- Net sales of $359.9 million were up 15.6% versus the prior year
quarter’s sales of $311.2 million
- Net income of $59.9 million was up 15.9% versus net income in
the prior year quarter of $51.7 million; net income as a percentage
of sales of 16.6% was level with the prior year quarter; diluted
earnings per share were $1.41 compared to $1.16
- Adjusted earnings of $62.2 million were up 26.2% versus
adjusted earnings in the prior year quarter of $49.3 million;
diluted adjusted earnings per share were $1.46 versus $1.15 in the
prior year quarter
- Adjusted EBITDA of $114.0 million were up 25.7% compared to
third quarter 2018 adjusted EBITDA of $90.7 million; adjusted
EBITDA margin of 31.7% increased 260 basis points versus third
quarter 2018
- Operating cash flow increased 25% to $118.7 million versus the
prior year quarter; free cash flow in the quarter increased 40% to
$97 million versus the prior year quarter
- Total debt to last twelve months’ net income ratio is 7.3x; net
debt to last twelve months’ adjusted EBITDA ratio is 2.9x
- Company revises fiscal year 2019 guidance to sales from between
$1.28 billion and $1.30 billion and adjusted EBITDA from between
$390 million and $400 million
The results and guidance in this release
include Non-GAAP financial measures. Refer to the section entitled
“Use of Non-GAAP Financial Measures” within this release.
Ingevity Corporation (NYSE: NGVT) today reported third quarter
net sales of $359.9 million, representing an increase of 15.6%
versus $311.2 million in the prior year’s third quarter. Net income
of $59.9 million, increased 15.9% versus $51.7 million in the
previous year’s quarter. Ingevity’s third quarter net income margin
of 16.6% was level to prior year. The third quarter diluted
earnings per share were $1.41 compared to $1.16 in the prior year
period.
Adjusted earnings of $62.2 million were up 26.2% versus prior
year quarter of $49.3 million. Diluted adjusted earnings per share
were $1.46, which exclude, net of tax, $0.05 related to both
restructuring charges and costs associated with the acquisition of
the Capa® caprolactone business. This compares to adjusted earnings
per share of $1.15 in the prior year quarter. Adjusted earnings
before interest, taxes, depreciation and amortization (EBITDA) of
$114.0 million were up 25.7% versus third quarter 2018 adjusted
EBITDA of $90.7 million. Adjusted EBITDA margin of 31.7% was up 260
basis points from the prior year’s third quarter adjusted EBITDA
margin of 29.1%.
“In the face of challenging global economic conditions, we
delivered a strong third quarter performance in line with our
expectations,” said Michael Wilson, Ingevity’s president and CEO.
“We posted earnings that were 26% higher on revenues that were up
16%. What’s more, we generated outstanding free cash flow of $97
million, up 40% versus the prior year’s quarter that reduced our
leverage and brought our net debt to adjusted EBITDA down to 2.9
times.”
Performance Chemicals
Third quarter 2019 sales in the Performance Chemicals segment
were $229.7 million, up $14.8 million, or 6.9%, versus the third
quarter 2018. Segment EBITDA were $59.8 million, up $10.7 million,
or 21.8%, versus the prior year quarter segment EBITDA. Segment
EBITDA margin rose 320 basis points to 26.0%.
“Sales in most areas of the Performance Chemicals segment were
negatively impacted by weak market fundamentals, especially in
Europe and Asia,” said Wilson. “Against this backdrop, we
benefitted from the acquisition of the Capa caprolactone business –
which we refer to as engineered polymers – and continued margin
improvement.”
Sales decreased in industrial specialties applications due to
demand weakness, deliberately lower sales to low-margin ink
applications, and oversupply of alternate materials. Oilfield
applications sales decreased based on slowing North American
drilling and production. Sales to pavement technologies
applications were up slightly as improved weather conditions
strengthened paving activity in North America; this was partially
offset by reductions in overseas markets. “Sales for the engineered
polymers product line were notably below the prior year’s period
due primarily to weak market demand in Europe,” Wilson said.
“However, our margins for these products are strong and have
remained consistent quarter to quarter.”
Segment EBITDA benefitted from increases in volumes and price
and mix, but were partially offset by slightly higher production
costs.
Performance Materials
Third quarter 2019 sales in the Performance Materials segment
were $130.2 million, up $33.9 million, or 35.2%, versus the third
quarter 2018. Segment EBITDA were $54.2 million, up $12.6 million,
or 30.3%, versus the prior year segment EBITDA. Segment EBITDA
margin decreased 160 basis points to 41.6%.
“Once again, the Performance Materials segment turned in
outstanding results,” said Wilson. “Because of the regulatory
driven growth in this segment, results were not noticeably impacted
by current economic conditions. In China, automakers continue to
implement the nationwide China 6 gasoline vapor emission control
standards at very strong pace. This has led to a step-change
increase in sales for the Performance Materials segment in China
and overall.”
Wilson said the segment is continuing to see strong growth in
sales of its patented ‘honeycomb’ scrubber products used by
automotive customers to meet U.S. and Canadian regulatory
standards, and is realizing increases in Europe driven primarily by
the European Union’s Euro 6d standard.
Segment EBITDA increased due to very strong volume increases,
and price and mix, but were partially offset by the consumption of
higher cost inventory associated with the Zhuhai, China, plant
scale-up; plant spending related to planned maintenance outages at
several facilities; and by increased legal expenses associated with
protecting intellectual property.
Outlook
Ingevity revised its fiscal year 2019 guidance to sales from
between $1.28 billion and $1.30 billion and adjusted EBITDA from
between $390 million and $400 million.
“Despite challenging global macroeconomic conditions, we will,
nevertheless, deliver strong year-over-year results for 2019,” said
Wilson.
Ingevity: Purify, Protect and Enhance
Ingevity provides specialty chemicals, high-performance carbon
materials and engineered polymers 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, coatings,
elastomers, bioplastics 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 1,750 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 live webcast on Thursday, October 24,
2019, at 10 a.m. (Eastern Time) to discuss third quarter fiscal
results. The webcast can be accessed through the Investors section
of Ingevity’s website (www.ingevity.com), or via this link:
Ingevity Q3 2019 webcast. You may also listen to the conference
call by dialing 877-407-2991 (inside the U.S.) or 201-389-0925
(outside the U.S.), at least 10 minutes prior to the start of the
event. Information on how to access the webcast and conference
call, along with a slide deck containing other relevant financial
and statistical information, will be posted to the Investors
section of Ingevity’s website prior to the call. For those unable
to join the live event, a replay of the webcast will be available
beginning at approximately 2 p.m. (Eastern Time) on Oct. 24, 2019,
through Nov. 24, 2019: Ingevity Q3 2019 webcast replay.
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 2019 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 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 Perstorp Holding AB’s Capa caprolactone business; additional
pension and postretirement settlement and curtailment (income)
charges; 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 and the
acquisition of Perstorp Holding AB’s Capa caprolactone business
(the “acquisitions”); capital and other expenditures; competitive
positions; growth opportunities for existing products; benefits
from new technology and cost-reduction initiatives, plans and
objectives; markets for securities and expected future repurchase
of shares, including statements about the manner, amount and timing
of repurchases. 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 acquisitions
will not be realized or will not be realized in the expected time
period; the risk that the acquired 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;
competition from infringing intellectual property activity;
attracting and retaining key personnel; the impact of Brexit;
conditions in the automotive market or adoption of alternative
technologies; worldwide air quality standards; a decrease in
government infrastructure spending; declining volumes and downward
pricing 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 alternative
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 breaches and other disruptions; 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, 2018 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
2019
2018
2019
2018
Net sales
$
359.9
$
311.2
$
989.5
$
855.0
Cost of sales
220.4
192.6
618.5
535.8
Gross profit
139.5
118.6
371.0
319.2
Selling, general and administrative
expenses
40.7
34.5
122.3
96.5
Research and technical expenses
4.9
5.6
15.0
16.3
Restructuring and other (income) charges,
net
1.7
—
2.0
(0.6
)
Acquisition-related costs
1.3
—
24.9
4.3
Other (income) expense, net
1.4
2.5
(2.3
)
2.7
Interest expense, net
12.1
7.9
36.3
21.8
Income (loss) before income taxes
77.4
68.1
172.8
178.2
Provision (benefit) for income taxes
17.5
16.4
33.4
38.5
Net income (loss)
59.9
51.7
139.4
139.7
Less: Net income (loss) attributable to
noncontrolling interests
—
2.2
—
12.7
Net income (loss) attributable to Ingevity
stockholders
$
59.9
$
49.5
$
139.4
$
127.0
Per share data
Basic earnings (loss) per share
attributable to Ingevity stockholders
$
1.42
$
1.18
$
3.33
$
3.02
Diluted earnings (loss) per share
attributable to Ingevity stockholders
$
1.41
$
1.16
$
3.30
$
2.98
Weighted average shares
outstanding
Basic
42.3
42.0
41.8
42.1
Diluted
42.6
42.7
42.2
42.6
INGEVITY CORPORATION Segment
Operating Results (Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
In millions
2019
2018
2019
2018
Net sales
Performance Materials
$
130.2
$
96.3
$
362.4
$
287.9
Automotive Technologies product line
120.5
86.6
334.1
258.6
Process Purification product line
9.7
9.7
28.3
29.3
Performance Chemicals
$
229.7
$
214.9
$
627.1
$
567.1
Oilfield Technologies product line
27.6
32.5
86.5
84.0
Pavement Technologies product line
69.8
68.1
152.9
152.2
Industrial Specialties product line
99.9
114.3
296.8
330.9
Engineered Polymers product line(1)
32.4
—
90.9
—
Total net sales
$
359.9
$
311.2
$
989.5
$
855.0
Segment EBITDA (2)
Performance Materials
$
54.2
$
41.6
$
154.7
$
126.5
Performance Chemicals
59.8
49.1
151.1
120.7
Total segment EBITDA (2)
$
114.0
$
90.7
$
305.8
$
247.2
Interest expense, net
(12.1
)
(7.9
)
(36.3
)
(21.8
)
(Provision) benefit for income taxes
(17.5
)
(16.4
)
(33.4
)
(38.5
)
Depreciation and amortization -
Performance Materials
(6.0
)
(5.3
)
(17.6
)
(16.7
)
Depreciation and amortization -
Performance Chemicals
(15.5
)
(9.4
)
(43.8
)
(25.4
)
Restructuring and other income (charges),
net (3)
(1.7
)
—
(2.0
)
0.6
Acquisition and other related costs
(4)
(1.3
)
—
(33.3
)
(5.7
)
Net (income) loss attributable to
noncontrolling interests
—
(2.2
)
—
(12.7
)
Net income (loss) attributable to the
Ingevity stockholders
$
59.9
$
49.5
$
139.4
$
127.0
_________________
(1) Engineered Polymers product line was
acquired on February 13, 2019; see Note 4 for more information.
(2) Segment EBITDA is the primary measure
used by the Company's chief operating decision maker to evaluate
the performance of and allocate resources among our operating
segments. Segment EBITDA is defined as segment revenue less segment
operating expenses (segment operating expenses consist of costs of
sales, selling, general and administrative expenses, other (income)
expense, net, excluding depreciation and amortization). We have
excluded the following items from segment EBITDA: interest expense
associated with corporate debt facilities, income taxes,
depreciation, amortization, restructuring and other (income)
charges, acquisition and other related costs, pension and
postretirement settlement and curtailment (income) charge.
(3) The restructuring activity relates to
Performance Chemicals for all periods presented.
(4) Costs incurred to complete and
integrate the acquisitions noted above into our Performance
Chemicals segment are expensed as incurred on our condensed
consolidated statement of operations. The following table
summarizes the costs incurred associated with these combined
activities.
Three Months Ended
Nine Months
Ended
September 30,
September 30,
In millions
2019
2018
2019
2018
Legal and professional service fees
$
1.3
$
—
$
12.2
$
4.3
Loss on hedging purchase price
—
—
12.7
—
Acquisition-related costs
$
1.3
$
—
$
24.9
$
4.3
Inventory fair value step-up amortization
(1)
—
—
8.4
1.4
Acquisition and other-related
costs
$
1.3
$
—
$
33.3
$
5.7
_________________
(1) Included within "Cost of sales" on the
condensed consolidated statement of operations.
INGEVITY CORPORATION Condensed
Consolidated Balance Sheets
In millions
September 30, 2019
December 31, 2018
Assets
(Unaudited)
Cash and cash equivalents
$
75.6
$
77.5
Accounts receivable, net
167.2
118.9
Inventories, net
210.2
191.4
Prepaid and other current assets
46.0
34.9
Current assets
499.0
422.7
Property, plant and equipment, net
641.9
523.8
Goodwill
416.1
130.7
Other intangibles, net
383.5
125.6
Restricted investment
72.7
71.2
Other assets
105.6
41.2
Total Assets
2,118.8
1,315.2
Liabilities
Accounts payable
$
107.5
$
92.9
Accrued expenses
34.8
36.7
Other current liabilities
66.5
53.7
Current liabilities
208.8
183.3
Long-term debt including finance lease
obligations
1,294.4
741.2
Deferred income taxes
107.8
36.9
Other liabilities
64.5
15.1
Total Liabilities
1,675.5
976.5
Equity
443.3
338.7
Total Liabilities and Equity
$
2,118.8
$
1,315.2
INGEVITY CORPORATION Condensed
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September
30,
In millions
2019
2018
Cash provided by (used in) operating
activities:
Net income (loss)
$
139.4
$
139.7
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Depreciation and amortization
61.4
42.1
Deferred income taxes
26.7
3.2
Restructuring and other (income) charges,
net
2.0
(0.6
)
Share-based compensation
11.0
10.1
Pension and other postretirement (benefit)
costs
1.0
1.4
Other non-cash items
8.7
7.9
Changes in operating assets and
liabilities, net of effect of acquisitions:
Accounts receivable, net
(34.5
)
(24.6
)
Inventories, net
0.4
(30.3
)
Prepaid and other current assets
(2.8
)
(4.7
)
Planned major maintenance outage
(5.5
)
(5.1
)
Accounts payable
2.2
21.6
Accrued expenses
(5.8
)
6.6
Accrued payroll and employee benefits
(18.8
)
(6.5
)
Income taxes payable
(5.1
)
7.5
Changes in other operating assets and
liabilities, net
9.9
(1.9
)
Net cash provided by (used in) operating
activities
190.2
166.4
Cash provided by (used in) investing
activities:
Capital expenditures
(79.8
)
(56.6
)
Payments for acquired businesses, net of
cash acquired
(537.9
)
(315.5
)
Other investing activities, net
(4.7
)
(4.2
)
Net cash provided by (used in) investing
activities
(622.4
)
(376.3
)
Cash provided by (used in) financing
activities:
Proceeds from revolving credit
facility
789.0
—
Proceeds from long-term borrowings
375.0
300.0
Payments on revolving credit facility
(596.0
)
—
Payments on long-term borrowings
(117.8
)
—
Debt issuance costs
(1.8
)
(7.1
)
Borrowings (repayments) of notes payable
and other short-term borrowings, net
2.2
0.7
Tax payments related to withholdings on
vested equity awards
(14.3
)
(2.1
)
Proceeds and withholdings from share-based
compensation plans, net
3.7
1.8
Repurchases of common stock under publicly
announced plan
(6.4
)
(18.1
)
Acquisition of noncontrolling interest
—
(80.0
)
Noncontrolling interest distributions
—
(15.3
)
Net cash provided by (used in) financing
activities
433.6
179.9
Increase (decrease) in cash, cash
equivalents and restricted cash
1.4
(30.0
)
Effect of exchange rate changes on
cash
(2.3
)
(0.1
)
Change in cash, cash equivalents, and
restricted cash(1)
(0.9
)
(30.1
)
Cash, cash equivalents, and restricted
cash at beginning of period
77.5
87.9
Cash, cash equivalents, and restricted
cash at end of period (1)
$
76.6
$
57.8
(1) Includes restricted cash of $1.0
million and $0.3 million and cash and cash equivalents of $75.6
million and $57.5 million as of September 30, 2019 and 2018,
respectively. Restricted cash is included within "Prepaid and Other
Current Assets" within the condensed consolidated balance
sheets.
Supplemental cash flow
information:
Cash paid for interest, net of capitalized
interest
$
40.1
$
22.6
Cash paid for income taxes, net of
refunds
$
12.6
$
27.6
Purchases of property, plant and equipment
in accounts payable
$
8.3
$
8.7
Leased assets obtained in exchange for new
finance lease liabilities
$
—
$
—
Leased assets obtained in exchange for new
operating lease liabilities
$
3.2
$
—
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, acquisition and other
related costs, pension and postretirement settlement and
curtailment (income) charges and the income tax expense (benefit)
on those items, less the provision (benefit) from certain discrete
tax 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, net per share, acquisition and other related
costs per share, pension and postretirement settlement and
curtailment (income) charges per share and the income tax expense
(benefit) per share on those items, less the per share tax
provision (benefit) from certain discrete tax items.
Adjusted EBITDA is defined as net
income (loss) plus provision for income taxes, interest expense,
depreciation and amortization, restructuring and other (income)
charges, acquisition and other related costs, and pension and
postretirement settlement and curtailment (income) charges.
Adjusted EBITDA Margin is defined as
Adjusted EBITDA divided by Net Sales
Net Debt is defined as the sum of
short-term debt, current maturities of long-term debt and long-term
debt less the sum of cash and cash equivalents and restricted
investment.
Net Debt Ratio is defined as Net Debt
divided by last twelve months Adjusted EBITDA, inclusive of
acquisition-related pro forma adjustments.
Free Cash Flow is defined as the sum
of cash provided (required) by the following items: operating
activities less capital expenditures
The Company also uses the above financial measures as the
primary measures of profitability used by managers of the business.
In addition, the Company believes Adjusted EBITDA and Adjusted
EBITDA Margin are useful measures because they exclude the effects
of financing and investment activities as well as non-operating
activities. None of these non-GAAP financial measures are 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 2019 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 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 Perstorp Holding AB’s Capa caprolactone business; additional
pension and postretirement settlement and curtailment (income)
charges; 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.
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)
2019
2018
2019
2018
Net income (loss)
$
59.9
$
51.7
$
139.4
$
139.7
Less: Net income (loss) attributable to
noncontrolling interests
—
2.2
—
12.7
Net income (loss) attributable to Ingevity
stockholders (GAAP)
59.9
49.5
139.4
127.0
Restructuring and other (income) charges
(1)
1.7
—
2.0
(0.6
)
Acquisition and other-related costs
(2)
1.3
—
33.3
5.7
Tax effect on items above
(0.8
)
—
(6.4
)
(1.3
)
Certain discrete tax provision (benefit)
(3)
0.1
(0.2
)
(6.7
)
(0.3
)
Adjusted earnings (loss)
(Non-GAAP)
$
62.2
$
49.3
$
161.6
$
130.5
Diluted earnings (loss) per common
share (GAAP)
$
1.41
$
1.16
$
3.30
$
2.98
Restructuring and other (income)
charges
0.04
—
0.05
(0.01
)
Acquisition and other related costs
0.03
—
0.79
0.13
Tax effect on items above
(0.02
)
—
(0.15
)
(0.03
)
Certain discrete tax provision
(benefit)
—
(0.01
)
(0.16
)
(0.01
)
Diluted adjusted earnings (loss) per
share (Non-GAAP)
$
1.46
$
1.15
$
3.83
$
3.06
Weighted average common shares outstanding
- Diluted
42.6
42.7
42.2
42.6
_______________
(1) The restructuring activity relates to
Performance Chemicals for all periods presented.
(2) Charges primarily relate to legal and
professional fees, inventory step-up amortization, and a purchase
price hedge incurred, associated with acquisitions in the
Performance Chemicals segment.
Three Months Ended September
30,
Nine Months Ended September
30,
In millions
2019
2018
2019
2018
Legal and professional service fees
$
1.3
$
—
$
12.2
$
4.3
Loss on hedging purchase price
—
—
12.7
—
Acquisition-related costs
$
1.3
$
—
$
24.9
$
4.3
Inventory fair value step-up amortization
(i)
—
—
8.4
1.4
Acquisition and other-related
costs
$
1.3
$
—
$
33.3
$
5.7
(i) Included within "Cost of sales" on the
condensed consolidated statement of operations.
(3) Represents certain changes in
estimates of tax matters related to prior fiscal years; certain
changes in the realizability of deferred tax assets and related
interim accounting impacts; excess tax benefits on stock
compensation; and changes in tax law. Management believes excluding
these discrete tax items assists investors, potential investors,
securities analysts, and others in understanding the tax provision
and the effective tax rate related to continuing operating results
thereby providing useful supplemental information about operational
performance.
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, except percentages
(unaudited)
2019
2018
2019
2018
Net income (loss) (GAAP)
$
59.9
$
51.7
$
139.4
$
139.7
Provision (benefit) for income taxes
17.5
16.4
33.4
38.5
Interest expense, net
12.1
7.9
36.3
21.8
Depreciation and amortization
21.5
14.7
61.4
42.1
Restructuring and other (income) charges,
net
1.7
—
2.0
(0.6
)
Acquisition and other-related costs
1.3
—
33.3
5.7
Adjusted EBITDA (Non-GAAP)
$
114.0
$
90.7
$
305.8
$
247.2
Net sales
$
359.9
$
311.2
$
989.5
$
855.0
Net income (loss) margin
16.6
%
16.6
%
14.1
%
16.3
%
Adjusted EBITDA margin
31.7
%
29.1
%
30.9
%
28.9
%
INGEVITY CORPORATION
Reconciliation of Non-GAAP
Financial Measures
Calculation of Free Cash Flow
(Non-GAAP)
Three months ended
September 30,
Nine months ended
September 30,
In millions (unaudited)
2019
2018
2019
2018
Cash Flow from Operations
$
118.7
95.3
190.2
166.4
Less: Capital Expenditures
22.1
26.2
79.8
56.6
Free Cash Flow
$
96.6
$
69.1
$
110.4
$
109.8
INGEVITY CORPORATION
Reconciliation of Non-GAAP
Financial Measures
Calculation of Total Debt to
Net Income (Loss) Ratio (GAAP) to Net Debt to Adjusted EBITDA Ratio
(Non-GAAP)
In millions, except ratios
(unaudited)
September 30, 2019
Notes payable and current maturities of
long-term debt
22.6
Long-term debt including finance lease
obligations
1,294.4
Debt issuance costs
7.2
Total Debt
1,324.2
Less:
Cash and cash equivalents
75.6
Restricted investment
72.7
Net Debt
1,175.9
Total Debt to Net income (loss) Ratio
(GAAP)
Net income (loss)
Twelve months ended December 31, 2018
$
181.8
Nine months ended September 30, 2018
(139.7)
Nine months ended September 30, 2019
139.4
Net income (loss) - last twelve months
(LTM) as of September 30, 2019
$
181.5
Total debt to Net income (loss) ratio
(GAAP)
7.30x
Net Debt Ratio (Non GAAP)
Adjusted EBITDA
Twelve months ended December 31, 2018
$
320.5
Nine months ended September 30, 2018
(247.2)
Nine months ended September 30, 2019
305.8
Adjusted EBITDA - LTM as of September 30,
2019
379.1
Caprolactone Business Pro Forma Adjusted
EBITDA LTM as of September 30, 2019 (1)
20.3
Adjusted EBITDA LTM inclusive of pro forma
as of September 30, 2019
$
399.4
Net debt ratio (Non GAAP)
2.94x
_______________
(1) Pro forma amount includes historical
results of the Caprolactone Business, prior to the acquisition date
of February 13, 2019. This amount also includes adjustments as if
the acquisition had occurred on January 1, 2018, including the
effects of purchase accounting. The pro forma amounts do not
include adjustments for expenses related to integration activities,
cost savings, or synergies that have been or may have been realized
had we acquired the businesses on January 1, 2018.
INGEVITY CORPORATION Pro Forma
Financial Information
The following unaudited pro forma condensed combined financial
information has been prepared to also illustrate the effect of the
acquisition of the Capa™ Caprolactone division ("Caprolactone
Business") of Perstorp Holding AB (the "Seller") by Ingevity. The
acquisition of the Caprolactone Business was completed on February
13, 2019 through the purchase of all outstanding equity in Perstorp
UK Ltd. which was previously held by the Seller for a total of
€578.9 million, less debt assumed plus accrued interest (the
“Caprolactone Acquisition”). The Company funded the Caprolactone
Acquisition through a combination of borrowings under Ingevity’s
revolving credit facilities and cash on hand. The unaudited pro
forma condensed combined financial information gives effect to the
Capa Acquisition.
The unaudited pro forma condensed combined financial information
gives effect to the Caprolactone Acquisition and the incurrence of
additional debt used to fund the acquisition, as if the acquisition
had been consummated on January 1, 2018, and combines Ingevity’s
historical results for the periods presented.
The unaudited pro forma condensed combined financial information
gives effect to the Caprolactone Acquisition under the acquisition
method of accounting in accordance with Financial Accounting
Standards Board Accounting Standard Codification Topic 805,
Business Combinations. The historical financial information has
been adjusted in the unaudited pro forma condensed combined
financial information to give effect to pro forma adjustments that
are (1) directly attributable to the acquisitions, (2) factually
supportable, and (3) with respect to the statements of operations,
expected to have a continuing impact. In addition, the historical
combined financial statements of the Caprolactone Business have
been adjusted to reflect certain reclassifications to conform to
Ingevity's financial statement presentation.
The unaudited pro forma financial information included herein
has been prepared by management in accordance with the regulations
of the United States Securities and Exchange Commission ("SEC") and
are not necessarily indicative of the combined financial position
or results of operations that would have been realized had the
Caprolactone Acquisition occurred as of the date indicated, nor are
they meant to be indicative of any anticipated financial position
or future results of operations. In addition, the accompanying
unaudited pro forma financial information does not include any
expected cost savings, operating synergies, or revenue enhancement,
which may be realized subsequent to the Caprolactone Acquisition or
the impact of any nonrecurring activity and one-time
transaction-related costs. The ultimate recognition of such costs
and liabilities would affect amounts in the unaudited pro forma
condensed combined financial information, and such costs and
liabilities could be material.
The estimated fair values used for the purpose of adjusting for
the unaudited pro forma condensed combined financial information
are preliminary, as the determination of fair value of the assets
and liabilities requires extensive use of estimates and
management's judgment. Final valuations will be performed and
management anticipates that the values assigned to the assets
acquired and liabilities assumed may be adjusted during the
one-year measurement period following the date of completion of
each acquisition. Differences between these preliminary estimates
and the final acquisition accounting may occur and could have a
material impact on the accompanying unaudited pro forma condensed
combined financial information. The pro forma adjustments are based
on information available to management and assumptions that
management believes are factually supportable at the time the pro
forma information was prepared. Ingevity undertakes no obligation
to publicly release any revision to the unaudited pro forma
information to update them to reflect events or circumstances
occurring after the date of this disclosure.
For more information regarding Ingevity’s unaudited pro forma
condensed combined financial information, see “Unaudited Pro Forma
Condensed Combined Financial Information” in Ingevity’s Current
Report on Form 8-K/A ("Form 8-K/A") filed with the U.S. Securities
and Exchange Commission on April 12, 2019, a copy of which may be
obtained by visiting the web site of the Securities and Exchange
Commission, or the SEC, at www.sec.gov. Presented below is a
quarterly impact of certain pro forma adjustments for the fiscal
quarter ended September 30, 2018.
INGEVITY CORPORATION
Pro Forma Financial Information
Reconciliation of Condensed
Statement of Operations to Pro Forma Condensed Statement of
Operations
Three Months Ended September
30, 2018
In millions, except percentages
(unaudited)
Historical Ingevity
Caprolactone Business
(1)
Pro Forma
Net sales
$
311.2
$
43.0
$
354.2
Cost of sales
192.6
25.4
218.0
Gross profit
118.6
17.6
136.2
Selling, general and administrative
expenses
34.5
5.9
40.4
Research and technical expenses
5.6
0.1
5.7
Acquisition-related costs
—
—
—
Other (income) expense, net
2.5
0.1
2.6
Interest expense, net
7.9
6.6
14.5
Income (loss) before income taxes
68.1
4.9
73.0
Provision (benefit) for income taxes
16.4
0.6
17.0
Net income (loss)
51.7
4.3
56.0
Less: Net income (loss) attributable to
noncontrolling interests
2.2
—
2.2
Net income (loss) attributable to Ingevity
stockholders
$
49.5
$
4.3
$
53.8
Diluted earnings (loss) per common share
attributable to Ingevity stockholders
$
1.16
$
1.26
___________________
(1) Pro forma amount includes historical
results of the Caprolactone Business, prior to the acquisition date
of February 13, 2019. This amount also includes adjustments as if
the acquisition had occurred on January 1, 2018, including the
effects of purchase accounting. The pro forma amounts do not
include adjustments for expenses related to integration activities,
cost savings, or synergies that have been or may have been realized
had we acquired the businesses on January 1, 2018.
INGEVITY CORPORATION
Pro Forma Financial Information
Reconciliation of Net Income
(Loss) to Pro Forma Adjusted EBITDA
Three Months Ended September
30, 2018
In millions, except percentages
(unaudited)
Historical
Ingevity
Caprolactone
Business (1)
Pro Forma
Net income (loss)
$
51.7
$
4.3
$
56.0
Provision (benefit) for income taxes
16.4
0.6
17.0
Interest expense, net
7.9
6.6
14.5
Depreciation and amortization
14.7
5.2
19.9
Adjusted EBITDA
$
90.7
$
16.7
$
107.4
Net sales
$
311.2
$
354.2
Net income (loss) margin
16.6
%
15.8
%
Adjusted EBITDA margin
29.1
%
30.3
%
Performance Chemicals Segment EBITDA
$
49.1
$
16.7
$
65.8
Performance Chemicals Net sales
$
214.9
$
257.9
Segment EBITDA margin
22.8
%
25.5
%
___________________
(1) Pro forma amount includes historical
results of the Caprolactone Business, prior to the acquisition date
of February 13, 2019. This amount also includes adjustments as if
the acquisition had occurred on January 1, 2018, including the
effects of purchase accounting. The pro forma amounts do not
include adjustments for expenses related to integration activities,
cost savings, or synergies that have been or may have been realized
had we acquired the businesses on January 1, 2018.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191023005848/en/
Contact: Jack
Maurer 843-746-8242
jack.maurer@ingevity.com
Investors: Dan Gallagher 843-740-2126 daniel.gallagher@ingevity.com
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