NORTH CHARLESTON, S.C.--(BUSINESS WIRE)--Ingevity Corporation (NYSE: NGVT) today reported its financial results for the third quarter 2023.
Third quarter net sales of $446.0 million declined 7% versus the record prior year quarter, reflecting lower volumes due to weak industrial demand primarily impacting Advanced Polymer Technologies and the Industrial Specialties business line, partially offset by improved North America and Asia sales in Performance Materials and increased pricing in the Pavement Technologies business line.
Net income of $25.2 million and diluted earnings per share (EPS) of $0.69 decreased 67% and 65%, respectively, and were negatively impacted by lower operating earnings, restructuring and other charges recorded during the quarter, and higher interest expense associated with the Ozark acquisition. Adjusted EBITDA of $110.4 million was down versus the prior year quarter, with adjusted EBITDA margin of 24.8%.
“This quarter we saw lower sales versus a record quarter last year as continued weak industrial demand reduced volumes. However, we maintained mid-twenties adjusted EBITDA margins due to the value delivered by our specialty businesses, and the cost reduction actions taken early in the quarter,” said Ingevity president and CEO, John Fortson. “Performance Materials benefited from increased sales in automotive products in both Asia and North America, and our Pavement Technologies business line continued to capture value in their specialty products that allow customers to reduce energy costs and emissions, and make longer lasting roads. Advanced Polymer Technologies saw lower volumes in areas like footwear and apparel but delivered strong margins due to disciplined price and cost management. The Industrial Specialties business line continues to address high Crude Tall Oil (CTO) costs along with weak demand for industrial products, particularly in rosin end markets. Our announcement today accelerates the repositioning of the Performance Chemicals segment as the next step in executing our corporate strategy that focuses on higher margin and higher growth specialty products, diversifies feedstocks, and optimizes our manufacturing network.”
Performance Chemicals
Sales in Performance Chemicals were $256.0 million, down 4% from prior year.
Industrial Specialties posted sales of $126.3 million, down 30%, due to lower volumes attributed primarily to weak demand across end markets, particularly for rosin-based products. Pavement Technologies sales increased to $129.7 million, driven by higher pricing in legacy pavement applications and sales associated with Ozark.
Segment EBITDA was $24.7 million, down 62%, reflecting lower sales volumes in Industrial Specialties and higher CTO costs, resulting in a segment EBITDA margin of 9.6%.
“Pavement Technologies continues to see increased technology adoption of their high-value products, both in the U.S. and abroad, as strong sales in South America contributed to our results. In Industrial Specialties, end market demand for rosin-based products remains weak, and during the quarter we also saw a reduction in oil drilling activity which negatively impacted our oilfield end market,” said Fortson. “These challenging end market dynamics combined with continued elevated CTO costs, resulted in a significant drop in EBITDA and margins, and we expect these dynamics to persist and be more impactful in the fourth quarter as the Pavement Technologies business line enters its customary slow season.”
Advanced Polymer Technologies
Sales in Advanced Polymer Technologies (APT) were down 38% to $42.8 million due to market weakness across the segment’s end markets in all regions. Segment EBITDA remained flat at $11.2 million and segment EBITDA margin improved to 26.2% due to price, cost management and lower input costs.
“APT delivered strong EBITDA margins in the face of lower demand in all of their end markets. We began to see customers become more price sensitive, which caused some volume to be lost to substitute products,” said Fortson. “We believe that the weakness in global demand has begun to abate, but it will likely take some time for a significant recovery in markets such as industrial applications and footwear and apparel. The trend toward higher value markets such as bioplastics is continuing, and we remain focused on helping our customers deliver sustainable products that make things tougher and more durable, as well as biodegradable at end of life.”
Performance Materials
Sales in Performance Materials were $147.2 million in the quarter, up 2% as increased automotive carbon demand, particularly in Asia Pacific and North America, offset volume declines of our lower margin, non-automotive carbon. Segment EBITDA was $74.5 million, up 22% versus the prior year quarter as a result of improved product mix and lower SG&A, with segment EBITDA margins of 50.6%.
“Performance Materials benefited from increased auto production as well as the increased adoption of hybrid vehicles, resulting in a higher mix of sales of automotive carbon during the quarter,” said Fortson. “We have seen the demand for hybrid vehicles improve, and as that trend continues, it will be a tailwind for this segment. The U.S. automotive strike had a limited impact for the quarter.”
Liquidity/Other
Third quarter operating cash flow was $106.9 million with free cash flow of $73.4 million, reflecting higher inventory driven by increased CTO prices and reduced rosin demand. There were no share repurchases for the quarter and $353.4 million remains available under the July 2022 $500 million Board authorization. Net leverage was 3.2 times, reflecting increased borrowing for the Ozark acquisition in Q4 2022.
Full Year 2023 Guidance
“The weak industrial demand environment we have seen throughout the year does not appear to be recovering as we enter the fourth quarter, and therefore we expect continued volume weakness. In addition, as the slowdown persists, there is more pricing pressure, particularly in cyclical markets such as adhesives and oilfield. With our CTO costs rising in the fourth quarter, and our inability to recover costs through pricing actions, we are reducing our full-year adjusted EBITDA guidance to between $375 million and $390 million,” said Fortson.
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 Chemicals, which includes specialty chemicals and Pavement Technologies; Advanced Polymer Technologies, which includes biodegradable plastics and polyurethane materials; and Performance Materials, which includes activated carbon. Our products are used in a variety of demanding applications, including adhesives, agrochemicals, asphalt paving, bioplastics, coatings, elastomers, lubricants, pavement markings, publication inks, oil exploration and production and automotive components. Headquartered in North Charleston, South Carolina, Ingevity operates from 31 countries around the world and employs approximately 1,900 people. The company’s common stock is traded on the New York Stock Exchange (NYSE: NGVT). For more information, visit Ingevity.com. Follow Ingevity on LinkedIn.
Additional Information
The company will host a live webcast on Thursday, November 2, at 10:00 a.m. (Eastern) to discuss third-quarter 2023 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.) or 929 526 1599 (outside the U.S.) and entering access code 140564. 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 Ingevity’s investor site prior to the call. For those unable to join the live event, a recording will be available beginning at approximately 2:00 p.m. (Eastern) on November 2, 2023, through November 1, 2024, at this replay link.
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 the 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; impact of COVID-19; 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 closure of our DeRidder, Louisiana plant; losses due to resale of CTO 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, including the impact of WestRock’s shutdown of its North Charleston paper mill; adverse effects from the COVID-19 pandemic; 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; and 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 |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
|
2022 |
|
||
Net sales |
$ |
446.0 |
|
$ |
482.0 |
|
$ |
1,320.4 |
|
|
$ |
1,284.7 |
|
||
Cost of sales |
|
317.0 |
|
|
305.7 |
|
|
908.0 |
|
|
|
820.0 |
|
||
Gross profit |
|
129.0 |
|
|
176.3 |
|
|
412.4 |
|
|
|
464.7 |
|
||
Selling, general and administrative expenses |
|
40.0 |
|
|
54.2 |
|
|
140.3 |
|
|
|
142.9 |
|
||
Research and technical expenses |
|
7.8 |
|
|
7.6 |
|
|
24.6 |
|
|
|
23.1 |
|
||
Restructuring and other (income) charges, net |
|
24.6 |
|
|
3.3 |
|
|
49.4 |
|
|
|
10.6 |
|
||
Acquisition-related costs |
|
0.1 |
|
|
1.9 |
|
|
3.8 |
|
|
|
1.9 |
|
||
Other (income) expense, net |
|
1.3 |
|
|
2.0 |
|
|
(13.9 |
) |
|
|
(1.0 |
) |
||
Interest expense, net |
|
23.1 |
|
|
11.5 |
|
|
64.3 |
|
|
|
37.3 |
|
||
Income (loss) before income taxes |
|
32.1 |
|
|
95.8 |
|
|
143.9 |
|
|
|
249.9 |
|
||
Provision (benefit) for income taxes |
|
6.9 |
|
|
20.4 |
|
|
32.5 |
|
|
|
53.9 |
|
||
Net income (loss) |
$ |
25.2 |
|
$ |
75.4 |
|
$ |
111.4 |
|
|
$ |
196.0 |
|
||
|
|
|
|
|
|
|
|
||||||||
Per share data |
|
|
|
|
|
|
|
||||||||
Basic earnings (loss) per share |
$ |
0.70 |
|
$ |
1.99 |
|
$ |
3.05 |
|
|
$ |
5.10 |
|
||
Diluted earnings (loss) per share |
|
0.69 |
|
|
1.98 |
|
|
3.03 |
|
|
|
5.06 |
|
||
Weighted average shares outstanding |
|
|
|
|
|
|
|
||||||||
Basic |
|
36.2 |
|
|
37.8 |
|
|
36.6 |
|
|
|
38.5 |
|
||
Diluted |
|
36.4 |
|
|
38.1 |
|
|
36.8 |
|
|
|
38.7 |
|
||
INGEVITY CORPORATION Segment Operating Results (Unaudited) |
|||||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||
In millions |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net sales |
|
|
|
|
|
|
|
||||||||
Performance Materials |
$ |
147.2 |
|
|
$ |
144.9 |
|
|
$ |
433.2 |
|
|
$ |
415.7 |
|
Performance Chemicals |
$ |
256.0 |
|
|
$ |
267.6 |
|
|
$ |
725.6 |
|
|
$ |
683.9 |
|
Pavement Technologies product line |
|
129.7 |
|
|
|
88.3 |
|
|
|
316.4 |
|
|
|
194.0 |
|
Industrial Specialties product line |
|
126.3 |
|
|
|
179.3 |
|
|
|
409.2 |
|
|
|
489.9 |
|
Advanced Polymer Technologies |
$ |
42.8 |
|
|
$ |
69.5 |
|
|
$ |
161.6 |
|
|
$ |
185.1 |
|
Total net sales |
$ |
446.0 |
|
|
$ |
482.0 |
|
|
$ |
1,320.4 |
|
|
$ |
1,284.7 |
|
|
|
|
|
|
|
|
|
||||||||
Segment EBITDA (1) |
|
|
|
|
|
|
|
||||||||
Performance Materials |
$ |
74.5 |
|
|
$ |
61.2 |
|
|
$ |
208.5 |
|
|
$ |
194.7 |
|
Performance Chemicals |
|
24.7 |
|
|
|
65.7 |
|
|
|
89.9 |
|
|
|
158.2 |
|
Advanced Polymer Technologies |
|
11.2 |
|
|
|
11.3 |
|
|
|
36.6 |
|
|
|
25.4 |
|
Total segment EBITDA (1) |
$ |
110.4 |
|
|
$ |
138.2 |
|
|
$ |
335.0 |
|
|
$ |
378.3 |
|
Interest expense, net |
|
(23.1 |
) |
|
|
(11.5 |
) |
|
|
(64.3 |
) |
|
|
(37.3 |
) |
(Provision) benefit for income taxes |
|
(6.9 |
) |
|
|
(20.4 |
) |
|
|
(32.5 |
) |
|
|
(53.9 |
) |
Depreciation and amortization - Performance Materials |
|
(9.5 |
) |
|
|
(8.9 |
) |
|
|
(28.7 |
) |
|
|
(26.7 |
) |
Depreciation and amortization - Performance Chemicals |
|
(17.8 |
) |
|
|
(9.7 |
) |
|
|
(45.6 |
) |
|
|
(29.4 |
) |
Depreciation and amortization - Advanced Polymer Technologies |
|
(7.9 |
) |
|
|
(7.1 |
) |
|
|
(23.4 |
) |
|
|
(22.5 |
) |
Restructuring and other income (charges), net (2) (5) |
|
(20.0 |
) |
|
|
(3.3 |
) |
|
|
(43.8 |
) |
|
|
(10.6 |
) |
Acquisition and other-related costs (3) (6) |
|
(0.1 |
) |
|
|
(1.9 |
) |
|
|
(4.6 |
) |
|
|
(1.9 |
) |
Gain on sale of strategic investment (4) |
|
0.1 |
|
|
|
— |
|
|
|
19.3 |
|
|
|
— |
|
Net income (loss) |
$ |
25.2 |
|
|
$ |
75.4 |
|
|
$ |
111.4 |
|
|
$ |
196.0 |
|
_______________
(1) |
Segment EBITDA is the primary measure used by our 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, research and technical expenses, other (income) expense, net, excluding depreciation and amortization). We have excluded the following items from segment EBITDA: interest expense, net, associated with corporate debt facilities, income taxes, depreciation, amortization, restructuring and other (income) charges, net, acquisition and other related costs, litigation verdict charges, (losses) and gains from the sale of strategic investments, pension and postretirement settlement and curtailment (income) charges, net. |
|
(2) |
For the three and nine months ended September 30, 2023, charges of $1.3 million and $7.5 million relate to the Performance Materials segment, charges of $18.3 million and $34.0 million relate to the Performance Chemicals segment, and charges of $0.4 million and $2.3 million relate to the Advanced Polymer Technologies segment, respectively. For the three and nine months ended September 30, 2022, charges of $1.1 million and $3.7 million relate to the Performance Materials segment, charges of $1.7 million and $5.4 million relate to the Performance Chemicals segment, and charges of $0.5 million and $1.5 million relate to the Advanced Polymer Technologies segment, respectively. |
|
(3) |
For the three and nine months ended September 30, 2023 and September 30, 2022, all charges relate to the acquisition and integration of Ozark Materials into the Performance Chemicals segment. |
|
(4) |
For the three and nine months ended September 30, 2023, gain on sale of strategic investment relates to the Performance Materials segment. |
|
(5) |
Excludes $4.6 million and $5.6 million of Depreciation and amortization for the three and nine months ended September 30, 2023, relating to the alternative feedstock transition and North Charleston plant transition within our Performance Chemicals reportable segment, respectively. |
|
(6) |
Includes zero and $0.8 million of Inventory fair value step-up amortization for the three and nine months ended September 30, 2023, respectively, relating to the acquisition and integration of Ozark Materials into the Performance Chemicals segment. Included within "Cost of sales" on the consolidated statement of operations. |
INGEVITY CORPORATION Condensed Consolidated Balance Sheets (Unaudited) |
|||||
In millions |
September 30, 2023 |
|
December 31, 2022 |
||
Assets |
|
|
|
||
Cash and cash equivalents |
$ |
84.5 |
|
$ |
76.7 |
Accounts receivable, net |
|
216.6 |
|
|
224.8 |
Inventories, net |
|
386.7 |
|
|
335.0 |
Prepaid and other current assets |
|
46.7 |
|
|
42.5 |
Current assets |
|
734.5 |
|
|
679.0 |
Property, plant, and equipment, net |
|
800.0 |
|
|
798.6 |
Goodwill |
|
520.1 |
|
|
518.5 |
Other intangibles, net |
|
375.6 |
|
|
404.8 |
Restricted investment |
|
80.2 |
|
|
78.0 |
Strategic investments |
|
99.3 |
|
|
109.8 |
Other assets |
|
157.1 |
|
|
147.8 |
Total Assets |
$ |
2,766.8 |
|
$ |
2,736.5 |
|
|
|
|
||
Liabilities |
|
|
|
||
Accounts payable |
$ |
197.3 |
|
$ |
174.8 |
Accrued expenses |
|
64.5 |
|
|
54.4 |
Other current liabilities |
|
43.3 |
|
|
74.3 |
Current liabilities |
|
305.1 |
|
|
303.5 |
Long-term debt including finance lease obligations |
|
1,469.7 |
|
|
1,472.5 |
Deferred income taxes |
|
105.0 |
|
|
106.5 |
Other liabilities |
|
168.3 |
|
|
155.7 |
Total Liabilities |
|
2,048.1 |
|
|
2,038.2 |
Equity |
|
718.7 |
|
|
698.3 |
Total Liabilities and Equity |
$ |
2,766.8 |
|
$ |
2,736.5 |
INGEVITY CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) |
|||||||||||||||
|
|
|
|||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||
In millions |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
||||||||
Net income (loss) |
$ |
25.2 |
|
|
$ |
75.4 |
|
|
$ |
111.4 |
|
|
$ |
196.0 |
|
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
||||||||
Depreciation and amortization |
|
35.2 |
|
|
|
25.7 |
|
|
|
97.7 |
|
|
|
78.6 |
|
Gain on sale of strategic investment |
|
(0.1 |
) |
|
|
— |
|
|
|
(19.3 |
) |
|
|
— |
|
Other non-cash items |
|
34.2 |
|
|
|
11.9 |
|
|
|
109.8 |
|
|
|
48.3 |
|
Changes in operating assets and liabilities, net of effect of acquisitions: |
|
|
|
|
|
|
|
||||||||
Changes in other operating assets and liabilities, net |
|
12.4 |
|
|
|
(12.9 |
) |
|
|
(139.1 |
) |
|
|
(108.0 |
) |
Net cash provided by (used in) operating activities |
$ |
106.9 |
|
|
$ |
100.1 |
|
|
$ |
160.5 |
|
|
$ |
214.9 |
|
Cash provided by (used in) investing activities: |
|
|
|
|
|
|
|
||||||||
Capital expenditures |
$ |
(33.5 |
) |
|
$ |
(36.1 |
) |
|
$ |
(80.6 |
) |
|
$ |
(93.3 |
) |
Proceeds from sale of strategic investment |
|
0.1 |
|
|
|
— |
|
|
|
31.5 |
|
|
|
— |
|
Purchase of strategic investment |
|
(2.4 |
) |
|
|
(60.8 |
) |
|
|
(2.4 |
) |
|
|
(62.8 |
) |
Net investment hedge settlement |
|
— |
|
|
|
14.7 |
|
|
|
— |
|
|
|
14.7 |
|
Other investing activities, net |
|
1.0 |
|
|
|
(3.9 |
) |
|
|
(4.8 |
) |
|
|
(3.3 |
) |
Net cash provided by (used in) investing activities |
$ |
(34.8 |
) |
|
$ |
(86.1 |
) |
|
$ |
(56.3 |
) |
|
$ |
(144.7 |
) |
Cash provided by (used in) financing activities: |
|
|
|
|
|
|
|
||||||||
Proceeds from revolving credit facility |
$ |
39.3 |
|
|
$ |
— |
|
|
$ |
237.1 |
|
|
$ |
788.0 |
|
Payments on revolving credit facility |
|
(95.3 |
) |
|
|
(23.0 |
) |
|
|
(240.1 |
) |
|
|
(279.0 |
) |
Payments on long-term borrowings |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(628.1 |
) |
Debt issuance costs |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3.0 |
) |
Debt repayment costs |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3.8 |
) |
Financing lease obligations, net |
|
(0.1 |
) |
|
|
— |
|
|
|
(0.6 |
) |
|
|
(0.4 |
) |
Borrowings (repayments) of notes payable and other short-term borrowings, net |
|
2.4 |
|
|
|
— |
|
|
|
2.4 |
|
|
|
— |
|
Tax payments related to withholdings on vested equity awards |
|
(0.3 |
) |
|
|
(0.2 |
) |
|
|
(4.8 |
) |
|
|
(2.2 |
) |
Proceeds and withholdings from share-based compensation plans, net |
|
0.7 |
|
|
|
0.9 |
|
|
|
4.7 |
|
|
|
2.8 |
|
Repurchases of common stock under publicly announced plan |
|
— |
|
|
|
(49.3 |
) |
|
|
(92.1 |
) |
|
|
(139.2 |
) |
Net cash provided by (used in) financing activities |
$ |
(53.3 |
) |
|
$ |
(71.6 |
) |
|
$ |
(93.4 |
) |
|
$ |
(264.9 |
) |
Increase (decrease) in cash, cash equivalents, and restricted cash |
|
18.8 |
|
|
|
(57.6 |
) |
|
|
10.8 |
|
|
|
(194.7 |
) |
Effect of exchange rate changes on cash |
|
(2.3 |
) |
|
|
(1.4 |
) |
|
|
(3.0 |
) |
|
|
(8.6 |
) |
Change in cash, cash equivalents, and restricted cash(1) |
|
16.5 |
|
|
|
(59.0 |
) |
|
|
7.8 |
|
|
|
(203.3 |
) |
Cash, cash equivalents, and restricted cash at beginning of period |
|
68.6 |
|
|
|
131.8 |
|
|
|
77.3 |
|
|
|
276.1 |
|
Cash, cash equivalents, and restricted cash at end of period (1) |
$ |
85.1 |
|
|
$ |
72.8 |
|
|
$ |
85.1 |
|
|
$ |
72.8 |
|
|
|
|
|
|
|
|
|
||||||||
(1) Includes restricted cash of $0.6 million and $0.5 million and cash and cash equivalents of $84.5 million and $72.3 million at September 30, 2023 and 2022, 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 |
$ |
17.9 |
|
|
$ |
7.2 |
|
|
$ |
57.9 |
|
|
$ |
35.9 |
|
Cash paid for income taxes, net of refunds |
|
4.3 |
|
|
|
15.7 |
|
|
|
27.9 |
|
|
|
42.6 |
|
Purchases of property, plant, and equipment in accounts payable |
|
0.8 |
|
|
|
(0.9 |
) |
|
|
6.1 |
|
|
|
5.1 |
|
Leased assets obtained in exchange for new finance lease liabilities |
|
0.2 |
|
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
Leased assets obtained in exchange for new operating lease liabilities |
|
7.2 |
|
|
|
1.5 |
|
|
|
26.0 |
|
|
|
9.2 |
|
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 on the following pages. 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. 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 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, acquisition and other-related costs, debt refinancing fees, litigation verdict charges, (losses) and gains from the sale of strategic investments, 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 plus restructuring and other (income) charges, net per share, acquisition and other-related costs per share, debt refinancing fees per share, litigation verdict charge per share, (losses) and gains from the sale of strategic investments 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 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, acquisition and other-related costs, litigation verdict charge, (losses) and gains from the sale of strategic investments, 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 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 less the sum of cash and cash equivalents, restricted cash associated with our New Market Tax Credit financing arrangement, and restricted investment excluding the allowance for credit losses on held-to-maturity debt securities.
Net Debt Ratio is defined as Net Debt divided by last twelve months Adjusted EBITDA, inclusive of acquisition-related pro forma adjustments.
Ingevity also uses the above financial measures as the primary measures of profitability used by managers 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 2023 Adjusted EBITDA Guidance
A reconciliation of net income to adjusted EBITDA as projected for 2023 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; litigation verdict charges; (losses) and gains from the sale of strategic investments; 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 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) and Diluted Earnings (Loss) Per Share (GAAP) to Adjusted Earnings (Loss) (Non-GAAP) and Diluted Adjusted Earnings (Loss) Per Share (Non-GAAP) |
|||||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||
In millions, except per share data (unaudited) |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income (loss) (GAAP) |
$ |
25.2 |
|
|
$ |
75.4 |
|
|
$ |
111.4 |
|
|
$ |
196.0 |
|
Restructuring and other (income) charges, net |
|
24.6 |
|
|
|
3.3 |
|
|
|
49.4 |
|
|
|
10.6 |
|
Acquisition and other-related costs |
|
0.1 |
|
|
|
1.9 |
|
|
|
4.6 |
|
|
|
1.9 |
|
Debt refinancing fees (1) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5.1 |
|
Gain on sale of strategic investment |
|
(0.1 |
) |
|
|
— |
|
|
|
(19.3 |
) |
|
|
— |
|
Tax effect on items above |
|
(5.8 |
) |
|
|
(1.2 |
) |
|
|
(8.1 |
) |
|
|
(4.1 |
) |
Certain discrete tax provision (benefit) (2) |
|
0.2 |
|
|
|
— |
|
|
|
(1.1 |
) |
|
|
0.4 |
|
Adjusted earnings (loss) (Non-GAAP) |
$ |
44.2 |
|
|
$ |
79.4 |
|
|
$ |
136.9 |
|
|
$ |
209.9 |
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings (loss) per common share (GAAP) |
$ |
0.69 |
|
|
$ |
1.98 |
|
|
$ |
3.03 |
|
|
$ |
5.06 |
|
Restructuring and other (income) charges, net |
|
0.67 |
|
|
|
0.09 |
|
|
|
1.34 |
|
|
|
0.27 |
|
Acquisition and other-related costs |
|
— |
|
|
|
0.05 |
|
|
|
0.13 |
|
|
|
0.05 |
|
Debt refinancing fees |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.13 |
|
Gain on sale of strategic investment |
|
— |
|
|
|
— |
|
|
|
(0.52 |
) |
|
|
— |
|
Tax effect on items above |
|
(0.16 |
) |
|
|
(0.03 |
) |
|
|
(0.23 |
) |
|
|
(0.10 |
) |
Certain discrete tax provision (benefit) |
|
0.01 |
|
|
|
— |
|
|
|
(0.03 |
) |
|
|
0.01 |
|
Diluted adjusted earnings (loss) per share (Non-GAAP) |
$ |
1.21 |
|
|
$ |
2.09 |
|
|
$ |
3.72 |
|
|
$ |
5.42 |
|
Weighted average common shares outstanding - Diluted |
|
36.4 |
|
|
|
38.1 |
|
|
|
36.8 |
|
|
|
38.7 |
|
_______________
(1) |
Represents the acceleration of deferred financing fees, debt extinguishment premium paid and other fees incurred related to our senior note redemption, term loan repayment, revolving credit facility amendment, and termination of certain interest rate swaps during the second quarter of 2022. Management believes excluding these items assists investors, potential investors, securities analysts, and others in understanding the continuing operating results thereby providing useful supplemental information about operational performance. |
|
(2) |
Represents certain discrete tax items such as excess tax benefits on stock compensation and impacts of legislative tax rate changes. 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. |
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) |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income (loss) (GAAP) |
$ |
25.2 |
|
|
$ |
75.4 |
|
|
$ |
111.4 |
|
|
$ |
196.0 |
|
Provision (benefit) for income taxes |
|
6.9 |
|
|
|
20.4 |
|
|
|
32.5 |
|
|
|
53.9 |
|
Interest expense, net |
|
23.1 |
|
|
|
11.5 |
|
|
|
64.3 |
|
|
|
37.3 |
|
Depreciation and amortization |
|
35.2 |
|
|
|
25.7 |
|
|
|
97.7 |
|
|
|
78.6 |
|
Restructuring and other (income) charges, net (1) |
|
20.0 |
|
|
|
3.3 |
|
|
|
43.8 |
|
|
|
10.6 |
|
Acquisition and other-related costs |
|
0.1 |
|
|
|
1.9 |
|
|
|
4.6 |
|
|
|
1.9 |
|
Gain on sale of strategic investment |
|
(0.1 |
) |
|
|
— |
|
|
|
(19.3 |
) |
|
|
— |
|
Adjusted EBITDA (Non-GAAP) |
$ |
110.4 |
|
|
$ |
138.2 |
|
|
$ |
335.0 |
|
|
$ |
378.3 |
|
|
|
|
|
|
|
|
|
||||||||
Net sales |
$ |
446.0 |
|
|
$ |
482.0 |
|
|
$ |
1,320.4 |
|
|
$ |
1,284.7 |
|
Net income (loss) margin |
|
5.7 |
% |
|
|
15.6 |
% |
|
|
8.4 |
% |
|
|
15.3 |
% |
Adjusted EBITDA margin |
|
24.8 |
% |
|
|
28.7 |
% |
|
|
25.4 |
% |
|
|
29.4 |
% |
_______________
(1) |
Excludes $4.6 million and $5.6 million of Depreciation and amortization for the three and nine months ended September 30, 2023, relating to the alternative feedstock transition and North Charleston plant transition within our Performance Chemicals reportable segment. |
Calculation of Free Cash Flow (Non-GAAP) |
|||||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||
In millions (unaudited) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
||||
Cash Flow from Operations |
$ |
106.9 |
|
$ |
100.1 |
|
$ |
160.5 |
|
$ |
214.9 |
||||
Less: Capital Expenditures |
|
33.5 |
|
|
36.1 |
|
|
80.6 |
|
|
93.3 |
||||
Free Cash Flow |
$ |
73.4 |
|
$ |
64.0 |
|
$ |
79.9 |
|
$ |
121.6 |
||||
Calculation of Net Debt Ratio (Non-GAAP) |
|||
In millions, except ratios (unaudited) |
September 30, 2023 |
||
Notes payable and current maturities of long-term debt |
$ |
3.0 |
|
Long-term debt including finance lease obligations |
|
1,469.7 |
|
Debt issuance costs |
|
5.6 |
|
Total Debt |
|
1,478.3 |
|
Less: |
|
||
Cash and cash equivalents (1) |
|
84.7 |
|
Restricted investment (2) |
|
80.5 |
|
Net Debt |
$ |
1,313.1 |
|
|
|
||
Net Debt Ratio (Non GAAP) |
|
||
Adjusted EBITDA (3) |
|
||
Twelve months ended December 31, 2022 |
$ |
452.6 |
|
Nine months ended September 30, 2022 |
|
(378.3 |
) |
Nine months ended September 30, 2023 |
|
335.0 |
|
Adjusted EBITDA - last twelve months (LTM) as of September 30, 2023 |
$ |
409.3 |
|
|
|
||
Net debt ratio (Non GAAP) |
|
3.2x |
|
_______________ |
|
||
(1) Includes $0.2 million of Restricted Cash related to the New Market Tax Credit arrangement. |
|||
(2) Excludes $0.3 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 for the reconciliation to the most comparable GAAP financial measure. |
|||
