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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-02 · 264 added, 137 removed, 224 unchanged (64% of the section changed)

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The following discussion should be read in conjunction with Ingevity’s consolidated financial statements as of and for the year ended December 31, 2023, filed on February 22, 2024, with the Securities and Exchange Commission ("SEC") as part of the company's Annual Reporting on Form 10-K ("2023 Annual Report") and the unaudited interim Condensed Consolidated Financial Statements and notes to the unaudited interim Condensed Consolidated Financial Statements, which are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

All references to notes (herein referred to as "Note") in this section refer to the notes accompanying the Condensed Consolidated Financial Statements included in Item 1 within this Form 10-Q.

Investors are cautioned that the forward-looking statements contained in this section and other parts of this Quarterly Report on Form 10-Q involve both risk and uncertainty.

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In addition to any such risks, uncertainties and other factors discussed elsewhere herein, risks, uncertainties and other factors that could cause or contribute to actual results differing materially from those expressed or implied by the forward-looking statements include, but are not limited to the following:

• the anticipated timing, charges and costs of the closure of our DeRidder, Louisiana plant may differ materially from our estimates due to events that may occur as a result of, or in connection with, the plant closure;

• the anticipated timing, charges and costs of the Performance Chemicals manufacturing consolidation and closure of our Crossett, Arkansas and DeRidder, Louisiana plants may differ materially from our estimates due to events that may occur as a result of, or in connection with, such consolidation or plant closures;

• the anticipated timing, charges and costs associated with the repositioning of our Performance Chemicals reportable segment and crude tall oil (“CTO”) resales may differ materially from our estimates due to events that may occur as a result of, or in connection with, such actions;

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• we are dependent upon third parties for the provision of certain critical operating services at several of our facilities;

• we may continue to be adversely affected by disruptions in our supply chain;

• we may be adversely affected by disruptions in our supply chain;

• the occurrence of natural disasters and extreme weather or other unanticipated problems such as labor difficulties (including work stoppages), equipment failure, or unscheduled maintenance and repair, which could result in operational disruptions of varied duration;

• adverse weather conditions may impact demand for certain of our road technologies products;

• we are dependent upon attracting and retaining key personnel;

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• losses due to lawsuits arising out of environmental damage or personal injuries associated with chemical or other manufacturing processes.

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

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.

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Recent Developments and Updates

Goodwill Impairment Charge

Beginning in fiscal year 2023, we began to see depressed volumes in our industrial end markets, constraining our ability to offset the continued CTO price inflation we were experiencing, and negatively impacting earnings and cash flow outlook within our Performance Chemicals’ reporting unit, particularly in our industrial specialties product line.

As a result, we concluded that a triggering event occurred in the third quarter of 2023.

Our third quarter 2023 impairment analysis included significant assumptions, such as the execution of several measures in 2023 to pursue greater cost efficiency, including a reorganization to streamline certain functions and reduce ongoing costs, and expectations of decreased CTO costs beginning in the second half of 2024.

We concluded that no impairment was necessary as a result of that third quarter 2023 interim analysis or at our annual impairment test, dated October 1, 2023.

During the second quarter of 2024, our supplier provided new information regarding the cost of CTO for the second half of 2024, which significantly exceeded our forecasted costs, resulting in a triggering event for our Performance Chemicals’ reporting unit.

We performed an analysis of the reporting unit’s goodwill, intangibles, and long-lived assets.

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.

Our analysis reassessed the expected cash flows in light of current performance and expected lack of near term recovery in our industrial specialties product line, resulting in lower volume and profitability expectations.

As a result, the company concluded that the carrying amount of the Performance Chemicals’ reporting unit exceeded its fair value, resulting in a non-cash goodwill impairment charge of $349.1 million, which represents all of the goodwill within the Performance Chemicals' reportable segment.

The charge was recorded within “Goodwill impairment charge” on the condensed consolidated statements of operations for the quarter ended June 30, 2024.

CTO Supply Contract Termination Agreement

On July 1, 2024, we entered into a termination agreement and release (the “Termination Agreement”), to terminate our long-term crude tall oil supply agreement with GP Pine Chemicals, LLC, (“Georgia-Pacific”), as amended (the“CTO Supply Agreement”), pursuant to which we were obligated to purchase and receive CTO produced by certain Georgia-Pacific facilities.

Pursuant to the Termination Agreement, as consideration for the termination of the CTO Supply Agreement, we made a cash payment to Georgia-Pacific in the amount of $50.0 million on July 1, 2024 and agreed to make an additional cash payment to Georgia-Pacific in the amount of $50.0 million by October 15, 2024.

Performance Chemicals' Repositioning

On November 1, 2023, we announced a number of strategic actions designed to reposition our Performance Chemicals reportable segment to improve 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 45 percent of our industrial specialties product line historical annualized net sales.

This initiative includes 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 Advanced Polymer Technologies (“APT”) reportable segment.

As of March 31, 2024, all production at the DeRidder Plant has ceased with the APT polyol production assets being shuttered in December 2023, and the CTO refinery and other Performance Chemicals’ production assets shuttered in February 2024.

The above actions are referred to as the "Performance Chemicals' repositioning." The Performance Chemicals’ repositioning initiative included additional corporate and business cost reduction actions executed in November 2023.

The Performance Chemicals' repositioning, when combined with other 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.

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

This initiative will focus on reducing exposure to lower margin end-use markets of our industrial specialties product line, such as adhesives, publication inks, and oilfield, representing approximately 45 percent of our industrial specialties product line historical annualized net sales.

This initiative included 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 Advanced Polymer Technologies (“APT”) reportable segment.

All production at the DeRidder Plant ceased in the first quarter of 2024.

The Performance Chemicals’ repositioning initiative included additional corporate and business cost reduction actions executed in November 2023.

The actions referenced above, when combined with other targeted workforce reduction initiatives during 2023, resulted in the reduction of Ingevity's global workforce by almost 20 percent.

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

Expected Charges

We expect to incur aggregate charges of approximately $280 million associated with the Performance Chemicals' repositioning, consisting of approximately $185 million in asset-related charges, approximately $15 million in severance and other employee-related costs, and approximately $80 million in other restructuring costs including decommissioning, dismantling and removal charges, and contract termination costs.

Through March 31, 2024, we have incurred $197.6 million associated with these actions, including $180.2 million of non-cash asset-related charges and $17.4 million of charges to be settled in cash.

As of March 31, 2024, $13.4 million of the charges to be settled in cash have been paid.

We expect to incur aggregate charges of approximately $250 million associated with the Performance Chemicals' repositioning.

This is a reduction of approximately $30 million from prior expectations due to lower than estimated plant cleaning costs.

Total expected charges now consist of approximately $185 million in asset-related charges, approximately $15 million in severance and other employee-related costs, and approximately $50 million in other restructuring costs, including decommissioning, dismantling and removal charges, and contract termination costs.

Through June 30, 2024, we have incurred $207.6 million associated with these actions, including $182.0 million of non-cash asset-related charges and $25.6 million of charges to be settled in cash.

As of June 30, 2024, $21.3 million of the charges to be settled in cash have been paid.

We expect approximately $185 million of the total charges to be non-cash and $65 million to be settled in cash.

The remainder of the non-cash and 50-60 percent of cash charges are expected to be recognized in 2024.

Charges Related to Exited End-Market Inventory

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 a result, we recorded $19.7 million and $2.5 million of non-cash, lower of cost or market, inventory charges during the three months ended December 31, 2023 and March 31, 2024, respectively, to adjust the carrying value of the impacted inventory to what we expect to realize upon disposal, less disposal costs.

Inventory Charges

The Company believes the collective actions of workforce, operational, and regional business exits will hinder our ability to dispose of the associated inventory on hand.

As a result, we recorded zero and $2.5 million of non-cash, lower of cost or market, inventory charges during the three and six months ended June 30, 2024, respectively, to adjust the carrying value of the impacted inventory to what we expect to realize upon disposal, less disposal costs.

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

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

Please refer to Note 14 within the Condensed Consolidated Financial Statements for more information.

CTO Resale Activity

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 needed to support our current business operations.

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 aggregate charges relating to the Performance Chemicals' repositioning 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 $50 million to $80 million of incremental losses in 2024.

This is updated from our previously disclosed estimate of $30 million to $80 million based on our current expectations on CTO procurement costs for 2024, which we expect to be offset by spot market CTO resales.

For the three months ended March 31, 2024, we have incurred $26.5 million of CTO resale losses, which are recorded as Other (income) expense, net on the condensed consolidated statement of operations.

Expected Savings and Impact

The Performance Chemicals' repositioning 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 45 percent of our industrial specialties product line historical annualized net sales.

The DeRidder Plant closure, and the corresponding reduced CTO refining capacity, significantly reduced our CTO volume requirements.

However, we were obligated, under an existing CTO supply contract, to purchase CTO volumes through 2025 at amounts in excess of our required CTO volumes needed to support our business operations.

To manage this excess inventory, we sold CTO volumes (herein referred to as "CTO resales") in the open market.

For the three and six months ended June 30, 2024, we have incurred $23.5 million and $50.0 million of CTO resale losses, which are recorded as Other (income) expense, net on the condensed consolidated statements of operations.

As of July 1, 2024, as further described in Note 16, we have terminated the CTO supply contract that resulted in these excess CTO volumes.

As a result of the termination of this supply contract, the purchases under the CTO supply contract ended, effective June 30, 2024.

Therefore, we are no longer required to purchase this excess CTO volume through 2025, and as such, we expect to end our CTO resale activity by the end of 2024 and to incur no more than $5.0 million in additional costs as we liquidate the excess CTO resale volumes on hand as of June 30, 2024.

Crossett, Arkansas Plant Closure

On July 31, 2024, we announced plans to transition the refining of oleo-based products manufactured for our Performance Chemicals reportable segment from our Crossett, Arkansas manufacturing plant (the “Crossett Facility”) to our North Charleston, South Carolina manufacturing plant.

In connection with this action, on July 29, 2024, the Board of Directors approved the closure of the Crossett Facility, as well as additional corporate and business cost reduction actions.

Ingevity plans to close the Crossett Facility in August 2024 and will continue to evaluate options for the site.

We expect to realize net operational savings of approximately $20-$25 million per year from the closure of the Crossett Facility, as well as annual savings of approximately $10 million from the corporate and business-related cost reduction actions.

The company expects to realize the full benefit of these savings beginning in 2025.

Expected Charges

As a result of these actions, Ingevity expects to incur aggregate charges of approximately $100 million, consisting of approximately $65 million in asset-related charges, approximately $10 million in severance and other employee-related costs and approximately $25 million in other restructuring costs, which include decommissioning, dismantling and removal charges and contract termination costs.

We expect approximately $65 million of the total charges to be non-cash.

The majority of non-cash charges and 50-60 percent of cash charges are expected to be recognized by the first half of 2025.

Expected Savings and Impact, Including Crossett, Arkansas Plant Closure

The Performance Chemicals' repositioning is focused on reducing exposure to lower margin end-use markets of our industrial specialties product line, such as adhesives, publication inks, and oilfield, representing approximately 45 percent of our industrial specialties product line historical annualized net sales, and as such, we expect annualized net sales to decrease accordingly.

The annualized cash savings we expect to realize from these actions are approximately $95 million to $110 million beginning in 2024.

These cash savings will be derived from headcount reductions, plant operating efficiencies, and reduced supply chain costs.

In addition to the cash savings, annualized depreciation and intangible amortization expense related to assets charges taken throughout this initiative will decline by approximately $10 million and $12 million, respectively, of which we expect to realize approximately $8 million and $10 million in 2024, respectively.

In addition to the cash savings, annualized depreciation and intangible amortization expense related to asset charges taken through this initiative will decline by approximately $15 million and $17 million, respectively, of which we expect to realize approximately $10 million and $12 million in 2024, respectively.

Collectively, these savings are expected to be realized in the following financial statement captions:

70-80 percent in Cost of sales, 15-25 percent in Selling, general, and administrative expenses, and ~5 percent in Research and technical expenses, all presented on our condensed consolidated statement of operations.

During the three months ended March 31, 2024, we realized cash savings of approximately $20 million, including $15 million in Cost of sales, $4 million in Selling, general, and administrative expenses, and $1 million in Research and technical expenses.

During the three and six months ended June 30, 2024, we realized cash savings of approximately $22 million and $42 million, including $17 million and $32 million in Cost of sales, $4 million and $8 million in Selling, general, and administrative expenses, and $1 million and $2 million in Research and technical expenses, respectively.

The charges we currently expect to incur and the savings we expect to obtain 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.

Measurement Alternative Investments

During the period ended March 31, 2024, the company identified a triggering event indicating that an investment being accounted for under the measurement alternative may be impaired.

For the three months ended March 31, 2024, the Company recognized an impairment of $4.8 million, recorded in Other (income) expense, net on the condensed consolidated statement of operations.

Results of Operations

Three Months Ended March 31,

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

In millions 2024 2023 2024 2023

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Restructuring and other (income) charges, net 13.1 19.2 75.9 24.8

Goodwill impairment charge 349.1 — 349.1 —

Acquisition-related costs (0.2) 1.8 0.1 3.7

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In millions Prior year Net sales Volume Price/Mix Currency effect Current year Net Sales

Three months ended March 31, 2024 vs.

Three months ended June 30, 2024 vs.

$ 481.8 (86.2) (1.6) (3.4) $ 390.6

Three Months Ended March 31, 2024 vs.

The sales decrease of $52.5 million in 2024 was driven primarily by our Performance Chemicals' industrial specialties product line due to repositioning actions which included a manufacturing plant closure and exit from certain low margin end markets.

Also contributing to the lower sales were continued weakness in China and certain industrial end markets that negatively impacted sales in our Advanced Polymer Technologies ("APT") reportable segment and industrial specialties product line, slightly offset by a three increase in Performance Materials reportable segment.

Volume declines in Performance Chemicals' industrial specialties product line and our APT reportable segment drove the combined volume decline of $45.0 million (11 percent).

Six months ended June 30, 2024 vs.

$ 874.4 (131.2) (5.7) (6.8) $ 730.7

Q2 2024 Performance Summary

The Net sales decrease was driven primarily by the Performance Chemicals' industrial specialties product line due to repositioning actions which included the focus on reducing exposure to lower margin end-use markets and therefore reduced sales during the quarter by approximately $78 million.

Also contributing to the lower sales was unfavorable weather in North America impacting our road technologies product line and continued weakness in certain industrial end markets that negatively impacted sales in our industrial specialties product line, slightly offset by an increase in our Performance Materials reportable segment.

Three Months Ended June 30, 2024 vs.

The Net sales decrease of $91.2 million in 2024 was driven by volume declines of $86.2 million (18 percent), primarily in our Performance Chemicals industrial specialties and road technologies product lines.

Unfavorable pricing and sales composition (mix) of $1.6 million (zero percent) and unfavorable foreign currency exchange of $3.4 million (one percent) also contributed to the decline in Net sales.

Six Months Ended June 30, 2024 vs.

The Net sales decrease of $143.7 million in 2024 was driven by volume declines of $131.2 million (15 percent), primarily in our Performance Chemicals industrial specialties product line and our APT reportable segment.

Unfavorable pricing and sales composition (mix) of $5.7 million (one percent) and unfavorable foreign currency exchange of $6.8 million (one percent) also contributed to the decline in Net sales.

Three Months Ended March 31, 2024 vs.

Gross profit decrease of $30.7 million was driven by unfavorable sales volume of $16.1 million, increased manufacturing costs of $7.4 million (which includes the realized savings of $15 million from the Performance Chemicals repositioning actions initiated in 2023) due primarily to significant CTO raw material cost pressure within our Performance Chemicals reportable segment, unfavorable pricing and sales composition (mix) of $4.3 million primarily driven by our APT reportable segment, Performance Chemicals' repositioning actions which lead to inventory charges of $2.5 million, and unfavorable foreign currency exchange of $0.4 million.

Three Months Ended June 30, 2024 vs.

Gross profit decrease of $29.8 million was driven primarily by unfavorable sales volume of $24.6 million in our Performance Chemicals industrial specialties product line.

The decrease was further driven by unfavorable pricing and sales composition (mix) of $3.1 million, primarily within our APT reportable segment, unfavorable foreign currency exchange of $1.9 million, and increased manufacturing cost of $0.2 million.

Gross profit includes the realized savings of $17.0 million from the Performance Chemicals repositioning actions initiated in 2023.

Refer to the Segment Operating Results section included within this MD&A for more information on the drivers to the changes in gross profit period over period for all segments.

Six Months Ended June 30, 2024 vs.

Gross profit decrease of $60.5 million was driven primarily by unfavorable sales volume of $40.7 million in our Performance Chemicals industrial specialties product line and our APT reportable segment, and increased manufacturing costs of $8.5 million.

The decrease was further driven by unfavorable pricing and sales composition (mix) of $7.4 million primarily within our APT reportable segment, and unfavorable foreign currency exchange of $3.9 million.

Gross profit includes the realized savings of $32.0 million from the Performance Chemicals repositioning actions initiated in 2023.

Refer to the Segment Operating Results section included within this MD&A for more information on the drivers to the changes in gross profit period over period for all segments.

Selling, general and administrative expenses

Three Months Ended March 31, 2024 vs.

Selling, general and administrative expenses ("SG&A") were $47.2 million (14 percent of Net sales) and $48.6 million (12 percent of Net sales) for the three months ended March 31, 2024 and 2023, respectively.

Three Months Ended June 30, 2024 vs.

Selling, general and administrative expenses ("SG&A") were $41.4 million (11 percent of Net sales) and $51.7 million (11 percent of Net sales) for the three months ended June 30, 2024 and 2023, respectively.

Overall, SG&A decreased by approximately $4.0 million or 10 percent due to cost savings initiatives implemented last year and $6.3 million due to decreased spending on commercial activities.

Six Months Ended June 30, 2024 vs.

SG&A was $88.6 million (12 percent of Net sales) and $100.3 million (11 percent of Net sales) for the six months ended June 30, 2024 and 2023, respectively.

SG&A as a percentage of Net sales increased due to lower sales.

Overall, SG&A decreased by approximately $4 million or 8 percent due to cost savings initiatives implemented last year offset by higher spending of $2.6 million on commercial activities.

Overall, SG&A decreased by approximately $8.0 million or 9 percent due to cost savings initiatives implemented last year and $3.7 million due to decreased spending on commercial activities.

Research and technical expenses

Three Months Ended March 31, 2024 vs.

Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, decreasing to 2.0 percent from 2.2 percent for the three months ended March 31, 2024 and 2023, respectively.

Included in the $2.0 million decrease is approximately $1 million realized from cost savings initiatives implemented last year.

Three Months Ended June 30, 2024 vs.

Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, increasing to 1.9 percent from 1.7 percent for the three months ended June 30, 2024 and 2023, respectively.

Research and technical expense as a percentage of Net sales increased due to lower sales.

Overall, Research and technical expense decreased by $0.7 million, which included approximately $1.0 million realized from cost savings initiatives implemented last year.

Six Months Ended June 30, 2024 vs.

Research and technical expenses as a percentage of Net sales remained consistent period over period, at 1.9 percent and 1.9 percent for the six months ended June 30, 2024 and 2023, respectively.

Included in the overall $2.7 million decrease is approximately $2.0 million realized from cost savings initiatives implemented last year.

Restructuring and other (income) charges, net

Three Months Ended March 31, 2024 vs.

Restructuring and other (income) charges, net were $62.8 million and $5.6 million for the three months ended March 31, 2024 and 2023, respectively.

Asset disposal charges increased $55.0 million, other restructuring charges increased $5.1 million, and costs associated with the North Charleston plant transition were $0.5 million, all for the three months ended March 31, 2024.

The increase was partially offset by a $2.5 million decrease related to our business transformation initiative and decreased severance and other employee-related costs of $0.9 million.

See Note 11 within the Condensed Consolidated Financial Statements for more information.

Three and Six Months Ended June 30, 2024 vs.

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

In millions 2024 2023 2024 2023

Work force reductions and other $ — $ 7.0 $ — $ 10.1

Performance Chemicals' repositioning 10.0 — 72.3 —

Restructuring charges (1)

$ 10.0 $ 7.0 $ 72.3 $ 10.1

Alternative feedstock transition — 6.6 — 6.6

North Charleston plant transition 3.1 2.9 3.6 2.9

Business transformation costs — 2.7 — 5.2

Other (income) charges, net (1)

$ 3.1 $ 12.2 $ 3.6 $ 14.7

Restructuring and other (income) charges, net (2)

$ 13.1 $ 19.2 $ 75.9 $ 24.8

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(1) See Note 11 for more information.

Goodwill impairment charge

Three and Six Months Ended June 30, 2024 vs.

Goodwill impairment charge of $349.1 million for the three and six months ended June 30, 2024 within our Performance Chemicals reportable segment.

See Note 7 for more information.

Acquisition-related costs

Three Months Ended March 31, 2024 vs.

Acquisition-related costs were $0.3 million and $1.9 million for the three months ended March 31, 2024 and 2023, respectively.

Three and Six Months Ended June 30, 2024 vs.

Acquisition-related (income) costs were $(0.2) million and $0.1 million for the three and six months ended June 30, 2024, and $1.8 million and $3.7 million three and six months ended June 30, 2023, respectively.

All charges relate to the integration of Ozark Materials into our Performance Chemicals segment.

Other (income) expense, net

Three Months Ended March 31, 2024 vs.

Three Months Ended March 31,

Three and Six Months Ended June 30, 2024 vs.

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

In millions 2024 2023 2024 2023

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Gain (loss) on strategic investments (1)

(0.1) — 4.7 (19.2)

Loss on CTO resales (2)

23.5 — 50.0 —

Other (income) expense, net (0.2) 0.6 (0.7) 1.3

1 unchanged sentence

_______________

(1) See Note 4 within the Condensed Consolidated Financial Statements for more information.

(2) See Note 11 and 14 within the Condensed Consolidated Financial Statements for more information.

(1) See Note 4 for more information.

(2) See Notes 11 and 14 for more information.

Interest expense, net

Three Months Ended March 31, 2024 vs.

Three Months Ended March 31,

Three and Six Months Ended June 30, 2024 vs.

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

In millions 2024 2023 2024 2023

Accounts receivable securitization (1)

$ 1.4 $ — $ 2.8 $ —

Finance lease obligations 1.8 1.8 3.6 3.6

Litigation related interest expense (2)

1.3 0.4 2.6 0.4

Revolving Credit Facility and other lines of credit (1)

14.0 15.0 27.2 28.2

Senior notes (1)

5.6 5.6 11.2 11.2

Other interest (income) expense, net (0.9) (1.2) (1.9) (2.2)

1 unchanged sentence

_______________

(1) See Note 9 within the Condensed Consolidated Financial Statements for more information.

(2) See Note 13 within the Condensed Consolidated Financial Statements for more information.

(1) See Note 9 for more information.

(2) See Note 13 for more information.

Provision (benefit) for income taxes

Three Months Ended March 31, 2024 vs.

For the three months ended March 31, 2024 and 2023, our effective tax rate was 22.1 percent and 20.9 percent, respectively.

Excluding discrete items, the effective rate was 24.2 percent compared to 22.8 percent in the three months ended March 31, 2024 and 2023, respectively.

See Note 12 within the Condensed Consolidated Financial Statements for more information.

Three and Six Months Ended June 30, 2024 vs.

For the three months ended June 30, 2024 and 2023, our effective tax rate was 15.2 percent and 25.6 percent, respectively.

Excluding discrete items, the effective rate was 33.5 percent compared to 23.8 percent in the three months ended June 30, 2024 and 2023, respectively.

See Note 12 for more information.

For the six months ended June 30, 2024 and 2023, our effective tax rate was 16.4 percent and 22.9 percent, respectively.

Excluding discrete items, the effective rate was 34.5 percent compared to 23.3 percent in the six months ended June 30, 2024 and 2023, respectively.

See Note 12 for more information.

Segment Operating Results

In addition to the information discussed above, the following sections discuss the results of operations for all of Ingevity's segments.

In addition to the information discussed above, the following sections discuss the results of operations for Ingevity's reportable segments.

Our segments are (i) Performance Materials, (ii) Performance Chemicals and (iii) Advanced Polymer Technologies.

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We have excluded the following items from segment EBITDA:

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 (loss) on strategic investments, loss on CTO resales, pension and postretirement settlement and curtailment income (charges), net.

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, goodwill impairment charge, acquisition and other-related income (costs), litigation verdict charges, gain (loss) on strategic investments, loss on CTO resales, and pension and postretirement settlement and curtailment income (charges), net.

In general, the accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies in the Annual Consolidated Financial Statements included in our 2023 Annual Report.

Performance Materials

Performance Summary

Net sales in our Performance Materials reportable segment increased three percent compared to the prior year quarter as a result of increased pricing and automotive carbon volumes.

Segment EBITDA increased $8.2 million or almost 12 percent primarily due to lower input costs such as energy and certain raw materials as well as a series of operational efficiencies that improved plant throughput.

In millions Three Months Ended March 31,

Q2 2024 Performance Summary

Net sales in our Performance Materials reportable segment increased nine percent compared to the prior year quarter as a result of increased pricing and automotive carbon volumes.

Segment EBITDA increased $18.0 million or 28 percent primarily due to lower input costs such as energy and certain raw materials as well as a series of operational efficiencies that improved plant throughput.

In millions Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Total Performance Materials - Net sales $ 157.2 $ 144.6 $ 302.3 $ 286.0

Segment EBITDA $ 82.2 $ 64.2 $ 160.2 $ 134.0

Net Sales Comparison of Three Months Ended March 31, 2024 and March 31, 2023:

Performance Materials (In millions)

Net Sales Comparison of Three and Six Months Ended June 30, 2024 and June 30, 2023:

Prior year Net sales Volume Price/Mix Currency effect Current year Net sales

Three months ended March 31, 2024 vs.

Three months ended June 30, 2024 vs.

$ 144.6 8.3 6.3 (2.0) $ 157.2

Three Months Ended March 31, 2024 vs.

Six months ended June 30, 2024 vs.

$ 286.0 10.5 10.2 (4.4) $ 302.3

Three Months Ended June 30, 2024 vs.

Segment net sales.

The increase of $3.7 million in 2024 was driven by favorable pricing and sales composition (mix) of $3.9 million (three percent) and a volume increase of $2.2 million (two percent).

The increase of $12.6 million in 2024 was driven by a volume increase of $8.3 million (six percent) and favorable pricing and sales composition (mix) of $6.3 million (four percent).

The increase was partially offset by unfavorable foreign currency exchange of $2.0 million (one percent).

Segment EBITDA.

The increase of $18.0 million in 2024 was driven by the increase in sales as noted above, decreased manufacturing costs of $6.9 million, favorable pricing and sales composition (mix) of $4.8 million, a volume increase of $4.7 million, and favorable foreign currency exchange of $1.7 million.

The increase was partially offset by increased SG&A and research and technical expenses of $0.1 million.

Six Months Ended June 30, 2024 vs.

Segment net sales.

The increase of $16.3 million in 2024 was driven by a volume increase of $10.5 million (four percent) and favorable pricing and sales composition (mix) of $10.2 million (four percent).

The increase was partially offset by unfavorable foreign currency exchange of $4.4 million (two percent).

Segment EBITDA.

The increase of $8.2 million in 2024 was driven by the increase in sales as noted above, decreased manufacturing costs of $7.0 million, favorable pricing and sales composition (mix) of $3.9 million, and a volume increase of $1.4 million.

The increase was partially offset by increased SG&A and research and technical expenses of $2.7 million, and unfavorable foreign currency exchange of $1.4 million.

The increase of $26.2 million in 2024 was driven by the increase in sales as noted above, decreased manufacturing costs of $13.9 million, favorable pricing and sales composition (mix) of $8.7 million, a volume increase of $6.1 million, and favorable foreign currency exchange of $0.3 million.

The increase was partially offset by increased SG&A and research and technical expenses of $2.8 million.

Performance Chemicals

Performance Summary

Q2 2024 Performance Summary

Net sales in our Performance Chemicals reportable segment decreased 35 percent compared to the prior year quarter.

The road technologies product line net sales were flat compared to last year.

The industrial specialties product line net sales decrease was primarily driven by lower volume as a result of exiting lower margin end markets as part of the Performance Chemicals' repositioning as well as lower market demand in certain industrial end markets such as lubricants and rubber.

The road technologies product line net sales decrease of $11.8 million was primarily driven by weather related delays.

The industrial specialties product line net sales decrease of $86.7 million was primarily driven by lower volumes as a result of the focus on reducing exposure to lower margin end-use markets as part of the Performance Chemicals' repositioning, which resulted in reduced sales of approximately $78 million, as well as continued weakness in certain industrial end markets.

Contributing to the decline in Segment EBITDA was higher CTO spend, which nearly doubled from last year, and unfavorable plant throughput due to continued weakness in industrial demand, which negatively impacted utilization rates at both our North Charleston, South Carolina and Crossett, Arkansas manufacturing sites.

Slightly offsetting these elevated costs were cost savings realized during the quarter as a result of the Performance Chemicals' repositioning.

Three Months Ended March 31,

Slightly offsetting these elevated costs were cost savings realized during the quarter due to the Performance Chemicals' repositioning.

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

In millions 2024 2023 2024 2023

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Segment EBITDA $ 9.3 $ 44.9 $ (1.3) $ 65.2

Net Sales Comparison of Three Months Ended March 31, 2024 and March 31, 2023:

Performance Chemicals (In millions)

Net Sales Comparison of Three and Six Months Ended June 30, 2024 and June 30, 2023:

Prior year Net sales Volume Price/Mix Currency effect Current year Net Sales

Three months ended March 31, 2024 vs.

Three months ended June 30, 2024 vs.

$ 284.0 (96.9) (1.3) (0.3) $ 185.5

Three Months Ended March 31, 2024 vs.

Road Technologies product line 140.9 (15.9) 4.2 (0.1) 129.1

Industrial Specialties product line 143.1 (81.0) (5.5) (0.2) 56.4

Six months ended June 30, 2024 vs.

$ 469.6 (132.4) (4.2) (0.5) $ 332.5

Road Technologies product line 186.7 (18.1) 6.4 (0.2) 174.8

Industrial Specialties product line 282.9 (114.3) (10.6) (0.3) 157.7

Three Months Ended June 30, 2024 vs.

Segment net sales.

The decrease of $38.6 million was driven by a volume decrease of $35.5 million (19 percent), driven by a decrease in industrial specialties ($33.3 million) and road technologies ($2.2 million), unfavorable pricing and sales composition (mix) of $2.8 million (two percent), attributed to a decrease in industrial specialties ($5.0 million), partially offset by an increase in road technologies ($2.2 million), and unfavorable foreign currency exchange of $0.3 million (zero percent).

The decrease of $98.5 million was driven by a volume decrease of $96.9 million (34 percent), as a result of a decrease in industrial specialties ($81.0 million) and road technologies ($15.9 million), unfavorable pricing and sales composition (mix) of $1.3 million (zero percent), attributable to a decrease in industrial specialties ($5.5 million), partially offset by an increase in road technologies ($4.2 million), and unfavorable foreign currency exchange of $0.3 million (zero percent).

Segment EBITDA.

The decrease of $30.9 million was driven by higher manufacturing costs of $20.2 million, primarily due to increased CTO cost, a volume decrease of $12.8 million, unfavorable pricing and sales composition (mix) of $2.8 million, and unfavorable foreign currency exchange of $0.6 million.

The decrease of $35.6 million was driven by a volume decrease of $30.3 million, higher manufacturing costs of $10.1 million, primarily due to increased CTO cost, unfavorable pricing and sales composition (mix) of $1.3 million, and unfavorable foreign currency exchange of $0.5 million.

The decrease was partially offset by lower SG&A of $6.6 million, which benefited from the Performance Chemicals' repositioning and cost saving initiatives implemented in 2023.

Six Months Ended June 30, 2024 vs.

Segment net sales.

The decrease of $137.1 million was driven by a volume decrease of $132.4 million (28 percent), as a result of a decrease in industrial specialties ($114.3 million) and road technologies ($18.1 million), unfavorable pricing and sales composition (mix) of $4.2 million (one percent), attributable to a decrease in industrial specialties ($10.6 million), partially offset by an increase in road technologies ($6.4 million), and unfavorable foreign currency exchange of $0.5 million (zero percent).

Segment EBITDA.

The decrease of $66.5 million was driven by a volume decrease of $43.1 million, higher manufacturing costs of $30.4 million, primarily due to increased CTO cost, unfavorable pricing and sales composition (mix) of $4.1 million, and unfavorable foreign currency exchange of $0.9 million.

The decrease was partially offset by lower SG&A of $12.0 million, which benefited from the Performance Chemicals' repositioning and cost saving initiatives implemented in 2023.

Advanced Polymer Technologies

Performance Summary

Net sales in our Advanced Polymer Technologies reportable segment decreased 27 percent compared to the prior year quarter due primarily to lower volumes which we attribute to the continued global demand weakness in many of the segment’s end-markets.

Segment EBITDA decreased primarily due to lower volumes and price, partially offset by lower input costs and benefits from the cost savings actions implemented last year.

In millions Three Months Ended March 31,

Q2 2024 Performance Summary

Net sales in our Advanced Polymer Technologies reportable segment decreased 10 percent compared to the prior year quarter as higher volumes were offset by reduced pricing.

Segment EBITDA decreased due to lower price primarily in Asia, partially offset by lower input costs and benefits from the cost savings actions implemented last year.

In millions Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Total Advanced Polymer Technologies - Net sales $ 47.9 $ 53.2 $ 95.9 $ 118.8

Segment EBITDA $ 9.8 $ 11.6 $ 19.3 $ 25.4

Net Sales Comparison of Three Months Ended March 31, 2024 and March 31, 2023:

Advanced Polymer Technologies (In millions)

Net Sales Comparison of Three and Six Months Ended June 30, 2024 and June 30, 2023:

Prior year Net sales Volume Price/Mix Currency effect Current year Net sales

Three months ended March 31, 2024 vs.

Three months ended June 30, 2024 vs.

$ 53.2 2.4 (6.6) (1.1) $ 47.9

Three Months Ended March 31, 2024 vs.

Six months ended June 30, 2024 vs.

$ 118.8 (9.3) (11.7) (1.9) $ 95.9

Three Months Ended June 30, 2024 vs.

Segment net sales.

The decrease of $17.6 million in 2024 was driven by a volume decline of $11.7 million (18 percent), unfavorable pricing and sales composition (mix) of $5.1 million (eight percent), and unfavorable foreign currency exchange of $0.8 million (one percent).

The decrease of $5.3 million in 2024 was driven by unfavorable pricing and sales composition (mix) of $6.6 million (12 percent) and unfavorable foreign currency exchange of $1.1 million (two percent), partially offset by a volume increase of $2.4 million (five percent).

Segment EBITDA.

The decrease of $1.8 million was driven by unfavorable pricing and sales composition (mix) of $6.6 million, partially offset by decreased manufacturing costs of $2.9 million, a volume increase of $1.0 million, decreased SG&A of $0.7 million, and favorable foreign currency exchange of $0.2 million.

Six Months Ended June 30, 2024 vs.

Segment net sales.

The decrease of $22.9 million in 2024 was driven by unfavorable pricing and sales composition (mix) of $11.7 million (10 percent), a volume decline of $9.3 million (eight percent), and unfavorable foreign currency exchange of $1.9 million (two percent).

Segment EBITDA.

The decrease of $6.1 million was driven by unfavorable pricing and sales composition (mix) of $12.0 million, a volume decline of $3.7 million, and unfavorable foreign currency exchange of $0.2 million.

The decrease was partially offset by decreased manufacturing costs of $5.3 million and decreased SG&A expenses of $0.9 million.

The decrease was partially offset by decreased manufacturing costs of $8.2 million and decreased SG&A of $1.6 million.

Use of Non-GAAP Financial Measure - Adjusted EBITDA

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We believe Adjusted EBITDA is a useful measure because it excludes the effects of financing and investment activities as well as non-operating activities.

Adjusted EBITDA is defined as net income (loss) plus interest expense, net, provision (benefit) for 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, (loss) gain on strategic investments, loss on CTO resales, and pension and postretirement settlement and curtailment (income) charges, net.

Adjusted EBITDA is defined as net income (loss) plus interest expense, net, provision (benefit) for income taxes, depreciation, amortization, restructuring and other (income) charges, net, goodwill impairment charge, acquisition and other-related (income) costs, litigation verdict charges, (loss) gain on strategic investments, loss on CTO resales, and pension and postretirement settlement and curtailment (income) charges, net.

This non-GAAP measure is not intended to replace the presentation of financial results in accordance with GAAP and investors should consider the limitations associated with these non-GAAP measures, including the potential lack of comparability of these measures from one company to another.

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Reconciliation of Net Income (Loss) to Adjusted EBITDA

Three Months Ended March 31,

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

In millions 2024 2023 2024 2023

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

13.1 19.2 75.9 24.8

Goodwill impairment charge (2)

349.1 — 349.1 —

Acquisition and other-related (income) costs, net (3)

(0.2) 1.8 0.1 4.5

Loss on CTO resales (4)

23.5 — 50.0 —

(Gain) loss on strategic investments (5)

(0.1) — 4.7 (19.2)

Adjusted EBITDA (Non-GAAP)

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These costs are excluded from our reportable segment results and for the purposes of calculating our non-GAAP financial performance measures.

Additionally, this adjustment includes $2.5 million of inventory charges recorded in cost of sales on our condensed consolidated statement of operations, associated with the repositioning of our Performance Chemicals segment in the three months ended March 31, 2024.

Refer to Note 11 within the Condensed Consolidated Financial Statements for more information.

Refer to Note 11 for more information.

(2) Refer to Note 7 for more information.

(3) Charges represent costs incurred to complete and integrate acquisitions and other strategic investments and include the expensing of the inventory fair value step-up resulting from the application of purchase accounting for acquisitions and certain legal and professional fees associated with the completion of acquisitions and strategic investments.

(3) Due to the DeRidder Plant closure, as noted in footnote 1 above, and the corresponding reduced CTO refining capacity, we may be obligated, under an existing CTO supply contract, to purchase CTO 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.

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

As of July 1, 2024, we have terminated the CTO supply contract that resulted in these excess CTO volumes.

As a result of the termination of this contract the purchases under the CTO supply contract ended, effective June 30, 2024.

Therefore, we are no longer required to purchase this excess CTO volume through 2025, and as such, we expect to end our CTO resale activity by the end of 2024.

Since these CTO resale activities are directly attributable to the Performance Chemicals’ repositioning, that is, they do not represent normal, recurring expenses necessary to operate our business, we have excluded the CTO resale (income) charges for the purposes of calculating our non-GAAP financial performance measures.

For the three months ended March 31, 2024, the loss on CTO resales relates to the Performance Chemicals segment.

Refer to Note 11 to the Condensed Consolidated Financial Statements for more information.

For the three and six months ended June 30, 2024, the loss on CTO resales relates to the Performance Chemicals segment.

Refer to Note 11 for more information.

(5) We exclude gains and losses from 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.

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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 4 to the Condensed Consolidated Financial Statements for more information.

Refer to Note 4 for more information.

Revision to Previously Reported Adjusted EBITDA (Non-GAAP)

We revised our March 31, 2024 non-GAAP Adjusted EBITDA calculation to remove previous adjustments of $2.5 million related to inventory lower of cost or market charges associated with the Company's Performance Chemicals' repositioning actions.

This change was made to address a request from the Securities and Exchange Commission to revise future filings to no longer exclude these adjustments from non-GAAP performance measures.

The following table presents the three months ended March 31, 2024 as previously reported and as revised.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

Three Months Ended March 31, 2024

In millions As previously reported As revised

Net income (loss) (GAAP) $ (56.0) $ (56.0)

Provision (benefit) for income taxes (15.9) (15.9)

Interest expense, net 22.3 22.3

Depreciation and amortization - Performance Materials 9.6 9.6

Depreciation and amortization - Performance Chemicals 12.4 12.4

Depreciation and amortization - Advanced Polymer Technologies 7.6 7.6

Restructuring and other (income) charges, net

Acquisition and other-related (income) costs 0.3 0.3

Loss on CTO resales

(Gain) loss on strategic investments 4.8 4.8

Adjusted EBITDA (Non-GAAP)

$ 76.9 $ 74.4

Adjusted EBITDA

Three Months Ended March 31, 2024 vs.

Three and Six Months Ended June 30, 2024 vs.

The factors that impacted adjusted EBITDA period to period are the same factors that affected earnings discussed in the Results of Operations and Segment Operating Results sections included within this MD&A.

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Net sales are expected to be between $1.40 billion and $1.50 billion for 2024.

We expect growth in our Performance Materials reportable segment on improved global automotive production over the prior year.

While our Performance Chemicals reportable segment revenue will reflect the impact of our Performance Chemicals repositioning, including the exit of certain low-margin businesses in our industrial specialties product line, we expect continued growth from our road technologies product line due to technology adoption and continued geographic expansion.

Our Advanced Polymer Technologies reportable segment is expected to see demand rebound in industrial markets in the second half of the year.

We expect growth in our Performance Materials reportable segment on improved global hybrid automotive production and lower than anticipated Battery Electric Vehicle penetration.

The Performance Chemicals reportable segment revenue will reflect the impact of our repositioning to improve profitability by focusing on higher margin end markets, as well as continued weak industrial demand.

We expect our road technologies product line revenue to grow through technology adoption and continued geographic expansion.

Our Advanced Polymer Technologies reportable segment anticipates revenues flat to prior year;

market improvements in Europe are mostly offset by a challenging China economy and industrial demand.

Adjusted EBITDA is expected to be between $350 million and $360 million for 2024.

We expect growth in our Performance Materials segment EBITDA, as volumes shift to higher-margin automotive carbon due to improved global automotive production and ongoing hybrid vehicle adoption.

In Performance Chemicals, we will have less exposure to certain lower-margin end markets from our industrial specialties product line due to the repositioning of the segment, and we expect to see continued growth in our road technologies product line which improves the margin profile for the segment.

Performance Chemicals will continue to be impacted by elevated CTO costs, which we expect to trend lower in the second half of the year.

We anticipate improved Advanced Polymer Technologies segment EBITDA on a combination of increased volumes and favorable manufacturing throughput.

We expect growth in our Performance Materials segment EBITDA, as volumes shift to higher-margin automotive carbon due to ongoing hybrid vehicle adoption.

Performance Chemicals will continue to be impacted by elevated CTO costs and the slow industrial market recovery.

We anticipate Advanced Polymer Technologies segment EBITDA will be flat vs prior year as favorable input costs offset lower prices.

A reconciliation of net income to adjusted EBITDA as projected for 2024 is not provided.

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We expect our cash flow provided by operations combined with cash on hand and available capacity under our revolving credit facility to be sufficient to fund our planned operations and meet our interest and other contractual obligations for at least the next twelve months.

As of March 31, 2024, our undrawn capacity under our revolving credit facility was $233.5 million.

As of June 30, 2024, our undrawn capacity under our revolving credit facility was $241.7 million.

Over the next twelve months, we expect to fund the following:

interest payments, capital expenditures, debt principal repayments, income tax payments, purchases pursuant to our stock repurchase program (and related excise tax payments), income tax payments, additional spending associated with our Performance Materials' intellectual property litigation, and restructuring activities such as the North Charleston plant transition, and the repositioning of our Performance Chemicals operating segment as further described within Note 11 to the Condensed Consolidated Financial Statements included within this Form 10-Q.

interest payments, capital expenditures, debt principal repayments, income tax payments, purchases pursuant to our stock repurchase program (and related excise tax payments), income tax payments, additional spending associated with our Performance Materials' intellectual property litigation, restructuring activities such as the repositioning of our Performance Chemicals reportable segment as further described within Note 11, and consideration for the termination of the CTO Supply Agreement further described within Note 16.

In addition, we may also evaluate and consider strategic acquisitions, joint ventures, or other transactions to create stockholder value and enhance financial performance.

In connection with such transactions, or to fund other anticipated uses of cash, we may modify our existing revolving credit facility, redeem all or part of our outstanding senior notes, seek additional debt financing, issue equity securities, or some combination thereof.

Cash and cash equivalents totaled $88.5 million at March 31, 2024.

Cash and cash equivalents totaled $107.4 million at June 30, 2024.

We continuously monitor deposit concentrations and the credit quality of the financial institutions that hold our cash and cash equivalents, as well as the credit quality of our insurance providers, customers, and key suppliers.

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

The cash and cash equivalents balance at March 31, 2024, included $84.9 million held by our foreign subsidiaries.

The cash and cash equivalents balance at June 30, 2024, included $97.9 million held by our foreign subsidiaries.

Cash and earnings of our foreign subsidiaries are generally used to finance our foreign operations and their capital expenditures.

We believe that our foreign holdings of cash will not have a material adverse impact on our U.S.

If these earnings were distributed, such amounts would be subject to U.S.

federal income tax at the statutory rate less the available foreign tax credits, if any, and would potentially be subject to withholding taxes in the various jurisdictions.

If these earnings were distributed, such amounts could be subject to U.S.

federal income tax at the statutory rate less the available foreign tax credits, if any, and could potentially be subject to withholding taxes in the various jurisdictions.

The potential tax implications of the repatriation of unremitted earnings are driven by facts at the time of distribution, therefore, it is not practicable to estimate the income tax liabilities that might be incurred if such cash and earnings were repatriated to the U.S.

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Debt and Finance Lease Obligations

Refer to Note 9 to the Condensed Consolidated Financial Statements included within this Form 10-Q for a summary of our outstanding debt obligations and revolving credit facility.

Refer to Note 9 for a summary of our outstanding debt obligations and revolving credit facility.

Other Potential Liquidity Needs

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

During the three months ended March 31, 2024 and 2023, we repurchased zero and $33.4 million, inclusive of $0.2 million excise tax, in common stock, representing zero and 449,475 shares of our common stock at a weighted average cost per share of zero and $73.86, respectively.

At March 31, 2024, $353.4 million remained unused under the 2022 Authorization.

During the three and six months ended June 30, 2024, we repurchased no common stock.

At June 30, 2024, $353.4 million remained unused under the 2022 Authorization.

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

Capital Expenditures

Projected 2024 capital expenditures are $90-$100 million.

We have no material commitments associated with these projected capital expenditures as of March 31, 2024 .

Cash flow comparison of the Three Months Ended March 31, 2024 and 2023

Three Months Ended March 31,

We have no material commitments associated with these projected capital expenditures as of June 30, 2024 .

Cash flow comparison of the Six Months Ended June 30, 2024 and 2023

Six Months Ended June 30,

In millions 2024 2023

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Cash flows provided by (used in) operating activities

Cash flows used in operating activities, which consists of net income (loss) adjusted for non-cash items including the cash impact from changes in operating assets and liabilities (i.e., working capital), totaled $12.1 million for the three months ended March 31, 2024.

Cash used in operating activities for the three months ended March 31, 2024, when compared to the three months ended March 31, 2023 decreased by $17.4 million.

This decrease was driven by reduced cash earnings of $59.8 million, higher spending on restructuring initiatives of $4.4 million and CTO resale spending of $19.8 million and higher cash interest paid of $1.7 million due primarily to rising interest rates when compared to 2023.

Partially offsetting these cash outflows was a net reduction in trade working capital of $34.6 million (including accounts receivable, inventory, and accounts payable), reduced employee compensation payments during the first quarter of 2024 of $28.5 million and a reduction in tax payments of $1.8 million as a result of the lower cash earnings.

Cash flows used in operating activities, which consists of net income (loss) adjusted for non-cash items including the cash impact from changes in operating assets and liabilities (i.e., working capital), totaled $17.6 million for the six months ended June 30, 2024.

Cash used in operating activities for the six months ended June 30, 2024, when compared to the six months ended June 30, 2023, decreased by $36.1 million.

This decrease was driven by reduced cash earnings of $107.3 million, CTO resale cash outflows of $45.3 million, and higher cash interest paid of $2.3 million due primarily to rising interest rates when compared to 2023.

Partially offsetting these cash outflows was a net reduction in trade working capital of $69.5 million (including accounts receivable, inventory, and accounts payable), reduced employee compensation payments $34.6 million, a reduction in tax payments of $1.4 million as a result of the lower cash earnings, and reduced spending on restructuring initiatives of $1.9 million.

Cash flows provided by (used in) investing activities

Cash used in investing activities in the three months ended March 31, 2024 was $16.3 million and was primarily driven by capital expenditures of $16.6 million.

In the three months ended March 31, 2024 and 2023, capital spending included the base maintenance capital supporting ongoing operations, and growth and cost improvement spending.

The change in Net cash provided by (used in) investing activities when compared to the prior year period is due to the first quarter 2023 sale of a strategic investment that resulted in a cash in flow of $31.4 million.

Capital expenditure categories Three Months Ended March 31,

Cash used in investing activities in the six months ended June 30, 2024 was $34.1 million and was primarily driven by capital expenditures of $34.7 million.

In the six months ended June 30, 2024 and 2023, capital spending included the base maintenance capital supporting ongoing operations, and growth and cost improvement spending.

The decrease in Net cash provided by (used in) investing activities when compared to the prior year period is primarily due to the first quarter 2023 sale of a strategic investment that resulted in a cash inflow of $31.4 million, offset by reduced capital expenditures of $12.4 million.

Capital expenditure categories Six Months Ended June 30,

In millions 2024 2023

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Cash flows provided by (used in) financing activities

Cash provided by financing activities in the three months ended March 31, 2024, was $23.4 million and was primarily driven by borrowings on our revolving credit facility and other borrowings of $81.4 million, partially offset by payments on our revolving credit facility of $55.0 million.

Cash used in financing activities in the three months ended March 31, 2023 was $5.6 million and was primarily driven by payments on revolving credit facility of $60.3 million, the repurchase of common stock of $33.4 million, and tax payments related to tax withholdings on restricted stock unit vestings of $4.5 million, partially offset by borrowings on our revolving credit facility of $90.3 million.

Cash provided by financing activities in the six months ended June 30, 2024, was $33.7 million and was primarily driven by borrowings on our revolving credit facility and other borrowings of $112.3 million, partially offset by payments on our revolving credit facility of $75.2 million.

Cash used in financing activities in the six months ended June 30, 2023 was $40.1 million and was primarily driven by payments on our revolving credit facility of $144.8 million, the repurchase of common stock of $92.1 million, and tax payments related to tax withholdings on restricted stock unit vestings of $4.5 million, partially offset by borrowings on our revolving credit facility of $197.8 million.

New Accounting Guidance

Refer to Note 2 to the Condensed Consolidated Financial Statements within this Form 10-Q for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on our Condensed Consolidated Financial Statements.

Refer to Note 2 for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on our Condensed Consolidated Financial Statements.

Critical Accounting Policies and Estimates

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis