Ingevity reports fourth quarter and full year 2023 financial results
- Record year for Performance Materials and Road Technologies segments.
- Q4 net sales decreased due to lower volumes in some segments.
- FY net loss primarily due to restructuring charges in the Performance Chemicals segment.
- Adjusted EBITDA decreased in Q4 and FY, impacted by higher raw material costs and lower volumes.
- 2024 guidance excludes non-core business resales and focuses on growth in Performance Materials and Road Technologies.
- Ingevity operates in three segments: Performance Chemicals, Advanced Polymer Technologies, and Performance Materials.
- The company's common stock is traded on the NYSE under the ticker symbol NGVT.
- Net loss in Q4 and FY.
- Decreased Adjusted EBITDA in Q4 and FY.
- Lower volumes in some segments impacting financial results.
- Restructuring charges affecting net loss.
- Uncertainties around global industrial recovery may impact APT and Industrial Specialties segments.
Insights
The reported net loss of $116.8 million, inclusive of restructuring charges, indicates a significant short-term financial strain for Ingevity Corporation. The restructuring, particularly the shutdown of the DeRidder CTO refinery, suggests a strategic pivot that could lead to long-term cost savings, although it results in a substantial immediate financial impact. The adjusted EBITDA margin decrease to 16.6% from a higher percentage in the previous year reflects margin compression, likely due to increased raw material costs and lower volumes in certain segments.
Looking at the full year, a modest increase in net sales juxtaposed with a net loss paints a picture of a challenging fiscal environment. However, the adjusted earnings provide a different angle, suggesting underlying operational health when excluding one-time restructuring costs. The guidance for 2024, with projected sales between $1.40 billion and $1.55 billion and adjusted EBITDA between $365 million and $390 million, seems conservative, potentially reflecting market uncertainties and the ongoing repositioning strategy.
For investors, the share repurchase of $92.1 million signals confidence from management in the intrinsic value of the company, although it is noteworthy that there were no share repurchases in the last quarter. The net debt ratio of 3.3 times, while higher than some industry benchmarks, is not alarming given the context of restructuring.
The Performance Materials segment shows resilience and growth potential, particularly due to increased global auto production and the shift towards hybrid electric vehicles. This segment's robust EBITDA margin of 51.1% in Q4 and record sales indicate a strong competitive position and pricing power. The Advanced Polymer Technologies segment, despite lower sales, achieved a record segment EBITDA, highlighting the effectiveness of cost management and price discipline in challenging market conditions.
On the other hand, the Performance Chemicals segment faced headwinds with increased CTO costs and sluggish demand, particularly in the Industrial Specialties business line. The Road Technologies business line, however, showed growth, suggesting that diversification within the segment could mitigate some of the volatility.
In terms of market positioning, Ingevity's focus on bioplastics and sustainable solutions aligns with growing environmental concerns and consumer trends. The company's strategic moves to reposition towards less cyclical end markets might pay dividends in the future, despite the short-term transitional challenges.
The shutdown of the DeRidder CTO refinery is a significant event for Ingevity, indicating a shift away from reliance on crude tall oil, a byproduct of the kraft process in paper manufacturing. This move likely reflects strategic adjustments to the supply chain and product portfolio in response to the volatile costs associated with CTO. For stakeholders, this suggests a focus on improving the cost structure and potentially stabilizing margins over time.
CTO's volatility in price and availability can significantly affect companies like Ingevity that rely on it as a raw material. The company's exploration of alternative oleo feedstocks is a forward-thinking approach to risk mitigation. By diversifying its raw material base, Ingevity can potentially protect itself from similar cost pressures in the future and maintain a competitive edge in the specialty chemicals market.
The company's emphasis on higher-margin, less cyclical end markets is a prudent strategy, particularly in the context of the global industrial slowdown which has impacted volumes in Advanced Polymer Technologies and the Industrial Specialties business line. This strategic positioning could lead to more stable revenue streams and improved investor confidence in the long-term prospects of the company.
Fourth Quarter (comparisons versus prior year period):
-
Net sales of
$371.7 million 3.1% -
Net loss of
$116.8 million $3.23 $107.5 million $7.8 million $0.21 -
Adjusted EBITDA of
$61.8 million 16.6% -
Accelerated the repositioning of the Performance Chemicals segment including the shutdown of the
DeRidder, Louisiana , crude tall oil (CTO) refinery completed in early February of 2024 with the remaining assets to be shut down during the first half of the year - Implemented significant cost savings actions
Full Year (comparisons versus prior year period):
-
Net sales of
$1.69 billion 1.4% -
Net loss of
$5.4 million $0.15 $145.3 million $144.7 million $3.94 -
Adjusted EBITDA of
$396.8 million 23.5% -
Share repurchases of
$92.1 million -
Operating cash flow of
$205.1 million $95.3 million
Guidance:
Company announces full year 2024 guidance for sales between
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.
Fourth quarter (Q4) net sales of
Full year (FY) net sales of
“2023 was a record year for Performance Materials driven by increased global auto production and the growing popularity of hybrid electric vehicles, and the Road Technologies business line posted another strong year as the team’s strategic focus on expanding technology adoption keeps driving steady growth,” said John Fortson, President and CEO. “The global industrial slowdown negatively impacted volumes in Advanced Polymer Technologies and the Industrial Specialties business line, which also faced unprecedented increases in CTO costs. I remain confident that as we execute the growth strategy we shared last year, the strength we delivered in Performance Materials and Road Technologies will continue and our APT segment and Industrial Specialties business line are positioned for more profitable growth in less cyclical end markets.”
Performance Materials
Sales in Performance Materials were up
“Performance Materials was firing on all cylinders delivering record sales and segment EBITDA for the year, reflecting the staying power of this segment and the rebound of global auto production from 2020 lows. We are encouraged to see consumer preferences trending towards hybrid vehicles and the stability of internal combustion engine demand. Our technology helps enable the transition to electric vehicles while protecting the environment, and based on recent comments from OEMs, the transition may take longer than previously thought, which will benefit Ingevity. We continue to focus on developing solutions where our activated carbon will support battery electric vehicles as well,” said Fortson.
Advanced Polymer Technologies
Sales in the Advanced Polymer Technologies segment were
“The Advanced Polymer Technologies team achieved record segment EBITDA for the year and significantly improved the segment’s profitability even as they faced lower demand in end markets such as footwear and industrial equipment. As we move into 2024, they will remain focused on increasing the use of our technology in areas like bioplastics, which continue to see growing adoption in end markets like apparel, agricultural chemicals, and consumer packaging, while maintaining the improved margin profile achieved last year,” said Fortson.
Performance Chemicals
Sales in the Performance Chemicals segment were
“2023 was the tale of two business lines for Performance Chemicals,” said Fortson. “Our Road Technologies business line had a record year as they integrated road markings into their portfolio and grew our legacy pavement business. In our Industrial Specialties business line, the team faced prolonged demand weakness and saw unprecedented increases in CTO costs but they pushed price to help offset these increases. We continue to make progress in using alternative oleo feedstocks to reduce our reliance on CTO and offer a more diverse product portfolio for use in higher margin, less cyclical end markets.”
Liquidity/Other
Full year operating cash flow was
Full Year 2024 Guidance
Ingevity announced its 2024 guidance of sales between
“Our Performance Materials segment and Road Technologies business line have good momentum from last year and are positioned for strong growth going into 2024, and we have taken significant steps to accelerate the repositioning of our Performance Chemicals segment and reduce costs,” said Fortson. “Uncertainties do remain, particularly around the global industrial recovery which would primarily impact APT and Industrial Specialties, but we are committed to maximizing Ingevity’s profitability. While 2024 will be a transitional year for Performance Chemicals as we complete the execution of our repositioning strategy, we will continue to focus on higher-growth end markets like bioplastics in APT and expect another year of strong results in Performance Materials,” said John 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 road technologies; Advanced Polymer Technologies, which includes caprolactone polymers; 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, oil exploration and production and automotive components. Headquartered in
Additional Information
The company will host a live webcast on Thursday, February 22, at 9:00 a.m. (Eastern) to discuss fourth-quarter and full year 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
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 presentation. 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
INGEVITY CORPORATION Condensed Consolidated Statements of Operations (Unaudited) |
|||||||||||||||
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
||||||||||||
In millions, except per share data |
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Net sales |
$ |
371.7 |
|
|
$ |
383.6 |
|
|
$ |
1,692.1 |
|
|
$ |
1,668.3 |
|
Cost of sales |
|
312.2 |
|
|
|
278.2 |
|
|
|
1,220.2 |
|
|
|
1,098.2 |
|
Gross profit |
|
59.5 |
|
|
|
105.4 |
|
|
|
471.9 |
|
|
|
570.1 |
|
Selling, general, and administrative expenses |
|
43.4 |
|
|
|
55.9 |
|
|
|
183.7 |
|
|
|
198.8 |
|
Research and technical expenses |
|
7.2 |
|
|
|
7.2 |
|
|
|
31.8 |
|
|
|
30.3 |
|
Restructuring and other (income) charges, net |
|
120.8 |
|
|
|
3.2 |
|
|
|
170.2 |
|
|
|
13.8 |
|
Acquisition-related costs |
|
(0.2 |
) |
|
|
3.1 |
|
|
|
3.6 |
|
|
|
5.0 |
|
Other (income) expense, net |
|
19.6 |
|
|
|
(0.7 |
) |
|
|
5.7 |
|
|
|
(1.7 |
) |
Interest expense, net |
|
22.7 |
|
|
|
17.0 |
|
|
|
87.0 |
|
|
|
54.3 |
|
Income (loss) before income taxes |
|
(154.0 |
) |
|
|
19.7 |
|
|
|
(10.1 |
) |
|
|
269.6 |
|
Provision (benefit) for income taxes |
|
(37.2 |
) |
|
|
4.1 |
|
|
|
(4.7 |
) |
|
|
58.0 |
|
Net income (loss) |
$ |
(116.8 |
) |
|
$ |
15.6 |
|
|
$ |
(5.4 |
) |
|
$ |
211.6 |
|
|
|
|
|
|
|
|
|
||||||||
Per share data |
|
|
|
|
|
|
|
||||||||
Basic earnings (loss) per share |
$ |
(3.23 |
) |
|
$ |
0.42 |
|
|
$ |
(0.15 |
) |
|
$ |
5.54 |
|
Diluted earnings (loss) per share |
$ |
(3.23 |
) |
|
$ |
0.41 |
|
|
$ |
(0.15 |
) |
|
$ |
5.50 |
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
||||||||
Basic |
|
36.2 |
|
|
|
37.4 |
|
|
|
36.5 |
|
|
|
38.2 |
|
Diluted |
|
36.2 |
|
|
|
37.7 |
|
|
|
36.5 |
|
|
|
38.5 |
|
INGEVITY CORPORATION Segment Operating Results (Unaudited) |
|||||||||||||||
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
||||||||||||
In millions |
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Net sales |
|
|
|
|
|
|
|
||||||||
Performance Materials |
$ |
152.8 |
|
|
$ |
132.8 |
|
|
$ |
586.0 |
|
|
$ |
548.5 |
|
Performance Chemicals |
|
176.5 |
|
|
|
191.2 |
|
|
|
902.1 |
|
|
|
875.1 |
|
Pavement Technologies product line |
|
53.4 |
|
|
|
47.3 |
|
|
|
369.8 |
|
|
|
241.3 |
|
Industrial Specialties product line |
|
123.1 |
|
|
|
143.9 |
|
|
|
532.3 |
|
|
|
633.8 |
|
Advanced Polymer Technologies |
|
42.4 |
|
|
|
59.6 |
|
|
|
204.0 |
|
|
|
244.7 |
|
Total net sales |
$ |
371.7 |
|
|
$ |
383.6 |
|
|
$ |
1,692.1 |
|
|
$ |
1,668.3 |
|
|
|
|
|
|
|
|
|
||||||||
Segment EBITDA (1) |
|
|
|
|
|
|
|
||||||||
Performance Materials |
$ |
78.1 |
|
|
$ |
57.5 |
|
|
$ |
286.6 |
|
|
$ |
252.2 |
|
Performance Chemicals |
|
(24.2 |
) |
|
|
2.2 |
|
|
|
65.7 |
|
|
|
160.4 |
|
Advanced Polymer Technologies |
|
7.9 |
|
|
|
14.6 |
|
|
|
44.5 |
|
|
|
40.0 |
|
Total segment EBITDA (1) |
$ |
61.8 |
|
|
$ |
74.3 |
|
|
$ |
396.8 |
|
|
$ |
452.6 |
|
|
|
|
|
|
|
|
|
||||||||
Interest expense, net |
|
(22.7 |
) |
|
|
(17.0 |
) |
|
|
(87.0 |
) |
|
|
(54.3 |
) |
(Provision) benefit for income taxes |
|
37.2 |
|
|
|
(4.1 |
) |
|
|
4.7 |
|
|
|
(58.0 |
) |
Depreciation and amortization - Performance Materials |
|
(9.6 |
) |
|
|
(9.4 |
) |
|
|
(38.3 |
) |
|
|
(36.1 |
) |
Depreciation and amortization - Performance Chemicals |
|
(13.2 |
) |
|
|
(13.7 |
) |
|
|
(53.2 |
) |
|
|
(43.1 |
) |
Depreciation and amortization - Advanced Polymer Technologies |
|
(7.9 |
) |
|
|
(7.1 |
) |
|
|
(31.3 |
) |
|
|
(29.6 |
) |
Restructuring and other income (charges), net (2)(3) |
|
(140.5 |
) |
|
|
(3.2 |
) |
|
|
(189.9 |
) |
|
|
(13.8 |
) |
Acquisition and other-related costs (2)(4) |
|
0.1 |
|
|
|
(4.0 |
) |
|
|
(4.5 |
) |
|
|
(5.9 |
) |
Loss on CTO resales (2)(5) |
|
(22.0 |
) |
|
|
— |
|
|
|
(22.0 |
) |
|
|
— |
|
Gain on sale of strategic investment (2)(6) |
|
— |
|
|
|
— |
|
|
|
19.3 |
|
|
|
— |
|
Pension and postretirement settlement and curtailment (charges) income, net (2)(7) |
|
— |
|
|
|
(0.2 |
) |
|
|
— |
|
|
|
(0.2 |
) |
Net income (loss) |
$ |
(116.8 |
) |
|
$ |
15.6 |
|
|
$ |
(5.4 |
) |
|
$ |
211.6 |
|
_______________ |
||
(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 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, including inventory lower of cost or market charges ("LCM") associated with restructuring actions, acquisition and other-related income (costs), litigation verdict charges, gain on sale of 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 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
|
|
Twelve Months Ended
|
||||||||
In millions |
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
Performance Materials |
$ |
1.6 |
|
$ |
1.1 |
|
$ |
9.0 |
|
$ |
4.8 |
Performance Chemicals |
|
124.5 |
|
|
1.6 |
|
|
164.2 |
|
|
7.0 |
Advanced Polymer Technologies |
|
14.4 |
|
|
0.5 |
|
|
16.7 |
|
|
2.0 |
Restructuring and other (income) charges, net |
$ |
140.5 |
|
$ |
3.2 |
|
$ |
189.9 |
|
$ |
13.8 |
(4) |
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
|
|
Twelve Months Ended
|
|||||||||
In millions |
2023 |
|
2022 |
|
2023 |
|
2022 |
|||||
Performance Materials |
$ |
— |
|
|
$ |
0.3 |
|
$ |
— |
|
$ |
0.3 |
Performance Chemicals |
|
(0.1 |
) |
|
|
3.7 |
|
|
4.5 |
|
|
5.6 |
Advanced Polymer Technologies |
|
— |
|
|
|
— |
|
|
— |
|
|
— |
Acquisition and other-related (income) costs |
$ |
(0.1 |
) |
|
$ |
4.0 |
|
$ |
4.5 |
|
$ |
5.9 |
(5) |
For three and twelve months ended December 31, 2023, charges relate to the Performance Chemicals reportable segment. |
|
(6) |
For twelve months ended December 31, 2023, gains relate to the Performance Materials reportable segment. |
|
(7) |
For three and twelve months ended December 31, 2022, charges relate to the Performance Materials reportable segment. |
INGEVITY CORPORATION Condensed Consolidated Balance Sheets (Unaudited) |
|||||
|
December 31, |
||||
In millions |
2023 |
|
2022 |
||
Assets |
|
|
|
||
Cash and cash equivalents |
$ |
95.9 |
|
$ |
76.7 |
Accounts receivable, net |
|
182.0 |
|
|
224.8 |
Inventories, net |
|
308.8 |
|
|
335.0 |
Prepaid and other current assets |
|
71.9 |
|
|
46.8 |
Current assets |
|
658.6 |
|
|
683.3 |
Property, plant, and equipment, net |
|
762.2 |
|
|
798.6 |
Goodwill |
|
527.5 |
|
|
518.5 |
Other intangibles, net |
|
336.1 |
|
|
404.8 |
Restricted investment |
|
79.1 |
|
|
78.0 |
Strategic investments |
|
99.2 |
|
|
109.8 |
Other assets |
|
160.6 |
|
|
143.5 |
Total Assets |
$ |
2,623.3 |
|
$ |
2,736.5 |
|
|
|
|
||
Liabilities |
|
|
|
||
Accounts payable |
$ |
158.4 |
|
$ |
174.8 |
Accrued expenses |
|
72.3 |
|
|
54.4 |
Notes payable and current maturities of long-term debt |
|
84.4 |
|
|
0.9 |
Other current liabilities |
|
47.8 |
|
|
73.4 |
Current liabilities |
|
362.9 |
|
|
303.5 |
Long-term debt including finance lease obligations |
|
1,382.8 |
|
|
1,472.5 |
Deferred income taxes |
|
70.9 |
|
|
106.5 |
Other liabilities |
|
175.3 |
|
|
155.7 |
Total Liabilities |
|
1,991.9 |
|
|
2,038.2 |
Equity |
|
631.4 |
|
|
698.3 |
Total Liabilities and Equity |
$ |
2,623.3 |
|
$ |
2,736.5 |
INGEVITY CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) |
|||||||||||||||
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
||||||||||||
In millions |
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
||||||||
Net income (loss) |
$ |
(116.8 |
) |
|
$ |
15.6 |
|
|
$ |
(5.4 |
) |
|
$ |
211.6 |
|
Adjustments to reconcile net income (loss) to cash provided by operating activities: |
|
|
|
|
|
|
|
||||||||
Depreciation and amortization |
|
30.7 |
|
|
|
30.2 |
|
|
|
122.8 |
|
|
|
108.8 |
|
Gain on sale of strategic investment |
|
— |
|
|
|
— |
|
|
|
(19.3 |
) |
|
|
— |
|
Restructuring and other (income) charges, net |
|
120.8 |
|
|
|
3.2 |
|
|
|
170.2 |
|
|
|
13.8 |
|
Other non-cash items |
|
33.5 |
|
|
|
21.8 |
|
|
|
99.5 |
|
|
|
59.5 |
|
Changes in other operating assets and liabilities, net |
|
(23.6 |
) |
|
|
27.7 |
|
|
|
(162.7 |
) |
|
|
(80.3 |
) |
Net cash provided by (used in) operating activities |
$ |
44.6 |
|
|
$ |
98.5 |
|
|
$ |
205.1 |
|
|
$ |
313.4 |
|
Cash provided by (used in) investing activities: |
|
|
|
|
|
|
|
||||||||
Capital expenditures |
$ |
(29.2 |
) |
|
$ |
(49.2 |
) |
|
$ |
(109.8 |
) |
|
$ |
(142.5 |
) |
Payments for acquired businesses, net of cash acquired |
|
— |
|
|
|
(344.5 |
) |
|
|
— |
|
|
|
(344.5 |
) |
Proceeds from sale of strategic investment |
|
— |
|
|
|
— |
|
|
|
31.5 |
|
|
|
— |
|
Net investment hedge settlement |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14.7 |
|
Purchase of strategic investments |
|
— |
|
|
|
(14.6 |
) |
|
|
(2.4 |
) |
|
|
(77.4 |
) |
Other investing activities, net |
|
8.2 |
|
|
|
1.1 |
|
|
|
3.4 |
|
|
|
(2.2 |
) |
Net cash provided by (used in) investing activities |
$ |
(21.0 |
) |
|
$ |
(407.2 |
) |
|
$ |
(77.3 |
) |
|
$ |
(551.9 |
) |
Cash provided by (used in) financing activities: |
|
|
|
|
|
|
|
||||||||
Proceeds from revolving credit facility and other borrowings |
$ |
136.8 |
|
|
$ |
376.7 |
|
|
$ |
376.3 |
|
|
$ |
1,164.7 |
|
Payments on revolving credit facility |
|
(142.8 |
) |
|
|
(57.7 |
) |
|
|
(382.9 |
) |
|
|
(336.7 |
) |
Payments on long-term borrowings |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(628.1 |
) |
Debt issuance costs |
|
(0.4 |
) |
|
|
— |
|
|
|
(0.4 |
) |
|
|
(3.0 |
) |
Debt repayment costs |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3.8 |
) |
Financing lease obligations, net |
|
(0.1 |
) |
|
|
(0.5 |
) |
|
|
(0.7 |
) |
|
|
(0.9 |
) |
Tax payments related to withholdings on vested equity awards |
|
— |
|
|
|
— |
|
|
|
(4.8 |
) |
|
|
(2.2 |
) |
Proceeds and withholdings from share-based compensation plans, net |
|
— |
|
|
|
1.3 |
|
|
|
4.7 |
|
|
|
4.1 |
|
Repurchases of common stock under publicly announced plan |
|
— |
|
|
|
(6.0 |
) |
|
|
(92.1 |
) |
|
|
(145.2 |
) |
Other financing activities, net |
|
— |
|
|
|
(0.8 |
) |
|
|
— |
|
|
|
(0.8 |
) |
Net cash provided by (used in) financing activities |
$ |
(6.5 |
) |
|
$ |
313.0 |
|
|
$ |
(99.9 |
) |
|
$ |
48.1 |
|
Increase (decrease) in cash, cash equivalents, and restricted cash |
|
17.1 |
|
|
|
4.3 |
|
|
|
27.9 |
|
|
|
(190.4 |
) |
Effect of exchange rate changes on cash |
|
2.7 |
|
|
|
2.6 |
|
|
|
(0.3 |
) |
|
|
(6.0 |
) |
Change in cash, cash equivalents, and restricted cash |
|
19.8 |
|
|
|
6.9 |
|
|
|
27.6 |
|
|
|
(196.4 |
) |
Cash, cash equivalents, and restricted cash at beginning of period |
|
92.1 |
|
|
|
77.4 |
|
|
|
84.3 |
|
|
|
280.7 |
|
Cash, cash equivalents, and restricted cash at end of period (1) |
$ |
111.9 |
|
|
$ |
84.3 |
|
|
$ |
111.9 |
|
|
$ |
84.3 |
|
|
|
|
|
|
|
|
|
||||||||
(1) Includes restricted cash of |
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
Supplemental cash flow information: |
|
|
|
|
|
|
|
||||||||
Cash paid for interest, net of capitalized interest |
$ |
24.8 |
|
|
$ |
18.9 |
|
|
$ |
82.7 |
|
|
$ |
54.8 |
|
Cash paid for income taxes, net of refunds |
|
1.8 |
|
|
|
12.2 |
|
|
|
29.7 |
|
|
|
54.8 |
|
Purchases of property, plant and equipment in accounts payable |
|
(3.3 |
) |
|
|
(0.2 |
) |
|
|
2.8 |
|
|
|
4.9 |
|
Leased assets obtained in exchange for new finance lease liabilities |
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
Leased assets obtained in exchange for new operating lease liabilities |
|
3.1 |
|
|
|
14.5 |
|
|
|
29.1 |
|
|
|
23.7 |
|
Ingevity Corporation
Non-GAAP Financial Measures
Ingevity has presented certain financial measures, defined below, which have not been prepared in accordance with
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, including inventory lower of cost or market charges associated with restructuring actions, acquisition and other-related (income) costs, pension and postretirement settlement and curtailment (income) charges, loss on CTO resales, gain on sale of 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, including inventory lower of cost or market charges associated with restructuring actions, 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 on sale of strategic investment 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, including inventory lower of cost or market charges associated with restructuring actions, acquisition and other-related (income) costs, litigation verdict charges, gain on sale of strategic investment, 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 December 31, |
|
Twelve Months Ended December 31, |
||||||||||||
In millions, except per share data (unaudited) |
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Net income (loss) (GAAP) |
$ |
(116.8 |
) |
|
$ |
15.6 |
|
|
$ |
(5.4 |
) |
|
$ |
211.6 |
|
Restructuring and other (income) charges, net (1) |
|
140.5 |
|
|
|
3.2 |
|
|
|
189.9 |
|
|
|
13.8 |
|
Acquisition and other-related costs (2) |
|
(0.1 |
) |
|
|
4.0 |
|
|
|
4.5 |
|
|
|
5.9 |
|
Pension and postretirement settlement and curtailment (income) charges (3) |
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
0.2 |
|
Loss on CTO resales (4) |
|
22.0 |
|
|
|
— |
|
|
|
22.0 |
|
|
|
— |
|
Gain on sale of strategic investment (5) |
|
— |
|
|
|
— |
|
|
|
(19.3 |
) |
|
|
— |
|
Debt refinancing fees (6) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5.1 |
|
Tax effect on items above (7) |
|
(38.3 |
) |
|
|
(1.8 |
) |
|
|
(46.4 |
) |
|
|
(5.9 |
) |
Certain discrete tax provision (benefit) (8) |
|
0.5 |
|
|
|
0.3 |
|
|
|
(0.6 |
) |
|
|
0.7 |
|
Adjusted earnings (loss) (Non-GAAP) |
$ |
7.8 |
|
|
$ |
21.5 |
|
|
$ |
144.7 |
|
|
$ |
231.4 |
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings (loss) per common share (GAAP) |
$ |
(3.23 |
) |
|
$ |
0.41 |
|
|
$ |
(0.15 |
) |
|
$ |
5.50 |
|
Restructuring and other (income) charges |
|
3.86 |
|
|
|
0.08 |
|
|
|
5.17 |
|
|
|
0.36 |
|
Acquisition and other-related costs |
|
— |
|
|
|
0.10 |
|
|
|
0.12 |
|
|
|
0.14 |
|
Pension and postretirement settlement and curtailment (income) charges |
|
— |
|
|
|
0.01 |
|
|
|
— |
|
|
|
0.01 |
|
Loss on CTO resales |
|
0.61 |
|
|
|
— |
|
|
|
0.60 |
|
|
|
— |
|
Gain on sale of strategic investment |
|
— |
|
|
|
— |
|
|
|
(0.52 |
) |
|
|
— |
|
Debt refinancing fees |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.13 |
|
Tax effect on items above |
|
(1.04 |
) |
|
|
(0.04 |
) |
|
|
(1.26 |
) |
|
|
(0.15 |
) |
Certain discrete tax provision (benefit) |
|
0.01 |
|
|
|
0.01 |
|
|
|
(0.02 |
) |
|
|
0.02 |
|
Diluted adjusted earnings (loss) per share (Non-GAAP) |
$ |
0.21 |
|
|
$ |
0.57 |
|
|
$ |
3.94 |
|
|
$ |
6.01 |
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding - Diluted (9) |
|
36.4 |
|
|
|
37.7 |
|
|
|
36.7 |
|
|
|
38.5 |
|
___________ |
||
(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
|
|
Twelve Months Ended
|
||||||||
In millions |
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
Work force reductions and other |
$ |
0.9 |
|
$ |
— |
|
$ |
12.5 |
|
$ |
— |
Performance Chemicals' repositioning |
|
113.1 |
|
|
— |
|
|
113.1 |
|
|
— |
Restructuring charges (1) |
$ |
114.0 |
|
$ |
— |
|
$ |
125.6 |
|
$ |
— |
Alternative feedstock transition |
|
3.7 |
|
|
— |
|
|
22.1 |
|
|
— |
|
|
2.1 |
|
|
— |
|
|
14.8 |
|
|
— |
Business transformation costs |
|
1.0 |
|
|
3.2 |
|
|
7.7 |
|
|
13.8 |
Other (income) charges, net (1) |
$ |
6.8 |
|
$ |
3.2 |
|
$ |
44.6 |
|
$ |
13.8 |
Performance Chemicals' repositioning inventory charges (2) |
|
19.7 |
|
|
— |
|
|
19.7 |
|
|
— |
Restructuring and other (income) charges, net (3) |
$ |
140.5 |
|
$ |
3.2 |
|
$ |
189.9 |
|
$ |
13.8 |
_________________ |
||
(1) |
Amounts are recorded within Restructuring and other (income) charges, net on the condensed consolidated statement of operations. |
|
(2) |
Amounts are recorded within Cost of sales on the condensed consolidated statement of operations. |
|
(3) |
For information on our Workforce reductions and other, Alternative feedstock transition, |
|
Performance Chemicals’ repositioning:
On November 1, 2023, as disclosed in Note 17, Subsequent Events, in the Notes to the Condensed Consolidated Financial Statements included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, we announced a number of strategic actions designed to further reposition our Performance Chemicals reportable segment to improve the profitability and reduce the cyclicality of the Company as a whole. These actions increase our focus on growing our most profitable Performance Chemicals' product lines such as road technologies and accelerate our transition to non-crude tall oil ("CTO") based fatty acids. This initiative will result in the reduction, and in some cases exit, of certain historical end-use markets of our industrial specialties product line such as adhesives, publication inks, and oilfield, representing approximately
During the three and twelve months ended December 31, 2023 the restructuring charges associated with this initiative represent
The Performance Chemicals' repositioning, when combined with earlier targeted workforce reduction initiatives, during 2023 resulted in the reduction of Ingevity's global workforce by almost 20 percent, one-fourth of these reductions being employees directly associated with commercial sales activities of the soon-to-be exited and/or reduced end-use markets of our industrial specialties product line. Specific to Performance Chemicals, the reduction represented approximately 30 percent of the reportable segment's workforce. The collective actions of workforce, operational, and regional business exits, we believe, will hinder our ability to dispose of the associated inventory on hand, as of December 31, 2023. As a result, we have recorded non-cash, lower of cost or market, inventory charges to adjust the carrying value of the impacted inventory to what we will realize upon disposal, less disposal costs. Since these inventory charges are directly attributable to the Performance Chemicals’ repositioning, that is, they do not represent normal, recurring expenses necessary to operate our business, we have combined these charges with the restructuring charges, noted above, for the purposes of calculating our non-GAAP financial performance measures. The future cash flow impact of such actions will, however, not be excluded from our non-GAAP financial liquidity measures. To the extent that we can dispose of the inventory at a higher value than we currently estimate, we will record any such benefit through Costs of sales and exclude it from our non-GAAP financial measures.
(2) |
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
|
|
Twelve Months Ended
|
|||||||||
In millions |
2023 |
|
2022 |
|
2023 |
|
2022 |
|||||
Legal and professional service fees |
$ |
(0.2 |
) |
|
$ |
3.1 |
|
$ |
3.6 |
|
$ |
5.0 |
Acquisition-related (income) costs |
$ |
(0.2 |
) |
|
$ |
3.1 |
|
$ |
3.6 |
|
$ |
5.0 |
Inventory fair value step-up amortization (1) |
|
0.1 |
|
|
|
0.9 |
|
|
0.9 |
|
|
0.9 |
Acquisition and other-related (income) charges |
$ |
(0.1 |
) |
|
$ |
4.0 |
|
$ |
4.5 |
|
$ |
5.9 |
_________________ |
||||||||||||
(1) Included in Cost of sales on the condensed consolidated statement of operations. |
||||||||||||
(3) |
Our pension and postretirement settlement and curtailment charges (income) are related to the acceleration of prior service costs, as a result of a reduction in the number of participants within the Union Hourly defined benefit pension plan. These are excluded from our segment results because we consider these costs to be outside our operational performance. We continue to include the service cost, amortization of prior service cost, interest costs, expected return on plan assets, and amortized actual gains and losses in our segment EBITDA. |
|
(4) |
Due to the DeRidder Plant closure, as noted in footnote 1 above, and the corresponding reduced CTO refining capacity, we may be obligated, under an existing CTO supply contract, to purchase CTO through 2025 at amounts in excess of required CTO volumes. We intend to manage our CTO volumes by reselling excess volumes (herein referred to as "CTO resales") in the open market, which, based on what we believe to be market rates today, may result in a loss of |
|
Our Performance Chemicals reportable segment is in the business of producing, primarily from CTO-based feedstocks, derivative specialty chemicals for sale to third-party customers. As a result of the Performance Chemicals’ repositioning, we are selling excess CTO volumes, which is outside of the ordinary course of business, that is, not a normal ongoing part of our operations and not core to our business. The excess CTO volumes, calculated as the volume directly attributable to reduced CTO refining capacity as defined under the contractual terms of the CTO supply contract, on hand at period end will be valued at the lower of cost or expected selling price, less costs to sell. Volumes on hand at period end and any pending CTO resale receivables will be recorded to Other current assets on the condensed consolidated balance sheet. Any liabilities associated with the purchases of the excess CTO volumes will be recorded to Accrued expenses on the condensed consolidated balance sheet. We will recognize the net gains or losses associated with the CTO resale activities within Other (income) expenses, net on the condensed consolidated statement of operations. Since these CTO resale activities are directly attributable to the Performance Chemicals’ repositioning, that is, they do not represent normal, recurring expenses necessary to operate our business, we have excluded the CTO resale (income) charges for the purposes of calculating our non-GAAP financial performance measures. |
||
(5) |
We exclude gains and losses from sales of 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) |
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 period ended December 31, 2022. We exclude these costs from our segment results, as well as our non-GAAP financial measures, because we do not consider such costs to be directly associated with the operational performance of our segments or the Company as a whole. |
|
(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 |
|
(8) |
Represents certain discrete tax items such as excess tax benefits on stock compensation and impacts of legislative tax rate changes. |
|
(9) |
The weighted average number of shares outstanding used in diluted adjusted earnings per share computation (Non-GAAP) includes 0.2 million diluted shares. This number of shares differs from the weighted average number of shares outstanding used in diluted loss per share computations (GAAP) as we had a net loss for the three and twelve months ended December 31, 2023, respectively. |
Reconciliation of Net Income (Loss) (GAAP) to Adjusted EBITDA (Non-GAAP) |
|||||||||||||||
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
||||||||||||
In millions, except percentages (unaudited) |
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Net income (loss) (GAAP) |
$ |
(116.8 |
) |
|
$ |
15.6 |
|
|
$ |
(5.4 |
) |
|
$ |
211.6 |
|
Interest expense, net |
|
22.7 |
|
|
|
17.0 |
|
|
|
87.0 |
|
|
|
54.3 |
|
Provision (benefit) for income taxes |
|
(37.2 |
) |
|
|
4.1 |
|
|
|
(4.7 |
) |
|
|
58.0 |
|
Depreciation and amortization |
|
30.7 |
|
|
|
30.2 |
|
|
|
122.8 |
|
|
|
108.8 |
|
Restructuring and other (income) charges, net (1) |
|
140.5 |
|
|
|
3.2 |
|
|
|
189.9 |
|
|
|
13.8 |
|
Acquisition and other-related (income) costs (1) |
|
(0.1 |
) |
|
|
4.0 |
|
|
|
4.5 |
|
|
|
5.9 |
|
Loss on CTO resales (1) |
|
22.0 |
|
|
|
— |
|
|
|
22.0 |
|
|
|
— |
|
Gain on sale of strategic investment (1) |
|
— |
|
|
|
— |
|
|
|
(19.3 |
) |
|
|
— |
|
Pension and postretirement settlement and curtailment charges (income) (1) |
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
0.2 |
|
Adjusted EBITDA (Non-GAAP) |
$ |
61.8 |
|
|
$ |
74.3 |
|
|
$ |
396.8 |
|
|
$ |
452.6 |
|
|
|
|
|
|
|
|
|
||||||||
Net sales |
$ |
371.7 |
|
|
$ |
383.6 |
|
|
$ |
1,692.1 |
|
|
$ |
1,668.3 |
|
Net income (loss) margin |
|
(31.4 |
)% |
|
|
4.1 |
% |
|
|
(0.3 |
)% |
|
|
12.7 |
% |
Adjusted EBITDA margin |
|
16.6 |
% |
|
|
19.4 |
% |
|
|
23.5 |
% |
|
|
27.1 |
% |
___________ |
||
(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 December 31, |
|
Twelve Months Ended December 31, |
||||||||
In millions (unaudited) |
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
Net cash provided by (used in) operating activities |
$ |
44.6 |
|
$ |
98.5 |
|
$ |
205.1 |
|
$ |
313.4 |
Less: Capital expenditures |
|
29.2 |
|
|
49.2 |
|
|
109.8 |
|
|
142.5 |
Free Cash Flow (Non-GAAP) |
$ |
15.4 |
|
$ |
49.3 |
|
$ |
95.3 |
|
$ |
170.9 |
Calculation of Net Debt Ratio (Non-GAAP) |
||
In millions, except ratios (unaudited) |
December 31, 2023 |
|
Notes payable and current maturities of long-term debt |
$ |
84.4 |
Long-term debt including finance lease obligations |
|
1,382.8 |
Debt issuance costs |
|
5.3 |
Total Debt |
|
1,472.5 |
Less: |
|
|
Cash and cash equivalents (1) |
|
96.1 |
Restricted investment (2) |
|
79.3 |
Net Debt |
$ |
1,297.1 |
|
|
|
Net Debt Ratio (Non-GAAP) |
|
|
Adjusted EBITDA (Non-GAAP) (3) |
|
|
Adjusted EBITDA - last twelve months (LTM) as of December 31, 2023 |
$ |
396.8 |
Net debt ratio (Non-GAAP) |
3.3x |
|
_______________ |
||
(1) |
Includes |
|
(2) |
Our restricted investment is a trust managed in order to secure repayment of the finance lease obligation associated with Performance Materials' |
|
(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. |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240221097281/en/
Caroline Monahan
843-740-2068
media@ingevity.com
Investors:
John E. Nypaver, Jr.
843-740-2002
investors@ingevity.com
Source: Ingevity Corporation
FAQ
What were Ingevity's Q4 net sales and how did they compare to the prior year?
What was Ingevity's full-year net sales for 2023 and how did they change from the previous year?
What was Ingevity's adjusted EBITDA for Q4 2023 and how did it compare to the prior year?
What is Ingevity's 2024 guidance for sales and adjusted EBITDA?
On which stock exchange does Ingevity's common stock trade and what is its ticker symbol?
