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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 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
__________________________________________________________________________
ngvt-20220331_g1.jpg
INGEVITY CORPORATION
(Exact name of registrant as specified in its charter)
_____________________________________________________________________ 
Delaware47-4027764
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
4920 O'Hear Avenue Suite 400North CharlestonSouth Carolina29405
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock ($0.01 par value)NGVTNew 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 38,750,506 shares of common stock, $0.01 par value, outstanding at May 2, 2022.



Ingevity Corporation
INDEX

2


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INGEVITY CORPORATION
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31,
In millions, except per share data20222021
Net sales$382.8 $320.3 
Cost of sales245.0 194.1 
Gross profit137.8 126.2 
Selling, general, and administrative expenses40.0 40.0 
Research and technical expenses7.3 6.6 
Restructuring and other (income) charges, net3.6 3.9 
Acquisition-related costs 0.3 
Other (income) expense, net(1.4)1.2 
Interest expense, net10.7 12.4 
Income (loss) before income taxes77.6 61.8 
Provision (benefit) for income taxes16.8 13.1 
Net income (loss)$60.8 $48.7 
Per share data
Basic earnings (loss) per share $1.56 $1.21 
Diluted earnings (loss) per share 1.55 1.20 

The accompanying notes are an integral part of these financial statements.
3


INGEVITY CORPORATION
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
Three Months Ended March 31,
In millions20222021
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.
4


INGEVITY CORPORATION
Condensed Consolidated Balance Sheets
In millions, except share and par value dataMarch 31, 2022December 31, 2021
Assets(Unaudited)
Cash and cash equivalents$222.6 $275.4 
Accounts receivable, net of allowance for credit losses of $2.0 - 2022 and $2.0 - 2021
206.9 161.7 
Inventories, net260.2 241.2 
Prepaid and other current assets43.1 46.6 
Current assets732.8 724.9 
Property, plant and equipment, net719.0 719.7 
Operating lease assets, net50.6 52.4 
Goodwill433.1 442.0 
Other intangibles, net322.3 337.6 
Deferred income taxes6.9 6.8 
Restricted investment, net of allowance for credit losses of $0.5 - 2022 and $0.5 - 2021
76.6 76.1 
Other assets114.5 109.5 
Total Assets$2,455.8 $2,469.0 
Liabilities
Accounts payable$128.9 $125.8 
Accrued expenses53.8 51.7 
Accrued payroll and employee benefits22.4 48.2 
Current operating lease liabilities17.2 17.4 
Notes payable and current maturities of long-term debt319.6 19.6 
Income taxes payable9.8 6.2 
Current liabilities551.7 268.9 
Long-term debt including finance lease obligations945.6 1,250.0 
Noncurrent operating lease liabilities34.5 36.2 
Deferred income taxes116.1 114.6 
Other liabilities121.8 125.5 
Total Liabilities1,769.7 1,795.2 
Commitments and contingencies (Note 14)
Equity
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)
0.4 0.4 
Additional paid-in capital139.6 136.3 
Retained earnings856.9 796.1 
Accumulated other comprehensive income (loss)3.0 13.1 
Treasury stock, common stock, at cost (4,461,696 shares - 2022 and 3,832,612 shares - 2021)
(313.8)(272.1)
Total Equity686.1 673.8 
Total Liabilities and Equity$2,455.8 $2,469.0 
The accompanying notes are an integral part of these financial statements.
5



INGEVITY CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31,
In millions20222021
Cash provided by (used in) operating activities:
Net income (loss)$60.8 $48.7 
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization27.1 27.0 
Non cash operating lease costs4.6 4.4 
Deferred income taxes1.4 (0.6)
LIFO Reserve10.7 1.7 
Share-based compensation3.0 2.5 
Other non-cash items1.8 2.9 
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable, net(46.1)(20.8)
Inventories, net(30.4)(17.4)
Prepaid and other current assets(1.0)0.5 
Accounts payable7.7 8.4 
Accrued expenses3.3 (2.2)
Accrued payroll and employee benefits(25.8)(8.6)
Income taxes11.2 11.3 
Operating leases(5.4)(5.2)
Changes in other operating assets and liabilities, net1.4 (1.5)
Net cash provided by (used in) operating activities$24.3 $51.1 
Cash provided by (used in) investing activities:
Capital expenditures$(27.6)$(17.0)
Other investing activities, net(2.6)(0.3)
Net cash provided by (used in) investing activities$(30.2)$(17.3)
Cash provided by (used in) financing activities:
Payments on long-term borrowings(4.7)(9.4)
Finance lease obligations, net(0.2)(0.1)
Borrowings (repayments) of notes payable and other short-term borrowings, net (1.9)
Tax payments related to withholdings on vested equity awards(1.8)(2.3)
Proceeds and withholdings from share-based compensation plans, net0.8 1.0 
Repurchases of common stock under publicly announced plan(40.4)(39.4)
Net cash provided by (used in) financing activities$(46.3)$(52.1)
Increase (decrease) in cash, cash equivalents, and restricted cash(52.2)(18.3)
Effect of exchange rate changes on cash(0.7)(1.7)
Change in cash, cash equivalents, and restricted cash(52.9)(20.0)
Cash, cash equivalents, and restricted cash at beginning of period276.1 258.4 
Cash, cash equivalents, and restricted cash at end of period(1)
$223.2 $238.4 
(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:
Cash paid for interest, net of capitalized interest$11.0 $11.5 
Cash paid for income taxes, net of refunds3.5 2.5 
Purchases of property, plant and equipment in accounts payable5.3 3.5 
Leased assets obtained in exchange for new finance lease liabilities  
Leased assets obtained in exchange for new operating lease liabilities2.9 2.4 
The accompanying notes are an integral part of these financial statements.
6


INGEVITY CORPORATION
Notes to the Condensed Consolidated Financial Statements
March 31, 2022
(Unaudited)


Note 1: Background
Description of Business
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. We report in two 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 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 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, 2021, 2020 and 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, 2021 (the "2021 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.
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 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
7


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 prospectively until December 31, 2022. As of 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 March 31,
In millions20222021
Performance Materials segment$148.4 $140.7 
Performance Chemicals segment
Pavement Technologies product line27.9 21.4 
Industrial Specialties product line144.7 112.1 
Engineered Polymers product line61.8 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 customer.
Three Months Ended March 31,
In millions20222021
North America$212.6 $163.1 
Asia Pacific97.6 100.7 
Europe, Middle East, and Africa62.7 51.1 
South America9.9 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.
Contract Asset
March 31,
In millions20222021
Beginning balance$5.3 $5.7 
Contract asset additions3.8 4.7 
Reclassification to accounts receivable, billed to customers(3.1)(4.3)
Ending balance (1)
$6.0 $6.1 
______________
(1) Included within "Prepaid and other current assets" on the condensed consolidated balance sheets.
8


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.
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 $13.1 million and $14.0 million at March 31, 2022 and December 31, 2021, respectively.
(5) Included within "Other liabilities" on the condensed consolidated balance sheets.
Nonrecurring Fair Value Measurements
There were no nonrecurring fair value measurements in the condensed consolidated balance sheet during the quarters ended March 31, 2022 and December 31, 2021.
Strategic Investments
During the second quarter of 2021, we acquired a strategic investment in a privately-held company for $16.5 million, which is accounted for under the equity method of accounting. The carrying value of our strategic equity investment was $16.2 million and $16.5 million at 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 the measurement alternative method investments for impairment or observable price changes for the period ended March 31, 2022.
9


INGEVITY CORPORATION
Notes to the Condensed Consolidated Financial Statements
March 31, 2022
(Unaudited)

Restricted Investment
At March 31, 2022 and December 31, 2021, the carrying value of our restricted investment, which is accounted for as held-to-maturity ("HTM") and therefore recorded at amortized costs, was $76.6 million and $76.1 million, net of an allowance for credit losses of $0.5 million and $0.5 million, and included cash of $5.3 million and $4.7 million, respectively. The fair value at March 31, 2022 and December 31, 2021 was $76.7 million and $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 millionsAA+AAAA-AA-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 March 31, 2022 and December 31, 2021, the carrying value of finance lease obligations was $102.2 million and $102.4 million, respectively, and the fair value was $112.5 million and $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 $323.4 million and $328.1 million as of March 31, 2022 and December 31, 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 March 31, 2022 and December 31, 2021, the carrying value of our fixed rate debt was $850.0 million and $850.0 million, respectively, and the fair value was $800.8 million and $843.9 million, respectively, based on Level 2 inputs.
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 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 March 31, 2022 and December 31, 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.
The following table summarizes the activity for financial liabilities utilizing Level 3 fair value measurements:
Contingent Consideration
In millionsMarch 31, 2022December 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.
10


INGEVITY CORPORATION
Notes to the Condensed Consolidated Financial Statements
March 31, 2022
(Unaudited)

Note 5: Inventories, net
In millionsMarch 31, 2022December 31, 2021
Raw materials$64.4 $48.8 
Production materials, stores and supplies27.6 26.8 
Finished and in-process goods196.7 183.4 
Subtotal288.7 $259.0 
Less: LIFO reserve(28.5)(17.8)
Inventories, net$260.2 $241.2 
Note 6: Property, Plant, and Equipment, net
In millionsMarch 31, 2022December 31, 2021
Machinery and equipment$1,120.3 $1,113.3 
Buildings and leasehold improvements177.6 177.2 
Land and land improvements21.2 20.4 
Construction in progress71.9 64.4 
Total cost1,391.0 $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 millionsPerformance ChemicalsPerformance MaterialsTotal
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 March 31, 2022.
Other Intangible Assets
March 31, 2022December 31, 2021
In millionsGrossAccumulated amortizationNetGrossAccumulated amortizationNet
Customer contracts and relationships$312.9 $99.5 $213.4 $317.8 $95.0 $222.8 
Brands (1)
79.7 21.2 58.5 81.7 20.3 61.4 
Developed technology70.3 19.9 50.4 72.2 18.8 53.4 
Other   0.5 0.5  
Other intangibles, net$462.9 $140.6 $322.3 $472.2 $134.6 $337.6 
_______________
(1) Represents trademarks, trade names, and know-how.
11


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 millionsMarch 31, 2022December 31, 2021
Performance Materials$1.8 $1.9 
Performance Chemicals320.5 335.7
Other intangibles, net$322.3 $337.6 
Amortization expense related to our intangible assets is included in Selling, general and administrative expenses on the condensed consolidated statement of operations. During the 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: 2022 - $32.5 million, 2023 - $32.4 million, 2024 - $32.1 million, 2025 - $32.1 million, and 2026 - $32.1 million. The estimated pre-tax amortization expense may fluctuate due to changes in foreign currency exchange rates.
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 1.63 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 $2.7 million and $1.0 million at March 31, 2022 and December 31, 2021, respectively. During the three months ended March 31, 2022 and 2021, we recognized net interest income associated with this financial instrument of $0.2 million and $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 March 31, 2022, there were $19.0 million open foreign currency derivative contracts. The fair value of the designated foreign currency hedge contracts was an asset (liability) of $0.9 million and $0.5 million at March 31, 2022 and December 31, 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 March 31, 2022, we had 1.6 million and 0.7 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 March 31, 2022, open commodity contracts hedge forecasted transactions until June 2023. The fair value of the outstanding designated natural gas
12


INGEVITY CORPORATION
Notes to the Condensed Consolidated Financial Statements
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. 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 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 $(0.3) million and $(4.0) million at March 31, 2022 and December 31, 2021, respectively.
Effect of Cash Flow and Net Investment Hedge Accounting on AOCI
In millionsAmount of Gain (Loss) Recognized in AOCIAmount of Gain (Loss) Reclassified from AOCI into Net incomeLocation of Gain (Loss) Reclassified from AOCI in Net income
Three Months Ended March 31,
2022202120222021
Cash flow hedging derivatives
Currency exchange contracts$0.5 $0.3 $(0.2)$ Net sales
Natural gas contracts4.1 0.1 (1.3)0.1 Cost of sales
Interest rate swap contracts3.7 1.4   Interest expense, net
Total$8.3 $1.8 $(1.5)$0.1 
In millionsAmount of Gain (Loss) Recognized in AOCIAmount 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,
2022202120222021
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 would be reclassified from AOCI to Other (income) expense, net.
Within the next twelve months, we expect to reclassify $4.5 million of net gains from AOCI to income, before taxes.
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 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 March 31, 2022 or December 31, 2021.
13


INGEVITY CORPORATION
Notes to the Condensed Consolidated Financial Statements
March 31, 2022
(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 "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.
14


INGEVITY CORPORATION
Notes to the Condensed Consolidated Financial Statements
March 31, 2022
(Unaudited)

Note 9: Debt, including Finance Lease Obligations
Current and long-term debt including finance lease obligations consisted of the following:
In millions, except percentagesMarch 31, 2022December 31, 2021
Revolving Credit Facility and other lines of credit (1)
$ $ 
Term Loan323.4 328.1 
3.88% Senior Notes due 2028
550.0 550.0 
4.50% Senior Notes due 2026
300.0 300.0 
Finance lease obligations102.2 102.4 
Total debt including finance lease obligations$1,275.6 $1,280.5 
Less: debt issuance costs10.4 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 $2.5 million and $2.5 million and available funds under the facility were $497.5 million and $497.5 million at March 31, 2022 and December 31, 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 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 Notes or 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, including the other series. We were in compliance with all covenants under the indentures as of March 31, 2022.
The credit agreements governing our revolving credit facility and 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 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 March 31, 2022 were 2.6 and 2.2, respectively, and our actual interest coverage for the four consecutive quarters ended March 31, 2022 was 9.9. We were in compliance with all covenants at March 31, 2022.
15


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 thousandsSharesAmountAdditional paid in capitalRetained earningsAccumulated
other
comprehensive
income (loss)
Treasury stockTotal Equity
Balance at December 31, 202143,102 $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 issued42 — — — — — — 
Exercise of stock options, net36 — 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, 202243,180 $0.4 $139.6 $856.9 $3.0 $(313.8)$686.1 
Common Stock
In millions, except per share data in thousandsSharesAmountAdditional paid in capitalRetained earningsAccumulated
other
comprehensive
income (loss)
Treasury stockTotal Equity
Balance at December 31, 202042,913 $0.4 $121.3 $678.0 $4.7 $(162.3)$642.1 
Net income (loss)— — — 48.7 — —