What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-07-29 compared with 2021-04-29 · 126 added, 88 removed, 226 unchanged (49% of the section changed)

11 unchanged sentences

We caution readers that a forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement.

Such risks and uncertainties include, among others, those discussed in Part I, Item 1A of our 2020 Annual Report, as well as in our unaudited condensed consolidated financial statements, related notes, and the other information appearing elsewhere in this report and our other filings with the SEC.

Such risks and uncertainties include, among others, those discussed in Part I, Item 1A of our 2020 Annual Report and Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as well as in our unaudited condensed consolidated financial statements, related notes, and the other information appearing elsewhere in this report and our other filings with the SEC.

We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances.

5 unchanged sentences

• our reported results could be adversely affected by currency exchange rates and currency devaluation could impair our competitiveness;

• our operations outside the U.S.

require us to comply with a number of U.S.

• our operations require us to comply with a number of U.S.

and foreign regulations, violations of which could have a material adverse effect on our financial condition and results of operations;

8 unchanged sentences

• our Performance Chemicals segment is highly dependent on crude tall oil ("CTO") which is limited in supply;

• lack of access to sufficient CTO would impact our ability to produce CTO-based products;

• a prolonged period of low energy prices may materially impact our results of operations;

5 unchanged sentences

• we are dependent upon attracting and retaining key personnel;

• from time to time, we are called upon to protect our intellectual property rights and proprietary information though litigation and other means;

• from time to time, we are called upon to protect our intellectual property rights and proprietary information through litigation and other means;

• if we are unable to protect our intellectual property and other proprietary information, we may lose significant competitive advantage;

1 unchanged sentence

• complications with the design or implementation of our new enterprise resource planning system;

• government policies and regulations, including, but not limited to, those affecting the environment, climate change, tax policies, tariffs and the chemicals industry;

• changes in government policies and regulations, including, but not limited to, those affecting the environment, climate change, tax policies, tariffs and the chemicals industry;

• losses due to lawsuits arising out of environmental damage or personal injuries associated with chemical or other manufacturing processes.

3 unchanged sentences

Recent Developments

During the first quarter of 2021, two collective bargaining unit agreements ("CBA") expired and new contracts were negotiated.

Our Crossett, Arkansas Performance Chemicals' manufacturing facility negotiated a new three year agreement with the International Association of Machinists and Aerospace Workers Union ("IAM") that was ratified on April 13, 2021, with an effective date of March 1, 2021.

Also, at our Covington, Virginia Performance Materials' manufacturing facility, the Company and Covington Local Union 464 of the International Brotherhood of Electrical Workers ("IBEW") negotiated a new four year contract that was ratified on April 8, 2021, with an effective date of January 15, 2021.

In addition, the CBA with Covington Local 675 affiliated with The Association of Western Pulp and Paper Workers ("AWPPW") will expire on December 1, 2021.

Negotiations with the Covington AWPPW are expected to begin in the fourth quarter of 2021.

Strategic Investment

During the three months ended June 30, 2021, our Performance Materials segment acquired a strategic equity investment in a privately-held company for $16.5 million.

Our strategic equity investment is accounted for under the equity method of accounting, which requires us to record our initial investment at cost.

Subsequently, we will recognize, through the condensed consolidated statements of operations (Other (income) expense, net) and as an adjustment to the investment balance (Other assets), our proportionate share of undistributed earnings or loss and the amortization of basis differences.

At each reporting period, we will evaluate our investment to determine whether events or changes in business circumstances indicate that the carrying value of the investment may not be fully recoverable.

The carrying value of our strategic equity investment was $16.5 million at June 30, 2021 and zero at December 31, 2020.

There were no adjustments to the carrying value of our strategic equity investment for impairment or observable price changes during the three months ended June 30, 2021.

Results of Operations

Three Months Ended March 31,

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

In millions 2021 2020 2021 2020

11 unchanged sentences

Net income (loss) $ 44.3 $ 20.2 $ 93.0 $ 65.5

Net sales and Gross profit

The table below shows the 2021 Net sales and percentage variances from 2020:

2 unchanged sentences

effect Price/Mix Volume

Three months ended March 31, 2021 $ 320.3 11% 1% 1% 9%

Three Months Ended March 31, 2021 vs.

Three months ended June 30, 2021 $ 358.4 32% 1% 4% 27%

Six months ended June 30, 2021 $ 678.7 21% 1% 3% 17%

Three Months Ended June 30, 2021 vs.

Net sales increase of $87.8 million in 2021 was primarily driven by favorable volume growth in both of our segments for a combined impact of $73.1 million and favorable pricing and product mix of $12.0 million.

Additionally, favorable foreign currency exchange impacted Net sales by $2.7 million, primarily related to euro and Chinese renminbi denominated sales.

Gross profit increase of $55.9 million was driven by favorable sales volume of $38.9 million and favorable pricing and product mix of $10.1 million.

Also contributing to the increase was lower manufacturing costs of $6.0 million, driven by higher plant throughput, offset slightly by increased freight and warehousing costs, as a result of increased volume demand, and favorable foreign currency exchange of $0.9 million.

Refer to the Segment Operating Results section included within this MD&A for more information on the drivers to the changes in gross profit period over period for both segments.

Six Months Ended June 30, 2021 vs.

Net sales increase of $119.9 million in 2021 was primarily driven by favorable volume growth in both of our segments for a combined impact of $98.7 million and favorable pricing and product mix of $15.3 million.

Additionally, favorable foreign currency exchange impacted Net sales by $5.9 million, primarily related to euro and Chinese renminbi denominated sales.

Gross profit increase of $67.5 million was driven by favorable sales volume of $52.4 million, favorable pricing and product mix of $14.9 million, and favorable foreign currency exchange of $1.7 million.

These positive impacts were slightly offset by increased manufacturing costs of $7.5 million related to higher freight, raw material inflation, energy, and depreciation expenses.

These positive impacts were slightly offset by higher net manufacturing costs of $1.5 million driven by freight, raw material price inflation, energy costs, and depreciation expenses, partially offset by higher plant throughput as a result of increased volume demand.

Refer to the Segment Operating Results section included within this MD&A for more information on the drivers to the changes in gross profit period over period for both segments.

Selling, general and administrative expenses

Three Months Ended March 31, 2021 vs.

Selling, general and administrative expenses ("SG&A") increased $1.5 million in 2021 compared to 2020.

The change in SG&A was driven by higher employee-related costs of $5.6 million, of which $4.2 million related to a one-time benefit recorded in 2020.

The higher employee-related costs were partially offset by $1.4 million of decreased legal costs and $2.7 million from reduced travel and other miscellaneous costs, primarily driven by the COVID-19 pandemic.

SG&A expenses as a percentage of Net sales decreased slightly to 12.5 percent for the three months ended March 31, 2021 from 13.4 percent in 2020, driven by the lower spending due to COVID-19 and higher sales.

Three Months Ended June 30, 2021 vs.

Selling, general and administrative expenses ("SG&A") increased $13.0 million in 2021 compared to the significantly COVID-19 impacted prior year.

The change in SG&A was driven by higher employee-related costs of $10.5 million, increased amortization expense of $1.3 million, and higher travel and other miscellaneous expense of $1.2 million.

SG&A expenses as a percentage of Net sales increased slightly to 13.3 percent for the three months ended June 30, 2021 from 12.7 percent in 2020, driven by lower employee-related and travel costs in 2020 due to the impact of COVID-19.

Six Months Ended June 30, 2021 vs.

SG&A increased $14.5 million in 2021 compared to 2020.

The change in SG&A was driven by higher employee-related costs of $16.1 million, of which $4.2 million related to a one-time benefit recorded in 2020, and increased amortization expense of $1.6 million.

The higher employee-related costs and amortization expense were partially offset by reduced legal, travel and other miscellaneous costs of $3.2 million.

SG&A expenses as a percentage of Net sales decreased slightly to 12.9 percent for the six months ended June 30, 2021 from 13.1 percent in 2020, driven by the lower spending in 2020 due to COVID-19 and higher sales in 2021.

Research and technical expenses

Three Months Ended March 31, 2021 vs.

Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, decreasing to 2.1 percent from 2.2 percent for the three months ended March 31, 2021 and 2020, respectively.

Three Months Ended June 30, 2021 vs.

Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, decreasing to 1.6 percent from 2.0 percent for the three months ended June 30, 2021 and 2020, respectively.

Six Months Ended June 30, 2021 vs.

Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, decreasing to 1.8 percent from 2.1 percent for the six months ended June 30, 2021 and 2020, respectively.

Restructuring and other (income) charges, net

Three Months Ended March 31, 2021 vs.

Restructuring and other (income) charges, net were $3.9 million and $0.5 million for the three months ended March 31, 2021 and 2020, respectively.

Three and Six Months Ended June 30, 2021 vs.

Restructuring and other (income) charges, net were $4.3 million and $8.2 million for the three and six months ended June 30, 2021, respectively, and $7.3 million and $7.8 million for the three and six months ended June 30, 2020, respectively.

See Note 12 within the condensed consolidated financial statements for more information.

Acquisition-related costs

Three Months Ended March 31, 2021 vs.

Acquisition-related costs of $0.3 million and $1.3 million for the three months ended March 31, 2021 and 2020, respectively, were incurred in connection with the integration of Perstorp's Capa business into our Performance Chemicals segment.

Three and Six Months Ended June 30, 2021 vs.

Acquisition-related costs were $0.4 million and $0.7 million for the three and six months ended June 30, 2021, respectively, and $0.4 million and $1.7 million for the three and six months ended June 30, 2020, respectively.

For the three and six months ended June 30, 2021, charges of $0.2 million and $0.2 million relate to the acquisition of a strategic investment in the Performance Materials segment, respectively, and charges of $0.2 million and $0.5 million relate to the integration of the Perstorp Capa business into our Performance Chemicals segment, respectively.

For the three and six months ended June 30, 2020, all charges relate to the integration of the Perstorp Capa business into our Performance Chemicals segment.

Other (income) expense, net

Three Months Ended March 31, 2021 vs.

Three Months Ended March 31,

Three and Six Months Ended June 30, 2021 vs.

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

In millions 2021 2020 2021 2020

6 unchanged sentences

Interest expense, net

Three Months Ended March 31, 2021 vs.

Three Months Ended March 31,

Three and Six Months Ended June 30, 2021 vs.

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

In millions 2021 2020 2021 2020

1 unchanged sentence

Interest expense on revolving credit and term loan facilities (1)

2.0 6.3 4.2 14.0

Interest expense on senior notes (1)

9.2 3.4 18.4 6.9

Interest income associated with our Restricted investment (0.5) (0.5) (1.0) (1.0)

1 unchanged sentence

Fixed-to-fixed cross-currency interest rate swap (2)

(0.1) (0.5) (0.2) (1.3)

Other interest (income) expense, net (0.3) (0.2) (0.3) (0.4)

4 unchanged sentences

Provision (benefit) for income taxes

Three Months Ended March 31, 2021 vs.

For the three months ended March 31, 2021 and 2020, our effective tax rate was 21.2 percent and 17.9 percent, respectively.

Excluding discrete items, the effective rate was 21.4 percent compared to 20.4 percent in the three months ended March 31, 2021 and 2020, respectively.

Three and Six Months Ended June 30, 2021 vs.

For the three months ended June 30, 2021 and 2020, our effective tax rate was 39.9 percent and 20.5 percent, respectively.

Excluding discrete items, the effective rate was 20.1 percent compared to 20.8 percent in the three months ended June 30, 2021 and 2020, respectively.

For the six months ended June 30, 2021 and 2020, our effective tax rate was 31.4 percent and 18.7 percent, respectively.

Excluding discrete items, the effective rate was 20.6 percent compared to 20.5 percent in the six months ended June 30, 2021 and 2020, respectively.

An explanation of the change in the effective tax rate is presented in Note 13 to the condensed consolidated financial statements.

8 unchanged sentences

Performance Materials

In millions Three Months Ended March 31,

In millions Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Total Performance Materials - Net sales (1)

9 unchanged sentences

effect Price/Mix Volume

Three months ended March 31, 2021 $ 140.7 16 % 2 % 2 % 12 %

Three Months Ended March 31, 2021 vs.

Three months ended June 30, 2021 $ 126.0 49 % 3 % 3 % 43 %

Six months ended June 30, 2021 $ 266.7 30 % 2 % 3 % 25 %

Three Months Ended June 30, 2021 vs.

Segment net sales increase of $41.6 million in 2021 was driven by $36.4 million in volume growth, primarily in automotive products, favorable pricing and product mix of $2.4 million, and favorable foreign currency exchange of $2.8 million.

Segment EBITDA increased $12.5 million primarily due to favorable volume of $11.4 million and favorable pricing and product mix of $3.4 million.

These increases were partially offset by higher manufacturing costs of $4.2 million and increased SG&A and research and technical expenses of $0.5 million.

Segment EBITDA increased $38.0 million primarily due to favorable volume of $23.8 million, favorable pricing and product mix of $2.4 million, and lower manufacturing costs of $12.4 million due to increased plant throughput.

These increases were partially offset by increased SG&A and research and technical expenses of $5.5 million.

Favorable foreign currency exchange and increased other miscellaneous income positively impacted Segment EBITDA by $4.9 million.

Six Months Ended June 30, 2021 vs.

Segment net sales increase of $61.2 million in 2021 was driven by $50.9 million in volume growth, primarily in automotive products, favorable pricing and product mix of $5.3 million, and favorable foreign currency exchange of $5.0 million.

Segment EBITDA increased $50.5 million primarily due to favorable volume of $35.2 million, favorable pricing and product mix of $5.8 million, and lower manufacturing costs of $8.2 million due to increased plant throughput.

These increases were partially offset by increased SG&A and research and technical expenses of $6.0 million.

Favorable foreign currency exchange and increased other miscellaneous income positively impacted Segment EBITDA by $7.3 million.

Performance Chemicals

Three Months Ended March 31,

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

In millions 2021 2020 2021 2020

1 unchanged sentence

Industrial Specialties product line (1)

120.1 90.7 232.2 200.8

Engineered Polymers product line 44.6 31.6 90.7 67.9

9 unchanged sentences

effect Price/Mix Volume

Three months ended March 31, 2021 $ 179.6 7 % 1 % — % 6 %

Three Months Ended March 31, 2021 vs.

Segment net sales increase of $12.5 million was driven mainly by favorable volume of $11.1 million, consisting of volume increases in engineered polymers ($8.4 million) and industrial specialties ($3.3 million), offset slightly by volume declines in pavement technologies products ($0.6 million).

Three months ended June 30, 2021 $ 232.4 25 % — % 5 % 20 %

Six months ended June 30, 2021 $ 412.0 17 % — % 3 % 14 %

Three Months Ended June 30, 2021 vs.

Segment net sales increase of $46.2 million was driven mainly by favorable volume of $36.7 million, consisting of volume increases in industrial specialties products ($25.2 million), engineered polymers products ($10.2 million), and pavement technologies products ($1.3 million).

Segment net sales were also impacted by favorable pricing implemented during the quarter in response to raw material inflation as well as product sales mix for a net impact of $9.6 million.

The net price/mix impact was driven by increases in pavement technologies ($1.2 million) and engineered polymers ($1.2 million), partially offset by a decline in industrial specialties ($1.8 million).

The net price/mix impact was driven by increases in engineered polymers ($4.4 million), industrial specialties ($3.3 million), and pavement technologies ($1.9 million).

Additionally, unfavorable foreign currency exchange impacted Net sales by $0.1 million.

Segment EBITDA increased by $12.5 million primarily due to an increase in volume of $15.1 million, favorable pricing and product mix of $7.7 million, and increased other miscellaneous income of $1.8 million.

These favorable operating results were offset slightly by higher manufacturing costs of $4.4 million due to higher energy and freight costs, higher SG&A expenses of $6.4 million, and unfavorable foreign currency exchange of $1.3 million.

Six Months Ended June 30, 2021 vs.

Segment net sales increase of $58.7 million was driven mainly by favorable volume of $47.8 million, consisting of volume increases in industrial specialties products ($28.5 million), engineered polymers products ($18.6 million), and pavement technologies products ($0.7 million).

Segment net sales were also impacted by favorable pricing implemented during the first half of 2021 in response to raw material inflation as well as product sales mix for a net impact of $10.0 million.

The net price/mix impact was driven by increases in engineered polymers ($5.6 million), pavement technologies ($3.1 million), and industrial specialties ($1.3 million).

Additionally, favorable foreign currency exchange impacted Net sales by $0.9 million.

Segment EBITDA increased by $0.7 million primarily due to an increase in volume of $2.1 million, favorable pricing and product mix of $1.4 million, and decreased other miscellaneous costs of $0.2 million.

Segment EBITDA increased by $13.2 million primarily due to an increase in volume of $17.2 million and favorable pricing and product mix of $9.1 million.

These favorable operating results were offset slightly by higher manufacturing costs of $5.7 million due to higher energy and freight costs, higher SG&A expenses of $6.7 million, and unfavorable foreign currency exchange of $0.7 million.

Use of Non-GAAP Financial Measure - Adjusted EBITDA

Ingevity has presented the financial measure, Adjusted EBITDA, defined below, which has not been prepared in accordance with GAAP and has provided a reconciliation to net income, the most directly comparable financial measure calculated in accordance with GAAP.

Adjusted EBITDA is not meant to be considered in isolation or as a substitute for Net income, the most directly comparable financial measure calculated in accordance with GAAP.

Ingevity has presented the financial measure, Adjusted EBITDA, defined below, which has not been prepared in accordance with GAAP, and has provided a reconciliation to net income (loss), the most directly comparable financial measure calculated in accordance with GAAP.

Adjusted EBITDA is not meant to be considered in isolation or as a substitute for Net income (loss), the most directly comparable financial measure calculated in accordance with GAAP.

Adjusted EBITDA is utilized by management as a measure of profitability.

together with our financial results computed in accordance with GAAP, provides a more complete understanding of the factors and trends affecting our historical financial performance and projected future results.

We believe this non-GAAP financial measure provides management as well as investors, potential investors, securities analysts and others with useful information to evaluate the performance of the business, because such measure, when viewed together with our financial results computed in accordance with GAAP, provides a more complete understanding of the factors and trends affecting our historical financial performance and projected future results.

We believe Adjusted EBITDA is a useful measure because it excludes the effects of investment activities as well as non-operating activities.

Adjusted EBITDA is defined as net income (loss) plus provision (benefit) for income taxes, interest expense, net, depreciation, amortization, restructuring and other (income) charges, net, acquisition and other-related costs, and pension and postretirement settlement and curtailment (income) charges, net.

Adjusted EBITDA is defined as net income (loss) plus interest expense, net, provision (benefit) for income taxes, depreciation, amortization, restructuring and other (income) charges, net, acquisition and other-related costs, and pension and postretirement settlement and curtailment (income) charges, net.

This non-GAAP measure is not intended to replace the presentation of financial results in accordance with GAAP and investors should consider the limitations associated with these non-GAAP measures, including the potential lack of comparability of these measures from one company to another.

1 unchanged sentence

Reconciliation of Net Income (Loss) to Adjusted EBITDA

Three Months Ended March 31,

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

In millions 2021 2020 2021 2020

10 unchanged sentences

Adjusted EBITDA

Three Months Ended March 31, 2021 vs.

Three and Six Months Ended June 30, 2021 vs.

The factors that impacted adjusted EBITDA period to period are the same factors that affected earnings discussed in the Results of Operations and Segment Operating Results sections included within this MD&A.

7 unchanged sentences

*Calculated as Operating Cash Flow less Capital Expenditures

While our performance continues to improve, we are still carefully watching issues related to transportation and logistics, raw material inflation, and automotive material disruptions that could become stronger headwinds throughout the rest of the year.

Based on our strong first quarter and continued optimism, we feel confident raising our guidance for sales to $1.275 billion - $1.325 billion and Adjusted EBITDA to $410 million - $430 million.

Additionally, we continue to expect capital expenditures of $100 million to $120 million and operating cash flow for the year of $300 million to $320 million.

Based on our solid performance in the second quarter and first half of the year and the continued robust demand for our products, we are increasing our fiscal year 2021 guidance for sales to be between $1.32 and $1.36 billion and adjusted EBITDA to between $425 and $440 million.

We expect issues related to the availability and rising costs of logistics, raw materials inflation and automotive sector input disruptions to be ongoing headwinds throughout the rest of the year.

We are paying close attention to supply and demand in the market and will pass through costs to ensure we extract the optimal value for our products.

Despite these macro headwinds, we see reason for optimism.

We believe Performance Materials will benefit in 2022 and beyond from the expected rebound in automotive production as a result of pent-up vehicle demand.

We also expect continued robust demand for our Performance Chemicals products and will pursue further improved pricing to offset higher raw materials costs.

A reconciliation of net income to adjusted EBITDA as projected for 2021 is not provided.

3 unchanged sentences

additional pension and postretirement settlement and curtailment (income) charges;

and revisions due to future guidance and assessment of U.S.

and revisions due to legislative tax rate changes.

Additionally, discrete tax items could drive variability in our projected effective tax rate.

3 unchanged sentences

The primary source of liquidity for our business is the cash flow provided by operating activities.

We expect our cash flow provided by operations combined with cash on hand and available capacity under our revolving credit facility to be sufficient to meet our working capital needs.

We expect our cash flow provided by operations combined with cash on hand and available capacity under our revolving credit facility to be sufficient to to fund our planned operations and meet our interest and other contractual obligations for at least the next twelve months.

As of June 30, 2021, our undrawn capacity under our revolving credit facility was $497.3 million.

Over the next twelve months, we expect to make interest payments, capital expenditures, expenditures related to our business transformation initiative, principal repayments, purchases pursuant to our stock repurchase program, income tax payments, and to incur additional spending associated with our Performance Materials' intellectual property litigation.

In addition, from time to time we may repurchase any of our outstanding 4.50 percent senior unsecured notes due in 2026 in open market or privately negotiated transactions or otherwise.

We believe our sources of liquidity will be sufficient to fund our planned operations and meet our interest and other contractual obligations for at least the next twelve months.

As of March 31, 2021, our undrawn capacity under our revolving credit facility was $497.7 million.

In addition, we also evaluate and consider strategic acquisitions, and joint ventures, as well as other transactions to create stockholder value and enhance financial performance.

Such transactions may require cash expenditures.

In connection with such transactions, or to fund other anticipated uses of cash, we may modify our existing revolving credit and term loan facilities, seek additional debt financing, issue equity securities, or some combination thereof.

Cash and cash equivalents totaled $237.8 million at March 31, 2021.

In addition, we may also evaluate and consider strategic acquisitions, joint ventures, or other transactions to create stockholder value and enhance financial performance.

In connection with such transactions, or to fund other anticipated uses of cash, we may modify our

existing revolving credit and term loan facilities, seek additional debt financing, issue equity securities, or some combination thereof.

Cash and cash equivalents totaled $233.3 million at June 30, 2021.

We continuously monitor deposit concentrations and the credit quality of the financial institutions that hold our cash and cash equivalents, as well as the credit quality of our insurance providers, customers, and key suppliers.

Due to the global nature of our operations, a portion of our cash is held outside the U.S.

The cash and cash equivalents balance at March 31, 2021 included $76.0 million held by our foreign subsidiaries.

The cash and cash equivalents balance at June 30, 2021 included $86.0 million held by our foreign subsidiaries.

Cash and earnings of our foreign subsidiaries are generally used to finance our foreign operations and capital expenditures.

We believe that our foreign holdings

of cash will not have a material adverse impact on our U.S.

We believe that our foreign holdings of cash will not have a material adverse impact on our U.S.

If these earnings were distributed, such amounts would be subject to U.S.

7 unchanged sentences

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 March 31, 2021, we repurchased $39.4 million in common stock, representing 527,550 shares of our common stock at a weighted average cost per share of $74.64.

At March 31, 2021, $372.6 million remained unused under our Board-authorized repurchase program.

During the three and six months ended June 30, 2021, we repurchased $28.7 million and $68.1 million in common stock, representing 356,116 and 883,666 shares of our common stock at a weighted average cost per share of $80.50 and $77.00, respectively.

At June 30, 2021, $344.0 million remained unused under our Board-authorized repurchase program.

Capital Expenditures

Projected 2021 capital expenditures are $100 - $120 million.

We have no material commitments associated with these projected capital expenditures as of March 31, 2021 .

Cash flow comparison of Three Months Ended March 31, 2021 and 2020

Three Months Ended March 31,

We have no material commitments associated with these projected capital expenditures as of June 30, 2021 .

Cash flow comparison of Six Months Ended June 30, 2021 and 2020

Six Months Ended June 30,

In millions 2021 2020

3 unchanged sentences

Cash flows provided by (used in) operating activities

During the first three months of 2021, cash flow provided by operations decreased primarily due to increased accounts receivable related to the increase in net sales, offset slightly by a smaller inventory build compared to 2020.

Below provides a description of the changes to working capital during the first three months of 2021 (i.e.

During the first six months of 2021, cash flow provided by operations increased primarily due to higher earnings driven by the increase in net sales.

The increase in net sales also drove higher accounts receivable and corresponding plant production that resulted in higher inventory levels, which negatively impacted the cash flow provided by operations compared to 2020.

Below provides a description of the changes to working capital during the first six months of 2021 (i.e.

current assets and current liabilities).

Current Assets and Liabilities

In millions March 31, 2021 December 31, 2020

In millions June 30, 2021 December 31, 2020

Cash and cash equivalents $ 233.3 $ 257.7

3 unchanged sentences

Total current assets $ 669.6 $ 628.7

Current assets as of March 31, 2021 increased $13.7 million compared to December 31, 2020, primarily due to increases in Accounts receivable, net and Inventories, net.

Accounts receivable, net as of March 31, 2021, increased $20.4 million due to increased sales during the quarter ended March 31, 2021 compared to the quarter ended December 31, 2020.

Inventories increased by $15.2 million mainly due to the build of inventory for forecasted sales.

These increases were offset by

a decrease in Cash and cash equivalents of $19.9 million and in Prepaid and other current assets of $2.0 million compared to the balances at December 31, 2020.

In millions March 31, 2021 December 31, 2020

Current assets as of June 30, 2021 increased $40.9 million compared to December 31, 2020, primarily due to increases in Accounts receivable, net and Inventories, net.

Accounts receivable, net as of June 30, 2021, increased $29.3 million due to increased sales during the quarter ended June 30, 2021 compared to the quarter ended December 31, 2020.

Inventories increased by $25.5 million mainly due to the build of inventory to support forecasted sales.

These increases were offset by a decrease in Cash and cash equivalents of $24.4 million compared to the balance at December 31, 2020.

Additionally, Prepaid and other current assets increased by $10.5 million, primarily related to prepaid insurance and services.

In millions June 30, 2021 December 31, 2020

Accounts payable $ 115.6 $ 104.2

5 unchanged sentences

Total current liabilities $ 232.8 $ 223.4

Current liabilities as of March 31, 2021, increased by $1.1 million compared to December 31, 2020, primarily driven by an increase in Accounts payable and Income taxes payable.

This increase was offset partially by decreases in Accrued payroll and employee benefits, Current operating lease liabilities, Notes payable and current maturities of long-term debt, and Accrued expenses.

Current liabilities as of June 30, 2021, increased by $9.4 million compared to December 31, 2020, primarily driven by an increase in Accounts payable and Accrued payroll and employee benefits.

This increase was offset partially by decreases in Current operating lease liabilities, Notes payable and current maturities of long-term debt, and Accrued expenses.

Cash flows provided by (used in) investing activities

Cash used by investing activities in the three months ended March 31, 2021 was $17.3 million and was primarily driven by capital expenditures.

In the three months ended March 31, 2021 and 2020, capital spending included the base maintenance capital supporting ongoing operations and growth and cost improvement spending primarily related to our business transformation initiative (see Note 12 within the condensed consolidated financial statements for more information).

Capital expenditure categories Three Months Ended March 31,

Cash used by investing activities in the six months ended June 30, 2021 was $57.2 million and was primarily driven by capital expenditures.

In the six months ended June 30, 2021 and 2020, capital spending included the base maintenance capital supporting ongoing operations and growth and cost improvement spending primarily related to our business transformation initiative (see Note 12 within the condensed consolidated financial statements for more information).

Also, during six months ended June 30, 2021, we acquired a strategic equity investment in a privately-held company for $16.5 million.

Capital expenditure categories Six Months Ended June 30,

In millions 2021 2020

4 unchanged sentences

Cash flows provided by (used in) financing activities

Cash used in financing activities in the three months ended March 31, 2021 was $52.1 million and was driven by the repurchase of common stock of $39.4 million, payments on long-term borrowings of $9.4 million, and tax payments related to withholdings on restricted stock unit vestings of $2.3 million.

Cash provided by financing activities in the three months ended March 31, 2020 was $203.2 million and was primarily driven by net borrowings of $243.8 million from our revolving credit facility, offset by payments on long-term borrowings of $4.7 million, tax payments related to withholdings on restricted stock unit vestings of $3.1 million, and the repurchase of common stock of $32.4 million.

Cash used in financing activities in the six months ended June 30, 2021 was $83.6 million and was driven by the repurchase of common stock of $68.1 million, payments on long-term borrowings of $14.1 million, and tax payments related to withholdings on restricted stock unit vestings of $2.3 million.

Cash provided by financing activities in the six months ended June 30, 2020 was $45.9 million and was primarily driven by net borrowings of $88.8 million from our revolving credit facility, offset by payments on long-term borrowings of $9.4 million, tax payments related to withholdings on restricted stock unit vestings of $3.0 million, and the repurchase of common stock of $32.4 million.

Off-Balance Sheet Arrangements

2 unchanged sentences

Information related to our contractual commitments at December 31, 2020 can be found in a table included within Part II, Item 7 of our 2020 Annual Report.

Except as described above, there have been no material changes to our contractual commitments during the three months ended March 31, 2021.

Except as described above, there have been no material changes to our contractual commitments during the six months ended June 30, 2021.

New Accounting Guidance

9 unchanged sentences

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 2. Management’s Discussion and Analysis