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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________ 
FORM 10-K
______________________________________________________________________________________________________
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-37586
__________________________________________________________________________
ngvt-20201231_g1.jpg
INGEVITY CORPORATION
(Exact name of registrant as specified in its charter)
_________________________________________________________________________ 
Delaware47-4027764
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
4920 O'Hear Avenue Suite 400North CharlestonSouth Carolina29405
(Address of principal executive offices)(Zip code)
843-740-2300
(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class: Trading Symbol(s)Name of Each Exchange on Which Registered:
Common Stock ($0.01 par value)NGVTNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.       
                                             Yes  x    No  o 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  x   No  o 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
x
Accelerated filer
  o
Non-accelerated filer  
o
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
    o
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.    
                             
Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes   No  x
At June 30, 2020, the aggregate market value of common stock held by non-affiliates of the Registrant was $2,162,317,073. The market value held by non-affiliates excludes the value of those shares held by executive officers and directors of the Registrant.
The Registrant had 40,468,010  shares of common stock, $0.01 par value, outstanding at February 15, 2021.

Documents Incorporated by Reference
Portions of the Company's definitive 2021 Annual Meeting Proxy Statement are incorporated by reference into Part III of this report.





Ingevity Corporation
Form 10-K
INDEX
Page No.


2



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995 that reflect our current expectations, beliefs, plans or forecasts with respect to, among other things, future events and financial performance. Forward-looking statements are often characterized by words or phrases such as “may,” “will,” “could,” “should,” “would,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “prospects,” “potential” and “forecast,” and other words, terms and phrases of similar meaning.
These statements, by their nature, involve certain estimates, expectations, projections, forecasts and assumptions and are subject to various risks and uncertainties that are difficult to predict and often beyond our control. These risks and uncertainties may, and often do, cause actual results to differ materially from those contained in a forward-looking statement. Accordingly, readers are cautioned not to place undue reliance on any forward-looking statement. Any forward-looking statement is based on information currently available to us and speaks only as of the date that it is made. We have no duty, and undertake no obligation, to update any forward-looking statement to reflect developments occurring after the statement is made.
The risks and uncertainties that may cause actual results to differ materially from those indicated in any forward-looking may be included with the forward-looking statement itself. Other such risks and uncertainties include, but are not limited to, those discussed in Item 1A. Risk Factors in this report, as well as the following:
adverse effects from the novel coronavirus ("COVID-19") pandemic;
we may be adversely affected by general economic and financial conditions beyond our control;
we are exposed to risks related to our international sales and operations;
our reported results could be adversely affected by currency exchange rates and currency devaluation could impair our competitiveness;
our operations outside the U.S. require us to comply with a number of U.S. and foreign regulations, violations of which could have a material adverse effect on our financial condition and results of operations;
we may be adversely affected by changes in trade policy, including the imposition of tariffs and the resulting consequences;
adverse conditions in the global automotive market or adoption of alternative and new technologies may adversely affect demand for our automotive carbon products;
we face competition from producers of alternative products and new technologies, and new or emerging competitors;
we face competition from infringing intellectual property activity;
if increasingly more stringent air quality standards worldwide are not adopted, our growth could be impacted;
we may be adversely affected by a decrease in government infrastructure spending;
adverse conditions in cyclical end markets may adversely affect demand for our engineered polymers products;
our printing inks business serves customers in a market that is facing declining volumes and downward pricing;
our Performance Chemicals segment is highly dependent on crude tall oil ("CTO") which is limited in supply;
lack of access to sufficient CTO would impact our ability to produce CTO-based products;
a prolonged period of low energy prices may materially impact our results of operations;
our engineered polymers product line may be adversely affected by the United Kingdom’s ("UK") withdrawal from the European Union;
the acquisition (the "Caprolactone Acquisition") of Perstorp Holding AB's caprolactone division (the "Caprolactone Business") may expose us to unknown or understated liabilities;
we are dependent upon third parties for the provision of certain critical operating services at several of our facilities;
we may be adversely affected by disruptions in our supply chain;
the occurrence of natural disasters, such as hurricanes, winter or tropical storms, earthquakes, tornadoes, floods, fires or other unanticipated problem such as labor difficulties (including work stoppages), equipment failure or unscheduled maintenance and repair, which could result in operational disruptions of varied duration;

3



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS (CONTINUED)
we are dependent upon attracting and retaining key personnel;
from time to time, we are called upon to protect our intellectual property rights and proprietary information though litigation and other means;
if we are unable to protect our intellectual property and other proprietary information, we may lose significant competitive advantage;
information technology security breaches and other disruptions;
complications with the design or implementation of our new enterprise resource planning system;
government policies and regulations, including, but not limited to, those affecting the environment, climate change, tax policies, tariffs and the chemicals industry; and
losses due to lawsuits arising out of environmental damage or personal injuries associated with chemical or other manufacturing processes.


4



PART I
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 both largely renewably sourced and help customers solve complex problems, while making the world more sustainable. We operate in two reporting segments: Performance Materials and Performance Chemicals. Our products are used in a variety of demanding applications, including automotive components that reduce gasoline vapor emissions, asphalt paving, oil exploration and production, agrochemicals, adhesives, lubricants, publication inks, coatings, elastomers, and bioplastics.
Throughout this Annual Report on Form 10-K, except where otherwise stated or indicated by the context, "Ingevity", the "Company", "we", "us", or "our" means Ingevity Corporation and its consolidated subsidiaries and their predecessors.
Our business originated as part of the operations of our former parent company, Westvaco Corporation, in 1964, and we operated as a division of Westvaco Corporation and its corporate successors, including MeadWestvaco Corporation and WestRock Company (“WestRock”) until our separation from WestRock in May 2016 (the “Separation”). Our common stock began "regular-way" trading on the New York Stock Exchange in May 2016 under the symbol "NGVT." Since the Separation, we acquired substantially all of the assets used in Georgia-Pacific Chemicals LLC’s pine chemical business (the “Pine Chemical Business”) in March 2018 and acquired Perstorp Holding AB’s entire caprolactone business (the “Caprolactone Business”) in February 2019. For additional information on these acquisitions, see Note 17 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K.
Our principal executive offices are located at 4920 O'Hear Avenue, Suite 400, North Charleston, South Carolina 29405. Ingevity maintains a website at www.ingevity.com. We make available, free of charge through our website, our filings with the Securities and Exchange Commission (the “SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after such items are filed with, or furnished to, the SEC. We also use our website to publish additional information that may be important to investors, such as presentations to analysts. Information contained in or connected to our website is not incorporated by reference into this Annual Report on Form 10-K. Reports we file with the SEC may also be viewed at www.sec.gov.
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 fiscal year 2020. For more information on our U.S. and foreign operations, see Notes 5 and 20, to the consolidated financial statements included within Part II. Item 8 of this Form 10-K.
Performance MaterialsPerformance Chemicals
Product LinesAutomotive TechnologiesProcess PurificationPavement TechnologiesOilfield TechnologiesIndustrial SpecialtiesEngineered Polymers
Primary End UsesGasoline vapor emissions control

Purification of food, water, beverages and chemicalsWarm mix asphalt

Pavement preservation

Pavement reconstruction and recycling

Well service additives

Production and downstream applications
Adhesives

Agrochemicals

Lubricants

Printing inks

Industrial intermediates
Coatings

Resins

Elastomers

Adhesives

Bioplastics

Medical devices
2020 Revenue$510.0 million$706.1 million


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Segments

Performance Materials
Our automotive technologies product line engineers, manufactures, and sells hardwood-based, chemically activated carbon products, produced through a highly technical and specialized process primarily for use in gasoline vapor emission control systems in cars, trucks, motorcycles, and boats. To maximize the productivity of our manufacturing assets, we also produce a number of other activated carbon products for food, water, beverage, and chemical purification applications, which are sold through our process purification product line.
Our automotive activated carbon products primarily take the form of granular, pellets and honeycomb "scrubber", which are primarily utilized in vehicle-based gasoline vapor emission control systems that capture gasoline vapor emissions that would otherwise be released into the atmosphere as volatile organic compounds. The captured gasoline vapors are largely purged from the activated carbon and directed to the engine where they are used as supplemental power for the vehicle. In this way, our automotive activated carbon products are part of a system that provides for both environmental control and energy recovery. Performance Materials' net sales for 2020, 2019, and 2018 were $510.0 million, $490.6 million, and $400.4 million, respectively; the chart below allocates our 2020 Performance Materials' net sales by geography. Sales are assigned to geographic areas based on the location of the third party to which product was shipped.
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Customers
We sell our automotive technologies products to over 60 customers around the globe. In 2020, our ten largest customers accounted for approximately 90 percent of the product line's 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. Kayser Automotive System GmbH, Korea Fuel-Tech Corporation, MAHLE GmbH, and many other large and small component manufacturers throughout the global automotive supply chain. Our process purification products are sold to approximately 70 customers globally. We sell our automotive technologies and process purification products primarily through our own direct sales force in North America, Europe, South America and Asia and also have a smaller, focused network of third-party distributors that have established a strong direct sales and marketing presence in North America and China.
Competition
Our automotive technologies competitors include Cabot Corp., Kuraray Co., Ltd., and several Chinese manufacturers. Ingevity has a decades-long track record of providing activated carbon that achieves life-of-vehicle emission standards. Given the imperative for automotive manufacturers to produce vehicles for the U.S., Canadian, and Chinese markets capable of meeting life-of-vehicle emission standards, or potentially face expensive recalls and unfavorable publicity, our automotive activated carbon products provide our customers the low-risk choice for this high performance application.
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Competitors in our process purification product line include Cabot Corp., Kuraray Co., Ltd., Osaka Gas Chemicals Co., Ltd., and several domestic U.S. manufacturers and distributors of imported products.
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.
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. 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.

Performance Chemicals
Ingevity’s Performance Chemicals segment is comprised of four product lines: pavement technologies, oilfield technologies, industrial specialties, and engineered polymers. Our products are utilized in warm mix paving, pavement preservation, pavement reconstruction and recycling, oil well service additives, oil production and downstream applications, adhesives, agrochemical dispersants, lubricants, printing inks, coatings, resins, elastomers, bioplastics, medical devices, and other diverse industrial uses. 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 2020, our top ten customers accounted for approximately 20 percent of our segment revenue, with the next 100 customers making up approximately 45 percent of our segment revenue. Performance Chemicals' net sales for 2020, 2019 and 2018 were $706.1 million, $802.3 million, and $733.2 million, respectively; the chart below allocates our 2020 Performance Chemicals' net sales by geography. Sales are assigned to geographic areas based on the location of the third party to which product was shipped.ngvt-20201231_g3.jpg
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.
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. 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.
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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. 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 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. Our cold in-place recycling additives allow our customers to reopen existing roadways faster, while also lowering overall costs and jobsite emissions.
Customers
We supply our pavement technologies products to approximately 500 customers in 60 countries through our own direct sales force, primarily in North America and Asia, as well as a network of third-party distributors. In 2020, our ten largest customers accounted for 40 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., and Kao Specialties Americas LLC. 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. Our combined expertise in the disciplines of chemistry and civil engineering provides us with a comprehensive understanding of the relationship between the molecular structure of our products and their impact on the performance of pavement systems. This allows us to develop products customized to local markets and to consistently deliver cost-effective solutions for our customers.
Oilfield Technologies
Our oilfield technologies product line produces and sells a wide range of innovative specialty chemical products for the global oilfield industry, including well service additives and chemical solutions for production and downstream applications.
Well Service Additives. Our well service additive products are formulated to increase emulsion stability and aid in fluid loss control for oil-based drilling fluids. Other additives include rheology modifiers, which are used to improve the viscosity properties of oil-based fluids and are typically used in deep water applications and wetting agents, which provide improved wetting of solids and aid in the efficiency of the drilling process. This family of products aids in accessing difficult to reach oil and gas reserves, both on and offshore around the globe.
Production and Downstream Applications. Our production and downstream products serve as corrosion inhibitors or their components. Crude oil and natural gas production are characterized by variable production rates and unpredictable changes due to the nature of the produced fluids including but not limited to water and salt content. Our corrosion inhibitors maximize production rates by reducing the downtime for key equipment and pipes due to corrosion.
Customers
We sell our oilfield technologies products to approximately 70 customers around the globe using our own sales representatives and third-party distributors. In 2020, our ten largest customers accounted for 70 percent of the product line's sales. Our largest customers include Ecolab, Inc., Halliburton Co., Schlumberger Ltd., and Newpark Resources, Inc.
Competition
Our primary oilfield technologies competitors include Lamberti S.p.A., Mobile Rosin Oil Company, Inc., and First Source Technologies, Inc. We compete based on our ability to understand our customers’ applications and deliver solutions that aid in their improvement of the exploration and production of oil and gas for end users. Our scale and manufacturing flexibility help us deliver the creativity, expedience, and confidence that customers in oilfield technologies require.
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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, and industrial intermediates.
Adhesives. We are a global supplier of tackifier resins, which provide superior adhesion to difficult-to-bond materials, to the adhesives industry. Adhesive applications for our products include construction, product assembly, packaging, pressure sensitive labels and tapes, hygiene products, and road markings.
Agrochemicals. We produce dispersants for crop protection products as well as other naturally derived products for agrochemicals. 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.
Lubricants. We 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. 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. Our products improve gloss, drying speed, viscosity, adhesion, and rub resistance of the finished ink to the substrate. We produce a wide array of resins, typically specifically tailored to a customer’s use, which can vary by application, pigment type, end use, formulation, manufacturing, and printing process.
Industrial Intermediates. Our functional chemistries are sold across a diverse range of industrial markets including, among others, paper chemicals, textile dyes, rubber, cleaners, mining, and nutraceuticals.
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 2020, our ten largest customers accounted for 40 percent of the product line's sales. Our largest customers include Ennis-Flint, Inc., H.B. Fuller Co., Syngenta Crop Protection AG, and Flint Group.
Competition
Our competitors, which differ depending on the product, application, and region, include Kraton Corp., Eastman Chemical Co., ExxonMobil Corp., Borregaard ASA, Lawter, Inc., Respol S.A., Firmenich SA, 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. Reputation and loyalty are also valued by our customers and allow us to win business when other factors are equal. 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 tackifier. 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. 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.
Engineered Polymers
Our engineered polymers product line includes caprolactone and caprolactone based specialty chemicals for use in coatings, resins, elastomers, adhesives, bioplastics, and medical devices.
Coatings. We supply coating products that are used in automobile refinishing, sports floors, and marine applications. Our products enhance product performance by providing abrasion resistance, long durability, high quality finish, and enhanced performance in resin modification. Our products are often preferred because they provide a combination of traits that allows customers to displace several combinations of other products.
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Resins. We supply resin products that are used in acrylic resins, polyurethane, and inks. Our products enhance product performance due to their protective properties, all weather performance and reduction or elimination of the need for solvents in formulations. Our products tend to be preferred where superior or particular performance levels are required.
Elastomers. We supply products that are used in wheel seals, mining screens, and polyurethane films. Our products enhance product performance due to their resistance to wear and tear, ability to maintain form and function under pressure and temperature and excellent UV resistance. Our products are often used in highly demanding applications where competing products do not reach required performance levels.
Adhesives. We supply products that are used in hot-melts, fabric lamination, and miscellaneous footwear components. Our products enhance product performance through their durability and substrate compatibility. Our products are often preferred because they are found to be easier to process and apply compared to competitive offerings.
Bioplastics. We supply products that are used in films, paper coatings, disposable cups, utensils, and packaging. Our products enhance product performance due to the combination of their biodegradability, improved mechanical properties, and wide processability when used in combination with other bioplastic solutions. Special grades are also available to help comply with food contact legislation in various regions and applications.
Medical Devices. We also supply products that are used in medical devices. Our products enhance end product performance due to their low melting point and ability to be thermoformed. Our products improve process conditions and provide patient comfort compared to competitive thermoplastic offerings.
Customers
We sell our engineered polymers chemicals to over 300 customers around the globe through our own direct sales representatives and third-party sales representatives and distributors. In 2020, our ten largest customers accounted for 40 percent of the product line's sales. Our largest customers include polyurethane, adhesive, coatings, and bioplastics manufacturers.
Competition
Our primary caprolactone competitors are Daicel, Corp. and BASF SE, but we also face competition from other competing materials. We compete based on performance as compared to the other competitive materials. We also compete by strengthening our technology-focused relationships with our customers.
Raw Materials and Production
Our Performance Chemicals segment serves customers globally from three manufacturing locations in the U.S. and one in the UK. Most of our pavement technologies, oilfield technologies, and industrial specialties products are derived from CTO, a co-product of the kraft pulping process, where pine is used as the source of the pulp. We also produce products derived from lignin, which is extracted from black liquor, another co-product of the kraft pulping process.
In 2016, we entered into a long-term supply agreement with WestRock pursuant to which we purchase all of the CTO and CTO equivalent tons of black liquor soap skimming ("BLSS"), the precursor to CTO, from WestRock's kraft mills as of such date, subject to certain exceptions. In 2018, we entered into a 20-year supply agreement with Georgia-Pacific LLC (“Georgia-Pacific”), pursuant to which we purchase the lesser of 125,000 tons of CTO and the aggregate output of CTO produced and originating at certain of Georgia-Pacific’s paper mills.
These relationships with WestRock and Georgia-Pacific are strategically important to our Performance Chemicals business due to the limited supply of CTO globally, of which we believe a significant portion is already under long-term supply agreements with other consumers of CTO. Under these agreements, we currently expect to source approximately 60 to 70 percent of our CTO requirements through 2025 based on the maximum operating rates of our three Performance Chemicals' pine chemicals facilities. The remainder of our CTO needs are sourced through short-term contracts in the open market.
We believe the supply from Georgia-Pacific, WestRock, and our other contracted sources of CTO will allow us to serve expected customer demand through 2021.
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
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cyclohexanone 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, UK facility under a long-term supply agreement.
The other key raw materials used in the Performance Chemicals business are nonylphenol, pentaerythritol, and ethylene amines. These are sourced where possible through multiple suppliers to protect against supply disruptions and to maintain competitive pricing.
Energy
Our manufacturing processes require a significant amount of energy. We are dependent on natural gas to fuel the processes in our chemical refineries and activated carbon plants. 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 in order to mitigate expected fluctuations in market prices and the volatility to earnings and cash flow resulting from changes to pricing of natural gas purchases. All of our manufacturing processes also consume a significant amount of electricity. Each of these facilities are located in regulated service areas that have stable rate structures with reliable electricity supply.
Governmental Regulations
Our manufacturing operations are subject to regulation by governmental and other regulatory authorities with jurisdiction over our operations. These regulations include regulations concerning 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 and the Toxic Substances Control Act in the U.S. and the Registration, Evaluation and Authorization of Chemicals, or REACH, directive in Europe, the UK, and other countries. It is not possible to quantify with certainty the material effects that compliance with these regulations may have upon the capital expenditures, earnings or competitive position of Ingevity, but we currently anticipate that such compliance will not have a material adverse effect on any of the foregoing. Environmental and other regulations and related legal proceedings have the potential to involve significant costs and liability for Ingevity.
Intellectual Property
Intellectual property, including patents, closely guarded trade secrets and highly proprietary manufacturing know-how, as well as other proprietary rights, is a critical part of maintaining our technology leadership and competitive edge. Our business strategy includes filing patent and trademark applications where appropriate for proprietary developments, as well as protecting our trade secrets. We actively create, protect, and enforce our intellectual property rights. We are filing for and being granted patents for product and process developments for our Performance Materials business that we believe are both novel and consistent with trends in the technological development of engines. Our Evotherm Warm Mix Asphalt technology is supported by numerous global patents. Additionally, our Caprolactone Business and related technologies are supported by numerous global patents and trademarks, as well as proprietary manufacturing and technical know-how. The protection afforded by our patents and trademarks varies based on country, scope, and coverage, as well as the availability of legal remedies. 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.
In November 2020, we received an adverse decision finding some, but not all, of the claims in our “canister bleed emissions” patent invalid in our infringement action against BASF Corp in the U.S. District Court for the District of Delaware. We intend to challenge the decision, however in the meantime we anticipate the decision having limited impact on our commercial operations or financial results through the patent's expiration in March 2022.
Seasonality
There are a variety of seasonal dynamics, including global climate and weather conditions, that impact our businesses, though none materially affect 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. From a supply perspective, this seasonality is effectively managed through pre-season inventory build and active inventory management throughout the year.
Human Capital Management
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. Ingevity is
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dependent upon our talented production workers who are key to ensuring safe and successful operations, as well as upon engineering, technical, sales and application specialists, together with experienced industry professionals, who are integral to our success. Additionally, we rely on senior management in order to establish and execute our business strategies. Our success depends, in part, on our ability to attract, retain and motivate these key performers. Our failure to attract and retain those making significant contributions could adversely affect our financial condition and results of operations.
We currently employ approximately 1,750 employees, of whom approximately 76 percent are employed in the U.S. Approximately 20 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 upon 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.
During the first quarter of 2020, at our Wickliffe, Kentucky Performance Materials' manufacturing facility, the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC ratified a three-year collective bargaining agreement ("CBA"), which expires February 1, 2023. Additionally, at our Crossett, Arkansas Performance Chemicals' manufacturing facility, the International Association of Machinists and Aerospace Workers Union ("IAM") agreed to extend the existing CBA by one year until January 15, 2021, in exchange for economic considerations. The Company and IAM resumed negotiations in Crossett in the first quarter of 2021, and the parties continue to operate under the expired CBA. In addition, at our Covington, Virginia Performance Materials' manufacturing facility, the CBA with Covington Local Union 464 of the International Brotherhood of Electrical Workers ("IBEW") agreement expired on January 15, 2021 and the CBA with Covington Local 675 affiliated with The Association of Western Pulp and Paper Workers ("AWPPW") will expire on December 1, 2021. The Company and Covington IBEW began negotiations in the first quarter of 2021, and the parties continue to operate under the expired CBA. Negotiations with the Covington AWPPW will begin in the fourth quarter of 2021.

Item 1A. Risk Factors
Based on the information currently known to us, we believe that the following information identifies the most significant risk factors affecting our company. However, the risks and uncertainties our company faces are not limited to those set forth in the risk factors described below. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. In addition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.
If any of the following risks and uncertainties develops 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.
Operational and Market Risks
The Novel Coronavirus (COVID-19) pandemic has and may continue to have an adverse effect our business, financial condition, results of operations, cash flows and stock price.
COVID-19 continues to spread in areas where we operate and transact business and the related pandemic continues to impact our operations and financial results. We have been classified as an essential business in the jurisdictions that have made this determination to date and have been allowed to continue our operations. However, our facilities - as well as the operations of our suppliers, customers and third-party sales representatives and distributors - have been, and will continue to be, disrupted by governmental and private sector responses to the COVID-19 pandemic. This includes business shutdowns, work-from-home orders and social distancing protocols, travel or health-related restrictions, as well as quarantines, self-isolations, and disruptions to transportation channels. Additional government shutdown orders or stay-at-home directives, or an outbreak among or quarantine of 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. Furthermore, we may be unsuccessful at continuing to manage our business effectively due to the extended period of working from home by some of our employees. Working remotely may eventually lead to inefficiencies, as well as technology and security risks. Additionally, we are unsure 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.
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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. Additionally, the operations of our customers have been, and could be further, disrupted, which can result in customers attempting to delay or cancel orders, reduce future orders or seek extended payment terms. Furthermore, the negative impact of the COVID-19 pandemic on the global economy, adverse changes in the industries that our products serve or adverse changes in the financial condition of our customers could further adversely impact demand for our products, particularly in the automotive industry and industrial and consumer applications. During 2020, many of our customers experienced extensive disruptions due to the COVID-19 pandemic, which directly impacted sales of our products, most particularly in the automotive industry during the second quarter of 2020. In addition, the significant decrease in energy prices resulting from the COVID-19 pandemic, including crude oil and gas prices, negatively impacted and could further impact the activities of our oilfield customers, resulting in a corresponding adverse effect on demand for our oilfield products. Furthermore, the markets for our engineered polymers products have also been negatively impacted due to reduced global industrial and consumer demand, and the markets for our industrial specialties products have also been negatively impacted due to reduced global industrial demand.
The extent of the impact that the COVID-19 pandemic will continue to have on our business and financial results will depend on various uncertainties and future developments, including the ultimate duration, severity and spread of the virus in the countries where we operate and transact business, additional actions taken by government authorities in their efforts to contain or treat the virus and to mitigate the economic disruptions and the global economic downturn resulting from the pandemic, the speed at which vaccines are deployed and their effectiveness against COVID-19 variants. These impacts, together with the other factors discussed, are highly uncertain and cannot be predicted, however they have and may continue to have an adverse effect on our business, financial condition, results of operations, cash flows and a negative impact on our stock price. There can be no assurance that any decrease in sales resulting from the COVID-19 pandemic will be offset by increased sales in subsequent periods.
If increasingly more stringent air quality standards worldwide are not adopted, our growth could be impacted.
Environmental standards drive the implementation of gasoline vapor emission control systems by automotive manufacturers. Given increasing societal concern over global warming and health hazards associated with poor air quality, there is growing pressure on regulators across the globe to take meaningful action. For those countries that have not significantly regulated gasoline vapor emissions, enacting more stringent regulations governing gasoline vapor emissions represents a significant upside to the Company’s automotive carbon business. However, regulators may react to a variety of considerations, including economic and political, that may mean that any such more stringent regulations are delayed or shelved entirely, in one or more countries or regions. 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.
In order to compete successfully, we must develop new products and technologies meeting evolving market and customer needs; disruptive technologies could reduce the demand for the Company’s products.
Our industries and the end-use markets into which we sell our products experience periodic technological change and product improvement. Our future growth will depend on our ability to gauge the direction of commercial and technological progress in key end-use markets and on our ability to fund and successfully develop, manufacture and market products in such changing end-use markets. If we fail to keep pace with the evolving technological innovations in our end-use markets on a competitive basis, including with respect to innovation with regard to the development of alternative uses for, or application of, products developed that utilize such end-use products, our financial condition and results of operations could be adversely affected. Similarly, we face competition in our applications. Disruptive technology involving new or superior solutions could reduce the demand for the Company’s products.
Adverse conditions in the automotive market may adversely affect demand for our automotive carbon products.
Sales of our automotive activated carbon products are tied to global automobile production levels. Automotive production in the markets we serve can be affected by macro-economic factors such as interest rates, fuel prices, shifts in vehicle mix (including shifts toward alternative energy vehicles), consumer confidence, employment trends, regulatory and legislative oversight requirements and trade agreements. For example, the global economic downturn in 2008/2009, led to a drastic reduction in vehicle sales and an even greater reduction in vehicle production as OEMs right-sized their inventories to meet the lower sales volumes. Furthermore, primarily during the first half of 2020, the COVID-19 pandemic led to a significant reduction in vehicle production and vehicles sales were negatively impacted by government shutdown orders and stay-at-home directives. Regional disruptions due to localized natural disasters or multi-month strikes at suppliers or OEMs can also
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significantly impact vehicle production and therefore demand for our automotive carbon products. Additionally, if the COVID-19 pandemic continues, it could negatively impact demand for automotive sales, which would adversely impact sales of our carbon products, as was the case in the second quarter of 2020. The extent to which COVID-19 pandemic impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including the severity of the COVD-19 pandemic, actions to contain COVID-19 or treat its impact, among others.
The Company’s pavement technologies product line is heavily dependent on government infrastructure spending.
A significant portion of our customers’ 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’ need for our products is similarly reduced. 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. 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 the expenditures and delays 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.
The Company’s engineered polymers product line is reliant on cyclical end-markets, such as the automotive market and the apparel market, which are impacted by changes in consumer and industrial demand.
Our engineered polymers product line end-markets are subject to constant and rapid technology changes, changes in consumer preferences, evolving standards, and changes in product supply and demand. 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 OEM specifications and global automobile production levels. In the footwear market, demand for our engineered polymers products, where our products are sold into footwear adhesives, may be affected by consumer discretionary spending and changes in consumer preferences. 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 product offerings. Additionally, if the COVID-19 pandemic continues, it could negatively impact demand for consumer and industrial demand, which would continue to adversely impact sales of our engineered polymers products.
The Company’s oilfield technologies business is significantly affected by trends in oil and natural gas prices that affect the level of exploration, development and production activity.
Demand for our oilfield technologies services and products is particularly sensitive to the level of exploration, development and production activity of, and the corresponding capital spending by, oil and natural gas companies, including national oil companies. The level of exploration, development and production activity is directly affected by trends in oil and natural gas prices, which historically have been volatile. Crude oil prices have declined significantly during 2020. Pricing moved from $58 per barrel in January to a low of $16 per barrel in April to $48 per barrel in December. Pricing is not currently forecasted to change significantly from these levels during 2021. While these pricing levels show recovery from the lows reached during the first half of 2020, they remain off their highs seen in the last decade.
Any prolonged low pricing environment for oil and natural gas is likely to result in reduced demand for our oilfield technology products, which may have a material adverse effect on our results of operations.
The Company’s printing inks business serves customers in a market that is facing declining volumes and downward pricing.
The use of inks in which our printing ink resins are used, such as those made for magazines and catalogs, has significantly decreased, as the printing industry has experienced a reduction in demand due to various factors including competition from alternative sources of communication, including email, the Web, electronic readers, interactive television and electronic retailing. The impacts of these changes have led to continued intense competition and downward pricing pressures on printing inks, and therefore, our ink products.

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A prolonged period of low energy prices may materially impact our results of operations.
The price of energy may directly or indirectly impact demand, pricing or the profitability for certain Ingevity products. As petroleum oil prices fall or change rapidly, Ingevity products may be disadvantaged due to the fact that CTO and BLSS are thinly traded commodities with pricing commonly established for periods ranging from one quarter to one year periods of time. Due to this, alternative technologies which compete with product offerings provided by Ingevity may be advantaged from time to time in the marketplace. Protracted periods of high volatility or sustained oversupply of petroleum oil may also translate into increased competition from petroleum-based alternatives which would otherwise be consumed in petroleum transportation fuel blends. In addition, pricing for competing naturally derived oils such as palm or soybean is likely to provide further pressure on pricing of the Company’s products during periods of depressed petroleum prices.
We face competition from producers of substitute products and new technologies, and new or emerging competitors.
In the Performance Materials segment, there is competition from various other activated carbon manufacturers. These competitors are actively trying to develop more advanced and alternative activated carbon products that would more effectively compete with our products in the automotive applications. There is also competition in the automotive applications from non-activated carbon competitors or product offerings. For example, at least one OEM is using sealed tanks in certain subsets of its vehicles to comply with the Tier 3/LEV III regulations. While the sealed tank fuel systems generally require a similarly sized pelleted activated carbon canister to deal with refueling emissions, in most cases, they do not use an extruded honeycomb to meet current U.S. and California regulations. There is also emerging competition in the "honeycomb" space, which may impact sales of the Company's products. If a competitor were to succeed in developing products that are better suited for automotive evaporative emissions capture applications and/or a competitive technology, such as, but not limited to, sealed gas tanks, were to be implemented across a material number of vehicle platforms, our financial results could be negatively impacted.
In addition, growth in alternative vehicles, such as all-electric vehicles and hydrogen fuel cell vehicles, which do not use gasoline, may also adversely affect the demand for our products.
In the Performance Chemicals segment, hydrocarbon resins and gum rosin-based products compete with TOR-based resins in the adhesives and printing inks markets. The price of gum rosin has a significant impact on the market price for TOR and rosin derivatives and the price of gum rosin is driven by labor rates, land leasing costs and various other factors that are not within our control. Hydrocarbon resins, for example, C5 resins, are co-products from isoprene (synthetic rubber). Availability and pricing are determined by the supply and demand for synthetic rubber as well as crude oil prices 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. The market price for TOFA products is impacted by the prices of other fats and oils and the prices for other fats and oils is driven by actual and expected harvest rates, crude oil prices and the biofuel market. Other monomers, thermoplastics and polyols compete with our caprolactone based products. The price for our products is impacted by the prices of competitive substitutes which are influenced by petroleum prices as well as other supply and demand factors. Additionally, the Company faces competition from competitors that are actively developing new technologies and competing products across the segment. A significant investment by a competitor in a competitive technology or product line could negatively impact our financial results.
Disruptions at any of our manufacturing facilities could negatively impact our production, financial condition and results of operations.
An operational disruption in any of our facilities could negatively impact production and our financial results. The occurrence of a natural disaster, such as a hurricane, tropical storm, earthquake, tornado, severe weather, flood, fire, as well as risk that may result from climate change, could cause operational disruptions. Additionally, other unanticipated problems such as labor difficulties, health epidemics (including the COVID-19 pandemic), equipment failure, cyberattack or other cybersecurity incident, capacity expansion difficulties or unscheduled maintenance could also cause operational disruptions of varied duration. These types of disruptions could materially adversely affect our financial condition and results of operations to varying degrees dependent upon the facility, the duration of the disruption, our ability to shift business to another facility or find alternative sources of materials or energy. In certain cases, we have some products that are only made at one facility. For example, in the case of our Waynesboro, Georgia facility, while we have some redundancies within the facility, we only have one facility that makes our extruded honeycomb products. In the case of our Warrington, UK facility, while we have some redundancies within the facility, we only have one facility that makes our caprolactone products. As other examples, in our Charleston SC facility, we source black liquor from an adjacent paper mill to isolate and subsequently modify lignin to serve
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our agriculture customers while we make the vast majority of our ink resin products in our DeRidder, Louisiana facility. While we have redundancies within these facilities, we have limited ability to make these products at other facilities. Finally, the COVID-19 pandemic is causing travel disruptions, quarantines and/or closures, which could result in disruptions to our manufacturing and production operations at our facilities, as well as those of our suppliers and customers. Any losses due to these events may not be covered by our existing insurance policies or may be subject to certain deductibles.
We are dependent upon third parties for the provision of certain critical operating services at several of our facilities.
We are dependent upon third parties for the provision of certain critical operating services at our Covington, Virginia Performance Materials facility and at the following Performance Chemicals facilities: Crossett, Arkansas; North Charleston, South Carolina; and Warrington, UK.
We are dependent on: (i) the WestRock Covington, Virginia paper mill (“WestRock VA Paper Mill”) for the provision of electricity, water, compressed air, steam and wastewater treatment to our Covington Performance Materials facility; (ii) the WestRock North Charleston, South Carolina paper mill (“WestRock SC Paper Mill”) for the provision of water, compressed air, steam and wastewater treatment at our North Charleston Performance Chemicals facility; (iii) the Georgia-Pacific Crossett, Arkansas paper mill and chemicals plant (collectively, “Georgia-Pacific Mill”) for the provision of natural gas, water, compressed air and wastewater treatment to our Crossett Performance Chemicals facility; and (iv) Solvay Plant for the provision of water, compressed air, nitrogen, natural gas, electricity, steam, and wastewater treatment and waste management at our Warrington Performance Chemicals facility. We have existing long-term contractual arrangements covering these services for our Covington, Crossett, North Charleston and Warrington facilities. The provision of these services would be at risk if any of the counterparties were to idle or permanently shut down the associated mill, or if operations at the associated mill 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.
In the event that WestRock VA Paper Mill, WestRock SC Paper Mill, Georgia-Pacific Mill or Solvay Plant were to fail to provide the contracted services, we would be required to obtain these services from other third parties at an increased cost or to expend capital to provide these services ourselves. The expenses associated with obtaining or providing these services, as well as any interruption in our operations as a result of the failure of the counterparty to provide these services, may be significant and may adversely affect our financial condition and results of operations.
Furthermore, in the event that WestRock VA Paper Mill wastewater treatment operations do not comply with permits or applicable law and the WestRock VA Paper Mill is unable to determine the cause of such 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 affect our financial condition and results of operations.
Additionally, (i) our Covington Performance Materials facility is located on real property leased from WestRock pursuant to a long-term lease agreement, and is surrounded by the WestRock VA Paper Mill, (ii) a portion of our North Charleston Performance Chemicals facility is located on real property leased from WestRock and is adjacent to the WestRock SC Paper Mill; (iii) our Crossett Performance Chemicals facility is located on real property leased from Georgia-Pacific pursuant to a long-term lease agreement, and is surrounded by the Georgia-Pacific Paper Mill and (iv) our Warrington, UK Performance Chemicals facility is located on real property leased from Solvay pursuant to multiple long-term lease agreements, and is surrounded by the Solvay Plant. In the event we were to have a dispute with WestRock, Georgia-Pacific or Solvay regarding the terms of the relevant lease agreements, or we were otherwise unable to fully access or utilize the leased property, the associated business disruption may be significant and may adversely affect our financial condition and results of operations.
We are also dependent on third parties for the disposal of brine, which results from our own conversion of BLSS into CTO. If these service providers do not perform under their contracts, the costs of disposing of brine ourselves, including, for example, the transportation costs, could be significant.
We are dependent on certain customers.
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 both segments) accounted for 36 percent of total sales for 2020. No customer accounted for more than 10 percent of total sales for 2020. With some exceptions, our business with those large
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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. If a major customer or multiple smaller customers elected not to purchase products from us, our financial condition and results of operations would be materially adversely affected.
We are dependent on attracting and retaining key personnel.
The Company is dependent upon its production workers, as well as upon engineering, technical, sales and application specialists, together with experienced industry professionals and senior management. Our success depends, in part, on our ability to attract, retain and motivate these key performers. Our failure to attract and retain those making significant contributions could adversely affect our financial condition and results of operations.
Work stoppages and other labor relations matters may have an adverse effect on our financial condition and results of operations.
Many of our production employees are governed by collective bargaining agreements (“CBAs”). From time to time the Company engages in negotiations to renew CBAs as those contracts are scheduled to expire. During the first quarter of 2020, at our Wickliffe, Kentucky Performance Materials' manufacturing facility, the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC ratified a three-year collective bargaining agreement ("CBA"), which expires February 1, 2023. Additionally, at our Crossett, Arkansas Performance Chemicals' manufacturing facility, the International Association of Machinists and Aerospace Workers Union ("IAM") agreed to extend the existing CBA by one year until January 15, 2021, in exchange for economic considerations. The Company and IAM resumed negotiations in Crossett in the first quarter of 2021, and the parties continue to operate under the expired CBA. In addition, at our Covington, Virginia Performance Materials' manufacturing facility, the CBA with Covington Local Union 464 of the International Brotherhood of Electrical Workers ("IBEW") agreement expired on January 15, 2021 and the CBA with Covington Local 675 affiliated with The Association of Western Pulp and Paper Workers ("AWPPW") will expire on December 1, 2021. The Company and Covington IBEW began negotiations in the first quarter of 2021, and the parties continue to operate under the expired CBA. Negotiations with the Covington AWPPW will begin in the fourth quarter of 2021.
While the Company has generally positive relations with its labor unions, there is no guarantee the Company will be able to successfully negotiate new union contracts without work stoppages, labor difficulties or unfavorable terms. If we were to experience any extended interruption of operations at any of our facilities because of strikes or other work stoppages, our results of operations and financial condition could be materially and adversely affected. In addition, due to the co-location of our Covington, Crossett, North Charleston, and Warrington facilities within the WestRock VA Paper Mill, Georgia-Pacific Mill, WestRock SC Paper Mill and Solvay Plant facilities, a strike or work stoppage at any of these facilities could cause disruptions at our facilities, and our results of operations could be materially and adversely affected.
As we rely on information technologies to conduct our business, security breaches and other disruptions could compromise our information and expose us to liability, which could cause our business and reputation to suffer.
We rely on information technologies, some of which are managed by third parties, to manage the day-to-day operations and activities of our business, operate elements of our manufacturing facilities, manage our customer and vendor transactions, and maintain our financial, accounting and business records. 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, maintenance and transmission of sensitive, confidential and personal data is critical to our operations and business strategy. We follow industry best practices and have instituted a system of security policies, procedures, capabilities, and internal controls designed to protect this information. Additionally, we engage third-party threat detection and monitoring services which includes a global cyber security incident response team and our auditor conducts periodic ISO 27001 gap assessments on our information technology systems. Despite our security design and controls, and those of our third-party providers, we may be vulnerable to cyber- attacks, computer viruses, security breaches, inadvertent or intentional employee actions, system failures and other risks that could potentially lead to the compromising of sensitive, confidential or personal data, improper use of our, or our third-party provider systems, solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, and operational disruptions. In addition, the global regulatory environment pertaining to information security and privacy is increasingly demanding, with new and changing requirements, such as the European Union’s General Data Protection Regulation (“GDPR”), California Consumer Privacy Act (“CCPA”), and the China Cybersecurity Law. GDPR, which applies to the collection, use, retention, security, processing, and
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transfer of personally identifiable information of residents of European Union (“EU”) countries, mandates new compliance obligations, and imposes significant fines and sanctions for violations. CCPA requires companies to provide new data disclosure, access, deletion and opt-out rights to consumers in California. Implementing and complying with these laws and regulations may be more costly or take longer than we anticipate, or could otherwise affect our business operations. Such breaches, cyber incidents and disruptions, or failure to comply with laws and regulations related to information security or privacy, could result in legal claims or proceedings against us by governmental entities or individuals, significant fines, penalties or judgements, disruption of our operations, remediation requirements, changes to our business practices, and damage to our reputation, which could adversely affect our business, financial condition or results of operations.
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 necessary due to the finite life of the existing operating system. 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. Such an initiative is a major financial undertaking and will require substantial time and attention of management and key employees. The implementation of the ERP system may prove to be more difficult, costly, or time consuming than expected, and it is possible that the system will not yield the benefits anticipated. Failure to successfully design and implement the new ERP system as planned could harm our business, financial condition, and operating results. 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 affected.

Supply Chain Risks
Disruptions within our supply chain could negatively impact our production, financial condition and results of operations.
We could be adversely affected by disruptions within our supply chain and transportation network. Our products are transported by truck, rail, barge or ship by third-party providers. 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. Significant delays or increased costs affecting these transportation methods could materially affect our financial condition and results of operations. Disruptions at our suppliers could lead to short term or longer rises in raw material or energy costs and/or reduced availability of materials or energy, potentially affecting our financial condition and results of operations. For example, Solvay is our primary provider of hydrogen peroxide to our Warrington, UK Performance Chemicals facility, which is co-located with the Solvay Warrington, UK chemical plant (“Solvay Plant”). Disruptions at the Solvay Plant impacting Solvay’s ability to supply hydrogen peroxide could adversely affect our financial condition and results of operations. See also “—General Business and Economic Risks—Our engineered polymers product line may be adversely affected by the UK’s withdrawal from the European Union” and Operational and Market Risks - We are dependent upon third parties for the provision of certain critical operating services at several of our facilities.”
Our Performance Chemicals segment is highly dependent on CTO, which is limited in supply; lack of access to sufficient CTO would impact our ability to produce CTO-based products.
The availability of CTO is essential to the Company’s Performance Chemicals segment. Availability of CTO is directly linked to the production output of kraft mills using pine as their source of pulp, which 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. Most of the CTO made available for sale by its producers in North America is covered by long-term supply agreements, further constraining availability.
In 2016, we entered into a long-term supply agreement with WestRock pursuant to which we purchase all of the BLSS and CTO output from WestRock’s existing (at the time of separation) kraft mills, subject to certain exceptions. This agreement includes pricing terms based on market prices.
Pricing for the products in our agreement with WestRock is based on the prevailing market prices of products at the time of purchase. The pricing formulas are subject to certain pricing floors as set forth in the agreement with WestRock. Given
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the take-or-pay requirements of the agreement with WestRock, in adverse market conditions we could be required to purchase BLSS and CTO from WestRock at prices where our results of operations could be materially and adversely affected.
In 2018, we entered into a 20-year CTO supply agreement with Georgia-Pacific, pursuant to which we purchase the lesser of 125,000 tons of CTO and the aggregate output of CTO produced and originating at certain of Georgia-Pacific’s paper mills.
Pricing for the CTO in our agreement with Georgia-Pacific is a market-based price, subject to ongoing adjustments. Given the take-or-pay requirements of the agreement with Georgia-Pacific, in adverse market conditions we could be required to purchase CTO from Georgia-Pacific at prices where our results of operations could be materially and adversely affected.
If any of our suppliers (including WestRock or Georgia-Pacific) 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 would be materially and adversely affected.
Beginning in 2025, either party to the WestRock agreement may provide a notice to the other party terminating the WestRock agreement five years from the date of such notice. Beginning one year after such notice, the quantity of products provided by WestRock under the agreement will be gradually reduced over a four-year period based on the schedule set forth in the agreement. In addition, from 2022 until 2025, either party may provide notice to remove a kraft mill as a supply source. The two largest kraft mills under the WestRock agreement currently supply approximately 17 to 19 percent and 18 to 20 percent, respectively, of the total amount of products supplied under our agreement with WestRock. If WestRock exercises its rights to terminate the agreement or remove a kraft mill as a supply source, and we are unable to arrange for a substitute supply of CTO, we would be unable to continue to produce the same quantity of products and our results of operations could be materially and adversely affected.
There are other pressures on the availability of CTO. 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. Also, as described below, there are regulatory pressures that may incentivize suppliers of CTO to sell CTO into alternative fuel markets rather than to historical end users such as Ingevity. Furthermore, 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 meeting Ingevity’s quality standards. For example, the combined impact of Hurricane Katrina in August 2005 and Hurricane Rita in September 2005 caused significant damage to forests throughout the southern U.S. This significantly affected the availability and quality of the supply of CTO during late 2005 and into 2006. In addition, Hurricanes Florence and Michael in 2018 disrupted vendor operations and reduced availability of CTO supply well into 2019.
The European Union’s Directive 2009/28 on the promotion of the use of energy from renewable resources (“Renewable Energy Directive” or “RED”), which will be repealed on July 1, 2021 (the “RED”), and the new Directive replacing Directive 2009/28, which has to be implemented by Member States by June 30, 2021 (the “RED II”)) and similar legislation in the U.S. and elsewhere may incentivize the use of CTO as a feedstock for production of alternative fuels.
In December 2008, the EU adopted the Renewable Energy Directive, which established a 20 percent EU-wide target for energy consumed from renewable sources relative to the EU’s gross final consumption of energy, as well as a 10 percent target for energy consumed from renewable sources in the transport section. In order to reach these targets, the RED established mandatory targets for each Member State and required each Member State to adopt a national renewable energy action plan setting forth measures to achieve its national targets. The RED also established sustainability criteria for biofuels, which must be satisfied in order for the consumption of a fuel to count toward a Member State’s national targets. CTO-based biofuel currently satisfies the RED’s biofuel sustainability criteria.
In spring 2015, the EU adopted amendments to the Renewable Energy Directive. RED now expressly lists CTO as a residue-type feedstock whose use in biofuel would make that biofuel eligible for double counting towards national targets of the Member States, and at least two Member States additionally have or plan fiscal incentives for the domestic marketing of CTO-based and other qualifying biofuels. In 2018, the EU adopted RED II (effective 2021-2030) which increased the target for energy consumed from renewable sources in the transport section to 14 percent by 2030. Advanced biofuels must comprise 0.2% of the transport sector by 2022 and 3.5% by 2030. CTO remains an expressly listed feedstock for advanced biofuels and may be doubled counted toward these goals. RED II requires Member States shall prepare plans to set national targets and growth trajectories for their contributions to the EU-wide target. The RED II now includes language to consider the potential for undue market distortion for the raw materials used to meet these targets.
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In addition to these developments in the European Union, various pieces of legislation regarding the use of alternative fuels have been introduced in the United States at both the Federal and State level. Currently, none of the legislation mandates or provides incentives for the use of CTO as a transportation fuel. Some regional cap and trade programs may incentivize the use of CTO in stationary sources. Future legislation in the U.S. and elsewhere may promote the use of CTO as a feedstock for production of alternative fuels.
Because the supply of CTO is inherently constrained by the volume of kraft pulp processing, any diversion of CTO for production of alternative fuels would reduce the available supply of CTO as the principal raw material of the pine chemicals industry. As described above, the Company is highly dependent on CTO as an essential raw material, and if the Company is unable to procure an adequate supply of CTO due to competing new uses such as for biofuel production, the Company’s results of operations would be materially and adversely affected.
Pricing for CTO is subject to particular pricing pressures by reason of limited supply and competing demands for end use, and we may be limited in our ability to pass on increased costs to our customers.
Pricing for CTO (which accounted for approximately 11 percent of all of our cost of sales and 37 percent of our raw materials purchases for 2020) is subject to particular pricing pressures by reason of the limited supply elasticity of the product and competing demands for its use, all of which drive pressure on price:
CTO is a product of the kraft pulping process, and the global supply of CTO is inherently constrained by the volume of kraft pulping processing;
CTO can be burned as alternative fuels, either in support of the originating pulp mill operations, by energy companies or biofuel companies; and
Regulations or other incentives that mandate or encourage the consumption of CTO for use in biofuels or alternatives.
We may not have the ability to pass through any increases in our cost of CTO to our customers in the form of price increases or other adjustments, with a resulting material adverse effect on our results of operations. Additionally, we may be placed at a competitive disadvantage relative to our competitors who rely on different primary raw materials or who have more favorable terms with their suppliers.
We are also dependent on other raw materials, and these are also subject to pricing pressures; lack of access to these raw materials and inability to pass on price increases could adversely affect our financial condition and results of operations.
The Company is dependent on other raw materials, including, but not limited to, hardwood sawdust, phosphoric acid, ethylene amines, black liquor, nonylphenol, hydrogen peroxide, cyclohexanone, and pentaerythritol. Raw material costs are a significant operating expense of the Company. The cost of raw materials can be volatile and subject to increases as a result of, among other things, changing economic conditions, political or policy considerations, supply and demand levels, instability in energy producing nations, and natural events such as extreme weather events or even insect infestations. Any interruption in the supply of the raw materials on which we depend, and any increases in the cost of raw materials that we are not able to pass on to customers in the form of price increases or other adjustments, may materially impact our financial condition and results of operations.

International Operations Risks
We are exposed to the risks inherent in international sales and operations.
In 2020, sales to customers outside of the U.S. made up approximately 50 percent of our total sales, and we sell our products to customers in approximately 75 countries. We have exposure to risks of operating in many foreign countries, 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.;
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difficulties and costs associated with complying with a wide variety of complex laws, treaties and regulations;
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;
political and economic instability;
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.
Any one or more of the above factors could adversely affect our international operations and could significantly affect our financial condition and results of operations. We have also expanded our participation in certain markets. As our international operations and activities expand, we inevitably have greater exposure to the risks of operating in many foreign countries.
Our reported results could be adversely affected by currency exchange rates and currency devaluation could impair our competitiveness.
Due to our international operations, we transact in many foreign currencies, including but not limited to the euro, pound sterling, Japanese yen and Chinese renminbi. As a result, we are subject to the effects of changes in foreign currency exchange rates. During times of a strengthening U.S. dollar, our reported net revenues and operating income will be reduced because the local currency will be translated into fewer U.S. dollars. During periods of local economic crisis, local currencies may be devalued significantly against the U.S. dollar, potentially reducing our margin. Ingevity may enter forward exchange contracts and other financial contracts in an attempt to mitigate the impact of currency rate fluctuations. However, there can be no assurance that such actions will eliminate any adverse impact from variation in currency rates. Also, actions to recover margins may result in lower volume and a weaker competitive position, which may have an adverse effect on our profitability.
Our operations outside the U.S. require us to comply with a number of U.S. and foreign regulations, violations of which could have a material adverse effect on our financial condition and results of operations.
Our operations outside the U.S. require us to comply with a number of U.S. and international regulations. For example, our operations in countries outside the U.S. are subject to the U.S. Foreign Corrupt Practices Act (“FCPA”), which prohibits U.S. companies and their agents and employees from providing anything of value to a foreign official for the purposes of influencing any act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person or corporate entity, or obtain any unfair advantage. Additionally, certain of our operations are subject to the UK Bribery Act, which prohibits public and commercial bribery. Our activities may create the risk of unauthorized payments or offers of payments by our employees, agents or joint venture partners that could be in violation of anti-corruption laws, even though these parties are not subject to our control. We have internal control policies and procedures and training and compliance programs for our employees and agents with respect to the FCPA, UK Bribery Act and other applicable anti-corruption laws. However, we cannot assure that our policies, procedures and programs always will protect us from reckless or criminal acts committed by our employees or agents. Allegations of violations of applicable anti-corruption laws may result in internal, independent or government investigations. Violations of anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our financial condition and results of operations.
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In addition, the shipment of goods, services and technology across international borders subjects us to extensive trade laws and regulations. Our import activities are governed by the unique customs laws and regulations in each of the countries where we operate. Moreover, many countries, including the U.S., control the export and re-export of certain goods, services and technology and impose related export record-keeping and reporting obligations. Governments may also impose economic sanctions against certain countries, persons and entities that may restrict or prohibit transactions involving such countries, persons and entities, which may limit or prevent our conduct of business in certain jurisdictions. We are also required to comply with similar laws and regulations in other countries where we do business, with the same associated risks.
The laws and regulations concerning import activity, export record-keeping and reporting, export control and economic sanctions are complex and constantly changing. These laws and regulations can cause delays in shipments and unscheduled operational downtime. Moreover, any failure to comply with applicable legal and regulatory trading obligations could result in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from governmental contracts, seizure of shipments and loss of import and export privileges. In addition, investigations by governmental authorities as well as legal, social, economic and political issues in these countries could have a material adverse effect on our business, results of operations and financial condition. We are also subject to the risks that our employees, joint venture partners and agents outside of the U.S. may fail to comply with other applicable laws.
Changes in trade policy, including the imposition of tariffs and the resulting consequences, could have a material adverse effect on our financial condition and results of operations.
The U.S. has indicated its intent to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements. Additionally, the UK and the EU have negotiated the EU-UK Trade and Cooperation Agreement and are in the process of implementing. Furthermore, the U.S. has recently imposed tariffs on certain U.S. imports and is considering the imposition of tariffs on other U.S. imports. China and other countries have responded with retaliatory tariffs on certain U.S. exports and additional tariffs could be imposed. The resulting trade war could have a significant adverse effect on world trade and the world economy. To the extent that changes in trade policies, trade tariffs and other restrictions imposed by the United States, EU, China and other countries increase the price of, or limit the amount of goods imported, the costs of our raw materials and products may be adversely affected and the demand from our customers for products may be diminished, which could adversely affect our revenues and profitability. We cannot predict future trade policy or the terms of any renegotiated trade agreements or their impact on our business. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the global economy, which in turn could adversely impact our business, financial condition and results of operations.
Our engineered polymers product line may be adversely affected by the United Kingdom's withdrawal from the European Union.
Our engineered polymers product line is manufactured in Warrington, UK. On January 31, 2020, the UK ceased to be a member of the EU, an event generally referred to as “Brexit”. Effective January 1, 2021, the EU and the UK form two separate markets and two distinct regulatory and legal spaces, creating new barriers to trade in goods and services and to cross-border mobility and exchanges.
Even though the UK reached an agreement with the EU on the terms of their future cooperation, as reflected in the EU-UK Trade and Cooperation Agreement (“TCA”) and related documents, it is unclear how the TCA will actually be implemented, how it will affect the nature of the UK’s relationship with the EU and how it will impact our business. The scope and implementation of the UK’s arrangements with other countries is also unclear. This uncertainty could continue to affect UK, EU and worldwide economic or market conditions and could contribute to instability in global financial markets and the value of the pound sterling or other currencies, including the Euro.
Additionally, the regulatory frameworks of the UK and the EU may subsequently change and potentially divergent laws and regulations may develop, including those relating to UK REACH and EU REACH. This may have adverse practical and/or operational implications for our engineered polymers product line, including potential disruption to supply chains, additional compliance and operational costs, required product modifications and necessary operational changes.
The trade uncertainties stemming from Brexit and the impact of possible regulatory changes may adversely affect our engineered polymers operations, results of operations and financial condition.

22



Acquisition Risks
The Caprolactone Acquisition may expose us to unknown liabilities.
On February 13, 2019, we acquired all the shares of Perstorp UK Ltd. and, as a result, we are generally subject to all of its liabilities, subject to a warranty and indemnity insurance policy and remedies in the Caprolactone Agreement. We may learn additional information about the Caprolactone Business that adversely affects us, such as unknown liabilities, including liabilities under environmental or tax laws, or issues that could affect our ability to comply with other applicable laws. If previously unknown liabilities or other obligations of the Caprolactone Business emerge in the future, and available remedies are not sufficient, our business could be materially affected.
The inability to make or effectively integrate future acquisitions may affect our results.
As part of our growth strategy, we may pursue acquisitions of complementary businesses and product lines or invest in joint ventures. The ability to grow through acquisitions or other investments depends upon our ability to identify, negotiate, complete and integrate suitable acquisitions or joint venture arrangements. If we fail to successfully integrate acquisitions into our existing business, our financial condition and results of operations could be adversely affected.

Legal and Regulatory Risks
From time to time we may be engaged in legal actions associated with our intellectual property rights and automotive carbon business, including associated potential counterclaims; if we are unsuccessful, these could potentially result in an adverse effect on our financial condition and results of operations.
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 our “canister bleed emissions” patent. We will endeavor to protect our intellectual property rights in key jurisdictions in which our products are produced or used, in jurisdictions into which our products are imported, and in jurisdictions where our competitors have significant manufacturing capabilities. Our success will depend to a significant degree upon our ability to protect and preserve our intellectual property rights. However, we may be unable to obtain or maintain protection for our intellectual property in key jurisdictions. Although we own and have applied for numerous patents and trademarks throughout the world, we may have to rely on judicial enforcement of our patents and other proprietary rights. Our patents and other intellectual property rights may be challenged, invalidated, circumvented and rendered unenforceable or otherwise compromised. We are currently involved in several legal actions relative to intellectual property associated with our "canister bleed emissions" patent. These have resulted in counterclaims against us, including claims alleging antitrust and interference with business relations, which we are vigorously defending. These and other legal actions to protect, defend or enforce our intellectual property rights could result in significant costs and diversion of our resources and our management’s attention, and we may not prevail in any such suits or proceedings. In November 2020, we received an adverse decision finding some, but not all, of the claims in our “canister bleed emissions” patent invalid in our infringement action against BASF Corp in the U.S. District Court for the District of Delaware. We intend to challenge the decision, however in the meantime we anticipate the decision having limited impact on our commercial operations or financial results through patent expiration in March 2022. A failure to protect, defend or enforce our intellectual property could have an adverse effect on our financial condition and results of operations. Similarly, third parties may assert claims against us and our customers and distributors alleging our products infringe upon third-party intellectual property rights.
We also rely materially upon unpatented proprietary technology, know-how and other trade secrets to maintain our competitive position. 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 breaches of such agreements. For instance, we manufacture some of our products in China where we may be at a greater risk of a third party misappropriating our intellectual property despite the foregoing policies, procedures and agreements. The failure of our patents or confidentiality agreements to protect our proprietary technology, know-how or trade secrets could result in significantly lower revenues, reduced profit margins or loss of market share.


23



We face competition from infringing intellectual property activity.
The Company is currently involved in several legal actions relative to intellectual property associated with our “canister bleed emissions” patent. These infringing activities also represent a competitive threat. The Company is vigorously addressing infringing activity through legal actions and other available means. While the Company believes its legal action claims are meritorious, there can be no assurances that the Company will prevail in such actions.
Our business involves hazards associated with chemical manufacturing, storage, transportation and disposal.
There are hazards associated with the chemicals we manufacture and the related storage and transportation of our raw materials, including common solvents, such as toluene and methanol, and reactive chemicals, such as acrylic acid, all of which fall under the OSHA Process Safety Management Code. These hazards could lead to an interruption or suspension of operations and have an adverse effect on the productivity and profitability of a particular manufacturing facility or on us as a whole. While we endeavor to provide adequate protection for the safe handling of these materials, issues could be created by various events, including natural disasters, severe weather events, acts of sabotage and performance by third parties, and as a result we could face the following potential hazards: piping and storage tank leaks and ruptures; mechanical failure; employee exposure to hazardous substances; and chemical spills and other discharges or releases of toxic or hazardous substances or gases.
These hazards may cause personal injury and loss of life, damage to property and contamination of the environment, which could lead to government fines, work stoppage injunctions, lawsuits by injured persons, damage to our public reputation and brand and diminished product acceptance. If such actions are determined adversely to us or there is an associated economic impact to our business, we may have inadequate insurance or cash flow to offset any associated costs. Such outcomes could adversely affect our financial condition and results of operations.
Regulation of exposure to certain process chemicals could require expenditures or changes to our product formulations.
Certain regulations applicable to our operations, including the Occupational Safety and Health Act and the Toxic Substances Control Act in the U.S. and the Registration, Evaluation and Authorization of Chemicals, or REACH, directive in Europe, the UK and other countries, prescribe limits restricting exposure to a number of 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. 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 in the U.S., Europe and elsewhere, which might further restrict or prohibit the use of, and exposure to, these chemicals. 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.
The Company’s operations are subject to a wide range of general and industry-specific environmental laws and regulations.
The Company’s operations are subject to a wide range of general and industry-specific environmental laws and regulations, including, for example, related to bisphenol A, formaldehyde and air emissions. Changes in environmental laws and regulations, or their application, could subject the Company to significant additional capital expenditures and operating expenses in future years. Additionally, changes in the regulation of greenhouse gases, as well as future climate change laws and regulations, depending on their nature and scope, could subject our operations to significant additional costs or limits on operations. Our manufacturing facilities use energy, including electricity and natural gas and some of our plants emit amounts of greenhouse gas that may in the future be affected by legislative and regulatory efforts to limit greenhouse gas emissions. Potential consequences could include increased energy, transportation and raw material costs and may require the Company to make additional investments in facilities and equipment or limit our ability to grow.
However, any such changes are uncertain and, therefore, it is not possible for the Company to predict with certainty the amount of additional capital expenditures or operating expenses that could be necessary for compliance with respect to any such changes. Even without such regulation, increased public awareness and adverse publicity about potential impacts on climate change emanating from us or our industry could have a negative impact on us.



24



Financial and Economic Risks
We may be adversely affected by general global economic and financial conditions beyond our control.
Our businesses may be affected by a number of factors that are beyond our control such as general economic and business conditions, changes in tax laws or tax rates and conditions in the financial services markets including counterparty risk, insurance carrier risk, rising interest rates, inflation, deflation, fluctuations in the value of local currency versus the U.S. dollar or the impact of a stronger U.S. dollar which may negatively impact our ability to compete. Macro-economic challenges, including conditions in financial and capital markets and levels of unemployment, and the ability of the U.S. and other countries to deal with their rising debt levels may continue to put pressure on the economy or lead to changes in tax laws or tax rates. There can be no assurance that changes in tax laws or tax rates will not have a material impact on our future cash taxes, effective tax rate or deferred tax assets and liabilities. Adverse developments in global or regional economies could drive an increase or decrease in the demand for our products that could increase or decrease our revenues, increase or decrease our manufacturing costs and ultimately increase or decrease our results of operations, financial condition and cash flows. As a result of negative changes in the economy, customers, vendors or counterparties may experience significant cash flow problems or cause consumers of our products to postpone or refrain from spending in response to adverse economic events or conditions. If customers are not successful in generating sufficient revenue or cash flows or are precluded from securing financing, they may not be able to pay or may delay payment of accounts receivable that are owed to us or we may experience lower sales volumes. Our financial condition and results of operations could be materially and adversely affected by any of the foregoing.
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. Ingevity’s ability to issue debt or enter into other financing arrangements on acceptable terms could be materially adversely affected if there is a material decline in the demand for Ingevity’s products or in the solvency of its customers or suppliers or if other significantly unfavorable changes in economic conditions occur. Volatility in the world financial markets could increase borrowing costs or affect Ingevity’s ability to gain access to the capital markets, which could have a material adverse effect on Ingevity’s competitive position, business, financial condition, results of operations and cash flows.
Our current level of debt could adversely affect our financial health and prevent us from fulfilling our debt obligations.
Our debt requires significant interest and principal payments. Our ability to make scheduled payments on or to refinance our debt obligations and to fund working capital, planned capital expenditures and expansion efforts and any strategic alliances or acquisitions we may make in the future depends on our ability to generate cash in the future and our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, regulatory and other factors beyond our control. There can be no assurance that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our debt.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our debt, including the notes. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. If our operating results and available cash are insufficient to meet our debt service obligations, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions or to obtain the proceeds sought from them, and these proceeds may not be adequate to meet any debt service obligations then due. Further, we may need to refinance all or a portion of our debt on or before maturity, and there can be no assurances we will be able to refinance any of our debt on commercially reasonable terms or at all. Any inability to generate sufficient cash flow or refinance our indebtedness on favorable terms could have a material adverse effect on our business, results of operations, and financial condition.
There could be significant liability if the Separation were determined to be a taxable transaction.
In connection with the Separation, our former parent received an opinion from outside tax counsel to the effect that the requirements for tax-free treatment under Section 355 of the Code would be satisfied. The opinion relied on certain facts, assumptions, representations and undertakings from our former parent and us regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions, representations or undertakings were incorrect or not satisfied, we and our stockholders may not be able to rely on the opinion of tax counsel and could be subject to significant tax liabilities.
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Notwithstanding the opinion of tax counsel, the IRS could determine upon audit that the Separation is taxable if it determines that any of these facts, assumptions, representations or undertakings were incorrect or violated or if it disagrees with the conclusions in the opinion, or for other reasons, including as a result of certain significant changes in the share ownership of our company or our former parent after the Separation. If the Separation were determined to be taxable for U.S. federal income tax purposes, our former parent and its stockholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities, and we could incur significant liabilities.
We are subject to continuing contingent tax-related liabilities of WestRock.
Under the U.S. Internal Revenue Code of 1986, as amended (the “Code”), each corporation that was a member of WestRock’s consolidated tax reporting group during any taxable period or portion of any taxable period ending on or before the effective time of the distribution is severally liable for the U.S. federal income tax liability of the entire consolidated tax reporting group for such taxable period. In connection with the Separation, we entered into the tax matters agreement with WestRock (the "Tax Matters Agreement") that allocates the responsibility for prior period taxes of WestRock’s consolidated tax reporting group between Ingevity and WestRock. If WestRock were unable to pay any prior period taxes for which it is responsible, however, we could be required to pay the entire amount of such taxes, and such amounts could be significant. The Tax Matters Agreement generally gives WestRock discretion to handle consolidated tax returns and audits for pre-distribution periods in a manner which may be unfavorable to us and which may result in additional tax costs to us.

ITEM 1B.    UNRESOLVED STAFF COMMENTS
None.

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ITEM 2.    PROPERTIES
We are headquartered in North Charleston, South Carolina and operate manufacturing facilities in the U.S., United Kingdom, and People's Republic of China and warehouse and distribution facilities globally. The following locations represent the principal properties of Ingevity. We believe these facilities are adequate and suitable for our current operations, and that the production capacity of our facilities is sufficient to meet current demand. In the case of the properties identified as “Leased”, we nevertheless own the manufacturing assets themselves.
Own / LeaseFunctional Use
North Charleston, South Carolina
Own / Lease (1)
Corporate Headquarters;
Application Labs;
Performance Chemicals: Manufacturing
Covington, VirginiaLeasePerformance Materials: Manufacturing
Crossett, ArkansasLeasePerformance Chemicals: Manufacturing
DeRidder, LouisianaOwnPerformance Chemicals: Manufacturing
Waynesboro, Georgia
Own(2)
Performance Materials: Manufacturing
Shanghai, People's Republic of ChinaLeaseRegional Headquarters; Application Lab
Wickliffe, KentuckyLeasePerformance Materials: Manufacturing
Changshu, People’s Republic of ChinaLeasePerformance Materials: Manufacturing
Warrington, United KingdomLeasePerformance Chemicals: Manufacturing, Application Lab
Zhuhai, People’s Republic of ChinaLeasePerformance Materials: Manufacturing, Application Lab
________________________
(1)Portions of the manufacturing operations are on leased land and our corporate headquarters building is leased.
(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).


ITEM 3.    LEGAL PROCEEDINGS
We are from time to time, involved in routine litigation incidental to our operations. None of the litigation in which we are currently involved, individually or in the aggregate, is material to our combined financial condition or results of operations nor are we aware of any material pending or contemplated proceedings.

ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.
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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. Fortson53President and Chief Executive Officer and Interim Chief Financial Officer & Treasurer (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)
Michael P. Smith60Executive Vice President & President of Performance Chemicals, Strategy and Business Development (2017-present); Senior Vice President Strategy and Business Development (2016-2017), Vice President of Health and Nutrition at FMC Corporation (2013-2015); Division General Manager of BioPolymer at FMC Corporation (2006-2013)
S. Edward Woodcock55Executive Vice President & President of Performance Materials (2015-present); Vice President of MeadWestvaco's Carbon Technologies business (2010-2015)
Stacy L. Cozad50
Executive Vice President, General Counsel & Secretary (2021-present); Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary at Spirit AeroSystems Holdings, Inc. (2017-2021); Senior Vice President, General Counsel and Corporate Secretary at Spirit AeroSystems Holdings, Inc. (2016-2017); Associate General Counsel – Litigation at Southwest Airlines Co. (2009-2015)
_______________
(1)    As of December 31, 2020.
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.

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PART II
ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDERS MATTER AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for Registrant's Common Equity and Related Stockholder Matters

Ingevity's common stock ($0.01 par value) is listed on the New York Stock Exchange, Inc. ("NYSE") under the symbol "NGVT." There were approximately 5,100 record holders of our common stock as of February 15, 2021.

Unregistered Sales of Equity Securities

Not Applicable.

Issuer Purchases of Equity Securities

The following table summarizes information with respect to the purchase of our common stock during the three months ended December 31, 2020.

PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal 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, 2020— $— — $467,615,810 
November 1-30, 2020145,786 $68.49 145,786 $457,630,510 
December 1-31, 2020637,656 $71.53 637,656 $412,017,195 
Total783,442 783,442 
_______________
(1) On February 28, 2020, our Board of Directors authorized the repurchase of up to $500.0 million of our common stock. We currently do not have any specific timetable or price targets for repurchasing shares, and may suspend or terminate the program at any time. Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market prevailing conditions and other factors. Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market prevailing conditions and other factors.

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 and the Dow Jones (DJ) U.S. Specialty Chemicals Index since Ingevity's stock began "regular-way" trading on the NYSE on May 16, 2016.

The graph assumes the investment of $100 in each of Ingevity's common stock, the S&P MidCap 400 Index, and DJ U.S. Specialty Chemicals Index on May 16, 2016, and that all dividends, if any, were reinvested.

December 31,
May 16, 201620162017201820192020
Ingevity Corporation$100.00 $204.24 $262.36 $311.58 $325.32 $281.94 
S&P MidCap 400 Index100.00 115.37 134.09 119.22 150.41 170.94 
Dow Jones U.S. Specialty Chemicals Index$100.00 $105.60 $129.24 $120.40 $135.15 $155.70 
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ngvt-20201231_g4.jpg
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. The stock price performance included in the graph above is not necessarily indicative of future stock performance.

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ITEM 6.    SELECTED FINANCIAL DATA
Our consolidated balance sheets as of December 31, 2020, 2019, 2018, 2017, and 2016, respectively, and our consolidated statements of operations, comprehensive income (loss), and cash flows for the years ended December 31, 2020, 2019, 2018, and 2017, respectively, consist of the consolidated balances of Ingevity as prepared on a stand-alone basis. Our consolidated statements of operations, comprehensive income (loss), and cash flows for the year ended December 31, 2016 have been prepared on a “carve out” basis for the periods and dates prior to the Separation. The selected consolidated financial data should be read in conjunction with our consolidated financial statements included within Part II. Item 8 of this Form 10-K.
Years Ended December 31,
In millions, except per share and share data20202019201820172016
Statements of Operations Data:
Net sales$1,216.1 $1,292.9 $1,133.6 $972.4 $908.3 
Gross profit465.5 482.0 416.8 329.0 274.4 
Income (loss) before income taxes235.1 227.9 221.8 174.8 87.0 
Net income (loss) attributable to Ingevity stockholders181.4 183.7 169.1 126.5 35.2 
Per Share Data attributable to Ingevity stockholders (1)
Basic earnings (loss) per share$4.39 $4.39 $4.02 $3.00 $0.83 
Diluted earnings (loss) per share$4.37 $4.35 $3.97 $2.97 $0.83 
Balance Sheet Data (at period end):
Working capital (2)
$405.3 $247.7 $239.4 $215.5 $158.3 
Property, plant, and equipment, net703.6 664.7 523.8 438.5 422.8 
Total assets2,334.5 2,141.7 1,315.2 929.6 832.8 
Long-term debt including finance lease obligations1,267.4 1,228.4 741.2 444.0 481.3 
Total equity642.1 530.8 338.7 277.9 134.6 
Other Data:
Capital expenditures$82.1 $114.8 $93.9 $52.6 $56.7 
Depreciation and amortization expense100.2 85.0 57.0 40.4 38.8 
Weighted average common stock outstanding (in thousands) (1):
Basic shares41,330 41,801 42,037 42,130 42,108 
Diluted shares41,547 42,200 42,601 42,529 42,271 
_______________
(1)    Basic and diluted earnings (loss) per share for the year ended December 31, 2016 is calculated using the weighted average number of common shares outstanding for the period beginning after May 15, 2016, the date of Separation.
(2)    Defined as current assets less current liabilities.

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ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Introduction
Management’s discussion and analysis of Ingevity’s financial condition and results of operations (“MD&A”) should be read in conjunction with Item 8. Financial Statements and Supplementary Data. 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. Many of these statements are macroeconomic in nature and are, therefore, beyond the control of management. 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") is a leading global manufacturer of specialty chemicals and high performance activated carbon materials. We provide innovative solutions to meet our customers’ unique and demanding requirements through proprietary formulated products. We report in two business segments, Performance Materials and Performance Chemicals.
Our Performance Materials segment consists of our automotive technologies and process purification product lines. Performance Materials manufactures products in the form of powder, granular, extruded pellets, extruded honeycombs, and activated carbon sheets. Automotive technologies products are sold into the gasoline vapor emission control applications within the automotive industry, while process purification products are sold into the food, water, beverage, and chemical purification industries.
Our Performance Chemicals segment consists of our pavement technologies, oilfield technologies, industrial specialties, and engineered polymers product lines. Performance Chemicals manufactures products derived from crude tall oil ("CTO") and lignin extracted from the kraft pulping process as well as caprolactone monomers and derivatives derived from cyclohexanone and hydrogen peroxide. Performance Chemicals products serve as critical inputs used in a variety of high performance applications, including warm mix paving, pavement preservation, and pavement reconstruction and recycling (pavement technologies product line), oil well service additives and oil production and downstream application (oilfield technologies product line), adhesives, agrochemicals, lubricants, printing inks, and industrial intermediates (industrial specialties product line), coatings, resins, elastomers, adhesives, bio-plastics, and medical devices (engineered polymers product line).

Recent Developments

2020 Senior Notes
On October 28, 2020, we issued $550.0 million aggregate principal amount of 3.875 percent senior unsecured notes due 2028 (the “2020 Notes”) in a private placement pursuant to an indenture dated as of October 28, 2020, by and among Ingevity, the subsidiary guarantors party thereto and U.S. Bank National Association, as trustee.
The net proceeds from the sale of the 2020 Notes, after deducting deferred financing fees of $8.8 million, were used to repay our $375.0 million term loan from 2019, with the remainder being utilized to repay outstanding balances under our revolving credit facility.
Interest payments on the 2020 Notes are due semiannually in arrears on November 1st and May 1st of each year, beginning on May 1, 2021, at a rate of 3.875 percent per year. The 2020 Notes will mature on November 1, 2028.
Revolving Credit Facility Amendment
On October 28, 2020, we entered into Amendment No. 5 to our existing credit agreement, dated as of March 7, 2016. Among other things, Amendment No. 5 extended the maturity date with respect to our revolving credit facility from August 7, 2023 to October 28, 2025 and reduced the aggregate principal amount of revolving commitments thereunder from $750.0 million to $500.0 million.

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Coronavirus Pandemic
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. COVID-19 has led to adverse impacts on the U.S. and global economies, and created uncertainty regarding potential impacts to our supply chain, operations, and customer demand. We have been classified as an essential business in the jurisdictions that have made this determination to date, allowing us to continue operations. However, our facilities - as well as the operations of our suppliers, customers, and third-party sales agents and distributors - have been, and will continue to be, disrupted by governmental and private sector responses to COVID-19. This includes business shutdowns, work-from-home orders and social distancing protocols, travel or health-related restrictions, as well as quarantines, self-isolations, and disruptions to transportation channels.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which includes modifications to the limitation on business interest expense and net operating loss provisions, and provided a payment delay of the employer's portion of U.S. Social Security taxes during 2020, after the date of enactment. We deferred $4.7 million of employer U.S. Social Security taxes due in 2020, with 50 percent due by December 31, 2021 and the remaining 50 percent by December 31, 2022. The CARES Act is not expected to have a material impact on our consolidated financial statements.
In order to strengthen our short-term liquidity and to ensure financial flexibility, in March 2020, we drew down $250 million from our revolving credit facility as a precautionary measure, all of which was repaid by year end. We also implemented work-from-home policies and protocols for the majority of our global salaried workforce, as well as social distancing practices to ensure the safety of our employees at our manufacturing facilities. During the second quarter, we decreased production at some of our U.S. and China based manufacturing plants due to COVID-19 customer demand impacts and implemented a cost reduction initiative further described in Note 16 to the consolidated financial statements included in Part II Item 8 of this Form 10-K. During the third quarter, we resumed normal production at all manufacturing plants as customer demand improved.
While the disruptions caused by the pandemic are currently expected to be temporary, there is uncertainty regarding the virus's duration and severity and the effectiveness of vaccines. COVID-19 has impacted, and will continue to impact, our results of operations, financial position, and liquidity.

Results of Operations
Years Ended December 31,
In millions, except per share data202020192018
Net sales$1,216.1 $1,292.9 $1,133.6 
Cost of sales750.6 810.9 716.8 
Gross profit465.5 482.0 416.8 
Selling, general and administrative expenses149.4 163.1 132.4 
Research and technical expenses22.6 19.7 21.5 
Separation costs— — — 
Restructuring and other (income) charges, net18.5 1.8 (0.5)
Acquisition-related costs1.8 26.9 10.8 
Other (income) expense, net(4.1)(4.3)1.0 
Interest expense47.1 54.6 33.2 
Interest income(4.9)(7.7)(3.4)
Income (loss) before income taxes235.1 227.9 221.8 
Provision (benefit) for income taxes53.7 44.2 40.0 
Net income (loss)181.4 183.7 181.8 
Less: Net income (loss) attributable to noncontrolling interests
— — 12.7 
Net income (loss) attributable to Ingevity stockholders$181.4 $183.7 $169.1 


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Net sales
The table below shows 2020 and 2019 Net sales and percentage variances from 2019 and 2018, respectively.
Percentage change vs. prior year
In millions, except percentagesNet salesTotal changeCurrency
effect
Price/MixVolume
Year Ended December 31, 2020$1,216.1 (6)%—%1%(7)%
Year Ended December 31, 20191,292.9 14%(1)%4%11%

Year Ended December 31, 2020 vs. 2019
The sales decrease in 2020 was driven by a volume decline of $85.2 million (seven percent of sales), primarily related to a volume decline in Performance Chemicals of $89.1 million, offset slightly by a volume increase in Performance Materials of $3.9 million, favorable pricing and product mix of $7.6 million (one percent of sales) and favorable foreign exchange impacts of $0.8 million (less than one percent of sales).
Year Ended December 31, 2019 vs. 2018
The sales increase in 2019 was driven primarily by a volume increase of $123.7 million (11 percent of sales). Performance Materials and Performance Chemicals contributed $70.1 million and $53.6 million, respectively, to the volume growth during the year. The acquisition of Caprolactone Business ("Caprolactone Acquisition"), completed in the first quarter of 2019, contributed $122.1 million to the favorable volume growth during the period. Additionally, the favorable pricing and product mix of $43.2 million (four percent of sales) across both segments, offset partially by unfavorable foreign exchange impacts of $7.6 million (one percent of sales) resulted in the year over year Net sales increase.
Gross Profit
Year Ended December 31, 2020 vs. 2019
Gross profit decline of $16.5 million was driven by unfavorable sales volume impacting gross profit by $35.8 million, increased manufacturing costs of $2.3 million due to reduced plant throughput, and unfavorable foreign currency exchange of $0.8 million, which were partially offset by favorable pricing and product mix improvement of $14.0 million. Additionally, the prior year was negatively impacted by inventory step-up amortization related to the Caprolactone Acquisition of $8.4 million (see Note 17 within the consolidated financial statements included within Part II. Item 8 of the Form 10-K for more information). Refer to the Segment Operating Results section included within this MD&A for more information on the drivers to the changes in gross profit period over period for both segments.
Year Ended December 31, 2019 vs. 2018
Gross profit improvement of $65.2 million was driven by favorable sales volume contributing $62.0 million of additional gross profit, pricing and product mix improvement of $39.5 million. These positive impacts were offset by increased manufacturing costs of $26.0 million, inventory step-up amortization related to the acquisitions of the Pine Chemical Business and the Caprolactone Business of $7.0 million (see Note 17 within the consolidated financial statements included within Part II. Item 8 of the Form 10-K for more information), and unfavorable foreign currency exchange of $3.3 million. Refer to the Segment Operating Results section included within this MD&A for more information on the drivers to the changes in gross profit period over period for both segments.

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Selling, general and administrative expenses
Year Ended December 31, 2020 vs. 2019
Selling, general and administrative ("SG&A") expenses were $149.4 million (12 percent of sales) and $163.1 million (13 percent of sales) for the years ended December 31, 2020 and 2019, respectively. The decrease in SG&A expenses is primarily due to reduced travel and other miscellaneous costs of $12.8 million, due to the COVID-19 pandemic, decreased intellectual property litigation costs of $5.0 million, and lower employee-related incentive costs of $3.0 million. The positive impact was partially offset by an increase in amortization costs associated with intangible assets acquired from in Caprolactone Acquisition (see Note 17 within the consolidated financial statements included within Part II. Item 8 of the Form 10-K for more information) and an increase in our credit allowance reserve which increased by a combined $7.1 million.
Year Ended December 31, 2019 vs. 2018
SG&A expenses were $163.1 million (13 percent of sales) and $132.4 million (12 percent of sales) for the years ended December 31, 2019 and 2018, respectively. The increase in SG&A is primarily due to intangible asset amortization associated with the Caprolactone Acquisition and Pine Chemical Acquisition of $16.5 million and increased intellectual property litigation costs associated with our Performance Materials' intellectual property litigation of $10.2 million, and increased spending related to the new engineered polymers product line.
Research and technical expenses
Years Ended December 31, 2020, 2019, and 2018
Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, increasing to 1.9 percent in the year ended December 31, 2020 from 1.5 percent and 1.9 percent in the years ended December 31, 2019 and 2018, respectively.

Restructuring and other (income) charges, net
Restructuring and other (income) charges, net, of $18.5 million, $1.8 million, and $(0.5) million for the years ended December 31, 2020, 2019, and 2018, respectively, with the increase in 2020 primarily attributable to our business transformation initiative and certain cost reduction initiatives. See Note 16 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, 2020, 2019, and 2018
Acquisition costs of $1.8 million, $26.9 million, and $10.8 million for the years ended December 31, 2020, 2019, and 2018, respectively, were comprised of charges incurred in connection with the Caprolactone Acquisition and Pine Chemical Acquisition. See Note 17 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K for more information.

Other (income) expense, net
Years Ended December 31, 2020, 2019, and 2018
Years Ended December 31,
In millions202020192018
Foreign currency exchange (income) loss$(5.8)$0.2 $2.0 
Royalty and sundry (income) loss(0.4)(1.9)(0.8)
Impairment of equity investment (1)
1.4 — 1.5 
Other (income) expense, net0.7 (2.6)(1.7)
Total Other (income) expense, net$(4.1)$(4.3)$1.0 
_______________
(1) Represents an impairment charge related to an equity investment within our Performance Materials segment.


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Interest expense
Years Ended December 31, 2020, 2019, and 2018
Years Ended December 31,
In millions202020192018
Interest expense on finance lease obligations$6.8 $6.1 $6.2 
Interest expense on revolving credit facility and term loans22.4 36.2 14.9 
Interest expense on senior notes18.1 13.5 13.0 
Capitalized interest(0.8)(1.6)(1.1)
Other0.6 0.4 0.2 
Total interest expense$47.1 $54.6 $33.2 

Interest income
Years Ended December 31 2020, 2019, and 2018
Years Ended December 31,
In millions202020192018
Interest income on restricted investment (1)
$2.0 $2.0 $2.0 
Interest income on fixed-to-fixed cross-currency interest rate swap (2)
1.6 2.3 — 
Other1.3 3.4 1.4 
Total interest expense$4.9 $7.7 $3.4 
_______________
(1) See Note 6 to the consolidated financial statements included in Part II. Item 8 of this Form 10-K for more information.
(2) See Note 10 to the consolidated financial statements included in Part II. Item 8 of this Form 10-K for more information.

Provision (benefit) for income taxes
Years Ended December 31, 2020, 2019, and 2018
For the years ended December 31, 2020, 2019, and 2018, our effective tax rate was 22.8 percent, 19.4 percent, and 18.0 percent respectively. An explanation of the change in the effective tax rate is presented in Note 18 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K.

Net income (loss) attributable to noncontrolling interests
Year Ended December 31, 2020, 2019, and 2018
Net income (loss) attributable to noncontrolling interests was zero, zero and $12.7 million for the years ended December 31, 2020, 2019, and 2018, respectively. Our noncontrolling interest represented the 30 percent ownership interest held by a third-party U.S.-based company in our consolidated Purification Cellutions, LLC legal entity, prior to our purchase of this remaining interest on August 1, 2018.


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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. Segment Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") is the primary measure used by the Company's chief operating decision maker to evaluate the performance of and allocate resources among our operating segments. Segment EBITDA is defined as segment revenue less segment operating expenses (segment operating expenses consist of costs of sales, selling, general and administrative expenses, other (income) expense, net, excluding depreciation and amortization). We have excluded the following items from segment EBITDA: interest expense associated with corporate debt facilities, income taxes, depreciation, amortization, restructuring and other (income) charges, net, acquisition and other-related costs, pension and postretirement settlement and curtailment (income) charge. In general, the accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies in Note 3 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K.
Performance Materials
In millionsYears Ended December 31,
202020192018
Net sales
Automotive Technologies product line$477.7 $454.9 $362.0 
Process Purification product line32.3 35.7 38.4 
Total Performance Materials - Net sales$510.0 $490.6 $400.4 
Segment EBITDA249.2 213.4 169.4 
Net Sales Comparison of Years Ended December 31, 2020, 2019, and 2018
Percentage change vs. prior year
In millions, except percentagesNet salesTotal changeCurrency
effect
Price/MixVolume
Year Ended December 31, 2020$510.0 %— %%%
Year Ended December 31, 2019$490.6 23 %(1)%%18 %

Year Ended December 31, 2020 vs. 2019
Segment net sales. The increase in 2020 was driven by favorable pricing and product mix of $13.6 million (three percent of sales). Additionally, $3.9 million (one percent of sales) in volume improvements in automotive evaporative emission canister products due to stricter environmental regulation in the Chinese, North American, and European automotive markets and favorable foreign currency exchange impacts of $1.9 million (less than one percent of sales) contributed to the overall increase.
Segment EBITDA. Segment EBITDA increased $35.8 million due to favorable pricing and product mix, which contributed $18.7 million, favorable volume, primarily in the automotive evaporative emission canister products, which contributed $2.8 million, lower manufacturing costs of $5.0 million and decreased SG&A expenses and research and technical costs of $8.0 million, primarily due to reduced travel and decreased intellectual property litigation costs. Favorable foreign currency exchange impacts, offset slightly by other miscellaneous charges, also contributed $1.3 million to the increase.
Year Ended December 31, 2019 vs. 2018
Segment net sales. The increase in 2019 was driven by $70.1 million (18 percent of sales) in volume improvements in automotive evaporative emission canister products due to stricter environmental regulation in the Chinese, North American, and European automotive markets. These gains were further bolstered by favorable pricing and product mix of $22.9 million (six percent of sales), partially offset by unfavorable foreign currency exchange impacts of $2.8 million (one percent of sales).
Segment EBITDA. Segment EBITDA increased $44.0 million due to favorable volume primarily in the automotive carbon application, which contributed $41.3 million and favorable pricing and product mix, which contributed $18.9 million.

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These gains were partially offset by increased manufacturing costs of $5.4 million and increased SG&A expenses and research and technical costs of $14.6 million, primarily due to increased intellectual property litigation costs of $10.2 million. Favorable foreign currency exchange impacts and other miscellaneous income of $3.8 million also contributed to the increase.
Performance Chemicals
Years Ended December 31,
In millions202020192018
Net sales
Oilfield Technologies product line$75.6 $111.4 $114.2 
Pavement Technologies product line186.8 183.3 178.5 
Industrial Specialties product line316.0 385.5 440.5 
Engineered Polymers product line127.7 122.1 — 
Total Performance Chemicals - Net sales$706.1 $802.3 $733.2 
Segment EBITDA148.7 183.5 151.1 

Net Sales Comparison of Years Ended December 31, 2020, 2019, and 2018
Percentage change vs. prior year
In millions, except percentagesNet salesTotal ChangeCurrency
effect
Price/MixVolume
Year Ended December 31, 2020$706.1 (12)%— %(1)%(11)%
Year Ended December 31, 2019$802.3 %(1)%%%

Pine Chemical Business and Caprolactone Business
The Pine Chemical Business has been integrated into our Performance Chemicals segment and has been included within our results of operations since March 8, 2018. The Caprolactone Business has been integrated into our Performance Chemicals segment and has been included within our results of operations since it was acquired on February 13, 2019. The information presented below includes the results of these acquisitions as compared to historical results. For a pro forma comparative analysis of 2020 versus 2019 and 2019 versus 2018 results, refer to the section below titled "Performance Chemicals Pro Forma Financial Results with the Pine Chemical Business and Caprolactone Business."
Year Ended December 31, 2020 vs. 2019
Segment net sales. The sales decrease was driven by unfavorable volume of $89.1 million (11 percent of sales), which consisted of volume declines in industrial specialties ($60.1 million) and oilfield technologies ($35.8 million), partially offset by volume growth in engineered polymers ($5.9 million) and pavement technologies product lines ($0.9 million). Also driving the net sales decline was unfavorable pricing and product mix of $6.0 million (one percent of sales) in industrial specialties ($9.0 million), which was partially offset by favorable pricing and product mix in oilfield technologies ($0.1 million) and pavement technologies product lines ($2.9 million). Unfavorable foreign currency of $1.1 million (less than one percent of sales) contributed to the overall decline impact.
Segment EBITDA. Segment EBITDA decreased $34.8 million, mainly due to the decline in volume of $38.6 million, unfavorable pricing and product mix of $4.7 million, and unfavorable foreign currency exchange impacts and other miscellaneous charges of $2.0 million. Favorable SG&A expenses due to reduced travel and lower employee-related costs of $10.3 million and favorable manufacturing productivity of $0.2 million offset part of the overall decline.
Year Ended December 31, 2019 vs. 2018
Segment net sales. The sales increase was driven by favorable volume of $53.6 million (seven percent of sales), which consisted of a favorable increase in engineered polymers ($122.1 million), partially offset by volume declines in industrial specialties ($63.9 million), oilfield technologies ($3.3 million) and pavement technologies product lines ($1.3 million). Also

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driving the net sales increase was pricing and product mix of $20.3 million (three percent of sales) in industrial specialties ($12.3 million), oilfield technologies ($0.8 million), and pavement technologies product lines ($7.2 million), which were partially offset by unfavorable $4.8 million (one percent of sales) of foreign currency exchange.
Segment EBITDA. Segment EBITDA increased $32.4 million due to favorable volume of $20.7 million, favorable price and product mix of $20.6 million, as well as favorable SG&A expenses of $2.0 million. These favorable operating results were partially offset by $10.4 million of unfavorable manufacturing productivity, primarily driven by higher freight costs, and unfavorable foreign currency exchange impacts and other miscellaneous charges of $0.5 million.

Performance Chemical Pro Forma Financial Results with the
Pine Chemical Business and Caprolactone Business
We believe that reviewing our operating results by combining actual and pro forma results for our Performance Chemicals segment is useful in identifying trends in, or reaching conclusions regarding, the overall operating performance. Our pro forma segment information includes adjustments as if the acquisitions had occurred on January 1st, in the year preceding the year of acquisition. Our pro forma results are adjusted for the effects of acquisition accounting but do not include adjustments for costs related to integration activities, cost savings or synergies that might be achieved by the combined businesses. Pro forma amounts presented are not necessarily indicative of what our results would have been had we operated the Pine Chemical Business and Caprolactone Business since January 1st in the year preceding the acquisition, nor are the pro forma amounts necessarily indicative of future results.

Performance Chemical Pro Forma Financial Results Comparison
Years Ended December 31,
In millions20202019
Pro Forma
2018
Pro Forma
Net sales
Performance Chemicals, as reported (1)
$706.1 $802.3 $733.2 
Pine Chemical Business and Caprolactone Business, pro forma (2)
— 17.7 187.2 
Net Sales (3)
$706.1 $820.0 $920.4 
Segment EBITDA
Performance Chemicals, as reported (1)
$148.7 $183.5 $151.1 
Pine Chemical Business and Caprolactone Business, pro forma (2)
— 5.5 65.9 
Segment EBITDA (3)
$148.7 $189.0 $217.0 
_______________
(1)     As reported amounts are the results of operations of Performance Chemicals, including the results of the Pine Chemical Business and Caprolactone Business, post acquisition dates of March 8, 2018 and February 13, 2019, respectively.
(2)     Pro forma amounts include historical results of the Pine Chemical Business and Caprolactone Business, prior to the acquisition dates of March 8, 2018 and February 13, 2019, respectively. These amounts also include adjustments as if the acquisitions had occurred on January 1st in the year preceding the acquisition, including the effects of purchase accounting. The pro forma amounts do not include adjustments for expenses related to integration activities, cost savings, or synergies that have been or may have been realized.
(3)     The pro forma combined results are not necessarily indicative of what the results would have been had we acquired the Pine Chemical Business and Caprolactone Business on January 1st in the year preceding the acquisition, nor are they indicative of future results.


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Performance Chemicals Pro Forma Net Sales Comparison
Years Ended December 31,
In millions20202019
Pro Forma
2018
Pro Forma
Oilfield Technologies product line$75.6 $111.4 $118.8 
Pavement Technologies product line186.8 183.3 178.7 
Industrial Specialties product line316.0 385.5 455.9 
Engineered Polymers product line127.7 139.8 167.0 
Net Sales - Performance Chemicals$706.1 $820.0 $920.4 

Pro Forma Comparison of Year Ended December 31, 2020, 2019, and 2018
Percentage change vs. prior year
Performance Chemicals (In millions, except percentages)
Net SalesTotal changeCurrency
effect
Price/MixVolume
Year Ended December 31, 2020$706.1 (14)%— %(1)%(13)%
Year Ended December 31, 2019$820.0 (11)%(1)%%(13)%

Pro Forma Results Comparison - Year Ended December 31, 2020 vs. 2019
Net Sales. The decrease was driven by unfavorable volume of $106.8 million (13 percent of sales), which consisted of unfavorable volumes in industrial specialties ($60.1 million), oilfield technologies ($35.8 million) and engineered polymers product lines ($11.8 million), partially offset by a slight increase in pavement technologies ($0.9 million). Also contributing to the decline was unfavorable pricing and product mix of $6.0 million (one percent of sales) driven by unfavorable price and product mix in industrial specialties product lines ($9.0 million), partially offset by pavement technologies ($2.9 million) and oilfield technologies ($0.1 million). In addition, unfavorable foreign currency exchange impacted Net sales by $1.1 million (less than one percent of sales).
Segment EBITDA. Pro Forma Segment EBITDA decreased by $40.3 million primarily due to decreased volumes of $44.0 million, increased manufacturing, freight and warehousing costs of $2.0 million, unfavorable pricing and product mix of $4.7 million, and unfavorable foreign currency exchange impact of $1.6 million. These declines were partially offset by $12.0 million of favorable SG&A expenses.
Pro Forma Results Comparison - Year Ended December 31, 2019 vs. 2018
Net Sales. The decrease was driven by unfavorable volume of $115.4 million (13 percent of sales), which consisted of unfavorable volumes in industrial specialties ($79.2 million), engineered polymers ($26.7 million), pavement technologies ($1.6 million), and oilfield technologies product lines ($7.9 million). This decline was partially offset by pricing and product mix increase of $20.3 million (three percent of sales) driven by favorable price and product mix in oilfield technologies ($0.8 million), pavement technologies ($7.2 million), and industrial specialties product lines ($12.3 million). In addition, unfavorable foreign currency exchange impacted Net sales by $5.3 million (less than one percent of sales).
Segment EBITDA. Pro Forma Segment EBITDA decreased by $28.0 million primarily due to decreased volumes of $50.3 million, increased manufacturing, freight and warehousing costs of $5.9 million, and unfavorable foreign currency exchange impact of $1.9 million. These declines were partially offset by $19.8 million of favorable pricing and product mix and $10.3 million of favorable SG&A expenses.

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

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most directly comparable financial measure calculated in accordance with GAAP. Adjusted EBITDA is not meant to be considered in isolation or as a substitute for the most directly comparable financial measure calculated in accordance with GAAP. Adjusted EBITDA is utilized by management as a measure of profitability.
We believe this non-GAAP financial measure provides management as well as investors, potential investors, securities analysts and others with useful information to evaluate the performance of the business, because such measure, when viewed together with our financial results computed in accordance with GAAP, provides a more complete understanding of the factors and trends affecting our historical financial performance and projected future results. We believe Adjusted EBITDA is a useful measure because it excludes the effects of financing and investment activities as well as non-operating activities.
Adjusted EBITDA is defined as net income (loss) plus provision (benefit) for income taxes, interest expense, net, depreciation, amortization, restructuring and other (income) charges, net, acquisition and other-related costs, and pension and postretirement settlement and curtailment (income) charges, net.
This non-GAAP measure is not intended to replace the presentation of financial results in accordance with GAAP and investors should consider the limitations associated with these non-GAAP measures, including the potential lack of comparability of these measures from one company to another. A reconciliation of Adjusted EBITDA to net income is set forth within this section.
Reconciliation of Net Income to Adjusted EBITDA
Years Ended December 31,
In millions202020192018
Net income (loss) (GAAP)
$181.4 $183.7 $181.8 
Interest expense47.1 54.6 33.2 
Interest income(4.9)(7.7)(3.4)
Provision (benefit) for income taxes53.7 44.2 40.0 
Depreciation and amortization - Performance Materials31.2 24.2 22.2 
Depreciation and amortization - Performance Chemicals69.0 60.8 34.8 
Pension and postretirement settlement and curtailment income (charges), net0.1 — 0.2 
Restructuring and other (income) charges, net18.5 1.8 (0.5)
Acquisition and other-related costs (1)
1.8 35.3 12.2 
Adjusted EBITDA (Non-GAAP)
$397.9 $396.9 $320.5 
_______________
(1)    These charges are associated with the acquisition and integration of the Pine Chemical Business and the acquisition and integration of the Caprolactone Business. See below for more detail on the charges incurred.
Years Ended December 31,
In millions202020192018
Legal and professional service fees (i)
$1.8 $14.2 $6.9 
Inventory fair value step-up amortization (ii)
— 8.4 1.4 
Purchase price hedge adjustment (i)
— 12.7 3.9 
Acquisition and other-related costs$1.8 $35.3 $12.2 
_______________
(i)    Included within "Acquisition-related costs" on the consolidated statements of operations.
(ii)    Included within "Cost of sales" on the consolidated statements of operations.
Adjusted EBITDA
Year Ended December 31, 2020, 2019 and 2018
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.

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Total Company Outlook and 2021 Guidance
For revenue, we expect favorable volume growth in Performance Materials’ automotive technologies product line largely due to continued industry efforts to refill the vehicle pipeline and despite the absence of any significant new gasoline vapor emission control regulations. In Performance Chemicals, we expect moderate growth in demand for pavement technologies and engineered polymers based on strong paving project backlog, continued Evotherm® warm mix technology adoption, and increased demand for thermoplastics. We also anticipate growth in merchant rosin sales and our agricultural dispersants products within industrial specialties, which will be partially offset by continued softness in publication inks and our oilfield chemicals business. Our outlook reflects our expectation that the first half of 2021 will continue to be impacted by the COVID-19 pandemic and by the microchip shortage, which is disrupting the global automotive supply chain.
Adjusted EBITDA is expected to grow by one percent to six percent versus 2020. In the Performance Materials segment, growth will be driven by continued volume, price, and mix improvements, due in part to a slight uptick in demand over 2020, and a continued refilling of the automotive pipeline. This growth will be partially offset by higher logistics costs, increased compensation costs, and continued legal costs to defend our Performance Materials' intellectual property. In our Performance Chemicals segment, continued profitable growth in pavement technologies and a return to growth in engineered polymers is expected to be partially offset by somewhat lower volumes in oilfield technologies, and modest inflationary costs for freight and primary raw materials. Some risks to the 2021 outlook include lower than anticipated U.S., China, Canadian, and European vehicle sales and production, higher non-primary raw materials costs, a shift towards smaller vehicles in the U.S. (versus the shift towards light trucks as seen in recent years), and further declines in oil drilling and production in oilfield technologies, negative impacts from Brexit, and prolonged disruptions in the global supply chain. We expect to deliver fiscal year 2021 Adjusted EBITDA of $400 million to $420 million. These estimates assume that the first half of the year will continue to impacted by the COVID-19 pandemic, with improvements in economic conditions over the second half of the year.
A reconciliation of net income to adjusted EBITDA as projected for 2021 is not provided. Ingevity does not forecast net income as it cannot, without unreasonable effort, estimate or predict with certainty various components of net income. These components, net of tax, include further restructuring and other income (charges), net; additional acquisition and other related costs in connection with the Perstorp Holding AB’s Capa caprolactone business; additional pension and postretirement settlement and curtailment (income) charges; and revisions due to future guidance and assessment of U.S. tax reform. Additionally, discrete tax items could drive variability in our projected effective tax rate. All of these components could significantly impact such financial measures. Further, in the future, other items with similar characteristics to those currently included in adjusted EBITDA, that have a similar impact on comparability of periods, and which are not known at this time, may exist and impact adjusted EBITDA.

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Liquidity and Capital Resources
The primary source of liquidity for our business is the cash flow provided by operating activities. We expect our cash flow provided by operations combined with cash on hand and available capacity under our revolving credit facility to be sufficient to meet our working capital needs. Over the next twelve months, we expect to make interest payments, capital expenditures, expenditures related to our business transformation initiative, principal repayments, purchases pursuant to our stock repurchase program, and income tax payments, and to incur additional spending associated with our Performance Materials' intellectual property litigation. In addition, from time to time we may repurchase any of our outstanding 4.50 percent senior unsecured notes due in 2026 in open market or privately negotiated transactions or otherwise. We believe our sources of liquidity will 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, 2020, our undrawn capacity under our revolving credit facility was $497.7 million. In addition, we also evaluate and consider strategic acquisitions, and joint ventures, as well as other transactions to create stockholder value and enhance financial performance. Such transactions may require cash expenditures. In connection with such transactions, or to fund other anticipated uses of cash, we may modify our existing debt facilities, seek additional debt financing, issue equity securities, or some combination thereof.
Cash and cash equivalents totaled $257.7 million at December 31, 2020. We continuously monitors deposit concentrations and the credit quality of the financial institutions that hold our cash and cash equivalents, as well as the credit quality of our insurance providers, customers, and key suppliers.
Due to the global nature of our operations, a portion of our cash is held outside the U.S. The cash and cash equivalents balance at December 31, 2020 included $88.2 million held by our foreign subsidiaries. Cash and earnings of our foreign subsidiaries are generally used to finance our foreign operations and their capital expenditures. We believe that our foreign holdings of cash will not have a material adverse impact on our U.S. liquidity. If these earnings were distributed, such amounts would be subject to U.S. federal income tax at the statutory rate less the available foreign tax credits, if any, and potentially subject to withholding taxes in the various jurisdictions. The potential tax implications of the repatriation of unremitted earnings are driven by facts at the time of distribution, therefore, it is not practicable to estimate the income tax liabilities that might be incurred if such cash and earnings were repatriated to the U.S. Management does not currently expect to repatriate cash earnings from our foreign operations in order to fund U.S. operations.
Debt Obligations and Facilities
Refer to Note 11 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K for a summary of our outstanding debt obligations and revolving credit facility.

Other Potential Liquidity Needs
Share Repurchases
On February 28, 2020, our Board of Directors authorized the repurchase of up to $500.0 million of our common stock, and at December 31, 2020, $412.0 million remained unused under this program. We currently do not have any specific timetable or price targets for repurchasing shares, and may suspend or terminate the program at any time. Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market prevailing conditions and other factors.
In the year ended December 31, 2020, we repurchased $88.0 million in common shares, representing 1,533,442 shares of our common stock at a weighted average cost per share of $57.38. At December 31, 2020, $412.0 million remained unused under our Board-authorized repurchase program.
Capital Expenditures
Projected 2021 capital expenditures are expected to be $100 million to $120 million. We have no material commitments associated with these projected capital expenditures as of December 31, 2020.

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Cash flow comparison of Years Ended December 31, 2020, 2019, and 2018
Years Ended December 31,
In millions202020192018
Net cash provided by (used in) operating activities$352.4 $275.7 $252.0 
Net cash provided by (used in) investing activities(110.6)(658.3)(414.4)
Net cash provided by (used in) financing activities(50.2)369.2 153.7 
Cash flows provided by (used in) operating activities
During the year ended December 31, 2020, cash flow provided by operations increased primarily due to working capital decreases compared to 2019, which are further explained below.
Current Assets and Liabilities
December 31,
In millions20202019
Cash and cash equivalents$257.7 $56.5 
Accounts receivable, net148.0 150.0 
Inventories, net189.0 212.5 
Prepaid and other current assets34.0 44.2 
Total current assets$628.7 $463.2 
Current assets as of December 31, 2020, increased $165.5 million compared to December 31, 2019, primarily due to an increase in cash of $201.2 million. This increase was partially offset by a decrease Inventories, net, of $23.5 million, due to a concerted effort to control inventory levels in 2020 due to the COVID-19 pandemic and higher that expected customer demand in the fourth quarter. Prepaid and other current assets decreased by $10.2 million primarily related to a reduction in restricted cash from our New Market Tax Credit transaction (see Note 11 in the consolidated financial statements included within Part II. Item 8 of this Form 10-K for more information). Accounts receivable, net, was relatively flat, decreasing by $2.0 million in 2020.
December 31,
In millions20202019
Accounts payable$104.2 $99.1 
Accrued expenses46.6 33.3 
Accrued payroll and employee benefits25.1 28.2 
Current operating lease liabilities16.2 17.1 
Notes payable and current portion of long-term debt26.0 22.5 
Income taxes payable5.3 15.3 
Total current liabilities$223.4 $215.5 

Current liabilities as of December 31, 2020, increased by $7.9 million compared to December 31, 2019, driven primarily by the increase in Accrued expenses of $13.3 million, related to an increase in accrued taxes of $4.7 million, accrued interest of $2.8 million, and accrued rebates of $2.1 million. Also increasing current liabilities was a $3.5 million increase in the current portion of long-term debt (see Note 11 in the consolidated financial statements included within Part II. Item 8 of this Form 10-K for more information on our debt balances). These increases were partially offset by a decrease of $10.0 million on our Income taxes payable (see Note 18 in the taxes and related balances) and a decrease of $3.1 million in Accrued payroll and employee benefits, primarily related to lower accrued incentive costs in the current year as compared to the year ended December 31, 2019.

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Cash flows provided by (used in) investing activities
The cash used in investing activities for the year ended December 31, 2020 was primarily driven by capital and finance lease expenditures. See the table below for the capital expenditure spending by category.
The cash used in investing activities for the year ended December 31, 2019 was primarily driven by the $537.9 million purchase of the Caprolactone Business (see Note 17 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K for more information). The remaining cash used by investing activities was primarily driven by capital expenditures. See the table below for the capital expenditure spending by category.
The cash used in investing activities for the year ended December 31, 2018 was primarily driven by the $315.5 million purchase of the Pine Chemical Business. The remaining cash used by investing activities was primarily driven by capital expenditures.
For the year ended December 31, 2020, capital spending was driven primarily by maintenance and growth spending. Our Performance Materials' facilities, including Covington, Virginia, Wickliffe, Kentucky, and Waynesboro, Georgia, incurred expenditures for growth and expansion projects, as well as base maintenance and safety spending. Our Performance Chemicals' facility in Warrington, United Kingdom, completed a large, multi-year growth and cost improvement project, and there was additional spending at all of our Performance Chemicals' facilities for base maintenance and safety spending. Additionally, we had capital expenditures related to our business transformation initiative (see Note 16 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K for more information) and our new corporate headquarters.
For the year ended December 31, 2019, capital spending was driven primarily by maintenance and growth spending. Our Covington, Virginia facility incurred expenditures for its expansion project, along with base maintenance and other various equipment purchases. Also, we incurred cost improvement spending at our DeRidder, Louisiana location related to installation of new CTO tanks as well as base maintenance spending, and our Waynesboro, Georgia location expended funds primarily for growth and cost improvement. We also invested capital spending in our newest location in Warrington, United Kingdom to enable further growth and cost improvement as well as base maintenance.
For the year ended December 31, 2018, capital spending included both growth and maintenance spending for expansion and specialized equipment at our Covington, Virginia, Waynesboro, Georgia, and Changshu, China facilities, as well as base maintenance spending to support ongoing operations across both segments. In addition, we expended funds for cost improvement related to CTO tanks at our DeRidder, Louisiana facility.
Capital expenditure categoriesYears Ended December 31,
In millions202020192018
Maintenance$49.1 $44.6 $41.1 
Safety, health and environment14.9 11.2 9.6 
Growth and cost improvement18.1 59.0 43.2 
Total capital expenditures$82.1 $114.8 $93.9 
Cash flows provided by (used in) financing activities
Cash provided by 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. We used these proceeds to repay the outstanding balance on the revolving credit facility of $131.2 million and the 2019 term loan of $375.0 million. We also paid $2.2 million in debt issuance costs for the amendment to our revolving credit facility (refer to Note 11 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K for more information). Additionally, we repaid $14.1 million of other long-term borrowings, repurchased $88.0 million of our common stock, and made payments of $3.2 million related to withholding tax on vested equity awards.
Cash provided by financing activities for the year ended December 31, 2019 was $369.2 million, and was driven by proceeds from long-term borrowings from a new term loan in the first quarter of 2019 of $375.0 million and $131.3 million in net borrowings related to our revolving credit facility (refer to Note 11 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K for more information). This was offset by repayments of $122.5 million on our long-term borrowings. Additionally, we made payments of $14.3 million related to withholding tax on vested equity awards.

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Cash provided by financing activities for the year ended December 31, 2018 was $153.7 million, and was driven by proceeds from long-term borrowings from the issuance of $300.0 million senior notes (refer to Note 11 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K for more information), offset by our purchase of the remaining portion of our joint venture with Purification Cellutions, LLC of $80.0 million (refer to Note 13 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K for more information), $47.4 million to repurchase shares under a share repurchase program (also refer to Note 13 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K for more information), and noncontrolling interest distributions of $15.3 million.
Off-Balance Sheet Arrangements
Ingevity is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on Ingevity's financial condition, results of operations or cash flows.
Contractual Obligations
We enter into various contractual obligations throughout the year. Presented below are the contractual obligations of Ingevity as of December 31, 2020, and the time period in which payments under the obligations are due. Included below are disclosures regarding the amounts due under purchase obligations. A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on Ingevity and that specifies all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. We have included in the below disclosure all normal and recurring purchase orders, take-or-pay contracts and supply arrangements as well as other purchase commitments that management believes meet the above definition of a purchase obligation. See Note 11 and Note 14 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K for more information.
Payments due in period
In millionsTotal at
December 31, 2020
20212022-20232024-20252026 and beyond
Contractual obligations
Debt maturities$1,203.4 $25.3 $328.1 $— $850.0 
Contractual interest (1)
258.5 40.7 77.5 69.6 70.7 
Finance lease obligations (2)
154.2 8.1 16.3 16.6 113.2 
Operating lease obligations57.0 18.3 24.5 9.9 4.3 
Purchase obligations152.2 151.1 1.1 — — 
Total$1,825.3 $243.5 $447.5 $96.1 $1,038.2 
_______________    
(1)    Contractual interest is the interest we are contracted to pay on our long-term debt obligations. We had $353.4 million of long-term
debt subject to variable interest rates at December 31, 2020 and $850.0 million of debt subject to fixed interest rates. The rate
assumed for the variable interest component of the contractual interest obligation was the rate in effect at December 31, 2020.
Variable rates are determined by the market and will fluctuate over time.
(2)    Amounts include the interest payments, as well as the principal payment due in 2027, for the finance lease related to assets at
our Wickliffe, Kentucky facility, and payments related to the finance lease for our North Charleston, South Carolina corporate headquarters which will be paid through the lease term ending in 2035.



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New Accounting Guidance
Refer to the Note 4 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.
Critical Accounting Policies
Our principal accounting policies are described in Note 3 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K. 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. Critical accounting policies are central to our presentation of results of operations and financial condition and require management to make estimates and judgments on certain matters. We base our estimates and judgments on historical experience, current conditions and other reasonable factors.
The following is a list of those accounting policies that we have deemed most critical to the presentation and understanding of our results of operations and financial condition:
Revenue recognition
Our revenue is derived from contracts with customers, and substantially all our revenue is recognized when products are either shipped from our manufacturing and warehousing facilities or delivered to the customer. Revenue, net of returns and customer incentives, are based on the sale of manufactured products. Revenues are recognized when performance obligations under the terms of a contract with our customer are satisfied; generally, this occurs with the transfer of control of our products. For certain limited contracts, where we are producing goods with no alternative use and for which we have an enforceable right to payment for performance completed to date, we are recognizing revenue as goods are manufactured, rather than when they are shipped. Revenues are presented as Net sales on the consolidated statements of operations to the consolidated financial statements.
Since Net sales are derived from product sales only, we have disaggregated our Net sales by our product lines within each reportable segment. Net sales are measured as the amount of consideration we expect to receive in exchange for transferring goods. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. 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 in Net sales. Shipping and handling fees billed to customers are included with Net sales. If we pay for the freight and shipping, we recognize the cost when control of the product has transferred to the customer as an expense in Cost of sales on the consolidated statements of operations. Although very rare, from time to time we incur expenses to obtain a sales contract. In these cases, if these costs are for orders that are fulfilled in one year or less, we expense these costs as they are incurred. Payment terms with our customers are typically in the range of zero to sixty days. Because the period between when we transfer a promised good to a customer and when the customer pays for that good will be one year or less, we elect not to adjust the promised amount of consideration for the effects of any financing component, as it is not significant.
Valuation of tangible and intangible long-lived assets and goodwill
Our long-lived assets primarily include property, plant and equipment and other intangible assets. We periodically evaluate whether current events or circumstances indicate that the carrying value of long-lived assets to be held and used may not be recoverable. 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 quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows. We report an asset to be disposed of at the lower of its carrying value or its estimated net realizable value.
Goodwill represents the excess of cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. 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

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unit is below its carrying value. Our reporting units are our operating segments, i.e. Performance Chemicals and Performance Materials. If the carrying value of a reporting unit that includes goodwill exceeds its fair value, which is determined using both the income approach and market approach, goodwill is considered impaired. The income approach determines fair value based on discounted cash flow model derived from a reporting unit’s long-term forecasted cash flows. The market approach determines fair value based on the application of earnings multiples of comparable companies to projected earnings of the reporting unit. The amount of impairment loss is measured as the difference between the carrying value and the fair value of a reporting unit but is limited to the total amount of goodwill allocated to the reporting unit. 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.
The factors we considered in developing our estimates and projections for cash flows include, but are not limited to, the following: (i) macroeconomic conditions; (ii) industry and market considerations; (iii) costs, such as increases in raw materials, labor, or other costs; (iv) our overall financial performance; and, (v) other relevant entity-specific events that impact our reporting units.
The determination of whether goodwill is impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the estimated fair values of our reporting units. We believe that the estimates and assumptions used in our impairment assessment are reasonable; however, these assumptions are judgmental and variations in any assumptions could result in materially different calculations of fair value. We will continue to evaluate goodwill on an annual basis as of October 1, and whenever events or changes in circumstances, such as significant adverse changes in operating results, market conditions, or changes in management’s business strategy indicate that there may be a probable indicator of impairment. It is possible that the assumptions used by management related to the evaluation may change or that actual results may vary significantly from management’s estimates.
Business Combinations
We account for business combinations in accordance with ASC 805 “Business Combinations” which requires, among other things, the acquiring entity in a business combination to recognize the fair value of the assets acquired and liabilities assumed; the recognition of acquisition-related costs in the consolidated results of operations; the recognition of restructuring costs in the consolidated results of operations for which the acquirer becomes obligated after the acquisition date; and contingent purchase consideration to be recognized at fair value on the acquisition date with subsequent adjustments recognized in the consolidated results of operations. We generally use third-party qualified consultants to assist management in determining the fair value of assets acquired and liabilities assumed. This includes, when necessary, assistance with the determination of lives and valuation of property 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.
The fair value assigned to identifiable intangible assets acquired are determined primarily by using an income approach, which is based on assumptions and estimates made by management. Significant assumptions utilized in the income approach are the attrition rate, growth rate, and discount rate. These assumptions are based on company specific information and projections, which are not observable in the market and are therefore considered Level 2 and Level 3 measurements. The excess of the purchase price over the fair value of the identified assets and liabilities is recorded as goodwill. Based on the acquired business’ end markets and products as well as how the chief operating decision maker will review the business results determines the most appropriate operating segment for which to integrate the acquired business. Goodwill acquired, if any, is allocated to the reporting unit within or at the operating segment for which the acquired business will be integrated. Operating results of the acquired entity are reflected in the consolidated financial statements from date of acquisition.
Income taxes
We are subject to income taxes in the U.S. and numerous foreign jurisdictions, including China and the United Kingdom. The provision for income taxes includes income taxes paid, currently payable or receivable, and deferred taxes. We follow the liability method of accounting for income taxes in accordance with current accounting standards regarding the accounting for income taxes. Under this method, deferred income taxes are recorded based upon the differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws in effect at the time the underlying assets or liabilities are recovered or settled. The ability to realize deferred tax assets is evaluated through the forecasting of taxable income, historical and projected future operating results, the reversal of existing temporary differences, and the availability of tax planning strategies. Valuation allowances are recognized to reduce deferred tax assets when it is more

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likely than not that a tax benefit will not be realized. We do not provide income taxes on undistributed earnings of consolidated foreign subsidiaries as it is our intention that such earnings will remain invested in those companies.
We recognize income tax positions that are more likely than not to be realized and accrue interest related to unrecognized income tax positions, which is included as a component of the income tax provision, on the consolidated statements of operations.

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 25 percent of our net sales in 2020. We have designated the local currency as the functional currency of our significant operations outside of the U.S. The primary currencies for which we have exchange rate exposure are the U.S. dollar versus the euro, the Japanese yen, the pound sterling, and the Chinese renminbi. In addition, certain of our domestic operations have sales to foreign customers. In the conduct of our foreign operations, we also make inter-company sales. All of this exposes us to the effect of changes in foreign currency exchange rates. Our earnings are therefore subject to change due to fluctuations in foreign currency exchange rates when the earnings in foreign currencies are translated into U.S. dollars. In some cases, we use foreign exchange forward contracts to hedge firm and highly anticipated foreign currency cash flows. Our largest exposures are to the Chinese renminbi and the euro. A hypothetical 10 percent change in the average Chinese renminbi and euro to U.S. dollar exchange rates during the year ended December 31, 2020, would have impacted our net sales and income before income taxes by approximately $19 million or two percent and $6 million or two percent, 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. We had accounts receivable from our largest customer of $4.7 million and $3.2 million as of December 31, 2020 and 2019, respectively. Sales to this customer, which are included in the Performance Materials segment, were approximately six percent, five percent, and three percent of total net sales for each of the years ended December 31, 2020, 2019, and 2018, respectively. No customers individually accounted for greater than 10 percent of the Ingevity's consolidated net sales.
Commodity price risk
A portion of our manufacturing costs include 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. The cost of energy is a manufacturing cost that is exposed to commodity pricing. Our energy costs are diversified among electricity, steam and natural gas, with natural gas comprising our largest energy input.
Crude tall oil price risk
Our results of operations are directly affected by the cost of our raw materials, particularly crude tall oil ("CTO"), which is approximately 11 percent of consolidated cost of sales and 37 percent of our raw materials purchases for the year ended December 31, 2020. Pricing for CTO is subject to particular pricing pressures by reasons of the limited supply elasticity of the product and competing demands for its use, both of which drive pressure on price. Our gross profit and margins could be adversely affected by changes in the cost of CTO if we are unable to pass the increases on to our customers. CTO is a thinly traded commodity with pricing commonly established for periods ranging from one quarter to one year periods of time. We try to protect against such pricing fluctuations through various business strategies. Based on average pricing during the year ended December 31, 2020, a hypothetical unhedged, unfavorable 10 percent change in the market price for CTO would have impacted costs of sales by approximately $8 million or one percent, which we may or may not have been able to pass on to our customers.

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Natural gas price risk
Natural gas is our largest form of energy purchases constituting approximately two percent of our cost of goods sold for the year ended December 31, 2020. Increases in natural gas costs, unless passed on to our customers, would adversely affect our results of operations. If natural gas prices increase significantly, our business or results of operations may be adversely affected. We enter into certain derivative financial instruments in order to mitigate expected fluctuations in market prices and the volatility to earnings and cash flow resulting from changes to pricing of natural gas purchases. Refer to the Note 10 to the consolidated financial statements included within Part II. Item 8 of this Form 10-K for more information on our natural gas price risk hedging program. For the year ended December 31, 2020, a hypothetical, unhedged 10 percent increase in natural gas pricing would have resulted in an increase to cost of sales of approximately $1.2 million or two percent. As of December 31, 2020, we had 0.9 million and 1.2 million mmBTUS (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity swap contracts and zero cost collar option contracts, respectively, designated as cash flow hedges. As of December 31, 2020, open commodity contracts hedge forecasted transactions until February 2022. The fair value of the outstanding designated natural gas commodity hedge contracts as of December 31, 2020 and 2019 was a net liability of $0.1 million and $0.5 million, respectively.
Interest Rate Risk
As of December 31, 2020, approximately $353 million of our borrowings include a variable interest rate component. As a result, we are subject to interest rate risk with respect to such floating-rate debt. A 100 basis point increase in the variable interest rate component of our borrowings would increase our annual interest expense by approximately $4 million or eight percent.
As of December 31, 2020, we have entered into an interest rate swap with a notional amount of $166.2 million to manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $166.2 million of our floating rate debt to a fixed rate. In accordance with the terms of this instrument, we receive floating rate interest payments based upon three-month U.S. dollar LIBOR and in return are obligated to pay interest at a fixed rate of 3.79 percent until July 2023. The fair value of the interest rate swap was an asset (liability) of $(8.9) million and $(3.9) million at December 31, 2020 and 2019, respectively.


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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO THE FINANCIAL STATEMENTS

DescriptionPage No.




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Ingevity Corporation
Management's Report on Internal Control over Financial Reporting


Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company's internal control over financial reporting includes those policies and procedures that:

i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and

iii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the Company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2020, based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on its assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2020.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of the Company's internal control over financial reporting as of December 31, 2020, as stated in their report, which is presented on the following page.


Date:February 19, 2021
By:/S/ JOHN C. FORTSON
John C. Fortson
President and Chief Executive Officer and Interim Chief Financial Officer and Treasurer





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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Ingevity Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Ingevity Corporation and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)ii (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework