HIGHLIGHTS:
- Net sales of $390.6 million, down 19% compared to prior
year
- Net loss of $283.7 million and diluted loss per share of $7.81
primarily due to a Performance Chemicals non-cash goodwill
impairment charge; adjusted earnings of $36.8 million and diluted
adjusted earnings per share (EPS) of $1.01
- Adjusted EBITDA of $101.3 million and adjusted EBITDA margin of
25.9%
- Operating cash flow of $29.7 million with free cash flow of
$11.6 million
- In July, the company took further actions to reposition its
Performance Chemicals segment, including the termination of a
long-term crude tall oil supply contract, the announced closure of
its Crossett, Arkansas, facility, to consolidate its manufacturing
footprint, and certain corporate cost savings actions
- Revising full year guidance of sales between $1.40 billion and
$1.50 billion and adjusted EBITDA between $350 million and $360
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. All
comparisons are made versus the same period in 2023 unless
otherwise stated.
Ingevity Corporation (NYSE: NGVT) today reported its financial
results for the second quarter 2024.
Second quarter net sales of $390.6 million declined 19%
primarily due to the repositioning of the Performance Chemicals
segment which included reducing exposure to certain markets in the
Industrial Specialties product line. The decline was partially
offset by higher sales in Performance Materials due to improved
pricing and strong automotive carbon volumes.
The net loss of $283.7 million and diluted loss per share of
$7.81 is primarily due to a Performance Chemicals non-cash goodwill
impairment charge of $349.1 million. The impairment charge was the
result of internal analysis that reassessed expected cash flows of
the segment in light of current performance and expected lack of
near-term recovery in our Industrial Specialties product line,
resulting in lower volumes and profitability expectations. Adjusted
Earnings before Interest, Taxes, Depreciation and Amortization
(EBITDA) was $101.3 million, down 16% with adjusted EBITDA margin
of 25.9%.
“As we move forward with transforming Performance Chemicals into
a more profitable and stable segment, we continue to see
Performance Materials deliver best-in-class results,” said John
Fortson, president and CEO. “The Advanced Polymer Technologies
segment experienced another quarter of volume growth and maintained
its strong margins. I am proud of the hard work our employees have
demonstrated as we navigate the uncertain pace of an industrial
recovery while we continue to reposition Performance Chemicals. The
effort and focus of our business leads and their teams delivered an
EBITDA margin of 26% for the quarter.”
Performance Materials
Sales in Performance Materials were $157.2 million in the
quarter, up 9% due to higher volumes in automotive end markets and
increased pricing. Segment EBITDA was $82.2 million, up 28%,
primarily reflecting lower input costs and improved operational
efficiency which drove lower energy usage, resulting in segment
EBITDA margins of 52.3%.
“Performance Materials results reflect our team's dedication and
commitment to increasing operational efficiency at the plants and
our commercial success in capturing value from our market-leading
gasoline vapor capture technology. We are encouraged to see
continued consumer demand for hybrid vehicles and view this as a
tailwind for the segment,” said Fortson.
Advanced Polymer Technologies
Sales in Advanced Polymer Technologies (APT) were down 10% to
$47.9 million as higher volumes were more than offset by lower
pricing. Segment EBITDA was $9.8 million, down 16% due to lower
pricing primarily in Asia, partially offset by lower input costs.
Segment EBITDA margin was 20.5%.
“We are seeing encouraging signs in APT as volumes were up both
year-over-year, and for the third consecutive quarter,” said
Fortson. “APT is geographically diverse. Europe is seeing a strong
rebound from last year’s lows with volumes approaching two-year
highs, while China demand continues to be relatively weak. The team
is also strategically pricing products to maintain volume in key
end markets. In addition, input costs have improved, and the team
continues to demonstrate good cost discipline, enabling the segment
to maintain 20% EBITDA margins.”
Performance Chemicals
Sales in Performance Chemicals were $185.5 million, down
35%.
Road Technologies product line sales of $129.1 million were down
8% from the record quarter last year primarily as a result of
unfavorable weather conditions in North America. Industrial
Specialties product line sales of $56.4 million were down 61% due
to the impact of the segment’s repositioning efforts which are
focused on reducing exposure to lower margin end markets, as well
as continued weakness in industrial demand.
Segment EBITDA was $9.3 million, reflecting the impact of
sharply higher crude tail oil (CTO) costs and low plant utilization
rates attributed to weak industrial demand, partially offset by the
impact of cost savings initiatives. Segment EBITDA margin was
5.0%.
“We are taking decisive actions in our repositioning efforts for
this segment to improve profitability by focusing on higher margin
end markets,” said Fortson. “We exited long-term supply agreements
for crude tall oil to provide the flexibility to respond to
changing market dynamics, diversify our raw materials and
suppliers, and optimize costs. And, we have rightsized our physical
footprint to meet the needs of the markets we serve. Higher cost
CTO will continue to impact the segment’s results this year and
into first quarter next year as we work through existing inventory,
but the segment is expected to have improved profitability
beginning in second quarter 2025 with more stable and predictable
growth.”
Liquidity/Other
Second quarter operating cash flow was $29.7 million with free
cash flow of $11.6 million, which includes the cash impact of $25.5
million in losses on CTO resales and $12.9 million of cash
restructuring charges. There were no share repurchases for the
quarter and $353.4 million remains available under the current $500
million Board authorization. Net leverage was 4.0 times as a result
of lower earnings, and also reflects a revision to previously
reported adjusted EBITDA to no longer exclude certain inventory
charges related to the Performance Chemicals repositioning efforts
per guidance from the Securities and Exchange Commission. As a
result, our March 31, 2024, first quarter adjusted EBITDA is lower
by $2.5 million to $74.4 million and our December 31, 2023, fourth
quarter adjusted EBITDA is lower by $19.7 million to $42.1 million.
For more details, please refer to the included financial
schedules.
Full Year 2024 Guidance
“We have taken additional actions to advance the repositioning
of the Performance Chemicals segment with a focus on sustained
profitability. Segment results this year will be challenged as a
result of high-cost CTO inventory, which we expect to work through
by the end of Q1 2025, and the lack of a rebound in industrial
demand, primarily impacting the Industrial Specialties product
line. In addition, weather conditions to date have been unfavorable
in North America and our guidance reflects some uncertainty
regarding the recovery of Road Technologies volumes in the second
half. The continued strength of Performance Materials and the
stability of APT will help offset the headwinds we face in
Performance Chemicals. We are revising our guidance of sales
between $1.40 billion and $1.50 billion, and our full year adjusted
EBITDA to between $350 million and $360 million,” said Fortson.
Additional Information
The company will host a live webcast on Thursday, August 1, at
11:00 a.m. (Eastern) to discuss second-quarter 2024 fiscal results.
The webcast can be accessed here or on the investors section of
Ingevity’s website. You may also listen to the conference call by
dialing 833 470 1428 (inside the U.S.) and entering access code
153840. Callers outside the U.S. can find global dial-in numbers
here. For those unable to join the live event, a recording will be
available beginning at approximately 2:00 p.m. (Eastern) on August
1, 2024, through July 31, 2025, at this replay link.
Ingevity: Purify, Protect and Enhance
Ingevity provides products and technologies that purify, protect
and enhance the world around us. Through a team of talented and
experienced people, we develop, manufacture and bring to market
solutions that help customers solve complex problems and make the
world more sustainable. We operate in three reporting segments:
Performance Materials, which includes activated carbon; Advanced
Polymer Technologies, which includes caprolactone polymers; and
Performance Chemicals, which includes specialty chemicals and road
technologies. Our products are used in a variety of demanding
applications, including adhesives, agrochemicals, asphalt paving,
certified biodegradable bioplastics, coatings, elastomers,
lubricants, pavement markings, oil exploration and production and
automotive components. Headquartered in North Charleston, South
Carolina, Ingevity operates from 31 countries around the world and
employs approximately 1,700 people. The company’s common stock is
traded on the New York Stock Exchange (NYSE:NGVT). For more
information, visit ingevity.com.
Use of non-GAAP financial measures: This press release
includes certain non‐GAAP financial measures intended to
supplement, not substitute for, comparable GAAP measures.
Reconciliations of non‐GAAP financial measures to GAAP financial
measures are provided within the Appendix to this press release.
Investors are urged to consider carefully the comparable GAAP
measures and the reconciliations to those measures provided. The
company does not attempt to provide reconciliations of
forward-looking non-GAAP guidance to the comparable GAAP measure
because the impact and timing of the factors underlying the
guidance assumptions are inherently uncertain and difficult to
predict and are unavailable without unreasonable efforts. In
addition, Ingevity believes such reconciliations would imply a
degree of certainty that could be confusing to investors.
Forward-Looking Statements
This press release contains “forward‑looking statements” within
the meaning of the Securities Exchange Act of 1934, as amended, and
the Private Securities Litigation Reform Act of 1995. Such
statements generally include the words “will,” “plans,” “intends,”
“targets,” “expects,” “outlook,” “guidance,” “believes,”
“anticipates” or similar expressions. Forward-looking statements
may include, without limitation, anticipated timing, charges and
costs of any current or future repositioning of our Performance
Chemicals segment, including the oleo-based product refining
transition, Crossett, Arkansas plant closure, and the previously
announced closure of our DeRidder, Louisiana plant; the potential
benefits of any acquisition or investment transaction, expected
financial positions, guidance, results of operations and cash
flows; financing plans; business strategies and expectations;
operating plans; capital and other expenditures; competitive
positions; growth opportunities for existing products; benefits
from new technology and cost-reduction initiatives, plans and
objectives; litigation-related strategies and outcomes; and markets
for securities. Actual results could differ materially from the
views expressed. 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, charges, costs or
actions, including adverse legal or regulatory actions, resulting
from, or in connection with, the current or future repositioning of
our Performance Chemicals segment, including the oleo-based product
refining transition, Crossett, Arkansas plant closure, and the
previously announced closure of our DeRidder, Louisiana plant;
losses due to resale of crude tall oil at less than we paid for it;
adverse effects from general global economic, geopolitical and
financial conditions beyond our control, including inflation and
the Russia-Ukraine war and Israel-Gaza war; risks related to our
international sales and operations; adverse conditions in the
automotive market; competition from substitute products, new
technologies and new or emerging competitors; worldwide air quality
standards; a decrease in government infrastructure spending;
adverse conditions in cyclical end markets; the limited supply of
or lack of access to sufficient raw materials, or any material
increase in the cost to acquire such raw materials; issues with or
integration of future acquisitions and other investments; the
provision of services by third parties at several facilities;
supply chain disruptions; natural disasters and extreme weather
events; or other unanticipated problems such as labor difficulties
(including work stoppages), equipment failure or unscheduled
maintenance and repair; attracting and retaining key personnel;
dependence on certain large customers; legal actions associated
with our intellectual property rights; protection of our
intellectual property and other proprietary information;
information technology security breaches and other disruptions;
complications with designing or implementing our new enterprise
resource planning system; government policies and regulations,
including, but not limited to, those affecting the environment,
climate change, tax policies, tariffs and the chemicals industry;
losses due to lawsuits arising out of environmental damage or
personal injuries associated with chemical or other manufacturing
processes; and the other factors detailed from time to time in the
reports we file with the Securities and Exchange Commission (the
“SEC”), including those described in Part I, Item 1A. Risk Factors
in our most recent Annual Report on Form 10‑K as well as in our
other filings with the SEC. These forward-looking statements speak
only to management’s beliefs as of the date of this press release.
Ingevity assumes no obligation to provide any revisions to, or
update, any projections and forward-looking statements contained in
this press release.
INGEVITY CORPORATION
Condensed Consolidated
Statements of Operations (Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
In millions, except per share
data
2024
2023
2024
2023
Net sales
$
390.6
$
481.8
$
730.7
$
874.4
Cost of sales
267.4
328.8
507.8
591.0
Gross profit
123.2
153.0
222.9
283.4
Selling, general and administrative
expenses
41.4
51.7
88.6
100.3
Research and technical expenses
7.3
8.0
14.1
16.8
Restructuring and other (income) charges,
net
13.1
19.2
75.9
24.8
Goodwill impairment charge
349.1
—
349.1
—
Acquisition-related costs
(0.2
)
1.8
0.1
3.7
Other (income) expense, net
23.9
3.0
56.1
(15.2
)
Interest expense, net
23.2
21.6
45.5
41.2
Income (loss) before income taxes
(334.6
)
47.7
(406.5
)
111.8
Provision (benefit) for income taxes
(50.9
)
12.2
(66.8
)
25.6
Net income (loss)
$
(283.7
)
$
35.5
$
(339.7
)
$
86.2
Per share data
Basic earnings (loss) per share
$
(7.81
)
$
0.98
$
(9.36
)
$
2.34
Diluted earnings (loss) per share
(7.81
)
0.97
(9.36
)
2.33
Weighted average shares outstanding
Basic
36.3
36.4
36.3
36.8
Diluted
36.3
36.6
36.3
37.1
INGEVITY CORPORATION
Segment Operating Results
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
In millions
2024
2023
2024
2023
Net sales
Performance Materials
$
157.2
$
144.6
$
302.3
$
286.0
Performance Chemicals
$
185.5
$
284.0
$
332.5
$
469.6
Road Technologies product line
129.1
140.9
174.8
186.7
Industrial Specialties product line
56.4
143.1
157.7
282.9
Advanced Polymer Technologies
$
47.9
$
53.2
$
95.9
$
118.8
Total net sales
$
390.6
$
481.8
$
730.7
$
874.4
Segment EBITDA (1)
Performance Materials
$
82.2
$
64.2
$
160.2
$
134.0
Performance Chemicals
9.3
44.9
(1.3
)
65.2
Advanced Polymer Technologies
9.8
11.6
19.3
25.4
Total segment EBITDA (1)
$
101.3
$
120.7
$
178.2
$
224.6
Interest expense, net
(23.2
)
(21.6
)
(45.5
)
(41.2
)
(Provision) benefit for income taxes
50.9
(12.2
)
66.8
(25.6
)
Depreciation and amortization -
Performance Materials
(9.7
)
(9.2
)
(19.3
)
(19.2
)
Depreciation and amortization -
Performance Chemicals
(10.1
)
(13.0
)
(22.5
)
(26.8
)
Depreciation and amortization - Advanced
Polymer Technologies
(7.5
)
(8.2
)
(15.1
)
(15.5
)
Restructuring and other income (charges),
net (2) (3)
(13.1
)
(19.2
)
(75.9
)
(24.8
)
Goodwill impairment charge (2)(4)
(349.1
)
—
(349.1
)
—
Acquisition and other-related costs (2)
(5)
0.2
(1.8
)
(0.1
)
(4.5
)
Inventory charges (6)
—
—
(2.5
)
—
Loss on CTO resales (2) (7)
(23.5
)
—
(50.0
)
—
Gain (loss) on strategic investments (2)
(8)
0.1
—
(4.7
)
19.2
Net income (loss)
$
(283.7
)
$
35.5
$
(339.7
)
$
86.2
_______________
(1)
Segment EBITDA is the primary measure used
by our chief operating decision maker ("CODM") to evaluate the
performance of and allocate resources among our operating segments.
Segment EBITDA is defined as segment net sales less segment
operating expenses (segment operating expenses consist of costs of
sales, selling, general and administrative expenses, research and
technical 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, interest income, income taxes,
depreciation, amortization, restructuring and other income
(charges), net, inventory lower of cost or market charges
associated with restructuring actions, goodwill impairment charge,
acquisition and other-related income (costs), litigation verdict
charges, gain (loss) on strategic investments, loss on CTO resales,
pension and postretirement settlement and curtailment income
(charges), net.
(2)
For more information on these charges,
refer to the Reconciliation of Adjusted Earnings table on page
10.
(3)
The table below provides an allocation of
these charges between our three reportable segments to provide
investors, potential investors, securities analysts and others with
the information, should they choose, to apply such (income) charges
to each respective reportable segment for which the charges
relate.
Three Months Ended June
30,
Six Months Ended June
30,
In millions
2024
2023
2024
2023
Performance Materials
$
—
$
4.5
$
0.1
$
6.2
Performance Chemicals
13.1
13.6
75.9
16.7
Advanced Polymer Technologies
—
1.1
(0.1
)
1.9
Restructuring and other (income) charges,
net
$
13.1
$
19.2
$
75.9
$
24.8
(4)
For the three and six months ended June
30, 2024, charges relate to the Performance Chemicals reportable
segment.
(5)
For the three and six months ended June
30, 2024 and 2023, charges relate to the Performance Chemicals
reportable segment.
(6)
For the three and six months ended June
30, 2024, inventory charges represent lower of cost or market
charges associated with the Performance Chemicals’ repositioning.
These charges were not allocated in the measurement of our
Performance Chemicals reportable segment profitability used by our
CODM. Amounts are included in Cost of sales on the condensed
consolidated statement of operations.
(7)
For the three and six months ended June
30, 2024, charges relate to the Performance Chemicals reportable
segment.
(8)
The table below provides an allocation of
these charges between our three reportable segments to provide
investors, potential investors, securities analysts and others with
the information, should they choose, to apply such (income) charges
to each respective reportable segment for which the charges
relate.
Three Months Ended June
30,
Six Months Ended June
30,
In millions
2024
2023
2024
2023
Performance Materials
$
(0.1
)
$
—
$
(0.1
)
$
(19.2
)
Performance Chemicals
—
—
4.8
—
Advanced Polymer Technologies
—
—
—
—
(Gain) loss on strategic investments
$
(0.1
)
$
—
$
4.7
$
(19.2
)
INGEVITY CORPORATION
Condensed Consolidated Balance
Sheets (Unaudited)
In millions
June 30, 2024
December 31, 2023
Assets
Cash and cash equivalents
$
107.4
$
95.9
Accounts receivable, net
213.4
182.0
Inventories, net
302.0
308.8
Prepaid and other current assets
63.0
71.9
Current assets
685.8
658.6
Property, plant, and equipment, net
722.2
762.2
Goodwill
177.0
527.5
Other intangibles, net
295.7
336.1
Restricted investment
80.5
79.1
Strategic investments
93.9
99.2
Other assets
221.1
160.6
Total Assets
$
2,276.2
$
2,623.3
Liabilities
Accounts payable
$
142.4
$
158.4
Accrued expenses
70.0
72.3
Notes payable and current maturities of
long-term debt
103.0
84.4
Other current liabilities
42.4
47.8
Current liabilities
357.8
362.9
Long-term debt including finance lease
obligations
1,401.0
1,382.8
Deferred income taxes
61.6
70.9
Other liabilities
171.0
175.3
Total Liabilities
1,991.4
1,991.9
Equity
284.8
631.4
Total Liabilities and Equity
$
2,276.2
$
2,623.3
INGEVITY CORPORATION
Condensed Consolidated
Statements of Cash Flows (Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
In millions
2024
2023
2024
2023
Cash provided by (used in) operating
activities:
Net income (loss)
$
(283.7
)
$
35.5
$
(339.7
)
$
86.2
Adjustments to reconcile net income (loss)
to cash provided by (used in) operating activities:
Depreciation and amortization
27.3
30.4
56.9
61.5
Restructuring and other (income) charges,
net
13.1
19.2
75.9
24.8
Loss on CTO resales
23.5
—
50.0
—
(Gain) loss on strategic investment
(0.1
)
—
4.7
(19.2
)
Goodwill impairment charge
349.1
—
349.1
—
Other non-cash items
(53.6
)
42.2
(63.8
)
76.6
Changes in operating assets and
liabilities, net of effect of acquisitions:
Restructuring and other cash outflow,
net
(12.9
)
(19.2
)
(22.9
)
(24.8
)
CTO resales cash outflow, net
(25.5
)
—
(45.3
)
—
Changes in other operating assets and
liabilities, net
(7.5
)
(59.7
)
(47.3
)
(151.4
)
Net cash provided by (used in) operating
activities
$
29.7
$
48.4
$
17.6
$
53.7
Cash provided by (used in) investing
activities:
Capital expenditures
$
(18.1
)
$
(21.7
)
$
(34.7
)
$
(47.1
)
Proceeds from sale of strategic
investment
—
—
—
31.4
Other investing activities, net
0.3
(1.1
)
0.6
(4.6
)
Net cash provided by (used in) investing
activities
$
(17.8
)
$
(22.8
)
$
(34.1
)
$
(20.3
)
Cash provided by (used in) financing
activities:
Proceeds from revolving credit facility
and other borrowings
$
30.9
$
107.5
$
112.3
$
197.8
Payments on revolving credit facility and
other borrowings
(20.2
)
(84.5
)
(75.2
)
(144.8
)
Financing lease obligations, net
(0.2
)
(0.2
)
(0.6
)
(0.5
)
Tax payments related to withholdings on
vested equity awards
(0.2
)
—
(2.8
)
(4.5
)
Proceeds and withholdings from share-based
compensation plans, net
—
1.4
—
4.0
Repurchases of common stock under publicly
announced plan
—
(58.7
)
—
(92.1
)
Net cash provided by (used in) financing
activities
$
10.3
$
(34.5
)
$
33.7
$
(40.1
)
Increase (decrease) in cash, cash
equivalents, and restricted cash
22.2
(8.9
)
17.2
(6.7
)
Effect of exchange rate changes on
cash
(2.0
)
(0.3
)
(3.8
)
(0.7
)
Change in cash, cash equivalents, and
restricted cash(1)
20.2
(9.2
)
13.4
(7.4
)
Cash, cash equivalents, and restricted
cash at beginning of period
105.1
86.1
111.9
84.3
Cash, cash equivalents, and restricted
cash at end of period (1)
$
125.3
$
76.9
$
125.3
$
76.9
(1) Includes restricted cash of $17.9
million and $8.9 million and cash and cash equivalents of $107.4
million and $68.0 million at June 30, 2024 and 2023, respectively.
Restricted cash is included within "Prepaid and other current
assets" and "Restricted investment" within the condensed
consolidated balance sheets.
Supplemental cash flow
information:
Cash paid for interest, net of capitalized
interest
$
25.3
$
24.7
$
42.3
$
40.0
Cash paid for income taxes, net of
refunds
19.3
18.9
22.2
23.6
Purchases of property, plant, and
equipment in accounts payable
(0.9
)
1.0
1.8
5.3
Leased assets obtained in exchange for new
operating lease liabilities
1.5
14.9
1.9
18.8
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 on the following pages. These
financial measures are not meant to be considered in isolation nor
as a substitute for the most directly comparable financial measure
calculated in accordance with GAAP. 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.
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, liquidity measures, and projected
future results.
Ingevity uses the following non-GAAP measures:
Adjusted earnings (loss) is defined as
net income (loss) plus restructuring and other (income) charges,
net, goodwill impairment charge, acquisition and other-related
(income) costs, pension and postretirement settlement and
curtailment (income) charges, loss on CTO resales, (gain) loss on
strategic investments, debt refinancing fees, litigation verdict
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 plus
restructuring and other (income) charges, net, per share, goodwill
impairment charge per share, acquisition and other-related (income)
costs per share, pension and postretirement settlement and
curtailment (income) charges per share, loss on CTO resales per
share, (gain) loss on strategic investments per share, debt
refinancing fees per share, litigation verdict charge per share,
and the income tax expense (benefit) per share on those items, less
the provision (benefit) from certain discrete tax items per
share.
Adjusted EBITDA is defined as net
income (loss) plus interest expense, net, provision (benefit) for
income taxes, depreciation, amortization, restructuring and other
(income) charges, net, goodwill impairment charge, acquisition and
other-related (income) costs, litigation verdict charges, (gain)
loss on strategic investments, loss on CTO resales, and pension and
postretirement settlement and curtailment (income) charges,
net.
Adjusted EBITDA Margin is defined as
Adjusted EBITDA divided by Net sales.
Free Cash Flow is defined as the sum
of net cash provided by (used in) the following items: operating
activities less capital expenditures.
Net Debt is defined as the sum of
notes payable, short-term debt, current maturities of long-term
debt and long-term debt including finance lease obligations less
the sum of cash and cash equivalents, restricted cash associated
with our new market tax credit financing arrangement, and
restricted investment associated with certain finance lease
obligations, excluding the allowance for credit losses on
held-to-maturity debt securities held within the restricted
investment.
Net Debt Ratio is defined as Net Debt
divided by the last twelve months Adjusted EBITDA, inclusive of
acquisition-related pro forma adjustments.
Ingevity's management also uses the above financial measures as
the primary measures of profitability and liquidity of the
business. In addition, Ingevity 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.
GAAP Reconciliation of 2024 Adjusted EBITDA
Guidance
A reconciliation of net income to adjusted EBITDA as projected
for 2024 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 (income) costs;
litigation verdict charges; additional pension and postretirement
settlement and curtailment (income) charges; and revisions due to
legislative tax rate changes. 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 the 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) and
Reconciliation of Diluted Earnings (Loss) per Common Share (GAAP)
to Diluted Adjusted Earnings per Share (Non-GAAP)
Three Months Ended June
30,
Six Months Ended June
30,
In millions, except per share data
(unaudited)
2024
2023
2024
2023
Net income (loss) (GAAP)
$
(283.7
)
$
35.5
$
(339.7
)
$
86.2
Restructuring and other (income) charges,
net (1)
13.1
19.2
75.9
24.8
Goodwill impairment charge (2)
349.1
—
349.1
—
Acquisition and other-related costs
(3)
(0.2
)
1.8
0.1
4.5
Loss on CTO resales (4)
23.5
—
50.0
—
(Gain) loss on strategic investments
(5)
(0.1
)
—
4.7
(19.2
)
Tax effect on items above (6)
(92.0
)
(4.8
)
(114.7
)
(2.3
)
Certain discrete tax provision (benefit)
(7)
27.1
(0.1
)
28.0
(1.3
)
Adjusted earnings (loss)
(Non-GAAP)
$
36.8
$
51.6
$
53.4
$
92.7
Diluted earnings (loss) per common
share (GAAP)
$
(7.81
)
$
0.97
$
(9.36
)
$
2.33
Restructuring and other (income) charges,
net
0.36
0.52
2.09
0.67
Goodwill impairment charge
9.62
—
9.62
—
Acquisition and other-related costs
(0.01
)
0.05
—
0.12
Loss on CTO resales
0.65
—
1.38
—
(Gain) loss on strategic investments
—
—
0.13
(0.52
)
Tax effect on items above
(2.55
)
(0.13
)
(3.17
)
(0.06
)
Certain discrete tax provision
(benefit)
0.75
—
0.77
(0.04
)
Diluted adjusted earnings (loss) per
share (Non-GAAP)
$
1.01
$
1.41
$
1.46
$
2.50
Weighted average common shares outstanding
- Diluted
36.5
36.6
36.5
37.1
_______________
(1)
We regularly perform strategic reviews and
assess the return on our operations, which sometimes results in a
plan to restructure the business. These costs are excluded from our
reportable segment results; details of which are included in the
table below. For the details of these costs between our reportable
segments, see Segment Operating Results on page 2.
Three Months Ended June
30,
Six Months Ended June
30,
In millions
2024
2023
2024
2023
Work force reductions and other
$
—
$
7.0
$
—
$
10.1
Performance Chemicals' repositioning
10.0
—
72.3
—
Restructuring charges (1)
$
10.0
$
7.0
$
72.3
$
10.1
Alternative feedstock transition
—
6.6
—
6.6
North Charleston plant transition
3.1
2.9
3.6
2.9
Business transformation costs
—
2.7
—
5.2
Other (income) charges, net (1)
$
3.1
$
12.2
$
3.6
$
14.7
Restructuring and other (income) charges,
net (2)
$
13.1
$
19.2
$
75.9
$
24.8
_______________
(1)
Amounts are recorded within Restructuring
and other (income) charges, net on the condensed consolidated
statement of operations.
(2)
For information on our Workforce
reductions and other, Performance Chemicals' repositioning, North
Charleston plant transition, and the Business transformation costs
please refer to Note 15, Restructuring and Other (Income) Charges,
net, in the Notes to the Consolidated Financial Statements included
in the Company’s Form 10-K for the year ended December 31, 2023,
filed on February 22, 2024. Updates will be provided in subsequent
filings of the Company's Form 10-Q in 2024.
(2)
During the second quarter of 2024, the
company concluded that the carrying amount of the Performance
Chemicals’ reporting unit exceeded its fair value, resulting in a
non-cash goodwill impairment charge. Updates will be provided in
subsequent filings of the Company's Form 10-Q in 2024.
(3)
Charges represent (gains) losses incurred
to complete and integrate acquisitions and other strategic
investments. Charges may include the expensing of the inventory
fair value step-up resulting from the application of purchase
accounting for acquisitions and certain legal and professional fees
associated with the completion of acquisitions and strategic
investments. For the details of these costs between our reportable
segments, see Segment Operating Results on page 2.
Three Months Ended June
30,
Six Months Ended June
30,
In millions
2024
2023
2024
2023
Legal and professional service fees
$
(0.2
)
$
1.8
$
0.1
$
3.7
Acquisition-related (income) costs
$
(0.2
)
$
1.8
$
0.1
$
3.7
Inventory fair value step-up amortization
(1)
—
—
—
0.8
Acquisition and other-related (income)
charges
$
(0.2
)
$
1.8
$
0.1
$
4.5
_________________
(1)
Included in Cost of sales on the condensed
consolidated statement of operations.
(4)
Due to the DeRidder Plant closure, as
noted in footnote 1 above, and the corresponding reduced CTO
refining capacity, we were obligated, under an existing CTO supply
contract, to purchase CTO through 2025 at amounts in excess of
required CTO volumes. As of July 1, 2024, we have terminated the
CTO supply contract that resulted in these excess CTO volumes. As a
result of the termination of this contract the purchases under the
CTO supply contract ended, effective June 30, 2024. Therefore, we
are no longer required to purchase this excess CTO volume through
2025, and as such, we expect to end our CTO resale activity by the
end of 2024. Updates will be provided in subsequent filings of the
Company's Form 10-Q in 2024.
(5)
We exclude gains and losses from strategic
investments from our segment results, as well as our non-GAAP
financial measures, because we do not consider such gains or losses
to be directly associated with the operational performance of the
segment. We believe that the inclusion of such gains or losses,
would impair the factors and trends affecting the historical
financial performance of our reportable segments. We continue to
include undistributed earnings or loss, distributions, amortization
or accretion of basis differences, and other-than-temporary
impairments for equity method investments that we believe are
directly attributable to the operational performance of such
investments, in our reportable segment results.
(6)
Income tax impact of non-GAAP adjustments
is the summation of the calculated income tax charge related to
each pre-tax non-GAAP adjustment. The non-GAAP adjustments relate
primarily to adjustments in the United States. As such, the income
tax effect is calculated using the statutory tax rates of 21% for
the United States and approximately 2.5% for state and local taxes,
applied to the non-GAAP adjustments.
(7)
Represents certain discrete tax items such
as excess tax benefits on stock compensation and impacts of
legislative tax rate changes.
Reconciliation of Net Income (Loss) (GAAP)
to Adjusted Earnings (Loss) (Non-GAAP) and Reconciliation of
Diluted Earnings (Loss) per Common Share (GAAP) to Diluted Adjusted
Earnings per Share (Non-GAAP)
We revised our March 31, 2024 non-GAAP Adjusted earnings (loss)
calculation to remove previous adjustments of $2.5 million related
to inventory lower of cost or market charges associated with the
Company's Performance Chemicals' repositioning. This change was
made to address a request from the Securities and Exchange
Commission to revise future filings to no longer exclude these
adjustments from non-GAAP performance measures. The following table
presents the three months ended March 31, 2024 as previously
reported and as revised.
Three Months Ended March 31,
2024
In millions, except per share data
(unaudited)
As previously reported
As revised
Net income (loss) (GAAP)
$
(56.0
)
$
(56.0
)
Restructuring and other (income) charges,
net (1)
65.3
62.8
Acquisition and other-related costs
(1)
0.3
0.3
Loss on CTO resales (1)
26.5
26.5
(Gain) loss on strategic investments
(1)
4.8
4.8
Tax effect on items above (1)
(22.7
)
(22.1
)
Certain discrete tax provision (benefit)
(1)
0.9
0.9
Adjusted earnings (loss)
(Non-GAAP)
$
19.1
$
17.2
Diluted earnings (loss) per common
share (GAAP)
$
(1.54
)
$
(1.54
)
Restructuring and other (income) charges,
net
1.79
1.73
Acquisition and other-related costs
0.01
0.01
Loss on CTO resales
0.73
0.73
(Gain) loss on strategic investments
0.13
0.13
Tax effect on items above
(0.62
)
(0.61
)
Certain discrete tax provision
(benefit)
0.02
0.02
Diluted adjusted earnings (loss) per
share (Non-GAAP)
$
0.52
$
0.47
Weighted average common shares outstanding
- Diluted
36.4
36.4
_______________
(1)
For more information on these charges,
refer to the Reconciliation of Adjusted Earnings included in the
Company’s Form 8-K for the quarter ended March 31, 2024, filed on
May 1, 2024.
Reconciliation of Net Income
(Loss) (GAAP) to Adjusted EBITDA (Non-GAAP)
Three Months Ended June
30,
Six Months Ended June
30,
In millions, except percentages
(unaudited)
2024
2023
2024
2023
Net income (loss) (GAAP)
$
(283.7
)
$
35.5
$
(339.7
)
$
86.2
Provision (benefit) for income taxes
(50.9
)
12.2
(66.8
)
25.6
Interest expense, net
23.2
21.6
45.5
41.2
Depreciation and amortization
27.3
30.4
56.9
61.5
Restructuring and other (income) charges,
net (1)
13.1
19.2
75.9
24.8
Goodwill impairment charge (1)
349.1
—
349.1
—
Acquisition and other-related (income)
costs (1)
(0.2
)
1.8
0.1
4.5
Loss on CTO resales (1)
23.5
—
50.0
—
(Gain) loss on strategic investments
(1)
(0.1
)
—
4.7
(19.2
)
Adjusted EBITDA (Non-GAAP)
$
101.3
$
120.7
$
175.7
$
224.6
Net sales
$
390.6
$
481.8
$
730.7
$
874.4
Net income (loss) margin
(72.6
)%
7.4
%
(46.5
)%
9.9
%
Adjusted EBITDA margin
25.9
%
25.1
%
24.0
%
25.7
%
_______________
(1)
For more information on these charges,
refer to the Reconciliation of Adjusted Earnings table on page
7.
Reconciliation of Net Income (Loss) (GAAP)
to Adjusted EBITDA (Non-GAAP)
We revised our March 31, 2024 non-GAAP Adjusted EBITDA
calculation to remove previous adjustments of $2.5 million related
to inventory lower of cost or market charges associated with the
Company's Performance Chemicals' repositioning. This change was
made to address a request from the Securities and Exchange
Commission to revise future filings to no longer exclude these
adjustments from non-GAAP performance measures. The following table
presents the three months ended March 31, 2024 as previously
reported and as revised.
Three Months Ended March 31,
2024
In millions, except percentages
(unaudited)
As previously reported
As revised
Net income (loss) (GAAP)
$
(56.0
)
$
(56.0
)
Provision (benefit) for income taxes
(15.9
)
(15.9
)
Interest expense, net
22.3
22.3
Depreciation and amortization
29.6
29.6
Restructuring and other (income) charges,
net (1)
65.3
62.8
Acquisition and other-related (income)
costs (1)
0.3
0.3
Loss on CTO resales (1)
26.5
26.5
(Gain) loss on strategic investments
(1)
4.8
4.8
Adjusted EBITDA (Non-GAAP)
$
76.9
$
74.4
Net sales
$
340.1
$
340.1
Net income (loss) margin
(16.5
)%
(16.5
)%
Adjusted EBITDA margin
22.6
%
21.9
%
_______________
(1)
For more information on these charges,
refer to the Reconciliation of Adjusted Earnings included in the
Company’s Form 8-K for the quarter ended March 31, 2024, filed on
May 1, 2024.
Reconciliation of Net Income (Loss) (GAAP)
to Adjusted EBITDA (Non-GAAP)
We revised our December 31, 2023 non-GAAP Adjusted EBITDA
calculation to remove previous adjustments of $19.7 million related
to inventory lower of cost or market charges associated with the
Company's Performance Chemicals' repositioning. This change was
made to address a request from the Securities and Exchange
Commission to revise future filings to no longer exclude these
adjustments from non-GAAP performance measures. The following table
presents the three and twelve months ended December 31, 2023 as
previously reported and as revised.
Three Months Ended
December 31, 2023
Twelve Months Ended
December 31, 2023
In millions, except percentages
(unaudited)
As previously reported
As revised
As previously reported
As revised
Net income (loss) (GAAP)
$
(116.8
)
$
(116.8
)
$
(5.4
)
$
(5.4
)
Provision (benefit) for income taxes
22.7
22.7
87.0
87.0
Interest expense, net
(37.2
)
(37.2
)
(4.7
)
(4.7
)
Depreciation and amortization
30.7
30.7
122.8
122.8
Restructuring and other (income) charges,
net (1)
140.5
120.8
189.9
170.2
Acquisition and other-related (income)
costs (1)
(0.1
)
(0.1
)
4.5
4.5
Loss on CTO resales (1)
22.0
22.0
22.0
22.0
(Gain) loss on strategic investments
(1)
—
—
(19.3
)
(19.3
)
Adjusted EBITDA (Non-GAAP)
$
61.8
$
42.1
$
396.8
$
377.1
Net sales
$
371.7
$
371.7
$
1,692.1
$
1,692.1
Net income (loss) margin
(31.4
)%
(31.4
)%
(0.3
)%
(0.3
)%
Adjusted EBITDA margin
16.6
%
11.3
%
23.5
%
22.3
%
_______________
(1)
For more information on these charges,
refer to the Reconciliation of Adjusted Earnings included in the
Company’s Form 8-K for the year ended December 31, 2023, filed on
February 21, 2024.
Calculation of Free Cash Flow
(Non-GAAP)
Three Months Ended June
30,
Six Months Ended June
30,
In millions (unaudited)
2024
2023
2024
2023
Net cash provided by (used in) operating
activities
$
29.7
$
48.4
$
17.6
$
53.7
Less: Capital expenditures
18.1
21.7
34.7
47.1
Free Cash Flow (Non-GAAP)
$
11.6
$
26.7
$
(17.1
)
$
6.6
Calculation of Net Debt Ratio
(Non-GAAP)
In millions, except ratios
(unaudited)
June 30, 2024
Notes payable and current maturities of
long-term debt
$
103.0
Long-term debt including finance lease
obligations
1,401.0
Debt issuance costs
4.8
Total Debt
1,508.8
Less:
Cash and cash equivalents (1)
107.6
Restricted investment (2)
80.6
Net Debt
$
1,320.6
Net Debt Ratio (Non GAAP)
Adjusted EBITDA
Twelve months ended December 31, 2023
(3)
$
377.1
Six months ended June 30, 2023 (4)
(224.6
)
Six months ended June 30, 2024 (4)
175.7
Adjusted EBITDA - last twelve months (LTM)
as of June 30, 2024
$
328.2
Net debt ratio (Non GAAP)
4.0x
_______________
(1)
Includes $0.2 million of Restricted Cash
related to the New Market Tax Credit arrangement.
(2)
Our restricted investment is a trust
managed in order to secure repayment of the finance lease
obligation associated with Performance Materials' Wickliffe,
Kentucky, manufacturing site at maturity. The trust, presented as
Restricted investment on our condensed consolidated balance sheets,
originally purchased long-term bonds that mature through 2026. The
principal received at maturity of the bonds, along with interest
income that is reinvested in the trust, are expected to be equal to
or more than the $80.0 million finance lease obligation that is due
in 2027. Excludes $0.1 million allowance for credit losses on
held-to-maturity debt securities.
(3)
Refer to the Reconciliation of Net Income
(GAAP) to Adjusted EBITDA (Non-GAAP) schedule on page 12 for the
reconciliation to the most comparable GAAP financial measure.
(4)
Refer to the Reconciliation of Net Income
(GAAP) to Adjusted EBITDA (Non-GAAP) schedule on page 10 for the
reconciliation to the most comparable GAAP financial measure.
Calculation of Net Debt Ratio
(Non-GAAP)
We revised our March 31, 2024 non-GAAP Net debt ratio
calculation to remove the previous adjustments of $2.5 million from
the three months ended March 31, 2024 and $19.7 million from the
three months ended December 31, 2023, from the last twelve months
Adjusted EBITDA related to inventory lower of cost or market
charges associated with the Company's Performance Chemicals'
repositioning. This change was made to address a request from the
Securities and Exchange Commission to revise future filings to no
longer exclude these adjustments from non-GAAP performance
measures. The following table presents the period ended March 31,
2024 as previously reported and as revised.
March 31, 2024
In millions, except ratios
(unaudited)
As previously reported
As revised
Notes payable and current maturities of
long-term debt
$
84.7
$
84.7
Long-term debt including finance lease
obligations
1,408.7
1,408.7
Debt issuance costs
5.0
5.0
Total Debt
1,498.4
1,498.4
Less:
Cash and cash equivalents (1)
88.7
88.7
Restricted investment (2)
79.9
79.9
Net Debt
$
1,329.8
$
1,329.8
Net Debt Ratio (Non GAAP)
Adjusted EBITDA
Twelve months ended December 31, 2023
(3)
$
396.8
$
377.1
Three months ended March 31, 2023
(103.9
)
(103.9
)
Three months ended March 31, 2024 (4)
76.9
74.4
Adjusted EBITDA - last twelve months (LTM)
as of March 31, 2024
$
369.8
$
347.6
Net debt ratio (Non GAAP)
3.6x
3.8x
_______________
(1)
Includes $0.2 million of Restricted Cash
related to the New Market Tax Credit arrangement.
(2)
Our restricted investment is a trust
managed in order to secure repayment of the finance lease
obligation associated with Performance Materials' Wickliffe,
Kentucky, manufacturing site at maturity. The trust, presented as
Restricted investment on our condensed consolidated balance sheets,
originally purchased long-term bonds that mature through 2026. The
principal received at maturity of the bonds, along with interest
income that is reinvested in the trust, are expected to be equal to
or more than the $80.0 million finance lease obligation that is due
in 2027. Excludes $0.1 million allowance for credit losses on
held-to-maturity debt securities.
(3)
Refer to the Reconciliation of Net Income
(GAAP) to Adjusted EBITDA (Non-GAAP) schedule on page 12 for the
reconciliation to the most comparable GAAP financial measure.
(4)
Refer to the Reconciliation of Net Income
(GAAP) to Adjusted EBITDA (Non-GAAP) schedule on page 11 for the
reconciliation to the most comparable GAAP financial measure.
Calculation of Net Debt Ratio
(Non-GAAP)
We revised our December 31, 2023 non-GAAP Net debt ratio
calculation to remove the previous adjustment of $19.7 million from
the three months ended December 31, 2023, from the last twelve
months Adjusted EBITDA related to inventory lower of cost or market
charges associated with the Company's Performance Chemicals'
repositioning. This change was made to address a request from the
Securities and Exchange Commission to revise future filings to no
longer exclude these adjustments from non-GAAP performance
measures. The following table presents the period ended December
31, 2023 as previously reported and as revised.
December 31, 2023
In millions, except ratios
(unaudited)
As previously reported
As revised
Notes payable and current maturities of
long-term debt
$
84.4
$
84.4
Long-term debt including finance lease
obligations
1,382.8
1,382.8
Debt issuance costs
5.3
5.3
Total Debt
1,472.5
1,472.5
Less:
Cash and cash equivalents (1)
96.1
96.1
Restricted investment (2)
79.3
79.3
Net Debt
$
1,297.1
$
1,297.1
Net Debt Ratio (Non GAAP)
Adjusted EBITDA (3)
Adjusted EBITDA - last twelve months (LTM)
as of December 31, 2023
$
396.8
$
377.1
Net debt ratio (Non GAAP)
3.3x
3.4x
_______________
(1)
Includes $0.2 million of Restricted Cash
related to the New Market Tax Credit arrangement.
(2)
Our restricted investment is a trust
managed in order to secure repayment of the finance lease
obligation associated with Performance Materials' Wickliffe,
Kentucky, manufacturing site at maturity. The trust, presented as
Restricted investment on our condensed consolidated balance sheets,
originally purchased long-term bonds that mature through 2026. The
principal received at maturity of the bonds, along with interest
income that is reinvested in the trust, are expected to be equal to
or more than the $80.0 million finance lease obligation that is due
in 2027. Excludes $0.2 million allowance for credit losses on
held-to-maturity debt securities.
(3)
Refer to the Reconciliation of Net Income
(GAAP) to Adjusted EBITDA (Non-GAAP) schedule on page 12 for the
reconciliation to the most comparable GAAP financial measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240731642634/en/
Caroline Monahan 843-740-2068 media@ingevity.com
Investors: John E. Nypaver, Jr. 843-740-2002
investors@ingevity.com
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