Ingevity Corp

Previous wording

•the anticipated timing, charges and costs of the closure of our DeRidder, Louisiana plant may differ materially from our estimates due to events that may occur as a result of, or in connection with, the plant closure;

Current wording

•the anticipated timing, charges and costs of the Performance Chemicals manufacturing consolidation and closure of our Crossett, Arkansas and DeRidder, Louisiana plants may differ materially from our estimates due to events that may occur as a result of, or in connection with, such consolidation or plant closures;

Previous wording

•we may continue to be adversely affected by disruptions in our supply chain;

Current wording

•we may be adversely affected by disruptions in our supply chain;

Previous wording

Ingevity Corporation ("Ingevity," "the company," "we," "us," or "our") provides products and technologies that purify, protect, and enhance the world around us. Through a diverse team of talented and experienced people, we develop, manufacture, and bring to market solutions that are largely renewably sourced and help customers solve complex problems while making the world more sustainable. Our products are used in a variety of demanding applications, including adhesives, agrochemicals, asphalt paving, bioplastics, coatings, elastomers, lubricants, pavement markings, oil exploration and production and automotive components. We operate in three reportable segments: Performance Materials, Performance Chemicals and Advanced Polymer Technologies.

Current wording

Ingevity Corporation provides products and technologies that purify, protect, and enhance the world around us. Through a diverse team of talented and experienced people, we develop, manufacture, and bring to market solutions that are largely renewably sourced and help customers solve complex problems while making the world more sustainable. Our products are used in a variety of demanding applications, including adhesives, agrochemicals, asphalt paving, bioplastics, coatings, elastomers, lubricants, pavement markings, oil exploration and production and automotive components. We operate in three reportable segments: Performance Materials, Performance Chemicals and Advanced Polymer Technologies.

Previous wording

On November 1, 2023, we announced a number of strategic actions designed to reposition our Performance Chemicals reportable segment to improve profitability and reduce the cyclicality of the Company as a whole. These actions increase our focus on growing our most profitable Performance Chemicals' product lines, such as road technologies, and accelerate our transition to non-crude tall oil ("CTO") based fatty acids. This initiative will result in the reduction, and in some cases exit, of certain historical end-use markets of our industrial specialties product line, such as adhesives, publication inks, and oilfield, representing approximately 45 percent of our industrial specialties product line historical annualized net sales. This initiative includes the permanent closure of our Performance Chemicals' CTO refinery and the closure of our manufacturing plant located in DeRidder, Louisiana (the “DeRidder Plant”), including the polyol production assets associated with the Advanced Polymer Technologies (“APT”) reportable segment. As of March 31, 2024, all production at the DeRidder Plant has ceased with the APT polyol production assets being shuttered in December 2023, and the CTO refinery and other Performance Chemicals’ production assets shuttered in February 2024. The above actions are referred to as the "Performance Chemicals' repositioning." The Performance Chemicals’ repositioning initiative included additional corporate and business cost reduction actions executed in November 2023.

Current wording

On November 1, 2023, we announced a number of strategic actions designed to reposition our Performance Chemicals reportable segment to improve profitability and reduce the cyclicality of the company as a whole. These actions increase our focus on growing our most profitable Performance Chemicals' product lines, such as road technologies, and accelerate our transition to non-CTO based fatty acids. This initiative will focus on reducing exposure to lower margin end-use markets of our industrial specialties product line, such as adhesives, publication inks, and oilfield, representing approximately 45 percent of our industrial specialties product line historical annualized net sales. This initiative included the permanent closure of our Performance Chemicals' CTO refinery and the closure of our manufacturing plant located in DeRidder, Louisiana (the “DeRidder Plant”), including the polyol production assets associated with the Advanced Polymer Technologies (“APT”) reportable segment. All production at the DeRidder Plant ceased in the first quarter of 2024. The Performance Chemicals’ repositioning initiative included additional corporate and business cost reduction actions executed in November 2023.

Previous wording

The Performance Chemicals' repositioning, when combined with other targeted workforce reduction initiatives during 2023, resulted in the reduction of Ingevity's global workforce by almost 20 percent, 25 percent of these reductions being employees directly associated with commercial sales activities of the soon-to-be exited and/or reduced end-use markets of our industrial specialties product line. Specific to Performance Chemicals, the reduction represented approximately 30 percent of the reportable segment's workforce.

Current wording

The actions referenced above, when combined with other targeted workforce reduction initiatives during 2023, resulted in the reduction of Ingevity's global workforce by almost 20 percent. Specific to Performance Chemicals, the reduction represented approximately 30 percent of the reportable segment's workforce.

Previous wording

We expect to incur aggregate charges of approximately $280 million associated with the Performance Chemicals' repositioning, consisting of approximately $185 million in asset-related charges, approximately $15 million in severance and other employee-related costs, and approximately $80 million in other restructuring costs including decommissioning, dismantling and removal charges, and contract termination costs. Through March 31, 2024, we have incurred $197.6 million associated with these actions, including $180.2 million of non-cash asset-related charges and $17.4 million of charges to be settled in cash. As of March 31, 2024, $13.4 million of the charges to be settled in cash have been paid. We expect approximately $185 million of the total charges to be non-cash and $95 million to be settled in cash. The remainder of the non-cash and 50-60 percent of cash charges are expected to be recognized in 2024.

Current wording

We expect to incur aggregate charges of approximately $250 million associated with the Performance Chemicals' repositioning. This is a reduction of approximately $30 million from prior expectations due to lower than estimated plant cleaning costs. Total expected charges now consist of approximately $185 million in asset-related charges, approximately $15 million in severance and other employee-related costs, and approximately $50 million in other restructuring costs, including decommissioning, dismantling and removal charges, and contract termination costs. Through June 30, 2024, we have incurred $207.6 million associated with these actions, including $182.0 million of non-cash asset-related charges and $25.6 million of charges to be settled in cash. As of June 30, 2024, $21.3 million of the charges to be settled in cash have been paid. We expect approximately $185 million of the total charges to be non-cash and $65 million to be settled in cash. The remainder of the non-cash and 50-60 percent of cash charges are expected to be recognized in 2024.

Previous wording

The collective actions of workforce, operational, and regional business exits, we believe will hinder our ability to dispose of the associated inventory on hand. As a result, we recorded $19.7 million and $2.5 million of non-cash, lower of cost or market, inventory charges during the three months ended December 31, 2023 and March 31, 2024, respectively, to adjust the carrying value of the impacted inventory to what we expect to realize upon disposal, less disposal costs. These inventory charges are recorded to Cost of sales on the condensed consolidated statement of operations. Since these inventory charges are directly attributable to the Performance Chemicals’ repositioning, that is, they do not represent normal, recurring expenses necessary to operate our business, we have combined these charges with the restructuring charges noted above, and have excluded such impact from the financial results of our Performance Chemicals reportable segment. Please refer to Note 14 within the Condensed Consolidated Financial Statements for more information.

Current wording

The Company believes the collective actions of workforce, operational, and regional business exits will hinder our ability to dispose of the associated inventory on hand. As a result, we recorded zero and $2.5 million of non-cash, lower of cost or market, inventory charges during the three and six months ended June 30, 2024, respectively, to adjust the carrying value of the impacted inventory to what we expect to realize upon disposal, less disposal costs. These inventory charges are recorded to Cost of sales on the condensed consolidated statement of operations.

Previous wording

Due to the DeRidder Plant closure and the corresponding reduced CTO refining capacity, we may be obligated, under an existing CTO supply contract, to purchase CTO volumes through 2025 at amounts in excess of required CTO volumes needed to support our current business operations. We intend to manage our CTO volumes by reselling excess volumes (herein referred to as "CTO resales") in the open market. Excluded from the estimated $280.0 million of aggregate charges relating to the Performance Chemicals' repositioning are potential costs we may incur associated with the CTO resales which, based on what we believe to be market rates today, may result in $50 million to $80 million of incremental losses in 2024. This is updated from our previously disclosed estimate of $30 million to $80 million based on our current expectations on CTO procurement costs for 2024, which we expect to be offset by spot market CTO resales. For the three months ended March 31, 2024, we have incurred $26.5 million of CTO resale losses, which are recorded as Other (income) expense, net on the condensed consolidated statement of operations.

Current wording

The DeRidder Plant closure, and the corresponding reduced CTO refining capacity, significantly reduced our CTO volume requirements. However, we were obligated, under an existing CTO supply contract, to purchase CTO volumes through 2025 at amounts in excess of our required CTO volumes needed to support our business operations. To manage this excess inventory, we sold CTO volumes (herein referred to as "CTO resales") in the open market. For the three and six months ended June 30, 2024, we have incurred $23.5 million and $50.0 million of CTO resale losses, which are recorded as Other (income) expense, net on the condensed consolidated statements of operations.

Previous wording

The Performance Chemicals' repositioning will result in the reduction, and in some cases exit, of certain historical end-use markets of our industrial specialties product line, such as adhesives, publication inks, and oilfield, representing approximately 45 percent of our industrial specialties product line historical annualized net sales. The annualized cash savings we expect to realize from these actions are approximately $65 million to $75 million beginning in 2024. These cash savings will be derived from headcount reductions, plant operating efficiencies, and reduced supply chain costs. In addition to the cash savings, annualized depreciation and intangible amortization expense related to assets charges taken throughout this initiative will decline by approximately $10 million and $12 million, respectively, of which we expect to realize approximately $8 million and $10 million in 2024, respectively.

Current wording

The Performance Chemicals' repositioning is focused on reducing exposure to lower margin end-use markets of our industrial specialties product line, such as adhesives, publication inks, and oilfield, representing approximately 45 percent of our industrial specialties product line historical annualized net sales, and as such, we expect annualized net sales to decrease accordingly. The annualized cash savings we expect to realize from these actions are approximately $95 million to $110 million beginning in 2024. These cash savings will be derived from headcount reductions, plant operating efficiencies, and reduced supply chain costs. In addition to the cash savings, annualized depreciation and intangible amortization expense related to asset charges taken through this initiative will decline by approximately $15 million and $17 million, respectively, of which we expect to realize approximately $10 million and $12 million in 2024, respectively.

Previous wording

Collectively, these savings are expected to be realized in the following financial statement captions: 70-80 percent in Cost of sales, 15-25 percent in Selling, general, and administrative expenses, and ~5 percent in Research and technical expenses, all presented on our condensed consolidated statement of operations. During the three months ended March 31, 2024, we realized cash savings of approximately $20 million, including $15 million in Cost of sales, $4 million in Selling, general, and administrative expenses, and $1 million in Research and technical expenses.

Current wording

Collectively, these savings are expected to be realized in the following financial statement captions: 70-80 percent in Cost of sales, 15-25 percent in Selling, general, and administrative expenses, and ~5 percent in Research and technical expenses, all presented on our condensed consolidated statement of operations. During the three and six months ended June 30, 2024, we realized cash savings of approximately $22 million and $42 million, including $17 million and $32 million in Cost of sales, $4 million and $8 million in Selling, general, and administrative expenses, and $1 million and $2 million in Research and technical expenses, respectively.

Previous wording

The sales decrease of $52.5 million in 2024 was driven primarily by our Performance Chemicals' industrial specialties product line due to repositioning actions which included a manufacturing plant closure and exit from certain low margin end markets. Also contributing to the lower sales were continued weakness in China and certain industrial end markets that negatively impacted sales in our Advanced Polymer Technologies ("APT") reportable segment and industrial specialties product line, slightly offset by a three increase in Performance Materials reportable segment.

Current wording

The Net sales decrease was driven primarily by the Performance Chemicals' industrial specialties product line due to repositioning actions which included the focus on reducing exposure to lower margin end-use markets and therefore reduced sales during the quarter by approximately $78 million. Also contributing to the lower sales was unfavorable weather in North America impacting our road technologies product line and continued weakness in certain industrial end markets that negatively impacted sales in our industrial specialties product line, slightly offset by an increase in our Performance Materials reportable segment.

Previous wording

Volume declines in Performance Chemicals' industrial specialties product line and our APT reportable segment drove the combined volume decline of $45.0 million (11 percent). Unfavorable pricing and sales composition (mix) of $4.0 million (one percent) and unfavorable foreign currency exchange of $3.5 million (one percent) also contributed to the decline in Net sales.

Current wording

The Net sales decrease of $143.7 million in 2024 was driven by volume declines of $131.2 million (15 percent), primarily in our Performance Chemicals industrial specialties product line and our APT reportable segment. Unfavorable pricing and sales composition (mix) of $5.7 million (one percent) and unfavorable foreign currency exchange of $6.8 million (one percent) also contributed to the decline in Net sales.

Previous wording

Gross profit decrease of $30.7 million was driven by unfavorable sales volume of $16.1 million, increased manufacturing costs of $7.4 million (which includes the realized savings of $15 million from the Performance Chemicals repositioning actions initiated in 2023) due primarily to significant CTO raw material cost pressure within our Performance Chemicals reportable segment, unfavorable pricing and sales composition (mix) of $4.3 million primarily driven by our APT reportable segment, Performance Chemicals' repositioning actions which lead to inventory charges of $2.5 million, and unfavorable foreign currency exchange of $0.4 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 all segments.

Current wording

Gross profit decrease of $60.5 million was driven primarily by unfavorable sales volume of $40.7 million in our Performance Chemicals industrial specialties product line and our APT reportable segment, and increased manufacturing costs of $8.5 million. The decrease was further driven by unfavorable pricing and sales composition (mix) of $7.4 million primarily within our APT reportable segment, and unfavorable foreign currency exchange of $3.9 million. Gross profit includes the realized savings of $32.0 million from the Performance Chemicals repositioning actions initiated in 2023. 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 all segments.

Previous wording

Selling, general and administrative expenses ("SG&A") were $47.2 million (14 percent of Net sales) and $48.6 million (12 percent of Net sales) for the three months ended March 31, 2024 and 2023, respectively. SG&A as a percentage of Net sales increased due to lower sales. Overall, SG&A decreased by approximately $4 million or 8 percent due to cost savings initiatives implemented last year offset by higher spending of $2.6 million on commercial activities.

Current wording

SG&A was $88.6 million (12 percent of Net sales) and $100.3 million (11 percent of Net sales) for the six months ended June 30, 2024 and 2023, respectively. SG&A as a percentage of Net sales increased due to lower sales. Overall, SG&A decreased by approximately $8.0 million or 9 percent due to cost savings initiatives implemented last year and $3.7 million due to decreased spending on commercial activities.

Previous wording

Research and technical expenses as a percentage of Net sales remained relatively consistent period over period, decreasing to 2.0 percent from 2.2 percent for the three months ended March 31, 2024 and 2023, respectively. Included in the $2.0 million decrease is approximately $1 million realized from cost savings initiatives implemented last year.

Current wording

Research and technical expenses as a percentage of Net sales remained consistent period over period, at 1.9 percent and 1.9 percent for the six months ended June 30, 2024 and 2023, respectively. Included in the overall $2.7 million decrease is approximately $2.0 million realized from cost savings initiatives implemented last year.

Previous wording

Acquisition-related costs were $0.3 million and $1.9 million for the three months ended March 31, 2024 and 2023, respectively. All charges relate to the integration of Ozark Materials into our Performance Chemicals segment.

Current wording

Acquisition-related (income) costs were $(0.2) million and $0.1 million for the three and six months ended June 30, 2024, and $1.8 million and $3.7 million three and six months ended June 30, 2023, respectively. All charges relate to the integration of Ozark Materials into our Performance Chemicals segment.

Previous wording

(2) See Note 11 and 14 within the Condensed Consolidated Financial Statements for more information.

Current wording

(2) See Notes 11 and 14 for more information.

Previous wording

For the three months ended March 31, 2024 and 2023, our effective tax rate was 22.1 percent and 20.9 percent, respectively. Excluding discrete items, the effective rate was 24.2 percent compared to 22.8 percent in the three months ended March 31, 2024 and 2023, respectively. See Note 12 within the Condensed Consolidated Financial Statements for more information.

Current wording

For the three months ended June 30, 2024 and 2023, our effective tax rate was 15.2 percent and 25.6 percent, respectively. Excluding discrete items, the effective rate was 33.5 percent compared to 23.8 percent in the three months ended June 30, 2024 and 2023, respectively. See Note 12 for more information.

Previous wording

In addition to the information discussed above, the following sections discuss the results of operations for all of Ingevity's segments. Our segments are (i) Performance Materials, (ii) Performance Chemicals and (iii) Advanced Polymer Technologies. 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 net sales less segment operating expenses (segment operating expenses consist of costs of sales, selling, general and administrative expenses, research and technical 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, interest income, income taxes, depreciation, amortization, restructuring and other income (charges), net, including inventory lower of cost or market charges associated with restructuring actions, acquisition and other-related income (costs), litigation verdict charges, gain (loss) on strategic investments, loss on CTO resales, pension and postretirement settlement and curtailment income (charges), net.

Current wording

In addition to the information discussed above, the following sections discuss the results of operations for Ingevity's reportable segments. Our segments are (i) Performance Materials, (ii) Performance Chemicals and (iii) Advanced Polymer Technologies. 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 net sales less segment operating expenses (segment operating expenses consist of costs of sales, selling, general and administrative expenses, research and technical 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, interest income, income taxes, depreciation, amortization, restructuring and other income (charges), net, including inventory lower of cost or market charges associated with restructuring actions, goodwill impairment charge, acquisition and other-related income (costs), litigation verdict charges, gain (loss) on strategic investments, loss on CTO resales, and pension and postretirement settlement and curtailment income (charges), net.

Previous wording

Net sales in our Performance Materials reportable segment increased three percent compared to the prior year quarter as a result of increased pricing and automotive carbon volumes. Segment EBITDA increased $8.2 million or almost 12 percent primarily due to lower input costs such as energy and certain raw materials as well as a series of operational efficiencies that improved plant throughput.

Current wording

Net sales in our Performance Materials reportable segment increased nine percent compared to the prior year quarter as a result of increased pricing and automotive carbon volumes. Segment EBITDA increased $18.0 million or 28 percent primarily due to lower input costs such as energy and certain raw materials as well as a series of operational efficiencies that improved plant throughput.

Previous wording

Segment EBITDA. The increase of $8.2 million in 2024 was driven by the increase in sales as noted above, decreased manufacturing costs of $7.0 million, favorable pricing and sales composition (mix) of $3.9 million, and a volume increase of $1.4 million. The increase was partially offset by increased SG&A and research and technical expenses of $2.7 million, and unfavorable foreign currency exchange of $1.4 million.

Current wording

Segment EBITDA. The increase of $18.0 million in 2024 was driven by the increase in sales as noted above, decreased manufacturing costs of $6.9 million, favorable pricing and sales composition (mix) of $4.8 million, a volume increase of $4.7 million, and favorable foreign currency exchange of $1.7 million. The increase was partially offset by increased SG&A and research and technical expenses of $0.1 million.

Previous wording

Segment net sales. The increase of $3.7 million in 2024 was driven by favorable pricing and sales composition (mix) of $3.9 million (three percent) and a volume increase of $2.2 million (two percent). The increase was partially offset by unfavorable foreign currency exchange of $2.4 million (two percent).

Current wording

Segment net sales. The increase of $16.3 million in 2024 was driven by a volume increase of $10.5 million (four percent) and favorable pricing and sales composition (mix) of $10.2 million (four percent). The increase was partially offset by unfavorable foreign currency exchange of $4.4 million (two percent).

Previous wording

Net sales in our Performance Chemicals reportable segment decreased 21 percent compared to the prior year quarter. The road technologies product line net sales were flat compared to last year. The industrial specialties product line net sales decrease was primarily driven by lower volume as a result of exiting lower margin end markets as part of the Performance Chemicals' repositioning as well as lower market demand in certain industrial end markets such as lubricants and rubber.

Current wording

Net sales in our Performance Chemicals reportable segment decreased 35 percent compared to the prior year quarter. The road technologies product line net sales decrease of $11.8 million was primarily driven by weather related delays. The industrial specialties product line net sales decrease of $86.7 million was primarily driven by lower volumes as a result of the focus on reducing exposure to lower margin end-use markets as part of the Performance Chemicals' repositioning, which resulted in reduced sales of approximately $78 million, as well as continued weakness in certain industrial end markets.

Previous wording

Contributing to the decline in Segment EBITDA was higher CTO spend, which nearly doubled from last year, and unfavorable plant throughput due to continued weakness in industrial demand, which negatively impacted utilization rates at both our North Charleston, South Carolina and Crossett, Arkansas manufacturing sites. Slightly offsetting these elevated costs were cost savings realized during the quarter as a result of the Performance Chemicals' repositioning.

Current wording

Contributing to the decline in Segment EBITDA was higher CTO spend, which nearly doubled from last year, and unfavorable plant throughput due to continued weakness in industrial demand, which negatively impacted utilization rates at both our North Charleston, South Carolina and Crossett, Arkansas manufacturing sites. Slightly offsetting these elevated costs were cost savings realized during the quarter due to the Performance Chemicals' repositioning.

Previous wording

Segment net sales. The decrease of $38.6 million was driven by a volume decrease of $35.5 million (19 percent), driven by a decrease in industrial specialties ($33.3 million) and road technologies ($2.2 million), unfavorable pricing and sales composition (mix) of $2.8 million (two percent), attributed to a decrease in industrial specialties ($5.0 million), partially offset by an increase in road technologies ($2.2 million), and unfavorable foreign currency exchange of $0.3 million (zero percent).

Current wording

Segment net sales. The decrease of $98.5 million was driven by a volume decrease of $96.9 million (34 percent), as a result of a decrease in industrial specialties ($81.0 million) and road technologies ($15.9 million), unfavorable pricing and sales composition (mix) of $1.3 million (zero percent), attributable to a decrease in industrial specialties ($5.5 million), partially offset by an increase in road technologies ($4.2 million), and unfavorable foreign currency exchange of $0.3 million (zero percent).

Previous wording

Segment EBITDA. The decrease of $30.9 million was driven by higher manufacturing costs of $20.2 million, primarily due to increased CTO cost, a volume decrease of $12.8 million, unfavorable pricing and sales composition (mix) of $2.8 million, and unfavorable foreign currency exchange of $0.6 million. The decrease was partially offset by lower SG&A of $5.5 million, which benefited from the Performance Chemicals' repositioning and cost saving initiatives implemented in 2023.

Current wording

Segment EBITDA. The decrease of $35.6 million was driven by a volume decrease of $30.3 million, higher manufacturing costs of $10.1 million, primarily due to increased CTO cost, unfavorable pricing and sales composition (mix) of $1.3 million, and unfavorable foreign currency exchange of $0.5 million. The decrease was partially offset by lower SG&A of $6.6 million, which benefited from the Performance Chemicals' repositioning and cost saving initiatives implemented in 2023.

Previous wording

Segment EBITDA decreased primarily due to lower volumes and price, partially offset by lower input costs and benefits from the cost savings actions implemented last year.

Current wording

Segment EBITDA decreased due to lower price primarily in Asia, partially offset by lower input costs and benefits from the cost savings actions implemented last year.

Previous wording

Segment net sales. The decrease of $17.6 million in 2024 was driven by a volume decline of $11.7 million (18 percent), unfavorable pricing and sales composition (mix) of $5.1 million (eight percent), and unfavorable foreign currency exchange of $0.8 million (one percent).

Current wording

Segment net sales. The decrease of $22.9 million in 2024 was driven by unfavorable pricing and sales composition (mix) of $11.7 million (10 percent), a volume decline of $9.3 million (eight percent), and unfavorable foreign currency exchange of $1.9 million (two percent).

Previous wording

Segment EBITDA. The decrease of $4.3 million was driven by unfavorable pricing and sales composition (mix) of $5.4 million, a volume decline of $4.7 million and unfavorable foreign currency exchange of $0.4 million. The decrease was partially offset by decreased manufacturing costs of $5.3 million and decreased SG&A expenses of $0.9 million.

Current wording

Segment EBITDA. The decrease of $6.1 million was driven by unfavorable pricing and sales composition (mix) of $12.0 million, a volume decline of $3.7 million, and unfavorable foreign currency exchange of $0.2 million. The decrease was partially offset by decreased manufacturing costs of $8.2 million and decreased SG&A of $1.6 million.

Previous wording

Adjusted EBITDA is defined as net income (loss) plus interest expense, net, provision (benefit) for income taxes, depreciation, amortization, restructuring and other (income) charges, net, including inventory lower of cost or market charges associated with restructuring actions, acquisition and other-related (income) costs, litigation verdict charges, (loss) gain on strategic investments, loss on CTO resales, and pension and postretirement settlement and curtailment (income) charges, net.

Current wording

Adjusted EBITDA is defined as net income (loss) plus interest expense, net, provision (benefit) for income taxes, depreciation, amortization, restructuring and other (income) charges, net, goodwill impairment charge, acquisition and other-related (income) costs, litigation verdict charges, (loss) gain on strategic investments, loss on CTO resales, and pension and postretirement settlement and curtailment (income) charges, net.

Previous wording

(1) We regularly perform strategic reviews and assess the return on our operations, which sometimes results in a plan to restructure the business. These costs are excluded from our reportable segment results and for the purposes of calculating our non-GAAP financial performance measures. Additionally, this adjustment includes $2.5 million of inventory charges recorded in cost of sales on our condensed consolidated statement of operations, associated with the repositioning of our Performance Chemicals segment in the three months ended March 31, 2024. Refer to Note 11 within the Condensed Consolidated Financial Statements for more information.

Current wording

(1) We regularly perform strategic reviews and assess the return on our operations, which sometimes results in a plan to restructure the business. These costs are excluded from our reportable segment results and for the purposes of calculating our non-GAAP financial performance measures. Refer to Note 11 for more information.

Previous wording

(3) Due to the DeRidder Plant closure, as noted in footnote 1 above, and the corresponding reduced CTO refining capacity, we may be obligated, under an existing CTO supply contract, to purchase CTO through 2025 at amounts in excess of required CTO volumes. We intend to manage our CTO volumes by reselling excess volumes (herein referred to as "CTO resales") in the open market. Since these CTO resale activities are directly attributable to the Performance Chemicals’ repositioning, that is, they do not represent normal, recurring expenses necessary to operate our business, we have excluded the CTO resale (income) charges for the purposes of calculating our non-GAAP financial performance measures. For the three months ended March 31, 2024, the loss on CTO resales relates to the Performance Chemicals segment. Refer to Note 11 to the Condensed Consolidated Financial Statements for more information.

Current wording

(4) Due to the DeRidder Plant closure, and the corresponding reduced CTO refining capacity, we were obligated, under an existing CTO supply contract, to purchase CTO through 2025 at amounts in excess of required CTO volumes. As of July 1, 2024, we have terminated the CTO supply contract that resulted in these excess CTO volumes. As a result of the termination of this contract the purchases under the CTO supply contract ended, effective June 30, 2024. Therefore, we are no longer required to purchase this excess CTO volume through 2025, and as such, we expect to end our CTO resale activity by the end of 2024. Since these CTO resale activities are directly attributable to the Performance Chemicals’ repositioning, that is, they do not represent normal, recurring expenses necessary to operate our business, we have excluded the CTO resale (income) charges for the purposes of calculating our non-GAAP financial performance measures. For the three and six months ended June 30, 2024, the loss on CTO resales relates to the Performance Chemicals segment. Refer to Note 11 for more information.

Previous wording

(4) We exclude gains and losses from strategic investments from our segment results, as well as our non-GAAP financial measures, because we do not consider such gains or losses to be directly associated with the operational performance of the segment. We believe that the inclusion of such gains or losses, would impair the factors and trends affecting the historical financial performance of our reportable segments. We continue to include undistributed earnings or loss, distributions, amortization or accretion of basis differences, and other-than-temporary impairments for equity method investments that we believe are directly attributable to the operational performance of such investments, in our reportable segment results. Refer to Note 4 to the Condensed Consolidated Financial Statements for more information.

Current wording

(5) We exclude gains and losses from strategic investments from our segment results, as well as our non-GAAP financial measures, because we do not consider such gains or losses to be directly associated with the operational performance of the segment. We believe that the inclusion of such gains or losses, would impair the factors and trends affecting the historical financial performance of our reportable segments. We continue to include undistributed earnings or loss, distributions, amortization or accretion of basis differences, and other-than-temporary impairments for equity method investments that we believe are directly attributable to the operational performance of such investments, in our reportable segment results. Refer to Note 4 for more information.

Previous wording

Net sales are expected to be between $1.40 billion and $1.55 billion for 2024. We expect growth in our Performance Materials reportable segment on improved global automotive production over the prior year. While our Performance Chemicals reportable segment revenue will reflect the impact of our Performance Chemicals repositioning, including the exit of certain low-margin businesses in our industrial specialties product line, we expect continued growth from our road technologies product line due to technology adoption and continued geographic expansion. Our Advanced Polymer Technologies reportable segment is expected to see demand rebound in industrial markets in the second half of the year.

Current wording

Net sales are expected to be between $1.40 billion and $1.50 billion for 2024. We expect growth in our Performance Materials reportable segment on improved global hybrid automotive production and lower than anticipated Battery Electric Vehicle penetration. The Performance Chemicals reportable segment revenue will reflect the impact of our repositioning to improve profitability by focusing on higher margin end markets, as well as continued weak industrial demand. We expect our road technologies product line revenue to grow through technology adoption and continued geographic expansion. Our Advanced Polymer Technologies reportable segment anticipates revenues flat to prior year; market improvements in Europe are mostly offset by a challenging China economy and industrial demand.

Previous wording

Adjusted EBITDA is expected to be between $365 million and $390 million for 2024. We expect growth in our Performance Materials segment EBITDA, as volumes shift to higher-margin automotive carbon due to improved global automotive production and ongoing hybrid vehicle adoption. In Performance Chemicals, we will have less exposure to certain lower-margin end markets from our industrial specialties product line due to the repositioning of the segment, and we expect to see continued growth in our road technologies product line which improves the margin profile for the segment. Performance Chemicals will continue to be impacted by elevated CTO costs, which we expect to trend lower in the second half of the year. We anticipate improved Advanced Polymer Technologies segment EBITDA on a combination of increased volumes and favorable manufacturing throughput.

Current wording

Adjusted EBITDA is expected to be between $350 million and $360 million for 2024. We expect growth in our Performance Materials segment EBITDA, as volumes shift to higher-margin automotive carbon due to ongoing hybrid vehicle adoption. Performance Chemicals will continue to be impacted by elevated CTO costs and the slow industrial market recovery. We anticipate Advanced Polymer Technologies segment EBITDA will be flat vs prior year as favorable input costs offset lower prices.

Previous wording

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 fund our planned operations and meet our interest and other contractual obligations for at least the next twelve months. As of March 31, 2024, our undrawn capacity under our revolving credit facility was $233.5 million. Over the next twelve months, we expect to fund the following: interest payments, capital expenditures, debt principal repayments, income tax payments, purchases pursuant to our stock repurchase program (and related excise tax payments), income tax payments, additional spending associated with our Performance Materials' intellectual property litigation, and restructuring activities such as the North Charleston plant transition, and the repositioning of our Performance Chemicals operating segment as further described within Note 11 to the Condensed Consolidated Financial Statements included within this Form 10-Q. In addition, we may also evaluate and consider strategic acquisitions, joint ventures, or other transactions to create stockholder value and enhance financial performance. In connection with such transactions, or to fund other anticipated uses of cash, we may modify our existing revolving credit facility, redeem all or part of our outstanding senior notes, seek additional debt financing, issue equity securities, or some combination thereof.

Current wording

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 fund our planned operations and meet our interest and other contractual obligations for at least the next twelve months. As of June 30, 2024, our undrawn capacity under our revolving credit facility was $241.7 million. Over the next twelve months, we expect to fund the following: interest payments, capital expenditures, debt principal repayments, income tax payments, purchases pursuant to our stock repurchase program (and related excise tax payments), income tax payments, additional spending associated with our Performance Materials' intellectual property litigation, restructuring activities such as the repositioning of our Performance Chemicals reportable segment as further described within Note 11, and consideration for the termination of the CTO Supply Agreement further described within Note 16. In addition, we may also evaluate and consider strategic acquisitions, joint ventures, or other transactions to create stockholder value and enhance financial performance. In connection with such transactions, or to fund other anticipated uses of cash, we may modify our existing revolving credit facility, redeem all or part of our outstanding senior notes, seek additional debt financing, issue equity securities, or some combination thereof.

Previous wording

Cash and cash equivalents totaled $88.5 million at March 31, 2024. We continuously monitor 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.

Current wording

Cash and cash equivalents totaled $107.4 million at June 30, 2024. We continuously monitor 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.

Previous wording

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 March 31, 2024, included $84.9 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 would potentially be 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.

Current wording

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 June 30, 2024, included $97.9 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 could be subject to U.S. federal income tax at the statutory rate less the available foreign tax credits, if any, and could potentially be 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.

Previous wording

Refer to Note 9 to the Condensed Consolidated Financial Statements included within this Form 10-Q for a summary of our outstanding debt obligations and revolving credit facility.

Current wording

Refer to Note 9 for a summary of our outstanding debt obligations and revolving credit facility.

Previous wording

During the three months ended March 31, 2024 and 2023, we repurchased zero and $33.4 million, inclusive of $0.2 million excise tax, in common stock, representing zero and 449,475 shares of our common stock at a weighted average cost per share of zero and $73.86, respectively. At March 31, 2024, $353.4 million remained unused under the 2022 Authorization.

Current wording

During the three and six months ended June 30, 2023, we repurchased $58.7 million, inclusive of $0.6 million excise tax, and $92.1 million, inclusive of $0.8 million excise tax, in common stock, representing 819,898 and 1,269,373 shares of our common stock at a weighted average cost per share of $70.87 and $71.93, respectively.