UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________________________

FORM 10-Q

_______________________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022


OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-37586

INGEVITY CORPORATION

(Exact name of registrant as specified in its charter)

~~_______________________________________________________________________~~_____________________________________________________________________

Delaware

47-4027764

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

4920 O'Hear Avenue Suite 400

North Charleston

South Carolina

29405

(Address of principal executive offices)

(Zip code)

843-740-2300

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($0.01 par value)	NGVT	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No x

The registrant had ~~39,286,199~~38,750,506 shares of common stock, $0.01 par value, outstanding at ~~October 25, 2021.~~May 2, 2022.

Ingevity Corporation

INDEX

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INGEVITY CORPORATION

Condensed Consolidated Statements of Operations (Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
In millions, except per share data	In millions, except per share data	2021		2020		2021		2020		In millions, except per share data	2022		2021
Net sales	Net sales	$	376.8	$	331.7	$	1,055.5	$	890.5	Net sales	$	382.8	$	320.3
Cost of sales	Cost of sales	235.0		192.1		647.7		552.4		Cost of sales	245.0		194.1
Gross profit	Gross profit	141.8		139.6		407.8		338.1		Gross profit	137.8		126.2
Selling, general, and administrative expenses	Selling, general, and administrative expenses	43.5		34.9		131.0		107.9		Selling, general, and administrative expenses	40.0		40.0
Research and technical expenses	Research and technical expenses	6.8		5.2		19.3		16.8		Research and technical expenses	7.3		6.6
Restructuring and other (income) charges, net	Restructuring and other (income) charges, net	4.1		5.5		12.3		13.3		Restructuring and other (income) charges, net	3.6		3.9
Acquisition-related costs	Acquisition-related costs	0.2		—		0.9		1.7		Acquisition-related costs	—		0.3
Other (income) expense, net	Other (income) expense, net	84.6		(3.0)		81.6		(0.1)		Other (income) expense, net	(1.4)		1.2
Interest expense, net	Interest expense, net	11.6		8.9		36.2		29.8		Interest expense, net	10.7		12.4
Income (loss) before income taxes	Income (loss) before income taxes	(9.0)		88.1		126.5		168.7		Income (loss) before income taxes	77.6		61.8
Provision (benefit) for income taxes	Provision (benefit) for income taxes	(4.8)		18.2		37.7		33.3		Provision (benefit) for income taxes	16.8		13.1
Net income (loss)	Net income (loss)	$	(4.2)	$	69.9	$	88.8	$	135.4	Net income (loss)	$	60.8	$	48.7

Per share data	Per share data									Per share data
Basic earnings (loss) per share	Basic earnings (loss) per share	$	(0.11)	$	1.69	$	2.22	$	3.27	Basic earnings (loss) per share	$	1.56	$	1.21
Diluted earnings (loss) per share	Diluted earnings (loss) per share	(0.11)		1.69		2.21		3.26		Diluted earnings (loss) per share	1.55		1.20

The accompanying notes are an integral part of these financial statements.

INGEVITY CORPORATION

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

Three Months Ended September 30, Nine Months Ended September 30,
In millions 2021 2020 2021 2020
Net income (loss) $ (4.2) $ 69.9 $ 88.8 $ 135.4
Other comprehensive income (loss), net of tax:
Foreign currency adjustments:
Foreign currency translation adjustment (16.7) 27.6 (8.5) (14.2)
Unrealized gain (loss) on net investment hedges, net of tax provision (benefit) of $0.9, $(1.9), $1.9, and $(0.8) 2.9 (6.2) 6.1 (2.7)
Total foreign currency adjustments, net of tax provision (benefit) of $0.9, $(1.9), $1.9, and $(0.8) (13.8) 21.4 (2.4) (16.9)
Derivative instruments:
Unrealized gain (loss), net of tax provision (benefit) of $0.8, $0.2, $1.6, and $(1.4) 2.8 0.7 5.3 (4.5)
Reclassifications of deferred derivative instruments (gain) loss, included in net income (loss), net of tax (provision) benefit of $(0.1), $0.1, $(0.1), and $0.2 (0.1) 0.4 (0.2) 0.7
Total derivative instruments, net of tax provision (benefit) of $0.7, $0.3, $1.5, and $(1.2) 2.7 1.1 5.1 (3.8)
Pension & other postretirement benefits:
Unrealized actuarial gains (losses) and prior service (costs) credits, net of tax of zero for all periods — — — —
Reclassifications of net actuarial and other (gain) loss and amortization of prior service cost, included in net income, net of tax of zero for all periods — 0.1 0.1 0.1
Total pension and other postretirement benefits, net of tax of zero for all periods — 0.1 0.1 0.1
Other comprehensive income (loss), net of tax provision (benefit) of $1.6, $(1.6), $3.4, and $(2.0) (11.1) 22.6 2.8 (20.6)
Comprehensive income (loss) $ (15.3) $ 92.5 $ 91.6 $ 114.8


	Three Months Ended March 31,
In millions	2022		2021
Net income (loss)	$	60.8	$	48.7
Other comprehensive income (loss), net of tax:
Foreign currency adjustments:
Foreign currency translation adjustment	(16.6)		2.4
Unrealized gain (loss) on net investment hedges, net of tax provision (benefit) of $0.4 and $1.5	1.3		4.9
Total foreign currency adjustments, net of tax provision (benefit) of $0.4 and $1.5	(15.3)		7.3
Derivative instruments:
Unrealized gain (loss), net of tax provision (benefit) of $2.0 and $0.4	6.3		1.3
Reclassifications of deferred derivative instruments (gain) loss, included in net income (loss), net of tax (provision) benefit of $(0.4) and zero	(1.1)		(0.1)
Total derivative instruments, net of tax provision (benefit) of $1.6 and $0.4	5.2		1.2




Other comprehensive income (loss), net of tax provision (benefit) of $2.0 and $1.9	(10.1)		8.5
Comprehensive income (loss)	$	50.7	$	57.2

The accompanying notes are an integral part of these financial statements.

INGEVITY CORPORATION

Condensed Consolidated Balance Sheets


In millions, except share and par value data	In millions, except share and par value data	September 30, 2021		December 31, 2020		In millions, except share and par value data	March 31, 2022		December 31, 2021
Assets	Assets	(Unaudited)				Assets	(Unaudited)
Cash and cash equivalents	Cash and cash equivalents	$	269.4	$	257.7	Cash and cash equivalents	$	222.6	$	275.4
Accounts receivable, net of allowance for credit losses of $1.9 million - 2021 and $1.9 million - 2020		175.8		148.0
Accounts receivable, net of allowance for credit losses of $2.0 - 2022 and $2.0 - 2021						Accounts receivable, net of allowance for credit losses of $2.0 - 2022 and $2.0 - 2021	206.9		161.7
Inventories, net	Inventories, net	228.3		189.0		Inventories, net	260.2		241.2
Prepaid and other current assets	Prepaid and other current assets	46.8		34.0		Prepaid and other current assets	43.1		46.6
Current assets	Current assets	720.3		628.7		Current assets	732.8		724.9
Property, plant and equipment, net	Property, plant and equipment, net	701.2		703.6		Property, plant and equipment, net	719.0		719.7
Operating lease assets, net	Operating lease assets, net	50.7		49.1		Operating lease assets, net	50.6		52.4
Goodwill	Goodwill	440.7		445.3		Goodwill	433.1		442.0
Other intangibles, net	Other intangibles, net	344.8		373.3		Other intangibles, net	322.3		337.6
Deferred income taxes	Deferred income taxes	6.9		8.1		Deferred income taxes	6.9		6.8
Restricted investment, net of allowance for credit losses of $0.5 million - 2021 and $0.9 million - 2020		75.5		73.6
Restricted investment, net of allowance for credit losses of $0.5 - 2022 and $0.5 - 2021						Restricted investment, net of allowance for credit losses of $0.5 - 2022 and $0.5 - 2021	76.6		76.1
Other assets	Other assets	86.1		52.8		Other assets	114.5		109.5
Total Assets	Total Assets	$	2,426.2	$	2,334.5	Total Assets	$	2,455.8	$	2,469.0
Liabilities	Liabilities					Liabilities
Accounts payable	Accounts payable	$	127.4	$	104.2	Accounts payable	$	128.9	$	125.8
Accrued expenses	Accrued expenses	46.1		46.6		Accrued expenses	53.8		51.7
Accrued payroll and employee benefits	Accrued payroll and employee benefits	34.6		25.1		Accrued payroll and employee benefits	22.4		48.2
Current operating lease liabilities	Current operating lease liabilities	16.4		16.2		Current operating lease liabilities	17.2		17.4
Notes payable and current maturities of long-term debt	Notes payable and current maturities of long-term debt	19.5		26.0		Notes payable and current maturities of long-term debt	319.6		19.6
Income taxes payable	Income taxes payable	3.6		5.3		Income taxes payable	9.8		6.2
Current liabilities	Current liabilities	247.6		223.4		Current liabilities	551.7		268.9
Long-term debt including finance lease obligations	Long-term debt including finance lease obligations	1,254.4		1,267.4		Long-term debt including finance lease obligations	945.6		1,250.0
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	35.7		34.7		Noncurrent operating lease liabilities	34.5		36.2
Deferred income taxes	Deferred income taxes	116.3		117.0		Deferred income taxes	116.1		114.6
Other liabilities	Other liabilities	127.7		49.9		Other liabilities	121.8		125.5
Total Liabilities	Total Liabilities	1,781.7		1,692.4		Total Liabilities	1,769.7		1,795.2
Commitments and contingencies (Note 14)	Commitments and contingencies (Note 14)	0		0		Commitments and contingencies (Note 14)	0		0
Equity	Equity					Equity
Preferred stock (par value $0.01 per share; 50,000,000 shares authorized; zero issued and outstanding - 2021 and 2020)		—		—
Common stock (par value $0.01 per share; 300,000,000 shares authorized; issued: 43,091,948 - 2021 and 42,912,846 - 2020; outstanding: 39,374,530 - 2021 and 40,509,997 - 2020)		0.4		0.4
Preferred stock (par value $0.01 per share; 50,000,000 shares authorized; zero issued and outstanding - 2022 and 2021)						Preferred stock (par value $0.01 per share; 50,000,000 shares authorized; zero issued and outstanding - 2022 and 2021)	—		—
Common stock (par value $0.01 per share; 300,000,000 shares authorized; issued: 43,180,164 - 2022 and 43,102,011 - 2021; outstanding: 38,718,468 - 2022 and 39,269,399 - 2021)						Common stock (par value $0.01 per share; 300,000,000 shares authorized; issued: 43,180,164 - 2022 and 43,102,011 - 2021; outstanding: 38,718,468 - 2022 and 39,269,399 - 2021)	0.4		0.4
Additional paid-in capital	Additional paid-in capital	133.4		121.3		Additional paid-in capital	139.6		136.3
Retained earnings	Retained earnings	766.8		678.0		Retained earnings	856.9		796.1
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	7.5		4.7		Accumulated other comprehensive income (loss)	3.0		13.1
Treasury stock, common stock, at cost (3,717,418 shares - 2021 and 2,402,849 shares - 2020)		(263.6)		(162.3)
Treasury stock, common stock, at cost (4,461,696 shares - 2022 and 3,832,612 shares - 2021)						Treasury stock, common stock, at cost (4,461,696 shares - 2022 and 3,832,612 shares - 2021)	(313.8)		(272.1)

Total Equity	Total Equity	644.5		642.1		Total Equity	686.1		673.8
Total Liabilities and Equity	Total Liabilities and Equity	$	2,426.2	$	2,334.5	Total Liabilities and Equity	$	2,455.8	$	2,469.0

The accompanying notes are an integral part of these financial statements.

INGEVITY CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)


			Nine Months Ended September 30,						Three Months Ended March 31,
In millions	In millions		2021		2020		In millions		2022		2021
Cash provided by (used in) operating activities:	Cash provided by (used in) operating activities:						Cash provided by (used in) operating activities:
Net income (loss)	Net income (loss)		$	88.8	$	135.4	Net income (loss)		$	60.8	$	48.7
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:	Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:						Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization		81.7		73.5		Depreciation and amortization		27.1		27.0
Non cash operating lease costs	Non cash operating lease costs		12.9		13.6		Non cash operating lease costs		4.6		4.4
Deferred income taxes	Deferred income taxes		(2.2)		11.3		Deferred income taxes		1.4		(0.6)

LIFO Reserve							LIFO Reserve		10.7		1.7
Share-based compensation	Share-based compensation		9.8		4.3		Share-based compensation		3.0		2.5

Other non-cash items	Other non-cash items		10.6		14.9		Other non-cash items		1.8		2.9
Changes in operating assets and liabilities, net of effect of acquisitions:	Changes in operating assets and liabilities, net of effect of acquisitions:						Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable, net	Accounts receivable, net		(28.2)		(5.6)		Accounts receivable, net		(46.1)		(20.8)
Inventories, net	Inventories, net		(39.2)		9.0		Inventories, net		(30.4)		(17.4)
Prepaid and other current assets	Prepaid and other current assets		(7.5)		1.5		Prepaid and other current assets		(1.0)		0.5

Accounts payable	Accounts payable		20.3		(8.5)		Accounts payable		7.7		8.4
Accrued expenses	Accrued expenses		(0.2)		3.3		Accrued expenses		3.3		(2.2)
Accrued payroll and employee benefits	Accrued payroll and employee benefits		9.6		(12.1)		Accrued payroll and employee benefits		(25.8)		(8.6)
Income taxes	Income taxes		(4.6)		(19.2)		Income taxes		11.2		11.3

Operating leases	Operating leases		(15.3)		(13.8)		Operating leases		(5.4)		(5.2)
Litigation expense			85.0		—
Changes in other operating assets and liabilities, net	Changes in other operating assets and liabilities, net		(4.5)		(8.5)		Changes in other operating assets and liabilities, net		1.4		(1.5)
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities		$	217.0	$	199.1	Net cash provided by (used in) operating activities		$	24.3	$	51.1
Cash provided by (used in) investing activities:	Cash provided by (used in) investing activities:						Cash provided by (used in) investing activities:
Capital expenditures	Capital expenditures		$	(66.4)	$	(51.0)	Capital expenditures		$	(27.6)	$	(17.0)

Finance lease expenditures			—		(23.8)

Purchase of strategic investments			(16.5)		—

Other investing activities, net	Other investing activities, net		(0.5)		(3.6)		Other investing activities, net		(2.6)		(0.3)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities		$	(83.4)	$	(78.4)	Net cash provided by (used in) investing activities		$	(30.2)	$	(17.3)
Cash provided by (used in) financing activities:	Cash provided by (used in) financing activities:						Cash provided by (used in) financing activities:
Proceeds from revolving credit facility			$	—	$	346.1

Payments on revolving credit facility			—		(307.3)

Payments on long-term borrowings	Payments on long-term borrowings		(18.8)		(14.1)		Payments on long-term borrowings		(4.7)		(9.4)

Finance lease obligations, net	Finance lease obligations, net		(0.6)		23.3		Finance lease obligations, net		(0.2)		(0.1)
Borrowings (repayments) of notes payable and other short-term borrowings, net	Borrowings (repayments) of notes payable and other short-term borrowings, net		(1.9)		(0.9)		Borrowings (repayments) of notes payable and other short-term borrowings, net		—		(1.9)
Tax payments related to withholdings on vested equity awards	Tax payments related to withholdings on vested equity awards		(2.4)		(3.0)		Tax payments related to withholdings on vested equity awards		(1.8)		(2.3)
Proceeds and withholdings from share-based compensation plans, net	Proceeds and withholdings from share-based compensation plans, net		3.7		3.1		Proceeds and withholdings from share-based compensation plans, net		0.8		1.0
Repurchases of common stock under publicly announced plan	Repurchases of common stock under publicly announced plan		(100.3)		(32.4)		Repurchases of common stock under publicly announced plan		(40.4)		(39.4)

Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities		$	(120.3)	$	14.8	Net cash provided by (used in) financing activities		$	(46.3)	$	(52.1)
Increase (decrease) in cash, cash equivalents, and restricted cash	Increase (decrease) in cash, cash equivalents, and restricted cash		13.3		135.5		Increase (decrease) in cash, cash equivalents, and restricted cash		(52.2)		(18.3)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash		(1.8)		0.3		Effect of exchange rate changes on cash		(0.7)		(1.7)
Change in cash, cash equivalents, and restricted cash	Change in cash, cash equivalents, and restricted cash		11.5		135.8		Change in cash, cash equivalents, and restricted cash		(52.9)		(20.0)
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period		258.4		64.6		Cash, cash equivalents, and restricted cash at beginning of period		276.1		258.4
Cash, cash equivalents, and restricted cash at end of period(1)	Cash, cash equivalents, and restricted cash at end of period(1)		$	269.9	$	200.4	Cash, cash equivalents, and restricted cash at end of period(1)		$	223.2	$	238.4

(1)	(1)	Includes restricted cash of $0.5 million and $2.2 million and cash and cash equivalents of $269.4 million and $198.2 million at September 30, 2021 and 2020, respectively. Restricted cash is included within "Prepaid and other current assets" within the condensed consolidated balance sheets.					(1)	Includes restricted cash of $0.6 million and $0.6 million and cash and cash equivalents of $222.6 million and $237.8 million at March 31, 2022 and 2021, respectively. Restricted cash is included within "Prepaid and other current assets" within the condensed consolidated balance sheets.

Supplemental cash flow information:	Supplemental cash flow information:						Supplemental cash flow information:
Cash paid for interest, net of capitalized interest	Cash paid for interest, net of capitalized interest		$	35.5	$	37.7	Cash paid for interest, net of capitalized interest		$	11.0	$	11.5
Cash paid for income taxes, net of refunds	Cash paid for income taxes, net of refunds		43.2		41.4		Cash paid for income taxes, net of refunds		3.5		2.5
Purchases of property, plant and equipment in accounts payable	Purchases of property, plant and equipment in accounts payable		5.9		1.9		Purchases of property, plant and equipment in accounts payable		5.3		3.5
Leased assets obtained in exchange for new finance lease liabilities	Leased assets obtained in exchange for new finance lease liabilities		—		23.8		Leased assets obtained in exchange for new finance lease liabilities		—		—
Leased assets obtained in exchange for new operating lease liabilities	Leased assets obtained in exchange for new operating lease liabilities		14.7		24.5		Leased assets obtained in exchange for new operating lease liabilities		2.9		2.4

The accompanying notes are an integral part of these financial statements.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

~~September 30, 2021~~March 31, 2022

(Unaudited)

Note 1: ~~Description of Business and Basis of Presentation~~Background

Description of Business

Ingevity Corporation ("Ingevity," "the Company," "we," "us," or "our") isprovides products and technologies that purify, protect, and enhance the world around us. Through a ~~leading global manufacturer~~team of ~~specialty chemicals~~talented and ~~high performance activated carbon materials. We provide innovative~~experienced people, we develop, manufacture, and bring to market solutions ~~to meet our customers’ unique~~that help customers solve complex problems and ~~demanding requirements through proprietary formulated products.~~make the world more sustainable. We report in 2 business segments, Performance Materials and Performance Chemicals.

Our Performance Materials segment manufactures products in the form of powder, granular, extruded pellets, extruded honeycombs, and activated carbon sheets. Automotive technologies products are sold into the gasoline vapor emission control applications within the automotive industry, while process purification products are sold into the food, water, beverage, and chemical purification industries.

Our Performance Chemicals segment consists of our pavement technologies, industrial specialties, and engineered polymers product lines. Performance Chemicals manufactures products derived from crude tall oil ("CTO") and lignin extracted from the kraft ~~paper making~~pulping process as well as caprolactone monomers and derivatives derived from cyclohexanone and hydrogen peroxide.

Performance Chemicals products serve as critical inputs used in a variety of high performance applications, including warm mix paving, pavement preservation, and pavement reconstruction and recycling (pavement technologies product line), adhesives, agrochemicals, lubricants, printing inks, industrial intermediates, and oilfield (industrial specialties product line), coatings, resins, elastomers, adhesives, bio-plastics, and medical devices (engineered polymers product line).

Basis of Consolidation and Presentation

These unaudited ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements reflect the consolidated operations of the Company and have been prepared in accordance with United States Securities and Exchange Commission ("SEC") interim reporting requirements. Accordingly, the accompanying ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements do not include all disclosures required by accounting principles generally accepted in the United States of America ("GAAP") for full financial statements and should be read in conjunction with the Annual Consolidated Financial Statements for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018,~~2019, collectively referred to as the “Annual Consolidated Financial Statements,” included in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (the ~~"2020~~"2021 Annual Report").

In the opinion of management, the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements contain all adjustments, which include only normal recurring adjustments, necessary to fairly state the condensed consolidated results for the interim periods presented. The consolidated results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

The preparation of the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements requires management to make estimates and assumptions with respect to the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

Certain prior year amounts have been reclassified to conform with the current year's presentation.

Note 2: New Accounting Guidance

The Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC" or "Codification") is the sole source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standards Update ("ASU") to communicate changes to the Codification. We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the consolidated financial statements.

Recently ~~Adopted Accounting Pronouncements~~

In December 2019, the FASB issued ASU 2019-12 "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." This ASU amends ASC 740 to add, remove, and clarify disclosure requirements related to income taxes. The new standard is effective for fiscal years beginning after December 15, 2020. We adopted the new guidance effective January 1, 2021. The adoption of the new guidance did not have a material impact on the consolidated financial statements.

~~Recently~~ Issued Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04 "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The ASU is intended to provide temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

(Unaudited)

expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance became effective beginning on March 12, 2020, and we may elect to apply the amendments

~~INGEVITY CORPORATION~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~September 30, 2021~~

~~(Unaudited)~~

prospectively until December 31, 2022. As of ~~September 30, 2021,~~March 31, 2022, we have not yet elected any optional expedients provided in the standard. We will apply the accounting relief, if necessary, as relevant contract and hedge accounting relationship modifications are made during the reference rate reform transition period. We do not expect this new standard to have a material impact on our consolidated financial statements.

Note 3: Revenues

Disaggregation of Revenue

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

Three Months Ended September 30, Nine Months Ended September 30,
In millions 2021 2020 2021 2020
Performance Materials segment(1)
$ 118.1 $ 143.8 $ 384.8 $ 349.3
Performance Chemicals segment
Pavement Technologies product line 73.2 72.5 162.4 157.1
Industrial Specialties product line(1)
132.6 90.1 364.7 290.9
Engineered Polymers product line 52.9 25.3 143.6 93.2
Total $ 258.7 $ 187.9 $ 670.7 $ 541.2
Net sales $ 376.8 $ 331.7 $ 1,055.5 $ 890.5

~~______________~~

(1) Beginning in Q1 2021, we updated disaggregated revenue disclosures, combining certain product groups to reflect categories that depict how the nature, amount, and uncertainty of revenue and cash flows are affected by economic factors. As a result, Automotive Technologies and Process Purification product lines have been combined within the Performance Materials segment. Similarly, the Oilfield Technologies product line has been combined with the Industrial Specialties product line within the Performance Chemicals segment.


	Three Months Ended March 31,
In millions		2022		2021


Performance Materials segment		$	148.4	$	140.7

Performance Chemicals segment
Pavement Technologies product line		27.9		21.4
Industrial Specialties product line		144.7		112.1
Engineered Polymers product line		61.8		46.1
Total		$	234.4	$	179.6
Net sales		$	382.8	$	320.3

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

Three Months Ended September 30, Nine Months Ended September 30,
In millions 2021 2020 2021 2020
North America $ 219.3 $ 191.9 $ 580.8 $ 510.3
Asia Pacific 89.6 89.9 285.0 240.4
Europe, Middle East, and Africa 62.3 45.5 172.5 126.0
South America 5.6 4.4 17.2 13.8
Net sales $ 376.8 $ 331.7 $ 1,055.5 $ 890.5


	Three Months Ended March 31,
In millions		2022		2021
North America		$	212.6	$	163.1
Asia Pacific		97.6		100.7
Europe, Middle East, and Africa		62.7		51.1
South America		9.9		5.4
Net sales		$	382.8	$	320.3

Contract Balances

The following table provides information about contract assets and contract liabilities from contracts with customers. The contract assets primarily relate to our rights to consideration for products produced but not billed at the reporting date. The contract assets are recognized as accounts receivables when the rights become unconditional and the customer has been billed. Contract liabilities represent obligations to transfer goods to a customer for which we have received consideration from our customer. For all periods presented we had no contract liabilities.

~~INGEVITY CORPORATION~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~September 30, 2021~~

~~(Unaudited)~~


		Contract Asset					Contract Asset
		September 30,					March 31,
In millions	In millions	2021		2020		In millions	2022		2021
Beginning balance	Beginning balance	$	5.7	$	6.2	Beginning balance	$	5.3	$	5.7
Contract asset additions	Contract asset additions	15.8		13.5		Contract asset additions	3.8		4.7
Reclassification to accounts receivable, billed to customers	Reclassification to accounts receivable, billed to customers	(15.4)		(12.9)		Reclassification to accounts receivable, billed to customers	(3.1)		(4.3)
Ending balance(1)	Ending balance(1)	$	6.1	$	6.8	Ending balance (1)	$	6.0	$	6.1

______________

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

(Unaudited)

Note 4: Fair Value Measurements

Fair Value Measurements

Recurring Fair Value Measurements

The following information is presented for assets and liabilities that are recorded in the condensed consolidated balance sheets at fair value measured on a recurring basis. There were no transfers of assets and liabilities that were recorded at fair value between the three-level fair value hierarchy during the periods reported. ~~Refer to Note 8 for more information regarding our fair value measurements of our financial instruments and risk management activities.~~

In millions
Level 1(1)
Level 2(2)
Level 3(3)
Total
September 30, 2021
Assets:
Deferred compensation plan investments (4)
$ 1.0 $ — $ — $ 1.0
Total assets $ 1.0 $ — $ — $ 1.0
Liabilities:
Deferred compensation arrangement (4)
$ 13.0 $ — $ — $ 13.0
Contingent consideration (5)
— — 0.8 0.8
Total liabilities $ 13.0 $ — $ 0.8 $ 13.8
December 31, 2020
Assets:
Equity securities (6)
$ 0.2 $ — $ — $ 0.2
Deferred compensation plan investments (4)
1.7 — — 1.7
Total assets $ 1.9 $ — $ — $ 1.9
Liabilities:
Deferred compensation arrangement (4)
$ 11.6 $ — $ — $ 11.6
Contingent consideration (5)
— — 0.8 0.8
Total liabilities $ 11.6 $ — $ 0.8 $ 12.4

~~INGEVITY CORPORATION~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~September 30, 2021~~

~~(Unaudited)~~


In millions	Level 1(1)		Level 2(2)		Level 3(3)		Total
March 31, 2022
Assets:

Deferred compensation plan investments (4)	$	0.9	$	—	$	—	$	0.9
Total assets	$	0.9	$	—	$	—	$	0.9
Liabilities:
Deferred compensation arrangement (4)	$	12.6	$	—	$	—	$	12.6

Contingent consideration (5)	—		—		0.8		0.8
Total liabilities	$	12.6	$	—	$	0.8	$	13.4
December 31, 2021
Assets:

Deferred compensation plan investments (4)	$	0.9	$	—	$	—	$	0.9
Total assets	$	0.9	$	—	$	—	$	0.9
Liabilities:
Deferred compensation arrangement (4)	$	13.7	$	—	$	—	$	13.7

Contingent consideration (5)	—		—		0.8		0.8
Total liabilities	$	13.7	$	—	$	0.8	$	14.5

______________

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

(2) Quoted prices for similar assets and liabilities in active markets.

(3) Significant unobservable inputs.

(4) Consists of a deferred compensation arrangement, through which we hold various investment securities. Both the asset and liability are recorded at fair value, and are included within "Other assets" and "Other liabilities" on the condensed consolidated balance sheets, respectively. In addition to the investment securities, we also have company-owned life insurance ("COLI") related to the deferred compensation arrangement. COLI is recorded at cash surrender value and included in "Other assets" on the condensed consolidated balance sheets in the amount of ~~$13.4~~$13.1 million and ~~$10.8~~$14.0 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021, respectively.

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

~~(6) Included within "Prepaid and other current assets" on~~Nonrecurring Fair Value Measurements

There were no nonrecurring fair value measurements in the condensed consolidated balance ~~sheets.~~sheet during the quarters ended March 31, 2022 and December 31, 2021.

~~Nonrecurring Fair Value Measurements~~

~~Equity Investment~~Strategic Investments

During the second quarter of 2021, ~~our Performance Materials segment~~we acquired a strategic ~~equity~~ investment in a privately-held company for $16.5 ~~million. Our strategic equity investment~~million, which is accounted for under the equity method of accounting, which requires us to record our initial investment at cost. Subsequently, we will recognize, through the condensed consolidated statements of operations (Other (income) expense, net) and as an adjustment to the investment balance (Other assets), our proportionate share of undistributed earnings or loss and the amortization of basis differences. At each reporting period, we will evaluate our investment to determine whether events or changes in business circumstances indicate that the carrying value of the investment may not be fully recoverable.accounting. The carrying value of our strategic equity investment was $16.2 million and $16.5 million at ~~September 30, 2021.~~March 31, 2022 and December 31, 2021, respectively.

During the first quarter of 2022, we acquired a strategic investment in a privately-held company for $2.0 million, which is accounted for under the measurement alternative method. The aggregate carrying value of all measurement alternative investments where fair value is not readily determinable totaled $20.8 million and $18.8 million at March 31, 2022 and December 31, 2021, respectively. There were no adjustments to the carrying value of ~~our strategic equity investment~~the measurement alternative method investments for impairment or observable price changes ~~during~~for the ~~three or nine months~~period ended ~~September 30, 2021.~~March 31, 2022.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

(Unaudited)

Restricted Investment

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the carrying value of our restricted investment, which is accounted for as held-to-maturity ("HTM") and therefore recorded at amortized costs, was ~~$75.5~~$76.6 million and ~~$73.6~~$76.1 million, net of an allowance for credit losses of $0.5 million and ~~$0.9~~$0.5 million, and included cash of ~~$4.1~~$5.3 million and ~~$2.4~~$4.7 million, respectively. The fair value at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was ~~$80.9~~$76.7 million and ~~$81.5~~$80.0 million, respectively, based on Level 1 inputs.

The following table shows the total amortized cost of our HTM debt securities by credit rating, excluding the allowance for credit losses and cash. The primary factor in our expected credit loss calculation is the composite bond rating. As the rating decreases, the risk present in holding the bond is inherently increased, leading to an increase in expected credit losses.

HTM Debt Securities
In millions AA+ AA A A- BBB+ Total
September 30, 2021 $ 13.4 10.6 24.2 13.3 10.4 $ 71.9
December 31, 2020 $ 13.5 10.6 24.2 13.4 10.4 $ 72.1


	HTM Debt Securities
In millions	AA+		AA	AA-	A	A-	BBB+	Total
March 31, 2022	$	13.4	—	10.5	13.3	14.1	20.5	$	71.8
December 31, 2021	$	13.4	—	10.6	13.3	14.1	20.5	$	71.9

Debt and Finance Lease Obligations

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the carrying value of finance lease obligations was ~~$102.6~~$102.2 million and ~~$103.1~~$102.4 million, respectively, and the fair value was ~~$120.4~~$112.5 million and ~~$127.0~~$118.6 million, respectively. The fair value of our finance lease obligations is based on the period-end quoted market prices for the obligations, using Level 2 inputs. The fair value of all other finance lease obligations approximates their carrying values.

The carrying amount, excluding debt issuance fees, of our variable interest rate long-term debt was ~~$332.8~~$323.4 million and ~~$353.4~~$328.1 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The carrying value is a reasonable estimate of the fair value of the outstanding debt based on the variable interest rate of the debt.

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the carrying value of our fixed rate debt was $850.0 million and $850.0 million, respectively, and the fair value was ~~$855.9~~$800.8 million and ~~$864.1~~$843.9 million, respectively, based on Level 2 inputs.

~~INGEVITY CORPORATION~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~September 30, 2021~~

~~(Unaudited)~~

Contingent Consideration

In connection with the acquisition of certain assets in May 2020, we are contingently obligated to make an additional payment for such assets of up to an aggregate amount of $7.0 million. The contingent consideration is payable if certain sales volume targets are achieved prior to ~~the measurement period ending on~~ December 31, 2024, herein referred to as "Revenue Earn-out."

The fair value of the five-year Revenue Earn-out consideration was $0.8 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. Any subsequent changes in the fair value of the contingent consideration liability will be recorded in current period earnings as a selling, general, and administrative ~~expense on the condensed consolidated statements of operations.~~

expense.

The following table summarizes the activity for financial liabilities utilizing Level 3 fair value measurements:

~~Contingent Consideration~~

~~In millions~~

~~September 30, 2021~~

~~Beginning balance~~

~~0.8~~

~~Newly issued~~

—

~~Change in revaluation of contingent consideration included in earnings~~

—

~~Exercises/settlements~~

—

~~Ending balance~~ ~~(1)~~

~~0.8~~


	Contingent Consideration
In millions	March 31, 2022		December 31, 2021
Beginning balance	$	0.8	$	0.8
Newly issued	—		—
Change in revaluation of contingent consideration included in earnings	—		—
Exercises/settlements	—		—
Ending balance (1)	$	0.8	$	0.8

______________

(1) Included within "Other liabilities" on the condensed consolidated balance sheets.

~~Note 5: Inventories, net~~
In millions September 30, 2021 December 31, 2020
Raw materials $ 41.5 $ 39.1
Production materials, stores and supplies 25.9 24.6
Finished and in-process goods 176.9 139.6
Subtotal 244.3 203.3
Less: LIFO reserve (16.0) (14.3)
Inventories, net $ 228.3 $ 189.0

~~Note 6: Property, Plant, and Equipment, net~~
In millions September 30, 2021 December 31, 2020
Machinery and equipment $ 1,100.7 $ 1,065.5
Buildings and leasehold improvements 175.4 174.0
Land and land improvements 20.4 20.0
Construction in progress 44.2 43.7
Total cost 1,340.7 1,303.2
Less: accumulated depreciation (639.5) (599.6)
Property, plant, and equipment, net $ 701.2 $ 703.6

1110

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

~~September 30, 2021~~March 31, 2022

(Unaudited)

Note 5: Inventories, net


In millions	March 31, 2022		December 31, 2021
Raw materials	$	64.4	$	48.8
Production materials, stores and supplies	27.6		26.8
Finished and in-process goods	196.7		183.4
Subtotal	288.7		$	259.0
Less: LIFO reserve	(28.5)		(17.8)
Inventories, net	$	260.2	$	241.2

Note 6: Property, Plant, and Equipment, net


In millions	March 31, 2022		December 31, 2021
Machinery and equipment	$	1,120.3	$	1,113.3
Buildings and leasehold improvements	177.6		177.2
Land and land improvements	21.2		20.4
Construction in progress	71.9		64.4
Total cost	1,391.0		$	1,375.3
Less: accumulated depreciation	(672.0)		(655.6)
Property, plant, and equipment, net	$	719.0	$	719.7

Note 7: Goodwill and Other Intangible Assets, net

Goodwill
Reporting Units
In millions Performance Chemicals Performance Materials Total
December 31, 2020 $ 441.0 $ 4.3 $ 445.3
Foreign currency translation (4.6) — (4.6)
September 30, 2021 $ 436.4 $ 4.3 $ 440.7


	Reporting Units
In millions	Performance Chemicals		Performance Materials		Total
December 31, 2021	$	437.7	$	4.3	$	442.0

Foreign currency translation	(8.9)		—		(8.9)
March 31, 2022	$	428.8	$	4.3	$	433.1

There were no interim triggering events or circumstances indicating that goodwill might be impaired as of ~~September 30, 2021.~~

March 31, 2022.

Other Intangible Assets


		September 30, 2021						December 31, 2020							March 31, 2022						December 31, 2021
In millions	In millions	Gross		Accumulated amortization		Net		Gross		Accumulated amortization		Net		In millions	Gross		Accumulated amortization		Net		Gross		Accumulated amortization		Net
Customer contracts and relationships	Customer contracts and relationships	$	317.1	$	89.5	$	227.6	$	319.5	$	73.6	$	245.9	Customer contracts and relationships	$	312.9	$	99.5	$	213.4	$	317.8	$	95.0	$	222.8
Brands (1)	Brands (1)	81.4		19.1		62.3		82.4		15.8		66.6		Brands (1)	79.7		21.2		58.5		81.7		20.3		61.4
Developed technology	Developed technology	72.0		17.1		54.9		73.0		12.5		60.5		Developed technology	70.3		19.9		50.4		72.2		18.8		53.4
Other	Other	0.5		0.5		—		2.7		2.4		0.3		Other	—		—		—		0.5		0.5		—
Other intangibles, net	Other intangibles, net	$	471.0	$	126.2	$	344.8	$	477.6	$	104.3	$	373.3	Other intangibles, net	$	462.9	$	140.6	$	322.3	$	472.2	$	134.6	$	337.6

_______________

(1) Represents trademarks, trade names, and know-how.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

(Unaudited)

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

In millions September 30, 2021 December 31, 2020
Performance Materials $ 2.0 $ 2.1
Performance Chemicals 342.8 371.2
Other intangibles, net $ 344.8 $ 373.3


In millions	March 31, 2022		December 31, 2021
Performance Materials	$	1.8	$	1.9
Performance Chemicals	320.5		335.7
Other intangibles, net	$	322.3	$	337.6

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

Three Months Ended September 30, Nine Months Ended September 30,
In millions 2021 2020 2021 2020
Cost of sales $ — $ — $ — $ 0.1
Selling, general, and administrative expenses 8.3 8.2 25.1 24.3
Total amortization expense $ 8.3 $ 8.2 $ 25.1 $ 24.4

three months ended March 31, 2022 and March 31, 2021, we recognized amortization expense of $8.1 million and $8.4 million, respectively.

Based on the current carrying values of intangible assets, estimated pre-tax amortization expense for the next five years is as follows: ~~2021 - $33.4 million,~~ 2022 - ~~$33.1~~$32.5 million, 2023 - ~~$33.0~~$32.4 million, 2024 - ~~$32.7~~$32.1 million, 2025 - $32.1 million, and ~~2025~~2026 - ~~$32.7~~$32.1 million. The estimated pre-tax amortization expense may fluctuate due to changes in foreign currency exchange rates.

~~INGEVITY CORPORATION~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~September 30, 2021~~

~~(Unaudited)~~

Note 8: Financial Instruments and Risk Management

Net Investment Hedges

We have fixed-to-fixed cross-currency interest rate swaps with an aggregate notional amount of $166.2 million and a maturity date of July 2023. We designated the swaps to hedge a portion of our net investment in a euro functional currency denominated subsidiary against foreign currency fluctuations. These contracts involve the exchange of fixed U.S. dollars with fixed euro interest payments periodically over the life of the contract and an exchange of the notional amount at maturity. This effectively converts a portion of our U.S. dollar denominated fixed-rate debt from a weighted average rate of 3.79 percent to a euro denominated weighted average fixed rate of ~~1.71~~1.63 percent. The difference between the fixed interest rate on the U.S. dollar denominated debt compared to euro denominated debt is recorded as interest income on the condensed consolidated statements of operations. The fair value of the fixed-to-fixed cross currency interest rate swap was a net asset (liability) of ~~$(0.7)~~$2.7 million and ~~$(8.6)~~$1.0 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021, respectively. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~we recognized net interest income associated with this financial instrument of $0.1 million and $0.3 million, respectively, and during the three and nine months ended September 30, 2020,~~ we recognized net interest income associated with this financial instrument of $0.2 million and ~~$1.5~~$0.1 million, respectively.

Cash Flow Hedges

Foreign Currency Exchange Risk Management

We manufacture and sell our products in several countries throughout the world and, thus, we are exposed to changes in foreign currency exchange rates. To manage the volatility relating to these exposures, we net the exposures on a consolidated basis to take advantage of natural offsets. To manage the remaining exposure, from time to time, we utilize forward currency exchange contracts and zero cost collar option contracts to minimize the volatility to earnings and cash flows resulting from the effect of fluctuating foreign currency exchange rates on export sales denominated in foreign currencies (principally the euro). These contracts are generally designated as cash flow hedges. Designated cash flow hedges entered to minimize foreign currency exchange risk of forecasted revenue transactions are recorded to Net sales on the condensed consolidated statement of operations when the forecasted transaction occurs. As of ~~September 30, 2021,~~March 31, 2022, there were ~~$4.8~~$19.0 million open foreign currency derivative contracts. The fair value of the designated foreign currency hedge contracts was an asset (liability) of ~~$0.2~~$0.9 million and ~~$(0.1)~~$0.5 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Commodity Price Risk Management

Certain energy sources used in our manufacturing operations are subject to price volatility caused by weather, supply and demand conditions, economic variables, and other unpredictable factors. This volatility is primarily related to the market pricing of natural gas. To mitigate expected fluctuations in market prices and the volatility to earnings and cash flow resulting from changes to pricing of natural gas purchases, from time to time, we will enter into swap contracts and zero cost collar option contracts and designate these contracts as cash flow hedges. As of ~~September 30, 2021,~~March 31, 2022, we had ~~1.2~~1.6 million and ~~0.9~~0.7 million ~~mmBTUS~~mm BTUS (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity swap contracts and zero cost collar option contracts, respectively, designated as cash flow hedges. As of ~~September 30, 2021,~~March 31, 2022, open commodity contracts hedge forecasted transactions until ~~February 2022.~~June 2023. The fair value of the outstanding designated natural gas ~~commodity hedge contracts as of September 30, 2021 and December 31, 2020 was a net asset (liability) of $3.0 million and $(0.1) million, respectively.~~

1312

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

~~September 30, 2021~~March 31, 2022

(Unaudited)

commodity hedge contracts as of March 31, 2022 and December 31, 2021 was a net asset (liability) of $3.2 million and $(0.6) million, respectively.

Interest Rate Risk Management

Our policy is to manage interest expense using a mix of fixed and variable rate debt. To manage interest rate risk effectively, from time to time, we may enter into interest rate derivative ~~instruments, which can consist of forward starting swaps.~~instruments. In all cases, the notional amount of the interest rate swap agreements is equal to or less than the designated debt being hedged. These instruments are designated as cash flow hedges. Designated interest rate cash flow hedge gains or losses are recorded in Accumulated other comprehensive income (loss) ("AOCI") and are recognized in "Interest expense, net" on the condensed consolidated statements of operations on a straight-line basis over the remaining maturity of the underlying debt.

As of ~~September 30, 2021,~~March 31, 2022, we have floating-to-fixed interest rate swaps with a notional amount of $166.2 million to manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $166.2 million of our floating rate debt to a fixed rate. In accordance with the terms of this instrument, we receive floating rate interest payments based upon three-month U.S. dollar LIBOR and in return are obligated to pay interest at a fixed rate of 3.79 percent until July 2023. The fair value of the interest rate swap was an asset (liability) of ~~$(6.0)~~$(0.3) million and ~~$(8.9)~~$(4.0) million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

~~INGEVITY CORPORATION~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~September 30, 2021~~

~~(Unaudited)~~

Effect of Cash Flow and Net Investment Hedge Accounting on AOCI

In millions Amount of Gain (Loss) Recognized in AOCI Amount of Gain (Loss) Reclassified from AOCI into Net income Location of Gain (Loss) Reclassified from AOCI in Net income
Three Months Ended September 30,
2021 2020 2021 2020
Cash flow hedging derivatives
Currency exchange contracts $ 0.1 $ (0.3) $ (0.2) $ (0.2) Net sales
Natural gas contracts 2.8 0.4 — (0.3) Cost of sales
Interest rate swap contracts 0.7 0.8 — — Interest expense, net
Total $ 3.6 $ 0.9 $ (0.2) $ (0.5)
In millions Amount of Gain (Loss) Recognized in AOCI Amount of Gain (Loss) Recognized in Income on Derivative
(Amount Excluded from Effectiveness Testing) Location of Gain or (Loss) Recognized in Income on Derivative
(Amount Excluded from
Effectiveness Testing)
Three Months Ended September 30,
2021 2020 2021 2020
Net investment hedging derivative
Currency exchange contracts(1)
$ 3.8 $ (8.1) $ — $ 0.2 Interest expense, net
Total $ 3.8 $ (8.1) $ — $ 0.2
In millions Amount of Gain (Loss) Recognized in AOCI Amount of Gain (Loss) Reclassified from AOCI into Net income Location of Gain (Loss) Reclassified from AOCI in Net income
Nine Months Ended September 30,
2021 2020 2021 2020
Cash flow hedging derivatives
Currency exchange contracts $ 0.3 $ (0.1) $ (0.2) $ — Net sales
Natural gas contracts 3.7 (0.1) (0.1) (0.9) Cost of sales
Interest rate swap contracts 2.9 (5.7) — — Interest expense, net
Total $ 6.9 $ (5.9) $ (0.3) $ (0.9)
In millions Amount of Gain (Loss) Recognized in AOCI Amount of Gain (Loss) Recognized in Income on Derivative
(Amount Excluded from Effectiveness Testing) Location of Gain or (Loss) Recognized in Income on Derivative
(Amount Excluded from
Effectiveness Testing)
Nine Months Ended September 30,
2021 2020 2021 2020
Net investment hedging derivative
Currency exchange contracts(1)
$ 8.0 $ (3.5) $ 0.2 $ 1.5 Interest expense, net
Total $ 8.0 $ (3.5) $ 0.2 $ 1.5


















In millions	Amount of Gain (Loss) Recognized in AOCI				Amount of Gain (Loss) Reclassified from AOCI into Net income				Location of Gain (Loss) Reclassified from AOCI in Net income
	Three Months Ended March 31,
	2022		2021		2022		2021
Cash flow hedging derivatives
Currency exchange contracts	$	0.5	$	0.3	$	(0.2)	$	—	Net sales
Natural gas contracts	4.1		0.1		(1.3)		0.1		Cost of sales
Interest rate swap contracts	3.7		1.4		—		—		Interest expense, net
Total	$	8.3	$	1.8	$	(1.5)	$	0.1

In millions	Amount of Gain (Loss) Recognized in AOCI				Amount of Gain (Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)				Location of Gain or (Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
	Three Months Ended March 31,
	2022		2021		2022		2021
Net investment hedging derivative
Currency exchange contracts (1)	$	1.7	$	6.4	$	—	$	0.1	Interest expense, net
Total	$	1.7	$	6.4	$	—	$	0.1

__________

(1) Reclassifications from AOCI to Net Income were zero for all periods presented. Gains and losses ~~if recognized~~ would be reclassified from AOCI to Other (income) expense, net.

Within the next twelve months, we expect to reclassify ~~$0.1~~$4.5 million of net gains from AOCI to income, before taxes.

~~INGEVITY CORPORATION~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~September 30, 2021~~

~~(Unaudited)~~

Fair Value Measurements

The following information is presented for derivative assets and liabilities that are recorded in the condensed consolidated balance sheets at fair value measured on a recurring basis. There were no transfers of assets and liabilities that are recorded at fair value between ~~the three-level fair value hierarchy~~Level 1 and Level 2 during the periods reported. There were no nonrecurring fair value measurements related to derivative assets and liabilities on the condensed consolidated balance sheets as of ~~September 30, 2021~~March 31, 2022 or December 31, ~~2020. Refer~~2021.

INGEVITY CORPORATION

Notes to ~~Note 4 for more information regarding our fair value measurements beyond our financial instruments and risk management activities.~~the Condensed Consolidated Financial Statements

In millions
Level 1(1)
Level 2(2)
Level 3(3)
Total
September 30, 2021
Assets:
Currency exchange contracts(4)
$ — $ 0.2 $ — $ 0.2
Natural gas contracts (4)
— 3.0 — 3.0
Net investment hedge (5)
— 0.6 — 0.6
Total assets $ — $ 3.8 $ — $ 3.8
Liabilities:
Natural gas contracts (6)
$ — $ — $ — $ —
Net investment hedge (7)
— 1.3 — 1.3
Interest rate swap contracts (7)
— 6.0 — 6.0
Total liabilities $ — $ 7.3 $ — $ 7.3
March 31, 2022

In millions
Level 1(1)
Level 2(2)
Level 3(3)
Total
December 31, 2020
Assets:
Natural gas contracts(4)
$ — $ 0.1 $ — $ 0.1
Total assets $ — $ 0.1 $ — $ 0.1
Liabilities:
Natural gas contracts (6)
$ — $ 0.2 $ — $ 0.2
Currency exchange contracts (6)
— 0.1 — 0.1
Net investment hedge (7)
— 8.6 — 8.6
Interest rate swap contracts (7)
— 8.9 — 8.9
Total liabilities $ — $ 17.8 $ — $ 17.8
(Unaudited)


	March 31, 2022
In millions	Level 1(1)		Level 2(2)		Level 3(3)		Total
Assets:
Currency exchange contracts (4)	$	—	$	0.9	$	—	$	0.9
Natural gas contracts (4)	—		3.2		—		3.2
Net investment hedge (5)	—		3.4		—		3.4
Interest rate swap contracts (5)	—		0.3		—		0.3
Total assets	$	—	$	7.8	$	—	$	7.8
Liabilities:


Net investment hedge (7)	$	—	$	0.7	$	—	$	0.7
Interest rate swap contracts (7)	—		0.6		—		0.6
Total liabilities	$	—	$	1.3	$	—	$	1.3


	December 31, 2021
In millions	Level 1(1)		Level 2(2)		Level 3(3)		Total
Assets:
Currency exchange contracts (4)	$	—	$	0.5	$	—	$	0.5

Net investment hedge (5)	—		2.0		—		2.0
Total assets	$	—	$	2.5	$	—	$	2.5
Liabilities:
Natural gas contracts (6)	$	—	$	0.6	$	—	$	0.6

Net investment hedge (7)	—		1.0		—		1.0
Interest rate swap contracts (7)	—		4.0		—		4.0
Total liabilities	$	—	$	5.6	$	—	$	5.6

__________

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

(2) Quoted prices for similar assets and liabilities in active markets.

(3) Significant unobservable inputs.

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

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

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

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

1614

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

~~September 30, 2021~~March 31, 2022

(Unaudited)

Note 9: Debt, including Finance Lease Obligations

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

September 30, 2021
In millions, except percentages Interest rate Maturity date September 30, 2021 December 31, 2020
Variable Rate Debt:
Revolving Credit Facility (1)
1.33% 2025 $ — $ —
Term Loan 1.38% 2023 332.8 351.6
Other notes payable —% 2021 — 1.8
Fixed Rate Debt:
Senior Notes
2028 Senior Note 3.88% 2028 550.0 550.0
2026 Senior Note 4.50% 2026 300.0 300.0
Finance lease obligations 7.17% 2027-2035 102.6 103.1
Total debt including finance lease obligations 1,285.4 1,306.5
Less: debt issuance costs 11.5 13.1
Total debt, including finance lease obligations, net of debt issuance costs 1,273.9 1,293.4
Less: debt maturing within one year (2)
19.5 26.0
Long-term debt including finance lease obligations $ 1,254.4 $ 1,267.4



In millions, except percentages	March 31, 2022		December 31, 2021

Revolving Credit Facility and other lines of credit (1)	$	—	$	—
Term Loan	323.4		328.1



3.88% Senior Notes due 2028	550.0		550.0
4.50% Senior Notes due 2026	300.0		300.0
Finance lease obligations	102.2		102.4
Total debt including finance lease obligations	$	1,275.6	$	1,280.5
Less: debt issuance costs	10.4		10.9
Total debt, including finance lease obligations, net of debt issuance costs	$	1,265.2	$	1,269.6
Less: debt maturing within one year (2)	319.6		19.6
Long-term debt including finance lease obligations	$	945.6	$	1,250.0

______________

(1) Letters of credit outstanding under the revolving credit facility were ~~$2.3~~$2.5 million and ~~$2.3~~$2.5 million and ~~undrawn capacity~~available funds under the facility ~~was $497.7~~were $497.5 million and ~~$497.7~~$497.5 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

(2) Debt maturing within one year is included in "Notes payable and current maturities of long-term debt" on the condensed consolidated balance sheets. See Note 17 for additional information.

Debt Covenants

Our indentures contain certain customary covenants (including covenants limiting Ingevity's and its restricted subsidiaries’ ability to grant or permit liens on certain property securing debt, declare or pay dividends, make distributions on or repurchase or redeem capital stock, make investments in unrestricted subsidiaries, engage in sale and lease-back transactions, and engage in a consolidation or merger, or sell, transfer or otherwise dispose of all or substantially all of the assets of ~~our~~Ingevity and our restricted subsidiaries, taken as a whole) and events of default (subject in certain cases to customary exceptions, as well as grace and cure periods). The occurrence of an event of default under the 2026 Senior ~~Note~~Notes or 2028 Senior ~~Note~~Notes could result in the acceleration of the notes of such series and could cause a cross-default resulting in the acceleration of other indebtedness of Ingevity and its subsidiaries, including the other series. We were in compliance with all covenants under the indentures as of ~~September 30, 2021.~~March 31, 2022.

The credit ~~agreement~~agreements governing our revolving credit facility and ~~2017~~ term loan contain customary default provisions, including defaults for non-payment, breach of representations and warranties, insolvency, non-compliance with covenants and cross-defaults to other material indebtedness. The occurrence of an uncured event of default under the credit agreement could result in all loans and other obligations becoming immediately due and payable and our revolving credit facility and term loan facilities being terminated. The credit agreement also contains certain customary covenants, including financial covenants. The revolving credit facility financial covenants require Ingevity to maintain on a consolidated basis a maximum total net leverage ratio of 4.0 to 1.0 (which may be increased to 4.5 to 1.0 under certain circumstances) and a minimum interest coverage ratio of 3.0 to 1.0. Additionally, the ~~2017~~ term loan financial covenants require Ingevity to maintain on a consolidated basis a maximum total gross leverage ratio of 4.0 to 1.0 (which may be increased to 4.5 to 1.0 under certain circumstances) and a minimum interest coverage ratio of 3.0 to 1.0. Our actual gross and net leverage for the four consecutive quarters ended ~~September 30, 2021~~March 31, 2022 were 2.6 and ~~2.1,~~2.2, respectively, and our actual interest coverage for the four consecutive quarters ended ~~September 30, 2021~~March 31, 2022 was ~~12.5.~~9.9. We were in compliance with all covenants at ~~September 30, 2021.~~March 31, 2022.

1715

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

(Unaudited)

Note 10: Equity

The tables below provide a roll forward of equity.



	Common Stock
In millions, except per share data in thousands	Shares	Amount		Additional paid in capital		Retained earnings		Accumulated other comprehensive income (loss)		Treasury stock		Total Equity
Balance at December 31, 2021	43,102	$	0.4	$	136.3	$	796.1	$	13.1	$	(272.1)	$	673.8
Net income (loss)	—	—		—		60.8		—		—		60.8
Other comprehensive income (loss)	—	—		—		—		(10.1)		—		(10.1)
Common stock issued	42	—		—		—		—		—		—
Exercise of stock options, net	36	—		0.4		—		—		—		0.4
Tax payments related to vested restricted stock units	—	—		—		—		—		(1.8)		(1.8)
Share repurchase program	—	—		—		—		—		(40.4)		(40.4)

Share-based compensation plans	—	—		2.9		—		—		0.5		3.4

Balance at March 31, 2022	43,180	$	0.4	$	139.6	$	856.9	$	3.0	$	(313.8)	$	686.1



	Common Stock
In millions, except per share data in thousands	Shares	Amount		Additional paid in capital		Retained earnings		Accumulated other comprehensive income (loss)		Treasury stock		Total Equity
Balance at December 31, 2020	42,913	$	0.4	$	121.3	$	678.0	$	4.7	$	(162.3)	$	642.1
Net income (loss)	—	—		—		48.7		—		—		48.7
Other comprehensive income (loss)	—	—		—		—		8.5		—		8.5
Common stock issued	97	—		—		—		—		—		—
Exercise of stock options, net	24	—		0.9		—		—		—		0.9
Tax payments related to vested restricted stock units	—	—		—		—		—		(2.3)		(2.3)
Share repurchase program	—	—		—		—		—		(39.4)		(39.4)

Share-based compensation plans	—	—		2.6		—		—		—		2.6

Balance at March 31, 2021	43,034	$	0.4	$	124.8	$	726.7	$	13.2	$	(204.0)	$	661.1

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

~~September 30, 2021~~March 31, 2022

(Unaudited)


Accumulated other comprehensive income (loss)
	Three Months Ended March 31,
In millions		2022		2021
Foreign currency translation
Beginning balance		$	18.4	$	16.4


Net gains (losses) on foreign currency translation		(16.6)		2.4
Gains (losses) on net investment hedges		1.7		6.4
Less: tax provision (benefit)		0.4		1.5
Net gains (losses) on net investment hedges		1.3		4.9
Other comprehensive income (loss), net of tax		(15.3)		7.3
Ending balance		$	3.1	$	23.7

Derivative instruments
Beginning balance		$	(2.1)	$	(6.9)
Gains (losses) on derivative instruments		8.3		1.7
Less: tax provision (benefit)		2.0		0.4
Net gains (losses) on derivative instruments		6.3		1.3
(Gains) losses reclassified to net income		(1.5)		(0.1)
Less: tax (provision) benefit		(0.4)		—
Net (gains) losses reclassified to net income		(1.1)		(0.1)
Other comprehensive income (loss), net of tax		5.2		1.2
Ending balance		$	3.1	$	(5.7)

Pension and other postretirement benefits
Beginning balance		$	(3.2)	$	(4.8)






Other comprehensive income (loss), net of tax		—		—
Ending balance		$	(3.2)	$	(4.8)

Total AOCI ending balance at March 31		$	3.0	$	13.2

~~Note 10: Equity~~

~~The tables below provide a roll forward of equity.~~

Common Stock
In millions, except per share data in thousands Shares Amount Additional paid in capital Retained earnings Accumulated
other
comprehensive
income (loss) Treasury stock Total Equity
Balance at December 31, 2020 42,913 $ 0.4 $ 121.3 $ 678.0 $ 4.7 $ (162.3) $ 642.1
Net income (loss) — — — 48.7 — — 48.7
Other comprehensive income (loss) — — — — 8.5 — 8.5
Common stock issued 97 — — — — — —
Exercise of stock options, net 24 — 0.9 — — — 0.9
Tax payments related to vested restricted stock units — — — — — (2.3) (2.3)
Share repurchase program — — — — — (39.4) (39.4)
Share-based compensation plans — — 2.6 — — — 2.6
Balance at March 31, 2021 43,034 $ 0.4 $ 124.8 $ 726.7 $ 13.2 $ (204.0) $ 661.1
Net income (loss) — — — 44.3 — — 44.3
Other comprehensive income (loss) — — — — 5.4 — 5.4
Common stock issued 19 — — — — — —
Exercise of stock options, net 32 — 1.5 — — — 1.5
Tax payments related to vested restricted stock units — — — — — — —
Share repurchase program — — — — — (28.7) (28.7)
Share-based compensation plans — — 4.0 — — 0.9 4.9
Balance at June 30, 2021 43,085 $ 0.4 $ 130.3 $ 771.0 $ 18.6 $ (231.8) $ 688.5
Net income (loss) — — — (4.2) — — (4.2)
Other comprehensive income (loss) — — — — (11.1) — (11.1)
Common stock issued 5 — — — — — —
Exercise of stock options, net 2 — 0.1 — — — 0.1
Tax payments related to vested restricted stock units — — — — — (0.1) (0.1)
Share repurchase program — — — — — (32.2) (32.2)
Share-based compensation plans — — 3.0 — — 0.5 3.5
Balance at September 30, 2021 43,092 $ 0.4 $ 133.4 $ 766.8 $ 7.5 $ (263.6) $ 644.5

~~INGEVITY CORPORATION~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~September 30, 2021~~

~~(Unaudited)~~

Common Stock
In millions, except per share data in thousands Shares Amount Additional paid in capital Retained earnings Accumulated
other
comprehensive
income (loss) Treasury stock Total Equity
Balance at December 31, 2019 42,675 $ 0.4 $ 112.8 $ 497.2 $ (5.0) $ (74.6) $ 530.8
Net income (loss) — — — 45.3 — — 45.3
Other comprehensive income (loss) — — — — (39.1) — (39.1)
Common stock issued 161 — — — — — —
Tax payments related to vested restricted stock units — — — — — (3.1) (3.1)
Share repurchase program — — — — — (32.4) (32.4)
Share-based compensation plans — — 0.8 — — 0.4 1.2
Adoption of accounting standard — — — (0.6) — — (0.6)
Balance at March 31, 2020 42,836 $ 0.4 $ 113.6 $ 541.9 $ (44.1) $ (109.7) $ 502.1
Net income (loss) — — — 20.2 — — 20.2
Other comprehensive income (loss) — — — — (4.1) — (4.1)
Common stock issued 5 — — — — — —
Exercise of stock options, net 50 — 1.4 — — — 1.4
Tax payments related to vested restricted stock units — — — — — 0.1 0.1
Share-based compensation plans — — 1.3 — — 1.9 3.2
Balance at June 30, 2020 42,891 $ 0.4 $ 116.3 $ 562.1 $ (48.2) $ (107.7) $ 522.9
Net income (loss) — — — 69.9 — — 69.9
Other comprehensive income (loss) — — — — 22.6 — 22.6
Common stock issued 3.0 — — — — — —
Exercise of stock options, net 1.0 — — — — — —
Tax payments related to vested restricted stock units — — — — — (0.1) (0.1)
Share-based compensation plans — — 0.5 — — 1.2 1.7
Balance at September 30, 2020 42,895 $ 0.4 $ 116.8 $ 632.0 $ (25.6) $ (106.6) $ 617.0

~~INGEVITY CORPORATION~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~September 30, 2021~~

~~(Unaudited)~~

Accumulated other comprehensive income (loss)
Three Months Ended September 30, Nine Months Ended September 30,
In millions 2021 2020 2021 2020
Foreign currency translation
Beginning balance $ 27.8 $ (36.8) $ 16.4 $ 1.5
Net gains (losses) on foreign currency translation (16.7) 27.6 (8.5) (14.2)
Gains (losses) on net investment hedges 3.8 (8.1) 8.0 (3.5)
Less: tax provision (benefit) 0.9 (1.9) 1.9 (0.8)
Net gains (losses) on net investment hedges 2.9 (6.2) 6.1 (2.7)
Other comprehensive income (loss), net of tax (13.8) 21.4 (2.4) (16.9)
Ending balance $ 14.0 $ (15.4) $ 14.0 $ (15.4)
Derivative instruments
Beginning balance $ (4.5) $ (8.4) $ (6.9) $ (3.5)
Gains (losses) on derivative instruments 3.6 0.9 6.9 (5.9)
Less: tax provision (benefit) 0.8 0.2 1.6 (1.4)
Net gains (losses) on derivative instruments 2.8 0.7 5.3 (4.5)
(Gains) losses reclassified to net income (0.2) 0.5 (0.3) 0.9
Less: tax (provision) benefit (0.1) 0.1 (0.1) 0.2
Net (gains) losses reclassified to net income (0.1) 0.4 (0.2) 0.7
Other comprehensive income (loss), net of tax 2.7 1.1 5.1 (3.8)
Ending balance $ (1.8) $ (7.3) $ (1.8) $ (7.3)
Pension and other postretirement benefits
Beginning balance $ (4.7) $ (3.0) $ (4.8) $ (3.0)
Unrealized actuarial gains (losses) and prior service (costs) credits — — — —
Less: tax provision (benefit) — — — —
Net actuarial gains (losses) and prior service (costs) credits — — — —
Amortization of actuarial and other (gains) losses, prior service cost (credits), and settlement and curtailment (income) charge reclassified to net income — 0.1 0.1 0.1
Less: tax (provision) benefit — — — —
Net actuarial and other (gains) losses, amortization of prior service cost (credits), and settlement and curtailment (income) charge reclassified to net income — 0.1 0.1 0.1
Other comprehensive income (loss), net of tax — 0.1 0.1 0.1
Ending balance $ (4.7) $ (2.9) $ (4.7) $ (2.9)
Total AOCI ending balance at September 30 $ 7.5 $ (25.6) $ 7.5 $ (25.6)

~~INGEVITY CORPORATION~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~September 30, 2021~~

~~(Unaudited)~~


Reclassifications of accumulated other comprehensive income (loss)	Reclassifications of accumulated other comprehensive income (loss)									Reclassifications of accumulated other comprehensive income (loss)

		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
In millions	In millions	2021		2020		2021		2020		In millions		2022		2021
Derivative instruments	Derivative instruments									Derivative instruments
Currency exchange contracts (1)	Currency exchange contracts (1)	$	0.2	$	(0.2)	$	0.2	$	—	Currency exchange contracts (1)		$	0.2	$	—
Natural gas contracts (2)	Natural gas contracts (2)	—		(0.3)		0.1		(0.9)		Natural gas contracts (2)		1.3		0.1

Total before tax	Total before tax	0.2		(0.5)		0.3		(0.9)		Total before tax		1.5		0.1
(Provision) benefit for income taxes	(Provision) benefit for income taxes	(0.1)		0.1		(0.1)		0.2		(Provision) benefit for income taxes		(0.4)		—
Amount included in net income (loss)	Amount included in net income (loss)	$	0.1	$	(0.4)	$	0.2	$	(0.7)	Amount included in net income (loss)		$	1.1	$	0.1

Pension and other post-retirement benefits
Amortization of prior service costs (2)		$	—	$	(0.1)	$	0.1	$	(0.1)

Total before tax		—		(0.1)		0.1		(0.1)
(Provision) benefit for income taxes		—		—		—		—
Amount included in net income (loss)		$	—	$	(0.1)	$	0.1	$	(0.1)

______________

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

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

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

(Unaudited)

Share Repurchases

~~At September 30, 2021, $311.7~~On March 2, 2020, our Board of Directors authorized the repurchase of up to $500 million remained unused under our Board-authorized repurchase program. During the three and nine months ended September 30, 2021, we repurchased $32.2 million and $100.3 million in common stock, representing 414,501 and 1,298,167 shares of our common stock, ~~at a weighted average cost per share of $77.77~~ and ~~$77.25, respectively.~~

~~Our~~rescinded the prior 2 outstanding repurchase ~~program does not include a specific timetable or price targets and may be suspended or terminated at any time.~~ authorizations. Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market prevailing conditions and other ~~factors.~~factors, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

During the three months ended March 31, 2022 and March 31, 2021, we repurchased $40.4 million and $39.4 million in common stock, representing 610,447 and 527,550 shares of our common stock at a weighted average cost per share of $66.26 and $74.64, respectively. At March 31, 2022 and March 31, 2021, $262.2 million and $372.6 million remained unused under our Board-authorized repurchase programs, respectively.

~~INGEVITY CORPORATION~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~September 30, 2021~~

~~(Unaudited)~~

Note 11: Retirement Plans

The following table summarizes the components of net periodic benefit cost (income) for our defined benefit pension plans:


		Three Months Ended September 30,									Three Months Ended March 31,
		Pensions				Other Benefits					Pensions				Other Benefits
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021		2022		2021
Components of net periodic benefit cost (income):	Components of net periodic benefit cost (income):									Components of net periodic benefit cost (income):
Service cost (1)	Service cost (1)	$	0.4	$	0.4	$	—	$	—	Service cost (1)	$	0.4	$	0.4	$	—	$	—
Interest cost (2)	Interest cost (2)	0.3		0.3		—		—		Interest cost (2)	0.3		0.3		—		—
Expected return on plan assets (2)	Expected return on plan assets (2)	(0.3)		(0.3)		—		—		Expected return on plan assets (2)	(0.4)		(0.3)		—		—
Amortization of prior service cost (credit) (1)	Amortization of prior service cost (credit) (1)	—		0.1		—		—		Amortization of prior service cost (credit) (1)	—		—		—		—
Amortization of net actuarial and other (gain) loss (2)	Amortization of net actuarial and other (gain) loss (2)	—		—		—		—		Amortization of net actuarial and other (gain) loss (2)	—		—		—		—
Net periodic benefit cost (income)	Net periodic benefit cost (income)	$	0.4	$	0.5	$	—	$	—	Net periodic benefit cost (income)	$	0.3	$	0.4	$	—	$	—

		Nine Months Ended September 30,
		Pensions				Other Benefits
In millions		2021		2020		2021		2020
Components of net periodic benefit cost (income):
Service cost (1)		$	1.3	$	1.2	$	—	$	—
Interest cost (2)		0.8		0.9		—		—
Expected return on plan assets (2)		(1.0)		(0.9)		—		—
Amortization of prior service cost (credit) (1)		0.1		0.1		—		—
Amortization of net actuarial and other (gain) loss (2)		—		—		—		—
Net periodic benefit cost (income)		$	1.2	$	1.3	$	—	$	—

_______________

(1) Amounts are recorded to "Cost of sales" on our condensed consolidated statements of operations consistent with the employee compensation costs that participate in the plan.

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

Contributions

We did not make any voluntary cash contributions to our Union Hourly defined benefit pension plan in the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. There are no required cash contributions to our Union Hourly defined benefit pension plan in ~~2021,~~2022, and we currently have no plans to make any voluntary cash contributions in ~~2021.~~

2022.

2218

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

~~September 30, 2021~~March 31, 2022

(Unaudited)

Note 12: Restructuring and Other (Income) Charges, net

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


	Three Months Ended March 31,
In millions		2022		2021

Severance and other employee-related costs(1)		$	—	$	0.1

Restructuring charges		$	—	$	0.1

Business transformation costs		3.6		3.8

Other (income) charges, net		$	3.6	$	3.8

Total restructuring and other (income) charges, net		$	3.6	$	3.9

Three Months Ended September 30, Nine Months Ended September 30,
In millions 2021 2020 2021 2020
Severance and other employee-related costs $ — $ 0.3 $ 0.1 $ 6.3
Other — 1.7 — 1.7
Restructuring charges — 2.0 0.1 8.0
Business transformation costs 4.1 3.5 12.2 5.3
Other (income) charges, net 4.1 3.5 12.2 5.3
Total restructuring and other (income) charges, net $ 4.1 $ 5.5 $ 12.3 $ 13.3
_______________

(1) Represents severance and employee benefit charges.

~~Restructuring charges~~

During the second quarter of 2020, we implemented a cost reduction initiative to realign our cost structure in response to reduced demand for some of our products due to the COVID-19 pandemic. As a result of this cost reduction initiative, we recorded severance and other employee-related costs of zero and $0.1 million during the three and nine months ended September 30, 2021. During the three and nine months ended September 30, 2020, we recorded severance and other employee-related costs of $0.3 million and ~~$6.3 million, respectively. Additionally, during the~~ ~~three and nine~~ ~~monthsended~~ ~~September 30, 2020,~~ ~~we recorded $1.7 million related to an impairment of an operating lease asset that is no longer in use.~~

Rollforward of Restructuring Reserves

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

Balance at

Change in

Cash

Balance at

Change in

Cash

Balance at

In millions

12/31/2020(1)

Reserve(2)

Payments

Other

9/30/2021(1)

In millions

12/31/2021(1)

Reserve

Payments

Other(2)

3/31/2022(1)

Restructuring Reserves

0.8

0.1

(0.5)

—

0.4

Restructuring Reserves

0.5

—

0.1

0.6

_______________

(1) Included in "Accrued Expenses" on the condensed consolidated balance sheets.

(2) ~~Includes severance and other employee-related costs.~~Primarily foreign currency translation adjustments.

Other (income) charges, net

Business transformation costs

In 2020, we embarked upon a business transformation initiative that includes the implementation of an upgraded enterprise resource planning ("ERP") system. This new ERP system will equip our employees with standardized processes and secure integrated technology that enable us to better understand and meet our customers' needs and compete in the marketplace. The implementation of our new ERP is expected to occur in multiple phases over two years beginning ~~in fiscal year~~with our pilot deployment which occurred during the first quarter of 2022. This business transformation requires the integration of the new ERP system with multiple new and existing information systems and business processes in order to maintain the accuracy of our books and records and to provide our management team with real-time information important to the operation of our business. Such an implementation initiative is a major financial undertaking and will require substantial time and attention of management and key employees. Costs incurred, during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, of ~~$4.1~~$3.6 million and ~~$12.2 million, respectively, and during the three and nine months ended September 30, 2020, of $3.5 million and $5.3~~$3.8 million, respectively, represent costs directly associated with the business transformation initiative that, in accordance with GAAP, cannot be capitalized. Over the course of this initiative, we anticipate incurring approximately ~~$60-70~~$90-95 million of total costs, which includes ~~$30-35~~$45-50 million of non-capitalizable costs, ~~approximately $180~~$15-17 million of which we expect to be incurred in ~~2021.~~2022.

2319

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

~~September 30, 2021~~March 31, 2022

(Unaudited)

Note 13: Income Taxes

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

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Effective tax rate (1)
53.3 % 20.7 % 29.8 % 19.7 %

~~_______________~~

(1) The effective tax rate (“ETR”) in the three months ended September 30, 2021 was primarily impacted by the litigation expense recorded during the period. The ETR for the nine months ended September 30, 2021 was impacted by the litigation expense and legislative tax rate change recorded during the period.


	Three Months Ended March 31,
		2022		2021
Effective tax rate		21.6	%	21.2	%

We determine our interim tax provision using an Estimated Annual Effective Tax Rate methodology (“EAETR”). The EAETR is applied to the year-to-date ordinary income, exclusive of discrete items. The tax effects of discrete items are then included to arrive at the total reported interim tax provision.

The determination of the EAETR is based upon a number of estimates, including the estimated annual pre-tax ordinary income in each tax jurisdiction in which we operate. As our projections of ordinary income change throughout the year, the EAETR will change period-to-period. The tax effects of discrete items are recognized in the tax provision in the period they occur. Depending on various factors, such as the item’s significance in relation to total income and the rate of tax applicable in the jurisdiction to which it relates, discrete items in any quarter may materially impact the reported effective tax rate. As a global enterprise, our tax expense may be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors. As such, there may be significant volatility in interim tax provisions.

~~INGEVITY CORPORATION~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~September 30, 2021~~

~~(Unaudited)~~

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

Three Months Ended September 30,
2021 2020
In millions, except percentages Before tax Tax Effective tax rate % impact Before tax Tax Effective tax rate % impact
Consolidated operations $ (9.0) $ (4.8) 53.3 % $ 88.1 $ 18.2 20.7 %
Discrete items:
Restructuring and other (income) charges, net (1)
— — 2.0 0.3
Acquisition and other-related costs (2)
— — — —
Legislative tax rate changes (3)
— 0.1 — —
Litigation expense (4)
85.0 19.7 — —
Other tax only discrete items — 0.5 — (0.2)
Total discrete items 85.0 20.3 2.0 0.1
Consolidated operations, before discrete items $ 76.0 $ 15.5 $ 90.1 $ 18.3
Quarterly effect of changes in the EAETR 20.4 % 20.3 %
Nine Months Ended September 30,
2021 2020
In millions, except percentages Before tax Tax Effective tax rate % impact Before tax Tax Effective tax rate % impact
Consolidated operations $ 126.5 $ 37.7 29.8 % $ 168.7 $ 33.3 19.7 %
Discrete items:
Restructuring and other (income) charges, net (1)
0.1 — 8.0 1.7
Acquisition and other-related costs (2)
— — 1.7 0.4
Legislative tax rate changes (3)
— (14.6) — —
Litigation expense (4)
85.0 19.7 — —
Other tax only discrete items — 0.7 — 1.0
Total discrete items 85.1 5.8 9.7 3.1
Consolidated operations, before discrete items $ 211.6 $ 43.5 $ 178.4 $ 36.4
EAETR (5)
20.6 % 20.4 %















	Three Months Ended March 31,
	2022						2021
In millions, except percentages	Before tax		Tax		Effective tax rate % impact		Before tax		Tax		Effective tax rate % impact
Consolidated operations	$	77.6	$	16.8	21.6	%	$	61.8	$	13.1	21.2	%
Discrete items:



Other tax only discrete items	—		(0.7)				—		0.1
Total discrete items	—		(0.7)				—		0.1
Consolidated operations, before discrete items	$	77.6	$	16.1			$	61.8	$	13.2
EAETR (1)					20.7	%					21.4	%

_______________

(1) ~~Refer to Note 12 for additional information.~~

~~(2) Costs incurred to integrate the Perstorp Capa business into our Performance Chemicals segment.~~

~~(3) Legislative tax rate changes, enacted~~Decrease in the United Kingdom ("UK"), resulted in discrete tax expense of $14.6 million related to the revaluation of our net deferred tax liability associated with our UK operations. The corporate tax rate in the UK increased from 19.0% to 25.0% on April 1, 2023. ImpactEAETR for the three months ended ~~September 30, 2021 are a result of currency translation.~~

~~(4) Refer to~~ ~~Note 14 for additional information.~~

~~(5) Increase in EAETR for the nine months ended September 30, 2021,~~March 31, 2022, as compared to ~~September 30, 2020,~~March 31, 2021, is due to an overall change in the mix

of forecasted earnings in various tax jurisdictions with varying rates.

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had deferred tax assets of ~~$8.5~~$10.0 million and ~~$8.4~~$8.8 million, respectively, resulting from certain historical net operating losses from our ~~Brazil~~Brazilian and ~~China~~Chinese operations and U.S. state tax credits for which a valuation allowance has been established. The ultimate realization of these deferred tax assets depends on the generation of future taxable income during the periods in which these net operating losses and tax credits are available to be used. In evaluating the realizability of these deferred tax assets, we consider projected future taxable income and tax planning

~~INGEVITY CORPORATION~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~September 30, 2021~~

~~(Unaudited)~~

strategies in making our assessment. As of ~~September 30, 2021,~~March 31, 2022, we cannot objectively assert that these deferred tax assets are more likely than not to be realized and therefore we have maintained a valuation allowance. We intend to continue maintaining a valuation allowance on these deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. A release of all or a portion of the valuation allowance could be possible, if we determine that sufficient positive evidence becomes available to allow us to reach a conclusion that the valuation allowance will no longer be needed. A release of the valuation allowance would result in the recognition of certain deferred tax assets and a reduction to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change based on the level of profitability that we are able to actually achieve.

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

(Unaudited)

Note 14: Commitments and Contingencies

Legal Proceedings

On July 19, 2018, ~~Ingevity~~we filed suit against BASF Corporation (“BASF”) in the United States District Court for the District of Delaware (the “Delaware Proceeding”) alleging BASF infringed Ingevity’s patent covering canister systems used in the control of automotive gasoline vapor emissions (U.S. Patent No. RE38,844) (the ~~“’844~~“844 Patent”). On February 14, 2019, BASF asserted counterclaims against ~~Ingevity~~us in the Delaware Proceeding, alleging ~~two~~2 claims for violations of U.S. antitrust law (one for exclusive dealing and the other for tying) as well as a claim for tortious interference with an alleged prospective business relationship between BASF and a BASF customer (the “BASF Counterclaims”). The BASF Counterclaims relate to ~~Ingevity’s~~our enforcement of the ~~‘844~~844 Patent and ~~Ingevity’s~~our entry into several supply agreements with customers of its fuel vapor canister honeycombs. The U.S. District Court dismissed ~~Ingevity’s~~our patent infringement claims on November 18, 2020, and the case proceeded to trial on the BASF Counterclaims in September 2021.

On ~~Sept.~~September 15, 2021, a jury in the Delaware Proceeding issued a verdict in favor of BASF on the BASF Counterclaims and awarded BASF damages of approximately $28.3 million, which will be trebled under U.S. antitrust law to approximately ~~$85 million.~~$85.0 million when the court enters judgment. In addition, BASF may seek pre- and post-judgment interest and attorneys’ fees and costs in amounts that they will have to support at a future date.

We disagree with the ~~outcome,~~verdict, including the court’s application of the law, and we intend to seek judgment as a matter of law in the Delaware Proceeding post-trial briefing stage and on appeal, if necessary. In addition, we intend to challenge the U.S. District Court’s November 2020 dismissal of our patent infringement claims against BASF. Ingevity believes in the strength of its intellectual property and the merits of its position and intends to pursue all legal relief available to challenge these outcomes in the Delaware Proceeding. Final resolution of these matters could take ~~several months~~ up to ~~two years.~~eighteen months.

As of ~~September 30,~~March 31, 2022, there has been no progress in the post-trial proceedings to warrant any change to our conclusions as disclosed within our 2021 ~~we have accrued a total of $85 million, the~~Annual Report. As such, no changes to our reserve were made during this quarter. The full amount of the ~~jury’s verdict. The amount~~jury's verdict, $85.0 million, is accrued ~~for this matter is included~~ in Other liabilities on the condensed consolidated balance sheet as of ~~September 30, 2021, and the charge is included in Other (income) expense, net on the condensed consolidated statement of operations for the three and nine months ended September 30, 2021.~~March 31, 2022. The amount of any liability ~~Ingevity~~we may ultimately incur related to the Delaware Proceeding could be more or less than the amount accrued.

2621

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

~~September 30, 2021~~March 31, 2022

(Unaudited)

Note 15: Segment Information


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
In millions	In millions	2021		2020		2021		2020		In millions		2022		2021
Net sales	Net sales									Net sales
Performance Materials	Performance Materials	$	118.1	$	143.8	$	384.8	$	349.3	Performance Materials		$	148.4	$	140.7
Performance Chemicals	Performance Chemicals	258.7		187.9		670.7		541.2		Performance Chemicals		234.4		179.6
Total net sales (1)	Total net sales (1)	$	376.8	$	331.7	$	1,055.5	$	890.5	Total net sales (1)		$	382.8	$	320.3

Segment EBITDA (2)	Segment EBITDA (2)									Segment EBITDA (2)
Performance Materials	Performance Materials	$	56.4	$	80.4	$	191.4	$	164.9	Performance Materials		$	77.9	$	73.7
Performance Chemicals	Performance Chemicals	63.1		47.2		151.2		122.1		Performance Chemicals		41.1		31.7
Total segment EBITDA (2)		$	119.5	$	127.6	$	342.6	$	287.0
Total Segment EBITDA (2)										Total Segment EBITDA (2)		$	119.0	$	105.4
Interest expense, net	Interest expense, net	(11.6)		(8.9)		(36.2)		(29.8)		Interest expense, net		(10.7)		(12.4)
(Provision) benefit for income taxes	(Provision) benefit for income taxes	4.8		(18.2)		(37.7)		(33.3)		(Provision) benefit for income taxes		(16.8)		(13.1)
Depreciation and amortization - Performance Materials	Depreciation and amortization - Performance Materials	(8.9)		(8.0)		(26.9)		(22.5)		Depreciation and amortization - Performance Materials		(9.0)		(9.1)
Depreciation and amortization - Performance Chemicals	Depreciation and amortization - Performance Chemicals	(18.7)		(17.1)		(54.8)		(51.0)		Depreciation and amortization - Performance Chemicals		(18.1)		(17.9)

Restructuring and other income (charges), net (3)	Restructuring and other income (charges), net (3)	(4.1)		(5.5)		(12.3)		(13.3)		Restructuring and other income (charges), net (3)		(3.6)		(3.9)

Acquisition and other-related costs (4)		(0.2)		—		(0.9)		(1.7)
Acquisition and other-related costs										Acquisition and other-related costs		—		(0.3)

Litigation expense (5)		(85.0)		—		(85.0)		—
Net income (loss)	Net income (loss)	$	(4.2)	$	69.9	$	88.8	$	135.4	Net income (loss)		$	60.8	$	48.7

_______________

(1) Relates to external customers only, all intersegment sales and related profit have been eliminated in consolidation.

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

resources among our operating segments. Segment EBITDA is defined as segment revenue less segment operating expenses (segment operating expenses consist of costs of sales, selling, general and administrative expenses, research and technical expenses, other (income) expense, net, excluding depreciation and amortization). We have excluded the following items from segment EBITDA: interest expense, net, associated with corporate debt facilities, income taxes, depreciation, amortization, restructuring and other (income) charges, net, acquisition and ~~other-related~~other related costs, ~~certain~~ litigation ~~expenses,~~verdict charges, pension and postretirement settlement and curtailment (income) charges, net.

(3) Income (charges) for all periods presented relate to restructuring activity and costs associated with the business transformation initiative. For the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, charges of ~~$1.1 million and $4.5~~$1.3 million relate to the Performance Materials segment and charges of ~~$3.0 million and $7.8~~$2.3 million relate to the Performance Chemicals ~~segment, respectively.~~segment. For the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, charges of ~~$2.6 million and $5.4~~$1.7 million relate to the Performance Materials segment and charges of ~~$2.9 million and $7.9~~$2.2 million relate to the Performance Chemicals ~~segment, respectively.~~segment. For more detail on the charges incurred ~~refer to~~see Note 12.

(4) For the three and nine months ended September 30, 2021, charges of zero and $0.2 million relate to the acquisition of a strategic investment in the Performance Materials segment and charges of $0.2 million and $0.7 million relate to the integration of the Perstorp Capa business into our Performance Chemicals segment, respectively. For the three and nine months ended September 30, 2020, all charges relate to the integration of the Perstorp Capa business into our Performance Chemicals segment.

~~(5) For the three and nine months ended September 30, 2021, litigation expense relates to the Performance Materials segment. Refer to Note 14 for additional information.~~

2722

INGEVITY CORPORATION

Notes to the Condensed Consolidated Financial Statements

~~September 30, 2021~~March 31, 2022

(Unaudited)

Note 16: Earnings (Loss) per Share

Basic earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares and potentially dilutive common shares outstanding for the period. The calculation of diluted net income per share excludes all antidilutive common shares.

Three Months Ended September 30, Nine Months Ended September 30,
In millions, except share and per share data 2021 2020 2021 2020
Net income (loss) $ (4.2) $ 69.9 $ 88.8 $ 135.4
Basic and Diluted earnings (loss) per share
Basic earnings (loss) per share $ (0.11) $ 1.69 $ 2.22 $ 3.27
Diluted earnings (loss) per share (0.11) 1.69 2.21 3.26
Shares (in thousands)
Weighted average number of common shares outstanding - Basic 39,537 41,276 39,993 41,400
Weighted average additional shares assuming conversion of potential common shares (1)
— 175 245 179
Shares - diluted basis (1)
39,537 41,451 40,238 41,579

~~_______________~~

(1) For the three months ended September 30, 2021, all potentially dilutive common shares were excluded from the calculation of diluted earnings (loss) per share as we had a net loss for the period.


	Three Months Ended March 31,
In millions, except share and per share data		2022		2021
Net income (loss)		$	60.8	$	48.7

Basic and Diluted earnings (loss) per share
Basic earnings (loss) per share		$	1.56	$	1.21
Diluted earnings (loss) per share		1.55		1.20

Shares (in thousands)
Weighted average number of common shares outstanding - Basic		39,010		40,424
Weighted average additional shares assuming conversion of potential common shares		254		276
Shares - diluted basis		39,264		40,700

The following average number of potential common shares were antidilutive, and therefore, were not included in the diluted earnings per share calculation:


	Three Months Ended March 31,
In thousands		2022	2021
Average number of potential common shares - antidilutive		255	135

Three Months Ended September 30, Nine Months Ended September 30,
In thousands 2021 2020 2021 2020
Average number of potential common shares - antidilutive 375 173 200 205

Note 17: Subsequent Events

2026 Senior Notes

In March 2022, we provided notice to the holders and trustee of our 4.50% Senior Notes due in 2026, indicating our intent to redeem the $300.0 million outstanding aggregate principal balance prior to maturity. As a result of this notice, we classified these outstanding notes as current on our March 31, 2022 condensed consolidated balance sheet. The redemption occurred on April 27, 2022 and was primarily funded utilizing the outstanding capacity under our revolving credit facility. At redemption, we recognized the $3.4 million redemption premium and accelerated the remaining deferred finance fees of $2.7 million. Legal expenses associated with this redemption have been recorded as incurred.

2823

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

Management’s discussion and analysis of ~~Ingevity’s~~Ingevity Corporation's (“Ingevity,”“the company,”“we,”“us,” or “our”) financial condition and results of operations (“MD&A”) is provided as a supplement to the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements and related notes included elsewhere herein to help provide an understanding of our financial condition, changes in financial condition and results of our operations. The following discussion should be read in conjunction with Ingevity’s consolidated financial statements as of and for the year ended December 31, ~~2020~~2021 filed on February ~~19, 2021~~24, 2022 with the Securities and Exchange Commission ("SEC") as part of the Company's Annual Reporting on Form 10-K ("~~2020~~2021 Annual Report") and the unaudited interim ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements and notes to the unaudited interim ~~condensed consolidated financial statements,~~Condensed Consolidated Financial Statements, which are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

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. Several important factors could cause actual results to differ materially from those anticipated by these statements. Many of these statements are macroeconomic in nature and are, therefore, beyond the control of management. See "Cautionary Statements About Forward-Looking Statements" below and at the beginning of our ~~2020~~2021 Annual Report.

Cautionary Statements About Forward-Looking Statements

This section and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements, within the meaning of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995 that reflect our current expectations, beliefs, plans or forecasts with respect to, among other things, future events and financial performance. Forward-looking statements are often characterized by words or phrases such as “may,” “will,” “could,” “should,” “would,” “anticipate,” “estimate,” “expect,” “outlook,” “project,” “intend,” “plan,” “believe,” “target,” “prospects,” “potential” and “forecast,” and other words, terms and phrases of similar meaning. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties. We caution readers that a forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement. Such risks and uncertainties include, among others, those ~~risks described~~discussed in ~~our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in the section below entitled “Item~~Part I, Item 1A. Risk Factors” of our 2021 Annual Report, as well as in our unaudited ~~condensed consolidated financial statements,~~Condensed Consolidated Financial Statements, related notes, and the other information appearing elsewhere in this report and our other filings with the SEC. We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. 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:

•adverse effects from the novel coronavirus ("COVID-19") pandemic;

•we may be adversely affected by general global economic, geopolitical and financial conditions beyond our ~~control;~~control, including inflation and war in Ukraine;

•we are exposed to risks related to our international sales and operations;

•~~our reported results could be adversely affected by currency exchange rates and currency devaluation could impair our competitiveness;~~

•~~our operations require us to comply with a number of U.S. and foreign regulations, violations of which could have a material adverse effect on our financial condition and results of operations;~~

•~~we may be adversely affected by changes in trade policy, including the imposition of tariffs and the resulting consequences;~~

•adverse conditions in the ~~global~~ automotive market ~~or adoption of alternative~~have and ~~new technologies~~ may ~~adversely affect~~continue to negatively impact demand for our automotive carbon products;

•we face competition from ~~producers of alternative~~substitute products, ~~and~~ new technologies and new or emerging competitors;

•~~we face competition from infringing intellectual property activity;~~

•if ~~increasingly~~ more stringent air quality standards worldwide are not adopted, our growth could be impacted;

•we may be adversely affected by a decrease in government infrastructure spending;

•adverse conditions in cyclical end markets may adversely affect demand for our ~~engineered polymers~~ products;

•~~our printing inks business serves customers in a market that is facing declining volumes and downward pricing;~~

•our Performance Chemicals segment is highly dependent on crude tall oil ("CTO") which is limited in ~~supply;~~supply and subject to price increases that we may be unable to pass through;

2924

•~~a prolonged period~~lack of ~~low energy prices may materially~~access to sufficient CTO and other raw materials upon which we depend would impact our ~~results of operations;~~

•ability to produce our ~~engineered polymers product line may be adversely affected by the United Kingdom’s ("UK") withdrawal from the European Union;~~products;

•the ~~acquisition (the "Caprolactone Acquisition") of Perstorp Holding AB's caprolactone division (the "Caprolactone Business")~~inability to make or effectively integrate future acquisitions may ~~expose us to unknown or understated liabilities;~~negatively affect our results;

•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;

•the occurrence of natural disasters ~~such as hurricanes, winter or tropical storms, earthquakes, tornadoes, floods, fires~~and extreme weather or other unanticipated problem such as labor difficulties (including work stoppages), equipment failure or unscheduled maintenance and repair, which could result in operational disruptions of varied duration;

•we are dependent upon attracting and retaining key personnel;

•we are dependent on certain large customers;

•from time to time, we ~~are called upon to protect~~may be engaged in legal actions associated with our intellectual property ~~rights and proprietary information through litigation and other means;~~rights;

•if we are unable to protect our intellectual property and other proprietary information, we may lose significant competitive advantage;

•information technology security breaches and other disruptions;

•complications with the design or implementation of our new enterprise resource planning system;

•~~adverse litigation judgments and exposure to significant litigation-related costs;~~

•~~changes in~~ government policies and regulations, including, but not limited to, those affecting the environment, climate change, tax policies, tariffs and the chemicals industry; and

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

Overview

Ingevity ~~Corporation ("Ingevity," "the company", "we," "us" or "our")~~ is a leading global manufacturer of specialty chemicals and high performance activated carbon materials. We provide innovative solutions to meet our customers’ unique and demanding requirements through proprietary formulated products. We report in two business segments, Performance Materials and Performance Chemicals.

Recent Developments

~~On July 19, 2018, Ingevity filed suit against BASF Corporation (“BASF”) in~~2026 Senior Notes

In March 2022, we provided notice to the United States District Court for the District of Delaware (the “Delaware Proceeding”) alleging BASF infringed Ingevity’s patent covering canister systems used in the control of automotive gasoline vapor emissions (U.S. Patent No. RE38,844) (the “’844 Patent”). On February 14, 2019, BASF asserted counterclaims against Ingevity in the Delaware Proceeding, alleging two claims for violations of U.S. antitrust law (one for exclusive dealingholders and the other for tying) as well as a claim for tortious interference with an alleged prospective business relationship between BASF and a BASF customer (the “BASF Counterclaims”). The BASF Counterclaims relate to Ingevity’s enforcement of the ‘844 Patent and Ingevity’s entry into several supply agreements with customers of its fuel vapor canister honeycombs. The U.S. District Court dismissed Ingevity’s patent infringement claims on November 18, 2020, and the case proceeded to trial on the BASF Counterclaims in September 2021.

On Sept. 15, 2021, a jury in the Delaware Proceeding issued a verdict in favor of BASF on the BASF Counterclaims and awarded BASF damages of approximately $28.3 million, which will be trebled under U.S. antitrust law to approximately $85 million. In addition, BASF may seek pre- and post-judgment interest and attorneys’ fees and costs in amounts that they will have to support at a future date.

We disagree with the outcome, including the court’s application of the law, and we intend to seek judgment as a matter of law in the Delaware Proceeding post-trial briefing stage and on appeal, if necessary. In addition, we intend to challenge the U.S. District Court’s November 2020 dismissaltrustee of our ~~patent infringement claims against BASF. Ingevity believes~~4.50% Senior Notes due in 2026, indicating our intent to redeem the ~~strength~~$300.0 million outstanding aggregate principal balance prior to maturity. As a result of ~~its intellectual property and the merits of its position and intends to pursue all legal relief available to challenge~~this notice, we classified these ~~outcomes in the Delaware Proceeding. Final resolution of these matters could take several months up to two years.~~

~~As of September 30, 2021, we have accrued a total of $85 million, the full amount of the jury’s verdict. The amount accrued for this matter is included in Other liabilities~~outstanding notes as current on ~~the~~our March 31, 2022 condensed consolidated balance ~~sheet~~sheet. The redemption occurred on April 27, 2022 and was primarily funded utilizing the outstanding capacity under our revolving credit facility. At redemption, we recognized the $3.4 million redemption premium and accelerated the remaining deferred finance fees of $2.7 million. Legal expenses associated with this redemption have been recorded as incurred.

War in Ukraine

We are monitoring the ongoing war between Russia and Ukraine including the related sanctions imposed on Russia and Belarus by the U.S. and other countries. Currently, we do not foresee any direct material adverse effects on our business, however, the global implications of ~~September 30, 2021,~~the Russia/Ukraine war are difficult to predict at this time and we will continue to monitor the charge is included in Other (income) expense, net on the condensed consolidated statement of operations for the three and nine months ended September 30, 2021. The amount of any liability Ingevity may ultimately incur related to the Delaware Proceeding could be more or less than the amount accrued.situation.

3025

Results of Operations

Three Months Ended September 30, Nine Months Ended September 30,
In millions 2021 2020 2021 2020
Net sales $ 376.8 $ 331.7 $ 1,055.5 $ 890.5
Cost of sales 235.0 192.1 647.7 552.4
Gross profit 141.8 139.6 407.8 338.1
Selling, general, and administrative expenses 43.5 34.9 131.0 107.9
Research and technical expenses 6.8 5.2 19.3 16.8
Restructuring and other (income) charges, net 4.1 5.5 12.3 13.3
Acquisition-related costs 0.2 — 0.9 1.7
Other (income) expense, net 84.6 (3.0) 81.6 (0.1)
Interest expense, net 11.6 8.9 36.2 29.8
Income (loss) before income taxes (9.0) 88.1 126.5 168.7
Provision (benefit) for income taxes (4.8) 18.2 37.7 33.3
Net income (loss) $ (4.2) $ 69.9 $ 88.8 $ 135.4


	Three Months Ended March 31,
In millions		2022		2021
Net sales		$	382.8	$	320.3
Cost of sales		245.0		194.1
Gross profit		137.8		126.2

Selling, general, and administrative expenses		40.0		40.0
Research and technical expenses		7.3		6.6

Restructuring and other (income) charges, net		3.6		3.9
Acquisition-related costs		—		0.3
Other (income) expense, net		(1.4)		1.2
Interest expense, net		10.7		12.4
Income (loss) before income taxes		77.6		61.8
Provision (benefit) for income taxes		16.8		13.1
Net income (loss)		$	60.8	$	48.7

Net sales ~~and Gross profit~~

The table below shows the ~~2021~~2022 Net sales and ~~percentage~~ variances from ~~2020:~~

Percentage change vs. prior year
In millions, except percentages Net sales Total change Currency
effect Price/Mix Volume
Three months ended September 30, 2021 $ 376.8 14% —% 8% 6%
Nine months ended September 30, 2021 $ 1,055.5 19% 1% 5% 13%
2021:


			Change vs. prior year
In millions	Prior year Net sales		Volume	Price/Mix	Currency effect	Current year Net Sales
Three months ended March 31, 2022 vs. 2021	$	320.3	6.6	58.7	(2.8)	$	382.8

Three Months Ended ~~September 30,~~March 31, 2022 vs. 2021 ~~vs. 2020~~

~~Net~~The sales increase of ~~$45.1~~$62.5 million in ~~2021~~2022 was ~~primarily~~ driven by favorable pricing of $58.7 million (eighteen percent) and favorable volume growth in both of our ~~Performance Chemicals segment, offset by volume decline in our Performance Materials segment,~~segments for a combined impact of ~~$20.3~~$6.6 million ~~and favorable pricing and product mix in both segments of $25.0 million. Additionally,~~(two percent), partially offset by unfavorable foreign currency exchange ~~impacted Net sales by $0.2~~of $2.8 million ~~primarily related to euro and Chinese renminbi denominated sales.~~(one percent).

Gross Profit

Gross profit increase of ~~$2.2~~$11.6 million was driven by favorable pricing improvement of $58.3 million and ~~product mix of $24.3 million, largely offset by higher raw material, logistics and energy costs of $20.1 million, unfavorable~~favorable sales volume of ~~$1.3~~$2.7 million, ~~and~~partially offset by unfavorable foreign currency exchange of ~~$0.7 million.~~

$1.5 million and increased manufacturing costs of $47.9 million due to raw material and energy cost inflationary pressures. Refer to the Segment Operating Results section included within this MD&A for more information on the drivers to the changes in ~~net sales and operating results period over period for both segments.~~

~~Nine Months Ended September 30, 2021 vs. 2020~~

Net sales increase of $165.0 million in 2021 was primarily driven by favorable volume growth in both of our segments for a combined impact of $119.0 million and favorable pricing and product mix of $40.3 million. Additionally, favorable foreign currency exchange impacted Net sales by $5.7 million, primarily related to euro and Chinese renminbi denominated sales.

~~Gross~~gross profit increase of $69.7 million was driven by favorable sales volume of $51.1 million, favorable pricing and product mix of $39.2 million, and favorable foreign currency exchange of $0.9 million. These positive impacts were partially offset by higher net manufacturing costs of $21.5 million driven by logistics, raw material price inflation, energy, and depreciation, partially offset by higher plant throughput as a result of increased volume demand.

~~Refer to the Segment Operating Results section included within this MD&A for more information on the drivers to the changes in net sales and operating results~~ period over period for both segments.

Selling, general and administrative expenses

Three Months Ended ~~September 30,~~March 31, 2022 vs. 2021 ~~vs. 2020~~

Selling, general and administrative expenses ("SG&A") ~~increased $8.6~~were $40.0 million in(10.4 percent of Net sales) and $40.0 million (12.5 percent of Net sales) for the three months ended March 31, 2022 and 2021, ~~compared to the significantly COVID-19 impacted prior year.~~respectively. The ~~change~~decrease in SG&A as a percentage of Net sales was driven by higher ~~employee-related costs of $5.8 million, increased legal expense of $1.8 million,~~sales and higher travel and other miscellaneous expense of $1.0 million. SG&A increased year over year as we resumed more normal commercial operations, including hiring to fill open positions, increased travel, and investing in growth and innovation resources as compared to the COVID-19 impacted prior year period.

~~Nine Months Ended September 30, 2021 vs. 2020~~

SG&A increased $23.1 million in 2021 compared to 2020. The change in SG&A was driven by higher employee-related costs of $21.9 million, of which $4.2 million related to a one-time benefit recorded in 2020, and increased amortization expense of $1.6 million. The higher employee-related costs and amortization expense were partially offset by reduced ~~legal,~~ travel and other miscellaneous costs of ~~$0.4~~$3.2 million. ~~SG&A expenses as a percentage~~The positive impact was partially offset by higher employee-related costs of ~~Net sales~~$1.4 million and increased ~~slightly to 12.4 percent for the nine months ended September 30, 2021 from 12.1 percent in 2020, driven by the lower spending in 2020 due to COVID-19 and higher sales in 2021.~~legal costs of $1.8 million.

Research and technical expenses

Three Months Ended ~~September 30,~~March 31, 2022 vs. 2021 ~~vs. 2020~~

Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, increasing to 1.8 percent from 1.6 percent for the three months ended September 30, 2021 and 2020, respectively.

~~Nine Months Ended September 30, 2021 vs. 2020~~

Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, decreasing to ~~1.8~~1.9 percent from ~~1.9~~2.1 percent for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

Restructuring and other (income) charges, net

Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 vs. 2021 ~~vs. 2020~~

Restructuring and other (income) charges, net were ~~$4.1~~$3.6 million and ~~$12.3~~$3.9 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~respectively,~~respectively. See Note 12 within the Condensed Consolidated Financial Statements for more information.

Acquisition-related costs

Three Months Ended March 31, 2022 vs. 2021

Acquisition-related costs were zero and ~~$5.5 million and $13.3~~$0.3 million for the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2022 and 2021, respectively. ~~Refer to Note 12 within the condensed consolidated financial statements for more information.~~

~~Acquisition-related costs~~

~~Three and Nine Months Ended September 30,~~The 2021 ~~vs. 2020~~

~~Acquisition-related~~ costs were $0.2 million and $0.9 million for the three and nine months ended September 30, 2021, respectively, and zero and $1.7 million for the three and nine months ended September 30, 2020, respectively. For the three and nine months ended September 30, 2021, charges of zero and $0.2 million relate to the acquisition of a strategic investmentincurred in ~~the Performance Materials segment, respectively, and charges of $0.2 million and $0.7 million relate to~~connection with the integration of ~~the~~ Perstorp ~~Capa business into our Performance Chemicals segment, respectively. For the three and nine months ended September 30, 2020, all charges relate to the integration of the Perstorp Capa~~Holding AB's caprolactone business into our Performance Chemicals segment.

Other (income) expense, net

Three ~~and Nine~~ Months Ended ~~September 30, 2021 vs. 2020~~
Three Months Ended September 30, Nine Months Ended September 30,
In millions 2021 2020 2021 2020
Foreign currency exchange (income) loss $ 0.2 $ (3.0) $ 2.1 $ (2.4)
Impairment of equity investment (1)
— — — 1.4
Litigation expense (2)
85.0 — 85.0 —
Other (income) expense, net (0.6) — (5.5) 0.9
Total Other (income) expense, net $ 84.6 $ (3.0) $ 81.6 $ (0.1)

~~_______________~~

~~(1) Represents an impairment charge recorded during the three months ended~~ March 31, ~~2020 related to an equity investment within our Performance Materials segment.~~

~~(2) Refer to Note 14 within the condensed consolidated financial statements for more information.~~

2022 vs. 2021


	Three Months Ended March 31,
In millions		2022		2021
Foreign currency exchange (income) loss		$	0.3	$	1.7


Other (income) expense, net		(1.7)		(0.5)
Total Other (income) expense, net		$	(1.4)	$	1.2

Interest expense, net

Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 vs. 2021 ~~vs. 2020~~
Three Months Ended September 30, Nine Months Ended September 30,
In millions 2021 2020 2021 2020
Interest expense on finance lease obligations $ 1.8 $ 1.9 5.5 4.9
Interest expense on revolving credit and term loan facilities(1)
2.0 4.5 6.2 18.3
Interest expense on senior notes(1)
9.1 3.5 27.5 10.7
Interest income associated with our Restricted investment (0.5) (0.5) (1.5) (1.5)
Capitalized interest (0.3) (0.2) (0.5) (0.6)
Fixed-to-fixed cross-currency interest rate swap(2)
(0.1) (0.2) (0.3) (1.5)
Other interest (income) expense, net (0.4) (0.1) (0.7) (0.5)
Total Interest expense, net $ 11.6 $ 8.9 $ 36.2 $ 29.8


	Three Months Ended March 31,
In millions		2022		2021

Finance lease obligations		1.8		1.8
Revolving credit and term loan facilities (1)		1.9		2.2
Senior notes (1)		9.2		9.2



Other interest (income) expense, net		(2.2)		(0.8)
Total Interest expense, net		$	10.7	$	12.4

_______________

(1) ~~Refer to~~See Note 9 within the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements for more information.

~~(2) Refer to Note 8 within the condensed consolidated financial statements for more information.~~

Provision (benefit) for income taxes

Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 vs. 2021 ~~vs. 2020~~

For the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ our effective tax rate was ~~53.3~~21.6 percent and ~~20.7~~21.2 percent, respectively. Excluding discrete items, the effective rate was ~~20.4~~20.7 percent compared to ~~20.3~~21.4 percent in the three months ended ~~September 30,~~March 31, 2022 and 2021, and 2020, respectively. For the nine months ended September 30, 2021 and 2020, our effective tax rate was 29.8 percent and 19.7 percent, respectively. Excluding discrete items, the effective rate was 20.6 percent compared to 20.4 percent in the nine months ended September 30, 2021 and 2020, respectively. An explanation of the change in the effective tax rate is presented in Note 13 to the ~~condensed consolidated financial statements.~~

Condensed Consolidated Financial Statements.

3427

Segment Operating Results

In addition to the information discussed above, the following sections discuss the results of operations for both of Ingevity's segments. Our segments are (i) Performance Materials and (ii) Performance Chemicals. Segment Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") is the primary measure used by ~~our~~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 revenue 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). We have excluded the following items from segment EBITDA: interest expense, net associated with corporate debt facilities, income taxes, depreciation, amortization, restructuring and other (income) charges, net, acquisition and other-related costs, ~~certain~~ litigation ~~expenses,~~verdict charges, and pension and postretirement settlement and curtailment (income) ~~charges, net.~~charges.

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 ~~2020~~2021 Annual Report.

Performance Materials

In millions Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Total Performance Materials - Net sales(1)
$ 118.1 $ 143.8 $ 384.8 $ 349.3
Segment EBITDA $ 56.4 $ 80.4 $ 191.4 $ 164.9

~~______________~~


In millions	Three Months Ended March 31,
		2022		2021


Total Performance Materials - Net sales		$	148.4	$	140.7
Segment EBITDA		$	77.9	$	73.7

~~The table below shows the~~ Net ~~sales variances 2021 compared to 2020:~~

Percentage change vs. prior year
Performance Materials (In millions, except percentages)
Net sales Total change Currency
effect Price/Mix Volume
Three months ended September 30, 2021 $ 118.1 (18) % 1 % 2 % (21) %
Nine months ended September 30, 2021 $ 384.8 10 % 2 % 2 % 6 %
Sales Comparison of Three Months Ended March 31, 2022 and March 31, 2021:


	Change vs. prior year
Performance Materials (In millions)	Prior year Net sales		Volume	Price/Mix	Currency effect	Current year Net sales

Three months ended March 31, 2022 vs. 2021	$	140.7	3.7	4.0	—	$	148.4

Three Months Ended ~~September 30,~~March 31, 2022 vs. 2021 ~~vs. 2020~~

Segment net sales ~~decrease~~increase of ~~$25.7~~$7.7 million in ~~2021~~2022 was driven by ~~$29.8~~favorable pricing of $4.0 million (three percent) and volume growth of $3.7 million (three percent).

Volume growth was driven by increased sales of our process purification products. Favorable pricing recognized in the first quarter was driven by process purification product sales as well as continued strong demand for our automotive gasoline vapor emission control products. Automotive volumes were however muted by lower vehicle production globally, driven by ongoing supply chain challenges and the global microchip shortage. North American sales of automotive gasoline vapor emission control products offset lower volumes in Asia-Pacific due to COVID-related customer shutdowns. Brazil's implementation of their new new emissions regulation standard, Proconve L-7, began in the first quarter of 2022 driving volume ~~decline, primarily~~growth in South America automotive ~~activated carbon products, partially~~gasoline vapor emission control products.

Segment EBITDA increased $4.2 million due to decreased SG&A and research and technical expenses of $2.5 million, favorable pricing of $2.1 million, favorable volume of $1.2 million and favorable foreign currency exchange of $0.7 million, offset by higher manufacturing costs of $2.3 million.

Performance Chemicals


	Three Months Ended March 31,
In millions		2022		2021

Net Sales
Pavement Technologies product line		$	27.9	$	21.4
Industrial Specialties product line		144.7		112.1
Engineered Polymers product line		61.8		46.1
Total Performance Chemicals - Net sales		$	234.4	$	179.6
Segment EBITDA		$	41.1	$	31.7

Net Sales Comparison of Three Months Ended March 31, 2022 and March 31, 2021:


	Change vs. prior year
Performance Chemicals (In millions)	Prior year Net sales		Volume	Price/Mix	Currency effect	Current year Net Sales

Three months ended March 31, 2022 vs. 2021	$	179.6	2.9	54.7	(2.8)	$	234.4

Three Months Ended March 31, 2022 vs. 2021

Segment net sales increase of $54.8 million was driven by favorable pricing and product mix of ~~$2.4~~$54.7 million (30 percent), driven by increases in industrial specialties ($39.7 million), engineered polymers ($14.9 million), and pavement technologies ($0.1 million). Also driving the segment net sales increase was favorable volume of $2.9 million (two percent), consisting of volume increases in pavement technologies ($6.6 million) and engineered polymers ($3.0 million), offset partially by volume decreases in industrial specialties ($6.7 million). Unfavorable foreign currency exchange ~~of $1.7 million.~~impacted Net sales by $2.8 million (two percent).

~~Sales~~Our Performance Chemicals segment saw strong revenue growth versus the prior year’s quarter on solid end-market demand and continued price improvement. These price increases were necessary to keep pace with the dramatic increases we are experiencing related to energy, raw material, and shipping costs.

Our Engineered Polymers business grew 34.1 percent as the business increased pricing to offset inflationary costs for raw materials, logistics, and energy that spiked in the fourth quarter of 2021 and has remained at elevated levels. From a regional perspective, sales in Asia for our ~~Performance Materials' segment~~products were ~~negatively impacted~~robust in the quarter due to demand in automotive and UV coatings applications. This was offset by ~~lower automotive production~~a decline in the Americas where some polyurethane customers experienced availability issues with key raw materials.

Industrial Specialties sales increased 29.1 percent versus the prior-year quarter with strong performance across all markets, particularly in oilfield and adhesives primary end-use markets. The sales improvements were supplemented by an improved mix shift to higher-value derivative products as ~~compared~~growth in higher-end additives to oilfield and adhesives primary end-use markets outpaced growth in industrial intermediate’s merchant tall oil fatty acid sales.

Pavement Technologies sales increased 30.4 percent versus the prior-year quarter. While price increases contributed to the ~~prior year period, due to the shortage~~sales improvement, most of microchips that continue to disrupt the automotive industry worldwide. Additionally, the prior year quarter benefited from robust automotive production which rebounded sharply from COVID-19 pandemic lowsthis growth was driven by improved volumes, primarily in the ~~first half of 2020.~~Americas and Europe.

Segment EBITDA~~decreased $24.0~~ increased by $9.4 million ~~primarily~~ due to unfavorable volume of $20.5 million, higher manufacturing costs of $1.8 million, increased SG&A and Research and technical expenses of $0.9 million, and unfavorable foreign currency exchange of $2.4 million. These impacts were partially offset by favorable pricing and product mix of ~~$1.6 million. The automotive activated carbon sales volume declines in the period was the most significant contributor to the Segment EBITDA decrease year over year.~~

~~Nine Months Ended September 30, 2021 vs. 2020~~

~~Segment net sales~~$56.2 million, an increase ~~of $35.5 million in 2021 was driven by $21.1 million~~ in volume ~~growth, primarily in automotive products, favorable pricing and product mix~~ of ~~$7.7~~$1.5 million, and favorable foreign currency exchange of ~~$6.7 million. Sales for the nine months ended September 30, 2020 were negatively impacted by COVID-19's impact on automotive production which occurred in the first half of fiscal year 2020.~~

~~Segment EBITDA~~ ~~increased $26.5~~$0.8 million, primarily due to favorable volume of $14.7 million, favorable pricing and product mix of $7.4 million, and lower manufacturing costs of $6.4 million due to increased plant throughput in 2021 when compared to COVID-19 impacts to production in 2020. These increases were partially offset by increased SG&A and Research and technical expenses of $6.9 million. Favorable foreign currency exchange and increased other miscellaneous income positively impacted Segment EBITDA by $4.9 million.

~~Performance Chemicals~~

Three Months Ended September 30, Nine Months Ended September 30,
In millions 2021 2020 2021 2020
Net sales
Pavement Technologies product line 73.2 72.5 162.4 157.1
Industrial Specialties product line(1)
132.6 90.1 364.7 290.9
Engineered Polymers product line 52.9 25.3 143.6 93.2
Total Performance Chemicals - Net sales $ 258.7 $ 187.9 $ 670.7 $ 541.2
Segment EBITDA $ 63.1 $ 47.2 $ 151.2 $ 122.1

~~______________~~

(1) Beginning in Q1 2021, we updated disaggregated revenue disclosures, combining certain product groups to reflect categories that depict how the nature, amount, and uncertainty of revenue and cash flows are affected by economic factors. As a result, Oilfield Technologies product line has been combined with the Industrial Specialties product line within the Performance Chemicals segment.

~~The table below shows the Net sales variances 2021 compared to 2020:~~

Percentage change vs. prior year
Performance Chemicals (In millions, except percentages)
Net sales Total change Currency
effect Price/Mix Volume
Three months ended September 30, 2021 $ 258.7 38 % (1) % 12 % 27 %
Nine months ended September 30, 2021 $ 670.7 24 % — % 6 % 18 %

~~Three Months Ended September 30, 2021 vs. 2020~~

~~Segment net sales~~ increase of $70.8 million was driven mainly by favorable volume of $50.1 million, consisting of volume increases in industrial specialties products ($29.6 million), increases in engineered polymers products ($22.2 million), and decreases in pavement technologies products ($1.7 million). Segment net sales were also impacted by favorable pricing implemented during 2021 in response to raw material inflation as well as product sales mix for a net impact of $22.6 million. The net price/mix impact was driven by increases in industrial specialties ($12.4 million), engineered polymers ($7.9 million), and pavement technologies ($2.3 million). Additionally, unfavorable foreign currency exchange impacted Net sales by $1.9 million.

Sales of our Pavement Technologies product line were up slightly compared to the previous year quarter, driven by continued adoption of our environmentally friendly cold recycling technology. Outside of North America, we realized strong sales growth in Europe but this was offset by a reduction in sales in China, which we attribute to temporarily reduced local government budgets, leading to curtailed paving activity.

Industrial Specialties sales rose 47%. Sales growth was driven by adhesives, lubricants and oilfield product sales. Adhesive sales growth was robust in both packaging adhesives and safety road striping. In the three months ended September 30, 2021, we saw the benefit of prior quarter price increases.

Sales of our Engineered Polymers product line rose over 100% due to improved volume for all primary end uses across the globe. We saw strong technology adoption and sales growth in protective coatings as well as in resins used in electric vehicle battery pads. In addition to volume growth, we also realized strong price improvement in Engineered Polymers which has been important to offset the inflation in raw material costs.

~~Segment EBITDA~~ ~~increased by $15.9 million primarily due to an increase in volume of $19.2 million, and favorable pricing and product mix of $22.7 million. These favorable results were partially~~ offset by higher manufacturing costs of ~~$15.8~~

$45.2 million, ~~due to logistics, raw material price inflation,~~ and ~~energy,~~ higher SG&A ~~and Research and technical~~ expenses of ~~$8.8 million, and unfavorable foreign currency exchange of $1.4 million.~~

~~Nine Months Ended September 30, 2021 vs. 2020~~

~~Segment net sales~~ increase of $129.5 million was driven mainly by favorable volume of $97.9 million, consisting of volume increases in industrial specialties products ($58.1 million), increases in engineered polymers products ($40.8 million), and decreases in pavement technologies products ($1.0 million). Segment net sales were also impacted by favorable pricing implemented during 2021 in response to raw material inflation as well as product sales mix for a net impact of $32.6 million. The net price/mix impact was driven by increases in industrial specialties ($13.9 million), engineered polymers ($13.3 million), and pavement technologies ($5.4 million). Additionally, unfavorable foreign currency exchange impacted Net sales by $1.0 million.

~~Segment EBITDA~~ increased by $29.1 million primarily due to an increase in volume of $36.4 million and favorable pricing and product mix of $31.8 million. These favorable drivers were partially offset by higher manufacturing costs of $21.4 million due to logistics, raw material price inflation, and energy, higher SG&A and Research and technical expenses of $15.5 million, and unfavorable foreign currency exchange of $2.2$3.9 million.

Use of Non-GAAP Financial Measure - Adjusted EBITDA

Ingevity has presented the financial measure, Adjusted EBITDA, defined below, which has not been prepared in accordance with GAAP and has provided a reconciliation to net income, ~~(loss),~~ the most directly comparable financial measure calculated in accordance with GAAP. Adjusted EBITDA is not meant to be considered in isolation ornor as a substitute for ~~Net income (loss),~~ the

most directly comparable financial measure calculated in accordance with GAAP. Adjusted EBITDA is utilized by management as a measure of profitability.

We believe this non-GAAP financial measure provides management as well as investors, potential investors, securities analysts and others with useful information to evaluate the performance of the business, because such measure, when viewed together with our financial results computed in accordance with GAAP, provides a more complete understanding of the factors and trends affecting our historical financial performance and projected future results. 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, interest expense, net, depreciation, amortization, restructuring and other (income) charges, net, acquisition and other-related costs, ~~certain~~ litigation ~~expenses,~~verdict 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 ~~(loss)~~ is set forth ~~below.~~within this section.

Reconciliation of Net Income (Loss) to Adjusted EBITDA
Three Months Ended September 30, Nine Months Ended September 30,
In millions 2021 2020 2021 2020
Net income (loss) (GAAP)
$ (4.2) $ 69.9 $ 88.8 $ 135.4
Interest expense, net 11.6 8.9 36.2 29.8
Provision (benefit) for income taxes (4.8) 18.2 37.7 33.3
Depreciation and amortization - Performance Materials 8.9 8.0 26.9 22.5
Depreciation and amortization - Performance Chemicals 18.7 17.1 54.8 51.0
Restructuring and other (income) charges, net 4.1 5.5 12.3 13.3
Acquisition and other-related costs 0.2 — 0.9 1.7
Litigation expense 85.0 — 85.0 —
Adjusted EBITDA (Non-GAAP)
$ 119.5 $ 127.6 $ 342.6 $ 287.0


Reconciliation of Net Income (Loss) to Adjusted EBITDA
	Three Months Ended March 31,
In millions		2022		2021
Net income (loss) (GAAP)		$	60.8	$	48.7
Interest expense, net		10.7		12.4
Provision (benefit) for income taxes		16.8		13.1
Depreciation and amortization - Performance Materials		9.0		9.1
Depreciation and amortization - Performance Chemicals		18.1		17.9

Restructuring and other (income) charges, net		3.6		3.9
Acquisition and other-related costs		—		0.3
Adjusted EBITDA (Non-GAAP)		$	119.0	$	105.4

Adjusted EBITDA

Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 vs. 2021 ~~vs. 2020~~

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.

Current Company Outlook


In millions			~~2021~~2022 Guidance
Net sales			$~~1,320~~1,525 - ~~$1,360~~$1,650
Adjusted EBITDA			$~~405~~430 - ~~$420~~$470
Operating Cash Flow			$~~300~~305 - ~~$315~~$325
Capital Expenditures			$~~100~~155 - ~~115~~$175
Free Cash Flow*			~$~~200~~150
*Calculated as Operating Cash Flow less Capital Expenditures

~~Our fiscal year 2021~~Ingevity raised the top end of its 2022 guidance ~~for~~to sales ~~is $1.32~~between $1.525 billion to ~~$1.36~~$1.65 billion and adjusted EBITDA ~~is $405~~between $430 million to ~~$420~~$470 million. ~~Our guidance for~~For revenue, we expect to capture volume growth in our Performance Chemical segment specifically within our Engineered Polymers’ business. We also anticipate continued growth in our adhesives and oilfield products within Industrial Specialties. Pavement technologies will benefit from the ~~remainder of the year reflects our lowered expectations for~~U.S. infrastructure bill and continued Evotherm® warm mix technology adoption. This expected demand will result in favorable pricing conditions. Performance Materials will see moderate growth as process purification volumes and ~~our confidence~~price increases will partially offset muted improvement in automotive due to the continued ~~strong demand for products~~constrained semiconductor shortage and the absence of any novel gasoline vapor emission control regulations.

Adjusted EBITDA is expected to grow versus 2021 mainly driven by our Performance Chemicals segment, where continued profitable growth in ~~Performance Chemicals. For the remainder of 2021, we expect an ongoing shortage of microchips, continued logistics headwinds, and raw materials and energy inflation~~all businesses is expected to be ~~challenges.~~partially offset by inflationary costs of energy, logistics and primary raw materials. The Performance Materials segment anticipates results similar to 2021 as U.S., Chinese, Canadian, and European vehicle production continues to be negatively impacted by global chip supply and general cost inflation. We expect to deliver fiscal year 2022 Adjusted EBITDA of $430 million to $470 million. These estimates assume that 2022 will continue to ~~monitor~~be impacted by global logistical headwinds, geopolitical uncertainty, significant cost inflation, and the microchip shortage which is disrupting the global automotive supply ~~and demand in the market and will pass through costs to ensure we extract the optimal value for our products.~~chain.

A reconciliation of net income to adjusted EBITDA as projected for ~~2021~~2022 is not provided. Ingevity does not forecast net income as it cannot, without unreasonable effort, estimate or predict with certainty various components of net income. These components, net of tax, include further restructuring and other income (charges), net; additional acquisition and other-related costs; ~~certain~~ litigation ~~expenses;~~verdict charges; additional pension and postretirement settlement and curtailment (income) charges; and revisions due to legislative tax rate changes. Additionally, discrete tax items could drive variability in our projected effective tax rate. All of these components could significantly impact such financial measures. Further, in the future, other items with similar characteristics to those currently included in adjusted EBITDA, that have a similar impact on comparability of periods, and which are not known at this time, may exist and impact adjusted EBITDA.

3931

Liquidity and Capital Resources

The primary source of liquidity for our business is the cash flow provided by operating activities. 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 ~~September 30, 2021,~~March 31, 2022, our undrawn capacity under our revolving credit facility was ~~$497.7~~$497.5 million. Over the next twelve months, we expect to fund the following: redemption of our 4.50% Senior Notes due in 2026 (see Note 17 within the Condensed Consolidated Financial Statements for more information), interest payments, capital expenditures, expenditures related to our business transformation initiative, debt principal repayments, purchases pursuant to our stock repurchase program, income tax payments, and to incur additional spending associated with our Performance Materials' intellectual property litigation. 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 and term loan ~~facilities,~~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 ~~$269.4~~$222.6 million at ~~September 30, 2021.~~March 31, 2022. 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 ~~September 30, 2021~~March 31, 2022, included ~~$79.2~~$95.8 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. liquidity. 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. 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. Management does not currently expect to repatriate cash earnings from our foreign operations in order to fund U.S. operations.

Other Potential Liquidity Needs

Share Repurchases

On ~~February 28,~~March 2, 2020, our Board of Directors authorized the repurchase of up to ~~$500.0~~$500 million of our common stock and rescinded the prior two outstanding repurchase authorizations. ~~Our repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time.~~ Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market prevailing conditions and other ~~factors.~~ factors, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and March 31, 2021, we repurchased ~~$32.2~~$40.4 million and ~~$100.3~~$39.4 million in common stock, representing ~~414,501~~610,447 and ~~1,298,167~~527,550 shares of our common stock at a weighted average cost per share of ~~$77.77~~$66.26 and ~~$77.25,~~$74.64, respectively. At ~~September 30,~~March 31, 2022 and March 31, 2021, ~~$311.7~~$262.2 million and $372.6 million remained unused under our Board-authorized repurchase ~~program.~~programs, respectively.

Capital Expenditures

Projected ~~2021~~2022 capital expenditures are ~~$100~~$155 - ~~$115~~$175 million. We have no material commitments associated with these projected capital expenditures as of ~~September 30, 2021~~March 31, 2022.

4032

Cash flow comparison of ~~Nine~~the Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

Nine Months Ended September 30,
In millions 2021 2020
Net cash provided by (used in) operating activities $ 217.0 $ 199.1
Net cash provided by (used in) investing activities (83.4) (78.4)
Net cash provided by (used in) financing activities (120.3) 14.8


	Three Months Ended March 31,
In millions	2022		2021
Net cash provided by (used in) operating activities	$	24.3	$	51.1
Net cash provided by (used in) investing activities	(30.2)		(17.3)
Net cash provided by (used in) financing activities	(46.3)		(52.1)

Cash flows provided by (used in) operating activities

During the first ~~nine~~three months of ~~2021,~~2022, cash flow provided by operations ~~increased primarily~~decreased due to ~~higher earnings driven by~~increased accounts receivable related to the increase in net ~~sales. The increase in net~~ sales ~~also drove higher accounts receivable~~ and ~~corresponding plant production that resulted in higher~~a larger inventory ~~levels, which negatively impacted the cash flow provided by operations~~build compared to ~~2020.~~2021. Below provides a description of the changes to working capital during the first ~~nine~~three months of ~~2021~~2022 (i.e. current assets and current liabilities).

Current Assets and Liabilities


In millions	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	222.6	$	275.4
Accounts receivable, net	206.9		161.7
Inventories, net	260.2		241.2
Prepaid and other current assets	43.1		46.6
Total current assets	$	732.8	$	724.9

In millions September 30, 2021 December 31, 2020
Cash and cash equivalents $ 269.4 $ 257.7
Accounts receivable, net 175.8 148.0
Inventories, net 228.3 189.0
Prepaid and other current assets 46.8 34.0
Total current assets $ 720.3 $ 628.7

Current assets as of ~~September 30, 2021~~March 31, 2022, increased ~~$91.6~~$7.9 million compared to December 31, ~~2020,~~2021, primarily due to increases in Accounts receivable, net and Inventories, net. Accounts receivable, net as of ~~September 30, 2021,~~March 31, 2022, increased ~~$27.8~~$45.2 million due to increased sales during the quarter ended ~~September 30, 2021 compared to the quarter ended December~~March 31, ~~2020.~~2022. Inventories increased by ~~$39.3~~$19.0 million ~~mainly~~ due to the build of inventory ~~to support~~for forecasted sales. ~~Additionally,~~These increases were offset by a decrease in Cash and cash equivalents ~~increased by $11.7~~of $52.8 million and a decrease in Prepaid and other current assets ~~increased by $12.8~~of $3.5 million ~~primarily related~~compared to ~~prepaid insurance and services.~~

In millions September 30, 2021 December 31, 2020
Accounts payable $ 127.4 $ 104.2
Accrued expenses 46.1 46.6
Accrued payroll and employee benefits 34.6 25.1
Current operating lease liabilities 16.4 16.2
Notes payable and current maturities of long-term debt 19.5 26.0
Income taxes payable 3.6 5.3
Total current liabilities $ 247.6 $ 223.4
the balances at December 31, 2021.


In millions	March 31, 2022		December 31, 2021
Accounts payable	$	128.9	$	125.8
Accrued expenses	53.8		51.7
Accrued payroll and employee benefits	22.4		48.2
Current operating lease liabilities	17.2		17.4
Notes payable and current maturities of long-term debt	319.6		19.6
Income taxes payable	9.8		6.2
Total current liabilities	$	551.7	$	268.9

Current liabilities as of ~~September 30, 2021,~~March 31, 2022, increased by ~~$24.2~~$282.8 million compared to December 31, ~~2020,~~2021, driven primarily ~~driven~~ by an increase ~~in Accounts payable and Accrued payroll and employee benefits. This increase was offset partially by decreases~~ in Notes payable and current maturities of long-term debt of $300.0 million due to the redemption of our 4.5% Senior Notes due in 2026 (see Note 17 within the Condensed Consolidated Financial Statements for more information), Income taxes payable of $3.6 million, Accounts payable of $3.1 million, and Accrued ~~expenses.~~expenses of $2.1 million. This increase was offset partially by decreases in Accrued payroll and employee benefits of $25.8 million, and Current operating lease liabilities of $0.2 million.

4133

Cash flows provided by (used in) investing activities

Cash used by investing activities in the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$83.4~~$30.2 million and was primarily driven by capital expenditures. In the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ capital spending included the base maintenance capital supporting ongoing operations and growth and cost improvement spending primarily related to our business transformation initiative ~~(refer to~~(see Note 12 within the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements for more information). ~~Also, during nine months ended September 30, 2021, we acquired a strategic equity investment in a privately-held company for $16.5 million.~~

Capital expenditure categories Nine Months Ended September 30,
In millions 2021 2020
Maintenance $ 29.9 $ 31.8
Safety, health and environment 8.7 9.3
Growth and cost improvement 27.8 9.9
Total capital expenditures $ 66.4 $ 51.0


Capital expenditure categories	Three Months Ended March 31,
In millions	2022		2021
Maintenance	$	12.4	$	7.6
Safety, health and environment	3.6		1.8
Growth and cost improvement	11.6		7.6
Total capital expenditures	$	27.6	$	17.0

Cash flows provided by (used in) financing activities

Cash used in financing activities in the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022, was ~~$120.3~~$46.3 million and was primarily driven by the repurchase of common stock of ~~$100.3~~$40.4 million, payments on long-term borrowings of ~~$18.8~~$4.7 million, and tax payments related to withholdings on restricted stock unit vestings of ~~$2.4~~$1.8 million. Cash ~~provided by~~used in financing activities in the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~$14.8~~$52.1 million and was primarily driven by ~~net borrowings~~the repurchase of ~~$38.8~~common stock of $39.4 million, ~~from our revolving credit facility, offset by~~ payments on long-term borrowings of ~~$14.1~~$9.4 million, and tax payments related to withholdings on restricted stock unit vestings of ~~$3.0 million, and the repurchase of common stock of $32.4~~$2.3 million.

~~Off-Balance Sheet Arrangements~~

We are not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations or cash flows.

~~Contractual Obligations~~

Information related to our contractual commitments at December 31, 2020 can be found in a table included within Part II, Item 7 of our 2020 Annual Report. Except as described above, there have been no material changes to our contractual commitments during the nine months ended September 30, 2021.

New Accounting Guidance

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

Condensed Consolidated Financial Statements.

Critical Accounting Policies and Estimates

Our ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements are prepared in conformity with GAAP. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We have described our accounting policies in Note 32 to our ~~2020~~consolidated financial statements included in our 2021 Annual Report. We have reviewed these accounting policies, identifying those that we believe to be critical to the preparation and understanding of our financial statements. Critical accounting policies are central to our presentation of results of operations and financial condition and require management to make estimates and judgments on certain matters. We base our estimates and judgments on historical experience, current conditions and other reasonable factors. For a description of our critical accounting policies and estimates, refer to Part II, Item 7, Critical Accounting Policies and Estimates in our 2021 Annual Report. Our critical accounting policies have not substantially changed from those described in the ~~2020~~2021 Annual Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign currency exchange rate risk

We have ~~non-U.S.-based~~foreign-based operations, primarily in Europe, South America and Asia, which accounted for approximately 2530 percent of our net sales in the first ~~nine~~three months of ~~2021.~~2022. We have designated the local currency as the functional currency of our significant operations outside of the U.S. The primary currencies for which we have exchange rate exposure are the U.S. dollar versus the euro, the Japanese yen, the pound sterling, and the Chinese renminbi. In addition, certain of our domestic operations have sales to foreign ~~customers, and in~~customers. In the conduct of our foreign operations, we also make inter-company sales. All of this exposes us to the effect of changes in foreign currency exchange rates. Our earnings are therefore subject to change due to fluctuations in foreign currency exchange rates when ~~our~~the earnings in foreign ~~currency denominated transactions~~currencies are translated into U.S. dollars. In some cases, to minimize the effects of such fluctuations, we use foreign exchange forward contracts to hedge firm and highly anticipated foreign currency cash flows. Our largest exposures are to the Chinese renminbi and the euro. A hypothetical 10 percent adverse change, excluding the impact of any hedging instruments, in the average Chinese renminbi and euro to U.S. dollar exchange rates during the three months ended March 31, 2022, would have decreased our net sales and income before income taxes by approximately $5.1 million or one percent, and $2.1 million or two percent, respectively. Comparatively, a hypothetical 10 percent adverse change in the average Chinese renminbi and euro to U.S. dollar exchange rates during the ~~nine~~three months ended ~~September 30,~~March 31, 2021, would have ~~impacted~~decreased our net sales and income before income taxes by approximately ~~$15.6~~$4.7 million or two percent, and ~~$6.9~~$1.9 million or ~~five~~three percent, respectively.

Interest rate risk

As of ~~September 30, 2021,~~March 31, 2022, approximately ~~$333~~$323 million of our borrowings include a variable interest rate component. As a result, we are subject to interest rate risk with respect to such floating-rate debt. A hypothetical 100 basis point increase in the variable interest rate component of our borrowings ~~as of September 30, 2021~~for the three months ended March 31, 2022 would ~~increase~~have increased our annual interest expense by approximately ~~$3.3~~$3.2 million or seven percent. Comparatively, a 100 basis point increase in the variable interest rate component of our borrowings for the three months ended March 31, 2021 would have increased our interest expense by approximately $3.4 million or seven percent.

As of ~~September 30, 2021,~~March 31, 2022, we have entered into an interest rate ~~swaps~~swap with an aggregate notional amount of $166.2 million to ~~limit exposure to~~manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $166.2 million of our floating rate debt to a fixed rate. In accordance with the terms of the interest rate swap, we receive floating rate interest payments based upon three-month U.S. dollar LIBOR and in return are obligated to pay interest at a fixed rate of 3.79 percent until July 2023. The fair value of the interest rate swap was an asset (liability) of ~~$(6.0)~~$(0.3) million and ~~$(8.9)~~$(4.0) million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Other market risks

Information about our other remaining market risks for the period ended ~~September 30, 2021~~March 31, 2022 does not differ materially from that discussed under Part II, Item 7A7A. Quantitative and Qualitative Disclosures About Market Risk of our ~~2020~~2021 Annual Report.

ITEM 4. CONTROLS AND PROCEDURES

a) Evaluation of Disclosure Controls and Procedures

Ingevity maintains a system of disclosure controls and procedures designed to give reasonable assurance that information required to be disclosed in Ingevity's reports filed or submitted under the Exchange Act is recorded, processed,

summarized and reported within the time periods specified in the rules and forms of the SEC. These controls and procedures also give reasonable assurance that information required to be disclosed in such reports is accumulated and communicated to management to allow timely decisions regarding required disclosures.

As of ~~September 30, 2021,~~March 31, 2022, Ingevity's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), together with management, conducted an evaluation of the effectiveness of Ingevity's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the CEO and CFO concluded that these disclosure controls and procedures are effective at the reasonable assurance level described above.

b) Changes in Internal Control over Financial Reporting

There has been no change in Ingevity's internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended ~~September 30, 2021~~March 31, 2022 that has materially affected, or is reasonably likely to materially affect, Ingevity's internal control over financial reporting.

We are implementing a new global enterprise resource planning (“ERP”) system, which will replace our existing operating and financial systems. The implementation is expected to occur in multiple phases over two years beginning ~~in fiscal year~~with our pilot deployment which occurred during the first quarter of 2022. Currently, we have had no changes in our internal controls over financial reporting with respect to this implementation, however, as the implementation progresses, we will give appropriate consideration to whether any process changes necessitate changes in the design of and testing for effectiveness of internal controls over financial reporting.

4436

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information regarding certain of these matters is set forth below and in Note 14 – Commitments and Contingencies within the ~~condensed consolidated financial statements.~~

Condensed Consolidated Financial Statements.

ITEM 1A. RISK FACTORS

Part I, Item 1A, ~~“Risk Factors”~~Risk Factors of our ~~most recently filed~~2021 Annual Report ~~on Form 10-K for the fiscal year ended December 31, 2020~~ sets forth information relating to important risks and uncertainties that could materially adversely affect the Company’s business, financial condition and operating results.

~~The following~~There have been no material changes in Ingevity's risk factors ~~are being provided to supplement and update the risk factors set forth~~disclosed in Part I, Item 1A, ~~“Risk Factors”~~Risk Factors of ~~the Company’s most recently filed~~our 2021 Annual Report ~~on Form 10-K~~ for the ~~fiscal year~~quarter ended ~~December~~March 31, ~~2020:~~

~~The jury verdict rendered against the Company in its infringement lawsuit involving BASF Corporation may have an adverse effect on the Company’s business, financial condition and operating results.~~

On Sept. 15, 2021, a jury in the lawsuit filed by the Company against BASF Corporation for patent infringement in the United States District Court for the District of Delaware (the “Delaware Proceeding”) issued a verdict in favor of BASF on certain counterclaims filed by BASF in the Delaware Proceeding. The jury awarded BASF damages of approximately $28.3 million, which will be trebled under U.S. antitrust law to approximately $85 million. In addition, BASF may seek pre- and post-judgment interest and attorneys’ fees and costs in amounts that they will have to prove at a future date. Earlier in the Delaware Proceeding, the U.S. District Court dismissed the Company’s patent infringement claims against BASF, and the case proceeded to trial on the BASF counterclaims. The Company disagrees with the outcome, including the court’s application of the law, and it intends to seek judgment as a matter of law in the Delaware Proceeding post-trial briefing stage and on appeal, if necessary. The Company also intends to challenge the District Court’s previous dismissal of the Company’s patent infringement claims against BASF in the Delaware Proceedings. Final resolution of these matters could take several months up to two years.

~~Because the outcome of the Company’s post-trial motions and possible appeal is difficult to predict, as of September 30, 2021, the Company has accrued a total of $85 million~~, the full amount of the jury’s verdict. The amount of any liability the Company may ultimately incur related to the Delaware Proceeding could be more or less than the amount accrued. The Company has and may continue to incur additional fees, costs and expenses for as long as the post-trial motions and possible appeal are ongoing. If the Company is required to pay the entire jury verdict (together with any associated fees, costs and expenses), or the Company must make certain changes to its business when the matters associated with the Delaware Proceeding are eventually resolved, such outcomes could have an adverse effect on the Company’s business, financial condition and operating results.

~~Adverse conditions in the automotive market may adversely affect demand for our automotive carbon products.~~

Sales of our automotive activated carbon products are tied to global automobile production levels. Automotive production in the markets we serve can be affected by macro-economic factors such as interest rates, fuel prices, shifts in vehicle mix (including shifts toward alternative energy vehicles), consumer confidence, employment trends, regulatory and legislative oversight requirements and trade agreements. For example, the global economic downturn in 2008/2009, led to a drastic reduction in vehicle sales and an even greater reduction in vehicle production as OEMs right-sized their inventories to meet the lower sales volumes. Furthermore, primarily during the first half of 2020, the COVID-19 pandemic led to a significant reduction in vehicle production and vehicles sales were negatively impacted by government shutdown orders and stay-at-home directives. Additionally, microchip shortages during 2021 have resulted in reduced vehicle production and as a result vehicle sales, and our operating results, have been negatively impacted. We currently anticipate this negative impact to continue throughout 2022. Regional disruptions due to localized natural disasters or multi-month strikes at suppliers or OEMs can also significantly impact vehicle production and therefore demand for our automotive carbon products. Additionally, if the COVID-19 pandemic continues, it could negatively impact demand for automotive sales, which would adversely impact sales of our carbon products, as was the case in the second quarter of 2020. The extent to which COVID-19 pandemic impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including the severity of the COVD-19 pandemic, actions to contain COVID-19 or treat its impact, among others.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table summarizes information with respect to the purchase of our common stock during the three months ended ~~September 30, 2021.~~March 31, 2022.

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(1)
July 1-31, 2021 263,747 $ 80.97 263,747 $ 322,617,099
August 1-31, 2021 — $ — — $ 322,617,099
September 1-30, 2021 150,754 $ 72.16 150,754 $ 311,739,317
Total 414,501 414,501



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(1)
January 1-31, 2022	248,510	$	72.20	248,510	$	284,680,847
February 1-28, 2022	31,937	$	64.44	31,937	$	282,622,676
March 1-31, 2022	330,000	$	61.96	330,000	$	262,175,326
Total	610,447			610,447

_______________

(1) On ~~February 28,~~March 2, 2020, our Board of Directors authorized the repurchase of up to $500.0 million of our common ~~stock. We currently do~~stock and rescinded the prior two outstanding repurchase authorizations. Our repurchase program does not ~~have any~~include a specific timetable or price targets ~~for repurchasing shares,~~ and may ~~suspend~~be suspended or ~~terminate the program~~terminated at any time. Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market prevailing conditions and other ~~factors.~~

factors, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

On October 25, 2021, our Board of Directors approved and adopted the Second Amended and Restated Bylaws of the Company (the “Second Amended and Restated Bylaws”), which further amend and restate the Company’s previously adopted bylaws.~~The amendments and clarifications set forth in the Second Amended and Restated Bylaws address, among other things:~~

•~~the use of gender neutral terms when referring to particular positions, offices or title holders;~~

•~~the Board of Directors’ ability to call stockholder meetings by remote communication (including virtually);~~

•~~the ability of the Board of Directors to set procedures for conducting stockholder meetings, including (but not limited to) imposing restrictions onrecording devices, limitations on attendance and time allotted for participants to speak; and~~

•certain documentation, stock ownership and procedural requirements relating to the proposal of business or the nomination of director candidates by the Company’s stockholders at an annual or special meeting of stockholders.

The foregoing summary of the amendments contained in the Second Amended and Restated Bylaws does not purport to be complete or comprehensive, and such summary is qualified in its entirety by reference to the full text of the Second Amended and Restated Bylaws.~~A copy of the Second Amended and Restated Bylaws is attached as Exhibit 3.2 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.~~

None.

4637

ITEM 6. EXHIBITS


Exhibit No.			Description of Exhibit
3.1*			~~Second Amended and Restated Certificate of Incorporation of Ingevity Corporation (incorporated by reference to Exhibit 3.1 to Form 8-K (File No. 001-37586) filed April 25, 2019).~~



~~3.2~~10.1*†			~~Second Amended and Restated Bylaws of~~Consulting Agreement between Ingevity Corporation ~~effective~~and Michael P. Smith dated February 23, 2022 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, as ~~of October 26, 2021.~~filed with the U.S. Securities Commission on February 23, 2022).

10.2+			Special Cash Award Agreement between Ingevity Corporation and Steven P. Hulme dated July 1, 2021.

31.1			Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Executive Officer.

31.2			Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Financial Officer.

32.1			Section 1350 Certification of the Company’s Principal Executive Officer. The information contained in this Exhibit shall not be deemed filed with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the registrant under the Securities Act of 1933, as amended.

32.2			Section 1350 Certification of the Company’s Principal Financial Officer. The information contained in this Exhibit shall not be deemed filed with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the registrant under the Securities Act of 1933, as amended.

101			Inline XBRL Instance Document and Related Items - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

104			The cover page from the Company’s Quarterly Report on Form 10-Q formatted in Inline XBRL (included in Exhibit 101).

______________

*Incorporated by reference

+ Management contract or compensatory plan or arrangement.

† Indicates that certain information has been omitted pursuant to Item 601(b)(10) of Regulation S-K.

4738

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


INGEVITY CORPORATION
(Registrant)

By:			/S/ MARY DEAN HALL
			Mary Dean Hall
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer and Duly Authorized Officer)

Date: ~~October 28, 2021~~May 5, 2022

4839


		Page No.
PART I - FINANCIAL INFORMATION		3
Item 1. Financial Statements		3
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		2924
Item 3. Quantitative and Qualitative Disclosures About Market Risk		4335
Item 4. Controls and Procedures		4335
PART II - OTHER INFORMATION		4537
Item 1. Legal Proceedings		4537
Item 1A. Risk Factors		4537
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		4637
Item 3. Defaults Upon Senior Securities		4637
Item 4. Mine Safety Disclosures		4637
Item 5. Other Information		4637
Item 6. Exhibits		4738
SIGNATURES		4839


	September 30, 2021
In millions, except percentages	Interest rate	Maturity date	September 30, 2021		December 31, 2020
Variable Rate Debt:
Revolving Credit Facility (1)	1.33%	2025	$	—	$	—
Term Loan	1.38%	2023	332.8		351.6
Other notes payable	—%	2021	—		1.8
Fixed Rate Debt:
Senior Notes
2028 Senior Note	3.88%	2028	550.0		550.0
2026 Senior Note	4.50%	2026	300.0		300.0
Finance lease obligations	7.17%	2027-2035	102.6		103.1
Total debt including finance lease obligations			1,285.4		1,306.5
Less: debt issuance costs			11.5		13.1
Total debt, including finance lease obligations, net of debt issuance costs			1,273.9		1,293.4
Less: debt maturing within one year (2)			19.5		26.0
Long-term debt including finance lease obligations			$	1,254.4	$	1,267.4


			Percentage change vs. prior year
In millions, except percentages	Net sales		Total change	Currency effect	Price/Mix	Volume
Three months ended September 30, 2021	$	376.8	14%	—%	8%	6%
Nine months ended September 30, 2021	$	1,055.5	19%	1%	5%	13%


	Percentage change vs. prior year
Performance Materials (In millions, except percentages)	Net sales		Total change		Currency effect		Price/Mix		Volume
Three months ended September 30, 2021	$	118.1	(18)	%	1	%	2	%	(21)	%
Nine months ended September 30, 2021	$	384.8	10	%	2	%	2	%	6	%


	Percentage change vs. prior year
Performance Chemicals (In millions, except percentages)	Net sales		Total change		Currency effect		Price/Mix		Volume
Three months ended September 30, 2021	$	258.7	38	%	(1)	%	12	%	27	%
Nine months ended September 30, 2021	$	670.7	24	%	—	%	6	%	18	%