What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-03 · 170 added, 129 removed, 700 unchanged (30% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Operations (Unaudited)

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

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

In millions, except per share data 2023 2022 2023 2022

17 unchanged sentences

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

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

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

In millions 2023 2022 2023 2022

7 unchanged sentences

Derivative instruments:

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

Unrealized gain (loss), net of tax provision (benefit) of $( 0.1 ), $ 0.8 , $( 0.8 ), $ 3.5

( 0.1 ) 2.7 ( 2.5 ) 11.4

4 unchanged sentences

Pension & other postretirement benefits:

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

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

0.1 0.1 0.1 0.1

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

0.1 0.1 0.1 0.1

Other comprehensive income (loss), net of tax provision (benefit) of $ 0.2 , $ 1.1 , $( 0.1 ), $ 5.0

4 unchanged sentences

Condensed Consolidated Balance Sheets

In millions, except share and par value data June 30, 2023 December 31, 2022

In millions, except share and par value data September 30, 2023 December 31, 2022

Assets (Unaudited)

43 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

In millions 2023 2022

14 unchanged sentences

Prepaid and other current assets ( 5.8 ) ( 2.3 )

Planned major maintenance outage ( 9.9 ) ( 4.4 )

Accounts payable 20.6 48.2

2 unchanged sentences

Income taxes 4.2 10.1

Pension contribution ( 2.0 ) —

Operating leases ( 16.6 ) ( 15.5 )

4 unchanged sentences

Proceeds from sale of strategic investment 31.5 —

Purchase of strategic investment ( 2.4 ) ( 62.8 )

Net investment hedge settlement — 14.7

Other investing activities, net ( 4.8 ) ( 3.3 )

7 unchanged sentences

Finance lease obligations, net ( 0.6 ) ( 0.4 )

Borrowings (repayments) of notes payable and other short-term borrowings, net 2.4 —

Tax payments related to withholdings on vested equity awards ( 4.8 ) ( 2.2 )

8 unchanged sentences

$ 85.1 $ 72.8

(1) Includes restricted cash of $ 0.6 million and $ 0.5 million and cash and cash equivalents of $ 68.0 million and $ 131.3 million at June 30, 2023 and 2022, respectively.

(1) Includes restricted cash of $ 0.6 million and $ 0.5 million and cash and cash equivalents of $ 84.5 million and $ 72.3 million at September 30, 2023 and 2022, respectively.

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

3 unchanged sentences

Purchases of property, plant, and equipment in accounts payable 6.1 5.1

Leased assets obtained in exchange for new finance lease liabilities 0.2 —

Leased assets obtained in exchange for new operating lease liabilities 26.0 9.2

2 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

Description of Business

24 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

Disaggregation of Revenue

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

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

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

In millions 2023 2022 2023 2022

6 unchanged sentences

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

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

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

In millions 2023 2022 2023 2022

11 unchanged sentences

Contract Asset

September 30,

In millions 2023 2022

12 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

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

In millions Level 1 (1)

June 30, 2023

September 30, 2023

Deferred compensation plan investments (4)

18 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 $ 14.3 million and $ 13.3 million at June 30, 2023 and December 31, 2022, respectively.

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 September 30, 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 June 30, 2023, and December 31, 2022.

There were no nonrecurring fair value measurements in the condensed consolidated balance sheet during the quarters ended September 30, 2023, and December 31, 2022.

Strategic Investments

Equity Method Investments

The aggregate carrying value of all strategic equity method investments totaled $ 16.2 million and $ 28.2 million at June 30, 2023 and December 31, 2022, respectively.

The aggregate carrying value of all strategic equity method investments totaled $ 16.1 million and $ 28.2 million at September 30, 2023 and December 31, 2022, respectively.

During the first quarter of 2023, we sold a strategic equity method investment for $ 31.5 million, resulting in a $ 19.3 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 June 30, 2023 and December 31, 2022.

There were no adjustments to the carrying value of equity method investments for impairment for the periods ended September 30, 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 June 30, 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 June 30, 2023 and December 31, 2022.

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 September 30, 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 September 30, 2023 and December 31, 2022.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

Restricted Investment

At June 30, 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 $ 79.5 million and $ 78.0 million, net of an allowance for credit losses of $ 0.3 million and $ 0.6 million, and included cash of $ 8.3 million and $ 7.0 million, respectively.

The fair value at June 30, 2023 and December 31, 2022 was $ 76.1 million and $ 74.7 million, respectively, based on Level 1 inputs.

At September 30, 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 $ 80.2 million and $ 78.0 million, net of an allowance for credit losses of $ 0.3 million and $ 0.6 million, and included cash of $ 9.1 million and $ 7.0 million, respectively.

The fair value at September 30, 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

June 30, 2023 $ 13.3 — 10.4 13.2 24.5 10.1 $ 71.5

September 30, 2023 $ 13.3 — 10.4 13.2 24.4 10.1 $ 71.4

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

Debt and Finance Lease Obligations

At June 30, 2023 and December 31, 2022, the carrying value of finance lease obligations was $ 101.4 million and $ 101.9 million, respectively, and the fair value was $ 104.8 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.

At September 30, 2023 and December 31, 2022, the carrying value of finance lease obligations was $ 101.3 million and $ 101.9 million, respectively, and the fair value was $ 103.6 million and $ 106.2 million, respectively.

The fair value of our finance lease obligation associated with our Performance Materials' Wickliffe, Kentucky, manufacturing site 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 $ 881.0 million and $ 828.0 million as of June 30, 2023 and December 31, 2022, respectively.

The carrying amount, excluding debt issuance fees, of our variable interest rate long-term debt was $ 825.0 million and $ 828.0 million as of September 30, 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 June 30, 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 $ 470.9 million and $ 471.8 million, respectively, based on Level 2 inputs.

At September 30, 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 $ 453.9 million and $ 471.8 million, respectively, based on Level 2 inputs.

Inventories, net

In millions June 30, 2023 December 31, 2022

In millions September 30, 2023 December 31, 2022

Raw materials $ 172.9 $ 106.7

3 unchanged sentences

LIFO reserve (1)

( 90.4 ) ( 27.8 )

Inventories, net $ 386.7 $ 335.0

(1) The increase in the LIFO balance in 2023 is primarily attributable to the significant inflation in the price of crude tall oil ("CTO") which is the primary raw material for our Performance Chemicals reportable segment.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2023

Property, Plant, and Equipment, net

In millions June 30, 2023 December 31, 2022

In millions September 30, 2023 December 31, 2022

Machinery and equipment $ 1,218.1 $ 1,162.7

5 unchanged sentences

Property, plant, and equipment, net $ 800.0 $ 798.6

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

Goodwill and Other Intangible Assets, net

1 unchanged sentence

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).

This reportable segment change impacted the identification of our Performance Chemicals reporting unit, 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;

5 unchanged sentences

Foreign currency translation — — 1.6 1.6

June 30, 2023 $ 4.3 $ 349.3 $ 173.5 $ 527.1

September 30, 2023 $ 4.3 $ 349.2 $ 166.6 $ 520.1

During the third quarter of 2023, continued reduction in demand in industrial end markets has negatively impacted our ability to offset elevated CTO costs through pricing actions within our Performance Chemicals’ reportable segment, particularly in our industrial specialties product line.

CTO is essential to our industrial specialties and some of our pavement technologies product lines within our Performance Chemicals reportable segment.

As a result, we concluded that a triggering event occurred for our Performance Chemicals’ reporting unit, and we performed an analysis of the reporting unit’s goodwill, intangibles and long-lived assets as of September 1, 2023.

Our analysis included significant assumptions such as:

revenue growth rate, Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") margin, and discount rate which are judgmental and variations in any assumptions could result in materially different calculations of fair value.

Based on our analysis, the headroom associated with our Performance Chemicals’ reporting unit, which is defined as the percentage difference between the fair value of a reporting unit and its carrying value, is 19 percent at September 30, 2023.

Consequently, we concluded that there was no impairment for the quarter ended September 30, 2023.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2023

Other Intangible Assets

4 unchanged sentences

Foreign currency translation 1.4 0.6 0.6 2.6

June 30, 2023 $ 396.2 $ 92.4 $ 91.6 $ 580.2

September 30, 2023 $ 389.9 $ 89.8 $ 89.1 $ 568.8

Accumulated Amortization

2 unchanged sentences

Foreign currency translation ( 0.3 ) — ( 0.1 ) ( 0.4 )

June 30, 2023 $ ( 129.0 ) $ ( 27.4 ) $ ( 29.6 ) $ ( 186.0 )

September 30, 2023 $ ( 134.1 ) $ ( 28.2 ) $ ( 30.9 ) $ ( 193.2 )

Other intangibles, net $ 255.8 $ 61.6 $ 58.2 $ 375.6

2 unchanged sentences

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

In millions June 30, 2023 December 31, 2022

In millions September 30, 2023 December 31, 2022

Performance Materials $ 1.5 $ 1.7

3 unchanged sentences

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

During the three and six months ended June 30, 2023, we recognized

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

amortization expense of $ 10.5 million and $ 20.9 million, respectively, and during the three and six months ended June 30, 2022, we recognized amortization expense of $ 7.8 million and $ 15.9 million, respectively.

During the three and nine months ended September 30, 2023, we recognized amortization expense of $ 10.5 million and $ 31.4 million, respectively, and during the three and nine months ended September 30, 2022, we recognized amortization expense of $ 7.9 million and $ 23.8 million, respectively.

The increase in amortization expense in 2023 as compared to 2022 was due to the Ozark Materials, LLC (“OM”), and Ozark Logistics, LLC (“OL” and, together with OM, “Ozark Materials”) acquisition as further described in Note 16.

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

3 unchanged sentences

Net Investment Hedges

During the three and six months ended June 30, 2023, we recognized net interest income associated with this financial instrument of zero and zero , respectively, and during the three and six months ended June 30, 2022, we recognized net interest income associated with this financial instrument of $ 2.5 million and $ 2.7 million, respectively.

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 and nine months ended September 30, 2023, we recognized net interest income associated with this financial instrument of zero and zero , respectively, and 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.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2023

Cash Flow Hedges

Foreign Currency Exchange Risk Management

As of June 30, 2023, there were $ 11.7 million open foreign currency derivative contracts.

The fair value of the designated foreign currency hedge contracts was a net asset (liability) of $( 0.3 ) million and $( 0.5 ) million at June 30, 2023 and December 31, 2022, respectively.

As of September 30, 2023, there were $ 6.0 million open foreign currency derivative contracts.

The fair value of the designated foreign currency hedge contracts was a net asset (liability) of $ 0.1 million and $( 0.5 ) million at September 30, 2023 and December 31, 2022, respectively.

Commodity Price Risk Management

As of June 30, 2023, we had 1.0 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 June 30, 2023, open commodity contracts hedge forecasted transactions until March 2024.

The fair value of the outstanding designated natural gas commodity hedge contracts as of June 30, 2023 and December 31, 2022, was a net asset (liability) of $( 1.4 ) million and $( 1.6 ) million, respectively.

As of September 30, 2023, we had 0.8 million and 0.1 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 September 30, 2023, open commodity contracts hedge forecasted transactions until May 2024.

The fair value of the outstanding designated natural gas commodity hedge contracts as of September 30, 2023 and December 31, 2022, was a net asset (liability) of $( 0.8 ) million and $( 1.6 ) million, respectively.

Interest Rate Risk Management

4 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

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 June 30,

Three Months Ended September 30,

2023 2022 2023 2022

8 unchanged sentences

Effectiveness Testing)

Three Months Ended June 30,

Three Months Ended September 30,

2023 2022 2023 2022

4 unchanged sentences

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

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 2023 2022

8 unchanged sentences

Effectiveness Testing)

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 2023 2022

8 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

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 June 30, 2023, or December 31, 2022.

June 30, 2023

There were no nonrecurring fair value measurements related to derivative assets and liabilities on the condensed consolidated balance sheets as of September 30, 2023, or December 31, 2022.

September 30, 2023

In millions Level 1 (1)

1 unchanged sentence

$ — $ 0.5 $ — $ 0.5

Natural gas contracts (4)

Total assets $ — $ 0.5 $ — $ 0.5

12 unchanged sentences

(3) Significant unobservable inputs.

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

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

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

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

Debt, including Finance Lease Obligations

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

In millions, except percentages June 30, 2023 December 31, 2022

In millions, except percentages September 30, 2023 December 31, 2022

Revolving Credit Facility and other lines of credit (1)

2 unchanged sentences

Finance lease obligations 101.3 101.9

Other notes payable 2.0 —

Total debt including finance lease obligations $ 1,478.3 $ 1,479.9

4 unchanged sentences

______________

(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 $ 116.7 million and $ 169.7 million at June 30, 2023 and December 31, 2022, 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 $ 172.7 million and $ 169.7 million at September 30, 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.

2 unchanged sentences

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 June 30, 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.

We were in compliance with all covenants under the indenture as of September 30, 2023.

The credit agreement governing our revolving credit facility contains 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 being terminated.

1 unchanged sentence

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 June 30, 2023 was 2.6 , and our actual interest coverage for the four consecutive quarters ended June 30, 2023 was 8.1 .

We were in compliance with all covenants under the credit agreement at June 30, 2023.

As calculated per the credit agreement, our net leverage for the four consecutive quarters ended September 30, 2023 was 2.5 , and our actual interest coverage for the four consecutive quarters ended September 30, 2023 was 6.8 .

We were in compliance with all covenants under the credit agreement at September 30, 2023.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

The tables below provide a roll forward of equity.

17 unchanged sentences

Share repurchase program — — — — — ( 58.7 ) ( 58.7 )

Noncontrolling interest distributions — — — — — — —

Share-based compensation plans — — 4.7 — — 1.6 6.3

Balance at June 30, 2023 43,430 $ 0.4 $ 163.6 $ 1,093.9 $ ( 33.5 ) $ ( 510.3 ) $ 714.1

Net income (loss) — — — 25.2 — — 25.2

Other comprehensive income (loss) — — — — ( 20.4 ) — ( 20.4 )

Common stock issued 13 — — — — — —

Exercise of stock options, net — — — — — — —

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

Share repurchase program — — — — — — —

Share-based compensation plans — — ( 1.0 ) — — 1.0 —

Balance at September 30, 2023 43,443 $ 0.4 $ 162.6 $ 1,119.1 $ ( 53.9 ) $ ( 509.5 ) $ 718.7

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

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

18 unchanged sentences

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

June 30, 2023

September 30, 2023

Accumulated other comprehensive income (loss)

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

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

In millions 2023 2022 2023 2022

27 unchanged sentences

Ending balance $ 0.5 $ ( 3.1 ) $ 0.5 $ ( 3.1 )

Total AOCI ending balance at June 30 $ ( 33.5 ) $ ( 43.7 ) $ ( 33.5 ) $ ( 43.7 )

Total AOCI ending balance at September 30 $ ( 53.9 ) $ ( 95.3 ) $ ( 53.9 ) $ ( 95.3 )

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

Reclassifications of accumulated other comprehensive income (loss)

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

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

In millions 2023 2022 2023 2022

21 unchanged sentences

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 and six months ended June 30, 2023, we repurchased $ 58.7 million, inclusive of $ 0.6 million in excise tax, and $ 92.1 million, inclusive of $ 0.8 million in excise tax, in common stock, representing 819,898 and 1,269,373 shares of our common stock at a weighted average cost per share of $ 70.87 and $ 71.93 , respectively.

At June 30, 2023, $ 353.4 million remained unused under our Board-authorized repurchase program.

During the three and six months ended June 30, 2022, we repurchased $ 49.5 million and $ 89.9 million in common stock, representing 719,236 and 1,329,683 shares of our common stock at a weighted average cost per share of $ 68.72 and $ 67.59 , respectively.

During the three and nine months ended September 30, 2023, we repurchased zero and $ 92.1 million, inclusive of $ 0.8 million in excise tax, in common stock, representing zero and 1,269,373 shares of our common stock at a weighted average cost per share of zero and $ 71.93 , respectively.

At September 30, 2023, $ 353.4 million remained unused under our Board-authorized repurchase program.

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.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

Restructuring and Other (Income) Charges, net

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

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

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

In millions 2023 2022 2023 2022

3 unchanged sentences

Alternative Feedstock Transition

11.8 — 18.4 —

North Charleston Plant Transition 9.8 — 12.7 —

6 unchanged sentences

Restructuring Charges

In the first quarter of 2023, we initiated several measures to pursue greater cost efficiency which included a reorganization to streamline certain functions and reduce ongoing costs.

During the second quarter, we took further actions to reorganize our operations.

Beginning in the first quarter of 2023, we initiated several measures to pursue greater cost efficiency which included a reorganization to streamline certain functions and reduce ongoing costs.

During the second and third quarters, we expanded our cost reduction actions to reorganize our operations and in the fourth quarter we announced further actions as described in Note 17.

The combined restructuring program is expected to cost approximately $ 12 - 14 million and is expected to be completed over the remainder of 2023.

During the three and six months ended June 30, 2023, we recorded $ 4.4 million and $ 7.4 million in severance and other employee-related costs and $ 2.6 million and $ 2.7 million in other restructuring charges, including asset write-offs associated with our reorganization.

During the three and nine months ended September 30, 2023, we recorded $ 1.5 million and $ 8.9 million in severance and other employee-related costs and zero and $ 2.7 million in other restructuring charges, including asset write-offs associated with our reorganization, respectively.

Restructuring Reserves

Restructuring reserves which are included within Accrued expenses on the condensed consolidated balance sheets were $ 5.9 million and $ 0.5 million at June 30, 2023 and December 31, 2022, respectively.

Restructuring reserves which are included within Accrued expenses on the condensed consolidated balance sheets were $ 3.2 million and $ 0.5 million at September 30, 2023 and December 31, 2022, respectively.

Other (income) charges, net

1 unchanged sentence

In April 2023, we began the feedstock transition of our Crossett, Arkansas manufacturing plant (“Crossett”).

This transition will convert Crossett from a crude tall oil (“CTO”) based feedstock production facility to produce fatty acids from alternative plant based feedstocks.

This transition will convert Crossett from a CTO based feedstock production facility to produce fatty acids from alternative plant based feedstocks.

To initiate this transition, we halted all production at Crossett in April.

During the three and six months ended June 30, 2023, we incurred $ 6.6 million in costs.

During the three and nine months ended September 30, 2023, we incurred $ 11.8 million and $ 18.4 million in costs, respectively.

We expect to incur approximately $ 20 - 25 million of expense in 2023, representing non-capital retooling and stranded costs, with modest levels of capital expenditure.

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Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

We expect to incur approximately $ 15 - 20 million of non-capital transition costs in 2023 as we continue to transition those shared services and minimize disruption to our operations and are continuing to evaluate the future impact.

During the three and six months ended June 30, 2023, we incurred $ 2.9 million in costs.

During the three and nine months ended September 30, 2023, we incurred $ 9.8 million and $ 12.7 million in costs, respectively.

Business transformation costs

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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 and six months ended June 30, 2023, of $ 2.7 million and $ 5.2 , respectively, and during the three and six months ended June 30, 2022, of $ 3.7 million and $ 7.3 million, respectively.

Costs incurred, during the three and nine months ended September 30, 2023, totaled $ 1.5 million and $ 6.7 million, respectively, and during the three and nine months ended September 30, 2022, totaled $ 3.3 million and $ 10.6 million, respectively.

Costs are directly associated with the business transformation initiative that, in accordance with GAAP, cannot be capitalized.

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

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

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

2023 2022 2023 2022

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Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

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

Three Months Ended June 30,

Three Months Ended September 30,

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

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

Legislative tax rate changes — — — 0.1

Sale of strategic investment (2)

( 0.1 ) — — —

Other tax only discrete items

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28.7 % 21.0 %

Six Months Ended June 30,

Nine Months Ended September 30,

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

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(2) See Note 4 for further information.

(3) Increase in EAETR for the three and six months ended June 30, 2023, as compared to June 30, 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 June 30, 2023 and December 31, 2022, we had deferred tax assets of $ 10.1 million and $ 9.2 million, respectively, resulting from certain historical net operating losses from our Brazilian and Chinese operations and U.S.

(3) I ncrease in EAETR for three and nine months ended September 30, 2023, as compared to September 30, 2022, is due to an overall change in the mix of forecasted earnings in various tax jurisdictions with varying rates, a significant decrease in the foreign derived intangible income benefit, and the corporate tax rate in the UK increasing from 19% to 25% on April 1, 2023.

Furthermore, changes in estimates used in the EAETR during the third quarter of 2023 as compared to the second quarter of 2023 attributed to the increase in the EAETR during the three months ended September 30, 2023.

At September 30, 2023 and December 31, 2022, we had deferred tax assets of $ 10.3 million and $ 9.2 million, respectively, resulting from certain historical net operating losses from our Brazil and China operations and U.S.

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

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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 June 30, 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.

As of September 30, 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.

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Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

Undistributed earnings of Ingevity’s foreign subsidiaries have historically been indefinitely reinvested offshore.

Management does not currently expect to repatriate cash earnings from our foreign operations to fund U.S.

however, during the second quarter, we determined that the current year's earnings of our China subsidiaries are no longer permanently reinvested.

however, during the second quarter of 2023, we determined that the current year's earnings of our China subsidiaries are no longer permanently reinvested.

No deferred tax liability was recorded as a result of this change in our assertion, as the impacts will be captured in the year current earnings are distributed.

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

As of June 30, 2023, nothing has occurred in the post-trial proceedings to warrant any change to our conclusions as disclosed within our 2022 Annual Report.

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 June 30, 2023.

In addition, as a result of entering the judgment on May 18, 2023, we have started accruing for the post-judgment interest.

As of September 30, 2023, nothing has occurred in the post-trial proceedings to warrant any change to our conclusions as disclosed within our 2022 Annual Report.

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 September 30, 2023.

In addition, as a result of the judgment being officially entered on May 18, 2023, we have started accruing for the post-judgment interest.

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

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Notes to the Condensed Consolidated Financial Statements

June 30, 2023

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

September 30, 2023

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

In millions 2023 2022 2023 2022

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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 and six months ended June 30, 2023, charges of $ 4.5 million and $ 6.2 million relate to the Performance Materials segment, charges of $ 12.6 million and $ 15.7 million relate to the Performance Chemicals segment, and charges of $ 1.1 million and $ 1.9 million relate to the Advanced Polymer Technologies segment, respectively.

For the three and six months ended June 30, 2022, charges of $ 1.3 million and $ 2.6 million relate to the Performance Materials segment, charges of $ 1.9 million and $ 3.7 million relate to the Performance Chemicals segment, and charges of $ 0.5 million and $ 1.0 million relate to the Advanced Polymer Technologies segment, respectively.

(3) For the three and nine months ended September 30, 2023, charges of $ 1.3 million and $ 7.5 million relate to the Performance Materials segment, charges of $ 18.3 million and $ 34.0 million relate to the Performance Chemicals segment, and charges of $ 0.4 million and $ 2.3 million relate to the Advanced Polymer Technologies segment, respectively.

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, charges of $ 1.7 million and $ 5.4 million relate to the Performance Chemicals segment, and charges of $ 0.5 million and $ 1.5 million relate to the Advanced Polymer Technologies segment, respectively.

For more detail on the charges incurred see Note 11.

(4) For the three and six months ended June 30, 2023, all charges relate to the acquisition and integration of Ozark Materials into the Performance Chemicals segment.

(4) For the three and nine months ended September 30, 2023 and September 30, 2022, 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 and six months ended June 30, 2023, gain on sale of strategic investment relates to the Performance Materials segment.

(5) For the three and nine months ended September 30, 2023, gain on sale of strategic investment relates to the Performance Materials segment.

For more detail see Note 4.

(6) Excludes $ 1.0 million of depreciation and amortization for the three and six months ended June 30, 2023, relating to the alternative feedstock transition within our Performance Chemicals reportable segment.

(6) Excludes $ 4.6 million and $ 5.6 million of depreciation and amortization for the three and nine months ended September 30, 2023, relating to the alternative feedstock transition and North Charleston plant transition within our Performance Chemicals reportable segment.

Refer to Note 11 for more information.

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Notes to the Condensed Consolidated Financial Statements

June 30, 2023

September 30, 2023

Earnings (Loss) per Share

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

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

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

In millions, except share and per share data 2023 2022 2023 2022

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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 June 30, Six Months Ended June 30,

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

In thousands 2023 2022 2023 2022

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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.

On October 3, 2022, we completed our acquisition of 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.

The Acquisition has been 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 condensed consolidated financial statements for the three months and six months ended June 30, 2023;

The Acquisition is not considered significant to our condensed consolidated financial statements for the three and nine months ended September 30, 2023;

therefore, proforma results of operations have not been presented.

Preliminary Purchase Price Allocation

Purchase Price Allocation

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

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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.

We finalized the purchase price allocation in the third quarter of 2023.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

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.

Preliminary Purchase Price Allocation

September 30, 2023

Purchase Price Allocation

In millions Weighted Average Amortization Period Fair Value

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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 zero and $ 0.8 million was expensed in the three and six months ended June 30, 2023.

(1) Fair value of finished goods inventories acquired included a step-up in the value of $ 1.8 million, of which zero and $ 0.8 million was expensed in the three and nine months ended September 30, 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 and $ 5.5 million for the three and six months ended June 30, 2023.

(2) The aggregate amortization expense was $ 2.7 million and $ 8.2 million for the three and nine months ended September 30, 2023.

Estimated amortization expense is as follows:

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See Note 7 for further information regarding our allocation of goodwill among our reporting units.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

Acquisition and other-related costs

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

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

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

In millions 2023 2022 2023 2022

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

September 30, 2023

Subsequent Events

On November 1, 2023, we announced a number of strategic actions designed to further reposition our Performance Chemicals segment to improve the profitability and reduce the cyclicality of the Performance Chemicals business and the Company as a whole.

These actions increase our focus on growing our most profitable Performance Chemicals product lines such as Pavement Technologies and accelerate our transition to non-CTO-based fatty acids.

The announced actions include the permanent closure of our Performance Chemicals manufacturing plant located in DeRidder, Louisiana (the “DeRidder Plant”) as well as additional corporate and business cost reduction actions.

We expect to close the DeRidder Plant by the end of the first half of 2024.

We expect to incur aggregate charges of approximately $ 280.0 million associated with these actions, consisting of approximately $ 180.0 million in asset-related charges, approximately $ 15.0 million in severance and other employee-related costs, and approximately $ 85.0 million in other restructuring costs including decommissioning, dismantling and removal charges, and contract termination costs.

We expect approximately $ 180.0 million of the total charges to be non-cash.

The majority of non-cash charges and 50 - 60 percent of cash charges are expected to be recognized by the end of the first half of 2024.

Excluded from the $ 280.0 million of estimated aggregate charges are potential costs we may incur associated with excess volumes of CTO that we may be obligated to purchase through October 2025 under existing long-term CTO supply contracts.

We intend to manage our CTO inventories by reselling excess volumes in the open market which, based on what we believe to be market rates today, may result in $ 30.0 million to $ 80.0 million of incremental losses in 2024.

The charges we currently expect to incur in connection with these actions are subject to a number of assumptions and risks, and actual results may differ materially.

We may also incur other material charges not currently contemplated due to events that may occur as a result of, or in connection with, these actions.

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