What changed in this filing

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Item 1. Financial Statements

2020-10-29 compared with 2020-07-30 · 245 added, 180 removed, 795 unchanged (35% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Operations (Unaudited)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

In millions, except per share data 2020 2019 2020 2019

17 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

In millions 2020 2019 2020 2019

3 unchanged sentences

Foreign currency translation adjustment 27.6 ( 22.9 ) ( 14.2 ) ( 29.0 )

Unrealized gain (loss) on net investment hedges, net of tax provision (benefit) of $( 0.6 ), zero , $ 1.1 , and zero

Unrealized gain (loss) on net investment hedges, net of tax provision (benefit) of $( 1.9 ), $ 1.6 , $( 0.8 ), and $ 1.5

( 6.2 ) 5.3 ( 2.7 ) 5.1

Total foreign currency adjustments, net of tax provision (benefit) of $( 0.6 ), zero , $ 1.1 , and zero

Total foreign currency adjustments, net of tax provision (benefit) of $( 1.9 ), $ 1.6 , $( 0.8 ), and $ 1.5

21.4 ( 17.6 ) ( 16.9 ) ( 23.9 )

6 unchanged sentences

1.1 ( 0.9 ) ( 3.8 ) ( 4.9 )

Pension & other postretirement benefits:

Unrealized actuarial gains (losses) and prior service (costs) credits, net of tax of zero for all periods

Reclassifications of net actuarial and other (gain) loss and amortization of prior service cost, included in net income, net of tax of zero for all periods

Total pension and other postretirement benefits, net of tax of zero for all periods

Other comprehensive income (loss), net of tax provision (benefit) of $( 1.6 ), $ 1.4 , $( 2.0 ), and $ 0.1

4 unchanged sentences

Condensed Consolidated Balance Sheets

In millions, except share and par value data June 30, 2020 December 31, 2019

In millions, except share and par value data September 30, 2020 December 31, 2019

Assets (Unaudited)

43 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

In millions 2020 2019

20 unchanged sentences

Payments for acquired businesses, net of cash acquired — ( 537.9 )

Finance lease expenditures ( 23.8 ) —

Other investing activities, net ( 3.6 ) ( 4.7 )

6 unchanged sentences

Debt issuance costs — ( 1.8 )

Finance lease obligations, net 23.3 —

Borrowings (repayments) of notes payable and other short-term borrowings, net ( 0.9 ) 2.2

10 unchanged sentences

$ 200.4 $ 76.6

(1) Includes restricted cash of $ 8.0 million and $ 1.1 million and cash and cash equivalents of $ 177.6 million and $ 53.3 million at June 30, 2020 and 2019, respectively.

(1) Includes restricted cash of $ 2.2 million and $ 1.0 million and cash and cash equivalents of $ 198.2 million and $ 75.6 million at September 30, 2020 and 2019, respectively.

Restricted cash is included within "Prepaid and other current assets" within the condensed consolidated balance sheets.

8 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

Description of Business and Basis of Presentation

16 unchanged sentences

Actual results could differ from these estimates.

During the three and six months ended June 30, 2020 and subsequent to this date, there have been significant changes to the global economic situation and to public securities markets as a consequence of the novel strain of coronavirus ("COVID-19") pandemic.

During the three and nine months ended September 30, 2020 and subsequent to this date, there have been significant changes to the global economic situation and to public securities markets as a consequence of the novel strain of coronavirus ("COVID-19") pandemic.

It is reasonably possible that this could cause changes to estimates as a result of the financial circumstances of the markets in which we operate, the price of our publicly traded equity in comparison to the carrying value, and the health of the global economy.

Such changes to estimates could potentially result in impacts that would be material to the condensed consolidated financial statements.

While there was not a material impact to our condensed consolidated financial statements as of and for the three and six months ended June 30, 2020, our future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to our consolidated financial statements in future reporting periods.

While there was not a material impact to our condensed consolidated financial statements as of and for the three and nine ended September 30, 2020, our future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to our consolidated financial statements in future reporting periods.

Certain prior year amounts have been reclassified to conform with the current year's presentation.

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

Coronavirus Pandemic

10 unchanged sentences

In order to strengthen our short-term liquidity and to ensure financial flexibility, in March 2020, we drew down $ 250 million from our revolving credit facility as a precautionary measure and also suspended our share repurchase program.

During the three months ended June 30, 2020 we paid back $ 155 million of this drawn down amount.

During the three and nine months ended September 30, 2020, we paid back $ 50 million and $ 205 million, respectively, of this drawn down amount.

We also implemented work-from-home policies and protocols for the majority of our global salaried workforce, as well as social distancing practices to ensure the safety of our employees at our manufacturing facilities.

Further, during the second quarter, we decreased production at some of our U.S.

and China based manufacturing plants due to COVID-19 impacts to the projected customer demand and implemented a cost reduction initiative further described in Note 14 .

As of March 31, 2020 and June 30, 2020, we evaluated, in accordance with ASC 350 - Goodwill and Other and ASC 360 - Property, Plant, and Equipment, whether the economic impacts of the COVID-19 pandemic constitute triggering events requiring impairment or recoverability analysis to be performed.

We considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact on each of the reporting units and asset groups.

Further, we assessed our current market capitalization, forecasts and the amount of excess fair value above book value as calculated in our 2019 impairment test.

We determined that a triggering event has not occurred which would require an interim impairment test to be performed.

However, a lack of sustained recovery or further deterioration in market conditions related to the general economy and the industries in which we operate, a sustained trend of weaker than anticipated financial performance, or further decline in our share price for a sustained period of time, or an increase in the market-based weighted average cost of capital, among other factors, could significantly impact the impairment analysis and may result in future impairment charges that, if incurred, could have a material adverse effect on our financial condition and results of operations.

During the second quarter, we decreased production at some of our U.S.

and China based manufacturing plants due to COVID-19 customer demand impacts and implemented a cost reduction initiative further described in Note 14.

During the third quarter, we resumed normal production at all manufacturing plants as customer demand improved.

While the disruptions caused by the pandemic are currently expected to be temporary, there is uncertainty regarding the virus's duration and severity.

8 unchanged sentences

We adopted this standard on a prospective basis on January 1, 2020.

As a result of the adoption, we anticipate

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

capitalizing certain implementation costs that were previously expensed as incurred, which will be recorded to either prepaid and other current assets or other assets on the condensed consolidated balance sheets, depending on the duration of the agreement.

As a result of the adoption, we anticipate capitalizing certain implementation costs that were previously expensed as incurred, which will be recorded to either prepaid and other current assets or other assets on the condensed consolidated balance sheets, depending on the duration of the agreement.

The impact of the adoption did not have a material impact on our condensed consolidated financial statements and related disclosures.

3 unchanged sentences

We adopted this standard on January 1, 2020.

We have updated our internal controls and operational processes and procedures, to include certain forward-looking considerations in our current process of developing and recognizing credit losses for our accounts receivable and restricted investment accounted for at amortized cost.

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

September 30, 2020

accounts receivable and restricted investment accounted for at amortized cost.

Generally, the adoption of ASC 326 did not have a material impact on our condensed consolidated balance sheet, results of operations or cash flows.

5 unchanged sentences

Using a PDM, we calculated an expected credit loss allowance at January 1, 2020 of $ 0.6 million, which was recorded as an adjustment to the opening balance of retained earnings.

The following table displays changes in our allowance for credit losses as of June 30, 2020, including the transition impact of adopting the CECL standard.

The following table displays changes in our allowance for credit losses as of September 30, 2020, including the transition impact of adopting the CECL standard.

(in millions) Balance at

1 unchanged sentence

Impact from Adoption of ASC 326 Balance at January 1, 2020 Current Period Provision Balance at

June 30, 2020 (2)

September 30, 2020 (2)

Allowance for credit losses $ 0.5 0.6 1.1 1.8 $ 2.9

1 unchanged sentence

(1) The allowance for credit losses at December 31, 2019 of $ 0.5 million was included in "Accounts receivable, net" on the condensed consolidated balance sheets.

(2) The allowance for credit losses at June 30, 2020 of $ 1.7 million and $ 1.0 million was included "Accounts receivable, net" and "Restricted investment" on the condensed consolidated balance sheets, respectively.

(2) The allowance for credit losses at September 30, 2020 of $ 1.8 million and $ 1.1 million was included "Accounts receivable, net" and "Restricted investment" on the condensed consolidated balance sheets, respectively.

Our expected credit losses can vary from period to period based on several factors, such as changes in bond ratings, actual observed bond defaults, and overall economic environment.

The primary factor that contributed to our provision for expected credit losses in the first half of 2020 was a pessimistic outlook of the macroeconomic environment due to the COVID-19 pandemic, and related effects on the financial performance of U.S.-based corporations.

The increase in the allowance for credit losses of $ 1.6 million is attributed to $ 0.4 million for Level 1 securities and $ 1.2 million for accounts receivable expected credit losses.

The primary factor that contributed to our provision for expected credit losses in the nine months ended September 30, 2020 was a pessimistic outlook of the macroeconomic environment due to the COVID-19 pandemic, and related effects on the financial performance of U.S.-based corporations.

The increase in the allowance for credit losses of $ 1.8 million in the nine months ended September 30, 2020 is attributed to $ 0.5 million for Level 1 securities and $ 1.3 million for accounts receivable expected credit losses.

Recently Issued Accounting Pronouncements

1 unchanged sentence

Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans." This ASU amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans.

The new standard is effective for fiscal years ending after December 15, 2020.

The new standard is effective for fiscal years beginning after December 15, 2020.

Although we are still evaluating the impact of this new standard, we do not believe that the adoption will materially impact our condensed consolidated financial statements and related disclosures.

1 unchanged sentence

Simplifying the Accounting for Income Taxes." This ASU amends ASC 740 to add, remove, and clarify disclosure requirements related to income taxes.

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

new standard is effective for fiscal years ending after December 15, 2020.

The new standard is effective for fiscal years beginning after December 15, 2020.

Although we are still evaluating the impact of this new standard, we do not believe that the adoption of this new standard will materially impact our condensed consolidated financial statements and related disclosures.

2 unchanged sentences

This guidance became effective beginning on March 12, 2020, and we may elect to apply the amendments prospectively until December 31, 2022.

We are currently evaluating the impact this guidance may have on our Condensed Consolidated Financial Statements and related disclosures.

As of September 30, 2020, we have not yet elected any optional expedients provided in the standard.

We will apply the accounting relief, if necessary, as relevant contract and hedge accounting relationship modifications are made during the reference rate reform transition period.

We do not expect this new standard to have a material impact on our consolidated financial statements.

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

September 30, 2020

Perstorp Holding AB's Caprolactone Business

1 unchanged sentence

At closing, the assumed debt was settled with an affiliate of the Seller.

The Caprolactone Acquisition has been integrated into our Performance Chemicals segment and included within our engineered polymers product line.

The Caprolactone Acquisition contributed Net sales of $ 31.6 million and $ 34.3 million for the three months ended June 30, 2020 and 2019, respectively, and $ 67.9 million and $ 58.5 million for the six months ended June 30, 2020 and 2019, respectively, to our consolidated operating results.

A substantial portion of the Caprolactone Business was integrated into our existing Performance Chemicals operations during 2019.

As a result, we were no longer able to separate operating performance of the Caprolactone Acquisition from our existing Performance Chemicals' operating results.

The Caprolactone Acquisition has been integrated into our Performance Chemicals segment and represented as our engineered polymers product line.

As a result, we are not able to separate operating performance of the Caprolactone Acquisition from our existing Performance Chemicals' operating results.

The Caprolactone Acquisition contributed Net sales of $ 93.2 million and $ 90.9 million for the nine months ended September 30, 2020 and 2019, respectively, to our consolidated operating results.

Purchase Price Allocation

The following table summarizes the consideration paid for the Caprolactone Business and the assets acquired and liabilities assumed, which was finalized in Q4 2019:

The following table summarizes the consideration paid for the Caprolactone Business, the assets acquired, and liabilities assumed, which was finalized in Q4 2019:

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

Purchase Price Allocation

21 unchanged sentences

Cash and restricted cash acquired (3)

Total cash paid, less cash and restricted cash acquired $ 537.9

Payments for acquired businesses, net of cash acquired $ 537.9

______________

2 unchanged sentences

Inventories are accounted for on a first-in, first-out basis of accounting.

(2) The aggregate amortization expense was $ 4.7 million and $ 3.9 million for the three months ended June 30, 2020 and 2019, respectively, and the aggregate amortization expense was $ 9.5 million and $ 5.8 million for the six months ended June 30, 2020 and 2019, respectively.

(2) The aggregate amortization expense was $ 4.8 million and $ 3.7 million for the three months ended September 30, 2020 and 2019, respectively, and the aggregate amortization expense was $ 14.3 million and $ 9.5 million for the nine months ended September 30, 2020 and 2019, respectively.

Estimated amortization expense is as follows:

2 unchanged sentences

(3) Cash and cash equivalents and restricted cash were $ 0.7 million and $ 0.8 million, respectively, at closing.

Restricted cash is included in "Prepaid and other current assets" on the consolidated balance sheet.

Restricted cash is included in "Prepaid and other current assets" in the above purchase price allocation.

Unaudited Pro Forma Financial Information

2 unchanged sentences

The pro forma results include additional interest expense on the debt issued to finance the acquisition, amortization and depreciation expense based on the estimated fair value and useful lives of intangible assets and tangible assets, and related tax effects.

The pro forma results presented below are adjusted for the removal of Acquisition and other-related costs for the six months ended June 30, 2019 of $ 32.0 million.

The pro forma results presented below are adjusted for the removal of Acquisition and other-related costs for the nine months ended September 30, 2019 of $ 33.3 million.

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

In millions Six Months Ended June 30, 2019

September 30, 2020

In millions, except per share data Nine Months Ended September 30, 2019

Net sales $ 1,007.2

2 unchanged sentences

Acquisition and other-related costs

Costs incurred to complete and integrate the Caprolactone Acquisition noted above into our Performance Chemicals segment are expensed as incurred on our condensed consolidated statement of operations.

Costs incurred to complete and integrate the Caprolactone Acquisition into our Performance Chemicals segment are expensed as incurred on our condensed consolidated statement of operations.

The following table summarizes such costs.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

In millions 2020 2019 2020 2019

10 unchanged sentences

The following table presents our Net sales disaggregated by product line.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

In millions 2020 2019 2020 2019

15 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

Three Months Ended June 30, Six Months Ended June 30,

September 30, 2020

Three Months Ended September 30, Nine Months Ended September 30,

In millions 2020 2019 2020 2019

6 unchanged sentences

The following table provides information about contract assets and contract liabilities from contracts with customers.

The contract assets primarily relate to our rights to consideration for products produced but not billed at the reporting date on contracts with certain customers.

The contract assets primarily relate to our rights to consideration for products produced but not billed at the reporting date.

The contract assets are recognized as accounts receivables when the rights become unconditional and the customer has been billed.

2 unchanged sentences

Contract Asset (1)

In millions June 30, 2020 June 30, 2019

September 30,

In millions 2020 2019

Beginning balance $ 6.2 $ 5.1

3 unchanged sentences

______________

(1) Included within "Prepaid and other current assets" on the condensed consolidated balance sheet.

(1) Included within "Prepaid and other current assets" on the condensed consolidated balance sheets.

Fair Value Measurements

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cash and cash equivalents, other receivables, other payables and accrued liabilities, approximate their fair values due to the short-term nature of these financial instruments.

See Note 10 for more information regarding our fair value measurements of our financial instruments and risk management activities.

Recurring Fair Value Measurements

The following information is presented for assets and liabilities that are recorded in the condensed consolidated balance sheets at fair value measured on a recurring basis.

The following information is presented for assets and liabilities that are recorded in the condensed consolidated balance sheets at fair value measured at each reporting date (i.e.

on a recurring basis).

There were no transfers of assets and liabilities that were recorded at fair value between Level 1 and Level 2 during the periods reported.

During the periods ended June 30, 2020 and December 31, 2019, we had no significant measurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

In millions Level 1 (1)

June 30, 2020

September 30, 2020

Equity securities (4)

4 unchanged sentences

$ 10.4 $ — $ — $ 10.4

Separation-related reimbursement awards (6)

Contingent consideration (7)

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(3) Significant unobservable inputs.

(4) Included within "Prepaid and other current assets" on the condensed consolidated balance sheet.

(5) Consists of a deferred compensation arrangement, through which we hold various investment securities, recognized on our balance sheets.

(4) Included within "Prepaid and other current assets" on the condensed consolidated balance sheets.

(5) Consists of a deferred compensation arrangement, through which we hold various investment securities.

Both the asset and liability are recorded at fair value, and are included within "Other assets" and "Other liabilities" on the condensed consolidated balance sheets, respectively.

(6) Included within "Accrued expenses" on the condensed consolidated balance sheet.

(7) Included within "Other liabilities" on the condensed consolidated balance sheet.

Equity Securities

Our investments in equity securities with a readily determinable fair value totaled $ 0.1 million and $ 0.4 million at June 30, 2020 and December 31, 2019, respectively.

The net realized gain/(loss) recognized during the three and six months ended June 30, 2020 was zero and $( 0.1 ) million, respectively, and the net realized gain/(loss) recognized during both the three and six months ended June 30, 2019 was zero .

The unrealized gain/(loss) was zero for the three and six months ended June 30, 2020 and 2019.

The aggregate carrying value of investments in equity securities where fair value is not readily determinable totaled zero and $ 1.5 million as of June 30, 2020 and December 31, 2019, respectively, and is included in "Other assets" on the condensed consolidated balance sheet.

During the three and six months ended June 30, 2020, we recorded an impairment charge of $ 0.1 million and $ 1.4 million, respectively, to an equity security where fair value is not readily determinable held within our Performance Materials segment.

The impairment charge represented the difference between liquidation value of the investment and our book value at the time our investment was liquidated.

In addition to the investment securities, we also have company-owned life insurance ("COLI") deferred compensation arrangement.

COLI is recorded at cash surrender value and included in "Other assets" on the condensed consolidated balance sheets in the amount of $ 9.0 million and $ 8.4 million at September 30, 2020 and December 31, 2019, respectively.

(6) Included within "Accrued expenses" on the condensed consolidated balance sheets.

(7) Included within "Other liabilities" on the condensed consolidated balance sheets.

Nonrecurring Fair Value Measurements

The following table presents our fair value hierarchy for those assets measured at fair value on a non-recurring basis in the condensed consolidated balance sheets during the nine months ended September 30, 2020.

There were no nonrecurring fair value measurements in the condensed consolidated balance sheets during the year ended December 31, 2019.

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

In millions September 30, 2020 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Gains (Losses) (Period Ended September 30, 2020)

Impairment of operating lease assets, net (1)

$ — $ — $ — $ — $ ( 1.7 )

Total assets $ — $ — $ — $ — $ ( 1.7 )

______________

(1) During the period ended September 30, 2020 we exited certain leased assets previously used in our daily operations.

These leased assets have remaining lease obligations through 2023.

This impairment charge was recorded adjust their fair value on our condensed consolidated balance sheet to zero.

Equity Securities

The aggregate carrying value of investments in equity securities where fair value is not readily determinable totaled zero and $ 1.5 million as of September 30, 2020 and December 31, 2019, respectively, and is included in "Other assets" on the condensed consolidated balance sheets.

During the three and nine months ended September 30, 2020, we recorded an impairment charge of zero and $ 1.5 million, respectively, to an equity security where fair value is not readily determinable held within our Performance Materials segment.

The impairment charge represented the difference between liquidation value of the investment and our book value at the time our investment was liquidated.

Restricted Investment

Our restricted investment is a trust managed in order to secure repayment of the finance lease obligation, associated with Performance Materials' Wickliffe, Kentucky manufacturing site, at maturity.

The trust, presented as restricted investment on our consolidated balance sheet, purchased long term bonds that mature in 2025 and 2026.

The trust, presented as restricted investment on our condensed consolidated balance sheets, purchased long-term bonds that mature in 2025 and 2026.

The principal received at maturity of the bonds along with interest income that is reinvested in the trust are expected to be equal to or more than the $ 80.0 million finance lease obligation that is due in 2027.

2 unchanged sentences

The investments held by the trust earn interest at the stated coupon rate of the invested bonds.

Interest earned on the investments held by the trust is recognized as interest income and presented within Interest income on our consolidated statement of operations.

At June 30, 2020, the book value of our restricted investment, which is accounted for as HTM and therefore held at amortized costs, was $ 72.5 million, which includes an allowance for credit losses of $ 1.0 million and cash of $ 1.2 million, and the fair value was $ 79.3 million, based on Level 1 inputs.

The following table shows the total amortized cost of our HTM debt securities by credit rating.

Interest earned on the investments held by the trust is recognized as interest income and presented within interest income on our condensed consolidated statement of operations.

At September 30, 2020, the book value of our restricted investment, which is accounted for as HTM and therefore held at amortized costs, was $ 73.0 million, net of an allowance for credit losses of $ 1.1 million and included cash of $ 1.9 million.

The fair value at September 30, 2020 was $ 79.9 million, based on Level 1 inputs.

The following table shows the total amortized cost of our HTM debt securities by credit rating, excluding the allowance for credit losses and cash.

The primary factor in our expected credit loss calculation is the composite bond rating.

As the rating decreases, the risk present in holding the bond is inherently increased, leading to an increase in expected credit losses.

June 30, 2020

September 30, 2020

In millions AA+ AA A A- BBB+ Total

Level 1 Securities $ 13.5 10.7 24.2 13.4 10.5 $ 72.3

HTM debt securities $ 13.5 10.7 24.2 13.4 10.4 $ 72.2

Debt Obligations

At June 30, 2020, the book value of finance lease obligations was $ 80.0 million and the fair value was $ 102.6 million.

The fair value of our finance lease obligations is based on the period-end quoted market prices for the obligations, using Level 2 inputs.

The carrying amount, excluding debt issuance fees, of our variable interest rate long-term debt was $ 956.3 million as of June 30, 2020.

At September 30, 2020, the book value of finance lease obligations was $ 103.3 million and the fair value was $ 128.4 million.

The fair value of our finance lease obligations is based quoted market prices for the obligations, using Level 2 inputs.

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

September 30, 2020

The carrying amount, excluding debt issuance fees, of our variable interest rate long-term debt was $ 901.8 million as of September 30, 2020.

The carrying value is a reasonable estimate of the fair value of the outstanding debt based on the variable interest rate of the debt.

At June 30, 2020, the book value of our fixed rate debt was $ 300.0 million, and the fair value was $ 296.6 million, based on Level 2 inputs.

At September 30, 2020, the book value of our fixed rate debt was $ 300.0 million, and the fair value was $ 304.1 million, based on Level 2 inputs.

Contingent Consideration

In connection with the acquisition of certain assets in May 2020, we are contingently obligated to make an additional payment for such assets of up to an aggregate amount of $ 7.0 million.

The contingent consideration is payable if certain sales volume targets are achieved prior to the expiration on December 31, 2024 .

The fair value of the five-year revenue earn-out consideration was $ 1.1 million at June 30, 2020.

The contingent consideration is payable if certain sales volume targets are achieved prior to the expiration on December 31, 2024, therein referred to as "Revenue Earn-out."

The fair value of the five-year Revenue Earn-out consideration was $ 1.1 million at September 30, 2020.

Any subsequent changes in the fair value of the contingent consideration liability will be recorded in current period earnings as a selling, general and administrative expense.

The following table summarizes the activity for financial liabilities utilizing Level 3 fair value measurements:

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

Contingent Consideration

In millions June 30, 2020

In millions September 30, 2020

Beginning balance $ —

4 unchanged sentences

______________

(1) Included within "Other liabilities" on the condensed consolidated balance sheet.

(1) Included within "Other liabilities" on the condensed consolidated balance sheets.

Inventories, net

In millions June 30, 2020 December 31, 2019

In millions September 30, 2020 December 31, 2019

Raw materials $ 46.5 $ 42.6

4 unchanged sentences

Inventories, net $ 204.0 $ 212.5

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

September 30, 2020

Property, Plant and Equipment, net

In millions June 30, 2020 December 31, 2019

In millions September 30, 2020 December 31, 2019

Machinery and equipment $ 1,008.8 $ 964.3

6 unchanged sentences

$ 685.3 $ 664.7

_______________

(1) This includes finance leases related to machinery and equipment at our Wickliffe, Kentucky facility of $ 68.8 million and $ 68.8 million and net book value of $ 5.7 million and $ 6.0 million at June 30, 2020, and December 31, 2019, respectively.

This also includes finance leases related to our Waynesboro, Georgia manufacturing facility for (a) machinery and equipment of $ 18.5 million and $ 18.4 million and net book value of $ 16.3 million and $ 16.8 million, (b) construction in progress of $ 8.8 million and $ 6.4 million and (c) buildings and leasehold improvements of $ 4.4 million and $ 4.2 million and net book value of $ 4.2 million and $ 4.2 million at June 30, 2020 and December 31, 2019, respectively.

Amortization expense associated with these finance leases is included within depreciation expense.

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

Goodwill and Other Intangible Assets, net

Operating Segments

Reporting Units

In millions Performance Chemicals Performance Materials Total

1 unchanged sentence

Foreign currency translation ( 8.6 ) — ( 8.6 )

June 30, 2020 $ 411.4 $ 4.3 $ 415.7

There were no events or circumstances indicating that goodwill might be impaired as of June 30, 2020.

September 30, 2020 $ 423.5 $ 4.3 $ 427.8

There were no events or circumstances indicating that goodwill might be impaired as of September 30, 2020.

Other Intangible Assets

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

In millions Gross Accumulated amortization Net Gross Accumulated amortization Net

7 unchanged sentences

(1) Represents trademarks, trade names and know-how.

At June 30, 2020 and December 31, 2019 , the intangible assets subject to amortization were allocated among our business segments as follows:

In millions June 30, 2020 December 31, 2019

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

September 30, 2020

At September 30, 2020 and December 31, 2019 , the intangible assets subject to amortization were allocated among our business segments as follows:

In millions September 30, 2020 December 31, 2019

Performance Chemicals $ 364.3 $ 396.2

2 unchanged sentences

The amortization expense related to our intangible assets in the table above is shown in the table below.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

In millions 2020 2019 2020 2019

5 unchanged sentences

(1) See Note 4 for more information about the Caprolactone Acquisition, and the related increase in amortization expense.

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

Based on the current carrying values of intangible assets, estimated pre-tax amortization expense for the next five years is as follows:

3 unchanged sentences

Net Investment Hedges

Beginning in the second quarter of 2019, we have entered into fixed-to-fixed cross-currency interest rate swaps with an aggregate notional amount of $ 166.2 million and a maturity date of July 2023.

We have fixed-to-fixed cross-currency interest rate swaps with an aggregate notional amount of $ 166.2 million and a maturity date of July 2023.

We designated the swaps to hedge a portion of our net investment in a euro functional currency denominated subsidiary against foreign currency fluctuations.

5 unchanged sentences

dollar denominated debt to euro denominated debt is recorded as interest income on the condensed consolidated statements of operations.

The fair value of the fixed-to-fixed cross currency interest rate swap was a net asset (liability) of $ 7.6 million and $ 3.0 million at June 30, 2020 and December 31, 2019, respectively.

During the three and six months ending June 30, 2020, we recognized net interest income associated with this financial instrument of $ 0.5 million and $ 1.3 million, respectively, and during both the three and six months ended June 30, 2019, we recognized net interest income associated with this financial instrument of $ 0.6 million.

The fair value of the fixed-to-fixed cross currency interest rate swap was a net asset (liability) of $( 0.4 ) million and $ 3.0 million at September 30, 2020 and December 31, 2019, respectively.

During the three and nine months ended September 30, 2020, we recognized net interest income associated with this financial instrument of $ 0.2 million and $ 1.5 million, respectively, and during both the three and nine months ended September 30, 2019, we recognized net interest income associated with this financial instrument of $ 0.9 million and $ 1.5 million, respectively.

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

September 30, 2020

Cash Flow Hedges

5 unchanged sentences

Designated cash flow hedges entered to minimize foreign currency exchange risk of forecasted revenue transactions are recorded to "Net sales" on the consolidated statement of operations when the forecasted transaction occurs.

As of June 30, 2020, there were $ 10.2 million open foreign currency derivative contracts.

The fair value of the designated foreign currency hedge contracts was an asset (liability) of $ 0.1 million and zero at June 30, 2020 and December 31, 2019, respectively.

As of September 30, 2020, there were $ 4.0 million open foreign currency derivative contracts.

The fair value of the designated foreign currency hedge contracts was an asset (liability) of $( 0.1 ) million and zero at September 30, 2020 and December 31, 2019, respectively.

Commodity Price Risk Management

2 unchanged sentences

To mitigate expected fluctuations in market prices and the volatility to earnings and cash flow resulting from changes to pricing of natural gas purchases, from time to time, we will enter into swap contracts and zero cost collar option contracts and designate these contracts as cash flow hedges.

As of June 30, 2020, we had 1.4 million and 0.6 million mmBTUS (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity swap contracts and zero cost collar option contracts, respectively.

As of September 30, 2020, we had 1.2 million and 1.1 million mmBTUS (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity swap contracts and zero cost collar option contracts, respectively.

Designated commodity cash flow hedge gains or losses recorded in Accumulated other comprehensive income ("AOCI") are recognized in "Cost of sales" on the condensed consolidated statements of operations when the inventory is sold.

As of June 30, 2020, open commodity contracts hedge forecasted transactions until November 2021.

The fair value of the outstanding designated natural gas commodity hedge contracts as of June 30, 2020 and December 31, 2019 was an asset (liability) of $( 0.3 ) million and $( 0.5 ) million, respectively.

As of September 30, 2020, open commodity contracts hedge forecasted transactions until November 2021.

The fair value of the outstanding designated natural gas commodity hedge contracts as of September 30, 2020 and December 31, 2019 was an asset (liability) of $ 0.3 million and $( 0.5 ) million, respectively.

Interest Rate Risk Management

Our policy is to manage interest expense using a mix of fixed and variable rate debt.

To manage interest rate risk effectively, from time to time, we may enter into cash flow interest rate derivative instruments, which can consist of forward

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

starting swaps and treasury locks.

To manage interest rate risk effectively, from time to time, we may enter into cash flow interest rate derivative instruments, which can consist of forward starting swaps and treasury locks.

In all cases, the notional amount of the interest rate swap agreements is equal to or less than the designated debt being hedged.

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These instruments are designated as cash flow hedges.

As of June 30, 2020, we have entered into interest rate swaps with a notional amount of $ 166.2 million to manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $ 166.2 million of our floating rate debt to a fixed rate.

As of September 30, 2020, we have entered into interest rate swaps with a notional amount of $ 166.2 million to manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $ 166.2 million of our floating rate debt to a fixed rate.

In accordance with the terms of this instrument, we receive floating rate interest payments based upon three-month U.S.

dollar LIBOR and in return are obligated to pay interest at a weighted average fixed rate of 3.79 percent until July 2023.

The fair value of the interest rate swap was an asset (liability) of $( 10.4 ) million and $( 3.9 ) million at June 30, 2020 and December 31, 2019, respectively.

The fair value of the interest rate swap was an asset (liability) of $( 9.6 ) million and $( 3.9 ) million at September 30, 2020 and December 31, 2019, respectively.

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

Effect of Cash Flow and Net Investment Hedge Accounting on AOCI

In millions Amount of Gain (Loss) Recognized in AOCI Amount of Gain (Loss) Reclassified from AOCI into Net income Location of Gain (Loss) Reclassified from AOCI in Net income

Three Months Ended June 30,

Three Months Ended September 30,

2020 2019 2020 2019

8 unchanged sentences

Effectiveness Testing)

Three Months Ended June 30,

Three Months Ended September 30,

2020 2019 2020 2019

4 unchanged sentences

In millions Amount of Gain (Loss) Recognized in AOCI Amount of Gain (Loss) Reclassified from AOCI into Net income Location of Gain (Loss) Reclassified from AOCI in Net income

Six Months Ended June 30,

Nine Months Ended September 30,

2020 2019 2020 2019

8 unchanged sentences

Effectiveness Testing)

Six Months Ended June 30,

Nine Months Ended September 30,

2020 2019 2020 2019

8 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

Fair Value Measurements

The following information is presented for derivative assets and liabilities that are recorded in the condensed consolidated balance sheets at fair value measured on a recurring basis.

See Note 6 for more information on our fair value measurements.

See Note 6 financial instruments for more information on our fair value measurements.

There were no transfers of assets and liabilities that are recorded at fair value between Level 1 and Level 2 during the periods reported.

There were no non-recurring fair value measurements in the condensed consolidated balance sheets as of June 30, 2020 or December 31, 2019.

There were no nonrecurring fair value measurements in the condensed consolidated balance sheets as of September 30, 2020 or December 31, 2019 relating to our derivatives.

In millions Level 1 (1)

June 30, 2020

Currency exchange contracts (4)

$ — $ 0.1 $ — $ 0.1

September 30, 2020

Natural gas contracts (4)

Net investment hedge (5)

Total assets $ — $ 1.3 $ — $ 1.3

Natural gas contracts (6)

$ — $ 0.3 $ — $ 0.3

Currency exchange contracts (6)

Net investment hedge (7)

Interest rate swap contracts (7)

— 10.4 — 10.4

Total liabilities $ — $ 11.1 $ — $ 11.1

17 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

Debt including Finance Lease Obligations

Current and long-term debt including finance lease obligations consisted of the following:

June 30, 2020

In millions, except percentages Interest rate Maturity date June 30, 2020 December 31, 2019

September 30, 2020

In millions, except percentages Interest rate Maturity date September 30, 2020 December 31, 2019

Revolving Credit Facility (1)

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Finance lease obligations (2)

7.16 % 2027-2035 103.3 80.0

Other 4.77 % 2020-2021 5.2 5.9

5 unchanged sentences

______________

(1) Letters of credit outstanding under the revolving credit facility were $ 2.2 million and undrawn capacity under the facility was $ 527.8 million at June 30, 2020.

(1) Letters of credit outstanding under the revolving credit facility were $ 2.4 million and undrawn capacity under the facility was $ 577.6 million at September 30, 2020.

(2) Includes finance lease obligations of $ 80.0 million related assets at our Wickliffe, Kentucky facility and $ 23.3 million related to our corporate headquarters.

(2) Debt maturing within one year is included in "Notes payable and current maturities of long-term debt" on the condensed consolidated balance sheets.

2020 Senior Notes Issuance and Revolving Credit Facility Amendment

On October 28, 2020 we issued $ 550.0 million aggregate principal amount of 3.875 percent senior unsecured notes due 2028.

Also on October 28, 2020, we entered into an Incremental Facility Agreement and Amendment no.

5 to modify our existing credit agreement.

See Note 19 for more information on both of these actions.

Debt Covenants

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The revolving credit facility and term loans' financial covenants require Ingevity to maintain on a consolidated basis a maximum total leverage ratio of 4.0 to 1.0 (which may be increased to 4.5 to 1.0 under certain circumstances) and a minimum interest coverage ratio of 3.0 to 1.0.

Our actual leverage for the four consecutive quarters ended June 30, 2020 was 3.5 , and our actual interest coverage for the four consecutive quarters ended June 30, 2020 was 7.2 .

We were in compliance with all covenants at June 30, 2020.

Our actual leverage for the four consecutive quarters ended September 30, 2020 was 3.3 , and our actual interest coverage for the four consecutive quarters ended September 30, 2020 was 8.3 .

We were in compliance with all covenants at September 30, 2020.

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

The tables below provide a roll forward of equity.

18 unchanged sentences

Balance at June 30, 2020 42,891 $ 0.4 $ 116.3 $ 562.1 $ ( 48.2 ) $ ( 107.7 ) $ 522.9

Net income (loss) — — — 69.9 — — 69.9

Other comprehensive income (loss) — — — — 22.6 — 22.6

Common stock issued 3 — — — — — —

Exercise of stock options, net 1 — — — — — —

Tax payments related to vested restricted stock units — — — — — ( 0.1 ) ( 0.1 )

Share-based compensation plans — — 0.5 — — 1.2 1.7

Balance at September 30, 2020 42,895 $ 0.4 $ 116.8 $ 632.0 $ ( 25.6 ) $ ( 106.6 ) $ 617.0

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

September 30, 2020

In millions, except per share data in thousands Shares Amount Additional paid in capital Retained earnings Accumulated

16 unchanged sentences

Balance at June 30, 2019 42,670 $ 0.4 $ 107.5 $ 393.0 $ ( 28.0 ) $ ( 72.2 ) $ 400.7

Net income (loss) — — — 59.9 — — 59.9

Other comprehensive income (loss) — — — — ( 18.5 ) — ( 18.5 )

Exercise of stock options, net 2 — 0.1 — — — 0.1

Share repurchase program — — — — — ( 3.1 ) ( 3.1 )

Share-based compensation plans — — 3.8 — — 0.4 4.2

Balance at September 30, 2019 42,672 $ 0.4 $ 111.4 $ 452.9 $ ( 46.5 ) $ ( 74.9 ) $ 443.3

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

Accumulated other comprehensive income (loss)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

In millions 2020 2019 2020 2019

29 unchanged sentences

Ending balance $ ( 2.9 ) $ ( 1.7 ) $ ( 2.9 ) $ ( 1.7 )

Total AOCI ending balance at June 30 $ ( 48.2 ) $ ( 28.0 ) $ ( 48.2 ) $ ( 28.0 )

Total AOCI ending balance at September 30 $ ( 25.6 ) $ ( 46.5 ) $ ( 25.6 ) $ ( 46.5 )

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

Reclassifications of accumulated other comprehensive income (loss)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

In millions 2020 2019 2020 2019

8 unchanged sentences

Pension and other post retirement benefits

Amortization of prior service costs (2)

$ ( 0.1 ) $ — $ ( 0.1 ) $ —

Amortization of unrecognized net actuarial and other gains (losses) (3)

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Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market prevailing conditions and other factors.

During the three months ended June 30, 2020, no shares of our common stock were repurchased as we previously suspended share repurchases in light of the uncertainty caused by the COVID-19 pandemic.

At June 30, 2020, $ 467.6 million remained unused under our Board-authorized repurchase program.

During the three months ended September 30, 2020, no shares of our common stock were repurchased as we previously suspended share repurchases in light of the uncertainty caused by the COVID-19 pandemic.

At September 30, 2020, $ 467.6 million remained unused under our Board-authorized repurchase program.

We record shares of common stock repurchased at cost as treasury stock, resulting in a reduction of stockholders’ equity in the condensed consolidated balance sheets.

3 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

Retirement Plans

The following table summarizes the components of net periodic benefit cost (income) for our defined benefit pension plans:

Three Months Ended June 30,

Three Months Ended September 30,

Pensions Other Benefits

6 unchanged sentences

( 0.3 ) ( 0.2 ) — —

Amortization of prior service cost (credit) (1)

Amortization of net actuarial and other (gain) loss (2)

Net periodic benefit cost (income) $ 0.5 $ 0.3 $ — $ —

Six Months Ended June 30,

Nine Months Ended September 30,

Pensions Other Benefits

6 unchanged sentences

( 0.9 ) ( 0.7 ) — —

Amortization of prior service cost (credit) (1)

Amortization of net actuarial and other (gain) loss (2)

4 unchanged sentences

Contributions

We did no t make any voluntary cash contributions to our Union Hourly defined benefit pension plan in the six months ended June 30, 2020.

We did no t make any voluntary cash contributions to our Union Hourly defined benefit pension plan in the nine months ended September 30, 2020.

There are no required cash contributions to our Union Hourly defined benefit pension plan in 2020, and we currently have no plans to make any voluntary cash contributions in 2020.

5 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

Detail on the restructuring charges and other (income) charges, net, is provided below.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

In millions 2020 2019 2020 2019

10 unchanged sentences

During the second quarter of 2020, we implemented a cost reduction initiative to realign our cost structure in response to reduced demand for some of our products in response to the COVID-19 pandemic.

As a result of this cost reduction initiative, we recorded $ 5.8 million in severance and other employee-related costs in the three months ended June 30, 2020.

During the six months ended June 30, 2020, we recorded $ 6.0 million, which in addition to the second quarter activity, included severance and other employee-related costs associated with the reorganization initiated in the third quarter of 2019.

As a result of this cost reduction initiative, we recorded $ 0.3 million and $ 6.3 million in severance and other employee-related costs in the three and nine months ended September 30, 2020, respe ctively.

Additionally, during the three and nine months ended September 30, 2020, we recorded $ 1.7 million related to an impairment of an operating lease asset that is no longer in use.

2019 activities

During the third quarter of 2019, we initiated a reorganization as part of an effort to improve our Performance Chemicals' workflow and efficiency to best serve our customers' needs and reduce costs.

As a result of this reorganization, we recorded $ 1.7 million in severance and other employee-related costs in the three and nine months ended September 30, 2019.

In April 2019, we sold assets from the Performance Chemicals derivatives operations in Palmeira, Brazil.

These assets were part of a facility that was closed as a result of a restructuring event in 2016.

As a result of this sale, we recorded $ 0.4 million as a gain on sale of assets, as well as $ 0.7 million related to other miscellaneous exit costs, in the three months ended June 30, 2019.

As a result of this sale, we recorded $ 0.4 million as a gain on sale of assets, as well as $ 0.7 million related to other miscellaneous exit costs, in the nine months ended September 30, 2019.

Rollforward of Restructuring Reserves

9 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

Other (income) charges, net

5 unchanged sentences

Such an implementation initiative is a major financial undertaking and will require substantial time and attention of management and key employees.

Costs incurred, during the three and six months ended June 30, 2020, of $ 1.5 million and $ 1.8 million, respectively, represent costs directly associated with the business transformation initiative that, in accordance with GAAP, cannot be capitalized.

Costs incurred, during the three and nine months ended September 30, 2020, of $ 3.5 million and $ 5.3 million, respectively, represent costs directly associated with the business transformation initiative that, in accordance with GAAP, cannot be capitalized.

Over the course of this initiative, we anticipate incurring approximately $ 60 - 70 million of total costs, which includes $ 13 - 16 million of non-capitalizable costs, $ 7 - 8 million of which we expect to be incurred in 2020.

The effective tax rates, including discrete items, were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

11 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

The below table provides a reconciliation between our reported effective tax rates and the EAETR.

Three Months Ended June 30,

Three Months Ended September 30,

In millions, except percentages Before tax Tax Effective tax rate % impact Before tax Tax Effective tax rate % impact

4 unchanged sentences

Acquisition and other-related costs (2)

0.4 0.1 0.8 0.3

Other tax only discrete items

3 unchanged sentences

Quarterly effect of changes in the EAETR 20.3 % 22.6 %

Six Months Ended June 30,

Nine Months Ended September 30,

In millions, except percentages Before tax Tax Effective tax rate % impact Before tax Tax Effective tax rate % impact

2 unchanged sentences

Restructuring and other (income) charges, net (1)

8.0 1.7 2.0 0.4

Acquisition and other-related costs (2)

5 unchanged sentences

_______________

(1) See Note 14 for more information on our restructuring and other (income) charges, net.

(2) See Note 4 for more information on our acquisition and other-related costs.

(2) Decrease in EAETR for the six months ended June 30, 2020, as compared to June 30, 2019, is due to a change in the mix of forecasted earnings in various tax jurisdictions with varying rates, offset by a large reduction in acquisition related costs and excess stock compensation benefit.

At June 30, 2020 and December 31, 2019, we had deferred tax assets of $ 9.8 million and $ 13.0 million, respectively, resulting from certain historical net operating losses from our Brazilian operations and U.S.

(3) Decrease in EAETR for the nine months ended September 30, 2020, as compared to September 30, 2019, is due to a change in the mix of forecasted earnings in various tax jurisdictions with varying rates, reduction of the officer’s compensation limitation due to forfeited equity awards already disallowed for tax purposes, as well as an increased benefit due to the generation of additional state tax credits as a result of the new corporate headquarters.

At September 30, 2020 and December 31, 2019, we had deferred tax assets of $ 9.8 million and $ 13.0 million, respectively, resulting from certain historical net operating losses from our Brazilian operations and U.S.

state tax credits for which a valuation allowance has been established.

1 unchanged sentence

In evaluating the realizability of these deferred tax assets, we consider projected future taxable income and tax planning strategies in making our assessment.

As of June 30, 2020, we cannot objectively assert that these deferred tax assets are more likely than not to be realized and therefore we have maintained a valuation allowance.

As of September 30, 2020, we cannot objectively assert that these deferred tax assets are more likely than not to be realized and therefore we have maintained a valuation allowance.

We intend to continue maintaining a valuation allowance on these deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

A release of all or a portion of the valuation allowance could be possible, if we determine that sufficient positive evidence becomes available to allow us to reach a conclusion that the valuation allowance will no longer be needed.

A release of the valuation allowance would result in the recognition of certain deferred tax assets and a reduction to income tax expense for the period the release is recorded.

However, the exact timing and amount of the valuation allowance release are subject to change based on the level of profitability that we are able to actually achieve.

A release of the valuation allowance would result in the recognition of certain deferred tax assets and a reduction to income tax

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

expense for the period the release is recorded.

However, the exact timing and amount of the valuation allowance release are subject to change based on the level of profitability that we are able to actually achieve.

Commitments and Contingencies

3 unchanged sentences

Segment Information

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

In millions 2020 2019 2020 2019

24 unchanged sentences

(3) Income (charges) for all periods presented relate to restructuring activity and costs associated with the business transformation initiative.

For the three and six months ended June 30, 2020, charges of $ 2.7 million and $ 2.9 million relate to the Performance Material segment, respectively, and charges of $ 4.6 million and $ 4.9 million related the Performance Chemicals segment.

For the three and six months ended June 30, 2019, all charges relate to the Performance Chemicals segment.

For the three and nine months ended September 30, 2020, charges of $ 2.6 million and $ 5.4 million relate to the Performance Materials segment, respectively, and charges of $ 2.9 million and $ 7.9 million relate to the Performance Chemicals segment.

For the three and nine months ended September 30, 2019, all charges relate to the Performance Chemicals segment.

For more detail on the charges incurred see Note 14 within these condensed consolidated financial statements.

3 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

Earnings (Loss) per Share

2 unchanged sentences

The calculation of diluted net income per share excludes all antidilutive common shares.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

In millions, except share and per share data 2020 2019 2020 2019

8 unchanged sentences

The following average number of potential common shares were antidilutive, and therefore, were not included in the diluted earnings per share calculation:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

In thousands 2020 2019 2020 2019

Average number of potential common shares - antidilutive 173 118 205 103

Subsequent Event

2020 Senior Notes

On October 28, 2020, we issued $ 550.0 million aggregate principal amount of 3.875 percent senior unsecured notes due 2028 (the “Notes”).

The Notes were issued pursuant to an indenture dated as of October 28, 2020 (the “Indenture”), by and among Ingevity, the subsidiary guarantors party thereto and U.S.

Bank National Association, as trustee.

The Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A and to certain non-U.S.

persons outside the U.S.

pursuant to Regulation S under the Securities Act of 1933, as amended (the “Securities Act”).

The Notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the U.S.

absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws.

The net proceeds from the sale of the Notes, after deducting anticipated financing fees of $ 8 million were approximately $ 542 million.

We intend to use the net proceeds from the sale of the Notes to repay our existing $ 375.0 million term loan facility due in August 2022, with the remainder being utilized to repay outstanding balances under our revolving credit facility.

Interest payments on the Notes are due semiannually in arrears on November 1st and May 1st of each year, beginning on May 1, 2021, at a rate of 3.875 percent per year.

The Notes will mature on November 1, 2028.

Ingevity Corporation

Notes to the Condensed Consolidated Financial Statements

September 30, 2020

Revolving Credit Facility

On October 28, 2020, we entered into Amendment no.

5 (the “Amendment no.

5") to our existing credit agreement, dated as of March 7, 2016 (“Credit Agreement”) (as amended, supplemented or otherwise modified prior to the date hereof, including pursuant to Amendment no.

4, dated as of March 7, 2019, Amendment no.

3, dated as of March 7, 2019, the Incremental Facility Agreement and Amendment no.

2, dated as of August 7, 2018, the Incremental Facility Agreement and Amendment No.

1, dated as of August 21, 2017, and the Credit Agreement).

Among other things, Amendment no.

5 extends the maturity date with respect to our revolving credit facility from August 7, 2023 to October 28, 2025 and reduced the aggregate principal amount of revolving commitments thereunder from $ 750.0 million to $ 500.0 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements