What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-03 · 122 added, 108 removed, 225 unchanged (51% of the section changed)

47 unchanged sentences

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.

Ozark Materials

On October 3, 2022, we completed our previously announced acquisition of Ozark Materials, LLC (“OM”), and Ozark Logistics, LLC (“OL” and, together with OM, “Ozark Materials”), pursuant to that certain Equity Purchase Agreement (the “Purchase Agreement”), by and among Ingevity, Ozark Materials and Ozark Holdings, Inc.

Refer to Note 17 to the Condensed Consolidated Financial Statements included within Part I.

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

Strategic Investment

During the third quarter of 2022, we acquired a strategic investment in a privately-held company for $60.0 million, which is accounted for under the measurement alternative method.

There were no adjustments to the carrying value of the measurement alternative method investment for impairment or observable price changes for the period ended September 30, 2022.

Refer to Note 4 to the Condensed Consolidated Financial Statements included within Part I.

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

Net Investment Hedge

During the third quarter of 2022, we terminated our fixed-to-fixed cross currency interest rate swaps, accounted for as net investment hedges, and received proceeds of $14.7 million.

Refer to Note 8 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 June 30, Six Months Ended June 30,

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

In millions 2022 2021 2022 2021

11 unchanged sentences

Net income (loss) $ 75.4 $ (4.2) $ 196.0 $ 88.8

Net sales and Gross profit

The table below shows the 2022 Net sales and variances from 2021:

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

Three months ended June 30, 2022 vs.

Three months ended September 30, 2022 vs.

$ 376.8 26.9 87.6 (9.3) $ 482.0

Six months ended June 30, 2022 vs.

Nine months ended September 30, 2022 vs.

$ 1,055.5 20.9 227.9 (19.6) $ 1,284.7

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.

Three Months Ended September 30, 2022 vs.

The sales increase of $105.2 million in 2022 was driven by favorable pricing and sales composition (mix) of $87.6 million (23 percent) and favorable volume of $26.9 million (seven percent), partially offset by unfavorable foreign currency exchange of $9.3 million (two percent), driven by the strengthening of the U.S.

dollar against the euro, Chinese renminbi and GBP.

Gross profit increase of $34.5 million was driven by favorable price/mix of $87.2 million, favorable sales volume of $16.2 million and favorable foreign currency exchange of $0.8 million, partially offset by increased manufacturing costs of $69.7 million due to raw material and energy cost inflationary pressures.

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

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.

Nine Months Ended September 30, 2022 vs.

The sales increase of $229.2 million in 2022 was driven by favorable price/mix of $227.9 million (22 percent) and higher sales volumes of $20.9 million (two percent), partially offset by unfavorable foreign currency exchange of $19.6 million (two percent), driven by the strengthening of the U.S.

dollar against the euro, Chinese renminbi and GBP.

Gross profit increase of $56.9 million was driven by favorable price/mix improvement of $225.6 million and favorable sales volume of $13.2 million, partially offset by increased manufacturing costs of $179.3 million due to raw material and energy cost inflationary pressures and unfavorable foreign currency exchange of $2.6 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 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.

Three Months Ended September 30, 2022 vs.

Selling, general and administrative expenses ("SG&A") were $54.2 million (11.2 percent of Net sales) and $43.5 million (11.5 percent of Net sales) for the three months ended September 30, 2022 and 2021, respectively.

The year over year increase of $10.7 million was primarily driven by increased travel and other miscellaneous costs of $5.8 million and increased employee-related costs of $8.8 million, slightly reduced by lower legal spending of $3.9 million.

The decrease in SG&A as a percentage of Net sales was driven by higher sales.

Nine Months Ended September 30, 2022 vs.

SG&A was $142.9 million (11.1 percent of Net sales) and $131.0 million (12.4 percent of Net sales) for the nine months ended September 30, 2022 and 2021, respectively.

The year over year increase of $11.9 million was driven by increased employee-related costs of $7.6 million and increased travel and other miscellaneous costs of $11.7 million, slightly offset by reduced legal costs of $7.4 million.

The decrease in SG&A as a percentage of Net sales was driven by higher sales.

Research and technical expenses

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.

Three Months Ended September 30, 2022 vs.

Research and technical expenses as a percentage of Net sales decreased to 1.6 percent from 1.8 percent for the three months ended September 30, 2022 and 2021, respectively.

Nine Months Ended September 30, 2022 vs.

Research and technical expenses as a percentage of Net sales remained consistent period over period, at 1.8 percent and 1.8 percent for the nine months ended September 30, 2022 and 2021, respectively.

Restructuring and other (income) charges, net

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.

Three and Nine Months Ended September 30, 2022 vs.

Restructuring and other (income) charges, net were $3.3 million and $10.6 million for the three and nine months ended September 30, 2022, respectively, and $4.1 million and $12.3 million for the three and nine months ended September 30, 2021, respectively.

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

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Acquisition-related costs

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.

Three and Nine Months Ended September 30, 2022 vs.

Acquisition-related costs were $1.9 million for the three and nine months ended September 30, 2022, respectively, and $0.2 million and $0.9 million for the three and nine months ended September 30, 2021, respectively.

For the three and nine months ended September 30, 2022, all charges relate to the integration of the Ozark Materials business into our Performance Chemicals segment.

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, respectively, and charges of $0.2 million and $0.7 million relate to the integration of Perstorp Holding AB's caprolactone business into our Performance Chemicals segment, respectively.

Other (income) expense, net

Three and Six Months Ended June 30, 2022 vs.

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

Three and Nine Months Ended September 30, 2022 vs.

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

In millions 2022 2021 2022 2021

Foreign currency exchange (income) loss $ 1.2 $ 0.2 $ 1.6 $ 2.1

Litigation verdict charge (1)

— 85.0 — 85.0

Other (income) expense, net 0.8 (0.6) (2.6) (5.5)

Total Other (income) expense, net $ 2.0 $ 84.6 $ (1.0) $ 81.6

_______________

(1) Refer to Note 14 within the Condensed Consolidated Financial Statements for more information.

Interest expense, net

Three and Six Months Ended June 30, 2022 vs.

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

Three and Nine Months Ended September 30, 2022 vs.

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

In millions 2022 2021 2022 2021

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Provision (benefit) for income taxes

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.

Three and Nine Months Ended September 30, 2022 vs.

For the three months ended September 30, 2022 and 2021, our effective tax rate was 21.3 percent and 53.3 percent, respectively.

Excluding discrete items, the effective tax rate was 21.0 percent and 20.4 percent, respectively.

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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.

For the nine months ended September 30, 2022 and 2021, our effective tax rate was 21.6 percent and 29.8 percent, respectively.

Excluding discrete items, the effective rate was 21.1 percent and 20.6 percent, respectively.

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Performance Materials

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

In millions Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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Segment EBITDA $ 61.2 $ 56.4 $ 194.7 $ 191.4

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

Quarterly Performance Summary

Our Performance Materials segment experienced robust automotive volume growth from improved semiconductor chip availability across all regions and China automobile production stimulus.

Additionally, the segment also recognized volume improvement in process purification products and we were able to increase prices to capture more of the value of our highly differentiated carbon.

Slightly offsetting these top line improvements was continued pressure on manufacturing costs from higher raw material input costs and higher logistic costs driven by inflation.

The strengthening of the U.S.

dollar against the Chinese renminbi and the euro created some headwinds when compared to the prior year quarter.

Net Sales Comparison of Three and Nine Months Ended September 30, 2022 and September 30, 2021:

Performance Materials (In millions)

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

Three months ended June 30, 2022 vs.

Three months ended September 30, 2022 vs.

2021 $ 118.1 27.6 3.6 (4.4) $ 144.9

Six months ended June 30, 2022 vs.

Nine months ended September 30, 2022 vs.

2021 $ 384.8 26.6 10.8 (6.5) $ 415.7

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.

Three Months Ended September 30, 2022 vs.

Segment net sales increase of $26.8 million in 2022 was driven by higher sales volumes of $27.6 million (23 percent) and favorable price/mix of $3.6 million (three percent), partially offset by unfavorable foreign currency exchange of $4.4 million (four percent).

Segment EBITDA increased $4.8 million due to higher sales volume of $16.6 million and favorable price/mix of $4.4 million, partially offset by higher manufacturing costs of $11.1 million, unfavorable foreign currency impacts of $2.7 million, and higher spending on SG&A and research and technical expenses of $2.4 million.

Nine Months Ended September 30, 2022 vs.

Segment net sales increase of $30.9 million in 2022 was driven by higher sales volumes of $26.6 million (seven percent) and favorable price/mix of $10.8 million (three percent), partially offset by unfavorable foreign currency exchange of $6.5 million (two percent).

Segment EBITDA increased $3.3 million due to higher sales volumes of $14.4 million, favorable price/mix of $10.3 million, and lowering SG&A and research and technical expenses of $1.2 million, partially offset by higher manufacturing costs of $18.4 million and unfavorable foreign currency impacts of $4.2 million.

Performance Chemicals

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

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

In millions 2022 2021 2022 2021

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Segment EBITDA $ 77.0 $ 63.1 $ 183.6 $ 151.2

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

Quarterly Performance Summary

Our Performance Chemicals segment saw strong revenue growth versus the prior year’s quarter on continued price improvement and favorable mix upgrade to higher margin products.

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

The strengthening of the U.S.

dollar against the euro and GBP created some headwinds on top line growth when compared to the prior year quarter.

Our Engineered Polymers business grew 31.4 percent as the business increased pricing to offset inflationary costs for raw materials, logistics, and particularly energy which has continued to rise throughout 2022.

Volume improvement was driven by stronger sales in automotive applications and footwear and apparel, mainly in Asia and Europe.

These positive volume improvements were slightly offset by a decline in the Americas where some polyurethane customers experienced availability issues with key raw materials.

Industrial Specialties sales increased 35.2 percent driven by price improvements with strong performance across all markets, particularly in oilfield and adhesives primary end-use markets.

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

Pavement Technologies sales increased 20.6 percent due primarily to improved volumes and price increases.

Volume growth was driven by technology adoption and highway funding in the United States.

Net Sales Comparison of Three and Nine Months Ended September 30, 2022 and September 30, 2021:

Performance Chemicals (In millions)

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

Three months ended June 30, 2022 vs.

Three months ended September 30, 2022 vs.

2021 $ 258.7 (0.7) 84.0 (4.9) $ 337.1

Six months ended June 30, 2022 vs.

Nine months ended September 30, 2022 vs.

2021 $ 670.7 (5.7) 217.1 (13.1) $ 869.0

Three Months Ended June 30, 2022 vs.

Three Months Ended September 30, 2022 vs.

Segment net sales increase of $78.4 million reflects favorable pricing and product mix of $84.0 million (32 percent), driven by increases in Industrial Specialties ($62.9 million), Engineered Polymers ($16.3 million), and Pavement Technologies ($4.8 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 volume impacted Net sales by $0.7 million (zero percent), reflecting volume decreases in Industrial Specialties ($15.3 million), partially offset by increases in Pavement Technologies ($10.9 million) and Engineered Polymers ($3.7 million).

Unfavorable foreign currency exchange impacted Net sales by $4.9 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 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 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 EBITDA increased by $13.9 million due to favorable pricing and product mix of $82.8 million and favorable foreign currency exchange of $2.9 million due to foreign currency denominated manufacturing costs, partially offset by higher manufacturing costs of $59.7 million, higher SG&A expenses of $11.7 million and a decrease in volume of $0.4 million.

Nine Months Ended September 30, 2022 vs.

Segment net sales increase of $198.3 million was driven by favorable pricing and product mix of $217.1 million (32 percent), driven by increases in Industrial Specialties ($157.7 million), Engineered Polymers ($46.5 million), and Pavement Technologies ($12.9 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 volume impacted Net sales by $5.7 million (one percent), reflecting decreases in

Industrial Specialties ($30.2 million), offset partially by increases in Pavement Technologies ($20.2 million) and Engineered Polymers ($4.3 million).

Unfavorable foreign currency exchange impacted Net sales by $13.1 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.

Segment EBITDA increased by $32.4 million due to favorable pricing and product mix of $215.3 million and favorable foreign currency exchange of $2.6 million, partially offset by higher manufacturing costs of $162.2 million, higher SG&A of $22.1 million and a decrease in volume of $1.2 million.

Use of Non-GAAP Financial Measure - Adjusted EBITDA

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Reconciliation of Net Income (Loss) to Adjusted EBITDA

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

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

In millions 2022 2021 2022 2021

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Acquisition and other-related costs 1.9 0.2 1.9 0.9

Litigation verdict charge — 85.0 — 85.0

Adjusted EBITDA (Non-GAAP)

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Adjusted EBITDA

Three and Six Months Ended June 30, 2022 vs.

Three and Nine Months Ended September 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.

Current Company Outlook

In millions 2022 Guidance

Net sales $1,525 - $1,650

Adjusted EBITDA $430 - $470

Operating Cash Flow $305 - $325

Capital Expenditures $155 - $175

Free Cash Flow* ~$150

*Calculated as Operating Cash Flow less Capital Expenditures

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.

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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 supply chain disruptions.

These assumptions 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.

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

As of September 30, 2022, our undrawn capacity under our revolving credit facility was $488.7 million.

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

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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.

Cash and cash equivalents totaled $72.3 million at September 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 June 30, 2022, included $87.4 million held by our foreign subsidiaries.

The cash and cash equivalents balance at September 30, 2022, included $57.9 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.

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

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

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

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

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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 (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.

On July 25, 2022, our Board of Directors authorized the repurchase of up to $500.0 million of our common stock (the "2022 Authorization"), and rescinded the prior outstanding repurchase authorization with respect to the shares that remained unused under the prior 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.

During the three and nine months ended September 30, 2022, we repurchased $49.3 million and $139.2 million in common stock, representing 697,523 and 2,027,206 shares of our common stock at a weighted average cost per share of $70.75 and $68.68, respectively.

At September 30, 2022, $450.7 million remained unused under our 2022 Authorization.

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.

Capital Expenditures

Projected 2022 capital expenditures are $130 - $150 million.

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,

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

Cash flow comparison of the Nine Months Ended September 30, 2022 and 2021

Nine Months Ended September 30,

In millions 2022 2021

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Cash flows provided by (used in) operating activities

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.

During the nine months ended September 30, 2022, cash flow provided by operations remained relatively consistent when compared to the prior year period.

Although net income increased more than $107 million in 2022 when compared to the prior year period, this increase was offset by an increase in trade working capital, less cash and cash equivalent of almost $102 million.

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

current assets and current liabilities).

Current Assets and Liabilities

In millions June 30, 2022 December 31, 2021

In millions September 30, 2022 December 31, 2021

Cash and cash equivalents $ 72.3 $ 275.4

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Total current assets $ 645.1 $ 724.9

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

Current assets, less cash and cash equivalents as of September 30, 2022, increased $123.3 million compared to December 31, 2021.

Accounts receivable, net increased $86.7 million due to strong sales and higher selling prices and Inventories, net increased $40.6 million driven by inflationary cost pressures on both input logistic costs as well as higher pricing on raw materials purchases.

In millions September 30, 2022 December 31, 2021

Accounts payable $ 164.6 $ 125.8

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Total current liabilities $ 290.3 $ 268.9

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.

Current liabilities as of September 30, 2022, increased by $21.4 million compared to December 31, 2021, due to higher Accounts payable of $38.8 million driven primarily from inflationary cost pressures which resulted in higher input costs and therefore large payable balances.

The larger Accounts payable balance was partially offset by decreases in Notes payable and current maturities of long-term debt of $18.7 million and Accrued payroll and employee benefits of $3.5 million.

Cash flows provided by (used in) investing activities

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,

Cash used by investing activities in the nine months ended September 30, 2022 and September 30, 2021 was $144.7 million and $83.4 million, primarily driven by capital expenditures.

In the nine months ended September 30, 2022 and 2021, we acquired strategic investments in privately-held companies for $62.8 million and $16.5 million, respectively.

Capital expenditure categories Nine Months Ended September 30,

In millions 2022 2021

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Cash flows provided by (used in) financing activities

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.

Cash used in financing activities in the nine months ended September 30, 2022, was $264.9 million.

Utilizing excess cash provided by operations we paid down outstanding debt in the amount of $119.1 million and were opportunistic with our share repurchases during the year repurchasing over 2 million shares for a total of $139.2 million.

Cash used in financing activities in the nine months ended September 30, 2021 was $120.3 million and was primarily driven by the repurchase of common stock of $100.3 million, and payments on long-term borrowings of $18.8 million.

New Accounting Guidance

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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