Ingevity Corp 10-K

ITEM 1. BUSINESS General Ingevity Corporation provides products and technologies that purify, protect, and enhance the world around us. 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. In November of 2023, we announced an initiative to reposition our Performance Chemicals segment to enhance profitability and earnings stability as we execute our corporate strategy to focus on higher margin and higher growth specialty products, diversify feedstocks and optimize our manufacturing network. This initiative will result in the reduction, and in some cases exit, of historical primary end uses of our Industrial Specialties product line such as adhesives, publication inks, and oilfield as well as the closure of our Performance Chemicals' manufacturing facility in DeRidder, Louisiana. Refer to the section: Performance Chemicals , within Item 1: BUSINESS for more information. Throughout this Annual Report on Form 10-K, except where otherwise stated or indicated by the context, "Ingevity," the "Company," "we," "us," or "our" means Ingevity Corporation and its consolidated subsidiaries and their predecessors. Our business originated as part of the operations of our former parent company, Westvaco Corporation, in 1964, and we operated as a division of Westvaco Corporation and its corporate successors, including MeadWestvaco Corporation and WestRock Company (“WestRock”) until our separation from WestRock in May 2016. Our common stock began "regular-way" trading on the New York Stock Exchange in May 2016 under the symbol "NGVT." Our principal executive offices are located at 4920 O'Hear Avenue, Suite 400, North Charleston, South Carolina 29405. Ingevity maintains a website at www.ingevity.com. We make available, free of charge through our website, our filings with the Securities and Exchange Commission (the “SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after such items are filed with, or furnished to, the SEC. We also use our website to publish additional information that may be important to investors, such as presentations to analysts. Information contained in or connected to our website is not incorporated by reference into this Annual Report on Form 10-K. Reports we file with the SEC may also be viewed at www.sec.gov. The table below illustrates our product lines and the primary end uses for our products by segment, as well as our revenue by segment for the fiscal year 2023. For more information on our U.S. and foreign operations, see Notes 4 and 19, to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K. 4 Performance Materials Performance Chemicals Advanced Polymer Technologies Product Lines Road Technologies (1) Industrial Specialties End-Use Markets Automotive Food, Chemicals, and Water Purification Pavement Construction Pavement Preservation Pavement Reconstruction and Recycling Pavement Markings Agricultural Chemicals Paper Chemicals Rubber Industrial Intermediates Limited (2) : Adhesives, Oilfield and Lubricants Automotive & Transportation Industrial Equipment Footwear & Apparel Consumer Packaging Medical & Health 2023 Revenue $586.0 million $902.1 million $204.0 million _______________ (1) Previously named Pavement Technologies (2) In November of 2023 we announced an initiative to reposition our Performance Chemicals segment to enhance profitability and earnings stability as we execute our corporate strategy to focus on higher margin and higher growth specialty products, diversify feedstocks and optimize our manufacturing network. This initiative will result in the reduction, and in some cases exit, of historical end-use markets of our Industrial Specialties product line such as adhesives, publication inks, and oilfield. Refer to the section: Performance Chemicals , within Item 1: BUSINESS for more information. Seasonality There are a variety of seasonal dynamics, including global climate and weather conditions, that impact our businesses, though none have currently materially affected our financial results, except in the case of the road technologies product line, where roughly 70 to 75 percent of revenue is generated between April and September. From a supply perspective, this seasonality is effectively managed through pre-season inventory build and active inventory management throughout the year. Energy Our manufacturing processes require a significant amount of energy. We are dependent on natural gas to fuel the processes in our chemical refineries and activated carbon plants. Although we believe that we currently have a stable natural gas supply and infrastructure for our operations, we are subject to volatility in the market price of natural gas. We enter into certain derivative financial instruments to mitigate expected fluctuations in market prices and the resulting volatility of earnings and cash flow. All of our manufacturing processes also consume a significant amount of electricity and are located in regulated service areas that have stable electricity rate structures with reliable supply. Leveraging Sustainability Throughout our Performance Materials, Performance Chemicals, and Advanced Polymer Technologies portfolios, we are a leader in adding value to products made from renewable materials and in derivatizing technologies that impart desirable environmental benefits in their use. To create a majority of our chemistries, we take crude tall oil ("CTO") from pine trees, hardwood sawdust (both co-products of the lumber, paper, and furniture-making industries), and plant based oils and convert them into products that benefit customers, the environment, and society. For the caprolactone-based products in our Advanced Polymer Technologies segment – although derived from traditional feedstocks – these products provide solutions that enable performance attributes in end-use markets that directly help customers and consumers meet sustainability goals. Put simply: Ingevity’s products help customers reduce their ecological impact. Our asphalt emulsifiers enable pavement recycling that reuses up to 100 percent of existing materials to create longer-lasting roads. Our automotive activated carbon products improve the air we breathe by recovering 8 million gallons of gasoline daily. Our agriculture adjuvants provide enhanced performance in crop protection. And our alternative-fuel vehicle technology enables the use of renewable natural gas as fuel for pickup trucks and buses. The superior durability of caprolactone-based polyurethane technologies extends product life and the biodegradable performance of our thermoplastic polycaprolactones offers compostable end of-life solutions. Our business is built on our ability to maximize the value and utility of materials over their lifecycle, and we will continue to enhance this value proposition through future acquisitions and new product development. 5 Human Capital Management Core Values Developed collaboratively by Ingevity employees in 2017, the IngeviWay is the cultural framework that shapes Ingevity’s future and enables our success. It describes who we are, what we want to be, and what’s important to us as we work together to fulfill our purpose to purify, protect and enhance the world around us. In early 2022, we reinforced our IngeviWay foundation by launching “The IngeviWay in Action,” an initiative that raises the bar on expectations to build, inspire and lead, and better aligns how we work as a team to create the Ingevity of the future. By focusing on making a positive impact through everyday actions, “The IngeviWay in Action” bolsters the way we live our core values of safety and sustainability, maximize value for our people and our customers, continue our commitment to excellence, integrity and ethical behavior and drive to create innovative solutions. Talent Our employees are critical to our success, and we strive to provide a safe, rewarding, and respectful workplace where our people have opportunities to pursue career paths based on skills, performance, and potential. Our success depends, in part, on our ability to attract, retain and motivate critical resources across production, technical, engineering, sales, and various functional disciplines. Labor Relations and Collective Bargaining We currently employ approximately 1,700 employees (excluding employees at our DeRidder, LA manufacturing facility which will be closed in 2024), of whom approximately 75 percent are employed in the U.S. Approximately 56 percent of our production employees are represented by labor unions under various collective bargaining agreements ("CBA"). We engage in negotiations with labor unions for new CBAs from time to time based on expiration dates of agreements and statutory requirements. We consider our relationships with all salaried, union-hourly, and non-hourly employees to be positive and collaborative. In 2023, the United Steel, Paper, Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, on behalf of its affiliated Local Union 0775 at our Wickliffe, Kentucky Performance Materials manufacturing facility ratified a four-year CBA, which expires on February 1, 2027. Also in 2023, the IBEW LOCAL Union No. 1753 at our Charleston, South Carolina Performance Chemicals manufacturing facility ratified a four-year CBA, which expires on June 20, 2026. The Advanced Polymer Technologies manufacturing facility in Warrington, United Kingdom is in the process of their annual negotiations with the GMB Union. Further, the CBA at our Crossett, Arkansas Performance Chemicals manufacturing facility with the International Association of Machinists and Aerospace Workers Union ("IAM") expires on March 1, 2024. These combined CBA impact approximately 40 percent of the workforce at these two locations. The parties began contract renewal negotiations during the first quarter of 2024 and continue to operate under the same terms and conditions while negotiations are pending. Diversity, Equity, Inclusion and Belonging Ingevity is guided by our IngeviWay vision for how we work together to engage the diversity, knowledge, energy, talents and expertise of all employees. This vision reflects our commitment to actively supporting an inclusive environment where all employees are heard, respected and empowered to grow to their fullest potential. Driving meaningful and sustainable growth as a company includes attracting and retaining top talent with a broad range of skills, experience and ideas, and we are focused on increasing recruitment of diverse talent. A strategic and intentional focus on diversity, equity, inclusion and belonging enhances the employee experience and satisfaction. It also supports more effective innovation, enhanced customer experience, and a deeper understanding of the communities Ingevity serves. Our diversity recruiting strategy is focused on ensuring everyone has an equitable experience by diversifying our talent pipeline through diverse candidate slates and interview teams as well as gender-neutral job descriptions. Our focus on advancing the diversity makeup of our leadership continues to positively impact our growth and success. Today, our board of directors is 30 percent women and 20 percent racially and ethnically diverse, and our executive team is 43 percent women-led and 14 percent racially and ethnically diverse. 6 Performance Management We assess employee performance comprehensively, taking into account behaviors and direct input from the employee, feedback, and the individual's progress toward goals, as well as their level of business impact. Achievements that bolster the team, our business, and our clients—internal and external—and our fundamental values are all included in the performance evaluation process. Our method involves keeping a codified record of employee performance at mid-year and end-of-year. It also includes a requirement for all Ingevity employees to ask for feedback from those who are aware of their performance and contributions. In order to boost productivity, provide positive business outcomes, and raise employee engagement, we encourage managers and their employees to have regular discussions. With our all-encompassing strategy, Ingevity is able to gain a comprehensive understanding of each worker's strengths and identify opportunities for growth and development. Health & Safety Ingevity has a world-class safety program and a strong safety culture. Personal, process, and public safety are core values at Ingevity. We work hard to protect employees, contractors, and the communities where we operate from injuries, illnesses and incidents through the design and delivery of safe operations, continuous improvement of personal and process safety performance, management systems, and programs, a strong culture of compliance, and a commitment to zero harm to people and the environment. In 2023, we continued our efforts to increase reporting of and response to near miss incidents to prevent more serious injuries before they occur. This included efforts to increase the number of near misses reported and an increase in reporting by a broader number of employees. We also continued to improve safety training, further expanded the use of leading indicators to ensure effective initiatives are proactively implemented, and improved incident investigation quality to ensure contributing factors are appropriately identified and addressed. Employees were trained on the importance of our Life-Saving Rules, put in place to prevent fatalities and serious injuries through leadership videos, monthly interactive training packages, and upgraded procedures, checklists, work permits, and audits. Additionally, in North America where the majority of our bulk shipments are executed, we abide by the American Chemistry Council’s Responsible Care practices for transporting our chemicals safely. We strategically utilize logistics providers that have committed to these higher standards of safety, security, stewardship, and sustainability. Governmental Regulations Our manufacturing operations are subject to regulation by governmental and other regulatory authorities with jurisdiction over our operations. These regulations include the discharge of materials into the environment, the handling, storage, transportation, disposal, and clean-up of chemicals and waste materials, and otherwise relating to the protection of the environment, as well as other operational regulations, such as the Occupational Safety and Health Act ("OSHA") and the Toxic Substances Control Act ("TSCA") in the U.S., and the Registration, Evaluation and Authorization of Chemicals ("REACH") directives in the European Union, the United Kingdom, and other countries. It is not possible to quantify with certainty the material effects that compliance with these regulations may have upon the capital expenditures, earnings, or competitive position of Ingevity, but we currently anticipate that such compliance will not have a material adverse effect on any of the foregoing. Environmental and other regulations and related legal proceedings have the potential to involve significant costs and liability for Ingevity. I ntellectual Property Intellectual property, including patents, closely guarded trade secrets, and highly proprietary manufacturing know-how, as well as other proprietary rights, is a critical part of maintaining our technology leadership and competitive edge. Our business strategy includes filing patent and trademark applications where appropriate for proprietary developments, as well as protecting our trade secrets. We actively create, protect, and enforce our intellectual property rights. We are filing for and being granted patents for product and process developments for our Performance Materials business that we believe are both novel and consistent with trends in the technological development of engines. Our Evotherm® Warm Mix Asphalt technology is supported by numerous global patents. Additionally, our caprolactone and related technologies are supported by numerous global patents and trademarks, as well as proprietary manufacturing and technical know-how. The protection afforded by our patents and trademarks varies based on country, scope, and coverage, as well as the availability of legal remedies. Although our intellectual property taken as a whole is material to the business, there is no individual patent or trademark the loss of which could have a material adverse effect on the business. 7 On July 19, 2018, we filed suit against BASF Corporation (“BASF”) in the U.S. District Court for the District of Delaware (the “Delaware Proceeding”) alleging BASF infringed Ingevity’s patent covering canister systems used in the control of automotive gasoline vapor emissions (U.S. Patent No. RE38,844) (the “844 Patent”). On February 14, 2019, BASF asserted counterclaims against us in the Delaware Proceeding, alleging two claims for violations of U.S. antitrust law (one for exclusive dealing and the other for tying) as well as a claim for tortious interference with an alleged prospective business relationship between BASF and a BASF customer (the “BASF Counterclaims”). The BASF Counterclaims relate to our enforcement of the 844 Patent and our entry into several supply agreements with customers of our fuel vapor canister honeycombs. The U.S. District Court dismissed our patent infringement claims on November 18, 2020, and the case proceeded to trial on the BASF Counterclaims in September 2021. On September 15, 2021, a jury in the Delaware Proceeding issued a verdict in favor of BASF on the BASF Counterclaims and awarded BASF damages of approximately $28.3 million, which will be trebled under U.S. 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 have to support 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 24 months. Segments Performance Materials We engineer, manufacture, and sell 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 automotive activated carbon products primarily take the form of granules, pellets, and honeycomb "scrubbers," which are primarily utilized in vehicle-based gasoline vapor emission control systems to capture gasoline vapors that would otherwise be released into the atmosphere as volatile organic compounds. The captured gasoline vapors are largely purged from the activated carbon and re-directed to the engine where they are used as supplemental power for the vehicle. In this way, our automotive activated carbon products are part of a system that improves the environment and fuel efficiency. Performance Materials' net sales for 2023, 2022, and 2021 were $586.0 million, $548.5 million, and $516.8 million, respectively. The chart below reflects our 2023 Performance Materials' net sales by geography. Sales are assigned to geographic areas based on the location of the party to which the product was shipped. 8 Raw Materials and Production Our Performance Materials segment serves customers globally from three manufacturing locations in the U.S. and two in China. The primary raw material (by volume) used in the manufacture of our activated carbon is hardwood sawdust. Sawdust is readily available and is sourced through multiple suppliers to protect against supply disruptions and to maintain competitive pricing. We also utilize phosphoric acid to chemically activate the hardwood sawdust. This phosphoric acid is sourced through multiple suppliers to protect against supply disruptions and to maintain competitive pricing. The market price of phosphoric acid is affected by the global agriculture market as the majority of global phosphate rock production is used for fertilizer production and only a portion of that production is used to manufacture purified phosphoric acid. Customers We sell our automotive technologies products to approximately 60 customers around the globe. In 2023, our ten largest customers accounted for approximately 82 percent of sales. We are the trusted source of these products for many of the world’s largest automotive parts manufacturers, including PHINIA Inc. (previously BorgWarner Inc.), A. Kayser Automotive System GmbH, Korea Fuel-Tech Corporation, MAHLE GmbH, and many other large and small component manufacturers throughout the global automotive supply chain. Our food, water, beverage, and chemical purification products are sold to approximately 50 customers globally. We sell our products primarily through our own direct sales force in North America, Europe, South America, Asia, and a smaller, focused network of third-party distributors that have established a strong direct sales and marketing presence in North America and China. Competition Our competitors include Norit, Kuraray Co., Ltd., and several domestic U.S. manufacturers and distributors of imported products and Chinese manufacturers. Ingevity has a decades-long track record of providing activated carbon that achieves life-of-vehicle emission standards. Given the imperative for automotive manufacturers to produce vehicles for the U.S., Canada, and China markets capable of meeting life-of-vehicle emission standards, or potentially face expensive recalls and unfavorable publicity, our automotive activated carbon products provide our customers the low-risk choice for this high-performance application. Additionally, we are well-positioned to meet increasing emissions standards around the world. 9 Performance Chemicals Our Performance Chemicals segment is comprised of two product lines: road technologies (previously named pavement technologies) and industrial specialties. Our products are utilized in pavement construction, pavement preservation, pavement reconstruction and recycling, road markings, agrochemical dispersants, paper chemicals, and other diverse industrial uses. Our application expertise is often called upon by our customers to provide unique solutions that maximize resource efficiency. We have a broad and diverse customer base in this segment. In 2023, our top ten customers accounted for approximately 22 percent of our segment revenue, with the next 100 customers making up approximately 47 percent of our segment revenue. Performance Chemicals' net sales for 2023, 2022, and 2021 were $902.1 million, $875.1 million, and $688.9 million, respectively. The chart below reflects our 2023 Performance Chemicals' net sales by geography. Sales are assigned to geographic areas based on the location of the party to which the product was shipped. In 2023, Ingevity began a transformation of the Performance Chemicals’ industrial specialties product line. In the spring of 2023, Ingevity ceased the processing of CTO at the Crossett Arkansas facility and converted the facility to the processing of a variety of plant based feedstocks. In addition, during the fourth quarter of 2023, Ingevity announced the planned closure of the DeRidder, Louisiana CTO refinery and derivatives operations. Once this transformation is complete, Ingevity’s participation in the rosin based adhesive and publication printing ink markets along with emulsifiers for drilling into the oilfield markets will be substantially reduced. Raw Materials and Production Our Performance Chemicals segment serves customers globally from six manufacturing locations in the U.S. Most of our industrial specialties and some of our road technologies products are derived from CTO, a co-product produced by softwood kraft pulp processors, such as WestRock and Georgia-Pacific LLC (“Georgia-Pacific”). We also produce products derived from lignin, which is extracted from black liquor, another co-product of softwood kraft pulp processing. We typically source our CTO needs primarily through supply contracts. Most of our contracted volumes are sourced through two primary parties: WestRock and Georgia-Pacific. During 2023, we sourced approximately 82 percent of our CTO from WestRock and Georgia-Pacific combined. CTO accounted for approximately 26 percent of our consolidated cost of sales and 51 percent of our consolidated raw materials purchases in 2023. The supply of CTO is generally inelastic and governed by the volume of softwood kraft pulp processing around the world. Also, there are regulatory pressures that may incentivize suppliers of CTO to sell CTO into alternative fuel markets (i.e., biofuels) rather than to historical end users such as Ingevity. CTO-based biofuel has been deemed to meet the EU’s Renewable Energy Directive, second phase (“RED II”) biofuel sustainability criteria. As a result of RED II and related government incentives, there has been a significant increase in demand for CTO and its derivatives during 2023. The increased demand, combined with the rationalization of softwood kraft pulp processing during 2023, has created pressure on CTO pricing and driven the cost of CTO to unprecedented levels, higher by as much as 300 percent in some cases. 10 In addition to these developments in the EU, various pieces of legislation regarding the use of alternative fuels have been introduced in the U.S. at both the federal and state level. Currently, none of the U.S. legislation mandates or provides incentives for the use of CTO or its derivatives as a biofuel. Future legislation in the U.S. and elsewhere may promote the use of CTO or its derivatives as a feedstock for the production of biofuels, further constraining supply. In 2023, we took further actions to diversify our raw materials stream and began a transformation of the Performance Chemicals’ industrial specialties product line. In April 2023, we converted our Crossett, Arkansas CTO facility to run on non-CTO plant-based natural oils including soy, canola and palm-based oils. We currently sell these products as well as derivatives into end markets for industrial applications. We have invested in production capability at our Crossett, Arkansas facility as we expand the commercialization of our product offerings in existing and new markets, which may include the personal care; home and industrial cleaners, as well as the biofuels market. Additionally, in November 2023, we announced the planned closure of the DeRidder, Louisiana CTO facility. With these combined actions we have CTO supply contracted for volumes that exceed our post-transformation manufacturing capacity. We are evaluating our requirements and working with our suppliers to adjust our contracted volumes. However, we expect to procure CTO volumes, under an existing long-term contract, in excess of production needs and will therefore need to balance our working capital requirements and sell, as necessary, excess CTO volumes to the open market. The other key raw materials used in the Performance Chemicals business are maleic anhydride, ethoxylates, and ethylene amines. These are sourced where possible through multiple suppliers to protect against supply disruptions and to maintain competitive pricing. Markets Served Road Technologies Our road technologies product line produces a broad line of innovative additives and technologies utilized globally in road construction and pavement preservation, including pavement reconstruction and recycling. With the 2022 acquisition of Ozark Materials, LLC and Ozark Logistics, LLC (collectively, “Ozark Materials”), we have added road striping technologies to the portfolio. Road Construction. Evotherm®, our premier road construction additive, is a warm mix asphalt technology that promotes adhesion by acting as both a liquid antistrip and a warm mix asphalt. Once Evotherm® is mixed into the binder utilized for road layer construction, production temperatures can be significantly cooler than conventional hot mix asphalt. Lower production temperatures allow our customers to reduce emissions and fuel use during road construction as well as extend their paving seasons into colder months. Pavement Preservation. We provide an array of pavement preservation products that eliminate many traditional asphalt heating, mixing, and transportation demands – saving our customers time, energy, and money. Our technical team matches the right emulsifier and design to our customers’ materials and conditions to create high-performing emulsions. We offer a full range of specialized cationic, anionic, and amphoteric emulsifiers with additional, custom-formulated specialty additives. Pavement Reconstruction and Recycling. We provide an array of pavement reconstruction and recycling additives that reduce the life cycle cost of pavement by enabling the milling and reuse of existing roadways. Our cold in-place recycling additives allow our customers to reopen existing roadways faster, while also lowering overall costs and jobsite emissions. Pavement Markings. We provide alkyd and hydrocarbon premium-based thermoplastic road striping technologies which provide long service life, excellent adhesion, superior color, and retro-reflectivity. Based on the customer and/or governmental agency requirements, the markings can be designed for varying levels of initial and retained performance properties. Customers We supply our road technologies products to approximately 850 customers in 60 countries through our own direct sales force, primarily in the Americas and Europe, as well as a network of third-party distributors. In 2023, our ten largest customers accounted for 30 percent of the product line's sales. Our largest customers include Ergon, Inc., The Heritage Group, and Idaho Asphalt Supply Inc. 11 Competition Our primary competitors in road technologies are Nouryon Chemicals B.V., Arkema S.A., Kao Specialties Americas LLC, Sherwin-Williams Company, and PPG Industries Traffic Solutions. We compete based on deep knowledge of our customers’ businesses and extensive insights into road-building technologies and trends globally. We use these strengths to develop consultative relationships with government departments of transportation, facilitating new technology introduction into key markets around the world. Our combined expertise in the disciplines of chemistry and civil engineering provides us with a comprehensive understanding of the relationship between the molecular structure of our products and their impact on the performance of pavement systems. This allows us to develop products customized to local markets and to consistently deliver cost-effective solutions for our customers. Industrial Specialties Our industrial specia lties product line produces and sells chemicals utilized in several industrial applications, including adhesive tackifiers, agrochemical dispersants, lubricant additives, printing ink resins, industrial intermediates, and oilfield. Agricultural Chemicals. We produce dispersants for crop protection products as well as other naturally derived products for agrochemicals. Crop protection formulations are highly engineered, specifically formulated, and cover a range of different formulation types, from liquids to solids. We deliver a wide range of dispersants that are high performing and consistent. In addition, our crop protection products are approved for use as inert ingredients in agrochemicals by regulatory agencies throughout the world. Paper Chemicals. We are a North American supplier of rosin-based sizing agents for the production of packaging related paper. Rubber. We are a global supplier of tall oil-based products, we offer a broad range of resins, rosin soaps, mixed acids and fatty acids from renewable resources. We currently supply specialty products to latex manufacturers, compounders and tire producers. Specific to tire producers, our resins help improved fuel efficiency, wear and traction. Industrial Intermediates. Our functional chemistries are sold across a diverse range of industrial markets including, among others, textile dyes, rubber, cleaners, mining, and nutraceuticals. Adhesives, Oilfield, and Lubricants. We are a North American supplier of tackifier resins, which provide superior adhesion to difficult-to-bond materials, to the adhesives industry. Adhesive applications for our products include construction, product assembly, packaging, pressure-sensitive labels and tapes, hygiene products, and road markings. We supply oilfield well service additives to improve emulsion stability, and aid in fluid loss control for oil-based drilling muds. Other specialty additives, typically used in deep water applications, include rheology modifiers and wetting agents that improve viscosity properties and aid in the efficiency of the drilling process. We also supply specialty additives for corrosion inhibition formulations used to maximize production rates by reducing the downtime for key equipment and pipes due to corrosion. We supply lubricant additives and corrosion inhibitors for the metalworking and fuel additives markets. Our lubricant products are multi-functional additives that contribute to lubricity, wetting, corrosion inhibition, emulsification, and general performance efficiency. Customers We sell our industrial specialties products to approximately 500 customers around the globe in over 45 countries through our own direct sales representatives and third-party sales representatives and distributors. In 2023, our ten largest customers accounted for 35 percent of the product line's sales. Our largest customers include Haliburton, Solenis, Flint Group, H.B. Fuller Co. and ChampionX. Competition Our competitors, which differ depending on the product, application, and region, include Kraton Corp., Eastman Chemical Co., Borregaard ASA, Repsol S.A., Lamberti S.p.A., Cargill, Vantage, PMC, as well as several others. Specific to our industrial specialty products, our customers select the product that provides the best balance of performance, consistency, and price. Reputation and loyalty are also valued by our customers and allow us to win business when other factors are equal. In agrochemicals, the selection of a dispersant is made early in the product development cycle and the formulator has a choice among our sulfonated lignin products, lower-quality lignosulfonates and other surfactants such as naphthalene sulfonates. In adhesives, our products compete against other tackifiers, including other tall oil resin ("TOR") based tackifiers as well as 12 tackifiers produced from gum rosin and hydrocarbon starting materials. In addition, the choice of polymer used in an adhesive formulation drives the selection of a tackifier. In lubricants, we compete against other producers of distilled tall oil and additives. In our industrial intermediates business, our tall oil fatty acid ("TOFA") competes against widely available fats and oils derived from tallow, soy, rapeseed, palm, and cotton sources. In oilfield, we compete against other tall oil specialty additives used for oil-based drilling fluids or corrosion inhibition formulations in the drilling, production and downstream applications of oilfield. Advanced Polymer Technologies Our Advanced Polymer Technologies segment produces caprolactone and caprolactone-based specialty polymers for use in coatings, resins, elastomers, adhesives, bioplastics, and medical devices. Advanced Polymer Technologies' net sales for 2023, 2022, and 2021 were $204.0 million, $244.7 million, and $185.8 million, respectively. The chart below reflects our 2023 Advanced Polymer Technologies' net sales by geography. Sales are assigned to geographic areas based on the location of the party to which the product was shipped. Raw Materials and Production Our Advanced Polymer Technologies segment serves customers globally from one manufacturing location in the U.K. Our Advanced Polymer Technologies' products are caprolactone-based, which is derived from cyclohexanone, a benzene derivative, and hydrogen peroxide, both of which are readily available in the market. We maintain multiple suppliers of cyclohexanone to protect against supply disruptions and to maintain competitive pricing. Our hydrogen peroxide is currently supplied by Solvay Interox Limited, a co-located supplier at our Warrington, United Kingdom facility under a long-term supply agreement. Customers We sell our Advanced Polymer Technologies products to approximately 300 customers around the globe through our own direct sales representatives and third-party sales representatives and distributors. In 2023, our ten largest customers accounted for approximately 47 percent of the segment's sales. Our largest customers include polyurethane, adhesive, coatings, and bioplastics manufacturers. Competition Our primary caprolactone competitors are Daicel, Corp., Juren, and BASF SE, but we also face competition from other competing materials. Our value proposition is focused on sustainability elements, either through the high durability performance our Capa polyols impart to polyurethane articles or via the biodegradability characteristics of our Capa thermoplastics which now hold certification in multiple environments. We also add value through customer intimacy, a high focus on environmental, health, safety and quality performance and our supply chain capabilities. 13