What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-28 compared with 2022-02-24 · 331 added, 298 removed, 1448 unchanged (30% of the section changed)

22 unchanged sentences

Based on its assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2022.

Our assessment of the effectiveness of internal control over financial reporting as of December 31, 2022 did not include the internal controls at our Ozark Materials, LLC and Ozark Logistics, LLC legal entities (collectively, "Ozark Materials"), as permitted by Securities and Exchange Commission guidelines that allow companies to exclude certain acquisitions from their assessment of internal control over financial reporting during the first year following an acquisition.

Ozark Materials owns the acquired net assets of the business that we acquired on October 3, 2022.

As of and for the year ended December 31, 2022, Ozark Materials represented four percent and one percent of Ingevity's consolidated total assets and consolidated revenues, respectively, which were excluded from management's assessment of internal control over financial reporting.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of the Company's internal control over financial reporting as of December 31, 2022, as stated in their report, which is presented on the following page.

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Fortson Mary Dean Hall

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

President and Chief Executive Officer Executive Vice President and Chief Financial Officer

Report of Independent Registered Public Accounting Firm

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Opinions on the Financial Statements and Internal Control over Financial Reporting

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

We have audited the accompanying consolidated balance sheets of Ingevity Corporation and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Ozark Materials, LLC and Ozark Logistics, LLC from its assessment of internal control over financial reporting as of December 31, 2022 because these entities were acquired by the Company in a purchase business combination during 2022.

We have also excluded Ozark Materials, LLC and Ozark Logistics, LLC from our audit of internal control over financial reporting.

Ozark Materials, LLC and Ozark Logistics, LLC are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 4% and 1% of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.

Definition and Limitations of Internal Control over Financial Reporting

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment – Performance Chemicals Reporting Unit

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

Management conducts a required annual review of goodwill for potential impairment at October 1, or sooner if events or changes in circumstances indicate that the fair value of a reporting unit is below its carrying value.

If the carrying value of a reporting unit that includes goodwill exceeds its fair value, which is determined using both the income approach and market approach, goodwill is considered impaired.

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

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

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

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

Acquisition of Ozark Materials - Valuation of Customer Relationships

As described in Notes 2 and 16 to the consolidated financial statements, on October 3, 2022, the Company completed the acquisition of Ozark Materials, LLC (“OM”) and Ozark Logistics, LLC (“OL” and, together with OM, “Ozark Materials”) for a purchase price of $325.0 million, which resulted in $88.6 million of customer relationships intangible assets being recorded.

The fair value assigned to the customer relationships acquired was determined using an income approach, which is based on assumptions and estimates made by management.

The significant assumptions utilized in the income approach are the revenue growth rates, attrition rate, EBITDA margins, and discount rate.

The principal considerations for our determination that performing procedures relating to the valuation of customer relationships from the acquisition of Ozark Materials is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the customer relationships acquired, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the revenue growth rates, attrition rate, EBITDA margins, and discount rate, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment for the reporting unit, including controls over the development of the revenue growth rates utilized in the income approach.

These procedures also included, among others (i) testing management’s process for determining the fair value measurement;

(ii) evaluating the appropriateness of the discounted cash flow model;

(iii) testing the completeness and accuracy of underlying data used in the model;

and (iv) evaluating the reasonableness of the revenue growth rates used by management.

Evaluating the revenue growth rates involved evaluating whether the assumption used by management was reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationships acquired.

These procedures also included, among others (i) reading the purchase agreement and (ii) testing management’s process for developing the fair value estimate of the customer relationships, (iii) evaluating the appropriateness of the income approach, (iv) testing the completeness and accuracy of data used in the income approach, and (v) evaluating the reasonableness of the significant assumptions used by management related to the revenue growth rates, attrition rate, EBITDA margins, and discount rate.

Evaluating management’s significant assumptions related to the revenue growth rates and EBITDA margins involved evaluating whether the assumptions used by management were reasonable considering (i) the past performance of the acquired businesses;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Evaluating the reasonableness of the attrition rate involved considering (i) the past performance of the acquired businesses and (ii) economic and industry forecasts.

The discount rate was evaluated by considering the (i) cost of capital of comparable businesses and (ii) other industry factors.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Company’s income approach and (ii) the reasonableness of the attrition rate and discount rate significant assumptions.

/s/ PricewaterhouseCoopers LLP

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8.5 5.5 ( 4.3 )

Reclassifications of deferred derivative instruments (gain) loss, included in net income (loss), net of tax (provision) benefit of $( 0.3 ), $ 0.3 , and $( 0.1 )

Reclassifications of deferred derivative instruments (gain) loss, included within net income (loss), net of tax (provision) benefit of $( 2.4 ), $( 0.3 ), and $ 0.3

( 7.8 ) ( 0.7 ) 0.9

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3.4 1.5 ( 2.1 )

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

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

Total pension and other postretirement benefits, net of tax provision (benefit) of $ 1.1 , $ 0.5 , and $( 0.6 )

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Other comprehensive income (loss), net of tax provision (benefit) of $ 4.5 , $ 4.2 , and $( 4.3 )

( 59.9 ) 8.4 9.7

Comprehensive income (loss) $ 151.7 $ 126.5 $ 191.1

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Restricted investment, net of allowance for credit losses of $ 0.6 million - 2022 and $ 0.5 million - 2021

Strategic investments 109.8 35.3

Other assets 85.5 74.2

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

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

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

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

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

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

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Capital expenditures ( 142.5 ) ( 103.8 ) ( 82.1 )

Finance lease expenditures — ( 23.8 ) —

Payments for acquired businesses, net of cash acquired ( 344.5 ) — —

Finance lease expenditures — — ( 23.8 )

Net investment hedge settlement 14.7 — —

Purchase of strategic investments ( 77.4 ) ( 35.3 ) —

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Debt issuance costs ( 3.0 ) — ( 11.0 )

Debt repayment costs ( 3.8 ) — —

Financing lease obligations, net ( 0.9 ) ( 0.7 ) 23.1

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21 Supplemental Information

22 Subsequent Event

Ingevity Corporation

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Cash equivalents:

Highly liquid securities with an original maturity of three months or less are considered to be cash equivalents.

Highly liquid securities with an original maturity of three months or less are considered cash equivalents.

Accounts receivable and allowance for credit losses:

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The allowance for credit losses is our best estimate of the amount of probable loss in the existing accounts receivable.

We determine the allowance based on our expected of future credit losses, which in part is based on historical write-off experience, current collection trends, and external business factors such as economic factors, including regional bankruptcy rates and political factors.

We determine the allowance based on our expected future credit losses, which is partly based on historical write-off experience, current collection trends, and external business factors such as economic factors, including regional bankruptcy rates and political factors.

Past-due balances over a specified amount are reviewed individually for collectability.

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We limit our credit risk by performing ongoing credit evaluations and, when necessary, requiring letters of credit, guarantees, or collateral.

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

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

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

Our largest customer as of December 31, 2022 had accounts receivable of $ 9.3 million and $ 5.7 million as of December 31, 2022 and 2021, respectively.

Sales to our largest customer, from our Performance Materials segment, were approximately four percent of total net sales for each of the years ended December 31, 2022, 2021, and 2020, respectively.

Sales to the automotive industry, which represents our largest industry concentration, were approximately 30 percent of our consolidated Net sales.

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

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Inventories, net:

Inventories held are valued at lower of cost or net realizable value, except for inventories determined using the the last-in, first-out method (“LIFO”), which are valued at the lower of LIFO or market cost.

Inventories are valued at lower of cost or net realizable value, except for inventories determined using the last-in, first-out method (“LIFO”), which are valued at the lower of LIFO or market cost.

The value of our U.S.

inventories is determined using LIFO for substantially all raw materials, finished goods, and production materials.

inventories is determined using LIFO for the majority of our raw materials, finished goods, and production materials.

The value of all other inventories, including stores and supplies inventories and inventories of non-U.S.

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

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

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

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

general costs of maintenance and repairs are charged to expense.

Repair and maintenance costs:

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Deferred amounts are recognized as expense ratably over the shorter of the estimated interval until the next major maintenance activity or the life of the deferred item.

The cash outflows related to these costs are included in operating activities in the consolidated statement of cash flows.

The cash outflows related to these costs are included in operating activities within the consolidated statement of cash flows.

The timing of this maintenance can vary by manufacturing plant and has a significant impact on our results of operations in the period performed primarily due to lost production during the maintenance period.

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The cost of property, plant, and equipment is depreciated, utilizing the straight-line method, over the estimated useful lives of the assets, the majority of which range from 20 to 40 years for buildings and leasehold improvements and 5 to 30 years for machinery and equipment.

The following table provides the detail behind the useful lives and proportion of our machinery and equipment (“M&E”) in each useful life category.

The following table provides details on the useful lives and proportion of our machinery and equipment (“M&E”) in each useful life category.

M&E Cost Depreciable Life in Years Types of Assets

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7 Various Various

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

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

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

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Other intangible assets are amortized over their estimated useful lives which range from 3 to 20 years.

See Note 8 for additional information.

Any potential impairment for definite-lived intangible assets will be calculated in the same manner as disclosed under impairment of property, plant and equipment.

Customer relationships are amortized in a manner that reflects the pattern in which the economic benefits of the intangible asset are consumed.

Capitalized software:

Capitalized software for internal use is included in Other assets on the consolidated balance sheets.

Capitalized software for internal use is included within Other assets on the consolidated balance sheets.

Amounts capitalized are presented in Capital expenditures on our consolidated statements of cash flow.

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Strategic investments:

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

We have a variety of strategic investments that are classified as long-term assets on the consolidated balance sheets.

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

We use the equity method of accounting for investments that we do not control, but for which we have the ability to exercise significant influence.

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

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

Subsequently, the carrying value for these investments will be impacted by our proportionate share of undistributed earnings or loss, distributions, amortization or accretion of basis differences, and other-than-temporary impairments.

Subsequent adjustments to our initial investment are recorded within Other (income) expense, net on the consolidated statement of operations.

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

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Our revenue is derived from contracts with customers, and substantially all our revenue is recognized when products are either shipped from our manufacturing and warehousing facilities or delivered to the customer.

Revenue, net of returns and customer incentives, are based on the sale of manufactured products.

Revenue, net of returns and customer incentives, is based on the sale of manufactured products.

Revenues are recognized when performance obligations under the terms of a contract with our customer are satisfied;

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

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

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

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

Net sales are measured as the amount of consideration we expect to receive in exchange for transferring goods.

Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

Sales returns and allowances are not a normal practice in the industry and are not significant.

Certain customers may receive cash-based incentives, including discounts and volume rebates, which are accounted for as variable consideration and included in Net sales.

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

If we pay for the freight and shipping, we recognize the cost when control of the product has transferred to the customer as an expense in Cost of sales on

Net sales are measured as the amount of consideration we expect to receive in exchange for

Ingevity Corporation

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December 31, 2022

the consolidated statements of operations.

transferring goods.

Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

Sales returns and allowances are not a normal practice in the industry and are not significant.

Certain customers may receive cash-based incentives, including discounts and volume rebates, which are accounted for as variable consideration and included within Net sales.

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

If we pay for the freight and shipping, we recognize the cost when control of the product has transferred to the customer as an expense within Cost of sales on the consolidated statements of operations.

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

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Cost of sales:

Costs primarily consists of the cost of inventory sold and other production related costs.

Costs primarily consist of the cost of inventory sold and other production related costs.

These costs include raw materials, direct labor, manufacturing overhead, packaging costs, and maintenance costs.

Shipping and handling costs are also recorded to Cost of sales.

Shipping and handling costs are recorded within Cost of sales on the consolidated statements of operations.

Selling, general, and administrative expenses:

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Research and technical expenses:

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

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

Royalty expense:

Our Performance Materials and Performance Chemicals segments have licensing agreements with third parties requiring us to pay royalties for certain technologies we use in the manufacturing of our products.

Royalty expense is recognized as incurred and recorded to Cost of sales on our consolidated statements of operations.

We have licensing agreements with third parties requiring us to pay royalties for certain technologies we use in the manufacturing of our products.

Royalty expense is recognized as incurred and recorded within Cost of sales on the consolidated statements of operations.

Restructuring and other (income) charges, net:

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

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

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

These costs are excluded from our operating segment results.

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We are subject to income taxes in the U.S.

and numerous foreign jurisdictions, including China and the United Kingdom.

and numerous foreign jurisdictions, including China and the United Kingdom ("UK").

The provision for income taxes includes income taxes paid, currently payable or receivable, and deferred taxes.

We follow the asset and liability method of accounting for income taxes in accordance with current accounting standards regarding the accounting for income taxes.

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

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

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

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We provide both qualified and non-qualified pension and postretirement benefit plans to our employees.

The expense related to the current employees of Ingevity, as well as the expense related to retirees of Ingevity, are included in the Consolidated Financial Statements.

The expense related to the current employees, as well as the expense related to retirees, are included within the Consolidated Financial Statements.

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

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

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

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

The costs (or benefits) and obligations for these benefit programs are also affected by other assumptions,

Ingevity Corporation

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December 31, 2022

recognized over future periods.

such as average retirement age, mortality rates, employee turnover, and plan participation.

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

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

See Note 14 for additional information.

Share-based compensation:

We recognize compensation expense in our Consolidated Financial Statements for all share-based compensation arrangements.

We recognize compensation expense within our Consolidated Financial Statements for all share-based compensation arrangements.

Share-based compensation cost is measured at the date of grant, based on the fair value of the award, and expense is recognized over the grantee's requisite service period;

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

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

See Note 11 for additional information .

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

Operating segments:

Ingevity’s operating segments are Performance Materials and Performance Chemicals.

Our operating segments are Performance Materials and Performance Chemicals.

Our operating segments were determined based upon the nature of the products produced, the nature of the production process, the type of customer for the products, the similarity of economic characteristics, and the manner in which management reviews results.

Ingevity’s chief operating decision maker evaluates the business at the segment level when making decisions about allocating resources and assessing performance of Ingevity as a whole.

Our chief operating decision maker evaluates the business at the segment level when making decisions about allocating resources and assessing the performance of Ingevity as a whole.

We evaluate sales in a format consistent with our reportable segments:

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

See Note 19 for additional information.

Fair value measurements:

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

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

Derivative financial instruments:

Ingevity’s operations are exposed to market risks, such as the impact of changes of interest rates on our floating rate debt, changes in foreign currency exchange rates, and commodity prices due to transactions denominated in a variety of foreign currencies and purchases of certain commoditized raw materials and inputs.

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

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

We are exposed to market risks, such as the impact of changes in interest rates on our floating rate debt, foreign currency exchange rates due to transactions denominated in a variety of foreign currencies, and commodity prices due to purchases of certain raw materials and inputs.

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

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

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

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

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

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

Cash Flow Hedges:

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of the underlying exposures being hedged.

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

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

The reclassification gain or losses of the hedge from AOCI are recorded in the same financial statement caption on the consolidated statements of operations as the hedged item.

For example, designated cash flow hedges entered to minimize foreign currency exchange risk of forecasted revenue transactions are recorded to Net sales on the consolidated statements of operations when the forecasted transaction occurs.

Designated commodity cash flow hedges gains or losses recorded in AOCI are recognized in Cost of sales on the consolidated statements of operations when the inventory is sold.

See Note 9 for more information regarding our cash flow hedges.

Designated commodity cash flow hedges gains or losses recorded in AOCI are recognized within Cost of sales on the consolidated statements of operations when the inventory is sold.

Net Investment Hedges:

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

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

The gains (losses) on net investment hedges are reclassified to earnings only when the related CTA are required to be reclassified, usually upon sale or liquidation of the investment.

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

The gains (losses) on net investment hedges are reclassified to earnings only when the related CTA are required to be reclassified, usually upon the sale or liquidation of the investment.

Treasury stock:

We record shares of common stock repurchased at cost as treasury stock, resulting in a reduction of stockholders’ equity in the consolidated balance sheets.

We record shares of common stock repurchased at cost as treasury stock, resulting in a reduction of stockholders’ equity on the consolidated balance sheets.

When the treasury shares are contributed under our employee benefit plans or issued for option exercises, we use a first-in, first-out (“FIFO”) method for determining cost.

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Translation of foreign currencies:

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

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

dollars using period-end exchange rates, and adjustments resulting from these financial statement translations are included in Accumulated other comprehensive income (loss) in the consolidated balance sheets.

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

The assets and liabilities of our foreign subsidiaries are translated into U.S.

dollars using period-end exchange rates, and adjustments resulting from these financial statement translations are included within AOCI on the consolidated balance sheets.

Revenues and expenses are translated at average rates prevailing during each period.

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

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

the recognition of Restructuring and other (income) charges, net in the consolidated statements of operations for which the acquirer becomes obligated after the acquisition date;

and contingent purchase consideration to be recognized at fair value on the acquisition date with subsequent adjustments recognized in the consolidated statement of operations.

We generally use third-party qualified consultants to assist management in determining the fair value of assets acquired and liabilities assumed.

the recognition of acquisition-related costs within the consolidated results of operations;

the recognition of restructuring costs within the consolidated results of operations for which the acquirer becomes obligated after the acquisition date;

and contingent purchase consideration to be recognized at fair value on the acquisition date with subsequent adjustments recognized on the consolidated statement of operations.

We generally use qualified third-party consultants to assist management in determining the fair value of assets acquired and liabilities assumed.

This includes, when necessary, assistance with the determination of lives and valuation of tangible property, plant, and equipment and identifiable intangibles, assisting management in determining the fair value of obligations associated with employee-related liabilities, and assisting management in assessing obligations associated with legal and environmental claims.

The fair value assigned to identifiable intangible assets acquired are determined primarily by using an income approach, which is based on assumptions and estimates made by management.

Significant assumptions utilized in the income approach are the attrition rate, growth rate, and the discount rate.

The purchase price allocation process allows us to refine these estimates over a measurement period not to exceed one year to reflect new information obtained surrounding facts and circumstances existing at the acquisition date.

The fair value assigned to identifiable intangible assets acquired is determined primarily by using an income approach, which is based on assumptions and estimates made by management.

Significant assumptions utilized in the income approach are the attrition rate, revenue growth rates, EBITDA margins, royalty rates, and the discount rate.

These assumptions are based on company-specific information and projections, which are not observable in the market and are therefore considered Level 2 and Level 3 measurements.

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Selection of the appropriate reporting unit is based on the level at which discrete financial information is available and reviewed by business management post-integration.

Operating results of the acquired entity are reflected in the Consolidated Financial Statements from date of acquisition.

Operating results of the acquired entity are reflected within the Consolidated Financial Statements from the date of acquisition.

Reclassifications:

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

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

Ingevity Corporation

6 unchanged sentences

ASUs not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the Consolidated Financial Statements.

Recently Adopted Accounting Pronouncements

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

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

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

We adopted the new guidance effective January 1, 2021.

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

Recently Issued Accounting Pronouncements

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Performance Materials segment $ 548.5 $ 516.8 $ 510.0

$ 516.8 $ 510.0 $ 490.6

Performance Chemicals segment

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Industrial Specialties product line 633.8 493.5 391.6

493.5 391.6 496.9

Engineered Polymers product line 244.7 185.8 127.7

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Net sales $ 1,668.3 $ 1,391.5 $ 1,216.1

_______________

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

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

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

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

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The contract assets primarily relate to our rights to consideration for products produced but not billed at the reporting date from contracts with certain customers.

The contract assets are recognized as accounts receivables when we have an enforceable right to payment for performance completed to date and the customer has been billed.

The contract assets are recognized as accounts receivables when we have an enforceable right

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

to payment for performance completed to date and the customer has been billed.

Contract liabilities represent obligations to transfer goods to a customer for which we have received consideration from our customer.

For all periods presented, we had no contract liabilities.

Years Ended December 31,

Year Ended December 31,

In millions 2022 2021

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

Fair Value Measurements

Recurring Fair Value Measurements

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

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

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

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$ 12.5 $ — $ — $ 12.5

Contingent consideration (6)

Total liabilities $ 12.5 $ — $ — $ 12.5

1 unchanged sentence

December 31, 2021

Equity securities (4)

$ 0.2 $ — $ — $ 0.2

Deferred compensation plan investments (4)

$ 0.9 $ — $ — $ 0.9

Total assets $ 0.9 $ — $ — $ 0.9

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(3) Significant unobservable inputs.

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

(4) Consists of a deferred compensation arrangement through which we hold various investment securities recognized on our balance sheets.

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

Nonrecurring Fair Value Measurements

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

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

These leased assets have remaining lease obligations through 2023.

Ingevity Corporation

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December 31, 2022

Nonrecurring Fair Value Measurements

There were no nonrecurring fair value measurements on the consolidated balance sheet during the year ended December 31, 2022 and 2021 , respectively.

Strategic Investments

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

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

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

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

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

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

Equity Method Investments

During 2021 and 2022, we acquired two separate strategic investments in privately-held companies for $ 16.5 million and $ 14.6 million, respectively, which are both accounted for under the equity method of accounting.

The carrying value of our strategic equity investments was $ 28.2 million at December 31, 2022 and $ 16.5 million at December 31, 2021.

There were no adjustments to the carrying value of equity method investments for impairment for the periods ended, December 31, 2022 and 2021 .

During 2022, we entered into an investment with a venture capital fund for $ 0.8 million, which is accounted for under the equity method of accounting.

As of December 31, 2022 and 2021, respectively, we had approximately $ 6.7 million and zero of unfunded commitments, which we anticipate will be paid over a period of 10 years.

The carrying value of our strategic equity investment was $ 0.7 million and zero at December 31, 2022 and 2021 , respectively .

Measurement Alternative Investments

During 2022, we invested $ 62.0 million to acquire equity interests in two separate strategic investments, $ 60.0 million of which was our investment in lithium-ion anode materials producer, Nexeon Limited.

Both of these investments are accounted for under the measurement alternative method.

During 2021, we acquired two strategic investments in privately-held companies for $ 18.8 million.

The aggregate carrying value of all measurement alternative investments where fair value is not readily determinable totaled $ 80.9 million and $ 18.8 million at December 31, 2022 and 2021, respectively.

There were no adjustments to the carrying value of the measurement alternative method investments for impairment or observable price changes for the periods ended December 31, 2022 or 2021.

Restricted Investment

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

Debt and Finance Lease Obligations

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At December 31, 2022 and 2021, the carrying value of our fixed rate debt was $ 550.0 million and $ 850.0 million, respectively, and the fair value was $ 471.8 million and $ 843.9 million, respectively, based on Level 2 inputs.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

Contingent Consideration

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

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

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

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

Contingent Consideration

In millions December 31, 2021 December 31, 2020

Beginning balance $ 0.8 $ —

Newly issued — 1.1

Change in revaluation of contingent consideration included in earnings — ( 0.3 )

Exercises/settlements — —

Ending balance (1)

______________

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

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

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

Inventories, net

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buildings and leasehold improvements of $ 39.6 million and $ 29.0 million, and net carrying value of $ 34.9 million and $ 26.2 million;

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

and construction in progress of zero and zero at December 31, 2022 and 2021, respectively.

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

The payments remaining under these finance leases obligations are included within Note 13.

The payments remaining under these finance lease obligations are included within Note 13.

Depreciation expense was $ 70.9 million, $ 70.6 million, and $ 61.2 million for the years ended December 31, 2022, 2021, and 2020, respectively.

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Foreign currency translation ( 33.3 ) — ( 33.3 )

Goodwill acquired (1)

109.8 — 109.8

December 31, 2022 $ 514.2 $ 4.3 $ 518.5

_______________

(1) See Note 16 for more information about our acquisitions.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

Other Intangible Assets

December 31, 2021 December 31, 2020

In millions Gross Accumulated amortization Net Gross Accumulated amortization Net

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

In millions Customer contracts and relationships Brands (1)

Developed Technology Other Total

Gross Asset Value

December 31, 2020 $ 319.5 $ 82.4 $ 73.0 $ 2.7 $ 477.6

Retirements — — — ( 2.2 ) ( 2.2 )

Foreign currency translation ( 1.7 ) ( 0.7 ) ( 0.8 ) — ( 3.2 )

December 31, 2021 317.8 81.7 72.2 0.5 472.2

Acquisitions (2)

88.6 15.0 23.5 — 127.1

Developed technology 72.2 18.8 53.4 73.0 12.5 60.5

Other 0.5 0.5 — 2.7 2.4 0.3

Retirements — — — ( 0.5 ) ( 0.5 )

Foreign currency translation ( 17.9 ) ( 7.5 ) ( 7.2 ) — ( 32.6 )

December 31, 2022 $ 388.5 $ 89.2 $ 88.5 $ — $ 566.2

Accumulated Amortization

December 31, 2020 $ ( 73.6 ) $ ( 15.8 ) $ ( 12.5 ) $ ( 2.4 ) $ ( 104.3 )

Amortization ( 21.7 ) ( 4.7 ) ( 6.6 ) ( 0.2 ) ( 33.2 )

Retirements — — — 2.1 2.1

Foreign currency translation 0.3 0.2 0.3 — 0.8

December 31, 2021 ( 95.0 ) ( 20.3 ) ( 18.8 ) ( 0.5 ) ( 134.6 )

Amortization ( 22.2 ) ( 4.6 ) ( 6.8 ) — ( 33.6 )

Retirements — — — 0.5 0.5

Foreign currency translation 3.4 1.0 1.9 — 6.3

December 31, 2022 $ ( 113.8 ) $ ( 23.9 ) $ ( 23.7 ) $ — $ ( 161.4 )

Other intangibles, net (3)

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

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

(2) See Note 16 for more information about our acquisitions.

(3) The weighted average amortization period remaining for all intangibles is 11.3 years, while the weighted average amortization period remaining for customer contracts and relationships, brands, and developed technology and other intangibles is 11.8 years, 12.3 years, 8.4 years, and zero years , respectively.

Ingevity Corporation

14 unchanged sentences

2023 - $ 41.8 million, 2024 - $ 41.5 million, 2025 - $ 41.2 million, 2026 - $ 40.5 million and 2027 - $ 40.5 million.

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

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

Financial Instruments and Risk Management

Net Investment Hedges

We have fixed-to-fixed cross-currency interest rate swaps with an aggregate notional amount of $ 166.2 million and a maturity date of July 2023.

We designated the swaps to hedge a portion of our net investment in a euro functional currency denominated subsidiary against foreign currency fluctuations.

These contracts involve the exchange of fixed U.S.

dollars with fixed euro interest payments periodically over the life of the contract and an exchange of the notional amount at maturity.

This effectively converts a portion of our U.S.

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

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

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

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

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

The proceeds are presented within cash provided by investing activities within the consolidated statement of cash flows.

The $ 14.7 million gain is reported as a component of the CTA within AOCI on the consolidated balance sheet.

Gains on net investment hedges are reclassified to earnings only when the related CTA are required to be reclassified, usually upon the sale or liquidation of the investment.

The fair value of our net investment hedge was a net asset (liability) of zero and $ 1.0 million at December 31, 2022 and December 31, 2021, respectively.

During the years ended December 31, 2022, 2021, and 2020, we recognized net interest income associated with this financial instrument of $ 1.1 million, $ 0.5 million, and $ 1.6 million, respectively.

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

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

As of December 31, 2022, there were $ 16.9 million in open foreign currency derivative contracts.

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

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

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

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

As of December 31, 2022, we had 1.4 million and 0.5 million mmBTUs (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity swap contracts and zero-cost collar option contracts, respectively, designated as cash flow hedges.

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

As of December 31, 2022, open commodity contracts hedge forecasted transactions until December 2023.

The fair value of the outstanding designated natural gas commodity hedge contracts was a net asset (liability) of $( 1.6 ) million and $( 0.6 ) million as of December 31, 2022 and 2021, respectively.

Interest Rate Risk Management

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

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

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

These instruments are designated as cash flow hedges.

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

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

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

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 $( 4.0 ) million and $( 8.9 ) million at December 31, 2021 and 2020, respectively.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2021

During the year, 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 received floating rate interest payments based upon a three-month U.S.

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

Due to the repayment of our term loan (refer to Note 10 for more information), during the second quarter of 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 income on the consolidated statement of operations.

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

Effect of Cash Flow and Net Investment Hedge Accounting on AOCI

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Natural gas contracts 4.4 1.6 ( 0.5 ) 6.5 0.7 ( 1.1 ) Cost of sales

Interest rate swap contracts 4.8 ( 5.0 ) — — Interest expense

Interest rate swap contracts 5.8 4.8 ( 5.0 ) 1.7 — — Interest income

Total $ 11.1 $ 7.2 $ ( 5.6 ) $ 10.2 $ 1.0 $ ( 1.2 )

15 unchanged sentences

Fair-Value Measurements

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

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

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

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

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

There were no non-recurring fair value measurements related to derivative assets and liabilities on our consolidated balance sheet during the fiscal years ending December 31, 2022, 2021, or 2020, respectively.

December 31, 2022

In millions Level 1 (1)

Currency exchange contracts (4)

$ — $ 0.5 $ — $ 0.5

Net investment hedge (5)

Total assets $ — $ 2.5 $ — 2.5

Natural gas contracts (6)

$ — $ 1.6 $ — $ 1.6

Net investment hedge (7)

Interest rate swap contracts (7)

Currency exchange contracts (6)

Total liabilities $ — $ 2.1 $ — $ 2.1

1 unchanged sentence

In millions Level 1 (1)

Natural gas contracts (4)

Currency exchange contracts (4)

$ — $ 0.5 $ — $ 0.5

Net investment hedge (5)

Total assets $ — $ 2.5 $ — $ 2.5

1 unchanged sentence

$ — $ 0.6 $ — $ 0.6

Currency exchange contracts (6)

Net investment hedge (7)

16 unchanged sentences

Term Loan — 328.1

3.88 % Senior Note due 2028

4.50 % Senior Note due 2026

3.88 % Senior Notes due 2028

4.50 % Senior Notes due 2026

Finance lease obligations (2)

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(2) Refer to Note 13 for more information.

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

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

Revolving Credit Facility

On October 28, 2020, we entered into Amendment No.

5 to our existing credit agreement, dated as of March 7, 2016.

Among other things, Amendment No.

5 extended the maturity date with respect to our revolving credit facility from August 7, 2023 to October 28, 2025 and reduced the aggregate principal amount of revolving commitments thereunder from $ 750.0 million to $ 500.0 million.

The revolving credit facility bears interest at either (a) an adjusted base rate or (b) an adjusted LIBOR rate (or a comparable or successor rate), in each case, plus an applicable margin, in the case of base rate loans, ranging between zero percent and 0.75 percent, and in the case of adjusted LIBOR rate loans, ranging between 1.00 percent and 1.75 percent.

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

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

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 increases the aggregate principal amount of revolving commitments thereunder from $ 500 million to $ 1 billion, (b) adds 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 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, zero , and $ 2.2 million were incurred in 2022, 2021, and 2020, respectively, to secure the various amendments associated with our revolving credit facility.

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

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

The combined borrowings of $ 375.0 million, collectively referred to as the Term Loan are treated as a single class.

On August 7, 2018, we further amended the credit agreement to, among other things, extended the maturity of the Term Loan to August 7, 2023.

The Term Loan amortized at zero percent per annum through May 9, 2019 and amortizes at 1.25 percent per annum during each year thereafter, with the balance due at maturity.

The Term Loan bears interest at either (a) an adjusted base rate or (b) an adjusted LIBOR rate (or a comparable or successor rate), in each case, plus an applicable margin, in the case of base rate loans, ranging between zero percent and 0.75 percent, and in the case of adjusted LIBOR rate loans, ranging between 1.00 percent and 1.75 percent.

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

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

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 and $ 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 on the consolidated statements of operations.

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

Ingevity Corporation

1 unchanged sentence

December 31, 2022

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

the "2028 Notes" and the "2026 Notes."

2028 Senior Notes:

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

Senior Note due 2026

On April 27, 2022, we redeemed the $ 300 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 on the consolidated statements of operations.

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

Senior Note due 2028

On October 28, 2020, we issued $ 550 million aggregate principal amount of 3.88 % senior unsecured notes due 2028 (the “2028 Notes”).

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

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

2026 Senior Notes:

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

The 2026 Notes were issued pursuant to an indenture dated as of January 24, 2018, by and among Ingevity, the subsidiary guarantors party thereto and U.S.

Bank National Association, as trustee.

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

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

The 2026 Notes will mature on February 1, 2026.

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

Debt Covenants

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

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

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

The credit 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 December 31, 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 December 31,

As calculated per the credit agreement, our net leverage for the four consecutive quarters ended December 31, 2022 were 2.5 and our actual interest coverage for the four consecutive quarters ended December 31, 2022 was 9.9 .

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

Ingevity Corporation

1 unchanged sentence

December 31, 2022

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

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

Share-based Compensation

Equity Incentive Plan

The Ingevity Corporation 2016 Omnibus Incentive Plan, adopted on May 15, 2016, grants certain corporate officers, key employees and non-employee directors of Ingevity and subsidiaries different forms of benefits, including stock options, restricted stock units ("RSU"), director stock units ("DSU"), and performance stock units ("PSU").

The Ingevity Corporation 2016 Omnibus Incentive Plan, adopted on May 15, 2016, grants certain corporate officers, key employees, and non-employee directors of Ingevity and subsidiaries different forms of benefits, including stock options, RSU, DSU, and PSU.

The Ingevity Corporation 2016 Omnibus Incentive Plan has a maximum shares reserve of 4,000,000 for the grant of equity awards.

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

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

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

Employee Stock Purchase Plan

On December 9, 2016, our Compensation Committee and Board of Directors approved the 2017 Ingevity Corporation Employee Stock Purchase Plan ("ESPP"), which was approved by Ingevity’ stockholders on April 27, 2017.

The ESPP allows eligible employee participants to purchase no more than 5,000 shares of our common stock at a discount through payroll deductions up to 15 percent of their compensation deducted during the purchase period.

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Forfeited ( 44 ) 69.94

Canceled ( 11 ) 61.48

Cancelled — —

Outstanding, December 31, 2022 335 $ 63.18 6.1 $ 4,100

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

PSUs granted to date have vesting periods of three years from the date of grant, including grants that have a cumulative three-year performance period, subject to satisfaction of the applicable performance goals established for the respective grant.

PSUs granted to date have vesting periods of three years from the date of grant, including grants that have a cumulative three-year performance period, subject to the satisfaction of the applicable performance goals established for the respective grant.

We periodically assess the probability of achievement of the performance criteria and adjust the amount of compensation expense accordingly.

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Reclassifications of accumulated other comprehensive income (loss)

The table below provides details about the reclassifications from AOCI and the affected line items in the consolidated statements of income (loss) for each of the periods presented.

The table below provides details about the reclassifications from AOCI and the affected line items on the consolidated statement of operations for each of the periods presented.

Years Ended December 31,

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6.5 0.7 ( 1.1 )

Interest rate swaps (4)

Total before tax 10.2 1.0 ( 1.2 )

(Provision) benefit for income taxes ( 2.4 ) ( 0.3 ) 0.3

Amount included in net income (loss) $ 0.7 $ ( 0.9 ) $ 0.2

Amount included within net income (loss) $ 7.8 $ 0.7 $ ( 0.9 )

Pension and other postretirement benefits

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

( 0.2 ) — ( 0.1 )

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

(Provision) benefit for income taxes 0.1 0.1 —

Amount included in net income (loss) $ ( 0.1 ) $ ( 0.3 ) $ ( 0.1 )

Amount included within net income (loss) $ ( 0.2 ) $ ( 0.1 ) $ ( 0.3 )

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

(4) Included within "Interest income" on the consolidated statements of operations.

Share Repurchases

On February 28, 2020, our Board of Directors authorized the repurchase of up to $ 500.0 million of our common stock, and rescinded the prior two outstanding authorizations.

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.

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 current repurchase 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 year ended December 31, 2022, we repurchased $ 145.2 million in common stock, representing 2,112,463 shares of our common stock at a weighted average cost per share of $ 68.73 .

At December 31, 2022, $ 444.7 million remained unused under our Board-authorized repurchase program.

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

During the year ended December 31, 2021 and 2020, we repurchased $ 109.4 million and $ 88.0 million in common stock, representing 1,421,379 and 1,533,442 shares of our common stock at a weighted average cost per share of $ 76.98 and $ 57.38 , respectively.

Ingevity Corporation

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Finance Leases

Our finance lease obligations of $ 102.4 million, and $ 103.1 million at December 31, 2021 and 2020, respectively, consisting of two leases.

The first obligation of $ 80.0 million is owed to the city of Wickliffe, Kentucky, associated with Performance Materials' Wickliffe, Kentucky manufacturing site, which is due at maturity in 2027.

The second obligation of $ 22.4 million is owed to the lessor of our new corporate headquarters in North Charleston, South Carolina.

Our finance lease obligations of $ 101.9 million, and $ 102.4 million at December 31, 2022 and 2021, respectively, primarily consist of three leases.

The first obligation of $ 80.0 million, at December 31, 2022, is owed to the city of Wickliffe, Kentucky, associated with Performance Materials' Wickliffe, Kentucky, manufacturing site, which is due at maturity in 2027.

The second obligation of $ 21.6 million, at December 31, 2022, is owed to the lessor of our corporate headquarters in North Charleston, South Carolina.

The lease commenced in July 2020, with a term of 15 years.

The third obligation of $ 0.3 million, at December 31, 2022, is owed to the Industrial Development Board of the city of Greenville, Alabama, associated with Performance Chemicals' Greenville, Alabama, manufacturing site, which is due to mature in 2028.

We also have a finance lease obligation due in 2031 for certain assets located at our Performance Materials' Waynesboro, Georgia, manufacturing facility.

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

(1) As of December 31, 2022, we have zero operating lease commitments that have not yet commenced related to manufacturing and office equipment leases.

Lease Term and Discount Rate

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and other post-retirement medical and life insurance benefits.

We are required to recognize in our consolidated balance sheets the overfunded and underfunded status of our defined benefit postretirement plans.

We are required to recognize on our consolidated balance sheets the overfunded and underfunded status of our defined benefit postretirement plans.

The overfunded and underfunded status is defined as the difference between the fair value of plan assets and the projected benefit obligation.

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December 31, 2022

The following tables summarize the weighted average assumptions used and components of our defined benefit postretirement plans.

The following tables summarize the weighted average assumptions used and components of our defined benefit postretirement plans at December 31, 2022 and 2021.

Pensions Other Benefits

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In millions 2022 2021 2022 2021

Amount recognized in the consolidated balance sheets:

Amount recognized on the consolidated balance sheets:

Pension and other postretirement benefit asset (2)

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(1) The accumulated benefit obligation for all years presented equals the projected benefit obligation for each plan, respectively.

(2) Asset balance is included in "Other assets" and liability balances are included in "Other liabilities" on the consolidated balance sheet.

(2) Asset balance is included within "Other assets" and liability balances are included within "Other liabilities" on the consolidated balance sheet.

Ingevity Corporation

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

(4) Our pension and postretirement settlement and curtailment (income) charges are related to the acceleration of prior service costs, as a result of a reduction in the number of participants within the Union Hourly defined benefit pension plan during 2020.

(4) Our pension and postretirement settlement and curtailment (income) charges are related to the acceleration of prior service costs as a result of a reduction in the number of participants within the Union Hourly defined benefit pension plan during 2022 and 2020.

Contributions

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• Other — Other assets are represented by investments in a series limited partnership.

These assets are not actively traded and classified as Level 2.

These assets are not actively traded and are classified as Level 2.

Ingevity Corporation

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In millions 2022 2021 2020

Gain on sale of assets and businesses $ — $ — $ ( 0.4 )

Severance and other employee-related costs (1)

$ — $ 0.1 $ 6.4

Restructuring charges — 0.1 8.5

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

Restructuring charges

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

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

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

Roll forward of Restructuring Reserves

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

12/31/2019 (1)

Payments 12/31/2020 (1)

Payments 12/31/2021 (1)

$ 0.4 6.8 ( 6.4 ) $ 0.8 0.1 ( 0.4 ) $ 0.5

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(1) Included in "Accrued expenses" on the consolidated balance sheet.

(2) Includes severance and other employee-related costs, exited leases, contract terminations and other miscellaneous exit costs.

Any asset write-downs including accelerated depreciation and impairment charges are not included in the above table.

Other (income) charges, net

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

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

The implementation of our new ERP is expected to occur in multiple phases over two years , beginning with our pilot deployment which occurred during the first quarter of 2022.

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

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

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

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

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

Costs incurred, during the years ended December 31, 2022, 2021, and 2020, of $ 13.8 million, $ 16.1 million, and $ 10.0 million, respectively, represent costs directly associated with the business transformation initiative that, in accordance with GAAP, cannot be capitalized.

Over the course of this initiative, which we expect to complete in 2023, we anticipate incurring approximately $ 90 - 95 million of total costs, which includes $ 45 - 50 million of non-capitalizable costs.

Restructuring Reserves

Restructuring reserves which are included within Accrued expenses on the consolidated balance sheets were $ 0.5 million and $ 0.5 million at December 31, 2022 and 2021, respectively.

Ingevity Corporation

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December 31, 2022

Perstorp Holding AB's Caprolactone Business

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

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

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

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

Unaudited Pro Forma Financial Information

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

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

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

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

In millions Year Ended December 31, 2019

Net sales $ 1,310.6

Income (loss) before income taxes 262.8

Diluted earnings (loss) per share attributable to Ingevity stockholders $ 5.01

Ozark Materials

On October 3, 2022, we completed our 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.

In accordance with the Purchase Agreement, we acquired from Seller, all of the issued and outstanding limited liability company membership interests of Ozark Materials for a purchase price of $ 325.0 million, subject to customary adjustments for working capital, indebtedness and transaction expenses (the "Acquisition").

The Acquisition is being integrated into our Performance Chemicals segment and is included within our Pavement Technologies product line.

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

The Acquisition is not considered significant to our Consolidated Financial Statements for the year ended December 31, 2022;

therefore, proforma results of operations have not been presented.

Preliminary Purchase Price Allocation

Ozark Materials is considered an acquisition of a business under business combinations accounting guidance, and therefore we applied acquisition accounting.

Acquisition accounting requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date.

The aggregate purchase price noted above was allocated to the major categories of assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date using primarily Level 2 and Level 3 inputs.

These Level 2 and Level 3 valuation inputs include an estimate of future cash flows and discount rates.

Additionally, estimated fair values are based, in part, upon outside appraisals for certain assets, including specifically-identified intangible assets.

See Note 5 for an additional explanation of Level 2 and Level 3 inputs.

The allocation of the purchase price to the assets acquired and liabilities assumed, including the residual amount allocated to goodwill, is based upon preliminary information and is subject to change within the measurement period (up to one year from the acquisition date) as additional information concerning final asset and liability valuations is obtained.

During the measurement period, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date, we will revise the preliminary purchase price allocation.

The effect of measurement period adjustments to the estimated fair values will be reflected as if the adjustments had been completed on the acquisition date.

The impact of all changes that do not qualify as measurement period adjustments will be included in current period earnings.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

Preliminary Purchase Price Allocation

In millions Weighted Average Amortization Period Fair Value

Cash and cash equivalents $ 8.0

Accounts receivable 28.7

Inventories (1)

Prepaid and other current assets 2.0

Property, plant and equipment 43.1

Intangible assets (2)

Brands 10 years 15.0

Customer relationships 15 years 88.6

Developed technology 7 years 23.5

Other assets, including operating leases 0.1

Total fair value of assets acquired $ 367.2

Accounts payable 13.9

Other liabilities 2.6

Total fair value of liabilities assumed $ 16.5

Cash acquired ( 8.0 )

Amounts due from Seller 1.8

Total cash paid, less cash and restricted cash acquired $ 344.5

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(1) Fair value of finished goods inventories acquired included a step-up in the value of $ 1.8 million, of which $ 0.9 million was expensed in the year ended December 31, 2022.

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

Inventories are accounted for on a LIFO basis of accounting.

(2) The aggregate amortization expense was $ 2.7 million for the year ended December 31, 2022.

Estimated amortization expense is as follows:

2023 - $ 10.9 million, 2024 - $ 10.9 million, 2025 - $ 10.7 million, 2026 - $ 10.0 million, and 2027 - $ 10.0 million.

(3) Goodwill largely consists of expected cost synergies and economies of scale resulting from the business combination.

We expect the full amount to be deductible for income tax purposes.

This acquired goodwill has been included within our Performance Chemicals reporting unit.

See Note 8 for further information regarding our allocation of goodwill among our reporting segments .

Acquisition and other-related costs

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Legal and professional service fees $ 5.0 $ 0.6 $ 1.8

Loss on hedging purchase price — — 12.7

Acquisition-related costs 5.0 0.6 1.8

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Foreign 69.6 55.4 43.9

Total $ 162.8 $ 235.1 $ 227.9

Income (loss) before income taxes $ 269.6 $ 162.8 $ 235.1

The provision (benefit) for income taxes consisted of:

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Provision (benefit) for income taxes $ 58.0 $ 44.7 $ 53.7

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

We recorded $ 4.5 million, $ 4.2 million, and $( 4.3 ) million of deferred tax provision (benefit) expense within components of other comprehensive income during the years ended December 31, 2022, 2021, and 2020, respectively.

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

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Legislative tax rate change 0.8 13.9 5.3

Excess stock compensation ( 0.3 ) 0.4 ( 5.9 )

Excess share-based compensation ( 0.1 ) ( 0.3 ) 0.4

Federal and state tax credits ( 4.8 ) ( 4.9 ) ( 4.0 )

Tax on dividends, deemed dividends, and GILTI 2.7 0.1 0.1

Foreign derived intangible income ( 6.2 ) ( 5.1 ) ( 3.1 )

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December 31, 2022

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

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

The decrease in our effective tax rate from 2021 to 2022 was primarily driven by the recognition of the United Kingdom's ("UK") six percent legislative rate increase in 2021.

During 2022, our effective tax rate benefited from reduced taxes at our China manufacturing plant associated with the purchases of our sustainably sourced raw material feedstock.

This reduction was partially offset by an increase in foreign earnings deemed taxable in the U.S.

mainly due to final U.S.

foreign tax credit regulations modifying the definition of what foreign taxes qualify as creditable taxes, denying Brazilian taxes paid as qualifying taxes.

The increase in our effective tax rate from 2020 to 2021 was driven by a six percent legislative tax rate increase in the UK.

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

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

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

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

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

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

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Litigation verdict accrual 19.9 19.9

Research and experimental expenses 8.9 —

Other 14.4 12.0

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

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

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

(1) Presentation in the table above is on a gross basis, however, due to jurisdictional netting, our net deferred tax asset and liability recorded on the consolidated balance sheets is $ 5.7 million and $ 106.5 million, respectively, as of December 31, 2022, and $ 6.8 million and $ 114.6 million, respectively, as of December 31, 2021.

Our net deferred tax liability decreased $ 7.0 million at December 31, 2022 as compared to December 31, 2021.

As part of Tax Cuts and Jobs Act ("TCJA") enacted in December 2017 under Internal Revenue Code Section 174, beginning in 2022 we are required to capitalize and amortize research and experimental expenditures, thus creating a new deferred tax asset for 2022.

The increase in deferred tax assets was slightly offset by an increase in the deferred fixed asset liability as a result of U.S.

bonus depreciation, UK super deduction, as well as the 2022 acquisition of Ozark Materials.

Impacts of foreign currency fluctuations, most notably in the UK, decreased the overall deferred tax liability by $ 6.6 million.

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

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

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

A valuation allowance has been provided where management has determined that it is more likely

Ingevity Corporation

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December 31, 2022

than not that the deferred tax assets will not be realized.

In 2022, we recognized tax expense of $ 0.1 million due to our expected inability to recognize the benefit associated with state tax credits prior to their expiration.

At December 31, 2022, foreign net operating loss carryforwards totaled $ 35.3 million.

Of this total, $ 0.8 million will expire in 3 to 9 years and $ 38.1 million has no expiration date.

Of this total, $ 0.1 million will expire in 2 years and $ 35.2 million has no expiration date.

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

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A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

Years ended December 31,

In millions 2022 2021 2020

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We recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

Commitments and Contingencies

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As a result of the jury's $ 85.0 million verdict, we have accrued the full amount as of December 31, 2022.

The amount accrued for this matter is included in Other liabilities on the consolidated balance sheet as of December 31, 2021, and the charge is included in Other (income) expense, net on the consolidated statement of operations for the year ended December 31, 2021.

The amount accrued for this matter is included within Other liabilities on the consolidated balance sheet as of December 31, 2022, and the charge was included within Other (income) expense, net on the consolidated statement of operations for the year ended December 31, 2021.

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

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

( 0.2 ) — ( 0.1 )

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

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

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

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

We have excluded the following items from segment EBITDA:

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

(3) For the year ended December 31, 2020, all charges relate to the Performance Materials segment.

Our pension and postretirement settlement and curtailment charges (income) are related to the acceleration of prior service costs, as a result of a reduction in the number of participants within the Union Hourly defined benefit pension plan during 2020.

(3) For all years, the charges relate to the Performance Materials segment.

These are excluded from our segment results because we consider these costs to be outside our operational performance.

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(4) For the year ended December 31, 2022, charges of $ 4.8 million and $ 9.0 million relate to the Performance Materials segment and Performance Chemicals segment, respectively.

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

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

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

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

(5) For the year ended December 31, 2021, $( 0.2 ) million relate to the acquisition of a strategic investment in the Performance Materials segment and $( 0.4 ) million relate to the integration of the Caprolactone Acquisition into our Performance Chemicals segment.

For additional information on the charges associated with the Caprolactone Acquisition see Note 16 within these Consolidated Financial Statements.

(5) For the years ended December 31, 2022 and 2021, charges of $ 0.3 million and $ 0.2 million relate to the acquisition of a strategic investment in the Performance Materials segment.

For the year ended December 31, 2022, charges of $ 5.6 million relate to the acquisition and integration of Ozark Materials into the Performance Chemicals segment.

For more detail on these charges see Note 16.

For the years ended December 31, 2021 and 2020, charges of $ 0.4 million and $ 1.8 million relate to the integration of the Caprolactone business, now referred to as our engineered polymers product line, into our Performance Chemicals segment.

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

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In millions (except share and per share data) 2022 2021 2020

Net income (loss) attributable to Ingevity stockholders $ 118.1 $ 181.4 $ 183.7

Net income (loss) $ 211.6 $ 118.1 $ 181.4

Basic and Diluted earnings (loss) per share (1)

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Finance lease assets, net (Note 13) 0.1 0.3

Strategic investments (Note 5) 35.3 —

Other 6.6 6.5

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Interest rate swaps (Note 9) — 4.0

New market tax credit payable 1.8 1.8

Contingent consideration (Note 5) — 0.8

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$ ( 1.7 ) $ 79.9 $ ( 4.1 )

Subsequent Event

During the first quarter of 2023, we realigned our segment reporting structure to increase transparency for our investors and better align with how our chief operating decision maker intends to measure segment operating performance and allocate resources across our operating segments.

Effective in the first quarter of 2023, we will separate our engineered polymers product line from the Performance Chemicals reporting segment into its own reporting segment.

This reporting segment change will also result in our Performance Chemicals reporting unit for goodwill being split into two separate reporting units for the purposes of goodwill impairment testing.

As of and for the year ended December 31, 2022, we continued to review financial information at the Performance Chemicals segment level, and therefore, these changes had no impact on our reporting structure.

This segment reporting change will have no impact on our consolidated operating results or the historical operating results for our Performance Materials operating segment.

INGEVITY CORPORATION

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$ 0.5 1.4 — — — $ 1.9

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

$ — 0.3 — 0.6 — $ 0.9

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

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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-K

Item 8. Financial Statements and Supplementary Data