HIGHLIGHTS:
- Net sales of $376.9 million, down 16% compared to prior year,
primarily due to repositioning actions in Performance
Chemicals
- Net loss of $107.2 million and diluted loss per share of $2.95
reflects before-tax restructuring charges of $86.9 million and
contract termination fees of $100.0 million; adjusted earnings of
$40.2 million and diluted adjusted earnings per share (EPS) of
$1.10
- Adjusted EBITDA of $106.4 million and adjusted EBITDA margin of
28.2%
- Operating cash flow of $46.5 million with free cash flow of
$28.5 million
- Affirms 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 third quarter 2024.
Third quarter net sales of $376.9 million declined 16% primarily
due to the repositioning of the Performance Chemicals segment which
included reducing exposure to certain markets in the Industrial
Specialties product line and weather-related impacts in the Road
Technologies product line. The decline was partially offset by
higher sales in Performance Materials and Advanced Polymer
Technologies.
The net loss of $107.2 million and diluted loss per share of
$2.95 reflects before-tax restructuring charges of $86.9 million
primarily related to the closure of our Crossett, Arkansas,
facility and $100.0 million for the termination of a long-term
crude tall oil (CTO) contract, both associated with the
repositioning of our Performance Chemicals segment. Adjusted
earnings were $40.2 million and diluted adjusted earnings per share
(EPS) was $1.10. Adjusted Earnings before Interest, Taxes,
Depreciation and Amortization (EBITDA) was $106.4 million, down
3.6%, with adjusted EBITDA margin of 28.2%. Adjusted EBITDA
included a $3.8 million inventory charge related to the shutdown of
our Crossett, Arkansas, facility and approximately $5 million for
CEO severance charges.
“This quarter's results demonstrate the strong foundation that
Ingevity has established,” said Luis Fernandez-Moreno, interim
president and CEO. “Performance Materials continues to deliver
outstanding results, Advanced Polymer Technologies has shown it can
maintain strong margins even in a prolonged industrial slowdown,
and Performance Chemicals is beginning to show the benefits of its
lower cost structure driven by our repositioning actions. I am
excited and energized to step into this role where my focus will be
on accelerating the teams’ existing business strategies through
improved execution and focus to drive consistent revenue growth and
margin improvement.”
Performance Materials
Sales in Performance Materials were $151.1 million in the
quarter, up 3%, primarily from strategic pricing adjustments.
Segment EBITDA was $80.6 million, up 8%, primarily driven by
operational improvements that contributed to lower input costs and
improved manufacturing efficiency, resulting in segment EBITDA
margins of 53.3%.
Advanced Polymer Technologies
Sales in Advanced Polymer Technologies (APT) were up 14% to
$48.8 million primarily due to higher volumes. Segment EBITDA was
$9.8 million, down 13%, and segment EBITDA margin was 20.1%. Higher
volume resulted in improved utilization rates, but these benefits
were largely offset by lower price and unfavorable product mix. In
addition, foreign exchange negatively impacted this quarter’s
EBITDA.
Performance Chemicals
Sales in Performance Chemicals were $177.0 million, down
31%.
Road Technologies product line sales of $119.0 million were down
8% driven by unfavorable weather conditions in key regions in North
America. Industrial Specialties product line sales of $58.0 million
were down 54% due primarily to the impact of the segment’s
repositioning actions which are focused on reducing exposure to
lower margin end markets, as well as continued weakness in
industrial demand.
Segment EBITDA was $19.8 million, down 20%, reflecting the
impact of higher CTO costs and continued weak industrial demand.
Segment EBITDA margin improved 160 basis points to 11.2% as the
segment benefited from the exit of lower margin end markets and
cost savings as a result of repositioning actions.
Liquidity/Other
Third quarter operating cash flow was $46.5 million with free
cash flow of $28.5 million, which includes the first of two $50.0
million payments to terminate a long-term CTO supply contract, as
well as the cash impact of $21.0 million in restructuring charges.
The second and final termination payment of $50.0 million was
completed in October. There were no share repurchases for the
quarter and $353.4 million remains available under the current $500
million Board authorization. Net leverage was flat to last quarter
at 4.0 times but is expected to improve beginning next quarter.
Full Year 2024 Guidance
“We began to see the positive impact of the Performance
Chemicals segment repositioning during the quarter. Our focus over
the next several quarters will be on execution to ensure we
maximize the benefits of our strategy. We are affirming our
guidance of sales between $1.40 billion and $1.50 billion and our
adjusted EBITDA to between $350 million and $360 million,” said
Fernandez-Moreno.
Additional Information
The company will host a live webcast on Wednesday, October 30,
at 10:00 a.m. (Eastern) to discuss third 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 381718. 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 October 30, 2024, through October 29, 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 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 conflict in the middle east; 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 September
30,
Nine Months Ended September
30,
In millions, except per share
data
2024
2023
2024
2023
Net sales
$
376.9
$
446.0
$
1,107.6
$
1,320.4
Cost of sales
247.0
317.0
754.8
908.0
Gross profit
129.9
129.0
352.8
412.4
Selling, general, and administrative
expenses
38.7
40.0
127.3
140.3
Research and technical expenses
6.7
7.8
20.8
24.6
Restructuring and other (income) charges,
net
86.9
24.6
162.8
49.4
Goodwill impairment charge
—
—
349.1
—
Acquisition-related costs
(0.1
)
0.1
—
3.8
Other (income) expense, net
111.8
1.3
167.9
(13.9
)
Interest expense, net
23.8
23.1
69.3
64.3
Income (loss) before income taxes
(137.9
)
32.1
(544.4
)
143.9
Provision (benefit) for income taxes
(30.7
)
6.9
(97.5
)
32.5
Net income (loss)
$
(107.2
)
$
25.2
$
(446.9
)
$
111.4
Per share data
Basic earnings (loss) per share
$
(2.95
)
$
0.70
$
(12.31
)
$
3.05
Diluted earnings (loss) per share
(2.95
)
0.69
(12.31
)
3.03
Weighted average shares outstanding
Basic
36.3
36.2
36.3
36.6
Diluted
36.3
36.4
36.3
36.8
INGEVITY CORPORATION
Segment Operating Results
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
In millions
2024
2023
2024
2023
Net sales
Performance Materials
$
151.1
$
147.2
$
453.4
$
433.2
Road Technologies product line
119.0
129.7
293.8
316.4
Industrial Specialties product line
58.0
126.3
215.7
409.2
Performance Chemicals
$
177.0
$
256.0
$
509.5
$
725.6
Advanced Polymer Technologies
$
48.8
$
42.8
$
144.7
$
161.6
Total net sales
$
376.9
$
446.0
$
1,107.6
$
1,320.4
Segment EBITDA (1)
Performance Materials
$
80.6
$
74.5
$
240.8
$
208.5
Performance Chemicals
19.8
24.7
18.5
89.9
Advanced Polymer Technologies
9.8
11.2
29.1
36.6
Total segment EBITDA (1)
$
110.2
$
110.4
$
288.4
$
335.0
Interest expense, net
(23.8
)
(23.1
)
(69.3
)
(64.3
)
(Provision) benefit for income taxes
30.7
(6.9
)
97.5
(32.5
)
Depreciation and amortization -
Performance Materials
(9.7
)
(9.5
)
(29.0
)
(28.7
)
Depreciation and amortization -
Performance Chemicals
(8.6
)
(13.2
)
(31.1
)
(40.0
)
Depreciation and amortization - Advanced
Polymer Technologies
(7.9
)
(7.9
)
(23.0
)
(23.4
)
Restructuring and other income (charges),
net (2) (3)
(86.9
)
(24.6
)
(162.8
)
(49.4
)
Goodwill impairment charge (2)(4)
—
—
(349.1
)
—
Acquisition and other-related costs (2)
(5)
0.1
(0.1
)
—
(4.6
)
Inventory charges (6)
(3.8
)
—
(6.3
)
—
Loss on CTO resales (2) (4)
(0.8
)
—
(50.8
)
—
CTO supply contract termination charges
(2) (4)
(100.0
)
—
(100.0
)
—
Gain (loss) on strategic investments (2)
(7)
(6.7
)
0.1
(11.4
)
19.3
Net income (loss)
$
(107.2
)
$
25.2
$
(446.9
)
$
111.4
_______________
(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,
CTO supply contract termination charges, 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
7.
(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 September
30,
Nine Months Ended September
30,
In millions
2024
2023
2024
2023
Performance Materials
$
0.6
$
1.3
$
0.7
$
7.5
Performance Chemicals
86.1
22.9
162.0
39.6
Advanced Polymer Technologies
0.2
0.4
0.1
2.3
Restructuring and other (income) charges,
net
$
86.9
$
24.6
$
162.8
$
49.4
(4)
For the three and nine months ended
September 30, 2024, charges relate to the Performance Chemicals
reportable segment.
(5)
For the three and nine months ended
September 30, 2024 and 2023, charges relate to the Performance
Chemicals reportable segment.
(6)
For the three and nine months ended September 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)
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 September
30,
Nine Months Ended September
30,
In millions
2024
2023
2024
2023
Performance Materials
$
—
$
(0.1
)
$
(0.1
)
$
(19.3
)
Performance Chemicals
4.5
—
9.3
—
Advanced Polymer Technologies
2.2
—
2.2
—
(Gain) loss on strategic investments
$
6.7
$
(0.1
)
$
11.4
$
(19.3
)
INGEVITY CORPORATION
Condensed Consolidated Balance
Sheets (Unaudited)
In millions
September 30, 2024
December 31, 2023
Assets
Cash and cash equivalents
$
135.5
$
95.9
Accounts receivable, net
189.9
182.0
Inventories, net
261.0
308.8
Prepaid and other current assets
50.4
71.9
Current assets
636.8
658.6
Property, plant, and equipment, net
671.3
762.2
Goodwill
186.9
527.5
Other intangibles, net
298.6
336.1
Restricted investment
81.1
79.1
Strategic investments
87.3
99.2
Other assets
249.6
160.6
Total Assets
$
2,211.6
$
2,623.3
Liabilities
Accounts payable
$
96.5
$
158.4
Accrued expenses
116.8
72.3
Notes payable and current maturities of
long-term debt
100.7
84.4
Other current liabilities
46.8
47.8
Current liabilities
360.8
362.9
Long-term debt including finance lease
obligations
1,397.6
1,382.8
Deferred income taxes
65.7
70.9
Other liabilities
173.0
175.3
Total Liabilities
1,997.1
1,991.9
Equity
214.5
631.4
Total Liabilities and Equity
$
2,211.6
$
2,623.3
INGEVITY CORPORATION
Condensed Consolidated
Statements of Cash Flows (Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
In millions
2024
2023
2024
2023
Cash provided by (used in) operating
activities:
Net income (loss)
$
(107.2
)
$
25.2
$
(446.9
)
$
111.4
Adjustments to reconcile net income (loss)
to cash provided by (used in) operating activities:
Depreciation and amortization
26.2
30.6
83.1
92.1
Restructuring and other (income) charges,
net
86.9
24.6
162.8
49.4
Loss on CTO resales
0.8
—
50.8
—
(Gain) loss on strategic investment
6.7
(0.1
)
11.4
(19.3
)
Goodwill impairment charge
—
—
349.1
—
CTO supply contract termination
charges
100.0
—
100.0
—
Other non-cash items
(24.7
)
39.3
(88.5
)
115.9
Changes in operating assets and
liabilities, net of effect of acquisitions:
Restructuring and other cash outflow,
net
(21.0
)
(21.9
)
(43.9
)
(46.7
)
CTO resales cash inflow (outflow), net
0.3
—
(45.0
)
—
CTO supply contract termination cash
outflow
(50.0
)
—
(50.0
)
—
Changes in other operating assets and
liabilities, net
28.5
7.5
(18.8
)
(143.9
)
Net cash provided by (used in) operating
activities
$
46.5
$
105.2
$
64.1
$
158.9
Cash provided by (used in) investing
activities:
Capital expenditures
$
(18.0
)
$
(33.5
)
$
(52.7
)
$
(80.6
)
Proceeds from sale of strategic
investment
—
0.1
—
31.5
Purchase of strategic investment
—
(2.4
)
—
(2.4
)
Other investing activities, net
0.6
3.5
1.2
(1.1
)
Net cash provided by (used in) investing
activities
$
(17.4
)
$
(32.3
)
$
(51.5
)
$
(52.6
)
Cash provided by (used in) financing
activities:
Proceeds from revolving credit facility
and other borrowings
$
38.2
$
41.7
$
150.5
$
239.5
Payments on revolving credit facility and
other borrowings
(44.1
)
(95.3
)
(119.3
)
(240.1
)
Finance lease obligations, net
(0.3
)
(0.1
)
(0.9
)
(0.6
)
Tax payments related to withholdings on
vested equity awards
(0.1
)
(0.3
)
(2.9
)
(4.8
)
Proceeds and withholdings from share-based
compensation plans, net
—
0.7
—
4.7
Repurchases of common stock under
publicly-announced plan
—
—
—
(92.1
)
Net cash provided by (used in) financing
activities
$
(6.3
)
$
(53.3
)
$
27.4
$
(93.4
)
Increase (decrease) in cash, cash
equivalents, and restricted cash
22.8
19.6
40.0
12.9
Effect of exchange rate changes on
cash
5.4
(2.3
)
1.6
(3.0
)
Change in cash, cash equivalents, and
restricted cash(1)
28.2
17.3
41.6
9.9
Cash, cash equivalents, and restricted
cash at beginning of period
125.3
76.9
111.9
84.3
Cash, cash equivalents, and restricted
cash at end of period (1)
$
153.5
$
94.2
$
153.5
$
94.2
(1) Includes restricted cash of $18.0
million and $9.7 million and cash and cash equivalents of $135.5
million and $84.5 million at September 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
$
18.7
$
17.9
$
61.0
$
57.9
Cash paid for income taxes, net of
refunds
1.8
4.3
24.0
27.9
Purchases of property, plant, and
equipment in accounts payable
0.4
0.8
2.2
6.1
Leased assets obtained in exchange for new
finance lease liabilities
—
0.2
—
0.2
Leased assets obtained in exchange for new
operating lease liabilities
3.6
7.2
5.5
26.0
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, CTO supply
contract termination charges, (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, CTO supply contract termination charges 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, CTO supply
contract termination charges, 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 September
30,
Nine Months Ended September
30,
In millions, except per share data
(unaudited)
2024
2023
2024
2023
Net income (loss) (GAAP)
$
(107.2
)
$
25.2
$
(446.9
)
$
111.4
Restructuring and other (income) charges,
net (1)
86.9
24.6
162.8
49.4
Goodwill impairment charge (2)
—
—
349.1
—
Acquisition and other-related costs
(3)
(0.1
)
0.1
—
4.6
Loss on CTO resales (4)
0.8
—
50.8
—
CTO supply contract termination charges
(5)
100.0
—
100.0
—
(Gain) loss on strategic investments
(6)
6.7
(0.1
)
11.4
(19.3
)
Tax effect on items above (7)
(43.3
)
(5.8
)
(158.0
)
(8.1
)
Certain discrete tax provision (benefit)
(8)
(3.6
)
0.2
24.4
(1.1
)
Adjusted earnings (loss)
(Non-GAAP)
$
40.2
$
44.2
$
93.6
$
136.9
Diluted earnings (loss) per common
share (GAAP)
$
(2.95
)
$
0.69
$
(12.31
)
$
3.03
Restructuring and other (income) charges,
net
2.39
0.67
4.48
1.34
Goodwill impairment charge
—
—
9.62
—
Acquisition and other-related costs
—
—
—
0.13
Loss on CTO resales
0.02
—
1.40
—
CTO supply contract termination
charges
2.75
—
2.75
—
(Gain) loss on strategic investments
0.18
—
0.31
(0.52
)
Tax effect on items above
(1.19
)
(0.16
)
(4.36
)
(0.23
)
Certain discrete tax provision
(benefit)
(0.10
)
0.01
0.67
(0.03
)
Diluted adjusted earnings (loss) per
share (Non-GAAP)
$
1.10
$
1.21
$
2.56
$
3.72
Weighted average common shares outstanding
- Diluted (9)
36.5
36.4
36.5
36.8
_______________
(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 September
30,
Nine Months Ended September
30,
In millions
2024
2023
2024
2023
Work force reductions and other
$
—
$
1.5
$
—
$
11.6
Performance Chemicals' repositioning
85.6
—
157.9
—
Restructuring charges (1)
$
85.6
$
1.5
$
157.9
$
11.6
Alternative feedstock transition
—
11.8
—
18.4
North Charleston plant transition
1.3
9.8
4.9
12.7
Business transformation costs
—
1.5
—
6.7
Other (income) charges, net (1)
$
1.3
$
23.1
$
4.9
$
37.8
Restructuring and other (income) charges,
net (2)
$
86.9
$
24.6
$
162.8
$
49.4
_______________
(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,
Alternative feedstock transition, 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.
(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 September
30,
Nine Months Ended September
30,
In millions
2024
2023
2024
2023
Legal and professional service fees
$
(0.1
)
$
0.1
$
—
$
3.8
Acquisition-related (income) costs
$
(0.1
)
$
0.1
$
—
$
3.8
Inventory fair value step-up amortization
(1)
—
—
—
0.8
Acquisition and other-related (income)
charges
$
(0.1
)
$
0.1
$
—
$
4.6
_______________
(1)
Included in Cost of sales on the condensed
consolidated statement of operations.
(4)
Due to the DeRidder Plant closure 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)
As consideration for the termination of
the CTO supply contract, we made a cash payment in the amount of
$50.0 million on July 1, 2024 and an additional cash payment in the
amount of $50.0 million on October 8, 2024. Since this contract
termination is directly attributable to the Performance Chemicals’
repositioning, that is, it does not represent normal, recurring
expenses necessary to operate our business, we have excluded the
CTO supply contract termination charges for the purposes of
calculating our non-GAAP financial performance measures. Updates
will be provided in subsequent filings of the Company's Form 10-Q
in 2024.
(6)
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.
(7)
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.
(8)
Represents certain discrete tax items such
as excess tax benefits on stock compensation and impacts of
legislative tax rate changes.
(9)
The average number of shares outstanding
used in the three and nine months ended September 30, 2024 diluted
adjusted earnings (loss) per share computation (Non-GAAP) includes
0.2 million diluted shares. This number of shares differs from the
average number of shares outstanding used in diluted earnings
(loss) per share computations (GAAP) as we had a net loss on a GAAP
basis.
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)
2024
2023
2024
2023
Net income (loss) (GAAP)
$
(107.2
)
$
25.2
$
(446.9
)
$
111.4
Provision (benefit) for income taxes
(30.7
)
6.9
(97.5
)
32.5
Interest expense, net
23.8
23.1
69.3
64.3
Depreciation and amortization
26.2
30.6
83.1
92.1
Restructuring and other (income) charges,
net (1)
86.9
24.6
162.8
49.4
Goodwill impairment charge (1)
—
—
349.1
—
Acquisition and other-related (income)
costs (1)
(0.1
)
0.1
—
4.6
Loss on CTO resales (1)
0.8
—
50.8
—
CTO supply contract termination charges
(1)
100.0
—
100.0
—
(Gain) loss on strategic investments
(1)
6.7
(0.1
)
11.4
(19.3
)
Adjusted EBITDA (Non-GAAP)
$
106.4
$
110.4
$
282.1
$
335.0
Net sales
$
376.9
$
446.0
$
1,107.6
$
1,320.4
Net income (loss) margin
(28.4
)%
5.7
%
(40.3
)%
8.4
%
Adjusted EBITDA margin
28.2
%
24.8
%
25.5
%
25.4
%
_______________
(1)
For more information on these charges,
refer to the Reconciliation of Adjusted Earnings table on page
7.
Calculation of Free Cash Flow
(Non-GAAP)
Three Months Ended September
30,
Nine Months Ended September
30,
In millions (unaudited)
2024
2023
2024
2023
Net cash provided by (used in) operating
activities
$
46.5
$
105.2
$
64.1
$
158.9
Less: Capital expenditures
18.0
33.5
52.7
80.6
Free Cash Flow (Non-GAAP)
$
28.5
$
71.7
$
11.4
$
78.3
Calculation of Net Debt Ratio
(Non-GAAP)
In millions, except ratios
(unaudited)
September 30, 2024
Notes payable and current maturities of
long-term debt
$
100.7
Long-term debt including finance lease
obligations
1,397.6
Debt issuance costs
4.5
Total Debt
1,502.8
Less:
Cash and cash equivalents (1)
135.7
Restricted investment (2)
81.3
Net Debt
$
1,285.8
Net Debt Ratio (Non GAAP)
Adjusted EBITDA
Twelve months ended December 31, 2023
$
377.1
Nine months ended September 30, 2023
(3)
(335.0
)
Nine months ended September 30, 2024
(3)
282.1
Adjusted EBITDA - last twelve months (LTM)
as of September 30, 2024
$
324.2
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 $0.2 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 9 for the reconciliation to the most
comparable GAAP financial measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241029418496/en/
Caroline Monahan 843-740-2068 media@ingevity.com
Investors: John E. Nypaver, Jr. 843-740-2002
investors@ingevity.com
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