What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-24 compared with 2021-02-19 · 283 added, 522 removed, 1463 unchanged (35% of the section changed)

3 unchanged sentences

Management's Report on Internal Control over Financial Reporting

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Statements of Operations

10 unchanged sentences

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company;

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the Company's assets that could have a material effect on the financial statements.

5 unchanged sentences

February 24, 2022

President and Chief Executive Officer and Interim Chief Financial Officer and Treasurer

FORTSON /S/ MARY DEAN HALL

Fortson Mary Dean Hall

President and Chief Executive Officer Executive Vice President, Chief Financial Officer and Treasurer

Report of Independent Registered Public Accounting Firm

1 unchanged sentence

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Ingevity Corporation and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended Decem ber 31, 2020, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)ii (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Ingevity Corporation and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)ii (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

1 unchanged sentence

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in N ote 14 to the consolid ated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

14 unchanged sentences

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

5 unchanged sentences

Goodwill Impairment Assessment – Performance Chemicals Reporting Unit

As described in Notes 3 and 9 to t he consolidated financial statements, the Company’s consolidated goodwill balance and goodwill balance for the Performance Chemicals reporting unit were $445.3 million and $441.0 million, respectively, as of December 31, 2020.

As described in Notes 2 and 8 to the consolidated financial statements, the Company’s consolidated goodwill balance and goodwill balance for the Performance Chemicals reporting unit were $442.0 million and $437.7 million, respectively, as of December 31, 2021.

Management conducts 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.

1 unchanged sentence

The income approach determines fair value based on a discounted cash flow model derived from a reporting unit’s long-term forecasted cash flows.

In performing the fair value analysis, management makes various judgments, estimates and assumptions, the most significant of which is the assumption related to revenue growth rates.

The amount of impairment loss is measured as the difference between the carrying value and the fair value of a reporting unit but is limited to the total amount of goodwill allocated to a reporting unit.

In performing the fair value analysis, management makes various judgments, estimates and assumptions, the most significant of which is the assumption related to revenue growth rates.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Performance Chemicals reporting unit is a critical audit matter are (i) the significant judgment by management when determining the fair value measurement of the reporting unit, which led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumption related to revenue growth rates used in the income approach.

27 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

Per share data

Basic earnings (loss) per share attributable to Ingevity stockholders $ 4.39 $ 4.39 $ 4.02

Diluted earnings (loss) per share attributable to Ingevity stockholders 4.37 4.35 3.97

Basic earnings (loss) per share $ 2.97 $ 4.39 $ 4.39

Diluted earnings (loss) per share 2.95 4.37 4.35

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

7 unchanged sentences

Foreign currency translation adjustment ( 5.3 ) 23.9 15.6

Unrealized gain (loss) on net investment hedges, net of tax provision (benefit) of $( 2.7 ), $ 0.7 , and zero

Unrealized gain (loss) on net investment hedges, net of tax provision (benefit) of $ 2.3 , $( 2.7 ), and $ 0.7

7.3 ( 9.0 ) 2.3

Total foreign currency adjustments, net of tax provision (benefit) of $( 2.7 ), $ 0.7 , and zero

Total foreign currency adjustments, net of tax provision (benefit) of $ 2.3 , $( 2.7 ), and $ 0.7

2.0 14.9 17.9

9 unchanged sentences

1.5 ( 2.1 ) ( 1.4 )

Reclassifications of net actuarial and other (gain) loss, amortization of prior service cost, and settlement and curtailment (income) charges, included in net income, net of tax (provision) benefit of zero , zero , and $ 0.1

Total pension and other postretirement benefits, net of tax provision (benefit) of $( 0.6 ), $( 0.4 ), and zero

Total pension and other postretirement benefits, net of tax provision (benefit) of $ 0.5 , $( 0.6 ), and $( 0.4 )

1.6 ( 1.8 ) ( 1.3 )

Other comprehensive income (loss), net of tax provision (benefit) of $ 4.2 , $( 4.3 ), and $( 0.9 )

9.7 12.7 ( 6.0 )

Comprehensive income (loss) $ 126.5 $ 191.1 $ 196.4

Comprehensive income (loss) attributable to noncontrolling interests — — 12.7

Comprehensive income (loss) attributable to the Ingevity stockholders $ 191.1 $ 196.4 $ 163.1

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

12 unchanged sentences

Deferred income taxes 6.8 8.1

Restricted investment, net of allowance for credit losses of $ 0.9 million - 2020

Restricted investment, net of allowance for credit losses of $ 0.5 million - 2021 and $ 0.9 million - 2020

Other assets 109.5 52.8

30 unchanged sentences

Ingevity Stockholders'

In millions, shares in thousands Shares Amount Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Treasury stock Noncontrolling interests Total Equity

In millions, shares in thousands Shares Amount Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Treasury stock Total Equity

Balance at December 31, 2018 42,331.9 $ 0.4 $ 98.3 $ 313.5 $ ( 17.7 ) $ ( 55.8 ) $ 338.7

5 unchanged sentences

Share repurchase program — — — — — ( 6.4 ) ( 6.4 )

Noncontrolling interest distributions — — — — — — ( 15.3 ) ( 15.3 )

Share-based compensation plans — — 12.8 — — 1.9 14.7

Adoption of accounting standard — — — 1.6 — — — 1.6

Acquisition of noncontrolling interest — — ( 54.3 ) — — — ( 11.4 ) ( 65.7 )

Balance at December 31, 2019 42,675.2 $ 0.4 $ 112.8 $ 497.2 $ ( 5.0 ) $ ( 74.6 ) $ 530.8

6 unchanged sentences

Share-based compensation plans — — 6.6 — — 3.5 10.1

Adoption of accounting standard — — — ( 0.6 ) — — ( 0.6 )

Balance at December 31, 2020 42,912.8 $ 0.4 $ 121.3 $ 678.0 $ 4.7 $ ( 162.3 ) $ 642.1

6 unchanged sentences

Share-based compensation plans — — 12.0 — — 2.0 14.0

Adoption of accounting standard — — — ( 0.6 ) — — — ( 0.6 )

Balance at December 31, 2021 43,102.0 $ 0.4 $ 136.3 $ 796.1 $ 13.1 $ ( 272.1 ) $ 673.8

12 unchanged sentences

Restructuring and other (income) charges, net — 1.7 2.2

LIFO reserve 3.5 3.9 3.0

Share-based compensation 12.3 8.4 12.3

10 unchanged sentences

Income taxes ( 6.2 ) ( 9.6 ) 14.7

Litigation verdict charge 85.0 — —

Operating leases ( 20.5 ) ( 18.5 ) ( 19.8 )

Pension contribution — — ( 1.6 )

Changes in all other operating assets and liabilities, net 4.7 ( 6.8 ) ( 0.5 )

4 unchanged sentences

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

Sale of equity securities — — 1.1

Restricted investment ( 2.0 ) ( 2.0 ) ( 2.0 )

Purchase of strategic investments ( 35.3 ) — —

Other investing activities, net ( 1.5 ) ( 4.7 ) ( 5.6 )

16 unchanged sentences

Repurchases of common stock under publicly announced plan ( 109.4 ) ( 88.0 ) ( 6.4 )

Acquisition of noncontrolling interest — — ( 80.0 )

Noncontrolling interest distributions — — ( 15.3 )

Other financing activities, net — — 2.3

20 unchanged sentences

Note Page No.

2 Coronavirus Pandemic

2 Summary of Significant Accounting Policies

5 unchanged sentences

9 Financial Instruments and Risk Management

11 Debt, including Fi nance Lease Obligations

10 Debt, including Finance Lease Obligations

11 Share-based Compensation

7 unchanged sentences

21 Supplemental Information

23 Quarterly Financial Information (Unaudited)

Ingevity Corporation

6 unchanged sentences

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.

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 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 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).

Basis of Consolidation and Presentation

2 unchanged sentences

The Consolidated Financial Statements include the accounts of Ingevity and subsidiaries in which a controlling interest is maintained.

If Ingevity's ownership is less than 100 percent, the outside stockholders' interests are shown as noncontrolling interests.

In 2018, 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, now known as Ingevity Georgia, LLC.

See Note 13 for information regarding our acquisition of the 30 percent interest in Purification Cellutions, LLC on August 1, 2018.

The preparation of the consolidated financial statements requires management to make estimates and assumptions with respect to the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities.

Actual results could differ from these estimates.

During the year ended December 31, 2020, and subsequent to this date, there have been significant changes to the global economic situation and to public securities markets as a consequence of the novel strain of coronavirus ("COVID-19") pandemic.

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

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

While there was not a material impact to our consolidated financial statements as of and for the year ended December 31, 2020, our future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to our consolidated financial statements in future reporting periods.

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 -

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

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.

During the third quarter of 2020, 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.

Summary of Significant Accounting Policies

16 unchanged sentences

We had accounts receivable from our largest customer of $ 6.6 million and $ 5.7 million as of December 31, 2021 and 2020, respectively.

Sales to this customer, which are included in the Performance Materials segment, were approximately six percent, five percent, and three percent of total net sales for each of the years ended December 31, 2020, 2019, and 2018, respectively.

Sales to this customer, which are included in the Performance Materials segment, were approximately five percent, five percent, and four percent of total net sales for each of the years ended December 31, 2021, 2020, and 2019, respectively.

Sales to the automotive industry represented approximately 35 percent of Ingevity’s consolidated Net sales and are our largest industry concentration risk.

No customers individually accounted for greater than 10 percent of Ingevity's consolidated Net sales.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

Inventories, net:

6 unchanged sentences

We routinely assess inventory for both potential obsolescence and potential declines in anticipated selling prices, to derive a market value for the inventory on hand.

This review also includes an analysis of potentially obsolete,

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

unmarketable, slow moving, or overvalued inventory.

If necessary, we will impair any inventories by an amount equal to the difference between the value of the held inventory (i.e.

cost) and its estimated net realizable value for FIFO and average cost inventories, and market value for LIFO inventories.

This review also includes an analysis of potentially obsolete, unmarketable, slow moving, or overvalued inventory.

If necessary, we will impair any inventories by an amount equal to the difference between the value of the held inventory (i.e., cost) and its estimated net realizable value for FIFO and average cost inventories, and market value for LIFO inventories.

Property, plant, and equipment:

1 unchanged sentence

Also included in the cost of these assets is interest on funds borrowed during the construction period.

When assets are sold, retired or disposed of, their cost and related accumulated depreciation are removed from the consolidated balance sheet and any resulting gain or loss is reflected in cost of sales.

Repair and maintenance costs that materially add to the value of the asset or prolong its useful life are capitalized and depreciated based on the extension of the useful life;

10 unchanged sentences

M&E Cost Depreciable Life in Years Types of Assets

50 20 Production vessels and kilns, storage tanks, piping

Production control system equipment and hardware, laboratory testing equipment

11 15 Control systems, instrumentation, metering equipment

49 20 Production vessels and kilns, storage tanks, piping

Blending equipment, storage tanks, piping, shipping equipment and platforms, safety equipment

Production control system equipment and hardware, laboratory testing equipment

3 40 Machinery & equipment support structures and foundations

9 Various Various

We lease a variety of assets for use in our operations that are classified as operating leases.

We lease a variety of assets for use in our operations that are classified as both operating and financing leases.

At contract inception, we determine that a lease exists if the contract conveys the right to control an identified asset for a period of time in exchange for consideration.

1 unchanged sentence

If a contract is considered to be a lease, we recognize a lease liability based on the present value of the future lease payments, with an offsetting entry to recognize a right-of-use asset.

As a majority of our leases do not provide an implicit rate within the lease, an incremental borrowing rate is used which is based on information available at the commencement date.

As a majority of our leases do not provide an explicit rate within the lease, an incremental borrowing rate is used which is based on information available at the commencement date.

The determination of the incremental borrowing rate for each individual lease was impacted by the following assumptions:

lease term, currency, and the economic environment for the physical location of the leased asset.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

Our operating leases principally relate to the following leased asset classes:

8 unchanged sentences

Lease expense is recognized on a straight-line basis over the expected lease term.

Some of our leases include options to extend the lease term at our sole

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

Some of our leases include options to extend the lease term at our sole discretion.

We account for lease and non-lease components together as a single component for all lease asset classes.

10 unchanged sentences

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.

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

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.

14 unchanged sentences

It is possible that the assumptions used by management related to the evaluation may change or that actual results may vary significantly from management’s estimates.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

Our fiscal year 2021 annual goodwill impairment test was performed as of October 1, 2021.

10 unchanged sentences

Amortization is recorded to Costs of sales on our consolidated statements of operations for software directly used in the production of inventory and Selling, general, and administrative expenses on our consolidated statements of operations for software used for non-production related activities.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

Strategic Investments:

We have a variety of strategic investments that are classified as other assets.

Our strategic investments are accounted for under either the equity method of accounting or the measurement alternative, where fair value is not readily determinable.

For strategic investments that are accounted for under the equity method of accounting, our initial investment is recorded at cost.

Subsequently, we will recognize, through the 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.

Strategic investments accounted for under the measurement alternative, where fair value is not readily determinable are accounted for at cost.

Adjustments for observable changes in prices or impairments are recognized in Other (income) expense, net in our consolidated statements of operations.

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

Legal liabilities:

1 unchanged sentence

Third-party fees for legal services are expensed as incurred.

If only a range of estimated losses can be determined, we accrue an amount that reflects the most likely outcome;

if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range.

If an unfavorable outcome is reasonably possible but not probable, we will disclose an estimate of the reasonably possible loss or range of loss.

If we cannot estimate the loss or range of losses arising from a legal proceeding, we will disclose that an estimate cannot be made.

In assessing the materiality of a legal proceeding, we evaluate, among other factors, the amount of monetary damages claimed, as well as the potential impact of non-monetary remedies sought by plaintiffs that may require us to change our business practices in a manner that could have a material adverse impact on our business.

Revenue recognition:

4 unchanged sentences

For certain limited contracts, where we are producing goods with no alternative use and for which we have an enforceable right to payment for performance completed to date, we are recognizing revenue as goods are manufactured, rather than when they are shipped.

Revenues are presented as Net sales on the consolidated statements of operations to the consolidated financial statements.

Revenues are presented as Net sales on the consolidated statements of operations in the Consolidated Financial Statements.

Since Net sales are derived from product sales only, we have disaggregated our Net sales by our product lines within each reportable segment.

4 unchanged sentences

Shipping and handling fees billed to customers are included with Net sales.

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.

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

the consolidated statements of operations.

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

8 unchanged sentences

Research and technical expenses:

Cost are expensed as incurred and primarily include employee compensation, technical equipment costs and material testing and innovation related expenses.

Costs are expensed as incurred and primarily include employee compensation, technical equipment costs and material testing and innovation related expenses.

Royalty expense:

3 unchanged sentences

We continually perform strategic reviews and assess the return on our operations which sometimes results in a plan to restructure the business.

The cost and benefit of these strategic restructuring initiatives are recorded as restructuring and other (income) charges, net recorded within Restructuring and other (income) charges, net on our consolidated statement of operations.

The cost and benefit of these strategic restructuring initiatives are recorded within Restructuring and other (income) charges, net on our consolidated statement of operations.

These costs are excluded from our operating segment results.

12 unchanged sentences

Under this method, deferred income taxes are recognized based upon the temporary differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws in effect at the time the underlying assets or liabilities are recovered or settled.

The ability to realize deferred tax assets

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

is evaluated through the forecasting of taxable income, historical and projected future operating results, the reversal of existing temporary differences, and the availability of tax planning strategies.

The ability to realize deferred tax assets is evaluated through the forecasting of taxable income, historical and projected future operating results, the reversal of existing temporary differences, and the availability of tax planning strategies.

Valuation allowances are recognized to reduce deferred tax assets when it is more-likely-than-not that a tax benefit will not be realized.

5 unchanged sentences

The costs (or benefits) and obligations related to these benefits reflect key assumptions related to general economic conditions, including interest (discount) rates, healthcare cost trend rates and expected return on plan assets.

The costs (or benefits) and obligations for these benefit programs are also affected by other assumptions, such as average retirement age, mortality, employee turnover, and plan participation.

The costs (or benefits) and obligations for these benefit programs are also affected by other assumptions, such as average retirement age, mortality rates, employee turnover, and plan participation.

To the extent our plans' actual experience, as influenced by changing economic and financial market conditions or by changes to our own plans' demographics, differs from these assumptions, the costs and obligations for providing these benefits, as well as the plans' funding requirements, could increase or decrease.

When actual results differ from our assumptions, the difference is typically recognized over future periods.

When actual results differ from our assumptions, the difference is typically

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

recognized over future periods.

In addition, the unrealized gains and losses related to our pension and postretirement benefit obligations may also affect periodic benefit costs (or benefits) in future periods.

5 unchanged sentences

We calculate the fair value of our stock options using the Black-Scholes option pricing model.

The fair value of restricted stock units ("RSU"s), non-employee director deferred stock units ("DSU"s) and performance-based restricted stock units ("PSU"s) is determined using our closing stock price on the day of the grant.

Substantially all compensation expense related to share-based awards is recorded as a component of Selling, general and administrative expenses in the consolidated statements of operations.

7 unchanged sentences

Each segment operates as a portfolio of various end uses for the relevant raw material used in that segment.

Business decisions are made and performance is generally measured based upon the total mix of end uses each raw material is being directed at in the segment.

See Note 19 for additional information.

5 unchanged sentences

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

See Note 6 for more information regarding the fair value measurements of our assets and liabilities, and Note 10 for more information regarding the fair value measurements of our financial instruments and risk management activities.

See Note 5 for more information regarding the fair value measurements of our assets and liabilities, Note 9 for more information regarding the fair value measurements of our financial instruments and risk management activities and Note 14 for more information regarding the fair value of our pension plan assets by asset class.

Derivative financial instruments:

1 unchanged sentence

Changes in these rates and prices may have an impact on Ingevity’s future cash flow and earnings.

We formally document all relationships

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

between the derivative financial instrument and hedged item, as well as the risk management objective and strategy for undertaking various hedge transactions.

We formally document all relationships between the derivative financial instrument and hedged item, as well as the risk management objective and strategy for undertaking various hedge transactions.

We do not hold or issue derivative financial instruments for speculative or trading purposes.

6 unchanged sentences

Due to our proactive mitigation of these potential credit risks, we anticipate performance by our counterparties to these contracts and therefore no material loss is expected.

In order to mitigate the impact of market risks we have entered into both net investment hedges as well as cash flow hedges.

In order to mitigate the impact of market risks we have entered into both net investment hedges and cash flow hedges.

Cash Flow Hedges:

Cash flow hedges are derivative financial instruments designated as and used to hedge the exposure to variability in expected future cash flows that are attributable to a particular risk.

The derivative financial instruments that are designated and qualify as a cash flow hedge are recorded on the balance sheet at fair value and the changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the anticipated cash flows of the underlying exposures being hedged.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

of the underlying exposures being hedged.

The gains and losses arising from qualifying hedging instruments are reported as a component of Accumulated other comprehensive income (loss) (“AOCI”) located in the consolidated balance sheets and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

4 unchanged sentences

Net Investment Hedges:

Net investment hedges are defined as derivative or non-derivative instruments designated as and used to hedge the foreign currency exposure of the net investment in certain foreign operations.

Net investment hedges are defined as derivative or non-derivative instruments, which are designated as and used to hedge the foreign currency exposure of the net investment in certain foreign operations.

The net of the change in the hedge instrument and the item being hedged against for qualifying net investment hedges is reported as a component of the foreign currency adjustments ("CTA") within Accumulated other comprehensive income ("AOCI") on the consolidated balance sheet.

1 unchanged sentence

See Note 9 for more information regarding our net investment hedges.

Noncontrolling interests:

When our ownership in a consolidated legal entity is less than 100 percent, the outside stockholders' interests are shown as noncontrolling interests.

Our noncontrolling interests for the year ended December 31, 2018, represented the 30 percent ownership interest held by a third-party U.S.

based company in our consolidated Purification Cellutions, LLC legal entity, as further discussed in Note 1.

Treasury stock:

3 unchanged sentences

Translation of foreign currencies:

The local currency is the functional currency for all of Ingevity’s significant operations outside the U.S.

consisting primarily of the euro, the Japanese yen, the pound sterling and the Chinese renminbi.

The local currency is the functional currency for all of Ingevity’s significant operations outside the U.S., consisting primarily of the euro, the Japanese yen, the pound sterling and the Chinese renminbi.

The assets and liabilities of Ingevity's foreign subsidiaries are translated into U.S.

2 unchanged sentences

Business combinations:

We account for business combinations in accordance with ASC 805 “Business Combinations” which requires, among other things, the acquiring entity in a business combination to recognize the fair value of the assets

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

acquired and liabilities assumed;

Accounting for business combinations which requires, among other things, the acquiring entity in a business combination to recognize the fair value of the assets acquired and liabilities assumed;

the recognition of Acquisition-related costs in the consolidated statements of operations;

13 unchanged sentences

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

New Accounting Guidance

4 unchanged sentences

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-15 "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract." This ASU requires companies to defer specific implementation costs incurred in a Cloud Computing Arrangement ("CCA") that are often expensed as incurred under current GAAP, and recognize the expense over the noncancelable term of the CCA.

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

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

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

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments – Credit losses:

Measurement of Credit Losses on Financial Instruments." In 2019 and 2020, the FASB issued several ASUs to amend and clarify the credit loss guidance in the original ASU 2016-13 (ASU 2016-13 and its amendments are herein referred to as “ASC 326” or "CECL").

ASC 326 amends FASB's guidance on the impairment of financial instruments, specifically adding an impairment model to GAAP that is based on expected losses, rather than incurred losses, which is intended to result in more timely recognition of such losses.

We adopted this standard on January 1, 2020.

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

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

ASC 326 had an immaterial impact to our allowance for credit losses reported in accounts receivable on our consolidated balance sheet upon adoption.

Additionally, upon adoption of ASC 326, we estimated an allowance for credit losses for our restricted investment on our consolidated balance sheet.

Our restricted investment, which is accounted for as a held-to-maturity investment, consists of highly rated corporate long-term bonds that mature in 2025 and 2026.

To calculate our expected credit loss allowance, we utilized a probability-of-default method (“PDM”) for each bond based on each securities term.

This process uses historical credit loss

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

experience on similar product types, adjusted for reasonable and supportable forecasts of future default rates.

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

The following table displays changes in our allowance for credit losses as of December 31, 2020, including the transition impact of adopting the CECL standard.

(in millions) Balance at

December 31, 2019 (1)

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

December 31, 2020 (2)

Allowance for credit losses $ 0.5 0.6 1.1 1.7 $ 2.8

______________

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

(2) The allowance for credit losses at December 31, 2020 of $ 1.9 million and $ 0.9 million was included "Accounts receivable, net" and "Restricted investment" on the consolidated balance sheets, respectively.

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

The primary factor that contributed to our provision for expected credit losses in the year ended December 31, 2020 was a pessimistic outlook of the macroeconomic environment due to the COVID-19 pandemic, and related effects on the financial performance of U.S.-based corporations.

The increase in the allowance for credit losses of $ 1.7 million in the year ended December 31, 2020 is attributed to $ 0.3 million for Level 1 securities and $ 1.4 million for accounts receivable expected credit losses.

In August 2018, the FASB issued ASU 2018-14 "Compensation — Retirement Benefits — Defined Benefit Plans — General (Topic 715-20):

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

We adopted this standard on a prospective basis on January 1, 2020, and it had no material impact to our consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12 "Income Taxes (Topic 740):

2 unchanged sentences

We adopted the new guidance effective January 1, 2021.

The adoption of the new guidance did not have a material impact.

The adoption of the new guidance did not have a material impact on the Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04 "Reference Rate Reform (Topic 848):

4 unchanged sentences

We do not expect this new standard to have a material impact on our Consolidated Financial Statements.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

Disaggregation of Revenue

2 unchanged sentences

In millions 2021 2020 2019

Automotive Technologies product line $ 477.7 $ 454.9 $ 362.0

Process Purification product line 32.3 35.7 38.4

Performance Materials segment (1)

Oilfield Technologies product line 75.6 111.4 114.2

$ 516.8 $ 510.0 $ 490.6

Performance Chemicals segment

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

Performance Chemicals segment $ 706.1 $ 802.3 $ 733.2

Consolidated Net sales $ 1,216.1 $ 1,292.9 $ 1,133.6

Total $ 874.7 $ 706.1 $ 802.3

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

_______________

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

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

The following table presents our Net sales disaggregated by geography, based on the delivery address of our customer.

12 unchanged sentences

For all periods presented, we had no contract liabilities.

Contract Asset

Years Ended December 31,

In millions 2021 2020

Balance at beginning of period $ 6.2 $ 5.1

Contract asset additions 23.6 29.5

Contract asset at beginning of period $ 5.7 $ 6.2

Additions 21.5 23.6

Reclassification to accounts receivable, billed to customers ( 21.9 ) ( 24.1 )

Balance at end of period (1)

Contract asset at end of period (1)

_______________

9 unchanged sentences

December 31, 2021

Equity securities (4)

$ 0.2 $ — $ — $ 0.2

Deferred compensation plan investments (5)

$ 0.9 $ — $ — $ 0.9

Total assets $ 0.9 $ — $ — $ 0.9

11 unchanged sentences

$ 11.6 $ — $ — $ 11.6

Separation-related reimbursement awards (7)

Contingent consideration (6)

Total liabilities $ 11.6 $ — $ 0.8 $ 12.4

7 unchanged sentences

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

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

Nonrecurring Fair Value Measurements

The following table presents our fair value hierarchy for those assets measured at fair value on a non-recurring basis in the consolidated balance sheets during the year ended December 31, 2020.

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

There were no nonrecurring fair value measurements in the consolidated balance sheet during the year ended December 31, 2021.

During the year ended December 31, 2020, we exited certain leased assets previously used in our daily operations, resulting in an impairment charge of $ 1.7 million to adjust their fair value on our consolidated balance sheet to zero.

These leased assets have remaining lease obligations through 2023.

Ingevity Corporation

1 unchanged sentence

December 31, 2021

In millions December 31, 2020

Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Gains (Losses)

(Year Ended December 31, 2020)

Impairment of operating lease assets, net (1)

$ — $ — $ — $ — $ ( 1.7 )

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

______________

(1) During the year ended December 31, 2020, we exited certain leased assets previously used in our daily operations.

These leased assets have remaining lease obligations through 2023.

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

Equity Securities

The aggregate carrying value of investments in equity securities where fair value is not readily determinable totaled zero and $ 1.5 million as of December 31, 2020 and 2019, respectively.

During the period ended December 31, 2020, we recorded an impairment charge of $ 1.4 million, related to an equity security where fair value is not readily determinable held within our Performance Materials segment.

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

Strategic Investments

During the second quarter of 2021, we acquired a strategic investment in a privately-held company for $ 16.5 million, which is accounted for under the equity method of accounting.

The carrying value of our strategic equity investment was $ 16.5 million at December 31, 2021.

There were no adjustments to the carrying value of our strategic equity investment for impairment or observable price changes during the twelve months ended December 31, 2021.

During the fourth quarter of 2021, we acquired two strategic investments in privately-held companies, which are both accounted for under the measurement alternative method.

The aggregate carrying value of these measurement alternative investments where fair value is not readily determinable totaled $ 18.8 million at December 31, 2021, respectively.

There were no adjustments to the carrying value of the measurement alternative method investments for impairment or observable price changes for the period ended December 31, 2021.

Restricted Investment

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

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

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

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

3 unchanged sentences

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

At December 31, 2020 and 2019, the carrying value of our restricted investment, which is accounted for as HTM and therefore held at amortized costs, was $ 73.6 million and $ 72.6 million, net of an allowance for credit losses of $ 0.9 million and zero and included cash of $ 2.4 million and $ 0.2 million, respectively.

At December 31, 2021 and 2020, the carrying value of our restricted investment, which is accounted for as HTM and therefore held at amortized costs, was $ 76.1 million and $ 73.6 million, net of an allowance for credit losses of $ 0.5 million and $ 0.9 million and included cash of $ 4.7 million and $ 2.4 million, respectively.

The fair value at December 31, 2021 and 2020 was $ 80.0 million and $ 81.5 million, respectively, based on Level 1 inputs.

2 unchanged sentences

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

December 31, 2020

In millions AA+ AA A A- BBB+ Total

HTM Debt Securities

Debt Obligations

In millions AA+ AA AA- A A- BBB+ Total

December 31, 2021 $ 13.4 — 10.6 13.3 14.1 20.5 $ 71.9

December 31, 2020 $ 13.5 10.6 — 24.2 13.4 10.4 $ 72.1

Debt and Finance Lease Obligations

At December 31, 2021 and 2020, the carrying value of finance lease obligations was $ 102.4 million and $ 103.1 million, respectively, and the fair value was $ 118.6 million and $ 127.0 million, respectively.

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

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

The fair value of all other finance lease obligations approximates their carrying values.

1 unchanged sentence

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

At December 31, 2021 and 2020, the carrying value of our fixed rate debt was $ 850.0 million and $ 850.0 million, respectively, and the fair value was $ 843.9 million and $ 864.1 million, respectively, based on Level 2 inputs.

Ingevity Corporation

1 unchanged sentence

December 31, 2021

At December 31, 2020 and 2019, the carrying value of our fixed rate debt was $ 850.0 million and $ 300.0 million, respectively, and the fair value was $ 864.1 million and $ 305.4 million, respectively, based on Level 2 inputs.

Contingent Consideration

1 unchanged sentence

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

The fair value of the five-year Revenue Earn-out consideration was $ 0.8 million at December 31, 2020 .

The fair value of the five-year Revenue Earn-out consideration was $ 0.8 million at December 31, 2021 and 2020, respectively .

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

1 unchanged sentence

Contingent Consideration

In millions December 31, 2020

In millions December 31, 2021 December 31, 2020

Beginning balance $ 0.8 $ —

11 unchanged sentences

Subtotal $ 259.0 $ 203.3

excess of cost over LIFO cost ( 14.3 ) ( 10.4 )

LIFO reserve ( 17.8 ) ( 14.3 )

Inventories, net $ 241.2 $ 189.0

As of December 31, 2020, approximately 31 percent, 13 percent, and 56 percent of our inventories were accounted for under the FIFO, average cost, and LIFO methods, respectively.

As of December 31, 2019, approximately 31 percent, 11 percent, and 58 percent of our inventories were accounted for under the FIFO, average cost, and LIFO methods, respectively.

As of December 31, 2021, approximately 38 percent, 11 percent, and 51 percent of our Inventories, net, were accounted for under the FIFO, average cost, and LIFO methods, respectively.

As of December 31, 2020, approximately 31 percent, 13 percent, and 56 percent of our Inventories, net, were accounted for under the FIFO, average cost, and LIFO methods, respectively.

Ingevity Corporation

13 unchanged sentences

_______________

(1) This includes finance leases related to machinery and equipment at our Wickliffe, Kentucky facility of $ 67.2 million and $ 68.8 million, and net carrying value of $ 5.3 million and $ 6.0 million at December 31, 2020 and 2019, respectively.

This also includes finance leases related to our Waynesboro, Georgia manufacturing facility for (a) machinery and equipment of $ 18.8 million and $ 18.4 million and net carrying value of $ 16.0 million and $ 16.8 million, (b) construction in progress of $ 9.2 million and $ 6.4 million and (c) buildings and leasehold improvements of $ 5.2 million and $ 4.2 million, and net carrying value of $ 5.0 million and $ 4.2 million at December 31, 2020 and 2019, respectively.

Also included in buildings and leasehold improvements is a finance lease related to our new corporate headquarters of $ 23.8 million and net carrying value of $ 23.0 million at December 31, 2020.

(1) This includes finance leases related to machinery and equipment of $ 94.5 million and $ 86.0 million, and net carrying value of $ 27.7 million and $ 21.3 million;

buildings and leasehold improvements of $ 29.0 million and $ 29.0 million, and net carrying value of $ 26.2 million and $ 28.0 million;

and construction in progress of zero and $ 9.2 million at December 31, 2021 and 2020, respectively.

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

2 unchanged sentences

Goodwill and Other Intangible Assets, net

Operating Segments

Reporting Units

In millions Performance Chemicals Performance Materials Total

1 unchanged sentence

Foreign currency translation 8.9 — 8.9

Goodwill acquired (1)

295.1 — 295.1

December 31, 2020 $ 441.0 $ 4.3 $ 445.3

1 unchanged sentence

December 31, 2021 $ 437.7 $ 4.3 $ 442.0

_______________

(1) See Note 17 for more information about our acquisitions .

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

Other Intangible Assets

December 31, 2021 December 31, 2020

In millions Gross carrying amount Accumulated amortization Net Gross carrying amount Accumulated amortization Net

In millions Gross Accumulated amortization Net Gross Accumulated amortization Net

Customer contracts and relationships $ 317.8 $ 95.0 $ 222.8 $ 319.5 $ 73.6 $ 245.9

6 unchanged sentences

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

(2) See Note 17 for more information about our acquisitions and the related increase in intangible assets.

(2) The weighted average amortization period remaining for all intangibles is 11.7 years, while the weighted average amortization period remaining for customer contracts and relationships, brands, developed technology and other intangibles is 11.5 years, 14.0 years, 9.8 years, and 0.1 years, respectively.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

Intangible assets subject to amortization were allocated among our business segments as follows:

In millions 2021 2020

Performance Chemicals $ 371.2 $ 396.2

Performance Materials $ 1.9 $ 2.1

Performance Chemicals 335.7 371.2

Other intangibles, net $ 337.6 $ 373.3

5 unchanged sentences

Total amortization expense $ 33.2 $ 32.6 $ 28.7

$ 32.6 $ 28.7 $ 12.3

_______________

(1) See Note 17 for more information about the Caprolactone Acquisition and Pine Chemical Acquisition and the related increase in amortization expense.

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

8 unchanged sentences

This effectively converts a portion of our U.S.

dollar denominated fixed-rate debt from a weighted average rate of 3.79 percent to euro denominated fixed-rate debt at a rate of 1.71 percent.

Any difference between the fixed interest rate between the U.S.

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

dollar denominated fixed-rate debt from a weighted average rate of 3.79 percent to a euro denominated weighted average fixed rate of 1.63 percent.

The difference between the fixed interest rate between the U.S.

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

The fair value of the fixed-to-fixed cross currency interest rate swap was a net asset (liability) of $ 1.0 million and $( 8.6 ) million at December 31, 2021 and 2020, respectively.

During the years ended December 31, 2020 and 2019, we recognized net interest income associated with this financial instrument of $ 1.6 million and $ 2.3 million, respectively.

During the years ended December 31, 2021, 2020 and 2019 we recognized net interest income associated with this financial instrument of $ 0.5 million, $ 1.6 million, and $ 2.3 million respectively.

Cash Flow Hedges

6 unchanged sentences

As of December 31, 2021, there were $ 21.6 million open foreign currency derivative contracts.

The fair value of the foreign currency hedge was an asset (liability) of $( 0.1 ) million as of December 31, 2020, and was zero as of December 31, 2019.

The fair value of the designated foreign currency hedge contracts was an asset (liability) of $ 0.5 million and $( 0.1 ) million as of December 31, 2021 and 2020, respectively.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

Commodity Price Risk Management

1 unchanged sentence

This volatility is primarily related to the market pricing of natural gas.

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

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

As of December 31, 2021, we had 1.4 million and 1.0 million mmBTUs (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity swap contracts and zero cost collar option contracts, respectively, designated as cash flow hedges.

As of December 31, 2020, open commodity contracts hedge forecasted transactions until February 2022.

As of December 31, 2021, open commodity contracts hedge forecasted transactions until March 2023.

The fair value of the outstanding designated natural gas commodity hedge contracts was a net asset (liability) of $( 0.6 ) million and $( 0.1 ) million as of December 31, 2021 and 2020, respectively.

1 unchanged sentence

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

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

To manage interest rate risk effectively, from time to time, we may enter into interest rate derivative instruments.

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

Designated interest rate cash flow hedge gains or losses recorded in AOCI are recognized in "Interest expense, net" on the consolidated statements of operations on a straight-line basis over the remaining maturity of the underlying debt.

These instruments are designated as cash flow hedges.

As of December 31, 2020, we a floating-to-fixed interest rate swap with a notional amount of $ 166.2 million to manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $ 166.2 million of our floating rate debt to a fixed rate.

Designated interest rate cash flow hedge gains or losses are recorded in Accumulated other comprehensive income (loss) ("AOCI") and are recognized in "Interest expense, net" on the consolidated statements of operations on a straight-line basis over the remaining maturity of the underlying debt.

As of December 31, 2021, we have a floating-to-fixed interest rate swap with a notional amount of $ 166.2 million to manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $ 166.2 million of our floating rate debt to a fixed rate.

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

6 unchanged sentences

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

Year Ended December 31,

Years Ended December 31,

2021 2020 2021 2020

7 unchanged sentences

(Amount Excluded from Effectiveness Testing)

Year Ended December 31,

Years Ended December 31,

2021 2020 2021 2020

6 unchanged sentences

Within the next twelve months, we expect to reclassify $ 1.3 million of losses from AOCI to earnings, before taxes.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

Fair-Value Measurements

2 unchanged sentences

There were no non-recurring fair value measurements related to derivative assets and liabilities on our consolidated balance sheet during fiscal years ending December 31, 2021, 2020, or 2019, respectively.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

In millions Level 1 (1)

December 31, 2020

Natural gas contracts (4)

Currency exchange contracts (4)

$ — $ 0.5 $ — $ 0.5

Net investment hedge (5)

Total assets $ — $ 2.5 $ — 2.5

1 unchanged sentence

$ — $ 0.6 $ — $ 0.6

Currency exchange contracts (6)

Net investment hedge (7)

1 unchanged sentence

Total liabilities $ — $ 5.6 $ — $ 5.6

In millions Level 1 (1)

December 31, 2020

Net investment hedge (5)

In millions Level 1 (1)

Natural gas contracts (4)

$ — $ 0.1 $ — $ 0.1

2 unchanged sentences

$ — $ 0.2 $ — $ 0.2

Currency exchange contracts (6)

Net investment hedge (7)

Interest rate swap contracts (7)

12 unchanged sentences

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

December 31, 2020 December 31,

In millions Interest rate Maturity date 2020 2019

Variable Rate Debt:

Revolving Credit Facility (1)

1.64 % 2025 $ — $ 131.3

2019 Term Loan — — — 375.0

In millions, except percentages 2021 2020

Revolving Credit Facility and other lines of credit (1)

Term Loan 328.1 351.6

Other notes payable 4.44 % 2021 1.8 5.9

Fixed Rate Debt:

2020 Senior Note 3.88 % 2028 550.0 —

2018 Senior Note 4.50 % 2026 300.0 300.0

3.88 % Senior Note due 2028

4.50 % Senior Note due 2026

Finance lease obligations (2)

7.17 % 2027-2035 103.1 80.0

Total debt including finance lease obligations $ 1,280.5 $ 1,306.5

5 unchanged sentences

(1) Letters of credit outstanding under the revolving credit facility were $ 2.5 million and $ 2.3 million and available funds under the facility were $ 497.5 million and $ 497.7 million at December 31, 2021 and 2020, respectively.

(2) Includes finance lease obligations of $ 80.0 million related assets at our Performance Materials' Wickliffe, Kentucky manufacturing site and $ 23.1 million related to our corporate headquarters.

(2) Refer to Note 13 for more information.

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

6 unchanged sentences

The margin is based on a total leverage-based pricing grid.

Fees of $ 2.2 million, zero and $ 1.1 million were incurred in 2020, 2019, and 2018, respectively, to secure the various amendments associated with our revolving credit facility.

Fees of zero , $ 2.2 million, and zero were incurred in 2021, 2020, and 2019, respectively, to secure the various amendments associated with our revolving credit facility.

These fees have been deferred and will be amortized over the term of the facility.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

Our term loans are comprised of two separate term loans:

the "2017 Term Loan" and the "2019 Term Loan." During the fourth quarter of 2020, we utilized a portion of the net proceeds from an issuance of senior notes to repay the outstanding principal amount of $ 375 million related to the 2019 Term Loan.

2019 Term Loan:

On March 7, 2019, we amended our credit agreement to, among other things, establish a new class of incremental term loan commitments, collectively referred to as the 2019 Term Loan, in the aggregate principal amount of $ 375.0 million.

The 2019 Term Loan was not subject to amortization;

the full principal balance was originally due and payable at maturity on August 7, 2022.

The 2019 Term Loan bore interest at either (a) an adjusted base rate or (b) an adjusted LIBOR rate (or a comparable or successor rate), in each case, plus an applicable margin, in the case of base rate loans, ranging between zero and 0.25 percent, and in the case of adjusted LIBOR rate loans, ranging between 0.75 percent and 1.25 percent.

The margin was based on a total leverage based pricing grid.

As consideration for the amendments relating to the 2019 Term Loan, we paid to each lender a consent fee equal to 0.05 percent of the aggregate principal amount of the commitments and outstanding loans under held by such lender, resulting in aggregate fees of $ 1.8 million.

These fees were deferred and amortized over the original term of the loan.

During the fourth quarter 2020, with the repayment of the outstanding principal balance, we recorded the remaining deferred finance fees of $ 1.0 million to Interest expense on our consolidated statements of operations.

2017 Term Loan:

On August 21, 2017, we amended our credit agreement to among other things, establish incremental term loan commitments in the aggregate principal amount of $ 75.0 million in addition to the existing term loan of $ 300.0 million.

4 unchanged sentences

The margin is based on a total leverage-based pricing grid.

As consideration for the amendments related to the 2017 Term Loan, we paid to each lender a consent fee equal to 0.05 percent of the aggregate principal amount of the commitments and outstanding loans held by such lender, resulting in aggregate fees of $ 0.3 million and $ 0.5 million in 2018 and 2017, respectively.

These fees have been deferred and will be amortized over the term of the loan.

At December 31, 2021 the interest rate on the term loan was 1.38 percent.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

Our senior notes are comprised of two separate series of notes:

1 unchanged sentence

2028 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.

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

The 2028 Notes were issued pursuant to an indenture dated as of October 28, 2020, by and among Ingevity, the subsidiary guarantors party thereto and U.S.

3 unchanged sentences

The 2028 Notes will mature on November 1, 2028.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

At any time prior to November 1, 2023, the Issuer may on any one or more occasions redeem up to 40 percent of the original aggregate principal amount of Notes (calculated after giving effect to any issuance of Additional Notes) issued under the Indenture, upon not less than 10 nor more than 60 days’ notice to holders of Notes (with a copy to the Trustee), at a redemption price equal to 103.875 percent of the principal amount of the Notes redeemed, plus accrued but unpaid interest.

2026 Senior Notes:

On January 24, 2018, we issued $ 300.0 million aggregate principal amount of 4.50 percent senior unsecured notes due 2026 (the “2018 Notes”) in a private placement.

On January 24, 2018, we issued $ 300.0 million aggregate principal amount of 4.50 percent senior unsecured notes due 2026 (the “2026 Notes”).

The 2026 Notes were issued pursuant to an indenture dated as of January 24, 2018, 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 2018 Notes, after deducting deferred financing fees of $ 5.7 million, were used to finance, in part, the Pine Chemical Acquisition (see Note 17 for more information).

The net proceeds from the sale of the 2026 Notes, after deducting deferred financing fees of $ 5.7 million, were used to finance, in part, acquisitions completed in 2018.

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

The 2026 Notes will mature on February 1, 2026.

On or after February 1, 2021, we may on any one or more occasions redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ notice to the Holders of Notes (with a copy to the Trustee), at the redemption prices (expressed as percentages of principal amount) 101.125 percent for 2022 and 100 percent for 2023 and thereafter, plus accrued but unpaid interest, if any, on the Notes redeemed, to, but excluding, the applicable redemption date.

Debt Covenants

Our indentures contain certain customary covenants (including covenants limiting Ingevity's and its restricted subsidiaries’ ability to grant or permit liens on certain property securing debt, declare or pay dividends, make distributions on or repurchase or redeem capital stock, make investments in unrestricted subsidiaries, engage in sale and lease-back transactions, and engage in a consolidation or merger, or sell, transfer or otherwise dispose of all or substantially all of the assets of our and our restricted subsidiaries, taken as a whole) and events of default (subject in certain cases to customary exceptions, as well as grace and cure periods).

The occurrence of an event of default under the 2018 Notes or 2020 Notes could result in the acceleration of the notes of such series and could cause a cross-default resulting in the acceleration of other indebtedness of Ingevity and its subsidiaries, including the other series.

Our indentures contain certain customary covenants (including covenants limiting Ingevity's and its restricted subsidiaries’ ability to grant or permit liens on certain property securing debt, declare or pay dividends, make distributions on or repurchase or redeem capital stock, make investments in unrestricted subsidiaries, engage in sale and lease-back transactions, and engage in a consolidation or merger, or sell, transfer or otherwise dispose of all or substantially all of the assets of Ingevity and our restricted subsidiaries, taken as a whole) and events of default (subject in certain cases to customary exceptions, as well as grace and cure periods).

The occurrence of an event of default under the 2026 Senior Note or 2028 Senior Note could result in the acceleration of the notes of such series and could cause a cross-default resulting in the acceleration of other indebtedness of Ingevity and its subsidiaries, including the other series.

We were in compliance with all covenants under the indentures as of December 31, 2021.

The credit agreement governing our revolving credit facility and the 2017 Term Loan contain customary default provisions, including defaults for non-payment, breach of representations and warranties, insolvency, non-compliance with covenants and cross-defaults to other material indebtedness.

The credit agreements governing our revolving credit facility and Term Loan contain customary default provisions, including defaults for non-payment, breach of representations and warranties, insolvency, non-compliance with covenants and cross-defaults to other material indebtedness.

The occurrence of an uncured event of default under the credit agreement could result in all loans and other obligations becoming immediately due and payable and our revolving credit facility and term loan facilities being terminated.

The credit agreement also contains certain customer covenants, including financial covenants.

The credit agreement also contains certain customary covenants, including financial covenants.

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

Additionally, the Term Loan financial covenants require Ingevity to maintain on a consolidated basis a maximum total gross leverage ratio of 4.0 to 1.0 (which may be increased to 4.5 to 1.0 under certain circumstances) and a minimum interest coverage ratio of 3.0 to 1.0.

Our actual gross and net leverage for the four consecutive quarters ended December 31, 2020 were 3.1 and 2.5 , respectively, and our actual interest coverage for the four consecutive quarters ended December 31, 2020 was 10.0 .

We were in compliance with all covenants at December 31, 2020.

New Markets Tax Credit

On November 14, 2019, we entered into a financing transaction with Wells Fargo Community Investment Holdings, LLC (“Wells Fargo”) related to a $ 7.0 million capital investment associated with a project to build out our new headquarters located in North Charleston, South Carolina (the "Project").

Wells Fargo made a $ 2.3 million capital contribution to Ingevity Virginia Corporation, a wholly-owned subsidiary of Ingevity (“Ingevity VA”), which in-turn made a $ 5.0 million loan to IH Investment Fund, LLC (the “Investment Fund”) under a qualified New Markets Tax Credit (“NMTC”) program.

The NMTC program was provided for in the Community Renewal Tax Relief Act of 2000 (the “Act”) and is intended to induce capital investment in qualified lower income communities.

The Act permits taxpayers to claim credits against their federal income taxes for up to 39 percent of qualified investments in the equity of a community development entity (“CDE”).

CDEs are conduit lenders through which privately managed investment institutions to make qualified low-income community investments.

Ingevity VA's $ 5.0 million loan to the Investment Fund at an interest rate of one percent per annum and matures in 2041.

The Investment Fund contributed the $ 5.0 million loan from Ingevity VA and the initial investment of $ 2.3 million (less syndication fees) by Wells Fargo to The Innovate Fund XVI, LLC ("Innovate CDE"), the CDE in this transaction.

The Innovate CDE, in turn, loaned the funds (net of fees) at an interest rate of 1.21 percent and a maturity of November 14, 2044 to Ingevity.

The proceeds of the loans from the Innovate CDE are to be restricted for use for the Project only.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

The $ 2.3 million contribution to the Investment Fund by Wells Fargo entitles Wells Fargo to substantially all of the tax benefits derived from the NMTC over a seven-year compliance period, while Ingevity effectively receives net loan proceeds equal to Wells Fargo’s contributions to the Investment Fund.

This transaction includes a put/call provision whereby Ingevity may be obligated or entitled to repurchase Wells Fargo’s interest in the Investment Fund.

The value attributed to the put/call is not significant.

We believe that Wells Fargo will exercise the put option in November 2026, subsequent to the seven-year recapture period.

Ingevity is required to be in compliance with various regulations and contractual provisions that apply to the NMTC arrangement, which is subject to 100 percent recapture for a period of seven years as provided by the Internal Revenue Code.

Non-compliance with applicable requirements could result in the projected tax benefits not being realized and, therefore, could require Ingevity to indemnify Wells Fargo for any loss or recapture of NMTC related to the financing until such time as the obligation to deliver tax benefits is relieved.

We do not anticipate any credit recaptures will be required in connection with this arrangement.

We have determined that this financing arrangement, with the Investment Fund and Innovate CDE, provides us with a controlling interest in both entities despite not having majority voting rights in either entity.

Therefore, we have concluded, both entities represent a variable interest entity (“VIE”).

The ongoing activities of the Investment Fund – collecting and remitting interest and fees and NMTC compliance – were all considered in the initial design and are not expected to significantly affect economic performance throughout the life of the Investment Fund.

We have considered:

the contractual arrangements that obligate Ingevity to deliver tax benefits and provide various other guarantees to the structure;

the Innovate CDE's and Wells Fargo’s overall lack of a material interest in the underlying economics of the Project;

and Ingevity's obligation to absorb losses of both the Innovate CDE and Investment Fund.

We have concluded that Ingevity is the primary beneficiary of each VIE and we have therefore consolidated both Innovate CDE and Investment Fund, as VIEs, in accordance with ASC 810.

Post consolidation, the only material remaining balances presented on Ingevity's consolidated financial statements are the original contribution of $ 2.3 million from Wells Fargo in the Investment Fund, less the third-party debt financing (syndication) fees paid and any remaining restricted proceeds to be used solely for the purpose of the capital investments in the Project.

Although ASC 810 would indicate that noncontrolling interest in these VIEs should be presented separately from Ingevity's equity based on our evaluation, we have concluded that the $ 2.3 million (net of syndication fees) should be presented as a liability of Ingevity on our consolidated financial statements as this more accurately reflects the substance of the financing arrangement.

As a result of this financing arrangement, we incurred $ 0.6 million in syndication (debt issuance) fees, which are being amortized over the life of the note payable.

The proceeds of the loans from the Innovate CDE (including loans representing the capital contribution made by Wells Fargo, net of syndication fees) of $ 2.3 million, were restricted for use on the Project.

As of December 31, 2020 and 2019, the balance of the loan liability, net of debt issuance fees of $ 0.5 million and $ 0.6 million, was $ 1.8 million and $ 1.7 million.

The loan liability, net of fees is recorded in Other liabilities on our consolidated balance sheets.

Additionally, at December 31, 2019, we had $ 7.7 million of cash restricted for use on the Project, this amount is recorded in Prepaid expenses and other current assets in our consolidated balance sheets.

As of December 31, 2020 all proceeds from this financing arrangement were used toward the Project and all capital expenditures have been placed in service.

Our actual gross and net leverage for the four consecutive quarters ended December 31,

Ingevity Corporation

1 unchanged sentence

December 31, 2021

2021 were 2.8 and 2.2 , respectively, and our actual interest coverage for the four consecutive quarters ended December 31, 2021 was 9.2 .

We were in compliance with all covenants at December 31, 2021.

Share-based Compensation

3 unchanged sentences

As of December 31, 2021, 3,041,028 shares under the Ingevity Corporation 2016 Omnibus Incentive Plan are still available for grants, assuming that Ingevity performs at the target performance level in each year of the three-year performance period for PSU awards.

Ingevity's Compensation Committee determines the long-term incentive mix, including stock options, RSUs and PSUs, and may authorize new grants annually.

The Leadership Development and Compensation Committee of Ingevity's Board of Directors ("Compensation Committee") determines the long-term incentive mix, including stock options, RSUs and PSUs, and may authorize new grants annually.

We typically issue new common shares for vesting of awards under our equity incentive plan.

24 unchanged sentences

(1) Amounts reflected in "Selling, general, and administrative expenses" on the consolidated statements of operations.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

Stock Options

All stock options vest in accordance with vesting conditions set by the compensation committee of Ingevity's Board of Directors.

All stock options vest in accordance with vesting conditions set by the Compensation Committee.

Stock options granted to date have vesting periods of one to three years from the date of grant.

1 unchanged sentence

Expense related to stock options granted is based on the assumptions shown in the table below:

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

Years Ended December 31,

20 unchanged sentences

Restricted Stock Units, Deferred Stock Units and Performance-based Restricted Stock Units

All RSUs, DSUs, and PSUs vest in accordance with vesting conditions set by the Compensation Committee of Ingevity’s Board of Directors.

All RSUs, DSUs, and PSUs vest in accordance with vesting conditions set by the Compensation Committee.

RSUs and DSUs granted to date have vesting periods ranging from less than one year to three years from the date of grant.

13 unchanged sentences

Nonvested, December 31, 2020

171 $ 59.75 142 $ 66.22

Granted 155 70.89 71 69.60

65 unchanged sentences

Recognized gain (loss) due to curtailment and settlement (2)

( 0.1 ) — ( 0.2 )

Total before tax ( 0.2 ) ( 0.3 ) ( 0.1 )

5 unchanged sentences

(3) Included within "Other (income) expense, net" on the consolidated statements of operations.

Noncontrolling interest acquisition

On August 1, 2018, we acquired the remaining 30 percent noncontrolling interest in Purification Cellutions, LLC, now known as Ingevity Georgia, LLC, which was treated as a partnership for tax purposes, for a purchase price of $ 80.0 million.

The acquisition resulted in the elimination of Noncontrolling interest of $ 11.4 million and the recognition of a Deferred tax asset of $ 14.3 million, with the remainder being recorded against Additional paid in capital of $ 54.3 million in our consolidated financial statements.

Share repurchases

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.

Our repurchase program does not include a specific timetable or price targets and may be suspended or terminated 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.

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.

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

At December 31, 2021, $ 302.6 million remained unused under our Board-authorized repurchase program.

During the year ended December 31, 2020 and December 31, 2019, we repurchased $ 88.0 million and $ 6.4 million in common stock, representing 1,533,442 and 80,300 shares of our common stock at a weighted average cost per share of $ 57.38 and $ 80.22 , respectively.

Ingevity Corporation

1 unchanged sentence

December 31, 2021

On January 1, 2019, we adopted ASC 842 utilizing the modified retrospective approach.

The modified retrospective approach we selected provides a method of transition allowing for the recognition of existing leases as of the beginning of the period of adoption (i.e.

January 1, 2019), and which does not require the adjustment of comparative periods.

Results for reporting periods beginning after January 1, 2019 are presented under ASC 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 840.

We have both Operating and Finance Leases, with the majority being operating lease agreements related to rail cars, tanks, equipment, and real estate.

Supplemental consolidated balance sheet information related to our leases is as follows:

15 unchanged sentences

(1) Operating lease assets, net are recorded net of accumulated amortization of $ 35.5 million, and $ 29.4 million as of December 31, 2021, and 2020, respectively.

(2) Finance lease assets, net are recorded net of accumulated amortization in Property, plant, and equipment, net and Other assets, net of $ 65.8 million and $ 0.8 million, respectively, as of December 31, 2020, and $ 64.3 million and $ 0.3 million, respectively, as of December 31, 2019.

(3) Operating lease liabilities include $ 0.2 million and $ 0.2 million of accrued interest, as of December 31, 2020 and

2019, respectively.

(2) Finance lease assets, net are recorded net of accumulated amortization in Property, plant, and equipment, net and Other assets, net of $ 69.6 million and $ 1.3 million, as of December 31, 2021, and $ 65.8 million and $ 0.8 million, as of December 31, 2020.

(3) Operating lease liabilities include $ 0.2 million, and $ 0.2 million of accrued interest, as of December 31, 2021 and 2020, respectively.

Finance Leases

41 unchanged sentences

_______________

(1) As of December 31, 2020, we have operating lease commitments that have not yet commenced of approximately $ 0.8 million primarily related to rail car leases.

(1) As of December 31, 2021, we have operating lease commitments that have not yet commenced of approximately $ 1.1 million related to manufacturing and office equipment leases.

Lease Term and Discount Rate

18 unchanged sentences

Defined Contribution Plans

On January 1, 2016, the Ingevity Corporation Retirement Savings Plan ("Plan") was established.

The Plan is a qualified salary-reduction plan under Section 401(k) of the U.S.

Internal Revenue Code.

Eligible U.S.

employees may participate by contributing a portion of their compensation.

Eligible employees may participate in our retirement savings plan ("Plan"), a qualified salary-reduction plan under Section 401(k) of the U.S.

Internal Revenue Code by contributing a portion of their compensation.

For non-union eligible employees participating in the Plan, Ingevity makes matching contributions up to six percent of the employee deferral.

In addition to the matching contributions, Ingevity also makes a non-elective contribution of three percent of eligible compensation per payroll for non-union employees.

For union eligible employees participating in the Plan Ingevity makes matching contributions up to 100 percent of the first three percent of the employee deferrals and 50 percent on the next two percent of deferrals.

salaried employees who were no longer eligible to participate in our prior parent's defined benefit pension plan were provided an enhanced contribution into the Plan.

The enhanced benefits consist of a transition contribution of four or ten percent of the employee’s eligible compensation for employees who were grandfathered into our prior parent's cash balance and final average pay pension plan, respectively.

The transition contributions continued until December 31, 2020, unless the grandfathered employee terminated employment sooner.

For eligible union employees participating in the Plan, Ingevity makes matching contributions up to 100 percent of the first three percent of the employee deferrals and 50 percent on the next two percent of deferrals.

Employee contributions as well as Ingevity’s match contributions are made to funds designated by the participant, none of which are based on Ingevity’s common stock.

Charges associated with employer contributions to the Plan were $ 9.5 million, $ 10.6 million, and $ 10.6 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Defined Benefit Pension and Postretirement Plans

On May 16, 2016, Ingevity established qualified and non-qualified benefit plans to provide pension and post-retirement benefits to certain employees and retirees.

Ingevity has both established qualified and non-qualified benefit plans to provide pension and post-retirement benefits to certain employees and retirees.

Our retirement obligations consist of accrued defined benefit obligations earned by Ingevity domestic hourly union employees;

15 unchanged sentences

Change in projected benefit obligation

Project benefit obligation at January 1 $ 36.5 $ 29.4 $ 0.9 $ 0.7

Projected benefit obligation at January 1 $ 45.0 $ 36.5 $ 1.0 $ 0.9

Service cost 1.7 1.6 — —

71 unchanged sentences

Recognized (gain) loss due to curtailments (4)

— 0.1 — — — —

Net annual benefit cost $ 1.6 $ 1.9 $ 1.5 $ — $ — $ —

4 unchanged sentences

(3) Amounts are recorded to "Other (income) expense, net" on our consolidated statements of operations.

(4) Our pension and postretirement settlement and curtailment (income) charges 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.

Contributions

15 unchanged sentences

The following table presents our fair value hierarchy for our major categories of pension plan assets by asset class.

In millions December 31, 2020 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs

(Level 3) Investments Measured at Net Asset Value

In millions December 31, 2021 Level 1 Level 2 Level 3 Investments Measured at Net Asset Value

Cash and short-term investments $ 0.2 $ 0.2 $ — $ — $ —

3 unchanged sentences

Total assets $ 31.8 $ 9.4 $ 2.1 $ — $ 20.3

In millions December 31, 2019 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs

(Level 3) Investments Measured at Net Asset Value

In millions December 31, 2020 Level 1 Level 2 Level 3 Investments Measured at Net Asset Value

Cash and short-term investments $ 0.1 $ 0.1 $ — $ — $ —

30 unchanged sentences

(2) Primarily represents costs associated with an impairment of an operating lease asset that is no longer in use and other miscellaneous exit costs.

2020 activities

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

We recorded $ 6.4 million in severance and other employee-related costs in the year ended December 31, 2020.

Additionally, during the year ended December 31, 2020, related to this cost reduction initiative.

Additionally, we recorded $ 1.7 million related to an impairment of an operating lease asset that is no longer in use and $ 0.4 million of other miscellaneous exit costs related to our Performance Chemicals derivatives operations in Palmeira, Brazil, which was closed in 2016.

2019 activities

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

As a result of this reorganization, we recorded $ 1.5 million in severance and other employee-related costs in the year ended December 31, 2019.

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

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

As a result of this sale, we recorded $ 0.4 million as a gain on sale of assets, as well as $ 0.7 million charge related to other miscellaneous exit costs, in the year ended December 31, 2019.

2018 activities

In February 2018, we sold assets from the Performance Chemicals derivatives operations in Duque De Caxias, Rio de Janeiro, Brazil.

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

As a result of this sale, we recorded $ 0.6 million as a gain on sale of assets offset by other employee related costs of $ 0.1 million for the year ended December 31, 2018.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

Restructuring charges

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

As a result of this cost reduction initiative, we recorded severance and other employee-related costs of $ 0.1 million during the year ended December 31, 2021 and $ 6.4 million during the year ended December 31, 2020, respectively.

Additionally, during the year ended December 31, 2020, we recorded $ 1.7 million related to an impairment of an operating lease asset that is no longer in use.

Roll forward of Restructuring Reserves

The following table shows a roll forward of restructuring reserves that will result in cash spending (in millions):

Balance at Change in Cash Balance at Change in Cash Balance at

8 unchanged sentences

Other (income) charges, net

Business transformation initiative costs

In the first quarter of 2020, we embarked upon a business transformation initiative that includes the implementation of an upgraded enterprise resource planning ("ERP") system.

Business transformation costs

In 2020, we embarked upon a business transformation initiative that includes the implementation of an upgraded enterprise resource planning ("ERP") system.

This new ERP system will equip our employees with standardized processes and secure integrated technology that enable us to better understand and meet our customers' needs and compete in the marketplace.

We expect this business transformation initiative and related ERP implementation to be a complex, multi-year project.

It requires the integration of the new ERP system with multiple new and existing information systems and business processes, in order to maintain the accuracy of our books and records and to provide our management team with real-time information important to the operation of our business.

The implementation of our new ERP is expected to occur in multiple phases beginning in fiscal year 2022.

This business transformation requires the integration of the new ERP system with multiple new and existing information systems and business processes in order to maintain the accuracy of our books and records and to provide our management team with real-time information important to the operation of our business.

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

Costs incurred, during the year ended December 31, 2020, of $ 10.0 million, represent costs directly associated with the business transformation initiative that, in accordance with GAAP, cannot be capitalized.

Costs incurred during the year ended December 31, 2021, and December 31, 2020 of $ 16.1 million and $ 10.0 million, respectively, represent costs directly associated with the business transformation initiative that, in accordance with GAAP, cannot be capitalized.

Over the course of this initiative, we anticipate incurring approximately $ 90 - 95 million of total costs, which includes $ 45 - 50 million of non-capitalizable costs.

Perstorp Holding AB's Caprolactone Business

On February 13, 2019, we completed the acquisition of 100 percent of the equity of Perstorp UK Ltd.

with Perstorp Holding AB ("Seller"), including the Seller's entire caprolactone business ("Caprolactone Business"), herein referred to as the "Caprolactone Acquisition." The Caprolactone Acquisition was completed for an aggregate purchase price of € 578.9 million ($ 652.5 million), less assumed debt of € 100.4 million ($ 113.1 million).

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

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

Our revolving credit facility was utilized as the primary source of funds, along with available cash on hand, to fund the Caprolactone Acquisition.

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

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

Purchase Price Allocation

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

Ingevity Corporation

1 unchanged sentence

December 31, 2021

Purchase Price Allocation

In millions Weighted Average Amortization Period Fair Value

Cash and cash equivalents $ 0.7

Accounts receivable, net 15.7

Inventories (1)

Prepaid and other current assets 1.9

Property, plant and equipment 86.3

Operating lease assets, net 1.8

Intangible assets (2)

Customer relationships (5)

17 years 159.0

Developed technology (5)

12 years 64.8

17 years 67.0

Non-compete agreement 3 years 0.5

Other assets 1.3

Total fair value of assets acquired $ 715.8

Accounts payable 13.6

Accrued expenses 2.3

Long-term debt 113.1

Operating lease liabilities 1.7

Deferred income taxes 45.7

Total fair value of liabilities assumed $ 176.4

Cash and restricted cash acquired (4)

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

_______________

(1) Fair value of finished goods inventories acquired included a step-up in the value of $ 8.4 million, all of which was expensed in the three months ended March 31, 2019.

The expense is included in "Cost of sales" on the consolidated statement of operations.

Inventories are accounted for on a FIFO basis of accounting.

(2) The aggregate amortization expense was $ 19.1 million and $ 14.4 million for the years ended December 31, 2020 and 2019, respectively.

Estimated amortization expense is as follows:

2021 - $ 19.2 million, 2022 - $ 19.1 million, 2023 - $ 19.0 million, 2024 - $ 19.0 million, and 2025 - $ 19.0 million.

The estimated pre-tax amortization expense may fluctuate due to changes in foreign currency.

(3) Goodwill consists of estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

This acquired goodwill has been included within our Performance Chemicals reporting unit, see Note 9 for further information regarding our allocation of goodwill among our reportable segments.

None of the acquired goodwill will be deductible for income tax purposes.

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

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

(5) The fair values assigned to the Customer Relationships intangible asset was determined by using a multi-period excess earnings model ("MP-Model").

Significant assumptions utilized in MP-Model are the attrition rate, revenue growth rates, and the discount rate.

The fair values assigned to the Developed Technology and Brands were determined using a relief from royalty model ("RfR-Model").

The RfR-Model's significant assumptions include the revenue growth rates, royalty rate, and discount rate considered in the aggregate.

Georgia-Pacific's Pine Chemical Business

On March 8, 2018, pursuant to the terms and conditions set forth in the asset purchase agreement with Georgia-Pacific Chemicals LLC, Georgia-Pacific LLC (together with Georgia-Pacific Chemicals LLC, "GP") and Ingevity Arkansas, LLC, a wholly-owned subsidiary of Ingevity, we completed the acquisition (the "Pine Chemical Acquisition") of substantially all the assets primarily used in GP's pine chemical business (the "Pine Chemical Business") for an aggregate purchase price of $ 315.5

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

The aggregate purchase price was finalized during the third quarter of 2018 with a final payment to GP in the amount of $ 0.5 million to finalize the net working capital acquired on March 8, 2018.

The Pine Chemical Business included the assets and facilities related to tall oil fractionation operations and the production or modification of tall oil fatty acids, tall oil rosins, rosin derivatives and formulated products.

In addition, on the Pine Chemical Acquisition, the Company and GP entered into a 20 -year, market-based crude tall oil ("CTO") supply contract with certain of Georgia-Pacific’s paper mill operations.

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

Although the integration was not complete, a substantial portion of the Pine Chemical Business was integrated into our existing Performance Chemicals operations as of September 30, 2018, subsequent to which, we were no longer able to separate net sales and operating performance of the Pine Chemical Acquisition from our existing Performance Chemicals' operating results.

Perstorp Holding AB's Caprolactone Business

On February 13, 2019, we completed the acquisition of Perstorp UK Ltd.

from Perstorp Holding AB ("Seller"), including the Seller's entire caprolactone business, herein referred to as the "Caprolactone Acquisition." The Caprolactone Acquisition was completed for an aggregate purchase price, less cash acquired, of $ 537.9 million.

Our revolving credit facility was utilized as the primary source of funds, along with available cash on hand, to fund the Caprolactone Acquisition.

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

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information assumes that the Caprolactone Acquisition as well as the Pine Chemical Acquisition occurred at the beginning of the periods presented..

The following unaudited pro forma financial information assumes that the Caprolactone Acquisition occurred at the beginning of the periods presented, January 1, 2019.

These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations would have been if the acquisitions occurred at the beginning of the periods presented, nor are they indicative of future results of operations.

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

The pro forma results presented below are adjusted for the removal of Acquisition and other-related costs of $ 35.3 million and $ 12.2 million for the years ended December 31, 2019 and 2018.

Years Ended December 31,

In millions 2019 2018

The pro forma results presented below are adjusted for the removal of Acquisition and other-related costs of $ 35.3 million for the year ended December 31, 2019.

In millions Year Ended December 31, 2019

Net sales $ 1,310.6

2 unchanged sentences

Acquisition and other-related costs

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

Costs incurred to complete and integrate acquisitions and other strategic investments are expensed as incurred on our consolidated statement of operations.

The following table summarizes the costs incurred associated with these combined activities.

30 unchanged sentences

We recorded $ 4.2 million, $( 4.3 ) million, and $( 0.9 ) million of deferred tax provision (benefit) in components of other comprehensive income during the years ended December 31, 2021, 2020, and 2019, respectively.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

The following table summarizes the major differences between taxes computed at the U.S.

6 unchanged sentences

Changes in valuation allowance 0.8 ( 1.9 ) ( 1.9 )

Deferred adjustments (including rate change) 3.9 ( 1.4 ) ( 0.1 )

Noncontrolling interest in consolidated partnership — — ( 2.7 )

Deferred adjustments 0.3 ( 1.4 ) ( 1.3 )

Legislative tax rate change 13.9 5.3 ( 0.1 )

Excess stock compensation ( 0.3 ) 0.4 ( 5.9 )

Federal and state tax credits ( 4.9 ) ( 4.0 ) ( 2.3 )

Tax Reform — — ( 1.9 )

Foreign derived intangible income ( 5.1 ) ( 3.1 ) ( 3.8 )

3 unchanged sentences

Effective tax rate 27.5 % 22.8 % 19.4 %

The increase in our effective tax rate from 2019 to 2020 was primarily driven by the reduction in the excess stock compensation benefit derived by declining stock prices in 2020, as well as a rate increase in the United Kingdom ("UK").

This effective tax rate increase was partially offset by a reduction of the officer's compensation limitation due to forfeited equity awards already disallowed for tax purposes, as well as increased benefit due to the generation of additional state tax credits as a result of the new corporate headquarters.

The increase in our effective tax rate from 2018 to 2019 was driven by multiple factors.

The August 1, 2018 acquisition of the remaining 30 percent noncontrolling interest in Purification Cellutions, LLC (see Note 13 for more information) resulted in an increase to our effective tax rate in 2019 as compared to 2018.

We recognized $ 5.0 million of excess tax benefits from the vesting of share-based awards.

We incurred nondeductible acquisition-related charges during the year, resulting in a tax impact of $ 1.4 million.

Also, as a result of finalized regulations stemming from U.S.

Tax Reform, we incurred tax expense relating to an adjustment of our net deferred tax liabilities to account for the future non-deductible portion of our officer's compensation of $ 1.1 million.

Additionally, in 2018, we adjusted our net deferred tax liabilities by $ 1.9 million due to further interpretations of U.S.

Tax Reform the impact of which did not repeat in 2019.

The remaining driver to the change in our effective tax rate from 2018 to 2019 is due to an increase in our earnings recognized in foreign jurisdictions some of which are taxed at higher rates than our U.S.

domestic earnings.

Ingevity Corporation

1 unchanged sentence

December 31, 2021

The increase in our effective tax rate from 2020 to 2021 was driven by a 6 percent legislative tax rate increase in the United Kingdom ("UK").

The impacts of this increase were partially offset by the benefit in excess stock compensation driven by the rebound of stock prices in 2021 compared to 2020, as well as the increased benefit associated with our foreign derived intangible income ("FDII").

This increased benefit from FDII was driven by higher taxable income as a result of reduced capital spend and deferral of litigation expenses for tax purposes.

Additionally, in depth research and development studies conducted, as well as amended state return filing, further increased the rate benefit associated with our federal and state credits in 2021, which also helped to partially offset the negative impacts of the UK rate change.

This rate increase was partially offset by a reduction of the officer’s compensation limitation due to forfeited equity awards already disallowed for tax purposes, as well as increased benefit due to the generation of additional state tax credits as a result of the new corporate headquarters.

The significant components of deferred tax assets and liabilities are as follows:

4 unchanged sentences

Leases 16.5 15.6

Litigation verdict accrual 19.9 —

Other 12.0 14.2

13 unchanged sentences

(1) Presentation in the table above is on a gross basis, however due to jurisdictional netting, our net deferred tax asset and liability recorded on our consolidated balance sheets is $ 6.8 million and $ 114.6 million, respectively, as of December 31, 2021, and $ 8.1 million and $ 117.0 million, respectively, as of December 31, 2020 .

Our net deferred tax liabilities increased $ 13.6 million at December 31, 2020 as compared to December 31, 2019.

Deferred tax liabilities associated with fixed assets increased significantly in 2020 due to an increase in assets placed in service in 2020 versus 2019 resulting in additional bonus depreciation deductions.

Additionally, a rise in the UK tax rate caused an increase in our overall deferred tax liability.

This increase in the liability was partially offset by increase in miscellaneous new deferred tax assets, including a capital loss carryover and deferred earn out associated with the ANGP asset acquisition.

Additionally, as a part of the CARES Act, payments associated with payroll taxes were allowed to be extended into 2021 creating a deferred tax asset.

We have deferred tax assets, including net operating loss carryforwards, which are available to offset future taxable income.

The UK legislative tax rate increase was the primary driver in our overall deferred tax liabilities, as seen in the increase in both intangibles as well as fixed assets.

Offsetting increases in the overall deferred tax assets was driven mostly by the deferral of the litigation verdict charge, which is not deductible until paid for tax purposes, as well an increase in employee benefits associated with the year-end bonus accrual.

We have deferred tax assets, including net operating loss and state tax credit carryforwards, which are available to offset future taxable income.

A valuation allowance has been provided where management has determined that it is more likely than not that the deferred tax assets will not be realized.

In 2020, we recognized a tax benefit of $ 2.7 million by releasing a valuation allowance that was associated with our Brazil operations.

The decision to release the valuation allowance due to positive evidence supporting future taxable income available to offset these losses.

In 2021, we recognized tax expense of $ 0.8 million due to our expected inability to recognize the benefit associated with state tax credits prior to their expiration.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

At December 31, 2021, foreign net operating loss carryforwards totaled $ 38.9 million.

4 unchanged sentences

The determination of the amount of taxes that may be due if earnings are remitted is not practicable because such liability, if any, is dependent on circumstances that exist if and when remittance occurs.

The circumstances that would affect the calculations include the source location and amount of the distribution, the underlying tax rate already paid on the earnings, foreign withholding taxes, the opportunity to use foreign tax

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

credits, and the potential impact of U.S.

Positive undistributed earnings considered to be indefinitely reinvested totaled $ 67.1 million at December 31, 2021.

2 unchanged sentences

Balance at beginning of year $ 0.1 $ 0.1 $ 0.3

Additions for tax positions related to current year — — 0.2

Reduction from lapse of statute of limitation — ( 0.2 ) ( 0.2 )

Additions for tax positions related to prior years 0.3 — —

Reduction for lapse of statute of limitation ( 0.1 ) — ( 0.2 )

Balance at end of year $ 0.3 $ 0.1 $ 0.1

3 unchanged sentences

Legal Proceedings

We are, from time to time, involved in routine litigation incidental to our operations.

None of the litigation in which we are currently involved, individually or in the aggregate, is material to our consolidated financial condition, liquidity or results of operations nor are we aware of any material pending or contemplated proceedings.

On July 19, 2018, we 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 us 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 our enforcement of the 844 Patent and our entry into several supply agreements with customers of its fuel vapor canister honeycombs.

District Court dismissed our 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 $ 85.0 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.

Ingevity Corporation

20 unchanged sentences

Pension and postretirement settlement and curtailment (charges) income, net (3)

( 0.1 ) — ( 0.2 )

Restructuring and other income (charges), net (4)

2 unchanged sentences

( 0.6 ) ( 1.8 ) ( 35.3 )

Net (income) loss attributable to noncontrolling interests — — ( 12.7 )

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

Litigation verdict charge (6)

Net income (loss) $ 118.1 $ 181.4 $ 183.7

_______________

3 unchanged sentences

We have excluded the following items from segment EBITDA:

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

(3) Our pension and postretirement settlement and curtailment (income) charges 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 2018 and 2020.

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) charges, net.

(3) 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.

1 unchanged sentence

(4) For the year ended December, 31, 2021, charges of $ 6.0 million and $ 10.2 million relate to the Performance Materials segment and Performance Chemicals segment, respectively.

For the years end December 31, 2019 and 2018, all income (charges) relate to the Performance Chemicals segment.

For the year ended December, 31, 2020, charges of $ 7.4 million and $ 11.1 million relate to the Performance Materials segment and Performance Chemicals segment, respectively.

For the year end December 31, 2019, all income (charges) relate to the Performance Chemicals segment.

Information about how restructuring and other (income) charges relate to our reporting segments is discussed in Note 15.

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

For more detail on these charges see Note 17 within these consolidated financial statements.

(5) 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.

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

Refer to Note 18 for additional information.

Ingevity Corporation

24 unchanged sentences

(1) Segment assets exclude assets not specifically managed as part of one specific segment herein referred to as "Corporate and other."

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

Earnings (Loss) per Share

2 unchanged sentences

The calculation of diluted net income per share excludes all anti-dilutive common shares.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2020

Years Ended December 31,

41 unchanged sentences

Finance lease assets, net (Note 13) 0.3 0.8

Strategic investments (Note 5) 35.3 —

Other 6.5 6.7

22 unchanged sentences

Interest rate swaps (Note 9) 4.0 8.9

New market tax credit payable (Note 11) 1.8 1.7

New market tax credit payable 1.8 1.8

Contingent consideration (Note 5) 0.8 0.8

Litigation verdict accrual (Note 18) 85.0 —

Other 4.8 3.3

5 unchanged sentences

Royalty and sundry (income)/loss ( 0.6 ) ( 0.4 ) ( 1.9 )

Impairment of equity investment (Note 6) 1.4 — 1.5

Litigation verdict charge (Note 18) 85.0 — —

Other (income)/expense, net ( 7.0 ) 2.1 ( 2.6 )

$ 79.9 $ ( 4.1 ) $ ( 4.3 )

Quarterly Financial Information (Unaudited)

The following is a summary of the quarterly results of operations for the years ended December 31, 2020 and 2019.

In millions, except earnings per share amounts 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Net sales $ 288.2 $ 270.6 $ 331.7 $ 325.6 $ 276.8 $ 352.8 $ 359.9 $ 303.4

Gross profit 114.6 83.9 139.6 127.4 97.1 134.4 139.5 111.0

Income (loss) before taxes 55.2 25.4 88.1 66.4 22.7 72.7 77.4 55.1

Net income (loss) 45.3 20.2 69.9 46.0 22.7 56.8 59.9 44.3

Basic earnings (loss) per common share attributable to Ingevity stockholders (1)

$ 1.09 $ 0.49 $ 1.69 $ 1.12 $ 0.54 $ 1.36 $ 1.42 $ 1.06

Diluted earnings (loss) per common share attributable to Ingevity stockholders (1)

$ 1.08 $ 0.49 $ 1.69 $ 1.11 $ 0.54 $ 1.34 $ 1.41 $ 1.05

Weighted average shares outstanding

Basic 41.7 41.2 41.3 41.1 41.7 41.8 42.3 41.8

Diluted 42.0 41.4 41.5 41.4 42.2 42.2 42.6 42.2

_______________

(1) Basic and diluted earnings (loss) per share are calculated using the weighted average number of common shares outstanding for the period.

The sum of quarterly earnings per common share may differ from the full-year amount.

INGEVITY CORPORATION

2 unchanged sentences

Provision/ (Benefit)

(in millions) Balance, Beginning of Year Charged to Costs and Expenses Charged to Other Comprehensive Income Charged to Retained Earnings (1)

Write-offs (2)

In millions Balance, Beginning of Year Charged to Costs and Expenses Charged to Other Comprehensive Income Charged to Retained Earnings Write-offs (1)

Balance, End of Year

8 unchanged sentences

$ 0.5 1.4 — — — $ 1.9

Held-to-maturity debt securities credit loss allowance (3)

$ — 0.3 — 0.6 — $ 0.9

Deferred tax valuation allowance $ 13.0 ( 1.9 ) ( 2.7 ) — — $ 8.4

4 unchanged sentences

_______________

(1) See Note 4 within the consolidated financial statements included within Part II.

Item 8 of the Form 10-K for more information related to our adoption of the new accounting standard related to credit losses (ASU 2016-13).

(1) Write-offs are net of recoveries.

3 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 8. Financial Statements and Supplementary Data