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Item 7. Management’s Discussion and Analysis

2025-02-19 compared with 2024-02-22 · 267 added, 201 removed, 303 unchanged (61% of the section changed)

6 unchanged sentences

See "Cautionary Statements about Forward-Looking Statements" at the beginning of this Annual Report on Form 10-K for further discussion.

All references to notes (herein referred to as "Note") in this section refer to the notes accompanying the Consolidated Financial Statements included in Part II.

Item 8 within this Form 10-K.

Ingevity Corporation ("Ingevity," "the Company," "we," "us," or "our") 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:

Our products are used in a variety of demanding applications, including adhesives, agrochemicals, asphalt paving, bioplastics, coatings, elastomers, lubricants, paint for road markings, oil drilling, and automotive components.

We operate in three reportable segments:

Performance Materials, Performance Chemicals, and Advanced Polymer Technologies.

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

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

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

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

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

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

Recent Developments

Restructuring Charges

Performance Chemicals Repositioning

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

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

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

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

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

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

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

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

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

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

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

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

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

Alternative Fatty Acid Transition

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

To execute this transition, we halted all CTO-based production at Crossett in April.

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

During the year ended December 31, 2023, we incurred $22.1 million in costs that, in accordance with GAAP, could not be capitalized.

North Charleston Plant Transition

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

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

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

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

During the year ended December 31, 2023, we incurred $14.8 million of expense.

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

Supply Agreements

On March 20, 2023, Ingevity and WestRock Shared Services, LLC and WestRock MWV, LLC, on behalf of the affiliates of WestRock Company (“WestRock”), entered into an amended and restated crude tall oil and black liquor soap skimmings agreement, which amends and restates that certain crude tall oil and black liquor soap skimmings agreement, dated as of January 1, 2016, by and between Ingevity and WestRock, as amended by that Amendment No.1 to Crude Tall Oil And Black Liquor Soap Skimmings Agreement, dated as of March 1, 2017, and Amendment No.2 to Crude Tall Oil And Black Liquor Soap Skimmings Agreement, dated as of November 3, 2020.

On November 1, 2023, Ingevity Corporation and WestRock entered into Amendment No.1 to that certain Amended and Restated Crude Tall Oil and Black Liquor Soap Skimmings Agreement, dated as of March 20, 2023, by and between the Company and WestRock.

On March 21, 2023, Ingevity, Georgia-Pacific LLC, on behalf of itself and its subsidiaries (“Georgia-Pacific”), and GP Pine Chemicals LLC, a direct subsidiary of Georgia-Pacific LLC, entered into a Second Amendment to the Crude Tall Oil Supply Agreement, to amend certain terms of the Crude Tall Oil Supply Agreement, dated as of March 9, 2018, by and between Ingevity and Georgia-Pacific, as amended by that Amendment to the Crude Tall Oil Supply Agreement, dated as of May 1, 2020.

Performance Chemicals Reporting Unit

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

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

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

Our analysis included significant assumptions such as:

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

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

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

Interest Rate Risk Management

During the third quarter of 2024, we entered into a floating-to-fixed interest rate swap with a notional amount of $200.0 million to manage the variability of cash flows in the interest rate payments associated with our existing Secured Overnight Financing Rate ("SOFR") based interest payments, effectively converting $200.0 million of our floating rate debt to a fixed rate.

In accordance with the terms of this instrument, we receive floating rate interest payments based upon one-month U.S.

dollar SOFR and in return are obligated to pay interest at a fixed rate of 3.84 percent until August 2026.

The fair value of outstanding interest rate instruments at December 31, 2024 and 2023 was an asset of $0.6 million and zero, respectively.

Measurement Alternative Investments

For the year ended December 31, 2024, the Company identified triggering events indicating that investments being accounted for under the measurement alternative may be impaired and recognized impairment charges of $11.5 million, recorded in Other (income) expense, net on the consolidated statement of operations.

Impairment Assessment(s) and Goodwill Impairment Charge

Impairment Assessment

Our fiscal year 2024 annual goodwill impairment assessment was performed as of October 1, 2024.

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

The results of our October 1st annual review calculated that our APT reporting unit headroom, defined as the percentage difference between the fair value of a reporting unit and its carrying value, is 12 percent.

Since the fair value of our APT reporting unit is higher than the carrying value, we have concluded that no impairment to goodwill is necessary.

Our analysis includes 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.

There were no events or circumstances indicating that goodwill might be impaired as of December 31, 2024.

Segment Change

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.

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

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.

This reportable segment change has no impact on our consolidated operating results or the historical operating results of our Performance Materials operating segment.

Equity Method Investment

During the first quarter of 2023, we sold a strategic equity method investment for $31.5 million, resulting in a $19.3 million gain, recorded within "Other (income) expense, net" on the consolidated statement of operations.

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 crude tall oil (“CTO”) price inflation we were experiencing, and negatively impacting earnings and cash flow 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 assessment, dated October 1, 2023.

During the second quarter of 2024, our contracted long-term supplier of CTO 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, 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, we 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 represented all of the goodwill within the Performance Chemicals' reportable segment.

The charge was is included within Goodwill impairment charge on the consolidated statements of operations for the year ended December 31, 2024.

Specific to our long-lived assets, we determined that the undiscounted cash flows were in excess of the carrying values and therefore concluded that no impairment existed.

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 increased our focus on growing our most profitable Performance Chemicals product lines, such as road technologies, and diversifying our raw material stream to non-CTO based fatty acids.

The repositioning 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's historical annualized net sales.

The repositioning included the permanent closure of our Performance Chemicals CTO refinery and our manufacturing plant located in DeRidder, Louisiana (the “DeRidder Plant”), including the polyol production assets associated with the 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.

Additionally, in July 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.

This action included the closure of the Crossett Facility, as well as additional corporate and business cost reduction actions.

We ceased production at the Crossett Facility in the third quarter of 2024.

The actions referenced above, when combined with other targeted workforce reduction initiatives, during 2024 and 2023 resulted in the reduction of Ingevity's global workforce by 23 percent.

Specific to Performance Chemicals, the reduction represented approximately 40 percent of the reportable segment's workforce.

Expected Charges

We expect to incur total charges of approximately $350.0 million, excluding CTO resale activity as described below, associated with the Performance Chemicals repositioning, consisting of approximately $250.0 million in asset-related charges, approximately $25.0 million in severance and other employee-related costs, and approximately $75.0 million in other restructuring costs including decommissioning, dismantling and removal charges, and contract termination costs.

We expect approximately $250.0 million of the total charges to be non-cash and $100.0 million to be settled in cash.

Through December 31, 2024, we have incurred $311.8 million associated with these actions, including $244.8 million of non-cash asset-

related charges, excluding $7.4 million related to an asset retirement obligation ("ARO"), and $67.0 million of charges to be settled in cash, which includes the aforementioned ARO.

As of December 31, 2024, $54.5 million of the charges to be settled in cash have been paid and all non-cash charges have been incurred.

In total, we expect approximately $100 million of cash charges, including approximately $20-$25 million during 2025.

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, in the years ended December 31, 2024 and 2023, we recorded $6.3 million and $19.7 million, respectively, of non-cash, lower of cost or market, inventory charges to adjust the carrying value of the impacted inventory to what we will realize upon disposal, less disposal costs.

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

Since these inventory charges are directly attributable to the Performance Chemicals’ repositioning, that is, they do not represent normal, recurring expenses necessary to operate our business, we have excluded such impact from the financial results of our Performance Chemicals reportable segment.

Refer to Note 19 for more information.

CTO Resale Activity

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 the 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.

During the years ended December 31, 2024 and 2023, we incurred $52.7 million and $22.0 million of CTO resale losses, which are recorded as Other (income) expense, net on the consolidated statements of operations.

Refer to Note 2, under the section:

Non-operating income and expense , for more information.

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

As consideration for the early termination of the CTO supply contract, we made cash payments totaling $100.0 million.

The total charge was recorded within Other (income) expense, net on the consolidated statements of operations for the year ended December 31, 2024.

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

The CTO resale activity described above ended in 2024 and no excess CTO volumes were on hand at December 31, 2024.

Expected Savings and Impact

The Performance Chemicals' repositioning, which began in November 2023, was focused on reducing exposure to lower margin end-use markets of our industrial specialties product line, such as adhesives, publication inks, and oilfield.

Sales into these end-use markets represented approximately 45 percent of our industrial specialties product line historical annualized net sales.

As a result of this initiative, we expect to realize savings of approximately $95 million to $110 million.

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

During the year ended December 31, 2024, we realized cash savings of approximately $84.0 million, including $68.0 million in Cost of sales, $12.0 million in Selling, general, and administrative expenses, and $4.0 million in Research and technical expenses, respectively.

Collectively, these savings are 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 consolidated statements of operations.

We expect to realize the remaining savings in 2025.

In addition to the cash savings, we expect to realize approximately $15 million to $17 million in depreciation and intangible amortization expenses, respectively.

During the year ended December 31, 2024, we realized savings of approximately $10 million.

We expect to realize the remaining savings in 2025.

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.

Results of Operations

7 unchanged sentences

Restructuring and other (income) charges, net 186.2 170.2 13.8

Goodwill impairment charge 349.1 — —

Acquisition-related costs 0.3 3.6 5.0

11 unchanged sentences

$ 1,668.3 (106.3) 142.3 (12.2) $ 1,692.1

2024 Performance Summary

The Net sales decrease was driven primarily by the Performance Chemicals industrial specialties product line due to repositioning actions that have resulted in the reduction of sales to lower margin end-use markets, therefore reducing Net sales during the year by approximately $210 million.

Also contributing to the lower sales was unfavorable weather in key North American regions impacting the Performance Chemicals road technologies product line contributing to the decline in Net sales of $27.5 million, continued weakness in certain industrial end markets that negatively impacted sales in the Performance Chemicals industrial specialties product line that contributed to the reduction in Net sales of $56.4 million, and lower sales in our Advanced Polymer Technologies reportable segment of $15.4 million, partially offset by an increase in our Performance Materials reportable segment of $23.6 million.

Year Ended December 31, 2024 vs.

The sales increase in 2023 was driven by favorable pricing and sales composition (mix) of $142.3 million (nine percent), primarily attributed to an increase in Performance Chemicals of $93.1 million, partially offset by volume decline of $106.3 million (six percent), and unfavorable foreign exchange impacts of $12.2 million (one percent).

The Net sales decrease in 2024 was driven by volume decline of $274.9 million (16 percent), unfavorable foreign exchange impacts of $9.8 million (one percent), and unfavorable pricing and sales mix of $1.0 million (zero percent).

Year Ended December 31, 2023 vs.

The sales increase in 2022 was driven by favorable pricing and sales composition (mix) of $294.2 million (21 percent), primarily attributed to an increase in Performance Chemicals of $216.9 million, and a volume increase of $9.4 million (one percent), offset slightly by unfavorable foreign exchange impacts of $26.8 million (two percent).

The Net sales increase in 2023 was driven by favorable pricing and sales mix of $142.3 million (nine percent), primarily attributed to an increase in Performance Chemicals of $93.1 million, partially offset by volume decline of $106.3 million (six percent), and unfavorable foreign exchange impacts of $12.2 million (one percent).

Year Ended December 31, 2024 vs.

Gross profit decrease of $98.2 million was driven by increased manufacturing costs of $158.6 million due primarily to significant CTO raw material cost pressure within our industrial specialties product line in our Performance Chemicals reportable segment, unfavorable sales volume of $46.9 million, inventory charges of $19.7 million and unfavorable foreign exchange impacts of $0.9 million, partially offset by favorable pricing and sales composition (mix) of $127.9 million.

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

Gross profit decrease of $17.2 million was driven by unfavorable sales volume of $35.8 million, unfavorable pricing and sales mix of $6.4 million, and unfavorable foreign exchange impacts of $2.9 million, partially offset by decreased manufacturing costs of $27.9 million.

Gross profit includes the realized savings of $68.0 million from the Performance Chemicals repositioning action initiated in 2023.

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

Year Ended December 31, 2023 vs.

Gross profit increase of $57.3 million was driven by favorable pricing and sales composition (mix) of $291.5 million, and favorable sales volume of $6.3 million, partially offset by increased manufacturing costs of $238.0 million primarily due to raw material and energy cost inflationary pressure, and unfavorable foreign currency exchange of $2.5 million.

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 both segments.

Gross profit decrease of $98.2 million was driven by increased manufacturing costs of $158.6 million primarily due to significant CTO raw material cost pressure within our industrial specialties product line in our Performance Chemicals reportable segment, unfavorable sales volume of $46.9 million, inventory charges of $19.7 million, and unfavorable foreign currency exchange impacts of $0.9 million, partially offset by favorable pricing and sales mix of $127.9 million.

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

1 unchanged sentence

Selling, general, and administrative ("SG&A") expenses were $166.7 million (12 percent of Net sales) and $183.7 million (11 percent of Net sales) for the years ended December 31, 2024 and 2023, respectively.

The decrease in SG&A expenses is primarily due to lower employee-related costs of $18.4 million, and decreased travel and other miscellaneous costs of $6.9 million, partially offset by increased amortization expense of $10.2 million due to the Ozark Materials acquisition.

Overall, SG&A decreased by approximately $17.0 million or nine percent.

Our Performance Chemicals' repositioning actions resulted in a non-cash reduction of intangible amortization expense of $11.4 million and $12.0 million in cash savings.

These combined savings were partially offset by increased spending on commercial activities of $1.0 million and increased variable incentive compensation of $5.4 million, driven by adjustments recognized in the year ended December 31, 2023, that did not repeat in 2024.

Year Ended December 31, 2023 vs.

SG&A expenses were $183.7 million (11 percent of Net sales) and $198.8 million (12 percent of Net sales) for the years ended December 31, 2023 and 2022, respectively.

The increase in SG&A expenses is primarily due to higher employee-related costs of $11.3 million and increased travel and other miscellaneous costs of $10.6 million.

This was partially offset by a decrease in litigation defense costs of $2.4 million.

Research and technical expenses

1 unchanged sentence

Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, totaling 2.0 percent of sales in the year ended December 31, 2024, compared to 1.9 percent in the year ended December 31, 2023, and 1.8 percent in the year ended December 31, 2022.

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

Overall, Research and technical expense decreased by $3.7 million in 2024, compared to 2023, which included approximately $4.0 million realized from the Performance Chemicals repositioning actions initiated in 2023.

Restructuring and other (income) charges, net

Years Ended December 31, 2024, 2023, and 2022

Restructuring and other (income) charges, net, were $170.2 million, $13.8 million, and $16.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

For the year ended December 31, 2023, asset disposal charges were $105.6 million, severance and other employee-related costs were $18.4 million, and other restructuring charges were $1.6 million.

Additionally, alternative fatty acid transition costs were $22.1 million, costs associated with the North Charleston plant transition were $14.8 million, and costs related to our digital transformation initiative were $7.7 million.

For the years ended December 31, 2022 and 2021, the majority of the charges were related to our digital transformation initiative.

See Note 15 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information.

Years Ended December 31,

In millions 2024 2023 2022

Work force reductions and other $ 2.3 $ 12.5 $ —

Performance Chemicals' repositioning 172.7 113.1 —

Restructuring charges $ 175.0 $ 125.6 $ —

Alternative feedstock transition — 22.1 —

North Charleston plant transition 11.2 14.8 —

Business transformation costs — 7.7 13.8

Other (income) charges, net $ 11.2 $ 44.6 $ 13.8

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

$ 186.2 $ 170.2 $ 13.8

_______________

(1) See Note 15 for more information.

Goodwill impairment charge

Years Ended December 31, 2024, 2023, and 2022

Goodwill impairment charge of $349.1 million for the year ended December 31, 2024 within our Performance Chemicals reporting unit.

See Note 8 for more information.

Acquisition-related costs

2 unchanged sentences

For the twelve months ended December 31, 2024, 2023, and 2022, all charges related to the integration of Ozark Materials into our Performance Chemicals segment.

For the twelve months ended December 31, 2021, all charges incurred were in connection with the Caprolactone acquisition into our Advanced Polymer Technologies segment.

See Note 16 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information.

See Note 16 for more information.

Other (income) expense, net

2 unchanged sentences

In millions 2024 2023 2022

Gain (loss) on sale of strategic investment (1)

(Gain) loss on strategic investments (1)

$ 11.4 $ (19.3) $ —

Foreign currency transaction (gain) loss 4.2 3.7 2.3

CEO severance charges 4.8 — —

Loss on CTO resales (2)

Litigation verdict charge (3)

CTO supply contract termination charges (2)

Other (income) expense, net (3.3) (0.7) (4.0)

1 unchanged sentence

_______________

(1) See Note 5 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information.

(2) See Note 2 and Note 15 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information.

(3) See Note 18 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information.

(1) See Note 5 for more information.

(2) See Note 15 for more information.

Interest expense

3 unchanged sentences

Finance lease obligations (1)

$ 7.3 $ 7.3 $ 7.5

Revolving credit facility and term loan (2) (3)

1 unchanged sentence

Senior Notes (3)

22.4 22.4 33.1

Accounts receivable securitization (3)

2 unchanged sentences

_______________

(1) The increase in interest expense was driven by higher average debt levels during 2023 due to the October 2022, $325.0 million acquisition of Ozark Materials, as well as higher average interest rates in 2023 compared to prior years.

(2) See Note 10 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information.

(3) See Note 18 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information.

(1) See Note 13 for more information.

(2) The increase in interest expense was driven by higher average debt levels during 2024 and 2023 due to the October 2022, $325.0 million acquisition of Ozark Materials, as well as higher average interest rates compared to prior years.

(3) See Note 10 for more information.

(4) See Note 18 for more information.q

Interest income

6 unchanged sentences

Floating-to-fixed interest rate swaps (2)

Other 3.9 2.6 1.5

Total interest income $ 7.7 $ 6.3 $ 7.5

_______________

(1) See Note 5 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information.

(2) See Note 9 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information.

(1) See Note 5 for more information.

(2) See Note 9 for more information.

(3) Primarily consists of bank interest.

Provision (benefit) for income taxes

1 unchanged sentence

For the years ended December 31, 2024, 2023, and 2022, our effective tax rate was 19.7 percent, 46.5 percent, and 21.5 percent respectively.

An explanation of the change in the effective tax rate is presented in Note 17 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K.

An explanation of the change in the effective tax rate is presented in Note 17.

Segment Operating Results

2 unchanged sentences

Segment Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") is the primary measure used by the Company's chief operating decision maker to evaluate the performance of and allocate resources among our operating segments.

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

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

We have excluded the following items from segment EBITDA:

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

In general, the accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies in Note 2 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K.

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, CTO supply contract termination charges, 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 Note 2.

Performance Materials

2024 Performance Summary

Our Performance Materials segment experienced solid automotive volume growth from improved semiconductor chip availability and China automobile production stimulus.

The segment also recognized volume improvement in food, water, beverage, and chemical purification products and we were able to increase prices to capture more of the value from our highly differentiated carbon.

These top-line improvements were largely offset by continued pressure from higher raw material input costs and higher logistic costs driven by inflation.

The strengthening of the U.S.

dollar against the Chinese renminbi and the euro also contributed to the pressure on EBITDA when compared to the prior year.

Performance Materials delivered record Net sales, Segment EBITDA, and Segment EBITDA margins.

Sales growth of four percent was driven by higher volume and improved price and mix.

There are two components to mix that are key to understanding this reportable segment.

The segment benefits from larger vehicles, such as trucks and sport utility vehicles, as well as more hybrids and internal combustion engine vehicles versus all electric vehicles, as these vehicles contain more of our activated carbon content.

Regional mix is also important as North America, which is nearly 50 percent of Performance Material sales, is our most profitable region due to the typica lly larger size of vehicles requiring more content, and this region also has the highest emissions control standards in the world requiring more advanced forms of our activated carbon product.

Asia Pacific is also an important region, representing about 40 percent of total Performance Materials net sales.

Within Asia Pacific, about half of our net sales are in China and the remaining are made up primarily of South Korea and Japan.

All of these countries have strict emissions control standards or strong export markets where our activated carbon plays an important role in meeting regulations.

Europe is our least impactful region due to the regulatory environment favoring electric vehicles, and also because European emissions standards lag behind North America and Asia Pacific.

Segme nt EBITDA for Performance Materials increased 11 percent to $319.1 million, with Segment EBITDA margins for the year of 52.3 percent.

This record result was primarily driven by operational improvements that enabled our production operations to run more efficiently which reduced our input costs by using less natural gas and also improved yields.

In millions Years Ended December 31,

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Segment net sales.

The increase in 2023 was driven by favorable pricing and sales composition (mix) of $32.2 million (six percent), and a volume increase of $17.3 million (three percent), partially offset by unfavorable foreign currency exchange impacts of $12.0 million (two percent).

The increase of $23.6 million in 2024 was driven by favorable pricing and sales mix of $17.3 million (three percent), and a volume increase of $11.2 million (two percent), partially offset by unfavorable foreign currency exchange impacts of $4.9 million (one percent).

Segment EBITDA.

Segment EBITDA increased by $34.4 million due to pricing and sales composition (mix) of $21.1 million, decreased SG&A expenses and research and technical costs of $11.6 million, and favorable volume of $10.9 million.

The increase was partially offset by higher manufacturing costs of $8.8 million, and unfavorable foreign currency exchange impacts of $0.4 million.

The increase of $32.5 million in 2024 was driven by decreased manufacturing costs of $26.0 million, pricing and sales mix of $11.9 million, and favorable volume of $6.3 million.

The increase was partially offset by higher SG&A expenses and research and technical costs of $10.9 million, and unfavorable foreign currency exchange and other charges of $0.8 million.

Year Ended December 31, 2023 vs.

Segment net sales.

The increase in 2022 was driven by a volume increase of $28.6 million (six percent) and favorable pricing of $14.9 million (three percent), partially offset by unfavorable foreign currency exchange impacts of $11.8 million (two percent).

The increase in 2023 was driven by favorable pricing and sales mix of $32.2 million (six percent), and a volume increase of $17.3 million (three percent), partially offset by unfavorable foreign currency exchange impacts of $12.0 million (two percent).

Segment EBITDA.

Segment EBITDA increased by $2.8 million due to favorable volume of $15.6 million, pricing and sales composition (mix) of $13.8 million, and decreased SG&A expenses and research and technical costs of $0.5 million.

The increase was largely offset by higher manufacturing costs of $21.5 million, and unfavorable foreign currency exchange impacts of $5.6 million.

Segment EBITDA increased by $34.4 million due to pricing and sales mix of $21.1 million, decreased SG&A expenses and research and technical costs of $11.6 million, and favorable volume of $10.9 million.

The increase was partially offset by higher manufacturing costs of $8.8 million, and unfavorable foreign currency exchange impacts of $0.4 million.

Performance Chemicals

2024 Performance Summary

Our Performance Chemicals segment grew revenue versus the prior year on continued price improvement and favorable mix upgrade to higher margin products.

These price increases were necessary to keep pace with the inflationary increases related to raw material, energy, and logistic costs.

Road Technologies sales increased by 53.3 percent due primarily to improved volumes and price increases.

Volume growth was driven by technology adoption and highway funding in the United States, as well as the acquisition of Ozark Materials.

Industrial Specialties sales decreased by 16.0 percent driven by volume declines attributed primarily to weak demand across all end markets, particularly adhesives and printing inks.

Performance Chemicals net sales of $608.2 million declined almost $300 million, a 33 percent decline, versus the prior year primarily as a result of our repositioning actions.

Approximately $210 million of the decline in net sales reflects the exit of lower-margin end markets in our industrial specialties product line as we continue to focus on maximizing profitability.

The remaining net sales decline was due primarily to lost sales as customers sought alternative suppliers in light of our repositioning actions and lower road technologies product line sales attributed to adverse weather in the key states within the U.S.

The segment generated Segment EBITDA of $14.7 million for the year.

T he year over year decline in Segment EBITDA was driven by higher CTO costs and lower volumes, particularly in the road technologies product line, partially offset by cost savings realized due to the Performance Chemicals repositioning.

Years Ended December 31,

In millions 2024 2023 2022

Total Performance Chemicals - Net sales $ 608.2 $ 902.1 $ 875.1

Road Technologies product line 342.3 369.8 241.3

Industrial Specialties product line 265.9 532.3 633.8

Total Performance Chemicals - Net sales $ 902.1 $ 875.1 $ 688.9

Segment EBITDA $ 14.7 $ 65.7 $ 160.4

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$ 902.1 (293.2) 0.5 (1.2) $ 608.2

Road Technologies product line 369.8 (30.8) 3.7 (0.4) 342.3

Industrial Specialties product line 532.3 (262.4) (3.2) (0.8) 265.9

Year Ended December 31, 2023 vs 2022

$ 875.1 (65.3) 93.1 (0.8) $ 902.1

Road Technologies product line 241.3 98.4 30.4 (0.3) 369.8

Industrial Specialties product line 633.8 (163.7) 62.7 (0.5) 532.3

Year Ended December 31, 2024 vs.

Segment net sales.

The sales increase was driven by favorable pricing and sales composition (mix) of $93.1 million (11 percent), comprised of industrial specialties ($62.7 million) and road technologies product lines ($30.4 million), respectively.

The increase was partially offset by a volume decrease of $65.3 million (seven percent), driven by a decline in industrial specialties ($167.7 million), partially offset by growth in road technologies ($102.4 million).

Unfavorable foreign currency exchange also impacted Net sales by $0.8 million (zero percent).

The decrease of $293.9 million in 2024 was driven by a volume decrease of $293.2 million (33 percent), as a result of a decrease in industrial specialties ($262.4 million) and road technologies ($30.8 million), and unfavorable foreign currency exchange of $1.2 million (zero percent).

The decrease was partially offset by favorable pricing

and sales mix of $0.5 million (zero percent), comprised of road technologies ($3.7 million), offset by industrial specialties ($3.2 million).

Segment EBITDA.

These increases were partially offset by favorable pricing and sales composition (mix) of $89.7 million and decreased SG&A expenses of $7.6 million.

The decrease of $51.0 million in 2024 was driven by a volume decrease of $45.0 million, higher manufacturing costs of $21.4 million, primarily due to higher cost CTO, and unfavorable foreign currency exchange and other charges of $5.1 million.

The decrease was partially offset by favorable pricing and sales mix of $0.5 million and lower SG&A expenses of $20.0 million, which benefited from the Performance Chemicals' repositioning and cost savings initiatives implemented in 2023.

Year Ended December 31, 2023 vs.

Segment net sales.

The sales increase was driven by favorable pricing and product mix of $216.9 million (31 percent) in industrial specialties ($201.8 million) and road technologies product lines ($15.1 million), partially offset by a volume decline of $26.1 million (four percent), and unfavorable foreign currency exchange impacting Net sales by $4.6 million (one percent).

The sales increase was driven by favorable pricing and sales mix of $93.1 million (11 percent), comprised of industrial specialties ($62.7 million) and road technologies product lines ($30.4 million), respectively.

The increase was partially offset by a volume decline of $65.3 million (seven percent), driven by a decline in industrial specialties ($163.7 million), partially offset by growth in road technologies ($98.4 million).

Unfavorable foreign currency exchange also impacted Net sales by $0.8 million (zero percent).

Segment EBITDA.

Segment EBITDA increased $19.9 million, mainly due to favorable pricing and product mix of $217.8 million, and favorable foreign currency exchange impacts and other miscellaneous charges of $1.6 million.

These increases were partially offset by higher manufacturing costs of $167.5 million due to inflationary raw material and energy costs, increased SG&A expenses of $20.0 million due to increased spending on growth initiatives, compensation, and travel, and volume decline of $12.0 million.

Segment EBITDA decreased $94.7 million, mainly due to higher manufacturing costs of $157.8 million primarily due to increased CTO cost, a volume decline of $34.1 million, and unfavorable foreign currency exchange impacts of $0.1 million, These increases were partially offset by favorable pricing and sales mix of $89.7 million, and decreased SG&A expenses of $7.6 million.

Advanced Polymer Technologies

2024 Performance Summary

Our Advanced Polymer Technologies segment sales decreased compared to the prior year due to market weakness across the segment's end markets in all regions, partially offset by higher prices.

Segment EBITDA increase was driven primarily by profit recovery initiatives, including pricing actions and product mix management, and lower input costs.

Advanced Polymer Technologies generated higher volumes year over year as the segment made progress in end markets such as elastomers, adhesives, and coatings;

however, unfavorable overall product mix and selective price concessions contributed to a revenue decline of eight percent.

The segment benefited from lower energy costs and an improvement in utilization rates as a result of higher volumes but these cost savings were more than offset by the revenue decline, resulting in segment EBITDA of $35.2 million and a segment EBITDA margin of 18.7 percent.

In millions Years Ended December 31,

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Segment net sales.

The sales decrease was driven by a volume decline of $58.3 million (24 percent), partially offset by favorable pricing and sales composition (mix) of $17.0 million (seven percent), and favorable foreign currency exchange of $0.6 million (zero percent).

The decrease of $15.4 million in 2024 was driven by unfavorable pricing and sales mix of $18.8 million (nine percent), and unfavorable foreign currency exchange of $3.7 million (two percent), partially offset by volume growth of $7.1 million (three percent).

Segment EBITDA.

Segment EBITDA increased $4.5 million, mainly due to favorable pricing and sales composition (mix) of $17.1 million, decreased manufacturing costs of $9.9 million, and decreased SG&A expenses of $5.9 million.

These increases were partially offset by volume declines of $23.7 million, and unfavorable foreign currency exchange impacts and other miscellaneous charges of $4.7 million.

The decrease of $9.3 million in 2024 was driven by unfavorable pricing and sales mix of $18.8 million, and unfavorable foreign currency exchange impacts and other charges of $2.8 million.

The decrease was partially offset by lower manufacturing costs of $8.8 million, volume growth of $2.9 million, and lower SG&A expenses of $0.6 million.

Year Ended December 31, 2023 vs.

Segment net sales.

The sales increase was driven by favorable pricing and product mix of $62.4 million (34 percent), and favorable volume of $6.9 million (four percent), partially offset by unfavorable foreign currency exchange of $10.4 million (six percent).

The sales decrease was driven by a volume decline of $58.3 million (24 percent), partially offset by favorable pricing and sales mix of $17.0 million (seven percent), and favorable foreign currency exchange of $0.6 million (zero percent).

Segment EBITDA.

Segment EBITDA increased $7.7 million, mainly due to favorable pricing and product mix of $60.1 million, favorable foreign currency exchange impacts and other miscellaneous charges of $4.8 million, and an increase in volume of $2.7 million.

These increases were partially offset by higher manufacturing costs of $50.9 million due to inflationary raw material and energy costs, and increased SG&A expenses of $9.0 million due to increased spending on growth initiatives, compensation, and travel.

Segment EBITDA increased $4.5 million, mainly due to favorable pricing and sales mix of $17.1 million, decreased manufacturing costs of $9.9 million, and decreased SG&A expenses of $5.9 million.

These increases were partially offset by volume declines of $23.7 million, and unfavorable foreign currency exchange impacts and other miscellaneous charges of $4.7 million.

Use of Non-GAAP Financial Measures

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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, gain on sale of 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, acquisition and other-related (income) costs, goodwill impairment charge, litigation verdict charges, (loss) gain on strategic investments, loss on CTO resales, CTO supply contract termination charges, 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.

A reconciliation of Adjusted EBITDA to net income is set forth within this section.

Reconciliation of Net Income to Adjusted EBITDA

Reconciliation of Net Income (Loss) to Adjusted EBITDA

Years Ended December 31,

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Provision (benefit) for income taxes (105.3) (4.7) 58.0

Depreciation and amortization - Performance Materials 38.3 36.1 36.8

Depreciation and amortization - Performance Chemicals 53.2 43.1 40.0

Depreciation and amortization - Advanced Polymer Technologies 31.3 29.6 33.1

Depreciation and amortization (1)

108.3 122.8 108.8

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

186.2 170.2 13.8

Goodwill impairment charge (3)

Acquisition and other-related costs (4)

Loss on CTO resales (5)

Gain on sale of strategic investment (4)

Litigation verdict charge (5)

CTO supply contract termination charges (6)

(Gain) loss on strategic investments (7)

11.4 (19.3) —

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

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_______________

(1) Refer to Note 19 for more information.

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

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

Additionally, this adjustment includes $19.7 million of inventory charges recorded in Cost of sales on our consolidated statement of operations, associated with the repositioning of our Performance Chemicals segment in the year ended December 31, 2023.

Refer to Note 15 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information on the charges.

(2) 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.

Refer to Note 16 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information.

(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.

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 year ended December 31, 2023, the loss on CTO resales relates to the Performance Chemicals segment.

Refer to Note 2 and Note 15 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information.

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

Refer to Note 15 for more information on the charges.

(3) Refer to Note 8 for more information.

(4) 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.

Refer to Note 16 for more information.

(5) 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 at amounts in excess of required CTO volumes.

As of July 1, 2024, we 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, and we ended our CTO resale activity as of December 31, 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 years ended December 31, 2024 and 2023, the loss on CTO resales relates to the Performance Chemicals segment.

Refer to Note 2 and Note 15 for more information.

(6) As consideration for the termination of the CTO supply contract, we made cash payments totaling $100.0 million during 2024.

Since this contract termination is directly attributable to the Performance Chemicals’ repositioning, that is, it does not represent normal, recurring expenses necessary to operate our business, we have excluded the CTO supply contract termination charges for the purposes of calculating our non-GAAP financial performance measures.

Refer to Note 2 and Note 15 for more information.

(7) 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.

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

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

Refer to Note 5 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information.

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

Refer to Note 18 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information.

Refer to Note 5 for more information.

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

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

Refer to Note 14 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information.

Refer to Note 14 for more information.

Revision to Previously Reported Adjusted EBITDA (Non-GAAP)

We revised our December 31, 2023 non-GAAP Adjusted EBITDA calculation to remove previous adjustments of $19.7 million related to inventory lower of cost or market charges associated with the Company's Performance Chemicals repositioning.

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 twelve months ended December 31, 2023 as previously reported and as revised.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

Twelve Months Ended December 31, 2023

In millions As previously reported As revised

Net income (loss) (GAAP)

$ (5.4) $ (5.4)

Interest expense 93.3 93.3

Interest income (6.3) (6.3)

Provision (benefit) for income taxes (4.7) (4.7)

Depreciation and amortization 122.8 122.8

Restructuring and other (income) charges, net 189.9 170.2

Acquisition and other-related costs

Loss on CTO resales 22.0 22.0

Gain on sale of strategic investment (19.3) (19.3)

Adjusted EBITDA (Non-GAAP)

$ 396.8 $ 377.1

Adjusted EBITDA

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Net sales are expected to be between $1.3 billion and $1.4 billion for 2025.

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 Technology 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 as well as growth from their sustainable products in the consumer packing, agriculture chemicals, and apparel end-use markets.

We expect growth in our Performance Materials reportable segment due to increased pricing on select products while global automotive production remains flat compared to the prior year.

For our Performance Chemicals reportable segment, we expect the industrial specialties product line to deliver Net sales between $160 and $200 million, which reflects the impact of our repositioning actions to improve profitability by focusing on higher margin end markets, as well as continued weak industrial demand.

Additionally, we expect our road technologies product line Net sales to improve compared to 2024 as adverse weather conditions experienced in key states within the U.S.

negatively impacted 2024.

Our Advanced Polymer Technologies reportable segment anticipates modest growth as industrial demand recovery will be tempered by continued competitive dynamics, particularly in Asia.

Adjusted EBITDA is expected to be between $400 million and $415 million for 2025.

We expect growth in our Performance Materials 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 businesses in the Industrial Specialties product line due to the repositioning of the segment, and we expect to see continued growth in our Road Technologies product line.

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

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

We expect modest improvement in our Performance Materials reportable segment EBITDA, while maintaining segment EBITDA margins around 50 percent, as improved pricing and continued operational efficiencies will be muted by expected higher input costs, particularly energy, and higher spend on innovation activities.

In our Performance Chemicals reportable segment, we expect improved segment EBITDA, with segment EBITDA margins in the mid-to-high single digits.

The segment will benefit from revenue growth in our road technologies product line and further savings from our repositioning actions.

While we expect to benefit from lower CTO costs in the latter part of the year, we expect these benefits to be offset by price concessions to align with market pricing.

We anticipate that our Advanced Polymer Technologies segment EBITDA will improve versus prior year as our enacted pricing and mix strategies will produce segment EBITDA margins of around 20 percent.

A reconciliation of net income to adjusted EBITDA as projected for 2025 is not provided.

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additional acquisition and other-related income (costs);

litigation verdict charges;

additional pension and postretirement settlement and curtailment (income) charges;

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

interest payments, capital expenditures, expenditures related to our business transformation initiative, 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 15 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K.

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

debt principal repayments, interest payments, capital expenditures, income tax payments, additional spending associated with our Performance Materials' intellectual property litigation, and restructuring activities such as the repositioning of our Performance Chemicals reportable segment as further described within Note 15.

In addition, we may also evaluate and consider purchases pursuant to our stock repurchase program (and related excise tax payments), 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.

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Debt and Finance Lease Obligations

Refer to Note 10 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for a summary of our outstanding debt obligations and revolving credit facility.

Refer to Note 10 for a summary of our outstanding debt obligations and revolving credit facility, and Note 13 for details of our lease obligations.

Other Potential Liquidity Needs

Share Repurchases

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

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

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

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

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

During the year ended December 31, 2024, we repurchased no common stock.

At December 31, 2024, $353.4 million remained available for purchase under our Board-authorized repurchase program.

Capital Expenditures

Projected 2024 capital expenditures are expected to be $90 million to $110 million.

Projected 2025 capital expenditures are expected to be $50 million to $70 million, the majority of which will be spent on maintenance and safety, health and environment projects.

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

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Cash flows provided by (used in) operating activities

Cash provided by (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 $205.1 million for the year ended December 31, 2023.

Cash provided by (used in) operating activities for 2023 was driven by lower cash earnings of $57.2 million and a net increase in overall working capital of $48.3 million, despite a decrease in trade working capital (accounts receivable, inventory, and accounts payable) of $15.6 million, compared to 2022.

Cash flow from operations was further reduced by an increase in cash interest paid of $27.9 million due to higher average debt levels resulting from the October 2022 acquisition of Ozark Materials and rising interest rates during 2023.

This was partially offset by a reduction in tax payments of $25.1 million.

Cash provided by (used in) operating activities for 2022 was driven by higher cash earnings of $41.4 million offset by a net increase in overall working capital of $12.9 million which includes an increase in trade working capital (accounts receivable, inventory, and accounts payable) of $8.3 million.

The build in trade working capital was due primarily to higher end of year accounts receivable on higher sales and higher inventory value due to inflation experienced during 2022 compared to 2021.

Cash flow from operations was further reduced by an increase in cash interest paid of $7.3 million primarily due to rising interest rates during 2022 compared to 2021, as well as an increase in cash tax payments of $1.1 million.

The higher tax payments were driven by the higher year over year earnings offset by refunds received in 2022 on prior years' earnings.

Cash provided by 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 $128.6 million for the year ended December 31, 2024.

Cash provided by operating activities for 2024, when compared to 2023, decreased by $76.5 million.

This decrease was driven by a payment to terminate a Performance Chemicals CTO contract of $100.0 million, reduced cash earnings of $75.8 million, CTO resale cash outflows of $35.5 million, increased spending on restructuring initiatives of $15.3 million, and an increase in cash interest paid of $2.7 million due primarily to rising interest rates when compared to 2023.

Partially offsetting these cash outflows was a net reduction in trade working capital (accounts receivable, inventory, and accounts payable) of $108.5 million, reduced employee variable compensation of $41.5 million, and a reduction in tax payments of $2.8 million.

Cash provided by operating activities for 2023, when compared to 2022, decreased by $108.3 million.

This decrease was driven by lower cash earnings of $41.4 million, increased employee compensation payments of $38.9 million, increased spending on restructuring initiatives of $30.2 million, an increase in cash interest paid of $27.9 million due to higher average debt levels resulting from the October 2022 acquisition of Ozark Materials and rising interest rates during 2023, and CTO resale cash outflows of $10.6 million.

This was partially offset by a reduction in tax payments of $25.1 million, and a decrease in trade working capital (accounts receivable, inventory, and accounts payable) of $15.6 million.

Cash flows provided by (used in) investing activities

For the year ended December 31, 2023, investing activities were driven by capital spending, offset partially by the proceeds from the sale of a strategic investment.

Cash used in investing activities for 2024 was primarily driven by capital spending.

Capital spending included the base maintenance capital supporting ongoing operations and cost improvement and growth spending.

Cash used in investing activities for 2023 was driven by capital spending, offset partially by the proceeds from the sale of a strategic investment (refer to Note 5 for more information).

Capital spending included the base maintenance capital supporting ongoing operations and cost improvement and growth spending in our Advanced Polymer Technologies segment.

Also, during the year ended December 31, 2023, we sold a strategic investment (refer to Note 5 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information).

For the year ended December 31, 2022, investing activities were driven by capital spending, the Ozark Materials acquisition, and the purchase of strategic investments.

Capital spending included the base maintenance capital supporting ongoing operations and cost improvement and growth spending primarily related to our business transformation initiative (refer to Note 15 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information).

Also, during the year ended December 31, 2022, we acquired Ozark Materials (refer to Note 16 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information) and we entered into multiple strategic investments (refer to Note 5 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for more information).

Capital expenditure categories Years Ended December 31,

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Cash flows provided by (used in) financing activities

Cash used in financing activities for the year ended December 31, 2023, was $99.9 million and was driven by share repurchases of $92.1 million, net payments on the revolving credit facility of $87.9 million, and offset by proceeds from our accounts receivable securitization facility of $81.3 million.

Cash provided by financing activities for the year ended December 31, 2022, was $48.1 million and was driven by net proceeds from the revolving credit facility of $828.0 million, offset by payments on long-term borrowings of $628.1 million, payments, and share repurchases of $145.2 million.

Cash used in financing activities for the year ended December 31, 2024, was $70.2 million and was primarily driven by net payments on the revolving credit facility and other borrowings of $66.1 million.

Cash used in financing activities for the year ended December 31, 2023, was $99.9 million and was driven by share repurchases of $92.1 million, and net payments on the revolving credit facility and other borrowings of $87.9 million, offset by proceeds from our accounts receivable securitization facility of $81.3 million.

New Accounting Guidance

Refer to Note 3 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on our Consolidated Financial Statements.

Refer to Note 3 for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on our Consolidated Financial Statements.

Critical Accounting Policies and Estimates

Our principal accounting policies are described in Note 2 to the Consolidated Financial Statements included within Part II.

Item 8 of this Form 10-K.

Our principal accounting policies are described in Note 2.

Our Consolidated Financial Statements are prepared in conformity with GAAP.

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

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

If the carrying value of a reporting unit that includes goodwill exceeds its fair

value, which is determined using both the income approach and market approach, goodwill is considered impaired.

The income approach determines fair value based on discounted cash flow model derived from a reporting unit’s long-term forecasted cash flows.

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

Since the fair value of our APT reporting unit is higher than the carrying value, we have concluded that no impairment to goodwill is necessary.

The below table shows how changes in certain significant assumptions utilized in our annual goodwill testing, specific to our APT reporting unit, impacts the calculated headroom.

Advanced Polymer Technologies Reporting Unit - Headroom Sensitivity Analysis

Revenue growth rate declines by 100 Bps EBITDA margin declines by 100 Bps Discount rate

increases by 100 Bps

Headroom 2% 3% (6)%

Business Combinations

8 unchanged sentences

These assumptions are based on company-specific information and projections, which are not observable in the market and are therefore considered Level 2 and Level 3 measurements.

The excess of the purchase price over the fair value of the identified assets and liabilities is recorded as goodwill.

The excess of the purchase price over the fair value of the identified assets and liabilities is recorded

Based on the acquired business’ end markets and products, as well as how the chief operating decision maker will review the business results, determines the most appropriate operating segment for which to integrate the acquired business.

Goodwill acquired, if any, is allocated to the reporting unit within or at the operating segment for which the acquired business will be integrated.

Selection of the appropriate reporting unit is based on the level at which discrete financial information is

available and reviewed by business management post-integration.

Selection of the appropriate reporting unit is based on the level at which discrete financial information is available and reviewed by business management post-integration.

Operating results of the acquired entity are reflected within the Consolidated Financial Statements from the date of acquisition.

9 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis