What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-03 compared with 2022-05-05 · 267 added, 136 removed, 578 unchanged (41% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Operations (Unaudited)

Three Months Ended March 31,

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

In millions, except per share data 2022 2021 2022 2021

17 unchanged sentences

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

Three Months Ended March 31,

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

In millions 2022 2021 2022 2021

3 unchanged sentences

Foreign currency translation adjustment ( 53.0 ) 5.8 ( 69.6 ) 8.2

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

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

Unrealized gain (loss) on net investment hedges, net of tax provision (benefit) of $ 1.8 , $( 0.5 ), $ 2.2 , $ 1.0

6.0 ( 1.7 ) 7.3 3.2

Total foreign currency adjustments, net of tax provision (benefit) of $ 1.8 , $( 0.5 ), $ 2.2 , $ 1.0

( 47.0 ) 4.1 ( 62.3 ) 11.4

Derivative instruments:

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

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

Unrealized gain (loss), net of tax provision (benefit) of $ 0.7 , $ 0.4 , $ 2.7 , $ 0.8

2.4 1.2 8.7 2.5

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

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

Reclassifications of deferred derivative instruments (gain) loss, included in net income (loss), net of tax (provision) benefit of $( 0.6 ), zero , $( 1.0 ), zero

( 2.2 ) — ( 3.3 ) ( 0.1 )

Total derivative instruments, net of tax provision (benefit) of $ 0.1 , $ 0.4 , $ 1.7 , $ 0.8

0.2 1.2 5.4 2.4

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 0.1

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

0.1 0.1 0.1 0.1

Other comprehensive income (loss), net of tax provision (benefit) of $ 1.9 , $( 0.1 ), $ 3.9 , $ 1.8

( 46.7 ) 5.4 ( 56.8 ) 13.9

Comprehensive income (loss) $ 13.1 $ 49.7 $ 63.8 $ 106.9

2 unchanged sentences

Condensed Consolidated Balance Sheets

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

In millions, except share and par value data June 30, 2022 December 31, 2021

Assets (Unaudited)

42 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended March 31,

Six Months Ended June 30,

In millions 2022 2021

21 unchanged sentences

Capital expenditures $ ( 57.2 ) $ ( 40.9 )

Purchase of strategic investments ( 2.0 ) ( 16.5 )

Other investing activities, net 0.6 0.2

1 unchanged sentence

Cash provided by (used in) financing activities:

Proceeds from revolving credit facility $ 788.0 $ —

Payments on revolving credit facility ( 256.0 ) —

Payments on long-term borrowings ( 628.1 ) ( 14.1 )

Debt issuance costs ( 3.0 ) —

Debt repayment costs ( 3.8 ) —

Finance lease obligations, net ( 0.4 ) ( 0.4 )

10 unchanged sentences

$ 131.8 $ 233.9

(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.

(1) Includes restricted cash of $ 0.5 million and $ 0.6 million and cash and cash equivalents of $ 131.3 million and $ 233.3 million at June 30, 2022 and 2021, respectively.

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

3 unchanged sentences

Purchases of property, plant and equipment in accounts payable 6.0 3.1

Leased assets obtained in exchange for new finance lease liabilities — —

Leased assets obtained in exchange for new operating lease liabilities 7.7 7.4

2 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

Description of Business

25 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

June 30, 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.

As of June 30, 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 March 31,

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

In millions 2022 2021 2022 2021

7 unchanged sentences

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

Three Months Ended March 31,

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

In millions 2022 2021 2022 2021

20 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

Fair Value Measurements

4 unchanged sentences

In millions Level 1 (1)

March 31, 2022

June 30, 2022

Deferred compensation plan investments (4)

20 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 $ 13.1 million and $ 14.0 million at March 31, 2022 and December 31, 2021, respectively.

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 $ 14.0 million at June 30, 2022 and December 31, 2021, respectively.

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

Nonrecurring Fair Value Measurements

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

There were no nonrecurring fair value measurements in the condensed consolidated balance sheet during the quarters ended June 30, 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.

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 June 30, 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 June 30, 2022.

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 $ 15.5 million and $ 16.5 million at June 30, 2022 and December 31, 2021, respectively.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

Restricted Investment

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.

At June 30, 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 $ 77.1 million and $ 76.1 million, net of an allowance for credit losses of $ 0.5 million and $ 0.5 million, and included cash of $ 5.8 million and $ 4.7 million, respectively.

The fair value at June 30, 2022 and December 31, 2021 was $ 75.2 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.

3 unchanged sentences

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

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

June 30, 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 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.

At June 30, 2022 and December 31, 2021, the carrying value of finance lease obligations was $ 102.1 million and $ 102.4 million, respectively, and the fair value was $ 109.3 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 amount, excluding debt issuance fees, of our variable interest rate long-term debt was $ 532.0 million and $ 328.1 million as of June 30, 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 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.

At June 30, 2022 and December 31, 2021, the carrying value of our fixed rate debt was $ 550.0 million and $ 850.0 million, respectively, and the fair value was $ 462.7 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.

In connection with the acquisition of certain assets in 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 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.

The fair value of the five-year Revenue Earn-out consideration was $ 0.8 million at June 30, 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.

1 unchanged sentence

Contingent Consideration

In millions March 31, 2022 December 31, 2021

In millions June 30, 2022 December 31, 2021

Beginning balance $ 0.8 $ 0.8

7 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

Inventories, net

In millions March 31, 2022 December 31, 2021

In millions June 30, 2022 December 31, 2021

Raw materials $ 71.3 $ 48.8

5 unchanged sentences

Property, Plant, and Equipment, net

In millions March 31, 2022 December 31, 2021

In millions June 30, 2022 December 31, 2021

Machinery and equipment $ 1,121.4 $ 1,113.3

10 unchanged sentences

Foreign currency translation ( 31.2 ) — ( 31.2 )

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.

June 30, 2022 $ 406.5 $ 4.3 $ 410.8

There were no interim triggering events or circumstances indicating that goodwill might be impaired as of June 30, 2022.

Other Intangible Assets

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

In millions Gross Accumulated amortization Net Gross Accumulated amortization Net

8 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

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

In millions March 31, 2022 December 31, 2021

In millions June 30, 2022 December 31, 2021

Performance Materials $ 1.8 $ 1.9

2 unchanged sentences

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.

During the three and six months ended June 30, 2022, we recognized amortization expense of $ 7.8 million and $ 15.9 million, respectively, and during the three and six months ended June 30, 2021, we recognized amortization expense of $ 8.4 million and $ 16.8 million, respectively.

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

11 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 $ 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.

The fair value of the fixed-to-fixed cross currency interest rate swap was a net asset (liability) of $ 10.6 million and $ 1.0 million at June 30, 2022 and December 31, 2021, respectively.

During the three and six months ended June 30, 2022, we recognized net interest income associated with this financial instrument of $ 2.5 million and $ 2.7 million, respectively, and during the three and six months ended June 30, 2021, we recognized net interest income associated with this financial instrument of $ 0.1 million and $ 0.2 million, respectively.

Cash Flow Hedges

5 unchanged sentences

Designated cash flow hedges entered to minimize foreign currency exchange risk of forecasted revenue transactions are recorded to Net sales on the 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.

As of June 30, 2022, there were $ 12.0 million open foreign currency derivative contracts.

The fair value of the designated foreign currency hedge contracts was an asset (liability) of $ 1.1 million and $ 0.5 million at June 30, 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 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

As of June 30, 2022, we had 1.7 million and 0.7 million mm BTUS (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity swap contracts

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

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.

June 30, 2022

and zero cost collar option contracts, respectively, designated as cash flow hedges.

As of June 30, 2022, open commodity contracts hedge forecasted transactions until December 2023.

The fair value of the outstanding designated natural gas commodity hedge contracts as of June 30, 2022 and December 31, 2021 was a net asset (liability) of $ 1.2 million and $( 0.6 ) million, respectively.

Interest Rate Risk Management

4 unchanged sentences

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 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.

We had floating-to-fixed interest rate swaps with a combined 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.

Per the terms of these instruments, we receive floating rate interest payments ba sed 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 $( 0.3 ) million and $( 4.0 ) million at March 31, 2022 and December 31, 2021, respectively.

Due to the repayment of our term loan (refer to Note 9 for more information), during the three months ended June 30, 2022, we terminated these interest rate swap instruments.

Upon termination of the interest rate swap instruments, we reclassified a $ 1.7 million gain from AOCI into Interest expense, net on the condensed consolidated statement of operations.

The fair value of outstanding interest rate instruments at June 30, 2022 and December 31, 2021 was an asset (liability) of zero and $( 4.0 ) million, respectively.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2022

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 March 31,

Three Months Ended June 30,

2022 2021 2022 2021

4 unchanged sentences

Total $ 3.1 $ 1.6 $ 2.8 $ —

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 June 30,

2022 2021 2022 2021

Net investment hedging derivative

Currency exchange contracts (1)

$ 7.8 $ ( 2.2 ) $ 2.5 $ 0.1 Interest expense, net

Total $ 7.8 $ ( 2.2 ) $ 2.5 $ 0.1

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

Six Months Ended June 30,

2022 2021 2022 2021

Cash flow hedging derivatives

Currency exchange contracts $ 1.3 $ 0.2 $ 0.8 $ — Net sales

Natural gas contracts 4.4 0.9 1.8 0.1 Cost of sales

Interest rate swap contracts 5.7 2.2 1.7 — Interest expense, net

Total $ 11.4 $ 3.3 $ 4.3 $ 0.1

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

2 unchanged sentences

Effectiveness Testing)

Three Months Ended March 31,

Six Months Ended June 30,

2022 2021 2022 2021

6 unchanged sentences

Within the next twelve months, we expect to reclassify $ 4.4 million of net gains from AOCI to income, before taxes.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2022

Fair Value Measurements

1 unchanged sentence

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

There were no nonrecurring fair value measurements related to derivative assets and liabilities on the condensed consolidated balance sheets as of June 30, 2022 or December 31, 2021.

June 30, 2022

In millions Level 1 (1)

3 unchanged sentences

Net investment hedge (5)

Interest rate swap contracts (5)

— 10.6 — 10.6

Total assets $ — $ 13.4 $ — $ 13.4

Net investment hedge (7)

Natural gas contracts (6)

$ — $ 0.5 $ — $ 0.5

Interest rate swap contracts (7)

Total liabilities $ — $ 0.5 $ — $ 0.5

19 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

Debt, including Finance Lease Obligations

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

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

In millions, except percentages June 30, 2022 December 31, 2021

Revolving Credit Facility and other lines of credit (1)

9 unchanged sentences

______________

(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.

(1) Letters of credit outstanding under the revolving credit facility were $ 1.8 million and $ 2.5 million and available funds under the facility were $ 466.2 million and $ 497.5 million at June 30, 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.

Senior Notes due 2026

On April 27, 2022, we redeemed the $ 300.0 million outstanding aggregate principal balance of our 4.50 % Senior Notes due in 2026 prior to maturity.

The redemption was primarily funded utilizing the outstanding capacity under our revolving credit facility.

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

Both the redemption premium and accelerated deferred finance fees were recorded to Interest Expense, net on the condensed consolidated statements of operations during the three months ended June 30, 2022.

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

Revolving Credit Facility Amendment

On June 23, 2022, we entered into an Amendment and Restatement Agreement (the “Amendment”) together with the other parties named therein, which amends and restates our existing credit agreement, dated as of March 7, 2016, as amended, supplemented or otherwise modified.

Among other things, the Amendment (a) extends the maturity date from October 28, 2025 to June 23, 2027 and increased the aggregate principal amount of revolving commitments thereunder from $ 500 million to $ 1 billion, (b) adds the Ingevity UK as a borrower under the revolving credit facility, and (c) modifies certain leverage ratio tests and thresholds.

Borrowings under the revolving credit facility bear interest at a rate per annum equal to either (a) the applicable term benchmark rate, subject to a zero floor, or (b) a base rate, in each case, plus an applicable margin of 1.00 percent to 1.75 percent for term benchmark loans and 0.00 percent to 0.75 percent for base rate loans.

Fees of $ 3.0 million were incurred to secure the Amendment.

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

Term Loan Repayment

On the closing date of the Amendment, we repaid our outstanding Term Loan in an aggregate principal amount of $ 323.0 million.

Upon repayment, we recognized $ 1.3 million in outstanding interest, $ 0.4 million in repayment fees and accelerated the remaining deferred finance fees of $ 0.4 million.

The interest, fees, and accelerated deferred finance fees were recorded to Interest Expense, net on the condensed consolidated statements of operations du ring the three months ended June 30, 2022.

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2022

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 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.

The occurrence of an event of default under the 2028 Senior Notes could result in the acceleration of the note of such series and could cause a cross-default resulting in the acceleration of other indebtedness of Ingevity and its subsidiaries.

We were in compliance with all covenants under the indenture as of June 30, 2022.

The credit agreements governing our revolving credit facility 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 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 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

March 31, 2022

Our actual gross and net leverage, as calculated per the credit agreement, for the four consecutive quarters ended June 30, 2022 were 2.3 and 2.0 , respectively, and our actual interest coverage for the four consecutive quarters ended June 30, 2022 was 9.3 .

We were in compliance with all covenants at June 30, 2022.

The tables below provide a roll forward of equity.

11 unchanged sentences

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

Net income (loss) — — — 59.8 — — 59.8

Other comprehensive income (loss) — — — — ( 46.7 ) — ( 46.7 )

Common stock issued 18 — — — — — —

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

Tax payments related to vested restricted stock units — — — — — ( 0.2 ) ( 0.2 )

Share repurchase program — — — — — ( 49.5 ) ( 49.5 )

Noncontrolling interest distributions — — — — — — —

Share-based compensation plans — — 3.3 — — 1.4 4.7

Balance at June 30, 2022 43,200 $ 0.4 $ 143.0 $ 916.7 $ ( 43.7 ) $ ( 362.1 ) $ 654.3

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2022

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

10 unchanged sentences

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

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

Accumulated other comprehensive income (loss)

Three Months Ended March 31,

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

In millions 2022 2021 2022 2021

19 unchanged sentences

Beginning balance $ ( 3.2 ) $ ( 4.8 ) $ ( 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 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 0.1

Other comprehensive income (loss), net of tax 0.1 0.1 0.1 0.1

Ending balance $ ( 3.1 ) $ ( 4.7 ) $ ( 3.1 ) $ ( 4.7 )

Total AOCI ending balance at March 31 $ 3.0 $ 13.2

Total AOCI ending balance at June 30 $ ( 43.7 ) $ 18.6 $ ( 43.7 ) $ 18.6

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2022

Reclassifications of accumulated other comprehensive income (loss)

Three Months Ended March 31,

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

In millions 2022 2021 2022 2021

1 unchanged sentence

Currency exchange contracts (1)

$ ( 1.8 ) $ — $ ( 1.8 ) $ —

Natural gas contracts (2)

( 0.8 ) — ( 0.8 ) 0.1

Interest rate swap contracts (3)

( 1.7 ) — ( 1.7 ) —

Total before tax ( 4.3 ) — ( 4.3 ) 0.1

1 unchanged sentence

Amount included in net income (loss) $ ( 3.3 ) $ — $ ( 3.3 ) $ 0.1

Pension and other post retirement benefits

Amortization of prior service costs (2)

$ 0.1 $ 0.1 $ 0.1 $ 0.1

Total before tax 0.1 0.1 0.1 0.1

(Provision) benefit for income taxes — — — —

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

(3) Included within "Interest expense, net" on the condensed consolidated statement of operations.

Share Repurchases

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

Under the 2020 Authorization, s hares were permitted to 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 and six months ended June 30, 2022, we repurchased $ 49.5 million and $ 89.9 million in common stock, representing 719,236 and 1,329,683 shares of our common stock at a weighted average cost per share of $ 68.72 and $ 67.59 , respectively.

At June 30, 2022, $ 212.7 million remained unused under our 2020 Authorization.

As described in Note 17 (Subsequent Events) to the Condensed Consolidated Financial Statements included within Part I.

Item 1 of this Form 10-Q, the 2020 Authorization was rescinded by our Board of Directors on July 25, 2022 and replaced by a new share repurchase authorization of up to $ 500 million of our common stock.

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

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.

June 30, 2022

Retirement Plans

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

Three Months Ended March 31,

Three Months Ended June 30,

Pensions Other Benefits

9 unchanged sentences

Net periodic benefit cost (income) $ 0.3 $ 0.4 $ — $ —

Six Months Ended June 30,

Pensions Other Benefits

In millions 2022 2021 2022 2021

Components of net periodic benefit cost (income):

Service cost (1)

$ 0.8 $ 0.9 $ — $ —

Interest cost (2)

Expected return on plan assets (2)

( 0.9 ) ( 0.7 ) — —

Amortization of prior service cost (credit) (1)

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

Net periodic benefit cost (income) $ 0.6 $ 0.8 $ — $ —

_______________

(1) Amounts are recorded to "Cost of sales" on our condensed consolidated statements of operations consistent with the employee compensation costs that participate in the plan.

1 unchanged sentence

Contributions

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.

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

March 31, 2022

June 30, 2022

Restructuring and Other (Income) Charges, net

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

Three Months Ended March 31,

In millions 2022 2021

Severance and other employee-related costs (1)

Restructuring charges $ — $ 0.1

Business transformation costs 3.6 3.8

Other (income) charges, net

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

_______________

(1) Represents severance and employee benefit charges.

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.

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 six months ended June 30, 2022, of $ 3.7 million and $ 7.3 million, respectively, and during the three and six months ended June 30, 2021, of $ 4.3 million and $ 8.1 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.

Rollforward of Restructuring Reserves

8 unchanged sentences

(2) Primarily foreign currency translation adjustments.

Other (income) charges, net

Business transformation costs

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

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.

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 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.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

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

Three Months Ended March 31,

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

2022 2021 2022 2021

Effective tax rate (1)

21.8 % 39.9 % 21.7 % 31.4 %

_______________

(1) The decrease in the effective tax rate in the three and six months ended June 30, 2022 was driven by a one-time legislative tax rate change in 2021.

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

June 30, 2022

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

Three Months Ended March 31,

Three Months Ended June 30,

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 — — — —

Acquisition and other-related costs — — — —

Legislative tax rate changes (1)

— 0.1 — ( 14.7 )

Other tax only discrete items — ( 0.2 ) — 0.1

2 unchanged sentences

21.7 % 20.1 %

Six Months Ended June 30,

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

Consolidated operations $ 154.1 $ 33.5 21.7 % $ 135.5 $ 42.5 31.4 %

Discrete items:

Restructuring and other (income) charges, net — — 0.1 —

Legislative tax rate changes (1)

— — — ( 14.7 )

(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.

Other tax only discrete items — ( 0.8 ) — 0.2

Total discrete items — ( 0.8 ) 0.1 ( 14.5 )

Consolidated operations, before discrete items $ 154.1 $ 32.7 $ 135.6 $ 28.0

21.2 % 20.6 %

_______________

(1) Legislative tax rate changes in 2021, enacted in the United Kingdom ("UK"), resulted in discrete tax expense of $ 14.7 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%.

(2) Increase in EAETR for the three and six months ended June 30, 2022, as compared to June 30, 2021, is due to an overall change in the mix of forecasted earnings in various tax jurisdictions with varying rates, as well as an increase in foreign earnings deemed taxable in the US.

At June 30, 2022 and December 31, 2021, we had deferred tax assets of $ 9.4 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.

1 unchanged sentence

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

As of 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.

As of June 30, 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.

4 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

Commitments and Contingencies

14 unchanged sentences

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 of June 30, 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 full amount of the jury's verdict, $ 85.0 million, is accrued in Other liabilities on the condensed consolidated balance sheet as of June 30, 2022.

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

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

Segment Information

Three Months Ended March 31,

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

In millions 2022 2021 2022 2021

15 unchanged sentences

Acquisition and other-related costs (4)

— ( 0.4 ) — ( 0.7 )

Net income (loss) $ 59.8 $ 44.3 $ 120.6 $ 93.0

7 unchanged sentences

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

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 the three and six months ended June 30, 2022, charges of $ 1.3 million and $ 2.6 million relate to the Performance Materials segment and charges of $ 2.4 million and $ 4.7 million relate to the Performance Chemicals segment, respectively.

For the three and six months ended June 30, 2021, charges of $ 1.7 million and $ 3.4 million relate to the Performance Materials segment and charges of $ 2.6 million and $ 4.8 million relate to the Performance Chemicals segment, respectively.

For more detail on the charges incurred see Note 12.

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

Earnings (Loss) per Share

2 unchanged sentences

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

Three Months Ended March 31,

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

In millions, except share and per share data 2022 2021 2022 2021

8 unchanged sentences

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

Three Months Ended March 31,

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

In thousands 2022 2021 2022 2021

1 unchanged sentence

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.

Share Repurchase

On July 25, 2022, our Board of Directors authorized the repurchase of up to $ 500 million of our common stock (the "2022 Authorization"), and rescinded the prior outstanding 2020 Authorization with respect to the shares that remained unused under the 2020 Authorization.

Shares under the 2022 Authorization 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.

Ozark Materials Acquisition

On July 31, 2022, we entered into an Equity Purchase Agreement (the “Purchase Agreement”), with Ozark Holdings, Inc.

(“Seller”), Ozark Materials, LLC, (“OM”), and Ozark Logistics, LLC, (“OL” and, together with OM, “Ozark Materials”), pursuant to which, among other things, we will acquire all of the issued and outstanding limited liability company membership interests of Ozark Materials (the “Acquisition”).

Ozark Materials is a leading producer of pavement marking materials, including thermoplastic pavement markings, waterborne traffic paints, and preformed thermoplastics.

The purchase price for the Acquisition is $ 325 million, subject to a customary adjustment for working capital, indebtedness and transaction expenses.

We expect to finance the Acquisition through a combination of borrowings under our existing credit facilities and cash on hand.

The Purchase Agreement contains representations, warranties and covenants and conditions to closing that the Company believes are customary for a transaction of this size and type (including all required consents, approvals and waivers

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2022

under applicable antitrust laws).

Seller does not have a material relationship with us and the Acquisition will not be an affiliated transaction.

The closing of the Acquisition is subject to satisfaction of certain customary conditions, including regulatory approvals, but is not subject to any financing or similar condition.

The Acquisition is expected to close early in the fourth quarter of 2022.

The Purchase Agreement contains customary termination rights for Ingevity and the Seller.

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