What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-11-03 · 240 added, 383 removed, 475 unchanged (57% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Operations (Unaudited)

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

Three Months Ended March 31,

In millions, except per share data 2023 2022

17 unchanged sentences

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

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

Three Months Ended March 31,

In millions 2023 2022

3 unchanged sentences

Foreign currency translation adjustment 10.5 ( 16.6 )

Unrealized gain (loss) on net investment hedges, net of tax provision (benefit) of $ 1.0 , $ 0.9 , $ 3.2 , $ 1.9

3.4 2.9 10.7 6.1

Total foreign currency adjustments, net of tax provision (benefit) of $ 1.0 , $ 0.9 , $ 3.2 , $ 1.9

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

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

10.5 ( 15.3 )

Derivative instruments:

Unrealized gain (loss), net of tax provision (benefit) of $ 0.8 , $ 0.8 , $ 3.5 , $ 1.6

2.7 2.8 11.4 5.3

Reclassifications of deferred derivative instruments (gain) loss, included in net income (loss), net of tax (provision) benefit of $( 0.7 ), $( 0.1 ), $( 1.7 ), $( 0.1 )

( 2.4 ) ( 0.1 ) ( 5.7 ) ( 0.2 )

Total derivative instruments, net of tax provision (benefit) of $ 0.1 , $ 0.7 , $ 1.8 , $ 1.5

0.3 2.7 5.7 5.1

Pension & other postretirement benefits:

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

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

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

Other comprehensive income (loss), net of tax provision (benefit) of $ 1.1 , $ 1.6 , $ 5.0 , $ 3.4

Unrealized gain (loss), net of tax provision (benefit) of $( 0.7 ) and $ 2.0

Reclassifications of deferred derivative instruments (gain) loss, included in net income (loss), net of tax (provision) benefit of $( 0.1 ) and $( 0.4 )

( 0.2 ) ( 1.1 )

Total derivative instruments, net of tax provision (benefit) of $( 0.8 ) and $ 1.6

Other comprehensive income (loss), net of tax provision (benefit) of $( 0.8 ) and $ 2.0

Comprehensive income (loss) $ 58.7 $ 50.7

2 unchanged sentences

Condensed Consolidated Balance Sheets

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

In millions, except share and par value data March 31, 2023 December 31, 2022

Assets (Unaudited)

10 unchanged sentences

Restricted investment , net of allowance for credit losses of $ 0.4 - 2023 and $ 0.6 - 2022

Strategic investments 98.9 109.8

Other assets 89.2 85.5

30 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

In millions 2023 2022

7 unchanged sentences

Share-based compensation 4.0 3.0

Gain on sale of strategic investment ( 19.2 ) —

Other non-cash items 4.7 1.8

7 unchanged sentences

Income taxes 9.5 11.2

Litigation verdict charge — 85.0

Operating leases ( 5.2 ) ( 5.4 )

3 unchanged sentences

Capital expenditures $ ( 25.4 ) $ ( 27.6 )

Purchase of strategic investments ( 62.8 ) ( 16.5 )

Net investment hedge settlement 14.7 —

Proceeds from sale of strategic investment 31.4 —

Other investing activities, net ( 4.1 ) ( 2.6 )

4 unchanged sentences

Payments on long-term borrowings — ( 4.7 )

Debt issuance costs ( 3.0 ) —

Debt repayment costs ( 3.8 ) —

Finance lease obligations, net ( 0.3 ) ( 0.2 )

Borrowings (repayments) of notes payable and other short-term borrowings, net — ( 1.9 )

Tax payments related to withholdings on vested equity awards ( 4.5 ) ( 1.8 )

8 unchanged sentences

$ 78.4 $ 223.2

(1) Includes restricted cash of $ 0.5 million and $ 0.5 million and cash and cash equivalents of $ 72.3 million and $ 269.4 million at September 30, 2022 and 2021, respectively.

(1) Includes restricted cash of $ 0.5 million and $ 0.6 million and cash and cash equivalents of $ 77.9 million and $ 222.6 million at March 31, 2023 and 2022, respectively.

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

7 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

March 31, 2023

Description of Business

1 unchanged sentence

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

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

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

Automotive technologies products are sold into gasoline vapor emission control applications within the automotive industry, while process purification products are sold into the food, water, beverage, and chemical purification industries.

Our Performance Chemicals segment consists of our pavement technologies, industrial specialties, and engineered polymers product lines.

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

Performance Chemicals products serve as critical inputs used in a variety of high performance applications, including warm mix paving, pavement preservation, and pavement reconstruction and recycling (pavement technologies product line);

adhesives, agrochemicals, lubricants, printing inks, industrial intermediates, and oilfield (industrial specialties product line);

and coatings, resins, elastomers, adhesives, bio-plastics, and medical devices (engineered polymers product line).

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.

We separated our February 2019 acquisition, engineered polymers, from the Performance Chemicals reportable segment into its own reportable segment, Advanced Polymer Technologies.

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

We operate in three reportable segments:

Performance Chemicals, which includes specialty chemicals and pavement technologies;

Advanced Polymer Technologies, which includes biodegradable plastics and polyurethane materials;

and Performance Materials, which includes activated carbon.

Our products are used in a variety of demanding applications, including adhesives, agrochemicals, asphalt paving, bioplastics, coatings, elastomers, lubricants, pavement markings, publication inks, oil exploration and production and automotive components that reduce gasoline vapor emissions.

Basis of Consolidation and Presentation

11 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 Issued Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04 "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The ASU is intended to provide temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

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

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

As of September 30, 2022, we have not yet elected any optional expedients provided in the standard.

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

We do not expect this new standard to have a material impact on our consolidated financial statements.

March 31, 2023

Disaggregation of Revenue

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

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

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

Three Months Ended March 31,

In millions 2023 2022

3 unchanged sentences

Industrial Specialties product line 139.8 144.7

Engineered Polymers product line 69.5 52.9 185.1 143.6

Total $ 337.1 $ 258.7 $ 869.0 $ 670.7

Advanced Polymer Technologies segment $ 65.6 $ 61.8

Net sales $ 392.6 $ 382.8

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

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

Three Months Ended March 31,

In millions 2023 2022

11 unchanged sentences

Contract Asset

September 30,

In millions 2023 2022

5 unchanged sentences

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

Fair Value Measurements

2 unchanged sentences

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

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

There were no transfers of assets and liabilities that were recorded at

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

fair value between the three-level fair value hierarchy during the periods reported.

In millions Level 1 (1)

September 30, 2022

March 31, 2023

Deferred compensation plan investments (4)

3 unchanged sentences

$ 14.6 $ — $ — $ 14.6

Contingent consideration (5)

Total liabilities $ 14.6 $ — $ — $ 14.6

5 unchanged sentences

$ 12.5 $ — $ — $ 12.5

Contingent consideration (5)

Total liabilities $ 12.5 $ — $ — $ 12.5

6 unchanged sentences

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

COLI is recorded at cash surrender value and included in "Other assets" on the condensed consolidated balance sheets in the amount of $ 12.7 million and $ 14.0 million at September 30, 2022 and December 31, 2021, respectively.

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

COLI is recorded at cash surrender value and included in "Other assets" on the condensed consolidated balance sheets in the amount of $ 13.8 million and $ 13.3 million at March 31, 2023 and December 31, 2022, respectively.

Nonrecurring Fair Value Measurements

There were no nonrecurring fair value measurements in the condensed consolidated balance sheet during the quarters ended September 30, 2022 and December 31, 2021.

There were no nonrecurring fair value measurements in the condensed consolidated balance sheet during the quarters ended March 31, 2023, and December 31, 2022.

Strategic Investments

During the first and third quarters of 2022, we acquired two strategic investments in privately-held companies for $ 2.0 million and $ 60.0 million respectively, which are accounted for under the measurement alternative method.

The aggregate carrying value of all measurement alternative investments where fair value is not readily determinable totaled $ 80.8 million and $ 18.8 million at September 30, 2022 and December 31, 2021, respectively.

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

Equity Method Investments

The aggregate carrying value of all strategic equity method investments totaled $ 15.7 million and $ 28.2 million at March 31, 2023 and December 31, 2022, respectively.

During the three months ended March 31, 2023, we sold a strategic equity method investment for $ 31.4 million, resulting in a $ 19.2 million gain, recorded within "Other (income) expense, net" on the condensed consolidated statement of operations.

There were no adjustments to the carrying value of equity method investments for impairment for the periods ended March 31, 2023 and December 31, 2022.

Measurement Alternative Investments

The aggregate carrying value of all measurement alternative investments where fair value is not readily determinable totaled $ 83.2 million and $ 80.8 million at March 31, 2023 and December 31, 2022, 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 March 31, 2023 and December 31, 2022.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

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

The carrying value of our strategic equity investment was $ 14.5 million and $ 16.5 million at September 30, 2022 and December 31, 2021, respectively.

During the third quarter of 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 September 30, 2022, we had approximately $ 6.8 million of unfunded commitments which we anticipate will be paid over a period of 10 years.

The carrying value of our strategic equity investment was $ 0.8 million at September 30, 2022.

March 31, 2023

Restricted Investment

At September 30, 2022 and December 31, 2021, the carrying value of our restricted investment, which is accounted for as held-to-maturity ("HTM") and therefore recorded at amortized cost, was $ 77.5 million and $ 76.1 million, net of an allowance for credit losses of $ 0.6 million and $ 0.5 million, and included cash of $ 6.4 million and $ 4.7 million, respectively.

The fair value at September 30, 2022 and December 31, 2021 was $ 73.5 million and $ 80.0 million, respectively, based on Level 1 inputs.

At March 31, 2023 and December 31, 2022, the carrying value of our restricted investment, which is accounted for as held-to-maturity ("HTM") and therefore recorded at amortized costs, was $ 78.8 million and $ 78.0 million, net of an allowance for credit losses of $ 0.4 million and $ 0.6 million, and included cash of $ 7.7 million and $ 7.0 million, respectively.

The fair value at March 31, 2023 and December 31, 2022 was $ 76.4 million and $ 74.7 million, respectively, based on Level 1 inputs.

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

3 unchanged sentences

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

September 30, 2022 $ 13.4 — 10.5 13.3 14.1 20.4 $ 71.7

March 31, 2023 $ 13.4 — 10.4 13.2 14.1 20.4 $ 71.5

December 31, 2022 $ 13.4 — 10.5 13.2 14.1 20.4 $ 71.6

Debt and Finance Lease Obligations

At September 30, 2022 and December 31, 2021, the carrying value of finance lease obligations was $ 101.8 million and $ 102.4 million, respectively, and the fair value was $ 107.1 million and $ 118.6 million, respectively.

At March 31, 2023 and December 31, 2022, the carrying value of finance lease obligations was $ 101.6 million and $ 101.9 million, respectively, and the fair value was $ 106.8 million and $ 106.2 million, respectively.

The fair value of our finance lease obligations is based on the period-end quoted market prices for the obligations, using Level 2 inputs.

The fair value of all other finance lease obligations approximates their carrying values.

The carrying amount, excluding debt issuance fees, of our variable interest rate long-term debt was $ 509.0 million and $ 328.1 million as of September 30, 2022 and December 31, 2021, respectively.

The carrying amount, excluding debt issuance fees, of our variable interest rate long-term debt was $ 858.0 million and $ 828.0 million as of March 31, 2023 and December 31, 2022, respectively.

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

At September 30, 2022 and December 31, 2021, the carrying value of our fixed rate debt was $ 550.0 million and $ 850.0 million, respectively, and the fair value was $ 452.4 million and $ 843.9 million, respectively, based on Level 2 inputs.

Contingent Consideration

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

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

The fair value of the five-year Revenue Earn-out consideration was $ 0.8 million at September 30, 2022 and December 31, 2021, respectively.

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

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

Contingent Consideration

In millions September 30, 2022 December 31, 2021

Beginning balance $ 0.8 $ 0.8

Newly issued — —

Change in revaluation of contingent consideration included in earnings — —

Exercises/settlements — —

Ending balance (1)

______________

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

At March 31, 2023 and December 31, 2022, the carrying value of our fixed rate debt was $ 550.0 million and $ 550.0 million, respectively, and the fair value was $ 478.9 million and $ 471.8 million, respectively, based on Level 2 inputs.

Inventories, net

In millions September 30, 2022 December 31, 2021

In millions March 31, 2023 December 31, 2022

Raw materials $ 111.8 $ 106.7

5 unchanged sentences

Property, Plant, and Equipment, net

In millions September 30, 2022 December 31, 2021

In millions March 31, 2023 December 31, 2022

Machinery and equipment $ 1,177.9 $ 1,162.7

5 unchanged sentences

Property, plant, and equipment, net $ 804.6 $ 798.6

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

Goodwill and Other Intangible Assets, net

As described in Note 1, we reorganized our segment reporting structure to increase transparency for our investors and better align with the markets and customers we serve through each of our segments.

This structure is also consistent with the manner in which information is presently used internally by our chief operating decision maker to evaluate performance and make resource allocation decisions.

This reportable segment change impacted the identification of reporting units, which are at the level of operating segment or lower, resulting in two reporting units (Performance Chemicals and Advanced Polymer Technologies).

We have reallocated goodwill as of January 1, 2023 to align to our new reporting unit structure by using a relative fair value approach and tested goodwill for impairment immediately before and after the realignment;

no impairment was identified.

Reporting Units

In millions Performance Chemicals Performance Materials Total

In millions Performance Materials Performance Chemicals Advanced Polymer Technologies Total

December 31, 2022 $ 4.3 $ 514.2 $ — $ 518.5

Segment change reallocation — ( 165.0 ) 165.0 —

Foreign currency translation — — 3.5 3.5

September 30, 2022 $ 383.3 $ 4.3 $ 387.6

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

March 31, 2023 $ 4.3 $ 349.2 $ 168.5 $ 522.0

Other Intangible Assets

September 30, 2022 December 31, 2021

In millions Gross Accumulated amortization Net Gross Accumulated amortization Net

Customer contracts and relationships $ 288.7 $ 105.0 $ 183.7 $ 317.8 $ 95.0 $ 222.8

69.4 21.5 47.9 81.7 20.3 61.4

Developed technology 60.4 19.8 40.6 72.2 18.8 53.4

Other — — — 0.5 0.5 —

In millions Customer contracts and relationships Brands (1)

Developed Technology Total

Gross Asset Value

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

Foreign currency translation 3.1 1.3 1.3 5.7

March 31, 2023 $ 391.6 $ 90.5 $ 89.8 $ 571.9

Accumulated Amortization

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

Amortization ( 6.6 ) ( 1.4 ) ( 2.3 ) ( 10.3 )

Foreign currency translation ( 0.7 ) ( 0.3 ) ( 0.5 ) ( 1.5 )

March 31, 2023 $ ( 121.1 ) $ ( 25.6 ) $ ( 26.5 ) $ ( 173.2 )

Other intangibles, net $ 270.5 $ 64.9 $ 63.3 $ 398.7

_______________

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

(2) The majority of our Other intangibles, net are held in British Pound Sterling (GBP) and changes period over period are primarily driven by foreign currency fluctuations between GBP and USD.

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

In millions September 30, 2022 December 31, 2021

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

In millions March 31, 2023 December 31, 2022

Performance Materials $ 1.6 $ 1.7

Performance Chemicals 192.2 198.0

Advanced Polymer Technologies 204.9 205.1

Other intangibles, net $ 398.7 $ 404.8

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

During the three and nine months ended September 30, 2022, we recognized amortization expense of $ 7.9 million and $ 23.8 million, respectively, and during the three and nine months ended September 30, 2021, we recognized amortization expense of $ 8.3 million and $ 25.1 million, respectively.

During the three months ended March 31, 2023 and 2022, we recognized amortization expense of $ 10.3 million and $ 8.1 million, respectively.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

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

2022 - $ 31.7 million, 2023 - $ 31.7 million, 2024 - $ 31.4 million, 2025 - $ 31.4 million, and 2026 - $ 31.4 million.

$ 31.2 million for the remainder of 2023, 2024 - $ 41.1 million, 2025 - $ 40.9 million, 2026 - $ 40.2 million, and 2027 - $ 40.2 million.

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

1 unchanged sentence

Net Investment Hedges

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

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

The $ 14.7 million gain is reported as a component of the foreign currency adjustments (“CTA”) within Accumulated other comprehensive income (loss) ("AOCI") on the condensed consolidated balance sheet.

The gain 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.

The fair value of our net investment hedge was a net asset (liability) of zero and $ 1.0 million at September 30, 2022 and December 31, 2021, respectively.

During the three and nine months ended September 30, 2022, we recognized net interest income associated with this financial instrument of $ 0.1 million and $ 2.8 million, respectively, and during the three and nine months ended September 30, 2021, we recognized net interest income associated with this financial instrument of $ 0.1 million and $ 0.3 million, respectively.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

In the third quarter of 2022, we terminated our fixed-to-fixed cross-currency interest rate swaps, accounted for as net investment hedges.

During the three months ended March 31, 2023 and 2022, we recognized net interest income associated with this financial instrument of zero and $ 0.2 million, respectively.

Cash Flow Hedges

Foreign Currency Exchange Risk Management

We manufacture and sell our products in several countries throughout the world and, thus, we are exposed to changes in foreign currency exchange rates.

To manage the volatility relating to these exposures, we net the exposures on a consolidated basis to take advantage of natural offsets.

To manage the remaining exposure, from time to time, we utilize forward currency exchange contracts to minimize the volatility to earnings and cash flows resulting from the effect of fluctuating foreign currency exchange rates on export sales denominated in foreign currencies (principally the euro).

These contracts are generally designated as cash flow hedges.

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

As of September 30, 2022, there were $ 5.6 million open foreign currency derivative contracts.

The fair value of the designated foreign currency hedge contracts was an asset (liability) of $ 0.9 million and $ 0.5 million at September 30, 2022 and December 31, 2021, respectively.

As of March 31, 2023, there were $ 14.1 million open foreign currency derivative contracts.

The fair value of the designated foreign currency hedge contracts was an asset (liability) of $( 0.7 ) million and $( 0.5 ) million at March 31, 2023 and December 31, 2022, respectively.

Commodity Price Risk Management

Certain energy sources used in our manufacturing operations are subject to price volatility caused by weather, supply and demand conditions, economic variables, and other unpredictable factors.

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.

As of September 30, 2022, we had 1.4 million and 0.4 million mmBTUS (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity swap contracts and zero cost collar option contracts, respectively, designated as cash flow hedges.

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

The fair value of the outstanding designated natural gas commodity hedge contracts as of September 30, 2022 and December 31, 2021 was a net asset (liability) of $ 1.9 million and $( 0.6 ) million, respectively.

Interest Rate Risk Management

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 ba sed upon 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 9 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 expense, net on the condensed consolidated statement of operations.

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

As of March 31, 2023, we had 1.6 million and 0.4 million mm BTUS (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity swap contracts and zero cost collar option contracts, respectively, designated as cash flow hedges.

As of March 31, 2023, open commodity contracts hedge forecasted transactions until March 2024.

The fair value of the outstanding designated natural gas commodity hedge contracts as of March 31, 2023 and December 31, 2022, was a net asset (liability) of $( 2.8 ) million and $( 1.6 ) million, respectively.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

March 31, 2023

Interest Rate Risk Management

During 2022, we had floating-to-fixed interest rate swaps effectively converting a portion of our floating rate debt to a fixed rate.

In the second quarter of 2022, we terminated the interest rate swap instruments.

Effect of Cash Flow and Net Investment Hedge Accounting on AOCI

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

Three Months Ended September 30,

2022 2021 2022 2021

Cash flow hedging derivatives

Currency exchange contracts $ 0.5 $ 0.1 $ ( 0.8 ) $ ( 0.2 ) Net sales

Natural gas contracts 3.0 2.8 ( 2.3 ) — Cost of sales

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

Total $ 3.5 $ 3.6 $ ( 3.1 ) $ ( 0.2 )

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

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

(Amount Excluded from

Effectiveness Testing)

Three Months Ended September 30,

2022 2021 2022 2021

Net investment hedging derivative

Currency exchange contracts (1)

$ 4.4 $ 3.8 $ 0.1 $ — Interest expense, net

Total $ 4.4 $ 3.8 $ 0.1 $ —

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

Nine Months Ended September 30,

Three Months Ended March 31,

2023 2022 2023 2022

8 unchanged sentences

Effectiveness Testing)

Nine Months Ended September 30,

Three Months Ended March 31,

2023 2022 2023 2022

6 unchanged sentences

Within the next twelve months, we expect to reclassify $ 5.0 million of net gains from AOCI to income, before taxes.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

Fair Value Measurements

1 unchanged sentence

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

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

September 30, 2022

There were no nonrecurring fair value measurements related to derivative assets and liabilities on the condensed consolidated balance sheets as of March 31, 2023, or December 31, 2022.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

In millions Level 1 (1)

1 unchanged sentence

$ — $ 0.9 $ — $ 0.9

Natural gas contracts (4)

Total assets $ — $ 0.9 $ — $ 0.9

Natural gas contracts (6)

Currency exchange contracts (5)

$ — $ 1.6 $ — $ 1.6

Natural gas contracts (5)

Total liabilities $ — $ 4.4 $ — $ 4.4

1 unchanged sentence

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 (5)

$ — $ 1.6 $ — $ 1.6

Net investment hedge (7)

Interest rate swap contracts (7)

Currency exchange contracts (5)

Total liabilities $ — $ 2.1 $ — $ 2.1

3 unchanged sentences

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

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

(5) Included within "Accrued expenses" on the condensed consolidated balance sheet.

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

March 31, 2023

Debt, including Finance Lease Obligations

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

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

In millions, except percentages March 31, 2023 December 31, 2022

Revolving Credit Facility and other lines of credit (1)

Term Loan — 328.1

3.88 % Senior Notes due 2028

$ 858.0 $ 828.0

3.88 % Senior Notes due 2028

6 unchanged sentences

______________

(1) Letters of credit outstanding under the revolving credit facility were $ 2.3 million and $ 2.5 million and available funds under the facility were $ 488.7 million and $ 497.5 million at September 30, 2022 and December 31, 2021, respectively.

(1) Letters of credit outstanding under the revolving credit facility were $ 2.3 million and $ 2.3 million and available funds under the facility were $ 139.7 million and $ 169.7 million at March 31, 2023 and December 31, 2022, respectively.

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

Senior Notes due 2026

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

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

At redemption, we recognized a $ 3.4 million redemption premium and accelerated the remaining deferred finance fees of $ 2.7 million, both the redemption premium and accelerated deferred finance fees were recorded to Interest Expense, net on the condensed consolidated statements of operations.

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

Revolving Credit Facility Amendment

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

Among other things, the Amendment (a) extends the maturity date from October 28, 2025 to June 23, 2027 and 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 1.00 percent to 1.75 percent for term benchmark loans and 0.00 percent to 0.75 percent for base rate loans.

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

These fees have been deferred and will be amortized over the term of the facility and recorded to Interest Expense, net on the condensed consolidated statement of operations.

Term Loan Repayment

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

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

The interest, fees, and accelerated deferred finance fees were recorded to Interest Expense, net on the condensed consolidated statements of operations .

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

Debt Covenants

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

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

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

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

We were in compliance with all covenants under the indenture as of March 31, 2023.

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.

2 unchanged sentences

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.

As calculated per the credit agreement, our net leverage for the four consecutive quarters ended September 30, 2022 was 2.0 , and our interest coverage for the four consecutive quarters ended September 30, 2022 was 10.7 .

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

As calculated per the credit agreement, our net leverage for the four consecutive quarters ended March 31, 2023 was 2.6 , and our actual interest coverage for the four consecutive quarters ended March 31, 2023 was 8.9 .

We were in compliance with all covenants under the credit agreement at March 31, 2023.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

March 31, 2023

The tables below provide a roll forward of equity.

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

In millions, shares in thousands Shares Amount Additional paid in capital Retained earnings Accumulated

comprehensive

9 unchanged sentences

Balance at March 31, 2023 43,408 $ 0.4 $ 158.9 $ 1,058.4 $ ( 38.8 ) $ ( 453.2 ) $ 725.7

Net income (loss) — — — 59.8 — — 59.8

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

Common stock issued 18 — — — — — —

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

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

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

Noncontrolling interest distributions — — — — — — —

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

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

Net income (loss) — — — 75.4 — — 75.4

Other comprehensive income (loss) — — — — ( 51.6 ) — ( 51.6 )

Common stock issued 8 — — — — ( 0.2 ) ( 0.2 )

Exercise of stock options, net 5 — 0.3 — — — 0.3

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

Share repurchase program — — — — — ( 49.3 ) ( 49.3 )

Share-based compensation plans — — 4.2 — — 0.8 5.0

Balance at September 30, 2022 43,213 $ 0.4 $ 147.5 $ 992.1 $ ( 95.3 ) $ ( 410.8 ) $ 633.9

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

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

In millions, shares in thousands Shares Amount Additional paid in capital Retained earnings Accumulated

comprehensive

9 unchanged sentences

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

Net income (loss) — — — 44.3 — — 44.3

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

Common stock issued 19 — — — — — —

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

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

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

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

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

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

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

Common stock issued 5 — — — — — —

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

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

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

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

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

March 31, 2023

Accumulated other comprehensive income (loss)

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

Three Months Ended March 31,

In millions 2023 2022

19 unchanged sentences

Beginning balance $ 0.4 $ ( 3.2 )

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

tax provision (benefit) — — — —

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

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

tax (provision) benefit — — — —

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

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

Ending balance $ 0.4 $ ( 3.2 )

Total AOCI ending balance at September 30 $ ( 95.3 ) $ 7.5 $ ( 95.3 ) $ 7.5

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

Total AOCI ending balance at March 31 $ ( 38.8 ) $ 3.0

Reclassifications of accumulated other comprehensive income (loss)

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

Three Months Ended March 31,

In millions 2023 2022

3 unchanged sentences

Natural gas contracts (2)

2.3 — 4.1 0.1

Interest rate swap contracts (3)

Total before tax 0.3 1.5

1 unchanged sentence

Amount included in net income (loss) $ 0.2 $ 1.1

Pension and other post retirement benefits

Amortization of prior service costs (2)

______________

Total before tax — — 0.1 0.1

(Provision) benefit for income taxes — — — —

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

______________

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

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

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

Share Repurchases

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

Shares under the 2022 Authorization may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market prevailing conditions and other factors, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

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

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

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

Retirement Plans

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

Three Months Ended September 30,

Pensions Other Benefits

In millions 2022 2021 2022 2021

Components of net periodic benefit cost (income):

Service cost (1)

$ 0.4 $ 0.4 $ — $ —

Interest cost (2)

Expected return on plan assets (2)

( 0.4 ) ( 0.3 ) — —

Amortization of prior service cost (credit) (1)

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

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

Nine Months Ended September 30,

Pensions Other Benefits

March 31, 2023

Share Repurchases

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

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

During the three months ended March 31, 2023 and 2022, we repurchased $ 33.4 million, inclusive of $ 0.2 million in excise tax, and $ 40.4 million in common stock, representing 449,475 and 610,447 shares of our common stock at a weighted average cost per share of $ 73.86 and $ 66.26 , respectively.

At March 31, 2023, $ 411.5 million remained unused under our Board-authorized repurchase program.

Restructuring and Other (Income) Charges, net

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

Three Months Ended March 31,

In millions 2023 2022

Components of net periodic benefit cost (income):

Service cost (1)

$ 1.2 $ 1.3 $ — $ —

Interest cost (2)

Expected return on plan assets (2)

( 1.3 ) ( 1.0 ) — —

Amortization of prior service cost (credit) (1)

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

Net periodic benefit cost (income) $ 0.9 $ 1.2 $ — $ —

Severance and other employee-related costs (1)

Restructuring charges 3.1 —

Business transformation costs 2.5 3.6

Other (income) charges, net 2.5 3.6

Total restructuring and other (income) charges, net $ 5.6 $ 3.6

_______________

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

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

Contributions

We did no t make any voluntary cash contributions to our Union Hourly defined benefit pension plan in the nine months ended September 30, 2022.

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

(1) Represents severance and employee benefit charges.

(2) Primarily represents other miscellaneous exit costs.

Restructuring Charges

During the quarter, we initiated a reorganization to streamline certain functions and reduce ongoing costs.

As a result, we recorded $ 3.0 million in severance and other employee-related costs for the three months ended March 31, 2023.

Restructuring Reserves

Restructuring reserves which are included within Accrued expenses on the consolidated balance sheets were $ 0.6 million and $ 0.5 million at March 31, 2023 and December 31, 2022, respectively.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

Restructuring and Other (Income) Charges, net

March 31, 2023

Other (income) charges, net

2 unchanged sentences

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

The implementation of our new ERP is expected to occur in multiple phases 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 requires substantial time and attention of management and key employees.

Costs incurred, during the three and nine months ended September 30, 2022, of $ 3.3 million and $ 10.6 million, respectively, and during the three and nine months ended September 30, 2021, of $ 4.1 million and $ 12.2 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, $ 12 - 14 million of which we expect to be incurred in 2022.

Rollforward of Restructuring Reserves

The following table shows a roll forward of restructuring reserves that will result in cash spending.

Balance at Change in Cash Balance at

In millions 12/31/2021 (1)

Reserve Payments Other (2)

9/30/2022 (1)

Restructuring Reserves $ 0.5 — — — $ 0.5

_______________

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

(2) Primarily foreign currency translation adjustments.

The implementation of our new ERP occurred in multiple phases beginning with our pilot deployment which occurred during the first quarter of 2022 and concluded with our final deployment in the first quarter of 2023.

Costs incurred, during the three months ended March 31, 2023 and 2022, of $ 2.5 million and $ 3.6 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, including $ 5 - 6 million during the remainder of 2023, and $ 45 - 50 million of non-capitalizable costs.

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

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

2022 2021 2022 2021

Three Months Ended March 31,

Effective tax rate 20.9 % 21.6 %

21.3 % 53.3 % 21.6 % 29.8 %

_______________

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

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

9 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

March 31, 2023

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

Three Months Ended September 30,

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

Consolidated operations $ 95.8 $ 20.4 21.3 % $ ( 9.0 ) $ ( 4.8 ) 53.3 %

Discrete items:

Legislative tax rate changes (1)

Litigation verdict charge (2)

— — 85.0 19.7

Other tax only discrete items — ( 0.3 ) — 0.5

Total discrete items — ( 0.3 ) 85.0 20.3

Consolidated operations, before discrete items $ 95.8 $ 20.1 $ 76.0 $ 15.5

21.0 % 20.4 %

Nine Months Ended September 30,

Three Months Ended March 31,

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

2 unchanged sentences

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

Legislative tax rate changes (1)

— — — ( 14.6 )

Litigation verdict charge (2)

Sale of strategic investment (2)

( 19.2 ) ( 4.5 ) — —

4 unchanged sentences

_______________

(1) Legislative tax rate changes in 2021, enacted in the United Kingdom ("UK"), resulted in discrete tax expense of $ 14.6 million related to the revaluation of our net deferred tax liability associated with our UK operations.

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

(2) Refer to Note 14 for additional information.

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

At September 30, 2022 and December 31, 2021, we had deferred tax assets of $ 9.2 million and $ 8.8 million, respectively, resulting from certain historical net operating losses from our Brazilian and Chinese operations and U.S.

(1) See Note 11 for further information.

(2) See Note 4 for further information.

(3) Increase in EAETR for the three months ended March 31, 2023, as compared to March 31, 2022, is due to an overall change in the mix of forecasted earnings in various tax jurisdictions with varying rates, an increase in the foreign earnings deemed taxable in the U.S., and the corporate tax rate in the UK increasing from 19% to 25% on April 1, 2023.

At March 31, 2023 and December 31, 2022, we had deferred tax assets of $ 9.5 million and $ 9.2 million, respectively, resulting from certain historical net operating losses from our Brazilian and Chinese operations and U.S.

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

1 unchanged sentence

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

As of September 30, 2022, we cannot objectively assert that these deferred tax assets are more likely than not to be realized and therefore we have maintained a valuation allowance.

As of March 31, 2023, we cannot objectively assert that these deferred tax assets are more likely than not to be realized and therefore we have maintained a valuation allowance.

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

A release of all or a portion of the valuation allowance could be possible, if we determine that sufficient positive evidence becomes available to allow us to reach a conclusion that the valuation allowance will no longer be needed.

A release of the valuation allowance would result in the recognition of certain deferred tax assets and a reduction to income tax

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

expense for the period the release is recorded.

A release of the valuation allowance would result in the recognition of certain deferred tax assets and a reduction to income tax expense for the period the release is recorded.

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

7 unchanged sentences

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

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

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

antitrust law to approximately $ 85.0 million when the court enters judgment.

In addition, BASF may seek pre- and post-judgment interest and attorneys’ fees and costs in amounts that they will have to support at a future date.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

We disagree with the verdict, including the court’s application of the law, and we intend to seek judgment as a matter of law in the Delaware Proceeding post-trial briefing stage and on appeal, if necessary.

2 unchanged sentences

Ingevity believes in the strength of its intellectual property and the merits of its position and intends to pursue all legal relief available to challenge these outcomes in the Delaware Proceeding.

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

As of September 30, 2022, there has been no progress in the post-trial proceedings to warrant any change to our conclusions as disclosed within our 2021 Annual Report.

Final resolution of these matters could take up to 30 months.

As of March 31, 2023, there has been no progress in the post-trial proceedings to warrant any change to our conclusions as disclosed within our 2022 Annual Report.

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

The full amount of the jury's verdict, $ 85.0 million, is accrued in Other liabilities on the C ondensed Consolidated Balance Sheet as of September 30, 2022.

The full amount of the trebled jury's verdict, $ 85.0 million, is accrued in Other liabilities on the condensed consolidated balance sheet as of March 31, 2023.

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

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

March 31, 2023

Segment Information

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

Segment change

As described in Note 1, effective in the first quarter of 2023, we separated our engineered polymers product line from the Performance Chemicals reportable segment into its own reportable segment, Advanced Polymer Technologies.

We have recast the data below to reflect the changes in our reportable segments to conform to the current year presentation.

Three Months Ended March 31,

In millions 2023 2022

1 unchanged sentence

Performance Chemicals 185.6 172.6

Advanced Polymer Technologies 65.6 61.8

Total net sales (1)

3 unchanged sentences

Performance Chemicals 20.3 30.8

Advanced Polymer Technologies 13.8 10.3

Total Segment EBITDA (2)

4 unchanged sentences

Depreciation and amortization - Performance Chemicals ( 13.8 ) ( 10.2 )

Depreciation and amortization - Advanced Polymer Technologies ( 7.3 ) ( 7.9 )

Restructuring and other income (charges), net (3)

1 unchanged sentence

Acquisition and other-related costs (4)

( 1.9 ) ( 0.2 ) ( 1.9 ) ( 0.9 )

Litigation verdict charge (5)

— ( 85.0 ) — ( 85.0 )

Gain on sale of strategic investment (5)

Net income (loss) $ 50.7 $ 60.8

5 unchanged sentences

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

For the three and nine months ended September 30, 2022, charges of $ 1.1 million and $ 3.7 million relate to the Performance Materials segment and charges of $ 2.2 million and $ 6.9 million relate to the Performance Chemicals segment, respectively.

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

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, (losses) and gains from the sale of strategic investments, and pension and postretirement settlement and curtailment (income) charges, net.

(3) For the three months ended March 31, 2023, charges of $ 1.7 million relate to the Performance Materials segment, charges of $ 3.1 million relate to the Performance Chemicals segment, and charges of $ 0.8 million relate to the Advanced Polymer Technologies segment.

For the three months ended March 31, 2022, charges of $ 1.3 million relate to the Performance Materials segment, charges of $ 1.8 million relate to the Performance Chemicals segment, and charges of $ 0.5 million relate to the Advanced Polymer Technologies segment.

For more detail on the charges incurred see Note 11.

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

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

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

Refer to Note 14 for additional information.

(4) For the three months ended March 31, 2023, all charges relate to the acquisition and integration of Ozark Materials into the Performance Chemicals segment.

For more detail see Note 16.

(5) For the three months ended March 31, 2023, gain on sale of strategic investment relates to the Performance Materials segment.

For more detail see Note 4.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2022

March 31, 2023

Earnings (Loss) per Share

2 unchanged sentences

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

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

Three Months Ended March 31,

In millions, except share and per share data 2023 2022

6 unchanged sentences

Weighted average additional shares assuming conversion of potential common shares 377 254

295 — 269 245

Shares - diluted basis 37,546 39,264

38,134 39,537 38,720 40,238

_______________

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

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

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

Three Months Ended March 31,

In thousands 2023 2022

Average number of potential common shares - antidilutive 182 255

Subsequent Events

Ozark Materials Acquisition

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

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.

Ozark Materials is considered a business under business combinations accounting guidance, and therefore we will apply acquisition accounting to the Acquisition.

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

The net assets of the Acquisition will be recorded at the estimated fair values, primarily using Level 2 and Level 3 inputs.

Our preliminary purchase price valuation is still in process and we will include the required details in our future filings once complete.

The Acquisition is not considered significant to our condensed consolidated financial statements for the three months March 31, 2023;

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 4 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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

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.

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 three months ended March 31, 2023.

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

Inventories are accounted for on a FIFO basis of accounting.

(2) The aggregate amortization expense was $ 2.7 million for the three months ended March 31, 2023.

Estimated amortization expense is as follows:

$ 8.2 million for the remainder of 2023, 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 7 for further information regarding our allocation of goodwill among our reporting units.

Acquisition and other-related costs

Costs incurred to complete and integrate acquisitions and other strategic investments are expensed as incurred on our consolidated statement of operations.

The following table summarizes the costs incurred associated with these combined activities.

Three Months Ended March 31,

In millions 2023 2022

Legal and professional service fees $ 1.9 $ —

Acquisition-related costs 1.9 —

Inventory fair value step-up amortization (1)

Acquisition and other-related costs $ 2.7 $ —

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

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

What changed 10-Q

Item 1. Financial Statements