What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-02-24 compared with 2021-02-19 · 157 added, 288 removed, 281 unchanged (61% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of Ingevity’s financial condition and results of operations (“MD&A”) should be read in conjunction with Item 8.

Financial Statements and Suppl ementary Data .

Financial Statements and Supplementary Data .

Investors are cautioned that the forward-looking statements contained in this section and other parts of this Annual Report on Form 10-K involve both risk and uncertainty.

2 unchanged sentences

See "Cautionary Statements about Forward-Looking Statements" at the beginning of this Annual Report on Form 10-K for further discussion.

Ingevity Corporation ("Ingevity," "the company", "we," "us" or "our") is a leading global manufacturer of specialty chemicals and high performance activated carbon materials.

Ingevity Corporation is a leading global manufacturer of specialty chemicals and high performance activated carbon materials.

We provide innovative solutions to meet our customers’ unique and demanding requirements through proprietary formulated products.

We report in two business segments, Performance Materials and Performance Chemicals.

Our Performance Materials segment consists of our automotive technologies and process purification product lines.

Performance Materials manufactures products in the form of powder, granular, extruded pellets, extruded honeycombs, and activated carbon sheets.

Automotive technologies products are sold into the gasoline vapor emission control applications within the automotive industry, while process purification products are sold into the food, water, beverage, and chemical purification industries.

Our Performance Chemicals segment consists of our pavement technologies, oilfield technologies, industrial specialties, and engineered polymers product lines.

Our Performance Materials segment manufactures products in the form of powder, granular, extruded pellets, extruded honeycombs, and activated carbon sheets.

Automotive technologies products are sold into gasoline vapor emission control applications within the automotive industry, while process purification products are sold into the food, water, beverage, and chemical purification industries.

Our Performance Chemicals segment consists of our pavement technologies, industrial specialties, and engineered polymers product lines.

Performance Chemicals manufactures products derived from crude tall oil ("CTO") and lignin extracted from the kraft pulping process as well as caprolactone monomers and derivatives derived from cyclohexanone and hydrogen peroxide.

Performance Chemicals products serve as critical inputs used in a variety of high performance applications, including warm mix paving, pavement preservation, and pavement reconstruction and recycling (pavement technologies product line), oil well service additives and oil production and downstream application (oilfield technologies product line), adhesives, agrochemicals, lubricants, printing inks, and industrial intermediates (industrial specialties product line), coatings, resins, elastomers, adhesives, bio-plastics, and medical devices (engineered polymers product line).

Performance Chemicals products serve as critical inputs used in a variety of high performance applications, including warm mix paving, pavement preservation, and pavement reconstruction and recycling (pavement technologies product line), adhesives, agrochemicals, lubricants, printing inks, industrial intermediates and oilfield (industrial specialties product line), coatings, resins, elastomers, adhesives, bio-plastics, and medical devices (engineered polymers product line).

Recent Developments

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 “2020 Notes”) in a private placement pursuant to an indenture dated as of October 28, 2020, by and among Ingevity, the subsidiary guarantors party thereto and U.S.

Bank National Association, as trustee.

The net proceeds from the sale of the 2020 Notes, after deducting deferred financing fees of $8.8 million, were used to repay our $375.0 million term loan from 2019, with the remainder being utilized to repay outstanding balances under our revolving credit facility.

Interest payments on the 2020 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 2020 Notes will mature on November 1, 2028.

Revolving Credit Facility Amendment

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

5 to our existing credit agreement, dated as of March 7, 2016.

Among other things, Amendment No.

5 extended 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.

Coronavirus Pandemic

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide.

COVID-19 has led to adverse impacts on the U.S.

and global economies, and created uncertainty regarding potential impacts to our supply chain, operations, and customer demand.

We have been classified as an essential business in the jurisdictions that have made this determination to date, allowing us to continue operations.

However, our facilities - as well as the operations of our suppliers, customers, and third-party sales agents and distributors - have been, and will continue to be, disrupted by governmental and private sector responses to COVID-19.

This includes business shutdowns, work-from-home orders and social distancing protocols, travel or health-related restrictions, as well as quarantines, self-isolations, and disruptions to transportation channels.

On March 27, 2020, the U.S.

government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which includes modifications to the limitation on business interest expense and net operating loss provisions, and provided a payment delay of the employer's portion of U.S.

Social Security taxes during 2020, after the date of enactment.

We deferred $4.7 million of employer U.S.

Social Security taxes due in 2020, with 50 percent due by December 31, 2021 and the remaining 50 percent by December 31, 2022.

The CARES Act is not expected to have a material impact on our consolidated financial statements.

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, all of which was repaid by year end.

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.

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 16 to the consolidated financial statements included in Part II Item 8 of this Form 10-K.

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 and the effectiveness of vaccines.

COVID-19 has impacted, and will continue to impact, our results of operations, financial position, and liquidity.

On July 19, 2018, Ingevity filed suit against BASF Corporation (“BASF”) in the United States District Court for the District of Delaware (the “Delaware Proceeding”) alleging BASF infringed Ingevity’s patent covering canister systems used in the control of automotive gasoline vapor emissions (U.S.

RE38,844) (the “844 Patent”).

On February 14, 2019, BASF asserted counterclaims against Ingevity in the Delaware Proceeding, alleging two claims for violations of U.S.

antitrust law (one for exclusive dealing and the other for tying) as well as a claim for tortious interference with an alleged prospective business relationship between BASF and a BASF customer (the “BASF Counterclaims”).

The BASF Counterclaims relate to Ingevity’s enforcement of the 844 Patent and Ingevity’s entry into several supply agreements with customers of its fuel vapor canister honeycombs.

District Court dismissed Ingevity’s patent infringement claims on November 18, 2020, and the case proceeded to trial on the BASF Counterclaims in September 2021.

On September.

15, 2021, a jury in the Delaware Proceeding issued a verdict in favor of BASF on the BASF Counterclaims and awarded BASF damages of approximately $28.3 million, which will be trebled under U.S.

antitrust law to approximately $85 million when the court enters judgment.

In addition, BASF may seek pre- and post-judgment interest and attorneys’ fees and costs in amounts that they will have to support at a future date.

We disagree with the verdict, including the court’s application of the law, and we intend to seek judgment as a matter of law in the Delaware Proceeding post-trial briefing stage and on appeal, if necessary.

In addition, we intend to challenge the U.S.

District Court’s November 2020 dismissal of our patent infringement claims against BASF.

Ingevity believes in the strength of its intellectual property and the merits of its position and intends to pursue all legal relief available to challenge these outcomes in the Delaware Proceeding.

Final resolution of these matters could take up to eighteen months.

As a result of the jury's $85.0 million verdict, we have accrued the full amount as of December 31, 2021.

The amount accrued for this matter is included in Other liabilities on the consolidated balance sheet as of December 31, 2021, and the charge is included in Other (income) expense, net on the consolidated statement of operations for the year ended December 31, 2021.

The amount of any liability we may ultimately incur related to the Delaware Proceeding could be more or less than the amount accrued.

Results of Operations

Years Ended December 31,

In millions, except per share data 2020 2019 2018

In millions 2021 2020 2019

Net sales $ 1,391.5 $ 1,216.1 $ 1,292.9

3 unchanged sentences

Research and technical expenses 26.3 22.6 19.7

Separation costs — — —

Restructuring and other (income) charges, net 16.2 18.5 1.8

6 unchanged sentences

Net income (loss) $ 118.1 $ 181.4 $ 183.7

Net income (loss) attributable to noncontrolling interests

Net income (loss) attributable to Ingevity stockholders $ 181.4 $ 183.7 $ 169.1

The table below shows 2020 and 2019 Net sales and percentage variances from 2019 and 2018, respectively.

Percentage change vs.

In millions, except percentages Net sales Total change Currency

effect Price/Mix Volume

Year Ended December 31, 2020 $ 1,216.1 (6)% —% 1% (7)%

Year Ended December 31, 2019 1,292.9 14% (1)% 4% 11%

The table below shows 2021 and 2020 Net sales and variances from 2020 and 2019, respectively.

In millions Prior year Net sales Volume Price/Mix Currency effect Current year Net sales

Year Ended December 31, 2021 vs.

The sales decrease in 2020 was driven by a volume decline of $85.2 million (seven percent of sales), primarily related to a volume decline in Performance Chemicals of $89.1 million, offset slightly by a volume increase in Performance Materials of $3.9 million, favorable pricing and product mix of $7.6 million (one percent of sales) and favorable foreign exchange impacts of $0.8 million (less than one percent of sales).

$ 1,216.1 97.0 74.7 3.7 $ 1,391.5

Year Ended December 31, 2020 vs.

The sales increase in 2019 was driven primarily by a volume increase of $123.7 million (11 percent of sales).

Performance Materials and Performance Chemicals contributed $70.1 million and $53.6 million, respectively, to the volume growth during the year.

The acquisition of Caprolactone Business ("Caprolactone Acquisition"), completed in the first quarter of 2019, contributed $122.1 million to the favorable volume growth during the period.

Additionally, the favorable pricing and product mix of $43.2 million (four percent of sales) across both segments, offset partially by unfavorable foreign exchange impacts of $7.6 million (one percent of sales) resulted in the year over year Net sales increase.

$ 1,292.9 (85.2) 7.6 0.8 $ 1,216.1

Year Ended December 31, 2021 vs.

Gross profit decline of $16.5 million was driven by unfavorable sales volume impacting gross profit by $35.8 million, increased manufacturing costs of $2.3 million due to reduced plant throughput, and unfavorable foreign currency exchange of $0.8 million, which were partially offset by favorable pricing and product mix improvement of $14.0 million.

Additionally, the prior year was negatively impacted by inventory step-up amortization related to the Caprolactone Acquisition of $8.4 million (see Note 17 within the consolidated financial statements included within Part II.

Item 8 of the Form 10-K for more information).

The sales increase in 2021 was driven by a volume increase of $97.0 million (eight percent), primarily related to a volume increase in Performance Chemicals of $110.0 million, favorable pricing of $74.7 million (six percent) and favorable foreign exchange impacts of $3.7 million (less than one percent), offset slightly by a volume decrease in Performance Materials of $13.0 million.

Year Ended December 31, 2020 vs.

The sales decrease in 2020 was driven by a volume decline of $85.2 million (seven percent) primarily related to a volume decline in Performance Chemicals of $89.1 million, offset slightly by a volume increase in Performance Materials of $3.9 million, favorable pricing of $7.6 million (one percent) and favorable foreign exchange impacts of $0.8 million (less than one percent).

Year Ended December 31, 2021 vs.

Gross profit increase of $47.3 million was driven by favorable pricing improvement of $73.0 million, favorable sales volume of $30.6 million, and favorable foreign currency exchange of $1.3 million, partially offset by increased manufacturing costs of $57.6 million due to raw material and energy cost inflationary pressures.

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.

Year Ended December 31, 2020 vs.

Gross profit improvement of $65.2 million was driven by favorable sales volume contributing $62.0 million of additional gross profit, pricing and product mix improvement of $39.5 million.

These positive impacts were offset by increased manufacturing costs of $26.0 million, inventory step-up amortization related to the acquisitions of the Pine Chemical Business and the Caprolactone Business of $7.0 million (see Note 17 within the consolidated financial statements included within Part II.

Item 8 of the Form 10-K for more information), and unfavorable foreign currency exchange of $3.3 million.

Gross profit decline of $16.5 million was driven by unfavorable sales volume impacting gross profits by $35.8 million, increased manufacturing costs of $2.3 million due to reduced plant throughput, and unfavorable foreign currency exchange of $0.8 million, which were partially offset by favorable pricing improvement of $14.0 million.

Additionally, the prior year was negatively impacted by inventory step-up amortization of $8.4 million related to the Caprolactone Acquisition (see Note 16 within the Consolidated Financial Statements included within Part II.

Item 8 of the Form 10-K for more information).

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.

1 unchanged sentence

Year Ended December 31, 2021 vs.

Selling, general and administrative ("SG&A") expenses were $149.4 million (12 percent of sales) and $163.1 million (13 percent of sales) for the years ended December 31, 2020 and 2019, respectively.

The decrease in SG&A expenses is primarily due to reduced travel and other miscellaneous costs of $12.8 million, due to the COVID-19 pandemic, decreased intellectual property litigation costs of $5.0 million, and lower employee-related incentive costs of $3.0 million.

The positive impact was partially offset by an increase in amortization costs associated with intangible assets acquired from in Caprolactone Acquisition (see Note 17 within the consolidated financial statements included within Part II.

Item 8 of the Form 10-K for more information) and an increase in our credit allowance reserve which increased by a combined $7.1 million.

Selling, general and administrative ("SG&A") expenses were $179.3 million (13 percent of Net sales) and $149.4 million (12 percent of Net sales) for the years ended December 31, 2021 and 2020, respectively.

The increase in SG&A expenses is primarily due to higher employee-related costs of $27.7 million and increased travel and other miscellaneous costs of $3.2 million.

This was partially offset by a decrease in litigation defense costs of $1.0 million.

Year Ended December 31, 2020 vs.

SG&A expenses were $163.1 million (13 percent of sales) and $132.4 million (12 percent of sales) for the years ended December 31, 2019 and 2018, respectively.

The increase in SG&A is primarily due to intangible asset amortization associated with the Caprolactone Acquisition and Pine Chemical Acquisition of $16.5 million and increased intellectual property litigation costs associated with our Performance Materials' intellectual property litigation of $10.2 million, and increased spending related to the new engineered polymers product line.

SG&A expenses were $149.4 million (12 percent of Net sales) and $163.1 million (13 percent of Net sales) for the years ended December 31, 2020 and 2019, respectively.

The decrease in SG&A is primarily due to reduced travel and other miscellaneous costs of $12.8 million, due to the COVID-19 pandemic, decreased intellectual property litigation defense costs of $5.0 million, and lower employee-related incentive costs of $3.0 million.

The positive impact was partially offset by an increase in amortization costs associated with intangible assets acquired in the Caprolactone Business ("Caprolactone Acquisition") (see Note 16 within the Consolidated Financial Statements included within Part II.

Item 8 of the Form 10-K for more information) and an increase in our credit allowance reserve of a combined $7.1 million, which included impacts from the COVID-19 pandemic.

Research and technical expenses

Years Ended December 31, 2021, 2020, and 2019

Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, increasing to 1.9 percent in the year ended December 31, 2020 from 1.5 percent and 1.9 percent in the years ended December 31, 2019 and 2018, respectively.

Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, totaling 1.9 percent of sales in the year ended December 31, 2021 compared to 1.9 percent and 1.5 percent in the years ended December 31, 2020 and 2019, respectively.

Restructuring and other (income) charges, net

Restructuring and other (income) charges, net, of $18.5 million, $1.8 million, and $(0.5) million for the years ended December 31, 2020, 2019, and 2018, respectively, with the increase in 2020 primarily attributable to our business transformation initiative and certain cost reduction initiatives.

Restructuring and other (income) charges, net, were $16.2 million, $18.5 million, and $1.8 million for the years ended December 31, 2021, 2020, and 2019, respectively, with the decrease in 2021 primarily attributable to certain cost reduction initiatives.

See Note 15 to the Consolidated Financial Statements included within Part II.

2 unchanged sentences

Years Ended December 31, 2021, 2020, and 2019

Acquisition costs of $1.8 million, $26.9 million, and $10.8 million for the years ended December 31, 2020, 2019, and 2018, respectively, were comprised of charges incurred in connection with the Caprolactone Acquisition and Pine Chemical Acquisition.

Acquisition costs of $0.6 million, $1.8 million, and $26.9 million for the years ended December 31, 2021, 2020, and 2019, respectively, were comprised of charges incurred in connection with the Caprolactone Acquisition.

See Note 16 to the Consolidated Financial Statements included within Part II.

5 unchanged sentences

Foreign currency exchange (income) loss $ 2.5 $ (5.8) $ 0.2

Royalty and sundry (income) loss (0.4) (1.9) (0.8)

Impairment of equity investment (1)

Litigation verdict charge (1)

Other (income) expense, net (7.6) 1.7 (4.5)

1 unchanged sentence

_______________

(1) Represents an impairment charge related to an equity investment within our Performance Materials segment.

(1) See Note 18 within the Consolidated Financial Statements for more information.

Interest expense

2 unchanged sentences

In millions 2021 2020 2019

Interest expense on finance lease obligations $ 6.8 $ 6.1 $ 6.2

Interest expense on revolving credit facility and term loans 22.4 36.2 14.9

Interest expense on senior notes 18.1 13.5 13.0

Capitalized interest (0.8) (1.6) (1.1)

Finance lease obligations $ 7.4 $ 6.8 $ 6.1

Revolving credit facility and term loan 8.0 22.4 36.2

Senior Notes 36.7 18.1 13.5

Other (0.4) (0.2) (1.2)

4 unchanged sentences

In millions 2021 2020 2019

Interest income on restricted investment (1)

Restricted investment (1)

$ 2.0 $ 2.0 $ 2.0

Interest income on fixed-to-fixed cross-currency interest rate swap (2)

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

Other 1.5 1.3 3.4

Total interest expense $ 4.9 $ 7.7 $ 3.4

Total interest income $ 4.0 $ 4.9 $ 7.7

_______________

8 unchanged sentences

Item 8 of this Form 10-K.

Net income (loss) attributable to noncontrolling interests

Year Ended December 31, 2020, 2019, and 2018

Net income (loss) attributable to noncontrolling interests was zero, zero and $12.7 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Our noncontrolling interest represented the 30 percent ownership interest held by a third-party U.S.-based company in our consolidated Purification Cellutions, LLC legal entity, prior to our purchase of this remaining interest on August 1, 2018.

Segment Operating Results

4 unchanged sentences

We have excluded the following items from segment EBITDA:

interest expense associated with corporate debt facilities, income taxes, depreciation, amortization, restructuring and other (income) charges, net, acquisition and other-related costs, pension and postretirement settlement and curtailment (income) charge.

interest expense, net, associated with corporate debt facilities, income taxes, depreciation, amortization, restructuring and other (income) charges, net, acquisition and other-related costs, litigation verdict charges, pension and postretirement settlement and curtailment (income) charge, net.

In general, the accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies in Note 2 to the Consolidated Financial Statements included within Part II.

3 unchanged sentences

2021 2020 2019

Automotive Technologies product line $ 477.7 $ 454.9 $ 362.0

Process Purification product line 32.3 35.7 38.4

Total Performance Materials - Net sales (1)

$ 516.8 $ 510.0 $ 490.6

Segment EBITDA 249.4 249.2 213.4

_______________

(1) Beginning in Q1 2021, we updated disaggregated revenue disclosures, combining certain product groups to reflect categories that depict how the nature, amount, and uncertainty of revenue and cash flows are affected by economic factors.

As a result, Automotive Technologies and Process Purification product lines have been combined within the Performance Materials segment.

Net Sales Comparison of Years Ended December 31, 2021, 2020, and 2019

Percentage change vs.

In millions, except percentages Net sales Total change Currency

effect Price/Mix Volume

Year Ended December 31, 2020 $ 510.0 4 % — % 3 % 1 %

Year Ended December 31, 2019 $ 490.6 23 % (1) % 6 % 18 %

In millions Prior year Net sales Volume Price/Mix Currency effect Current year Net sales

Year Ended December 31, 2021 vs 2020

$ 510.0 (13.0) 12.6 7.2 $ 516.8

Year Ended December 31, 2020 vs 2019

$ 490.6 3.9 13.6 1.9 $ 510.0

Year Ended December 31, 2021 vs.

Segment net sales.

The increase in 2020 was driven by favorable pricing and product mix of $13.6 million (three percent of sales).

Additionally, $3.9 million (one percent of sales) in volume improvements in automotive evaporative emission canister products due to stricter environmental regulation in the Chinese, North American, and European automotive markets and favorable foreign currency exchange impacts of $1.9 million (less than one percent of sales) contributed to the overall increase.

The increase in 2021 was driven by favorable pricing of $12.6 million (three percent) and favorable foreign currency exchange impacts of $7.2 million (less than one percent).

The increase was offset by $13.0 million (three percent) in volume decline in automotive evaporative emission canister products due to semiconductor shortages in automotive markets.

Segment EBITDA.

Segment EBITDA increased $35.8 million due to favorable pricing and product mix, which contributed $18.7 million, favorable volume, primarily in the automotive evaporative emission canister products, which contributed $2.8 million, lower manufacturing costs of $5.0 million and decreased SG&A expenses and research and technical costs of $8.0 million, primarily due to reduced travel and decreased intellectual property litigation costs.

Favorable foreign currency exchange impacts, offset slightly by other miscellaneous charges, also contributed $1.3 million to the increase.

Segment EBITDA increased $0.2 million due to favorable pricing, contributing $11.3 million, and lower manufacturing costs of $2.4 million.

The increase was partially offset by unfavorable volume of $11.2 million, primarily in the automotive evaporative emission canister products, and increased SG&A expenses and research and technical costs of $7.4 million, due to increased travel, outside services, and consulting expenses.

Favorable foreign currency exchange impacts also contributed $5.1 million to the increase.

Year Ended December 31, 2020 vs.

Segment net sales.

The increase in 2019 was driven by $70.1 million (18 percent of sales) in volume improvements in automotive evaporative emission canister products due to stricter environmental regulation in the Chinese, North American, and European automotive markets.

These gains were further bolstered by favorable pricing and product mix of $22.9 million (six percent of sales), partially offset by unfavorable foreign currency exchange impacts of $2.8 million (one percent of sales).

The increase in 2020 was driven primarily by favorable pricing and product mix of $13.6 million (three percent).

Additionally, we benefited from $3.9 million (one percent) in volume improvements in automotive evaporative emission canister products due to stricter environmental regulation in the Chinese, North American, and European automotive markets, and favorable foreign currency exchange impacts of $1.9 million (less than one percent).

Segment EBITDA.

Segment EBITDA increased $44.0 million due to favorable volume primarily in the automotive carbon application, which contributed $41.3 million and favorable pricing and product mix, which contributed $18.9 million.

These gains were partially offset by increased manufacturing costs of $5.4 million and increased SG&A expenses and research and technical costs of $14.6 million, primarily due to increased intellectual property litigation costs of $10.2 million.

Favorable foreign currency exchange impacts and other miscellaneous income of $3.8 million also contributed to the increase.

Segment EBITDA increased $35.8 million due to favorable pricing and product mix, which contributed $18.7 million, favorable volume, primarily in the automotive evaporative emission canister products, which contributed $2.8 million, lower manufacturing costs of $5.0 million, and decreased SG&A expenses and research and technical

costs of $8.0 million, primarily due to reduced travel and decreased intellectual property litigation defense costs.

Favorable foreign currency exchange impacts, offset slightly by other miscellaneous charges, also contributed $1.3 million to the increase.

Performance Chemicals

1 unchanged sentence

In millions 2021 2020 2019

Oilfield Technologies product line $ 75.6 $ 111.4 $ 114.2

Pavement Technologies product line $ 195.4 $ 186.8 $ 183.3

Industrial Specialties product line (1)

493.5 391.6 496.9

Engineered Polymers product line 185.8 127.7 122.1

1 unchanged sentence

Segment EBITDA 172.8 148.7 183.5

(1) In 2021, we updated disaggregated revenue disclosures, combining certain product groups to reflect categories that depict how the nature, amount, and uncertainty of revenue and cash flows are affected by economic factors.

As a result, the Oilfield Technologies product line has been combined with the Industrial Specialties product line within the Performance Chemicals segment.

Net Sales Comparison of Years Ended December 31, 2021, 2020, and 2019

Percentage change vs.

In millions, except percentages Net sales Total Change Currency

effect Price/Mix Volume

Year Ended December 31, 2020 $ 706.1 (12) % — % (1) % (11) %

Year Ended December 31, 2019 $ 802.3 9 % (1) % 3 % 7 %

Pine Chemical Business and Caprolactone Business

The Pine Chemical Business has been integrated into our Performance Chemicals segment and has been included within our results of operations since March 8, 2018.

The Caprolactone Business has been integrated into our Performance Chemicals segment and has been included within our results of operations since it was acquired on February 13, 2019.

The information presented below includes the results of these acquisitions as compared to historical results.

For a pro forma comparative analysis of 2020 versus 2019 and 2019 versus 2018 results, refer to the section below titled "Performance Chemicals Pro Forma Financial Results with the Pine Chemical Business and Caprolactone Business."

In millions Prior year Net sales Volume Price/Mix Currency effect Current year Net sales

Year Ended December 31, 2021 vs 2020

$ 706.1 110.0 62.1 (3.5) $ 874.7

Year Ended December 31, 2020 vs 2019

$ 802.3 (89.1) (6.0) (1.1) $ 706.1

Year Ended December 31, 2021 vs.

Segment net sales.

The sales decrease was driven by unfavorable volume of $89.1 million (11 percent of sales), which consisted of volume declines in industrial specialties ($60.1 million) and oilfield technologies ($35.8 million), partially offset by volume growth in engineered polymers ($5.9 million) and pavement technologies product lines ($0.9 million).

Also driving the net sales decline was unfavorable pricing and product mix of $6.0 million (one percent of sales) in industrial specialties ($9.0 million), which was partially offset by favorable pricing and product mix in oilfield technologies ($0.1 million) and pavement technologies product lines ($2.9 million).

Unfavorable foreign currency of $1.1 million (less than one percent of sales) contributed to the overall decline impact.

The sales increase was driven by favorable volume of $110.0 million (15 percent), which consisted of volume growth in all business lines:

industrial specialties ($64.9 million), engineered polymers ($43.5 million) and pavement technologies product lines ($1.6 million).

Also driving the net sales increase was favorable pricing and product mix of $62.1 million (nine percent) in industrial specialties ($35.3 million), engineered polymers ($20.7 million), and pavement technologies product lines ($6.1 million).

In addition, unfavorable foreign currency exchange impacted Net sales by $3.5 million (less than one percent).

Segment EBITDA.

Segment EBITDA decreased $34.8 million, mainly due to the decline in volume of $38.6 million, unfavorable pricing and product mix of $4.7 million, and unfavorable foreign currency exchange impacts and other miscellaneous charges of $2.0 million.

Favorable SG&A expenses due to reduced travel and lower employee-related costs of $10.3 million and favorable manufacturing productivity of $0.2 million offset part of the overall decline.

Segment EBITDA increased $24.1 million, mainly due to favorable pricing and product mix of $61.7 million, and an increase in volume of $41.8 million.

These increases were partially offset by higher manufacturing costs of $51.6 million due to inflationary raw material and energy inflationary costs, and increased SG&A expenses of $23.6 million due to increased spending on growth initiatives, compensation, and modest travel.

Unfavorable foreign currency exchange impacts and other miscellaneous charges of $4.2 million also contributed to increased costs.

Year Ended December 31, 2020 vs.

Segment net sales.

The sales increase was driven by favorable volume of $53.6 million (seven percent of sales), which consisted of a favorable increase in engineered polymers ($122.1 million), partially offset by volume declines in industrial specialties ($63.9 million), oilfield technologies ($3.3 million) and pavement technologies product lines ($1.3 million).

driving the net sales increase was pricing and product mix of $20.3 million (three percent of sales) in industrial specialties ($12.3 million), oilfield technologies ($0.8 million), and pavement technologies product lines ($7.2 million), which were partially offset by unfavorable $4.8 million (one percent of sales) of foreign currency exchange.

Segment EBITDA.

Segment EBITDA increased $32.4 million due to favorable volume of $20.7 million, favorable price and product mix of $20.6 million, as well as favorable SG&A expenses of $2.0 million.

These favorable operating results were partially offset by $10.4 million of unfavorable manufacturing productivity, primarily driven by higher freight costs, and unfavorable foreign currency exchange impacts and other miscellaneous charges of $0.5 million.

Performance Chemical Pro Forma Financial Results with the

Pine Chemical Business and Caprolactone Business

We believe that reviewing our operating results by combining actual and pro forma results for our Performance Chemicals segment is useful in identifying trends in, or reaching conclusions regarding, the overall operating performance.

Our pro forma segment information includes adjustments as if the acquisitions had occurred on January 1st, in the year preceding the year of acquisition.

Our pro forma results are adjusted for the effects of acquisition accounting but do not include adjustments for costs related to integration activities, cost savings or synergies that might be achieved by the combined businesses.

Pro forma amounts presented are not necessarily indicative of what our results would have been had we operated the Pine Chemical Business and Caprolactone Business since January 1st in the year preceding the acquisition, nor are the pro forma amounts necessarily indicative of future results.

Performance Chemical Pro Forma Financial Results Comparison

Years Ended December 31,

In millions 2020 2019

Pro Forma 2018

Performance Chemicals, as reported (1)

$ 706.1 $ 802.3 $ 733.2

Pine Chemical Business and Caprolactone Business, pro forma (2)

Net Sales (3)

$ 706.1 $ 820.0 $ 920.4

Segment EBITDA

Performance Chemicals, as reported (1)

$ 148.7 $ 183.5 $ 151.1

Pine Chemical Business and Caprolactone Business, pro forma (2)

Segment EBITDA (3)

$ 148.7 $ 189.0 $ 217.0

_______________

(1) As reported amounts are the results of operations of Performance Chemicals, including the results of the Pine Chemical Business and Caprolactone Business, post acquisition dates of March 8, 2018 and February 13, 2019, respectively.

(2) Pro forma amounts include historical results of the Pine Chemical Business and Caprolactone Business, prior to the acquisition dates of March 8, 2018 and February 13, 2019, respectively.

These amounts also include adjustments as if the acquisitions had occurred on January 1st in the year preceding the acquisition, including the effects of purchase accounting.

The pro forma amounts do not include adjustments for expenses related to integration activities, cost savings, or synergies that have been or may have been realized.

(3) The pro forma combined results are not necessarily indicative of what the results would have been had we acquired the Pine Chemical Business and Caprolactone Business on January 1st in the year preceding the acquisition, nor are they indicative of future results.

Performance Chemicals Pro Forma Net Sales Comparison

Years Ended December 31,

In millions 2020 2019

Pro Forma 2018

Oilfield Technologies product line $ 75.6 $ 111.4 $ 118.8

Pavement Technologies product line 186.8 183.3 178.7

Industrial Specialties product line 316.0 385.5 455.9

Engineered Polymers product line 127.7 139.8 167.0

Net Sales - Performance Chemicals $ 706.1 $ 820.0 $ 920.4

Pro Forma Comparison of Year Ended December 31, 2020, 2019, and 2018

Percentage change vs.

Performance Chemicals (In millions, except percentages)

Net Sales Total change Currency

effect Price/Mix Volume

Year Ended December 31, 2020 $ 706.1 (14) % — % (1) % (13) %

Year Ended December 31, 2019 $ 820.0 (11) % (1) % 3 % (13) %

Pro Forma Results Comparison - Year Ended December 31, 2020 vs.

The decrease was driven by unfavorable volume of $106.8 million (13 percent of sales), which consisted of unfavorable volumes in industrial specialties ($60.1 million), oilfield technologies ($35.8 million) and engineered polymers product lines ($11.8 million), partially offset by a slight increase in pavement technologies ($0.9 million).

Also contributing to the decline was unfavorable pricing and product mix of $6.0 million (one percent of sales) driven by unfavorable price and product mix in industrial specialties product lines ($9.0 million), partially offset by pavement technologies ($2.9 million) and oilfield technologies ($0.1 million).

In addition, unfavorable foreign currency exchange impacted Net sales by $1.1 million (less than one percent of sales).

Segment EBITDA .

Pro Forma Segment EBITDA decreased by $40.3 million primarily due to decreased volumes of $44.0 million, increased manufacturing, freight and warehousing costs of $2.0 million, unfavorable pricing and product mix of $4.7 million, and unfavorable foreign currency exchange impact of $1.6 million.

These declines were partially offset by $12.0 million of favorable SG&A expenses.

Pro Forma Results Comparison - Year Ended December 31, 2019 vs.

The decrease was driven by unfavorable volume of $115.4 million (13 percent of sales), which consisted of unfavorable volumes in industrial specialties ($79.2 million), engineered polymers ($26.7 million), pavement technologies ($1.6 million), and oilfield technologies product lines ($7.9 million).

This decline was partially offset by pricing and product mix increase of $20.3 million (three percent of sales) driven by favorable price and product mix in oilfield technologies ($0.8 million), pavement technologies ($7.2 million), and industrial specialties product lines ($12.3 million).

In addition, unfavorable foreign currency exchange impacted Net sales by $5.3 million (less than one percent of sales).

The sales decrease was driven by unfavorable volume of $89.1 million (11 percent), which consisted of volume declines in industrial specialties ($95.9 million), partially offset by volume growth in engineered polymers ($5.9 million) and pavement technologies product lines ($0.9 million).

Also driving the net sales decline was unfavorable pricing and product mix of $6.0 million (one percent) in industrial specialties ($8.9 million), which was partially offset by favorable pricing and product mix in pavement technologies product lines ($2.9 million).

Unfavorable foreign currency exchange of $1.1 million (less than one percent) contributed to the overall decline.

Segment EBITDA.

Pro Forma Segment EBITDA decreased by $28.0 million primarily due to decreased volumes of $50.3 million, increased manufacturing, freight and warehousing costs of $5.9 million, and unfavorable foreign currency exchange impact of $1.9 million.

These declines were partially offset by $19.8 million of favorable pricing and product mix and $10.3 million of favorable SG&A expenses.

Segment EBITDA decreased $34.8 million mainly due to decline in volume of $38.6 million, unfavorable pricing and product mix of $4.7 million, and unfavorable foreign currency exchange impacts and other miscellaneous charges of $2.0 million.

Favorable SG&A expenses due to reduced travel and lower employee-related costs of $10.3 million and favorable manufacturing productivity of $0.2 million offset part of the overall decline.

Use of Non-GAAP Financial Measures

Ingevity has presented the financial measure, Adjusted EBITDA, defined below, which has not been prepared in accordance with U.S.

generally accepted accounting principles (“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 the most directly comparable financial measure calculated in accordance with GAAP.

generally accepted accounting principles (“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 nor as a substitute for the most directly comparable financial measure calculated in accordance with GAAP.

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

1 unchanged sentence

We believe Adjusted EBITDA is a useful measure because it excludes the effects of financing and 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 provision (benefit) for income taxes, interest expense, net, depreciation, amortization, restructuring and other (income) charges, net, acquisition and other-related costs, litigation verdict charges, 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.

10 unchanged sentences

Depreciation and amortization - Performance Chemicals 73.1 69.0 60.8

Pension and postretirement settlement and curtailment income (charges), net 0.1 — 0.2

Pension and postretirement settlement and curtailment charges (income), net (1)

Restructuring and other (income) charges, net 16.2 18.5 1.8

Acquisition and other-related costs (2)

1.8 35.3 12.2

Litigation verdict charge (3)

Adjusted EBITDA (Non-GAAP)

1 unchanged sentence

_______________

(1) These charges are associated with the acquisition and integration of the Pine Chemical Business and the acquisition and integration of the Caprolactone Business.

See below for more detail on the charges incurred.

Years Ended December 31,

In millions 2020 2019 2018

Legal and professional service fees (i)

$ 1.8 $ 14.2 $ 6.9

Inventory fair value step-up amortization (ii)

Purchase price hedge adjustment (i)

Acquisition and other-related costs $ 1.8 $ 35.3 $ 12.2

_______________

(i) Included within "Acquisition-related costs" on the consolidated statements of operations.

(ii) Included within "Cost of sales" on the consolidated statements of operations.

(1) For the year ended December 31, 2020, all charges relate to the Performance Materials segment.

Our pension and postretirement settlement and curtailment charges (income) are related to the acceleration of prior service costs, as a result of a reduction in the number of participants within the Union Hourly defined benefit pension plan during 2020.

These are excluded from our segment results because we consider these costs to be outside our operational performance.

We continue to include the service cost, amortization of prior service cost, interest costs, expected return on plan assets, and amortized actual gains and losses in our segment EBITDA.

(2) For the year ended December 31, 2021, $(0.2) million relate to the acquisition of a strategic investment in the Performance Materials segment and $(0.4) million relate to the integration of the Caprolactone Acquisition into our Performance Chemicals segment.

For additional information on the charges associated with the Caprolactone Acquisition see Note 16 within these Consolidated Financial Statements.

(3) For the year ended December 31, 2021, litigation verdict charge relates to the Performance Materials segment.

Refer to Note 18 for additional information.

Adjusted EBITDA

2 unchanged sentences

Total Company Outlook and 2022 Guidance

For revenue, we expect favorable volume growth in Performance Materials’ automotive technologies product line largely due to continued industry efforts to refill the vehicle pipeline and despite the absence of any significant new gasoline vapor emission control regulations.

In Performance Chemicals, we expect moderate growth in demand for pavement technologies and engineered polymers based on strong paving project backlog, continued Evotherm® warm mix technology adoption, and increased demand for thermoplastics.

We also anticipate growth in merchant rosin sales and our agricultural dispersants products within industrial specialties, which will be partially offset by continued softness in publication inks and our oilfield chemicals business.

Our outlook reflects our expectation that the first half of 2021 will continue to be impacted by the COVID-19 pandemic and by the microchip shortage, which is disrupting the global automotive supply chain.

Adjusted EBITDA is expected to grow by one percent to six percent versus 2020.

In the Performance Materials segment, growth will be driven by continued volume, price, and mix improvements, due in part to a slight uptick in demand over 2020, and a continued refilling of the automotive pipeline.

This growth will be partially offset by higher logistics costs, increased compensation costs, and continued legal costs to defend our Performance Materials' intellectual property.

In our Performance Chemicals segment, continued profitable growth in pavement technologies and a return to growth in engineered polymers is expected to be partially offset by somewhat lower volumes in oilfield technologies, and modest inflationary costs for freight and primary raw materials.

Some risks to the 2021 outlook include lower than anticipated U.S., China, Canadian, and European vehicle sales and production, higher non-primary raw materials costs, a shift towards smaller vehicles in the U.S.

(versus the shift towards light trucks as seen in recent years), and further declines in oil drilling and production in oilfield technologies, negative impacts from Brexit, and prolonged disruptions in the global supply chain.

In millions 2022 Guidance

Net sales $1,525 - $1,600

Adjusted EBITDA $430 - $460

Operating Cash Flow $305 - $325

Capital Expenditures $155 - 175

Free Cash Flow* ~$150

*Calculated as Operating Cash Flow less Capital Expenditures

For revenue, we expect to capture volume growth in our Performance Chemical segment specifically within our Engineered Polymers’ thermoplastics products.

We also anticipate continued growth in our adhesives, lubricants, and oilfield products within Industrial Specialties.

Pavement technologies will benefit from the U.S.

infrastructure bill and continued Evotherm® warm mix technology adoption.

This expected demand will result in favorable pricing conditions.

Performance Materials will see moderate growth as process purification volumes and price increases will partially offset muted improvement in automotive due to the continued constrained semiconductor shortage and the absence of any novel gasoline vapor emission control regulations.

Adjusted EBITDA is expected to grow versus 2021 mainly driven by our Performance Chemicals segment, where continued profitable growth in all businesses is expected to be partially offset by inflationary costs for freight and primary raw materials.

The Performance Materials segment anticipates results similar to 2021 as U.S., Chinese, Canadian, and European vehicle production continues to be negatively impacted by global chip supply and general cost inflation.

We expect to deliver fiscal year 2022 Adjusted EBITDA of $430 million to $460 million.

These estimates assume that the first half of the year will continue to impacted by the COVID-19 pandemic, with improvements in economic conditions over the second half of the year.

These estimates assume that 2022 will continue to be impacted by global logistical headwinds, significant cost inflation, and by the microchip shortage, which is disrupting the global automotive supply chain.

A reconciliation of net income to adjusted EBITDA as projected for 2022 is not provided.

1 unchanged sentence

These components, net of tax, include further restructuring and other income (charges), net;

additional acquisition and other related costs in connection with the Perstorp Holding AB’s Capa caprolactone business;

additional acquisition and other-related costs;

litigation verdict charges;

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.

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, and 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.

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 fund our planned operations and meet our interest and other contractual obligations for at least the next twelve months.

As of December 31, 2021, our undrawn capacity under our revolving credit facility was $497.5 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 debt facilities, seek additional debt financing, issue equity securities, or some combination thereof.

Over the next twelve months, we expect to fund the following:

interest payments, capital expenditures, expenditures related to our business transformation initiative, debt 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, 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 facility, redeem all or part of our outstanding senior notes, seek additional debt financing, issue equity securities, or some combination thereof.

Cash and cash equivalents totaled $275.4 million at December 31, 2021.

We continuously monitors 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.

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.

3 unchanged sentences

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

federal income tax at the statutory rate less the available foreign tax credits, if any, and potentially subject to withholding taxes in the various jurisdictions.

federal income tax at the statutory rate less the available foreign tax credits, if any, and would potentially be subject to withholding taxes in the various jurisdictions.

The potential tax implications of the repatriation of unremitted earnings are driven by facts at the time of distribution, therefore, it is not practicable to estimate the income tax liabilities that might be incurred if such cash and earnings were repatriated to the U.S.

Management does not currently expect to repatriate cash earnings from our foreign operations in order to fund U.S.

Debt Obligations and Facilities

Debt and Finance Lease Obligations

Refer to Note 10 to the Consolidated Financial Statements included within Part II.

2 unchanged sentences

Share Repurchases

On February 28, 2020, our Board of Directors authorized the repurchase of up to $500.0 million of our common stock, and at December 31, 2020, $412.0 million remained unused under this program.

We currently do not have any specific timetable or price targets for repurchasing shares, and may suspend or terminate the program at any time.

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.

On February 28, 2020, our Board of Directors authorized the repurchase of up to $500.0 million of our common stock, and rescinded the prior two outstanding authorizations.

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, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

In the year ended December 31, 2021, we repurchased $109.4 million in common shares, representing 1,421,379 shares of our common stock at a weighted average cost per share of $76.98.

10 unchanged sentences

Cash flows provided by (used in) operating activities

During the year ended December 31, 2020, cash flow provided by operations increased primarily due to working capital decreases compared to 2019, which are further explained below.

During the year ended December 31, 2021, cash flow provided by operations decreased primarily due to working capital increases compared to 2020, which are further explained below.

Current Assets and Liabilities

5 unchanged sentences

Total current assets $ 724.9 $ 628.7

Current assets as of December 31, 2020, increased $165.5 million compared to December 31, 2019, primarily due to an increase in cash of $201.2 million.

This increase was partially offset by a decrease Inventories, net, of $23.5 million, due to a concerted effort to control inventory levels in 2020 due to the COVID-19 pandemic and higher that expected customer demand in the fourth quarter.

Prepaid and other current assets decreased by $10.2 million primarily related to a reduction in restricted cash from our New Market Tax Credit transaction (see Note 11 in the consolidated financial statements included within Part II.

Item 8 of this Form 10-K for more information).

Accounts receivable, net, was relatively flat, decreasing by $2.0 million in 2020.

Current assets as of December 31, 2021, increased $96.2 million compared to December 31, 2020, primarily due to an increase in Inventories, net of $52.2 million to support forecasted sales.

Additionally, cash and cash equivalents increased by $17.7 million, Accounts receivable, net increased by $13.7 million, and Prepaid and other current assets increased by $12.6 million in 2021.

In millions 2021 2020

3 unchanged sentences

Current operating lease liabilities 17.4 16.2

Notes payable and current portion of long-term debt 26.0 22.5

Notes payable and current maturities of long-term debt 19.6 26.0

Income taxes payable 6.2 5.3

Total current liabilities $ 268.9 $ 223.4

Current liabilities as of December 31, 2020, increased by $7.9 million compared to December 31, 2019, driven primarily by the increase in Accrued expenses of $13.3 million, related to an increase in accrued taxes of $4.7 million, accrued interest of $2.8 million, and accrued rebates of $2.1 million.

Also increasing current liabilities was a $3.5 million increase in the current portion of long-term debt (see Note 11 in the consolidated financial statements included within Part II.

Item 8 of this Form 10-K for more information on our debt balances).

These increases were partially offset by a decrease of $10.0 million on our Income taxes payable (see Note 18 in the taxes and related balances) and a decrease of $3.1 million in Accrued payroll and employee benefits, primarily related to lower accrued incentive costs in the current year as compared to the year ended December 31, 2019.

Current liabilities as of December 31, 2021 increased by $45.5 million compared to December 31, 2020, driven primarily by the increase in sales and business activity with Accrued payroll and employee benefits up $23.1 million, Accounts payable of $21.6 million, Accrued expenses of $5.1 million, Current operating lease liabilities of $1.2 million and Income taxes payable of $0.9 million.

These increases were partially offset by a decrease in Notes payable and current portion of long-term debt of $6.4 million.

Cash flows provided by (used in) investing activities

The cash used in investing activities for the year ended December 31, 2020 was primarily driven by capital and finance lease expenditures.

See the table below for the capital expenditure spending by category.

The cash used in investing activities for the year ended December 31, 2019 was primarily driven by the $537.9 million purchase of the Caprolactone Business (see Note 17 to the consolidated financial statements included within Part II.

For the year ended December 31, 2021, investing activities was driven by capital spending and strategic investments.

Capital spending included the base maintenance capital supporting ongoing operations and growth and cost improvement spending primarily related to our business transformation initiative (refer to Note 15 within the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information).

The remaining cash used by investing activities was primarily driven by capital expenditures.

See the table below for the capital expenditure spending by category.

The cash used in investing activities for the year ended December 31, 2018 was primarily driven by the $315.5 million purchase of the Pine Chemical Business.

The remaining cash used by investing activities was primarily driven by capital expenditures.

For the year ended December 31, 2020, capital spending was driven primarily by maintenance and growth spending.

Also, during twelve months ended December 31, 2021, we entered into multiple strategic investments (refer to Note 5 within the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information).

For the year ended December 31, 2020, investing activities were driven by capital spending.

Our Performance Materials' facilities, including Covington, Virginia, Wickliffe, Kentucky, and Waynesboro, Georgia, incurred expenditures for growth and expansion projects, as well as base maintenance and safety spending.

2 unchanged sentences

Item 8 of this Form 10-K for more information) and our new corporate headquarters.

For the year ended December 31, 2019, capital spending was driven primarily by maintenance and growth spending.

For the year ended December 31, 2019, the cash used in investing activities was primarily driven by the $537.9 million Caprolactone Acquisition (see Note 16 to the Consolidated Financial Statements included within Part II.

Item 8 of this form 10-K for more information).

The remaining cash used by investing activities was primarily driven by capital expenditures, driven primarily by maintenance and growth spending.

Our Covington, Virginia facility incurred expenditures for its expansion project, along with base maintenance and other various equipment purchases.

1 unchanged sentence

We also invested capital spending in our newest location in Warrington, United Kingdom to enable further growth and cost improvement as well as base maintenance.

For the year ended December 31, 2018, capital spending included both growth and maintenance spending for expansion and specialized equipment at our Covington, Virginia, Waynesboro, Georgia, and Changshu, China facilities, as well as base maintenance spending to support ongoing operations across both segments.

In addition, we expended funds for cost improvement related to CTO tanks at our DeRidder, Louisiana facility.

Capital expenditure categories Years Ended December 31,

5 unchanged sentences

Cash flows provided by (used in) financing activities

Cash provided by financing activities for the year ended December 31, 2020 was $50.2 million, and was driven by proceeds from long-term borrowings from the senior notes that were issued in the fourth quarter of $550.0 million, net of debt issuance costs of $8.8 million.

Cash used in financing activities for the year ended December 31, 2021 was $133.1 million, and was driven by the repurchase of common stock of $109.4 million, payments on long-term borrowings of $23.4 million, and tax payments related to withholding tax on vested equity awards of $2.4 million.

Cash used in financing activities for the year ended December 31, 2020 was $50.2 million, and was driven by proceeds from long-term borrowings from the senior notes that were issued in the fourth quarter of $550.0 million, net of debt issuance costs of $8.8 million.

We used these proceeds to repay the outstanding balance on the revolving credit facility of $131.2 million and the 2019 term loan of $375.0 million.

6 unchanged sentences

Additionally, we made payments of $14.3 million related to withholding tax on vested equity awards.

Cash provided by financing activities for the year ended December 31, 2018 was $153.7 million, and was driven by proceeds from long-term borrowings from the issuance of $300.0 million senior notes (refer to Note 11 to the consolidated financial statements included within Part II.

Item 8 of this Form 10-K for more information), offset by our purchase of the remaining portion of our joint venture with Purification Cellutions, LLC of $80.0 million (refer to Note 13 to the consolidated financial statements included within Part II.

Item 8 of this Form 10-K for more information), $47.4 million to repurchase shares under a share repurchase program (also refer to Note 13 to the consolidated financial statements included within Part II.

Item 8 of this Form 10-K for more information), and noncontrolling interest distributions of $15.3 million.

Off-Balance Sheet Arrangements

Ingevity is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on Ingevity's financial condition, results of operations or cash flows.

Contractual Obligations

We enter into various contractual obligations throughout the year.

Presented below are the contractual obligations of Ingevity as of December 31, 2020, and the time period in which payments under the obligations are due.

Included below are disclosures regarding the amounts due under purchase obligations.

A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on Ingevity and that specifies all significant terms, including fixed or minimum quantities to be purchased;

fixed, minimum or variable price provisions;

and the approximate timing of the transaction.

We have included in the below disclosure all normal and recurring purchase orders, take-or-pay contracts and supply arrangements as well as other purchase commitments that management believes meet the above definition of a purchase obligation.

See Note 11 and Note 14 to the consolidated financial statements included within Part II.

Item 8 of this Form 10-K for more information.

Payments due in period

In millions Total at

December 31, 2020 2021 2022-2023 2024-2025 2026 and beyond

Contractual obligations

Debt maturities $ 1,203.4 $ 25.3 $ 328.1 $ — $ 850.0

Contractual interest (1)

258.5 40.7 77.5 69.6 70.7

Finance lease obligations (2)

154.2 8.1 16.3 16.6 113.2

Operating lease obligations 57.0 18.3 24.5 9.9 4.3

Purchase obligations 152.2 151.1 1.1 — —

Total $ 1,825.3 $ 243.5 $ 447.5 $ 96.1 $ 1,038.2

_______________

(1) Contractual interest is the interest we are contracted to pay on our long-term debt obligations.

We had $353.4 million of long-term

debt subject to variable interest rates at December 31, 2020 and $850.0 million of debt subject to fixed interest rates.

assumed for the variable interest component of the contractual interest obligation was the rate in effect at December 31, 2020.

Variable rates are determined by the market and will fluctuate over time.

(2) Amounts include the interest payments, as well as the principal payment due in 2027, for the finance lease related to assets at

our Wickliffe, Kentucky facility, and payments related to the finance lease for our North Charleston, South Carolina corporate headquarters which will be paid through the lease term ending in 2035.

New Accounting Guidance

1 unchanged sentence

Item 8 of this Form 10-K for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on our Consolidated Financial Statements.

Critical Accounting Policies

Critical Accounting Policies and Estimates

Our principal accounting policies are described in Note 2 to the Consolidated Financial Statements included within Part II.

20 unchanged sentences

If we pay for the freight and shipping, we recognize the cost when control of the product has transferred to the customer as an expense in Cost of sales on the consolidated statements of operations.

Although very rare, from time to time we incur expenses to obtain a sales contract.

In these cases, if these costs are for orders that are fulfilled in one year or less, we expense these costs as they are incurred.

Payment terms with our customers are typically in the range of zero to sixty days.

8 unchanged sentences

Goodwill represents the excess of cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination.

We conduct a required annual review of goodwill for potential impairment at October 1, or sooner if events or changes in circumstances indicate that the fair value of a reporting

unit is below its carrying value.

Our reporting units are our operating segments, i.e.

Performance Chemicals and Performance Materials.

We conduct a required annual review of goodwill for potential impairment at October 1, or sooner if events or changes in circumstances indicate that the fair value of a reporting unit is below its carrying value.

Our reporting units are our operating segments, i.e., Performance Chemicals and Performance

If the carrying value of a reporting unit that includes goodwill exceeds its fair value, which is determined using both the income approach and market approach, goodwill is considered impaired.

39 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-K

Item 7. Management’s Discussion and Analysis