.
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 2018
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, net of tax, include
additional separation costs associated with the separation from
WestRock; further restructuring and other income (charges), net;
additional acquisition and other related costs in connection with the
acquisition of Georgia-Pacific’s pine chemical business; and revisions
due to future guidance and assessment of U.S. Tax Reform. 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”); 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 that
the expected benefits from the 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, and new or emerging competitors; 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, tariffs
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, 2017 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 data
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Net sales
|
|
|
$
|
311.2
|
|
|
$
|
264.1
|
|
|
|
$
|
855.0
|
|
|
|
$
|
742.9
|
Cost of sales
|
|
|
|
192.6
|
|
|
|
170.9
|
|
|
|
|
535.8
|
|
|
|
|
489.2
|
Gross profit
|
|
|
|
118.6
|
|
|
|
93.2
|
|
|
|
|
319.2
|
|
|
|
|
253.7
|
Selling, general and administrative expenses
|
|
|
|
34.5
|
|
|
|
26.2
|
|
|
|
|
96.5
|
|
|
|
|
78.5
|
Research and technical expenses
|
|
|
|
5.6
|
|
|
|
4.8
|
|
|
|
|
16.3
|
|
|
|
|
14.6
|
Separation costs
|
|
|
|
—
|
|
|
|
0.2
|
|
|
|
|
—
|
|
|
|
|
0.7
|
Restructuring and other (income) charges, net
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
|
(0.6
|
)
|
|
|
|
3.5
|
Acquisition-related costs
|
|
|
|
—
|
|
|
|
4.1
|
|
|
|
|
4.3
|
|
|
|
|
4.1
|
Other (income) expense, net
|
|
|
|
2.5
|
|
|
|
(0.5
|
)
|
|
|
|
2.7
|
|
|
|
|
0.9
|
Interest expense, net
|
|
|
|
7.9
|
|
|
|
3.2
|
|
|
|
|
21.8
|
|
|
|
|
9.3
|
Income (loss) before income taxes
|
|
|
|
68.1
|
|
|
|
55.1
|
|
|
|
|
178.2
|
|
|
|
|
142.1
|
Provision (benefit) for income taxes
|
|
|
|
16.4
|
|
|
|
16.7
|
|
|
|
|
38.5
|
|
|
|
|
44.9
|
Net income (loss)
|
|
|
|
51.7
|
|
|
|
38.4
|
|
|
|
|
139.7
|
|
|
|
|
97.2
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
|
2.2
|
|
|
|
4.6
|
|
|
|
|
12.7
|
|
|
|
|
12.3
|
Net income (loss) attributable to Ingevity stockholders
|
|
|
$
|
49.5
|
|
|
$
|
33.8
|
|
|
|
$
|
127.0
|
|
|
|
$
|
84.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share attributable to Ingevity
stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
1.18
|
|
|
$
|
0.80
|
|
|
|
$
|
3.02
|
|
|
|
$
|
2.01
|
Diluted
|
|
|
$
|
1.16
|
|
|
$
|
0.79
|
|
|
|
$
|
2.98
|
|
|
|
$
|
2.00
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
42.0
|
|
|
|
42.1
|
|
|
|
|
42.1
|
|
|
|
|
42.1
|
Diluted
|
|
|
|
42.7
|
|
|
|
42.5
|
|
|
|
|
42.6
|
|
|
|
|
42.5
|
|
|
INGEVITY CORPORATION
Segment Operating Results (Unaudited)
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
In millions
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Materials
|
|
|
$
|
96.3
|
|
|
|
$
|
85.4
|
|
|
|
$
|
287.9
|
|
|
|
$
|
258.3
|
|
Automotive Technologies product line
|
|
|
|
86.6
|
|
|
|
|
75.6
|
|
|
|
|
258.6
|
|
|
|
|
230.1
|
|
Process Purification product line
|
|
|
|
9.7
|
|
|
|
|
9.8
|
|
|
|
|
29.3
|
|
|
|
|
28.2
|
|
Performance Chemicals
|
|
|
$
|
214.9
|
|
|
|
$
|
178.7
|
|
|
|
$
|
567.1
|
|
|
|
$
|
484.6
|
|
Oilfield Technologies product line
|
|
|
|
32.5
|
|
|
|
|
20.3
|
|
|
|
|
84.0
|
|
|
|
|
58.1
|
|
Pavement Technologies product line
|
|
|
|
68.1
|
|
|
|
|
64.5
|
|
|
|
|
152.2
|
|
|
|
|
137.2
|
|
Industrial Specialties product line
|
|
|
|
114.3
|
|
|
|
|
93.9
|
|
|
|
|
330.9
|
|
|
|
|
289.3
|
|
Total net sales
|
|
|
$
|
311.2
|
|
|
|
$
|
264.1
|
|
|
|
$
|
855.0
|
|
|
|
$
|
742.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Materials
|
|
|
$
|
36.3
|
|
|
|
$
|
29.3
|
|
|
|
$
|
109.8
|
|
|
|
$
|
89.5
|
|
Performance Chemicals
|
|
|
|
39.7
|
|
|
|
|
33.4
|
|
|
|
|
95.3
|
|
|
|
|
70.2
|
|
Total segment operating profit
|
|
|
$
|
76.0
|
|
|
|
$
|
62.7
|
|
|
|
$
|
205.1
|
|
|
|
$
|
159.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs (1)
|
|
|
|
—
|
|
|
|
|
(0.2
|
)
|
|
|
|
—
|
|
|
|
|
(0.7
|
)
|
Restructuring and other income (charges) (2)
|
|
|
|
—
|
|
|
|
|
(0.1
|
)
|
|
|
|
0.6
|
|
|
|
|
(3.5
|
)
|
Acquisition and other related costs (3)
|
|
|
|
—
|
|
|
|
|
(4.1
|
)
|
|
|
|
(5.7
|
)
|
|
|
|
(4.1
|
)
|
Interest expense, net
|
|
|
|
(7.9
|
)
|
|
|
|
(3.2
|
)
|
|
|
|
(21.8
|
)
|
|
|
|
(9.3
|
)
|
(Provision) benefit for income taxes
|
|
|
|
(16.4
|
)
|
|
|
|
(16.7
|
)
|
|
|
|
(38.5
|
)
|
|
|
|
(44.9
|
)
|
Net (income) loss attributable to noncontrolling interests
|
|
|
|
(2.2
|
)
|
|
|
|
(4.6
|
)
|
|
|
|
(12.7
|
)
|
|
|
|
(12.3
|
)
|
Net income (loss) attributable to the Ingevity stockholders
|
|
|
$
|
49.5
|
|
|
|
$
|
33.8
|
|
|
|
$
|
127.0
|
|
|
|
$
|
84.9
|
|
_______________
|
(1)
|
|
Represents transaction costs associated with separation of Ingevity
from WestRock. These costs are primarily related to professional
fees associated with separation activities within the finance, tax
and legal functions.
|
(2)
|
|
The restructuring activity relates to Performance Chemicals for all
periods presented.
|
(3)
|
|
Charges primarily relate to legal and professional fees and
inventory step-up amortization incurred associated with the
acquisition of Georgia Pacific’s Pine Chemicals Business. For the
nine months ended September 30, 2018, the legal and professional
fees of $4.3 million and the inventory step-up amortization of $1.4
million are included in “Acquisition-related costs” and “Cost of
sales” on the condensed statement of operations, respectively.
|
|
|
INGEVITY CORPORATION
Condensed Consolidated Balance Sheets
|
|
In millions
|
|
|
September 30, 2018
|
|
|
December 31, 2017
|
Assets
|
|
|
(Unaudited)
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
57.5
|
|
|
$
|
87.9
|
Accounts receivable, net
|
|
|
|
140.4
|
|
|
|
100.0
|
Inventories, net
|
|
|
|
194.3
|
|
|
|
160.0
|
Prepaid and other current assets
|
|
|
|
28.6
|
|
|
|
20.8
|
Current assets
|
|
|
|
420.8
|
|
|
|
368.7
|
Property, plant and equipment, net
|
|
|
|
498.9
|
|
|
|
438.5
|
Goodwill
|
|
|
|
130.6
|
|
|
|
12.4
|
Other intangibles, net
|
|
|
|
129.2
|
|
|
|
4.9
|
Restricted investment
|
|
|
|
70.7
|
|
|
|
71.3
|
Other assets
|
|
|
|
41.7
|
|
|
|
33.8
|
Total assets
|
|
|
$
|
1,291.9
|
|
|
$
|
929.6
|
Liabilities
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
108.7
|
|
|
$
|
83.1
|
Accrued expenses
|
|
|
|
26.2
|
|
|
|
20.0
|
Other current liabilities
|
|
|
|
44.9
|
|
|
|
50.1
|
Current liabilities
|
|
|
|
179.8
|
|
|
|
153.2
|
Long-term debt including capital lease obligations
|
|
|
|
744.0
|
|
|
|
444.0
|
Deferred income taxes
|
|
|
|
31.2
|
|
|
|
41.3
|
Other liabilities
|
|
|
|
14.2
|
|
|
|
13.2
|
Total liabilities
|
|
|
|
969.2
|
|
|
|
651.7
|
Equity
|
|
|
|
322.7
|
|
|
|
277.9
|
Total liabilities and equity
|
|
|
$
|
1,291.9
|
|
|
$
|
929.6
|
|
|
INGEVITY CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited)
|
|
|
|
|
Nine Months Ended September 30,
|
In millions
|
|
|
2018
|
|
|
2017
|
Cash flows provided by (used in) operating activities:
|
|
|
$
|
165.7
|
|
|
|
$
|
133.6
|
|
Cash flows provided by (used in) investing activities:
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
(55.9
|
)
|
|
|
|
(36.2
|
)
|
Payments for acquired business, net of cash acquired
|
|
|
|
(315.5
|
)
|
|
|
|
—
|
|
Purchase of equity securities
|
|
|
|
—
|
|
|
|
|
(2.4
|
)
|
Sale of equity securities
|
|
|
|
1.1
|
|
|
|
|
0.7
|
|
Other investing activities, net
|
|
|
|
(5.3
|
)
|
|
|
|
(4.1
|
)
|
Net cash provided by (used in) by investing activities
|
|
|
$
|
(375.6
|
)
|
|
|
$
|
(42.0
|
)
|
Cash flows provided by (used in) financing activities:
|
|
|
|
|
|
|
Net borrowings under our revolving credit facility
|
|
|
|
—
|
|
|
|
|
(111.9
|
)
|
Proceeds from long-term borrowings
|
|
|
|
300.0
|
|
|
|
|
75.0
|
|
Debt issuance costs
|
|
|
|
(7.1
|
)
|
|
|
|
(1.3
|
)
|
Tax payments related to withholdings on vested restricted stock units
|
|
|
|
(2.1
|
)
|
|
|
|
(0.9
|
)
|
Proceeds and withholdings from share-based compensation plans, net
|
|
|
|
1.8
|
|
|
|
|
—
|
|
Repurchases of common stock under publicly announced plan
|
|
|
|
(18.1
|
)
|
|
|
|
(2.6
|
)
|
Acquisition of noncontrolling interest
|
|
|
|
(80.0
|
)
|
|
|
|
—
|
|
Noncontrolling interest distributions
|
|
|
|
(15.3
|
)
|
|
|
|
(8.2
|
)
|
Other financing activities, net
|
|
|
|
0.7
|
|
|
|
|
—
|
|
Net cash provided by (used in) by financing activities
|
|
|
$
|
179.9
|
|
|
|
$
|
(49.9
|
)
|
Increase (decrease) in cash, cash equivalents and restricted cash
|
|
|
|
(30.0
|
)
|
|
|
|
41.7
|
|
Effect of exchange rate changes on cash
|
|
|
|
(0.1
|
)
|
|
|
|
(1.7
|
)
|
|
|
|
|
|
|
|
Change in cash, cash equivalents and restricted cash
|
|
|
|
(30.1
|
)
|
|
|
|
40.0
|
|
Cash, cash equivalents, and restricted cash at beginning of period
|
|
|
|
87.9
|
|
|
|
|
30.5
|
|
Cash, cash equivalents, and restricted cash at end of period (1)
|
|
|
$
|
57.8
|
|
|
|
$
|
70.5
|
|
_______________
|
(1)
|
|
Includes restricted cash of $0.3 million and $0.3 million and cash
and cash equivalents of $57.5 million and $70.2 million as of
September 30, 2018 and 2017, respectively. Restricted cash is
included within “Prepaid and Other Current Assets” within the
condensed consolidated balance sheets.
|
|
|
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.
We believe these non-GAAP financial measures provide management as well
as 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 and other related costs
and the income tax expense (benefit) on those items, less the benefit
from U.S. Tax Reform.
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, net per share, separation
costs per share, acquisition and other related costs per share and the
income tax expense (benefit) per share on those items, less the per
share tax benefit from U.S. Tax Reform.
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 and other related 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
Segment 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 (loss) to Adjusted EBITDA as projected
for 2018 is not provided because we do not forecast Net income as we
cannot, without unreasonable effort, estimate or predict with certainty
various components of Net income. These components, net of tax, include
separation costs associated with the separation from WestRock,
additional acquisition and other related costs associated with the
Acquisition; further restructuring and other income (charges), net; and
revisions due to future guidance and assessment of U.S. Tax Reform.
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 Net income
(loss) attributable to Ingevity stockholders and 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 data (unaudited)
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Net income (loss)
|
|
|
$
|
51.7
|
|
|
$
|
38.4
|
|
|
|
$
|
139.7
|
|
|
|
$
|
97.2
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
|
2.2
|
|
|
|
4.6
|
|
|
|
|
12.7
|
|
|
|
|
12.3
|
|
Net income (loss) attributable to Ingevity stockholders (GAAP)
|
|
|
|
49.5
|
|
|
|
33.8
|
|
|
|
|
127.0
|
|
|
|
|
84.9
|
|
Restructuring and other (income) charges (1)
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
|
(0.6
|
)
|
|
|
|
3.5
|
|
Separation costs (2)
|
|
|
|
—
|
|
|
|
0.2
|
|
|
|
|
—
|
|
|
|
|
0.7
|
|
Acquisition and other related costs (3)
|
|
|
|
—
|
|
|
|
4.1
|
|
|
|
|
5.7
|
|
|
|
|
4.1
|
|
Tax effect on items above
|
|
|
|
—
|
|
|
|
(1.6
|
)
|
|
|
|
(1.3
|
)
|
|
|
|
(2.4
|
)
|
Adjusted earnings (loss) (Non-GAAP)
|
|
|
$
|
49.5
|
|
|
$
|
36.6
|
|
|
|
$
|
130.8
|
|
|
|
$
|
90.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share (GAAP)
|
|
|
$
|
1.16
|
|
|
$
|
0.79
|
|
|
|
$
|
2.98
|
|
|
|
$
|
2.00
|
|
Restructuring and other (income) charges
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(0.01
|
)
|
|
|
|
0.08
|
|
Separation costs
|
|
|
|
—
|
|
|
|
0.01
|
|
|
|
|
—
|
|
|
|
|
0.01
|
|
Acquisition and other related costs
|
|
|
|
—
|
|
|
|
0.10
|
|
|
|
|
0.13
|
|
|
|
|
0.10
|
|
Tax effect on items above
|
|
|
|
—
|
|
|
|
(0.04
|
)
|
|
|
|
(0.03
|
)
|
|
|
|
(0.06
|
)
|
Diluted adjusted earnings (loss) per share (Non-GAAP)
|
|
|
$
|
1.16
|
|
|
$
|
0.86
|
|
|
|
$
|
3.07
|
|
|
|
$
|
2.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - Diluted
|
|
|
|
42.7
|
|
|
|
42.5
|
|
|
|
|
42.6
|
|
|
|
|
42.5
|
|
_______________
|
(1)
|
|
Income for the nine months ended September 30, 2018, includes $0.6
million related to proceeds from the sale of assets from our
Performance Chemicals’ derivatives operations in Duque De Caxias,
Rio de Janeiro, Brazil facility, which was closed in 2016. 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.
|
(2)
|
|
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.
|
(3)
|
|
Charges primarily relate to legal and professional fees and
inventory step-up amortization incurred associated with the
acquisition of Georgia Pacific’s Pine Chemicals Business. For the
nine months ended September 30, 2018, the legal and professional
fees of $4.3 million and the inventory step-up amortization of $1.4
million are included in “Acquisition-related costs” and “Cost of
sales” on the condensed statement of operations, respectively.
|
|
|
|
|
INGEVITY CORPORATION
Reconciliation of Non-GAAP Financial Measures
Reconciliation of Net Income (Loss) (GAAP) to Adjusted EBITDA
(Non-GAAP)
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
In millions (unaudited)
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Net income (loss) (GAAP)
|
|
|
$
|
51.7
|
|
|
|
$
|
38.4
|
|
|
|
$
|
139.7
|
|
|
|
$
|
97.2
|
|
Provision (benefit) for income taxes
|
|
|
|
16.4
|
|
|
|
|
16.7
|
|
|
|
|
38.5
|
|
|
|
|
44.9
|
|
Interest expense, net
|
|
|
|
7.9
|
|
|
|
|
3.2
|
|
|
|
|
21.8
|
|
|
|
|
9.3
|
|
Separation costs
|
|
|
|
—
|
|
|
|
|
0.2
|
|
|
|
|
—
|
|
|
|
|
0.7
|
|
Depreciation and amortization
|
|
|
|
14.7
|
|
|
|
|
10.0
|
|
|
|
|
42.1
|
|
|
|
|
30.4
|
|
Restructuring and other (income) charges, net
|
|
|
|
—
|
|
|
|
|
0.1
|
|
|
|
|
(0.6
|
)
|
|
|
|
3.5
|
|
Acquisition and other related costs
|
|
|
|
—
|
|
|
|
|
4.1
|
|
|
|
|
5.7
|
|
|
|
|
4.1
|
|
Adjusted EBITDA (Non-GAAP)
|
|
|
$
|
90.7
|
|
|
|
$
|
72.7
|
|
|
|
$
|
247.2
|
|
|
|
$
|
190.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
311.2
|
|
|
|
$
|
264.1
|
|
|
|
$
|
855.0
|
|
|
|
$
|
742.9
|
|
Net income (loss) margin
|
|
|
|
16.6
|
%
|
|
|
|
14.5
|
%
|
|
|
|
16.3
|
%
|
|
|
|
13.1
|
%
|
Adjusted EBITDA margin
|
|
|
|
29.1
|
%
|
|
|
|
27.5
|
%
|
|
|
|
28.9
|
%
|
|
|
|
25.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Segment operating profit (GAAP)
|
|
|
$
|
36.3
|
|
|
|
$
|
29.3
|
|
|
|
$
|
109.8
|
|
|
|
$
|
89.5
|
|
Depreciation and amortization
|
|
|
|
5.3
|
|
|
|
|
4.9
|
|
|
|
|
16.7
|
|
|
|
|
14.9
|
|
Segment EBITDA (Non-GAAP)
|
|
|
$
|
41.6
|
|
|
|
$
|
34.2
|
|
|
|
$
|
126.5
|
|
|
|
$
|
104.4
|
|
Net sales
|
|
|
$
|
96.3
|
|
|
|
$
|
85.4
|
|
|
|
$
|
287.9
|
|
|
|
$
|
258.3
|
|
Segment operating margin
|
|
|
|
37.7
|
%
|
|
|
|
34.3
|
%
|
|
|
|
38.1
|
%
|
|
|
|
34.6
|
%
|
Segment EBITDA margin
|
|
|
|
43.2
|
%
|
|
|
|
40.0
|
%
|
|
|
|
43.9
|
%
|
|
|
|
40.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (GAAP)
|
|
|
$
|
39.7
|
|
|
|
$
|
33.4
|
|
|
|
$
|
95.3
|
|
|
|
$
|
70.2
|
|
Depreciation and amortization
|
|
|
|
9.4
|
|
|
|
|
5.1
|
|
|
|
|
25.4
|
|
|
|
|
15.5
|
|
Segment EBITDA (Non-GAAP)
|
|
|
$
|
49.1
|
|
|
|
$
|
38.5
|
|
|
|
$
|
120.7
|
|
|
|
$
|
85.7
|
|
Net sales
|
|
|
$
|
214.9
|
|
|
|
$
|
178.7
|
|
|
|
$
|
567.1
|
|
|
|
$
|
484.6
|
|
Segment operating margin
|
|
|
|
18.5
|
%
|
|
|
|
18.7
|
%
|
|
|
|
16.8
|
%
|
|
|
|
14.5
|
%
|
Segment EBITDA margin
|
|
|
|
22.8
|
%
|
|
|
|
21.5
|
%
|
|
|
|
21.3
|
%
|
|
|
|
17.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ingevity Corporation
Jack Maurer, 843-746-8242
jack.maurer@ingevity.com
or
Investors:
Dan Gallagher, 843-740-2126
daniel.gallagher@ingevity.com