What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-09 compared with 2021-08-09 · 226 added, 204 removed, 449 unchanged (49% of the section changed)

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We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short- and long-term business operations and objectives, and financial needs.

Examples of forward-looking statements include, but are not limited to, statements we make regarding the use of proceeds from the sale of the Performance Chemicals business segment, including the special cash dividend, our financial results and our liquidity, including our belief that our existing cash, cash equivalents and cash flow from operations, combined with availability under our asset based lending revolving credit facility will be sufficient to meet our presently anticipated future cash needs for at least the next 12 months.

Examples of forward-looking statements include, but are not limited to, our financial results and our liquidity, including our belief that our existing cash, cash equivalents and cash flow from operations, combined with availability under our asset based lending revolving credit facility will be sufficient to meet our presently anticipated future cash needs for at least the next 12 months.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions.

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In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed herein may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Some of the key factors that could cause actual results to differ from our expectations include risks related to:

• the impact of the ongoing COVID-19 pandemic on the global economy and financial markets, as well as on our business and our suppliers, and the response of governments and of our company to the outbreak;

Some of the key factors that could cause actual results to differ from our expectations include risks related to the following:

• the impact of the ongoing COVID-19 pandemic on the global economy and financial markets, as well as on our business and our suppliers, and the response of our company and governments to the outbreak, including associated containment, remediation and vaccination efforts;

• as a global business, we are exposed to local business risks in different countries;

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We believe that our products, which are predominantly inorganic, and services contribute to improving the sustainability of the environment.

In connection with the closing of the sale of the Performance Chemicals business, we changed our name from “PQ Group Holdings Inc.” to “ Ecovyst Inc.”, changed the ticker symbol of our common stock listed on the New York Stock Exchange from “PQG” to “ECVT” and rebranded our former segments from “Refining Services” to “Ecoservices” and “Catalysts” to “Catalyst Technologies.” We conduct operations through two reporting segments:

We are the leading provider of sulfuric acid recycling services to North American refineries for the production of alkylate, an essential gasoline component for lowering vapor pressure and increase octane to meet stringent gasoline specifications and fuel efficiency standards.

We are a leading provider of sulfuric acid recycling services to North American refineries for the production of alkylate, an essential gasoline component for lowering vapor pressure and increasing octane to meet stringent gasoline specifications and fuel efficiency standards.

We are also a leading North American producer of on-purpose virgin sulfuric acid for water treatment, mining, and industrial applications.

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This segment includes our 50% interest in the Zeolyst Joint Venture, where we are a leading global supplier of zeolites used for catalysts that remove nitric oxide from diesel engine emissions as well as sulfur from fuels during the refining process.

Recent Developments

Recent Divestitures

On December 14, 2020, we completed the sale of our Performance Materials business for $650.0 million, which was subject to certain adjustments for indebtedness, working capital and cash at the closing of the transaction.

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Refer to Note 3 to our condensed consolidated financial statements for additional information.

Effective on August 1, 2021, we completed the sale of our Performance Chemicals business for $1.1 billion, subject to certain adjustments set forth in the agreement.

We used a portion of the net cash proceeds to repay the entire Senior Secured Term Loan Facility due February 2027 of $231.4 million and the 5.750% Senior Notes due 2025 (the “Senior Notes”) of $295.0 million .

On August 1, 2021, we completed the sale of our Performance Chemicals business for $1.1 billion, subject to certain adjustments set forth in the agreement.

We used a portion of the net cash proceeds to repay the entire outstanding principal balance of $231.4 million on the Senior Secured Term Loan Facility due February 2027 and the entire outstanding principal balance of $295.0 million on the 5.750% Senior Notes due 2025 (the “Senior Notes”).

The Senior Notes were redeemed at a redemption price equal to the sum of 102.875% of the principal amount of the Senior Notes plus accrued and unpaid interest to, but excluding, August 2, 2021.

Additionally, our Board of Directors (the “Board”) declared a special cash dividend of $3.20 per share, payable on August 23, 2021 to shareholders of record as of the close of business on August 12, 2021.

Additionally, our Board of Directors (the “Board”) declared a special cash dividend of $3.20 per share, paid on August 23, 2021, to stockholders of record as of the close of business on August 12, 2021.

The results of operations, financial condition, and cash flows for the Performance Chemicals business are presented herein as discontinued operations.

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Refineries have seen demand return with increasing miles driven, recovery from winter storm Uri and a general increase in economic activity.

Emission control and refining catalysts continue to lag, as vehicle builds have been slowed for numerous reasons including computer chip shortages, but show signs of rebound in the second half of 2021.

Polyethlene demand remains strong driven by the growing consumer demand for films and packaging.

Higher refinery utilization rates are increasing catalyst demand for both traditional and renewable fuels on the continued recovery in vehicle miles driven.

In February 2021, the Gulf Coast of the United States experienced significant and unexpectedly severe weather from winter storm Uri.

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The take-or-pay volume protection allows us to cover fixed costs through intermittent, temporary production issues at customer refineries.

While natural gas is not a direct feedstock for any product, natural gas powered furnaces are used to heat raw materials and create the chemical reactions necessary to produce end-products.

We maintain multiple suppliers wherever possible, make forward purchases of natural gas in the United States and structure our customer contracts when possible to allow for the pass-through of raw material and natural gas costs.

While natural gas is not a direct feedstock for any product, natural gas powered machinery and equipment are used to heat raw materials and create the chemical reactions necessary to produce end-products.

We maintain multiple suppliers wherever possible and structure our customer contracts when possible to allow for the pass-through of raw material, labor and natural gas costs.

Joint Ventures

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Our largest joint venture, the Zeolyst Joint Venture, manufactures high performance, specialty, zeolite-based catalysts for use in the packaging and engineered plastics, emission control, refining and petrochemical industries and other areas of the broader chemicals industry.

Demand for the Zeolyst Joint Venture products fluctuate based upon the timing of our customer’s fixed bed catalyst replacements.

Demand for the Zeolyst Joint Venture products fluctuates based upon the timing of our customer’s fixed bed catalyst replacements.

We share proportionally in the management of our joint ventures with the other parties to each such joint venture.

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As a global business, we are subject to the impact of gains and losses on currency translations, which occur when the financial statements of foreign operations are translated into U.S.

We operate in various geographies with approximately 10% of our sales for the six months ended June 30, 2021 and the year ended December 31, 2020 are in currencies other than the U.S.

We operate in various geographies with approximately 10% of our sales for the nine months ended September 30, 2021 and the year ended December 31, 2020 in currencies other than the U.S.

Because our consolidated financial results are reported in U.S.

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Results of Operations

Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

The following is a summary of our financial performance for the three months ended June 30, 2021 compared with the three months ended June 30, 2020.

Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020

The following is a summary of our financial performance for the three months ended September 30, 2021 compared with the three months ended September 30, 2020.

• Sales increased $36.7 million to $167.4 million.

The increase in sales was primarily due to a rebound in Ecoservices volumes and the impact of the pass-through of higher sulfur costs.

• Gross profit increased $3.6 million to $38.5 million .

The increase in gross profit was primarily due an increase in sales volumes partially offset by higher production and maintenance costs.

The increase in sales was primarily due to the impact of the pass-through of higher sulfur costs and an increase in demand for our polyethylene and chemical catalysts.

• Gro ss profit increased $12.8 million to $53.6 million.

The increase in gross profit was primarily due to higher sales volumes and favorable product mix, which was partially offset by higher production and maintenance costs.

Operating Income

• Operating income increased by $3.7 million to $22.5 million.

The increase in operating income was due to an increase in gross profit, which was partly offset by higher selling, general and administrative expenses.

The increase in operating income was due to an increase in gross profit, which was partly offset by higher other operating expenses.

Equity in Net Income of Affiliated Companies

• Equity in net income of affiliated companies for the three months ended June 30, 2021 was $6.8 million, compared to $11.5 million for the three months ended June 30, 2020.

The decrease of $4.7 million was due to lower earnings generated by the Zeolyst Joint Venture for the three months ended June 30, 2021.

The following is our unaudited condensed consolidated statements of income and a summary of financial results for the three months ended June 30, 2021 and 2020:

• Equity in net income of affiliated companies for the three months ended September 30, 2021 was $8.8 million, compared to $0.1 million for the three months ended September 30, 2020.

The increase of $8.7 million was due to higher earnings generated by the Zeolyst Joint Venture for the three months ended September 30, 2021.

The following is our unaudited condensed consolidated statements of income and a summary of financial results for the three months ended September 30, 2021 and 2020:

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Operating income margin 13.4 % 14.4 %

Equity in net (income) from affiliated companies (6.8) (11.5) 4.7 (40.9) %

Equity in net (income) from affiliated companies (8.8) (0.1) (8.7) NM

Interest expense, net 9.0 10.4 (1.4) (13.5) %

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Other income, net (0.2) (4.1) 3.9 (95.1) %

(Loss) Income before income taxes and noncontrolling interest (0.2) 9.7 (9.9) (102.1) %

Provision (benefit) for income taxes 7.7 (24.6) 32.3 (131.3) %

Income (loss) before income taxes and noncontrolling interest 7.3 (1.4) 8.7 (621.4) %

Provision for income taxes 2.6 21.3 (18.7) (87.8) %

Effective tax rate 35.6 % (1,579.7) %

Net (loss) income from continuing operations (7.9) 34.3 (42.2) (123.0) %

Net income (loss) from discontinued operations, net of tax 6.5 (18.1) 24.6 NM

Net (loss) income (1.4) 16.2 (17.6) (108.6) %

Net income (loss) from continuing operations 4.7 (22.7) 27.4 (120.7) %

Net (loss) income from discontinued operations, net of tax (75.9) 30.5 (106.4) (348.9) %

Net (loss) income (71.2) 7.8 (79.0) NM

Net income attributable to the noncontrolling interest - discontinued operations 0.1 0.3 (0.2) (66.7) %

Net (loss) income attributable to Ecovyst Inc.

$ (1.5) $ 15.9 $ (17.4) (109.4) %

$ (71.3) $ 7.5 $ (78.8) NM

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Ecoservices $ 137.5 $ 107.6 $ 29.9 27.8 %

Silica Catalysts 26.2 25.2 1.0 4.0 %

Catalyst Technologies 29.9 23.1 6.8 29.4 %

Total sales $ 167.4 $ 130.7 $ 36.7 28.1 %

Sales in Ecoservices for the three months ended June 30, 2021 were $120.8 million, an increase of $30.4 million, or 33.6%, compared to sales of $90.4 million for the three months ended June 30, 2020.

The increase in sales was due to an increase in volumes of $21.0 million and higher average selling prices of $9.4 million.

Sales increased as result of a rebound in gasoline production by refiners compared to the prior year period that was depressed by stay-at-home mandates related to the COVID-19 pandemic.

Higher average selling prices were primarily a result of the pass-through of higher sulfur costs of $9.8 million in our virgin sulfuric acid product group.

Silica Catalysts:

S ales in Silica Catalysts for the three months ended June 30, 2021 were $26.2 million, an increase of $1.0 million, or 4.0%, compared to sales of $25.2 million for the three months ended June 30, 2020.

The increase in sales was primarily due to a favorable product mix of polyethylene catalysts resulting in an increase in pricing of $1.8 million, which was partially offset by lower demand for our methyl methacrylate catalysts due to the timing of orders.

Gross profit for the three months ended June 30, 2021 was $38.5 million, an increase of $3.6 million, or 10.3%, compared with $34.9 million for the three months ended June 30, 2020.

The increase in gross profit was due to higher sales volumes of $13.3 million, favorable product mix of $2.0 million and favorable customer pricing of $11.2 million, which was partially offset by unfavorable manufacturing and maintenance costs of $22.3 million.

The increase in volumes was a result of a rebound in gasoline production by refiners compared to the prior year period that was depressed by the COVID-19 pandemic.

Favorable product mix was a result of increased sales of higher-margin polyethylene catalysts.

The increase in manufacturing costs was a result of the timing of plant “turnaround” maintenance projects and higher inventory absorption costs, which was offset by the pass-through of $9.8 million in higher sulfur costs .

Sales in Ecoservices for the three months ended September 30, 2021 were $137.5 million, an increase of $29.9 million, or 27.8%, compared to sales of $107.6 million for the three months ended September 30, 2020.

The increase in sales was due to higher average selling prices of $25.3 million and an increase in volumes of $4.6 million.

Higher average selling prices were primarily a result of the pass-through of higher sulfur costs of $15.3 million within our virgin sulfuric acid product group and the pass-through of other raw material costs within our regenerations services product group.

The increase in volumes was primarily driven by sales from the Chem32 acquisition as well as increased sales of regeneration services.

Catalyst Technologies:

S ales in Catalyst Technologies for the three months ended September 30, 2021 were $29.9 million, an increase of $6.8 million, or 29.4%, compared to sales of $23.1 million for the three months ended September 30, 2020.

The increase in sales was due to an increase in volumes of $11.6 million partially offset by lower average selling prices of $5.2 million.

Demand for our polyethylene and chemical catalysts drove the increase in sales, with higher volumes more than offsetting lower customer price mix.

Gross profit for the three months ended September 30, 2021 was $53.6 million, an increase of $12.8 million, or 31.4%, compared with $40.8 million for the thre e months ended September 30, 2020.

The increase in gross profit was due to higher sales volumes of $5.0 million, favorable customer pricing of $4.8 million, and favorable product mix of $4.2 million, which was partially offset by unfavorable manufacturing and maintenance costs of $1.0 million.

The favorable change in volumes and product mix was a result of increased demand for our high-margin polyethylene catalysts and the impact of our recent Chem32 acquisition.

Favorable customer pricing was driven by the pass-through of labor index and energy costs within our regeneration services product group.

The increase in manufacturing costs was a result of the timing of plant “turnaround” maintenance projects, which was offset by the pass-through of $15.3 million in higher sulfur costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended June 30, 2021 were $21.9 million, an increase of $1.3 million compared with $20.6 million for the three m onths ended June 30, 2020.

The increase in selling, general and administrative expenses was due to an increase in compensation-related expenses partially offset by income generated from the transition service agreement entered into as part of the sale of the Performance Materials business.

Selling, general and administrative expenses for the three months ended September 30, 2021 were $24.8 million, an increase of $6.1 million compared with $18.7 million for the three months ended September 30, 2020.

The increase in selling, general and administrative expenses was due to an increase in compensation-related expenses.

Other Operating Expense, Net

Other operating expense, net was comparable between both periods.

Other operating expense, net for the three months ended June 30, 2021 was $5.0 million, an increase of $0.6 million, compared with $4.4 million for the three months ended June 30, 2020.

Other operating expense, net for the three months ended September 30, 2021 was $6.3 million, an increase of $3.0 million, compared with $3.3 million for the three months ended September 30, 2020.

The increase in other operating expense, net, was due to an increase in asset disposals related to plant “turnaround” maintenance projects.

Equity in Net Income of Affiliated Companies

Equity in net income of affiliated companies for the three months ended June 30, 2021 was $6.8 million, compared to $11.5 million for the three months ended June 30, 2020.

The decrease was primarily due to $4.7 million of lower earnings from the Zeolyst Joint Venture during the three months ended June 30, 2021 as compare d to the three months ended June 30, 2020.

The decrease in earnings from the Zeolyst Joint Venture was due to lower demand for hydrocracking and specialty catalysts.

Equity in net income of affiliated comp anies for the three months ended September 30, 2021 was $8.8 million, compared to $0.1 million for the three months ended September 30, 2020.

The increase was primarily due to $8.7 million of higher earnings from the Zeolyst Joint Venture during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.

The increase in earnings from the Zeolyst Joint Venture was due to increased demand for our catalysts used in renewable fuels and the demand recovery for emission control catalysts.

Interest Expense, Net

Interest expense, net for the three month s ended June 30, 2021 was $8.7 million, a decrease of $6.4 million, as compared with $15.1 million for the three months ended June 30, 2020.

The decrease in interest expense, net was primarily due to lower interest rates on our variable-rate debt, along with lower average debt balances and a favorable increase in variable versus fixed-rate debt during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

Interest expense, net for the three month s ended September 30, 2021 was $9.0 million, a decrease of $1.4 million, as compared with $10.4 million for the three months ended September 30, 2020.

The decrease in interest expense, net was primarily due lower average debt balances and a favorable increase in variable versus fixed-rate debt during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.

Debt Extinguishment Costs

Debt extinguishment costs for the three months ended June 30, 2021 were $11.7 million.

In June 2021, we entered into an agreement for a new senior secured term loan facility and used the proceeds to repay portions of our existing term loan facilities.

As a result of this transaction, we recorded $5.7 million of new creditor and third-party financing costs as debt extinguishment costs during the three months ended June 30, 2021.

In addition, previous unamortized deferred financing costs of $1.7 million and original issue discount of $3.7 million associated with the previously outstanding debt were written off as debt extinguishment costs.

In June 2021, we amended our ABL Credit Agreement to decrease the aggregate amount of revolving loan commitments and extend the maturity date.

As a result of the amendment, we wrote off $0.6 million of unamortized deferred financing costs as debt extinguishment costs.

Othe r (Income) Expense, Net

Other (income) expense, net for the three months ended June 30, 2021 was income of $1.8 million, a decrease of $1.6 million, as compared with income of $3.4 million for the three months ended June 30, 2020.

Debt extinguishment costs for the three months ended September 30, 2021 and 2020 were $15.2 million and $14.0 million, respectively.

Concurrent with, and using a portion of the net cash proceeds from, the divestiture of the Performance Chemicals business in August 2021, we repaid the remaining balance on our 2016 Term Loan Facility and redeemed the Senior Notes.

In connection with the redemption of the Senior Notes, we paid a redemption premium of $8.5 million, which was recorded as debt extinguishment costs during the three months ended September 30, 2021.

We wrote off $0.8 million of unamortized deferred financing costs and $2.4 million of original issue discount related to the 2016 Term Loan Facility and $2.3 million of unamortized deferred financing costs and $1.2 million of original issue discount related to the Senior Notes as debt extinguishment costs during the three months ended September 30, 2021.

On July 22, 2020, we entered into an agreement for a new senior secured term loan facility in an aggregate principal amount of $650.0 million, the proceeds of which were used to repay the remaining outstanding balance of $625.0 million on the 6.75% Senior Secured Notes due 2022.

In conjunction with the issuance of such senior secured term loan facility, we paid $10.6 million in prepayment premiums and recorded $0.1 million of new creditor and third-party financing fees as debt extinguishment costs.

In addition, previous unamortized deferred financing costs of $2.1 million and original issue discount of $1.2 million associated with the 6.75% Senior Secured Notes due 2022 were written off as debt extinguishment costs.

Other Income, Net

Other income, net for the three months ended September 30, 2021 was income of $0.2 million, a decrease of $3.9 million, as compared with income of $4.1 million for the three months ended September 30, 2020.

The change in other expense, net primarily consisted of a decrease in foreign currency gains related to the non-permanent intercompany debt denominated in local currency and translated to the U.S.

Provision (Benefit) for Income Taxes

The provision for income taxes for the three months ended June 30, 2021 was $7.7 million compared to a $24.6 million provision for the three months ended June 30, 2020.

The effective income tax rate for the three months ended June 30, 2021 was (4,371.6)% compared to (254.3)% for the three months ended June 30, 2020.

Provision for Income Taxes

The provision for income taxes for the three months ended September 30, 2021 was $2.6 million compared to a $21.3 million provision for the three m onths ended September 30, 2020.

The effective income tax rate for the three months ended September 30, 2021 was 35.6% compared to (1,579.7)% for the three months ended September 30, 2020.

The Company’s effective income tax rate fluctuates based primarily on changes in income mix, the impacts of the Global Intangible Low Taxed Income (“GILTI”) tax rules, tax rate changes and changes in foreign exchange gains and losses, which create permanent differences in certain jurisdictions.

The difference between the U.S.

federal statutory income tax rate and the Company’s effective income tax rate for the three months ended June 30, 2021 was mainly due to the tax effect of permanent differences related to foreign currency exchange gain or loss, the inclusion of foreign earnings in U.S.

federal statutory income tax rate and the Company’s effective income tax rate for the three months ended September 30, 2021 was mainly due to the tax effect of permanent differences related to foreign currency exchange gain or loss, the inclusion of foreign earnings in U.S.

taxable income, the discrete impact of the product line and asset sales, foreign tax rate changes, pre-tax losses with no associated tax benefit and state taxes.

Net Income Attributable to Ecovyst

For the foregoing reasons and after the effect of the non-controlling interest in earnings of subsidiaries for each period presented, net income attributable to Ecovyst was $1.5 million for the three months ended June 30, 2021 compared with net income of $15.9 million for the three months ended June 30, 2020.

Net (Loss) Income Attributable to Ecovyst

For the foregoing reasons and after the effect of the non-controlling interest in earnings of subsidiaries for each period presented, net loss attributable to Ecovyst was $71.3 million for the three months ended September 30, 2021 compared with net income of $7.5 million for the three months ended September 30, 2020.

Adjusted EBITDA

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Segment Adjusted EBITDA may not be comparable with EBITDA or Adjusted EBITDA as defined by other companies.

(2) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment was $12.1 million for the three months ended June 30, 2021, which includes $6.8 million of equity in net income, excluding $1.6 million of amortization of investment in affiliate step-up plus $3.7 million of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment was $16.9 million for the three months ended June 30, 2020, which includes $11.5 million of equity in net income, excluding $1.7 million of amortization of investment in affiliate step-up plus $3.7 million of joint venture depreciation, amortization and interest.

(2) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment was $14.5 million for the three months ended September 30, 2021, which includes $8.8 million of equity in net income, excluding $1.6 million of amortization of investment in affiliate step-up plus $4.1 million of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment was $5.3 million for the three months ended September 30, 2020, which includes $0.1 million of equity in net income, excluding $1.7 million of amortization of investment in affiliate step-up plus $3.6 million of joint venture depreciation, amortization and interest.

(3) Our total Segment Adjusted EBITDA differs from our total consolidated Adjusted EBITDA due to unallocated corporate expenses.

Adjusted EBITDA for the three months ended June 30, 2021 was $40.5 million, an increase of $5.5 million, or 15.7%, compared with $35.0 million for the three months ended June 30, 2020.

The increase in Adjusted EBITDA was a result of a rebound in sales volumes as compared to the prior year period partially offset by higher plant “turnaround” maintenance expenses.

Adjusted EBITDA for the three months ended September 30, 2021 was $51.9 million, an increase of $7.6 million, or 17.2%, compared with $44.3 million for the three months ended September 30, 2020.

The increase in Adjusted EBITDA was a result of higher regeneration services volumes, favorable virgin sulfuric acid pricing and the impact of our recent Chem32 acquisition.

Catalyst Technologies:

Adjusted EBITDA for th e three months ended June 30, 2021 was $20.7 million, a decrease of $4.6 million, or 18.2%, compared with $25.3 million for the three months ended June 30, 2020.

The decrease in Adjusted EBITDA was primarily a result of reduced volumes in the Zeolyst Joint Venture due to timing of customer orders.

A reconciliation of net loss from continuing operations to Segment Adjusted EBITDA is as follows:

Adjusted EBITDA for th e three months ended September 30, 2021 was $25.5 million, an increase of $13.7 million, or 116.1%, compared with $11.8 million for the three months ended September 30, 2020.

The increase in Adjusted EBITDA was primarily a result of higher demand for our polyethylene and pressure product catalysts and improved manufacturing network efficiencies.

A reconciliation of net income (loss) from continuing operations to Segment Adjusted EBITDA is as follows:

Three months ended

September 30,

(in millions)

Reconciliation of net (loss) income from continuing operations to Segment Adjusted EBITDA

Net (loss) income from continuing operations $ (7.9) $ 34.3

Provision (benefit) for income taxes 7.7 (24.6)

Reconciliation of net income (loss) from continuing operations to Segment Adjusted EBITDA

Net income (loss) from continuing operations $ 4.7 $ (22.7)

Provision for income taxes 2.6 21.3

Interest expense, net 9.0 10.4

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Net loss on asset disposals (c)

Foreign currency exchange gain (d)

Foreign currency exchange loss (gain) (d)

LIFO benefit (e)

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As such, we do not view such income or expenses as core to our ongoing business operations.

(i) Other costs consist of certain expenses that are not core to our ongoing business operations, including environmental remediation-related costs associated with the legacy operations of our business prior to a business combination consummated in a prior year period and capital and franchise taxes.

(i) Other costs consist of certain expenses that are not core to our ongoing business operations, including environmental remediation-related costs, capital and franchise taxes.

Included in this line-item are rounding discrepancies that may arise from rounding from dollars (in thousands) to dollars (in millions).

Adjusted Net Income

Summarized adjusted net income information is shown below in the following table:

Three months ended June 30,

Summarized adjusted net income (loss) information is shown below in the following table:

Three months ended September 30,

Pre-tax Tax expense (benefit) After-tax Pre-tax Tax expense (benefit) After-tax

(in millions)

Reconciliation of net (loss) income from continuing operations to Adjusted Net Income (1)(2)

Net (loss) income attributable to Ecovyst Inc.

Reconciliation of net income (loss) from continuing operations to Adjusted Net Income (1)(2)

Net income (loss) attributable to Ecovyst Inc.

$ 7.3 $ 2.6 $ 4.7 $ (1.4) $ 21.3 $ (22.7)

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2.2 0.5 1.7 0.6 0.4 0.2

Foreign currency exchange gain (d)

Foreign currency exchange loss (gain) (d)

0.9 0.2 0.7 (4.3) (1.6) (2.7)

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(2) Refer to the Adjusted EBITDA notes above for more information with respect to each adjustment.

(3) Due to reporting the Performance Chemicals business as held for sale in discontinued operations, the estimated tax rate used to value deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) needs to be adjusted to remove the Performance Chemicals rate.

Given it is a direct result of the sale of discontinued operations and the need to adjust the estimated tax rate arose because of discontinued operations, the impact of revaluing the reporting entity’s DTAs and DTLs are reflected in continuing operations.

Due to this revaluation being solely as a result of the Performance Chemicals divestiture and a non-cash item, it is treated as an addback.

(3) Due to the sale of the Performance Chemicals business, the tax rates used to value deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) needs to be adjusted.

Given it is a direct result of the sale of discontinued operations and the need to adjust the tax rates arose because of discontinued operations, the impact of revaluing the reporting entity’s DTAs and DTLs are reflected in continuing operations.

The adjustments to net income attributable to Ecovyst Inc.

are shown net of applicable tax rates as determined by the calculation of our quarterly tax provision under interim financial reporting for the three months ended June 30, 2021 and June 30, 2020, except for the foreign currency exchange loss, impacts of tax rate changes and the effects of the sale of assets for which the taxes are calculated as discrete items using the applicable statutory income tax rates.

are shown net of applicable tax rates as determined by the calculation of our quarterly tax provision under interim financial reporting for the three months ended September 30, 2021 and September 30, 2020, except for the foreign currency exchange loss, impacts of tax rate changes and the effects of the sale of assets for which the taxes are calculated as discrete items using the applicable statutory income tax rates.

Results of Operations

Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

The following is a summary of our financial performance for the six months ended June 30, 2021 compared with the six months ended June 30, 2020.

Nine months ended September 30, 2021 Compared to the Nine months ended September 30, 2020

The following is a summary of our financial performance for the nine months ended September 30, 2021 compared with the nine months ended September 30, 2020.

• Sales increased $69.2 million to $441.0 million.

The increase in sales was primarily due to favorable cost pass-through pricing and a rebound in volume in our Ecoservices segment.

• Gross profit decreased $4.0 million to $68.6 million.

The decrease in gross profit was primarily due an increase in manufacturing costs, which was partially offset by higher sales volumes.

The increase in sales was primarily due to favorable cost pass-through pricing, a rebound in volumes in our Ecoservices segment and higher demand for our polyethylene catalysts.

• Gross profit increased $8.8 million to $122.2 million.

The increase in gross profit was primarily due to higher sales volumes, favorable cost pass-through pricing and favorable product mix, which was partially offset by an increase in manufacturing costs.

Operating Income

• Operating income decreased by $4.0 million to $36.6 million.

The decrease in operating income was due to a decrease in gross profit during the current year period.

The increase in operating income was due to an increase in gross profit, partially offset by increased selling, general and maintenance costs and other operating expenses.

Equity in Net Income of Affiliated Companies

• Equity in net income of affiliated companies for the six months ended June 30, 2021 was $12.0 million, compared with $19.8 million for the six months ended June 30, 2020.

The decrease of $7.8 million was due to a decrease in sales volume in the Zeolyst Joint Venture for the six months ended June 30, 2021.

The following is our unaudited condensed consolidated statements of income and a summary of financial results for the six months ended June 30, 2021 and 2020:

Six months ended

June 30, Change

• Equity in net income of affiliated companies for the nine months ended September 30, 2021 was $20.7 million, compared with $19.9 million for the nine months ended September 30, 2020.

The increase of $0.8 million was due to an increase in sales volume in the Zeolyst Joint Venture for the nine months ended September 30, 2021.

The following is our unaudited condensed consolidated statements of income and a summary of financial results for the nine months ended September 30, 2021 and 2020:

Nine months ended

September 30, Change

2021 2020 $ %

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Debt extinguishment costs 26.9 16.5 10.4 63.0 %

Other expense, net 3.3 4.0 (0.7) (17.5) %

(Loss) income before income taxes and noncontrolling interest (8.1) 4.7 (12.8) (272.3) %

Other expense (income), net 3.1 (0.2) 3.3 NM

Income before income taxes and noncontrolling interest (0.9) 3.3 (4.2) (127.3) %

Provision (benefit) for income taxes 5.1 (5.0) 10.1 (202.0) %

Effective tax rate (610.9) % (149.9) %

Net (loss) income from continuing operations (10.6) 31.0 (41.6) (134.2) %

Net loss from discontinued operations, net of tax (83.3) (14.2) (69.1) NM

Net (loss) income (93.9) 16.8 (110.7) NM

Net income from continuing operations (6.0) 8.3 (14.3) (172.3) %

Net (loss) income from discontinued operations, net of tax (159.1) 16.3 (175.4) NM

Net (loss) income (165.1) 24.6 (189.7) (771.1) %

Net income attributable to the noncontrolling interest - discontinued operations 0.3 0.9 (0.6) (66.7) %

Net (loss) income attributable to Ecovyst Inc.

$ (94.2) $ 16.2 $ (110.4) NM

Six months ended

June 30, Change

$ (165.4) $ 23.7 $ (189.1) (797.9) %

Nine months ended

September 30, Change

2021 2020 $ %

(in millions, except percentages)

Ecoservices $ 358.5 $ 298.7 $ 59.8 20.0 %

Silica Catalysts 52.6 50.1 2.5 5.0 %

Catalyst Technologies 82.5 73.1 9.4 12.9 %

Total sales $ 441.0 $ 371.8 $ 69.2 18.6 %

Ecoservices :

Sales in Ecoservices for the six months ended June 30, 2021 were $221.0 million, an increase of $29.9 million, or 15.6%, compared to sales of $191.1 million for the six months ended June 30, 2020.

Sales in Ecoservices for the nine months ended September 30, 2021 were $358.5 million, an increase of $59.8 million, or 20.0%, compared to sales of $298.7 million for the nine months ended September 30, 2020.

The increase in sales was due to higher average selling prices of $40.5 million and an increase in sales volumes of $19.3 million.

Higher average selling prices benefited from the pass-through of higher sulfur costs of $27.8 million.

Sales volumes increased as result of a rebound in gasoline production by refiners compared to the prior year period that was depressed by the COVID-19 pandemic.

Silica Catalysts :

Sales in Silica Catalysts for the six months ended June 30, 2021 were $52.6 million, an increase of $2.5 million, or 5.0%, compared to sales of $50.1 million for the six months ended June 30, 2020.

The increase in sales was primarily due to product mix of polyethylene catalysts resulting in an increase in pricing of $2.5 million.

Gross profit for the six months ended June 30, 2021 was $68.6 million, a decrease of $4.0 million, or 5.5%, compared with $72.6 million for the six months ended June 30, 2020.

The decrease in gross profit was due to higher maintenance costs and unfavorable inventory absorption, which was partially offset by favorable volumes in Ecoservices of $10.0 million.

The increase in manufacturing costs is due to one-time repair costs related to winter storms in the Gulf region, timing of plant “turnaround” maintenance expenditures and higher inventory absorption costs.

Favorable product mix was a result of increased sales of higher-margin polyethylene catalysts.

The increase in volumes was a result of a rebound in gasoline production by refiners compared to the prior year period that was burdened by the COVID-19 pandemic.

Sales volumes increased as result of a rebound in refinery utilization compared to the prior year period that was depressed by the COVID-19 pandemic as well as the impact of our recent Chem32 acquisition.

Catalyst Technologies :

Sales in Catalyst Technologies for the nine months ended September 30, 2021 were $82.5 million, an increase of $9.4 million, or 12.9%, compared to sales of $73.1 million for the nine months ended September 30, 2020.

The increase in sales was due to an increase in volumes of $10.5 million partially offset by lower average selling prices of $2.7 million.

Demand for our polyethylene catalysts drove the increase in sales, with higher volumes more than offsetting lower customer price mix.

Gross profit for the nine months ended September 30, 2021 was $122.2 million, an increase of $8.8 million, or 7.8%, compared with $113.4 million for the nine mon ths ended September 30, 2020.

The increase in gross profit was due to favorable volumes in Ecoservices of $12.5 million, higher pricing of $10.0 million and favorable product mix in Silica Catalysts of $9.3 million, which was partially offset by higher manufacturing costs of $18.7 million.

The impact of favorable volumes on our gross profit was a result of a rebound in refinery utilization compared to the prior year period that was burdened by the COVID-19 pandemic as well as the impact of our recent Chem32 acquisition.

Take or pay provisions within our contracts drove a favorable pricing benefit.

The favorable product mix in Silica Catalysts was due to increased demand for our higher-margin polyethylene catalysts.

One-time repair costs related to winter storms in the Gulf region, timing of plant “turnaround” maintenance expenditures and higher inventory absorption costs drove the unfavorable change in manufacturing costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six months ended June 30, 2021 was $44.0 million, a increase of $1.1 million as compa red to $42.9 million for the six months ended June 30, 2020.

Selling, general and administrative expenses for the nine months ended September 30, 2021 was $68.8 million, an increase of $7.3 million as compa red to $61.5 million for the nine months ended September 30, 2020.

The increase in selling, general and administrative expenses was due to increased compensation-related expenses, partially offset by income generated from the transition service agreement entered into as part of the sale of the Performance Materials business.

Other Operating Expense, Net

Other operating expense, net for the six months ended June 30, 2021 was $10.5 million, an increase of $2.6 million, compared with $7.9 million for the six months ended June 30, 2020.

The increase in other operating expense, net was a result of severance charges incurred in the current year period.

Other operating expense, net for the nine months e nded September 30, 2021 was $16.8 million, an increase of $5.5 million, compared with $11.3 million for the nine months ended September 30, 2020.

The increase in other operating expense, net was a result of asset disposals related to plant “turnaround” maintenance projects and severance charges incurred in the current year period.

Equity in Net Income of Affiliated Companies

Equity in net income of affiliated companies for the six months ended June 30, 2021 was $12.0 million, compared to $19.8 million for the six months ended June 30, 2020.

The decrease was primarily due to $7.8 million of lower earnings from the Zeolyst Joint Ventur e during the six months ended June 30, 2021.

The decline in earnings was a result of lower volume from deferred customer change-outs related to reduced output from oil refineries and heavy duty vehicle production, which led to a decrease in demand for our emission control and hydrocracking catalysts.

Equity in net income of affiliated companies for the nine months ended September 30, 2021 was $20.7 million, compared to $19.9 million for the nine months ended September 30, 2020.

The increase was primarily due to $0.9 million of lower earnings from the Zeolyst Joint Ventur e during the nine months ended September 30, 2021.

Interest Expense, Net

Interest expense, net for the six months ended June 30, 2021 was $19.2 million, a decrease of $11.2 million, as compared with $30.4 million for the six months ended June 30, 2020.

The decrease in interest expense was primarily due to lower interest rates on our variable-rate debt.

Interest expense, net for the nine months ended September 30, 2021 was $28.2 million, a decrease of $12.7 million, as compared with $40.9 million for the nine months ended September 30, 2020.

The decrease in interest expense was primarily due to lower interest rates on our variable-rate debt and lower average debt balances.

Debt Extinguishment Costs

Debt extinguishment costs were $11.7 million and $2.5 million for the six months ended June 30, 2021 and 2020 , respectively.

Debt extinguishment costs were $26.9 million and $16.5 million for the nine months ended September 30, 2021 and 2020 , respectively.

In connection with the redemption of the Senior Notes, we paid a redemption premium of $8.5 million, which was recorded as debt extinguishment costs during the nine months ended September 30, 2021.

In June 2021, we entered into an agreement for a new senior secured term loan facility and used the proceeds to repay a portion of our existing term loan facilities.

As a result of this transaction, we recorded $5.7 million of new creditor and third-party financing costs as debt extinguishment costs during the three months ended June 30, 2021.

As a result of this transaction, we recorded $5.7 million of new creditor and third-party financing costs as debt extinguishment costs during the three months ended September 30, 2021.

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As a result of the amendment, we wrote off $0.5 million of unamortized deferred financing costs as debt extinguishment costs.

On February 7, 2020, we amended our existing senior secured term loan facility to reduce the applicable interest rates and extend the maturity of the facility to February 2027.

We recorded $2.2 million of new creditor and third-party financing fees as debt extinguishment costs for the six months ended June 30, 2020 .

In addition, previously unamortized deferred financing costs of $0.1 million and original issue discount of $0.2 million associated with the existing senior secured term loan facility were written off as debt extinguishment costs for the six months ended June 30, 2020 .

Other (Income) Expense, Net

Other expense, net for the six months ended June 30, 2021 was expense of $3.3 million, a decrease of $0.7 million, as compared with expense of $4.0 million for the six months ended June 30, 2020.

The decrease in other expense, net primarily consisted of a decrease in franchise taxes.

We recorded $2.2 million of new creditor and third-party financing fees as debt extinguishment costs for the nine months ended September 30, 2020 .

Other Expense (Income), Net

Other (income) expense, net for the nine months ended September 30, 2021 was expense of $3.1 million, a decrease of $3.3 million, as compared with income of $0.2 million for the nine months ended September 30, 2020.

The decrease in other (income) expense, net primarily consisted of foreign currency losses in the current year as compared to gains in the prior year related to the non-permanent intercompany debt denominated in local currency and translated to the U.S.

Provision (Benefit) for Income Taxes

The benefit for income taxes for the six months ended June 30, 2021 was $2.5 million compared to a $26.3 million benefit for the six months ended June 30, 2020.

The effective income tax rate for the six months ended June 30, 2021 was (30.9)% compared to (562.5)% for the six months ended June 30, 2020.

The benefit for income taxes for the nine months ended September 30, 2021 was $5.1 million compared to a $5.0 million benefit for the nine months ended September 30, 2020.

The effective income tax rate for the nine months ended September 30, 2021 was (610.9)% compared to (149.9)% for the nine months ended September 30, 2020.

The Company’s effective income tax rate fluctuates primarily due to income mix, the impacts of GILTI, discrete impacts of the divestiture of the Performance Chemicals business, tax rate changes and changes in foreign exchange gains and losses, which create permanent differences in certain jurisdictions.

The difference between the U.S.

federal statutory income tax rate and the Company’s effective income tax rate for the six months ended June 30, 2021 was mainly due to the impacts of GILTI, discrete tax impacts related to intraperiod allocation revaluation of deferred tax assets and liabilities as a result of the Performance Chemicals divestiture, tax rate changes and the tax effect of permanent differences related to foreign currency exchange gain or loss.

federal statutory income tax rate and the Company’s effective income tax rate for the nine months ended September 30, 2021 was mainly due to the impacts of GILTI, discrete tax impacts related to intraperiod allocation revaluation of deferred tax assets and liabilities as a result of the divestiture of the Performance Chemicals business, tax rate changes and the tax effect of permanent differences related to foreign currency exchange gain or loss.

Net (Loss) Income Attributable to Ecovyst

For the foregoing reasons and after the effect of the non-controlling interest in earnings of subsidiaries for each period presented, net loss attributable to Ecovyst was $94.2 million for the six months ended June 30, 2021 compared with net income of $16.2 million for the six months ended June 30, 2020.

For the foregoing reasons and after the effect of the non-controlling interest in earnings of subsidiaries for each period presented, net loss attributable to Ecovyst was $165.4 million for the nine months ended September 30, 2021 compared with net income of $23.7 million for the nine months ended September 30, 2020.

Adjusted EBITDA

Summarized Segment Adjusted EBITDA information is shown below in the following table:

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2021 2020 $ %

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Segment Adjusted EBITDA may not be comparable with EBITDA or Adjusted EBITDA as defined by other companies.

(2) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $22.6 million for the six months ended June 30, 2021, which includes $12.0 million of equity in net income, excluding $3.3 million of amortization of investment in affiliate step-up plus $7.3 million of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $30.6 million for the six months ended June 30, 2020, which includes $19.8 million of equity in net income, excluding $3.3 million of amortization of investment in affiliate step-up plus $7.5 million of joint venture depreciation, amortization and interest.

(2) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $37.1 million for the nine months ended September 30, 2021, which includes $20.8 million of equity in net income, excluding $4.9 million of amortization of investment in affiliate step-up plus $11.4 million of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $35.9 million for the nine months ended September 30, 2020, which includes $19.9 million of equity in net income, excluding $5.0 million of amortization of investment in affiliate step-up plus $11.1 million of joint venture depreciation, amortization and interest.

(3) Our total Segment Adjusted EBITDA differs from our total consolidated Adjusted EBITDA due to unallocated corporate expenses.

Rounding discrepancies may arise when rounding segment results from dollars (in thousands) to dollars (in millions).

Adjusted EBITDA for the six months ended June 30, 2021 was $73.5 million, an increase of $1.3 million, or 1.8%, compared with $72.2 million for the six mo nths ended June 30, 2020.

Adjusted EBITDA for the nine months ended September 30, 2021 was $125.4 million, an increase of $8.9 million, or 7.6%, compared with $116.5 million for the nine mo nths ended September 30, 2020.

The increase in Adjusted EBITDA was due to a rebound in sales volumes partially offset by higher repair costs to our facilities and lost sales related to winter storm Uri.

Catalyst Technologies:

Adjusted EBITDA for the six months ended June 30, 2021 was $39.2 million, a decrease of $8.8 million, or 18.3%, compared with $48.0 million for the six months ended June 30, 2020.

The decrease in Adjusted EBITDA was a result of lower Zeolyst Joint Venture sales volumes and unfavorable fixed cost absorption.

A reconciliation of net loss from continuing operations to Segment Adjusted EBITDA is as follows:

Six months ended

Adjusted EBITDA for the nine months ended September 30, 2021 was $64.6 million, an increase of $4.9 million, or 8.2%, compared with $59.7 million for the nine months ended September 30, 2020.

The increase in Adjusted EBITDA was a result of higher demand for polyethylene catalyst and catalyst used for renewable fuels as well as favorable inventory absorption to match anticipated future demand partially offset by lower hydrocracking and specialty catalyst sales volumes.

A reconciliation of net income from continuing operations to Segment Adjusted EBITDA is as follows:

Nine months ended

September 30,

(in millions)

Reconciliation of net (loss) income from continuing operations to Segment Adjusted EBITDA

Net (loss) income from continuing operations $ (10.6) $ 31.0

Reconciliation of net income from continuing operations to Segment Adjusted EBITDA

Net income from continuing operations $ (6.0) $ 8.3

Provision (benefit) for income taxes 5.1 (5.0)

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Net loss on asset disposals (c)

Foreign currency exchange loss (d)

Foreign currency exchange loss (gain) (d)

LIFO benefit (e)

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As such, we do not view such income or expenses as core to our ongoing business operations.

(i) Other costs consist of certain expenses that are not core to our ongoing business operations, including environmental remediation-related costs, capital and franchise taxes.

Included in this line-item are rounding discrepancies that may arise from rounding from dollars (in thousands) to dollars (in millions).

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Summarized adjusted net income information is shown below in the following table:

Six months ended June 30,

Nine months ended September 30,

Pre-tax Tax expense (benefit) After-tax Pre-tax Tax expense (benefit) After-tax

(in millions)

Reconciliation of net (loss) income from continuing operations to Adjusted Net Income (1)(2)

Net (loss) income attributable to Ecovyst Inc.

Reconciliation of net income from continuing operations to Adjusted Net Income (1)(2)

Net income attributable to Ecovyst Inc.

$ (0.9) $ 5.1 $ (6.0) $ 3.3 $ (5.0) $ 8.3

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4.5 1.2 3.3 1.2 0.5 0.7

Foreign currency exchange loss (d)

Foreign currency exchange losses (gains) (d)

4.8 1.3 3.5 (0.6) (0.2) (0.4)

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(2) Refer to the Adjusted EBITDA notes above for more information with respect to each adjustment.

Due to this revaluation being solely as a result of the Performance Chemicals divestiture and a non-cash item, it is treated as an addback.

(3) Due to the sale of the Performance Chemicals business, the tax rates used to value deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) needs to be adjusted.

The adjustments to net income attributable to Ecovyst Inc.

are shown net of applicable tax rates of 27.7% and 195.3% for the six months ended June 30, 2021 and 2020, respectively, except for the foreign currency exchange loss and discrete impacts of the divestiture of the Performance Chemicals business.

are shown net of applicable tax rates of 28.0% and 36.3% for the nine months ended September 30, 2021 and 2020, respectively, except for the foreign currency exchange loss and discrete impacts of the divestiture of the Performance Chemicals business.

Financial Condition, Liquidity and Capital Resources

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We may, from time to time, increase borrowings under our asset based lending revolving credit facility to meet our future cash needs.

As of June 30, 2021, we had cash and cash equivalents of $55.8 million and availability of $107.1 million under our asset based lending revolving credit facility, after giving effect to $17.8 million of outstanding letters of credit, for a total available liquidity of $162.9 million.

We did not have any revolving credit facility borrowings as of June 30, 2021.

As of June 30, 2021, we were in compliance with all covenants under our debt agreements.

On a continuing operations basis, we held an immaterial balance of cash and cash equivalents in foreign jurisdictions as of June 30, 2021.

We repatriate cash held outside of the United States from certain foreign subsidiaries in order to meet domestic liquidity needs.

As of September 30, 2021, we had cash and cash equivalents of $104.8 million and availability of $60.8 million under our asset based lending revolving credit facility, after giving effect to $17.5 million of outstanding letters of credit, for a total available liquidity of $165.6 million.

We did not have any revolving credit facility borrowings as of September 30, 2021.

As of September 30, 2021, we were in compliance with all covenants under our debt agreements.

We held an immaterial balance of cash and cash equivalents in foreign jurisdictions as of September 30, 2021.

We continue to repatriate cash held outside of the United States from certain foreign subsidiaries in order to meet domestic liquidity needs.

Depending on domestic and foreign cash balances, we have certain flexibility to repatriate funds in order to meet those needs.

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Our liquidity requirements are significant, primarily due to debt service requirements.

As reported, our cash interest paid for the six months ended June 30, 2021 and 2020 wa s approximately $28.8 million and $53.8 million, respectively.

As reported, our cash interest paid for the nine months ended September 30, 2021 and 2020 wa s approximately $43.1 million and $75.3 million, respectively.

Before any impact of hedges, a one percent change in assumed interest rates for our variable interest credit facilities would have an annual impact of approximately $9.0 million on interest expense.

We hedge the interest rate fluctuations on debt obligations through interest rate cap agreements.

As of June 30, 2021, we had interest rate caps on $500.0 million of notional variable-rate debt with a cap rate of 0.84% through July 2022 and $400.0 million of notional variable-rate debt with a cap rate of 1.00% through August 2023.

Six months ended

As of September 30, 2021, we had interest rate caps on $500.0 million of notional variable-rate debt with a cap rate of 0.84% through July 2022 and $400.0 million of notional variable-rate debt with a cap rate of 1.00% through August 2023.

Nine months ended

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(in millions)

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Cash, cash equivalents and restricted cash at end of period of continuing operations $ 104.8 $ 124.5

Six months ended

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September 30,

(in millions)

Continuing Operations

Net (loss) income $ (10.6) $ 31.0

Net income $ (6.0) $ 8.3

Non-cash and non-working capital related activities (1)

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(1) Includes depreciation, amortization, amortization of deferred financing costs and original issue discount, foreign currency exchange gains and losses, deferred income tax provision (benefit), net (gains) losses on asset disposals, stock compensation expense and equity in net income and dividends received from affiliated companies.

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(in millions)

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$ (18.5) $ (33.7)

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(in millions)

1 unchanged sentence

Purchases of property, plant and equipment $ (44.6) $ (34.6)

Proceeds from business divestiture, net of cash 980.4 —

Business combinations, net of cash acquired (42.8) —

Proceeds from sale of assets — 2.4

Net cash used in investing activities, continuing operations $ (70.0) $ (19.8)

Six months ended

Other, net (0.1) —

Net cash provided by (used in) investing activities, continuing operations $ 892.9 $ (32.2)

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(in millions)

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Net cash borrowings (repayments) on debt obligations (532.1) (5.9)

Proceeds from failed sale-leaseback 14.1 —

Dividends paid to stockholders (435.6) —

Other financing activities (9.9) (3.9)

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The following discussions related to our cash flows are presented on a continuing operations basis, which excludes the cash flows from our Performance Materials and Performance Chemicals businesses accounted for as discontinued operations.

Net cash provided by operating activities was $37.2 million for the six months ended June 30, 2021, compared to $24.3 million provided for the six months ended June 30, 2020.

Cash generated by operating activities, other than changes in working capital, was lower during the six months ended June 30, 2021 by $25.8 million compared to the same period in the prior year.

The change in working capital during the six months ended June 30, 2021 was favorable compared to the six months ended June 30, 2020.

Cash used to fund working capital was $15.2 million and $53.8 million for the six months ended June 30, 2021 and 2020, respectively.

The decrease in cash generated by operating activities, other than changes in working capital, was lower by $25.8 million as compared to the prior year period primarily due to a decrease in dividends received from affiliated companies offset by a decline in operating profit.

The increase in cash from working capital of $38.6 million as compared to the prior year was primarily due to favorable changes in accrued liabilities, inventories and accounts payable which were partially offset by unfavorable changes in accounts receivable and prepaid and other current assets.

The favorable change in accrued liabilities was driven by a decrease in current income taxes payable and lower interest accruals.

The increase in cash provided by inventory changes was due to the timing of sales orders for our polyethylene catalysts in the current year period compared to an inventory build in the prior year period.

The favorable change in accounts payable is due to the timing of capital spending and the favorable change in accrued liabilities relates to changes in various expense accruals.

The unfavorable change in accounts receivable was driven by the increase in sales within our Ecoservices segment.

Net cash used in investing activities was $70.0 million for the six months ended June 30, 2021, compared to cash used of $19.8 million during the same period in 2020.

Cash used in investing activities consisted of utilizing $28.0 million and $22.2 million to fund capital expenditures during the six months ended June 30, 2021 and 2020, respectively.

During the six months ended June 30, 2021, we acquired Chem32, LLC for $42.0 million.

We received proceeds of $2.4 million related to the sale of non-core assets during the six months ended June 30, 2020.

Net cash used in financing activities was $5.0 million for the six months ended June 30, 2021, compared to net cash used of $6.7 million during the same period in 2020.

Net cash used in financing activities was primarily driven by $3.5 million of debt issuance costs related to the 2021 Term Loan Facility and $1.5 million of stock repurchases during the six months ended June 30, 2021.

Net cash provided by financing activities was primarily driven by $3.9 million of stock repurchases and $3.0 million of debt issuance costs the six months ended June 30, 2020.

Net cash provided by operating activities was $92.3 million for the nine months ended September 30, 2021, compared to $56.4 million provided for the nine months ended September 30, 2020.

Cash generated by operating activities, other than changes in working capital, was higher during the nine months ended September 30, 2021 by $20.7 million compared to the same period in the prior year.

The change in working capital during the nine months ended September 30, 2021 was favorable compared to the nine months ended September 30, 2020.

Cash used to fund working capital was $18.5 million and $33.7 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase in cash generated by operating activities, other than changes in working capital, was higher by $20.7 million as compared to the prior year period primarily due to an increase in operating profit and an increase in dividends received from affiliated companies.

The increase in cash from working capital of $15.2 million as compared to the prior year was primarily due to unfavorable changes in accounts receivable and prepaid and other current assets, which were partially offset by favorable changes in inventories, accounts payable and accrued liabilities.

The unfavorable change in accounts receivable was driven by the increase in sales volumes and higher pass-through pricing within our Ecoservices segment and the timing of sales within our Catalysts segment.

The unfavorable change in prepaid and other current assets relates to the timing of receivables from related parties and the timing of insurance prepayments.

The increase in cash provided by inventory was due to the increase in sales within our Catalysts segment in the current year period.

The favorable change in accounts payable is due to the timing of vendor payments as well as capital spending.

The favorable change in accrued liabilities relates to changes in various accruals.

Net cash provided by investing activities was $892.9 million for the nine months ended September 30, 2021, compared to cash used of $32.2 million during the same period in 2020.

Cash used in investing activities consisted of utilizing $44.6 million and $34.6 million to fund capital expenditures during the nine months ended September 30, 2021 and 2020, respectively.

During the nine months ended September 30, 2021, we divested our Performance Chemicals business and received $980.4 million in net proceeds and acquired Chem32, LLC for $42.8 million.

We received proceeds of $2.4 million related to the sale of non-core assets during the nine months ended September 30, 2020.

Net cash used in financing activities was $963.5 million for the nine months ended September 30, 2021, compared to net cash used of $9.8 million during the same period in 2020.

During the nine months ended September 30, 2021, we used the proceeds from the divestiture of the Performance Chemicals business to repay approximately $526.4 million of outstanding debt, pay a special dividend of $435.6 million and pay a redemption premium on our debt of $8.5 million.

Net cash used in financing activities was primarily driven by $10.6 million of debt prepayment charges and $4.1 million of stock repurchases, which was partially offset by $4.7 million of net debt borrowings for the nine months ended September 30, 2020.

September 30,

2021 December 31,

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Senior Secured Term Loan Facility due February 2027 (the “2016 Term Loan Facility”) (1)

$ 231.4 $ 671.7

Senior Secured Term Loan Facility due February 2027 (the “2020 Term Loan Facility”) — 459.7

Senior Secured Term Loan Facility due June 2028 (the “2021 Term Loan Facility”) 897.8 —

5.750% Senior Notes due 2025 (1)

5.750% Senior Notes due 2025 (the “Senior Notes”) (1)

ABL Facility — —

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Total long-term debt, excluding current portion $ 874.6 $ 1,400.4

(1) A portion of the net cash proceeds from the closing of the sale of the Performance Chemicals business was used to repay the 2016 Term Loan Facility in full and to redeem all of the 5.750% Senior Notes due 2025.

As of June 30, 2021, our total debt was $1,426.4 million, excluding the original issue discount of $13.1 million and deferred financing fees of $8.3 million for our senior secured credit facilities and notes.

Our net debt as of June 30, 2021 was $1,370.6 million, including cash and cash equivalents of $55.8 million.

(1) A portion of the net cash proceeds from the closing of the sale of the Performance Chemicals business was used to repay the 2016 Term Loan Facility in full and to redeem all of the Senior Notes.

As of September 30, 2021, our total debt was $897.8 million, excluding the original issue discount of $9.1 million and deferred financing fees of $5.1 million for our senior secured credit facilities and notes.

Our net debt as of September 30, 2021 was $793.0 million, including cash and cash equivalents of $104.8 million.

We may seek, subject to market conditions and other factors, opportunities to repurchase, refinance or otherwise reprice our debt.

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These capital expenditures represent our “book” capital expenditures for which the company has recorded, but not necessarily paid for the capital expenditures.

Six months ended

Nine months ended

September 30,

(in millions)

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Capital expenditures remained at a level sufficient for required maintenance and certain expansion growth initiatives during these periods.

Maintenance capital expenditures were higher in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 due to higher spending on health and safety.

Growth capital expenditures were in-line in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Maintenance capital expenditures were higher in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 due to higher plant maintenance costs and spending on health and safety.

Growth capital expenditures were in-line in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.

Pension Funding

We did not pay any cash contributions into our defined benefit plans and other postretirement plans during the six months ended June 30, 2021.

We paid $0.9 million in cash contributions into our defined benefit pension plans and other post-retirement plans during the six months ended June 30, 2020.

The net periodic pension expense was $1.2 million and $0.2 million for those same periods, respectively.

We did not pay any cash contributions into our defined benefit plans and other postretirement plans during the nine months ended September 30, 2021.

We paid $3.3 million in cash contributions into our defined benefit pension plans and other post-retirement plans during the nine months ended September 30, 2020.

The net periodic pension expense was $1.8 million and $0.3 million for the nine months ended September 30, 2020, respectively.

Off–Balance Sheet Arrangements

We had $17.8 million of outstanding letters of credit on our ABL Facility as of June 30, 2021.

We had $17.5 million of outstanding letters of credit on our ABL Facility as of September 30, 2021.

Contractual Obligations

Information related to our contractual obligations at December 31, 2020 can be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Op erations” included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 17, 2021, which we refer to as our Annual Report on Form 10-K.

During the six months ended June 30, 2021, there have been no significant c hanges to our contractual obligations as disclosed in our Annual Report on Form 10-K.

Information related to our contractual obligations at December 31, 2020 can be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 17, 2021, which we refer to as our Annual Report on Form 10-K.

During the nine months ended September 30, 2021, there have been no significant changes to our contractual obligations as disclosed in our Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis