What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-28 · 489 added, 282 removed, 1497 unchanged (34% of the section changed)

22 unchanged sentences

Based on its assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2023.

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

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

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

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of the Company's internal control over financial reporting as of December 31, 2023, as stated in their report, which is presented on the following page.

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

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

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

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

Definition and Limitations of Internal Control over Financial Reporting

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

Acquisition of Ozark Materials - Valuation of Customer Relationships

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

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

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

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

Interim and Annual Goodwill Impairment Assessments – Performance Chemicals Reporting Unit

As described in Notes 2 and 8 to the consolidated financial statements, the Company’s consolidated goodwill balance was $ 527.5 million as of December 31, 2023, of which $ 349.4 million relates to the Performance Chemicals reporting unit.

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

During the third quarter of 2023, management concluded that a triggering event occurred for the Performance Chemical’s reporting unit and, as a result management performed an analysis of the reporting unit’s goodwill as of September 1, 2023.

The fair value of the reporting unit was determined using both the income approach and market approach.

The income approach determines fair value based on a discounted cash flow model derived from a reporting unit’s long-term forecasted cash flows, and the market approach determines fair value based on the application of earnings multiples of comparable companies to projected earnings of the reporting unit.

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

The calculated estimated fair value of the reporting unit reflects a number of significant management assumptions and estimates including forecasted revenue growth rates, forecasted Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) margins, and discount rate.

Management concluded that there was no impairment for the quarter ended September 30, 2023 or for the year ended December 31, 2023.

The principal considerations for our determination that performing procedures relating to the interim and annual goodwill impairment assessments of the Performance Chemicals reporting unit is a critical audit matter are (i) the significant judgment by management when determining the fair value estimates of the reporting unit, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to forecasted revenue growth rates, forecasted EBITDA margins, and discount rate used in the income approach;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

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

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

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

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

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

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

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

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

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

These procedures included testing the effectiveness of controls relating to management’s interim and annual goodwill impairment assessments, including controls over the valuation of the Performance Chemicals reporting unit.

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

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

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

and (iv) evaluating the reasonableness of the significant assumptions used by management related to the forecasted revenue growth rates, forecasted EBITDA margins, and discount rate.

Evaluating management’s significant assumptions related to the forecast of forecasted revenue growth rates and forecasted EBITDA margins involved evaluating whether the significant assumptions used by management were reasonable considering (i) the current and past performance of the Performance Chemicals reporting unit;

(ii) the consistency with external market data;

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

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Company’s discounted cash flow model and (ii) the reasonableness of the discount rate.

/s/ PricewaterhouseCoopers LLP

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Foreign currency translation adjustment 20.2 ( 74.9 ) ( 5.3 )

Unrealized gain (loss) on net investment hedges, net of tax provision (benefit) of $ 3.2 , $ 2.3 , and $( 2.7 )

10.7 7.3 ( 9.0 )

Total foreign currency adjustments, net of tax provision (benefit) of $ 3.2 , $ 2.3 , and $( 2.7 )

Unrealized gain (loss) on net investment hedges, net of tax provision (benefit) of zero , $ 3.2 , and $ 2.3

Total foreign currency adjustments, net of tax provision (benefit) of zero , $ 3.2 , and $ 2.3

20.2 ( 64.2 ) 2.0

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Pension & other postretirement benefits:

Unrealized actuarial gains (losses) and prior service (costs) credits, net of tax provision (benefit) of $ 1.0 , $ 0.4 , and $( 0.6 )

3.4 1.5 ( 2.1 )

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

Unrealized actuarial gains (losses) and prior service (costs) credits, net of tax provision (benefit) of zero , $ 1.0 , and $ 0.4

Total pension and other postretirement benefits, net of tax provision (benefit) of $ 0.1 , $ 1.1 , and $ 0.5

3.6 1.6 ( 1.8 )

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

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

20.1 ( 59.9 ) 8.4

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Cash and cash equivalents $ 95.9 $ 76.7

Accounts receivable, net of allowance for credit losses of $ 0.5 million - 2022 and $ 2.0 million - 2021

Accounts receivable, net of allowance of $ 1.1 million - 2023 and $ 0.5 million - 2022

Inventories, net 308.8 335.0

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Deferred income taxes 11.6 5.7

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

Restricted investment, net of allowance of $ 0.2 million - 2023 and $ 0.6 million - 2022

Strategic investments 99.2 109.8

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Total Liabilities 1,991.9 2,038.2

Commitments and contingencies (Note 18)

Preferred stock (par value $ 0.01 per share;

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

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

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

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Share-based compensation 10.6 16.1 12.3

Gain on sale of strategic investment ( 19.3 ) — —

Pension and other postretirement benefit costs 1.6 1.4 1.6

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Income taxes 6.4 4.9 ( 6.2 )

Litigation verdict charge — 85.0 —

Litigation verdict charge and interest 3.0 — 85.0

Operating leases ( 22.5 ) ( 18.8 ) ( 20.5 )

Pension contribution ( 2.0 ) — —

Restructuring and other spending ( 44.0 ) ( 13.8 ) ( 16.2 )

CTO resales ( 10.6 ) — —

Changes in all other operating assets and liabilities, net 15.1 14.2 5.0

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

Finance lease expenditures — — ( 23.8 )

Proceeds from sale of strategic investment 31.5 — —

Net investment hedge settlement — 14.7 —

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Cash provided by (used in) financing activities:

Proceeds from revolving credit facility 1,164.7 — 346.1

Proceeds from long-term borrowings — — 550.0

Proceeds from revolving credit facility and other borrowings 376.3 1,164.7 —

Payments on revolving credit facility ( 382.9 ) ( 336.7 ) —

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(1) Includes restricted cash of $ 16.0 million, $ 7.6 million, and $ 5.3 million and cash and cash equivalents of $ 95.9 million, $ 76.7 million, and $ 275.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.

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

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

Supplemental cash flow information:

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21 Supplemental Information

22 Subsequent Event

Ingevity Corporation

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Ingevity Corporation ("Ingevity," "the company," "we," "us," or "our") provides products and technologies that purify, protect, and enhance the world around us.

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.

Through a diverse team of talented and experienced people, we develop, manufacture, and bring to market solutions that are largely renewably sourced and help customers solve complex problems while making the world more sustainable.

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.

We operate in three reporting segments:

Performance Materials, Performance Chemicals and Advanced Polymer Technologies.

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 engineered polymers product line 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.

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

Performance Materials engineers, manufactures, and sells hardwood-based, chemically activated carbon products which are produced through a highly technical and specialized process primarily for use in gasoline vapor emission control systems in internal combustion engines and hybrid electric vehicles including cars, trucks, motorcycles, and boats.

To maximize the productivity of our manufacturing assets, we also produce several other activated carbon products for food, water, beverage, and chemical purification applications.

Our Performance Chemicals segment consists of our road technologies (previously named pavement technologies) and industrial specialties product lines.

Performance Chemicals products serve as critical inputs used in a variety of high-performance applications, including pavement construction, pavement preservation, pavement reconstruction and recycling, road markings (road technologies product line), as well as agrochemical dispersants, paper chemicals, and other diverse industrial uses (industrial specialties product line).

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

These actions increase our focus on growing our most profitable Performance Chemicals' product lines such as road technologies and accelerate our transition to non-crude tall oil ("CTO") based fatty acids.

This initiative will result in the reduction, and in some cases exit, of certain historical end-use markets of our industrial specialties product line such as adhesives, publication inks, and oilfield, representing approximately $ 300.0 million of net sales.

The announced actions include the permanent closure of our Performance Chemicals' CTO refinery and the closure of our manufacturing plant located in DeRidder, Louisiana (the “DeRidder Plant”), including the polyol production assets associated with the Advance Polymer Technologies reportable segment, as well as additional corporate and business cost reduction actions.

Our Advanced Polymer Technologies segment produces caprolactone and caprolactone-based specialty polymers for use in coatings, resins, elastomers, adhesives, bioplastics, and medical devices.

Basis of Consolidation and Presentation

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We are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Actual results are likely to differ from those estimates, but we do not believe such differences will materially affect our financial position, results of operations, or cash flows.

Our estimates are based on historical experiences, facts, and circumstances available at the time and various other assumptions that we believe are reasonable.

Actual results may differ from those estimates.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

Cash equivalents:

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

Accounts receivable and allowance for credit losses:

Accounts receivable, net on the consolidated balance sheets are comprised of trade receivables less allowances for credit losses.

Accounts receivable, net of allowance:

Accounts receivable, net on the consolidated balance sheets are comprised of trade receivables less allowances for doubtful accounts and credit losses (herein referred to as "credit losses").

Trade receivables consist of amounts owed to Ingevity from customer sales and are recorded at the invoiced amounts when revenue is recognized and generally do not bear interest.

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Our largest customer as of December 31, 2023 had accounts receivable of $ 7.5 million and $ 9.3 million as of December 31, 2023 and 2022, respectively.

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

Sales to our largest customer were approximately four percent of total net sales for each of the years ended December 31, 2023, 2022, and 2021, respectively.

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

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

Inventories, net:

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We expense routine repair and maintenance costs as we incur them.

We defer expenses incurred during planned major maintenance activities and record these amounts to Other assets on our consolidated balance sheet.

We defer expenses incurred during planned major maintenance activities and record these amounts to Prepaid and other current assets on our consolidated balance sheet.

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

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

M&E Cost Depreciable Life in Years Types of Assets

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lease term, currency, and the economic environment for the physical location of the leased asset.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

Our operating leases principally relate to the following leased asset classes:

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Rail cars 0 to 10 years

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet.

Lease expense is recognized on a straight-line basis over the expected lease term.

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Certain leases provide for escalation of the lease payments, as well as maintenance costs and taxes increase.

Asset retirement obligations:

We record asset retirement obligations (“AROs”) at fair value at the time the liability is incurred if we can reasonably estimate the settlement date.

The associated AROs are capitalized as part of the carrying amount of related long-lived assets.

In future periods, the liability is accreted to its present value and the capitalized cost is depreciated over the useful life of the related asset.

We also adjust the liability for changes resulting from the passage of time and/or revisions to the timing or the amount of the original estimate.

Upon the retirement of the long-lived asset, we either settle the obligation for its recorded amount or incur a gain or loss.

The carrying amounts for the AROs for the years ended December 31, 2023 and 2022 are $ 12.9 million and $ 4.3 million , respectively, and are included in Accrued expenses and Other liabilities on the consolidated balance sheet.

Impairment of long-lived assets:

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If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available.

If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows.

If quoted market prices are not available, the estimate of fair value is based on various valuation techniques,

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

including a discounted value of estimated future cash flows.

We report an asset to be disposed of at the lower of its carrying value or its estimated net realizable value.

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

Our reporting units are our operating segments, i.e., Performance Chemicals and Performance Materials.

Our reporting units are our operating segments, i.e., Performance Materials, Performance Chemicals, and Advanced Polymer Technologies.

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

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

In performing the fair value analysis, management makes various judgments, estimates and assumptions, the most significant of which are the assumptions related to revenue growth rates, Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") margin, and discount rate.

The factors we considered in developing our estimates and projections for cash flows include, but are not limited to, the following:

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It is possible that the assumptions used by management related to the evaluation may change or that actual results may vary significantly from management’s estimates.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

Our fiscal year 2023 annual goodwill impairment test was performed as of October 1, 2023.

We determined that the fair value of both our reporting units were substantially in excess of their carrying value and therefore concluded that no goodwill impairment existed.

We determined that the fair value of our reporting units were in excess of their carrying value and therefore concluded that no goodwill impairment existed.

There were no events or circumstances indicating that goodwill might be impaired as of December 31, 2023.

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

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

Subsequently, the carrying value for these investments will be impacted by our proportionate share of

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

undistributed earnings or loss, distributions, amortization or accretion of basis differences, and other-than-temporary impairments.

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

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

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

transferring goods.

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

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

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

Royalty expense:

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

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

Selling, general, and administrative expenses:

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

Royalty expense:

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

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

Restructuring and other (income) charges, net:

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

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

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

These costs are excluded from our operating segment results.

We record an accrual for severance and other non-recurring costs under the provisions of the relevant accounting guidance.

We record an accrual for severance and other costs under the provisions of the relevant accounting guidance.

Additionally, in some restructuring plans, write-downs of long-lived assets may occur.

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The useful lives of assets to be abandoned that have a remaining future service potential are adjusted and depreciation is recorded over the adjusted useful life.

Non-operating income and expense:

Non-operating income and expenses are included within Other (income) expense, net on the consolidated statement of operations.

Included within Other (income) expense, net, among other items, are gains and losses associated with crude tall oil ("CTO") resales.

As further described in Note 1 and Note 15, due to the DeRidder Plant closure and the corresponding reduced CTO refining capacity, we may be obligated, under an existing CTO supply contract, to purchase CTO volumes through 2025 at amounts in excess of required CTO volumes.

We intend to manage our CTO volumes by reselling excess volumes (herein referred to as "CTO resales") in the open market.

Our Performance Chemicals reportable segment is in the business of producing, primarily from CTO-based feedstocks, derivative specialty chemicals for sale to third-party customers.

As a result of the Performance Chemicals’ repositioning, we are selling excess CTO volumes, which is outside of the ordinary course of business, that is, not a normal ongoing part of our operations and not core to our business.

The excess CTO volumes, calculated as the volume directly attributable to reduced CTO refining capacity as defined under the contractual terms of the CTO supply contract, on hand at period end will be valued at the lower of cost or expected selling price, less costs to sell.

Volumes on hand at period end and any pending CTO resale receivables will be recorded to Other current assets on the consolidated balance sheet.

Any liabilities associated with the purchases of the excess CTO volumes will be recorded to Accrued expenses on the consolidated balance sheet.

We will recognize the net gains or losses associated with the CTO resale activities within Other (income) expenses, net on the consolidated statement of operations.

Income taxes:

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We recognize income tax positions that are more-likely-than-not to be realized and accrue interest related to unrecognized income tax positions, which is included as a component of the income tax provision, on the consolidated statements of operations.

Earnings per Share:

Basic earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding during the period.

Diluted earnings (loss) per share reflects the dilution that could occur if the outstanding stock-based compensation awards, including any unvested awards, were vested and exercised, resulting in the issuance of common stock as determined under the treasury stock method.

Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding for the period.

The calculation of diluted net income per share excludes all anti-dilutive common shares.

In periods where we incur a net loss, stock-based compensation awards are excluded from the calculation of earnings per share as their inclusion would have an anti-dilutive effect.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

Pension and postretirement benefits:

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

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

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

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

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

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We calculate the fair value of our stock options using the Black-Scholes option pricing model.

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

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

Beginning in 2023, certain granted PSUs include a market condition, relative total shareholder return ("rTSR"), which requires that the fair value of the award be calculated using a Monte Carlo simulation.

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

Operating segments:

Our operating segments are Performance Materials and Performance Chemicals.

Our operating segments are Performance Materials, Performance Chemicals, and Advanced Polymer Technologies.

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

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

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

(1) Performance Materials, which includes wood-based, chemically activated carbon products and (2) Performance Chemicals, which includes specialty pine-based chemical co-products derived from the kraft pulping process and caprolactone monomers and derivatives derived from cyclohexanone and hydrogen peroxide.

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

Fair value measurements:

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Cash flow hedges are derivative financial instruments designated as and used to hedge the exposure to variability in expected future cash flows that are attributable to a particular risk.

The derivative financial instruments that are designated and qualify as a cash flow hedge are recorded on the balance sheet at fair value, and the changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the anticipated cash flows

The derivative financial instruments that are

Ingevity Corporation

1 unchanged sentence

December 31, 2023

of the underlying exposures being hedged.

designated and qualify as a cash flow hedge are recorded on the consolidated balance sheet at fair value, and the changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the anticipated cash flows of the underlying exposures being hedged.

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

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

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

dollars using period-end exchange rates, and adjustments resulting from these financial statement translations are reported as a component of CTA within AOCI on the consolidated balance sheets.

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

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New Accounting Guidance

The Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC" or "Codification") is the sole source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants.

The Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC" or "Codification") is the sole source of authoritative GAAP other than the U.S.

Securities and Exchange Commission ("SEC") issued rules and regulations that apply only to SEC registrants.

The FASB issues an Accounting Standards Update ("ASU") to communicate changes to the Codification.

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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 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, 2024.

As of December 31, 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.

Disaggregation of Revenue

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting:

Improvements to Reportable Segment Disclosures”, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The purpose of the amendment is to provide readers of the financial statements with information to better understand an entity’s overall performance and assess potential future cash flows.

The guidance is effective beginning with our 2024 fiscal year consolidated financial statements and will be applied to all prior periods presented in the financial statements.

We are currently evaluating the potential impact of adopting this new guidance on our Consolidated Financial Statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures”, which is intended to enhance income tax disclosures around the rate reconciliation and income taxes paid.

The purpose of the amendment is to provide readers of the financial statements with information to better assess the differences between the effective tax rate and the statutory tax rate across multiple jurisdictions, enabling them to understand tax implications around operational opportunities and potential future cash flows.

The guidance is effective beginning with our 2025 fiscal year consolidated financial statements.

Early adoption is permitted and we are currently evaluating the potential impact of adopting this new guidance on our Consolidated Financial Statements and related disclosures.

Disaggregation of Net sales

The following tables present our Net sales disaggregated by product line and geography.

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Performance Chemicals segment

Pavement Technologies product line 241.3 195.4 186.8

Road Technologies product line (1)

369.8 241.3 195.4

Industrial Specialties product line 532.3 633.8 493.5

Engineered Polymers product line 244.7 185.8 127.7

Total $ 902.1 $ 875.1 $ 688.9

Advanced Polymer Technologies segment $ 204.0 $ 244.7 $ 185.8

Net sales $ 1,692.1 $ 1,668.3 $ 1,391.5

_______________

(1) Previously named Pavement Technologies

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

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

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

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

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

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

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

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

Fair Value Measurements

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$ 12.5 $ — $ — $ 12.5

Contingent consideration (5)

Total liabilities $ 12.5 $ — $ — $ 12.5

_______________

(1) Quoted prices in active markets for identical assets.

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(3) Significant unobservable inputs.

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

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

Both the asset and liability related to investment securities are recorded at fair value and are included within "Other assets" and "Other liabilities" on the consolidated balance sheets, respectively.

In addition to the investment securities, we also had company-owned life insurance related to the deferred compensation arrangement recorded at cash surrender value in "Other assets" of $ 14.9 million and $ 13.3 million at December 31, 2023 and 2022, respectively.

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

Nonrecurring Fair Value Measurements

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

There were no nonrecurring fair value measurements on the consolidated balance sheet during the years ended December 31, 2023 and 2022.

Strategic Investments

Equity Method Investments

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

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

The aggregate carrying value of all strategic equity method investments was $ 16.0 million and $ 28.2 million at December 31, 2023 and 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 consolidated statement of operations.

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

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

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

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

As of December 31, 2023 and 2022, respectively, we had approximately $ 5.6 million and $ 6.7 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 $ 1.7 million and $ 0.7 million at December 31, 2023 and 2022, respectively .

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

Measurement Alternative Investments

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

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

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

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

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Our restricted investment is a trust managed in order to secure repayment of the finance lease obligation associated with Performance Materials' Wickliffe, Kentucky, manufacturing site at maturity.

The trust, presented as a restricted investment on our consolidated balance sheets, purchased long-term bonds that mature in 2025 and 2026.

The trust, presented as Restricted investment on our consolidated balance sheets, originally purchased long-term bonds that mature through 2026.

The principal received at maturity of the bonds, along with interest income that is reinvested in the trust, are expected to be equal to or more than the $ 80.0 million finance lease obligation that is due in 2027.

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The investments held by the trust earn interest at the stated coupon rate of the invested bonds.

Interest earned on the investments held by the trust is recognized as interest income and presented within interest income on our consolidated statement of operations.

At December 31, 2022 and 2021, the carrying value of our restricted investment, which is accounted for as HTM and therefore held at amortized costs, was $ 78.0 million and $ 76.1 million, net of an allowance for credit losses of $ 0.6 million and $ 0.5 million and included cash of $ 7.0 million and $ 4.7 million, respectively.

Interest earned on the investments held by the trust is recognized and presented as interest income on our consolidated statement of operations.

As interest from the bonds is received and as bonds mature, any proceeds not reinvested are held in highly liquid securities and treated as restricted cash.

At December 31, 2023 and 2022, the carrying value of our restricted investment, which is accounted for as HTM and therefore held at amortized costs, was $ 79.1 million and $ 78.0 million, net of an allowance for credit losses of $ 0.2 million and $ 0.6 million and included restricted cash of $ 15.4 million and $ 7.0 million, respectively.

The fair value at December 31, 2023 and 2022 was $ 76.7 million and $ 74.7 million, respectively, based on Level 1 inputs.

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HTM Debt Securities

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

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

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

December 31, 2023 $ 13.3 10.4 13.2 17.0 10.0 $ 63.9

Ingevity Corporation

Notes to the Consolidated Financial Statements

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

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The carrying value, excluding debt issuance fees, of our variable rate debt was $ 821.4 million and $ 828.0 million as of December 31, 2023 and 2022, respectively.

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

The carrying value of our variable rate debt is a reasonable estimate of the fair value.

At December 31, 2023 and 2022, the carrying value of our fixed rate debt was $ 550.0 million and $ 550.0 million, respectively, and the fair value was $ 494.6 million and $ 471.8 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 the expiration on December 31, 2024, therein referred to as "Revenue Earn-out."

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

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

Inventories, net

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LIFO reserve (1)

( 100.7 ) ( 27.8 )

Inventories, net $ 308.8 $ 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.

As of December 31, 2023, approximately 27 percent, 8 percent, and 65 percent of our Inventories, net, were accounted for under the FIFO, average cost, and LIFO methods, respectively.

As of December 31, 2022, approximately 47 percent, 8 percent, and 45 percent of our Inventories, net, were accounted for under the FIFO, average cost, and LIFO methods, respectively.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

Property, Plant, and Equipment, net

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accumulated depreciation (1)

( 818.9 ) ( 710.8 )

Property, plant, and equipment, net (2)

1 unchanged sentence

_______________

(1) As a result of the Performance Chemicals repositioning, as further described in Note 15, we accelerated the depreciation of certain property, plant and equipment assets in 2023.

This resulted in $ 46.3 million of additional expense in 2023, which is included in Restructuring and other (income) charges, net within the consolidated statement of operations.

(2) This includes finance leases related to machinery and equipment of $ 94.2 million and $ 94.3 million, and net carrying value of $ 22.7 million and $ 25.2 million;

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

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

buildings and leasehold improvements of $ 39.2 million and $ 39.6 million, and net carrying value of $ 32.3 million and $ 34.9 million, respectively.

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

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Depreciation expense was $ 81.5 million, $ 70.9 million, and $ 70.6 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 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 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;

no impairment was identified.

Reporting Units

In millions Performance Chemicals Performance Materials Total

December 31, 2020 $ 441.0 $ 4.3 $ 445.3

Foreign currency translation ( 3.3 ) — ( 3.3 )

In millions Performance Materials Performance Chemicals Advanced Polymer Technologies Total

December 31, 2021 $ 4.3 $ 437.7 $ — $ 442.0

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

Segment change reallocation — ( 165.0 ) 165.0 —

Foreign currency translation — 0.2 8.8 9.0

December 31, 2023 $ 4.3 $ 349.4 $ 173.8 $ 527.5

_______________

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

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 road 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.

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

Our fiscal year 2023 annual goodwill impairment test was performed as of October 1, 2023.

We determined that the fair value of our reporting units were in excess of their carrying value and therefore concluded that no goodwill impairment existed.

There were no events or circumstances indicating that goodwill might be impaired as of December 31, 2023.

Ingevity Corporation

6 unchanged sentences

December 31, 2021 $ 317.8 $ 81.7 $ 72.2 $ 0.5 $ 472.2

Acquisitions (2)

88.6 15.0 23.5 — 127.1

Retirements — — — ( 0.5 ) ( 0.5 )

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December 31, 2022 388.5 89.2 88.5 — 566.2

Acquisitions (2)

88.6 15.0 23.5 — 127.1

Retirements — — — — —

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Amortization (4)

( 63.5 ) ( 5.7 ) ( 10.1 ) — ( 79.3 )

Retirements — — — — —

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

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

(3) The weighted average amortization period remaining for all intangibles is 10.8 years, while the weighted average amortization period remaining for customer contracts and relationships, brands, developed technology and other intangibles is 11.4 years, 11.4 years, 7.6 years, and zero years , respectively.

(4) As a result of the Performance Chemicals' repositioning, as further described in Note 15, we accelerated the amortization of certain customer contract and relationship finite-lived intangible assets in 2023.

This resulted in $ 37.4 million of additional expense in 2023, which is included in Restructuring and other (income) charges, net within the consolidated statement of operations.

Ingevity Corporation

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Performance Chemicals (1)

Advanced Polymer Technologies 197.1 205.1

Other intangibles, net $ 336.1 $ 404.8

_______________

(1) Refer to footnote 4 in the preceding Other Intangible Asset table for more information on the change in amortization in 2023.

The amortization expense related to our intangible assets in the table above is shown in the table below.

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In millions 2023 2022 2021

Cost of sales $ — $ — $ 0.1

Selling, general, and administrative expenses $ 41.9 $ 33.6 $ 33.2

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

Total amortization expense $ 79.3 $ 33.6 $ 33.2

_______________

(1) Amounts recorded to Restructuring and other (income) charges, net are not included within segment depreciation and amortization.

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

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

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

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

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

Gains from net investment hedges are reclassified to earnings only when the related CTA are required to be reclassified, usually upon the sale or liquidation of the investment (i.e., the legal entity).

The fair value of our net investment hedge was a net asset (liability) of zero at December 31, 2023 and 2022.

During the years ended December 31, 2023, 2022, and 2021, we recognized net interest income associated with this financial instrument of zero , $ 1.1 million, and $ 0.5 million, respectively.

Cash Flow Hedges

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These contracts are generally designated as cash flow hedges.

As of December 31, 2023, open foreign currency exchange contracts hedge forecasted transactions until June 2024.

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

As of December 31, 2023, there were $ 4.0 million in open foreign currency derivative contracts.

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

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

Ingevity Corporation

9 unchanged sentences

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.

During 2022, we had floating-to-fixed interest rate swaps with a combined notional amount of $ 166.2 million to manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $ 166.2 million of our floating rate debt to a fixed rate.

Per the terms of these instruments, we received floating rate interest payments based upon a three-month U.S.

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Upon termination of the interest rate swap instruments, we reclassified a $ 1.7 million gain from AOCI into Interest income on the consolidated statement of operations.

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

The fair value of outstanding interest rate instruments at December 31, 2023 and 2022 was an asset (liability) of zero .

Effect of Cash Flow and Net Investment Hedge Accounting on AOCI

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Total $ — $ 13.9 $ 9.6 $ — $ 1.1 $ 0.5

_______________

(1) Reclassifications from AOCI to Net Income were zero for all periods presented.

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In millions Level 1 (1)

Currency exchange contracts (4)

$ — $ 0.5 $ — $ 0.5

Total assets $ — $ 0.5 $ — 0.5

Natural gas contracts (5)

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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

_______________

(1) Quoted prices in active markets for identical assets.

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(3) Significant unobservable inputs.

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

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

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

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

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

Ingevity Corporation

4 unchanged sentences

In millions, except percentages 2023 2022

Revolving Credit Facility and other lines of credit (1)

Term Loan — 328.1

3.88 % Senior Notes due 2028

Revolving Credit Facility (1)

$ 738.0 $ 828.0

3.88 % Senior Notes due 2028

Finance lease obligations (2)

Accounts receivable securitization 81.3 —

Other notes payable 2.1 —

Total debt including finance lease obligations $ 1,472.5 $ 1,479.9

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(1) Letters of credit outstanding under the revolving credit facility were $ 2.5 million and $ 2.3 million and available funds under the facility were $ 259.5 million and $ 169.7 million at December 31, 2023 and 2022, respectively.

(2) Refer to Note 13 for more information.

(2) Refer to Note 13 for more information on finance lease obligations.

At December 31, 2023 and 2022, $ 80.0 million of the finance lease obligation upon maturity will be settled utilizing liquid assets that have been placed into a trust established strictly for this purpose.

The trust is presented as Restricted investments on the consolidated balance sheets in the amount of $ 79.1 million and $ 78.0 million as of December 31, 2023 and 2022, respectively.

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

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Among other things, the Amendment (a) extends the maturity date from October 28, 2025 to June 23, 2027 and increases the aggregate principal amount of revolving commitments thereunder from $ 500 million to $ 1 billion, (b) adds Ingevity UK as a borrower under the revolving credit facility, and (c) modifies certain leverage ratio tests and thresholds.

Borrowings under the revolving credit facility bear interest at a rate per annum equal to either (a) the applicable term benchmark rate, subject to a zero floor, or (b) a base rate, in each case, plus an applicable margin of 1 percent to 1.75 percent for term benchmark loans and 0.00 percent to 0.75 percent for base rate loans.

Fees of $ 3.0 million, zero , and $ 2.2 million were incurred in 2022, 2021, and 2020, respectively, to secure the various amendments associated with our revolving credit facility.

Borrowings under the revolving credit facility bear interest at a rate per annum equal to either (a) the Secured Overnight Financing Rate ("SOFR"), subject to a zero floor, or (b) a base rate, in each case, plus an applicable margin of 1 percent to 1.75 percent for term benchmark loans and 0.00 percent to 0.75 percent for base rate loans.

The weighted average interest rate associated with our revolving credit facility was 6.36 percent and 3.99 percent for the periods ended December 31, 2023, and 2022, respectively.

There were no borrowings associated with our revolving credit facility as of December 31, 2021.

Fees of zero , $ 3.0 million, and zero were incurred in 2023, 2022, and 2021, respectively, to secure the various amendments associated with our revolving credit facility.

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

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.

During 2022, we repaid our outstanding term loan in an aggregate principal amount of $ 323.0 million.

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

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The net proceeds from the sale of the 2028 Notes, after deducting deferred financing fees of $ 8.8 million, were used to repay the existing term loan and the outstanding balances under our revolving credit facility.

Interest payments on the 2028 Notes are due semiannually in arrears on November 1st and May 1st of each year, beginning on May 1, 2021, at a rate of 3.88 percent per year.

The 2028 Notes will mature on November 1, 2028.

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

Interest payments on the 2028 Notes are due semiannually in arrears on November 1st and May 1st of each year, at a rate of 3.88 percent per year.

The 2028 Notes mature on November 1, 2028.

Accounts Receivable Securitization

On October 2, 2023, we entered into a revolving accounts receivable securitization facility (“Facility”).

The Facility enables us to borrow, on a revolving basis, up to a maximum of $ 100.0 million based upon eligible trade receivables.

The Facility expires in October 2024, unless renewed by the mutual consent of the parties.

The program's effective borrowing cost is based upon an asset-backed commercial paper conduit rate plus a negotiated margin.

In addition, a fee is assessed for any undrawn portion of the facility.

The Facility required the establishment of a bankruptcy-remote special purpose entity (“SPE”), wholly owned and fully consolidated by Ingevity Corporation.

Trade receivables will be sold to this SPE and held as secured collateral for the borrowings under the Facility.

Ingevity maintains continuing involvement as it acts as the servicer for the eligible trade receivables and guarantees payment to the bank.

Such receivables, recorded on the consolidated balance sheet, totaled $ 81.3 million as of December 31, 2023.

The borrowings will be presented on the consolidated balance sheet as short-term debt, and cash flows will be presented as financing on our cash flow statement.

Fees of $ 0.4 million were incurred in 2023 to secure the Facility.

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

The interest rate associated with our accounts receivable securitization program was 5.61 percent for the period ended December 31, 2023.

Debt Covenants

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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 December 31, 2022 were 2.5 and our actual interest coverage for the four consecutive quarters ended December 31, 2022 was 9.9 .

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

As calculated per the credit agreement, our net leverage for the four consecutive quarters ended December 31, 2023 we re 2.5 and our actual interest coverage for the four consecutive quarters ended December 31, 2023 was 6.2 .

We were in compli ance with all covenants at December 31, 2023.

Ingevity Corporation

5 unchanged sentences

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

As of December 31, 2022, 2,930,182 shares under the Ingevity Corporation 2016 Omnibus Incentive Plan are still available for grants, assuming that Ingevity performs at the target performance level in each year of the three-year performance period for PSU awards.

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

As of December 31, 2023, 2,066,651 shares under the Ingevity Corporation 2016 Omnibus Incentive Plan are still available to be granted, assuming that Ingevity performs at the target performance level in each year of the three-year performance period for PSU awards.

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

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

6 unchanged sentences

Employees purchase shares in each purchase period at 85 percent of the market value of our common stock at either the beginning of the offering period or the end of the purchase period, whichever price is lower.

Under the ESPP, a total of 250,000 shares of Ingevity's common stock are reserved and authorized for issuance to participating U.S.

employees, as defined by the ESPP, which excludes certain officers of Ingevity.

On April 27, 2023, the ESPP was amended to add an additional 300,000 shares of Ingevity's common stock, increasing the total amount of shares under the ESPP to 550,000 shares, those additional shares were registered with the SEC on May 4, 2023.

The shares are reserved and authorized for issuance to participating U.S.

employees, as defined by the ESPP, excluding certain officers of Ingevity.

We typically issue treasury shares for issuances under the ESPP.

As of December 31, 2023, 319,611 shares under the ESPP are still available for issuance.

The initial offering period under the ESPP began on July 1, 2017.

During fiscal year 2023, there were 34,036 shares issued under the ESPP at an average price of $ 55.82 .

All purchases under the ESPP were suspended during the third quarter of 2023.

Our share-based compensation and ESPP expense is included in the table below.

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_______________

(1) Amounts reflected in "Selling, general, and administrative expenses" on the consolidated statements of operations.

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

Ingevity Corporation

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All stock options vest in accordance with vesting conditions set by the Compensation Committee.

The Compensation Committee, with the addition of rTSR to the PSUs, did not grant stock options in 2023.

Stock options granted to date have vesting periods of one to three years from the date of grant.

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

Granted 74 68.23

Exercised ( 43 ) 52.67

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The amount changes based on the fair market value of Ingevity's stock.

As of December 31, 2022, $ 1.1 million of total unrecognized compensation expense related to stock options is expected to be recognized over a weighted-average period of one year .

As of December 31, 2023, $ 0.3 million of total unrecognized compensation expense related to stock options is expected to be recognized over a weighted-average period of 0.5 years.

Restricted Stock Units, Deferred Stock Units, and Performance-based Restricted Stock Units

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

Beginning in 2023, certain granted PSUs include a rTSR modifier that, when combined with the performance criteria could modify the final PSU payout by +/- 15 percent depending on the Company's rTSR performance over a three year performance period.

The rTSR component of the 2023 PSU awards is a market condition requiring the use of a Monte Carlo simulation on the grant date to estimate the fair value.

The assumptions utilized to calculate the fair value of the 2023 PSUs are shown in the table below.

Compensation expense is recognized over the vesting period and adjusted for the probability of achievement of the performance criteria.

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December 31, 2023

Weighted-average assumptions used to calculate expense for PSUs Year Ended December 31, 2023

Risk-free interest rate 4.5 %

Average life of options (years) 3.0

Volatility 37.9 %

Dividend yield —

Fair value per PSU $ 86.92

The following table summarizes Ingevity's RSUs, DSUs, and PSUs activity.

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Amortization of unrecognized net actuarial and other gains (losses) (3)

— ( 0.1 ) ( 0.1 )

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

( 0.2 ) — ( 0.1 )

Total before tax ( 0.1 ) ( 0.3 ) ( 0.2 )

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

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

During the year ended December 31, 2023, we repurchased $ 92.1 million (inclusive of $ 0.8 million in excise tax) in common stock, representing 1,269,373 shares of our common stock at a weighted average cost per share of $ 71.93 .

At December 31, 2023, $ 353.4 million remained unused under our Board-authorized repurchase program.

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Finance Leases

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

Our finance lease obligations of $ 101.1 million, and $ 101.9 million at December 31, 2023 and 2022, respectively, primarily consist of two leases.

The first obligation of $ 80.0 million, at December 31, 2023, is owed to the city of Wickliffe, Kentucky, associated with Performance Materials' Wickliffe, Kentucky, manufacturing site, which is due at maturity in 2027.

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

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

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

This obligation will be settled upon maturity utilizing liquid assets that have been placed into a trust established strictly for this purpose.

The trust is presented as Restricted investment on the consolidated balance sheet in the amount of $ 79.1 million as of December 31, 2023, see Note 5 for more information.

The remaining obligation of $ 20.9 million, at December 31, 2023, is primarily owed to the lessor of our corporate headquarters in North Charleston, South Carolina.

The lease commenced in July 2020, with a term of 15 years, and is structured as a traditional rental with payments due on a monthly basis.

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

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Changes in plan assets and benefit obligations recognized in other comprehensive income (loss) are as follows:

Years Ended December 31,

Pensions Other Benefits Total

Years Ended December 31,

In millions 2023 2022 2021 2023 2022 2021 2023 2022 2021

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The following table summarizes the weighted-average assumptions used for the components of net annual benefit cost:

Years Ended December 31,

Pensions Other Benefits

Years Ended December 31,

In millions, except percentages 2023 2022 2021 2023 2022 2021

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

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

Contributions

We made no voluntary cash contributions to our domestic hourly union defined benefit pension plan in the years ended December 31, 2022, 2021, and 2020.

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

We made a $ 2.0 million voluntary cash contribution to our domestic hourly union defined benefit pension plan during the year ended December 31, 2023.

There were no voluntary cash contributions to our domestic hourly union defined benefit pension plan in the years ended December 31, 2022, and 2021.

The minimum required contribution to our domestic hourly union defined benefit plan for fiscal year 2024 is $ 0.2 million.

Fair Value Hierarchy

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In millions 2023 2022 2021

Severance and other employee-related costs (1)

$ — $ 0.1 $ 6.4

Restructuring charges $ 125.6 $ — $ 0.1

Business transformation costs 13.8 16.1 10.0

Other (income) charges, net 44.6 13.8 16.1

Total Restructuring and other (income) charges, net $ 170.2 $ 13.8 $ 16.2

Restructuring Charges

In millions Severance and other employee-related costs Other charges (income) (1)

Asset disposal charges (2)

Performance Chemicals' repositioning $ 8.6 $ 1.5 $ 103.0 $ 113.1

9.8 0.1 2.6 12.5

(1) Represents severance and employee benefit charges.

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

Year ended December 31, 2023 $ 18.4 $ 1.6 $ 105.6 $ 125.6

Other — — — —

Year ended December 31, 2022 $ — $ — $ — $ —

Other — 0.1 — 0.1

Year ended December 31, 2021 $ — $ 0.1 $ — $ 0.1

_______________

(1) Primarily represents costs associated with contract terminations, plant and equipment decommissioning charges and other miscellaneous exit costs.

(2) Primarily represents property, plant and equipment and finite-lived intangible asset write-downs, accelerated depreciation and amortization, and impairment charges on certain assets, which were or are to be disposed of or abandoned.

Also included, to the extent incurred, the acceleration effect of re-estimating settlement dates and revised cost estimates associated with asset retirement obligations related to asset disposal charges that are included within restructuring charges.

(3) During 2023, we incurred severance and asset charges associated with targeted workforce reduction initiatives.

Throughout 2023 we initiated several measures across the organization to pursue greater cost efficiency which included a reorganization to streamline certain functions and reduce ongoing costs.

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

These actions are referred to as Performance Chemicals' repositioning.

The Performance Chemicals' repositioning, when combined with earlier targeted workforce reduction initiatives, during 2023 resulted in the reduction of Ingevity's global workforce by almost 20 percent, 25 percent of these reductions being employees directly associated with commercial sales activities of the soon-to-be exited and/or reduced end-use markets of our industrial specialties product line.

Specific to Performance Chemicals, the reduction represented approximately 30 percent of the reportable segment's workforce.

The collective actions of workforce, operational, and regional business exits, we believe, will hinder our ability to dispose of the associated inventory on hand, as of December 31, 2023.

As a result, we have recorded $ 19.7 million of non-cash, lower of cost or market, inventory charges to adjust the carrying value of the impacted inventory to what we will realize upon disposal, less disposal costs.

These inventory charges are recorded to Cost of sales on the consolidated statement of operations.

Since these inventory charges are directly attributable to the Performance Chemicals’

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

repositioning, that is, they do not represent normal, recurring expenses necessary to operate our business, we have combined these charges with the restructuring charges, noted above, and have excluded such impact from the financial results of our Performance Chemicals reportable segment, refer to Note 19 for more information.

We expect to incur aggregate charges of approximately $ 280.0 million associated with the Performance Chemicals' repositioning, 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 in 2024.

Due to the DeRidder Plant closure and the corresponding reduced CTO refining capacity, we may be obligated, under an existing CTO supply contract, to purchase CTO volumes through 2025 at amounts in excess of required CTO volumes.

We intend to manage our CTO volumes by reselling excess volumes (herein referred to as "CTO resales") in the open market.

Excluded from the estimated $ 280.0 million of estimated aggregate charges are potential costs we may incur associated with the CTO resales 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.

Refer to Note 2, under the section:

Non-operating income and expense , for more information.

During the year ended December 31, 2023, we incurred $ 5.1 million in cash charges and $ 127.7 million in non-cash charges related to the strategic actions initiated during the fourth quarter of 2023.

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.

Other (income) charges, net

Alternative feedstock transition

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

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

During the year ended December 31, 2023, we incurred $ 22.1 million in costs, including $ 8.8 million in asset disposal costs.

North Charleston plant transition

Our North Charleston, South Carolina Performance Chemicals manufacturing plant has historically been co-located with a WestRock Company (“WestRock”) paper mill.

In May 2023, WestRock announced that it would permanently cease operating its North Charleston paper mill by August 31, 2023 and notified us that it was terminating the shared services in accordance with our operating agreement.

WestRock ceased production at their North Charleston paper mill in June 2023.

During 2023, we executed a transition plan to separate certain critical operating services WestRock had historically provided to us such as steam, water and wastewater treatment.

During the year ended December 31, 2023, we incurred $ 14.8 million of expense, including $ 4.3 million in asset disposal costs.

We expect to incur an additional $ 3 - 5 million of costs as we complete this transition in the first half of 2024.

Business transformation costs

In 2020, we embarked upon a business transformation initiative that includes the implementation of an upgraded enterprise resource planning ("ERP") system.

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 the attention of management and key employees.

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

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

Restructuring Reserves

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

We embarked upon a business transformation initiative that included the implementation of an upgraded enterprise resource planning ("ERP") system.

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

This business transformation initiative concluded in the fourth quarter of 2023.

Costs incurred, during the years ended December 31, 2023, 2022, and 2021, of $ 7.7 million, $ 13.8 million, and $ 16.1 million, respectively, represent costs directly associated with the business transformation initiative that, in accordance with GAAP, could not be capitalized.

Ingevity Corporation

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December 31, 2023

Restructuring and Other (Income) Charges, net Reserves

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

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

12/31/2021 (1)

Payments 12/31/2022 (1)

Payments Other (3)

12/31/2023 (1)

$ 0.5 13.8 ( 13.8 ) $ 0.5 51.5 ( 44.0 ) 0.2 $ 8.2

_______________

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

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

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

(3) Primarily foreign currency translation adjustments.

Ozark Materials

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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 road technologies product line.

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

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

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

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

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

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

We finalized the purchase price allocation in the third quarter of 2023, with no material adjustments recorded.

Ingevity Corporation

1 unchanged sentence

December 31, 2023

Preliminary Purchase Price Allocation

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 $ 0.9 million was expensed in the year ended December 31, 2022.

(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 during each of the years ended December 31, 2023 and December 31, 2022, respectively.

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

Inventories are accounted for on a LIFO basis of accounting.

Inventories are accounted for on a FIFO basis of accounting.

(2) The aggregate amortization expense was $ 10.9 million for the year ended December 31, 2023.

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

Acquisition and other-related costs

Acquisition and other-related (income) costs

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

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Inventory fair value step-up amortization (1)

Acquisition and other-related costs $ 5.9 $ 0.6 $ 1.8

Acquisition and other-related (income) costs, net $ 4.5 $ 5.9 $ 0.6

_______________

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Provision (benefit) for income taxes $ ( 4.7 ) $ 58.0 $ 44.7

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

We recorded zero , $ 4.5 million, and $ 4.2 million of deferred tax provision (benefit) expense within components of other comprehensive income during the years ended December 31, 2023, 2022, and 2021, respectively.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

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

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Changes in valuation allowance 1.3 0.1 0.8

Deferred adjustments 0.1 0.3 ( 1.4 )

Legislative tax rate change 0.8 13.9 5.3

Foreign derived intangible income ( 2.4 ) ( 5.9 ) ( 5.1 )

Meals & entertainment 0.3 0.2 0.1

Lobbying 0.3 0.2 —

Officers compensation 0.9 0.6 0.3

Excess share-based compensation ( 1.1 ) ( 0.1 ) ( 0.3 )

Federal and state tax credits ( 4.2 ) ( 4.8 ) ( 4.9 )

Deferred adjustments 0.2 0.1 0.3

Legislative tax rate change 0.5 0.8 13.9

Sustainably sourced carbon benefit ( 0.7 ) ( 1.3 ) —

Uncertain tax positions 0.5 0.5 0.3

Tax on foreign royalties 0.4 0.4 0.5

Tax on Dividends, Deemed Dividends, and GILTI (1)

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

Officers compensation 0.6 0.3 0.5

Other 0.2 0.2 ( 0.1 )

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Effective tax rate 46.5 % 21.5 % 27.5 %

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

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

_______________

(1) GILTI is defined as Global Intangible Low Tax Income

The increase in our effective tax rate from 2022 to 2023 was mainly driven by the mix of earnings, with U.S.

losses, primarily due to the restructuring activities during the year (see Note 15), driving an overall global loss and tax benefit for the year.

Furthermore, significant decline in U.S.

taxable earnings drove a decrease in the foreign derived intangible income benefit as compared to prior years skewing the effective tax rate.

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

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

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

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

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

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

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

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

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Net operating losses 10.6 10.5

Inventory 16.9 —

Leases 18.7 17.2

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Research and experimental expenses 15.3 8.9

Interest limitation 7.6 —

Other 16.3 14.4

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Our net deferred tax liability decreased $ 41.5 million at December 31, 2023 as compared to December 31, 2022.

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

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

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

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

As part of Tax Cuts and Jobs Act ("TCJA") enacted in December 2017 under Internal Revenue Code ("IRC") Section 174, beginning in 2022 we were required to capitalize and amortize research and experimental expenditures.

This requirement continued to increase the deferred tax asset for 2023.

Also as modified by TCJA, IRC Section 163(j) limits U.S.

business interest expense deductions as a function of adjusted taxable income.

In 2023 due to a reduction in taxable income, Ingevity was subject to these limitations creating a new deferred tax asset for 2023, labeled above as interest limitation.

The increase in the LIFO reserve in 2023 flipped our 2022 deferred tax liability to a deferred tax asset in 2023.

Further acceleration of book amortization on intangibles drove a decline in the overall deferred tax liability for the year.

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

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

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

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

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

In 2023, we recognized tax expense of $ 1.3 million due to our expected inability to recognize the benefit associated with state tax credits prior to their expiration.

At December 31, 2023, foreign net operating loss carryforwards totaled $ 32.9 million;

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

of this total, $ 0.1 million will expire in 1 year and $ 32.8 million has no expiration date.

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

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At December 31, 2023, 2022, and 2021, no deferred income taxes have been provided for our share of undistributed net earnings of foreign operations due to management’s intent to reinvest such amounts indefinitely.

The determination of the amount of taxes that may be due if earnings are remitted is not practicable because such liability, if any, is dependent on circumstances that exist if and when remittance occurs.

The circumstances that would affect the calculations include the source location and amount of the distribution, the underlying tax rate already paid on the earnings, foreign withholding taxes, the opportunity to use foreign tax credits, and the potential impact of U.S.

The determination of the amount of taxes that may be due if

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

earnings are remitted is not practicable because such liability, if any, is dependent on circumstances that exist if and when remittance occurs.

Positive undistributed earnings considered to be indefinitely reinvested totaled $ 90.0 million at December 31, 2023.

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Balance at end of year (1)

$ 1.2 $ 0.8 $ 0.3

_______________

(1) Included in "Other liabilities" on the consolidated balance sheet.

As of December 31, 2023, 2022, and 2021, $ 1.4 million, $ 0.9 million, and $ 0.4 million, respectively, of unrecognized tax benefit, including penalties and interest, would, if recognized, impact our effective tax rate.

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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.

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.

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.

In addition, we intend to challenge the U.S.

antitrust law to approximately $ 85.0 million.

On May 18, 2023, the court in the Delaware Proceeding entered judgment on the jury’s verdict, which commenced the post-trial briefing stage.

On February 13, 2024, the court in the Delaware Proceeding denied BASF’s motion for pre-judgment interest on its tortious interference claim as well as and our motion seeking judgment as a matter of law, or a new trial in the alternative.

In addition, BASF has indicated it will seek attorneys’ fees and costs in amounts that they will allege and have to demonstrate at a future date.

Unless the judgment is set aside, BASF will be entitled to post-judgment interest pursuant to the rate provided under federal law.

We disagree with the verdict, including the court’s application of the law and entry of judgment, and intend to appeal.

In addition, we may challenge the U.S.

District Court’s November 2020 dismissal of our patent infringement claims against BASF.

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

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

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

Final resolution of these matters could take up to 24 months.

As of December 31, 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 verdict, $ 85.0 million, is accrued within Other liabilities on the consolidated balance sheet as of December 31, 2023 and the charge was included within Other (income) expense, net on the consolidated statement of operations for the year ended December 31, 2021.

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

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

Ingevity Corporation

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Segment Information

Ingevity’s operating segments are (i) Performance Materials and (ii) Performance Chemicals, a description of both operating segments is included in Note 1.

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.

Ingevity’s operating segments are (i) Performance Materials, (ii) Performance Chemicals, and (iii) Advanced Polymer Technologies.

A description of our operating segments is included in Note 1.

Years Ended December 31,

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Performance Chemicals 902.1 875.1 688.9

Advanced Polymer Technologies 204.0 244.7 185.8

Total net sales (1)

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Performance Chemicals 65.7 160.4 140.5

Advanced Polymer Technologies 44.5 40.0 32.3

Total Segment EBITDA (2)

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Depreciation and amortization - Performance Chemicals ( 53.2 ) ( 43.1 ) ( 40.0 )

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

( 0.2 ) — ( 0.1 )

Depreciation and amortization - Advanced Polymer Technologies ( 31.3 ) ( 29.6 ) ( 33.1 )

Restructuring and other income (charges), net (3)(9)

( 189.9 ) ( 13.8 ) ( 16.2 )

Acquisition and other-related costs (5)

Acquisition and other-related income (costs), net (4)

( 4.5 ) ( 5.9 ) ( 0.6 )

Loss on CTO resales (5)

Gain (loss) on sale of strategic investment (6)

Litigation verdict charge (7)

Pension and postretirement settlement and curtailment income (charges), net (8)

Net income (loss) $ ( 5.4 ) $ 211.6 $ 118.1

2 unchanged sentences

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

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

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

We have excluded the following items from segment EBITDA:

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

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

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

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

We continue to include the service cost, amortization of prior service cost, interest costs, expected return on plan assets, and amortized actual gains and losses in our segment EBITDA.

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

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

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

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

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

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

interest expense associated with corporate debt facilities, interest income, income taxes, depreciation, amortization, restructuring and other income (charges), net, including inventory lower of cost or market charges associated with restructuring actions, acquisition and other-related income (costs), litigation verdict charges, gain on sale of strategic investments, loss on CTO resales, pension and postretirement settlement and curtailment income (charges), net.

(3) The table below provides an allocation of these charges between our three reportable segments to provide investors, potential investors, securities analysts and others with the information, should they choose, to apply such (income) charges to each respective reportable segment for which the charges relate.

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

Years Ended December 31,

In millions 2023 2022 2021

Performance Materials $ 9.0 $ 4.8 $ 6.0

Performance Chemicals 164.2 7.0 8.0

Advanced Polymer Technologies (1)

Restructuring and other (income) charges, net $ 189.9 $ 13.8 $ 16.2

_________________

(1) Included in the charges for the year ended December 31, 2023 was $ 13.3 million of asset disposal charges associated with Advanced Polymer Technologies polyol production assets located at the DeRidder Plant.

(4) The table below provides an allocation of these charges between our three reportable segments to provide investors, potential investors, securities analysts and others with the information, should they choose, to apply such (income) charges to each respective reportable segment for which the charges relate.

For more detail on these charges see Note 16.

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

Years Ended December 31,

In millions 2023 2022 2021

Performance Materials $ — $ 0.3 $ 0.2

Performance Chemicals 4.5 5.6 —

Advanced Polymer Technologies — — 0.4

Acquisition and other-related (income) costs, net $ 4.5 $ 5.9 $ 0.6

(5) For the year ended December 31, 2023, charges relates to the Performance Chemicals reportable segment.

Refer to Note 2, under the section:

Non-operating income and expense , for more information.

(6) For the year ended December 31, 2023, gains related to our Performance Materials reportable segment.

We exclude gains and losses from sales of strategic investments from our segment results, as well as our non-GAAP financial measures, because we do not consider such gains or losses to be directly associated with the operational performance of the segment.

We believe that the inclusion of such gains or losses, would impair the factors and trends affecting the historical financial performance of our reportable segments.

We continue to include undistributed earnings or loss, distributions, amortization or accretion of basis differences, and other-than-temporary impairments for equity method investments that we believe are directly attributable to the operational performance of such investments, in our reportable segment results.

Refer to Note 5, under the section:

Strategic Investments, for more information.

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

Refer to Note 18 for additional information.

(8) For the year ended December 31, 2022 the charges relate to the Performance Materials reportable segment.

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

We continue to include the service cost, amortization of prior service cost, interest costs, expected return on plan assets, and amortized actual gains and losses in our segment EBITDA.

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

These costs are excluded from our reportable segment results;

details of which are included in the table below.

Years Ended December 31,

In millions 2023 2022 2021

Restructuring charges (1)

$ 125.6 $ — $ 0.1

Other (income) charges, net (1)

44.6 13.8 16.1

Performance Chemicals' repositioning inventory charges (2)

Restructuring and other (income) charges, net $ 189.9 $ 13.8 $ 16.2

_________________

(1) Amounts are recorded within Restructuring and other (income) charges, net on the consolidated statement of operations, refer to Note 15 for more information.

(2) Amounts are recorded within Cost of sales on the condensed consolidated statement of operations, refer to Note 15 for more information.

Ingevity Corporation

6 unchanged sentences

Performance Chemicals 53.2 43.1 40.0 49.6 62.4 37.1

Advanced Polymer Technologies 31.3 29.6 33.1 23.8 20.3 20.5

Total $ 122.8 $ 108.8 $ 109.9 $ 109.8 $ 142.5 $ 103.8

10 unchanged sentences

Performance Chemicals (1)

1,218.1 1,430.5

Advanced Polymer Technologies (1)

Total segment assets (2)

3 unchanged sentences

_______________

(1) On January 1, 2023, w e separated our engineered polymers product line from the Performance Chemicals reportable segment into its own reportable segment, Advanced Polymer Technologies.

As a result of this separation, we allocated $ 165.0 million of Performance Chemicals goodwill to the newly created Advanced Polymer Technologies reportable segment.

Refer to Note 8 for more information.

(2) Segment assets exclude assets not specifically managed as part of one specific segment herein referred to as "Corporate and other."

3 unchanged sentences

Earnings (Loss) per Share

Basic earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding during the period.

The calculation of diluted net income per share excludes all anti-dilutive common shares.

Years Ended December 31,

10 unchanged sentences

(2) Shares are presented in thousands.

(3) For the year ended December 31, 2023, 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:

17 unchanged sentences

Restricted cash 0.6 0.6

CTO resales (Note 2) 24.2 —

Planned major maintenance activities 2.5 4.3

Currency exchange and natural gas contracts (Note 9) 0.5 —

Other 5.6 7.6

5 unchanged sentences

Land-use rights 4.4 4.6

Planned major maintenance activities 4.3 3.2

Deferred software as a service 2.8 4.0

Deferred compensation plan assets (Note 5) 17.9 14.4

Net investment hedge (Note 9) — 2.0

Finance lease assets, net (Note 13) 0.1 0.1

1 unchanged sentence

$ 81.9 $ 81.2

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2023

Accrued expenses:

8 unchanged sentences

Accrued energy 2.3 3.2

CTO resales (Note 2) 13.6 —

Asset retirement obligations (Note 2) 5.5 4.3

Other 9.6 10.0

$ 72.3 $ 54.4

Ingevity Corporation

Notes to the Consolidated Financial Statements

December 31, 2022

Other liabilities:

3 unchanged sentences

Unrecognized tax benefits (Note 17) 1.2 0.8

Net investment hedge (Note 9) — 1.0

Interest rate swaps (Note 9) — 4.0

Contingent consideration (Note 5) — 0.8

Litigation verdict accrual (Note 18) 87.4 85.0

Asset retirement obligations (Note 2) 7.4 —

Other 5.6 6.2

3 unchanged sentences

In millions 2023 2022 2021

Foreign currency translation (income)/loss $ 2.3 $ 2.5 $ ( 5.8 )

Royalty and sundry (income)/loss ( 0.2 ) ( 0.6 ) ( 0.4 )

(Gain)/loss on sale of strategic investment (Note 5) $ ( 19.3 ) $ — $ —

Foreign currency transaction (gain)/loss 3.7 2.3 2.5

Loss on CTO resales (Note 2) 22.0 — —

Litigation verdict charge (Note 18) — — 85.0

1 unchanged sentence

$ 5.7 $ ( 1.7 ) $ 79.9

Subsequent Event

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

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

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

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

INGEVITY CORPORATION

28 unchanged sentences

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data