Correction to previously issued financial statements

During 2016, we identified various errors related to our previously issued annual and interim Consolidated Financial Statements. Specifically, in the first quarter of 2016, we determined that $3.3 million of cumulative intercompany profit in inventory had not been eliminated in prior years. During the fourth quarter of 2016, we also identified errors related to the understatement of accruals for services rendered in prior years, as well as errors related to the timing for which revenue has been previously recognized. A cash flow reclassification error decreased 2014 cash flow from operating activities and increased cash flow from investing activities by $6.0 million and was also corrected as part of this revision.

The cumulative impact of the errors identified in 2016 had resulted in the overstatement of pre-tax and net income of $1.6 million and $1.0 million in 2015 and $0.9 million and $0.6 million in 2014, and a cumulative impact to net parent investment of $2.5 million as of January 1, 2014. In addition, such errors resulted in the $9.4 million and $5.5 million overstatement of revenue in 2015 and 2014, respectively. Although Ingevity’s management has determined that the impact of such errors is immaterial to all previously issued financial statements, we revised the previously issued financial statements for the periods ended December 31, 2015 and 2014, as shown in our 2016 Annual Report, and those corrections are also reflected for the three and six months ended June 30, 2016 in the tables below.



	Three Months Ended June 30, 2016						Six Months Ended June 30, 2016
In millions	As reported		Increase/(decrease)		Revised		As reported		Increase/(decrease)		Revised
Statement of Operations
Net sales	$	248.7	(3.3	)	$	245.4	$	452.6	(7.6	)	$	445.0
Cost of sales	172.6		(1.9	)	170.7		316.5		(9.2	)	307.3
Gross profit	76.1		(1.4	)	74.7		136.1		1.6		137.7
Selling, general and administrative costs	24.3		(1.5	)	22.8		47.2		(1.6	)	45.6
Income before income taxes	38.4		0.1		38.5		58.2		3.2		61.4
Provision for income taxes	12.6		—		12.6		22.6		1.2		23.8
Net income (loss)	25.8		0.1		25.9		35.6		2.0		37.6
Less: Net income (loss) attributable to noncontrolling interest	2.1		(0.3	)	1.8		3.7		0.6		4.3
Net income (loss) attributable to Ingevity stockholders	$	23.7	0.4		$	24.1	$	31.9	1.4		$	33.3



In millions	Three Months Ended June 30, 2016						Six Months Ended June 30, 2016
Segment Information	As reported		Increase/(decrease)		Revised		As reported		Increase/(decrease)		Revised
Net sales
Performance Materials	$	74.5	(0.3	)	$	74.2	$	145.3	(1.0	)	$	144.3
Performance Chemicals	174.2		(3.0	)	171.2		307.3		(6.6	)	300.7
Total net sales	$	248.7	(3.3	)	$	245.4	$	452.6	(7.6	)	$	445.0

Segment operating profit
Performance Materials	$	26.3	(0.1	)	$	26.2	$	53.9	3.0		$	56.9
Performance Chemicals	22.8		0.2		23.0		31.4		0.2		31.6
Total segment operating profit	$	49.1	0.1		$	49.2	$	85.3	3.2		$	88.5



In millions	Six Months Ended June 30, 2016
Statement of Cash Flows	As reported			Increase/(decrease)		Revised
Net income (loss)	$	35.6		2.0		$	37.6
Deferred income taxes	(10.6		)	1.1		(9.5		)
Accounts receivable, net	(18.3		)	2.1		(16.2		)
Inventories	(4.0		)	(5.1	)	(9.1		)
Accrued expenses	(1.9		)	(0.5	)	(2.4		)
Income taxes payable	6.5			0.2		6.7
Changes in all other operating assets and liabilities, net	(0.7		)	(0.3	)	(1.0		)
Net cash provided by (used in) operating activities	36.7			(0.5	)	36.2
Transactions with WestRock, net	51.4			0.5		51.9
Net cash provided by (used in) financing activities	$	78.3		0.5		$	78.8