What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-10-28 · 178 added, 339 removed, 536 unchanged (49% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Operations (Unaudited)

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

Three Months Ended March 31,

In millions, except per share data 2022 2021

17 unchanged sentences

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

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

Three Months Ended March 31,

In millions 2022 2021

4 unchanged sentences

Unrealized gain (loss) on net investment hedges, net of tax provision (benefit) of $ 0.4 and $ 1.5

2.9 ( 6.2 ) 6.1 ( 2.7 )

Total foreign currency adjustments, net of tax provision (benefit) of $ 0.4 and $ 1.5

( 13.8 ) 21.4 ( 2.4 ) ( 16.9 )

Derivative instruments:

Unrealized gain (loss), net of tax provision (benefit) of $ 2.0 and $ 0.4

2.8 0.7 5.3 ( 4.5 )

Reclassifications of deferred derivative instruments (gain) loss, included in net income (loss), net of tax (provision) benefit of $( 0.1 ), $ 0.1 , $( 0.1 ), and $ 0.2

Reclassifications of deferred derivative instruments (gain) loss, included in net income (loss), net of tax (provision) benefit of $( 0.4 ) and zero

( 1.1 ) ( 0.1 )

Total derivative instruments, net of tax provision (benefit) of $ 1.6 and $ 0.4

2.7 1.1 5.1 ( 3.8 )

Pension & other postretirement benefits:

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

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

— 0.1 0.1 0.1

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

— 0.1 0.1 0.1

Other comprehensive income (loss), net of tax provision (benefit) of $ 2.0 and $ 1.9

( 11.1 ) 22.6 2.8 ( 20.6 )

Comprehensive income (loss) $ 50.7 $ 57.2

2 unchanged sentences

Condensed Consolidated Balance Sheets

In millions, except share and par value data September 30, 2021 December 31, 2020

In millions, except share and par value data March 31, 2022 December 31, 2021

Assets (Unaudited)

Cash and cash equivalents $ 222.6 $ 275.4

Accounts receivable , net of allowance for credit losses of $ 1.9 million - 2021 and $ 1.9 million - 2020

Accounts receivable , net of allowance for credit losses of $ 2.0 - 2022 and $ 2.0 - 2021

Inventories, net 260.2 241.2

6 unchanged sentences

Deferred income taxes 6.9 6.8

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

Restricted investment , net of allowance for credit losses of $ 0.5 - 2022 and $ 0.5 - 2021

Other assets 114.5 109.5

30 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

In millions 2022 2021

5 unchanged sentences

Deferred income taxes 1.4 ( 0.6 )

LIFO Reserve 10.7 1.7

Share-based compensation 3.0 2.5

9 unchanged sentences

Operating leases ( 5.4 ) ( 5.2 )

Litigation expense 85.0 —

Changes in other operating assets and liabilities, net 1.4 ( 1.5 )

2 unchanged sentences

Capital expenditures $ ( 27.6 ) $ ( 17.0 )

Finance lease expenditures — ( 23.8 )

Purchase of strategic investments ( 16.5 ) —

Other investing activities, net ( 2.6 ) ( 0.3 )

1 unchanged sentence

Cash provided by (used in) financing activities:

Proceeds from revolving credit facility $ — $ 346.1

Payments on revolving credit facility — ( 307.3 )

Payments on long-term borrowings ( 4.7 ) ( 9.4 )

11 unchanged sentences

$ 223.2 $ 238.4

(1) Includes restricted cash of $ 0.5 million and $ 2.2 million and cash and cash equivalents of $ 269.4 million and $ 198.2 million at September 30, 2021 and 2020, respectively.

(1) Includes restricted cash of $ 0.6 million and $ 0.6 million and cash and cash equivalents of $ 222.6 million and $ 237.8 million at March 31, 2022 and 2021, respectively.

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

8 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

Description of Business and Basis of Presentation

March 31, 2022

Description of Business

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

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

Ingevity Corporation ("Ingevity," "the Company," "we," "us," or "our") provides products and technologies that purify, protect, and enhance the world around us.

Through a team of talented and experienced people, we develop, manufacture, and bring to market solutions that help customers solve complex problems and make the world more sustainable.

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

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

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

Basis of Presentation

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, 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), 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

These unaudited Condensed Consolidated Financial Statements reflect the consolidated operations of the Company and have been prepared in accordance with United States Securities and Exchange Commission ("SEC") interim reporting requirements.

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ASUs not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the consolidated financial statements.

Recently Adopted Accounting Pronouncements

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

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

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

We adopted the new guidance effective January 1, 2021.

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):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The ASU is intended to provide temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates.

This guidance became effective beginning on March 12, 2020, and we may elect to apply the amendments

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

prospectively until December 31, 2022.

As of September 30, 2021, we have not yet elected any optional expedients provided in the standard.

March 31, 2022

expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates.

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

As of March 31, 2022, we have not yet elected any optional expedients provided in the standard.

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

2 unchanged sentences

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

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

Three Months Ended March 31,

In millions 2022 2021

Performance Materials segment $ 148.4 $ 140.7

$ 118.1 $ 143.8 $ 384.8 $ 349.3

Performance Chemicals segment

1 unchanged sentence

Industrial Specialties product line 144.7 112.1

132.6 90.1 364.7 290.9

Engineered Polymers product line 61.8 46.1

1 unchanged sentence

Net sales $ 382.8 $ 320.3

______________

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

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

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

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

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

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

Three Months Ended March 31,

In millions 2022 2021

10 unchanged sentences

For all periods presented we had no contract liabilities.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

Contract Asset

September 30,

In millions 2022 2021

5 unchanged sentences

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

Fair Value Measurements

3 unchanged sentences

There were no transfers of assets and liabilities that were recorded at fair value between the three-level fair value hierarchy during the periods reported.

Refer to Note 8 for more information regarding our fair value measurements of our financial instruments and risk management activities.

In millions Level 1 (1)

September 30, 2021

March 31, 2022

Deferred compensation plan investments (4)

6 unchanged sentences

December 31, 2021

Equity securities (6)

$ 0.2 $ — $ — $ 0.2

Deferred compensation plan investments (4)

$ 0.9 $ — $ — $ 0.9

Total assets $ 0.9 $ — $ — $ 0.9

3 unchanged sentences

Total liabilities $ 13.7 $ — $ 0.8 $ 14.5

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

______________

5 unchanged sentences

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

COLI is recorded at cash surrender value and included in "Other assets" on the condensed consolidated balance sheets in the amount of $ 13.4 million and $ 10.8 million at September 30, 2021 and December 31, 2020 respectively.

COLI is recorded at cash surrender value and included in "Other assets" on the condensed consolidated balance sheets in the amount of $ 13.1 million and $ 14.0 million at March 31, 2022 and December 31, 2021, respectively.

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

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

Nonrecurring Fair Value Measurements

Equity Investment

During the second quarter of 2021, our Performance Materials segment acquired a strategic equity investment in a privately-held company for $ 16.5 million.

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

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

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

The carrying value of our strategic equity investment was $ 16.5 million at September 30, 2021.

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

There were no nonrecurring fair value measurements in the condensed consolidated balance sheet during the quarters ended March 31, 2022 and December 31, 2021.

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 $ 16.2 million and $ 16.5 million at March 31, 2022 and December 31, 2021, respectively.

During the first quarter of 2022, we acquired a strategic investment in a privately-held company for $ 2.0 million, which is accounted for under the measurement alternative method.

The aggregate carrying value of all measurement alternative investments where fair value is not readily determinable totaled $ 20.8 million and $ 18.8 million at March 31, 2022 and 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 March 31, 2022.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

Restricted Investment

At September 30, 2021 and December 31, 2020, the carrying value of our restricted investment, which is accounted for as held-to-maturity ("HTM") and therefore recorded at amortized costs, was $ 75.5 million and $ 73.6 million, net of an allowance for credit losses of $ 0.5 million and $ 0.9 million, and included cash of $ 4.1 million and $ 2.4 million, respectively.

The fair value at September 30, 2021 and December 31, 2020 was $ 80.9 million and $ 81.5 million, respectively, based on Level 1 inputs.

At March 31, 2022 and December 31, 2021, the carrying value of our restricted investment, which is accounted for as held-to-maturity ("HTM") and therefore recorded at amortized costs, was $ 76.6 million and $ 76.1 million, net of an allowance for credit losses of $ 0.5 million and $ 0.5 million, and included cash of $ 5.3 million and $ 4.7 million, respectively.

The fair value at March 31, 2022 and December 31, 2021 was $ 76.7 million and $ 80.0 million, respectively, based on Level 1 inputs.

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

2 unchanged sentences

HTM Debt Securities

In millions AA+ AA A A- BBB+ Total

September 30, 2021 $ 13.4 10.6 24.2 13.3 10.4 $ 71.9

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

March 31, 2022 $ 13.4 — 10.5 13.3 14.1 20.5 $ 71.8

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

Debt Obligations

At September 30, 2021 and December 31, 2020, the carrying value of finance lease obligations was $ 102.6 million and $ 103.1 million, respectively, and the fair value was $ 120.4 million and $ 127.0 million, respectively.

The carrying amount, excluding debt issuance fees, of our variable interest rate long-term debt was $ 332.8 million and $ 353.4 million as of September 30, 2021 and December 31, 2020, respectively.

Debt and Finance Lease Obligations

At March 31, 2022 and December 31, 2021, the carrying value of finance lease obligations was $ 102.2 million and $ 102.4 million, respectively, and the fair value was $ 112.5 million and $ 118.6 million, respectively.

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.

The carrying amount, excluding debt issuance fees, of our variable interest rate long-term debt was $ 323.4 million and $ 328.1 million as of March 31, 2022 and December 31, 2021, respectively.

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

At September 30, 2021 and December 31, 2020, the carrying value of our fixed rate debt was $ 850.0 million and the fair value was $ 855.9 million and $ 864.1 million, respectively, based on Level 2 inputs.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

At March 31, 2022 and December 31, 2021, the carrying value of our fixed rate debt was $ 850.0 million and $ 850.0 million, respectively, and the fair value was $ 800.8 million and $ 843.9 million, respectively, based on Level 2 inputs.

Contingent Consideration

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

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

The fair value of the Revenue Earn-out consideration was $ 0.8 million at September 30, 2021 and December 31, 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 on the condensed consolidated statements of operations.

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

The fair value of the five-year Revenue Earn-out consideration was $ 0.8 million at March 31, 2022 and December 31, 2021, 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.

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

Contingent Consideration

In millions September 30, 2021

In millions March 31, 2022 December 31, 2021

Beginning balance $ 0.8 $ 0.8

5 unchanged sentences

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

Inventories, net

In millions September 30, 2021 December 31, 2020

In millions March 31, 2022 December 31, 2021

Raw materials $ 64.4 $ 48.8

5 unchanged sentences

Property, Plant, and Equipment, net

In millions September 30, 2021 December 31, 2020

In millions March 31, 2022 December 31, 2021

Machinery and equipment $ 1,120.3 $ 1,113.3

5 unchanged sentences

Property, plant, and equipment, net $ 719.0 $ 719.7

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

Goodwill and Other Intangible Assets, net

3 unchanged sentences

Foreign currency translation ( 8.9 ) — ( 8.9 )

September 30, 2021 $ 436.4 $ 4.3 $ 440.7

There were no interim triggering events or circumstances indicating that goodwill might be impaired as of September 30, 2021.

March 31, 2022 $ 428.8 $ 4.3 $ 433.1

There were no interim triggering events or circumstances indicating that goodwill might be impaired as of March 31, 2022.

Other Intangible Assets

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

In millions Gross Accumulated amortization Net Gross Accumulated amortization Net

6 unchanged sentences

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

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

In millions September 30, 2021 December 31, 2020

In millions March 31, 2022 December 31, 2021

Performance Materials $ 1.8 $ 1.9

1 unchanged sentence

Other intangibles, net $ 322.3 $ 337.6

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

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

In millions 2021 2020 2021 2020

Cost of sales $ — $ — $ — $ 0.1

Selling, general, and administrative expenses 8.3 8.2 25.1 24.3

Total amortization expense $ 8.3 $ 8.2 $ 25.1 $ 24.4

Amortization expense related to our intangible assets is included in Selling, general and administrative expenses on the condensed consolidated statement of operations.

During the three months ended March 31, 2022 and March 31, 2021, we recognized amortization expense of $ 8.1 million and $ 8.4 million, respectively.

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

1 unchanged sentence

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

Financial Instruments and Risk Management

8 unchanged sentences

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

The fair value of the fixed-to-fixed cross currency interest rate swap was a net asset (liability) of $( 0.7 ) million and $( 8.6 ) million at September 30, 2021 and December 31, 2020 , respectively.

During the three and nine months ended September 30, 2021, we recognized net interest income associated with this financial instrument of $ 0.1 million and $ 0.3 million, respectively, and during the three and nine months ended September 30, 2020, we recognized net interest income associated with this financial instrument of $ 0.2 million and $ 1.5 million, respectively.

The fair value of the fixed-to-fixed cross currency interest rate swap was a net asset (liability) of $ 2.7 million and $ 1.0 million at March 31, 2022 and December 31, 2021 , respectively.

During the three months ended March 31, 2022 and 2021, we recognized net interest income associated with this financial instrument of $ 0.2 million and $ 0.1 million, respectively.

Cash Flow Hedges

4 unchanged sentences

These contracts are generally designated as cash flow hedges.

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

As of September 30, 2021, there were $ 4.8 million open foreign currency derivative contracts.

The fair value of the designated foreign currency hedge contracts was an asset (liability) of $ 0.2 million and $( 0.1 ) million at September 30, 2021 and December 31, 2020, respectively.

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

As of March 31, 2022, there were $ 19.0 million open foreign currency derivative contracts.

The fair value of the designated foreign currency hedge contracts was an asset (liability) of $ 0.9 million and $ 0.5 million at March 31, 2022 and December 31, 2021, respectively.

Commodity Price Risk Management

2 unchanged sentences

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

As of September 30, 2021, we had 1.2 million and 0.9 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 September 30, 2021, open commodity contracts hedge forecasted transactions until February 2022.

The fair value of the outstanding designated natural gas commodity hedge contracts as of September 30, 2021 and December 31, 2020 was a net asset (liability) of $ 3.0 million and $( 0.1 ) million, respectively.

As of March 31, 2022, we had 1.6 million and 0.7 million mm BTUS (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 March 31, 2022, open commodity contracts hedge forecasted transactions until June 2023.

The fair value of the outstanding designated natural gas

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

March 31, 2022

commodity hedge contracts as of March 31, 2022 and December 31, 2021 was a net asset (liability) of $ 3.2 million and $( 0.6 ) million, respectively.

Interest Rate Risk Management

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

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

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.

1 unchanged sentence

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 condensed consolidated statements of operations on a straight-line basis over the remaining maturity of the underlying debt.

As of September 30, 2021, we have floating-to-fixed interest rate swaps with a notional amount of $ 166.2 million to manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $ 166.2 million of our floating rate debt to a fixed rate.

As of March 31, 2022, we have floating-to-fixed interest rate swaps with a notional amount of $ 166.2 million to manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $ 166.2 million of our floating rate debt to a fixed rate.

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

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

The fair value of the interest rate swap was an asset (liability) of $( 6.0 ) million and $( 8.9 ) million at September 30, 2021 and December 31, 2020, respectively.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

The fair value of the interest rate swap was an asset (liability) of $( 0.3 ) million and $( 4.0 ) million at March 31, 2022 and December 31, 2021, respectively.

Effect of Cash Flow and Net Investment Hedge Accounting on AOCI

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

Three Months Ended September 30,

2021 2020 2021 2020

Cash flow hedging derivatives

Currency exchange contracts $ 0.1 $ ( 0.3 ) $ ( 0.2 ) $ ( 0.2 ) Net sales

Natural gas contracts 2.8 0.4 — ( 0.3 ) Cost of sales

Interest rate swap contracts 0.7 0.8 — — Interest expense, net

Total $ 3.6 $ 0.9 $ ( 0.2 ) $ ( 0.5 )

In millions Amount of Gain (Loss) Recognized in AOCI Amount of Gain (Loss) Recognized in Income on Derivative

(Amount Excluded from Effectiveness Testing) Location of Gain or (Loss) Recognized in Income on Derivative

(Amount Excluded from

Effectiveness Testing)

Three Months Ended September 30,

2021 2020 2021 2020

Net investment hedging derivative

Currency exchange contracts (1)

$ 3.8 $ ( 8.1 ) $ — $ 0.2 Interest expense, net

Total $ 3.8 $ ( 8.1 ) $ — $ 0.2

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

Nine Months Ended September 30,

Three Months Ended March 31,

2022 2021 2022 2021

8 unchanged sentences

Effectiveness Testing)

Nine Months Ended September 30,

Three Months Ended March 31,

2022 2021 2022 2021

4 unchanged sentences

(1) Reclassifications from AOCI to Net Income were zero for all periods presented.

Gains and losses if recognized would be reclassified from AOCI to Other (income) expense, net.

Gains and losses would be reclassified from AOCI to Other (income) expense, net.

Within the next twelve months, we expect to reclassify $ 4.5 million of net gains from AOCI to income, before taxes.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

Fair Value Measurements

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

There were no transfers of assets and liabilities that are recorded at fair value between the three-level fair value hierarchy during the periods reported.

There were no nonrecurring fair value measurements related to derivative assets and liabilities on the condensed consolidated balance sheets as of September 30, 2021 or December 31, 2020.

Refer to Note 4 for more information regarding our fair value measurements beyond our financial instruments and risk management activities.

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

There were no nonrecurring fair value measurements related to derivative assets and liabilities on the condensed consolidated balance sheets as of March 31, 2022 or December 31, 2021.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

In millions Level 1 (1)

September 30, 2021

Currency exchange contracts (4)

2 unchanged sentences

Net investment hedge (5)

Interest rate swap contracts (5)

Total assets $ — $ 7.8 $ — $ 7.8

Natural gas contracts (6)

$ — $ — $ — $ —

Net investment hedge (7)

$ — $ 0.7 $ — $ 0.7

Interest rate swap contracts (7)

Total liabilities $ — $ 1.3 $ — $ 1.3

In millions Level 1 (1)

December 31, 2021

Natural gas contracts (4)

In millions Level 1 (1)

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)

4 unchanged sentences

(3) Significant unobservable inputs.

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

(4) Included within "Other current assets" on the condensed consolidated balance sheet.

(5) Included within "Other assets" on the condensed consolidated balance sheet.

3 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

March 31, 2022

Debt, including Finance Lease Obligations

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

September 30, 2021

In millions, except percentages Interest rate Maturity date September 30, 2021 December 31, 2020

Variable Rate Debt:

Revolving Credit Facility (1)

1.33 % 2025 $ — $ —

In millions, except percentages March 31, 2022 December 31, 2021

Revolving Credit Facility and other lines of credit (1)

Term Loan 323.4 328.1

Other notes payable — % 2021 — 1.8

Fixed Rate Debt:

2028 Senior Note 3.88 % 2028 550.0 550.0

2026 Senior Note 4.50 % 2026 300.0 300.0

3.88 % Senior Notes due 2028

4.50 % Senior Notes due 2026

Finance lease obligations 102.2 102.4

5 unchanged sentences

______________

(1) Letters of credit outstanding under the revolving credit facility were $ 2.3 million and $ 2.3 million and undrawn capacity under the facility was $ 497.7 million and $ 497.7 million at September 30, 2021 and December 31, 2020, respectively.

(1) Letters of credit outstanding under the revolving credit facility were $ 2.5 million and $ 2.5 million and available funds under the facility were $ 497.5 million and $ 497.5 million at March 31, 2022 and December 31, 2021, respectively.

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

See Note 17 for additional information.

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 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 September 30, 2021.

The credit agreement governing our revolving credit facility and 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.

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 Notes or 2028 Senior 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.

We were in compliance with all covenants under the indentures as of March 31, 2022.

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.

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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 September 30, 2021 were 2.6 and 2.1 , respectively, and our actual interest coverage for the four consecutive quarters ended September 30, 2021 was 12.5 .

We were in compliance with all covenants at September 30, 2021.

Our actual gross and net leverage for the four consecutive quarters ended March 31, 2022 were 2.6 and 2.2 , respectively, and our actual interest coverage for the four consecutive quarters ended March 31, 2022 was 9.9 .

We were in compliance with all covenants at March 31, 2022.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

March 31, 2022

The tables below provide a roll forward of equity.

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Balance at March 31, 2022 43,180 $ 0.4 $ 139.6 $ 856.9 $ 3.0 $ ( 313.8 ) $ 686.1

Net income (loss) — — — 44.3 — — 44.3

Other comprehensive income (loss) — — — — 5.4 — 5.4

Common stock issued 19 — — — — — —

Exercise of stock options, net 32 — 1.5 — — — 1.5

Tax payments related to vested restricted stock units — — — — — — —

Share repurchase program — — — — — ( 28.7 ) ( 28.7 )

Share-based compensation plans — — 4.0 — — 0.9 4.9

Balance at June 30, 2021 43,085 $ 0.4 $ 130.3 $ 771.0 $ 18.6 $ ( 231.8 ) $ 688.5

Net income (loss) — — — ( 4.2 ) — — ( 4.2 )

Other comprehensive income (loss) — — — — ( 11.1 ) — ( 11.1 )

Common stock issued 5 — — — — — —

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

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

Share repurchase program — — — — — ( 32.2 ) ( 32.2 )

Share-based compensation plans — — 3.0 — — 0.5 3.5

Balance at September 30, 2021 43,092 $ 0.4 $ 133.4 $ 766.8 $ 7.5 $ ( 263.6 ) $ 644.5

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

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

5 unchanged sentences

Common stock issued 97 — — — — — —

Exercise of stock options, net 24 — 0.9 — — — 0.9

Tax payments related to vested restricted stock units — — — — — ( 2.3 ) ( 2.3 )

1 unchanged sentence

Share-based compensation plans — — 2.6 — — — 2.6

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

Balance at March 31, 2021 43,034 $ 0.4 $ 124.8 $ 726.7 $ 13.2 $ ( 204.0 ) $ 661.1

Net income (loss) — — — 20.2 — — 20.2

Other comprehensive income (loss) — — — — ( 4.1 ) — ( 4.1 )

Common stock issued 5 — — — — — —

Exercise of stock options, net 50 — 1.4 — — — 1.4

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

Share-based compensation plans — — 1.3 — — 1.9 3.2

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

Net income (loss) — — — 69.9 — — 69.9

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

Common stock issued 3.0 — — — — — —

Exercise of stock options, net 1.0 — — — — — —

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

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

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

March 31, 2022

Accumulated other comprehensive income (loss)

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

Three Months Ended March 31,

In millions 2022 2021

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Beginning balance $ ( 3.2 ) $ ( 4.8 )

Unrealized actuarial gains (losses) and prior service (costs) credits — — — —

tax provision (benefit) — — — —

Net actuarial gains (losses) and prior service (costs) credits — — — —

Amortization of actuarial and other (gains) losses, prior service cost (credits), and settlement and curtailment (income) charge reclassified to net income — 0.1 0.1 0.1

tax (provision) benefit — — — —

Net actuarial and other (gains) losses, amortization of prior service cost (credits), and settlement and curtailment (income) charge reclassified to net income — 0.1 0.1 0.1

Other comprehensive income (loss), net of tax — —

Ending balance $ ( 3.2 ) $ ( 4.8 )

Total AOCI ending balance at September 30 $ 7.5 $ ( 25.6 ) $ 7.5 $ ( 25.6 )

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

Total AOCI ending balance at March 31 $ 3.0 $ 13.2

Reclassifications of accumulated other comprehensive income (loss)

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

Three Months Ended March 31,

In millions 2022 2021

1 unchanged sentence

Currency exchange contracts (1)

$ 0.2 $ ( 0.2 ) $ 0.2 $ —

Natural gas contracts (2)

— ( 0.3 ) 0.1 ( 0.9 )

Total before tax 1.5 0.1

1 unchanged sentence

Amount included in net income (loss) $ 1.1 $ 0.1

Pension and other post-retirement benefits

Amortization of prior service costs (2)

______________

Total before tax — ( 0.1 ) 0.1 ( 0.1 )

(Provision) benefit for income taxes — — — —

Amount included in net income (loss) $ — $ ( 0.1 ) $ 0.1 $ ( 0.1 )

______________

(1) Included within "Net sales" on the condensed consolidated statement of operations.

(2) Included within "Cost of sales" on the condensed consolidated statement of operations.

Share Repurchases

At September 30, 2021, $ 311.7 million remained unused under our Board-authorized repurchase program.

During the three and nine months ended September 30, 2021, we repurchased $ 32.2 million and $ 100.3 million in common stock, representing 414,501 and 1,298,167 shares of our common stock at a weighted average cost per share of $ 77.77 and $ 77.25 , respectively.

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.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

March 31, 2022

Share Repurchases

On March 2, 2020, our Board of Directors authorized the repurchase of up to $ 500 million of our common stock, and rescinded the prior two outstanding repurchase authorizations.

Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market prevailing conditions and other factors, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

During the three months ended March 31, 2022 and March 31, 2021, we repurchased $ 40.4 million and $ 39.4 million in common stock, representing 610,447 and 527,550 shares of our common stock at a weighted average cost per share of $ 66.26 and $ 74.64 , respectively.

At March 31, 2022 and March 31, 2021, $ 262.2 million and $ 372.6 million remained unused under our Board-authorized repurchase programs, respectively.

Retirement Plans

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

Three Months Ended September 30,

Pensions Other Benefits

In millions 2021 2020 2021 2020

Components of net periodic benefit cost (income):

Service cost (1)

$ 0.4 $ 0.4 $ — $ —

Interest cost (2)

Expected return on plan assets (2)

( 0.3 ) ( 0.3 ) — —

Amortization of prior service cost (credit) (1)

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

Net periodic benefit cost (income) $ 0.4 $ 0.5 $ — $ —

Nine Months Ended September 30,

Three Months Ended March 31,

Pensions Other Benefits

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Contributions

We did no t make any voluntary cash contributions to our Union Hourly defined benefit pension plan in the nine months ended September 30, 2021.

We did no t make any voluntary cash contributions to our Union Hourly defined benefit pension plan in the three months ended March 31, 2022.

There are no required cash contributions to our Union Hourly defined benefit pension plan in 2022, and we currently have no plans to make any voluntary cash contributions in 2022.

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

March 31, 2022

Restructuring and Other (Income) Charges, net

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

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

Three Months Ended March 31,

In millions 2022 2021

Severance and other employee-related costs (1)

Other — 1.7 — 1.7

Restructuring charges $ — $ 0.1

2 unchanged sentences

Total restructuring and other (income) charges, net $ 3.6 $ 3.9

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 zero and $ 0.1 million during the three and nine months ended September 30, 2021.

During the three and nine months ended September 30, 2020, we recorded severance and other employee-related costs of $ 0.3 million and $ 6.3 million, respectively.

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

_______________

(1) Represents severance and employee benefit charges.

Rollforward of Restructuring Reserves

2 unchanged sentences

In millions 12/31/2021 (1)

Payments Other 9/30/2021 (1)

Reserve Payments Other (2)

3/31/2022 (1)

Restructuring Reserves $ 0.5 — — 0.1 $ 0.6

1 unchanged sentence

(1) Included in "Accrued Expenses" on the condensed consolidated balance sheets.

(2) Includes severance and other employee-related costs.

(2) Primarily foreign currency translation adjustments.

Other (income) charges, net

2 unchanged sentences

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.

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

The implementation of our new ERP is expected to occur in multiple phases over two years beginning with our pilot deployment which occurred during the first quarter of 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 three and nine months ended September 30, 2021, of $ 4.1 million and $ 12.2 million, respectively, and during the three and nine months ended September 30, 2020, of $ 3.5 million and $ 5.3 million, respectively, represent costs directly associated with the business transformation initiative that, in accordance with GAAP, cannot be capitalized.

Over the course of this initiative, we anticipate incurring approximately $ 60 - 70 million of total costs, which includes $ 30 - 35 million of non-capitalizable costs, approximately $ 18 million of which we expect to be incurred in 2021.

Costs incurred, during the three months ended March 31, 2022 and 2021, of $ 3.6 million and $ 3.8 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, $ 15 - 17 million of which we expect to be incurred in 2022.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

March 31, 2022

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

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

2021 2020 2021 2020

Three Months Ended March 31,

Effective tax rate 21.6 % 21.2 %

53.3 % 20.7 % 29.8 % 19.7 %

_______________

(1) The effective tax rate (“ETR”) in the three months ended September 30, 2021 was primarily impacted by the litigation expense recorded during the period.

The ETR for the nine months ended September 30, 2021 was impacted by the litigation expense and legislative tax rate change recorded during the period.

We determine our interim tax provision using an Estimated Annual Effective Tax Rate methodology (“EAETR”).

7 unchanged sentences

As such, there may be significant volatility in interim tax provisions.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

The below tables provide a reconciliation between our reported effective tax rates and the EAETR.

Three Months Ended September 30,

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

Consolidated operations $ ( 9.0 ) $ ( 4.8 ) 53.3 % $ 88.1 $ 18.2 20.7 %

Discrete items:

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

Acquisition and other-related costs (2)

Legislative tax rate changes (3)

Litigation expense (4)

85.0 19.7 — —

Other tax only discrete items

— 0.5 — ( 0.2 )

Total discrete items 85.0 20.3 2.0 0.1

Consolidated operations, before discrete items $ 76.0 $ 15.5 $ 90.1 $ 18.3

Quarterly effect of changes in the EAETR 20.4 % 20.3 %

Nine Months Ended September 30,

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

Three Months Ended March 31,

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

1 unchanged sentence

Discrete items:

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

0.1 — 8.0 1.7

Acquisition and other-related costs (2)

Legislative tax rate changes (3)

— ( 14.6 ) — —

Litigation expense (4)

85.0 19.7 — —

Other tax only discrete items — ( 0.7 ) — 0.1

3 unchanged sentences

_______________

(1) Refer to Note 12 for additional information.

(2) Costs incurred to integrate the Perstorp Capa business into our Performance Ch emicals segment.

(3) Legislative tax rate changes, enacted in the United Kingdom ("UK"), resulted in discrete tax expense of $ 14.6 million related to the revaluation of our net deferred tax liability associated with our UK operations.

The corporate tax rate in the UK increased from 19.0 % to 25.0 % on April 1, 2023.

Impact for the three months ended September 30, 2021 are a result of currency translation.

(4) Refer to Note 14 for additional information.

(5) Increase in EAETR for the nine months ended September 30, 2021, as compared to September 30, 2020, is due to an overall change in the mix of forecasted earnings in various tax jurisdictions with varying rates.

At September 30, 2021 and December 31, 2020, we had deferred tax assets of $ 8.5 million and $ 8.4 million, respectively, resulting from certain historical net operating losses from our Brazil and China operations and U.S.

(1) Decrease in EAETR for the three months ended March 31, 2022, as compared to March 31, 2021, is due to an overall change in the mix

of forecasted earnings in various tax jurisdictions with varying rates.

At March 31, 2022 and December 31, 2021, we had deferred tax assets of $ 10.0 million and $ 8.8 million, respectively, resulting from certain historical net operating losses from our Brazilian and Chinese operations and U.S.

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

The ultimate realization of these deferred tax assets depends on the generation of future taxable income during the periods in which these net operating losses and tax credits are available to be used.

In evaluating the realizability of these deferred tax assets, we consider projected future taxable income and tax planning

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

strategies in making our assessment.

As of September 30, 2021, we cannot objectively assert that these deferred tax assets are more likely than not to be realized and therefore we have maintained a valuation allowance.

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

As of March 31, 2022, we cannot objectively assert that these deferred tax assets are more likely than not to be realized and therefore we have maintained a valuation allowance.

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

2 unchanged sentences

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

Commitments and Contingencies

Legal Proceedings

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

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 Ingevity in the Delaware Proceeding, alleging two claims for violations of U.S.

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 Ingevity’s enforcement of the ‘844 Patent and Ingevity’s entry into several supply agreements with customers of its fuel vapor canister honeycombs.

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

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

antitrust law to approximately $ 85 million.

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 outcome, 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.

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.

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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 several months up to two years.

As of September 30, 2021, we have accrued a total of $ 85 million, the full amount of the jury’s verdict.

The amount accrued for this matter is included in Other liabilities on the condensed consolidated balance sheet as of September 30, 2021, and the charge is included in Other (income) expense, net on the condensed consolidated statement of operations for the three and nine months ended September 30, 2021.

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

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

As of March 31, 2022, there has been no progress in the post-trial proceedings to warrant any change to our conclusions as disclosed within our 2021 Annual Report.

As such, no changes to our reserve were made during this quarter.

The full amount of the jury's verdict, $ 85.0 million, is accrued in Other liabilities on the condensed consolidated balance sheet as of March 31, 2022.

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

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

March 31, 2022

Segment Information

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

Three Months Ended March 31,

In millions 2022 2021

15 unchanged sentences

Acquisition and other-related costs — ( 0.3 )

( 0.2 ) — ( 0.9 ) ( 1.7 )

Litigation expense (5)

( 85.0 ) — ( 85.0 ) —

Net income (loss) $ 60.8 $ 48.7

1 unchanged sentence

(1) Relates to external customers only, all intersegment sales and related profit have been eliminated in consolidation.

(2) Segment EBITDA is the primary measure used by our chief operating decision maker to evaluate the performance of and allocate resources among our operating segments.

Segment EBITDA is defined as segment revenue less segment operating expenses (segment operating expenses consist of costs of sales, selling, general and administrative expenses, other (income) expense, net, excluding depreciation and amortization).

(2) Segment EBITDA is the primary measure used by our chief operating decision maker to evaluate the performance of and allocate

resources among our operating segments.

Segment EBITDA is defined as segment revenue less segment operating expenses (segment operating expenses consist of costs of sales, selling, general and administrative expenses, research and technical expenses, other (income) expense, net, excluding depreciation and amortization).

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, net, acquisition and other-related costs, certain litigation expenses, pension and postretirement settlement and curtailment (income) charges, net.

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

For the three and nine months ended September 30, 2021, charges of $ 1.1 million and $ 4.5 million relate to the Performance Materials segment and charges of $ 3.0 million and $ 7.8 million relate to the Performance Chemicals segment, respectively.

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

For more detail on the charges incurred refer to Note 12.

(4) For the three and nine months ended September 30, 2021, charges of zero and $ 0.2 million relate to the acquisition of a strategic investment in the Performance Materials segment and charges of $ 0.2 million and $ 0.7 million relate to the integration of the Perstorp Capa business into our Performance Chemicals segment, respectively.

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

(5) For the three and nine months ended September 30, 2021, litigation expense relates to the Performance Materials segment.

Refer to Note 14 for additional information.

For the three months ended March 31, 2022, charges of $ 1.3 million relate to the Performance Materials segment and charges of $ 2.3 million relate to the Performance Chemicals segment.

For the three months ended March 31, 2021, charges of $ 1.7 million relate to the Performance Materials segment and charges of $ 2.2 million relate to the Performance Chemicals segment.

For more detail on the charges incurred see Note 12.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2021

March 31, 2022

Earnings (Loss) per Share

2 unchanged sentences

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

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

Three Months Ended March 31,

In millions, except share and per share data 2022 2021

6 unchanged sentences

Weighted average additional shares assuming conversion of potential common shares 254 276

— 175 245 179

Shares - diluted basis 39,264 40,700

39,537 41,451 40,238 41,579

_______________

(1) For the three months ended September 30, 2021, all potentially dilutive common shares were excluded from the calculation of diluted earnings (loss) per share as we had a net loss for the period.

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

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

Three Months Ended March 31,

In thousands 2022 2021

Average number of potential common shares - antidilutive 255 135

Subsequent Events

2026 Senior Notes

In March 2022, we provided notice to the holders and trustee of our 4.50 % Senior Notes due in 2026, indicating our intent to redeem the $ 300.0 million outstanding aggregate principal balance prior to maturity.

As a result of this notice, we classified these outstanding notes as current on our March 31, 2022 condensed consolidated balance sheet.

The redemption occurred on April 27, 2022 and was primarily funded utilizing the outstanding capacity under our revolving credit facility.

At redemption, we recognized the $ 3.4 million redemption premium and accelerated the remaining deferred finance fees of $ 2.7 million.

Legal expenses associated with this redemption have been recorded as incurred.

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

What changed 10-Q

Item 1. Financial Statements