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What changed in Ingevity Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Ingevity Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+358 added−331 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-28)

Top changes in Ingevity Corp's 2023 10-K

358 paragraphs added · 331 removed · 245 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

62 edited+37 added−39 removed20 unchanged
Biggest changeOur lubricant products are multi-functional additives that contribute to lubricity, wetting, corrosion inhibition, emulsification, and general performance efficiency. Our products are valued because of their ease in handling, robust performance, and improved formulation stability. Printing Inks. We are a leading supplier of ink resins from renewable resources to the global graphic arts industry for the preparation of printing inks.
Biggest changeWe supply lubricant additives and corrosion inhibitors for the metalworking and fuel additives markets. Our lubricant products are multi-functional additives that contribute to lubricity, wetting, corrosion inhibition, emulsification, and general performance efficiency.
ITEM 1. BUSINESS General Ingevity provides products and technologies that purify, protect, and enhance the world around us. Through a diverse team of talented and experienced people, we develop, manufacture, and bring to market solutions that are largely renewably sourced and help customers solve complex problems while making the world more sustainable.
ITEM 1. BUSINESS General Ingevity Corporation provides products and technologies that purify, protect, and enhance the world around us. Through a diverse team of talented and experienced people, we develop, manufacture, and bring to market solutions that are largely renewably sourced and help customers solve complex problems while making the world more sustainable.
Our automotive activated carbon products primarily take the form of granules, pellets, and honeycomb "scrubbers," which are primarily utilized in vehicle-based gasoline vapor emission control systems to capture gasoline vapors that would 7 otherwise be released into the atmosphere as volatile organic compounds.
Our automotive activated carbon products primarily take the form of granules, pellets, and honeycomb "scrubbers," which are primarily utilized in vehicle-based gasoline vapor emission control systems to capture gasoline vapors that would otherwise be released into the atmosphere as volatile organic compounds.
These regulations include the discharge of materials into the environment, the handling, storage, transportation, disposal, and clean-up of chemicals and waste materials, and otherwise relating to the protection of the environment, as well as other operational regulations, such as the Occupational Safety and Health Act ("OSHA") and the Toxic 4 Substances Control Act ("TSCA") in the U.S. and the Registration, Evaluation and Authorization of Chemicals ("REACH"), directives in the European Union, the United Kingdom ("UK"), and other countries.
These regulations include the discharge of materials into the environment, the handling, storage, transportation, disposal, and clean-up of chemicals and waste materials, and otherwise relating to the protection of the environment, as well as other operational regulations, such as the Occupational Safety and Health Act ("OSHA") and the Toxic Substances Control Act ("TSCA") in the U.S., and the Registration, Evaluation and Authorization of Chemicals ("REACH") directives in the European Union, the United Kingdom, and other countries.
Seasonality There are a variety of seasonal dynamics, including global climate and weather conditions, that impact our businesses, though none have currently materially affected our financial results, except in the case of the pavement technologies product line, where roughly 70 to 75 percent of revenue is generated between April and September.
Seasonality There are a variety of seasonal dynamics, including global climate and weather conditions, that impact our businesses, though none have currently materially affected our financial results, except in the case of the road technologies product line, where roughly 70 to 75 percent of revenue is generated between April and September.
On February 14, 2019, BASF asserted counterclaims against Ingevity in the Delaware Proceeding, alleging two claims for violations of U.S. antitrust law (one for exclusive dealing and the other for tying) as well as a claim for tortious interference with an alleged prospective business relationship between BASF and a BASF customer (the “BASF Counterclaims”).
On February 14, 2019, BASF asserted counterclaims against us in the Delaware Proceeding, alleging two claims for violations of U.S. antitrust law (one for exclusive dealing and the other for tying) as well as a claim for tortious interference with an alleged prospective business relationship between BASF and a BASF customer (the “BASF Counterclaims”).
We compete based on deep knowledge of our customers’ businesses and extensive insights into road-building technologies and trends globally. We use these strengths to develop consulting relationships with government departments of transportation, facilitating new technology introduction into key markets around the world.
We compete based on deep knowledge of our customers’ businesses and extensive insights into road-building technologies and trends globally. We use these strengths to develop consultative relationships with government departments of transportation, facilitating new technology introduction into key markets around the world.
The market price of phosphoric acid is affected by the global agriculture market as the majority of global phosphate rock production is used for fertilizer production and only a portion of that production is used to manufacture purified phosphoric acid. Customers We sell our automotive technologies products to approximately 80 customers around the globe.
The market price of phosphoric acid is affected by the global agriculture market as the majority of global phosphate rock production is used for fertilizer production and only a portion of that production is used to manufacture purified phosphoric acid. Customers We sell our automotive technologies products to approximately 60 customers around the globe.
Ingevity believes in the strength of its intellectual property and the merits of its position and intends to pursue all legal relief available to challenge these outcomes in the Delaware Proceeding. The final resolution of these matters could take up to eighteen months.
Ingevity believes in the strength of its intellectual property and the merits of its position and intends to pursue all legal relief available to challenge these outcomes in the Delaware Proceeding. Final resolution of these matters could take up to 24 months.
Additionally, in North America where the majority of our bulk shipments are executed, we abide by the American Chemistry Council’s Responsible Care practices of transporting our chemicals safely. We strategically utilize logistics providers that have committed to these higher standards of Safety, Security, Stewardship, and the Environment.
Additionally, in North America where the majority of our bulk shipments are executed, we abide by the American Chemistry Council’s Responsible Care practices for transporting our chemicals safely. We strategically utilize logistics providers that have committed to these higher standards of safety, security, stewardship, and sustainability.
The BASF Counterclaims relate to Ingevity’s enforcement of the 844 Patent and Ingevity’s entry into several supply agreements with customers of its fuel vapor canister honeycombs. The U.S. District Court dismissed Ingevity’s patent infringement claims on November 18, 2020, and the case proceeded to trial on the BASF Counterclaims in September 2021.
The BASF Counterclaims relate to our enforcement of the 844 Patent and our entry into several supply agreements with customers of our fuel vapor canister honeycombs. The U.S. District Court dismissed our patent infringement claims on November 18, 2020, and the case proceeded to trial on the BASF Counterclaims in September 2021.
In 2022, we continued our efforts to increase reporting of and response to near miss incidents to prevent more serious injuries before they could occur. This included efforts to increase the number of near misses reported and an increase in reporting by a broader number of employees.
In 2023, we continued our efforts to increase reporting of and response to near miss incidents to prevent more serious injuries before they occur. This included efforts to increase the number of near misses reported and an increase in reporting by a broader number of employees.
To create a majority of our chemistries, we take crude tall oil from pine trees, hardwood sawdust (both co-products of the lumber, paper, and furniture-making industries), and vegetable oils and convert them into products that benefit customers, the environment, and society.
To create a majority of our chemistries, we take crude tall oil ("CTO") from pine trees, hardwood sawdust (both co-products of the lumber, paper, and furniture-making industries), and plant based oils and convert them into products that benefit customers, the environment, and society.
On September 15, 2021, a jury in the Delaware Proceeding issued a verdict in favor of BASF on the BASF Counterclaims and awarded BASF damages of approximately $28.3 million, which will be trebled under U.S. antitrust law to approximately $85.0 million when the court enters judgment.
On September 15, 2021, a jury in the Delaware Proceeding issued a verdict in favor of BASF on the BASF Counterclaims and awarded BASF damages of approximately $28.3 million, which will be trebled under U.S. antitrust law to approximately $85.0 million.
Our engineered polymers' products are caprolactone based, which is derived from cyclohexanone, a benzene derivative, and hydrogen peroxide, both of which are readily available in the market. We maintain multiple suppliers of cyclohexanone to protect against supply disruptions and to maintain competitive pricing.
Our Advanced Polymer Technologies' products are caprolactone-based, which is derived from cyclohexanone, a benzene derivative, and hydrogen peroxide, both of which are readily available in the market. We maintain multiple suppliers of cyclohexanone to protect against supply disruptions and to maintain competitive pricing.
We also utilize phosphoric acid, which is used to chemically activate the hardwood sawdust. This phosphoric acid is sourced through multiple suppliers to protect against supply disruptions and to maintain competitive pricing.
Sawdust is readily available and is sourced through multiple suppliers to protect against supply disruptions and to maintain competitive pricing. We also utilize phosphoric acid to chemically activate the hardwood sawdust. This phosphoric acid is sourced through multiple suppliers to protect against supply disruptions and to maintain competitive pricing.
In adhesives, our products compete against other tackifiers, including other tall oil resin ("TOR") based tackifiers as well as tackifiers produced from gum rosin and hydrocarbon starting materials. In addition, the choice of polymer used in an adhesive formulation drives the selection of a tackifier.
In adhesives, our products compete against other tackifiers, including other tall oil resin ("TOR") based tackifiers as well as 12 tackifiers produced from gum rosin and hydrocarbon starting materials. In addition, the choice of polymer used in an adhesive formulation drives the selection of a tackifier. In lubricants, we compete against other producers of distilled tall oil and additives.
Segments Performance Materials We engineer, manufacture, and sell hardwood-based, chemically activated carbon products, which are produced through a highly technical and specialized process primarily for use in gasoline vapor emission control systems in cars, trucks, motorcycles, and boats.
Segments Performance Materials We engineer, manufacture, and sell hardwood-based, chemically activated carbon products which are produced through a highly technical and specialized process primarily for use in gasoline vapor emission control systems in internal combustion engines and hybrid electric vehicles including cars, trucks, motorcycles, and boats.
Customers We sell our industrial specialties products to approximately 500 customers around the globe in over 60 countries through our own direct sales representatives and third-party sales representatives and distributors. In 2022, our ten largest customers accounted for 36 percent of the product line's sales. Our largest customers include Haliburton, Solenis, Flint Group, H.B.
Customers We sell our industrial specialties products to approximately 500 customers around the globe in over 45 countries through our own direct sales representatives and third-party sales representatives and distributors. In 2023, our ten largest customers accounted for 35 percent of the product line's sales. Our largest customers include Haliburton, Solenis, Flint Group, H.B. Fuller Co. and ChampionX.
The table below illustrates our product lines and the primary end uses for our products by segment, as well as our revenue by segment for the fiscal year 2022. For more information on our U.S. and foreign operations, see Notes 4 and 19, to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K.
The table below illustrates our product lines and the primary end uses for our products by segment, as well as our revenue by segment for the fiscal year 2023. For more information on our U.S. and foreign operations, see Notes 4 and 19, to the Consolidated Financial Statements included within Part II.
Based on the customer and/or governmental agency requirements, the markings can be designed for varying levels of initial and retained performance properties. 10 Customers We supply our pavement technologies products to approximately 650 customers in 65 countries through our own direct sales force, primarily in North America and Asia, as well as a network of third-party distributors.
Based on the customer and/or governmental agency requirements, the markings can be designed for varying levels of initial and retained performance properties. Customers We supply our road technologies products to approximately 850 customers in 60 countries through our own direct sales force, primarily in the Americas and Europe, as well as a network of third-party distributors.
In 2022, our ten largest customers accounted for 42 percent of the product line's sales. Our largest customers include Colas SA, Ergon, Inc., Associated Asphalt Inc., and Idaho Asphalt Supply Inc. Competition Our primary competitors in pavement technologies are Nouryon Chemicals B.V., Arkema S.A., Kao Specialties Americas LLC, Sherwin-Williams Company, and PPG Industries Traffic Solutions.
In 2023, our ten largest customers accounted for 30 percent of the product line's sales. Our largest customers include Ergon, Inc., The Heritage Group, and Idaho Asphalt Supply Inc. 11 Competition Our primary competitors in road technologies are Nouryon Chemicals B.V., Arkema S.A., Kao Specialties Americas LLC, Sherwin-Williams Company, and PPG Industries Traffic Solutions.
On July 19, 2018, Ingevity filed suit against BASF Corporation (“BASF”) in the United States District Court for the District of Delaware (the “Delaware Proceeding”) alleging BASF infringed Ingevity’s patent covering canister systems used in the control of automotive gasoline vapor emissions (U.S. Patent No. RE38,844) (the “844 Patent”).
District Court for the District of Delaware (the “Delaware Proceeding”) alleging BASF infringed Ingevity’s patent covering canister systems used in the control of automotive gasoline vapor emissions (U.S. Patent No. RE38,844) (the “844 Patent”).
Our products are used in a variety of demanding applications, including automotive components that reduce gasoline vapor emissions, asphalt paving, road striping, oil exploration and production, agrochemicals, adhesives, lubricants, publication inks, coatings, elastomers, and bioplastics. We operate in two reporting segments: Performance Materials and Performance Chemicals.
Our products are used in a variety of demanding applications, including adhesives, agrochemicals, asphalt paving, bioplastics, coatings, elastomers, lubricants, pavement markings, publication inks, oil exploration and production and automotive components. We operate in three reporting segments: Performance Materials, Performance Chemicals and Advanced Polymer Technologies.
We sell our automotive technologies and process purification products primarily through our own direct sales force in North America, Europe, South America, Asia, and a smaller, focused network of third-party distributors that have established a strong direct sales and marketing presence in North America and China.
Our food, water, beverage, and chemical purification products are sold to approximately 50 customers globally. We sell our products primarily through our own direct sales force in North America, Europe, South America, Asia, and a smaller, focused network of third-party distributors that have established a strong direct sales and marketing presence in North America and China.
In 2022, our ten largest customers accounted for approximately 45 percent of the product line's sales. Our largest customers include polyurethane, adhesive, coatings, and bioplastics manufacturers. 12 Competition Our primary caprolactone competitors are Daicel, Corp., Juren, and BASF SE, but we also face competition from other competing materials. We compete based on performance as compared to the other competitive materials.
In 2023, our ten largest customers accounted for approximately 47 percent of the segment's sales. Our largest customers include polyurethane, adhesive, coatings, and bioplastics manufacturers. Competition Our primary caprolactone competitors are Daicel, Corp., Juren, and BASF SE, but we also face competition from other competing materials.
We currently sell AFA as well as AFA derivatives into end markets such as oilfield and industrial applications. We have invested and will continue to invest, in AFA production capacity at our Crossett, Arkansas facility as we expand the commercialization of our product offerings in existing and new markets, which may include the biofuels market.
We currently sell these products as well as derivatives into end markets for industrial applications. We have invested in production capability at our Crossett, Arkansas facility as we expand the commercialization of our product offerings in existing and new markets, which may include the personal care; home and industrial cleaners, as well as the biofuels market.
Performance Materials' net sales for 2022, 2021, and 2020 were $548.5 million, $516.8 million, and $510.0 million, respectively. The chart below reflects our 2022 Performance Materials' net sales by geography. Sales are assigned to geographic areas based on the location of the party to which the product was shipped.
Performance Chemicals' net sales for 2023, 2022, and 2021 were $902.1 million, $875.1 million, and $688.9 million, respectively. The chart below reflects our 2023 Performance Chemicals' net sales by geography. Sales are assigned to geographic areas based on the location of the party to which the product was shipped.
We disagree with the verdict, including the court’s application of the law, and we intend to seek judgment as a matter of law in the Delaware Proceeding post-trial briefing stage and on appeal, if necessary. In addition, we intend to challenge the U.S. District Court’s November 2020 dismissal of our patent infringement claims against BASF.
We disagree with the verdict, including the court’s application of the law and entry of judgment and intend to appeal. In addition, we may challenge the U.S. District Court’s November 2020 dismissal of our patent infringement claims against BASF.
Although our intellectual property taken as a whole is material to the business, there is no individual patent or trademark the loss of which could have a material adverse effect on the business.
Although our intellectual property taken as a whole is material to the business, there is no individual patent or trademark the loss of which could have a material adverse effect on the business. 7 On July 19, 2018, we filed suit against BASF Corporation (“BASF”) in the U.S.
Although we believe that we currently have a stable natural gas supply and infrastructure for our operations, we are subject to volatility in the market price of natural gas.
Although we believe that we currently have a stable natural gas supply and infrastructure for our operations, we are subject to volatility in the market price of natural gas. We enter into certain derivative financial instruments to mitigate expected fluctuations in market prices and the resulting volatility of earnings and cash flow.
Each of these facilities are located in regulated service areas that have stable rate structures with reliable electricity supply. Leveraging Sustainability Throughout our Performance Chemicals and Performance Materials portfolios, we are a leader in adding value to products made from renewable materials and in derivatizing technologies that impart desirable environmental benefits in their use.
Leveraging Sustainability Throughout our Performance Materials, Performance Chemicals, and Advanced Polymer Technologies portfolios, we are a leader in adding value to products made from renewable materials and in derivatizing technologies that impart desirable environmental benefits in their use.
The chart below reflects our 2022 Performance Chemicals' net sales by geography. Sales are assigned to geographic areas based on the location of the party to which the product was shipped. Raw Materials and Production Our Performance Chemicals segment serves customers globally from seven manufacturing locations in the U.S. and one in the UK.
Sales are assigned to geographic areas based on the location of the party to which the product was shipped. Raw Materials and Production Our Advanced Polymer Technologies segment serves customers globally from one manufacturing location in the U.K.
Other specialty additives, typically used in deep water applications, include rheology modifiers and wetting agents that improve viscosity properties and aid in the efficiency of the drilling process. We also supply corrosion inhibitors or their components for oil and gas production and downstream applications.
Other specialty additives, typically used in deep water applications, include rheology modifiers and wetting agents that improve viscosity properties and aid in the efficiency of the drilling process. We also supply specialty additives for corrosion inhibition formulations used to maximize production rates by reducing the downtime for key equipment and pipes due to corrosion.
Put simply: Ingevity’s products help customers reduce their ecological impact. Our asphalt emulsifiers enable pavement recycling that reuses up to 100 percent of existing materials to create longer-lasting roads. Our automotive activated carbon products improve the air we breathe by recovering 8 million gallons of gasoline daily. Our lubricant technologies increase tool life and simplify formulations.
Our asphalt emulsifiers enable pavement recycling that reuses up to 100 percent of existing materials to create longer-lasting roads. Our automotive activated carbon products improve the air we breathe by recovering 8 million gallons of gasoline daily. Our agriculture adjuvants provide enhanced performance in crop protection.
It also supports more effective innovation, enhanced customer experience, and a deeper understanding of the communities Ingevity serves. Our diversity recruiting strategy is focused on ensuring everyone has an equitable experience by diversifying our talent pipeline through diverse candidate slates and interview teams as well as gender-neutral job descriptions.
Our diversity recruiting strategy is focused on ensuring everyone has an equitable experience by diversifying our talent pipeline through diverse candidate slates and interview teams as well as gender-neutral job descriptions. Our focus on advancing the diversity makeup of our leadership continues to positively impact our growth and success.
We deliver a wide range of dispersants that are high performing and consistent. In addition, our crop protection products are approved for use as inert ingredients in agrochemicals by regulatory agencies throughout the world. Lubricants. We supply lubricant additives and corrosion inhibitors for the metalworking and fuel additives markets.
Crop protection formulations are highly engineered, specifically formulated, and cover a range of different formulation types, from liquids to solids. We deliver a wide range of dispersants that are high performing and consistent. In addition, our crop protection products are approved for use as inert ingredients in agrochemicals by regulatory agencies throughout the world. Paper Chemicals.
For the caprolactone-based products in our Performance Chemicals segment – although derived from traditional feedstocks – these solutions enable performance attributes in end-use markets that directly help customers and consumers meet sustainability goals. The superior durability of capa-based polyurethane technologies extends product life and the biodegradable performance of our thermoplastic polycaprolactones offers compostable end of-life solutions.
For the caprolactone-based products in our Advanced Polymer Technologies segment – although derived from traditional feedstocks – these products provide solutions that enable performance attributes in end-use markets that directly help customers and consumers meet sustainability goals. Put simply: Ingevity’s products help customers reduce their ecological impact.
In agrochemicals, the selection of a dispersant is made early in the product development cycle and the formulator has a choice among our sulfonated lignin products, lower-quality lignosulfonates and other surfactants such as naphthalene sulfonates. In lubricants, we compete against other producers of distilled tall oil and additives.
Reputation and loyalty are also valued by our customers and allow us to win business when other factors are equal. In agrochemicals, the selection of a dispersant is made early in the product development cycle and the formulator has a choice among our sulfonated lignin products, lower-quality lignosulfonates and other surfactants such as naphthalene sulfonates.
Human Capital Management Talent Our employees are critical to our success, and we strive to provide a safe, rewarding, and respectful workplace where our people are provided with opportunities to pursue career paths based on skills, performance, and potential.
Talent Our employees are critical to our success, and we strive to provide a safe, rewarding, and respectful workplace where our people have opportunities to pursue career paths based on skills, performance, and potential. Our success depends, in part, on our ability to attract, retain and motivate critical resources across production, technical, engineering, sales, and various functional disciplines.
In addition, BASF may seek pre- and post-judgment interest and attorneys’ fees and costs in amounts that they will have to support at a future date.
In addition, BASF has indicated it will seek attorneys’ fees and costs in amounts that they will have to support at a future date. Unless the judgment is set aside, BASF will be entitled to post-judgment interest pursuant to the rate provided under federal law.
Raw Materials and Production Our Performance Materials segment serves customers globally from three manufacturing locations in the U.S. and two in China. The primary raw material (by volume) used in the manufacture of our activated carbon is hardwood sawdust. Sawdust is readily available and is sourced through multiple suppliers to protect against supply disruptions and to maintain competitive pricing.
Sales are assigned to geographic areas based on the location of the party to which the product was shipped. 8 Raw Materials and Production Our Performance Materials segment serves customers globally from three manufacturing locations in the U.S. and two in China. The primary raw material (by volume) used in the manufacture of our activated carbon is hardwood sawdust.
In 2022, our ten largest customers accounted for approximately 89 percent of sales. We are the trusted source of these products for many of the world’s largest automotive parts manufacturers, including BorgWarner Inc. (previously Delphi Technologies PLC), A.
In 2023, our ten largest customers accounted for approximately 82 percent of sales. We are the trusted source of these products for many of the world’s largest automotive parts manufacturers, including PHINIA Inc. (previously BorgWarner Inc.), A. Kayser Automotive System GmbH, Korea Fuel-Tech Corporation, MAHLE GmbH, and many other large and small component manufacturers throughout the global automotive supply chain.
In the fourth quarter of 2022, at our Charleston South Carolina Performance Chemicals’ facility: (1) the United Steel, Paper, Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (“USW”) on behalf of its Local Union 9-0508-02, ratified a four-year CBA, which expires June 30, 2026, and (2) the International Association of Machinists and Aerospace Workers (“IAM”) and its Charleston Lodge No. 183, ratified a four-year CBA, which expires June 30, 2026.
In 2023, the United Steel, Paper, Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, on behalf of its affiliated Local Union 0775 at our Wickliffe, Kentucky Performance Materials manufacturing facility ratified a four-year CBA, which expires on February 1, 2027.
Additionally, we are well-positioned to meet increasing emissions standards around the world. 8 Performance Chemicals Ingevity’s Performance Chemicals segment is comprised of three product lines: pavement technologies, industrial specialties, and engineered polymers.
Additionally, we are well-positioned to meet increasing emissions standards around the world. 9 Performance Chemicals Our Performance Chemicals segment is comprised of two product lines: road technologies (previously named pavement technologies) and industrial specialties. Our products are utilized in pavement construction, pavement preservation, pavement reconstruction and recycling, road markings, agrochemical dispersants, paper chemicals, and other diverse industrial uses.
Fuller Co., and Arboris. 11 Competition Our competitors, which differ depending on the product, application, and region, include Kraton Corp., Eastman Chemical Co., ExxonMobil Corp., Borregaard ASA, Lawter, Inc., Repsol S.A., Firmenich SA, Lamberti S.p.A., Mobile Rosin Oil Company, Inc., as well as several others.
Competition Our competitors, which differ depending on the product, application, and region, include Kraton Corp., Eastman Chemical Co., Borregaard ASA, Repsol S.A., Lamberti S.p.A., Cargill, Vantage, PMC, as well as several others. Specific to our industrial specialty products, our customers select the product that provides the best balance of performance, consistency, and price.
We provide alkyd and hydrocarbon premium-based thermoplastic road striping technologies which provide long service life, excellent adhesion, superior color, and retro-reflectivity.
Our cold in-place recycling additives allow our customers to reopen existing roadways faster, while also lowering overall costs and jobsite emissions. Pavement Markings. We provide alkyd and hydrocarbon premium-based thermoplastic road striping technologies which provide long service life, excellent adhesion, superior color, and retro-reflectivity.
And our alternative-fuel vehicle technology enables the use of renewable natural gas as fuel for pickup trucks and busses. Our business is built on our ability to maximize the value and utility of materials over their lifecycle, and we will continue to enhance this value proposition through future acquisitions and new product development.
Our business is built on our ability to maximize the value and utility of materials over their lifecycle, and we will continue to enhance this value proposition through future acquisitions and new product development. 5 Human Capital Management Core Values Developed collaboratively by Ingevity employees in 2017, the IngeviWay is the cultural framework that shapes Ingevity’s future and enables our success.
For example, sanctions imposed on Russia in 2022 have constrained the global CTO supply by approximately 10 percent. Also, there are regulatory pressures that may incentivize suppliers of CTO to sell CTO into alternative fuel markets (i.e., biofuels) rather than to historical end users such as Ingevity.
Also, there are regulatory pressures that may incentivize suppliers of CTO to sell CTO into alternative fuel markets (i.e., biofuels) rather than to historical end users such as Ingevity. CTO-based biofuel has been deemed to meet the EU’s Renewable Energy Directive, second phase (“RED II”) biofuel sustainability criteria.
Markets Served Pavement Technologies Our pavement technologies product line produces a broad line of innovative additives and technologies utilized globally in road construction and pavement preservation, including pavement reconstruction and recycling. With the acquisition of Ozark Materials, LLC and Ozark Logistics, LLC (collectively, “Ozark Materials”), we have added road striping technologies to the portfolio. Warm Mix Asphalt.
With the 2022 acquisition of Ozark Materials, LLC and Ozark Logistics, LLC (collectively, “Ozark Materials”), we have added road striping technologies to the portfolio. Road Construction. Evotherm®, our premier road construction additive, is a warm mix asphalt technology that promotes adhesion by acting as both a liquid antistrip and a warm mix asphalt.
Evotherm®, our premier road construction additive, is a warm mix asphalt technology that promotes adhesion by acting as both a liquid antistrip and a warm mix asphalt. Once Evotherm® is mixed into the binder utilized for road layer construction, production temperatures can be significantly cooler than conventional hot mix asphalt.
Once Evotherm® is mixed into the binder utilized for road layer construction, production temperatures can be significantly cooler than conventional hot mix asphalt. Lower production temperatures allow our customers to reduce emissions and fuel use during road construction as well as extend their paving seasons into colder months. Pavement Preservation.
Industrial Specialties Our industrial specialties product line produces and sells chemicals utilized in several industrial applications, including adhesive tackifiers, agrochemical dispersants, lubricant additives, printing ink resins, industrial intermediates, and oilfield. Adhesives. We are a global supplier of tackifier resins, which provide superior adhesion to difficult-to-bond materials, to the adhesives industry.
Industrial Specialties Our industrial specia lties product line produces and sells chemicals utilized in several industrial applications, including adhesive tackifiers, agrochemical dispersants, lubricant additives, printing ink resins, industrial intermediates, and oilfield. Agricultural Chemicals. We produce dispersants for crop protection products as well as other naturally derived products for agrochemicals.
In printing inks, our products compete against other resins that can be derived from TOR, gum rosin and, to a lesser extent, hydrocarbon sources. In our industrial intermediates business, our tall oil fatty acid ("TOFA") competes against widely available fats and oils derived from tallow, soy, rapeseed, palm, and cotton sources.
In our industrial intermediates business, our tall oil fatty acid ("TOFA") competes against widely available fats and oils derived from tallow, soy, rapeseed, palm, and cotton sources. In oilfield, we compete against other tall oil specialty additives used for oil-based drilling fluids or corrosion inhibition formulations in the drilling, production and downstream applications of oilfield.
Our technical team matches the right emulsifier and design to our customers’ materials and conditions to create high-performing emulsions. We offer a full range of specialized cationic, anionic, and amphoteric emulsifiers with additional, custom-formulated specialty additives. Pavement Reconstruction and Recycling.
We offer a full range of specialized cationic, anionic, and amphoteric emulsifiers with additional, custom-formulated specialty additives. Pavement Reconstruction and Recycling. We provide an array of pavement reconstruction and recycling additives that reduce the life cycle cost of pavement by enabling the milling and reuse of existing roadways.
We have a broad and diverse customer base in this segment. In 2022, our top ten customers accounted for approximately 23 percent of our segment revenue, with the next 100 customers making up approximately 49 percent of our segment revenue. Performance Chemicals' net sales for 2022, 2021, and 2020 were $1,119.8 million, $874.7 million, and $706.1 million, respectively.
Our application expertise is often called upon by our customers to provide unique solutions that maximize resource efficiency. We have a broad and diverse customer base in this segment. In 2023, our top ten customers accounted for approximately 22 percent of our segment revenue, with the next 100 customers making up approximately 47 percent of our segment revenue.
Lower production temperatures allow our customers to reduce emissions and fuel use during road construction as well as extend their paving seasons into colder months. Pavement Preservation. We provide an array of pavement preservation products that eliminate many traditional asphalt heating, mixing, and transportation demands – saving our customers time, energy, and money.
We provide an array of pavement preservation products that eliminate many traditional asphalt heating, mixing, and transportation demands – saving our customers time, energy, and money. Our technical team matches the right emulsifier and design to our customers’ materials and conditions to create high-performing emulsions.
As a consequence of RED II, there has been a significant increase in demand for CTO and its derivatives, resulting in significantly increasing prices. 9 In addition to these developments in the EU, various pieces of legislation regarding the use of alternative fuels have been introduced in the U.S. at both the federal and state level.
The increased demand, combined with the rationalization of softwood kraft pulp processing during 2023, has created pressure on CTO pricing and driven the cost of CTO to unprecedented levels, higher by as much as 300 percent in some cases. 10 In addition to these developments in the EU, various pieces of legislation regarding the use of alternative fuels have been introduced in the U.S. at both the federal and state level.
Our functional chemistries are sold across a diverse range of industrial markets including, among others, paper chemicals, textile dyes, rubber, cleaners, mining, and nutraceuticals. Oilfield. We supply oilfield well service additives to improve emulsion stability, aid in fluid loss control, for oil-based drilling muds.
Specific to tire producers, our resins help improved fuel efficiency, wear and traction. Industrial Intermediates. Our functional chemistries are sold across a diverse range of industrial markets including, among others, textile dyes, rubber, cleaners, mining, and nutraceuticals. Adhesives, Oilfield, and Lubricants.
We currently employ approximately 2,050 employees, of whom approximately 77 percent are employed in the U.S. Approximately 19 percent of our employees are represented by domestic (i.e., U.S.) labor unions under various collective bargaining agreements ("CBA"). We engage in negotiations with labor unions for new CBAs from time to time based on expiration dates of agreements and statutory requirements.
We engage in negotiations with labor unions for new CBAs from time to time based on expiration dates of agreements and statutory requirements. We consider our relationships with all salaried, union-hourly, and non-hourly employees to be positive and collaborative.
We typically source over 80 percent of our CTO needs through long-term supply contracts. The remainder of our CTO needs is sourced through short-term contracts and spot purchases in the open market. Most of our long-term contracted volumes are sourced through two primary parties: WestRock and Georgia-Pacific LLC (“Georgia-Pacific”).
We also produce products derived from lignin, which is extracted from black liquor, another co-product of softwood kraft pulp processing. We typically source our CTO needs primarily through supply contracts. Most of our contracted volumes are sourced through two primary parties: WestRock and Georgia-Pacific. During 2023, we sourced approximately 82 percent of our CTO from WestRock and Georgia-Pacific combined.
Performance measurement includes accomplishments that supported the team, our company, internal and external customers, and our core values. In 2022, we modified our approach to create a more formalized record of employee performance at mid-year and year-end, including a new requirement for everyone at Ingevity to request feedback from colleagues who have insight into the respective employee's performance and contributions.
Achievements that bolster the team, our business, and our clients—internal and external—and our fundamental values are all included in the performance evaluation process. Our method involves keeping a codified record of employee performance at mid-year and end-of-year. It also includes a requirement for all Ingevity employees to ask for feedback from those who are aware of their performance and contributions.
Our hydrogen peroxide is currently supplied by Solvay Interox Limited, a co-located supplier at our Warrington, UK facility under a long-term supply agreement. The other key raw materials used in the Performance Chemicals business are maleic anhydride, pentaerythritol, and ethylene amines. These are sourced where possible through multiple suppliers to protect against supply disruptions and to maintain competitive pricing.
Our hydrogen peroxide is currently supplied by Solvay Interox Limited, a co-located supplier at our Warrington, United Kingdom facility under a long-term supply agreement. Customers We sell our Advanced Polymer Technologies products to approximately 300 customers around the globe through our own direct sales representatives and third-party sales representatives and distributors.
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Performance Materials Performance Chemicals Product Lines Pavement Technologies Industrial Specialties Engineered Polymers Primary End Uses Gasoline vapor emissions control Purification of food, water, beverages, and chemicals Warm mix asphalt Pavement preservation Pavement reconstruction and recycling Thermoplastic pavement markings Adhesives Agrochemicals Lubricants Printing inks Industrial intermediates Oilfield Coatings Resins Elastomers Adhesives Bioplastics Medical devices 2022 Revenue $548.5 million $1,119.8 million Governmental Regulations Our manufacturing operations are subject to regulation by governmental and other regulatory authorities with jurisdiction over our operations.
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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.
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We enter into certain derivative financial instruments to mitigate expected fluctuations in market prices and the volatility of earnings and cash flow resulting from changes to the pricing of natural gas purchases. All of our manufacturing processes also consume a 5 significant amount of electricity.
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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.
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Our success depends, in part, on our ability to attract, retain and motivate critical resources across production, technical, engineering, sales, and various functional disciplines. If an ongoing failure to attract and retain individuals in key business roles and functions materialized, it could adversely affect our financial condition and operational results.
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In November of 2023, we announced an initiative to reposition our Performance Chemicals segment to enhance profitability and earnings stability as we execute our corporate strategy to focus on higher margin and higher growth specialty products, diversify feedstocks and optimize our manufacturing network.
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We consider our relationships with all salaried, union-hourly, and non-hourly employees to be positive and collaborative. During the second quarter of 2022, at our Covington, Virginia Performance Materials' facility, the International Brotherhood of Electrical Workers (“IBEW”) AFL-CIO Local Union 464 ratified a four-year CBA, which expires January 15, 2025.
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This initiative will result in the reduction, and in some cases exit, of historical primary end uses of our Industrial Specialties product line such as adhesives, publication inks, and oilfield as well as the closure of our Performance Chemicals' manufacturing facility in DeRidder, Louisiana. Refer to the section: Performance Chemicals , within Item 1: BUSINESS for more information.
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In the third quarter of 2022, at our Covington Virginia Performance Materials' facility, the Covington Paper Workers Union, Local 675, affiliated with the Association of Western Pulp and Paper Workers ratified a four-year CBA which expires December 1, 2025.
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Item 8 of this Form 10-K. 4 Performance Materials Performance Chemicals Advanced Polymer Technologies Product Lines Road Technologies (1) Industrial Specialties End-Use Markets Automotive Food, Chemicals, and Water Purification Pavement Construction Pavement Preservation Pavement Reconstruction and Recycling Pavement Markings Agricultural Chemicals Paper Chemicals Rubber Industrial Intermediates Limited (2) : Adhesives, Oilfield and Lubricants Automotive & Transportation Industrial Equipment Footwear & Apparel Consumer Packaging Medical & Health 2023 Revenue $586.0 million $902.1 million $204.0 million _______________ (1) Previously named Pavement Technologies (2) In November of 2023 we announced an initiative to reposition our Performance Chemicals segment to enhance profitability and earnings stability as we execute our corporate strategy to focus on higher margin and higher growth specialty products, diversify feedstocks and optimize our manufacturing network.
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In addition, the CBA at our Wickliffe, Kentucky Performance Materials facility with the USW, on behalf of its affiliated Local Union 0775, expired on February 1, 2023. The parties began contract renewal negotiations in January 2023.
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This initiative will result in the reduction, and in some cases exit, of historical end-use markets of our Industrial Specialties product line such as adhesives, publication inks, and oilfield. Refer to the section: Performance Chemicals , within Item 1: BUSINESS for more information.
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Diversity, Equity & Inclusion At Ingevity, we are committed to fostering a culture where we recognize, celebrate, and welcome the ways in which each other's unique backgrounds, experiences and perspectives help us reach the best solutions for our customers.
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All of our manufacturing processes also consume a significant amount of electricity and are located in regulated service areas that have stable electricity rate structures with reliable supply.
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To support us in developing practical and thoughtful ways to embed these principles into our everyday work, we created a dedicated team to advance diversity, equity, and inclusion ("DEI"). 6 A strategic and intentional focus on DEI enhances the employee experience and satisfaction.
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And our alternative-fuel vehicle technology enables the use of renewable natural gas as fuel for pickup trucks and buses. The superior durability of caprolactone-based polyurethane technologies extends product life and the biodegradable performance of our thermoplastic polycaprolactones offers compostable end of-life solutions.
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We are also enhancing our partnerships with organizations such as the National Society of Black Engineers (NSBE), National Black MBA Association, Society of Women Engineers (SWE), Society of Hispanic Engineers (SHPE), Society of Asian Scientist and Engineers (SASE), Corporate Gray, an organization that focuses on military recruiting, and historically black colleges and universities to broaden our candidate pool.
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It describes who we are, what we want to be, and what’s important to us as we work together to fulfill our purpose to purify, protect and enhance the world around us.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAdditionally, we may be placed at a competitive disadvantage relative to certain competitors who rely on different primary raw materials or who have more favorable terms with their suppliers.
Biggest changeIf we remain unable to pass through the increased CTO costs to our customers or transition to lower cost raw materials on a timely and cost-effective basis, our results of operations could continue to be negatively impacted and we may be placed at a competitive disadvantage relative to certain competitors who rely on different primary raw materials or who have more favorable terms with their CTO suppliers. 15 We typically source our CTO needs through supply contracts.
If any of the following risks and uncertainties develop into actual events, these events could have a material adverse effect on our business, financial condition. or results of operations. In such a case, the trading price of our Common Stock could decline.
If any of the following risks and uncertainties develop into actual events, these events could have a material adverse effect on our business, financial condition. or results of operations. In such case, the trading price of our Common Stock could decline.
While we maintain policies to enter into confidentiality agreements with our employees and third parties to protect our proprietary expertise and other trade secrets, these agreements may not be enforceable or, even if legally enforceable, we may not have adequate remedies for breaches of such agreements. We also may not be able to readily detect 20 breaches of such agreements.
While we maintain policies to enter into confidentiality agreements with our employees and third parties to protect our proprietary expertise and other trade secrets, these agreements may not be enforceable or, even if legally 20 enforceable, we may not have adequate remedies for breaches of such agreements. We also may not be able to readily detect breaches of such agreements.
These unpredictable events could negatively impact our results of operations and cash flows. Further, any of these factors may impact our customers’ non-U.S. operations, which could reduce demand for our products. As our international operations and activities expand, we inevitably have greater exposure to the risks associated with operating in many foreign countries.
These unpredictable events could negatively impact our results of operations and cash flows. Further, any of these factors may impact our customers’ non-U.S. operations, which could reduce demand for our products. As our 19 international operations and activities expand, we inevitably have greater exposure to the risks associated with operating in many foreign countries .
We may not be able to pass through raw material cost increases, or we may lose market share if we do not effectively manage our pricing, which in either case could negatively impact our financial results. 14 Additionally, the price of energy may directly or indirectly impact demand, pricing, or profitability for certain of our products.
We may not be able to pass through raw material cost increases, or we may lose market share if we do not effectively manage our pricing, which in either case could negatively impact our financial results . Additionally, the price of energy may directly or indirectly impact demand, pricing or profitability for certain of our products.
In addition, we collect and store certain data, including proprietary business information, and may have access to confidential or personal information that is subject to privacy and security laws and regulations. The secure processing, storage, and transmission of sensitive, confidential, and personal data is critical to our operations and business strategy.
In addition, we collect and store certain data, including proprietary business information, and may have access to confidential or personal information that is subject to privacy and security laws and regulations . 18 The secure processing, storage, and transmission of sensitive, confidential, and personal data is critical to our operations and business strategy.
Our financial condition and results of operations could be materially and adversely affected by any of the foregoing. Inflation and other adverse global economic conditions could result in an adverse impact on our results of operations. We are affected by general global economic and financial conditions that are beyond our control, including inflation and significant spikes in energy costs.
Our financial condition and results of operations could be materially and adversely affected by any of the foregoing . Inflation could result in an adverse impact on our results of operations. We are affected by general global economic and financial conditions that are beyond our control, including inflation and significant spikes in energy costs.
Furthermore, in the event that WestRock’s Covington, VA paper mill’s wastewater treatment operations do not comply with permits or applicable law and WestRock is unable to determine the cause of such non-compliance, then we will be responsible for up to 50 percent of the costs and expenses of such noncompliance (increasing in 10 percent increments per violation during each twelve month period) despite representing less than 3 percent of the total wastewater volume.
Furthermore, in the event that WestRock’s Covington, VA paper mill’s wastewater treatment operations do not comply with permits or applicable law and WestRock is unable to determine the cause of such non-compliance, then we will be responsible for between 10 percent and 50 percent of the costs and expenses of such noncompliance (increasing in 10 percent increments per violation during each twelve-month period) despite representing less than 3 percent of the total wastewater volume.
These costs and expenses may be significant and may adversely impact our financial condition and results of operations. Additionally, several of our manufacturing facilities are leased.
These costs and expenses may be significant and may adversely impact our financial condition and results of operations. 14 Additionally, several of our manufacturing facilities are leased.
Our failure to attract and retain individuals making significant contributions to our business could adversely affect our financial condition and results of operations. The inability to make or effectively integrate future acquisitions and other investments may negatively affect our results. As part of our growth strategy, we may pursue acquisitions of businesses and product lines or invest in joint ventures.
Our failure to attract and retain individuals making significant contributions to our business could adversely affect our financial condition and results of operations . The inability to make or effectively integrate future acquisitions may negatively affect our results. As part of our growth strategy, we may pursue acquisitions of businesses and product lines or invest in joint ventures.
Availability and pricing are determined by the supply/demand dynamics for synthetic rubber as well as the price of crude oil as the feedstock for isoprene and various other factors that are not within our control. Animal and vegetable-based fatty acids compete with TOFA products in lubricant and industrial specialties.
Availability and pricing are determined by the supply/demand dynamics for synthetic rubber as well as the price of crude oil as the feedstock for isoprene and various other factors that are not within our control. Animal and plant based fatty acids compete with TOFA products in lubricant and industrial specialties.
Additional regulation of or requirements for these or other chemicals could require us to change our operations, and these changes could affect the quality or types of products we manufacture and/or materially increase our costs. Increased focus by governmental entities on environmental issues and sustainability may result in new or increased regulations.
Additional regulation of or requirements for such chemicals could require us to change our operations, and these changes could affect the quality or types of products we manufacture and/or materially increase our costs . Increased focus by governmental entities on environmental issues and sustainability may result in new or increased regulations.
We have exposure to risks of operating outside the U.S., including: fluctuations in foreign currency exchange rates, including the euro, pound sterling, Japanese yen and Chinese renminbi; restrictions on, or difficulties and costs associated with, the repatriation of cash from foreign countries to the U.S.; difficulties and costs associated with complying with a wide variety of complex laws, treaties and regulations, which may carry significant penalties for non-compliance; unexpected changes in political or regulatory environments; earnings and cash flows that may be subject to tax withholding requirements or the imposition of tariffs, exchange controls or other restrictions; geopolitical and economic instability; general country strikes or work stoppages; unforeseen public health crises, such as pandemic and epidemic diseases (including the COVID-19 pandemic); import and export restrictions, tariffs, and other trade barriers or retaliatory actions; difficulties in maintaining overseas subsidiaries and international operations; difficulties in obtaining approval for significant transactions; government limitations on foreign ownership; government takeover or nationalization of business; and government mandated price controls.
We have exposure to risks of operating outside the U.S., including: fluctuations in foreign currency exchange rates, including the euro, pound sterling, Japanese yen and Chinese renminbi; restrictions on, or difficulties and costs associated with, the repatriation of cash from foreign countries to the U.S.; difficulties and costs associated with complying with a wide variety of complex laws, treaties and regulations, which may carry significant penalties for non-compliance; unexpected changes in political or regulatory environments; earnings and cash flows that may be subject to tax withholding requirements or the imposition of tariffs, exchange controls or other restrictions; geopolitical and economic instability, including the wars in Ukraine and the Gaza region; general country strikes or work stoppages; unforeseen public health crises, such as pandemic and epidemic diseases; import and export restrictions, tariffs, and other trade barriers or retaliatory actions; difficulties in maintaining overseas subsidiaries and international operations; difficulties in obtaining approval for significant transactions; government limitations on foreign ownership; government takeover or nationalization of business; and government mandated price controls .
Intellectual property rights, including patents, trade secrets, confidential information, trademarks, trade names, and trade dress, are important to our business. See "Intellectual Property" included within Part I. Item 1 of this Form 10-K for more information on the 844 Patent.
Intellectual property rights, including patents, trade secrets, confidential information, trademarks, trade names, and trade dress, are important to our business. See “Intellectual Property” included within Part I. Item 1 of this Form 10-K for more information on the 844 Patent.
Because the outcome of the Company’s post-trial motions and possible appeal is difficult to predict, as of December 31, 2022, the Company has accrued a total of $85.0 million, the full amount of the jury’s verdict (including treble damages).
Because the outcome of the Company’s post-trial motions and possible appeal is difficult to predict, as of December 31, 2023, the Company has accrued a total of $85.0 million , the full amount of the jury’s verdict (including treble damages).
As the adoption of more stringent regulations governing gasoline vapor emissions is expected to drive significant growth in our automotive carbon applications, the failure to enact such regulations will have a significant impact on the growth prospects for these products.
As the adoption of more stringent regulations governing gasoline vapor emissions is expected to drive significant growth in our automotive carbon applications, the failure to enact such regulations will have an impact on the growth prospects for these products .
In the event that the applicable counterparty was to fail to provide the contracted services, we would be required to obtain these services from other third parties, most likely at an increased cost, or to expend capital to provide these services ourselves.
In the event that the applicable counterparty were to fail to provide the contracted services, we would be required to obtain these services from other third parties, most likely at an increased cost, or to expend capital to provide these services ourselves.
Weather conditions have in the past and may in the future affect the availability and quality of pine trees used in the kraft pulping process and, therefore, the availability of CTO that meets Ingevity’s quality standards. Geopolitical risk factors could constrain CTO availability.
Weather conditions have in the past and may in the future affect the availability and quality of pine trees used in the kraft pulping process and, therefore, the availability of CTO that meets Ingevity’s quality standards. Geopolitical risk factors could constrain C TO availability.
The ERP system implementation requires the integration of the new ERP system with multiple new and existing information systems and business processes in order to maintain the accuracy of our books and records and to provide our management team with information important to the operation of our business.
The ERP system implementation required the integration of the new ERP system with multiple new and existing information systems and business processes in order to maintain the accuracy of our books and records and to provide our management team with information important to the operation of our business.
Challenges in the commercial and credit environment may materially adversely affect our future access to capital. We have, at times, relied on various forms of credit to satisfy working capital needs.
Challenges in the commercial and credit environment may materially adversely affect Ingevity’s future access to capital. We have, at times, relied on various forms of credit to satisfy working capital needs.
The market price for TOFA products is impacted by the prices of other fats and oils, and the prices for other fats and oils are driven by actual and expected harvest rates, petroleum oil prices, and the biofuel market. Other monomers, thermoplastics, and polyols compete with our caprolactone-based products.
The market price for our TOFA and oleochemical products are impacted by the prices of other fats and 17 oils, and the prices for other fats and oils are driven by actual and expected harvest rates, petroleum oil prices, and the biofuel market. Other monomers, thermoplastics, and polyols compete with our caprolactone-based products.
No customer accounted for more than 10 percent of total sales for 2022. With some exceptions, our business with those large customers is based primarily upon individual purchase orders. As such, our customers could cease buying our products from us at any time, for any reason, with little or no recourse.
No customer accounted for more than 10 percent of total sales for 2023. Wi th some exceptions, our business with those large customers is based primarily upon individual purchase orders. As such, our customers could cease buying our products from us at any time, for any reason, with little or no recourse.
We purchase a variety of other raw materials, which are also subject to pricing pressures; inability to procure these raw materials or to pass on price increases could negatively impact our operations or financial results.
We purchase a variety of other raw materials, which are also subject to pricing pressures and limited availability; inability to procure these raw materials or to pass on price increases could negatively impact our operations or financial results.
Certain of our products face competition from substitute products where the costs of different raw material inputs can impact the price competitiveness of our products and negatively impact our sales and/or profits as we respond to substitute product competition. Gum rosin-based products and hydrocarbon resins compete with our TOR-based resins in the adhesives and printing ink markets.
Certain of our products face competition from substitute products where the costs of different raw material inputs can impact the price competitiveness of our products and negatively impact our sales and/or profits as we respond to substitute product competition. Gum rosin-based products and hydrocarbon resins compete with our TOR-based resins in the adhesives market.
The amount accrued for this matter is included within Other liabilities on the consolidated balance sheet as of December 31, 2022, and the charge is included within Other (income) expense, net on the consolidated statement of operations for the twelve months ended December 31, 2022.
The amount accrued for this matter is included within Other liabilities on the consolidated balance sheet as of December 31, 2023, and the charge is included within Other (income) expense, net on the consolidated statement of operations for the twelve months ended December 31, 2021.
Softwood pulp is the predominant fiber source for packaging grades of paper as well as fluff pulp for personal care products. As a result, there is a finite global supply of CTO, with global demand for softwood pulp driving the global supply of CTO, rather than demand for CTO itself.
Softwood pulp is the predominant fiber source for packaging grades of paper as well as fluff pulp for personal care products. As a result, there is a finite global supply of CTO, with global demand for softwood pulp driving the global supply of CTO.
Disruptions to any of our manufacturing operations or other facilities, due to natural disasters and extreme weather, such as a hurricane, tropical storm, earthquake, tornado, severe weather, flood, fire, or other unanticipated problems such as labor difficulties, pandemics (including the COVID-19 pandemic), equipment failure, cyberattacks or other cybersecurity incidents, capacity expansion difficulties or unscheduled maintenance, could cause operational disruptions of varied duration.
Disruptions to any of our manufacturing operations or other facilities, due to natural disasters and extreme weather, such as a hurricane, tropical storm, earthquake, tornado, severe weather, flood, fire or other unanticipated problems such as labor difficulties, pandemics, equipment failure, cyberattacks or other cybersecurity incidents, capacity expansion difficulties or unscheduled maintenance, could cause operational disruptions of varied duration.
The impact of these changes may lead to increased competition from competing and substitute products and downward pricing pressures on our customers, and therefore, our engineered polymers and industrial specialties product offerings. We face competition from new technologies and new or emerging competitors.
The impact of these changes may lead to increased competition from competing and substitute products and downward pricing pressures on our customers, and therefore, our Advanced Polymer Technologies and industrial specialties product offerings. We face competition from new technologies and new or emerging competitors.
For example, demand for our engineered polymers products in the automotive market, where our products are formulated into automotive resins and coatings and various components, may be affected by technological advances, changing automotive original equipment manufacturer ("OEM") specifications, and global automobile production levels.
For example, demand for our Advanced Polymer Technologies products in the automotive market, where our products are formulated into automotive resins and coatings and various components, may be affected by technological advances, changing automotive original equipment manufacturer ("OEM") specifications, and global automobile production levels.
CTO is essential to our industrial specialties and some of our pavement technologies product lines within our Performance Chemicals segment. Availability of CTO is directly linked to (as it is a co-product of) the production output of kraft mills using softwood, primarily pine trees, as their feedstock, (i.e., pulp).
CTO is a key raw material in our industrial specialties and some of our road technologies product lines within our Performance Chemicals segment. Availability of CTO is directly linked to (as it is a co-product of) the production output of kraft paper mills using softwood, primarily pine trees, as their feedstock, (i.e., pulp).
Certain regulations applicable to our operations, including the OSHA and the TSCA in the U.S. and the REACH directive in Europe, the UK and other countries, prescribe limits restricting exposure to several chemicals used in our operations, including certain forms of formaldehyde, a raw material used in the manufacture of phenolic modified rosin-based ink resins and some lignin-based dispersants.
Certain regulations applicable to our operations, including the OSHA and the TSCA in the U.S. and the REACH directive in Europe, the United Kingdom and other countries, prescribe limits restricting exposure to several chemicals used in our operations, including certain forms of formaldehyde, a raw material used in the manufacture of some lignin-based dispersants.
Operational and Market Risks Adverse conditions in the automotive market have and may continue to negatively impact demand for our automotive carbon products. Sales of our automotive activated carbon products are tied to global internal-combustion-engine ("ICE") and hybrid electric vehicle automobile ("HEV") production levels.
Market Risks Adverse conditions in the automotive market may negatively impact demand for our automotive carbon products. Sales of our automotive activated carbon products are tied to global internal-combustion-engine (“ICE”) and hybrid electric vehicle automobile (“HEV”) production levels.
We have certain large customers in particular businesses, the loss of which could have a material adverse effect on the applicable segment’s sales and, depending on the significance of the loss, our results of operations, financial condition, or cash flows. Sales to Ingevity’s ten largest customers (across both segments) accounted for 30 percent of total sales for 2022.
We have certain large customers in particular businesses, the loss of which could have a material adverse effect on the applicable segment’s sales and, depending on the significance of the loss, our results of operations, financial condition or cash flows. Sales to the Company’s ten largest customers (across all three segments) accounted for 31 percent of total sales for 2023.
Complications with the design or implementation of our new enterprise resource planning (“ERP”) system could adversely impact our business and operations. We are in the process of a complex, multi-year implementation of a new ERP system that is necessary due to the finite life of the existing operating system.
Complications with the design or implementation of our new enterprise resource planning (“ERP”) system could adversely impact our business and operations. We have recently completed a complex, multi-year implementation of a new ERP system that was necessary due to the finite life of the existing operating system.
Demand for our engineered 13 polymers products, where our products are sold into footwear adhesives and structural support, may be affected by consumer discretionary spending and changes in consumer preferences. Additionally, sales of our industrial specialties products may be negatively impacted due to reduced global industrial demand.
Demand for our Advanced Polymer Technologies products which are sold into footwear adhesives and structural support, may be affected by consumer discretionary spending and changes in consumer preferences. Additionally, sales of our industrial specialties products may be negatively impacted due to reduced global industrial demand.
Consumer demand for these alternative-fueled vehicles is expected to continue to increase significantly in future years as certain states and international governments implement limits on the sale of vehicles with ICE with targets to completely phase out sales of such vehicles by as early as 2030.
Consumer demand for these alternative-fueled vehicles is expected to continue to increase significantly in future years as certain states and international governments implement limits on the sale of vehicles with ICE with various time lines to phase out sales of ICE vehicles.
Our customers provide paving services to, for example, the governments of various jurisdictions within North America, South America, Europe, China, Brazil, and India, and we sell pavement marking materials to the governments of various jurisdictions within North America, and revenue either directly or indirectly attributable to such government spending continues to remain a significant portion of our revenues.
While we do not do business directly with governmental agencies, our customers provide paving services to, for example, the governments of various jurisdictions within North America, South America, Europe, China, Brazil and India, and revenue either directly or indirectly attributable to such government spending continues to remain a significant portion of our revenues.
ICE and HEV automotive production in the markets we serve can be affected by macro-economic factors such as interest rates, fuel prices, shifts in vehicle mix (including shifts toward alternative energy vehicles), consumer confidence, employment trends, regulatory and legislative oversight requirements, and trade agreements.
ICE and HEV automotive production in the markets we serve can be affected by macro-economic factors such as interest rates, fuel prices, shifts in vehicle mix (including shifts toward alternative energy vehicles), consumer confidence, employment trends, regulatory and legislative oversight requirements, and trade agreements. The Company’s road technologies product line is heavily dependent on government infrastructure spending.
We have been, and could continue to be, adversely affected by disruptions within our supply chain and transportation network. Our products are transported by truck, rail, barge or ship primarily by third-party providers.
Disruptions within our supply chain have negatively impacted, and could continue to negatively impact, our production, financial condition and results of operations. We have been, and could continue to be, adversely affected by disruptions within our supply chain and transportation network. Our products are transported by truck, rail, barge or ship primarily by third-party providers.
The provision of these services would be at risk if any of the counterparties were to idle or permanently shut down their plant, or if operations were disrupted due to natural or other disaster, or by reason of strikes or other labor disruptions, or if there were a significant contractual dispute between the parties.
For the third-party services that remain, any such services would be at risk if any of the counterparties were to idle or permanently shut down the associated mill or plant, or if operations at the associated mill or plant were disrupted due to natural or other disaster, or by reason of strikes or other labor disruptions, or if there were a significant contractual dispute between the parties.
The Company’s pavement technologies product line is heavily dependent on government infrastructure spending. A significant portion of our customers’ and our revenues in our pavement technologies business is derived from contracts with various foreign and U.S. governmental agencies, and therefore, when government spending is reduced, our customers’ demand for our products is similarly reduced.
A significant portion of our customers’ revenues in our road technologies business is derived from contracts with various foreign and U.S. governmental agencies, and therefore, when government spending is reduced, our customers’ demand for our products is similarly reduced.
Government business is, in general, subject to special risks and challenges, including: delays in funding and uncertainty regarding the allocation of funds to federal, state, and local agencies; delays in spending or reductions in other state and local funding dedicated to transportation projects; other government budgetary constraints, cutbacks, delays or reallocation of government funding; long purchase cycles or approval processes; our customers’ and government agencies’ competitive bidding and qualification requirements; changes in government policies and political agendas; and international conflicts or other military operations that could cause the temporary or permanent diversion of government funding from transportation or other infrastructure projects.
Government business is, in general, subject to special risks and challenges, including: delays in funding and uncertainty regarding the allocation of funds to federal, state and local agencies; delays in spending or reductions in other state and local funding dedicated for transportation projects; other government budgetary constraints, cutbacks, delays or reallocation of government funding; long purchase cycles or approval processes; our customers’ competitive bidding and qualification requirements; changes in government policies and political agendas; and international conflicts or other military operations that could cause the temporary or permanent diversion of government funding from transportation or other infrastructure projects. 16 Certain of the Company’s products are sold into cyclical end-markets, such as the automotive market and the apparel market, which are impacted by changes in consumer and industrial demand.
Future studies on the health effects of chemicals used in our operations, including alkylphenols, such as bisphenol A, which are used in our TOR-based ink resins, may result in additional regulation or new requirements, which might further restrict or prohibit the use of, and exposure to, these chemicals.
Future studies on the health effects of chemicals used in our operations may result in additional regulation or new requirements, which might further restrict or prohibit the use of, and exposure to, these chemicals.
These long-term CTO supply contracts permit periodic adjustment or negotiation of pricing and other terms. There can be no guarantee that pricing, CTO volume, and other terms will not be materially impacted as a result of these adjustments or negotiations.
Some of our CTO supply contracts permit periodic adjustment or negotiation of pricing and other terms that may result in an unfavorable impact on our financial results. There can be no guarantee that pricing, CTO volume, and other terms will not be materially impacted as a result of these adjustments or negotiations.
We are dependent upon third parties for the provision of certain critical operating services, primarily utilities and related services (e.g., steam, compressed air, energy, water, wastewater treatment) at our Covington, Virginia Performance Materials facility and the following Performance Chemicals facilities: Crossett, Arkansas; North Charleston, South Carolina; and Warrington, UK. We have existing long-term contractual arrangements covering these services.
We are dependent upon third parties for the provision of certain critical operating services, primarily utilities and related services (depending on the site, e.g., steam, compressed air, energy, water, wastewater treatment, hydrogen peroxide), at our Covington, Virginia Performance Materials facility, at our Warrington, United Kingdom Advanced Polymer Technologies facility, and at the following Performance Chemicals facilities: Crossett, Arkansas and North Charleston, South Carolina.
Some pulp or paper mills may choose to consume their production of CTO to meet their energy needs or reduce their carbon footprint, rather than sell the CTO to third parties.
Further, some pulp or paper mills may choose to consume their production of CTO to meet their energy needs or reduce their carbon footprint rather than sell the CTO to third parties, further constraining the availability of CTO and increasing inflationary pricing pressure as a result.
If any of our suppliers fail to meet their respective obligations under our supply agreements or we are otherwise unable to procure an adequate supply of CTO, we would be unable to maintain our current level of production and our results of operations could be materially and adversely affected. There are other pressures on the availability of CTO.
If any of our suppliers fail to meet their respective obligations under our supply agreements or we are otherwise unable to procure an adequate supply of CTO, or are unable to pass through significant cost increases to customers, our current level of production could be constrained and our results of operations could be materially and adversely affected.
District Court dismissed the Company’s patent infringement claims against BASF alleging BASF infringed the 844 Patent and invalidated some, but not all, of the claims in our 844 patent, which expired in March 2022.
District Court dismissed the Company’s patent infringement claims against BASF alleging BASF infringed the 844 Patent and invalidated some, but not all, of the claims in our 844 patent, which expired in March 2022 . The Company disagrees with the verdict, including the court’s application of the law and entry of judgment, and intends to appeal.
The costs of transporting our products could be negatively affected by factors outside of our control, including rail service interruptions or rate increases, extreme weather events, tariffs, rising fuel costs, and capacity constraints.
The costs of transporting our products could be negatively affected by factors outside of our control, including rail service interruptions or rate increases, extreme weather events, tariffs, rising fuel costs, and capacity constraints. Recently, the Panama Canal drought and Suez Canal attacks have, and could continue to, adversely impact the reliability and cost of our export shipments to customers.
While we have some redundancies within the facilities that are the sole manufacturer of certain products, we have limited ability to make these products at other facilities. 15 We are dependent upon third parties for the provision of certain critical operating services at several of our facilities.
While we have some redundancies within the facilities that are the sole manufacturer of certain products, we have limited ability to make these products at other facilities .
The jury awarded BASF damages of approximately $28.3 million, which will be trebled under U.S. antitrust law to approximately $85.0 million when the court enters judgment. In addition, BASF may seek pre- and post-judgment interest and attorneys’ fees and costs in amounts that they will have to prove at a future date. Earlier in the Delaware Proceeding, the U.S.
In addition, BASF may seek post-judgment interest and attorneys’ fees and costs in amounts that they will have to prove at a future date. Earlier in the Delaware Proceeding, the U.S.
There can be no assurances that we will be able to integrate these acquisitions in an efficient and cost-effective manner or that these acquisitions or joint ventures will generate the expected value. 16 Acquisitions and other investments may expose us to liability from the target company and/or joint venture partner.
The ability to grow through acquisitions or other investments depends upon our ability to identify, negotiate, finance, complete, and integrate suitable acquisitions or joint venture arrangements. There can be no assurances that we will be able to integrate these acquisitions in an efficient and cost-effective manner or that these acquisitions or joint ventures will generate the expected value .
Our Performance Chemicals segment is highly dependent on CTO as a raw material, which is limited in supply, and may be subject to price increases; changing supply and demand economics for CTO could limit access to sufficient supply and/or cause price increases that we may be unable to pass through to customers.
Supply Chain Risks Our Performance Chemicals segment is highly dependent on CTO as a raw material, which is in limited supply, and has been and may continue to be subject to significant price increases resulting in costs that we may not be able to pass through to customers.
Protracted periods of high volatility or sustained oversupply of petroleum oil may also translate into increased competition from petroleum-based alternatives. In addition, pricing for competing naturally derived oils such as palm or soybean is likely to put further pressure on the pricing of the Company’s products during periods of depressed petroleum prices.
In addition, pricing for competing oleochemicals such as palm or soybean is likely to put further pressure on pricing of the Company’s products during periods of depressed petroleum prices.
The final resolution of these matters could take up to eighteen months and there can be no assurance that the Company will prevail in its attempts to challenge the verdict.
The Company also intends to challenge the U.S. District Court’s previous dismissal of the Company’s patent infringement claims against BASF in the Delaware Proceedings. The final resolution of these matters could take up to twenty-four months and there can be no assurance that the Company will prevail in its attempts to challenge the verdict.
As petroleum oil prices can change rapidly, Ingevity products may be disadvantaged because CTO and BLSS are thinly traded commodities with pricing commonly established for periods ranging from one quarter to one-year periods. Due to this, alternative technologies which compete with product offerings provided by Ingevity may be advantaged from time to time in the marketplace.
As petroleum oil prices can change rapidly, Ingevity products may be disadvantaged due to the fact that CTO is a thinly traded commodity with pricing commonly established for periods ranging from one quarter to one-year periods of time.
International Operations Risks We are exposed to the risks inherent in international sales and operations. In 2022, sales to customers outside of the U.S. made up approximately 47 percent of our total sales, and we sell our products to customers in approximately 80 countries.
In 2023, sales to customers outside of the U.S. made up approximately 37 percent of our total sales, and we sell our products to customers in approximately 75 c ountries.
Additionally, if we do not effectively implement the ERP system as planned or the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be negatively impacted. 17 Supply Chain Risks Disruptions within our supply chain have negatively impacted and could continue to negatively impact, our production, financial condition, and results of operations.
If the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be negatively impacted . International Operations Risks We are exposed to the risks inherent in international sales and operations.
For example, at times we have been unable to obtain our full requirements of hydrogen peroxide for our Warrington UK facility and we have limited ability to store quantities onsite. we may be unable to procure the quantities of raw materials we need which could negatively impact our operations or we may be unable to pass through price increases to our customers which could negatively impact our financial results.
The Company may be unable to procure the quantities of raw materials it needs which could negatively impact our operations or we may be unable to pass through price increases to our customers which could negatively impact our financial results.
We are currently involved in several legal actions relative to the intellectual property associated with the 844 Patent.
We are currently involved in several legal actions relative to the intellectual property associated with the 844 Patent. On September 15, 2021, a jury in the lawsuit filed by the Company against BASF Corporation for patent infringement in the U.S.
We purchase a variety of other raw materials from third parties for our manufacturing operations, including, but not limited to, hardwood sawdust, phosphoric acid, ethylene amines, black liquor, maleic/fumaric acid, hydrogen peroxide, cyclohexanone, pentaerythritol, calcium carbonates, pigments, glass beads, acrylic emulsions, and resins.
The Company purchases a variety of other raw materials from third parties for its manufacturing operations, including, but not limited to, hardwood sawdust, phosphoric acid, ethylene amines, black liquor, maleic/fumaric acid, hydrogen peroxide, cyclohexanone, and ethoxylates. Each raw material is subject to its own supply and demand dynamics which may, at times, limit availability and/or cause price volatility.
The inability to pass through any increases in our cost of CTO to our customers in the form of price increases or other adjustments will result in a negative impact on our results of operations.
The impacts of RED II coupled with a reduction in demand in industrial end markets have negatively impacted our ability to pass through any increases in our cost of CTO to our customers, with a resulting negative impact on our results of operations.
CTO-based biofuel has been deemed to meet the EU’s Renewable Energy Directive, second phase (“RED II”) biofuel sustainability criteria. As a consequence of RED II, there has been a significant increase in demand for CTO and its derivatives, resulting in significantly increasing prices.
As a consequence of RED II and related government incentives, there has been a significant increase in demand for CTO and its derivatives resulting in exponential price increases for CTO and its derivatives.
On September 15, 2021, a jury in the lawsuit filed by the Company against BASF Corporation for patent infringement in the United States District Court for the District of Delaware (the “Delaware Proceeding”) issued a verdict in favor of BASF on certain counterclaims filed by BASF in the Delaware Proceeding.
District Court for the District of Delaware (the “Delaware Proceeding”) issued a verdict in favor of BASF on certain counterclaims filed by BASF in the Delaware Proceeding. The jury awarded BASF damages of approximately $28.3 million, which will be trebled under U.S. antitrust law to approximately $85.0 million when the court enters judgment.
In addition, the CBA at our Wickliffe, Kentucky Performance Materials facility with the USW, on behalf of its affiliated Local Union 0775, expired on February 1, 2023. The parties began contract renewal negotiations in January 2023. At both facilities, the parties continue to operate under the applicable expired CBA while negotiations are pending.
Also, many of our production employees are governed by collective bargaining agreements (“CBAs”). The CBA at our Warrington, United Kingdom Advanced Polymer Technologies manufacturing facility with GMB Union expired on January 15, 2024. The parties began contract renewal negotiations during the first quarter of 2024 and continue to operate under the expired CBA while negotiations are pending.
Removed
For example, during the first half of 2020, the COVID-19 pandemic led to a significant reduction in vehicle production, and vehicle sales were negatively impacted by government shutdown orders and stay-at-home directives.
Added
Operational Risks There may be negative impacts to our business arising out of the closure of our plant in DeRidder, Louisiana. On November 1, 2023, we announced our plan to close our plant in DeRidder, Louisiana (the “DeRidder Plant”).
Removed
Additionally, vehicle production inputs, such as the microchip shortages during 2021 and 2022, were further impacted by the complexity of the global automotive supply chain and have resulted in reduced vehicle production and, as a result, vehicle sales, and our operating results have been negatively impacted. We currently anticipate this negative impact to lessen during 2023.
Added
The anticipated timing, charges, and costs of the closure of the DeRidder Plant could materially differ from our estimates if the plant closure results in adverse legal or regulatory actions, if personnel required to effect the shutdown become unavailable, or we are affected by other factors not currently contemplated.
Removed
Certain of the Company’s products are sold into cyclical end-markets, such as the automotive market and the apparel market, which are impacted by changes in consumer and industrial demand.
Added
As a result of the Deridder Plant closing and reduced CTO refining capacity, we may be obligated, under an existing CTO supply contract, to purchase CTO volumes through 2025 at amounts in excess of needed CTO volumes. We intend to manage our CTO inventories by reselling excess volumes in the open market.
Removed
The COVID-19 pandemic has had and may continue to have, a negative impact on our business, financial condition, results of operations, and cash flows. The COVID-19 pandemic continues to impact our operations and financial results.
Added
Depending on the then current market price for CTO at the time of such sales, we may have to sell the CTO at a loss when our contracted price exceeds market, which may adversely affect our financial condition and results of operations.
Removed
Our facilities, as well as the operations of our suppliers, customers, and third-party sales representatives and distributors, have been, and continue to be, disrupted by governmental and private sector responses to the COVID-19 pandemic, including, without limitation, government shutdown requirements, business shutdowns, work-from-home orders and social distancing protocols, travel or health-related restrictions, quarantines, self-isolations, and disruptions to transportation channels.
Added
We are dependent upon third parties for the provision of certain critical operating services at several of our facilities.
Removed
These types of disruptions, or an outbreak among the employees in any of our facilities, could cause significant interruptions to, or temporary closures of, our operations and could materially adversely affect our ability to adequately staff and maintain our operations. Working remotely may eventually lead to inefficiencies, as well as technology and security risks.
Added
The third party providers of critical and non-critical services at our location in North Charleston, South Carolina have announced the cessation of these services. The services in North Charleston are currently being wound down, with only certain water supply and treatment services to be transitioned in 2024.
Removed
Additionally, we are uncertain if the extended period during which our employees are unable to travel to our facilities or those of our customers and suppliers may negatively impact our business.
Added
We have incurred and expect to incur significant costs to provide these services ourselves or obtain these services from other third parties. While we are executing our plans to minimize disruption to our business, there is no guarantee that we will be able to replace these services on a timely and cost-effective basis.
Removed
Disruptions to the operations of our suppliers have at times, and may again, negatively impact our ability to purchase goods and services for our business at efficient prices and in sufficient amounts.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest change(2) Certain manufacturing assets are subject to a finance lease with the Development Authority of Burke County (the county in which Waynesboro, Georgia is located). (3) Certain manufacturing assets are subject to a finance lease. (4) Portions of the manufacturing operations are on leased land.
Biggest change(2) We expect to complete the closure of our manufacturing facility in DeRidder, Louisiana in 2024. (3) Certain manufacturing assets are subject to a finance lease with the Development Authority of Burke County (the county in which Waynesboro, Georgia is located). (4) Certain manufacturing assets are subject to a finance lease.
Location Own / Lease Functional Use North Charleston, South Carolina Own / Lease (1) Corporate Headquarters; Application Labs; Performance Chemicals: Manufacturing Covington, Virginia Lease Performance Materials: Manufacturing Crossett, Arkansas Lease Performance Chemicals: Manufacturing DeRidder, Louisiana Own Performance Chemicals: Manufacturing Waynesboro, Georgia Own (2) Performance Materials: Manufacturing Shanghai, People's Republic of China Lease Regional Headquarters; Application Lab Wickliffe, Kentucky Own (3) Performance Materials: Manufacturing Changshu, People’s Republic of China Lease Performance Materials: Manufacturing Warrington, United Kingdom Lease Performance Chemicals: Manufacturing, Application Lab Zhuhai, People’s Republic of China Lease Performance Materials: Manufacturing, Application Lab Greenville, Alabama Lease Performance Chemicals: Manufacturing Dayton, Nevada Own Performance Chemicals: Manufacturing Childress, Texas Own (4) Performance Chemicals: Manufacturing Marion, Indiana Own Performance Chemicals: Manufacturing ________________________ (1) Portions of the manufacturing operations are on leased land and our corporate headquarters building is leased.
Location Own / Lease Functional Use North Charleston, South Carolina Own / Lease (1) Corporate Headquarters; Application Labs; Performance Chemicals: Manufacturing Covington, Virginia Lease Performance Materials: Manufacturing Crossett, Arkansas Lease Performance Chemicals: Manufacturing DeRidder, Louisiana Own (2) Performance Chemicals: Manufacturing Waynesboro, Georgia Own (3) Performance Materials: Manufacturing Shanghai, People's Republic of China Lease Regional Headquarters; Application Lab Wickliffe, Kentucky Own (4) Performance Materials: Manufacturing Changshu, People’s Republic of China Lease Performance Materials: Manufacturing Warrington, United Kingdom Lease Advanced Polymer Technologies: Manufacturing, Application Lab Zhuhai, People’s Republic of China Lease Performance Materials: Manufacturing, Application Lab Greenville, Alabama Lease Performance Chemicals: Manufacturing Dayton, Nevada Own Performance Chemicals: Manufacturing Childress, Texas Own (5) Performance Chemicals: Manufacturing Marion, Indiana Own Performance Chemicals: Manufacturing ________________________ (1) Portions of the manufacturing operations are on leased land and our corporate headquarters building is leased.
Added
(5) Portions of the manufacturing operations are on leased land.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest change(2009-2015) Rich White 60 Senior Vice President, Performance Chemicals, and President, Industrial Specialties and Pavement Technologies (2022-present); Vice President, Industrial Specialties (2019-2022); VP Global Sales at DuPont Nutrition & Biosciences (2017-2019); Prior to that role, he held various senior-level positions of increasing responsibility with FMC from 1998 through 2017.
Biggest change(2009-2015) Rich White 61 Senior Vice President & President of Performance Chemicals (2022-present); Vice President, Industrial Specialties (2019-2022); VP Global Sales at DuPont Nutrition & Biosciences (2017-2019); Prior to that role, he held various senior-level positions of increasing responsibility with FMC from 1998 through 2017.
All officers are elected to hold office for one year or until their successors are elected and qualified. No family relationships exist among any of our executive officers or directors, and there are no arrangements or understandings between any of the above-listed officers and any other person pursuant to which they serve as an officer. 24 PART II
All officers are elected to hold office for one year or until their successors are elected and qualified. No family relationships exist among any of our executive officers or directors, and there are no arrangements or understandings between any of the above-listed officers and any other person pursuant to which they serve as an officer. 25 PART II
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 23 INFORMATION ABOUT OUR EXECUTIVE OFFICERS The executive officers of Ingevity Corporation, the offices they currently hold, their business experience over the past five years and their ages are as follows: Name Age (1) Present Position and Business Experience John C.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 24 INFORMATION ABOUT OUR EXECUTIVE OFFICERS The executive officers of Ingevity Corporation, the offices they currently hold, their business experience over the past five years and their ages are as follows: Name Age (1) Present Position and Business Experience John C.
Christine Stunyo 44 Senior Vice President, Chief Human Resources Officer (2022 - present); Senior Vice President Human Resources at Host Hotels & Resorts (2020-2022); Senior Vice President, Global Human Resources at US Pharmacopeia (2019-2020), Vice President, Global Human Resources at US Pharmacopeia (2015-2018); Prior to that role, she held various senior-level positions of increasing responsibility with Capital One and PepsiCo from 2005 through 2015. _______________ (1) As of December 31, 2022.
Christine Stunyo 45 Senior Vice President, Chief Human Resources Officer (2022 - present); Senior Vice President Human Resources at Host Hotels & Resorts (2020-2022); Senior Vice President, Global Human Resources at US Pharmacopeia (2019-2020), Vice President, Global Human Resources at US Pharmacopeia (2015-2018); Prior to that role, she held various senior-level positions of increasing responsibility with Capital One and PepsiCo from 2005 through 2015. _______________ (1) As of December 31, 2023.
Fortson 55 President and Chief Executive Officer (2020-present); Executive Vice President, Chief Financial Officer & Treasurer (2015-2020); Vice President, Chief Financial Officer and Treasurer of AAR Corporation (2013-2015); Managing Director in the Investment Banking Department of Bank of America Merrill Lynch (2007-2013) Mary Dean Hall 65 Executive Vice President and Chief Financial Officer (2021-present); Senior Vice President, Chief Financial Officer and Treasurer at Quaker Houghton (2015-2021); Vice President and Treasurer at Eastman Chemical Company (2009-2015); Prior to that role, she held various senior-level financial positions of increasing responsibility with Eastman from 1995 through 2009, including Treasurer, Vice President and Controller, and Vice President, Finance.
Fortson 56 President and Chief Executive Officer (2020-present); Executive Vice President, Chief Financial Officer & Treasurer (2015-2020); Vice President, Chief Financial Officer and Treasurer of AAR Corporation (2013-2015); Managing Director in the Investment Banking Department of Bank of America Merrill Lynch (2007-2013) Mary Dean Hall 66 Executive Vice President and Chief Financial Officer (2021-present); Senior Vice President, Chief Financial Officer and Treasurer at Quaker Houghton (2015-2021); Vice President and Treasurer at Eastman Chemical Company (2009-2015); Prior to that role, she held various senior-level financial positions of increasing responsibility with Eastman from 1995 through 2009, including Treasurer, Vice President and Controller, and Vice President, Finance.
S. Edward Woodcock 57 Executive Vice President & President of Performance Materials (2015-present); Vice President of MeadWestvaco's Carbon Technologies business (2010-2015) Stacy L. Cozad 52 Executive Vice President, General Counsel & Secretary (2021-present); Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary at Spirit AeroSystems Holdings, Inc.
S. Edward Woodcock 58 Executive Vice President & President of Performance Materials (2015-present); Vice President of MeadWestvaco's Carbon Technologies business (2010-2015) Stacy L. Cozad 53 Executive Vice President, General Counsel & Secretary (2021-present); Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary at Spirit AeroSystems Holdings, Inc.
Steve Hulme 54 Senior Vice President, Performance Chemicals, and President, Engineered Polymers (2022-present); Vice President, Engineered Polymers (2020-2022); General Manager at Maysta International Ltd (2018-2020); Prior to that role, he held various senior-level positions of increasing responsibility with Evonik and Air Products and Chemicals from 2010 through 2018.
Steve Hulme 55 Senior Vice President & President of Advanced Polymer Technologies (2022-present); Vice President, Engineered Polymers (2020-2022); General Manager at Maysta International Ltd (2018-2020); Prior to that role, he held various senior-level positions of increasing responsibility with Evonik and Air Products and Chemicals from 2010 through 2018.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+2 added−1 removed3 unchanged
Biggest changeThe graph assumes the investment of $100 in each of Ingevity's common stock, the S&P MidCap 400 Index, the S&P Chemicals 600 Index, and the DJ U.S.
Biggest changeThe graph assumes the investment of $100 in each of Ingevity's common stock, the S&P SmallCap 600 Index, S&P MidCap 400 Index, the S&P Chemicals 600 Index, and the DJ U.S. Specialty Chemicals Index, respectively, as of market close on December 31, 2018, and that all dividends, if any, were reinvested.
Stock Performance Graph The following table and graph present the cumulative total stockholder return for Ingevity's common stock compared with the Standard & Poor's (S&P) MidCap 400 Index, the Standard & Poor's (S&P) Chemicals 600 Index, and the Dow Jones (DJ) U.S. Specialty Chemicals Index for the five-year period ended December 31, 2022.
Stock Performance Graph The following table and graph present the cumulative total stockholder return for Ingevity's common stock compared with the Standard & Poor's (S&P) SmallCap 600 Index, S&P MidCap 400 Index, the S&P Chemicals 600 Index, and the Dow Jones (DJ) U.S. Specialty Chemicals Index for the five-year period ended December 31, 2023.
("NYSE") under the symbol "NGVT." There were approximately 4,600 record holders of our common stock as of February 20, 2023 . Unregistered Sales of Equity Securities Not Applicable. Issuer Purchases of Equity Securities The following table summarizes information with respect to the repurchase of our common stock during the three months ended December 31, 2022.
("NYSE") under the symbol "NGVT." There were approximately 4,400 record holders of our common stock as of February 14, 2024 . Unregistered Sales of Equity Securities Not Applicable. Issuer Purchases of Equity Securities The following table summarizes information with respect to the repurchase of our common stock during the three months ended December 31, 2023.
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1) October 1-31, 2022 — $ — — $ 450,648,949 November 1-30, 2022 — $ — — $ 450,648,949 December 1-31, 2022 85,257 $ 69.92 85,257 $ 444,688,057 Total 85,257 85,257 _______________ (1) On July 25, 2022, our Board of Directors authorized the repurchase of up to $500.0 million of our common stock and rescinded the prior outstanding repurchase authorization with respect to the shares that remained unused under the prior authorization.
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1) October 1-31, 2023 — $ — — $ 353,384,633 November 1-30, 2023 — $ — — $ 353,384,633 December 1-31, 2023 — $ — — $ 353,384,633 Total — — _______________ (1) On July 25, 2022, our Board of Directors authorized the repurchase of up to $500.0 million of our common stock and rescinded the prior outstanding repurchase authorization with respect to the shares that remained unused under the prior authorization.
Specialty Chemicals Index $ 100.00 $ 93.16 $ 104.57 $ 120.47 $ 149.13 $ 128.81 The graph and related information set forth above are not deemed to be "filed" with the SEC for purposes of Section 18 of the Exchange Act or incorporated by reference into any future filing made by us with the SEC, except to the extent that we specifically incorporate it by reference into any such filing.
Specialty Chemicals Index $ 100.00 $ 112.25 $ 129.32 $ 160.08 $ 138.26 $ 140.21 The graph and related information set forth above are not deemed to be "filed" with the SEC for purposes of Section 18 of the Exchange Act or incorporated by reference into any future filing made by us with the SEC, except to the extent that we specifically incorporate it by reference into any such filing.
Removed
Specialty Chemicals Index, respectively, as of market close on December 31, 2017, and that all dividends, if any, were reinvested. 25 December 31, 2017 2018 2019 2020 2021 2022 Ingevity Corporation $ 100.00 $ 118.76 $ 124.00 $ 107.46 $ 101.75 $ 99.96 S&P MidCap 400 Index $ 100.00 $ 88.90 $ 112.17 $ 127.48 $ 159.01 $ 138.18 S&P Chemicals 600 Index $ 100.00 $ 84.94 $ 98.60 $ 116.95 $ 146.60 $ 125.47 Dow Jones U.S.
Added
Previously, Ingevity was included in the S&P MidCap 400 Index and was moved to the S&P SmallCap 600 Index on June 16, 2023, so we updated our comparative broad market index accordingly for the fiscal year ended December 31, 2023.
Added
In light of our market capitalization, the S&P SmallCap 600 Index is a more comparable broad market index with which to compare Ingevity's common stock. 26 December 31, 2018 2019 2020 2021 2022 2023 Ingevity Corporation $ 100.00 $ 104.41 $ 90.49 $ 85.67 $ 84.17 $ 56.42 S&P Small Cap 600 Index $ 100.00 $ 122.74 $ 136.53 $ 173.04 $ 145.10 $ 168.23 S&P MidCap 400 Index $ 100.00 $ 126.17 $ 143.39 $ 178.85 $ 155.42 $ 180.90 S&P Chemicals 600 Index $ 100.00 $ 116.09 $ 137.69 $ 172.60 $ 147.72 $ 156.99 Dow Jones U.S.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

85 edited+55 added−17 removed42 unchanged
Biggest changeA reconciliation of Adjusted EBITDA to net income is set forth within this section. 33 Reconciliation of Net Income to Adjusted EBITDA Years Ended December 31, In millions 2022 2021 2020 Net income (loss) (GAAP) $ 211.6 $ 118.1 $ 181.4 Interest expense 61.8 51.7 47.1 Interest income (7.5) (4.0) (4.9) Provision (benefit) for income taxes 58.0 44.7 53.7 Depreciation and amortization - Performance Materials 36.1 36.8 31.2 Depreciation and amortization - Performance Chemicals 72.7 73.1 69.0 Pension and postretirement settlement and curtailment charges (income), net (1) 0.2 — 0.1 Restructuring and other (income) charges, net 13.8 16.2 18.5 Acquisition and other-related costs (2) 5.9 0.6 1.8 Litigation verdict charge (3) — 85.0 — Adjusted EBITDA (Non-GAAP) $ 452.6 $ 422.2 $ 397.9 _______________ (1) For all years, the charges relate to the Performance Materials segment.
Biggest changeReconciliation of Net Income to Adjusted EBITDA Years Ended December 31, In millions 2023 2022 2021 Net income (loss) (GAAP) $ (5.4) $ 211.6 $ 118.1 Interest expense 93.3 61.8 51.7 Interest income (6.3) (7.5) (4.0) Provision (benefit) for income taxes (4.7) 58.0 44.7 Depreciation and amortization - Performance Materials 38.3 36.1 36.8 Depreciation and amortization - Performance Chemicals 53.2 43.1 40.0 Depreciation and amortization - Advanced Polymer Technologies 31.3 29.6 33.1 Restructuring and other (income) charges, net (1) 189.9 13.8 16.2 Acquisition and other-related costs (2) 4.5 5.9 0.6 Loss on CTO resales (3) 22.0 — — Gain on sale of strategic investment (4) (19.3) — — Litigation verdict charge (5) — — 85.0 Pension and postretirement settlement and curtailment charges (income), net (6) — 0.2 — Adjusted EBITDA (Non-GAAP) $ 396.8 $ 452.6 $ 422.2 _______________ (1) We regularly perform strategic reviews and assess the return on our operations, which sometimes results in a plan to restructure the business.
Other Potential Liquidity Needs Share Repurchases On July 25, 2022, our Board of Directors authorized the repurchase of up to $500.0 million of our common stock (the "2022 Authorization") and rescinded the prior outstanding repurchase authorization with respect to the shares that remained unused under the prior authorization.
Other Potential Liquidity Needs Share Repurchases On July 25, 2022, our Board of Directors authorized the repurchase of up to $500.0 million of our common stock and rescinded the prior outstanding repurchase authorization with respect to the shares that remained unused under the prior authorization.
If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by the long-lived asset, or the appropriate grouping of assets, is compared to carrying value to determine whether an impairment exists. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available.
If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by the long-lived asset, or the appropriate grouping of assets, is compared to carrying value to determine whether an impairment exists. 41 If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available.
Our pension and postretirement settlement and curtailment charges (income) are related to the acceleration of prior service costs, as a result of a reduction in the number of participants within the Union Hourly defined benefit pension plan. These are excluded from our segment results because we consider these costs to be outside our operational performance.
(6) Our pension and postretirement settlement and curtailment charges (income) are related to the acceleration of prior service costs, as a result of a reduction in the number of participants within the Union Hourly defined benefit pension plan. These are excluded from our segment results because we consider these costs to be outside our operational performance.
Sales returns and allowances are not a normal practice in the industry and are not significant. Certain customers may 38 receive cash-based incentives, including discounts and volume rebates, which are accounted for as variable consideration and included within Net sales. Shipping and handling fees billed to customers are included in Net sales.
Sales returns and allowances are not a normal practice in the industry and are not significant. Certain customers may receive cash-based incentives, including discounts and volume rebates, which are accounted for as variable consideration and included within Net sales. Shipping and handling fees billed to customers are included in Net sales.
Selection of the appropriate reporting unit is based on the level at which discrete financial information is available and reviewed by business management post-integration. Operating results of the acquired entity are reflected within the Consolidated Financial Statements from the date of acquisition.
Selection of the appropriate reporting unit is based on the level at which discrete financial information is 42 available and reviewed by business management post-integration. Operating results of the acquired entity are reflected within the Consolidated Financial Statements from the date of acquisition.
This includes, when necessary, assistance with the determination of lives and valuation of 39 tangible property, plant, and equipment and identifiable intangibles, assisting management in determining the fair value of obligations associated with employee-related liabilities and assisting management in assessing obligations associated with legal and environmental claims.
This includes, when necessary, assistance with the determination of lives and valuation of tangible property, plant, and equipment and identifiable intangibles, assisting management in determining the fair value of obligations associated with employee-related liabilities and assisting management in assessing obligations associated with legal and environmental claims.
Investors are cautioned that the forward-looking statements contained in this section and other parts of this Annual Report on Form 10-K involve both risk and uncertainty. Several important factors could cause actual results to differ materially from those anticipated by these statements. 26 Many of these statements are macroeconomic in nature and are, therefore, beyond the control of management.
Investors are cautioned that the forward-looking statements contained in this section and other parts of this Annual Report on Form 10-K involve both risk and 27 uncertainty. Several important factors could cause actual results to differ materially from those anticipated by these statements. Many of these statements are macroeconomic in nature and are, therefore, beyond the control of management.
Gross profit Year Ended December 31, 2022 vs. 2021 Gross profit increase of $57.3 million was driven by favorable pricing and sales composition (mix) of $291.5 million and favorable sales volume of $6.3 million, partially offset by increased manufacturing costs of $238.0 million primarily due to raw material and energy cost inflationary pressure, and unfavorable foreign exchange impacts of $2.5 million.
Year Ended December 31, 2022 vs. 2021 Gross profit increase of $57.3 million was driven by favorable pricing and sales composition (mix) of $291.5 million, and favorable sales volume of $6.3 million, partially offset by increased manufacturing costs of $238.0 million primarily due to raw material and energy cost inflationary pressure, and unfavorable foreign currency exchange of $2.5 million.
Segment EBITDA is defined as segment revenue less segment operating expenses (segment operating expenses consist of costs of sales, selling, general and administrative expenses, other (income) expense, net, excluding depreciation and amortization).
Segment EBITDA is defined as segment net sales less segment operating expenses (segment operating expenses consist of costs of sales, selling, general and administrative expenses, other (income) expense, net, excluding depreciation and amortization).
Further, in the future, other items with similar characteristics to those currently included within adjusted EBITDA, that have a similar impact on the comparability of periods, and which are not known at this time, may exist and impact adjusted EBITDA. 35 Liquidity and Capital Resources The primary source of liquidity for our business is the cash flow provided by operating activities.
Further, in the future, other items with similar characteristics to those currently included in adjusted EBITDA, that have a similar impact on comparability of periods, and which are not known at this time, may exist and impact adjusted EBITDA. 38 Liquidity and Capital Resources The primary source of liquidity for our business is the cash flow provided by operating activities.
We conduct a required annual review of goodwill for potential impairment at October 1, or sooner if events or changes in circumstances indicate that the fair value of a reporting unit is below its carrying value. Our reporting units are our operating segments, i.e., Performance Chemicals and Performance Materials.
We conduct a required annual review of goodwill for potential impairment at October 1, or sooner if events or changes in circumstances indicate that the fair value of a reporting unit is below its carrying value. Our reporting units are our operating segments, i.e., Performance Materials, Performance Chemicals and Advanced Polymer Technologies.
The build in trade working capital was due primarily to higher end of year accounts receivable on higher sales and higher inventory value due to inflation experienced during 2021 compared to 2020.
The build in trade working capital was due primarily to higher end of year accounts receivable on higher sales and higher inventory value due to inflation experienced during 2022 compared to 2021.
The cash and cash equivalents balance at December 31, 2022, includ ed $71.7 million held by our foreign subsidiaries. Cash and earnings of our foreign subsidiaries are generally used to finance our foreign operations and their capital expenditures. We believe that our foreign holdings of cash will not have a material adverse impact on our U.S. liquidity.
The cash and cash equivalents balance at December 31, 2023, includ ed $90.7 million held by our foreign subsidiaries. Cash and earnings of our foreign subsidiaries are generally used to finance our foreign operations and their capital expenditures. We believe that our foreign holdings of cash will not have a material adverse impact on our U.S. liquidity.
Research and technical expenses Years Ended December 31, 2022, 2021, and 2020 Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, totaling 1.8 percent of sales in the year ended December 31, 2022 compared to 1.9 percent in the years ended December 31, 2021 and 2020, respectively.
Research and technical expenses Years Ended December 31, 2023, 2022, and 2021 Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, totaling 1.9 percent of sales in the year ended December 31, 2023, compared to 1.8 percent in the year ended December 31, 2022, and 1.9 percent in the year ended December 31, 2021.
Performance Chemicals Performance Summary Our Performance Chemicals segment saw strong revenue growth versus the prior year on continued price improvement and favorable mix upgrade to higher margin products. These price increases were necessary to keep pace with the inflationary increases related to energy, raw material, and logistic costs.
Performance Chemicals Performance Summary Our Performance Chemicals segment grew revenue versus the prior year on continued price improvement and favorable mix upgrade to higher margin products. These price increases were necessary to keep pace with the inflationary increases related to raw material, energy, and logistic costs.
For the twelve months ended December 31, 2022, all charges related to the integration of Ozark Materials into our Performance Chemicals segment. For the twelve months ended December 31 2021 and 2020, all charges incurred were in connection with the Caprolactone Acquisition. See Note 16 to the Consolidated Financial Statements included within Part II.
For the twelve months ended December 31, 2023 and 2022, all charges related to the integration of Ozark Materials into our Performance Chemicals segment. For the twelve months ended December 31, 2021, all charges incurred were in connection with the Caprolactone acquisition into our Advanced Polymer Technologies segment. See Note 16 to the Consolidated Financial Statements included within Part II.
Provision (benefit) for income taxes Years Ended December 31, 2022, 2021, and 2020 For the years ended December 31, 2022, 2021, and 2020, our effective tax rate was 21.5 percent, 27.5 percent, and 22.8 percent respectively. An explanation of the change in the effective tax rate is presented in Note 17 to the Consolidated Financial Statements included within Part II.
Provision (benefit) for income taxes Years Ended December 31, 2023, 2022, and 2021 For the years ended December 31, 2023, 2022, and 2021, our effective tax rate was 46.5 percent, 21.5 percent, and 27.5 percent respectively. An explanation of the change in the effective tax rate is presented in Note 17 to the Consolidated Financial Statements included within Part II.
The increase in 2022 was driven by a volume increase of $28.6 million (six percent) and favorable pricing and sales composition (mix) of $14.9 million (three percent), partially offset by unfavorable foreign currency exchange impacts of $11.8 million. Segment EBITDA.
The increase in 2022 was driven by a volume increase of $28.6 million (six percent) and favorable pricing of $14.9 million (three percent), partially offset by unfavorable foreign currency exchange impacts of $11.8 million (two percent). Segment EBITDA.
Cash flow from operations was further reduced by an increase in cash interest paid of $7.3 million due to the rising interest rates during 2022 when compared to 2021 as well as $1.1 million of additional tax payments.
Cash flow from operations was further reduced by an increase in cash interest paid of $7.3 million primarily due to rising interest rates during 2022 compared to 2021, as well as an increase in cash tax payments of $1.1 million.
In connection with such transactions, or to fund other anticipated uses of cash, we may modify our existing revolving credit facility, redeem all or part of our outstanding senior notes, seek additional debt financing, issue equity securities, or some combination thereof. Cash and cash equivalents totaled $76.7 million at December 31, 2022.
In connection with such transactions, or to fund other anticipated uses of cash, we may modify our existing revolving credit facility, redeem all or part of our outstanding senior notes, seek additional debt financing, issue equity securities, or some combination thereof. Cash and cash equivalents totaled $95.9 million at December 31, 2023.
We expect our cash flow provided by operations combined with cash on hand and available capacity under our revolving credit facility to be sufficient to fund our planned operations and meet our interest and other contractual obligations for at least the next twelve months. As of December 31, 2022, our undrawn capacity under our revolving credit facility was $169.7 million.
We expect our cash flow provided by operations combined with cash on hand and available capacity under our revolving credit facility to be sufficient to fund our planned operations and meet our interest and other contractual obligations for at least the next twelve months. As of December 31, 2023, our undrawn capacity under our revolving credit facility was $259.5 million.
Performance Materials Performance Summary Our Performance Materials segment experienced solid automotive volume growth from improved semiconductor chip availability and China automobile production stimulus. Additionally, the segment also recognized volume improvement in process purification products and we were able to increase prices to capture more of the value from our highly differentiated carbon.
Performance Materials Performance Summary Our Performance Materials segment experienced solid automotive volume growth from improved semiconductor chip availability and China automobile production stimulus. The segment also recognized volume improvement in food, water, beverage, and chemical purification products and we were able to increase prices to capture more of the value from our highly differentiated carbon.
Item 8 of this Form 10-K. 30 Segment Operating Results In addition to the information discussed above, the following sections discuss the results of operations for each of Ingevity's segments. Our segments are (i) Performance Materials and (ii) Performance Chemicals.
Item 8 of this Form 10-K. 33 Segment Operating Results In addition to the information discussed above, the following sections discuss the results of operations for each of Ingevity's segments. Our segments are (i) Performance Materials, (ii) Performance Chemicals, and (iii) Advanced Polymer Technologies.
Cash provided by (used in) operating activities for 2022 was driven by higher cash earnings of $43.8 million offset by a net increase in overall working capital of $15.3 million which includes an increase in trade working capital (accounts receivable, inventory, and accounts payable) of $8.3 million.
Cash provided by (used in) operating activities for 2022 was driven by higher cash earnings of $41.4 million offset by a net increase in overall working capital of $12.9 million which includes an increase in trade working capital (accounts receivable, inventory, and accounts payable) of $8.3 million.
Pavement Technologies sales increased by 23.5 percent due primarily to improved volumes and price increases. Volume growth was driven by technology adoption and highway funding in the United States, as well as the acquisition of Ozark Materials.
Road Technologies sales increased by 53.3 percent due primarily to improved volumes and price increases. Volume growth was driven by technology adoption and highway funding in the United States, as well as the acquisition of Ozark Materials.
Also, during the year ended December 31, 2022, we acquired Ozark Materials (refer to Note 16 within the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information) and we entered into multiple strategic investments (refer to Note 5 within the Consolidated Financial Statements included within Part II.
Item 8 of this Form 10-K for more information). Also, during the year ended December 31, 2022, we acquired Ozark Materials (refer to Note 16 to the Consolidated Financial Statements included within Part II.
Our Consolidated Financial Statements are prepared in conformity with GAAP. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. We have reviewed these accounting policies, identifying those that we believe to be critical to the preparation and understanding of our financial statements.
The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. We have reviewed these accounting policies, identifying those that we believe to be critical to the preparation and understanding of our financial statements.
In millions Years Ended December 31, 2022 2021 2020 Total Performance Materials - Net sales $ 548.5 $ 516.8 $ 510.0 Segment EBITDA 252.2 249.4 249.2 Net Sales Comparison of Years Ended December 31, 2022, 2021, and 2020 Change vs. prior year In millions Prior year Net sales Volume Price/Mix Currency effect Current year Net sales Year Ended December 31, 2022 vs 2021 $ 516.8 28.6 14.9 (11.8) $ 548.5 Year Ended December 31, 2021 vs 2020 $ 510.0 (13.0) 12.6 7.2 $ 516.8 Year Ended December 31, 2022 vs. 2021 Segment net sales.
In millions Years Ended December 31, 2023 2022 2021 Total Performance Materials - Net sales $ 586.0 $ 548.5 $ 516.8 Segment EBITDA 286.6 252.2 249.4 Net Sales Comparison of Years Ended December 31, 2023, 2022, and 2021 Change vs. prior year In millions Prior year Net sales Volume Price/Mix Currency effect Current year Net sales Year Ended December 31, 2023 vs 2022 $ 548.5 17.3 32.2 (12.0) $ 586.0 Year Ended December 31, 2022 vs 2021 $ 516.8 28.6 14.9 (11.8) $ 548.5 Year Ended December 31, 2023 vs. 2022 Segment net sales.
We have no material commitments associated with these projected capital expenditures as of December 31, 2022. 36 Cash flow comparison of Years Ended December 31, 2022, 2021, and 2020 Years Ended December 31, In millions 2022 2021 2020 Net cash provided by (used in) operating activities $ 313.1 $ 293.0 $ 352.4 Net cash provided by (used in) investing activities (553.9) (140.6) (110.6) Net cash provided by (used in) financing activities 48.1 (133.1) (50.2) Cash flows provided by (used in) operating activities Cash flows provided by (used in) operating activities, which consists of net income (loss) adjusted for non-cash items including the cash impact from changes in operating assets and liabilities (i.e., working capital), totaled $313.1 million for the year ended December 31, 2022.
We have no material commitments associated with these projected capital expenditures as of December 31, 2023. 39 Cash flow comparison of Years Ended December 31, 2023, 2022, and 2021 Years Ended December 31, In millions 2023 2022 2021 Net cash provided by (used in) operating activities $ 205.1 $ 313.4 $ 293.3 Net cash provided by (used in) investing activities (77.3) (551.9) (138.6) Net cash provided by (used in) financing activities (99.9) 48.1 (133.1) Cash flows provided by (used in) operating activities Cash provided by (used in) operating activities, which consists of net income (loss) adjusted for non-cash items including the cash impact from changes in operating assets and liabilities (i.e., working capital), totaled $205.1 million for the year ended December 31, 2023.
This non-GAAP measure is not intended to replace the presentation of financial results in accordance with GAAP and investors should consider the limitations associated with these non-GAAP measures, including the potential lack of comparability of these measures from one company to another.
This non-GAAP measure is not intended to replace the presentation of financial results in accordance with GAAP and investors should consider the limitations associated with these non-GAAP measures, including the potential lack of comparability of these measures from one company to another. A reconciliation of Adjusted EBITDA to net income is set forth within this section.
Selling, general, and administrative expenses Year Ended December 31, 2022 vs. 2021 Selling, general, and administrative ("SG&A") expenses were $198.8 million (12 percent of Net sales) and $179.3 million (13 percent of Net sales) for the years ended December 31, 2022 and 2021, respectively.
Selling, general, and administrative expenses Year Ended December 31, 2023 vs. 2022 Selling, general, and administrative ("SG&A") expenses were $183.7 million (11 percent of Net sales) and $198.8 million (12 percent of Net sales) for the years ended December 31, 2023 and 2022, respectively.
This was partially offset by a decrease in litigation defense costs of $1.0 million.
This was partially offset by a decrease in litigation defense costs of $2.4 million.
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.
Our Performance Materials segment manufactures products in the form of powder, granular, extruded pellets, extruded honeycombs, and activated carbon sheets.
Year Ended December 31, 2021 vs. 2020 SG&A expenses were $179.3 million (13 percent of Net sales) and $149.4 million (12 percent of Net sales) for the years ended December 31, 2021 and 2020, respectively. The increase in SG&A expenses is primarily due to higher employee-related costs of $27.7 million and increased travel and other miscellaneous costs of $3.2 million.
Year Ended December 31, 2022 vs. 2021 SG&A expenses were $198.8 million (12 percent of Net sales) and $179.3 million (13 percent of Net sales) for the years ended December 31, 2022 and 2021, respectively. The increase in SG&A expenses is primarily due to higher employee-related costs of $11.3 million and increased travel and other miscellaneous costs of $10.6 million.
In addition, we may also evaluate and consider strategic acquisitions, joint ventures, or other transactions to create stockholder value and enhance financial performance.
Item 8 of this Form 10-K. In addition, we may also evaluate and consider strategic acquisitions, joint ventures, or other transactions to create stockholder value and enhance financial performance.
Item 8 of this Form 10-K for more information. 27 Results of Operations Years Ended December 31, In millions 2022 2021 2020 Net sales $ 1,668.3 $ 1,391.5 $ 1,216.1 Cost of sales 1,098.2 878.7 750.6 Gross profit 570.1 512.8 465.5 Selling, general, and administrative expenses 198.8 179.3 149.4 Research and technical expenses 30.3 26.3 22.6 Restructuring and other (income) charges, net 13.8 16.2 18.5 Acquisition-related costs 5.0 0.6 1.8 Other (income) expense, net (1.7) 79.9 (4.1) Interest expense 61.8 51.7 47.1 Interest income (7.5) (4.0) (4.9) Income (loss) before income taxes 269.6 162.8 235.1 Provision (benefit) for income taxes 58.0 44.7 53.7 Net income (loss) $ 211.6 $ 118.1 $ 181.4 Net sales The table below shows 2022 and 2021 Net sales and variances from 2021 and 2020, respectively.
Results of Operations Years Ended December 31, In millions 2023 2022 2021 Net sales $ 1,692.1 $ 1,668.3 $ 1,391.5 Cost of sales 1,220.2 1,098.2 878.7 Gross profit 471.9 570.1 512.8 Selling, general, and administrative expenses 183.7 198.8 179.3 Research and technical expenses 31.8 30.3 26.3 Restructuring and other (income) charges, net 170.2 13.8 16.2 Acquisition-related costs 3.6 5.0 0.6 Other (income) expense, net 5.7 (1.7) 79.9 Interest expense 93.3 61.8 51.7 Interest income (6.3) (7.5) (4.0) Income (loss) before income taxes (10.1) 269.6 162.8 Provision (benefit) for income taxes (4.7) 58.0 44.7 Net income (loss) $ (5.4) $ 211.6 $ 118.1 Net sales The table below shows 2023 and 2022 Net sales and variances from 2022 and 2021, respectively.
Change vs. prior year In millions Prior year Net sales Volume Price/Mix Currency effect Current year Net sales Year Ended December 31, 2022 vs. 2021 $ 1,391.5 9.4 294.2 (26.8) $ 1,668.3 Year Ended December 31, 2021 vs. 2020 $ 1,216.1 97.0 74.7 3.7 $ 1,391.5 Year Ended December 31, 2022 vs. 2021 The sales increase in 2022 was driven by favorable pricing and sales composition (mix) of $294.2 million (21 percent), primarily driven by an increase in Performance Chemicals of $279.3 million, and a volume increase of $9.4 million (one percent), offset slightly by unfavorable foreign exchange impacts of $26.8 million (two percent).
Change vs. prior year In millions Prior year Net sales Volume Price/Mix Currency effect Current year Net sales Year Ended December 31, 2023 vs. 2022 $ 1,668.3 (106.3) 142.3 (12.2) $ 1,692.1 Year Ended December 31, 2022 vs. 2021 $ 1,391.5 9.4 294.2 (26.8) $ 1,668.3 Year Ended December 31, 2023 vs. 2022 The sales increase in 2023 was driven by favorable pricing and sales composition (mix) of $142.3 million (nine percent), primarily attributed to an increase in Performance Chemicals of $93.1 million, partially offset by volume decline of $106.3 million (six percent), and unfavorable foreign exchange impacts of $12.2 million (one percent). 30 Year Ended December 31, 2022 vs. 2021 The sales increase in 2022 was driven by favorable pricing and sales composition (mix) of $294.2 million (21 percent), primarily attributed to an increase in Performance Chemicals of $216.9 million, and a volume increase of $9.4 million (one percent), offset slightly by unfavorable foreign exchange impacts of $26.8 million (two percent).
Item 8 of this Form 10-K for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on our Consolidated Financial Statements. Critical Accounting Policies and Estimates Our principal accounting policies are described in Note 2 to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K.
New Accounting Guidance Refer to Note 3 to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on our Consolidated Financial Statements.
Segment EBITDA increased by $2.8 million due to favorable volume of $15.6 million, pricing and sales composition (mix) of $13.8 million, and decreased SG&A expenses and research and technical costs of $0.5 million.
Segment EBITDA increased by $2.8 million due to favorable volume of $15.6 million, pricing and sales composition (mix) of $13.8 million, and decreased SG&A expenses and research and technical costs of $0.5 million. The increase was largely offset by higher manufacturing costs of $21.5 million, and unfavorable foreign currency exchange impacts of $5.6 million.
We have excluded the following items from segment EBITDA: interest expense, net, associated with corporate debt facilities, income taxes, depreciation, amortization, restructuring and other (income) charges, net, acquisition and other-related costs, litigation verdict charges, pension and postretirement settlement and curtailment (income) charge, net.
We have excluded the following items from segment EBITDA: interest expense, net, associated with corporate debt facilities, income taxes, depreciation, amortization, restructuring and other (income) charges, net, including inventory lower of cost or market charges associated with restructuring actions, acquisition and other-related (income) costs, litigation verdict charges, (losses) gains from the sale of strategic investments, (losses) gains on CTO resales, and pension and postretirement settlement and curtailment (income) charge, net.
See Note 15 to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information. Acquisition-related costs Years Ended December 31, 2022, 2021, and 2020 Acquisition costs were $5.0 million, $0.6 million, and $1.8 million for the years ended December 31, 2022, 2021, and 2020, respectively.
Item 8 of this Form 10-K for more information. 31 Acquisition-related costs Years Ended December 31, 2023, 2022, and 2021 Acquisition costs were $3.6 million, $5.0 million, and $0.6 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Adjusted EBITDA is defined as net income (loss) plus provision (benefit) for income taxes, interest expense, net, depreciation, amortization, restructuring and other (income) charges, net, acquisition, and other-related costs, litigation verdict charges, and pension and postretirement settlement and curtailment (income) charges, net.
Adjusted EBITDA is defined as net income (loss) plus interest expense, net, provision (benefit) for income taxes, depreciation, amortization, restructuring and other (income) charges, net, including inventory lower of cost or market charges associated with restructuring actions, acquisition and other-related (income) costs, litigation verdict charges, gain on sale of strategic investments, loss on CTO resales, and pension and postretirement settlement and curtailment (income) charges, net.
Item 8 of this Form 10-K for more information) and our new corporate headquarters. 37 Capital expenditure categories Years Ended December 31, In millions 2022 2021 2020 Maintenance $ 57.4 $ 47.9 $ 49.1 Safety, health and environment 19.7 14.4 14.9 Growth and cost improvement 65.4 41.5 18.1 Total capital expenditures $ 142.5 $ 103.8 $ 82.1 Cash flows provided by (used in) financing activities Cash provided by financing activities for the year ended December 31, 2022, was $48.1 million and was driven by net proceeds from the revolving credit facility of $828.0 million, offset by payments on long-term borrowings of $628.1 million, payments, and share repurchases of $145.2 million.
Capital expenditure categories Years Ended December 31, In millions 2023 2022 2021 Maintenance $ 65.5 $ 57.4 $ 47.9 Safety, health and environment 11.3 19.7 14.4 Growth and cost improvement 33.0 65.4 41.5 Total capital expenditures $ 109.8 $ 142.5 $ 103.8 40 Cash flows provided by (used in) financing activities Cash used in financing activities for the year ended December 31, 2023, was $99.9 million and was driven by share repurchases of $92.1 million, net payments on the revolving credit facility of $87.9 million, and offset by proceeds from our accounts receivable securitization facility of $81.3 million.
In performing the fair value analysis, management makes various judgments, estimates, and assumptions, the most significant of which is the assumption related to revenue growth rates.
In performing the fair value analysis, management makes various judgments, estimates, and assumptions, the most significant of which are the assumptions related to revenue growth rates, Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") margin, and discount rate.
Segment EBITDA increased $27.6 million, mainly due to favorable pricing and sales composition (mix) of $277.7 million, favorable foreign currency exchange impacts and other miscellaneous charges of $6.4 million.
Segment EBITDA increased $19.9 million, mainly due to favorable pricing and product mix of $217.8 million, and favorable foreign currency exchange impacts and other miscellaneous charges of $1.6 million.
The sales increase was driven by favorable pricing and sales composition (mix) of $279.3 million (32 percent) in industrial specialties ($201.8 million), engineered polymers ($62.4 million), and pavement technologies product 32 lines ($15.1 million), partially offset by a volume decrease of $19.2 million (two percent) and unfavorable foreign currency exchange impacting Net sales by $15.0 million (two percent). Segment EBITDA.
The sales increase was driven by favorable pricing and product mix of $216.9 million (31 percent) in industrial specialties ($201.8 million) and road technologies product lines ($15.1 million), partially offset by a volume decline of $26.1 million (four percent), and unfavorable foreign currency exchange impacting Net sales by $4.6 million (one percent). Segment EBITDA.
The increase in SG&A expenses is primarily due to higher employee-related costs of $11.3 million and increased travel and other miscellaneous costs of $10.6 million. This was partially offset by a decrease in litigation defense costs of $2.4 million.
The decrease in SG&A expenses is primarily due to lower employee-related costs of $18.4 million, and decreased travel and other miscellaneous costs of $6.9 million, partially offset by increased amortization expense of $10.2 million due to the Ozark Materials acquisition.
Item 8 of this Form 10-K for more information. 29 Other (income) expense, net Years Ended December 31, 2022, 2021, and 2020 Years Ended December 31, In millions 2022 2021 2020 Foreign currency exchange (income) loss $ 2.3 $ 2.5 $ (5.8) Litigation verdict charge (1) — 85.0 — Other (income) expense, net (4.0) (7.6) 1.7 Total Other (income) expense, net $ (1.7) $ 79.9 $ (4.1) _______________ (1) See Note 18 t o the Consolidated Financial Statements included within Part II.
Other (income) expense, net Years Ended December 31, 2023, 2022, and 2021 Years Ended December 31, In millions 2023 2022 2021 Gain (loss) on sale of strategic investment (1) $ (19.3) $ — $ — Foreign currency transaction (gain) loss 3.7 2.3 2.5 Loss on CTO resales (2) 22.0 — — Litigation verdict charge (3) — — 85.0 Other (income) expense, net (0.7) (4.0) (7.6) Total Other (income) expense, net $ 5.7 $ (1.7) $ 79.9 _______________ (1) See Note 5 to the Consolidated Financial Statements included within Part II.
Also, during twelve months ended December 31, 2021, we entered into multiple strategic investments (refer to Note 5 within the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information). For the year ended December 31, 2020, investing activities were driven by capital spending.
Item 8 of this Form 10-K for more information) and we entered into multiple strategic investments (refer to Note 5 to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information).
Segment EBITDA increased $24.1 million, mainly due to favorable pricing and product mix of $61.7 million, and an increase in volume of $41.8 million.
Segment EBITDA increased $7.7 million, mainly due to favorable pricing and product mix of $60.1 million, favorable foreign currency exchange impacts and other miscellaneous charges of $4.8 million, and an increase in volume of $2.7 million.
Over the next twelve months, we expect to fund the following: interest payments, capital expenditures, expenditures related to our business transformation initiative, debt principal repayments, purchases pursuant to our stock repurchase program, income tax payments, and to incur additional spending associated with our Performance Materials' intellectual property litigation.
Over the next twelve months, we expect to fund the following: interest payments, capital expenditures, expenditures related to our business transformation initiative, debt principal repayments, income tax payments, purchases pursuant to our stock repurchase program (and related excise tax payments), income tax payments, additional spending associated with our Performance Materials' intellectual property litigation, and restructuring activities such as the North Charleston plant transition, and the repositioning of our Performance Chemicals operating segment as further described within Note 15 to the Consolidated Financial Statements included within Part II.
Use of Non-GAAP Financial Measures Ingevity has presented the financial measure, Adjusted EBITDA, defined below, which has not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and has provided a reconciliation to net income, the most directly comparable financial measure calculated in accordance with GAAP.
These increases were partially offset by higher manufacturing costs of $50.9 million due to inflationary raw material and energy costs, and increased SG&A expenses of $9.0 million due to increased spending on growth initiatives, compensation, and travel. 36 Use of Non-GAAP Financial Measures Ingevity has presented the financial measure, Adjusted EBITDA, defined below, which has not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and has provided a reconciliation to net income, the most directly comparable financial measure calculated in accordance with GAAP.
Restructuring and other (income) charges, net Years Ended December 31, 2022, 2021, and 2020 Restructuring and other (income) charges, net, were $13.8 million, $16.2 million, and $18.5 million for the years ended December 31, 2022, 2021, and 2020, respectively. For all years presented the majority of the charges were related to our digital transformation initiative.
Restructuring and other (income) charges, net Years Ended December 31, 2023, 2022, and 2021 Restructuring and other (income) charges, net, were $170.2 million, $13.8 million, and $16.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Interest expense Years Ended December 31, 2022, 2021, and 2020 Years Ended December 31, In millions 2022 2021 2020 Finance lease obligations $ 7.5 $ 7.4 $ 6.8 Revolving credit facility and term loan 21.2 7.6 22.2 Senior Notes 33.1 36.7 18.1 Total interest expense $ 61.8 $ 51.7 $ 47.1 Interest income Years Ended December 31 2022, 2021, and 2020 Years Ended December 31, In millions 2022 2021 2020 Restricted investment (1) $ 2.1 $ 2.0 $ 2.0 Fixed-to-fixed cross-currency interest rate swap (2) 1.1 0.5 1.6 Floating-to-fixed interest rate swaps (2) 1.7 — — Other 2.6 1.5 1.3 Total interest income $ 7.5 $ 4.0 $ 4.9 _______________ (1) See Note 5 to the Consolidated Financial Statements included within Part II.
Item 8 of this Form 10-K for more information. 32 Interest income Years Ended December 31 2023, 2022, and 2021 Years Ended December 31, In millions 2023 2022 2021 Restricted investment (1) $ 2.4 $ 2.1 $ 2.0 Fixed-to-fixed cross-currency interest rate swap (2) — 1.1 0.5 Floating-to-fixed interest rate swaps (2) — 1.7 — Other 3.9 2.6 1.5 Total interest income $ 6.3 $ 7.5 $ 4.0 _______________ (1) See Note 5 to the Consolidated Financial Statements included within Part II.
Capital spending included the base maintenance capital supporting ongoing operations and cost improvement and growth spending primarily related to our business transformation initiative (refer to Note 15 within the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information).
Capital spending included the base maintenance capital supporting ongoing operations and cost improvement and growth spending in our Advanced Polymer Technologies segment. Also, during the year ended December 31, 2023, we sold a strategic investment (refer to Note 5 to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information).
Capital spending included the base maintenance capital supporting ongoing operations and growth and cost improvement spending primarily related to our business transformation initiative (refer to Note 15 within the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information).
For the year ended December 31, 2022, investing activities were driven by capital spending, the Ozark Materials acquisition, and the purchase of strategic investments. Capital spending included the base maintenance capital supporting ongoing operations and cost improvement and growth spending primarily related to our business transformation initiative (refer to Note 15 to the Consolidated Financial Statements included within Part II.
Years Ended December 31, In millions 2022 2021 2020 Net sales Pavement Technologies product line $ 241.3 $ 195.4 $ 186.8 Industrial Specialties product line 633.8 493.5 391.6 Engineered Polymers product line 244.7 185.8 127.7 Total Performance Chemicals - Net sales $ 1,119.8 $ 874.7 $ 706.1 Segment EBITDA 200.4 172.8 148.7 Net Sales Comparison of Years Ended December 31, 2022, 2021, and 2020 Change vs. prior year In millions Prior year Net sales Volume Price/Mix Currency effect Current year Net sales Year Ended December 31, 2022 vs 2021 $ 874.7 (19.2) 279.3 (15.0) $ 1,119.8 Year Ended December 31, 2021 vs 2020 $ 706.1 110.0 62.1 (3.5) $ 874.7 Year Ended December 31, 2022 vs. 2021 Segment net sales.
Years Ended December 31, In millions 2023 2022 2021 Net sales Road Technologies product line $ 369.8 $ 241.3 $ 195.4 Industrial Specialties product line 532.3 633.8 493.5 Total Performance Chemicals - Net sales $ 902.1 $ 875.1 $ 688.9 Segment EBITDA 65.7 160.4 140.5 Net Sales Comparison of Years Ended December 31, 2023, 2022, and 2021 Change vs. prior year In millions Prior year Net sales Volume Price/Mix Currency effect Current year Net sales Year Ended December 31, 2023 vs 2022 $ 875.1 (65.3) 93.1 (0.8) $ 902.1 Year Ended December 31, 2022 vs 2021 $ 688.9 (26.1) 216.9 (4.6) $ 875.1 Year Ended December 31, 2023 vs. 2022 Segment net sales.
These increases were partially offset by higher manufacturing costs of $51.6 million due to inflationary raw material and energy costs and increased SG&A expenses of $23.6 million due to increased spending on growth initiatives, compensation, and travel. Unfavorable foreign currency exchange impacts and other miscellaneous charges of $4.2 million also contributed to increased costs.
These increases were partially offset by higher manufacturing costs of $167.5 million due to inflationary raw material and energy costs, increased SG&A expenses of $20.0 million due to increased spending on growth initiatives, compensation, and travel, and volume decline of $12.0 million.
Recent Developments Ozark Materials On October 3, 2022, we completed our acquisition of Ozark Materials, LLC and Ozark Logistics, LLC (collectively, “Ozark Materials”). Refer to Note 16 to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information.
Refer to Note 16 to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information.
Cash provided by (used in) operating activities for 2021 was driven by higher cash earnings of $26.1 million offset by a net increase in overall working capital of $70.5 million which includes an increase in trade working capital (accounts receivable, inventory, and accounts payable) of $89.3 million.
Cash provided by (used in) operating activities for 2023 was driven by lower cash earnings of $57.2 million and a net increase in overall working capital of $48.3 million, despite a decrease in trade working capital (accounts receivable, inventory, and accounts payable) of $15.6 million, compared to 2022.
The increase was largely offset by higher manufacturing costs of $21.5 million and unfavorable foreign currency exchange impacts of $5.6 million. 31 Year Ended December 31, 2021 vs. 2020 Segment net sales. The increase in 2021 was driven by favorable pricing of $12.6 million (three percent) and favorable foreign currency exchange impacts of $7.2 million (less than one percent).
The increase was partially offset by higher manufacturing costs of $8.8 million, and unfavorable foreign currency exchange impacts of $0.4 million. 34 Year Ended December 31, 2022 vs. 2021 Segment net sales.
Ingevity does not forecast net income as it cannot, without unreasonable effort, estimate or predict with certainty various components of net income. These components, net of tax, include further restructuring and other income (charges), net; additional acquisition and other-related costs; litigation verdict charges; additional pension and postretirement settlement and curtailment (income) charges; and revisions due to legislative tax rate changes.
These components, net of tax, include further restructuring and other income (charges), net; additional acquisition and other-related income (costs); litigation verdict charges; additional pension and postretirement settlement and curtailment (income) charges; and revisions due to legislative tax rate changes. Additionally, discrete tax items could drive variability in our projected effective tax rate.
During the year ended December 31, 2022, we repurchased $145.2 million in common shares, representing 2,112,463 shares of our common stock at a weighted average cost per share of $68.73. At December 31, 2022, $444.7 million remained available for purchase under our Board-authorized repurchase program. Capital Expenditures Projected 2023 capital expenditures are expected to be $140 million to $160 million.
During the year ended December 31, 2023, we repurchased $92.1 million in common shares (inclusive of $0.8 million in excise tax), representing 1,269,373 shares of our common stock at a weighted average cost per share of $71.93. At December 31, 2023, $353.4 million remained available for purchase under our Board-authorized repurchase program.
Adjusted EBITDA Year Ended December 31, 2022, 2021 and 2020 The factors that impacted Adjusted EBITDA period to period are the same factors that affected earnings discussed in the sections entitled "Results of Operations" and "Segment Operating Results" within MD&A. 34 Total Company Outlook and 2023 Guidance In millions 2023 Guidance Net sales $1,900 - $2,100 Adjusted EBITDA $495 - $515 Operating Cash Flow $300 - $320 Capital Expenditures $140 - $160 Free Cash Flow* ~$160 *Calculated as Operating Cash Flow less Capital Expenditures Net sales are expected to be between $1.9 billion and $2.1 billion.
Adjusted EBITDA Year Ended December 31, 2023, 2022 and 2021 The factors that impacted Adjusted EBITDA period to period are the same factors that affected earnings discussed in the sections entitled "Results of Operations" and "Segment Operating Results" within MD&A. Current Full Year Company Outlook vs.
Refer to Note 10 to the Consolidated Financial Statements included within Part II.
Refer to Note 15 to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information on the charges.
Additionally, discrete tax items could drive variability in our projected effective tax rate. All of these components could significantly impact such financial measures.
All of these components could significantly impact such financial measures.
The higher tax payments were driven by the higher year over year earnings offset by refunds received in 2022 on prior years' earnings.
The higher tax payments were driven by the higher year over year earnings offset by refunds received in 2022 on prior years' earnings. Cash flows provided by (used in) investing activities For the year ended December 31, 2023, investing activities were driven by capital spending, offset partially by the proceeds from the sale of a strategic investment.
Performance Chemicals products serve as critical inputs used in a variety of high-performance applications, including warm mix paving, pavement preservation, pavement reconstruction and recycling, and road striping thermoplastics and paint (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).
Performance Chemicals products serve as critical inputs used in a variety of high-performance applications, including pavement construction, pavement preservation, pavement reconstruction and recycling, road markings (road technologies product line), as well as agrochemical dispersants, paper chemicals, and other diverse industrial uses (industrial specialties product line).
See "Cautionary Statements about Forward-Looking Statements" at the beginning of this Annual Report on Form 10-K for further discussion. Overview Ingevity Corporation is a leading global manufacturer of specialty chemicals and high-performance activated carbon materials. We provide innovative solutions to meet our customers’ unique and demanding requirements through proprietary formulated products.
See "Cautionary Statements about Forward-Looking Statements" at the beginning of this Annual Report on Form 10-K for further discussion. Overview Ingevity Corporation ("Ingevity," "the company," "we," "us," or "our") provides products and technologies that purify, protect, and enhance the world around us.
We continue to include the service cost, amortization of prior service cost, interest costs, expected return on plan assets, and amortized actual gains and losses in our segment EBITDA. (2) For the years ended December 31, 2022 and 2021, charges of $0.3 million and $0.2 million relate to the acquisitions of strategic investments in the Performance Materials segment.
We continue to include the service cost, amortization of prior service cost, interest costs, expected return on plan assets, and amortized actual gains and losses in our segment EBITDA. Refer to Note 14 to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information.
Cash used in financing activities for the year ended December 31, 2020, was $50.2 million, and was driven by proceeds from long-term borrowings from the senior notes that were issued in the fourth quarter of $550.0 million, net of debt issuance costs of $8.8 million.
Cash provided by financing activities for the year ended December 31, 2022, was $48.1 million and was driven by net proceeds from the revolving credit facility of $828.0 million, offset by payments on long-term borrowings of $628.1 million, payments, and share repurchases of $145.2 million.
Net Investment Hedge In 2022, we terminated our fixed-to-fixed cross-currency interest rate swaps, accounted for as net investment hedges, and received proceeds of $14.7 million. Refer to Note 9 to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information.
Item 8 of this Form 10-K for more information. (2) See Note 2 and Note 15 to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information. (3) See Note 18 to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information.
Strategic Investments During 2022, we continued to invest in inorganic strategic investments by obtaining equity positions in four separate privately-held companies for a total of $77.4 million. Refer to Note 5 to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information.
(2) See Note 10 to the Consolidated Financial Statements included within Part II. Item 8 of this Form 10-K for more information. (3) See Note 18 to the Consolidated Financial Statements included within Part II.
Automotive technologies products are sold into 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.
To maximize the productivity of our manufacturing assets, we also produce several other activated carbon products for food, water, beverage, and chemical purification applications. Our Performance Chemicals segment consists of our road technologies (previously named pavement technologies) and industrial specialties product lines.
We expect EBITDA growth for our Performance Materials segment as volumes shift throughout 2023 to higher margin automotive carbon and automotive production supply chain dynamics improve. A reconciliation of net income to adjusted EBITDA as projected for 2023 is not provided.
We expect growth in our Performance Materials EBITDA, as volumes shift to higher-margin automotive carbon due to improved global automotive production and ongoing hybrid vehicle adoption.
Cash flow from operations was further reduced by an increase in cash interest paid of $7.9 million primarily due to a full year of interest on our 3.88% Senior Notes due 2028 as well as an increase in cash tax payments of $7.1 million.
Cash flow from operations was further reduced by an increase in cash interest paid of $27.9 million due to higher average debt levels resulting from the October 2022 acquisition of Ozark Materials and rising interest rates during 2023. This was partially offset by a reduction in tax payments of $25.1 million.
Refer to the Segment Operating Results section included within this MD&A for more information on the drivers of the changes in gross profit period over period for both segments. 28 Year Ended December 31, 2021 vs. 2020 Gross profit increase of $47.3 million was driven by favorable pricing improvement of $73.0 million, favorable sales volume of $30.6 million, and favorable foreign currency exchange of $1.3 million, partially offset by increased manufacturing costs of $57.6 million due to raw material and energy cost inflationary pressure.
Refer to the Segment Operating Results section included within this MD&A for more information on the drivers of the changes in gross profit period over period for both segments.
The increase was partially offset by unfavorable volume of $11.2 million, primarily in the automotive evaporative emission canister products, and increased SG&A expenses and research and technical costs of $7.4 million, due to increased travel, outside services, and consulting expenses. Favorable foreign currency exchange impacts also contributed $5.1 million to the increase.
Segment EBITDA increased $4.5 million, mainly due to favorable pricing and sales composition (mix) of $17.1 million, decreased manufacturing costs of $9.9 million, and decreased SG&A expenses of $5.9 million. These increases were partially offset by volume declines of $23.7 million, and unfavorable foreign currency exchange impacts and other miscellaneous charges of $4.7 million.
Also driving the net sales increase was favorable pricing and product mix of $62.1 million (nine percent) in industrial specialties ($35.3 million), engineered polymers ($20.7 million), and pavement technologies product lines ($6.1 million). In addition, unfavorable foreign currency exchange impacted Net sales by $3.5 million (less than one percent). Segment EBITDA.
The sales increase was driven by favorable pricing and sales composition (mix) of $93.1 million (11 percent), comprised of industrial specialties ($62.7 million) and road technologies product lines ($30.4 million), respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeSales to our largest customer, which is from our Performance Materials segment, were approximately four percent of total net sales for each of the years ended December 31, 2022, 2021, and 2020, respectively. Sales to the automotive industry, which represents our largest industry concentration, were approximately 30 percent of our consolidated Net sales.
Biggest changeOur largest customer as of December 31, 2023, had accounts receivable of $7.5 million and $9.3 million as of December 31, 2023 and 2022, respectively. Sales to our largest customer, which is from our Performance Materials segment, were approximately four percent of total net sales for each of the years ended December 31, 2023, 2022, and 2021, respectively.
During the year we had floating-to-fixed interest rate swaps with a combined 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.
During 2022, we had floating-to-fixed interest rate swaps with a combined 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.
As a result, we are subject to interest rate risk with respect to such floating-rate debt. For the year ended December 31, 2022, a hypothetical 100 basis point increase in the variable interest rate component of our borrowings would increase our annual interest expense by approximately $8 million or 11 percent.
As a result, we are subject to interest rate risk with respect to such floating-rate debt. For the year ended December 31, 2023, a hypothetical 100 basis point increase in the variable interest rate component of our borrowings would increase our annual interest expense by approximately $8 million or 10 percent.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign currency We have foreign-based operations, primarily in Europe, South America, and Asia, which accounted for approximately 24 percent of our net sales in 2022. We have designated the local currency as the functional currency of our significant operations outside of the U.S.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign currency We have foreign-based operations, primarily in Europe, South America, and Asia, which accounted for approximately 22 percent of our net sales in 2023. We have designated the local currency as the functional currency of our significant operations outside of the U.S.
Natural gas price risk Natural gas, both direct and indirect, is our largest form of energy costs constituting approximately seven percent of our cost of goods sold for the year ended December 31, 2022. Increases in natural gas costs, unless passed on to our customers, would adversely affect our results of operations.
Natural gas price risk Natural gas, both direct and indirect, is our largest form of energy costs constituting approximately five percent of our cost of goods sold for the year ended December 31, 2023. Increases in natural gas costs, unless passed on to our customers, would adversely affect our results of operations.
A hypothetical 10 percent adverse change, excluding the impact of any hedging instruments, in the average Chinese renminbi and euro to U.S. dollar exchange rates during the year ended December 31, 2022, would have decreased our net sales and income before income taxes for the year ended December 31, 2022, by approximately $19 million or one percent and $7 million or two percent, respectively.
A hypothetical 10 percent adverse change, excluding the impact of any hedging instruments, in the average Chinese renminbi and euro to U.S. dollar exchange rates during the year ended December 31, 2023, would have decreased our net sales and income before income taxes for the year ended December 31, 2023, by approximately $18 million or one percent and $6 million or two percent, respectively.
Based on average pricing during the year ended December 31, 2022, a hypothetical unhedged, unfavorable 10 percent increase in the market price for CTO would have increased our cost of sales for the year ended December 31, 2022, by approximately $11 million or one percent, which we may or may not have been able to pass on to our customers.
Based on average pricing during the year ended December 31, 2023, a hypothetical unhedged, unfavorable 10 percent increase in the market price for CTO would have increased our cost of sales for the year ended December 31, 2023, by approximately $31.6 million or three percent, which we may not have been able to pass on to our customers.
Comparatively, based on average pricing during the year ended December 31, 2021 , a hypothetical unhedged, unfavorable 10 percent increase in the market price for CTO would have increased our cost of sales for the year ended December 31, 2021 by approximately $9 million or one percent.
Comparatively, based on average pricing during the year ended December 31, 2022 , a hypothetical unhedged, unfavorable 10 percent increase in the market price for CTO would have increased our cost of sales for the year ended December 31, 2022 by approximately $13.4 million or one percent .
The fair value of the outstanding designated natural gas commodity hedge contracts as of December 31, 2022 and 2021 was a net liability of $1.6 million and $0.6 million, respectively. 41 Interest Rate Risk As of December 31, 2022, approximately $828 million of our borrowings include a variable interest rate component.
The fair value of the outstanding designated natural gas commodity hedge contracts as of December 31, 2023 and 2022 was a net liability of $0.9 million and $1.6 million, respectively. Interest Rate Risk As of December 31, 2023, approximately $821 million of our borrowings include a variable interest rate component.
Comparatively, for the year ended December 31, 2021, a hypothetical 100 basis point increase in the variable interest rate component of our borrowings would have increased our annual interest expense by approximately $3 million or seven percent.
Comparatively, for the year ended December 31, 2022, a hypothetical 100 basis point increase in the variable interest rate component of our borrowings would have increased our annual interest expense by approximately $8 million or 11 percent.
Comparatively, for the year ended December 31, 2021, a hypothetical, unhedged 10 percent increase in natural gas pricing would have resulted in an increase to cost of sales of approximately $4.3 million or 50 basis points. As of December 31, 2022, open commodity contracts hedge forecasted transactions until December 2023.
Comparatively, for the year ended December 31, 2022, a hypothetical, unhedged 10 percent increase in natural gas pricing would have resulted in an increase to cost of sales of approximately $7.9 million or 70 basis points. As of December 31, 2023, open commodity contracts hedge forecasted transactions until December 2024.
As of December 31, 2022, we had 1.4 million and 0.5 million mmBTUS (millions of British Thermal Units) in the aggregate notional volume of outstanding natural gas commodity swap contracts and zero-cost collar option contracts, respectively, designated as cash flow hedges.
As of December 31, 2023, we had 0.8 million and 0.2 million mmBTUS (millions of British Thermal Units) in the aggregate notional volume of outstanding natural gas commodity swap contracts and zero-cost collar option contracts, respectively, designated as cash flow hedges.
For the year ended December 31, 2022, a hypothetical, unhedged 10 percent increase in natural gas pricing would have resulted in an increase to cost of sales of approximately $7.9 million or 70 basis points.
For the year ended December 31, 2023, a hypothetical, unhedged 10 percent increase in natural gas pricing would have resulted in an increase to cost of sales of approximately $6.5 million or 53 basis points.
No customers individually accounted for greater than 10 percent of Ingevity's consolidated Net sales. Commodity price risk A portion of our manufacturing costs includes purchased raw materials, which are commodities whose prices fluctuate as market supply and demand fundamentals change. Accordingly, product margins and the level of our profitability tend to fluctuate with the changes in these commodity prices.
Sales to the automotive industry, which represents our largest industry concentration, were approximately 30 percent of our consolidated Net sales. No customers individually accounted for greater than 10 percent of Ingevity's consolidated Net sales. Commodity price risk A portion of our manufacturing costs includes purchased raw materials, which are commodities whose prices fluctuate as market supply and demand fundamentals change.
The fair value of outstanding interest rate instruments at December 31, 2022 and 2021 was an asset (liability) of zero and $(4.0) million, respectively. 42
The fair value of outstanding interest rate instruments at December 31, 2023 and 2022 was an asset (liability) of zero. 44
Comparatively, a hypothetical 10 percent adverse change in the average Chinese renminbi and euro to U.S. dollar exchange rates during the year ended December 31, 2021 would have decreased our net sales and income before income taxes for the year ended December 31, 2021, by approximately $22 million or two percent and $9 million or five percent, respectively. 40 Concentration of credit risk Concentration of credit risk: The financial instruments that potentially subject Ingevity to concentrations of credit risk are accounts receivable.
Comparatively, a hypothetical 10 percent adverse change in the average Chinese renminbi and euro to U.S. dollar exchange rates during the year ended December 31, 2022 would have decreased our net sales and income before income taxes for the year ended December 31, 2022, by approximately $19 million or one percent and $7 million or two percent, respectively.
Crude tall oil price risk Our results of ope rations are directly affected by the cost of our raw materials, particularly crude tall oil ("CTO"), which represents approximately 14 percent of consolidated cost of sales and 22 percent of our full company raw materials purchases for the year ended December 31, 2022.
Our sources of energy costs are diversified among electricity, steam and natural gas, with natural gas comprising our largest energy input. 43 Crude tall oil price risk Our results of ope rations are directly affected by the cost of our raw materials, particularly CTO, which represents approximately 26 percent of consolidated cost of sales and 51 percent of our full company raw materials purchases for the year ended December 31, 2023.
We limit our credit risk by performing ongoing credit evaluations and, when necessary, requiring letters of credit, guarantees, or collateral. Our largest customer as of December 31, 2022, had accounts receivable of $9.3 million and $5.7 million as of December 31, 2022 and 2021, respectively.
Concentration of credit risk The financial instruments that potentially subject Ingevity to concentrations of credit risk are accounts receivable. We limit our credit risk by performing ongoing credit evaluations and, when necessary, requiring letters of credit, guarantees, or collateral.
The cost of energy is a manufacturing cost that is exposed to commodity pricing. Our sources of energy costs are diversified among electricity, steam and natural gas, with natural gas comprising our largest energy input.
Accordingly, product margins and the level of our profitability tend to fluctuate with the changes in these commodity prices. The cost of energy is a manufacturing cost that is exposed to commodity pricing.

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