What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-03 compared with 2022-05-05 · 130 added, 100 removed, 203 unchanged (53% of the section changed)

42 unchanged sentences

Recent Developments

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.

War in Ukraine

1 unchanged sentence

and other countries.

Currently, we do not foresee any direct material adverse effects on our business, however, the global implications of the Russia/Ukraine war are difficult to predict at this time and we will continue to monitor the situation.

We have not seen and do not foresee any direct material adverse effects on our business.

However, as a result of the geopolitical disruption, we have experienced volatility in energy prices, specifically natural gas, but the impact has not been and is not expected to be material to our results.

Financing Activities

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.

On June 23, 2022, we repaid our outstanding Term Loan in an aggregate principal amount of $323.0 million and we amended and restated our revolving credit facility.

Refer to Note 9 to the Condensed Consolidated Financial Statements included within Part I.

Item 1 of this Form 10-Q for more information.

Results of Operations

Three Months Ended March 31,

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

In millions 2022 2021 2022 2021

13 unchanged sentences

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

Three months ended March 31, 2022 vs.

Three months ended June 30, 2022 vs.

$ 358.4 (12.6) 81.7 (7.6) $ 419.9

Three Months Ended March 31, 2022 vs.

The sales increase of $62.5 million in 2022 was driven by favorable pricing of $58.7 million (eighteen percent) and favorable volume growth in both of our segments for a combined impact of $6.6 million (two percent), partially offset by unfavorable foreign currency exchange of $2.8 million (one percent).

Gross profit increase of $11.6 million was driven by favorable pricing improvement of $58.3 million and favorable sales volume of $2.7 million, partially offset by unfavorable foreign currency exchange of $1.5 million and increased manufacturing costs of $47.9 million due to raw material and energy cost inflationary pressures.

Six months ended June 30, 2022 vs.

$ 678.7 (6.0) 140.2 (10.2) $ 802.7

Three Months Ended June 30, 2022 vs.

The sales increase of $61.5 million in 2022 was driven by favorable pricing of $81.7 million (23 percent), partially offset by unfavorable volume decline in both of our segments for a combined impact of $12.6 million (four percent) and unfavorable foreign currency exchange of $7.6 million (two percent).

Gross profit increase of $10.8 million was driven by favorable pricing improvement of $80.1 million, partially offset by increased manufacturing costs of $61.9 million due to raw material and energy cost inflationary pressures, unfavorable sales volume of $5.6 million and unfavorable foreign currency exchange of $1.8 million.

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

Six Months Ended June 30, 2022 vs.

The sales increase of $124.0 million in 2022 was driven by favorable pricing of $140.2 million (21 percent), partially offset by unfavorable foreign currency exchange of $10.2 million (two percent) and unfavorable volume decline in both of our segments for a combined impact of $6.0 million (one percent).

Gross profit increase of $22.4 million was driven by favorable pricing improvement of $138.4 million, partially offset by increased manufacturing costs of $109.7 million due to raw material and energy cost inflationary pressures, unfavorable foreign currency exchange of $3.3 million and unfavorable sales volume of $3.0 million.

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

Selling, general and administrative expenses

Three Months Ended March 31, 2022 vs.

Selling, general and administrative expenses ("SG&A") were $40.0 million (10.4 percent of Net sales) and $40.0 million (12.5 percent of Net sales) for the three months ended March 31, 2022 and 2021, respectively.

The decrease in SG&A as a percentage of Net sales was driven by higher sales and reduced travel and other miscellaneous costs of $3.2 million.

The positive impact was partially offset by higher employee-related costs of $1.4 million and increased legal costs of $1.8 million.

Three Months Ended June 30, 2022 vs.

Selling, general and administrative expenses ("SG&A") were $48.7 million (11.6 percent of Net sales) and $47.5 million (13.3 percent of Net sales) for the three months ended June 30, 2022 and 2021, respectively.

The decrease in SG&A as a percentage of Net sales was driven by higher sales and decreased legal costs of $1.7 million.

The positive impact was partially offset by increased travel and other miscellaneous costs of $2.7 million and higher employee-related costs of $0.2 million.

Six Months Ended June 30, 2022 vs.

SG&A was $88.7 million (11.1 percent of Net sales) and $87.5 million (12.9 percent of Net sales) for the six months ended June 30, 2022 and 2021, respectively.

The decrease in SG&A as a percentage of Net sales was driven by higher sales, reduced employee-related costs of $1.2 million and reduced legal costs of $3.5 million.

The positive impact was partially offset by increased travel and other miscellaneous costs of $5.9 million.

Research and technical expenses

Three Months Ended March 31, 2022 vs.

Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, decreasing to 1.9 percent from 2.1 percent for the three months ended March 31, 2022 and 2021, respectively.

Three Months Ended June 30, 2022 vs.

Research and technical expenses as a percentage of Net sales increased to 2.0 percent from 1.6 percent for the three months ended June 30, 2022 and 2021, respectively.

Six Months Ended June 30, 2022 vs.

Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, increasing to 1.9 percent from 1.8 percent for the six months ended June 30, 2022 and 2021, respectively.

Restructuring and other (income) charges, net

Three Months Ended March 31, 2022 vs.

Restructuring and other (income) charges, net were $3.6 million and $3.9 million for the three months ended March 31, 2022 and 2021, respectively.

See Note 12 within the Condensed Consolidated Financial Statements for more information.

Three and Six Months Ended June 30, 2022 vs.

Restructuring and other (income) charges, net were $3.7 million and $7.3 million for the three and six months ended June 30, 2022, respectively, and $4.3 million and $8.2 million for the three and six months ended June 30, 2021, respectively.

See Note 12 to the Condensed Consolidated Financial Statements included within Part I.

Item 1 of this Form 10-Q for more information.

Acquisition-related costs

Three Months Ended March 31, 2022 vs.

Acquisition-related costs were zero and $0.3 million for the three months ended March 31, 2022 and 2021, respectively.

The 2021 costs were incurred in connection with the integration of Perstorp Holding AB's caprolactone business into our Performance Chemicals segment.

Three and Six Months Ended June 30, 2022 vs.

Acquisition-related costs were zero for the three and six months ended June 30, 2022, respectively, and $0.4 million and $0.7 million for the three and six months ended June 30 2021, respectively.

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

Other (income) expense, net

Three Months Ended March 31, 2022 vs.

Three Months Ended March 31,

Three and Six Months Ended June 30, 2022 vs.

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

In millions 2022 2021 2022 2021

3 unchanged sentences

Interest expense, net

Three Months Ended March 31, 2022 vs.

Three Months Ended March 31,

Three and Six Months Ended June 30, 2022 vs.

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

In millions 2022 2021 2022 2021

1 unchanged sentence

Revolving credit and term loan facilities (1)

Senior notes (1)

4.2 2.0 6.1 4.2

Senior note (1)

12.7 9.2 21.9 18.4

Other interest (income) expense, net (3.7) (0.9) (5.9) (1.7)

3 unchanged sentences

Provision (benefit) for income taxes

Three Months Ended March 31, 2022 vs.

For the three months ended March 31, 2022 and 2021, our effective tax rate was 21.6 percent and 21.2 percent, respectively.

Excluding discrete items, the effective rate was 20.7 percent compared to 21.4 percent in the three months ended March 31, 2022 and 2021, respectively.

An explanation of the change in the effective tax rate is presented in Note 13 to the Condensed Consolidated Financial Statements.

Three and Six Months Ended June 30, 2022 vs.

For the three months ended June 30, 2022 and 2021, our effective tax rate was 21.8 percent and 39.9 percent, respectively.

Excluding discrete items, the effective tax rate was 21.7 percent and 20.1 percent, respectively.

An explanation of the change in the effective tax rate is presented in Note 13 to the Condensed Consolidated Financial Statements included within Part I.

Item 1 of this Form 10-Q.

For the six months ended June 30, 2022 and 2021, our effective tax rate was 21.7 percent and 31.4 percent, respectively.

Excluding discrete items, the effective rate was 21.2 percent and 20.6 percent, respectively.

An explanation of the change in the effective tax rate is presented in Note 13 to the Condensed Consolidated Financial Statements included within Part I.

Item 1 of this Form 10-Q.

Segment Operating Results

2 unchanged sentences

Segment Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") is the primary measure used by the Company's 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).

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:

2 unchanged sentences

Performance Materials

In millions Three Months Ended March 31,

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

2022 2021 2022 2021

Total Performance Materials - Net sales $ 122.4 $ 126.0 $ 270.8 $ 266.7

Segment EBITDA $ 55.6 $ 61.3 $ 133.5 $ 135.0

Net Sales Comparison of Three Months Ended March 31, 2022 and March 31, 2021:

Net Sales Comparison of Three and Six Months Ended June 30, 2022 and June 30, 2021:

Performance Materials (In millions)

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

Three months ended March 31, 2022 vs.

Three months ended June 30, 2022 vs.

2021 $ 126.0 (4.7) 3.4 (2.3) $ 122.4

Three Months Ended March 31, 2022 vs.

Segment net sales increase of $7.7 million in 2022 was driven by favorable pricing of $4.0 million (three percent) and volume growth of $3.7 million (three percent).

Volume growth was driven by increased sales of our process purification products.

Favorable pricing recognized in the first quarter was driven by process purification product sales as well as continued strong demand for our automotive gasoline vapor emission control products.

Automotive volumes were however muted by lower vehicle production globally, driven by ongoing supply chain challenges and the global microchip shortage.

North American sales of automotive gasoline vapor emission control products offset lower volumes in Asia-Pacific due to COVID-related customer shutdowns.

Brazil's implementation of their new new emissions regulation standard, Proconve L-7, began in the first quarter of 2022 driving volume growth in South America automotive gasoline vapor emission control products.

Segment EBITDA increased $4.2 million due to decreased SG&A and research and technical expenses of $2.5 million, favorable pricing of $2.1 million, favorable volume of $1.2 million and favorable foreign currency exchange of $0.7 million, offset by higher manufacturing costs of $2.3 million.

Six months ended June 30, 2022 vs.

2021 $ 266.7 (1.0) 7.2 (2.1) $ 270.8

Three Months Ended June 30, 2022 vs.

Segment net sales decrease of $3.6 million in 2022 was driven by volume decline of $4.7 million (four percent) and unfavorable foreign currency exchange of $2.3 million (two percent), partially offset by favorable pricing of $3.4 million (three percent).

Our Performance Materials segment experienced volume decline from China COVID-related shutdowns, offsetting favorable growth of automotive products in North America.

Favorable pricing recognized in the second quarter was driven primarily by base automotive carbon price increases.

Process purification sales were higher as volume increased and we were able to increase prices to capture more of the value of our highly differentiated carbon.

Segment EBITDA decreased $5.7 million due to higher manufacturing costs of $5.0 million, unfavorable volume of $3.4 million, and unfavorable foreign currency exchange of $2.2 million, partially offset by decreased SG&A and research and technical expenses of $1.1 million, and favorable pricing of $3.8 million.

Six Months Ended June 30, 2022 vs.

Segment net sales increase of $4.1 million in 2022 was driven by favorable pricing of $7.2 million (three percent), partially offset by volume decline of $1.0 million (zero percent) and unfavorable foreign currency exchange of $2.1 million (one percent).

Segment EBITDA decreased $1.5 million due to higher manufacturing costs of $7.3 million, unfavorable volume of $2.2 million, and unfavorable foreign currency exchange of $1.5 million, partially offset by decreased SG&A and research and technical expenses of $3.6 million, and favorable pricing of $5.9 million.

Performance Chemicals

Three Months Ended March 31,

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

In millions 2022 2021 2022 2021

4 unchanged sentences

Segment EBITDA $ 65.5 $ 56.4 $ 106.6 $ 88.1

Net Sales Comparison of Three Months Ended March 31, 2022 and March 31, 2021:

Net Sales Comparison of Three and Six Months Ended June 30, 2022 and June 30, 2021:

Performance Chemicals (In millions)

Prior year Net sales Volume Price/Mix Currency effect Current year Net Sales

Three months ended March 31, 2022 vs.

Three months ended June 30, 2022 vs.

2021 $ 232.4 (7.9) 78.3 (5.3) $ 297.5

Three Months Ended March 31, 2022 vs.

Segment net sales increase of $54.8 million was driven by favorable pricing and product mix of $54.7 million (30 percent), driven by increases in industrial specialties ($39.7 million), engineered polymers ($14.9 million), and pavement technologies ($0.1 million).

Also driving the segment net sales increase was favorable volume of $2.9 million (two percent), consisting of volume increases in pavement technologies ($6.6 million) and engineered polymers ($3.0 million), offset partially by volume decreases in industrial specialties ($6.7 million).

Six months ended June 30, 2022 vs.

2021 $ 412.0 (5.0) 133.0 (8.1) $ 531.9

Three Months Ended June 30, 2022 vs.

Segment net sales increase of $65.1 million reflects favorable pricing and product mix of $78.3 million (34 percent), driven by increases in industrial specialties ($55.1 million), engineered polymers ($15.2 million), and pavement technologies ($8.0 million).

Unfavorable volume impacted Net sales by $7.9 million (three percent), consisting of volume in decreases in industrial specialties ($8.1 million) and engineered polymers ($2.5 million), partially offset by increases in pavement technologies ($2.7 million).

Unfavorable foreign currency exchange impacted Net sales by $5.3 million (two percent).

Our Performance Chemicals segment saw strong revenue growth versus the prior year’s quarter on solid end-market demand and continued price improvement.

These price increases were necessary to keep pace with the dramatic increases we are experiencing related to energy, raw material, and shipping costs.

Our Engineered Polymers business grew 34.1 percent as the business increased pricing to offset inflationary costs for raw materials, logistics, and energy that spiked in the fourth quarter of 2021 and has remained at elevated levels.

From a regional perspective, sales in Asia for our products were robust in the quarter due to demand in automotive and UV coatings applications.

These price increases were necessary to keep pace with the dramatic increases we are experiencing related to energy, raw material, and logistic costs.

Our Engineered Polymers business grew 20.6 percent as the business increased pricing to offset inflationary costs for raw materials, logistics, and particularly energy which spiked in the fourth quarter of 2021 and has remained at elevated levels.

Volumes were impacted by temporary supplier extended outages and operational challenges.

From a regional perspective, sales in Europe, Middle East, and Africa ("EMEA") for our products were robust in the quarter due to demand in polyurethane and polymer additives.

This was offset by a decline in the Americas where some polyurethane customers experienced availability issues with key raw materials.

Industrial Specialties sales increased 29.1 percent versus the prior-year quarter with strong performance across all markets, particularly in oilfield and adhesives primary end-use markets.

The sales improvements were supplemented by an improved mix shift to higher-value derivative products as growth in higher-end additives to oilfield and adhesives primary end-use markets outpaced growth in industrial intermediate’s merchant tall oil fatty acid sales.

Pavement Technologies sales increased 30.4 percent versus the prior-year quarter.

While price increases contributed to the sales improvement, most of this growth was driven by improved volumes, primarily in the Americas and Europe.

Segment EBITDA increased by $9.4 million due to favorable pricing and product mix of $56.2 million, an increase in volume of $1.5 million, and favorable foreign currency exchange of $0.8 million, offset by higher manufacturing costs of $45.2 million, and higher SG&A expenses of $3.9 million.

Industrial Specialties sales increased 38.1 percent with strong performance across all markets, particularly in oilfield and adhesives primary end-use markets and lubricants metalworking applications.

Price improvements were supplemented by a favorable mix shift to higher-value derivative products as volumes were impacted by raw material availability.

Pavement Technologies sales increased 14.9 percent due primarily to improved volumes, primarily in the Americas, and supplemented by price increases.

Segment EBITDA increased by $9.1 million due to favorable pricing and product mix of $76.3 million, partially offset by higher manufacturing costs of $57.4 million, higher SG&A expenses of $6.5 million, a decrease in volume of $2.2 million, and unfavorable foreign currency exchange of $1.1 million.

Six Months Ended June 30, 2022 vs.

Segment net sales increase of $119.9 million was driven by favorable pricing and product mix of $133.0 million (32 percent), driven by increases in industrial specialties ($94.8 million), engineered polymers ($30.1 million), and pavement technologies ($8.1 million).

Unfavorable volume impacted Net sales by $5.0 million (one percent), consisting of decreases in industrial specialties ($14.9 million), offset partially by increases in pavement technologies ($9.3 million) and engineered polymers ($0.6 million).

Unfavorable foreign currency exchange impacted Net sales by $8.1 million (two percent).

Segment EBITDA increased by $18.5 million due to favorable pricing and product mix of $132.5 million, partially offset by higher manufacturing costs of $102.5 million, higher SG&A of $10.4 million, a decrease in volume of $0.8 million, and unfavorable foreign currency exchange of $0.3 million.

Use of Non-GAAP Financial Measure - Adjusted EBITDA

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

Adjusted EBITDA is not meant to be considered in isolation nor as a substitute for the

most directly comparable financial measure calculated in accordance with GAAP.

Adjusted EBITDA is not meant to be considered in isolation nor as a substitute for the most directly comparable financial measure calculated in accordance with GAAP.

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

5 unchanged sentences

Reconciliation of Net Income (Loss) to Adjusted EBITDA

Three Months Ended March 31,

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

In millions 2022 2021 2022 2021

10 unchanged sentences

Adjusted EBITDA

Three Months Ended March 31, 2022 vs.

Three and Six Months Ended June 30, 2022 vs.

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

7 unchanged sentences

*Calculated as Operating Cash Flow less Capital Expenditures

Ingevity raised the top end of its 2022 guidance to sales between $1.525 billion to $1.65 billion and adjusted EBITDA between $430 million to $470 million.

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

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

Pavement technologies will benefit from the U.S.

infrastructure bill and continued Evotherm® warm mix technology adoption.

This expected demand will result in favorable pricing conditions.

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

Ingevity is holding its 2022 guidance of sales between $1.525 billion to $1.65 billion and adjusted EBITDA between $430 million to $470 million.

For Performance Chemicals revenue, we expect to recognize favorable price improvements across the segment as we work to offset inflation in energy, raw material, and logistic costs.

We expect continued volume growth in the Pavement Technologies and Engineered Polymers’ business.

Performance Materials will see moderate growth as we expect to benefit from some recovery of auto production.

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

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

Additionally, we expect our Performance Materials segment results to be similar to 2021 as U.S., Chinese, Canadian, and European vehicle production continues to be negatively impacted by global supply chain disruption.

We expect to deliver fiscal year 2022 Adjusted EBITDA of $430 million to $470 million.

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

These estimates assume that 2022 will continue to be impacted by global logistical headwinds, geopolitical uncertainty, significant cost inflation, and supply chain disruptions.

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

11 unchanged sentences

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

As of March 31, 2022, our undrawn capacity under our revolving credit facility was $497.5 million.

As of June 30, 2022, our undrawn capacity under our revolving credit facility was $466.2 million.

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

redemption of our 4.50% Senior Notes due in 2026 (see Note 17 within the Condensed Consolidated Financial Statements for more information), interest payments, capital expenditures, expenditures related to our business transformation initiative, debt principal repayments, purchases pursuant to our stock repurchase program, income tax payments, and to incur additional spending associated with our Performance Materials' intellectual property litigation.

interest payments, capital expenditures, expenditures related to our business transformation initiative, debt principal repayments, purchases pursuant to our stock repurchase program, income tax payments, and to incur additional spending associated with our Performance Materials' intellectual property litigation.

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

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

Cash and cash equivalents totaled $222.6 million at March 31, 2022.

In connection with such transactions, or to fund other anticipated uses of cash, we may modify our existing revolving credit, redeem all or part of our outstanding senior note, seek additional debt financing, issue equity securities, or some combination thereof.

Cash and cash equivalents totaled $131.3 million at June 30, 2022.

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

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

The cash and cash equivalents balance at March 31, 2022, included $95.8 million held by our foreign subsidiaries.

The cash and cash equivalents balance at June 30, 2022, included $87.4 million held by our foreign subsidiaries.

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

6 unchanged sentences

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.

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 (the "2020 Authorization").

Under the 2020 Authorization, shares 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.

Capital Expenditures

Projected 2022 capital expenditures are $155 - $175 million.

We have no material commitments associated with these projected capital expenditures as of March 31, 2022 .

Cash flow comparison of the Three Months Ended March 31, 2022 and 2021

Three Months Ended March 31,

We have no material commitments associated with these projected capital expenditures as of June 30, 2022 .

Cash flow comparison of the Six Months Ended June 30, 2022 and 2021

Six Months Ended June 30,

In millions 2022 2021

3 unchanged sentences

Cash flows provided by (used in) operating activities

During the first three months of 2022, cash flow provided by operations decreased due to increased accounts receivable related to the increase in net sales and a larger inventory build compared to 2021.

Below provides a description of the changes to working capital during the first three months of 2022 (i.e.

During the first six months of 2022, cash flow provided by operations decreased due to increased accounts receivable related to the increase in net sales and an increase in inventory driven by price compared to 2021.

Below provides a description of the changes to working capital during the first six months of 2022 (i.e.

current assets and current liabilities).

Current Assets and Liabilities

In millions March 31, 2022 December 31, 2021

In millions June 30, 2022 December 31, 2021

Cash and cash equivalents $ 131.3 $ 275.4

3 unchanged sentences

Total current assets $ 677.7 $ 724.9

Current assets as of March 31, 2022, increased $7.9 million compared to December 31, 2021, primarily due to increases in Accounts receivable, net and Inventories, net.

Accounts receivable, net as of March 31, 2022, increased $45.2 million due to increased sales during the quarter ended March 31, 2022.

Inventories increased by $19.0 million due to the build of inventory for forecasted sales.

These increases were offset by a decrease in Cash and cash equivalents of $52.8 million and a decrease in Prepaid and other current assets of $3.5 million compared to the balances at December 31, 2021.

In millions March 31, 2022 December 31, 2021

Current assets as of June 30, 2022, decreased $47.2 million compared to December 31, 2021, primarily due to decreases in Cash and cash equivalents.

Cash and cash equivalents decreased $144.1 million compared to December 31, 2021, primarily due to share repurchases and our debt refinancing activities that occurred during the quarter ended June 30, 2022.

These decreases were partially offset by increases in Accounts receivable, net of $59.7 million due to increased sales during the quarter ended June 30, 2022, increases in Inventories, net of $35.8 million driven by inflation, and increases in Prepaid and other current assets of $1.4 million.

In millions June 30, 2022 December 31, 2021

Accounts payable $ 168.3 $ 125.8

5 unchanged sentences

Total current liabilities $ 267.2 $ 268.9

Current liabilities as of March 31, 2022, increased by $282.8 million compared to December 31, 2021, driven primarily by an increase in Notes payable and current maturities of long-term debt of $300.0 million due to the redemption of our 4.5% Senior Notes due in 2026 (see Note 17 within the Condensed Consolidated Financial Statements for more information), Income taxes payable of $3.6 million, Accounts payable of $3.1 million, and Accrued expenses of $2.1 million.

This increase was offset partially by decreases in Accrued payroll and employee benefits of $25.8 million, and Current operating lease liabilities of $0.2 million.

Current liabilities as of June 30, 2022, decreased by $1.7 million compared to December 31, 2021, primarily due to decreases in Notes payable and current maturities of long-term debt of $18.7 million, Accrued payroll and employee benefits of $17.6 million, Accrued expenses of $6.9 million, Income taxes payable of $0.6 million, and Current operating lease liabilities of $0.4 million.

This was partially offset by an increase in Accounts payable of $42.5 million.

Cash flows provided by (used in) investing activities

Cash used by investing activities in the three months ended March 31, 2022 was $30.2 million and was primarily driven by capital expenditures.

In the three months ended March 31, 2022 and 2021, capital spending included the base maintenance capital supporting ongoing operations and growth and cost improvement spending primarily related to our business transformation initiative (see Note 12 within the Condensed Consolidated Financial Statements for more information).

Capital expenditure categories Three Months Ended March 31,

Cash used by investing activities in the six months ended June 30, 2022 and June 30, 2021 was $58.6 million and $57.2 million, primarily driven by capital expenditures.

In the six months ended June 30, 2022 and 2021, we acquired strategic investments in privately-held companies for $2.0 million and $16.5 million, respectively.

Capital expenditure categories Six Months Ended June 30,

In millions 2022 2021

4 unchanged sentences

Cash flows provided by (used in) financing activities

Cash used in financing activities in the three months ended March 31, 2022, was $46.3 million and was primarily driven by the repurchase of common stock of $40.4 million, payments on long-term borrowings of $4.7 million, and tax payments related to withholdings on restricted stock unit vestings of $1.8 million.

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

Cash used in financing activities in the six months ended June 30, 2022, was $193.3 million and was primarily driven by payments on long-term borrowings of $628.1 million, payments on revolving credit facility of $256.0 million, the repurchase of common stock of $89.9 million, debt repayment costs of $3.8 million, debt issuance costs of $3.0 million and tax payments related to withholdings on restricted stock unit vestings of $2.0 million, offset partially by proceeds from revolving credit facility borrowing of $788.0 million.

Cash used in financing activities in the six months ended June 30, 2021 was $83.6 million and was primarily driven by the repurchase of common stock of $68.1 million, payments on long-term borrowings of $14.1 million.

New Accounting Guidance

Refer to Note 2 to the Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on our Condensed Consolidated Financial Statements.

Refer to Note 2 to the Condensed Consolidated Financial Statements included within Part I.

Item 1 of this Form 10-Q for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on our Condensed Consolidated Financial Statements.

Critical Accounting Policies and Estimates

8 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis