8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________________________ 

FORM 8-K/A

(Amendment #1)

_______________________________________________________________________

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 8, 2018

__________________________________________________________________________

INGEVITY CORPORATION

(Exact name of registrant as specified in its charter)

__________________________________________________________________________ 

Delaware	001-37586	47-4027764
(State of other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)
5255 Virginia Avenue
North Charleston, South Carolina 29406
(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: 843-740-2300

Not Applicable


(Former name or former address, if changed since last report)

_____________________________________________________________________________________________________

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
	Emerging growth company  o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

_____________________________________________________________________________________________________

EXPLANATORY NOTE

On March 8, 2018, Ingevity Corporation (the “Company”) completed the previously announced acquisition of substantially all the assets primarily used in the pine chemicals business (the “Pine Chemical Business”) of Georgia-Pacific LLC, including assets and facilities related to tall oil fractionation operations and the production or modification of tall oil fatty acids, tall oil rosins, rosin derivatives and formulated products, for the aggregate purchase price of $315.0 million, which includes an adjustment for working capital of $5.0 million (the "Acquisition").

On March 8, 2018, the Company filed a Current Report on Form 8-K (the "Original Report") with the Securities and Exchange Commission to report the completion of the Acquisition.

This Current Report on Form 8-K/A amends the Original Report to include (i) audited Combined Financial Statements as of and for the year ended December 31, 2016 of the Pine Chemical Business, (ii) unaudited Combined Balance Sheet as of September 30, 2017 and December 31, 2016 and the related unaudited Combined Statements of Operations, Changes in Parent Company Net Investment and Cash Flows for the nine month periods ended September 30, 2017 and 2016 of the Pine Chemical Business and (iii) unaudited Pro Forma Condensed Combined Financial Information as of and for the year ended December 31, 2017 related to the Acquisition, as required by Items 9.01(a) and 9.01(b) of Form 8-K.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements of the Business Acquired

(i) Audited Combined Financial Statements as of and for the year ended December 31, 2016 of the Pine Chemical Business are attached as Exhibit 99.1 to this Current Report on Form 8-K/A.

(ii) Unaudited Combined Balance Sheet as of September 30, 2017 and December 31, 2016 and the related unaudited Combined Statements of Operations, Changes in Parent Company Net Investment and Cash Flows for the nine month periods ended September 30, 2017 and 2016 of the Pine Chemical Business are attached as Exhibit 99.2 to this Current Report on Form 8-K/A.

(b) Pro Forma Financial Information

The following unaudited pro forma condensed combined financial information related to the Acquisition is attached as Exhibit 99.3 to this Current Report on Form 8-K/A.

(i) Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2017.

(ii) Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2017.

(d) Exhibits

Exhibit No.	Description of Exhibit
23.1	Consent of Ernst & Young LLP, Independent Auditor.
99.1	Pine Chemical Business Audited Combined Financial Statements as of and for the year ended December 31, 2016.
99.2	Pine Chemical Business Unaudited Combined Balance Sheet as of September 30, 2017 and December 31, 2016 and the related unaudited Combined Statements of Operations, Changes in Parent Company Net Investment and Cash Flows for the nine month periods ended September 30, 2017 and 2016.
99.3	Unaudited Pro Forma Condensed Combined Financial Information.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

INGEVITY CORPORATION
(Registrant)
By:	/S/ JOHN C. FORTSON
	John C. Fortson
	Executive Vice President, Chief Financial Officer and Treasurer

Date: May 10, 2018

EX-23.1

Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statements (Forms S-8 Nos. 333-211430 and 333-218185) pertaining to the Ingevity Corporation 2016 Omnibus Incentive Plan and 2017 Ingevity Corporation Employee Stock Purchase Plan of our report dated October 13, 2017, with respect to the audited combined financial statements of Pine Chemicals (a business of Georgia-Pacific LLC) as of and for the year ended December 31, 2016, included in this Current Report on Form 8-K/A of Ingevity Corporation dated May 10, 2018.

/s/ Ernst & Young LLP

Atlanta, Georgia

May 10, 2018

EX-99.1

Exhibit 99.1

Pine Chemicals

(A Business of Georgia-Pacific LLC)

Combined Financial Statements

For the Year Ended December 31, 2016

With Report of Independent Auditors

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Pine Chemicals

(A Business of Georgia-Pacific LLC)

INDEX TO 2016 COMBINED FINANCIAL STATEMENTS

Report of Independent Auditors	3
Combined Balance Sheet	4
Combined Statement of Operations	5
Combined Statement of Changes in Parent Company Net Investment	6
Combined Statement of Cash Flows	7
Notes to Combined Financial Statements	8

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Report of Independent Auditors

Board of Directors and Management

Georgia-Pacific LLC

We have audited the accompanying combined financial statements of Pine Chemicals (a business of Georgia-Pacific LLC), which comprise the combined balance sheet as of December 31, 2016, and the related combined statement of operations, changes in parent company net investment and cash flows for the year then ended, and the related notes to the combined financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Pine Chemicals at December 31, 2016, and the combined results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Atlanta, Georgia

October 13, 2017

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PINE CHEMICALS

(A Business of Georgia-Pacific LLC)

Combined Balance Sheet

As of December 31, 2016

(Dollars in thousands)

	Notes	2016
ASSETS
Current assets:
Accounts receivable, net	Note 2	$	10,920
Inventories	Note 3	7,043
Other current assets	Note 4	2,119
Related party receivables	Note 8	674
Total current assets		20,756
Property, plant and equipment, net	Note 5	36,061
Other assets	Note 5	845
Total assets		$	57,662
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	1,988
Other current liabilities		504
Related party payables	Note 8	10
Total current liabilities		2,502
Deferred income taxes	Note 6	12,281
Total liabilities		14,783
Parent company net investment		42,879
Total liabilities and parent company net investment		$	57,662

The accompanying notes are an integral part of the combined financial statements.

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PINE CHEMICALS

(A Business of Georgia-Pacific LLC)

Combined Statement of Operations

For the Year Ended December 31, 2016

(Dollars in thousands)

	Notes	2016
Sales and operating revenues	Note 9	$	103,202
Costs and operating expenses
Cost of sales	Note 7 and 10	83,649
Selling, general and administrative	Note 1 and 8	6,625
Depreciation and amortization	Note 5	7,480
Total costs and operating expenses		97,754
Income from operations		5,448
Other loss, net		1
Income before taxes		5,447
Income tax expense	Note 6	1,775
Net income		$	3,672

The accompanying notes are an integral part of the combined financial statements.

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PINE CHEMICALS

(A Business of Georgia-Pacific LLC)

Combined Statement of Changes in Parent Company Net Investment

For the Year Ended December 31, 2016

(Dollars in thousands)

	Notes	2016
Balance as of December 31, 2015		$	50,441
Net income		3,672
Net transfer to Parent		(11,234)
Balance as of December 31, 2016		$	42,879

The accompanying notes are an integral part of the combined financial statements.

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PINE CHEMICALS

(A Business of Georgia-Pacific LLC)

Combined Statement of Cash Flows

For the Year Ended December 31, 2016

(Dollars in thousands)

	2016
Cash flows from operating activities:
Net income	$	3,672
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,480
Deferred tax (benefit)	(2,309		)
(Gain)/loss on sale of property	1
Net change in operating assets and liabilities
Accounts receivable	217
Inventories	6,397
Accounts payable	(2,020		)
Other working capital	(281		)
Turnaround expenditures	(23		)
Net cash provided by operating activities	13,134
Cash flows from investing activities:
Capital expenditures	(1,900		)
Net cash used in investing activities	(1,900		)
Cash flows from financing activities:
Net transfers to Parent Company	(11,234		)
Net cash used in financing activities	(11,234		)
Net increase (decrease) in cash and cash equivalents	—
Cash and cash equivalents, beginning of year	—
Cash and cash equivalents, end of year	$	—

The accompanying notes are an integral part of the combined financial statements.

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PINE CHEMICALS

(A Business of Georgia-Pacific LLC)

Notes to Combined Financial Statements

NOTE 1. FORMATION AND BASIS OF PRESENTATION

Pine Chemicals (the "Business", "we", "us", or "our") is a wholly-owned business of Georgia-Pacific LLC, a Delaware limited liability company ("Georgia-Pacific" or the"Parent").

Description of the Business

The Business is part of the pine chemicals industry and primarily manufactures fractionated tall oil (crude tall oil ("CTO"), blends, and derivatives), dry oilfields emulsifier, and mining related products. The pine chemicals industry refers to the recovery and fractionation of bio-renewable products and co-products obtained primarily from trees of the genus Pinus, via the kraft pulping process or by the wounding or “chipping” of trees to collect the exudated oleoresin. From the kraft pulping process, CTO is obtained and fractionated into different streams. The fractionated products and co-products can be upgraded into components used in a variety of materials, including adhesives, paints and coating, inks, soaps and detergents, lubricants, fuel additives, tires, paving materials, and chewing gum.

The Pine Chemicals business consists of a CTO fractionation facility in Crossett, Arkansas, and further processes some of these products at separate thermosetting resin facilities in Crossett, Arkansas, Lufkin, Texas, and Beaver Creek, Michigan.

On August 22, 2017, Georgia-Pacific entered into a binding Asset Purchase Agreement with Ingevity Arkansas, LLC, which contemplates the purchase of substantially all of the assets primarily used in Georgia-Pacific's Pine Chemicals business ("Pine Chemicals" or "the Business"), including assets and facilities related to tall oil fractionation operations and the production or modification of tall oil fatty acids, tall oil rosins, rosin derivatives, and formulated products (excluding manufacturing operations or assets located at the thermosetting facilities).

Basis of Presentation and Consolidation

The accompanying combined financial statements of the Business are presented in accordance with United States ("US") generally accepted accounting principles ("GAAP"). The Business is an integrated business of Parent and is not a stand-alone entity. The accompanying combined financial statements have been derived from historical accounting records of Parent. The historical operating results and cash flows of the Business may not be indicative of what they would have been had we been a stand-alone entity, nor are they necessarily indicative of what our operating results and cash flows may be in the future.

8

Parent company net investment in our operations is shown in lieu of stockholder's equity in the combined financial statements. The combined financial statements of the Business include all of the assets, liabilities, revenue, expenses, and cash flows of the Pine Chemicals business, as well as expenses allocated deemed reasonable by management, to present the combined financial position, results of operations, statement of changes in Parent company net investment, and cash flows on a stand-alone basis. The combined financial statements only include assets and liabilities that are specifically identifiable or otherwise attributable to the Pine Chemicals business.

Preparation of the combined financial statements included making certain adjustments necessary to reflect all costs of doing business to present the historical records on a basis as if the Business had been a separate stand-alone entity. As a result, our combined statement of operations includes allocations of certain corporate costs from Georgia-Pacific incurred on our behalf, as well as division costs from the Building Products and Chemicals divisions within Georgia-Pacific. Such costs that are specifically identifiable to us have been fully reflected in our combined statement of operations; the remaining corporate-level and division-level costs are being allocated to the Business using a number of allocation metrics including headcount, estimated percentage of time utilized by the Business, sales volume, and others. Corporate costs include finance and accounting, human resources, information technology, compliance, procurement, general counsel, and other costs. Division-level costs include sales and marketing, general and administrative, operations, research and development, engineering, finance and accounting, and other costs. We believe the methodologies applied for the allocation of these costs are reasonable.

The preparation of the combined financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the combined financial statements and related footnotes. Actual results could differ from those estimates.

Fixed assets which were deemed to be integral to the operation of the Business have been included within "Property, plant and equipment, net" in the accompanying combined balance sheet. Those assets which are shared with Parent and not necessarily integral to the operation of the Business have been excluded from the accompanying combined balance sheet, and a shared use charge has been recorded in "Cost of sales" in the accompanying combined statement of operations to reflect the Business's share of costs associated with using those assets (see Note 8).

Our employees participate in defined contribution plans and defined benefit plans (the "Plans") sponsored by Parent. These Plans have been accounted for by us as multi-employer plans in the accompanying combined financial statements as discussed in Note 8.

All significant intercompany accounts and transactions within the Pine Chemicals business have been eliminated in the accompanying combined financial statements.

Current and deferred income taxes and related tax expense have been determined based on our stand-alone results by applying Accounting Standards Codification ("ASC") 740, Income Taxes, to our operations as if we were a separate taxpayer (i.e., following the separate-return methodology). Additionally, current income taxes payable calculated by the Business in applying the separate return methodology for determining our income tax provision are deemed to have been remitted, in cash, to Parent in the period the related tax expense was recorded.

9

Parent uses a centralized approach to cash management and financing its operations. Accordingly, cash, cash equivalents, debt, and related interest expense resulting from transactions with Parent have not been reflected in the combined financial statements, as such transactions between Parent and the Business are accounted for through the Parent company net investment account (see Note 8 for further discussion).

Transactions between Parent and the Business are deemed to have been settled immediately through the Parent company net investment account. Specifically, all charges and allocations of cost for facilities, functions, and services performed by Parent have been deemed paid by the Business to Parent, in cash, in the period in which the cost was recorded in the combined statement of operations. We reflect all intercompany transactions with Parent as being settled at the time of the transaction in the combined statement of cash flows.

Accounting Policies

Significant accounting policies are discussed throughout the notes to the combined financial statements.

Recent Accounting Pronouncements

Adopted Pronouncements

In December 2016, the FASB issued amendments to make minor corrections and minor improvements to the Accounting Standards Codification that are not expected to have a significant effect on current accounting practice. The amendments cover a wide range of topics in the Codification and include amendments related to differences between original guidance and the Accounting Standards Codification; guidance clarification and reference corrections; simplification and streamlining the Accounting Standards Codification; and minor improvements. These amendments were effective upon issuance. The guidance did not have a significant impact on the combined financial statements.

In August 2014, the FASB issued guidance to incorporate into US GAAP a requirement that management evaluate whether there are conditions and events that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the combined financial statements are available to be issued. Historically, the requirement to perform a going concern evaluation existed only in auditing standards. The new requirements are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. The guidance did not have a significant impact on the combined financial statements.

Pronouncements Not Yet Adopted

In October 2016, the FASB issued guidance that amends current guidance by requiring that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017. Early adoption is permitted. The guidance is not expected to have a material impact on the combined financial statements.

10

In February 2016, the FASB issued guidance requiring lessees to recognize assets and liabilities for most leases and change certain aspects of today's lessor accounting, among other things. The guidance is effective retrospectively for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. The Business is currently evaluating the impact of adopting the new standard.

In July 2015, the FASB issued guidance that requires an entity to measure inventory that is measured using first-in, first-out ("FIFO") or average cost at the lower of cost and net realizable value. Subsequent measurement is unchanged for inventory measured using last-in, first-out ("LIFO") or the retail inventory method. This guidance is effective for annual and interim reporting periods beginning after December 15, 2016.The guidance is not expected to have a material impact on the combined financial statements.

In May 2014, the FASB issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under US GAAP. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration which the company expects to be entitled to in exchange for those goods and services. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date option. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Business is currently evaluating the impact of adopting the new standard.

NOTE 2. ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consisted of the following as of December 31 (in thousands):

	2016
Accounts receivable	$	11,122
Allowance for doubtful accounts	(202)
Total accounts receivable, net	$	10,920

The Business believes that the carrying amounts of accounts receivable approximate fair value due to their short-term maturities.

An allowance for doubtful accounts has been established based on the Business's collection experience and its assessment of the collectability of specific accounts. The Business evaluates the collectability of accounts based on a combination of factors. The allowance is adjusted when the Business becomes aware of changes in a specific customer's ability to meet its financial obligations or as a result of changes in the overall aging of accounts receivable.

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Concentration of Credit Risk

Our top ten external customers accounted for 58% of sales in fiscal 2016, two of which individually accounted for 21% and 4% of sales, respectively. These same customers accounted for 16% and 14% of the Business's accounts receivable balance, respectively. If any one of the Business’s significant customers reduces, delays, or cancels substantial orders for any reason, the Business’s results of operations could be negatively affected, particularly for the period in which the delay or cancellation occurs.

NOTE 3. INVENTORIES

Inventories are valued at the lower of cost or market (“LCM”) and are summarized as follows as of December 31 (in thousands):

	2016
Finished goods	$	5,487
Raw materials	2,151
Supplies	438
LIFO reserve	(1,033)
Total inventories	$	7,043

Inventory Valuation

Inventory values include the costs of materials, labor, and manufacturing overhead. The last-in, first-out ("LIFO") method was used to determine the cost of substantially all inventories as of December 31, 2016. The cost of other inventories are determined using the first-in, first-out method or weighted-average cost.

NOTE 4. STOREROOM SUPPLIES

Storeroom supplies represent equipment spare parts used at the Business’s manufacturing locations. These supplies are valued using weighted-average cost and are expensed when consumed. Storeroom supplies are classified as current assets, as they exist for usage in current operations. Total storeroom supplies included in “Other current assets” in the accompanying combined balance sheet as of December 31, 2016 were $2,043 thousand.

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NOTE 5. PROPERTY, PLANT AND EQUIPMENT

Major classes of property, plant, and equipment consisted of the following as of December 31 (in thousands):

	Estimated Useful Life	2016
	(in years)
Machinery and equipment	3 – 20	$	71,000
Buildings	20 – 45	2,805
Land and improvements	15 – 30	195
Construction in progress		1,500
Property, plant and equipment, at cost		75,500
Accumulated depreciation		(39,439)
Property, plant and equipment, net		$	36,061

Replacements of major units of property are capitalized, and the replaced properties are retired.

Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. For the year ended December 31, 2016 depreciation expense was $4,746 thousand. Upon retirement or disposition of assets, cost and accumulated depreciation are removed from the related accounts and any gain or loss is included in “Other loss, net” in the accompanying combined statement of operations. 

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing net book value to projected future undiscounted cash flows. If undiscounted net cash flows are less than the net book value, the recognized impairment is measured by the excess net book value over fair value. Fair values are based upon appraisals or estimates of discounted future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The Business recorded no impairments of property, plant and equipment during the year.

The Business accounts for planned major maintenance activities (“turnaround”) that restore the service potential of an asset using the deferral method. Under this method, the actual cost of each turnaround is capitalized and amortized to the next turnaround. As of December 31, 2016, a noncurrent asset of $845 thousand, representing the unamortized asset components of turnaround, was recorded in “Other assets” in the accompanying combined balance sheet. For the year ended December 31, 2016, amortization expense related to turnaround was $2,734 thousand and has been recorded in “Depreciation and amortization” in the accompanying combined statement of operations. Replacements of minor components of property and all other repair and maintenance costs are expensed as incurred.

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NOTE 6. INCOME TAXES

Parent’s historic consolidated financial statements included the Business’s operations. For purposes of these carve-out financial statements, the Business’s taxes were computed and reported herein under the separate return method. Use of the separate return method may result in significant differences when the sum of the amounts allocated to carve‑out tax provisions are compared with amounts presented in historic consolidated financial statements. Furthermore, certain tax attributes, e.g., net operating loss carryforwards, reflected in the historic consolidated financial statements may not exist at the carve-out level, and vice versa.

U.S. income from continuing operations before income taxes was $5,447 thousand for the year ended December 31, 2016. The provision for income taxes includes income taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities.

The provision for income taxes consists of the following for the year ended December 31 (in thousands):

	2016
Current income taxes:
U.S. Federal	$	3,365
U.S. State	719
Total current income taxes	4,084
Deferred income taxes:
U.S. federal	$	(2,019	)
U.S. state and local	(218		)
Total deferred income taxes	(2,309		)
Provision for income taxes	$	1,775

A reconciliation of income tax expense using the statutory U.S. income tax rate compared with the actual income tax (benefit) provision for the year ended December 31(in thousands):

	2016
Net Income before income taxes	$	5,447
U.S. statutory income tax rate	35.0		%
Tax expense at U.S. statutory income tax rate	1,906
State and Local income taxes	326
Other	(113		)
Domestic Manufacturing Deduction	(344		)
Income Tax Provision	$	1,775
Effective Tax Rate	32.6		%

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Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates, applicable to future years, to differences between book and tax bases of existing assets and liabilities. With respect to deferred tax assets, the Business maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances are included in the Business's income tax provision in the period of change. In determining whether a valuation is warranted, the Business takes into account such factors as prior earnings history, expected future earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. As of December 31, 2016, the Business had recorded no valuation allowance to reduce the carrying value of our deferred tax assets as we concluded that it was more likely than not that such deferred tax assets would be fully realized.

The tax effects of significant temporary differences, representing deferred tax assets and liabilities, consist of the following as of December 31 (in thousands):

	2016
Deferred tax assets:
Allowance for doubtful accounts	$	75
Total deferred tax assets	$	75
Deferred tax liabilities:
PP&E	(10,879)
Inventory	(1,147)
Turnaround	(330)
Total deferred tax liabilities	(12,356)
Net deferred tax liabilities	$	(12,281)

Parent’s U.S. federal income tax returns for years prior to 2012 have been audited and settled. The Internal Revenue Service (“IRS”) is currently auditing Parent’s federal income tax returns for the years 2013 and 2014. The years 2015 and 2016 have not been audited by the IRS.

The Business’s policy is to recognize an estimate of potential interest and penalties related to liabilities for unrecognized tax benefits in the provision for income taxes. The Business has determined that it has no unrecognized tax benefits.

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NOTE 7. COMMITMENTS AND CONTINGENCIES

Leases

Total rental expense, all of which is included in "Cost of sales" in the accompanying combined statement of operations, was approximately $2,885 thousand for the year ended December 31, 2016, which includes the amount attributable to certain assets leased by the Chemical division (see Note 8).

NOTE 8. RELATED-PARTY TRANSACTIONS    

Historically, the Pine Chemicals business has been managed and operated in the normal course of business with other businesses of Parent. Accordingly, certain shared costs have been allocated to Pine Chemicals and reflected as expenses in the accompanying combined financial statements. Management of Parent and Pine Chemicals consider the allocation methodologies used to be reasonable and appropriate reflections of the historical Parent expense attributable to Pine Chemicals for purposes of the combined financial statements; however, the expenses reflected in the combined financial statements may not be indicative of the actual expenses that would have been incurred during the period presented if Pine Chemicals historically operated as a separate, standalone business. In addition, the expenses reflected in the combined financial statements may not be indicative of related expenses that will be incurred in the future by Pine Chemicals.

(a) Cash Management and Financing

Pine Chemicals participates in Parent's centralized cash management and financing programs. Disbursements are made through centralized accounts payable systems that are operated by Parent. Cash receipts are transferred to centralized accounts, also maintained by Parent. As cash is disbursed and received by Parent, it is accounted for by Pine Chemicals through Parent company net investment account. All obligations are financed by Parent and financing decisions for wholly- and majority-owned operations are determined by central Parent treasury operations. As a result, all principal and interest remains with Parent.

(b) Allocated Cost

The allocated corporate-, segment-, and division-level costs included in "Cost of sales" and "Selling, general, and administrative" in the accompanying combined statement of operations were as follows for the year ended December 31 (in thousands):

	2016
Corporate and building products segment costs	$	3,048
Chemical division costs	6,768
Total Allocated Costs	$	9,816

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Parent shares certain fixed assets with the Business that are operated at the manufacturing locations, as well as other administrative sites. The Business recognized charges for the use of such assets of $313 thousand for the year ended December 31, 2016. These charges are reflected in "Cost of sales" in the accompanying combined statement of operations.

Research and development costs of $1,943 thousand for the year ended December 31, 2016 were included within "Selling, general, and administrative" in the accompanying combined statement of operations. These costs are a component of the "Chemical division costs".

The Business recognized charges for the use of certain assets leased by the Chemical division of $2,820 thousand for the year ended December 31, 2016. These charges are reflected in "Cost of sales" in the accompanying combined statement of operations.

(c) Related-Party Sales and Purchases

Parent

Throughout the periods covered by the accompanying combined financial statements, we purchased a majority of our raw materials (primarily by-products created as part of the manufacturing process) from non-Pine Chemicals Parent facilities. These purchases of by-products were based on transfer prices in existence at the time and may or may not reflect the market value of the products. These purchases totaled $42,363 thousand and are included in "Cost of sales" in the accompanying combined statement of operations.

We also sold finished goods to non-Pine Chemicals Parent facilities, which consisted of fractionated products. Related-party sales to certain Parent facilities totaled $724 thousand and are included in "Sales and operating revenues" in the accompanying combined statement of operations.

Koch

From time to time, the Business purchases raw materials from various subsidiaries of Koch. The Business's purchases from Koch for the year ended December 31, 2016 were $507 thousand and are noted within "Cost of sales" in the accompanying combined statement of operations. The payables due as of December 31, 2016 as a result of these purchases were $10 thousand and are included in "Related party payables" in the accompanying combined balance sheet.

The Business sells products to various subsidiaries of Koch. The Business’s sales to Koch were $2,873 thousand for the year ended December 31, 2016. The receivables due from Koch were $674 thousand and are included in "Related party receivables" as of December 31, 2016.

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(d) Defined Benefit Pension Plans

Parent sponsors two U.S. noncontributory defined benefit pension plans in which employees of the Business participate: one covering salaried employees and the other covering hourly employees. Salaried employees and non-union hourly employees who are eligible for salaried benefits hired after January 1, 2006 do not participate in the salaried pension plan but receive additional benefits through Parent's defined contribution plan (see section "(e) Defined Contribution Plans" below). Salaried employees and non-union hourly employees who are eligible for salaried benefits hired before January 1, 2006 continue to accrue benefits under the salaried pension plan. Benefits under this plan primarily accumulate based upon compensation and age. Benefits under the noncontributory defined benefit pension plan for hourly employees primarily accumulate based upon years of service.

These plans are accounted for as multi-employer benefits plans in the accompanying combined financial statements and, accordingly, the combined balance sheet does not reflect any assets or liabilities related to these plans. Our combined statement of operations includes expense allocations for these benefits. All funding requirements have been made by Parent. As discussed in Note 1, transactions between Parent and the Business are deemed to have been settled immediately through Parent company net investment account.

Pension expense related to these plans for the year ended December 31, 2016 was $188 thousand.

(e) Defined Contribution Plans

Parent sponsors two qualified defined contribution plans to provide eligible employees with additional income upon retirement. Salaried employees and non-union hourly employees who are eligible for salaried benefits hired on or after January 1, 2006 receive an additional contribution to the salaried defined contribution plan instead of participating in the defined benefit pension plan. Parent's contributions to the plans are based on employee contributions and compensation. Contributions for employees of the Business for the year ended December 31, 2016 were $189 thousand. As these costs are directly attributable to Pine Chemicals, they are not included in the allocations table in section "(b) Allocated Costs" of this note.

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NOTE 9. SALES AND OPERATING REVENUES

Revenue Recognition

The Business recognizes revenue when the following criteria are met: persuasive evidence of an agreement exists, delivery has occurred or services have been rendered, the Business’s price to the buyer is fixed and determinable, and collectability is reasonably assured. Delivery is not considered to have occurred until the customer takes title and assumes the risks and rewards of ownership. The timing of revenue recognition is largely dependent on shipping terms. Revenue is recorded at the time of shipment for terms designated free on board (“f.o.b.”) shipping point, where the Business does not bear the risk of loss during shipment. For sales transactions designated f.o.b. destination and other shipments where the Business bears the risk of loss during shipment, revenue is recorded when the product is delivered to the customer’s delivery site. Revenue is recognized net of discounts and allowances, which are comprised of trade allowances, cash discounts and sales returns. Reserves for cash discounts, trade allowances, credit losses and sales returns are estimated using historical experience.

NOTE 10. COST OF SALES

Cost of sales consist primarily of raw materials, freight, manufacturing costs (fixed costs, variable costs, energy and utilities costs), and maintenance expenses. Fixed costs include operating employee wages, supplies, contracted services, and other miscellaneous costs necessary to operate and maintain the manufacturing facilities.

Shipping and Handling Costs

Shipping and handling costs are included within “Cost of sales” in the accompanying combined statement of operations.

NOTE 11. SUBSEQUENT EVENTS

In preparing the combined financial statements, the Business has evaluated the events and transactions that occurred from January 1, 2017 to October 13, 2017 the date these financial statements were issued.

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EX-99.2

Exhibit 99.2

Pine Chemicals

(A Business of Georgia-Pacific LLC)

Unaudited Combined Financial Statements

For the Nine Months Ended September 30, 2017 and 2016

Pine Chemicals

(A Business of Georgia-Pacific LLC)

INDEX TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)

Combined Balance Sheets	3
Combined Statements of Operations	4
Combined Statements of Changes in Parent Company Net Investment	5
Combined Statements of Cash Flows	6
Notes to the Unaudited Combined Financial Statements	7

2

PINE CHEMICALS

(A Business of Georgia-Pacific LLC)

Combined Balance Sheets

As of September 30, 2017 and December 31, 2016

(Dollars in thousands)

	Notes	September 30, 2017		December 31, 2016
ASSETS		(unaudited)
Current assets:
Accounts receivable, net	Note 2	$	14,301	$	10,920
Inventories	Note 3	9,924		7,043
Other current assets	Note 4	2,400		2,119
Related party receivables	Note 8	334		674
Total current assets		26,959		20,756
Property, plant and equipment, net	Note 5	33,547		36,061
Other assets	Note 5	150		845
Total assets		$	60,656	$	57,662
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	2,346	$	1,988
Other current liabilities		626		504
Related party payables	Note 8	4		10
Total current liabilities		2,976		2,502
Deferred income taxes	Note 6	11,545		12,281
Total liabilities		14,521		14,783
Parent company net investment		46,135		42,879
Total liabilities and parent company net investment		$	60,656	$	57,662

The accompanying notes are an integral part of these unaudited combined financial statements.

3

PINE CHEMICALS

(A Business of Georgia-Pacific LLC)

Combined Statements of Operations

Nine Months Ended September 30, 2017 and 2016

(Dollars in thousands)

		Nine Months Ended
	Notes	September 30, 2017		September 30, 2016
		(unaudited)
Sales and operating revenues	Note 9	$	76,256	$	78,841
Costs and operating expenses
Cost of sales	Notes 7 and 10	58,342		63,427
Selling, general and administrative	Notes 1 and 8	5,219		5,026
Depreciation and amortization	Note 5	4,427		5,758
Total costs and operating expenses		67,988		74,211
Income from operations		8,268		4,630
Other loss, net		—		1
Income before taxes		8,268		4,629
Income tax expense	Note 6	2,845		1,523
Net income		$	5,423	$	3,106

The accompanying notes are an integral part of these unaudited combined financial statements.

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PINE CHEMICALS

(A Business of Georgia-Pacific LLC)

Combined Statements of Changes in Parent Company Net Investment

Nine Months Ended September 30, 2017 and 2016

(Dollars in thousands)

		Nine Months Ended
	Notes	September 30, 2017			September 30, 2016
		(unaudited)
Parent company net investment, beginning of period		$	42,879		$	50,441
Net income		5,423			3,106
Net transfer to Parent		(2,167		)	(9,723		)
Parent company net investment, end of period		$	46,135		$	43,824

The accompanying notes are an integral part of these unaudited combined financial statements.

5

PINE CHEMICALS

(A Business of Georgia-Pacific LLC)

Combined Statements of Cash Flows

Nine Months Ended September 30, 2017 and 2016

(Dollars in thousands)

	Nine Months Ended
	September 30, 2017			September 30, 2016
	(unaudited)
Cash flows from operating activities:
Net income	$	5,423		$	3,106
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,427			5,758
Deferred tax (benefit)	(736		)	(1,947		)
(Gain)/loss on sale of property	44			1
Net change in operating assets and liabilities:
Accounts receivable	(3,041		)	585
Inventories	(2,881		)	5,444
Accounts payable	352			(1,804		)
Other working capital	(160		)	(103		)
Turnaround expenditures	—			(23		)
Net cash provided by operating activities	3,428			11,017
Cash flows from investing activities:
Capital expenditures	(1,261		)	(1,294		)
Net cash used in investing activities	(1,261		)	(1,294		)
Cash flows from financing activities:
Net transfers to Parent Company	(2,167		)	(9,723		)
Net cash used in financing activities	(2,167		)	(9,723		)
Net increase (decrease) in cash and cash equivalents	—			—
Cash and cash equivalents, beginning of period	—			—
Cash and cash equivalents, end of period	$	—		$	—

The accompanying notes are an integral part of these unaudited combined financial statements.

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PINE CHEMICALS

(A Business of Georgia-Pacific LLC)

Notes to the Unaudited Combined Financial Statements

NOTE 1. FORMATION AND BASIS OF PRESENTATION

Pine Chemicals (the "Business", "we", "us", or "our") is a wholly-owned business of Georgia-Pacific LLC, a Delaware limited liability company ("Georgia-Pacific" or the "Parent").

Description of the Business

The Business is part of the pine chemicals industry and primarily manufactures fractionated tall oil (crude tall oil ("CTO"), blends, and derivatives), dry oilfields emulsifier, and mining related products. The pine chemicals industry refers to the recovery and fractionation of bio-renewable products and co-products obtained primarily from trees of the genus Pinus, via the kraft pulping process or by the wounding or “chipping” of trees to collect the exudated oleoresin. From the kraft pulping process, CTO is obtained and fractionated into different streams. The fractionated products and co-products can be upgraded into components used in a variety of materials, including adhesives, paints and coating, inks, soaps and detergents, lubricants, fuel additives, tires, paving materials, and chewing gum.

The Pine Chemicals business consists of a CTO fractionation facility in Crossett, Arkansas, and further processes some of these products at separate thermosetting resin facilities in Crossett, Arkansas, Lufkin, Texas, and Beaver Creek, Michigan.

On August 22, 2017, Georgia-Pacific entered into a binding Asset Purchase Agreement with Ingevity Arkansas, LLC, which contemplates the purchase of substantially all of the assets primarily used in Georgia-Pacific's Pine Chemicals business ("Pine Chemicals" or "the Business"), including assets and facilities related to tall oil fractionation operations and the production or modification of tall oil fatty acids, tall oil rosins, rosin derivatives, and formulated products (excluding manufacturing operations or assets located at the thermosetting facilities).

Basis of Presentation and Consolidation

The accompanying unaudited combined financial statements of the Business have been prepared in accordance with United States ("US") generally accepted accounting principles ("GAAP") for interim financial reporting. Accordingly, they do not include all information and notes required by GAAP for complete financial statements. However, except as disclosed herein, there have been no material changes in information disclosed in the notes to the annual combined financial statements of the Business for the year ended December 31, 2016. The accompanying unaudited interim financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Business’s financial position, results of operations and cash flows, and should be read in conjunction with the audited financial statements and notes thereto for the period ended December 31, 2016. The

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Business is an integrated business of Parent and is not a stand-alone entity. The accompanying unaudited combined financial statements have been derived from historical accounting records of Parent. The historical operating results and cash flows of the Business may not be indicative of what they would have been had we been a stand-alone entity, nor are they necessarily indicative of what our operating results and cash flows may be in the future.

Parent company net investment in our operations is shown in lieu of stockholders' equity in the unaudited combined financial statements. The unaudited combined financial statements of the Business include all of the assets, liabilities, revenue, expenses, and cash flows of the Pine Chemicals business, as well as expenses allocated deemed reasonable by management, to present the combined financial position, results of operations, statements of changes in Parent company net investment, and cash flows on a stand-alone basis. The unaudited combined financial statements only include assets and liabilities that are specifically identifiable or otherwise attributable to the Pine Chemicals business.

Preparation of the unaudited combined financial statements included making certain adjustments necessary to reflect all costs of doing business to present the historical records on a basis as if the Business had been a separate stand-alone entity. As a result, our combined statements of operations includes allocations of certain corporate costs from

Georgia-Pacific incurred on our behalf, as well as division costs from the Building Products and Chemicals divisions within Georgia-Pacific. Such costs that are specifically identifiable to us have been fully reflected in our combined statements of operations; the remaining corporate-level and division-level costs are being allocated to the Business using a number of allocation metrics including headcount, estimated percentage of time utilized by the Business, sales volume, and others. Corporate costs include finance and accounting, human resources, information technology, compliance, procurement, general counsel, and other costs. Division-level costs include sales and marketing, general and administrative, operations, research and development, engineering, finance and accounting, and other costs. We believe the methodologies applied for the allocation of these costs are reasonable.

The preparation of the unaudited combined financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited combined financial statements and related footnotes. Actual results could differ from those estimates.

Fixed assets which were deemed to be integral to the operation of the Business have been included within "Property, plant and equipment, net" in the accompanying combined balance sheets. Those assets which are shared with Parent and not necessarily integral to the operation of the Business have been excluded from the accompanying combined balance sheets, and a shared use charge has been recorded in "Cost of sales" in the accompanying combined statements of operations to reflect the Business's share of costs associated with using those assets (see Note 8).

Our employees participate in defined contribution plans and defined benefit plans (the "Plans") sponsored by Parent. These Plans have been accounted for by us as multi-employer plans in the accompanying unaudited combined financial statements as discussed in Note 8.

All significant intercompany accounts and transactions within the Pine Chemicals business have been eliminated in the accompanying unaudited combined financial statements.

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Current and deferred income taxes and related tax expense have been determined based on our stand-alone results by applying Accounting Standards Codification ("ASC") 740, Income Taxes, to our operations as if we were a separate taxpayer (i.e., following the separate-return methodology). Additionally, current income taxes payable calculated by the Business in applying the separate return methodology for determining our income tax provision are deemed to have been remitted, in cash, to Parent in the period the related tax expense was recorded.

Parent uses a centralized approach to cash management and financing its operations. Accordingly, cash, cash equivalents, debt, and related interest expense resulting from transactions with Parent have not been reflected in the unaudited combined financial statements, as such transactions between Parent and the Business are accounted for through the Parent company net investment account (see Note 8 for further discussion).

Transactions between Parent and the Business are deemed to have been settled immediately through the Parent company net investment account. Specifically, all charges and allocations of cost for facilities, functions, and services performed by Parent have been deemed paid by the Business to Parent, in cash, in the period in which the cost was recorded in the combined statements of operations. We reflect all intercompany transactions with Parent as being settled at the time of the transaction in the combined statements of cash flows.

Recent Accounting Pronouncements

Adopted Pronouncements

In December 2016, the FASB issued amendments to make minor corrections and minor improvements to the Accounting Standards Codification that are not expected to have a significant effect on current accounting practice. The amendments cover a wide range of topics in the Codification and include amendments related to differences between original guidance and the Accounting Standards Codification; guidance clarification and reference corrections; simplification and streamlining the Accounting Standards Codification; and minor improvements. These amendments were effective upon issuance. The guidance did not have a significant impact on the unaudited combined financial statements.

In July 2015, the FASB issued guidance that requires an entity to measure inventory that is measured using first-in, first-out ("FIFO") or average cost at the lower of cost and net realizable value. Subsequent measurement is unchanged for inventory measured using last-in, first-out ("LIFO") or the retail inventory method. This guidance is effective for annual and interim reporting periods beginning after December 15, 2016.The guidance did not have a material impact on the unaudited combined financial statements.

In August 2014, the FASB issued guidance to incorporate into US GAAP a requirement that management evaluate whether there are conditions and events that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the unaudited combined financial statements are available to be issued. Historically, the requirement to perform a going concern evaluation existed only in auditing standards. The new requirements are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning

9

after December 15, 2016. The guidance did not have a significant impact on the unaudited combined financial statements.

Pronouncements Not Yet Adopted

In October 2016, the FASB issued guidance that amends current guidance by requiring that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017. Early adoption is permitted. The guidance is not expected to have a material impact on the unaudited combined financial statements.

In February 2016, the FASB issued guidance requiring lessees to recognize assets and liabilities for most leases and change certain aspects of today's lessor accounting, among other things. The guidance is effective retrospectively for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. The Business is currently evaluating the impact of adopting the new standard.

In May 2014, the FASB issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under US GAAP. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration which the company expects to be entitled to in exchange for those goods and services. The new revenue standard may be applied retrospectively with the cumulative affect recognized as an adjustment to the opening balance of Net Parent Investment ("modified retrospective" application). The guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Business anticipates adopting this standard effective January 1, 2018. We have begun our initial assessment of the impact that ASU 2014-09 and subsequent amendments will have on our unaudited combined financial statements and related disclosures. Based upon the results of our initial assessment thus far, we have tentatively decided to adopt this new standard under the modified retrospective approach. We are still evaluating the impact to our financial statements and disclosures.

NOTE 2. ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consisted of the following as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30, 2017		December 31, 2016
	(unaudited)
Accounts receivable	$	14,606	$	11,122
Allowance for doubtful accounts	(305)		(202)
Total accounts receivable, net	$	14,301	$	10,920

The Business believes that the carrying amounts of accounts receivable approximate fair value due to their short-term maturities.

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An allowance for doubtful accounts has been established based on the Business's collection experience and its assessment of the collectability of specific accounts. The Business evaluates the collectability of accounts based on a combination of factors. The allowance is adjusted when the Business becomes aware of changes in a specific customer's ability to meet its financial obligations or as a result of changes in the overall aging of accounts receivable.

Concentration of Credit Risk

Our top ten external customers accounted for 57% of sales for the nine months ended September 30, 2017, two of which individually accounted for 13% and 11% of sales, respectively. These same customers accounted for 11% and 19% of the Business's accounts receivable balance as of September 30, 2017, respectively. If any one of the Business’s significant customers reduces, delays, or cancels substantial orders for any reason, the Business’s results of operations could be negatively affected, particularly for the period in which the delay or cancellation occurs.

Our top ten external customers accounted for 57% of sales for the nine months ended September 30, 2016, two of which individually accounted for 21% and 3% of sales, respectively. These same customers accounted for 16% and 14% of the Business's accounts receivable balance as of December 31, 2016, respectively. If any one of the Business’s significant customers reduces, delays, or cancels substantial orders for any reason, the Business’s results of operations could be negatively affected, particularly for the period in which the delay or cancellation occurs.

NOTE 3. INVENTORIES

Inventories are valued at the lower of cost or market (“LCM”) and are summarized as follows as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30, 2017		December 31, 2016
	(unaudited)
Finished goods	$	7,223	$	5,487
Raw materials	1,629		2,151
Supplies	387		438
LIFO reserve	685		(1,033		)
Total inventories	$	9,924	$	7,043

Inventory Valuation

Inventory values include the costs of materials, labor, and manufacturing overhead. The last-in, first-out ("LIFO") method was used to determine the cost of substantially all inventories as of September 30, 2017 and December 31, 2016. The cost of other inventories are determined using the first-in, first-out method or weighted-average cost.

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NOTE 4. STOREROOM SUPPLIES

Storeroom supplies represent equipment spare parts used at the Business’s manufacturing locations. These supplies are valued using weighted-average cost and are expensed when consumed. Storeroom supplies are classified as current assets, as they exist for usage in current operations. Total storeroom supplies included in “Other current assets” in the accompanying combined balance sheets were $2,092 thousand and $2,043 thousand as of September 30, 2017 and December 31, 2016, respectively.

NOTE 5. PROPERTY, PLANT AND EQUIPMENT

Major classes of property, plant, and equipment consisted of the following as of September 30, 2017 and December 31, 2016 (in thousands):

	Estimated Useful Life	September 30, 2017			December 31, 2016
	(in years)	(unaudited)
Machinery and equipment	3 – 20	$	73,128		$	71,000
Buildings	20 – 45	3,021			2,805
Land and improvements	15 – 30	195			195
Construction in progress		208			1,500
Property, plant and equipment, at cost		76,552			75,500
Accumulated depreciation		(43,005		)	(39,439		)
Property, plant and equipment, net		$	33,547		$	36,061

Replacements of major units of property are capitalized, and the replaced properties are retired.

Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Depreciation expense was $3,732 thousand and $3,549 thousand for the nine months ended September 30, 2017 and 2016, respectively. Upon retirement or disposition of assets, cost and accumulated depreciation are removed from the related accounts and any gain or loss is included in “Other loss, net” in the accompanying combined statements of operations. 

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing net book value to projected future undiscounted cash flows. If undiscounted net cash flows are less than the net book value, the recognized impairment is measured by the excess net book value over fair value. Fair values are based upon appraisals or estimates of discounted future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The Business recorded no impairments of property, plant and equipment during the nine months ended September 30, 2017 or 2016.

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The Business accounts for planned major maintenance activities (“turnaround”) that restore the service potential of an asset using the deferral method. Under this method, the actual cost of each turnaround is capitalized and amortized to the next turnaround. As of September 30, 2017 and December 31, 2016, a noncurrent asset representing the unamortized asset components of turnaround was recorded in “Other assets” in the accompanying combined balance sheets of $150 thousand and $845 thousand, respectively. Amortization expense related to turnaround was $695 thousand and $2,209 thousand for the nine months ended September 30, 2017 and 2016, respectively, and has been recorded in “Depreciation and amortization” in the accompanying combined statements of operations. Replacements of minor components of property and all other repair and maintenance costs are expensed as incurred.

NOTE 6. INCOME TAXES

For the nine months ended September 30, 2017, the Company recorded income tax expense of $2,845 thousand on pre-tax book income of $8,268 thousand, resulting in an effective tax rate for the nine months ended September 30, 2017 of approximately 34.4%.

For the nine months ended September 30, 2016, the Company recorded income tax expense of $1,523 thousand on pre-tax income of $4,629 thousand, resulting in an effective tax rate for the nine months ended September 30, 2016 of approximately 32.9%.

The difference between the effective tax rate and the federal statutory rate of 35% for both the nine months ended September 30, 2017 and 2016 primarily relates to state and local income taxes, the tax effect of certain statutory non-deductible items and the domestic manufacturing tax deduction, and the impact of graduated U.S. tax rates.

The Business continually reviews the adequacy of the valuation allowance and recognizes the benefits of deferred tax assets only as the reassessment indicates that it is more likely than not that the deferred tax assets will be recognized in accordance with ASC Topic 740, Income Taxes ("ASC 740"). As of September 30, 2017, the Business has determined that its deferred tax assets are more likely than not to be realized and no valuation allowance has been recorded.

The Business has determined that all positions meet the more likely than not recognition threshold under ASC 740-10 and therefore it has no unrecognized tax benefits. The Business's policy is to recognize an estimate of potential interest and penalties related to liabilities for unrecognized tax benefits in the provisions for domestic and foreign income taxes.

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NOTE 7. COMMITMENTS AND CONTINGENCIES

Leases

Total rental expense, all of which is included in "Cost of sales" in the accompanying combined statements of operations, was approximately $2,754 thousand and $2,075 thousand for the nine months ended September 30, 2017 and 2016, respectively, which includes the amount attributable to certain assets leased by the Chemical division (see Note 8).

NOTE 8. RELATED-PARTY TRANSACTIONS    

Historically, the Pine Chemicals business has been managed and operated in the normal course of business with other businesses of Parent. Accordingly, certain shared costs have been allocated to Pine Chemicals and reflected as expenses in the accompanying unaudited combined financial statements. Management of Parent and Pine Chemicals consider the allocation methodologies used to be reasonable and appropriate reflections of the historical Parent expense attributable to Pine Chemicals for purposes of the unaudited combined financial statements; however, the expenses reflected in the unaudited combined financial statements may not be indicative of the actual expenses that would have been incurred during the period presented if Pine Chemicals historically operated as a separate, standalone business. In addition, the expenses reflected in the unaudited combined financial statements may not be indicative of related expenses that will be incurred in the future by Pine Chemicals.

(a) Cash Management and Financing

Pine Chemicals participates in Parent's centralized cash management and financing programs. Disbursements are made through centralized accounts payable systems that are operated by Parent. Cash receipts are transferred to centralized accounts, also maintained by Parent. As cash is disbursed and received by Parent, it is accounted for by Pine Chemicals through Parent company net investment account. All obligations are financed by Parent and financing decisions for wholly- and majority-owned operations are determined by central Parent treasury operations. As a result, all principal and interest remains with Parent.

(b) Allocated Cost

The allocated corporate-, segment-, and division-level costs included in "Cost of sales" and "Selling, general, and administrative" in the accompanying combined statements of operations were as follows for the nine months ended September 30 (in thousands):

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	Nine Months Ended
	September 30, 2017		September 30, 2016
	(unaudited)
Corporate and building products segment costs	$	1,841	$	2,277
Chemical division costs	5,525		5,471
Total Allocated Costs	$	7,366	$	7,748

Parent shares certain fixed assets with the Business that are operated at the manufacturing locations, as well as other administrative sites. The Business recognized charges for the use of such assets of $219 thousand and $235 thousand for the nine months ended September 30, 2017 and 2016, respectively. These charges are reflected in "Cost of sales" in the accompanying combined statements of operations.

Research and development costs of $1,155 thousand and $1,458 thousand for the nine months ended September 30, 2017 and 2016, respectively, were included within "Selling, general, and administrative" in the accompanying combined statements of operations. These costs are a component of the "Chemical division costs".

The Business recognized charges for the use of certain assets leased by the Chemical division of $2,732 thousand and $2,023 thousand for the nine months ended September 30, 2017 and 2016, respectively. These charges are reflected in "Cost of sales" in the accompanying combined statements of operations.

(c) Related-Party Sales and Purchases

Parent

Throughout the periods covered by the accompanying unaudited combined financial statements, we purchased a majority of our raw materials (primarily by-products created as part of the manufacturing process) from non-Pine Chemicals Parent facilities. These purchases of by-products were based on transfer prices in existence at the time and may or may not reflect the market value of the products. These purchases totaled $29,201 thousand and $32,372 thousand for the nine months ended September 30, 2017 and 2016, respectively, which are included in "Cost of sales" in the accompanying combined statements of operations.

We also sold finished goods to non-Pine Chemicals Parent facilities, which consisted of fractionated products. Related-party sales to certain Parent facilities totaled $587 thousand and $579 thousand for the nine months ended September 30, 2017 and 2016, respectively, which are included in "Sales and operating revenues" in the accompanying combined statements of operations.

Koch

From time to time, the Business purchases raw materials from various subsidiaries of Koch. The Business's purchases from Koch were $286 thousand and $448 thousand for the nine months ended September 30, 2017 and 2016,

15

respectively, which are noted within "Cost of sales" in the accompanying combined statements of operations. The payables due as a result of these purchases were $4 thousand and $10 thousand as of September 30, 2017 and December 31, 2016, respectively, which are included in "Related party payables" in the accompanying combined balance sheets.

The Business sells products to various subsidiaries of Koch. The Business’s sales to Koch were $2,049 thousand and $2,085 thousand for the nine months ended September 30, 2017 and 2016, respectively, which are noted within "Sales and operating revenues" in the accompanying combined statements of operations. The receivables due from Koch as a result of these purchases were $334 thousand and $674 thousand as of September 30, 2017 and December 31, 2016, respectively, which are included in "Related party receivables" in the accompanying combined balance sheets.

(d) Defined Benefit Pension Plans

Parent sponsors two U.S. noncontributory defined benefit pension plans in which employees of the Business participate: one covering salaried employees and the other covering hourly employees. Salaried employees and non-union hourly employees who are eligible for salaried benefits hired after January 1, 2006 do not participate in the salaried pension plan but receive additional benefits through Parent's defined contribution plan (see section "(e) Defined Contribution Plans" below). Salaried employees and non-union hourly employees who are eligible for salaried benefits hired before January 1, 2006 continue to accrue benefits under the salaried pension plan. Benefits under this plan primarily accumulate based upon compensation and age. Benefits under the noncontributory defined benefit pension plan for hourly employees primarily accumulate based upon years of service.

These plans are accounted for as multi-employer benefits plans in the accompanying unaudited combined financial statements and, accordingly, the accompanying combined balance sheets do not reflect any assets or liabilities related to these plans. Our combined statements of operations include expense allocations for these benefits. All funding requirements have been made by Parent. As discussed in Note 1, transactions between Parent and the Business are deemed to have been settled immediately through Parent company net investment account.

Pension expense related to these plans was $284 thousand and $158 thousand for the nine months ended September 30, 2017 and 2016, respectively.

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(e) Defined Contribution Plans

Parent sponsors two qualified defined contribution plans to provide eligible employees with additional income upon retirement. Salaried employees and non-union hourly employees who are eligible for salaried benefits hired on or after January 1, 2006 receive an additional contribution to the salaried defined contribution plan instead of participating in the defined benefit pension plan. Parent's contributions to the plans are based on employee contributions and compensation. Contributions for employees of the Business were $102 thousand and $147 thousand for the nine months ended September 30, 2017 and 2016, respectively.

NOTE 9. SALES AND OPERATING REVENUES

Revenue Recognition

The Business recognizes revenue when the following criteria are met: persuasive evidence of an agreement exists, delivery has occurred or services have been rendered, the Business’s price to the buyer is fixed and determinable, and collectability is reasonably assured. Delivery is not considered to have occurred until the customer takes title and assumes the risks and rewards of ownership. The timing of revenue recognition is largely dependent on shipping terms. Revenue is recorded at the time of shipment for terms designated free on board (“f.o.b.”) shipping point, where the Business does not bear the risk of loss during shipment. For sales transactions designated f.o.b. destination and other shipments where the Business bears the risk of loss during shipment, revenue is recorded when the product is delivered to the customer’s delivery site. Revenue is recognized net of discounts and allowances, which are comprised of trade allowances, cash discounts and sales returns. Reserves for cash discounts, trade allowances, credit losses and sales returns are estimated using historical experience.

NOTE 10. COST OF SALES

Cost of sales consists primarily of raw materials, freight, manufacturing costs (fixed costs, variable costs, energy and utilities costs), and maintenance expenses. Fixed costs include operating employee wages, supplies, contracted services, and other miscellaneous costs necessary to operate and maintain the manufacturing facilities.

Shipping and Handling Costs

Shipping and handling costs are included within “Cost of sales” in the accompanying combined statements of operations.

NOTE 11. SUBSEQUENT EVENTS

In preparing the unaudited combined financial statements, the Business has evaluated the events and transactions that occurred from January 1, 2017 to November 14, 2017, the date these financial statements were issued.

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EX-99.3

Exhibit 99.3

INGEVITY CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the acquisition of substantially all the assets primarily used in the pine chemical business of Georgia-Pacific LLC and Georgia-Pacific Chemicals LLC ("Georgia-Pacific”), by Ingevity Corporation and Ingevity Arkansas, LLC (“Ingevity” or the “Company”). On March 8, 2018, pursuant to the terms and conditions set forth in the Asset Purchase Agreement ("Asset Purchase Agreement"), Ingevity acquired Georgia-Pacific's pine chemical business ("Pine Chemical Business"), including assets and facilities related to tall oil fractionation operations and the production or modification of tall oil fatty acids, tall oil rosins, rosin derivatives and formulated products (the "Acquisition"). The purchase price for the Acquisition was $315.0 million, which includes an adjustment for working capital of $5.0 million. Total purchase consideration consisted of cash, which the Company funded primarily through the issuance of $300.0 million aggregate principal amount of 4.50 percent senior unsecured notes and cash on hand. The unaudited pro forma condensed combined financial information gives effect to the Acquisition and the incurrence of additional debt used to fund the Acquisition.

The unaudited pro forma condensed combined balance sheet gives effect to the Acquisition and related borrowing as if it had been consummated on December 31, 2017 and includes pro forma adjustments based on Ingevity management’s preliminary valuations of certain tangible and intangible assets. The unaudited pro forma condensed combined balance sheet combines Ingevity’s audited historical consolidated balance sheet as of December 31, 2017 with Pine Chemical Business unaudited historical combined balance sheet as of September 30, 2017. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2017 gives effect to the Acquisition and related borrowing as if it had been consummated on January 1, 2017 and combines Ingevity’s historical results for the year ended December 31, 2017 with Pine Chemical Business historical results for the twelve months ended September 30, 2017. The Pine Chemical Business historical results do not reflect the impact of U.S. Tax Reform that occurred during December 2017; there were no other significant transactions outside the ordinary course of business for Pine Chemical Business in the three months ended December 31, 2017 or 2016.

The tax rate used for the pro forma financial information is a blended statutory tax rate, which will likely vary from the actual effective tax rate in periods subsequent to completion of the pro forma events. No adjustment has been made to the unaudited pro forma condensed combined financial information as it relates to limitations of the ability to utilize deferred tax assets as a result of the pro forma events.

The unaudited pro forma condensed combined financial information gives effect to the Acquisition under the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standard Codification Topic 805, Business Combinations. The historical financial information has been adjusted in the unaudited pro forma condensed combined financial information to give effect to pro forma adjustments that are (1) directly attributable to the Acquisition, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact. In addition, the historical combined financial statements of the Pine Chemical Business have been adjusted to reflect certain reclassifications to conform to Ingevity's financial statement presentation.

The unaudited pro forma condensed combined financial information has been prepared by management in accordance with the regulations of the United States Securities and Exchange Commission ("SEC") and are not necessarily indicative of the combined

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financial position or results of operations that would have been realized had the Acquisition occurred as of the dates indicated, nor are they meant to be indicative of any anticipated financial position or future results of operations that Ingevity will experience after the Acquisition. In addition, the accompanying unaudited pro forma condensed combined financial information does not include any expected cost savings, operating synergies, or revenue enhancement, which may be realized subsequent to the Acquisition or the impact of any nonrecurring activity and one-time transaction-related costs. The ultimate recognition of such costs and liabilities would affect amounts in the unaudited pro forma condensed combined financial information, and such costs and liabilities could be material.

The estimated fair values used for the purpose of adjusting for the Acquisition within the unaudited pro forma condensed combined financial information are preliminary, as the determination of fair value of the Pine Chemical Business assets and liabilities requires extensive use of estimates and management's judgment. Final valuations will be performed and management anticipates that the values assigned to the assets acquired and liabilities assumed may be adjusted during the one-year measurement period following the date of completion of the Acquisition. Differences between these preliminary estimates and the final acquisition accounting may occur and could have a material impact on the accompanying unaudited pro forma condensed combined financial information. The pro forma adjustments are based on information available to management and assumptions that management believes are factually supportable. The unaudited pro forma condensed combined financial information is for illustrative and informational purposes only and is not intended to reflect what Ingevity’s consolidated financial position would have been had the Acquisition occurred on December 31, 2017 and is not necessarily indicative of Ingevity’s future consolidated financial position.

The unaudited pro forma condensed combined financial information should be read in conjunction with the following:

• The accompanying notes to the unaudited pro forma condensed consolidated financial information;

• Pine Chemical Business Audited Combined Financial Statements as of and for the year ended December 31, 2016 and related notes thereto attached as Exhibit 99.1 to this Current Report on Form 8-K/A;

• Pine Chemical Business Unaudited Combined Balance Sheet as of September 30, 2017 and December 31, 2016 and the related unaudited Combined Statements of Operations, Changes in Parent Company Net Investment and Cash Flows for the nine month periods ended September 30, 2017 and 2016 and related notes thereto attached as Exhibit 99.2 to this Current Report on Form 8-K/A; and

• Ingevity Corporation Consolidated Financial Statements as of and for the year ended December 31, 2017 and related notes thereto contained in its Annual Report on Form 10-K filed with the SEC on February 28, 2018.

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INDEX TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)

Unaudited Pro Forma Condensed Combined Balance Sheet	4
Unaudited Pro Forma Condensed Combined Statement of Operations	5
Notes to the Unaudited Pro Forma Condensed Consolidated Combined Financial Information	6

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INGEVITY CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2017
(in millions)	Historical Ingevity			Pine Chemical Business (Note 1)		Pro Forma Adjustments			Note 2	Ingevity Pro Forma
Assets
Cash and cash equivalents	$	87.9		$	—	$	(24.5	)	A	$	63.4
Accounts receivable, net	100.0			14.6		—				114.6
Inventories, net	160.0			12.0		1.7			B	173.7
Prepaid and other current assets	20.8			0.3		—				21.1
Current assets	368.7			26.9		(22.8		)		372.8
Property, plant and equipment, net	438.5			33.5		6.8			C	478.8
Goodwill	12.4			—		115.8			D	128.2
Other intangibles, net	4.9			—		133.1			E	138.0
Deferred income taxes	3.4			—		—				3.4
Restricted investment	71.3			—		—				71.3
Other assets	30.4			0.2		—			F	30.6
Total Assets	$	929.6		$	60.6	$	232.9			$	1,223.1
Liabilities and Equity
Accounts payable	$	83.1		$	2.4	$	—			$	85.5
Accrued expenses	20.0			0.6		—				20.6
Accrued payroll and employee benefits	39.2			—		—				39.2
Current maturities of long-term debt	9.4			—		—				9.4
Income taxes payable	1.5			—		—				1.5
Current liabilities	153.2			3.0		—				156.2
Long-term debt including capital lease obligations	444.0			—		294.3			G	738.3
Deferred income taxes	41.3			11.5		(11.5		)	H	41.3
Other liabilities	13.2			—		—				13.2
Total Liabilities	651.7			14.5		282.8				949.0
Equity
Preferred stock	—			—		—				—
Common stock	0.4			—		—				0.4
Additional paid-in capital	140.1			—		—				140.1
Retained earnings	142.8			—		(3.8		)	I	139.0
Accumulated other comprehensive loss	(11.7		)	—		—				(11.7		)
Treasury stock, common stock, at cost	(7.7		)	—		—				(7.7		)
Parent company net investment	—			46.1		(46.1		)	J	—
Total Ingevity stockholders' equity	263.9			46.1		(49.9		)		260.1
Noncontrolling interests	14.0			—		—				14.0
Total Equity	277.9			46.1		(49.9		)		274.1
Total Liabilities and Equity	$	929.6		$	60.6	$	232.9			$	1,223.1

The accompanying notes are an integral part of the unaudited pro forma condensed combined financial information.

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INGEVITY CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2017
(in millions, except per share data)	Historical Ingevity			Pine Chemical Business (Note 1)		Pro Forma Adjustments			Note 2	Ingevity Pro Forma
Net sales	$	972.4		$	100.6	$	—			$	1,073.0
Cost of sales	643.4			84.7		(12.7		)	K	715.4
Gross profit	329.0			15.9		12.7				357.6
Selling, general and administrative expenses	106.4			6.8		12.6			L	125.8
Research and technical expenses	19.8			—		—				19.8
Separation expense	0.9			—		—				0.9
Restructuring and other (income) charges, net	3.7			—		—				3.7
Acquisition costs	7.1			—		(7.1		)	M	—
Other (income) expense, net	0.5			—		—				0.5
Interest expense	18.1			—		14.2			G	32.3
Interest income	(2.3		)	—		—				(2.3		)
Income (loss) before income taxes	174.8			9.1		(7.0		)		176.9
Provision (benefit) for income taxes	29.6			3.1		(2.6		)	N	30.1
Net income (loss)	145.2			6.0		(4.4		)		146.8
Less: Net income (loss) attributable to noncontrolling interests	18.7			—		—				18.7
Net income (loss) attributable to Ingevity stockholders	$	126.5		$	6.0	$	(4.4	)		$	128.1
Net income (loss) per share
Basic	$	3.00								$	3.04
Diluted	$	2.97								$	3.01
Weighted average shares outstanding (in thousands)
Basic	42,130									42,130
Diluted	42,529									42,529

The accompanying notes are an integral part of the unaudited pro forma condensed combined financial information.

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Notes to the Unaudited Pro Forma Condensed

Combined Financial Information
(in millions, except share data)

Notes to the Unaudited Combined Financial Statements

1. Pine Chemical Business historical financial statements

The unaudited pro forma condensed combined balance sheet combines Ingevity’s audited historical consolidated balance sheet as of December 31, 2017 with the Pine Chemical Business unaudited historical combined balance sheet as of September 30, 2017. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2017 gives effect to the Acquisition and related borrowing as if it had been consummated on January 1, 2017 and combines Ingevity’s historical results for the year ended December 31, 2017 with the Pine Chemical Business historical results for the twelve months ended September 30, 2017.

The Pine Chemical Business historical balance sheet and statement of operations have been adjusted to align with Ingevity’s presentation, as described below:

• $0.3 million of related party receivables between the Pine Chemical Business and subsidiaries of Koch Industries, Inc., the parent organization for Georgia-Pacific, were reclassified to accounts receivable, net.

• $2.1 million of other current assets related to storeroom supplies were reclassified to inventories, net.

• $6.1 million of depreciation and amortization expenses were reclassified to cost of sales.

2. Pro Forma Adjustments

Acquisition Purchase Consideration and Preliminary Purchase Price Allocation

Ingevity has performed a preliminary valuation analysis of the fair market value of Pine Chemical Business assets to be acquired and liabilities to be assumed. Using the total consideration for the Acquisition, the Company has estimated the allocations to such assets and liabilities. The following table summarizes the allocation of the preliminary purchase price as of the acquisition date:

	Amount
Current assets	$	28.6
Property, plant, and equipment, net	40.3
Other intangibles, net	133.1
Other assets	0.2
Total assets acquired	202.2
Total current liabilities	(3.0)
Total liabilities assumed	(3.0)
Net identifiable assets acquired	199.2
Goodwill	115.8
Total consideration transferred	$	315.0

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Notes to the Unaudited Pro Forma Condensed

Combined Financial Information
(in millions, except share data)

A. Cash and cash equivalents

Cash and cash equivalents are adjusted as follows:

	Amount
Net proceeds from senior notes (1)	$	294.3
Consideration transferred (2)	(315.0		)
Acquisition-related transaction costs (3)	(3.8		)
Total pro forma adjustment to cash and cash equivalents	$	(24.5	)

(1) Reflects the net proceeds from the issuance of the senior notes described in Note 2(G).

(2) Total cash consideration transferred to Georgia-Pacific upon closing.

(3) Reflects acquisition-related transaction costs associated with advisory, legal, accounting and other professional fees incurred subsequent to December 31, 2017.

B. Inventories, net

Adjustment of $1.7 million to reflect the preliminary fair value of acquired inventories estimated at $13.7 million.

C. Property, plant and equipment, net

Property, plant and equipment were adjusted as follows:

	Amount
Preliminary fair value adjustment (1)	$	12.9
Excluded property, plant and equipment (2)	(6.1		)
Total pro forma adjustment to property, plant and equipment	$	6.8

(1) Represents the estimated fair value adjustment to Pine Chemical Business property, plant and equipment:

	Preliminary Fair Value		Average Estimated Remaining Useful Life in Years	Depreciation expense Year ended December 31, 2017
Machinery and equipment	$	35.5	9	$	4.7
Buildings and leasehold equipment	2.8		15	0.2
Land and land improvements	2.0		5	0.2
Total	$	40.3		$	5.1
Less: depreciation expense for excluded assets				(0.7		)
Less: depreciation expense for acquired assets included in historical statement of operations of the Pine Chemical Business				(4.2		)
Net pro forma adjustment to depreciation expense				$	0.2

(2) To adjust certain assets included in the Pine Chemical Business historical balance sheet that will not be transferred in accordance with the Asset Purchase Agreement.

D. Goodwill

Reflects the preliminary purchase price allocation and recognition of goodwill described above. The goodwill resulting from the Acquisition is primarily due to the expected cost synergies and economies of scale resulting from the business combination. The full amount of goodwill is expected to be deductible for income tax purposes.

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Notes to the Unaudited Pro Forma Condensed

Combined Financial Information
(in millions, except share data)

E. Other intangibles, net

The preliminary amounts assigned to the identifiable intangible assets, the estimated useful lives, and the estimated amortization expense related to these identifiable intangible assets are as follows:

	Preliminary Fair Value		Average Estimated Remaining Useful Life in Years	Amortization expense Year ended December 31, 2017
Customer relationships	$	129.0	11	$	11.7
Patents	1.9		12	0.2
Noncompetition agreements	2.2		3	0.7
Total	$	133.1		$	12.6

F. Other assets

Other assets were adjusted as follows:

	Amount
Preliminary fair value adjustment of identified other assets (1)	$	0.2
Reversal of historically capitalized planned major maintenance activities costs (2)	(0.2		)
Total pro forma adjustment to other assets	$	0.0

(1) Represents an adjustment to record an asset associated with an acquired operating lease with below-market terms at fair value. The estimated useful life of this intangible asset is based on the lease term of 50 years. Pro forma amortization for the year ended December 31, 2017 was less than $0.1 million.

(2) Represents costs capitalized for planned major maintenance activities, which were determined to have an acquisition date fair value of zero.

G. Long-term debt and interest expense

On January 24, 2018, Ingevity issued $300.0 million aggregate principal amount of 4.50 percent senior unsecured notes (the “Notes”) due 2026. The net proceeds from the sale of the Notes, after deducting deferred financing fees and other expenses of $5.7 million, were $294.3 million. Ingevity used the net proceeds from the sale of the Notes to finance the Acquisition.

Interest payments on the Notes are due semiannually in arrears on February 1st and August 1st of each year, beginning on August 1, 2018, at a rate of 4.50 percent per year. The Notes will mature on February 1, 2026.

The table below illustrates Ingevity's debt transaction and summarizes the adjustment to reflect Ingevity's pro forma long-term debt:

	Amount
Total private placement (8-year senior unsecured notes)	$	300.0
Debt issuance costs	(5.7		)
Total pro forma adjustment to Ingevity's long-term debt	$	294.3

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Notes to the Unaudited Pro Forma Condensed

Combined Financial Information
(in millions, except share data)

For the preparation of the unaudited condensed combined pro forma financial information, interest expense was estimated using the interest rate of 4.50 percent.

	Amount
Interest expense on new long term debt	$	13.5
Amortization of new debt issuance costs	0.7
Total pro forma adjustment to Ingevity's interest expense	$	14.2

H. Deferred income taxes

This adjustment is the reversal of deferred tax liabilities within the Pine Chemical Business historical financial statements. As the Acquisition is considered a taxable business combination, the tax bases of the Pine Chemical Business assets acquired and liabilities assumed are stepped up to their fair value at the date of the Acquisition.

I. Retained earnings

Represents an adjustment of $3.8 million to retained earnings for acquisition-related transaction costs; see Note 2(A).

J. Parent company net investment

Parent company net investment was adjusted as follows:

	Amount
Excluded assets (1)	$	(6.1	)
Elimination of remaining historical parent investment (2)	(40.0		)
Total pro forma adjustment to parent company net investment	$	(46.1	)

(1) Represents the adjustment to the Pine Chemical Business historical parent company net investment balance for property, plant and equipment of the Pine Chemical Business not transferred to Ingevity in accordance with the Asset Purchase Agreement; see Note 2(C).

(2) Relates to the elimination of Georgia-Pacific’s investment in the Pine Chemical Business.

K. Cost of sales

Adjustments to cost of sales were as follows:

	Amount
Total pro forma adjustment to depreciation of acquired property, plants and equipment (1)	$	0.2
Pro forma adjustment to remove historical amortization of planned major maintenance activities costs (2)	(1.2		)
Adjustment from historical transfer pricing to market-based pricing per long term supply agreement (3)	(11.7		)
Total pro forma adjustment to cost of sales	$	(12.7	)

(1) Represents the adjustment to Pine Chemical Business historical depreciation as a result of preliminary fair value adjustments to the acquired depreciable assets and adjustments to their respective estimated remaining useful lives; see Note 2(C).

(2) Represents the adjustment to Pine Chemical Business historical amortization of planned major maintenance activities costs that were determined to have a preliminary acquisition date fair value of zero; see Note 2(F).

(3) Relates to a long-term supply agreement between Ingevity and Georgia-Pacific for the purchase of crude tall oil (“CTO”). The supply agreement was entered into on March 8, 2018 whereby Ingevity has agreed to purchase CTO originating from Georgia-Pacific mills at market-based prices for a term of 20 years.

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Notes to the Unaudited Pro Forma Condensed

Combined Financial Information
(in millions, except share data)

L. Selling, general and administrative expenses

Adjustment of $12.6 million to selling, general and administrative expenses related to the amortization of acquired customer relationship, patent, and noncompetition agreement intangible assets. Refer to Note 2(E).

M. Acquisition costs

Ingevity incurred one time transaction costs associated related to the Acquisition. An adjustment of $7.1 million was made to reflect the reversal of these one-time costs recognized in Ingevity's historical condensed combined statement of operations.

N. Provision (benefit) for income taxes

A blended statutory rate of 37.2 percent was applied to the above adjustments. The total effective tax rate of the combined company is subject to change based upon post-acquisition income by jurisdiction and other factors.

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