United States securities and exchange commission logo
April 23, 2024
Mary Dean Hall
Executive Vice President and Chief Financial Officer
Ingevity Corp
4920 O'Hear Avenue Suite 400
North Charleston, SC 29405
Re: Ingevity Corp
Form 10-K for the
Fiscal Year Ended December 31, 2023
File No. 001-37586
Dear Mary Dean Hall:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments.
Please respond to this letter within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe a
comment applies to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to this letter, we may have additional comments.
Form 10-K for the Fiscal Year Ended December 31, 2023
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Recent Developments
Restructuring Charges, Performance Chemicals Repositioning, page 28
1. Revise future filings
to include a discussion about the expected effects on future earnings
and cash flows
resulting from the repositioning plan (for example, reduced depreciation,
reduced employee
expense, etc.). The effect on future periods should be quantified and
disclosed, along with
the initial period in which those effects are expected to be realized.
This includes whether
the cost savings are expected to be offset by anticipated increases in
other expenses or
reduced revenues. This discussion should clearly identify the income
statement line items to
be impacted (for example, cost of sales; marketing; selling, general
and administrative
expenses; etc.). In addition, in future periods, if actual savings
anticipated by the exit
plan are not achieved as expected or are achieved in periods other
than as expected, MD&A
should discuss that outcome, its reasons, and its likely effects on
future operating
results and liquidity. Reference SAB Topic 5P4.
Mary Dean Hall
FirstName LastNameMary Dean Hall
Ingevity Corp
Comapany
April NameIngevity Corp
23, 2024
April 223, 2024 Page 2
Page
FirstName LastName
Performance Chemicals Reporting Unit, page 29
2. Reference your disclosure on page that you performed impairment tests
of goodwill
related to the Performance Chemicals reporting unit because continued
reduction in
demand in industrial end markets had negatively impacted your ability
to offset elevated
CTO costs through pricing actions. In future filings, revise to
provide information for
investors to assess the probability of future goodwill impairment
charges. For example,
for each reporting unit at risk of failing an impairment test,
disclose the following:
the percentage by which fair value exceeded carrying value at the
date of the most
recent test;
a detailed description of the methods and key assumptions used and
how the key
assumptions were determined;
a discussion of the degree of uncertainty associated with the
assumptions; and
a description of potential events and/or changes in circumstances
that could
reasonably be expected to negatively affect the key assumptions.
Refer to Item 303(b)(3) of Regulation S-K.
3. As a related matter, we also note that in your earnings release you
refer to Road
Technologies business line and Industrial Specialties business line as
components of your
Performance Chemicals segment. Please provide us an analysis how you
have determined
that they do not represent separate reporting units under ASC350-20 as
you stated on page
42 that your reporting units are your operating segments.
Reconciliation of Net Income to Adjusted EBITDA, page 37
4. Please tell us how you determined that the non-GAAP adjustment for
"Loss on CTO
resales" meets the requirements of Question 100.01 of the C&DI on
Non-GAAP Financial
Measures. Reference ASC 420-10-S99-3 which states, the staff
believes that decisions
about the timing, method, and pricing of dispositions of inventory
generally are
considered to be normal, recurring activities integral to the
management of the ongoing
business."
5. We note that the non-GAAP adjustment for Restructuring and other
(income) charges, net
includes $19.7 million of inventory charges that were recorded within
cost of sales. With
reference to ASC 420-10-S99-3, please tell us your consideration of
the guidance in
Question 100.01 the Compliance and Disclosure Interpretations for
Non-GAAP Financial
Measures for this portion of the adjustment.
Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies, Non-operating income and
expense, page
61
6. Please explain to us the basis for your accounting for gains and
losses associated with
crude tall oil ("CTO") resales by addressing the following items in
your response:
Explain to us in detail the composition of the "net gains or
losses associated with the
Mary Dean Hall
Ingevity Corp
April 23, 2024
Page 3
CTO resale activities" that is recorded during FY23;
Discuss to whom you sell the CTO inventory, how it is different
from your normal
CTO sales, and why you believe it is outside of your ordinary
course of business;
Tell us why it is appropriate to record those amounts within
other income and
expense when dispositions of inventory appear to be normal,
recurring activities
integral to the management of the ongoing business as referenced
in ASC 420-10-
S99-3;
Discuss how you determine the amount of excess CTO volume each
period;
Tell us how you account for the CTO resales within the
Statement of Cash Flows.
7. As a related matter, tell us in detail of your supply agreement for
the CTO, including but
not limited to any firm purchase commitments. And if so, please tell
us how you have
considered guidance under firm purchase commitments for inventory
subject to ASC 330-
10, which may require a reporting entity to recognize a loss based on
an anticipated
impairment of the inventory upon acquisition. In that regard, we note
you disclosed that
reselling excess volumes in the open market may result in $30.0
million to $80.0 million
of incremental losses in 2024.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
Please contact Kristin Lochhead at 202-551-3664 or Li Xiao at
202-551-4391 with any
questions.
Sincerely,
FirstName LastNameMary Dean Hall
Division of
Corporation Finance
Comapany NameIngevity Corp
Office of
Industrial Applications and
April 23, 2024 Page 3 Services
FirstName LastName