Ingevity(NGVT) - 2023 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents Ingevity Corporation's unaudited condensed consolidated financial statements for the three months ended March 31, 2023, including statements of operations, comprehensive income (loss), balance sheets, cash flows, and detailed notes. Key financial metrics show a decrease in net income and operating cash flow, alongside a slight increase in net sales and total assets Condensed Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :---------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net sales | $392.6 | $382.8 | | Cost of sales | $262.2 | $245.0 | | Gross profit | $130.4 | $137.8 | | Selling, general, and administrative expenses | $48.6 | $40.0 | | Research and technical expenses | $8.8 | $7.3 | | Restructuring and other (income) charges, net | $5.6 | $3.6 | | Acquisition-related costs | $1.9 | — | | Other (income) expense, net | $(18.2) | $(1.4) | | Interest expense, net | $19.6 | $10.7 | | Income (loss) before income taxes | $64.1 | $77.6 | | Provision (benefit) for income taxes | $13.4 | $16.8 | | Net income (loss) | $50.7 | $60.8 | | Basic earnings (loss) per share | $1.36 | $1.56 | | Diluted earnings (loss) per share | $1.35 | $1.55 | Condensed Consolidated Statements of Comprehensive Income (Loss) | Metric | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net income (loss) | $50.7 | $60.8 | | Foreign currency translation adjustment | $10.5 | $(16.6) | | Unrealized gain (loss) on net investment hedges, net of tax | — | $1.3 | | Total foreign currency adjustments, net of tax | $10.5 | $(15.3) | | Unrealized gain (loss) on derivative instruments, net of tax | $(2.3) | $6.3 | | Reclassifications of deferred derivative instruments (gain) loss, net of tax | $(0.2) | $(1.1) | | Total derivative instruments, net of tax | $(2.5) | $5.2 | | Other comprehensive income (loss), net of tax | $8.0 | $(10.1) | | Comprehensive income (loss) | $58.7 | $50.7 | Condensed Consolidated Balance Sheets | Metric | March 31, 2023 (Millions) | December 31, 2022 (Millions) | | :------------------------------------------ | :-------------------------- | :--------------------------- | | Cash and cash equivalents | $77.9 | $76.7 | | Accounts receivable, net | $240.4 | $224.8 | | Inventories, net | $361.4 | $335.0 | | Current assets | $716.3 | $679.0 | | Property, plant, and equipment, net | $804.6 | $798.6 | | Goodwill | $522.0 | $518.5 | | Other intangibles, net | $398.7 | $404.8 | | Total Assets | $2,772.2 | $2,736.5 | | Accounts payable | $173.9 | $174.8 | | Current liabilities | $278.8 | $303.5 | | Long-term debt including finance lease obligations | $1,502.5 | $1,472.5 | | Total Liabilities | $2,046.5 | $2,038.2 | | Total Equity | $725.7 | $698.3 | | Total Liabilities and Equity | $2,772.2 | $2,736.5 | Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net income (loss) | $50.7 | $60.8 | | Depreciation and amortization | $31.1 | $27.1 | | Gain on sale of strategic investment | $(19.2) | — | | Net cash provided by (used in) operating activities | $5.2 | $24.3 | | Capital expenditures | $(25.4) | $(27.6) | | Proceeds from sale of strategic investment | $31.4 | — | | Net cash provided by (used in) investing activities | $1.9 | $(30.2) | | Proceeds from revolving credit facility | $90.3 | — | | Payments on revolving credit facility | $(60.3) | — | | Repurchases of common stock under publicly announced plan | $(33.4) | $(40.4) | | Net cash provided by (used in) financing activities | $(5.6) | $(46.3) | | Increase (decrease) in cash, cash equivalents, and restricted cash | $1.5 | $(52.2) | | Cash, cash equivalents, and restricted cash at end of period | $78.4 | $223.2 | Notes to the Condensed Consolidated Financial Statements Note 1: Background - In Q1 2023, Ingevity realigned its segment reporting structure, separating engineered polymers from the Performance Chemicals segment into a new Advanced Polymer Technologies segment to enhance transparency and align with operational decision-making[21] - The company operates in three reportable segments: Performance Chemicals (specialty chemicals, pavement technologies), Advanced Polymer Technologies (biodegradable plastics, polyurethane materials), and Performance Materials (activated carbon)[22] Note 2: New Accounting Guidance - The company assessed all Accounting Standards Updates (ASUs) and determined that those not listed are either not applicable or are not expected to have a material impact on the consolidated financial statements[26] Note 3: Revenues | Segment | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :-------------------------- | :------------------------------------------- | :------------------------------------------- | | Performance Materials | $141.4 | $148.4 | | Performance Chemicals | $185.6 | $172.6 | | Advanced Polymer Technologies | $65.6 | $61.8 | | Net sales | $392.6 | $382.8 | | Geography | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :------------------------ | :------------------------------------------- | :------------------------------------------- | | North America | $234.7 | $212.6 | | Asia Pacific | $85.7 | $97.6 | | Europe, Middle East, and Africa | $62.7 | $62.7 | | South America | $9.5 | $9.9 | | Net sales | $392.6 | $382.8 | Note 4: Fair Value Measurements - During the three months ended March 31, 2023, Ingevity sold a strategic equity method investment for $31.4 million, resulting in a $19.2 million gain recorded in 'Other (income) expense, net'[39] | Item | March 31, 2023 (Millions) | December 31, 2022 (Millions) | | :-------------------------------- | :-------------------------- | :--------------------------- | | Deferred compensation plan investments (Level 1 Assets) | $1.5 | $1.1 | | Deferred compensation arrangement (Level 1 Liabilities) | $14.6 | $12.5 | Note 5: Inventories, net | Category | March 31, 2023 (Millions) | December 31, 2022 (Millions) | | :-------------------------- | :-------------------------- | :--------------------------- | | Raw materials | $111.8 | $106.7 | | Production materials, stores, and supplies | $28.9 | $27.9 | | Finished and in-process goods | $270.8 | $228.2 | | Subtotal | $411.5 | $362.8 | | Less: LIFO reserve | $(50.1) | $(27.8) | | Inventories, net | $361.4 | $335.0 | Note 6: Property, Plant, and Equipment, net | Category | March 31, 2023 (Millions) | December 31, 2022 (Millions) | | :-------------------------- | :-------------------------- | :--------------------------- | | Machinery and equipment | $1,177.9 | $1,162.7 | | Buildings and leasehold improvements | $204.2 | $200.9 | | Land and land improvements | $25.2 | $24.9 | | Construction in progress | $127.7 | $120.9 | | Total cost | $1,535.0 | $1,509.4 | | Less: accumulated depreciation | $(730.4) | $(710.8) | | Property, plant, and equipment, net | $804.6 | $798.6 | Note 7: Goodwill and Other Intangible Assets, net | Reporting Unit | December 31, 2022 (Millions) | Segment Change Reallocation (Millions) | Foreign Currency Translation (Millions) | March 31, 2023 (Millions) | | :-------------------------- | :--------------------------- | :------------------------------------- | :-------------------------------------- | :-------------------------- | | Performance Materials | $4.3 | — | — | $4.3 | | Performance Chemicals | $514.2 | $(165.0) | — | $349.2 | | Advanced Polymer Technologies | — | $165.0 | $3.5 | $168.5 | | Total Goodwill | $518.5 | — | $3.5 | $522.0 | | Category | December 31, 2022 (Millions) | Foreign Currency Translation (Millions) | Amortization (Millions) | March 31, 2023 (Millions) | | :-------------------------- | :--------------------------- | :-------------------------------------- | :---------------------- | :-------------------------- | | Gross Asset Value | $566.2 | $5.7 | — | $571.9 | | Accumulated Amortization | $(161.4) | $(1.5) | $(10.3) | $(173.2) | | Other intangibles, net | $404.8 | $4.2 | $(10.3) | $398.7 | - Amortization expense related to intangible assets was $10.3 million for the three months ended March 31, 2023, up from $8.1 million in the prior year period[55] Note 8: Financial Instruments and Risk Management - The company terminated its fixed-to-fixed cross-currency interest rate swaps, accounted for as net investment hedges, in the third quarter of 2022[58] - As of March 31, 2023, there were $14.1 million in open foreign currency derivative contracts and 1.6 million mm BTUs of outstanding natural gas commodity swap contracts designated as cash flow hedges[59][60] - The company expects to reclassify $5.0 million of net gains from Accumulated Other Comprehensive Income (AOCI) to income, before taxes, within the next twelve months[65] Note 9: Debt, including Finance Lease Obligations | Category | March 31, 2023 (Millions) | December 31, 2022 (Millions) | | :------------------------------------------ | :-------------------------- | :--------------------------- | | Revolving Credit Facility and other lines of credit | $858.0 | $828.0 | | 3.88% Senior Notes due 2028 | $550.0 | $550.0 | | Finance lease obligations | $101.6 | $101.9 | | Total debt including finance lease obligations | $1,509.6 | $1,479.9 | | Less: debt issuance costs | $6.2 | $6.5 | | Total debt, including finance lease obligations, net of debt issuance costs | $1,503.4 | $1,473.4 | - As of March 31, 2023, available funds under the revolving credit facility were $139.7 million[72] - The company was in compliance with all debt covenants at March 31, 2023, with a net leverage ratio of 2.6 (maximum 4.0 to 1.0) and an interest coverage ratio of 8.9 (minimum 3.0 to 1.0)[75] Note 10: Equity | Metric | December 31, 2022 (Millions) | March 31, 2023 (Millions) | | :------------------------------------------ | :--------------------------- | :-------------------------- | | Total Equity (Balance) | $698.3 | $725.7 | | Net income (loss) | $1,007.7 (Retained Earnings) | $1,058.4 (Retained Earnings) | | Other comprehensive income (loss) | $(46.8) (Accumulated) | $(38.8) (Accumulated) | | Share repurchase program | $(416.0) (Treasury Stock) | $(453.2) (Treasury Stock) | - During Q1 2023, the company repurchased $33.4 million of common stock (449,475 shares) at a weighted average cost of $73.86 per share. $411.5 million remained unused under the Board-authorized repurchase program as of March 31, 2023[86] Note 11: Restructuring and Other (Income) Charges, net | Category | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Severance and other employee-related costs | $3.0 | — | | Other restructuring charges | $0.1 | — | | Business transformation costs | $2.5 | $3.6 | | Total restructuring and other (income) charges, net | $5.6 | $3.6 | - The company initiated a reorganization in Q1 2023, resulting in $3.0 million in severance and other employee-related costs[90] - The business transformation initiative, including an ERP system upgrade, is expected to be completed in 2023, with total costs of $90-95 million, including $45-50 million of non-capitalizable costs[94] Note 12: Income Taxes | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Effective tax rate | 20.9% | 21.6% | | Effective tax rate (before discrete items) | 22.8% | 20.7% | - The increase in the Estimated Annual Effective Tax Rate (EAETR) for Q1 2023 compared to Q1 2022 is attributed to a change in the mix of forecasted earnings across tax jurisdictions, an increase in foreign earnings deemed taxable in the U.S., and the UK corporate tax rate increasing from 19% to 25% on April 1, 2023[100] Note 13: Commitments and Contingencies - A jury in the Delaware Proceeding issued a verdict in favor of BASF Corporation on antitrust counterclaims, awarding $28.3 million in damages, which trebled under U.S. antitrust law to approximately $85.0 million[103] - The full trebled jury's verdict of $85.0 million is accrued in 'Other liabilities' on the condensed consolidated balance sheet as of March 31, 2023. Ingevity intends to challenge the verdict and the dismissal of its patent infringement claims[105][106] Note 14: Segment Information | Segment | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :-------------------------- | :------------------------------------------- | :------------------------------------------- | | Performance Materials Net sales | $141.4 | $148.4 | | Performance Chemicals Net sales | $185.6 | $172.6 | | Advanced Polymer Technologies Net sales | $65.6 | $61.8 | | Total net sales | $392.6 | $382.8 | | Performance Materials Segment EBITDA | $69.8 | $77.9 | | Performance Chemicals Segment EBITDA | $20.3 | $30.8 | | Advanced Polymer Technologies Segment EBITDA | $13.8 | $10.3 | | Total Segment EBITDA | $103.9 | $119.0 | Note 15: Earnings (Loss) per Share | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income (loss) | $50.7 | $60.8 | | Basic earnings (loss) per share | $1.36 | $1.56 | | Diluted earnings (loss) per share | $1.35 | $1.55 | | Weighted average number of common shares outstanding - Basic (thousands) | 37,169 | 39,010 | | Weighted average additional shares assuming conversion of potential common shares (thousands) | 377 | 254 | | Shares - diluted basis (thousands) | 37,546 | 39,264 | Note 16: Acquisitions - Ingevity completed the acquisition of Ozark Materials, LLC for $325.0 million on October 3, 2022, integrating it into the Performance Chemicals segment's pavement technologies product line[117] - The preliminary purchase price allocation for Ozark Materials included $109.8 million in goodwill, which is expected to be fully deductible for income tax purposes[124][126] - Acquisition-related costs, primarily legal and professional service fees, totaled $1.9 million for the three months ended March 31, 2023, related to the integration of Ozark Materials[128] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Ingevity's financial performance and condition for Q1 2023. It highlights a slight increase in net sales driven by pricing, offset by volume declines and increased costs, leading to lower net income and Adjusted EBITDA. The discussion also covers recent developments, segment-specific results, the full-year outlook, and liquidity, emphasizing the impact of segment realignment and strategic investments Introduction - The Management's Discussion and Analysis (MD&A) supplements the Condensed Consolidated Financial Statements, providing insights into Ingevity's financial condition and results of operations[129] - Investors are cautioned that forward-looking statements in this report involve risks and uncertainties, and actual results could differ materially from expectations[130][131] Cautionary Statements About Forward-Looking Statements - Key risks and uncertainties include adverse global economic conditions (e.g., inflation, war in Ukraine), international sales and operations, automotive market demand, competition, government policies, supply chain disruptions, and legal actions[131][132][136] - Other factors that could cause actual results to differ include the inability to integrate acquisitions, dependence on third-party services, natural disasters, labor difficulties, retention of key personnel, reliance on large customers, intellectual property disputes, IT security breaches, and complications with the new ERP system[136] Overview - Ingevity is a leading global manufacturer of specialty chemicals and high-performance activated carbon materials, offering innovative solutions to customers[133] - The company reports in three segments: Performance Materials, Performance Chemicals, and Advanced Polymer Technologies[133] Recent Developments - In Q1 2023, Ingevity realigned its segment reporting structure, creating the Advanced Polymer Technologies segment from engineered polymers previously in Performance Chemicals[134] - The company sold a strategic equity method investment for $31.4 million, realizing a $19.2 million gain in Q1 2023[135] - Restructuring charges of $3.0 million were recorded in Q1 2023 due to a reorganization aimed at streamlining functions and reducing costs[137] - In March 2023, Ingevity amended crude tall oil supply agreements with WestRock and Georgia-Pacific[138][139] Results of Operations | Metric | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net sales | $392.6 | $382.8 | | Cost of sales | $262.2 | $245.0 | | Gross profit | $130.4 | $137.8 | | Selling, general, and administrative expenses | $48.6 | $40.0 | | Research and technical expenses | $8.8 | $7.3 | | Restructuring and other (income) charges, net | $5.6 | $3.6 | | Acquisition-related costs | $1.9 | — | | Other (income) expense, net | $(18.2) | $(1.4) | | Interest expense, net | $19.6 | $10.7 | | Income (loss) before income taxes | $64.1 | $77.6 | | Provision (benefit) for income taxes | $13.4 | $16.8 | | Net income (loss) | $50.7 | $60.8 | Net Sales Variance (Q1 2023 vs. Q1 2022): | Factor | Change (Millions) | Percentage | | :-------- | :---------------- | :--------- | | Volume | $(44.3) | (12%) | | Price/Mix | $58.8 | 15% | | Currency | $(4.7) | (1%) | | Total | $9.8 | 2.6% | - Gross profit decreased by $7.4 million, primarily due to increased manufacturing costs ($44.1 million) and unfavorable sales volume ($20.6 million), partially offset by favorable pricing and sales composition ($58.7 million)[144] - Selling, general and administrative expenses increased by $8.6 million, driven by higher employee-related costs ($5.4 million) and increased amortization costs ($2.0 million) from the Ozark Materials acquisition[145] - Interest expense, net, increased by $8.9 million, primarily due to higher costs from revolving credit and term loan facilities ($13.2 million in 2023 vs. $1.9 million in 2022)[151] Segment Operating Results Performance Materials | Metric | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :-------------------------- | :------------------------------------------- | :------------------------------------------- | | Net sales | $141.4 | $148.4 | | Segment EBITDA | $69.8 | $77.9 | - Net sales decreased by $7.0 million (8% volume decline, 2% unfavorable foreign currency), partially offset by favorable price/mix (6%)[160] - Segment EBITDA decreased by $8.1 million due to lower sales, increased manufacturing costs ($8.9 million), and volume decline ($6.9 million), partially offset by favorable price/mix ($8.2 million)[161] Performance Chemicals | Metric | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :-------------------------- | :------------------------------------------- | :------------------------------------------- | | Net sales | $185.6 | $172.6 | | Pavement Technologies product line | $45.8 | $27.9 | | Industrial Specialties product line | $139.8 | $144.7 | | Segment EBITDA | $20.3 | $30.8 | - Net sales increased by $13.0 million, driven by favorable price/mix ($39.1 million) and the Ozark Materials acquisition, partially offset by a volume decrease ($25.6 million) primarily in industrial specialties[166] - Segment EBITDA decreased by $10.5 million due to higher manufacturing costs ($30.9 million), volume decrease ($11.4 million), and higher SG&A expenses ($7.1 million), partially offset by favorable price/mix ($39.0 million)[167] Advanced Polymer Technologies | Metric | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :-------------------------- | :------------------------------------------- | :------------------------------------------- | | Net sales | $65.6 | $61.8 | | Segment EBITDA | $13.8 | $10.3 | - Net sales increased by $3.8 million, driven by favorable price/mix ($11.5 million) and increased volume in North America, partially offset by volume decline ($6.7 million) in Europe and Asia[171] - Segment EBITDA increased by $3.5 million, primarily due to favorable price/mix ($11.5 million), partially offset by higher manufacturing costs ($3.6 million) and increased SG&A/R&T expenses ($1.7 million)[172] Use of Non-GAAP Financial Measure - Adjusted EBITDA - Adjusted EBITDA is a non-GAAP financial measure used by management to evaluate business profitability, excluding financing, investment, and non-operating activities[173][174][175] | Metric | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :-------------------------- | :------------------------------------------- | :------------------------------------------- | | Net income (loss) (GAAP) | $50.7 | $60.8 | | Interest expense, net | $19.6 | $10.7 | | Provision (benefit) for income taxes | $13.4 | $16.8 | | Depreciation and amortization | $31.1 | $27.1 | | Restructuring and other (income) charges, net | $5.6 | $3.6 | | Gain on sale of strategic investment | $(19.2) | — | | Acquisition and other-related costs | $2.7 | — | | Adjusted EBITDA (Non-GAAP) | $103.9 | $119.0 | Current Full Year Company Outlook - For the full year 2023, Ingevity expects net sales to be between $1.75 billion and $1.95 billion[180] - Full year 2023 Adjusted EBITDA is projected to be between $450 million and $480 million[181] - Growth drivers include improved global automobile production (Performance Materials), geographic expansion in pavement technologies, and increased presence in key end markets (Advanced Polymer Technologies). Challenges include significant increases in crude tall oil costs (Performance Chemicals)[180][181] Liquidity and Capital Resources - The primary source of liquidity is cash flow from operating activities, supplemented by cash on hand ($77.9 million at March 31, 2023) and $139.7 million in undrawn capacity under the revolving credit facility[183][184] | Cash Flow Activity | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net cash provided by (used in) operating activities | $5.2 | $24.3 | | Net cash provided by (used in) investing activities | $1.9 | $(30.2) | | Net cash provided by (used in) financing activities | $(5.6) | $(46.3) | - Cash provided by investing activities turned positive in Q1 2023 due to $31.4 million in proceeds from the sale of a strategic investment, offsetting capital expenditures of $25.4 million[193] - Cash used in financing activities decreased, primarily driven by $90.3 million in revolving credit facility proceeds, partially offset by $33.4 million in common stock repurchases and $60.3 million in revolving credit facility payments[195] - Projected capital expenditures for 2023 are $120 million to $140 million[188] Critical Accounting Policies and Estimates - The company's financial statements are prepared in conformity with GAAP, requiring management to make estimates and judgments[197] - Critical accounting policies and estimates have not substantially changed from those described in the 2022 Annual Report[197] Item 3. Quantitative and Qualitative Disclosures About Market Risk Ingevity is exposed to foreign currency exchange rate risk, primarily from operations in Europe, South America, and Asia, and interest rate risk due to variable-rate debt. A hypothetical 10% adverse change in key foreign currencies would decrease Q1 2023 net sales by approximately $3.8 million and income before taxes by $1.1 million. A 100 basis point increase in variable interest rates would increase annual interest expense by approximately $8.6 million - Foreign-based operations accounted for approximately 24% of net sales in the first three months of 2023, with primary currency exposures to the U.S. dollar versus the euro, Japanese yen, pound sterling, and Chinese renminbi[198] - A hypothetical 10% adverse change in the average Chinese renminbi and euro to U.S. dollar exchange rates during Q1 2023 would have decreased net sales by approximately $3.8 million (1%) and income before income taxes by approximately $1.1 million (2%)[198] - Approximately $858.0 million of the company's borrowings had a variable interest rate component as of March 31, 2023[199] - A hypothetical 100 basis point increase in the variable interest rate component of borrowings for Q1 2023 would have increased annual interest expense by approximately $8.6 million (11%)[199] Item 4. Controls and Procedures Ingevity's CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2023. The implementation of a new global ERP system led to updates in processes and control activities, but no other material changes to internal control over financial reporting occurred during the quarter - The CEO and CFO concluded that Ingevity's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2023[202] - The company implemented a new global enterprise resource planning (ERP) system, which resulted in updates and changes to processes and related control activities[203] - Except for the ERP implementation, there were no other material changes in internal control over financial reporting during the quarter ended March 31, 2023[204] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 13 of the Condensed Consolidated Financial Statements for detailed information regarding the company's legal proceedings, specifically the ongoing litigation with BASF Corporation - Information regarding legal proceedings is detailed in Note 13 – Commitments and Contingencies within the Condensed Consolidated Financial Statements[207] Item 1A. Risk Factors This section highlights a new material risk factor related to the potential negative impact of WestRock's paper mill closure in North Charleston on Ingevity's operations, due to the termination of a reciprocal plant operating agreement. Other risk factors remain consistent with the 2022 Annual Report - A new material risk factor is the potential negative impact of WestRock Company's paper mill closure in North Charleston, South Carolina, and the termination of the Reciprocal Plant Operating Agreement (RPOA), which could require significant capital expenditure to replace critical operating services[209] - Except for the WestRock closure, there have been no other material changes in Ingevity's risk factors disclosed in the 2022 Annual Report[210] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2023, Ingevity repurchased 449,475 shares of common stock for $33.4 million under its Board-authorized program. As of March 31, 2023, $411.5 million remained available for repurchases under the $500 million authorization | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | :------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------- | | January 1-31, 2023 | 179,828 | $76.79 | 179,828 | | February 1-28, 2023 | 17,500 | $79.68 | 17,500 | | March 1-31, 2023 | 252,147 | $71.36 | 252,147 | | Total | 449,475 | | 449,475 | - As of March 31, 2023, approximately $411.5 million remained unused under the $500.0 million common stock repurchase authorization approved on July 25, 2022[212] Item 3. Defaults Upon Senior Securities This item is not applicable to Ingevity Corporation for the reporting period - Not applicable[213] Item 4. Mine Safety Disclosures This item is not applicable to Ingevity Corporation for the reporting period - Not applicable[214] Item 5. Other Information There is no other information to report under this item for the current period - None[215] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including various agreements such as a separation and severance agreement, amended crude tall oil supply agreements, and required certifications from the Principal Executive Officer and Principal Financial Officer - Exhibits include a Separation and Severance Agreement, Amended and Restated Crude Tall Oil and Black Liquor Soap Skimmings Agreement, Second Amendment to Crude Tall Oil Supply Agreement, and Rule 13a-14(a)/15d-14(a) and Section 1350 Certifications[217] SIGNATURES - The report was signed on behalf of Ingevity Corporation by Mary Dean Hall, Executive Vice President and Chief Financial Officer, on May 4, 2023[222]