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843-740-2300

(Registrant’s telephone number, including area code)

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 securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.                                    o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).                            o

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 36,231,266 shares of common stock, $0.01 par value, outstanding at October 31, 2023.

Ingevity Corporation ("Ingevity," "the Company," "we," "us," or "our") provides products and technologies that purify, protect, and enhance the world around us. Through a team of talented and experienced people, we develop, manufacture, and bring to market solutions that help customers solve complex problems and make the world more sustainable. During the first quarter of 2023, we realigned our segment reporting structure to increase transparency for our investors and better align with how our chief operating decision maker intends to measure segment operating performance and allocate resources across our operating segments. We separated our engineered polymers product line from the Performance Chemicals reportable segment into its own reportable segment, Advanced Polymer Technologies. This reportable segment change also resulted in our Performance Chemicals reporting unit for goodwill being split into two separate reporting units for the purposes of goodwill impairment testing.

We operate in three reportable segments: Performance Chemicals, which includes specialty chemicals and pavement technologies; Advanced Polymer Technologies, which includes biodegradable plastics and polyurethane materials; and Performance Materials, which includes activated carbon. Our products are used in a variety of demanding applications, including adhesives, agrochemicals, asphalt paving, bioplastics, coatings, elastomers, lubricants, pavement markings, publication inks, oil exploration and production and automotive components.

These unaudited 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 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, 2022, 2021 and 2020, collectively referred to as the “Annual Consolidated Financial Statements,” included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Annual Report").

In the opinion of management, the 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 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.

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

			Three Months Ended September 30,												Nine Months Ended September 30,
In millions			2023						2022						2023						2022
Performance Materials segment			$	147.2					$	144.9					$	433.2					$	415.7
Performance Chemicals segment			$	256.0					$	267.6					$	725.6					$	683.9
Pavement Technologies product line			129.7						88.3						316.4						194.0
Industrial Specialties product line			126.3						179.3						409.2						489.9
Advanced Polymer Technologies segment			$	42.8					$	69.5					$	161.6					$	185.1
Net sales			$	446.0					$	482.0					$	1,320.4					$	1,284.7

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

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.

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

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.

In millions Level 1(1) Level 2(2) Level 3(3) Total September 30, 2023 Assets: Deferred compensation plan investments (4) $ 2.4 $ — $ — $ 2.4 Total assets $ 2.4 $ — $ — $ 2.4 Liabilities: Deferred compensation arrangement (4) $ 15.1 $ — $ — $ 15.1 Total liabilities $ 15.1 $ — $ — $ 15.1 December 31, 2022 Assets: Deferred compensation plan investments (4) $ 1.1 $ — $ — $ 1.1 Total assets $ 1.1 $ — $ — $ 1.1 Liabilities: Deferred compensation arrangement (4) $ 12.5 $ — $ — $ 12.5 Total liabilities $ 12.5 $ — $ — $ 12.5

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(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 $13.8 million and $13.3 million at September 30, 2023 and December 31, 2022, respectively.

There were no nonrecurring fair value measurements in the condensed consolidated balance sheet during the quarters ended September 30, 2023, and December 31, 2022.

The aggregate carrying value of all strategic equity method investments totaled $16.1 million and $28.2 million at September 30, 2023 and December 31, 2022, respectively. During the first quarter of 2023, we sold a strategic equity method investment for $31.5 million, resulting in a $19.3 million gain, recorded within "Other (income) expense, net" on the condensed consolidated statement of operations. There were no adjustments to the carrying value of equity method investments for impairment for the periods ended September 30, 2023 and December 31, 2022.

The aggregate carrying value of all measurement alternative investments where fair value is not readily determinable totaled $83.2 million and $80.8 million at September 30, 2023 and December 31, 2022, respectively. There were no adjustments to the carrying value of the measurement alternative method investments for impairment or observable price changes for the periods ended September 30, 2023 and December 31, 2022.

At September 30, 2023 and December 31, 2022, the carrying value of our restricted investment, which is accounted for as held-to-maturity ("HTM") and therefore recorded at amortized costs, was $80.2 million and $78.0 million, net of an allowance for credit losses of $0.3 million and $0.6 million, and included cash of $9.1 million and $7.0 million, respectively. The fair value at September 30, 2023 and December 31, 2022 was $76.4 million and $74.7 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.

At September 30, 2023 and December 31, 2022, the carrying value of finance lease obligations was $101.3 million and $101.9 million, respectively, and the fair value was $103.6 million and $106.2 million, respectively. The fair value of our finance lease obligation associated with our Performance Materials' Wickliffe, Kentucky, manufacturing site 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 $825.0 million and $828.0 million as of September 30, 2023 and December 31, 2022, 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, 2023 and December 31, 2022, the carrying value of our fixed rate debt was $550.0 million and $550.0 million, respectively, and the fair value was $453.9 million and $471.8 million, respectively, based on Level 2 inputs.

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(1) The increase in the LIFO balance in 2023 is primarily attributable to the significant inflation in the price of crude tall oil ("CTO") which is the primary raw material for our Performance Chemicals reportable segment.

As described in Note 1, we reorganized our segment reporting structure to increase transparency for our investors and better align with the markets and customers we serve through each of our segments. This structure is also consistent with the manner in which information is presently used internally by our chief operating decision maker to evaluate performance and make resource allocation decisions. This reportable segment change impacted the identification of our Performance Chemicals reporting unit, resulting in two reporting units, Performance Chemicals and Advanced Polymer Technologies.

We have reallocated goodwill as of January 1, 2023 to align to our new reporting unit structure by using a relative fair value approach and tested goodwill for impairment immediately before and after the realignment; no impairment was identified.

During the third quarter of 2023, continued reduction in demand in industrial end markets has negatively impacted our ability to offset elevated CTO costs through pricing actions within our Performance Chemicals’ reportable segment, particularly in our industrial specialties product line. CTO is essential to our industrial specialties and some of our pavement technologies product lines within our Performance Chemicals reportable segment. As a result, we concluded that a triggering event occurred for our Performance Chemicals’ reporting unit, and we performed an analysis of the reporting unit’s goodwill, intangibles and long-lived assets as of September 1, 2023. Our analysis included significant assumptions such as: revenue growth rate, Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") margin, and discount rate which are judgmental and variations in any assumptions could result in materially different calculations of fair value. Based on our analysis, the headroom associated with our Performance Chemicals’ reporting unit, which is defined as the percentage difference between the fair value of a reporting unit and its carrying value, is 19 percent at September 30, 2023. Consequently, we concluded that there was no impairment for the quarter ended September 30, 2023.

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

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

Amortization expense related to our intangible assets is included in Selling, general and administrative expenses on the condensed consolidated statement of operations. During the three and nine months ended September 30, 2023, we recognized amortization expense of $10.5 million and $31.4 million, respectively, and during the three and nine months ended September 30, 2022, we recognized amortization expense of $7.9 million and $23.8 million, respectively. The increase in amortization expense in 2023 as compared to 2022 was due to the Ozark Materials, LLC (“OM”), and Ozark Logistics, LLC (“OL” and, together with OM, “Ozark Materials”) acquisition as further described in Note 16.

Based on the current carrying values of intangible assets, estimated pre-tax amortization expense for the next five years is as follows: $10.5 million for the remainder of 2023, 2024 - $41.6 million, 2025 - $41.3 million, 2026 - $40.6 million, and 2027 - $40.6 million. The estimated pre-tax amortization expense may fluctuate due to changes in foreign currency exchange rates.

In the third quarter of 2022, we terminated our fixed-to-fixed cross-currency interest rate swaps, accounted for as net investment hedges. During the three and nine months ended September 30, 2023, we recognized net interest income associated with this financial instrument of zero and zero, respectively, and during the three and nine months ended September 30, 2022, we recognized net interest income associated with this financial instrument of $0.1 million and $2.8 million, respectively.

As of September 30, 2023, there were $6.0 million open foreign currency derivative contracts. The fair value of the designated foreign currency hedge contracts was a net asset (liability) of $0.1 million and $(0.5) million at September 30, 2023 and December 31, 2022, respectively.

As of September 30, 2023, we had 0.8 million and 0.1 million 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, 2023, open commodity contracts hedge forecasted transactions until May 2024. The fair value of the outstanding designated natural gas commodity hedge contracts as of September 30, 2023 and December 31, 2022, was a net asset (liability) of $(0.8) million and $(1.6) million, respectively.

During 2022, we had floating-to-fixed interest rate swaps effectively converting a portion of our floating rate debt to a fixed rate. In the second quarter of 2022, we terminated the interest rate swap instruments. Upon termination of the interest rate swap instruments, we reclassified a $1.7 million gain from AOCI into Interest expense, net on the condensed consolidated statement of operations.

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

Within the next twelve months, we expect to reclassify $2.1 million of net gains from AOCI to income, before taxes.

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 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, 2023, or December 31, 2022.

__________

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

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

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

In millions, except percentages															September 30, 2023						December 31, 2022
Revolving Credit Facility and other lines of credit (1)															$	825.0					$	828.0
3.88% Senior Notes due 2028															550.0						550.0
Finance lease obligations															101.3						101.9
Other notes payable															2.0						—
Total debt including finance lease obligations															$	1,478.3					$	1,479.9
Less: debt issuance costs															5.6						6.5
Total debt, including finance lease obligations, net of debt issuance costs															$	1,472.7					$	1,473.4
Less: debt maturing within one year (2)															3.0						0.9
Long-term debt including finance lease obligations															$	1,469.7					$	1,472.5

______________

(1) Letters of credit outstanding under the revolving credit facility were $2.3 million and $2.3 million and available funds under the facility were $172.7 million and $169.7 million at September 30, 2023 and December 31, 2022, 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.

Our Senior Notes indenture contains 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 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 2028 Senior 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. We were in compliance with all covenants under the indenture as of September 30, 2023.

The credit agreement governing our revolving credit facility contains 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 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. As calculated per the credit agreement, our net leverage for the four consecutive quarters ended September 30, 2023 was 2.5, and our actual interest coverage for the four consecutive quarters ended September 30, 2023 was 6.8. We were in compliance with all covenants under the credit agreement at September 30, 2023.

The tables below provide a roll forward of equity.

			Common Stock
In millions, shares in thousands			Shares						Amount						Additional paid in capital						Retained earnings						Accumulated other comprehensive income (loss)						Treasury stock												Total Equity
Balance at December 31, 2022			43,228						$	0.4					$	153.0					$	1,007.7					$	(46.8)					$	(416.0)											$	698.3
Net income (loss)			—						—						—						50.7						—						—												50.7
Other comprehensive income (loss)			—						—						—						—						8.0						—												8.0
Common stock issued			139						—						—						—						—						—												—
Exercise of stock options, net			41						—						2.2						—						—						—												2.2
Tax payments related to vested restricted stock units			—						—						—						—						—						(4.5)												(4.5)
Share repurchase program			—						—						—						—						—						(33.4)												(33.4)
Share-based compensation plans			—						—						3.7						—						—						0.7												4.4
Balance at March 31, 2023			43,408						$	0.4					$	158.9					$	1,058.4					$	(38.8)					$	(453.2)											$	725.7
Net income (loss)			—						—						—						35.5						—						—												35.5
Other comprehensive income (loss)			—						—						—						—						5.3						—												5.3
Common stock issued			22						—						—						—						—						—												—
Exercise of stock options, net			—						—						—						—						—						—												—
Tax payments related to vested restricted stock units			—						—						—						—						—						—												—
Share repurchase program			—						—						—						—						—						(58.7)												(58.7)
Share-based compensation plans			—						—						4.7						—						—						1.6												6.3
Balance at June 30, 2023			43,430						$	0.4					$	163.6					$	1,093.9					$	(33.5)					$	(510.3)											$	714.1
Net income (loss)			—						—						—						25.2						—						—												25.2
Other comprehensive income (loss)			—						—						—						—						(20.4)						—												(20.4)
Common stock issued			13						—						—						—						—						—												—
Exercise of stock options, net			—						—						—						—						—						—												—
Tax payments related to vested restricted stock units			—						—						—						—						—						(0.2)												(0.2)
Share repurchase program			—						—						—						—						—						—												—
Share-based compensation plans			—						—						(1.0)						—						—						1.0												—
Balance at September 30, 2023			43,443						$	0.4					$	162.6					$	1,119.1					$	(53.9)					$	(509.5)											$	718.7