Ingevity Corporation Common Stock

Hello, and welcome to the Ingevity second quarter 2020 earnings conference call and webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Jack Maher, Vice President, Public Affairs and Investor Relations. Jack, please go ahead.

Thank you, Kevin. Good morning, everyone. Welcome to Ingevity's second quarter 2020 earnings conference call. Earlier this morning, we posted a presentation onto the investors section of our website. If you haven't already done so, I would encourage you to download this file so you can follow along on the call. You can find it by visiting ir.ingevity.com under Invets and Presentations. For participants who are logged into our webcast, the slides should be visible in the online viewing pane. are also available to download. Our slide number two of that deck, you'll see our disclaimer that today's earnings call may contain forward-looking statements. Relevant factors that could cause actual results to differ materially from these forward-looking statements are contained in our earnings release and in our SEC filings, including our Form 10-K and our most recent Form 10-Q. Ingevity undertakes no obligation to publicly release any revision to the projections and forward-looking statements made during this call or to update them to reflect events or circumstances occurring after the date of this call. Throughout this call, we may refer to non-GAAP financial measures, which are intended to supplement, not substitute for, comparable GAAP measures. Definitions of these non-GAAP financial measures and reconciliations to comparable GAAP financial measures are included in our earnings release and can be found on the investor relations section of our website. Our agenda is on slide number three. With me today are Rick Kelson, Chairman of the Board and Interim President and CEO, John Fortson, Executive Vice President and CFO, Mike Smith, President of Performance Chemicals, and Ed Woodcock, President of Performance Materials. First, Rick will comment on the highlights of the quarter and discuss some of the recent cost reduction actions we've taken in light of the economic impact related to the coronavirus or COVID-19. Then, Mike and Ed will review the performance of our two segments. John will discuss our current financial status and our reaffirmed annual guidance. Rick will offer some closing thoughts and then we'll open up the call for Q&A. With that, I'll turn the call over to Rick Kelsen.

Thanks, Jack, and good morning, everyone. Thank you for joining us this morning. We appreciate your interest in Ingevity. If you turn to slide four, you'll note some highlights for the quarter. Ingevity delivered second quarter financial results in line with the special one-time guidance we provided at the end of the first quarter. And looking forward, as John will discuss later, we're reaffirming our fiscal year 2020 guidance. During the quarter, our team remained focused and implemented a series of cost reduction initiatives to bolster second quarter profitability while at the same time continuing to conduct business despite the constraints of the economic impact of the coronavirus or COVID-19. Overall revenues in the second quarter were $271 million, down 23% when compared to the previous year's quarter. This was slightly better than our second quarter guidance. Similar to most companies, we experienced lower volumes attributable to weakened demand associated with the coronavirus. The downturn in automotive sales and production in North America and Europe during the quarter significantly reduced our revenues for our automotive activated carbon products. This was partially offset by an upturn in demand for similar products in China. Reduced demand in industrial specialties applications such as printing aims and volatility in the oil field drilling and production industry also contributed to the revenue decline. With respect to earnings, adjusted EBITDA were $67 million, down 38% from the previous year's quarter. This was within the range of our guidance. We experienced an increase in production costs due to the reduced throughput Thank you for joining us. I'd like to review some of the steps we've taken. We made some difficult decisions to reduce headcount in the organization. That said, we sought to act quickly and respect people's dignity while at the same time making sure we retain the talent we need for our future. We implemented an early retirement program for which approximately 61 people were eligible. We had 39 acceptances. We also implemented an involuntary reduction in force of approximately 26 people. We suspended 401K and deferred compensation matches and have reduced the accrual for annual incentive compensation. In terms of SG&A, we've seen reduced travel as you might imagine, but we've also reduced spending on other corporate initiatives. As a result of these actions, we will see a benefit this year of $16 million and have taken about 9 million out of the annual run rate. During the quarter, our operations and supply chain teams were able to quickly adapt to changes in demand signals from customers in this dynamic market, which allowed us to meet demand while keeping costs down. If you add this to the benefits of lower plant spending associated with reduced demand, and this includes curtailed production and temporary furloughs at certain facilities, maintenance expenses and energy savings. The cost reductions total $35 million in 2020 and will reduce our ongoing cost structure by $12 million. In summary, we continue to maintain a strong financial position. Most importantly, we are working on controlling what we can control. and continue to focus on the levers we can pull to enhance our performance in an environment of uncertainty. If you turn to slide six, you will see the second quarter results for performance chemicals. At this point, I'll turn the call over to Mike Smith. Mike?