What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-01 compared with 2021-03-17 · 839 added, 1093 removed, 2114 unchanged (48% of the section changed)

22 unchanged sentences

OTHER INFORMATION.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

6 unchanged sentences

The information required by this Item 13 will be included in our 2022 Proxy Statement, which we intend to file with the SEC within 120 days of our December 31, 2021 fiscal year end, and is incorporated herein by reference.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required by this Item 14 will be included in our 2022 Proxy Statement, which we intend to file with the SEC within 120 days of our December 31, 2021 fiscal year end, and is incorporated herein by reference.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.

(a) The following documents are filed as part of this report:

11 unchanged sentences

8-K 001-38221 2.1 03/04/2021

3.1 Second Restated Certificate of Incorporation of PQ Group Holdings Inc.

10-Q 001-38221 3.1 11/14/2017

3.2 Amended and Restated Bylaws of PQ Group Holdings Inc.

S-1/A 333-218650 3.2 9/1/2017

4.1 Indenture, dated as of May 4, 2016, among PQ Corporation, as Issuer, the Guarantors from time to time party thereto and Wells Fargo Bank, National Association, as Trustee and Collateral Agent, including the form of Global Note attached as Exhibit A thereto

S-1 333-218650 4.2 6/9/2017

4.2 Indenture, dated as of December 11, 2017, among PQ Corporation, as Issuer, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee

8-K 001-38221 4.1 12/13/2017

4.3 Description of PQ Group Holdings Inc.’s common stock

2.3 Amendment No.

1 to Stock Purchase Agreement, dated as of June 24, 2021, by and among PQ Group Holdings Inc.

and Sparta Aggregator L.P.

8-K 001-38221 2.1 6/30/2021

10.1 Term Loan Credit Agreement, dated as of May 4, 2016, by and among PQ Corporation, CPQ Midco I Corporation, the Lenders from time to time party thereto, and Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and Collateral Agent, with Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, JPMorgan Chase Bank, N.A., Morgan Stanley Senior Funding, Inc., Deutsche Bank Securities Inc., Goldman Sachs Lending Partners LLC, Jefferies Finance LLC and KeyBanc Capital Markets Inc., as Joint Lead Arrangers and Joint Bookrunners

S-1 333-218650 10.1 6/9/2017

10.1 New Term Loan Credit Agreement, dated as of July 22, 2020 among CPQ Midco I Corporation, PQ Corporation, Eco Services Operations Corp., Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the lenders from time to time party thereto

2.4 Amendment No.

2 to Stock Purchase Agreement, dated as of July 12, 2021, by and among PQ Group Holdings Inc.

and Sparta Aggregator L.P.

8-K 001-38221 2.1 7/15/2021

10.2 First Amendment Agreement, dated as of November 14, 2016, to the Term Loan Credit Agreement dated as of May 4, 2016, among PQ Corporation, CPQ Midco I Corporation, the Guarantors named on the signature pages thereto, JPMorgan Chase Bank, N.A., as an Additional Term Lender, and Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and Collateral Agent

S-1 333-218650 10.2 6/9/2017

Incorporated by Reference

Description Filed

Herewith Form File

Exhibit Filing

10.3 Second Amendment Agreement, dated as of August 7, 2017, to the Term Loan Credit Agreement dated as of May 4, 2016 (as amended by the First Amendment Agreement dated as of November 14, 2016), among PQ Corporation, CPQ Midco I Corporation, the Guarantors named on the signature pages thereto, Citibank, N.A., as an Additional Term Lender, and Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and Collateral Agent

S-1/A 333-218650 10.19 8/14/2017

10.4 Third Amendment Agreement, dated as of February 8, 2018, to the Term Loan Credit Agreement dated as of May 4, 2016 (as amended by the First Amendment Agreement dated as of November 14, 2016 and the Second Amendment Agreement dated as of August 7, 2017) among PQ Corporation, CPQ Midco I Corporation, the Guarantors named on the signature pages thereto, Citibank, N.A., as an Additional Term Lender, and Credit Suisse AG, Cayman Island Branch, as Administrative Agent and Collateral Agent

3.1 Second Restated Certificate of Incorporation

10-Q 001-38221 3.1 11/14/2017

3.2 Certificate of Amendment of Certificate of Incorporation

8-K 001-38221 3.1 8/3/2021

10.5 Fourth Amendment Agreement, dated as of February 7, 2020, to the Term Loan Credit Agreement dated as of May 4, 2016 (as amended by the First Amendment Agreement dated as of November 14, 2016, the Second Amendment Agreement dated as of August 7, 2017 and the Third Amendment Agreement dated as of February 8, 2018) among PQ Corporation, CPQ Midco I Corporation, the Guarantors named on the signature pages thereto, Citibank, N.A., as the replacement lender, and Credit Suisse AG, Cayman Island Branch, as Administrative Agent and Collateral Agent

3.3 Certificate of Correction of Certificate of Amendment of Certificate of Incorporation

10-Q 001-38221 3.3 11/9/2021

3.4 Second Amended and Restated Bylaws of Ecovyst Inc.

8-K 001-38221 3.2 8/3/2021

10.6 ABL Credit Agreement, dated as of May 4, 2016, by and among PQ Corporation, CPQ Midco I Corporation, the Canadian Borrowers from time to time party thereto, the European Borrowers from time to time party thereto, the Lenders from time to time party thereto and Citibank, N.A., as Administrative Agent and Issuing Bank, with Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, JPMorgan Chase Bank, N.A., Morgan Stanley Senior Funding, Inc., Deutsche Bank Securities Inc., Goldman Sachs Lending Partners LLC, Jefferies Finance LLC and KeyBanc Capital Markets Inc., as Joint Lead Arrangers and Joint Bookrunners

S-1 333-218650 4.2 6/9/2017

4.2 Indenture, dated as of December 11, 2017, among PQ Corporation, as Issuer, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee

8-K 001-38221 4.1 12/13/2017

4.3 Description of Ecovyst Inc.’s common stock

10.1 Partnership Agreement, dated as of February 1, 1988, by and between PQ Corporation and Shell Polymers and Catalysts Enterprises Inc.

7 unchanged sentences

S-1/A 333-218650 10.13 8/14/2017

10.11 Lease Agreement, dated January 1, 2017, by and between The Realty Associates Fund X, L.P.

and PQ Corporation

10.5 Form of Amended and Restated Stockholders Agreement between PQ Group Holdings Inc.

and certain stockholders of PQ Group Holdings Inc.

S-1/A 333-218650 10.5 9/1/2017

10.6* Ecovyst Inc.

2017 Omnibus Incentive Plan, as Amended and Restated

S-8 333-262180 4.1 1/14/2022

3 unchanged sentences

Exhibit Filing

10.12 Form of Amended and Restated Stockholders Agreement between PQ Group Holdings Inc.

and certain stockholders of PQ Group Holdings Inc.

S-1/A 333-218650 10.5 9/1/2017

10.13* PQ Group Holdings Inc.

2017 Omnibus Incentive Plan

S-1/A 333-218650 10.14 9/19/2017

10.14* Form of Stock Option Award Agreement under the PQ Group Holdings Inc.

2017 Omnibus Incentive Plan

S-1/A 333-218650 10.15 9/1/2017

10.15* Form of Restricted Stock Award Agreement under the PQ Group Holdings Inc.

2017 Omnibus Incentive Plan

S-1/A 333-218650 10.16 9/1/2017

10.16* Form of Restricted Stock Unit Award Agreement under the PQ Group Holdings Inc.

2017 Omnibus Incentive Plan

S-1/A 333-218650 10.17 9/1/2017

10.17* Form of Performance Stock Unit Award Agreement under the PQ Group Holdings Inc.

2017 Omnibus Incentive Plan

10-Q 001-38221 10.1 5/10/2019

10.7* Form of Stock Option Award Agreement under the Ecovyst Inc.

2017 Omnibus Incentive Plan, as Amended and Restated

10.8* Form of Restricted Stock Award Agreement under the Ecovyst Inc.

2017 Omnibus Incentive Plan, as Amended and Restated

10.9* Form of Restricted Stock Unit Award Agreement under the Ecovyst Inc.

2017 Omnibus Incentive Plan, as Amended and Restated

10.10* Form of 20 19 Performance Stock Unit Award Agreement under the Ecovyst Inc.

2017 Omnibus Incentive Plan, as Amended and Restated

10.11* Form of 202 0 Performance Stock Unit Award Agreement under the Ecovyst Inc.

2017 Omnibus Incentive Plan, as Amended and Restated

10.12* PQ Group Holdings Inc.

47 unchanged sentences

8-K 001-38221 10.1 12/18/2020

10.39* PQ Group Holdings Inc.

2017 Omnibus Incentive Plan as Amended and Restated

10.33* Transition Agreement and General Release and Waiver of Claims by and between the Company, PQ and Michael Crews

8-K 001-38221 10.1 3/23/2021

10.40* First Amendment Agreement, dated as of March 20,2020, to the ABL Credit Agreement, dated as of May 4,2016, by and among PQ Corporation, CPQ Midco I Corporation, the Canadian Borrowers from time to time party thereto, the European Borrowers from time to time party thereto, the Guarantors from time to time party thereto, the Replacement Lenders from time to time party thereto, and Citibank, N.A., as Administrative Agent and as Collateral Agent

10.34 Term Loan Credit Agreement, dated as of June 9, 2021 among CPQ Midco I Corporation, PQ Corporation, Ecovyst Catalyst Technologies LLC, Eco Services Operations Corp., Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the lenders from time to time party thereto, with Citibank, N.A., Credit Suisse Loan Funding LLC, BofA Securities, Inc., Deutsche Bank Securities Inc., Goldman Sachs Bank USA, KeyBanc Capital Markets Inc.

and Truist Securities, Inc., as Joint Lead Arrangers and Joint Bookrunners

8-K 001-38221 10.1 6/11/2021

10.41* Form of Performance Stock Unit Award Agreement under the PQ Group Holdings Inc.

2017 Omnibus Incentive Plan

10.35 Third Amendment Agreement, dated as of June 9, 2021, to the ABL Credit Agreement, dated as of May 4, 2016, by and among PQ Corporation, CPQ Midco I Corporation, the Canadian Borrowers from time to time party thereto, the European Borrowers from time to time party thereto, the Lenders from time to time party thereto and Citibank, N.A., as Administrative Agent and Issuing Bank, with Citigroup Global Markets Inc., Credit Suisse Loan Funding LLC, Bank of America, N.A., Deutsche Bank Securities Inc., Goldman Sachs Bank USA, KeyBanc Capital Markets Inc.

and Truist Securities, Inc., as Joint Lead Arrangers and Joint Bookrunners

8-K 001-38221 10.2 6/11/2021

10.36* Amendment to Form of Director and Officer Indemnification Agreement

10-Q 001-38221 10.3 8/9/2021

21.1 Subsidiaries of PQ Group Holdings Inc.

23.1 Consent of PricewaterhouseCoopers LLP related to the consolidated financial statements and financial statement schedule of PQ Group Holdings Inc.

10.37* Form of Ecovyst Inc.

Director and Officer Indemnification Agreement

10-Q 001-38221 10.4 8/9/2021

10.38* Form of 2021 Performance Stock Unit Award Agreement under the Ecovyst Inc.

2017 Omnibus Incentive Plan, as Amended and Restated

21.1 Subsidiaries of Ecovyst Inc.

23.1 Consent of PricewaterhouseCoopers LLP related to the consolidated financial statements and financial statement schedule of Ecovyst Inc.

as of December 31, 202 1 and 20 20 and for each of the three years in the period ended December 31, 202 1

23.2 Consent of PricewaterhouseCoopers LLP related to the financial statements of Zeolyst International as of December 31, 202 1 and 20 20 and for each of the three years in the period ended December 31, 202 1

31.1 Certification of Chief Executive Officer of PQ Group Holdings Inc.

Incorporated by Reference

Description Filed

Herewith Form File

Exhibit Filing

31.1 Certification of Chief Executive Officer of Ecovyst Inc.

pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Financial Officer of PQ Group Holdings Inc.

31.2 Certification of Chief Financial Officer of Ecovyst Inc.

pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification of Chief Executive Officer of PQ Group Holdings Inc.

32.1 Certification of Chief Executive Officer of Ecovyst Inc.

pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification of Chief Financial Officer of PQ Group Holdings Inc.

32.2 Certification of Chief Financial Officer of Ecovyst Inc.

pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Incorporated by Reference

Description Filed

Herewith Form File

Exhibit Filing

101 The following financial statements from the Annual Report on Form 10-K of PQ Group Holdings Inc.

101 The following financial statements from the Annual Report on Form 10-K of Ecovyst Inc.

for the year ended December 31, 2021, formatted in Inline XBRL:

(i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags

104 The cover page from the Annual Report on Form 10-K of PQ Group Holdings Inc.

104 The cover page from the Annual Report on Form 10-K of Ecovyst Inc.

for the year ended December 31, 2021, formatted in Inline XBRL

2 unchanged sentences

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PQ GROUP HOLDINGS INC.

March 1, 2022 By:

/s/ MICHAEL CREWS

Michael Crews

Executive Vice President and Chief Financial Officer

/s/ MICHAEL FEEHAN

Michael Feehan

Vice President and Chief Financial Officer

(Duly Authorized Officer and Principal Financial and Accounting Officer)

3 unchanged sentences

Belgacem Chariag (Principal Executive Officer)

/s/ MICHAEL CREWS Executive Vice President and Chief Financial Officer March 17, 2021

Michael Crews (Principal Financial and Accounting Officer)

/s/ MICHAEL FEEHAN Vice President and Chief Financial Officer March 1, 2022

Michael Feehan (Principal Financial and Accounting Officer)

/s/ GREG BRENNEMAN Director March 1, 2022

15 unchanged sentences

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

Audited Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Income for the Years Ended December 31, 2020, 2019 and 2018

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Statements of Income for the Years Ended December 31, 2021, 2020 a nd 2019

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019

13 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of PQ Group Holdings Inc.

To the Board of Directors and Stockholders of Ecovyst Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of PQ Group Holdings Inc.

and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes and schedule of condensed parent company information as of December 31, 2020 and 2019 and for each of the three years in the period ended December 31, 2020 listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Ecovyst Inc.

and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

2 unchanged sentences

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A.

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits.

19 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment - Performance Chemicals Reporting Unit

As described in Notes 2 and 15 to the consolidated financial statements, the Company’s consolidated goodwill balance was $717.7 million as of December 31, 2020, and the goodwill associated with the Performance Chemicals reporting unit was $326.2 million.

Goodwill Impairment Assessment - Catalyst Technologies Reporting Unit

As described in Notes 2 and 16 to the consolidated financial statements, goodwill associated with the Company’s Catalyst Technologies reporting unit was $79.5 million as of December 31, 2021.

Management is required to test goodwill associated with each of its reporting units for impairment at least annually and whenever events or circumstances indicate that it is more likely than not that goodwill may be impaired.

2 unchanged sentences

If the carrying value of a reporting unit exceeds its implied fair value, an impairment charge is recognized.

Management applied the market approach to estimate the fair value of the Performance Chemicals reporting unit.

The Company recorded a goodwill impairment charge of $260 million in the fourth quarter of 2020 related to the Performance Chemicals reporting unit.

In applying the market approach, management estimates the reporting unit fair value using publicly traded comparable company values and applies the selected market multiples to each reporting unit’s trailing twelve months adjusted EBITDA.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Performance Chemicals reporting unit is a critical audit matter are (i) the significant judgment by management when determining the fair value estimate of the reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the significant assumption related to market multiples;

Management determined the fair value of its reporting units using a split between a market approach and an income, or discounted cash flow, approach.

In applying the market approach, management estimates reporting unit market approach fair value using publicly traded comparable company values and applies the selected market multiples to each reporting unit’s trailing twelve months adjusted EBITDA.

Management estimates reporting unit income-based fair value using the discounted cash flow approach, which requires use of significant assumptions including revenue growth rates and discount rate.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Catalyst Technologies reporting unit is a critical audit matter are (i) the significant judgment by management when determining the fair value of the Catalyst Technologies reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to market multiples, revenue growth rates, and discount rate;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Performance Chemicals reporting unit.

These procedures also included, among others, (i) testing management’s process for determining the fair value estimate of the Performance Chemicals reporting unit;

(ii) evaluating the appropriateness of the market approach method;

(iii) evaluating the reasonableness of the significant assumption used by management related to market multiples;

and (iv) testing the completeness and accuracy of the underlying data used in the estimate.

Evaluating management’s assumption related to market multiples involved evaluating whether the assumption was reasonable considering (i) the current and past performance of the reporting unit;

(ii) consistency with external industry data, and (iii) whether this assumption was consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the market approach method and (ii) reasonableness of the significant assumption related to market multiples.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Catalyst Technologies reporting unit.

These procedures also included, among others, (i) testing management’s process for determining the fair value of the reporting unit;

(ii) evaluating the appropriateness of the market and income approaches;

(iii) evaluating the reasonableness of the significant assumptions used by management related to market multiples, revenue growth rates, and discount rate;

and (iv) testing the completeness and accuracy of the underlying data used in the market and income approaches.

Evaluating management’s significant assumptions related to revenue growth rates involved evaluating whether the assumption was reasonable considering (i) the current and past performance of the Catalyst Technologies reporting unit;

(ii) consistency with external market and industry data;

and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the market and income approaches and (ii) the reasonableness of the market multiples and discount rate significant assumptions.

/s/ PricewaterhouseCoopers LLP

2 unchanged sentences

We have served as the Company’s auditor since 2015.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

6 unchanged sentences

Selling, general and administrative expenses 97,781 81,545 83,509

Goodwill impairment charge 260,000 — —

Other operating expense, net 24,273 17,842 17,734

Operating (loss) income ( 162,924 ) 147,508 155,563

Operating income 54,607 51,566 65,967

Equity in net income from affiliated companies ( 27,737 ) ( 21,065 ) ( 45,808 )

2 unchanged sentences

Other (income) expense, net 4,511 ( 5,021 ) ( 1,916 )

(Loss) income from continuing operations before income taxes and noncontrolling interest ( 227,585 ) 105,430 84,020

(Benefit) provision for income taxes ( 48,122 ) 39,677 33,641

Net (loss) income from continuing operations ( 179,463 ) 65,753 50,379

Income from continuing operations before income taxes and noncontrolling interest 13,941 2,215 43,419

Provision (benefit) for income taxes 12,147 ( 52,065 ) 12,299

Net income from continuing operations 1,794 54,280 31,120

Net (loss) income from discontinued operations, net of tax ( 141,410 ) ( 335,984 ) 49,190

Net (loss) income ( 139,616 ) ( 281,704 ) 80,310

Net (loss) income attributable to the noncontrolling interest - continuing operations ( 3,198 ) 617 1,108

Net income (loss) attributable to the noncontrolling interest - discontinued operations 333 ( 2,933 ) 771

Net (loss) income attributable to PQ Group Holdings Inc.

Net (loss) income attributable to Ecovyst Inc.

$ ( 139,949 ) $ ( 278,771 ) $ 79,539

(Loss) income from continuing operations $ ( 176,265 ) $ 65,136 $ 49,271

Income from continuing operations $ 1,794 $ 54,280 $ 31,120

(Loss) income from discontinued operations ( 141,743 ) ( 333,051 ) 48,419

Net (loss) income attributable to PQ Group Holdings Inc.

Net (loss) income attributable to Ecovyst Inc.

$ ( 139,949 ) $ ( 278,771 ) $ 79,539

Net (loss) income per share:

Basic (loss) income per share - continuing operations $ ( 1.30 ) $ 0.48 $ 0.37

Diluted (loss) income per share - continuing operations $ ( 1.30 ) $ 0.48 $ 0.37

Basic income per share - continuing operations:

$ 0.01 $ 0.40 $ 0.23

Diluted income per share - continuing operations:

$ 0.01 $ 0.40 $ 0.23

Basic (loss) income per share - discontinued operations $ ( 1.04 ) $ ( 2.46 ) $ 0.36

6 unchanged sentences

See accompanying notes to consolidated financial statements.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

5 unchanged sentences

Pension and postretirement benefits 5,794 1,938 2,430

Net (loss) gain from hedging activities 166 ( 2,665 ) ( 330 )

Net gain (loss) from hedging activities 2,914 166 ( 2,665 )

Foreign currency translation 10,611 ( 17,519 ) 22,889

2 unchanged sentences

Comprehensive (loss) income attributable to noncontrolling interests 333 ( 3,856 ) 1,543

Comprehensive (loss) income attributable to PQ Group Holdings Inc.

Comprehensive (loss) income attributable to Ecovyst Inc.

$ ( 120,630 ) $ ( 293,263 ) $ 101,421

See accompanying notes to consolidated financial statements.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

26 unchanged sentences

Other long-term liabilities 24,094 15,399

Long-term liabilities of held for sale — 87,198

Long-term liabilities held for sale — 155,354

Total liabilities 1,190,482 1,921,169

8 unchanged sentences

Additional paid-in capital 1,073,409 1,477,859

(Accumulated deficit) retained earnings ( 175,758 ) 103,013

Accumulated deficit ( 315,707 ) ( 175,758 )

Treasury stock, at cost;

2 unchanged sentences

Accumulated other comprehensive loss ( 5,792 ) ( 15,265 )

Total PQ Group Holdings Inc.

Total Ecovyst Inc.

equity 740,737 1,277,126

3 unchanged sentences

See accompanying notes to consolidated financial statements.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

9 unchanged sentences

December 31, 2018 135,758,269 $ 1,358 $ 1,674,703 $ 25,523 ( 166,224 ) $ ( 2,920 ) $ ( 39,104 ) $ 4,585 $ 1,664,145

Cumulative effect adjustment from adoption of new accounting standards — — — ( 2,049 ) — — 1,874 — ( 175 )

December 31, 2018, as adjusted 135,758,269 $ 1,358 $ 1,674,703 $ 23,474 ( 166,224 ) $ ( 2,920 ) $ ( 37,230 ) $ 4,585 $ 1,663,970

Net income — — — 79,539 — — — 771 80,310

Other comprehensive income (loss) — — — — — — ( 43,415 ) 71 ( 43,344 )

Repurchases of common shares — — — — ( 166,224 ) ( 2,920 ) — — ( 2,920 )

Other comprehensive income — — — — — — 21,882 772 22,654

Tax withholdings on equity award vesting — — — — ( 230,197 ) ( 3,563 ) — — ( 3,563 )

Distributions to noncontrolling interests — — — — — — — ( 260 ) ( 260 )

2 unchanged sentences

December 31, 2019 136,861,382 $ 1,369 $ 1,696,899 $ 103,013 ( 396,421 ) $ ( 6,483 ) $ ( 15,348 ) $ 5,868 $ 1,785,318

Cumulative effect adjustment from adoption of new accounting standards — — — ( 2,049 ) — — 1,874 — ( 175 )

December 31, 2018, as adjusted 135,758,269 $ 1,358 $ 1,674,703 $ 23,474 ( 166,224 ) $ ( 2,920 ) $ ( 37,230 ) $ 4,585 $ 1,663,970

Net income — — — 79,539 — — — 771 80,310

Other comprehensive income (loss) — — — — — — 21,882 772 22,654

Net loss — — — ( 278,771 ) — — — ( 2,933 ) ( 281,704 )

Other comprehensive loss — — — — — — ( 14,492 ) ( 923 ) ( 15,415 )

Repurchases of common shares — — — — ( 211,700 ) ( 2,059 ) — — ( 2,059 )

Tax withholdings on equity award vesting — — — — ( 175,465 ) ( 2,539 ) — — ( 2,539 )

Distributions to noncontrolling interests — — — — — — — ( 1,219 ) ( 1,219 )

Dividends paid on common stock ($ 1.80 per share)

— — ( 243,749 ) — — — — — ( 243,749 )

Disposal of business — — — — — — 14,575 ( 740 ) 13,835

Stock compensation expense — — 24,366 — — — — — 24,366

1 unchanged sentence

December 31, 2020 137,102,143 1,371 1,477,859 ( 175,758 ) ( 783,586 ) ( 11,081 ) ( 15,265 ) 53 1,277,179

Net loss — — — ( 278,771 ) — — — ( 2,933 ) ( 281,704 )

Other comprehensive income (loss) — — — — — — ( 14,492 ) ( 923 ) ( 15,415 )

Repurchases of common shares — — — — ( 387,165 ) ( 4,598 ) — — ( 4,598 )

Net (loss) income — — — ( 139,949 ) — — — 333 ( 139,616 )

Other comprehensive income — — — — — — 19,319 — 19,319

Tax withholdings on equity award vesting — — — — ( 98,627 ) ( 1,470 ) — — ( 1,470 )

Distributions to noncontrolling interests — — — — — — — ( 1,109 ) ( 1,109 )

6 unchanged sentences

See accompanying notes to consolidated financial statements.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

6 unchanged sentences

Net loss (income) from discontinued operations 141,410 335,984 ( 49,190 )

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 65,955 65,333 61,244

Amortization 13,786 11,593 13,537

Goodwill impairment charge 260,000 — —

Amortization of deferred financing costs and original issue discount 1,907 2,515 2,799

3 unchanged sentences

Pension and postretirement healthcare benefit funding — ( 3,264 ) ( 4,955 )

Deferred income tax provision (benefit) ( 64,693 ) 15,489 4,072

Net (gain) loss on asset disposals ( 11,392 ) ( 13,207 ) 4,190

Deferred income tax (benefit) provision 4,548 ( 60,060 ) 3,898

Net loss on asset disposals 5,666 4,722 4,559

Stock compensation 31,838 17,194 13,281

1 unchanged sentence

Dividends received from affiliated companies 35,000 40,000 40,000

Net interest income on swaps designated as net investment hedges ( 4,963 ) ( 8,480 ) ( 4,859 )

Gain on contract termination — — ( 20,612 )

Other, net ( 2,930 ) ( 3,478 ) ( 3,185 )

10 unchanged sentences

Purchases of property, plant and equipment ( 60,045 ) ( 54,837 ) ( 55,252 )

Investment in affiliated companies — — ( 5,000 )

Proceeds from business divestiture, net of cash and indebtedness 978,449 624,256 —

Proceeds from sale of assets — 2,375 —

Proceeds from sale of product line 18,000 27,658 —

Proceeds from sale of investment 1,761 — —

Proceeds from settlement of swaps designated as net investment hedges — 38,070 —

Net interest proceeds on swaps designated as net investment hedges 4,963 8,480 4,859

Business combinations, net of cash acquired ( 42,639 ) — —

Other, net ( 12 ) — 469

1 unchanged sentence

Net cash (used in) provided by investing activities, discontinued operations ( 40,021 ) ( 20,322 ) 19,424

Net cash (used in) provided by investing activities 551,472 ( 35,359 ) ( 119,290 )

Net cash provided by (used in) investing activities 835,732 551,472 ( 35,359 )

Years ended December 31,

7 unchanged sentences

Debt prepayment fees ( 8,481 ) ( 10,550 ) —

Proceeds from financing obligation 16,005 — —

Dividends paid to stockholders ( 435,593 ) ( 243,749 ) —

Repurchases of common shares — ( 2,059 ) —

Tax withholdings on equity award vesting ( 1,470 ) ( 2,539 ) ( 3,563 )

Proceeds from stock options exercised 746 373 3,975

Other, net ( 2,868 ) ( 317 ) ( 134 )

Repayments of financing obligation ( 1,435 ) — —

Other 1,545 ( 1,875 ) ( 155 )

Net cash used in financing activities, continuing operations ( 963,089 ) ( 720,180 ) ( 214,743 )

9 unchanged sentences

See accompanying notes to consolidated financial statements.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

3 unchanged sentences

Description of Business

PQ Group Holdings Inc.

and subsidiaries (the “Company” or “PQ Group Holdings”) is a leading integrated and innovative global provider of specialty catalysts, chemicals and services.

and subsidiaries (the “Company” or “Ecovyst”), formerly known as PQ Group Holdings Inc.

and subsidiaries (“PQ Group Holdings”), is a leading integrated and innovative global provider of specialty catalysts and services.

The Company supports customers globally through its strategically located network of manufacturing facilities.

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Basis of Presentation

The Company has three uniquely positioned specialty businesses:

Refining Services provides sulfuric acid recycling to the North American refining industry;

Catalysts serves the packaging and engineered plastics industry and the global refining, petrochemical and emissions control industries through its Zeolyst joint venture;

and Performance Chemicals supplies diverse product end uses, including personal and industrial cleaning products, fuel-efficient tires, surface coatings, and food and beverage products.

Effective December 14, 2020, the Company completed the sale of its Performance Materials business and the results of operations of this business have been presented as discontinued operations in the consolidated statements of income for all periods presented.

See Note 4 for more information on the assets and liabilities classified as held for sale.

On December 14, 2020, the Company completed the sale of its Performance Materials business for $ 650,000 , and the financial results of this business have been presented as discontinued operations in the consolidated financial statements for all periods presented.

See Note 4 for more information on the transaction.

Effective on August 1, 2021, the Company completed the sale of its Performance Chemicals business for $ 1,100,000 , subject to certain purchase price adjustments as set forth in the agreement.

Upon entering into the definitive agreement on February 28, 2021, the transaction met the held for sale criteria and consequently the financial results of the Performance Chemicals business are reported in discontinued operations in the consolidated financial statements for all periods presented.

See Note 5 for more information on the transaction.

In connection with the closing of the sale of the Performance Chemicals business, the Company changed its name from “PQ Group Holdings Inc.” to “ Ecovyst Inc.”, changed the ticker symbol of its common stock listed on the New York Stock Exchange from “PQG” to “ECVT” and rebranded PQ Group Holdings segments from “Refining Services” to “Ecoservices” and “Catalysts” to “Catalyst Technologies”.

Financial information presented herein related to the Ecoservices and Catalyst Technologies segments remains unchanged from the Company’s previously issued financial statements filed on Form 10-K for the years ended December 31, 2020 and 2019, respectively.

The Company has two uniquely positioned specialty businesses:

Ecoservices provides sulfuric acid recycling to the North American refining industry for the production of alkylate and provides on-purpose virgin sulfuric acid for water treatment, mining, and industrial applications;

and Catalyst Technologies provides finished silica catalysts and catalyst supports necessary to produce high strength and high stiffness plastics and, through its Zeolyst joint venture, supplies zeolites used for catalysts that remove nitric oxide from diesel engine emissions as well as sulfur from fuels during the refining process.

The Company’s regeneration services product group, which is a part of the Company’s Ecoservices segment, typically experiences seasonal fluctuations as a result of higher demand for gasoline products in the summer months and lower demand in the winter months.

These demand fluctuations result in higher sales and working capital requirements in the second and third quarters.

The notes to the consolidated financial statements, unless otherwise indicated, are on a continuing operations basis.

The Company’s Refining Services segment typically experiences seasonal fluctuations as a result of higher demand for gasoline products in the summer months and lower demand in the winter months.

These demand fluctuations result in higher sales and working capital requirements in the second and third quarter.

In March 2020, the outbreak of a novel coronavirus (“COVID-19”) was declared a national emergency in the United States.

COVID-19 continues to spread in the United States and other parts of the world and has adversely impacted economic activity and contributed to volatility in financial markets.

The spread of COVID-19 in the United States and other parts of the world has adversely impacted economic activity and contributed to volatility in financial markets.

In response to the COVID-19 pandemic, the federal government and various state, local and foreign governments have issued decrees and orders that have disrupted many businesses and implemented social distancing, travel and other restrictions.

In response to these restrictions, the Company has taken a variety of actions, including an international travel ban, distribution of personal protective equipment to employees and work-at-home requirements for many of the Company’s employees who are not an integral part of its manufacturing operations.

The Company has also implemented and refined its existing business continuity plans in an effort to minimize operational disruptions.

The Company’s manufacturing operations, as well as the operations of its key vendors and the majority of its key customers, have continued to operate with limited interruptions.

The extent and timing of the impact of the COVID-19 pandemic on the Company’s business led to lower sales volume demand beginning in the second quarter of 2020.

The Company is not aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of the issuance of the consolidated financial statements.

These estimates may change, as the pandemic continues to evolve and the duration remains uncertain, and may adversely impact the Company’s results of operations, financial condition or cash flow.

PQ GROUP HOLDINGS INC.

During the year ended December 31, 2020, the Company took actions to mitigate the slowdown in its business as a result of the effects of COVID-19, including adjusting its production levels to meet anticipated customer demand, reducing discretionary spending, furloughs, delaying headcount additions and deferring capital maintenance expenditures.

The Company also implemented and refined its business continuity plans in an effort to minimize operational disruptions.

AND SUBSIDIARIES

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(Dollars in thousands, except share and per share amounts)

The Company’s manufacturing plants require a limited number of on-site employees in order to continue to operate effectively.

The Company has not experienced any material production issues, but has had limited and temporary shutdowns or slowdowns in some of its facilities.

The Company has also seen limited disruptions in the availability of certain of its raw materials and other supplies, which to date have not had a material impact on production.

During the year ended December 31, 2021, as the economy began to recover from the global pandemic, the demand for most of the Company’s products and services increased.

With the increased demand for the Company’s products, its businesses began to produce and sell its products to its customers consistent with pre-pandemic levels.

Summary of Significant Accounting Policies:

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All intercompany transactions have been eliminated.

Noncontrolling interests represent third-party equity ownership in certain of the Company’s consolidated subsidiaries and are presented as a component of equity separate from the equity attributable to the Company’s shareholders.

The noncontrolling interests’ share in the Company’s net earnings are included in net income attributable to the noncontrolling interest in the Company’s consolidated statements of income, and their portion of the Company’s comprehensive income is included in comprehensive income (loss) attributable to noncontrolling interests in the Company’s consolidated statements of comprehensive income (loss).

The Company’s noncontrolling interests relate to third-party minority ownership interests held in certain of the Company’s foreign subsidiaries acquired as part of a former business combination.

Foreign Currency Translation.

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dollars using exchange rates in effect at the balance sheet date.

Adjustments resulting from translation of the balance sheets and intercompany loans, which are considered permanent, are included in stockholders’ equity as part of accumulated other comprehensive income (loss).

Adjustments resulting from translation of the balance sheets are included in stockholders’ equity as part of accumulated other comprehensive income (loss).

Adjustments resulting from translation of certain intercompany loans, which are not considered permanent and are denominated in foreign currencies, are included in other (income) expense, net in the consolidated statements of income.

1 unchanged sentence

For the years ended December 31, 2021, 2020 and 2019, all intercompany loan arrangements were determined to be non-permanent based on management’s intention as well as actual lending and repayment activity.

Therefore, the foreign currency transaction gains or losses associated with the intercompany loans were recorded in the consolidated statements of income for the years ended December 31, 2020, 2019 and 2018.

Therefore, the foreign currency transaction gains or losses associated with the int ercompany loans were recorded in the consolidated statements of income for the years ended December 31, 2021, 2020 and 2019.

Income and expense items are translated at average exchange rates during the year.

Net foreign currency exchange (gains) and losses included in other (income) expense, net were $( 4,172 ), $ 2,410 and $ 12,543 for the years ended December 31, 2020, December 31, 2019 and December 31, 2018, respectively.

The net foreign currency losses realized in 2020 were driven by the non-permanent intercompany debt denominated in local currency and translated to U.S.

The net foreign currency losses realized in 2019 and in 2018 were primarily driven by the Euro-denominated term loan (which was settled as part of the February 2018 term loan refinancing, see Note 17 to these consolidated financial statements for further information) and the non-permanent intercompany debt denominated in local currency and translated to U.S.

Net foreign currency exchange (gains) and losses included in other (income) expense, net were $ 4,716 , $( 5,264 ) and $ 1,228 for the years ended December 31, 2021, 2020 and 2019 , respectively.

The n et foreign currency losses realized during these years were driven by the non-permanent intercompany debt denominated in local currency and translated to U.S.

Cash and Cash Equivalents.

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Restricted cash, which is restricted as to withdrawal or usage, is classified separately from cash and cash equivalents on the Company’s consolidated balance sheets.

The Company’s total restricted cash balances were $ 1,688 and $ 1,331 as of December 31, 2020 and 2019, respectively, and are included on the Company’s consolidated balance sheets as other current assets.

The Company’s total restricted cash balances were $ 0 and $ 1,640 as of December 31, 2021 and 2020, respectively, and are included on the Company’s consolidated balance sheets as prepaid and other current assets.

Accounts Receivable and Allowance for Credit Losses.

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The Company does not have any off-balance sheet credit exposure related to its customers.

As of December 31, 2020 and 2019, the Company’s allowance for credit losses was $ 1,521 and $ 2,068 , respectively.

The Company’s allowance for credit losses was not material as of December 31, 2021 and 2020.

Certain domestic inventories are stated at the lower of cost or market and valued using the last-in, first-out (“LIFO”) method.

All other inventories are stated at the lower of cost and net realizable value and valued using the weighted average cost or first-in, first-out (“FIFO”) methods.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Property, Plant and Equipment.

2 unchanged sentences

Maintenance, repairs and minor renewals are charged to expense as incurred.

The Company capitalizes certain internal costs associated with the implementation of purchased software.

The Company capitalizes

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

certain internal costs associated with the implementation of purchased software.

When property, plant and equipment is retired or otherwise disposed of, the net carrying amount is eliminated with any gain or loss on disposition recognized in earnings at that time.

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Some leases include options to terminate or extend for one or more years.

These options are incorporated in the Company’s lease term when it is reasonably certain that the option will be exercised.

These options are incorporated in the Compan y’s lease term when it is reasonably certain that the option will be exercised.

Some leases include options to purchase, which the Company assesses under the guidance to determine if these leases should be classified as finance lease agreements.

23 unchanged sentences

Otherwise, the spare part is expensed and charged as a cost of production when utilized.

PQ GROUP HOLDINGS INC.

Investments in Affiliated Companies.

Investments in affiliated companies are accounted for using the equity method of accounting if the investment provides the Company with the ability to exercise significant influence, but not control,

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

Investments in Affiliated Companies.

Investments in affiliated companies are accounted for using the equity method of accounting if the investment provides the Company with the ability to exercise significant influence, but not control, over the investee.

over the investee.

Significant influence is generally deemed to exist if the Company’s ownership interest in the voting stock of the investee ranges between 20% and 50%, although other factors, such as representation on the investee’s board of directors and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate.

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Goodwill and Intangible Assets.

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a former business combination that are not individually identified and separately recognized.

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

The Company is required to test goodwill associated with each of its reporting units for impairment at least annually and whenever events or circumstances indicate that it is more likely than not that goodwill may be impaired.

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If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount based on the qualitative assessment, the Company will perform a quantitative goodwill impairment test to identify the potential goodwill impairment and measure the amount of the goodwill impairment loss, if any, to be recognized for that reporting unit.

For the annual assessments in 2020 and 2019, the Company bypassed the option to perform the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test for each of our reporting units.

For the annual assessments in 2021 and 2020, the Company bypassed the option to perform the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test for each of its reporting units.

The quantitative test identifies both the potential existence of impairment and the amount of impairment loss.

1 unchanged sentence

If the fair value of a reporting unit exceeds its carrying value, goodwill is not impaired.

If the carrying value of a reporting unit exceeds its implied fair value, an impairment charge is recognized, requiring recognition of a goodwill impairment charge for the differential up to the carrying value of goodwill.

If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value.

An impairment loss cannot exceed the carrying value of goodwill assigned to a reporting unit and the loss establishes a new basis in the goodwill.

5 unchanged sentences

The Company performs an impairment review of property, plant and equipment and definite-lived intangible assets when facts and circumstances indicate that the carrying value of an asset or asset group may not be recoverable from its undiscounted future cash flows.

When evaluating long-lived assets for

PQ GROUP HOLDINGS INC.

When evaluating long-lived assets for impairment, if the carrying amount of an asset or asset group is found not to be recoverable, a potential impairment loss may be recognized.

An impairment loss is measured by comparing the carrying amount of the asset or asset group to its

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

impairment, if the carrying amount of an asset or asset group is found not to be recoverable, a potential impairment loss may be recognized.

An impairment loss is measured by comparing the carrying amount of the asset or asset group to its fair value.

Fair value is determined using quoted market prices when available, or other techniques including discounted cash flows.

1 unchanged sentence

Derivative Financial Instruments.

The Company utilizes certain derivative financial instruments to enhance its ability to manage risk, including exposure to interest rate, commodity price and foreign currency fluctuations that exist as part of ongoing business operations.

The Company utilizes certain derivative financial instruments to enhance its ability to manage risk, including exposure to interest rate fluctuations that exist as part of ongoing business operations.

Derivative instruments are entered into for periods consistent with the related underlying exposures and do not constitute positions independent of those exposures.

17 unchanged sentences

See Note 18 to these consolidated financial statements regarding the fair value of debt.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Revenue Recognition.

6 unchanged sentences

The Company identifies a contract when an agreement with a customer creates legally enforceable rights and obligations, which occurs when a contract has been approved by both parties, the parties are committed to perform their respective obligations, each party’s rights and payment terms are clearly identified, commercial substance exists and it is probable that the Company will collect the consideration to which it is entitled.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The Company may offer rebates to customers who have reached a specified volume of optional purchases.

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These accrued liabilities represent a provision for taxes that are reasonably expected to be incurred on the basis of available information but which are not certain.

Pursuant to the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No.118 (“SAB 118”), the Company was allowed a measurement period of up to one year after the enactment date of the Tax Cuts and Jobs Act (“TCJA”) to finalize the recording of any related tax impacts with respect to its transition tax liability.

In accordance with SAB 118, the Company finalized the impacts of the transition tax as of December 31, 2018 and recorded a measurement period adjustment of $ 2,102 as a benefit to tax expense.

There was no cash tax outlay associated with the final transition tax amount, as the Company elected to utilize net operating loss (“NOL”) carryforwards to offset the associated taxable income.

Based on FASB guidance, the Company is permitted to make an accounting policy election to either (1) treat the taxes incurred as a result of the Global Intangible Low Taxed Income (“GILTI”) provision as a current-period expense when incurred or (2) factor such amounts into its measurement of deferred taxes.

The Company has elected to treat any expense incurred as a current-period expense.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

Asset Retirement Obligations.

The Company records a liability when the fair value of any future obligation to retire a long-lived asset as a result of an existing or enacted law, statute, ordinance or contract is reasonably estimable.

The Company also records a liability for the fair value of a conditional asset retirement obligation if the fair value can be reasonably estimated.

When the liability is initially recorded, the Company capitalizes the cost by increasing the amount of the related long-lived asset.

Over time, the Company adjusts the liability to its present value by recognizing accretion expense as an operating expense in the consolidated statements of income each period, and the capitalized cost is depreciated over the useful life of the related asset.

Upon settlement of the liability, the Company records a gain or loss if the actual costs differ from the accrued amount.

The Company has recorded asset retirement obligations (“AROs”) in other long-term liabilities in order to recognize legal obligations associated with the retirement of tangible long-lived assets.

The Company has assessed whether an ARO is required at each manufacturing facility and has recorded an obligation for those locations for which an obligation exists.

The most significant of these are primarily attributable to environmental remediation liabilities associated with current operations that were incurred during the course of normal operations.

The Company has AROs that are conditional in nature.

The Company identified certain conditional AROs upon which it was able to reasonably estimate their fair value and recorded a liability.

These AROs were triggered upon commitments by the Company to comply with local, state and national laws to remove environmentally hazardous materials.

The AROs have been recognized on a discounted basis using a credit adjusted risk free rate.

Accretion of the AROs is recorded in other operating expense, net in the Company’s consolidated statements of income.

The following table includes the changes in the Company’s ARO liability during the years ended December 31, 2020 and 2019:

Beginning balance $ 4,555 $ 4,224

Accretion expense 342 311

Foreign exchange impact 46 20

Ending balance $ 4,943 $ 4,555

Environmental Expenditures.

13 unchanged sentences

See Note 23 to these consolidated financial statements regarding compensation expense associated with the Company’s equity incentive awards.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Pensions and Postretirement Benefits.

The Company maintains qualified and non-qualified defined benefit pension plans that cover employees in the United States and Canada, as well as certain employees in other international locations.

The Company maintains qualified and non-qualified defined benefit pension plans that cover employees in the United States as well as certain employees in other international locations.

Benefits for a majority of the plans are based on average final pay and years of service.

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Not all defined benefit pension plans are funded.

In the United States and Canada, the pension plans’ assets include equity and fixed income securities.

In our other international locations, the pension plans’ assets include equity and fixed income securities, as well as insurance contracts.

Certain assumptions are made regarding the occurrence of future events affecting pension costs, such as mortality, withdrawal, disablement and retirement, changes in compensation and benefits, and discount rates to reflect the time value of money.

In the United States the pension plans’ assets include equity and fixed income securities.

In our other international locations, the pension plans’ assets include insurance contracts.

Certain assumptions are made regarding the occurrence of future events affecting pension costs, such as mortality, withdrawal, disa blement and retirement, changes in compensation and benefits, and discount rates to reflect the time value of money.

The major elements in determining pension income and expense are pension liability discount rates and the expected return on plan assets.

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In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company and legal counsel evaluate the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a loss has been incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s financial statements.

If the assessment of a contingency indicates that it is probable that a loss has

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

been incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s financial statements.

If the assessment indicates that a loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

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Actual results could differ from those estimates.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Reclassifications.

Certain reclassifications have been made to the historical presentation of notes accompanying the consolidated financial statements to conform with the current year presentation.

New Accounting Standards:

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued guidance that affects loans, trade receivables and any other financial assets that have the contractual right to receive cash.

Under the new guidance, an entity is required to recognize expected credit losses rather than incurred losses for financial assets.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued new guidance to reduce the complexity in accounting for income taxes by removing certain exceptions to the general principles and simplifying areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes.

The new guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years.

The Company adopted the new guidance effective January 1, 2020, with no material impact to the Company’s consolidated financial position, results of operations or cash flows.

In August 2018, the FASB issued guidance which modifies certain disclosure requirements over fair value measurements.

The guidance is effective for fiscal years beginning after December 15, 2019, including all interim periods within that fiscal year.

The Company adopted the new guidance effective January 1, 2020.

The Company does not currently classify any of its derivative contracts or restoration plan assets as Level 3 assets or liabilities, nor did the Company have any transfers amongst fair value levels during the year ended December 31, 2020.

As a result, the guidance did not have an impact on Company’s the fair value measurement disclosures upon adoption.

In January 2017, the FASB issued guidance which eliminates the second step from the traditional two-step goodwill impairment test.

Under current guidance, an entity performed the first step of the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount;

if an impairment loss was indicated, the entity computed the implied fair value of goodwill to determine whether an impairment loss existed, and if so, the amount to recognize.

Under the new guidance, an impairment loss is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value (the Step 1 test), with no further testing required.

Any impairment loss recognized is limited to the amount of goodwill allocated to the reporting unit.

The new guidance is effective for public companies that are Securities and Exchange Commission (“SEC”) registrants for fiscal years beginning after December 15, 2019.

The Company adopted the new guidance on January 1, 2020, and applied the guidance prospectively to its goodwill impairment tests.

The Company adopted the new guidance effective January 1, 2021, with no material impact to the Company’s condensed consolidated financial position, results of operations or cash flows.

Accounting Standards Not Yet Adopted as of December 31, 2021

In December 2019, the FASB issued new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes.

The new guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted.

The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.

In March 2020, the FASB issued guidance to address certain accounting consequences from the anticipated transition from the use of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

In November 2021, the FASB issued guidance that requires entities to provide certain disclosures when they (1) have received government assistance and (2) use a grant or contribution accounting model by analogy to other accounting guidance.

Previously, there was no guidance under GAAP on recognizing or measuring government grants to business entities.

The new guidance does not provide any additional guidance on this topic;

rather, it only provides guidance on required disclosures for business entities that receive government assistance and apply another grant or contribution accounting framework by analogy.

The new guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted, and can be applied either prospectively or retrospectively.

The Company adopted the new guidance as required on January 1, 2022;

the Company has not identified any significant government assistance or grants subject to the scope of the guidance upon adoption.

In October 2021, the FASB issued guidance that requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with revenue recognition guidance.

Under current GAAP, contract assets and contract liabilities acquired in a business combination are recorded by the acquirer at fair value.

The new guidance creates an exception to the general recognition and measurement principles related to business combinations, and is expected to result in the acquirer recognizing contract assets and liabilities at the same amounts recorded by the acquiree.

The new guidance is effective for business combinations occurring during fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted.

The Company is currently evaluating the impact of the new guidance, which would only be applied prospectively to business combinations upon the adoption of the guidance.

In March 2020 and January 2021, the FASB issued guidance to address certain accounting consequences from the anticipated transition from the use of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

The new guidance contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance is optional and may be elected over time as reference rate reform activities occur.

During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based on matches the index of the corresponding derivatives.

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

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(Dollars in thousands, except share and per share amounts)

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Performance Materials Divestiture:

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The net cash proceeds to the Company from the sale were $ 624,256 after certain customary adjustments for indebtedness, working capital and cash at the closing of the transaction.

The Company classified the proceeds within net cash provided by (used in) investing activities – continuing operations in the consolidated statements of cash flows and used the net proceeds from the sale as well as cash on hand to pay down debt and issue a special cash dividend of $ 1.80 /share to stockholders.

In the fourth quarter of 2020, the Performance Materials business met the criteria set forth in Accounting Standards Codification 205-20, Presentation of Financial Statements – Discontinued Operations (“ASC 205-20”), as the sale represents a strategic shift that will have a major effect on the Company’s operations and financial results.

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The total transaction costs incurred in connection with the sale were approximately $ 13,161 for the year ended December 31, 2020.

The Company recorded a pre-tax loss on sale of $ 70,878 , which is included in (loss) income from discontinued operations, net of tax in the Company’s consolidated statements of income for the year ended December 31, 2020.

The Company recorded a pre-tax loss on sale of $ 70,878 , which is included in net (loss) income from discontinued operations, net of tax in the Company’s consolidated statements of income for the year ended December 31, 2020.

The following is a reconciliation of the loss recorded on the sale:

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Loss on sale of Performance Materials $ ( 70,878 )

In c onnection with the sale of Performance Materials and the related loss, as noted above, the Company has recognized a tax expense of $ 58,008 within d iscontinued operations.

PQ GROUP HOLDINGS INC.

In connection with the sale of Performance Materials and the related loss, as noted above, the Company has recognized a tax expense of $ 58,008 within d iscontinued operations for the year ended December 31, 2020.

AND SUBSIDIARIES

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The following table summarizes the results of discontinued operations for the periods presented:

2020 2019 2018

Sales $ 342,738 $ 373,686

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(Loss) income from discontinued operations before income tax ( 44,233 ) 15,579

Provision (benefit) for income taxes 58,008 1,022 ( 4,646 )

Provision for income taxes 58,008 1,022

(Loss) income from discontinued operations, net of tax $ ( 102,241 ) $ 14,557

(1) The closing of the transaction triggered the Company’s obligation to provide partial repayment under both its Amended and Restated Term Loan Credit Agreement, dated May 4, 2016, and its New Term Loan Credit Agreement, dated as of July 22, 2020.

As such, interest expense has been allocated to discontinued operations on the basis of the Company’s mandatory repayment of $ 275,787 of the Senior Secured Term Loan Facility due February 2027 and its mandatory payment of $ 188,722 of the New Senior Secured Term Loan Facility due February 2027.

As such, interest expense has been allocated to discontinued operations on the basis of the Company’s required refinancing of debt repayment provision of $ 275,787 of the Senior Secured Term Loan Facility due February 2027 and its required repayment of $ 188,722 of the Senior Secured Term Loan Facility due February 2027.

During the year ended December 31, 2021 , the Company incurred transaction costs of $ 2,054 and stock-based compensation expense of $ 1,970 , and an associated tax benefit of $ 988 related to the Performance Materials divestiture, as well as a provision to return benefit of $ 5,429 related to the filing of the 2020 tax returns filed in the fourth quarter of 2021, which is included in loss from discontinued operations, net of tax.

Net income attributable to the noncontrolling interest related to the Performance Materials business, net of tax was $ 265 and $ 154 for the years ended December 31, 2020 and 2019, respectively.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

6 unchanged sentences

Prepaid and other current assets 4,139

Current assets held for sale $ 206,369

Investments in affiliated companies $ 115

4 unchanged sentences

Other long-term assets 71,697

Total assets held for sale $ 870,013

Long-term assets held for sale $ 663,644

Notes payable and current maturities of long-term debt $ 7,766

2 unchanged sentences

Accrued liabilities 16,744

Current liabilities held for sale $ 58,103

Long-term debt, excluding current portion $ 55,972

2 unchanged sentences

Other long-term liabilities 17,366

Total liabilities held for sale $ 145,301

In connection with the transaction, the Company entered into a Transition Services Agreement with the Purchaser pursuant to which the Purchaser is receiving certain services to provide for the orderly transition of various functions and processes after the closing of the transaction.

Long-term liabilities held for sale $ 87,198

Upon the close of the transaction, the Company entered into a Transition Services Agreement with the buyer pursuant to which the buyer is receiving certain services to provide for the orderly transition of various functions and processes after the closing of the transaction.

The services under the Transition Services Agreement include information technology, accounting, tax, financial services, human resources, facilities, and other administrative support services.

These services are being provided at cost for a period of 9 months, with three 30 -day extensions available.

The Company billed $ 3,314 under the Transition Services Agreement to the buyer during the year ended December 31, 2021.

Those billings are included in selling, general and administrative expenses on the consolidated financial statements.

Additionally, in connection with the transaction, the Company entered into various supply agreements with the Purchaser.

Cash flows associated with these transition services and supply agreements are not expected to be material to the Company’s results of operations.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

Performance Chemicals Divestiture:

On February 28, 2021, the Company entered into a definitive agreement to sell its Performance Chemicals business to Sparta Aggregator L.P.

(the “Buyer”), a partnership established by Koch Minerals & Trading, LLC and Cerberus Capital Management, L.P.

for a purchase price of $ 1,100,000 subject to certain adjustments including indebtedness, cash, working capital and transaction expenses.

The Company completed the sale of its Performance Chemicals business effective on August 1, 2021.

The net cash proceeds to the Company from the sale were $ 978,449 after certain customary adjustments for indebtedness, working capital and cash at the closing of the transaction.

Prior to the closing of the transaction, the di sposal group was tested for recoverability as of each of the balance sheet dates since meeting the discontinued operations criteria, and the Company recognized an estimated disposal loss of $ 109,584 during the year ended December 31, 2021, which was included in net loss from discontinued operati ons, net of tax on the consolidated statements of income for the respective periods.

During the year ended December 31, 2021, the Company incurred transaction costs of $ 35,402 and stock-based compensation expense of $ 5,691 in connection with the sale, which is included in loss from discontinued operations, net of tax.

The final pre-tax loss on the sale of the Performance Chemicals business was $ 150,230 , which is included in net (loss) income from discontinued operations, net of tax in the Company’s consolidated statements of income for the year ended December 31, 2021 .

The following is a reconciliation of the loss recorded on the sale:

Net proceeds received from the sale of the Performance Chemicals business $ 978,449

Transaction costs ( 35,402 )

Net assets derecognized ( 1,093,277 )

Loss on sale of the Performance Chemicals business $ ( 150,230 )

In connection with the sale of the Performance Chemicals business and the related loss, as noted above, the Company has recognized a tax benefit of $ 37,255 within net loss from discontinued operations, net of tax on the consolidated statement of income.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The following table summarizes the results of discontinued operations related to Performance Chemicals for the periods presented:

Sales $ 389,870 $ 614,704

Cost of goods sold 284,220 492,302

Selling, general and administrative expenses 29,856 43,749

Goodwill impairment charge 75,080 260,000

Other operating expense, net (1)

14,765 33,144

Loss on sale of the Performance Chemicals business 150,230 —

Operating (loss) income ( 164,281 ) ( 214,491 )

Equity in net income from affiliated companies ( 111 ) ( 172 )

Interest expense, net (2)

10,730 16,570

Other income, net ( 6,210 ) ( 1,089 )

(Loss) income from discontinued operations before income tax ( 168,690 ) ( 229,800 )

(Benefit) Provision for income taxes ( 24,886 ) 3,943

(Loss) income from discontinued operations, net of tax $ ( 143,804 ) $ ( 233,743 )

(1) The Company reclassified transaction costs that were previously recorded to this line item and included those charges in the line item Loss on sale of the Performance Chemicals business during the years ended December 31, 2021 and 2020 .

(2) Upon the close of the transaction, the Company used a portion of the net proceeds to repay a portion of its outstanding debt amounting to $ 526,363 .

Refer to Note 18 for additional details on the repayment of outstanding debt.

Prior to the Company’s debt refinancing in June 2021, the Company’s outstanding term loan facilities had required refinancing of debt with repayment provisions.

As a result, interest expense has been allocated to discontinued operations on the basis of the Company’s total repayment of $ 526,363 .

Net (loss) income attributable to the noncontrolling interest related to the Performance Chemicals business, net of tax was $ 333 and $( 3,198 ) for the years ended December 31, 2021 and 2020, respectively.

Net (loss) income attributable to Ecovyst Inc., related to the Performance Chemicals business, net of tax was $( 144,137 ) and $( 230,545 ) for the years ended December 31, 2021 and 2020, respectively.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The following table summarizes the assets and liabilities of discontinued operations at December 31, 2020 and 2019, respectively:

2020 December 31,

Cash and cash equivalents $ 22,153 $ 17,736

Accounts receivables, net 87,202 86,627

Inventories, net 74,647 86,732

Prepaid and other current assets 21,088 24,131

Current assets held for sale $ 205,090 $ 215,226

Investments in affiliated companies $ 324 $ 1,476

Property, plant and equipment, net 391,524 401,595

326,173 583,075

Other intangible assets, net 388,857 406,656

Right-of-use lease assets 19,296 24,093

Other long-term assets 23,269 17,688

Long-term assets held for sale $ 1,149,443 $ 1,434,583

Notes payable and current maturities of long-term debt $ — $ —

Accounts payable 74,728 76,482

Operating lease liabilities—current 8,479 6,341

Accrued liabilities 25,330 26,182

Current liabilities held for sale $ 108,537 $ 109,005

Deferred income taxes $ 49,690 $ 47,848

Operating lease liabilities—noncurrent 10,047 16,182

Other long-term liabilities 95,617 72,538

Long-term liabilities held for sale $ 155,354 $ 136,568

(1) The Company applied the market approach to estimate the fair value of the Performance Chemicals business, which is consistent with the accounting policies described in Note 2 and the valuation techniques described in Note 15.

In applying the market approach, the Company estimated the fair value using publicly traded comparable company values and applied the selected market multiples to a trailing twelve months adjusted EBITDA.

As a result, the Company recorded an additional goodwill impairment charge of $ 75,080 in the first quarter of 2021 related to the Performance Chemicals business.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

In connection with the divestiture of the Performance Chemicals business, the Company entered into a five year contract manufacturing agreement effective on August 2, 2021 with PQ Silicas UK Ltd., a subsidiary of the Buyer, related to a facility in Warrington, United Kingdom.

Pursuant to this agreement, the Buyer will manufacture and sell silica catalyst finished good products to the Company, which are finished good products sold within the Company’s Catalyst Technologies segment.

Additionally, certain machinery, equipment, and other tangible personal property assets identified in the Agreement (“Catalyst Production Assets”) owned by the Buyer will be used exclusively in the manufacture of silica catalyst products for the Company.

The Company does not meet the requirements for a sale-leaseback transaction as described in Accounting Standards Codification 842-40, Leases - Sale-Leaseback Transactions.

Under the failed-sale-leaseback accounting model, the Company is deemed under GAAP to still own the Catalyst Production Assets, which the Company must continue to reflect in its consolidated balance sheet and depreciate over the assets’ remaining useful lives.

For the year ended December 31, 2021 , the Company recorded a financing lease liability of £ 11,648 (equivalent $ 16,005 ).

The current portion of the obligation are included in accrued liabilities and the long term portion in other long term liabilities on the consolidated financial statements.

Based on the estimated fair market values of the Catalyst Production Assets, the failed-sale-leaseback accounting treatment resulted in a loss of $ 16,005 due to the requirement to treat a certain amount of the pre-tax cash proceeds from the divestiture as though it were the result of a financing obligation.

The agreement has an initial term of five years, with an option to renew, as well as an “Option Bill of Sale” which provides for the transfer from the Buyer to the Company of the Catalyst Production Assets upon the Company’s exercise of a one-dollar purchase option.

Payments made to the Buyer under the contact manufacturing agreement were $ 3,395 for the year ended December 31, 2021 .

In addition to the contract manufacturing agreement noted above, the Company also entered into certain supply agreements with the Buyer, as well as a Transition Services Agreement, pursuant to which the Buyer is receiving and performing certain services to provide for the orderly transition of various functions and processes after the closing of the transaction.

The services under the Transition Services Agreement include information technology, accounting, tax, financial services, human resources, facilities, and other administrative support services.

These services are provided for a period of six months, which ended in January 2022.

Billings under the Transition Services Agreement to the Buyer during the year ended December 31, 2021 were immaterial.

T hose billings are included in selling, general and administrative expenses on the consolidated financial statements for the year ended December 31, 2021 .

On March 1, 2021 (the “Closing Date”), the Company completed the acquisition of Chem32, LLC (“Chem32”) as part of a stock transaction (the “Acquisition”) for $ 44,000 in cash.

The net cash paid by the Company was $ 42,639 , after certain customary adjustments for indebtedness, working capital, cash and a holdback amount pursuant to the agreement.

Based in Orange, Texas, Chem32 is a leader in ex situ pre-sulfiding and pre-activation for hydro-processing catalysts.

The Acquisition was accounted for using the acquisition method of accounting.

Under the acquisition method, the purchase price was allocated to the identifiable net assets acquired based on the fair values of the identifiable assets acquired and liabilities assumed as of the Closing Date.

The excess of the purchase price over fair values of the identifiable net assets acquired was recorded to goodwill.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The following table sets forth the calculation and allocation of the purchase price to the identifiable net assets acquired with respect to the Acquisition, which was complete as of December 31, 2021:

Provisional Purchase

Price Allocation Adjustments Purchase

Price Allocation

Cash paid, net of cash acquired $ 41,994 $ 645 $ 42,639

Holdback $ 2,000 $ ( 1,000 ) $ 1,000

Total consideration, net of cash acquired $ 43,994 $ ( 355 ) $ 43,639

Recognized amounts of identifiable assets acquired and liabilities assumed:

Receivables $ 1,368 $ — $ 1,368

Inventories 204 — 204

Prepaid and other current assets 351 — 351

Property, plant and equipment 5,046 — 5,046

Other intangible assets — 22,100 22,100

Other long-term assets 38 149 187

Fair value of assets acquired 7,007 22,249 29,256

Accounts payable 207 — 207

Accrued liabilities 452 ( 264 ) 188

Fair value of net assets acquired 6,348 22,513 28,861

Goodwill 37,646 ( 22,868 ) 14,778

$ 43,994 $ ( 355 ) $ 43,639

In accordance with the requirements of the purchase method of accounting for acquisitions, accounts receivable and inventories were recorded at fair market value.

As of the Closing Date, the fair value of accounts receivable approximated historical cost.

The gross contractual amount of accounts receivable at the Closing Date was $ 1,368 , of which there was no amount deemed uncollectible.

Fair value of inventory is defined as estimated selling prices less the sum of (a) costs of disposal and (b) a reasonable profit allowance for the selling effort of the acquiring entity, which the Company determined acquired cost equaled fair value of the inventory acquired.

The Company believes that the Acquisition will enable it to offer a more robust portfolio of services within the refining industry leveraging the Company’s existing relationships, which contributed to a total purchase price that resulted in the recognition of goodwill.

The Company assigned all of the goodwill to the Ecoservices segment.

The goodwill associated with the Acquisition is deductible for tax purposes.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The valuation of the intangible assets acquired and the related weighted-average amortization periods are as follows:

Amount Weighted-Average

Expected Useful Life

Intangible assets subject to amortization:

Customer relationships $ 16,000 10

Technical know-how 3,800 10

Non-compete agreements 700 5

Trade names 1,600 10

Total intangible assets subject to amortization $ 22,100

The Company’s consolidated financial statements include Chem32’s results of operations from the Closing Date through December 31, 2021.

Net sales and net income attributable to Chem32 during this period are included in the Company’s consolidated statement of income for the year ended December 31, 2021 and total $ 14,419 and $ 4,755 , respectively.

Pro forma financial information has not been presented as it is immaterial for the year ended December 31, 2021.

Acquisition and integration costs were $ 1,235 for the year ended December 31, 2021 and are included in other operating expense, net in the Company’s consolidated statements of income.

Revenue from Contracts with Customers:

15 unchanged sentences

Revenues related to stand-ready provisions and reservation of capacity fees are recognized on a ratable basis throughout the contract term and billed to the customer on a monthly basis.

As described above, the Company’s MSAs with its customers may outline prices for individual products or contract provisions.

MSAs in the Company’s Performance Chemicals and Refining Services segments may contain provisions whereby raw material costs are passed-through to the customer per the terms of their contract.

The Company’s exposure to fluctuations in raw material prices is limited, as the majority of pass-through contract provisions reset based on fluctuations in the underlying raw material price.

MSAs in the Company’s Refining Services segment also contain take-or-pay arrangements, whereby the customer would incur a penalty in the form of a volume shortfall fee.

During the year ended December 31, 2020, some customers fell short of monthly orders due to the pandemic and take-or-pay were acted upon.

In 2019, there have been no issues in which Refining Services customers failed to meet their contractual obligations.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Revenue from product sales are recorded at the sales price, which includes estimates of variable consideration for which reserves are established and which result from discounts, returns or other allowances that are offered within contracts between the Company and its customers.

3 unchanged sentences

The Company does not have any significant payment terms as payment is received at, or shortly after, the point of sale.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Refining Services

Contracts between the Company’s Refining Services segment and its customers are typically evidenced by entering into a MSA which generally has a term in excess of one year.

Contracts between the Company’s Ecoservices segment and its customers are typically evidenced by entering into a MSA which generally has a term in excess of one year.

Though each MSA is unique, the terms may include performance obligations such as stand-ready provisions and minimum purchase requirements.

Stand-ready provisions within these contracts are billed on a monthly basis, as the performance obligation resets on a monthly basis and does not carry-over to the following month.

Certain of the Company’s Refining Services MSAs contain minimum purchase requirements that expire within the calendar year.

The Company reviews each contract with minimum purchase requirements to determine if the customer will meet the provisions within the current calendar year.

During the years ended December 31, 2020 and 2019, there have been no issues in which Refining Services customers failed to meet their contractual obligations.

Contracts within Refining Services may also contain raw material pricing adjustments which are typically based on a commodity index or Refining Services’ cost to acquire the commodity.

MSAs within the Ecoservices segment may contain raw material pricing adjustments which are typically based on a commodity index or Ecoservices’ cost to acquire the commodity.

The Company’s exposure to fluctuations in raw material prices is limited, as the majority of pass-through contract provisions reset based on fluctuations in the underlying raw material price.

These raw material pass-through provisions reset on a periodic basis and prospectively adjust the raw material cost component of the goods sold to the customer.

The Company accounts for the raw material costs on a prospective basis, as the price changes affect the future consideration of the sale of goods.

The Company’s Catalysts segment sells customized products to its customers.

These customized products are reformulations of existing Catalysts products, tailored to meet individual customer specifications.

Stand-ready provisions within these contracts are billed on a monthly basis, as the performance obligation resets on a monthly basis and does not carry-over to the following month.

Certain of the Company’s Ecoservices MSAs contain minimum purchase requirements that expire within the calendar year.

The Company reviews each contract with minimum purchase requirements to determine if the customer will meet the provisions within the current calendar year.

During the year ended December 31, 2021, there have been no material issues in which Ecoservices customers failed to meet their contractual obligations.

During the year ended December 31, 2020, some customers fell short of monthly orders due to the pandemic and take-or-pay provisions within contracts were acted upon.

Catalyst Technologies

The Company’s Catalyst Technologies segment sells customized products to its customers through its Silica Catalysts product group.

These customized products are reformulations of existing Catalyst Technologies products, tailored to meet individual customer specifications.

Prior to entering into an arrangement, the Company will allow a customer to obtain a sample of goods to ensure that it meets their needs.

2 unchanged sentences

Although the duration of these supply arrangements are in excess of one year, a contract is formed between the Company and its customer upon receipt of a purchase order.

Performance Chemicals

Contracts between the Company’s Performance Chemicals segment and its customers are typically evidenced by entering into a supply arrangement that outlines the specification of the products to be sold and contains terms and conditions under which purchase orders are issued.

Certain Performance Chemicals supply arrangements may contain raw material pricing adjustments which are typically based on a commodity index.

These raw material pass-through provisions reset on a periodic basis and prospectively adjust the raw material cost component of the goods sold to the customer.

The Company accounts for the raw material pass-through costs on a prospective basis, as the price changes affect the future consideration of the sale of goods.

Contract Assets and Liabilities

1 unchanged sentence

A contract liability exists when the Company receives consideration in advance of the fulfillment of its performance obligations.

The Company has no contract assets recorded on its consolidated balance sheets as of December 31, 2020 and 2019, respectively.

The Company recognized a € 10,216 ($ 11,486 ) contract liability associated with the sale of its magnesium silicate product line in July 2020, of which € 9,202 ($ 11,318 ) of deferred revenue remained as of December 31, 2020.

The Company recognized revenue o f € 1,014 ($ 1,197 ) relat ed to this contract liability during the year ended December 31, 2020.

Refer to Note 8 of these condensed consolidated financial statements for additional information related to the sale of the product line.

The Company recognized a $ 9,000 contract liability associated with the sale of a portion of its sulfate salts product line in June 2019, of which $ 2,070 and $ 6,450 of deferred revenue remained as of December 31, 2020 and 2019, respectively.

The Company recognized revenue of $ 4,374 and $ 2,550 related to this contract liability during the year ended December 31, 2020 and 2019, respectively.

Refer to Note 8 of these consolidated financial statements for additional information related to the sale of the product line.

PQ GROUP HOLDINGS INC.

The Company has no contract assets or material contract liabilities recorded on its consolidated balance sheets as of December 31, 2021 and 2020, respectively.

AND SUBSIDIARIES

19 unchanged sentences

Key End Uses Key Products

Industrial & process chemicals • Silicate precursors for the tire industry

• Silica gels for surface coatings

Fuels & emission control • Refinery catalysts

Industrial & process chemicals • Sulfur derivatives for industrial production

• Treatment services

Fuels & emission control • Refining hydrocracking catalysts

• Emission control catalysts

• Catalyst recycling services

Packaging & engineered plastics • Catalysts for high-density polyethlene and chemicals syntheses

• Catalyst recycling regeneration services

Packaging & engineered plastics • Catalysts for high-density polyethylene and chemicals syntheses

• Antiblocks for film packaging

• Sulfur derivatives for nylon production

• Silicate precursors for catalysts used in plastics manufacturing

• Silicate for catalyst manufacturing

Consumer products • Silica gels for edible oil and beer clarification

• Precipitated silicas, silicates and zeolites for the dentifrice and dishwasher and

laundry detergent applications

Natural resources • Silicates for drilling muds

• Silicates and alum for water treatment mining

• Bleaching aids for paper

PQ GROUP HOLDINGS INC.

Natural resources • Sulfur derivatives for mining

AND SUBSIDIARIES

3 unchanged sentences

Year ended December 31, 2021

Refining Services Catalysts Performance Chemicals Total

Ecoservices Catalyst Technologies Total

Industrial & process chemicals $ 88,844 $ — $ 88,844

2 unchanged sentences

Packaging & engineered plastics 71,991 110,688 182,679

Consumer products — — 235,792 235,792

Natural resources 82,608 — 82,608

Total segment sales 401,913 94,007 614,704 1,110,624

Inter-segment sales eliminations ( 3,256 ) ( 5 ) — ( 3,261 )

Total $ 500,513 $ 110,688 $ 611,201

Year ended December 31, 2020

Refining Services Catalysts Performance Chemicals Total

Ecoservices Catalyst Technologies Total

Industrial & process chemicals $ 70,648 $ 125 $ 70,773

2 unchanged sentences

Packaging & engineered plastics 38,772 93,882 132,654

Consumer products — — 260,495 260,495

Natural resources 67,451 — 67,451

Total segment sales 447,081 85,667 670,563 1,203,311

Inter-segment sales eliminations ( 3,397 ) — — ( 3,397 )

Total $ 401,913 $ 94,007 $ 495,920

Year ended December 31, 2019

Refining Services Catalysts Performance Chemicals Total

Ecoservices Catalyst Technologies Total

Industrial & process chemicals $ 80,661 $ 109 $ 80,770

2 unchanged sentences

Packaging & engineered plastics 48,056 85,558 133,614

Consumer products — — 272,187 272,187

Natural resources 66,070 — 66,070

Total segment sales 455,562 72,099 704,502 1,232,163

Inter-segment sales eliminations ( 3,237 ) — — ( 3,237 )

Total $ 447,080 $ 85,667 $ 532,747

(1) As described in Note 1, the Company experiences seasonal sales fluctuations to customers in the fuels & emission control end use.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Fair Value Measurements:

6 unchanged sentences

The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3).

The classification of an asset or a liability is based on the lowest level input that is significant to its measurement.

The classification of an asset or a liability is based on the lowest level

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

input that is significant to its measurement.

For example, a Level 3 fair value measurement may include inputs that are both observable (Levels 1 and 2) and unobservable (Level 3).

6 unchanged sentences

Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of December 31, 2021 and 2020, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

3 unchanged sentences

Derivative contracts (Note 20) $ 1,288 $ — $ 1,288 $ —

Restoration plan assets 3,724 3,724 — —

Total $ 6,973 $ 3,724 $ 3,249 $ —

Derivative contracts (Note 19) $ 34,466 $ — $ 34,466 $ —

2020 Quoted Prices in

2 unchanged sentences

Derivative contracts (Note 20) $ 3,704 $ — $ 3,704 $ —

Restoration plan assets 4,199 4,199 — —

Total $ 8,127 $ 4,199 $ 3,928 $ —

Derivative contracts (Note 19) $ 11,376 $ — $ 11,376 $ —

The following table presents information about the Company’s assets and liabilities that were measured at fair value on a non-recurring basis as of December 31, 2020 (there were no such assets or liabilities measured during the year ended December 31, 2019).

The Company performed its annual impairment test on its goodwill on October 1, 2020, and determined that an impairment existed with respect to the Performance Chemicals segment.

As a result, the Company recorded a non cash goodwill impairment charge of $ 260,000 .

Refer to Note 15 to these consolidated financial statements for a description of the valuation techniques the Company utilized to determine such fair value and for the results of the impairment testing procedures performed.

2020 Quoted Prices in

Active Markets

(Level 1) Significant Other

Observable Inputs

(Level 2) Significant

(Level 3) Total

$ 717,738 $ — $ 717,738 $ — $ ( 260,000 )

(1) Goodwill with a carrying amount of $ 973,578 was written down to $ 717,738 as part of the Company’s annual impairment assessment on October 1, 2020.

This resulted in an impairment charge of $ 260,000 on the consolidated statements of income.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Restoration plan assets

The fair values of the Company’s restoration plan assets are determined through quoted prices in active markets.

Restoration plan assets are assets held in a Rabbi trust to fund the obligations of the Company’s defined benefit supplementary retirement plans and include various stock and fixed income mutual funds.

See Note 21 to these consolidated financial statements regarding defined benefit supplementary retirement plans.

The Company’s restoration plan assets are included in other long-term assets on its consolidated balance sheets.

Gains and losses related to these investments are included in other expense, net in the Company’s consolidated statements of income.

Unrealized gains associated with the underlying stock and fixed income mutual funds were $ 545 and $ 944 as of December 31, 2020 and 2019, respectively and an unrealized loss of $ 346 as of December 31, 2018.

Derivative contracts

6 unchanged sentences

For OTC derivatives that trade in liquid markets, such as forward contracts, swaps and options, model inputs can generally be corroborated by observable market data by correlation or other means, and model selection does not involve significant management judgment.

The Company has interest rate caps and cross currency swaps that are fair valued using Level 2 inputs.

The Company has interest rate caps that are fair valued using Level 2 inputs.

In addition, the Company applies a credit valuation adjustment to reflect credit risk which is calculated based on credit default swaps.

To the extent that the Company’s net exposure under a specific master agreement is an asset, the Company utilizes the counterparty’s default swap rate.

If the net exposure under a specific master agreement is a liability, the Company utilizes a default swap rate comparable to PQ Group Holdings.

If the net exposure under a specific master agreement is a liability, the Company utilizes a default swap rate comparable to Ecovyst.

The credit valuation adjustment is added to the discounted fair value to reflect the exit price that a market participant would be willing to receive to assume the Company’s liabilities or that a market participant would be willing to pay for the Company’s assets.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Stockholders' Equity:

8 unchanged sentences

Accumulated other comprehensive loss $ ( 5,792 ) $ ( 15,265 )

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The following table presents the tax effects of each component of other comprehensive income (loss) for the years ended December 31, 2021, 2020 and 2019:

7 unchanged sentences

Amortization of prior service cost ( 232 ) 58 ( 174 ) ( 232 ) 58 ( 174 ) ( 156 ) 39 ( 117 )

Settlement gain (loss) 2,059 ( 515 ) 1,544 64 ( 16 ) 48 — — —

Benefit plans, net 7,712 ( 1,918 ) 5,794 2,592 ( 654 ) 1,938 2,814 ( 384 ) 2,430

3 unchanged sentences

Other comprehensive income (loss) $ 15,254 $ 4,065 $ 19,319 $ ( 8,455 ) $ ( 6,960 ) $ ( 15,415 ) $ 19,800 $ 2,854 $ 22,654

(1) The income tax benefit or expense included in other comprehensive income is attributed to the portion of foreign currency translation associated with the Company’s cross-currency interest rate swaps, for which the tax effect is based on the applicable U.S.

deferred income tax rate.

See Note 19 to these consolidated financial statements for information regarding the Company’s cross currency interest rate swaps.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

based on the applicable U.S.

deferred income tax rate.

See Note 20 to these consolidated financial statements for information regarding the Company’s cross currency interest rate swaps.

The following table presents the change in accumulated other comprehensive income (loss), net of tax, by component for the years ended December 31, 2021 and 2020:

6 unchanged sentences

Amounts reclassified from accumulated other comprehensive income (1)

( 67 ) 723 — 656

Disposal of business ( 228 ) 1,012 13,791 14,575

Net current period other comprehensive loss 1,710 1,178 ( 2,805 ) 83

Tax Cuts and Jobs Act, reclassification from AOCI to retained earnings 1,684 190 — 1,874

December 31, 2020 5,278 ( 660 ) ( 19,883 ) ( 15,265 )

1 unchanged sentence

Amounts reclassified from accumulated other comprehensive income (1)

171 334 — 505

Disposal of business — — ( 9,846 ) ( 9,846 )

Net current period other comprehensive income (loss) 1,710 1,178 ( 2,805 ) 83

Net current period other comprehensive income 5,794 2,914 765 9,473

December 31, 2021 $ 11,072 $ 2,254 $ ( 19,118 ) $ ( 5,792 )

1 unchanged sentence

Amounts in parentheses indicate debits.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

10 unchanged sentences

( 227 ) ( 113 ) Total before tax

25 ( 45 ) Tax benefit (expense)

56 25 Tax benefit

$ ( 171 ) $ ( 88 ) Net of tax

1 unchanged sentence

Interest rate caps $ ( 444 ) $ ( 54 ) Interest expense

Natural gas swaps — ( 335 ) Cost of goods sold

( 54 ) ( 960 ) Total before tax

110 13 Tax benefit

3 unchanged sentences

(2) These accumulated other comprehensive income (loss) components are components of net periodic pension and other postretirement cost (see Note 22 to these consolidated financial statements for additional details).

Treasury Stock Repurchases

Stock Repurchase Program

2 unchanged sentences

If no such credits exist, the differences are charged to retained earnings.

On March 12, 2020, the Company announced plans to purchase up to $ 50,000 of PQ Group Holdings Inc.

On March 12, 2020, the Company announced plans to purchase up to $ 50,000 of Ecovyst Inc.

common stock under a stock repurchase program approved by the Company’s Board of Directors.

2 unchanged sentences

The stock repurchase program is valid until March 2022.

From the announcement date of the program through December 31, 2020, the Company repurchased 211,700 shares on the open market at an average price of $ 9.73 for a total of $ 2,059 .

From the announcement of the program through March 31, 2020, the Company repurchased 211,700 shares on the open market at an average price of $ 9.73 for a total of $ 2,059 .

The Company has not made any additional repurchases under the program.

As of December 31, 2021, $ 47,941 was available for additional share repurchases under the program.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

Tax Withholdings on Equity Award Vesting

In connection with the vesting of restricted stock awards, restricted stock units and performance stock units, shares of common stock may be delivered to the Company by employees to satisfy withholding tax obligations at the instruction of the employee award holders.

These transactions when they occur are accounted for as stock repurchases by the Company, with the shares returned to treasury stock at a cost representing the payment by the Company of the tax obligations on behalf of the employees in lieu of shares for the vesting unit.

The fair value of the shares withheld to cover tax payments were $ 1,470 and $ 2,539 for the years ended December 31, 2021 and 2020 , respectively.

Dividends Paid

2 unchanged sentences

Refer to Note 4 of these consolidated financial statements for additional details.

Dispositions:

Magnesium Silicate Product Line Sale

On July 1, 2020, the Company completed the sale of its magnesium silicate product line within its Performance Chemicals segment for $ 18,000 and recorded a pre-tax gain on sale of $ 4,958 .

The transaction was recorded as an asset sale, with the gain on disposition included in the other operating expense, net line item in the Company’s condensed consolidated statement of income for the year ended December 31, 2020 (see Note 9 to these condensed consolidated financial statements for additional details).

At the time of disposition, the carrying value of the Company’s inventory related to this non-core product line was $ 1,556 .

The Company allocated $ 11,486 of the consideration received to a contract liability for deferred revenue.

Concurrent with the product line sale, the Company entered into a tolling arrangement with the buyer in which the Company agreed to manufacture the product for the buyer through June 2025.

The Company deferred $ 11,486 of the $ 18,000 consideration received as a liability, to be recognized as the Company executes its performance obligations over the term of the contractual agreement with the buyer.

Sulfate Salts Product Line Sale

On June 28, 2019, the Company completed the sale of a portion of its sulfate salts product line within its Performance Chemicals segment for $ 28,000 , with net cash consideration of $ 27,658 and a pre-tax gain on sale of $ 11,518 .

The transaction was recorded as an asset sale, with the gain on disposition included in the other operating expense, net line item in the Company’s consolidated statement of income for the year ended December 31, 2019 (see Note 9 to these consolidated financial statements for additional details).

At the time of disposition, the carrying value of the Company’s net working capital related to this non-core product line was $ 4,215 .

In addition to the net working capital sold as part of the transaction, the Company also derecognized $ 3,276 of property, plant and equipment related to the product line and allocated $ 9,000 of the consideration received to a liability for deferred revenue.

Concurrent with the product line sale, the Company entered into a tolling arrangement with the buyer in which the Company will use its existing manufacturing facilities for the product line to manufacture the product for the buyer, the majority of which runs until June 2021.

The Company deferred $ 9,000 of the consideration received as a liability, to be recognized as the Company executes its performance obligations over the term of the contractual agreement with the buyer.

Additionally, the Company concluded that an embedded lease arrangement exists as a result of the combination of the sale and tolling agreements.

Given the ability of the buyer to control substantially all of the output of the facilities and the existence of bargain purchase options on the manufacturing assets, the Company determined that the buyer is effectively leasing the assets from the Company and derecognized the associated property, plant and equipment under a sales-type leasing arrangement.

The gain on the sale of fixed assets is included as part of the Company’s overall gain on sale related to the transaction, with the Company’s net investment in the leased assets having been settled as part of the consideration received in the transaction with no additional future cash flows to be recognized on the lease.

Sale of Assets

On December 19, 2019, the Company completed the sale of real property for $ 19,100 , with net cash consideration of $ 17,100 and a holdback receivable to be settled by December 2021 of $ 1,000 , and recorded a pre-tax gain on sale of $ 7,150 .

On December 30, 2019, the Company entered into a leaseback arrangement with the buyer-lessor which expires in December 2021.

The Company recorded the asset sale separately from the leaseback, with the gain on disposition included in the other operating expense, net line item in the Company’s consolidated statement of income for the year ended December 31, 2019 (see Note 9 to these consolidated financial statements for additional details).

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

At the time of disposition, the Company derecognized $ 10,735 of property, plant and equipment and accounted for the leased asset as an operating lease.

A right-of-use lease asset of $ 3,588 and lease liability of $ 3,524 was recorded at December 31, 2020, based on the present value of the lease payments and future demolition costs associated with the lease.

On August 4, 2021, the Company’s Board declared a special cash dividend of $ 3.20 per share, using after tax cash proceeds from the sale of the Performance Chemicals business.

The dividend was paid on August 23, 2021 to the Company’s stockholders of record at the close of business on August 12, 2021.

Refer to Note 5 of these consolidated financial statements for additional details.

Other Operating Expense, Net:

3 unchanged sentences

Transaction and other related costs 2,268 1,033 170

8,274 407 491

Restructuring, integration and business optimization costs 2,964 1,994 2,135

13,028 2,692 5,819

Net (gain) loss on asset disposals (3)

( 134 ) ( 13,207 ) 4,190

Insurance recoveries (4)

— — ( 5,480 )

Write-off of long-term supply contract obligation (Note 25) — — ( 20,612 )

Environmental related costs 1,092 2,522 638

Net loss on asset disposals 5,666 4,722 4,559

Other, net 3,054 1,404 2,115

$ 24,273 $ 17,842 $ 17,734

(1) Transaction and other related costs during the year ended December 31, 2020 primarily related to costs incurred from the strategic review of the Company’s Performance Chemicals business.

Refer to Note 29 of these consolidated financial statements for additional details.

(2) During the year ended December 31, 2020 , the Company’s results were impacted by costs associated with the execution of the Company’s strategic initiatives.

The costs incurred during the year ended December 31, 2020 primarily relate to demolition and decommissioning costs related to various asset sales.

The costs incurred during the years ended December 31, 2019 and 2018 relate to severance charges for certain executives and employees, transition/duplicate staffing, professional fees and other expenses related to the Company’s organization changes.

(3) During the year ended December 31, 2020, the Company recognized a gain of $ 4,958 related to the sale of a product line and a gain of $ 672 related to the sale of its interest in the Quaker Holdings joint venture, which were offset by fixed asset write-offs.

During the year ended December 31, 2019, the Company recognized a gain of $ 11,518 related to the sale of a product line and a gain of $ 7,150 related to a property sale, which were partially offset by fixed asset write-offs.

Refer to Note 8 of these consolidated financial statements for additional details.

(4) During the year ended December 31, 2018, the Company recognized $ 6,450 of insurance recoveries in its consolidated statement of income related to the Company’s claim for losses sustained during Hurricane Harvey in August 2017.

For the year ended December 31, 2018, $ 5,480 was recorded as a gain in other operating expense, net, as reimbursement of expenses, $ 207 was recorded as a gain in net loss on asset disposals within other operating expense, net, for the Company’s previously recognized property losses, and $ 763 represented recoveries in excess of the Company’s property losses which was recorded as a non-operating gain in other expense, net, in the Company’s consolidated statement of income.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

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Therefore, the fair value allocated to the acquired LIFO inventory was treated as the new base inventory value.

If inventories valued under the LIFO basis had been valued using the FIFO method, inventories would have been $ 4,255 lower and $ 974 higher than reported as of December 31, 2020 and 2019, respectively, driven primarily by the purchase accounting fair value step-up of the LIFO inventory base value associated with the business combination.

If inventories valued under the LIFO basis had been valued using the FIFO method, inventories would have been $ 6,837 and $ 4,907 lower than reported as of December 31, 2021 and 2020, respectively, driven primarily by the purchase accounting fair value step-up of the LIFO inventory base value associated with the business combination.

Investments in Affiliated Companies:

2 unchanged sentences

Company Country Percent

PQ Silicates Ltd.

Zeolyst International USA 50 %

10 unchanged sentences

Net income 68,433 55,328 106,683

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

3 unchanged sentences

the Company’s share of the net assets and net income of affiliates is calculated based on the percent ownership specified in the table above.

In March 2020, the Company sold its 49 % interest in the Quaker Holdings joint venture to a third party.

Prior to the Company’s disposition of its shares in the joint venture, the Company received a liquidating dividend of $ 729 as well as $ 1,032 for the sale of the joint venture shares, which was included in the proceeds from sale of investment within the investing activities section of the Company’s consolidated statement of cash flows.

The Company’s investments in affiliated companies balance as of December 31, 2020 and 2019 includes net purchase accounting fair value adjustments of $ 243,899 and $ 250,532 , respectively, related a prior business combination, consisting primarily of goodwill and intangible assets such as customer relationships, technical know-how and trade names.

The Company’s investments in affiliated companies balance as of December 31, 2021 and 2020 includes net purchase accounting fair value adjustments of $ 237,419 and $ 243,899 , respectively, related to a prior business combination, consisting primarily of goodwill and intangible assets such as customer relationships, technical know-how and trade names.

Consolidated equity in net income from affiliates is net of $ 6,480 , $ 6,634 and $ 6,634 of amortization expense related to purchase accounting fair value adjustments for the years ended December 31, 2021, 2020 and 2019, respectively.

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The Company did no t purchase goods from affiliates during the years ended December 31, 2021, 2020 and 2019.

On December 18, 2013, PQ Holdings and its joint venture, Zeolyst International, entered into a ten year real estate tax abatement agreement with the Unified Government of Wyandotte County, Kansas.

The agreement utilizes an Industrial Revenue Bond (“IRB”) financing structure to achieve a 75% real estate tax abatement on the value of the improvements that were constructed during the expansion of PQ Holdings and Zeolyst International’s facilities at the jointly-operated Kansas City, Kansas plant.

On December 18, 2013, the Company and its joint venture, Zeolyst International, entered into a ten year real estate tax abatement agreement with the Unified Government of Wyandotte County, Kansas.

The agreement utilizes an Industrial Revenue Bond (“IRB”) financing structure to achieve a 75% real estate tax abatement on the value of the improvements that were constructed during the expansion of the Company and Zeolyst International’s facilities at the jointly-operated Kansas City, Kansas plant.

A similar tax abatement agreement has been executed on an annual basis since December 18, 2013 with respect to additional plant expansions during those years.

2 unchanged sentences

The financing obligations and the industrial bonds receivable have been presented net, as the financing obligations and the industrial bonds meet the criteria for right of set off conditions under GAAP.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

4 unchanged sentences

Land $ 97,047 $ 93,650

Buildings 168,204 160,653

Buildings and improvements 77,851 76,010

Machinery and equipment 714,435 656,502

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Operating lease costs of $ 9,825 and $ 8,183 are included in cost of goods sold and in selling, general and administrative expenses on the consolidated statement of income for the year ended December 31, 2021 and 2020, respectively.

Finance lease, short-term lease and variable lease costs for the years ended December 31, 2020 and 2019 were not material.

Finance lease and financing obligation costs of $ 1,656 and $ 203 are included in cost of goods sold and in selling, general, and administrative expenses on the consolidated statement of income for the years ended December 31, 2021 and 2020.

Lease income is not material to the results of operations for the years ended December 31, 2021 and 2020.

The Company entered into a sale-leaseback transaction during the year ended December 31, 2019.

Disclosures related to this transaction can be found within Note 8 to these consolidated financial statements.

The table below presents the operating and finance right-of-use lease assets and lease liabilities recognized on the consolidated balance sheet as of December 31, 2021 and 2020:

2 unchanged sentences

Operating lease assets Right-of-use lease assets $ 30,115 $ 28,943

Finance lease assets Property, plant and equipment, net 1,752 1,556

Finance lease and financing obligation assets Property, plant and equipment, net 29,737 1,727

Total leased assets $ 59,852 $ 30,670

Operating lease liabilities Operating lease liabilities—current $ 8,306 $ 6,715

Finance lease liabilities Accrued liabilities 262 185

Finance lease and financing obligation liabilities Accrued liabilities 3,181 245

Operating lease liabilities Operating lease liabilities—noncurrent 21,719 21,972

Finance lease liabilities Other long-term liabilities 366 315

Finance lease and financing obligation liabilities Other long-term liabilities 11,667 349

Total lease liabilities $ 44,873 $ 29,281

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

5 unchanged sentences

Operating leases 4.79 5.51

Finance leases 2.45 2.65

Finance leases and financing obligations 4.69 2.46

Weighted average discount rate:

Operating leases 5.02 % 6.06 %

Finance leases 4.67 % 4.67 %

Finance leases and financing obligations 2.86 % 4.70 %

Maturities of lease liabilities as of December 31, 2021 are as follows:

1 unchanged sentence

Leases Finance

Leases and Financing Obligations

2021 $ 9,459 $ 3,478

2 unchanged sentences

2024 4,215 3,452

2025 2,662 1,974

Thereafter 3,664 —

3 unchanged sentences

(1) Refer to the above table regarding the Company’s right-of-use lease assets and lease liabilities for the presentation of the lease liabilities in the Company’s consolidated balance sheet at December 31, 2021.

The following table presents other information related to the Company’s operating and finance leases and the impact on the Company’s consolidated statement of cash flows:

The following table presents other information related to the Company’s operating and finance leases and financing obligations and the impact on the Company’s consolidated statement of cash flows:

Cash paid for amounts included in the measurement of lease liabilities:

Payments on operating leases included in operating cash flows $ 9,755 $ 8,322

Interest payments under finance lease obligations included in operating cash flows 21 26

Principal payments under finance lease obligations included in financing cash flows 209 177

Interest payments under finance leases and financing obligations included in operating cash flows 189 20

Principal payments under finance leases and financing obligations included in financing cash flows 1,466 209

Right-of-use assets obtained in exchange for new lease liabilities (non-cash):

Operating leases 9,526 10,633

Finance leases 353 —

PQ GROUP HOLDINGS INC.

Finance leases and financing obligations — 353

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

Under prior lease guidance, total rent expense related to the Company’s various leasing arrangements was $ 20,594 for the year ended December 31, 2018.

Rent expense for the year ended December 31, 2018 included both lease and non-lease costs related to leasing arrangements in place during those years.

Reportable Segments:

The Company has organized its business around three operating segments based on the review of discrete financial results for each of the operating segments by the Company’s chief operating decision maker (the Company’s Chairman of the Board, President and Chief Executive Officer), or CODM, for performance assessment and resource allocation purposes.

The Company has organized its business around two operating segments based on the review of discrete financial results for each of the operating segments by the Company’s chief operating decision maker (the Company’s Chairman of the Board, President and Chief Executive Officer), or CODM, for performance assessment and resource allocation purposes.

Each of the Company’s operating segments represents a reportable segment under GAAP.

The Company’s reportable segments are organized based on the nature and economic characteristics of the Company’s products.

The Company’s three reportable segments are as follows:

(1) Refining Services provides sulfuric acid recycling to the North American refining industry;

(2) Catalysts serves the packaging and engineered plastics and the global refining, petrochemical and emissions control industries;

and (3) Performance Chemicals supplies diverse product end uses, including personal and industrial cleaning products, fuel-efficient tires, surface coatings, and food and beverage products.

The Catalysts segment includes equity in net income from Zeolyst International and Zeolyst C.V.

The Company’s two reportable segments are as follows:

(1) Ecoservices provides sulfuric acid recycling to the North American refining industry for the production of alkylate and provides on-purpose virgin sulfuric acid for water treatment, mining, and industrial applications;

and (2) Catalyst Technologies serves the packaging and engineered plastics and the global refining, petrochemical and emissions control industries.

The Catalyst Technologies segment includes equity in net income from Zeolyst International and Zeolyst C.V.

(collectively, the “Zeolyst Joint Venture”), each of which are 50/50 joint ventures with CRI Zeolites Inc.

1 unchanged sentence

The Zeolyst Joint Venture is accounted for using the equity method in the Company’s consolidated financial statements (see Note 12 to these consolidated financial statements for further information).

Company management evaluates the Catalysts segment’s performance, including the Zeolyst Joint Venture, on a proportionate consolidation basis.

Accordingly, the revenues and expenses used to compute the Catalysts segment’s adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) include the Zeolyst Joint Venture’s results of operations on a proportionate basis based on the Company’s 50% ownership level.

Company management evaluates the Catalyst Technologies segment’s performance, including the Zeolyst Joint Venture, on a proportionate consolidation basis.

Accordingly, the revenues and expenses used to compute the Catalyst Technologies segment’s adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) include the Zeolyst Joint Venture’s results of operations on a proportionate basis based on the Company’s 50% ownership level.

Since the Company uses the equity method of accounting for the Zeolyst Joint Venture, these items are eliminated when reconciling to the Company’s consolidated results of operations.

1 unchanged sentence

Adjusted EBITDA consists of EBITDA, which is a measure defined as net income before interest, income taxes, depreciation and amortization (each of which is included in the Company’s consolidated statements of income), and adjusted for certain items as discussed below.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

3 unchanged sentences

2021 2020 2019

Refining Services $ 401,913 $ 447,081 $ 455,562

Catalysts (1)

94,007 85,667 72,099

Performance Chemicals 614,704 670,563 704,502

Eliminations (2)

Ecoservices $ 500,513 $ 401,913 $ 447,080

Catalyst Technologies (1)

110,688 94,007 85,667

Total $ 611,201 $ 495,920 $ 532,747

Segment Adjusted EBITDA:

Refining Services $ 157,198 $ 175,640 $ 176,499

Catalysts (4)

74,504 107,808 81,067

Performance Chemicals 142,372 151,547 168,196

Total Segment Adjusted EBITDA (5)

Adjusted EBITDA:

Ecoservices $ 177,672 $ 157,198 $ 175,640

Catalyst Technologies (3)

88,028 74,504 107,808

Unallocated corporate expenses ( 38,089 ) ( 39,087 ) ( 43,263 )

Total $ 227,611 $ 192,615 $ 240,185

(1) Excludes the Company’s proportionate share of sales from the Zeolyst Joint Venture accounted for using the equity method.

The proportionate share of sales is $ 131,332 , $ 128,623 and $ 170,338 for the years ended December 31, 2021, 2020 and 2019, respectively.

(2) The Company eliminates intersegment sales when reconciling to the Company’s consolidated statements of income.

(2) The Company defines Adjusted EBITDA as EBITDA adjusted for certain items as noted in the reconciliation below.

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

(4) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalysts segment is $ 42,515 for the year ended December 31, 2020, which includes $ 21,157 of equity in net income plus $ 6,634 of amortization of investment in affiliate step-up plus $ 14,724 of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalysts segment is $ 68,138 for the year ended December 31, 2019, which includes $ 45,899 of equity in net income plus $ 7,534 of amortization of investment in affiliate step-up plus $ 14,705 of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalysts segment is $ 56,663 for the year ended December 31, 2018, which includes $ 37,437 of equity in net income plus $ 6,634 of amortization of investment in affiliate step-up plus $ 12,592 of joint venture depreciation, amortization and interest.

(5) Total Segment Adjusted EBITDA differs from the Company’s consolidated Adjusted EBITDA due to unallocated corporate expenses.

PQ GROUP HOLDINGS INC.

(3) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $ 49,872 for the year ended December 31, 2021, which includes $ 27,827 of equity in net income plus $ 6,480 of amortization of investment in affiliate step-up plus $ 15,565 of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $ 42,515 for the year ended December 31, 2020, which includes $ 21,157 of equity in net income plus $ 6,634 of amortization of investment in affiliate step-up plus $ 14,724 of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $ 68,138 for the year ended December 31, 2019, which includes $ 45,899 of equity in net income plus $ 7,534 of amortization of investment in affiliate step-up plus $ 14,705 of joint venture depreciation, amortization and interest.

AND SUBSIDIARIES

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(Dollars in thousands, except share and per share amounts)

A reconciliation of net income attributable to PQ Group Holdings to Segment Adjusted EBITDA is as follows:

A reconciliation of net income attributable to Ecovyst to Adjusted EBITDA is as follows:

2021 2020 2019

Reconciliation of net (loss) income attributable to PQ Group Holdings Inc.

to Segment Adjusted EBITDA

Net (loss) income from continuing operations $ ( 176,265 ) $ 65,136 $ 49,271

(Benefit) provision for income taxes ( 48,122 ) 39,677 33,641

Reconciliation of net income attributable to Ecovyst Inc.

to Adjusted EBITDA

Net income from continuing operations $ 1,794 $ 54,280 $ 31,120

Provision (benefit) for income taxes 12,147 ( 52,065 ) 12,299

Interest expense, net 36,990 50,409 66,872

Depreciation and amortization 79,741 76,926 74,781

Segment EBITDA ( 5,568 ) 343,682 327,601

EBITDA 130,672 129,550 185,072

Joint venture depreciation, amortization and interest 15,565 14,724 14,705

Amortization of investment in affiliate step-up 6,480 6,634 7,534

Goodwill impairment charge 260,000 — —

Debt extinguishment costs 26,902 25,028 3,400

Net (gain) loss on asset disposals ( 134 ) ( 13,207 ) 4,190

Net loss on asset disposals 5,666 4,722 4,559

Foreign currency exchange (gain) loss 4,716 ( 5,264 ) 1,228

3 unchanged sentences

Restructuring, integration and business optimization expenses 2,964 1,994 2,571

Defined benefit pension plan cost 12 2,960 411

Gain on contract termination (1)

— — ( 20,612 )

Defined benefit pension plan (benefit) cost ( 858 ) ( 598 ) 553

Other 3,588 2,775 638

Adjusted EBITDA $ 227,611 $ 192,615 $ 240,185

Unallocated corporate expenses 36,079 41,033 37,842

Segment Adjusted EBITDA $ 374,074 $ 434,995 $ 425,762

(1) Includes the non-cash write-off of a long-term supply contract obligation (see Note 25), which was recorded as a reduction in other operating expense, net in the consolidated statement of income for the year ended December 31, 2018.

The Company’s consolidated results include equity in net income from affiliated companies of $ 27,737 , $ 21,065 and $ 45,808 for the years ended December 31, 2021, 2020, and 2019, respectively.

This is primarily comprised of equity in net income of $ 21,157 , $ 45,899 and $ 37,437 in the Catalysts segment from the Zeolyst Joint Venture for the years ended December 31, 2020, 2019 and 2018, respectively.

The remaining equity in net income for the Company is included in the Performance Chemicals segment, which was attributed to smaller investments and was not material.

This is primarily comprised of equity in net income of $ 27,827 , $ 21,157 and $ 45,899 in the Catalyst Technologies segment from the Zeolyst Joint Venture for the years ended December 31, 2021, 2020 and 2019, respectively.

The Company’s equity in net income from affiliated companies in the consolidated results includes amortization expense related to purchase accounting fair value adjustments associated with the Zeolyst Joint Venture as a result of a prior business combination.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Capital expenditures for the Company’s reportable segments are shown in the following table:

1 unchanged sentence

Capital expenditures:

Refining Services $ 31,799 $ 42,310 $ 46,617

Catalysts (1)

Ecoservices $ 43,561 $ 31,799 $ 42,310

Catalyst Technologies (1)

15,997 11,177 8,984

Performance Chemicals 40,864 53,910 56,759

Corporate (2)

3 unchanged sentences

(2) Includes corporate capital expenditures, the cash impact from changes in capital expenditures in accounts payable and capitalized interest.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Total assets by segment are not disclosed by the Company because the information is not prepared or used by the CODM to assess performance and to allocate resources.

3 unchanged sentences

United States $ 571,587 $ 443,682 $ 492,146

Netherlands 108,338 117,211 127,803

United Kingdom 107,539 99,048 101,277

Other foreign countries 39,614 52,238 40,601

1 unchanged sentence

(1) Except for the United States, no sales in an individual country exceeded 10% of the Company’s total sales.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The Company sold products through its Ecoservices and Catalyst Technologies segments to customer A, which accounted for 12.6 %, 10.4 % and 11.7 % of the Company’s total sales as of December 31, 2021, 2020, and 2019 respectively.

Long-lived assets (1) :

United States $ 597,506 $ 555,558

Netherlands 53,006 49,559

United Kingdom 100,392 92,229

Other foreign countries 28,840 65,095

1 unchanged sentence

(1) Long-lived assets includes property, plant and equipment, net and right-of-use lease assets.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Goodwill and Other Intangible Assets:

The changes in the carrying amount of goodwill for the years ended December 31, 2021 and 2020 is summarized as follows:

Refining Services Catalysts Performance

Chemicals Total

Ecoservices Catalyst Technologies Total

Balance as of December 31, 2019 $ 311,892 $ 78,611 $ 390,503

1 unchanged sentence

Balance as of December 31, 2020 311,892 79,673 391,565

Goodwill impairment — — ( 260,000 ) ( 260,000 )

Goodwill recognized (Note 6)

14,778 — 14,778

Foreign exchange impact — ( 204 ) ( 204 )

Balance as of December 31, 2021 $ 326,670 $ 79,469 $ 406,139

The carrying amounts of goodwill at December 31, 2020, 2019 and 2018 are net of the following accumulated impairment losses:

Refining Services Catalysts Performance

Chemicals Total

Accumulated impairment losses as of December 31, 2018 — — — —

Accumulated impairment losses as of December 31, 2019 — — — —

Accumulated impairment losses as of December 31, 2020 — — ( 260,000 ) ( 260,000 )

The Company completed its annual goodwill impairment assessments as of October 1, 2021 and 2020.

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The quantitative test identifies both the potential existence of impairment and the amount of impairment loss.

For each of the October 1, 2020 and 2019 assessments, the Company identified three reporting units, which align with the Company’s operating segments.

For each of the October 1, 2021 and 2020 assessments, the Company identified two reporting units, which align with the Company’s operating segments.

The Company determined the fair value of its reporting units using a split between a market approach and an income, or discounted cash flow, approach.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The Company estimates reporting unit market approach fair value using publicly traded comparable company values and applies the selected market multiples to each reporting unit’s trailing twelve months adjusted EBITDA.

3 unchanged sentences

Discount rate assumptions are based on an assessment of the risk inherent in those future cash flows.

Based on the Company’s announced strategic review of the Performance Chemicals reporting unit in the fourth quarter, the Company concluded the market approach was more appropriate to estimate the fair value of the reporting unit for the annual impairment test.

The Company reviewed the recent reporting unit performance and peer company performance under current market conditions.

As a result, the Company recorded a goodwill impairment charge of $ 260,000 in the fourth quarter of 2020, included in goodwill impairment charge in the consolidated statements of income related to the Performance Chemicals reporting unit.

The carrying value of the Performance Chemicals reporting unit's goodwill was $ 326,173 at December 31, 2020.

No other goodwill impairments were identified as a result of the 2020 testing.

As of October 1, 2021, the fair values of each of the Company’s reporting units exceeded their respective carrying values and therefore, no goodwill impairment exists for the year ended December 31, 2021.

1 unchanged sentence

The fair values of the Company’s indefinite-lived trade names and trademarks were in excess of their carrying amounts as of the respective testing dates, and as such, there was no further impairment of the Company’s indefinite-lived intangible assets for the years ended December 31, 2021 and 2020.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Gross carrying amounts and accumulated amortization for intangible assets other than goodwill are as follows:

7 unchanged sentences

Customer relationships 131,248 ( 57,262 ) 73,986 115,303 ( 47,740 ) 67,563

Contracts — — — 16,200 ( 15,258 ) 942

Non-compete agreements 700 ( 117 ) 583 — — —

Trademarks 7,682 ( 2,902 ) 4,780 7,709 ( 2,399 ) 5,310

Trade names 1,600 ( 133 ) 1,467 — — —

Permits 9,100 ( 9,100 ) — 9,100 ( 9,100 ) —

In-process research and development 500 ( 25 ) 475 — — —

Total definite-lived intangible assets 206,252 ( 90,162 ) 116,090 184,326 ( 76,450 ) 107,876

Indefinite-lived trade names 25,627 — 25,627 25,670 — 25,670

Indefinite-lived trademarks 82,613 — 82,613 80,999 — 80,999

In-process research and development 3,900 — 3,900 3,900 — 3,900

Total intangible assets $ 235,779 $ ( 90,162 ) $ 145,617 $ 213,896 $ ( 76,450 ) $ 137,446

The Company amortizes technical know-how over periods that range from eleven years to twenty years , customer relationships over periods that range from seven years to fifteen years , trademarks over periods that range from eleven years to fifteen years , contracts over periods that range from two years to sixteen years , and permits over five years .

In-process research and development intangible assets are considered indefinite-lived until such time as the associated projects are completed, at which time amortization commences on the assets, or abandoned, which results in the impairment of the assets.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Amortization expense related to technical know-how, contracts and permits is included in cost of goods sold in the consolidated statements of income and was $ 9,369 , $ 13,877 and $ 13,579 for the years ended December 31, 2020, 2019 and 2018, respectively.

Amortization expense related to technical know-how, contracts, non-compete agreements, and permits is included in cost of goods sold in the consolidated statements of income and was $ 3,465 , $ 3,111 and $ 3,111 for the years ended December 31, 2021, 2020 and 2019, respectively.

Amortization expense related to customer relationships and trademarks is included in other operating expense, net in the consolidated statements of income and was $ 10,321 , $ 8,678 and $ 8,678 for the years ended December 31, 2021, 2020 and 2019, respectively.

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Total estimated future aggregate amortization expense $ 116,098

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Accrued Liabilities:

3 unchanged sentences

Property tax 2,144 2,379

Environmental reserves (Note 24) 4,309 4,548

Income taxes 9,864 2,897

Commissions and rebates 854 1,459

Pension, postretirement and supplemental retirement plans (Note 21) 1,852 1,825

Finance lease and financing obligation liabilities 3,181 245

Dividends payable 8,574 834

Derivative liabilities 1,288 1,954

Accrued closing adjustments for Performance Chemicals divestiture (Note 5) 3,745 —

Other 11,390 8,395

$ 75,915 $ 48,482

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Long-term Debt:

The summary of long-term debt is as follows:

Senior Secured Term Loan Facility due February 2027 $ 671,710 $ 947,497

New Senior Secured Term Loan Facility due February 2027 459,653 —

6.75% Senior Secured Notes due 2022 — 625,000

Senior Secured Term Loan Facility due February 2027 (the “2016 Term Loan Facility”) $ — $ 671,710

Senior Secured Term Loan Facility due February 2027 (the “2020 Term Loan Facility”) — 459,653

Senior Secured Term Loan Facility due June 2028 (the “2021 Term Loan Facility”) 895,500 —

5.75% Senior Unsecured Notes due 2025 — 295,000

7 unchanged sentences

Senior Secured Credit Facilities

On May 4, 2016, the Company entered into senior secured credit facilities (collectively, the “2016 Senior Secured Credit Facilities”) comprised of a $ 1,200,000 term loan facility, which consisted of a $ 900,000 U.S.

dollar-denominated tranche and a $ 300,000 Euro-denominated (or € 265,000 ) tranche (the “2016 Term Loan Facility”), and a $ 200,000 asset-based revolving credit facility (the “ABL Facility”).

On February 8, 2018 (the “Third Amendment Closing Date”), PQ Corporation (the “Borrower”), an indirect, wholly owned subsidiary of the Company, refinanced its existing U.S.

Dollar and Euro denominated senior secured term loan facilities with a new $ 1,267,000 senior secured term loan facility (the “ Senior Secured Term Loan Facility”) by entering into the Third Amendment Agreement to the 2016 Term Loan Facility (the “Third Amendment”), which amended and restated the Term Loan Credit Agreement dated as of May 4, 2016, among the Borrower, CPQ Midco I Corporation, Credit Suisse AG, Cayman Island Branch, as administrative agent and collateral agent, and the lenders and the other parties party thereto from time to time (as amended prior to the Third Amendment, the “Existing Credit Agreement” and as amended and restated by the Amendment, the “New Credit Agreement”).

On February 7, 2020, the Company amended its Senior Secured Term Loan Facility to, among other things, (a) reduce the interest rate applicable to all LIBOR rate tranche B-1 term loans to LIBOR plus 2.25 % per annum, (b) reduce the interest rate applicable to all base rate tranche B-1 term loans to the alternate base rate plus 1.25 % per annum and (c) extend the maturity date of all tranche B-1 term loans to February 7, 2027.

On July 22, 2020, the Company entered into an agreement for a new senior secured term loan facility (the “New Senior Secured Term Loan Facility”, collectively with the Senior Secured Term Loan Facility, the “Term Loan Facilities”) in an aggregate principal amount of $ 650,000 with an original issue discount of 1.5 % and interest at a floating rate of LIBOR (with a 1.0 % minimum LIBOR floor) plus 3.0 % per annum.

The proceeds were used to redeem its existing $ 625,000 of 6.75 % Senior Secured Notes due 2022 and pay the associated early redemption premiums.

The New Senior Secured Term Loan Facility requires scheduled quarterly amortization payments, each equal to 0.25 % of the original principal amount of the loans under the New Senior Secured Term Loan Facility.

As of December 31, 2020, the Senior Secured Term Loan Facility accrued interest at a floating rate of LIBOR plus 2.50 % per annum and is scheduled to mature in February 2027.

The Term Loan Facility requires scheduled quarterly amortization payments, each equal to 0.25 % of the original principal amount of the loans under the Term Loan Facility.

PQ GROUP HOLDINGS INC.

On May 4, 2016, PQ Corporation (“PQ Corp”), an indirect, wholly owned subsidiary of the Company prior to the closing of the sale of the Performance Chemical business entered into senior secured credit facilities (collectively, the “2016 Senior Secured Credit Facilities”) comprised of a $ 1,200,000 term loan facility, which consisted of a $ 900,000 U.S.

available borrowings, up to $ 10,000 in Canadian available borrowings and up to $ 40,000 of European available borrowings.

Borrowings under the ABL Facility bore interest at a rate equal to the LIBOR rate or the base rate elected by PQ Corp at the time of the borrowing plus a margin of between 1.50 %- 2.00 % or 0.50 %- 1.00 %, respectively, depending on availability under the ABL Facility.

In addition, there was an annual commitment fee equal to 0.375 %, with a step-down to 0.25 % based on the average usage of the revolving credit borrowings available.

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

On the Third Amendment Closing Date, the Company also entered into multiple cross currency swap arrangements to hedge foreign currency risk.

The swaps were designed to enable the Company to effectively convert a portion of its fixed-rate U.S.

dollar denominated debt obligations into approximately € 280,000 .

The swaps were to mature in February 2023.

In October 2019, the Company settled all of its cross-currency interest rate swap arrangements (the “February 2018 swaps”) and concurrently entered into new cross-currency interest rate swap arrangements (the “October 2019 swaps”) with the same notional amount of € 280,000 equivalent ($ 344,403 as of December 31, 2020) and same maturity of February 2023.

Consistent with the February 2018 swaps, the October 2019 swaps are designed to enable the Company to effectively convert a portion of its fixed-rate U.S.

dollar-denominated debt obligations under the Term Loan Facility into a Euro-denominated equivalent.

The October 2019 swaps have been designated and qualify as net investment hedges of the Company’s foreign currency exchange rate exposure on the net investments of certain of its Euro-denominated subsidiaries.

The settlement of the February 2018 swaps resulted in cash proceeds to the Company of $ 38,070 , which the Company used for additional debt repayment on the Company’s Senior Secured Term Loan Facility.

The Company may at any time or from time to time voluntarily prepay loans under the Term Loan Facilities in whole or in part without premium or penalty.

The Term Loan Facilities requires mandatory prepayments from (i) 50% of “Excess Cash Flow” (as defined in the New Credit Agreement) on an annual basis with step downs to lower percentages based on the Borrower’s leverage ratio, if applicable, (ii) net cash proceeds from the issuance or incurrence of certain indebtedness and (iii) net cash proceeds received from certain non-ordinary course disposition of assets and casualty events to the extent such net cash proceeds were not reinvested in the Company’s business within a certain specified time period.

Prepayments are applied to remaining amortization installments in direct order of maturity.

The remaining principal balance of the term loans are due upon maturity.

In addition, the New Credit Agreement contains customary affirmative and negative covenants and events of default, all of which are substantially the same as under the Existing Credit Agreement.

The Borrower and certain Canadian and European subsidiaries of the Borrower also have a $ 200,000 asset-based revolving credit facility (the “ABL Facility”) which provides for $ 150,000 in U.S.

available borrowings, up to $ 10,000 in Canadian available borrowings and up to $ 40,000 of European available borrowings.

Borrowings under the ABL Facility bear interest at a rate equal to the LIBOR rate or the base rate elected by the Company at the time of the borrowing plus a margin of between 1.50 %- 2.00 % or 0.50 %- 1.00 %, respectively, depending on availability under the ABL Facility.

In addition, there is an annual commitment fee equal to 0.375 %, with a step-down to 0.25 % based on the average usage of the revolving credit borrowings available.

As of December 31, 2020, there were no revolving credit borrowings under the ABL Facility.

Revolving credit borrowings are payable at the option of the Company throughout the term of the ABL Facility with the balance due May 4, 2021.

On March 20, 2020, the Company amended its existing ABL Facility to increase the aggregate amount of the revolving loan commitments available by $ 50,000 to $ 250,000 , consisting of up to $ 195,000 in U.S.

On February 8, 2018 (the “2018 Amendment Closing Date”), PQ Corp, refinanced its existing U.S.

Dollar and Euro denominated senior secured term loan facilities with a new $ 1,267,000 senior secured term loan facility (the “2018 Term Loan Facility”) by entering into the Third Amendment Agreement to the 2016 Term Loan Facility (the “2018 Amendment”), which amended and restated the Term Loan Credit Agreement dated as of May 4, 2016, among PQ Corp, CPQ Midco I Corporation, Credit Suisse AG, Cayman Island Branch, as administrative agent and collateral agent, and the lenders and the other parties party thereto from time to time.

On February 7, 2020, PQ Corp amended its 2018 Term Loan Facility to, among other things, (a) reduce the interest rate applicable to all LIBOR rate tranche B-1 term loans to LIBOR plus 2.25 % per annum, (b) reduce the interest rate applicable to all base rate tranche B-1 term loans to the alternate base rate plus 1.25 % per annum and (c) extend the maturity date of all tranche B-1 term loans to February 7, 2027.

On March 20, 2020, PQ Corp amended its existing ABL Facility to increase the aggregate amount of the revolving loan commitments available by $ 50,000 to $ 250,000 , consisting of up to $ 195,000 in U.S.

commitments, up to $ 15,000 in Canadian commitments and up to $ 40,000 in European commitments.

The maturity of the facility has been extended to March 20, 2025.

The maturity of the facility was extended to March 20, 2025.

Following the amendment, the borrowings under the amended ABL Facility bear interest at a rate equal to the LIBOR rate or the base rate plus a margin of between 1.25 % to 1.75 % or 0.25 % to 0.75 % respectively.

On July 22, 2020, PQ Corp entered into an agreement for a new senior secured term loan facility (the “2020 Term Loan Facility”, collectively with the Senior Secured Term Loan Facility, the “Term Loan Facilities”) in an aggregate principal amount of $ 650,000 with an original issue discount of 1.5 % and interest at a floating rate of LIBOR (with a 1.0 % minimum LIBOR floor) plus 3.0 % per annum.

The proceeds were used to redeem its existing $ 625,000 of 6.75 % Senior Secured Notes due 2022 and pay the associated early redemption premiums.

The 2020 Term Loan Facility required scheduled quarterly amortization payments, each equal to 0.25 % of the original principal amount of the loans under the 2020 Term Loan Facility.

On June 9, 2021, PQ Corp and Ecovyst Catalyst Technologies LLC (“Ecovyst LLC” and, following the closing of the sale of the Performance Chemicals business, the “Borrower”), an indirect, wholly owned subsidiary of the Company, entered into an agreement (the “2021 Credit Agreement”) for a new senior secured term loan facility (the “2021 Term Loan Facility”) in an aggregate principal amount of $ 900,000 with an original issue discount of 0.25 % and interest at a floating rate of LIBOR (with a 0.50 % minimum LIBOR floor) plus 2.75 % per annum (or, depending on the Borrower’s first lien net leverage ratio, 2.50 %).

The 2021 Term Loan Facility requires scheduled quarterly amortization payments, each equal to 0.25 % of the original principal amount of the loans under the 2021 Term Loan Facility.

The proceeds of the 2021 Term Loan Facility were used to pay in full the 2020 Term Loan Facility, partially pay the 2016 Term Loan Facility and pay the associated fees and expenses.

On June 9, 2021, PQ Corp and Ecovyst LLC entered into a third amendment agreement (the “ABL Amendment”), which amended its ABL Credit Agreement, dated as of May 4, 2016 (the “ABL Credit Agreement” and, as amended by the ABL Amendment, the “Amended ABL Credit Agreement”).

The ABL Amendment amended the ABL Credit Agreement to, among other things, following the sale of Performance Chemicals, decrease the aggregate amount of revolving loan commitments available to the borrowers thereunder by an aggregate amount of $ 150,000 to $ 100,000 , consisting of $ 90,000 in U.S.

commitments and $ 10,000 in European commitments and extended the maturity date with respect to borrowings under the Amended ABL Credit Agreement to August 2, 2026.

On August 1, 2021, the Company used a portion of the net cash proceeds from the sale of the Performance Chemicals business to repay the entire 2016 Term Loan Facility balance of $ 231,363 .

As a result, Ecovyst LLC wrote off $ 849 of unamortized deferred financing costs and $ 2,395 of original issue discount as debt extinguishment costs during the year ended December 31, 2021.

As of December 31, 2021, the 2021 Term Loan Facility accrued interest at a floating rate of LIBOR plus 2.75 % per annum and is scheduled to mature in June 2028.

As of December 31, 2021, there were no revolving credit borrowings outstanding under the ABL Facility.

Revolving credit borrowings are payable at the option of the Borrower throughout the term of the ABL Facility with the balance due August 2, 2026.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The Company has the ability to request letters of credit under the ABL Facility.

The Company had $ 17,541 of letters of credit outstanding as of December 31, 2021, which reduce available borrowings under the ABL Facility by such amounts.

The Term Loan Facilities are guaranteed by CPQ Midco I Corporation, a subsidiary of the Company and the direct parent of the Borrower (“Holdings”) and substantially all of the Borrower’s wholly owned U.S.

subsidiaries.

The Company may at any time or from time to time voluntarily prepay loans under the 2021 Term Loan Facility in whole or in part without premium or penalty.

The 2021 Term Loan Facility requires mandatory prepayments from (i) 50% of “Excess Cash Flow” (as defined in the 2021 Credit Agreement) on an annual basis with step downs to lower percentages based on the Borrower’s leverage ratio, if applicable, (ii) net cash proceeds from the issuance or incurrence of certain indebtedness and (iii) net cash proceeds received from certain non-ordinary course disposition of assets and casualty events to the extent such net cash proceeds were not reinvested in the Company’s business within a certain specified time period.

Prepayments are applied to remaining amortization installments in direct order of maturity.

The remaining principal balance of the term loans are due upon maturity.

The 2021 Term Loan Facility is guaranteed by Ecovyst Catalyst Technologies LLC and Ecoservices Operations Corp, subsidiaries of the Company.

The obligations under the Term Facility are secured (i) by a first-priority security interest in, among other things, a pledge of substantially all of the Borrower’s and the guarantors’ assets (other than collateral securing the ABL Facility on a first-priority basis) and (ii) by a second-priority security interest in receivables, inventory, deposit accounts and other collateral of the Borrower and the U.S.

subsidiary guarantors securing the ABL Facility.

The liens securing the Term Loan Facilities and the guarantees are pari passu with the liens securing the Senior Secured Notes subject to the pari passu intercreditor agreement.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The obligations of the Borrower under the ABL Facility are guaranteed by Holdings and the same U.S.

subsidiary guarantors that guarantee the Term Loan Facilities, the obligations of the Canadian Borrowers under the ABL Facility are guaranteed by a Canadian subsidiary of the Borrower and the obligations of the European Borrowers under the ABL Facility are guaranteed by certain other European subsidiaries of the Borrower.

The obligations of the borrowers and guarantors under the ABL Facility are secured (i) by a first-priority security interest in, among other things, substantially all of their receivables, inventory, deposit accounts and other collateral securing the ABL Facility on a first-priority basis and (ii) by a second-priority security interest in the property and assets of Holdings, the Borrower and the U.S.

subsidiary guarantors that secure the Term Loan Facilities.

In addition, the ABL Facility is secured by the equity interests in, and substantially all of the assets of, certain foreign guarantors in connection with the Canadian dollar-denominated and Euro-denominated availability.

The Term Loan Facilities and the ABL Facility contain various non-financial restrictive covenants.

Each limits the ability of PQ Corporation and its restricted subsidiaries to incur certain indebtedness or liens, merge, consolidate or liquidate, dispose of certain property, make investments or declare or pay dividends, make optional payments, modify certain debt instruments, enter into certain transactions with affiliates, enter into certain sales and leasebacks, and certain other non-financial restrictive covenants.

The obligations of the Borrower under the ABL Facility are guaranteed by the same U.S.

subsidiary guarantors that guarantee the 2021 Term Loan Facility and the obligations of the European Borrowers under the ABL Facility are guaranteed by a certain European subsidiary of the Borrower.

subsidiary guarantors that secure the 2021 Term Loan Facility.

In addition, the ABL Facility is secured by the equity interests in, and substantially all of the assets of, certain foreign guarantors in connection with the Euro-denominated availability.

The 2021 Term Loan Facility and the ABL Facility contain various non-financial restrictive covenants.

Each limits the ability of the Borrower and its restricted subsidiaries to incur certain indebtedness or liens, merge, consolidate or liquidate, dispose of certain property, make investments or declare or pay dividends, make optional payments, modify certain debt instruments, enter into certain transactions with affiliates, enter into certain sales and leasebacks, and certain other non-financial restrictive covenants.

The ABL Facility also contains one financial covenant which applies when minimum availability under the ABL Facility exceeds a certain threshold.

1 unchanged sentence

The Company is in compliance with all debt covenants as of December 31, 2021 and 2020, respectively.

During the year ended December 31, 2020, the Company prepaid $ 466,134 of outstanding principal balance on its Term Loan Facilities.

The Company wrote off $ 162 of previously unamortized deferred financing costs and original issue discount of $ 12,781 as debt extinguishment costs.

The prepayments were applied against the remaining scheduled installments of principal due in respect of the loans under the Term Loan Facilities in direct order of maturity.

During the year ended December 31, 2019, the Company prepaid $ 210,000 of outstanding principal balance on the Senior Secured Term Loan Facility.

During the year ended December 31, 2020, PQ Corp prepaid $ 466,134 of outstanding principal balance on the 2018 Term Loan Facility and the 2020 Term Loan Facility.

The Company wrote off $ 162 of previously unamortized deferred financing costs and original issue discount of $ 12,781 as debt extinguishment costs.

The prepayments were applied against the remaining scheduled installments of principal due in respect of the loans under the Senior Secured Term Loan Facility in direct order of maturity.

The prepayments were applied against the remaining scheduled installments of principal due in respect of the loans under the 2018 Term Loan Facility and the 2020 Term Loan Facility in direct order of maturity.

Debt extinguishment costs resulting from Term Loan amendments

As a result of amending the Term Loan Facilities during the year ended December 31, 2020, the Company recorded $ 2,188 of new creditor and third-party financing costs as debt extinguishment costs.

In addition, previous unamortized deferred financing costs of $ 97 and original issue discount of $ 228 associated with the previously outstanding debt were written off as debt extinguishment costs.

As a result of amending the Term Loan Facilities during the year ended December 31, 2018, the Company recorded $ 2,124 of new creditor and third-party financing costs as debt extinguishment costs.

In addition, previous unamortized deferred financing costs of $ 1,403 and original issue discount of $ 2,352 associated with the previously outstanding debt were written off as debt extinguishment costs.

PQ GROUP HOLDINGS INC.

As a result of amending the term loan facilities during the year ended December 31, 2021, Ecovyst LLC recorded $ 5,736 of new creditor and third-party financing costs as debt extinguishment costs.

In addition, previous unamortized deferred financing costs of $ 1,725 and original issue discount of $ 3,664 associated with the previously outstanding debt were written off as debt extinguishment costs during the year ended December 31, 2021.

As a result of the ABL Amendment, unamortized deferred financing costs of $ 485 and original issue discount of $ 107 associated with the ABL Credit Agreement were written off as debt extinguishment costs during the year ended December 31, 2021.

As a result of amending the term loan facilities during the year ended December 31, 2020, PQ Corp recorded $ 2,188 of new creditor and third-party financing costs as debt extinguishment costs.

In addition, previous unamortized

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

deferred financing costs of $ 97 and original issue discount of $ 228 associated with the previously outstanding debt were written off as debt extinguishment costs.

6.75% Senior Secured Notes - Redeemed in 2020

On May 4, 2016, the Borrower issued $ 625,000 of 6.750 % Senior Secured Notes due November 2022 (the “6.75% Senior Secured Notes”) in transactions exempt from or not subject to registration under the Securities Act pursuant to Rule 144A and Regulation S under the Securities Act of 1933.

On May 4, 2016, PQ Corp issued $ 625,000 of 6.750 % Senior Secured Notes due November 2022 (the “6.75% Senior Secured Notes”) in transactions exempt from or not subject to registration under the Securities Act pursuant to Rule 144A and Regulation S under the Securities Act of 1933.

The 6.75% Senior Secured Notes were guaranteed by guaranteed by PQ Holdings Inc.

and by the U.S.

subsidiary guarantors that guarantee the Term Loan Facility and were secured by liens on the assets of the Borrower and the U.S.

subsidiary guarantors that guaranteed the 2016 Term Loan Facility and were secured by liens on the assets of the Borrower and the U.S.

subsidiary guarantors on a pari passu with the liens securing the 2016 Term Loan Facility subject to the pari passu intercreditor agreement.

1 unchanged sentence

was unsecured.

The indenture relating to the 6.75% Senior Secured Notes contains various limitations on the Company’s and its restricted subsidiaries’ ability to incur additional indebtedness, pay dividends or repay certain debt, make loans and investments, sell assets, create liens, enter into transactions with affiliates, enter into agreements restricting the Borrower’s subsidiaries ability to pay dividends, and merge and consolidate with other companies, among other things.

Interest on the 6.75% Senior Secured Notes was payable on May 15 and November 15 of each year, commencing November 15, 2016.

The indenture relating to the 6.75% Senior Secured Notes contained various limitations on the Company’s and its restricted subsidiaries’ ability to incur additional indebtedness, pay dividends or repay certain debt, make loans and investments, sell assets, create liens, enter into transactions with affiliates, enter into agreements restricting the Borrower’s subsidiaries ability to pay dividends, and merge and consolidate with other companies, among other things.

Interest on the 6.75% Senior Secured Notes was payable semi-annually on May 15 and November 15 of each year, commencing November 15, 2016.

No principal payments were required with respect to the 6.75% Senior Secured Notes prior to their final maturity.

Prior to redeeming the notes, the 6.75% Senior Secured Notes had mature on date of November 15, 2022.

The 6.75% Senior Secured Notes were redeemable, in whole or in part, at the redemption prices (expressed as percentages of principal amount of the 6.75% Senior Secured Notes to be redeemed) set forth below, plus accrued and unpaid interest, if any, to, but not including, the redemption date, if redeemed on or after any of the dates below until the subsequent date below:

Year Percentage

May 15, 2020 101.688 %

May 15, 2021 and thereafter 100.000 %

As a result of redeeming the 6.75% Senior Secured Notes due 2022, the Company paid a redemption premium of $ 10,550 which was recorded as debt extinguishment costs during the year ended December 31, 2020.

Prior to redeeming the notes, the 6.75% Senior Secured Notes had a maturity date of November 15, 2022.

As a result of redeeming the 6.75% Senior Secured Notes due 2022 on July 22, 2020, PQ Corp paid a redemption premium of $ 10,550 which was recorded as debt extinguishment costs during the year ended December 31, 2020.

In addition, previous unamortized deferred financing costs of $ 2,085 and original issue discount of $ 1,186 associated with the previously outstanding debt were written off as debt extinguishment costs for the year ended December 31, 2020.

New Senior Secured Term Loan Facility due February 2027

In July 2020, the Company entered into an agreement for a new senior secured term loan facility in an aggregate principal amount of $ 650,000 with an original issue discount of 1.5 % and interest at a floating rate of LIBOR (with a 1.0 % minimum LIBOR floor) plus 3.0 % per annum.

The proceeds were used to redeem its existing $ 625,000 of 6.75% Senior Secured Notes due 2022 and pay the associated early redemption premiums.

The new senior secured term loan facility requires scheduled quarterly amortization payments, each equal to 0.25 % of the original principal amount of the loans under the new senior secured term loan facility.

5.75 % Senior Unsecured Notes due 2025

On December 11, 2017, the Borrower issued $ 300,000 aggregate principal amount of 5.75% Senior Unsecured Notes due 2025 (the “ 5.75 % Senior Unsecured Notes”) in a private placement exempt from the registration requirements of the Securities Act.

The 5.75 % Senior Unsecured Notes mature on December 15, 2025.

Interest on the 5.75 % Senior Unsecured Notes is to be paid semi-annually on February 15 and August 15, commencing August 15, 2018, at an annual rate of 5.75 %.

5.75 % Senior Unsecured Notes due 2025 - Redeemed in 2021

On December 11, 2017, PQ Corp issued $ 300,000 aggregate principal amount of 5.75% Senior Unsecured Notes due 2025 (the “ 5.75 % Senior Unsecured Notes”) in a private placement exempt from the registration requirements of the Securities Act.

Prior to being redeemed, the 5.75 % Senior Unsecured Notes had a maturity date of December 15, 2025.

Interest on the 5.75 % Senior Unsecured Notes was to be paid semi-annually on February 15 and August 15, commencing August 15, 2018, at an annual rate of 5.75 %.

The indenture relating to the 5.75 % Senior Unsecured Notes contained various limitations on the Borrower’s and its restricted subsidiaries’ ability to incur additional indebtedness, pay dividends or repay certain debt, make loans and investments, sell assets, create liens, enter into transactions with affiliates, enter into agreements restricting the Borrower’s subsidiaries ability to pay dividends, and merge and consolidate with other companies, among other things.

No principal payments are required with respect to the Senior Secured Notes prior to their final maturity.

The obligations of the Borrower under the 5.75 % Senior Unsecured Notes and the related indenture are guaranteed by its U.S.

No principal payments were required with respect to the Senior Secured Notes prior to their final maturity.

The obligations of the Borrower under the 5.75 % Senior Unsecured Notes and the related indenture were guaranteed by its U.S.

subsidiary guarantors that guarantee the 2016 Term Loan Facility.

The obligations of the Company under the 5.75 % Senior Unsecured Notes and the indenture are unsecured.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

If any Event of Default (other than a default relating to certain events of bankruptcy or insolvency of PQ Corporation or certain of its subsidiaries) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 30 % in principal amount of the then total outstanding notes by notice to the Company may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding notes to be due and payable immediately.

If an event of default arising from certain events of bankruptcy or insolvency of the Company occurs, the principal of, premium, if any, and interest on all the Senior Secured Notes shall become immediately due and payable without any declaration or other act on the part of the trustee or any holders.

At any time prior to December 15, 2020, the Borrower may, at its option and on one more occasions, redeem (a) up to 40 % of the aggregate principal amount of the 5.75 % Senior Unsecured Notes with the cash proceeds from certain equity offerings at a redemption price equal to the sum of 105.75 % of the aggregate principal amount thereof plus accrued and unpaid interest thereon, and (b) all or part of the 5.75 % Senior Unsecured Notes at 100.00 % of the aggregate principal amount redeemed plus accrued and unpaid interest thereon and a make-whole premium (the “Applicable Premium”).

The Applicable Premium is equal to the greater of:

(a) 1 % of the principal amount of notes redeemed, or (b) the excess, if any, of:

(1) the present value at the redemption date of (i) the redemption price of such notes at December 15, 2020 (as set forth in the table below), plus (ii) all required remaining scheduled interest payments due on such notes through December 15, 2020 (excluding accrued but unpaid interest to, but excluding, the redemption date), computed using a discount rate equal to the applicable United States Treasury rate as of such redemption date plus 50 basis points;

over (2) the outstanding principal amount of such notes on the redemption date.

On or after December 15, 2020, the 5.75 % Senior Unsecured Notes are redeemable, in whole or in part, at the redemption prices (expressed as percentages of principal amount of the 5.75 % Senior Unsecured Notes to be redeemed) set forth below, plus accrued and unpaid interest, if any, to, but not including, the redemption date, if redeemed on or after any of the dates below until the subsequent date below:

Year Percentage

December 15, 2020 102.875 %

December 15, 2021 101.438 %

December 15, 2022 and thereafter 100.000 %

Upon the occurrence of a change of control, as defined, each holder will have the right to require the Company to purchase all or any part of such holder’s Senior Secured Notes at a purchase price in cash equal to 101 % of the principal amount, plus accrued and unpaid interest.

The obligations of the Company under the 5.75 % Senior Unsecured Notes and the indenture were unsecured.

Concurrent with, and using a portion of the net proceeds from, the divestiture of the Performance Chemicals business on August 1, 2021, the Company redeemed the remaining principal balance of $ 295,000 of its 5.75% Senior Notes due 2025.

In connection with the redemption of the 5.75% Senior Notes due 2025, PQ Corp paid a redemption premium of $ 8,481 which was recorded as debt extinguishment costs during the year ended December 31, 2021.

In addition, previous unamortized deferred financing costs of $ 2,262 and original issue discount of $ 1,198 associated with the previously outstanding debt were written off as debt extinguishment costs during the year ended December 31, 2021 .

Fair Value of Debt

The fair value of a financial instrument is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.

As of December 31, 2020 and 2019, the fair value of the senior secured term loans and senior secured and unsecured notes was $ 1,427,123 and $ 1,905,822 , respectively.

As of December 31, 2021 and 2020, the fair value of the senior secured term loan was $ 894,381 and $ 1,427,123 , respectively.

The fair value is classified as Level 2 based upon the fair value hierarchy (see Note 8 to these consolidated financial statements for further information on fair value measurements).

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

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The following table summarizes the components of other long-term liabilities as follows:

Pension benefits $ 40,812 $ 52,060

Other postretirement benefits 3,644 1,668

Supplemental retirement plans 11,376 10,632

Derivative liabilities 32,512 10,956

Deferred revenue 13,388 6,450

Pension plan liabilities $ 3,551 $ 11,542

Other postretirement benefit plan liabilities 607 634

Finance lease and financing obligation liabilities 11,667 349

Reserve for uncertain tax positions 7,658 —

Asset retirement obligation 4,943 4,555

Other 614 2,874

$ 24,094 $ 15,399

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Financial Instruments:

The Company uses (1) interest rate related derivative instruments to manage its exposure related to changes in interest rates on its variable-rate debt instruments and (2) foreign currency related derivative instruments to manage its foreign currency exposure to its net investments in certain foreign operations.

The Company uses interest rate related derivative instruments to manage its exposure to changes in interest rates on its variable-rate debt instruments.

The Company does not speculate using derivative instruments.

By using derivative financial instruments to hedge exposures to changes in interest rates and foreign currency, the Company exposes itself to credit risk and market risk.

By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk and market risk.

Credit risk is the failure of the counterparty to perform under the terms of the derivative contract.

3 unchanged sentences

The derivative instruments entered into by the Company do not contain credit-risk-related contingent features.

Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates or currency exchange rates.

The market risk associated with interest rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates.

The market risk associated with the Company’s derivative instruments is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

Use of Derivative Financial Instruments to Manage Interest Rate Risk.

The Company is exposed to fluctuations in interest rates on its senior secured credit facilities.

Changes in interest rates will not affect the market value of such debt but will affect the amount of the Company’s interest payments over the term of the loans.

Changes in interest rates will not affect the market value of such debt but will affect the Company’s interest payments over the term of the loans.

Likewise, an increase in interest rates could have a material impact on the Company’s cash flow.

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In November 2018, the Company entered into additional interest rate cap agreements to mitigate interest rate volatility from July 2020 through July 2022, with a cap rate of 3.50 % on $ 500,000 of notional variable-rate debt and a $ 3,380 premium annuitized during the effective period.

During the year ended December 31, 2020, the Company restructured its $ 500,000 of notional variable-rate debt interest rate cap agreements from July 2020 through July 2022, to lower the interest cap rate to 2.50 % with an incremental $ 130 premium annuitized during the effective period.

In March 2020, the Company again amended such interest rate cap agreements to lower the cap rate to 0.84 % from 2.50 % on $ 500,000 of notional variable-rate debt and paid an additional incremental $ 900 premium annuitized during the effective period.

The term remains unchanged from July 2020 through July 2022.

The total cumulative annuitized premium on the $ 500,000 of notional variable-rate debt is $ 4,410 .

The cap rate in effect at December 31, 2020 was 0.84 % associated with the $ 500,000 of notional variable-rate debt.

In July 2020, the Company entered into additional interest rate cap agreements to mitigate interest rate volatility from August 2020 to August 2023, with a cap rate of 1.00 % on $ 400,000 of notional variable-rate debt.

With the Company’s prepayments on its Term Loan Facility during 2019 (see Note 17 to these consolidated financial statements for additional information), the original forecasted interest rate payments associated with the dedesginated portion of the interest rate cap agreement are no longer probable of occurring.

As a result of the discontinuance of cash flow hedge accounting on this portion of the interest rate cap agreement, the Company immediately reclassified into earnings the loss deferred in AOCI related to the dedesignated portion of the hedge, which was not material.

Any future gains and losses associated with the dedesignated portion of the interest rate cap agreement through its maturity in July 2020 was recognized in earnings.

In February 2020, the Company restructured these agreements to lower the interest cap rate to 2.50 % with an incremental $ 130 premium annuitized during the effective period.

In March 2020, the Company again amended such interest rate cap agreements to lower the cap rate to 0.84 % and paid an additional $ 900 premium annuitized during the effective period.

The term and notional amount remained unchanged, and the total cumulative annuitized premium on the $ 500,000 of notional variable-rate debt is $ 4,410 .

Upon the expiration of the July 2016 interest rate cap agreements in July 2020, the Company entered into additional interest rate cap agreements to mitigate interest rate volatility from August 2020 to August 2023, with a cap rate of 1.00 % on $ 400,000 of notional variable-rate debt.

In January 2022, the Company entered into two new interest rate cap agreements, with notional amounts of $ 250,000 each and cap rates of 1.00 % and paid $ 4,450 in premiums.

The term for one of the interest rate caps is August 2022 through October 2024 and the term for the other is September 2023 through October 2025.

Use of Derivative Financial Instruments to Manage Foreign Currency Risk.

The Company is exposed to risks related to its net investments in foreign operations due to fluctuations in foreign currency exchange rates, particularly between the United States dollar and the Euro.

In connection with the February 2018 term loan refinancing (see Note 17 to these consolidated financial statements), the Company entered into multiple cross currency interest rate swap arrangements with an aggregate notional amount of € 280,000 to hedge this exposure on the net investments of certain of its Euro-denominated subsidiaries.

The Company records these swap agreements at fair value as assets or liabilities in its consolidated balance sheet.

In October 2019, the Company settled all of its February 2018 swaps and concurrently entered into the October 2019 swaps with the same notional amount of € 280,000 ($ 344,403 as of December 31, 2020) and same maturity date of February 2023, which resulted in cash proceeds to the Company of $ 38,070 .

Consistent with the February 2018 swaps, the October 2019 swaps are designed to enable the Company to effectively convert a portion of its fixed-rate U.S.

dollar-denominated debt obligations under the Term Loan Facility into a Euro-denominated equivalent.

As the derivatives are designated and qualify as net investment hedges, changes in the fair value of the swaps attributable to changes in the spot exchange rates are recognized in cumulative translation adjustment (“CTA”) within

PQ GROUP HOLDINGS INC.

The Company is exposed to risks related to its net investments in foreign operations due to fluctuations in foreign currency exchange rates, and prior to the sale of the Performance Materials and Performance Chemicals businesses, particularly between the United States dollar and the Euro.

In connection with the February 2018 term loan refinancing (see Note 18 to these consolidated financial statements), the Company entered into multiple cross-currency interest rate swap arrangements with an aggregate notional amount of € 280,000 to hedge this exposure on the net investments of certain of its Euro-denominated

AND SUBSIDIARIES

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(Dollars in thousands, except share and per share amounts)

OCI and are held there until the hedged net investments are sold or substantially liquidated.

subsidiaries in its Performance Materials and Performance Chemicals businesses.

The Company records these swap agreements at fair value as assets or liabilities in its consolidated balance sheet.

The swaps were to mature in February 2023.

In October 2019, the Company settled all of its February 2018 swaps and concurrently entered into the October 2019 swaps with the same notional amount of € 280,000 and same maturity date of February 2023, which resulted in cash proceeds to the Company of $ 38,070 , which the Company used for additional debt repayment on the Company’s Term Loan Facility.

Consistent with the February 2018 swaps, the October 2019 swaps were designed to enable the Company to effectively convert a portion of its fixed-rate U.S.

dollar-denominated debt obligations under the 2018 Term Loan Facility into a Euro-denominated equivalent.

The October 2019 swaps were designated and qualify as net investment hedges of the Company’s foreign currency exchange rate exposure on the net investments of certain of its Euro-denominated subsidiaries in its Performance Materials and Performance Chemicals businesses.

In March 2021, as a result of the Performance Materials and Performance Chemicals divestitures, the Company settled its October 2019 cross-currency swaps.

At the date of settlement, the total notional value of the cross-currency swaps was $ 311,380 .

The Company paid $ 13,170 in cash to settle the swaps, which is included in n et cash used in investing activities, discontinued operations in the Company’s consolidated statement of cash flows for the year ended December 31, 2021, as the underlying subsidiary subject to the net investment hedging relationship is part of the Performance Chemicals business.

As the derivatives were designated and qualify as net investment hedges, changes in the fair value of the swaps attributable to changes in the spot exchange rates are recognized in cumulative translation adjustment (“CTA”) within OCI and are held there until the hedged net investments are sold or substantially liquidated.

Changes in the fair value of the swaps attributable to the cross currency basis spread are excluded from the assessment of hedge effectiveness and are recorded in current period earnings.

Upon such sale or liquidation, the amount recognized in CTA is reclassified to earnings and reported in the same line item as the gain or loss on the liquidation of the net investments.

In connection with the sale of the Performance Materials business in December 2020, a portion of the amount deferred in CTA related to the cross-currency swaps was reclassified from accumulated other comprehensive income and recognized as part of the loss on sale.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The fair values of derivative instruments held as of December 31, 2021 and 2020 are shown below:

1 unchanged sentence

Derivative assets:

Derivatives designed as net investment hedges:

Cross currency swaps Prepaid and other current assets 3,249 3,928

Derivatives designated as cash flow hedges:

Interest rate caps Other long-term assets 1,080 —

Total derivative assets $ 1,080 $ —

3 unchanged sentences

Interest rate caps Other long-term liabilities — 1,750

Derivatives designated as net investment hedges:

Cross currency swaps Other long-term liabilities 30,762 8,134

Total derivative liabilities $ 1,288 $ 3,704

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The following table shows the effect of the Company’s derivative instruments designated as hedges on accumulated other comprehensive income (loss) (“AOCI”) and the statements of income for the years ended December 31, 2021, 2020 and 2019:

13 unchanged sentences

Amount of gain (loss) reclassified from AOCI into income — ( 444 ) — ( 54 ) — ( 625 )

The amount of unrealized losses in AOCI related to the Company’s cash flow hedges that is expected to be reclassified to the consolidated statement of income over the next twelve months is $ 711 as of December 31, 2021.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The following table shows the effect of the Company’s net investment hedges on AOCI and the consolidated statements of income for the years ended December 31, 2021, 2020 and 2019:

Amount of gain (loss) recognized in OCI on derivative Location of gain (loss) reclassified from AOCI into income Amount of gain (loss) reclassified from AOCI into income Location of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing) Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)

Amount of pre-tax gain (loss) recognized in OCI on derivative Location of gain (loss) reclassified from AOCI into income Amount of gain (loss) reclassified from AOCI into income Location of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing) Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)

December 31, Years ended

1 unchanged sentence

2021 2020 2019 2021 2020 2019 2021 2020 2019

Cross currency swaps $ ( 23,622 ) $ 17,077 $ 18,843 Net (loss) income from discontinued operations, net of tax $ 1,967 $ — $ — Interest (expense) income $ 5,090 $ 7,320 $ 6,752

There are $ 281 amounts of unrealized losses in AOCI that are expected to be reclassified to the consolidated statement of income over the next twelve months as of December 31, 2020.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Cross currency swaps $ 9,787 $ ( 23,622 ) $ 17,077 Net (loss) income from discontinued operations, net of tax (1)

$ 9,754 $ 1,967 $ — Interest (expense) income $ 545 $ 5,090 $ 7,320

(1) Includes the gain (loss) on the sale of the underlying subsidiary .

Income Taxes:

14 unchanged sentences

4,548 ( 60,060 ) 3,898

Provision (benefit) for income taxes $ ( 48,122 ) $ 39,677 $ 33,641

PQ GROUP HOLDINGS INC.

(Benefit) provision for income taxes $ 12,147 $ ( 52,065 ) $ 12,299

AND SUBSIDIARIES

6 unchanged sentences

State income taxes, net of federal income tax benefit 3,942 ( 401 ) 6,725

Tax on global intangible low-taxed income 7,820 8,741 14,465

Impact of Discrete Tax Items, GILTI Inclusion 390 ( 105 ) 1,003

Changes in uncertain tax positions 877 164 ( 1,288 )

Change in valuation allowances ( 119 ) 135 1,415

2 unchanged sentences

Foreign tax rate differential ( 4 ) 165 217

Non-taxable interest ( 5,353 ) — —

Non-deductible goodwill 53,342 — —

Foreign tax credits ( 759 ) ( 56,359 ) —

Permanent difference created by foreign exchange gain or loss ( 1,324 ) 1,852 ( 4,839 )

Research and development tax credits ( 620 ) ( 717 ) ( 32 )

Other, net 303 313 738

Provision (benefit) for income taxes $ 12,147 $ ( 52,065 ) $ 12,299

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Deferred tax assets (liabilities) are comprised of the following:

1 unchanged sentence

Net operating loss carryforwards $ 24,107 $ 24,467

Section 163(j) interest disallowance carryforward 266 16,535

Interest disallowance carryforward 24 266

Pension 227 9,149

2 unchanged sentences

State credits 13,110 12,733

Foreign withholding tax credits 9,083 9,083

Foreign tax credit — 62,752

4 unchanged sentences

Inventory ( 2,899 ) ( 4,946 )

Intangible assets ( 162,301 ) ( 184,764 )

Intangibles ( 62,557 ) ( 117,063 )

Operating lease right-of-use assets ( 7,384 ) ( 11,250 )

2 unchanged sentences

Net deferred tax liabilities $ ( 126,580 ) $ ( 125,850 )

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Under the tax laws of various jurisdictions in which we operate, deductions or credits that cannot be fully utilized for tax purposes during the year may be carried forward, subject to statutory limitations, to reduce taxable income or taxes payable in a future year.

As of December 31, 2021, the Company has indefinite carryforwards of $ 9,083 foreign withholding tax credits.

The Company has recorded a full valuation allowance against the foreign withholding tax credits as it is more likely than not that the benefit from these foreign tax credits will never be realized.

The Company has $ 13,110 of deferred tax assets related to state tax credits, which are subject to a 16-year carryforward period.

A partial valuation allowance of $ 12,012 has been recorded due to the expected expiration of these credits before they are able to be utilized.

The Company has $ 24,107 of deferred tax assets related to state net operating losses, which are subject to various carryforward periods of 5 to 20 years or an indefinite carryforward period.

A partial valuation allowance of $ 18,762 has been recorded due to the expected expiration of these credits before they are able to be utilized.

The change in net deferred tax liabilities for the years ended December 31, 2021 and 2020 was primarily related to the usage of U.S.

federal and state net operating losses reducing those deferred tax assets, activity related to book amortization of intangible assets with no corresponding tax basis reducing those deferred tax liabilities, activity with respect to tax deductible goodwill, as well as the election for full expensing on certain assets creating additional deferred tax liabilities for depreciable property.

Further, the increase of the foreign tax credits on the deferred tax assets and the decrease of the Section 163(j) interest disallowance carryforward accounted for the change in net deferred tax liabilities for year ended December 31, 2020.

The net change in the total valuation allowance was a decrease of $ 1,499 in 2020.

The valuation allowance at December 31, 2020 was primarily related to foreign and state net operating loss carryforwards and tax credits that, in the judgment of management, are not more likely than not to be realized.

federal credit carryforwards reducing those deferred tax assets, activity related to book amortization of intangible assets with no corresponding tax basis reducing those deferred tax liabilities, activity with respect to tax deductible goodwill, as well as the impact of the Performance Chemicals business being classified as held for sale for year ended December 31, 2020.

The net change in the total valuation allowance was an increase of $ 5,668 in 2021.

The valuation allowance at December 31, 2021 was related to state net operating loss carryforwards and tax credits that, in the judgment of management, are not more likely than not to be realized.

In assessing the ability to realize deferred tax assets, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The cumulative unremitted earnings of foreign subsidiaries outside the United States are considered permanently reinvested, for which no withholding taxes have been provided.

3 unchanged sentences

Balance at beginning of period $ 7,787 $ 8,080

Increases related to prior year tax positions — 22

Decreases related to prior year tax positions ( 14 ) ( 1,046 )

Increases related to current year tax positions — 164

5 unchanged sentences

To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period for which the event occurs requiring the adjustment.

The $ 112 and $ 181 in accrued interest and penalties as of December 31, 2020 and 2019, respectively, is recorded in other long-term liabilities on the consolidated balance sheets.

The Company recorded no accrued interest and penalties as of December 31, 2021 and 2020, respectively, in other long-term liabilities on its consolidated balance sheets.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The Company files numerous consolidated and separate income tax returns in the U.S.

4 unchanged sentences

United States-State 2010-Present

Netherlands 2014-Present

Mexico 2016-Present

United Kingdom 2014-Present

Brazil 2016-Present

(1) Includes federal as well as local jurisdictions

Given that the Company has utilized U.S.

and state net operating loss in the current and prior years, the statute for examination by the U.S.

and state taxing authorities will typically remain open for a period following the use of such net operating loss carryforwards, extending the period for examination beyond the years indicated above.

The Company has subsidiaries in various states, provinces and countries that are currently under audit for years ranging from 2014 through 2018.

To date, no material adjustments have been proposed as a result of these audits.

Given that the Company has utilized state net operating loss in the current and prior years, the statute for examination by the state taxing authorities will typically remain open for a period following the use of such net operating loss carryforwards, extending the period for examination beyond the years indicated above.

As of December 31, 2021, the Company does not believe that there are any positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

As of December 31, 2020, the Company no longer has a federal NOL carryforward.

As of December 31, 2020, the Company has foreign tax credit carryforwards of $ 62,752 , which are net of $ 7,658 of uncertain tax position balances, which is permissible per ASU 2013-11.

These carryforwards have a ten year carryforward, of which $ 13,241 are set to expire in 2021.

Cumulative state net operating losses carrying forward into December 31, 2020 are $ 24,467 .

A valuation allowance of $ 14,344 has been applied against the total state net operating loss deferred tax assets, leaving losses of $ 10,123 that have been recognized for financial accounting purposes for the portion of those losses that the Company believes, on a more likely than not basis, will be realized.

Foreign net operating losses of $ 3,678 , of which $ 68 will begin to expire in 2028, $ 160 will begin to expire in 2036, with the remaining $ 3,450 carrying forward indefinitely, are available to reduce future foreign income taxes payable.

A valuation allowance of $ 3,531 has been applied to deferred tax assets related to foreign net operating loss carry-forwards, leaving a net deferred tax asset relating to foreign net operating losses of $ 147 that has been recognized for financial accounting purposes.

As of December 31, 2021, the Company no longer has a federal NOL or foreign tax credit carryforward.

There are no foreign net operating losses as of December 31, 2021.

Cash payments for income taxes, net of refunds, are as follows:

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Benefit Plans:

The Company sponsors defined benefit pension plans covering employees in the United States and certain employees at its foreign subsidiaries.

Benefits for a majority of the plans are based on average final pay and years of service.

The Company sponsors defined benefit pension plans covering certain of its employees.

Benefits under the plans are generally based on average final pay and years of service.

The Company’s funding policy is to fund the minimum required contribution under local statutory requirements.

The Company sponsors unfunded plans to provide certain health care benefits to retired employees in the United States and Canada.

The plans pay a stated percentage of medical expenses reduced by deductibles and other coverage.

The plans are unfunded and obligations are paid out of the Company’s operations.

The Company also has defined benefit supplementary retirement plans which provide benefits for certain U.S.

employees in excess of qualified plan limitations.

The obligations are paid out of the Company’s general assets, including assets held in a Rabbi trust, or restoration plan assets.

The Company uses a December 31 measurement date for all of its defined benefit pension, postretirement medical and supplementary retirement plans.

The following discussion includes information for the Eco Services benefit plans for all periods presented, and the acquired PQ Holdings benefit plans beginning on the date of a former business combination.

The Eco Services benefit plans include two defined benefit pension plans and one retiree health plan, all based in the U.S.

The PQ Holdings benefit plans include a U.S.

defined benefit pension plan as well as the defined benefit pension plans for all of the Company’s foreign subsidiaries, two retiree health plans ( one each in the U.S and Canada), and the Company’s defined benefit supplementary retirement plans.

PQ GROUP HOLDINGS INC.

The Company sponsors an unfunded plan to provide health care benefits to certain retired employees in the United States.

The plan pays a stated percentage of medical expenses reduced by deductibles and other coverage.

The plan is unfunded and obligations are paid out of the Company’s operations.

AND SUBSIDIARIES

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(Dollars in thousands, except share and per share amounts)

Of the Company’s three defined benefit pension plans covering employees in the U.S., only the Eco Services Hourly Pension Plan continues to accrue benefits for certain participants;

however, this plan will be frozen to future accruals as of December 31, 2020.

All future accruals were frozen for the PQ Corporation Retirement Plan as of December 31, 2006 and for the Eco Services Pension Equity Plan as of December 31, 2016.

With respect to the Company’s three retiree health plans, the PQ Holdings plans in the U.S.

and Canada were closed to new retirees as of December 31, 2006.

The Eco Services Postretirement Life and Dental Plan was closed to new retirees effective July 1, 2017.

The Company’s defined benefit supplementary retirement plans were frozen to future accruals as of December 31, 2006.

The Company uses a December 31 measurement date for all of its defined benefit pension and postretirement medical plans.

Of the Company’s two defined benefit pension plans covering employees in the U.S., the Eco Services Hourly Pension Plan was frozen to future accruals as of December 31, 2020, and the Eco Services Pension Equity Plan was frozen to future accruals as of December 31, 2016.

The retiree healthcare plan was closed to new retirees effective July 1, 2017.

The Company no longer has a defined benefit pension plan covering its employees at a foreign subsidiary since during the year ended December 31, 2021, that plan was converted to a defined contribution plan.

Defined Benefit Pension Plans

The following tables summarize changes in the benefit obligation, plan assets and funded status of the Company’s significant defined benefit pension plans as well as the components of net periodic benefit cost, including key assumptions:

The following tables summarize changes in the benefit obligation, plan assets and funded status of the Company’s defined benefit pension plans as well as the components of net periodic benefit cost, including key assumptions:

December 31, December 31,

23 unchanged sentences

Funded status of the plans (underfunded) $ ( 3,551 ) $ ( 11,542 ) $ — $ —

PQ GROUP HOLDINGS INC.

The total actuarial gains for the year ended December 31, 2021 was $ 3,818 , which was driven by declines in the discount rates of $ 3,989 and changes in the lump sum conversion of $ 545 offset by changes in mortality assumptions of $ 204 and declines in general experience of $ 512 .

The total actuarial losses for the year ended December 31, 2020 was $ 8,743 , which was driven by declines in the discount rates of $ 8,938 and declines in general demographic experience of $ 343 , which was offset by favorable changes in mortality assumptions of $ 538 .

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

The total actuarial losses for the year ended December 31, 2020 across the Company’s U.S.

plans was $ 25,894 , which was driven by declines in the discount rates of $ 26,642 and declines in general demographic experience of $ 1,261 , which was offset by favorable changes in mortality assumptions of $ 2,009 .

The total actuarial losses for the year ended December 31, 2020 across the Company’s foreign plans was $ 4,664 , which was driven by declines in the discount rates of $ 5,981 and declines in general demographic experience of $ 56 and favorable changes in mortality assumptions of $ 1,372 .

The total actuarial losses for the year ended December 31, 2019 across the Company’s U.S.

was $ 25,148 , which was driven by declines in the discount rates of $ 26,604 and declines in general demographic experience of $ 2,953 , which was offset by favorable changes in mortality assumptions of $ 4,409 .

The total actuarial losses for the year ended December 31, 2019 across the Company’s foreign plans was $ 13,459 , which was driven by declines in the discount rates of $ 13,837 , which was offset by favorable changes in general demographic experience of $ 312 and favorable changes in mortality assumptions of $ 66 .

Amounts recognized in the consolidated balance sheets consist of:

1 unchanged sentence

2021 2020 2021 2020

Current liability — — ( 46 ) ( 6 )

Noncurrent liability ( 3,551 ) ( 11,542 ) — —

14 unchanged sentences

Expected return on plan assets ( 4,360 ) ( 3,898 ) ( 3,444 ) ( 255 ) ( 287 ) ( 275 )

Amortization of prior service cost

Amortization of net (gain) loss — — — — 95 —

Curtailment gain recognized — — ( 576 ) — — —

Settlement (gain) loss recognized ( 26 ) 78 49 2,084 — —

Net periodic expense (benefit) $ ( 2,176 ) $ ( 386 ) $ 682 $ 2,084 $ 1,187 $ 1,057

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

All components of net periodic benefit cost other than service cost are presented within other expense (income), net in the Company’s consolidated statements of income.

2 unchanged sentences

pension plans was $ 86,465 and $ 91,937 , respectively.

The total accumulated benefit obligation as of December 31, 2020 and 2019 for the Company’s foreign pension plans was $ 110,605 and $ 96,891 , respectively.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The following table presents selected information about the Company’s pension plans with accumulated benefit obligations in excess of plan assets:

12 unchanged sentences

2021 2020 2021 2020

Discount rate 2.42 % 3.32 % 1.78 % 2.34 %

Discount rate 2.90 % 2.50 % N/A 1.20 %

Rate of compensation increase (1)

N/A 3.00 % 2.05 % 2.07 %

N/A N/A N/A 1.75 %

Significant weighted average assumptions used in determining net periodic benefit cost include the following:

3 unchanged sentences

Rate of compensation increase (1)

3.00 % 3.00 % 3.00 % 2.07 % 2.08 % 2.22 %

N/A 3.00 % 3.00 % 1.75 % 1.75 % 1.75 %

Expected return on assets 5.60 % 5.70 % 6.00 % 1.20 % 1.50 % 1.60 %

(1) Includes only plans not frozen to benefit accruals for the respective periods.

The discount rate for each of the U.S.

plans was determined by utilizing a yield curve model.

The discount rate was determined by utilizing a yield curve model.

The model develops a spot rate curve based on the yields available from a broad-based universe of high quality corporate bonds.

The discount rate is then set as the weighted average spot rate, using the respective plan’s expected benefit cash flows as the weights.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

The investment objective for the U.S.

plans is to generate returns sufficient to meet future obligations.

The investment objective for the plans is to generate returns sufficient to meet future obligations.

The strategy to meet the objective includes generating attractive returns using higher returning assets such as equity securities and balancing risk using less volatile assets such as fixed income securities.

plans invest in an allocation of assets across the two broadly-defined financial asset categories of equity and fixed income securities.

The target allocations for the plan assets across the three U.S.

The plans invest in an allocation of assets across the two broadly-defined financial asset categories of equity and fixed income securities.

The target allocations for the plan assets across the two U.S.

plans are as follows:

45 % equity securities and 55 % fixed income investments for the PQ Corporation Retirement Plan;

10 % equity securities and 90 % fixed income investments for the Eco Services Pension Equity Plan;

and 30 % equity securities and 70 % fixed income investments for the Eco Services Hourly Pension Plan.

Similar considerations are applied to the investment objectives of the non-U.S.

plans as well as the asset classes available in each location and any legal restrictions on plan investments.

The Company classifies plan assets based upon a fair value hierarchy (see Note 8 to these consolidated financial statements for further information).

13 unchanged sentences

Level 3 assets include investments covered by insurance contracts and real estate funds valued using significant unobservable inputs.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

11 unchanged sentences

Corporate bonds 33,877 33,877 — —

Investment fund bonds 112,024 — 112,024 —

Insurance contracts 48,819 — 42,983 5,836

Total $ 82,914 $ 82,914 $ — $ —

8 unchanged sentences

Corporate bonds 16,668 16,668 — —

Investment fund bonds 106,198 1,170 105,028 —

Insurance contracts 22,210 — 22,210 —

Total $ 102,605 $ 80,395 $ 22,210 $ —

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The changes in the Level 3 pension plan assets are as follows for the years ended December 31:

Insurance Contracts

Beginning balance $ 4,714 $ 4,322

Actual return on plan assets 113 111

Benefits paid ( 78 ) ( 69 )

Contributions 577 441

Exchange rate changes and other 510 ( 91 )

Ending balance $ 5,836 $ 4,714

The Company expects to contribute $ 446 to the U.S.

pension plans and $ 3,559 to the foreign pension plans in 2021.

The Company does not expect to contribute to the U.S.

pension plans or to the foreign pension plan in 2022.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

2021 $ 17,138 $ 2,204

2022 16,200 2,384

2023 16,278 2,610

2024 16,254 2,898

2025 15,968 3,144

Years 2027-2031 22,707

Certain of the Company’s foreign subsidiaries maintain other defined benefit plans that are consistent with statutory practices.

These plans are not included in the disclosures above as they are not significant to the Company’s consolidated financial statements.

Supplemental Retirement Plans

The following tables summarize changes in the benefit obligation, plan assets and funded status of the Company’s defined benefit supplementary retirement plans, as well as the components of net periodic benefit cost, including key assumptions:

Change in benefit obligation:

Benefit obligation at beginning of period $ 11,652 $ 11,868

Interest cost 352 465

Benefits paid ( 1,001 ) ( 1,045 )

Actuarial (gains) losses 1,412 364

Benefit obligation at end of period $ 12,415 $ 11,652

Change in plan assets:

Fair value of plan assets at beginning of period $ — $ —

Employer contributions 1,001 1,045

Benefits paid ( 1,001 ) ( 1,045 )

Fair value of plan assets at end of period $ — $ —

Funded status of the plans (underfunded) $ ( 12,415 ) $ ( 11,652 )

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

The total actuarial losses for the year ended December 31, 2020 across the Company’s supplemental retirement plans was $ 1,412 , which was driven by declines in the discount rates of $ 871 , declines in general demographic experience of $ 234 and declines in mortality assumptions of $ 307 .

The total actuarial losses for the year ended December 31, 2019 across the Company’s supplemental retirement plans was $ 364 , which was driven by declines in the discount rates of $ 971 , which was offset by favorable changes in general demographic experience of $ 281 and favorable changes in mortality assumptions of $ 326 .

Amounts recognized in the consolidated balance sheets consist of:

Current liability $ ( 1,039 ) $ ( 1,019 )

Noncurrent liability ( 11,376 ) ( 10,633 )

Accumulated other comprehensive income 633 253

Net amount recognized $ ( 11,782 ) $ ( 11,399 )

Amounts recognized in accumulated other comprehensive income consist of:

Net gain $ ( 731 ) $ 681

Gross amount recognized ( 731 ) 681

Deferred income taxes 1,364 ( 428 )

Net amount recognized $ 633 $ 253

Components of net periodic benefit cost consist of:

2020 2019 2018

Interest cost $ 352 $ 465 $ 450

Amortization of net (gain) loss — ( 10 ) —

Net periodic expense $ 352 $ 455 $ 450

Interest cost is presented within other expense (income), net in the Company’s consolidated statements of income.

The accumulated benefit obligation of the Company’s defined benefit supplemental retirement plans as of December 31, 2020 and 2019 was $ 12,415 and $ 11,652 , respectively.

The discount rate used in determining the defined benefit supplemental retirement plan obligation was 2.20 % and 3.10 % as of December 31, 2020 and 2019, respectively.

The discount rate used in determining net periodic benefit cost was 3.10 %, 4.20 % and 3.60 % for the years ended December 31, 2020, 2019 and 2018, respectively.

There was no rate of compensation increase for any of the periods presented, as all future accruals were frozen for the defined benefit supplementary retirement plans as of December 31, 2006.

There was no rate of interest crediting rate, as there are no cash balance accounts associated with these plans.

The Company expects to contribute $ 1,039 to the defined benefit supplementary retirement plans in 2021.

PQ GROUP HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Years 2025-2029 3,944

What changed 10-K

Item 9A. Controls and Procedures