Investor Presentaiton
Non-GAAP Financial Measures
Ingevity has presented certain financial measures, defined below, which have not been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and has
provided a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP. These financial measures are not meant to be considered in isolation
or as a substitute for the most directly comparable financial measure calculated in accordance with GAAP. The company believes these non-GAAP measures provide investors,
potential investors, securities analysts and others with useful information to evaluate the performance of the business, because such measures, when viewed together with our financial
results computed in accordance with GAAP, provide a more complete understanding of the factors and trends affecting our historical financial performance and projected future results.
Ingevity uses the following non-GAAP measures:
Adjusted earnings (loss) is defined as net income (loss) attributable to Ingevity stockholders plus restructuring and other (income) charges, separation costs, and the income
tax expense (benefit) on those items.
Diluted adjusted earnings (loss) per share is defined as diluted earnings (loss) per common share attributable to Ingevity stockholders plus restructuring and other (income)
charges per share, separation costs per share, and the income tax expense (benefit) per share on those items.
Adjusted EBITDA is defined as net income (loss) plus provision for income taxes, interest expense, depreciation and amortization, separation costs and restructuring and
other (income) charges.
Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Net Sales
Segment EBITDA is defined as segment operating profit plus depreciation and amortization.
Segment EBITDA Margin is defined as Segment EBITDA divided by Net Sales.
Free cash flow is defined as the sum of cash provided (required) by the following items: operating activities less capital expenditures.
Net debt to Adjusted EBITDA Margin is defined as the sum of short-term debt, current portion of long-term debt, long-term debt and deferred financing fees less the sum
of cash and cash equivalents and restricted cash, divided by Adjusted EBITDA Margin (Adjusted EBITDA divided by Net sales)
Total Debt to Adjusted EBITDA is defined as total debt divided by net income (loss) plus provision for income taxes, interest expense, depreciation and amortization,
separation costs and restructuring and other (income) charges.
Adjusted Tax Rate is calculated by dividing the provision for income taxes on Adjusted Earnings by the Adjusted Earnings before income taxes and noncontrolling interests.
The Company also uses the above financial measures as the primary measures of profitability used by managers of the business and its segments. In addition, the Company believes
Adjusted EBITDA, Adjusted EBITDA Margin, Segment EBITDA and Segment EBITDA Margin are useful measures because they exclude the effects of financing and investment
activities as well as non-operating activities. These non-GAAP financial measures are not intended to replace the presentation of financial results in accordance with GAAP and
investors should consider the limitations associated with these non-GAAP measures, including the potential lack of comparability of these measures from one company to another.
Reconciliations of these non-GAAP financial measures are set forth within the following pages.
A reconciliation of Net income to Adjusted EBITDA as projected for future periods is not provided because we do not forecast Net income as we cannot, without unreasonable effort,
estimate or predict with certainty various components of Net income. These components, net of tax, include additional separation costs associated with the separation from WestRock;
further restructuring and other income (charges), net; acquisition-related charges in connection with the planned acquisition of Georgia-Pacific's pine chemical business; and revisions
due to future guidance and assessment of U.S. Tax Reform. Additionally, discrete tax items could drive variability in our projected effective tax rate. All of these components could
significantly impact such financial measures. Further, in the future other items with similar characteristics to those currently included in Adjusted EBITDA, that have a similar impact
on comparability of periods, and which are not known at this time, may exist and impact Net income (loss) attributable to Ingevity stockholders and Adjusted EBITDA.
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