Ecovyst Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process, designed by, or under the supervision of the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions and dispositions of assets; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures are made only in accordance with management and board authorizations; and providing reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria for effective internal control over financial reporting described in the “Internal Control-Integrated Framework” (2013) set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on the assessment, management concluded that, as of December 31, 2021, our internal control over financial reporting was effective based on those criteria. The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included in Item 8. Changes in Internal Control Over Financial Reporting No changes in our internal control over financial reporting occurred during the quarter ended December 31, 2021 that materially affected, or which are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION. None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. 73 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The information required by this Item 10 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. ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item 11 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. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The information required by this Item 12 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. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. 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. ITEM 14. 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. 74 PART IV ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES. (a) The following documents are filed as part of this report: (1) and (2) The response to this portion of Item 15 is submitted as a separate section of this report beginning on page F-1. All other schedules have been omitted as inapplicable or are not required, or because the required information is included in the consolidated financial statements or accompanying notes. (3) The exhibits filed as part of this report are listed in the accompanying index. Incorporated by Reference Exhibit No. Exhibit Description Filed Herewith Form File No. Exhibit Filing Date 2.1 Stock Purchase Agreement, dated as of October 15, 2020, by and among PQ Corporation and Potters Buyer, LLC 8-K 001-38221 2.1 10/16/2020 2.2 Stock Purchase Agreement, dated as of February 28, 2021, by and among PQ Group Holdings Inc. and Sparta Aggregator L.P. 8-K 001-38221 2.1 03/04/2021 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 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 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 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 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 Ecovyst Inc.’s common stock X 10.1 Partnership Agreement, dated as of February 1, 1988, by and between PQ Corporation and Shell Polymers and Catalysts Enterprises Inc. S-1/A 333-218650 10.10 8/14/2017 10.2 First Amendment to Partnership Agreement, dated January 1, 1993, by and among PQ Corporation, Shell Catalyst Ventures Inc. and CRI Zeolites Inc. S-1/A 333-218650 10.11 8/14/2017 10.3 Second Amendment to Partnership Agreement, dated October 18, 2002, by and between PQ Corporation and Shell Catalyst Ventures Inc. S-1/A 333-218650 10.12 8/14/2017 10.4 Third Amendment to Partnership Agreement, dated January 1, 2005, by and between PQ Corporation and CRI Zeolites Inc. S-1/A 333-218650 10.13 8/14/2017 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 75 Incorporated by Reference Exhibit No. Exhibit Description Filed Herewith Form File No. Exhibit Filing Date 10.7* Form of Stock Option Award Agreement under the Ecovyst Inc. 2017 Omnibus Incentive Plan, as Amended and Restated X 10.8* Form of Restricted Stock Award Agreement under the Ecovyst Inc. 2017 Omnibus Incentive Plan, as Amended and Restated X 10.9* Form of Restricted Stock Unit Award Agreement under the Ecovyst Inc. 2017 Omnibus Incentive Plan, as Amended and Restated X 10.10* Form of 20 19 Performance Stock Unit Award Agreement under the Ecovyst Inc. 2017 Omnibus Incentive Plan, as Amended and Restated X 10.11* Form of 202 0 Performance Stock Unit Award Agreement under the Ecovyst Inc. 2017 Omnibus Incentive Plan, as Amended and Restated X 10.12* PQ Group Holdings Inc. Stock Incentive Plan S-1 333-218650 10.6 6/9/2017 10.13* Form of Nonqualified Stock Option Award Agreement under the PQ Group Holdings Inc. Stock Incentive Plan S-1 333-218650 10.7 6/9/2017 10.14* Form of Restricted Stock Agreement under the PQ Group Holdings Inc. Stock Incentive Plan S-1 333-218650 10.8 6/9/2017 10.15* Form of Director and Officer Indemnification Agreement S-1/A 333-218650 10.9 9/1/2017 10.16* Severance Agreement, dated August 9, 2018, by and between PQ Corporation and Belgacem Chariag 8-K 001-38221 10.2 8/9/2018 10.17* Severance Agreement, dated August 31, 2017, by and between PQ Corporation and James F. Gentilcore S-1/A 333-218650 10.18 9/19/2017 10.18* Letter Agreement, dated August 9, 2018, by and between PQ Corporation, PQ Group Holdings Inc. and James F. Gentilcore 8-K 001-38221 10.1 8/9/2018 10.19* Separation and General Release Agreement, dated December 21, 2018, by and between PQ Corporation, PQ Group Holdings Inc. and James F. Gentilcore 8-K 001-38221 10.1 12/26/2018 10.20* Severance Agreement, dated August 31, 2017, by and between PQ Corporation and Michael Crews S-1/A 333-218650 10.19 9/19/2017 10.21* Severance Agreement, dated August 31, 2017, by and between PQ Corporation and Scott Randolph S-1/A 333-218650 10.20 9/19/2017 10.22* Severance Agreement, dated August 31, 2017, by and between PQ Corporation and Paul Ferrall S-1/A 333-218650 10.21 9/19/2017 10.23* Severance Agreement and General Release, dated August 31, 2017, by and between PQ Corporation and Michael R. Boyce S-1/A 333-218650 10.22 9/19/2017 10.24* Letter of employment, dated August 30, 2017, by and between PQ Corporation and David Taylor 10-Q 001-38221 10.2 5/10/2019 10.25* Consent under the August 31, 2017 Severance Agreement, dated March 29, 2019, by and between PQ Corporation and Scott Randolph 10-Q 001-38221 10.3 5/10/2019 10.26* Transition Agreement and General Release, dated November 15, 2019, between PQ Corporation and David J. Taylor 8-K 001-38221 10.1 11/21/2019 10.27* Transition Agreement and General Release, dated November 26, 2019, between PQ Corporation and Paul J. Ferrall 8-K 001-38221 10.1 12/03/2019 76 Incorporated by Reference Exhibit No. Exhibit Description Filed Herewith Form File No. Exhibit Filing Date 10.28* Consulting Agreement, dated November 26, 2019, between PQ Corporation and Paul J. Ferrall 8-K 001-38221 10.2 12/03/2019 10.29* Amendment to the Severance Agreement, dated August 31, 2017, by and between PQ Corporation and Scott Randolph 10-K 001-38221 10.35 2/27/2020 10.30* Letter of employment, dated December 8, 2015, by and between PQ Corporation and Ray Kolberg 10-K 001-38221 10.36 2/27/2020 10.31* Severance Agreement, dated September 25, 2017, by and between PQ Corporation and Joseph S. Koscinksi 10-K 001-38221 10.37 2/27/2020 10.32* Transition Agreement and General Release and Waiver of Claims, dated December 16, 2020, between PQ Corporation and Scott Randolph 8-K 001-38221 10.1 12/18/2020 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 10.34 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 10.35 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 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 X 21.1 Subsidiaries of Ecovyst Inc. X 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 X 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 X 77 Incorporated by Reference Exhibit No. Exhibit Description Filed Herewith Form File No. Exhibit Filing Date 31.1 Certification of Chief Executive Officer of Ecovyst Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 31.2 Certification of Chief Financial Officer of Ecovyst Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 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 X 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 X 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 X 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 X * Management contract or compensatory plan ITEM 16. FORM 10-K SUMMARY. None. 78 SIGNATURES 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. ECOVYST INC. Date: March 1, 2022 By: /s/ MICHAEL FEEHAN Michael Feehan Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer) 79 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ BELGACEM CHARIAG Chairman of the Board, President and Chief Executive Officer March 1, 2022 Belgacem Chariag (Principal Executive 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 Greg Brenneman /s/ TIMOTHY WALSH Director March 1, 2022 Timothy Walsh /s/ MARK McFADDEN Director March 1, 2022 Mark McFadden /s/ CHRISTOPHER BEHRENS Director March 1, 2022 Christopher Behrens /s/ ROBERT COXON Director March 1, 2022 Robert Coxon /s/ ANDREW CURRIE Director March 1, 2022 Andrew Currie /s/ JONNY GINNS Director March 1, 2022 Jonny Ginns /s/ KYLE VANN Director March 1, 2022 Kyle Vann /s/ MARTIN S. CRAIGHEAD Director March 1, 2022 Martin S. Craighead /s/ SUSAN F. WARD Director March 1, 2022 Susan F. Ward 80 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ECOVYST INC. AND SUBSIDIARIES Audited Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) F- 2 Consolidated Statements of Income for the Years Ended December 31, 2021, 2020 a nd 2019 F- 5 Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019 F- 6 Consolidated Balance Sheets as of December 31, 2021 and 2020 F- 7 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 202 1, 2020 and 2019 F- 8 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 F- 9 Notes to Consolidated Financial Statements F- 11 Schedule I—Parent Company Financial Information F- 78 ZEOLYST INTERNATIONAL Audited Financial Statements Report of Independent Auditors F- 82 Balance Sheets as of December 31, 2021 and 2020 F- 84 Statements of Operations and Accumulated Earnings for the Years Ended December 31, 2021, 2020 and 2019 F- 85 Statements of Changes in Partners’ Capital for the Years Ended December 31, 2021, 2020 and 2019 F- 86 Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 F- 87 Notes to the Financial Statements F- 88 F-1 Report of Independent Registered Public Accounting Firm 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 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). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. 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 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. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. F-2 Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. 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 - 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. Management performs its annual goodwill impairment test as of October 1. Goodwill is tested for impairment at the reporting unit level. If the carrying value of a reporting unit exceeds its implied fair value, an impairment charge is recognized. 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. F-3 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 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 Philadelphia, Pennsylvania March 1, 2022 We have served as the Company’s auditor since 2015. F-4 ECOVYST INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per share amounts) Years ended December 31, 2021 2020 2019 Sales $ 611,201 $ 495,920 $ 532,747 Cost of goods sold 434,540 344,967 365,537 Gross profit 176,661 150,953 167,210 Selling, general and administrative expenses 97,781 81,545 83,509 Other operating expense, net 24,273 17,842 17,734 Operating income 54,607 51,566 65,967 Equity in net income from affiliated companies ( 27,737 ) ( 21,065 ) ( 45,808 ) Interest expense, net 36,990 50,409 66,872 Debt extinguishment costs 26,902 25,028 3,400 Other (income) expense, net 4,511 ( 5,021 ) ( 1,916 ) 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 Less: Net income (loss) attributable to the noncontrolling interest - discontinued operations 333 ( 2,933 ) 771 Net (loss) income attributable to Ecovyst Inc. $ ( 139,949 ) $ ( 278,771 ) $ 79,539 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 Ecovyst Inc. $ ( 139,949 ) $ ( 278,771 ) $ 79,539 Net (loss) income per share: 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 Diluted (loss) income per share - discontinued operations $ ( 1.03 ) $ ( 2.44 ) $ 0.36 Basic (loss) income per share $ ( 1.03 ) $ ( 2.06 ) $ 0.59 Diluted (loss) income per share $ ( 1.02 ) $ ( 2.04 ) $ 0.59 Weighted average shares outstanding: Basic 136,167,384 135,528,977 134,389,667 Diluted 137,708,931 136,450,953 135,548,694 See accompanying notes to consolidated financial statements. F-5 ECOVYST INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Years ended December 31, 2021 2020 2019 Net (loss) income $ ( 139,616 ) $ ( 281,704 ) $ 80,310 Other comprehensive income (loss), net of tax: Pension and postretirement benefits 5,794 1,938 2,430 Net gain (loss) from hedging activities 2,914 166 ( 2,665 ) Foreign currency translation 10,611 ( 17,519 ) 22,889 Total other comprehensive income (loss) 19,319 ( 15,415 ) 22,654 Comprehensive (loss) income ( 120,297 ) ( 297,119 ) 102,964 Less: Comprehensive (loss) income attributable to noncontrolling interests 333 ( 3,856 ) 1,543 Comprehensive (loss) income attributable to Ecovyst Inc. $ ( 120,630 ) $ ( 293,263 ) $ 101,421 See accompanying notes to consolidated financial statements. F-6 ECOVYST INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) December 31, 2021 December 31, 2020 ASSETS Cash and cash equivalents $ 140,889 $ 113,377 Accounts receivables, net 80,802 45,943 Inventories, net 53,813 52,789 Prepaid and other current assets 16,165 11,468 Current assets held for sale — 205,090 Total current assets 291,669 428,667 Investments in affiliated companies 446,074 458,128 Property, plant and equipment, net 596,231 591,710 Goodwill 406,139 391,565 Other intangible assets, net 145,617 137,446 Right-of-use lease assets 30,115 28,943 Other long-term assets 15,374 12,446 Long-term assets held for sale — 1,149,443 Total assets $ 1,931,219 $ 3,198,348 LIABILITIES Current maturities of long-term debt $ 9,000 $ — Accounts payable 51,860 38,131 Operating lease liabilities—current 8,306 6,715 Accrued liabilities 75,915 48,482 Current liabilities held for sale — 108,537 Total current liabilities 145,081 201,865 Long-term debt, excluding current portion 872,839 1,400,369 Deferred income taxes 126,749 126,210 Operating lease liabilities—noncurrent 21,719 21,972 Other long-term liabilities 24,094 15,399 Long-term liabilities held for sale — 155,354 Total liabilities 1,190,482 1,921,169 Commitments and contingencies (Note 25) EQUITY Common stock ($ 0.01 par); authorized shares 450,000,000 ; issued shares 137,820,971 and 137,102,143 on December 31, 2021 and 2020, respectively; outstanding shares 136,938,758 and 136,318,557 on December 31, 2021 and 2020, respectively 1,378 1,371 Preferred stock ($ 0.01 par); authorized shares 50,000,000 ; no shares issued or outstanding on December 31, 2021 and 2020, respectively — — Additional paid-in capital 1,073,409 1,477,859 Accumulated deficit ( 315,707 ) ( 175,758 ) Treasury stock, at cost; shares 882,213 and 783,586 on December 31, 2021 and 2020, respectively ( 12,551 ) ( 11,081 ) Accumulated other comprehensive loss ( 5,792 ) ( 15,265 ) Total Ecovyst Inc. equity 740,737 1,277,126 Noncontrolling interest — 53 Total equity 740,737 1,277,179 Total liabilities and equity $ 1,931,219 $ 3,198,348 See accompanying notes to consolidated financial statements. F-7 ECOVYST INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except share data) Shares of Common stock Common stock Additional paid-in capital Retained earnings (accum. deficit) Shares of Treasury stock Treasury stock, at cost Accum. other comp. income (loss) Non-control ling interest Total 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 — — — — — — 21,882 772 22,654 Tax withholdings on equity award vesting — — — — ( 230,197 ) ( 3,563 ) — — ( 3,563 ) Distributions to noncontrolling interests — — — — — — — ( 260 ) ( 260 ) Stock compensation expense — — 18,225 — — — — — 18,225 Shares issued under equity incentive plan, net of forfeitures 1,103,113 11 3,971 — — — — — 3,982 December 31, 2019 136,861,382 $ 1,369 $ 1,696,899 $ 103,013 ( 396,421 ) $ ( 6,483 ) $ ( 15,348 ) $ 5,868 $ 1,785,318 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 Shares issued under equity incentive plan, net of forfeitures 240,761 2 343 — — — — — 345 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) 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 ) Dividends paid on common stock ($ 3.20 per share) — — ( 435,593 ) — — — — — ( 435,593 ) Disposal of business — — — — — — ( 9,846 ) 723 ( 9,123 ) Stock compensation expense — — 30,404 — — — — — 30,404 Shares issued under equity incentive plan, net of forfeitures 718,828 7 739 — — — — — 746 December 31, 2021 137,820,971 $ 1,378 $ 1,073,409 $ ( 315,707 ) ( 882,213 ) $ ( 12,551 ) $ ( 5,792 ) $ — $ 740,737 See accompanying notes to consolidated financial statements. F-8 ECOVYST INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years ended December 31, 2021 2020 2019 Cash flows from operating activities: Net (loss) income $ ( 139,616 ) $ ( 281,704 ) $ 80,310 Net loss (income) from discontinued operations 141,410 335,984 ( 49,190 ) 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 Amortization of deferred financing costs and original issue discount 1,907 2,515 2,799 Debt extinguishment costs 21,166 22,658 3,400 Foreign currency exchange (gain) loss 4,716 ( 5,264 ) 1,228 Pension and postretirement healthcare (benefit) expense ( 302 ) 416 1,471 Pension and postretirement healthcare benefit funding — ( 3,264 ) ( 4,955 ) 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 Equity in net income from affiliated companies ( 27,737 ) ( 21,065 ) ( 45,808 ) Dividends received from affiliated companies 35,000 40,000 40,000 Other, net ( 2,930 ) ( 3,478 ) ( 3,185 ) Working capital changes that provided (used) cash, excluding the effect of acquisitions and dispositions: Receivables ( 33,476 ) 6,971 4,486 Inventories 631 ( 2,976 ) ( 4,226 ) Prepaids and other current assets ( 7,827 ) ( 1,359 ) 2,883 Accounts payable 10,006 6,868 541 Accrued liabilities 12,597 5,015 6,903 Net cash provided by operating activities, continuing operations 137,338 140,099 133,176 Net cash provided by operating activities, discontinued operations ( 7,420 ) 83,499 134,587 Net cash provided by operating activities 129,918 223,598 267,763 Cash flows from investing activities: Purchases of property, plant and equipment ( 60,045 ) ( 54,837 ) ( 55,252 ) Proceeds from business divestiture, net of cash and indebtedness 978,449 624,256 — Proceeds from sale of assets — 2,375 — Business combinations, net of cash acquired ( 42,639 ) — — Other, net ( 12 ) — 469 Net cash provided by (used in) investing activities, continuing operations 875,753 571,794 ( 54,783 ) Net cash (used in) provided by investing activities, discontinued operations ( 40,021 ) ( 20,322 ) 19,424 Net cash provided by (used in) investing activities 835,732 551,472 ( 35,359 ) F-9 Years ended December 31, 2021 2020 2019 Cash flows from financing activities: Draw down of revolving credit facilities — 126,500 175,500 Repayments of revolving credit facilities — ( 126,500 ) ( 175,500 ) Issuance of long-term debt, net of original issue discount and financing fees 897,750 640,340 — Debt issuance costs ( 1,293 ) ( 8,987 ) — Repayments of long-term debt ( 1,430,863 ) ( 1,091,134 ) ( 215,000 ) 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 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 ) Net cash used in financing activities, discontinued operations ( 1,144 ) ( 2,640 ) ( 1,350 ) Net cash used in financing activities ( 964,233 ) ( 722,820 ) ( 216,093 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 2,253 11,052 ( 2,120 ) Net change in cash, cash equivalents and restricted cash 3,670 63,302 14,191 Cash, cash equivalents and restricted cash at beginning of period 137,219 73,917 59,726 Cash, cash equivalents and restricted cash at end of period 140,889 137,219 73,917 Less cash, cash equivalents and restricted cash of discontinued operations — ( 22,202 ) ( 36,505 ) Cash, cash equivalents and restricted cash at end of period of continuing operations $ 140,889 $ 115,017 $ 37,412 For supplemental cash flow disclosures, see Note 28. See accompanying notes to consolidated financial statements. F-10 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 1. Background and Basis of Presentation: Description of Business Ecovyst Inc. 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. The Company believes that its products, which are predominantly inorganic, and services contribute to improving the sustainability of the environment. Basis of Presentation 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. COVID-19 In March 2020, the outbreak of a novel coronavirus (“COVID-19”) was declared a national emergency in the United States. 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. 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. F-11 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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. 2. Summary of Significant Accounting Policies: Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its controlled subsidiaries. Investments in affiliated companies are recorded at cost plus the Company’s equity in their undistributed earnings. All intercompany transactions have been eliminated. Foreign Currency Translation. All assets and liabilities of foreign subsidiaries and affiliated companies are translated to U.S. dollars using exchange rates in effect at the balance sheet date. 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. The Company considers intercompany loans to be of a permanent or long-term nature if management expects and intends that the loans will not be repaid. 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 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 $ 4,716 , $( 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. dollars. Cash and Cash Equivalents. Cash and cash equivalents include highly liquid investments with original terms to maturity of 90 days or less from the time of purchase. Restricted Cash. 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 $ 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. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for credit losses is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable and is reviewed during each reporting period over their contractual life. The Company recognizes an allowance for credit losses based on historical collection experience, current regional economic and market conditions, the aging of accounts receivable and assessments of current creditworthiness of customers. Account balances are charged against the allowance when the Company believes it is probable that the associated receivables will not be recovered. If the financial condition of the Company’s customers were to deteriorate resulting in an impairment of their ability to make payments, additional allowances may be required. The Company does not have any off-balance sheet credit exposure related to its customers. The Company’s allowance for credit losses was not material as of December 31, 2021 and 2020. Inventories. 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. Property, Plant and Equipment. Property, plant and equipment are carried at cost and include expenditures for new facilities, major renewals and betterments. The Company capitalizes the cost of furnace rebuilds as part of property, plant and equipment. Maintenance, repairs and minor renewals are charged to expense as incurred. The Company capitalizes F-12 ECOVYST INC. 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. Depreciation is provided on the straight-line method based on the estimated useful lives of the assets, which generally range from 15 to 33 years for buildings and improvements and 3 to 10 years for machinery and equipment. Leasehold improvements are depreciated using the straight-line method based on the shorter of the useful life of the improvement or remaining lease term. The Company capitalizes the interest cost associated with the development and construction of significant new plant and equipment and depreciates that amount over the lives of the related assets. Capitalized interest recorded during the years ended December 31, 2021, 2020 and 2019 was $ 1,235 , $ 1,788 and $ 1,941 , respectively. Lea ses . The Company has operating and finance lease agreements with remaining lease terms as of December 31, 2021 of up to 23 years, including leases of land, buildings, railcars, vehicles, manufacturing equipment and general office equipment. Some leases include options to terminate or extend for one or more years. 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. When the Company enters into an arrangement, at inception, the Company determines if the arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. Some of the Company’s lease arrangements contain lease components (e.g. minimum rent payments) and non-lease components (e.g. maintenance). The Company accounts for the lease and non-lease components separately based on the estimated standalone price of each component. Certain of the Company’s lease agreements include rental payments that are adjusted periodically for an index or rate and these are initially measured using the index or rate in effect at the commencement date. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company recognizes a right-of-use lease asset and lease liability at the lease commencement date based on the present value of the remaining lease payments over the lease term. The Company assesses its leasing arrangements to determine the rate implicit in the lease arrangement. Historically, the Company’s leasing arrangements do not contain the information necessary to determine the rate implicit in the lease. As such, the Company utilizes its incremental borrowing rate over the relevant lease term, which is the rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The incremental borrowing rate is determined at the lease commencement date and is developed utilizing a readily available market interest rate curve adjusted for the Company’s credit quality. The Company has elected to use a portfolio approach to apply its incremental borrowing rate to individual leases based on lease term and geographic jurisdiction. Short-term leases, which have an initial term of twelve months or less, are not recorded on the Company’s balance sheet. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense for financing leases is bifurcated into two components, with the amortization expense component of the right-of-use asset recognized on a straight-line basis and the interest expense component recognized using the effective interest method over the lease term. The amortization expense component of the right-of-use lease asset is included in cost of goods sold and in selling, general and administrative expenses and the interest expense component is included in interest expense, net on the consolidated statements of income. Spare Parts. Spare parts are maintained by the Company’s facilities to keep machinery and equipment in working order. Spare parts are capitalized and included in other long-term assets. Spare parts are measured at cost and are not depreciated or expensed until utilized; however, reserves may be provided on aged spare parts. When a spare part is utilized as part of an improvement to property, plant and equipment, the carrying value is depreciated over the applicable life once placed in service. Otherwise, the spare part is expensed and charged as a cost of production when utilized. 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, F-13 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 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. Under the equity method of accounting, the investments in equity-method investees are recorded in the consolidated balance sheets as investments in affiliated companies, and the Company’s share of the investees’ earnings or losses, together with other than temporary impairments in value, is recorded as equity in net income from affiliated companies in the consolidated statements of income. Any differences between the Company’s cost of an equity method investment and the underlying equity in the net assets of the investment, such as fair value step-ups resulting from acquisitions, are accounted for according to their nature and impact the amounts recognized as equity in net income from affiliated companies in the consolidated statements of income. The Company evaluates all distributions received from its equity method investments using the nature of distribution approach. Under this approach, the Company evaluates the nature of activities of the investee that generated the distribution. The distributions received are either classified as a return on investment, which is presented as a component of operating activities on the Company’s consolidated statements of cash flows, or as a return of investment, which is presented as a component of investing activities on the Company’s consolidated statements of cash flows. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period. Goodwill and Intangible Assets. 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. The Company performs its annual goodwill impairment test as of October 1. Goodwill is tested for impairment at the reporting unit level. In performing tests for goodwill impairment, the Company is able to use its discretion to first perform an optional qualitative assessment about the likelihood of the carrying value of a reporting unit exceeding its fair value. The qualitative assessment need not be applied to all reporting units. 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 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. In applying the quantitative test, the Company calculates and compares the reporting unit’s estimated fair value to its carrying value, including goodwill. 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 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. Subsequent reversal of an impairment loss is not permitted. For intangible assets other than goodwill, definite-lived intangible assets are amortized over their respective estimated useful lives. Intangible assets with indefinite lives are not amortized, but rather are tested for impairment at least annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of the intangible asset below its carrying amount. The Company tests its indefinite-lived intangible assets as of October 1 of each year in conjunction with its annual goodwill impairment test. Impairment Assessment of Long-Lived Assets. 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 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 F-14 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) fair value. Fair value is determined using quoted market prices when available, or other techniques including discounted cash flows. The Company’s estimates of future cash flows involve assumptions concerning future operating performance, economic conditions and technological changes that may affect the future useful lives of the assets. Derivative Financial Instruments. 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. All derivatives designated as hedges are recognized on the consolidated balance sheets at fair value. The Company may designate a derivative as a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge), a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge), a foreign currency fair-value or cash-flow hedge (foreign currency hedge), or a hedge of a net investment in a foreign operation (net investment hedge). The Company’s hedging strategies include derivatives designated as cash flow hedges and net investment hedges. Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash flow hedge are recorded in other comprehensive income and subsequently reclassified into earnings in the same period(s) in which the hedged transaction affects earnings. Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a hedge of a net investment in a foreign operation are recorded in the foreign currency translation adjustment account within accumulated other comprehensive income, where the associated gains and losses will remain until such time that the hedged net investment (foreign subsidiary) is sold or liquidated. Changes in the fair value of a derivative that is not designated or does not qualify as a hedge are recorded in the consolidated statements of income. Cash flows from derivative instruments are reported in the same cash flow category as the cash flows from the items being hedged. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. The Company also formally assesses whether each hedging relationship is highly effective in achieving offsetting changes in fair values or cash flows of the hedged item during the period, both at the inception of the hedge and on an ongoing basis. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly-effective hedge, hedge accounting is discontinued with respect to that derivative prospectively. Fair Value Measurements. The Company measures fair value using the guidelines under U.S. generally accepted accounting principles (“GAAP”). An asset’s fair value is defined as the price at which the asset could be exchanged in a current transaction between market participants. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a market participant, not the amount that would be paid to settle the liability with the creditor. See Note 8 to these consolidated financial statements regarding the application of fair value measurements. The carrying values of cash, accounts receivable, accounts payable and accrued liabilities approximate fair value due to the short-term nature of these items. See Note 18 to these consolidated financial statements regarding the fair value of debt. F-15 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Revenue Recognition. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under its agreements, the Company performs the following steps: (i) identification of the contract with the customer; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. 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. The Company may offer rebates to customers who have reached a specified volume of optional purchases. The Company recognizes rebates given to customers as a reduction of revenue based on an allocation of the cost of honoring rebates earned and claimed to each of the underlying revenue transactions that result in progress by the customer toward earning the rebate. Rebates are recognized at the time revenue is recorded. The Company measures the rebate obligation based on the estimated amount of sales that will result in a rebate at the adjusted sales price per the respective sales agreement. Shipping and Handling Costs. Amounts billed to a customer in a sale transaction related to shipping and handling, if any, represent revenues earned for the goods provided and are classified as revenue. Costs related to shipping and handling of products shipped to customers are classified as cost of goods sold. Refer to Note 7 for disclosures regarding the recognition of revenue for shipping and handling costs that are billed to customers. Research and Development. Research and development costs of $ 7,499 , $ 7,137 and $ 7,357 for the years ended December 31, 2021, 2020 and 2019, respectively, were expensed as incurred and reported in selling, general and administrative expenses in the consolidated statements of income. Income Taxes. The Company operates within multiple taxing jurisdictions and is subject to tax filing requirements and potential audits within these jurisdictions. The Company uses the asset and liability method in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, using statutory tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. The Company evaluates its deferred tax assets each period to ensure that estimated future taxable income will be sufficient in character (e.g., capital gain versus ordinary income treatment), amount and timing, to result in their realizability. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets, unless it is more likely than not that those assets will be realized. Generally, APB 23 of ASC Topic 740, Income Taxes (“ASC 740”), provides guidance with respect to establishing deferred income taxes on earnings from foreign subsidiaries, to the extent that these earnings are considered to be available for repatriation. Further, ASC 740-30 requires that deferred taxes be established with respect to the earnings of a foreign subsidiary, unless existing tax law provides a means by which the investment in a subsidiary can be recovered tax-free. The Company has determined that it is able to repatriate the non-permanently reinvested earnings of its foreign subsidiaries in a tax-free manner. As such, the Company is able to asset, for purposes of ASC 740-30, that no deferred income taxes are needed with respect to earnings from foreign subsidiaries. The Company recognizes a financial statement benefit for positions taken for tax return purposes when it will be more likely than not (i.e. greater than 50%) that the positions will be sustained upon tax examination, based solely on the technical merits of the tax positions. Otherwise, no tax benefit is recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. Tax examinations are often complex as tax authorities may disagree with the treatment of items reported by the Company and may require several years to resolve. 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. F-16 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Environmental Expenditures. Environmental expenditures that pertain to current operations or to future revenues are expensed or capitalized consistent with the Company’s capitalization policy for property, plant and equipment. Expenditures that result from the remediation of an existing condition caused by past operations and that do not contribute to current or future revenues are expensed. Liabilities are recognized for remedial activities when the remediation is probable and the cost can be reasonably estimated. Recoveries of expenditures for environmental remediation are recognized as assets only when recovery is deemed probable. See Note 25 to these consolidated financial statements regarding commitments and contingencies and Note 17 regarding the accrued environmental reserve. Deferred Financing Costs. Financing costs incurred in connection with the issuance of long-term debt are deferred and presented as a direct reduction from the related debt instruments on the Company’s consolidated balance sheets. Deferred financing costs are amortized as interest expense using the effective interest method over the respective terms of the associated debt instruments. Stock-Based Compensation. The Company applies the fair value based method to account for stock options, restricted stock awards, restricted stock units and performance stock units issued in connection with its equity incentive plans. Stock-based compensation expense is recognized on a straight-line basis over the vesting periods of the respective awards, and the Company accounts for forfeitures of equity incentive awards as they occur. 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 event. See Note 23 to these consolidated financial statements regarding compensation expense associated with the Company’s equity incentive awards. Pensions and Postretirement Benefits. 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. Our funding policy, consistent with statutory requirements, is based on actuarial computations utilizing the projected unit credit method of calculation. Not all defined benefit pension plans are funded. 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. The Company references rates of return on high-quality, fixed income investments when estimating the discount rate, and the expected period over which payments will be made based upon historical experience. The long-term rate of return used to calculate the expected return on plan assets is the average rate of return estimated to be earned on invested funds for providing pension benefits. In addition to pension benefits, the Company provides certain health care benefits for employees who meet age, participation and length of service requirements at retirement. The Company uses explicit assumptions using the best estimates available of the plan’s future experience. Principal actuarial assumptions include: discount rates, present value factors, retirement age, participation rates, mortality rates, cost trend rates, Medicare reimbursement rates and per capita claims cost by age. Current interest rates as of the measurement date are used for discount rates in present value calculations. The Company also has defined contribution plans covering domestic employees of the Company and certain subsidiaries. Contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. 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 F-17 ECOVYST INC. 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. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed, including the approximate term, how the guarantee arose, and the events or circumstances that would require the guarantor to perform under the guarantee. Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications. Certain reclassifications have been made to the historical presentation of notes accompanying the consolidated financial statements to conform with the current year presentation. 3. New Accounting Standards: Recently Adopted Accounting Standards 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, 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 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 F-18 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 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. 4. Performance Materials Divestiture: On December 14, 2020, the Company completed the sale of its Performance Materials business to Potters Buyer, LLC (the “Purchaser”), an affiliate of The Jordan Company, L.P., for a purchase price of $ 650,000 . 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 per 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. As a result, the Company’s consolidated financial statements for all periods presented reflect the Performance Materials business as a discontinued operation. The divested business was historically reported in the Performance Materials reportable segment, with the exception of certain Australian operations that were historically reported in the Performance Chemicals reportable segment. 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 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: Net proceeds received from the sale of Performance Materials $ 624,256 Transaction costs ( 13,161 ) Net assets derecognized ( 681,973 ) Loss on sale of Performance Materials $ ( 70,878 ) 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. F-19 ECOVYST INC. 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 for the periods presented: Years ended December 31, 2020 2019 Sales $ 342,738 $ 373,686 Cost of goods sold 251,917 281,566 Selling, general and administrative expenses 33,195 37,364 Other operating expense, net 18,289 14,462 Operating income 39,337 40,294 Equity in net income from affiliated companies ( 37 ) ( 12 ) Interest expense, net (1) 16,210 24,453 Other (income) expense, net ( 3,481 ) 274 Loss on sale of Performance Materials 70,878 — (Loss) income from discontinued operations before income tax ( 44,233 ) 15,579 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 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. F-20 ECOVYST INC. 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, 2019: December 31, 2019 ASSETS Cash and cash equivalents $ 18,423 Accounts receivables, net 40,484 Inventories, net 143,323 Prepaid and other current assets 4,139 Current assets held for sale $ 206,369 Investments in affiliated companies $ 115 Property, plant and equipment, net 175,614 Goodwill 286,227 Other intangible assets, net 121,113 Right-of-use lease assets 8,878 Other long-term assets 71,697 Long-term assets held for sale $ 663,644 LIABILITIES Notes payable and current maturities of long-term debt $ 7,766 Accounts payable 30,267 Operating lease liabilities—current 3,326 Accrued liabilities 16,744 Current liabilities held for sale $ 58,103 Long-term debt, excluding current portion $ 55,972 Deferred income taxes 8,612 Operating lease liabilities—noncurrent 5,248 Other long-term liabilities 17,366 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. F-21 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 5. 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. 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 $ 3.20 per share to stockholders. 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. F-22 ECOVYST INC. 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: Years ended December 31, 2021 2020 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. F-23 ECOVYST INC. 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: December 31, 2020 December 31, 2019 ASSETS 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 Goodwill (1) 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 LIABILITIES 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. F-24 ECOVYST INC. 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 . 6. Acquisition: 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. F-25 ECOVYST INC. 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. F-26 ECOVYST INC. 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 (in years) 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. 7. Revenue from Contracts with Customers: Revenue Recognition Model As described in Note 2, the Company applies the five-step revenue recognition model to each contract with its customers. Evidence of a contract between the Company and its customers may take the form of a master service agreement (“MSA”), a MSA in combination with an underlying purchase order, a combination of a pricing quote with an underlying purchase order or an individual purchase order received from a customer. The Company and certain of its customers enter into MSAs that establish the terms, including prices, under which orders to purchase goods may be placed. In cases where the MSA contains a distinct order for goods or contains an enforceable minimum quantity to be purchased by the customer, the Company considers the MSA to be evidence of a contract between the Company and its customer as the MSA creates enforceable rights and obligations. In cases where the MSA does not contain a distinct order for goods, the Company’s contract with a customer is the purchase order issued under the MSA. Customers of the Company may also negotiate orders via pricing quotes, which typically detail product pricing, delivery terms and payment information. When a customer procures goods under this method, the Company considers the combination of the pricing quote and the purchase order to create enforceable rights and obligations. Absent either a MSA or pricing quote, the Company considers an individual purchase order remitted by a customer to create enforceable rights and obligations. The Company identifies a performance obligation in a contract for each promised good that is separately identifiable from other promises in the contract and for which the customer can benefit from the good. The majority of the Company’s contracts have a single performance obligation, which is the promise to transfer individual goods to the customer. Single performance obligations are satisfied according to the shipping terms noted within the MSA or purchase order. The Company has certain contracts that include multiple performance obligations under which the purchase price for each distinct performance obligation is defined in the contract. These distinct performance obligations may include stand-ready provisions, which are arrangements to provide a customer assurance that they will have access to output from the Company’s manufacturing facilities, or monthly reservations of capacity fees. The Company considers stand-ready provisions and reservation of capacity fees to be performance obligations satisfied over time. 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. F-27 ECOVYST INC. 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. The Company recognizes revenues when performance obligations under the terms of a contract with its customer are satisfied, which generally occurs at a point in time by transferring control of a product to the customer. The Company determines the point in time when a customer obtains control of a product and the Company satisfies the performance obligation by considering factors including when the Company has a right to payment for the product, the customer has legal title to the product, the Company has transferred possession of the product, the customer has assumed the risks and rewards of ownership of the product and the customer has accepted the product. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The Company does not have any significant payment terms as payment is received at, or shortly after, the point of sale. Ecoservices 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. 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. 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. The customer will enter into a long-term supply arrangement that outlines the specification of the products to be sold and contains terms and conditions under which purchase orders are issued. These supply arrangements typically have a duration from one to ten years. 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. Contract Assets and Liabilities A contract asset is a right to consideration in exchange for goods that the Company has transferred to a customer when that right is conditional on something other than the passage of time. A contract liability exists when the Company receives consideration in advance of the fulfillment of its performance obligations. The Company has no contract assets or material contract liabilities recorded on its consolidated balance sheets as of December 31, 2021 and 2020, respectively. F-28 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Practical Expedients and Accounting Policy Elections The Company has elected to use certain practical expedients and has made certain accounting policy elections as permitted under the new revenue recognition guidance. The majority of the Company’s contracts with customers are based on an individual purchase order; thus, the duration of these contracts are for one year or less. As described above, the Company’s performance obligations reset either monthly or at the end of the calendar year. The Company has made an accounting policy election to omit certain disclosures related to these performance obligations, as the initial term of the Company’s performance obligations are for a term of one year or less. The Company uses an output method to recognize revenues related to performance obligations satisfied over time. These performance obligations, as described above, are satisfied within a calendar year. As such, the Company has elected to utilize the “as-invoiced” practical expedient, which permits the Company to recognize revenue in the amount to which it has a right to invoice the customer, provided that the amount corresponds directly with the value provided by the performance obligation as completed to date. When the Company performs shipping and handling activities after the transfer of control to the customer (e.g. when control transfers prior to delivery), they are considered fulfillment activities as opposed to separate performance obligations, and the Company recognizes revenue upon the transfer of control to the customer. Accordingly, the costs associated with these shipping and handling activities are accrued when the related revenue is recognized under the Company’s policy election. The Company does not utilize sales-based commissions plans, and as a result, the Company does not capitalize any costs which could be considered incremental costs of obtaining a contract. Sales, value added and other taxes the Company collects concurrent with revenue producing activities are excluded from revenues. Disaggregated Revenue The Company’s primary means of disaggregating revenues is by reportable segment, which can be found in Note 15 to these consolidated financial statements. The Company’s portfolio of products are integrated into a variety of end uses, which are described in the table below: Key End Uses Key Products Industrial & process chemicals • Sulfur derivatives for industrial production • Treatment services Fuels & emission control • Refining hydrocracking catalysts • Emission control catalysts • Catalyst recycling regeneration services Packaging & engineered plastics • Catalysts for high-density polyethylene and chemicals syntheses • Antiblocks for film packaging • Sulfur derivatives for nylon production Natural resources • Sulfur derivatives for mining F-29 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The following table disaggregates the Company’s sales, by segment and end use, for the years ended December 31, 2021, 2020 and 2019: Year ended December 31, 2021 Ecoservices Catalyst Technologies Total Industrial & process chemicals $ 88,844 $ — $ 88,844 Fuels & emission control (1) 257,070 — 257,070 Packaging & engineered plastics 71,991 110,688 182,679 Natural resources 82,608 — 82,608 Total $ 500,513 $ 110,688 $ 611,201 Year ended December 31, 2020 Ecoservices Catalyst Technologies Total Industrial & process chemicals $ 70,648 $ 125 $ 70,773 Fuels & emission control (1) 225,042 — 225,042 Packaging & engineered plastics 38,772 93,882 132,654 Natural resources 67,451 — 67,451 Total $ 401,913 $ 94,007 $ 495,920 Year ended December 31, 2019 Ecoservices Catalyst Technologies Total Industrial & process chemicals $ 80,661 $ 109 $ 80,770 Fuels & emission control (1) 252,293 — 252,293 Packaging & engineered plastics 48,056 85,558 133,614 Natural resources 66,070 — 66,070 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. 8. Fair Value Measurements: Fair values are based on quoted market prices when available. When market prices are not available, fair values are generally estimated using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality. In instances where there is little or no market activity for the same or similar instruments, the Company estimates fair values using methods, models and assumptions that management believes a hypothetical market participant would use to determine a current transaction price. These valuation techniques involve some level of management estimation and judgment that becomes significant with increasingly complex instruments or pricing models. Where appropriate, adjustments are included to reflect the risk inherent in a particular methodology, model or input used. The Company’s financial assets and liabilities carried at fair value have been classified based upon a fair value hierarchy. 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 F-30 ECOVYST INC. 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). The levels of the fair value hierarchy are as follows: • Level 1—Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date. Active markets provide pricing data for trades occurring at least weekly and include exchanges and dealer markets. • Level 2—Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads and yield curves. • Level 3—Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. 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. 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. December 31, 2021 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Liabilities: Derivative contracts (Note 20) $ 1,288 $ — $ 1,288 $ — December 31, 2020 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Liabilities: Derivative contracts (Note 20) $ 3,704 $ — $ 3,704 $ — Derivative contracts Derivative assets and liabilities can be exchange-traded or traded over-the-counter (“OTC”). The Company generally values exchange-traded derivatives using models that calibrate to market transactions and eliminate timing differences between the closing price of the exchange-traded derivatives and their underlying instruments. OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, model calibration to market transactions, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. When models are used, the selection of a particular model to value an OTC derivative depends on the contractual terms of, and specific risks inherent in, the instrument as well as the availability of pricing information in the market. The Company generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices and rates, forward curves, measures of volatility, and correlations of such inputs. 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 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 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. F-31 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 9. Stockholders' Equity: Accumulated Other Comprehensive Income (Loss) The following table presents the components of accumulated other comprehensive income (loss), net of tax, as of December 31, 2021 and 2020: December 31, 2021 2020 Amortization and unrealized gains (losses) on pension and postretirement plans, net of tax of $( 3,567 ) and $( 1,649 ) $ 11,072 $ 5,278 Net changes in fair values of derivatives, net of tax of $( 422 ) and $ 549 2,254 ( 660 ) Foreign currency translation adjustments, net of tax of $ 8,177 and $ 1,223 ( 19,118 ) ( 19,883 ) Accumulated other comprehensive loss $ ( 5,792 ) $ ( 15,265 ) 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: Years ended December 31, 2021 2020 2019 Pre-tax amount Tax benefit/ (expense) After-tax amount Pre-tax amount Tax benefit/ (expense) After-tax amount Pre-tax amount Tax benefit/ (expense) After-tax amount Defined benefit and other postretirement plans: Amortization of net gains and (losses) $ 5,885 $ ( 1,461 ) $ 4,424 $ 2,760 $ ( 696 ) $ 2,064 $ 2,970 $ ( 423 ) $ 2,547 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 Net (loss) gain from hedging activities 3,885 ( 971 ) 2,914 221 ( 55 ) 166 ( 3,553 ) 888 ( 2,665 ) Foreign currency translation (1) 3,657 6,954 10,611 ( 11,268 ) ( 6,251 ) ( 17,519 ) 20,539 2,350 22,889 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 F-32 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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: Defined benefit and other postretirement plans Net gain (loss) from hedging activities Foreign currency translation Total December 31, 2019 $ 3,568 $ ( 1,838 ) $ ( 17,078 ) $ ( 15,348 ) Other comprehensive income (loss) before reclassifications 1,850 125 ( 16,596 ) ( 14,621 ) Amounts reclassified from accumulated other comprehensive income (1) 88 41 — 129 Disposal of business ( 228 ) 1,012 13,791 14,575 Net current period other comprehensive loss 1,710 1,178 ( 2,805 ) 83 December 31, 2020 5,278 ( 660 ) ( 19,883 ) ( 15,265 ) Other comprehensive income (loss) before reclassifications 5,623 2,580 10,611 18,814 Amounts reclassified from accumulated other comprehensive income (1) 171 334 — 505 Disposal of business — — ( 9,846 ) ( 9,846 ) 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) See the following table for details about these reclassifications. Amounts in parentheses indicate debits. F-33 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The following table presents the reclassifications out of accumulated other comprehensive income for the years ended December 31, 2021 and 2020. Details about Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income (1) Affected Line Item in the Statements of Income Years ended December 31, 2021 2020 Amortization of defined benefit and other postretirement plans: Prior service credit (cost) $ ( 232 ) $ 119 Other income (expense) (2) Actuarial gains (losses) 5 ( 232 ) Other income (expense) (2) ( 227 ) ( 113 ) Total before tax 56 25 Tax benefit $ ( 171 ) $ ( 88 ) Net of tax Gains and losses on cash flow hedges: Interest rate caps $ ( 444 ) $ ( 54 ) Interest expense 110 13 Tax benefit $ ( 334 ) $ ( 41 ) Net of tax Total reclassifications for the period $ ( 505 ) $ ( 129 ) Net of tax (1) Amounts in parentheses indicate debits to profit/loss. (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 The Company records repurchases of its common stock for treasury at cost. Upon the reissuance of the Company’s common stock from treasury, differences between the proceeds from reissuance and the average cost of the treasury stock are credited or charged to capital in excess of par value to the extent of prior credits related to the reissuance of treasury stock. 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 Ecovyst Inc. common stock under a stock repurchase program approved by the Company’s Board of Directors. The Company may repurchase shares from time to time for cash in open market transactions or in privately negotiated transactions in accordance with applicable federal securities laws. The Company will determine the timing and the amount of any repurchases based on its evaluation of market conditions, share price and other factors. The stock repurchase program is valid until March 2022. 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. F-34 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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 On December 14, 2020, the Company’s Board of Directors declared a special cash dividend of $ 1.80 per share, using after tax cash proceeds and cash on hand from the sale of the Performance Materials business. The dividend was paid to our stockholders of record at the close of business on December 21, 2020. Refer to Note 4 of these consolidated financial statements for additional details. 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. 10. Other Operating Expense, Net: A summary of other operating expense, net is as follows: Years ended December 31, 2021 2020 2019 Amortization expense $ 10,321 $ 8,689 $ 8,755 Transaction and other related costs 2,268 1,033 170 Restructuring, integration and business optimization costs 2,964 1,994 2,135 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 F-35 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 11. Inventories, Net: Inventories, net are classified and valued as follows: December 31, 2021 2020 Finished products and work in process $ 46,894 $ 48,500 Raw materials 6,919 4,289 $ 53,813 $ 52,789 Valued at lower of cost or market: LIFO basis $ 33,330 $ 31,072 Valued at lower of cost and net realizable value: FIFO or average cost basis 20,483 21,717 $ 53,813 $ 52,789 The domestic inventory acquired as part of a previous business combination is valued based on the LIFO method. 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 $ 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. 12. Investments in Affiliated Companies: The Company accounts for investments in affiliated companies under the equity method. Affiliated companies accounted for on the equity method as of December 31, 2021 are as follows: Company Country Percent Ownership Zeolyst International USA 50 % Zeolyst C.V. Netherlands 50 % Following is summarized information of the combined investments (1) : December 31, 2021 2020 Current assets $ 245,859 $ 217,836 Noncurrent assets 223,982 254,397 Current liabilities 43,337 65,958 Noncurrent liabilities 7,471 36,323 Years ended December 31, 2021 2020 2019 Sales $ 296,416 $ 275,621 $ 376,372 Gross profit 101,069 88,616 143,668 Operating income 66,978 53,500 105,614 Net income 68,433 55,328 106,683 F-36 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (1) Summarized information of the combined investments is presented at 100%; 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. 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. The following table summarizes the activity related to the Company’s investments in affiliated companies balance on the consolidated balance sheets: Years ended December 31, 2021 2020 Balance at beginning of period $ 458,128 $ 471,338 Equity in net income of affiliated companies 34,216 27,699 Charges related to purchase accounting fair value adjustments ( 6,480 ) ( 6,634 ) Dividends received ( 35,000 ) ( 40,000 ) Foreign currency translation adjustments ( 4,790 ) 5,725 Balance at end of period $ 446,074 $ 458,128 The Company had net receivables due from affiliates of $ 6,739 and $ 3,376 as of December 31, 2021 and 2020, respectively, which are included in prepaid and other current assets. Net receivables due from affiliates are generally non-trade receivables. Sales to affiliates were $ 3,643 , $ 7,042 and $ 0 for the years ended December 31, 2021, 2020 and 2019, respectively. The Company did no t purchase goods from affiliates during the years ended December 31, 2021, 2020 and 2019. 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. During the year ended December 31, 2019, the original IRB financing structure from December 2013 was exhausted. In order to fund future plant expansions, the Company entered into an additional IRB financing structure on December 19, 2019 with similar terms and conditions, which also provides for 75% real estate tax abatement on the value of future improvements. 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. F-37 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 13. Property, Plant and Equipment: A summary of property, plant and equipment, at cost, and related accumulated depreciation is as follows: December 31, 2021 2020 Land $ 97,047 $ 93,650 Buildings and improvements 77,851 76,010 Machinery and equipment 714,435 656,502 Construction in progress 45,952 42,447 935,285 868,609 Less: accumulated depreciation ( 339,054 ) ( 276,899 ) $ 596,231 $ 591,710 Depreciation expense was $ 65,955 , $ 65,333 and $ 61,244 for the years ended December 31, 2021, 2020 and 2019, respectively. 14. Leases: 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 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 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: Classification December 31, 2021 December 31, 2020 Assets Operating lease assets Right-of-use lease assets $ 30,115 $ 28,943 Finance lease and financing obligation assets Property, plant and equipment, net 29,737 1,727 Total leased assets $ 59,852 $ 30,670 Liabilities Current: Operating lease liabilities Operating lease liabilities—current $ 8,306 $ 6,715 Finance lease and financing obligation liabilities Accrued liabilities 3,181 245 Noncurrent: Operating lease liabilities Operating lease liabilities—noncurrent 21,719 21,972 Finance lease and financing obligation liabilities Other long-term liabilities 11,667 349 Total lease liabilities $ 44,873 $ 29,281 F-38 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The Company’s weighted average remaining lease term and weighted average discount rate for operating and financing leases as of December 31, 2021 are as follows: December 31, 2021 December 31, 2020 Weighted average remaining lease term (in years): Operating leases 4.79 5.51 Finance leases and financing obligations 4.69 2.46 Weighted average discount rate: Operating leases 5.02 % 6.06 % Finance leases and financing obligations 2.86 % 4.70 % Maturities of lease liabilities as of December 31, 2021 are as follows: Year Operating Leases Finance Leases and Financing Obligations 2021 $ 9,459 $ 3,478 2022 7,857 3,478 2023 6,123 3,478 2024 4,215 3,452 2025 2,662 1,974 Thereafter 3,664 — Total lease payments 33,980 15,860 Less: Interest ( 3,955 ) ( 1,012 ) Total lease liabilities $ 30,025 $ 14,848 (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 financing obligations and the impact on the Company’s consolidated statement of cash flows: Years ended December 31, 2021 2020 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 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 and financing obligations — 353 F-39 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 15. Reportable Segments: 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 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. (a wholly-owned subsidiary of Royal Dutch Shell). 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 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. The Company’s management evaluates the operating results of each reportable segment based upon Adjusted EBITDA. 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. F-40 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Summarized financial information for the Company’s reportable segments is shown in the following table: Years ended December 31, 2021 2020 2019 Sales: Ecoservices $ 500,513 $ 401,913 $ 447,080 Catalyst Technologies (1) 110,688 94,007 85,667 Total $ 611,201 $ 495,920 $ 532,747 Adjusted EBITDA: (2) 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 defines Adjusted EBITDA as EBITDA adjusted for certain items as noted in the reconciliation below. Management evaluates the performance of its segments and allocates resources based on several factors, of which the primary measure is Adjusted EBITDA. Adjusted EBITDA should not be considered as an alternative to net income as an indicator of the Company’s operating performance. Adjusted EBITDA as defined by the Company may not be comparable with EBITDA or Adjusted EBITDA as defined by other companies. (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. F-41 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) A reconciliation of net income attributable to Ecovyst to Adjusted EBITDA is as follows: Years ended December 31, 2021 2020 2019 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 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 Debt extinguishment costs 26,902 25,028 3,400 Net loss on asset disposals 5,666 4,722 4,559 Foreign currency exchange (gain) loss 4,716 ( 5,264 ) 1,228 LIFO (benefit) expense ( 1,931 ) ( 5,262 ) 6,458 Transaction and other related costs 2,009 1,118 186 Equity-based compensation 31,838 17,194 13,281 Restructuring, integration and business optimization expenses 2,964 1,994 2,571 Defined benefit pension plan (benefit) cost ( 858 ) ( 598 ) 553 Other 3,588 2,775 638 Adjusted EBITDA $ 227,611 $ 192,615 $ 240,185 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 $ 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. Capital expenditures for the Company’s reportable segments are shown in the following table: Years ended December 31, 2021 2020 2019 Capital expenditures: Ecoservices $ 43,561 $ 31,799 $ 42,310 Catalyst Technologies (1) 15,997 11,177 8,984 Corporate (2) 487 11,861 3,958 Capital expenditures per the consolidated statements of cash flows $ 60,045 $ 54,837 $ 55,252 (1) Excludes the Company’s proportionate share of capital expenditures from the Zeolyst Joint Venture. (2) Includes corporate capital expenditures, the cash impact from changes in capital expenditures in accounts payable and capitalized interest. F-42 ECOVYST INC. 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. Sales and long-lived assets by geographic area are presented in the following tables. Sales are attributed to countries based upon location of products shipped. Years ended December 31, 2021 2020 2019 Sales (1) : United States $ 571,587 $ 443,682 $ 492,146 Other foreign countries 39,614 52,238 40,601 Total $ 611,201 $ 495,920 $ 532,747 (1) Except for the United States, no sales in an individual country exceeded 10% of the Company’s total sales. 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. December 31, 2021 2020 Long-lived assets (1) : United States $ 597,506 $ 555,558 Other foreign countries 28,840 65,095 Total $ 626,346 $ 620,653 (1) Long-lived assets includes property, plant and equipment, net and right-of-use lease assets. F-43 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 16. 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: Ecoservices Catalyst Technologies Total Balance as of December 31, 2019 $ 311,892 $ 78,611 $ 390,503 Foreign exchange impact — 1,062 1,062 Balance as of December 31, 2020 311,892 79,673 391,565 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 Company completed its annual goodwill impairment assessments as of October 1, 2021 and 2020. For the annual assessments, 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. 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. 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. The Company estimates reporting unit income-based fair value using the discounted cash flow approach. This approach requires use of significant assumptions about future cash flows and based on management’s assessment of a number of factors. Such factors include reporting unit revenue growth rates from implementation of strategic plans, operating margin growth rates, the perpetual growth rate, and the weighted average cost of capital, as well as the reporting unit’s recent performance and management’s ability to execute on planned future strategic initiatives. Discount rate assumptions are based on an assessment of the risk inherent in those future cash flows. 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. In addition to the annual goodwill impairment assessment, the Company also performed the annual impairment test over its other indefinite-lived intangible assets as of October 1, 2021 and 2020. 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. F-44 ECOVYST INC. 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: December 31, 2021 December 31, 2020 Gross Carrying Amount Accumulated Amortization Net Balance Gross Carrying Amount Accumulated Amortization Net Balance Technical know-how $ 55,922 $ ( 20,648 ) $ 35,274 $ 52,214 $ ( 17,211 ) $ 35,003 Customer relationships 131,248 ( 57,262 ) 73,986 115,303 ( 47,740 ) 67,563 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 ) — 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 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 , 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. 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. Estimated future aggregate amortization expense of intangible assets is as follows: Year Amount 2022 $ 14,129 2023 14,129 2024 14,129 2025 14,129 2026 12,955 Thereafter 46,627 Total estimated future aggregate amortization expense $ 116,098 F-45 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 17. Accrued Liabilities: The following table summarizes the components of accrued liabilities as follows: December 31, 2021 2020 Compensation and bonus $ 30,079 $ 20,395 Interest 5,650 11,383 Property tax 2,144 2,379 Income taxes 9,864 2,897 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 18. Long-term Debt: The summary of long-term debt is as follows: December 31, 2021 2020 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 ABL Facility — — Total debt 895,500 1,426,363 Original issue discount ( 8,762 ) ( 15,641 ) Deferred financing costs ( 4,899 ) ( 10,353 ) Total debt, net of original issue discount and deferred financing costs 881,839 1,400,369 Less: current portion ( 9,000 ) — Total long-term debt, excluding current portion $ 872,839 $ 1,400,369 Senior Secured Credit Facilities 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. 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”), which provided 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 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. F-46 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 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 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. F-47 ECOVYST INC. 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 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 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. 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 the Borrower and the U.S. 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. During such time, the Company is required to maintain a fixed-charge coverage ratio of at least 1 .0 to 1.0. The Company is in compliance with all debt covenants as of December 31, 2021 and 2020, respectively. 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 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, 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 F-48 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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, 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 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. The guarantee by PQ Holdings Inc. was unsecured. 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 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. 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 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 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, 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). F-49 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Aggregate Long-term Debt Maturities The aggregate long-term debt maturities are: Year Amount 2022 $ 9,000 2023 9,000 2024 9,000 2025 9,000 2026 9,000 Thereafter 850,500 $ 895,500 19. Other Long-term Liabilities: The following table summarizes the components of other long-term liabilities as follows: December 31, 2021 2020 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 — Other 614 2,874 $ 24,094 $ 15,399 F-50 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 20. Financial Instruments: 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, 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. When the fair value of a derivative contract is an asset, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is a liability, the Company owes the counterparty and therefore, the Company is not exposed to the counterparty’s credit risk in those circumstances. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with high quality counterparties. 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. 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 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. The Company hedges the interest rate fluctuations on debt obligations through interest rate cap agreements. The Company records these agreements at fair value as assets or liabilities in its consolidated balance sheet. As the derivatives are designated and qualify as cash flow hedges, the gains or losses on the interest rate cap agreements are recorded in stockholders’ equity as a component of OCI, net of tax. Reclassifications of the gains and losses on the interest rate cap agreements into earnings are recorded as part of interest expense in the consolidated statements of income as the Company makes its interest payments on the hedged portion of its senior secured credit facilities. Fair value is determined based on estimated amounts that would be received or paid to terminate the contracts at the reporting date based on quoted market prices. In July 2016, the Company entered into interest rate cap agreements, paying a premium of $ 1,551 to mitigate interest rate volatility from July 2016 through July 2020 by employing varying cap rates, ranging from 1.50 % to 3.00 % on $ 1,000,000 of notional variable-rate debt. 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. 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, 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 F-51 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 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. F-52 ECOVYST INC. 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: December 31, Balance sheet location 2021 2020 Derivative assets: Derivatives designated as cash flow hedges: Interest rate caps Other long-term assets 1,080 — Total derivative assets $ 1,080 $ — Derivative liabilities: Derivatives designated as cash flow hedges: Interest rate caps Accrued liabilities 1,288 1,954 Interest rate caps Other long-term liabilities — 1,750 Total derivative liabilities $ 1,288 $ 3,704 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: Years ended December 31, 2021 2020 2019 Location of gain (loss) reclassified from AOCI into income Amount of gain (loss) recognized in OCI on derivatives Amount of gain (loss) reclassified from AOCI into income Amount of gain (loss) recognized in OCI on derivatives Amount of gain (loss) reclassified from AOCI into income Amount of gain (loss) recognized in OCI on derivatives Amount of gain (loss) reclassified from AOCI into income Interest rate caps Interest (expense) income $ ( 3,441 ) $ ( 444 ) $ ( 167 ) $ ( 54 ) $ ( 3,304 ) $ ( 625 ) The following table shows the effect of the Company’s cash flow hedge accounting on the consolidated statements of income for the years ended December 31, 2021, 2020 and 2019: Location and amount of gain (loss) recognized in income on cash flow hedging relationships Years ended December 31, 2021 2020 2019 Cost of goods sold Interest (expense) income Cost of goods sold Interest (expense) income Cost of goods sold Interest (expense) income Total amounts of income and expense line items presented in the statement of income in which the effects of cash flow hedges are recorded $ ( 434,540 ) $ ( 36,990 ) $ ( 344,967 ) $ ( 50,409 ) $ ( 365,537 ) $ ( 66,872 ) The effects of cash flow hedging: Gain (loss) on cash flow hedging relationships: Interest contracts: 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. F-53 ECOVYST 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 net investment hedges on AOCI and the consolidated statements of income for the years ended December 31, 2021, 2020 and 2019: 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) Years ended December 31, Years ended December 31, Years ended December 31, 2021 2020 2019 2021 2020 2019 2021 2020 2019 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 . 21. Income Taxes: Income (loss) before income taxes and noncontrolling interest within or outside the United States are shown below: Years ended December 31, 2021 2020 2019 Domestic $ 6,185 $ ( 10,454 ) $ 32,760 Foreign 7,756 12,669 10,659 Total $ 13,941 $ 2,215 $ 43,419 The provision (benefit) for income taxes as shown in the accompanying consolidated statements of income consists of the following: Years ended December 31, 2021 2020 2019 Current: Federal $ 2,469 $ — $ ( 3 ) State 1,813 1,982 2,141 Foreign 3,317 6,013 6,263 7,599 7,995 8,401 Deferred: Federal ( 1,813 ) ( 58,125 ) 1,320 State 2,551 ( 2,596 ) 2,244 Foreign 3,810 661 334 4,548 ( 60,060 ) 3,898 (Benefit) provision for income taxes $ 12,147 $ ( 52,065 ) $ 12,299 F-54 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) A reconciliation of income tax expense (benefit) at the U.S. federal statutory income tax rate to actual income tax expense is as follows: Years ended December 31, 2021 2020 2019 Tax at statutory rate $ 2,928 $ 466 $ 9,118 State income taxes, net of federal income tax benefit 3,942 ( 401 ) 6,725 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 Rate changes 5,209 4,274 1,054 Foreign withholding taxes — — ( 6,651 ) Foreign tax rate differential ( 4 ) 165 217 Foreign tax credits ( 759 ) ( 56,359 ) — Research and development tax credits ( 620 ) ( 717 ) ( 32 ) Other, net 303 313 738 Provision (benefit) for income taxes $ 12,147 $ ( 52,065 ) $ 12,299 Deferred tax assets (liabilities) are comprised of the following: December 31, 2021 2020 Deferred tax assets: Net operating loss carryforwards $ 24,107 $ 24,467 Interest disallowance carryforward 24 266 Pension 227 9,149 Operating lease liability 7,362 10,816 Other 14,732 18,997 State credits 13,110 12,733 Foreign withholding tax credits 9,083 9,083 Foreign tax credit — 62,752 Valuation allowance ( 39,857 ) ( 34,189 ) $ 28,788 $ 114,074 Deferred tax liabilities: Depreciation $ ( 71,815 ) $ ( 92,922 ) Inventory ( 2,899 ) ( 4,946 ) Intangibles ( 62,557 ) ( 117,063 ) Operating lease right-of-use assets ( 7,384 ) ( 11,250 ) Other ( 10,713 ) ( 13,743 ) $ ( 155,368 ) $ ( 239,924 ) Net deferred tax liabilities $ ( 126,580 ) $ ( 125,850 ) F-55 ECOVYST INC. 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 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. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considered the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies that are prudent in making this assessment. In order to fully realize deferred tax assets, the Company will need to generate future taxable income prior to the expiration of the net operating loss and credit carryforwards. 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. The cumulative unremitted earnings of foreign subsidiaries outside the United States are considered permanently reinvested, for which no withholding taxes have been provided. Such earnings are expected to be reinvested indefinitely and, as a result, no deferred tax liability has been recognized with regard to such earnings. Determination of the deferred withholding tax liability on these unremitted earnings is not practicable. The following table summarizes the activity related to the Company’s gross unrecognized tax benefits: Years ended December 31, 2021 2020 Balance at beginning of period $ 7,787 $ 8,080 Increases related to current year tax positions — 164 Decreases related to settlements with taxing authorities — ( 457 ) Balance at end of period $ 7,787 $ 7,787 The total unrecognized tax benefits of $ 7,787 and $ 7,787 as of December 31, 2021 and 2020, respectively. If these amounts are recognized in future periods, it would affect the effective tax rate on income from continuing operations for the years in which they are recognized. Interest and penalties released related to uncertain tax positions amounted to $ 0 and $ 37 for the years ended December 31, 2021 and 2020, respectively. 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 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. F-56 ECOVYST INC. 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. federal jurisdiction and in many state and foreign jurisdictions. The following describes the open tax years, by significant tax jurisdiction, as of December 31, 2021: Jurisdiction Period United States-Federal 2010-Present United States-State 2010-Present 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. 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: Years ended December 31, 2021 2020 2019 Domestic $ 549 $ 1,894 $ 1,879 Foreign 69 29 ( 29 ) $ 618 $ 1,923 $ 1,850 22. Benefit Plans: 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 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. F-57 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 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 defined benefit pension plans as well as the components of net periodic benefit cost, including key assumptions: U.S. Foreign December 31, December 31, 2021 2020 2021 2020 Change in benefit obligation: Benefit obligation at beginning of period $ 91,937 $ 82,726 $ 22,210 $ 19,673 Service cost — 769 — 1,080 Interest cost 2,210 2,665 255 299 Participant contributions — — — 112 Plan curtailments — — — ( 1,603 ) Plan settlements ( 1,795 ) ( 1,455 ) ( 21,622 ) — Benefits paid ( 2,069 ) ( 1,511 ) — ( 213 ) Expenses paid — — — ( 60 ) Actuarial (gains) losses ( 3,818 ) 8,743 — 949 Translation adjustment — — ( 843 ) 1,973 Benefit obligation at end of the period $ 86,465 $ 91,937 $ — $ 22,210 Change in plan assets: Fair value of plan assets at beginning of period $ 80,395 $ 69,450 $ 22,210 $ 18,365 Actual return on plan assets 6,383 11,539 255 1,238 Employer contributions — 2,372 — 820 Employee contributions — — — 112 Plan settlements ( 1,795 ) ( 1,455 ) ( 21,622 ) — Benefits paid ( 2,069 ) ( 1,511 ) — ( 213 ) Expenses paid — — — ( 60 ) Translation adjustment — — ( 843 ) 1,948 Fair value of plan assets at end of the period $ 82,914 $ 80,395 $ — $ 22,210 Funded status of the plans (underfunded) $ ( 3,551 ) $ ( 11,542 ) $ — $ — 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 . F-58 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Amounts recognized in the consolidated balance sheets consist of: U.S. Foreign December 31, December 31, 2021 2020 2021 2020 Noncurrent liability ( 3,551 ) ( 11,542 ) — — Accumulated other comprehensive income (loss) ( 672 ) 371 — ( 1,198 ) Net amount recognized $ ( 4,223 ) $ ( 11,171 ) $ — $ ( 1,198 ) Amounts recognized in accumulated other comprehensive income (loss) consist of: U.S. Foreign December 31, December 31, 2021 2020 2021 2020 Net gain (loss) 2,486 ( 3,328 ) — ( 2,166 ) Gross amount recognized 2,486 ( 3,328 ) — ( 2,166 ) Deferred income taxes ( 3,158 ) 3,699 — 968 Net amount recognized $ ( 672 ) $ 371 $ — $ ( 1,198 ) Components of net periodic benefit cost consist of: U.S. Foreign Years ended December 31, Years ended December 31, 2021 2020 2019 2021 2020 2019 Service cost $ — $ 769 $ 978 $ — $ 1,080 $ 977 Interest cost 2,210 2,665 3,099 255 299 355 Expected return on plan assets ( 4,360 ) ( 3,898 ) ( 3,444 ) ( 255 ) ( 287 ) ( 275 ) Amortization of net (gain) loss — — — — 95 — Settlement (gain) loss recognized ( 26 ) 78 49 2,084 — — Net periodic expense (benefit) $ ( 2,176 ) $ ( 386 ) $ 682 $ 2,084 $ 1,187 $ 1,057 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. The net amount of projected benefit obligation and plan assets for all underfunded and unfunded plans was $ 3,551 and $ 11,542 as of December 31, 2021 and 2020, respectively, and was classified as noncurrent liabilities. The total accumulated benefit obligation as of December 31, 2021 and 2020 for the Company’s U.S. pension plans was $ 86,465 and $ 91,937 , respectively. F-59 ECOVYST INC. 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: U.S. Foreign December 31, December 31, 2021 2020 2021 2020 Projected benefit obligation $ 86,465 $ 91,937 $ — — Accumulated benefit obligation 86,465 91,937 — — Fair value of plan assets 82,914 80,395 — — The following table presents selected information about the Company’s pension plans with projected benefit obligations in excess of plan assets: U.S. Foreign December 31, December 31, 2021 2020 2021 2020 Projected benefit obligation $ 86,465 $ 91,937 $ — — Fair value of plan assets 82,914 80,395 — — Significant weighted average assumptions used in determining the pension obligations include the following: U.S. Foreign December 31, December 31, 2021 2020 2021 2020 Discount rate 2.90 % 2.50 % N/A 1.20 % Rate of compensation increase (1) N/A N/A N/A 1.75 % Significant weighted average assumptions used in determining net periodic benefit cost include the following: U.S. Foreign Years ended December 31, Years ended December 31, 2021 2020 2019 2021 2020 2019 Discount rate 2.50 % 3.4 % 4.37 % 1.20 % 1.50 % 2.30 % Rate of compensation increase (1) 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 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. F-60 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 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. 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: 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. The Company classifies plan assets based upon a fair value hierarchy (see Note 8 to these consolidated financial statements for further information). The classification of each asset within the hierarchy is based on the lowest level input that is significant to its measurement. The fair value hierarchy consists of three levels as follows: • Level 1—Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date. Active markets provide pricing data for trades occurring at least weekly and include exchanges and dealer markets. Level 1 assets primarily include investments in publicly traded equity securities and mutual funds. These securities (or the underlying investments of the funds) are actively traded and valued using quoted prices for identical securities from the market exchanges. • Level 2—Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads and yield curves. Level 2 assets primarily consist of fixed-income securities and commingled funds that are not actively traded or whose underlying investments are valued using observable marketplace inputs. The fair value of plan assets invested in fixed-income securities is generally determined using valuation models that use observable inputs such as interest rates, bond yields, low-volume market quotes and quoted prices for similar assets. Plan assets that are invested in commingled funds are valued using a unit price or net asset value (“NAV”) that is based on the underlying investments of the fund. • Level 3—Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. 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. Level 3 assets include investments covered by insurance contracts and real estate funds valued using significant unobservable inputs. F-61 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The following tables set forth by level, within the fair value hierarchy, plan assets at fair value: December 31, 2021 Total Level 1 Level 2 Level 3 Cash and cash equivalents $ 202 $ 202 $ — $ — Equity securities: U.S. investment funds 12,150 12,150 — — International investment funds 7,816 7,816 — — Fixed income securities: Government securities 28,869 28,869 — — Corporate bonds 33,877 33,877 — — Total $ 82,914 $ 82,914 $ — $ — December 31, 2020 Total Level 1 Level 2 Level 3 Cash and cash equivalents $ 151 $ 151 $ — $ — Equity securities: U.S. investment funds 28,040 28,040 — — International investment funds 18,770 18,770 — — Fixed income securities: Government securities 16,766 16,766 — — Corporate bonds 16,668 16,668 — — Other: Insurance contracts 22,210 — 22,210 — Total $ 102,605 $ 80,395 $ 22,210 $ — 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: Year Amount 2022 $ 4,619 2023 4,544 2024 4,393 2025 4,266 2026 4,339 Years 2027-2031 22,707 F-62 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Other Postretirement Benefit Plan The following tables summarize changes in the benefit obligation, plan assets and funded status of the Company’s other postretirement benefit plan as well as the components of net periodic benefit cost, including key assumptions: December 31, 2021 2020 Change in benefit obligation: Benefit obligation at beginning of period $ 650 $ 554 Interest cost 17 19 Benefits paid ( 1 ) ( 2 ) Premiums paid ( 2 ) ( 3 ) Actuarial (gains) losses ( 40 ) 82 Benefit obligation at end of period $ 624 $ 650 Change in plan assets: Employer contributions 3 5 Benefits paid ( 1 ) ( 2 ) Premiums paid ( 2 ) ( 3 ) Fair value of plan assets at end of period $ — $ — Funded status of the plan (underfunded) $ ( 624 ) $ ( 650 ) The total actuarial gains for the year ended December 31, 2021 was $ 40 , which was driven by increases in the discount rates of $ 27 , changes in mortality assumptions of $ 1 , and general experience of $ 12 . The total actuarial losses for the year ended December 31, 2020 was $ 82 , which was driven by declines in the discount rates of $ 83 , declines in general demographic experience of $ 4 , and declines in mortality assumptions of $ 3 . Amounts recognized in the consolidated balance sheets consist of: December 31, 2021 2020 Current liability $ ( 17 ) $ ( 16 ) Noncurrent liability ( 607 ) ( 634 ) Accumulated other comprehensive income ( 59 ) 238 Net amount recognized $ ( 683 ) $ ( 412 ) F-63 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Amounts recognized in accumulated other comprehensive income consist of: December 31, 2021 2020 Prior service credit $ 364 $ 596 Net gain ( 114 ) ( 159 ) Gross amount recognized 250 437 Deferred income taxes ( 309 ) ( 199 ) Net amount recognized $ ( 59 ) $ 238 Components of net periodic benefit cost consist of: Years ended December 31, 2021 2020 2019 Service cost $ — $ — $ 10 Interest cost 17 19 29 Amortization of prior service credit ( 232 ) ( 232 ) ( 157 ) Amortization of net loss (gain) 5 1 ( 11 ) Net periodic benefit $ ( 210 ) $ ( 212 ) $ ( 129 ) 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. The discount rate used in determining the other postretirement benefit plan obligation was 2.90 % and 2.60 % as of December 31, 2021 and 2020, respectively. The discount rate used in determining net periodic benefit cost was 2.60 %, 3.50 % and 4.50 % for the years ended December 31, 2021, 2020 and 2019, respectively. There was no rate of interest crediting rate, as there are no cash balance accounts associated with this plan. Assumed health care cost trend rates were as follows: December 31, 2021 2020 Immediate trend rate NA NA Ultimate trend rate NA NA Year that the rate reaches ultimate trend rate NA NA The Company expects to contribute $ 17 to the retiree health plan in 2022. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid: Year Amount 2022 $ 17 2023 18 2024 19 2025 20 2026 21 Years 2025-2029 128 There are no expected Medicare subsidy receipts expected in future periods. F-64 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Defined Contribution Plans The Company also has defined contribution plans covering domestic employees of the Company and a foreign subsidiary. The Company recorded expenses of $ 2,054 , $ 1,357 and $ 1,305 related to these plans for the years ended December 31, 2021, 2020 and 2019, respectively. 23. Stock-Based Compensation: The Company has an equity incentive plan under which it grants common stock awards to employees, directors and affiliates of the Company. At December 31, 2021, 12,405,315 shares of common stock were available for issuance under the plan. The Company settles these awards through the issuance of new shares. Modifications Sale of Performance Chemicals As described in Note 9 to these consolidated financial statements, the Company’s Board of Directors declared a special cash dividend of $ 3.20 per share to stockholders of record as of the close of business on August 12, 2021. The dividend declaration also included a dividend equivalent for all unvested restricted stock units, performance stock units and restricted stock awards (collectively, the “awards”) as of August 23, 2021 equal to $ 3.20 per award. Additionally, the Company’s Board of Directors approved a reduction in the strike price on all outstanding vested and unvested stock options by the amount of the dividend payment. Further, with respect to stock options and awards held by employees of Performance Chemicals at the time of the sale (see Note 5 to these consolidated financial statements), the Company’s Board of Directors approved modifications to the post-termination stock option exercise, and stock option and award vesting periods. The modifications provided that all stock options held by Performance Chemicals employees that were vested as of the date of the sale are eligible to be exercised for a period of one year from the date of the sale. Additionally, modifications to unvested stock options and awards allowed holders to continue to vest in those instruments under the original terms of the instruments for a period of up to one year from the date of sale, depending on the award. The terms of the modifications to the Performance Chemicals awards are contingent upon the employee providing continued service to the Buyer. The modifications impacted all holders of the Company’s stock options and awards, and along with modifications for a retired executive during the same period, resulted in incremental stock-based compensation expense recognized at the time of the modifications of $6,667 during the year ended December 31, 2021. Of this amount, $2,635 was included in loss from discontinued operations, net of tax on the Company’s consolidated statements of income. F-65 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Sale of Performance Materials As described in Note 9 to these consolidated financial statements, the Company’s Board of Directors declared a special cash dividend of $ 1.80 per share to stockholders of record as of the close of business on December 21, 2020. The dividend declaration also included a dividend equivalent for all unvested awards as of December 21, 2020 equal to $ 1.80 per award. Additionally, the Company’s Board of Directors approved a reduction in the strike price on all outstanding vested and unvested stock options by the amount of the dividend payment. Further, with respect to stock options and awards held by employees of Performance Materials at the time of the sale (see Note 4 to these consolidated financial statements), the Company’s Board of Directors approved modifications to the post-termination stock option exercise, and stock option and award vesting periods. The modifications provided that all stock options held by Performance Materials employees that were vested as of the date of the sale are eligible to be exercised for a period of one year from the date of the sale. Additionally, modifications to unvested stock options and awards allowed holders to continue to vest in those instruments under the original terms of the instruments for a period of one year from the date of sale. The terms of the modifications to the Performance Materials awards are contingent upon the employee providing continued service to the Purchaser. The modifications impacted all holders of the Company’s stock options and awards, and resulted in incremental stock-based compensation expense recognized at the time of the modifications of $ 2,144 during the year ended December 31, 2020. Of this amount, $ 654 was included in loss from discontinued operations, net of tax on the Company’s consolidated statements of income. Stock Options The Company has issued stock options to purchase Ecovyst Inc. common stock as part of its equity incentive compensation program. There are various vesting conditions associated with stock options issued prior to the launch of the Company’s initial pubic offering (“IPO”) in September 2017, including satisfaction of certain service and/or performance based conditions. Subsequent to the IPO, the Company’s stock option grants have been subject to graded vesting conditions based on service. The maximum contractual term of the Company’s stock options is ten years . F-66 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The following table summarizes the activity of common stock options for the period from December 31, 2018 through the year ended December 31, 2021: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2018 2,941,154 $ 10.79 Exercised ( 492,498 ) $ 8.07 Forfeited ( 74,299 ) $ 8.16 Outstanding at December 31, 2019 2,374,357 $ 11.44 Exercised ( 43,250 ) $ 8.64 Forfeited ( 157,776 ) $ 9.23 Outstanding at December 31, 2020 2,173,331 $ 9.84 (1) Exercised ( 208,500 ) $ 3.56 Forfeited ( 39,996 ) $ 3.53 Expired ( 40,484 ) $ 14.52 Outstanding at December 31, 2021 1,884,351 $ 6.99 (2) 4.97 $ 7,714 Exercisable at December 31, 2021 1,547,535 $ 7.75 5.03 $ 5,417 (1) Reflects the impact of the reduction in the strike price on all outstanding vested and unvested stock options by $ 1.80 per share as described above. (2) Reflects the impact of the reduction in the strike price on all outstanding vested and unvested stock options by $ 3.20 per share as described above. The aggregate intrinsic value per the above table represents the difference between the fair value the Company’s common stock on the last trading day of the reporting period (determined in accordance with the plan terms) and the exercise price of in-the-money stock options multiplied by the respective number of stock options as of that date. The total intrinsic value of stock options exercised during the year ended December 31, 2019 and the resulting tax benefits recognized by the Company were $ 3,615 ; the total intrinsic value of stock options exercised during the years ended December 31, 2020 and 2021 was no t material for either year. Additionally, cash proceeds received by the Company from the exercise of stock options were $ 3,975 during the year ended December 31, 2019 and were no t material for the years ended December 31, 2020 and 2021. There were no stock option awards granted during the years ended December 31, 2021, 2020 and 2019. The Company uses the Black-Scholes option pricing model to determine the fair value of its stock option grants. Restricted Stock Awards, Restricted Stock Units and Performance Stock Units Restricted Stock Awards The Company has granted restricted stock awards subject to vesting conditions based on (1) service only, (2) performance only, or (3) a combination of service and performance conditions, dependent on which event occurs first. The vesting requirements for the majority of these awards were based upon the achievement of a performance condition. As defined in the award agreements, each award subject to the performance condition fully vests upon the occurrence of a defined liquidity event upon which certain investment funds affiliated with CCMP receive proceeds exceeding certain thresholds. Although achievement of the performance condition is subject to continued service with the Company, the terms of awards issued with performance conditions stipulate that the performance vesting condition can be attained for a period of six months following separation from service under certain circumstances, depending on the means of separation from the Company and subject to other factors such as individual separation agreements. The same performance vesting condition for the Company’s restricted stock awards also governs the achievement of the F-67 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) performance vesting condition for the Company’s stock options. As of December 31, 2021, all of the Company’s outstanding unvested restricted stock awards were subject to the performance vesting condition. In addition to restricted stock awards, the Company has granted restricted stock units and performance stock units as part of its equity incentive compensation program. Restricted Stock Units Each restricted stock unit provides the recipient with the right to receive a share of common stock subject to graded vesting terms based on service, which generally requires one year of service for members of the Company’s board of directors and three years of service for employees. The value of the restricted stock units granted by the Company is based on the average of the high and low trading prices of the Company’s common stock on the NYSE on the preceding trading day, in accordance with the Company’s policy for valuing such awards. Compensation expense related to the restricted stock units is recognized on a straight-line basis over the respective vesting period. Performance Stock Units 2019 Grants The Company granted performance stock units during the year ended December 31, 2019, which provide the recipients with the right to receive shares of common stock dependent on the achievement of two Company-specific financial performance targets and the provision of service through the vesting date. Attainment of the metrics is measured based on the average levels of achievement across the three -year period from January 1, 2019 through December 31, 2021. Depending on the Company’s performance against the pre-determined thresholds for achievement, each performance stock unit award holder is eligible to earn a percentage of the target number of shares granted to the holder, ranging from zero to 200 %. The performance stock units, to the extent earned, will vest on the date the Company’s compensation and governance committee certifies the achievement of the performance metrics for the three-year period ending December 31, 2021, which will occur subsequent to the end of the performance period and after the Company files its annual consolidated financial statements for the year then ended. 2020 Grants The Company also granted performance stock units during the year ended December 31, 2020. The performance stock units granted in 2020 provide the recipients with the right to receive shares of common stock dependent 50% on the achievement of a Company-specific financial performance target and 50% on a total shareholder return (“TSR”) goal, and are generally subject to the provision of service through the vesting date of the award. The Company-specific financial performance target and the TSR goal are measured independently of each other, but achievement of both of the metrics is measured based on the same three-year performance period from January 1, 2020 through December 31, 2022. The TSR goal is based on the Company’s relative TSR performance against the companies included in the Russell 2000 Index over the performance period. Achievement of the Company-specific financial performance target is measured based on the average levels of achievement across the performance period. Depending on the Company’s performance against the predetermined thresholds for achievement, each performance stock unit award recipient is eligible to earn a percentage of the target number of shares granted to the recipient, ranging from zero to 200%. The performance stock units, to the extent earned, will vest on the date the Company’s compensation and governance committee certifies the achievement of the performance metrics for the three-year period ending December 31, 2022, which will occur subsequent to the end of the performance period but before the Company files its annual consolidated financial statements for the year then ended. The value of the portions of the performance stock units granted during the years ended December 31, 2020 and 2019 eligible to be earned based on the achievement of the Company-specific financial performance targets was measured on the same basis as that of the restricted stock units, and based on the target number of shares granted; because the performance vesting conditions affect the ability of the recipients to vest in the awards, they are not factored into the fair value measure of the award. Compensation expense related to such performance stock units is recognized ratably over the requisite service period, and the Company must assess the probability that the performance conditions will be met each reporting period and the level at which they are estimated to be attained. Should the probability assessment change during a given reporting period, the total compensation cost (both recognized and unrecognized) will be adjusted to reflect the revised assessment. F-68 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The TSR goal, which determines how much of the 50% of the performance stock units granted during 2020 may be earned, is considered a market condition as opposed to a vesting condition. Because a market condition is not considered a vesting condition, it is reflected in the grant date fair value of an award and the associated compensation cost based on the fair value of the award is recognized over the performance period, regardless of whether the Company actually achieves the market condition or the level of achievement, as long as service is provided by the recipient. The Company used a Monte Carlo simulation to estimate the fair value of the portion of the awards subject to the TSR goal, with the following assumptions: Expected dividend yield — % Risk-free interest rate 1.56 % Expected volatility 28.57 % Expected term (in years) 2.95 Grant date fair value $ 24.11 2021 Grants The performance stock units granted during the year ended December 31, 2021 provide the recipients with the right to receive shares of common stock dependent on the achievement of a TSR goal, and are generally subject to the provision of service through the vesting date of the award. The performance period for the TSR goal is measured based on a three-year performance period from January 1, 2021 through December 31, 2023. The TSR goal is based on the Company’s actual TSR percentage increase over the performance period. Depending on the Company’s performance relative to the TSR goal, each performance stock unit award recipient is eligible to earn a percentage of the target number of shares granted to the recipient, ranging from zero to 200%. The performance stock units, to the extent earned, will vest on the date the Company’s compensation and governance committee certifies the achievement of the performance metric for the three-year period ending December 31, 2023, which will occur subsequent to the end of the performance period but before the Company files its annual consolidated financial statements for the year ending December 31, 2023. The Company used a Monte Carlo simulation to estimate the fair value of the awards, with the following assumptions: Expected dividend yield — % Risk-free interest rate 0.20 % Expected volatility 41.70 % Expected term (in years) 2.95 Grant date fair value $ 13.21 F-69 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Award Activity The following table summarizes the activity of restricted stock awards, restricted stock units and performance stock units for the period from December 31, 2018 through the year ended December 31, 2021: Restricted Stock Awards Restricted Stock Units Performance Stock Units Number of Shares Weighted Average Grant Date Fair Value (per share) Number of Units Weighted Average Grant Date Fair Value (per share) Number of Units Weighted Average Grant Date Fair Value (per share) Nonvested as of December 31, 2018 1,770,660 $ 8.39 998,786 $ 16.83 — $ — Granted — $ — 1,245,628 $ 15.42 550,676 $ 15.41 Vested ( 97,140 ) $ 12.32 ( 541,383 ) $ 16.68 — $ — Forfeited ( 127,390 ) $ 8.04 ( 74,595 ) $ 16.09 — $ — Nonvested as of December 31, 2019 1,546,130 $ 8.17 1,628,436 $ 15.83 550,676 $ 15.41 Granted — $ — 1,158,605 $ 16.60 456,311 $ 20.29 Vested ( 29,760 ) $ 12.32 ( 816,866 ) $ 16.17 — $ — Forfeited ( 619,355 ) $ 8.04 ( 129,036 ) $ 16.28 ( 41,251 ) $ 15.95 Nonvested as of December 31, 2020 897,015 $ 13.80 (1) 1,841,139 $ 16.14 965,736 $ 17.69 Granted — $ — 1,697,623 $ 15.39 211,985 $ 13.21 Vested — $ — ( 773,619 ) $ 16.00 — $ — Forfeited ( 263,291 ) $ 15.31 (1) ( 257,722 ) $ 16.03 ( 60,166 ) $ 17.11 Nonvested as of December 31, 2021 633,724 $ 15.84 (1) 2,507,421 $ 15.68 1,117,555 $ 16.91 (1) Reflects the impact of the modification on all unvested restricted stock awards as described above. The total fair value of restricted stock awards that vested during the years ended December 31, 2021, 2020 and 2019 was $ 0 , $ 510 and $ 1,543 , respectively. The total fair value of restricted stock units that vested during the years ended December 31, 2021, 2020 and 2019 was $ 11,507 , $ 11,269 and $ 8,493 , respectively. None of the Company’s performance stock units vested during the years ended December 31, 2021, 2020 and 2019. Total Stock-Based Compensation Expense For the years ended December 31, 2021, 2020 and 2019, total stock-based compensation expense for the Company on a continuing operations basis was $ 31,838 , $ 17,194 and $ 13,281 , respectively. The associated income tax benefit recognized in the statements of income for the years ended December 31, 2021, 2020 and 2019 was $ 7,735 , $ 3,933 and $ 3,182 , respectively. As of December 31, 2021, there was no unrecognized compensation cost related to nonvested stock options or nonvested restricted stock awards subject to service vesting conditions. As of December 31, 2021, there was $ 22,069 of total unrecognized compensation cost related to nonvested restricted stock units and $ 6,554 of total unrecognized compensation cost related to nonvested performance stock units considered probable of vesting, which include costs for both continuing and discontinued operations. The weighted-average period over which these costs are expected to be recognized at December 31, 2020 is 1.32 years for the restricted stock units and 0.89 years for the performance stock units. No expense has been recognized for any restricted stock awards or stock options subject to the performance condition for the years ended December 31, 2021, 2020 and 2019, as the performance-based criteria was not achieved nor considered probable of achievement. F-70 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Restricted stock awards and stock options issued with performance conditions vest based on the occurrence of a defined liquidity event upon which certain investment funds affiliated with CCMP receive proceeds exceeding certain thresholds. All of the Company’s equity incentive awards with performance-based vesting, whether in the form of stock options or restricted stock awards, are subject to achievement of the same performance condition. If an exit event occurs that exceeds the defined threshold, then all performance-based awards of the Company vest 100 %, with no potential for partial vesting or excess achievement. If an exit event or events occur with no further possibility of meeting the defined threshold, then all of the Company’s awards subject to the performance vesting condition will be forfeited. In addition to the defined liquidity event, subsequent to the Company’s IPO, the performance vesting condition can also be achieved if the average closing trading price of the Company’s common stock on the NYSE over any consecutive ten-day trading period equals or exceeds a price that would be equivalent to the achievement of the threshold proceeds to CCMP. See Note 24 to these consolidated financial statements for further information on the number of awards outstanding subject to performance-based vesting. 24. Earnings per Share: Basic earnings per share is calculated as income (loss) available to common stockholders, divided by the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding during the period for the computation of basic earnings per share excludes restricted stock awards that have legally been issued but are nonvested during the period, as the sale of these shares is prohibited pending satisfaction of certain vesting conditions by the award recipients in order to earn the rights to the shares (see Note 23 to these consolidated financial statements for further information regarding outstanding nonvested restricted stock awards). Diluted earnings per share is calculated as income (loss) available to common stockholders, divided by the weighted average number of common and potential common shares outstanding during the period, if dilutive. Potential common shares reflect (1) unvested restricted stock awards and restricted stock units with service vesting conditions, (2) performance stock units with vesting conditions considered probable of achievement and (3) options to purchase common stock, all of which have been included in the diluted earnings per share calculation using the treasury stock method. The reconciliation from basic to diluted weighted average shares outstanding is as follows: Years ended December 31, 2021 2020 2019 Weighted average shares outstanding – Basic 136,167,384 135,528,977 134,389,667 Dilutive effect of unvested common shares and restricted stock units with service conditions, performance stock units considered probable of vesting and assumed stock option exercises and conversions 1,541,547 921,976 1,159,027 Weighted average shares outstanding – Diluted 137,708,931 136,450,953 135,548,694 F-71 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Basic and diluted earnings per share are calculated as follows: Years ended December 31, 2021 2020 2019 Numerator: Net (loss) income attributable to Ecovyst Inc. $ ( 139,949 ) $ ( 278,771 ) $ 79,539 Denominator: Weighted average shares outstanding – Basic 136,167,384 135,528,977 134,389,667 Weighted average shares outstanding – Diluted 137,708,931 136,450,953 135,548,694 Net (loss) income per share: Basic (loss) income per share $ ( 1.03 ) $ ( 2.06 ) $ 0.59 Diluted (loss) income per share $ ( 1.02 ) $ ( 2.04 ) $ 0.59 The table below presents the details of the Company’s weighted average equity-based awards outstanding during each respective year that were excluded from the calculation of diluted earnings per share: Years ended December 31, 2021 2020 2019 Restricted stock awards with performance only targets not yet achieved 839,432 1,225,855 1,584,980 Stock options with performance only targets not yet achieved 373,105 507,461 558,283 Anti-dilutive restricted stock awards, restricted stock units and performance stock units 6,214 1,453,120 — Anti-dilutive stock options 244,473 846,049 863,063 Restricted stock awards and stock options with performance only vesting conditions are not included in the dilution calculation, as the performance targets have not been achieved nor were probable of achievement as of the end of the respective periods. Certain stock options to purchase shares of common stock were excluded from the computation of diluted earnings per share for the respective periods, because the combination of the options’ exercise price and remaining unamortized stock-based compensation expense was greater than the average market price of the common shares. Anti-dilutive awards are not included in the dilution calculation, as their inclusion would have the effect of increasing diluted income per share. F-72 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 25. Commitments and Contingent Liabilities: Environmental Contingencies There is a risk of environmental impact in chemical manufacturing operations. The Company’s environmental policies and practices are designed to comply with existing laws and regulations and to minimize the possibility of significant environmental impact. The Company is also subject to various other lawsuits and claims with respect to matters such as governmental regulations, labor and other actions arising out of the normal course of business. All claims that are probable and reasonably estimable have been accrued for in the Company’s consolidated financial statements, some of which are described in detail within this note. When these matters are ultimately concluded and determined, the Company believes that there will be no material adverse effect on its consolidated financial position, results of operations or liquidity. The Company has recorded a reserve of $ 410 and $ 510 as of December 31, 2021 and 2020, respectively, to address remaining subsurface remedial and wetlands/marsh management activities at the Company’s Martinez, CA site. Although currently a sulfuric acid regeneration plant, the site originally was operated by Mountain Copper Company (“Mococo”) as a copper smelter. Also, the site sold iron pyrite to various customers and allowed their customers to deposit waste iron pyrite cinder and slag on the site. The property is adjacent to Peyton Slough, where Mococo had a permitted discharge point from its process. In 1997, the San Francisco Bay Regional Water Quality Control Board (“RWQCB”) required characterization and remediation of Peyton Slough for Copper, Zinc and Acidic Soils. Various remediation activities were undertaken and completed, and the site has received final concurrence from the Army Corps with respect to the completed work. The RWQCB has agreed that Eco Services LLC, a wholly owned subsidiary of the Company (“Eco Services”), has achieved the goals for vegetative cover. The current marsh condition is being sustained by the opening and subsequent closing of the tide gates on a once per year basis. The Company is continuing to indicate to the RWQCB a plan to involve Contra Costa County and work towards development of an alliance for operating, maintaining and funding the tide gates is appropriate. The Company is currently in the process of obtaining permits for the long-term maintenance of Peyton Slough. As of December 31, 2021 and 2020, the Company has recorded a reserve of $ 306 and $ 427 , respectively, for subsurface remediation and the Soil Vapor Extraction Project at the Company’s Dominguez, CA site. In the 1980s and 1990s, the EPA and the Los Angeles Regional Water Quality Control Board conducted investigations of the site due to historic chlorinated pesticide and chlorinated solvent use. Soil and groundwater beneath the site were impacted by chlorinated solvents and associated breakdown products, petroleum hydrocarbons, chlorinated pesticides and metals. A Corrective Measures Plan approved in October 2011 requires (1) soil vapor extraction (“SVE”) in affected areas, (2) covering of unpaved areas containing pesticide impacted soil, and (3) annual groundwater monitoring of the perched water-bearing zone. Annual groundwater sampling and soil vapor monitoring indicates that the SVE system has been effective in reducing subsurface contaminant levels. The Company is moving in the direction of rendering the SVE system dormant and potentially closing this matter within the next few years following rebound testing, including the preparation of an updated long-term Operations and Maintenance Plan as requested by the California Department of Toxic Substances Control. Letters of Credit At December 31, 2021, the Company had outstanding letters of credit of $ 17,541 . Letters of credit are guarantees of payment to third parties. The Company’s letters of credit are used primarily as collateral for various items, including environmental, energy and insurance payments. The letters of credit are supported by the Company’s ABL facility. F-73 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 26. Related Party Transactions: The Company maintains certain policies and procedures for the review, approval and ratification of related party transactions to ensure that all transactions with selected parties are fair, reasonable and in the Company’s best interests. All significant relationships and transactions are separately identified by management if they meet the definition of a related party or a related party transaction. Related party transactions include transactions that occurred during the year, or are currently proposed, in which the Company was or will be a participant, and for which any related person had or will have a direct or indirect material interest. All related party transactions are reviewed, approved and documented by the appropriate level of the Company’s management in accordance with these policies and procedures. Joint Venture Agreement The Company entered into a joint venture agreement (the “ZI Partnership Agreement”) in 1988 with Shell Catalysts & Technologies, an affiliate of Royal Dutch Shell plc, to form Zeolyst International, a 50/50 joint venture partnership (the “Partnership”). Under the terms of the ZI Partnership Agreement, the Partnership leases certain land used in its Kansas City production facilities from Ecovyst. This lease, which has been recorded as an operating lease, provided for rental payments to the Company of $ 310 , $ 305 and $ 295 during the years ended December 31, 2021, 2020 and 2019, respectively. The terms of this lease are evergreen as long as the ZI Partnership Agreement is in place. The Partnership recognized no sales to the Company’s of during the years ended December 31, 2021, 2020 and 2019, respectively. The Partnership purchases certain of its raw materials from the Company and is charged for various manufacturing costs incurred at the Company’s Kansas City production facility. The amount of these costs charged to the Partnership were $ 21,778 , $ 19,976 and $ 16,869 for the years ended December 31, 2021, 2020 and 2019, respectively. Certain administrative, marketing, engineering, management-related, and research and development services are provided to the Partnership by the Company. During the years ended December 31, 2021, 2020 and 2019, the Partnership was charged $ 11,406 , $ 12,871 and $ 12,727 , respectively, for these services. In addition, the Partnership was charged certain product demonstration costs of $ 924 , $ 2,204 and $ 1,768 during the years ended December 31, 2021, 2020 and 2019, respectively. These charges to the Partnership are recorded as reductions in either cost of goods sold or selling, general and administrative expenses in the consolidated statements of income, depending on the nature of the expenditures. Other From time to time, the Company makes sales to and purchases raw materials from portfolio companies of funds that are affiliated with CCMP and companies that are affiliated with INEOS Capital Partners. The Company had sales of $ 3,923 , $ 11,212 and $ 4,154 to companies affiliated with INEOS Capital Partners during the years ended December 31, 2021, 2020, and December 31, 2019 respectively. The Company purchases of raw materials from companies affiliated with INEOS Capital Partners were immaterial for the year ended December 31, 2021 and the Company did no t purchase raw materials during the years ended December 31, 2020 and December 31, 2019, respectively. F-74 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 27. Quarterly Financial Summary (Unaudited): The following tables summarize the Company’s quarterly financial results during the years ended December 31, 2021 and 2020: 2021 First Quarter Second Quarter Third Quarter Fourth Quarter Sales $ 126,624 $ 146,952 $ 167,428 $ 170,197 Gross profit 30,119 38,473 53,644 54,425 Operating income 2,482 11,652 22,494 17,979 Net income (loss) from continuing operations ( 2,748 ) ( 7,870 ) 4,689 7,723 Net income (loss) from discontinued operations, net of tax ( 89,770 ) 6,520 ( 75,872 ) 17,712 Net (loss) income ( 92,518 ) ( 1,350 ) ( 71,183 ) 25,435 Less: Net income (loss) attributable to the noncontrolling interest - discontinued operations 117 140 76 — Net income (loss) attributable to Ecovyst Inc. ( 92,635 ) ( 1,490 ) ( 71,259 ) 25,435 Earnings (loss) per common share - basic Continuing operations $ ( 0.02 ) $ ( 0.06 ) $ 0.03 $ 0.06 Discontinued operations $ ( 0.66 ) $ 0.05 $ ( 0.56 ) $ 0.13 Net earnings (loss) per share - basic $ ( 0.68 ) $ ( 0.01 ) $ ( 0.52 ) $ 0.19 Earnings (loss) per common share - diluted: Continuing operations $ ( 0.02 ) $ ( 0.06 ) $ 0.03 $ 0.06 Discontinued operations $ ( 0.66 ) $ 0.05 $ ( 0.55 ) $ 0.13 Net earnings (loss) per share - diluted $ ( 0.68 ) $ ( 0.01 ) $ ( 0.52 ) $ 0.18 Weighted average shares outstanding: Basic 136,006,082 136,095,060 136,129,591 136,256,601 Diluted 136,006,082 136,095,060 137,354,427 137,528,028 F-75 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 2020 First Quarter Second Quarter Third Quarter Fourth Quarter Sales $ 125,554 $ 115,641 $ 130,675 $ 124,050 Gross profit 37,704 34,872 40,831 37,546 Operating income 11,974 9,845 18,754 10,993 Net income from continuing operations ( 3,347 ) 34,317 ( 22,658 ) 45,968 Net income (loss) from discontinued operations, net of tax 3,856 ( 18,071 ) 30,470 ( 352,239 ) Net income 509 16,246 7,812 ( 306,271 ) Less: Net income attributable to the noncontrolling interest - discontinued operations 285 321 298 ( 3,837 ) Net income attributable to Ecoyvst Inc. 224 15,925 7,514 ( 302,434 ) Earnings (loss) per common share - basic: Continuing operations $ ( 0.03 ) $ 0.25 $ ( 0.17 ) $ 0.34 Discontinued operations $ 0.03 $ ( 0.13 ) $ 0.23 $ ( 2.57 ) Net earnings per share - basic $ — $ 0.12 $ 0.06 $ ( 2.23 ) Earnings (loss) per common share - diluted: Continuing operations $ ( 0.03 ) $ 0.25 $ ( 0.17 ) $ 0.34 Discontinued operations $ 0.03 $ ( 0.13 ) $ 0.23 $ ( 2.56 ) Net earnings per share - diluted $ — $ 0.12 $ 0.06 $ ( 2.22 ) Weighted average shares outstanding: Basic 135,240,897 135,083,126 135,106,969 135,406,081 Diluted 135,240,897 135,671,830 135,106,969 136,284,272 F-76 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 28. Supplemental Cash Flow Information: The following table presents supplemental cash flow information for the Company, which includes activity from both continuing and discontinued operations: Years ended December 31, 2021 2020 2019 Cash paid during the year for: Income taxes, net of refunds $ 11,843 $ 35,013 $ 17,406 Interest (1) 59,040 90,291 117,775 Non-cash investing activity (2) : Capital expenditures acquired on account but unpaid as of the year end 6,116 16,245 27,155 (1) Cash paid for interest is shown net of capitalized interest for the periods presented and excludes $ 2,307 and $ 4,963 of net interest proceeds on swaps designated as net investment hedges for the years ended December 31, 2021 and 2020, respectively, which are included within cash flows from investing activities, discontinued operations in the Company’s consolidated statements of cash flows. (2) For the supplemental non-cash information on lease liabilities arising from obtaining right-of-use lease assets, see Note 14 to these consolidated financial statements for additional details. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets as of December 31, 2021, 2020 and 2019 to the total of the same amounts shown in the consolidated statements of cash flows for the years then ended: December 31, 2021 2020 2019 Cash and cash equivalents $ 140,889 $ 113,377 $ 36,125 Restricted cash included in prepaid and other current assets — 1,640 1,287 Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows $ 140,889 $ 115,017 $ 37,412 29. Subsequent Events: In January 2022, the Company entered into two new interest rate cap agreements. See Note 20 to these consolidated financial statements for additional details. Other than this item, the Company has evaluated subsequent events since the balance sheet date and determined that there are no additional matters to disclose. F-77 Table of Contents SCHEDULE I ECOVYST INC. AND SUBSIDIARIES (PARENT) CONDENSED FINANCIAL INFORMATION CONDENSED STATEMENTS OF INCOME (in thousands) Years ended December 31, 2021 2020 2019 Stock compensation expense $ 39,523 $ 25,200 $ 18,225 Equity in net loss (income) from subsidiaries 100,426 253,571 ( 97,764 ) Net (loss) income ( 139,949 ) ( 278,771 ) 79,539 Other comprehensive income (loss), net of tax: Pension and postretirement benefits 5,794 1,938 2,430 Net gain (loss) from hedging activities 2,914 166 ( 2,665 ) Foreign currency translation 10,611 ( 16,596 ) 22,117 Total other comprehensive income (loss) 19,319 ( 14,492 ) 21,882 Comprehensive (loss) income $ ( 120,630 ) $ ( 293,263 ) $ 101,421 See accompanying notes to condensed financial statements. F-78 Table of Contents SCHEDULE I ECOVYST INC. AND SUBSIDIARIES (PARENT) CONDENSED FINANCIAL INFORMATION CONDENSED BALANCE SHEETS (in thousands, except share and per share amounts) December 31, 2021 December 31, 2020 ASSETS Investment in subsidiaries $ 740,737 $ 1,277,126 Total assets $ 740,737 $ 1,277,126 LIABILITIES Total liabilities $ — $ — STOCKHOLDERS' EQUITY Common stock ( 0.01 par); authorized shares 450,000,000 ; issued shares 137,820,971 and 137,102,143 on December 31, 2021 and 2020, respectively; outstanding shares 136,938,758 and 136,318,557 on December 31, 2021 and 2020, respectively 1,378 1,371 Preferred stock ( 0.01 par); authorized shares 50,000,000 ; no shares issued or outstanding on December 31, 2021 and 2020, respectively — — Additional paid-in capital 1,073,409 1,477,859 Accumulated deficit ( 315,707 ) ( 175,758 ) Treasury stock, at cost; shares 882,213 and 783,586 on December 31, 2021 and 2020, respectively ( 12,551 ) ( 11,081 ) Accumulated other comprehensive loss ( 5,792 ) ( 15,265 ) Total Ecovyst Inc. equity 740,737 1,277,126 Total liabilities and equity $ 740,737 $ 1,277,126 See accompanying notes to condensed financial statements. F-79 Table of Contents SCHEDULE I ECOVYST INC. AND SUBSIDIARIES (PARENT) CONDENSED FINANCIAL INFORMATION CONDENSED STATEMENTS OF CASH FLOWS (in thousands) Years ended December 31, 2021 2020 2019 Cash flows from operating activities: Net (loss) income $ ( 139,949 ) $ ( 278,771 ) $ 79,539 Adjustments to reconcile net income to net cash provided by operating activities: Equity in net income from subsidiaries 100,426 253,571 ( 97,764 ) Stock compensation expense 39,523 25,200 18,225 Net cash provided by operating activities — — — Cash flows from investing activities: Distribution from subsidiaries 435,593 243,749 — Net cash provided by investing activities 435,593 243,749 — Cash flows from financing activities: Dividends paid to stockholders ( 435,593 ) ( 243,749 ) — Net cash used in financing activities ( 435,593 ) ( 243,749 ) — Effect of exchange rate changes on cash, cash equivalents and restricted cash — — — Net change in cash, cash equivalents and restricted cash — — — Cash, cash equivalents and restricted cash at beginning of period — — — Cash, cash equivalents and restricted cash at end of period of continuing operations $ — $ — $ — See accompanying notes to condensed financial statements. F-80 Table of Contents SCHEDULE I ECOVYST INC. AND SUBSIDIARIES (PARENT) CONDENSED FINANCIAL INFORMATION NOTES TO CONDENSED SCHEDULE I 1. Description of Ecovyst Inc. and Subsidiaries Ecovyst Inc. (“Ecovyst” or the “Parent Company”) is a holding company that conducts substantially all of its business operations through its wholly owned subsidiary, Ecovyst Catalyst Technologies LLC. As specified in certain of Ecovyst Catalyst Technologies LLC’s debt agreements, there are restrictions on the ability of Ecovyst Catalyst Technologies LLC to make payments to its stockholder, Ecovyst, on behalf of its equity interests (refer to Note 18 to the Ecovyst consolidated financial statements for further information regarding Ecovyst debt). 2. Basis of Presentation The accompanying condensed Parent Company financial statements are required in accordance with Rule 4-08(e)(3) of Regulation S-X. These condensed financial statements have been presented on a “parent-only” basis. Under a parent-only presentation, the Parent Company’s investment in its consolidated subsidiary is presented under the equity method of accounting. Under the equity method, the investment in subsidiary is stated at cost plus contributions and equity in undistributed income (loss) of the subsidiary, less distributions received since the date of acquisition. These parent-only financial statements should be read in conjunction with Ecovyst’s audited consolidated financial statements. 3. Stock-Based Compensation Refer to Note 23 of the notes to the Ecovyst consolidated financial statements for a description of stock-based compensation. 4. Dividends Paid On December 14, 2020, Ecovyst’s Board of Directors declared a special cash dividend of $1.80 per share, using proceeds and cash on hand from the sale of the Performance Materials business. The dividend was paid on December 29, 2020 to the Company’s stockholders of record at the close of business on December 21, 2020. On August 4, 2021, the Company’s Board of Directors declared a special cash dividend of $3.20 per share, using the 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. F-81 Table of Contents Report of Independent Auditors To the Management Committee of Zeolyst International: Opinion We have audited the accompanying financial statements of Zeolyst International (the “Partnership”), which comprise the balance sheets as of December 31, 2021 and 2020, and the related statements of operations and accumulated earnings, of changes in partners’ capital and of cash flows for the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “financial statements”). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Partnership and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Emphasis of Matter As discussed within Footnote 15 to the financial statements, the Partnership has significant related party transactions. Our opinion is not modified with respect to this matter. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Partnership’s ability to continue as a going concern for one year after the date the financial statements are available to be issued. Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with US GAAS, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed. F-82 Table of Contents • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. /s/ PricewaterhouseCoopers LLP Philadelphia, Pennsylvania March 1, 2022 F-83 Table of Contents ZEOLYST INTERNATIONAL BALANCE SHEETS (in thousands) December 31, 2021 December 31, 2020 ASSETS Cash $ 29,651 $ 47,837 Trade receivables, net: Receivables from third parties 28,208 24,316 Receivables from affiliates 42,138 9,132 Inventories 116,480 98,241 Other current assets 1,210 576 Total current assets 217,687 180,102 Property, plant and equipment, net 130,885 142,871 Intangible assets 6,000 7,050 Right-of-use lease asset 5,950 5,968 Other long-term assets 270 480 Total assets $ 360,792 $ 336,471 LIABILITIES Revolver $ — $ — Trade accounts payable 13,429 5,292 Accounts payable to affiliates 17,431 21,066 Operating lease liability—current 109 109 Other current liabilities 6,848 2,965 Total current liabilities 37,817 29,432 Operating lease liability—noncurrent 5,841 5,859 Total liabilities 43,658 35,291 Commitments and contingencies (Note 14) PARTNERS’ CAPITAL Contributed capital 54,930 54,930 Accumulated earnings 262,204 246,250 Net partners’ capital 317,134 301,180 Total liabilities and partners' capital $ 360,792 $ 336,471 See accompanying notes to financial statements. F-84 Table of Contents ZEOLYST INTERNATIONAL STATEMENTS OF OPERATIONS AND ACCUMULATED EARNINGS (in thousands) Years ended December 31, 2021 2020 2019 Sales $ 183,772 $ 129,708 $ 161,725 Related party sales 78,892 127,538 178,950 Total sales 262,664 257,246 340,675 Cost of goods sold 59,626 85,392 84,566 Related party cost of goods sold 101,967 83,018 112,441 Total cost of goods sold 161,593 168,410 197,007 Gross profit 101,071 88,836 143,668 Selling, general and administrative expenses (SG&A) 5,632 3,146 3,857 Related party SG&A 28,333 32,204 37,085 Operating income 67,106 53,486 102,726 Interest expense, net 144 224 76 Other (income) expense, net 1,008 (178) (1,712) Net income 65,954 53,440 104,362 Accumulated earnings at beginning of year 246,250 272,810 248,448 Dividends paid (50,000) (80,000) (80,000) Accumulated earnings at end of year $ 262,204 $ 246,250 $ 272,810 See accompanying notes to financial statements. F-85 Table of Contents ZEOLYST INTERNATIONAL STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (in thousands) Contributed capital Accumulated earnings Net partners' capital Ecovyst, Inc.: Balance, January 1, 2019 $ 27,465 $ 124,224 $ 151,689 Dividends paid (40,000) (40,000) Net income 52,181 52,181 Balance, December 31, 2019 $ 27,465 $ 136,405 $ 163,870 Dividends paid (40,000) (40,000) Net income 26,720 26,720 Balance, December 31, 2020 $ 27,465 $ 123,125 $ 150,590 Dividends paid (25,000) (25,000) Net income 32,977 32,977 Balance, December 31, 2021 27,465 $ 131,102 $ 158,567 CRI Zeolites Inc.: Balance, January 1, 2019 $ 27,465 $ 124,224 $ 151,689 Dividends paid (40,000) (40,000) Net income 52,181 52,181 Balance, December 31, 2019 $ 27,465 $ 136,405 $ 163,870 Dividends paid $ (40,000) $ (40,000) Net income $ 26,720 $ 26,720 Balance, December 31, 2020 $ 27,465 $ 123,125 $ 150,590 Dividends paid $ (25,000) $ (25,000) Net income $ 32,977 $ 32,977 Balance, December 31, 2021 $ 27,465 $ 131,102 $ 158,567 Total partners' capital at December 31, 2017 $ 54,930 $ 242,740 $ 297,670 Total partners' capital at December 31, 2018 $ 54,930 $ 248,448 $ 303,378 Total partners' capital at December 31, 2019 $ 54,930 $ 272,810 $ 327,740 Total partners' capital at December 31, 2020 $ 54,930 $ 246,250 $ 301,180 Total partners' capital at December 31, 2021 $ 54,930 $ 262,204 $ 317,134 See accompanying notes to financial statements. F-86 Table of Contents ZEOLYST INTERNATIONAL STATEMENTS OF CASH FLOWS (in thousands) Years ended December 31, 2021 2020 2019 Cash flows from operating activities: Net income $ 65,954 $ 53,440 $ 104,362 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,460 17,397 17,845 Loss on sale or disposal of capital assets (5) 25 47 Amortization of deferred financing fees 45 30 — Gain on sale of investment — (372) (3,062) Net change in returns allowance 340 (713) 856 Net change in inventory reserve (96) — — Working capital changes that provided (used) cash: Receivables, including affiliates (37,238) 47,163 (24,598) Inventories (18,143) 29,623 (34,975) Other current assets (532) 58 175 Accounts payable, including affiliates 4,350 5,298 844 Other current liabilities 3,883 (811) (2,275) Net cash provided by operating activities 37,018 151,138 59,219 Cash flows from investing activities: Purchases of property, plant and equipment (5,054) (19,105) (26,388) Proceeds from sale of investment — 372 3,062 Net cash used in investing activities (5,054) (18,733) (23,326) Cash flows from financing activities: Proceeds from revolver — — 25,000 Payments on revolver — (15,000) (10,000) Revolver re-financing payments (150) (90) — Payments of cash dividends (50,000) (80,000) (80,000) Net cash used in financing activities (50,150) (95,090) (65,000) Net change in cash (18,186) 37,315 (29,107) Cash at beginning of period 47,837 10,522 39,629 Cash at end of period $ 29,651 $ 47,837 $ 10,522 Non-cash investing activity: Capital expenditures acquired on account but unpaid $ 1,969 $ 1,816 $ 6,506 See accompanying notes to financial statements. F-87 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) 1. Organization: Zeolyst International is a Kansas general partnership (“Partnership”) by and between Ecovyst Catalyst Technologies LLC (“Ecovyst”) and CRI Zeolites Inc. (“CRI”), a Royal Dutch Shell affiliate (collectively, the “Partners”) formed pursuant to a Partnership Agreement dated February 1, 1988, as amended (“the Agreement”). Pursuant to a Contribution, Assignment, and Assumption Agreement dated July 29, 2021 (the “Contribution Agreement”) by and between Ecovyst and PQ Corporation (“PQ”), PQ transferred and Ecovyst assumed PQ’s interest in the Partnership and the Agreement. The percentage interests as of December 31, 2021 and 2020 are as follows: Ecovyst 50% CRI 50% The Partnership was formed pursuant to the Kansas Uniform Partnership Act. The Agreement specifies that the partners share equally in capital contributions. The Agreement states that the profits and losses of the Partnership will be allocated in accordance with the partners’ interests in the Partnership. The intent of the Partnership is to develop, manufacture, and sell zeolites and zeolite-containing catalysts. The Partnership has significant transactions with its partners and related affiliates. Refer to the Related Party Transactions footnote for further disclosure. 2. Partnership Business: The Partnership manufactures zeolites and zeolytic catalysts that are used by refiners to capture impurities in the processing of petroleum and other chemicals. The filtration ability of zeolites placed into a customer’s chemical process generally extends two to three years. As a result, a significant portion of the Partnership’s customer base tends to change on an annual basis. A significant percentage of the base materials purchased for the Partnership’s manufacturing process is acquired from related parties. In addition, a significant portion of the Partnership’s sales is transacted through Criterion Catalyst Company (“Criterion”) which is a subsidiary of CRI. The Partnership compensates Criterion with a 2% sales commission or royalty fee on specific sales transactions. 3. Summary of Significant Accounting Policies: These financial statements have been prepared in accordance with generally accepted accounting principles. These financial statements are accounted for on a historical cost basis and do not reflect the results of any purchase accounting adjustments recorded in the Partners’ respective consolidated financial statements. Cash and Cash Equivalents. Cash and cash equivalents include investments with original terms to maturity of 90 days or less from the time of purchase. Trade Accounts Receivables and Allowance for Doubtful Accounts: Trade accounts receivables are recorded at the invoiced amount and do not bear interest. The Partnership maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Allowances for doubtful accounts are based on historical experience and known factors regarding specific customers. If the financial condition of the Partnership’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances would be required. Account balances are charged off against the allowance when it is probable the receivable will not be recovered. Inventories: Inventories are stated at the lower of cost or net realizable value, valued on the first-in, first-out (“FIFO”) method. The Partnership establishes reserves for slow-moving and obsolete inventory. Property, Plant and Equipment: Property, plant, and equipment are carried at cost and include expenditures for new facilities and major renewals and betterments. Interest is capitalized on capital projects as applicable. Maintenance, repairs and minor renewals are charged to expense as incurred. When assets are sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in the results of operations. F-88 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) Depreciation is generally provided on the straight-line method based on estimated useful lives of the assets, ranging up to 33 years for buildings and improvements and 10 years for machinery and equipment. We perform an impairment review of property, plant and equipment and other long-lived assets when events and circumstances indicate that those assets may be impaired by comparing the carrying amount of the assets to their fair value. Fair value is determined using quoted market prices where available, or other techniques including discounted cash flows. The Partnership’s estimates of future cash flows involve assumptions concerning future operating performance, economic conditions, and technological changes that may affect the future useful lives of the assets. Leases . The Partnership has an evergreen land lease agreement with a remaining lease term of 30 years as of December 31, 2021. Accounting Standards Codification Topic 842, Leases (“ASC 842”), does not provide definitive guidance as to determining the length of evergreen leasing arrangements. As such, the Partnership estimated the term of the lease agreement to be commensurate with the estimated useful life of the buildings located on the land that is being leased. Upon adoption of ASC 842 on January 1, 2019, the Partnership assigned a 33 year life to the land lease agreement. When the Company enters into an arrangement, at inception, the Partnership determines if the arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. The Partnership’s lease arrangement only contains lease components. The Partnership’s lease agreement does not contain any material residual value guarantees or material restrictive covenants. The Partnership recognizes a right-of-use lease asset and lease liability at the lease commencement date based on the present value of the remaining lease payments over the lease term. The Partnership was unable to readily determine the discount rate implicit in the lease agreement in accordance with the policy. As such, the Partnership utilized its incremental borrowing rate over the relevant lease term, which is the rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Short-term leases, which have an initial term of twelve months or less, are not recorded on the Partnership’s balance sheet. Lease expense for the operating lease is recognized on a straight-line basis over the lease term. The amortization expense component of the right-of-use lease asset is included in cost of goods sold and in selling, general and administrative expenses on the consolidated statements of income. Intangibles and Other Long-term Assets: Other long-term assets primarily include intangible assets, at cost and spare parts. In April 2018, the Partnership made a $4,000 strategic investment to buy down royalty obligations related to certain license agreements. On May 10, 2017, the Partnership made a $6,500 strategic investment for license of materials-based solutions for catalytic and separations processes. The Partnership amortizes these intangible assets over a ten-year period and includes the expense in selling, general and administrative expenses on its statements of operations. These investments are accounted for under the cost method of accounting. The Partnership incurred intangible asset related amortization expense of $1,050 for each of the years ended December 31 2021, 2020 and 2019, respectively. Revenue Recognition: In determining the appropriate amount of revenue to be recognized as the Partnership fulfills its obligations under its agreements, the Partnership performs the following steps: (i) identification of the contract with the customer; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Partnership satisfies each performance obligation. The Partnership 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 Partnership will collect the consideration to which it is entitled. The Partnership may offer rebates to customers who have reached a specified volume of optional purchases. The Partnership recognizes rebates given to customers as a reduction of revenue based on an allocation of the cost of honoring rebates earned and claimed to each of the underlying revenue transactions that result in progress by the customer toward earning the rebate. Rebates are recognized at the time revenue is recorded. The Partnership measures F-89 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) the rebate obligation based on the estimated amount of sales that will result in a rebate at the adjusted sales price per the respective sales agreement. The Partnership recognizes revenue when all essential elements of the sales order have shipped and both title and risk of loss has passed to the customer. Hydrocracking and specialty catalyst orders are typically filled by a number of individual shipments, and those shipments may span the end of a fiscal quarter or year. If a portion of the order has not shipped and it is essential to the functionality of the customer’s end use, revenue is recognized when the order is completed. A shipment is considered essential if each individual shipment has no value to the customer on a stand-alone basis and if the remaining shipment is not considered inconsequential and perfunctory. The Partnership reserves 3% of the Hydrocracking Catalyst sales due to a clause in the contract that allows customers to return up to 5% of the unused products they purchase within 90 days, and based on historical experience. The total sales returns reserve as of December 31, 2021 and 2020 amounted to $1,015 and $677, respectively. Shipping and Handling Costs: The Partnership classifies costs related to shipping and handling of products shipped to customers as cost of goods sold. Research and Development: Research and development costs of $13,068, $13,554 and $17,468 for the years ended December 31, 2021, 2020 and 2019, respectively, were expensed as incurred and reported in selling, general and administrative expenses in the accompanying statements of operations. Costs include salaries, contractor fees, building costs, utilities, and administrative expenses. Foreign Exchange Transactions: The functional currency of the Partnership is the U.S. Dollar. The Partnership enters into transactions that are denominated in other currencies. Gains and losses on foreign currency transactions are included in other (income) / expense, net on the statements of operations. Foreign exchange loss of $1,551, gain of $41 and loss of $967 were recognized for the years ended December 31, 2021, 2020 and 2019, respectively. Fair Value Measurements: The Partnership’s financial assets and liabilities are reflected in the financial statements at amortized cost which approximates fair market value. Fair value is defined as the price at which an asset could be exchanged in a current transaction between willing market participants. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a market participant, not the amount that would be paid to settle the liability with a creditor. The Partnership’s cash balances approximate fair value due to their short-term maturity. Use of Estimates: The preparation of the Partnership’s financial statements in conformity with generally accepted accounting principles requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 4. Recently Issued Accounting Standards: Recently Adopted Accounting Standards In February 2016, the FASB issued guidance (with subsequent targeted amendments) that modifies the accounting for leases. Under the new guidance, a lessee will recognize assets and liabilities for most leases (including those classified under existing GAAP as operating leases, which based on current standards are not reflected on the balance sheet), but will recognize expenses similar to current lease accounting. The new guidance also requires companies to provide expanded disclosures regarding leasing arrangements. The guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The new guidance must be adopted using a modified retrospective transition method. The Partnership can choose to apply the new guidance at the beginning of the earliest period presented in the financial statements, or at the date of adoption, with a cumulative-effect adjustment to the opening balance of retained earnings and no recast of prior period results presented within the Partnership’s financial statements. The Partnership adopted the new guidance as of January 1, 2019 (date of adoption) and has included all relevant disclosures within Note 3 and Note 9 to these financial statements. 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. The new guidance is F-90 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Partnership adopted the new guidance effective January 1, 2020, with no material impact to the Partnership’s consolidated financial position, results of operations or cash flows. Accounting Standards Not Yet Adopted as of December 31, 2021 In March 2020 and January 2021, the Financial Accounting Standards Board 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. The Partnership continues to evaluate the impact of the guidance and may apply elections as applicable as additional changes in the market occur. 5. Revenue from Contracts with Customers: The Partnership applies the five-step revenue recognition model to each contract with its customers. Evidence of a contract between the Partnership and its customers may take the form of a master service agreement (“MSA”), a MSA in combination with an underlying purchase order, a combination of a pricing quote with an underlying purchase order or an individual purchase order received from a customer. The Partnership and certain of its customers enter into MSAs that establish the terms, including prices, under which orders to purchase goods may be placed. In cases where the MSA contains a distinct order for goods or contains an enforceable minimum quantity to be purchased by the customer, the Partnership considers the MSA to be evidence of a contract between the Partnership and its customer as the MSA creates enforceable rights and obligations. In cases where the MSA does not contain a distinct order for goods, the Partnership’s contract with a customer is the purchase order issued under the MSA. Customers of the Partnership may also negotiate orders via pricing quotes, which typically detail product pricing, delivery terms and payment information. When a customer procures goods under this method, the Partnership considers the combination of the pricing quote and the purchase order to create enforceable rights and obligations. Absent either a MSA or pricing quote, the Partnership considers an individual purchase order to create enforceable rights and obligations. The Partnership identifies a performance obligation in a contract for each promised good that is separately identifiable from other promises in the contract and for which the customer can benefit from the good. The Partnership’s contracts have a single performance obligation, which is the promise to transfer individual goods to the customer. Single performance obligations are satisfied according to the shipping terms noted within the MSA or purchase order. As described above, the Partnership’s MSAs with its customers may outline prices for individual products or contract provisions. 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 Partnership and its customers. The Partnership recognizes revenues when performance obligations under the terms of a contract with its customer are satisfied, which generally occurs at a point in time by transferring control of a product to the customer. The Partnership determines the point in time when a customer obtains control of a product and the Partnership satisfies the performance obligation by considering factors including when the Partnership has a right to payment for the product, the customer has legal title to the product, the Partnership has transferred possession of the product, the customer has assumed the risks and rewards of ownership of the product and the customer has accepted the product. Revenue is measured as the amount of consideration the Partnership expects to receive in exchange for transferring goods. The Partnership does not have any significant payment terms as payment is received at, or shortly after, the point of sale. Contract Assets and Liabilities A contract asset is a right to consideration in exchange for goods that the Partnership has transferred to a customer when that right is conditional on something other than the passage of time. A contract liability exists when the Partnership receives consideration in advance of performance obligations. The Partnership has not recorded any contract assets or contract liabilities on its balance sheet as of December 31, 2021 and 2020. F-91 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) Practical Expedients and Accounting Policy Elections The Partnership has elected to use certain practical expedients and has made certain accounting policy elections as permitted under the new revenue recognition guidance. Certain of the Partnership’s contracts with customers are based on an individual purchase order; thus, the duration of these contracts are for one year or less. The Partnership has made an accounting policy election to omit certain disclosures related to remaining performance obligations for contracts which have an initial term of one year or less. The Partnership uses an output method to recognize revenues related to performance obligations. These performance obligations, as described above, are satisfied within a calendar year. As such, the Partnership has elected to utilize the “as-invoiced” practical expedient, which permits the Partnership to recognize revenue in the amount to which it has a right to invoice the customer, provided that the amount corresponds directly with the value provided by the performance obligation as completed to date. When the Partnership performs shipping and handling activities after the transfer of control to the customer (e.g. when control transfers prior to delivery), they are considered fulfillment activities as opposed to separate performance obligations, and the Partnership recognizes revenue upon the transfer of control to the customer. Accordingly, the costs associated with these shipping and handling activities are accrued when the related revenue is recognized under the Partnership’s policy election. The Partnership expenses incremental costs of obtaining a contract as incurred if the expected amortization period of the asset that the Partnership would have recognized is one year or less. Sales, value added and other taxes the Partnership collects concurrent with revenue producing activities are excluded from revenues. Disaggregated Revenue The following table disaggregates the Partnership’s sales by end use for the year ended December 31, 2021, 2020, and 2019: Years ended December 31, 2021 2020 2019 Fuels and Emission Controls $ 165,086 $ 185,722 $ 245,926 Packaging & Engineered Plastics 97,578 71,524 94,749 Total $ 262,664 $ 257,246 $ 340,675 6. Accounts Receivable and Allowance for Doubtful Accounts: The components of accounts receivable are as follows: December 31, 2021 2020 Trade accounts receivable $ 71,362 $ 34,124 Allowance (1,016) (676) $ 70,346 $ 33,448 F-92 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) 7. Inventories: Inventories were classified and valued as follows: December 31, 2021 2020 Finished products and work in process $ 110,926 $ 92,128 Raw materials and containers 5,554 6,113 $ 116,480 $ 98,241 8. Property, Plant and Equipment: A summary of property, plant and equipment, at cost, and related accumulated depreciation is as follows: December 31, 2021 2020 Land and buildings $ 68,329 $ 49,831 Machinery and equipment 213,684 176,401 Construction in progress 891 51,655 282,904 277,887 Less: accumulated depreciation (152,019) (135,016) $ 130,885 $ 142,871 Depreciation expense was $17,197, $16,134 and $16,582 for the years ended December 31, 2021, 2020, and 2019, respectively. Disposal of assets reduced PP&E and accumulated depreciation by $192, $4,268, and $8,356, respectively with a $5 increase, a $25 reduction, and a $47 reduction to earnings for the years ended December 31, 2021, 2020, and 2019, respectively. 9. Leases: Operating lease costs of $310 are included in cost of goods sold on the consolidated statements of income for the year ended December 31, 2021. The weighted average lease term is 30 years with a weighted average discount rate of 3.25%. Cash payments on operating leases included in operating cash flows was $310 for the year ended December 31, 2021. The current portion of the lease liability is included on the Partnership’s balance sheet in other current liabilities. Finance lease costs for the year ended December 31, 2021 is $0. Maturities of lease liabilities as of December 31, 2021 are as follows: F-93 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) Operating Lease 2022 $ 310 2023 310 2024 310 2025 310 2026 310 Thereafter 7,750 Total lease payments 9,300 Less: Interest (3,350) Total lease liabilities $ 5,950 10. Other Current Liabilities: A summary of other current liabilities is as follows: December 31, 2021 2020 Accrued royalties and license fees $ 487 $ 224 Accrued commissions 2,425 713 Accrued other 3,936 2,028 $ 6,848 $ 2,965 11. Revolver: On March 2, 2016, the Partnership entered into a five-year revolving line of credit facility of $60,000, which carries an initial interest rate of LIBOR. On May 26, 2020 this agreement was initially amended and extended to May 25, 2022. On November 30, 2021, this agreement was amended and extended to November 29, 2026. The interest rate on the facility is LIBOR plus an interest margin of 1.00% per annum. A commitment fee is paid to the bank for this agreement. As of December 31, 2021, availability under this agreement was $60,000. The revolving credit agreement contains certain restrictions and covenants that require the Partnership to maintain a minimum partners’ equity, as defined, of $200,000 plus 10% of net income, and a minimum EBITDA of $40,000 on a last twelve month basis measured quarterly. The Partnership was in compliance with all covenants during 2021. Cash payments for interest were approximately $150, $225 and $134 for the years ended December 31, 2021, 2020 and 2019, respectively. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction. The carrying amount of the revolving line of credit approximates fair value because it is a short- term liquidity tool to fund operations, which is drawn down and paid back with cash generated from operations. 12. Partners’ Contributions: In accordance with the Agreement, in the event that cash flow from operations is insufficient to meet the Partnership’s requirements, following a majority vote by the Management Committee of the Partnership to request capital from the partners, the partners will provide additional capital to enable the Partnership to meet its obligations. No such contributions were made during the years ended December 31, 2021, 2020, or 2019 as the Partnership had the ability to finance operations through cash flow from operations and borrowings under the Partnership’s revolving line of credit facility. F-94 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) 13. Income Taxes: As a partnership, Zeolyst International is not liable for the payment of taxes on income in the U.S. Net income and losses are allocated to the respective partners on an annual basis, and it is the partners’ responsibility to pay income taxes, if any, thereon according to their respective tax positions. F-95 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) 14. Commitments and Contingent Liabilities: In 1998, the Partnership entered into a ten year tolling agreement (“the Tolling Agreement”) with CRI Belgium, a related party, for the manufacture of specialty extruded products. Effective January 2004, the 1998 Tolling Agreement was replaced by a new evergreen ten-year tolling agreement with CRI Belgium. Both parties can terminate this agreement without cause with twenty-four months’ notice. The Partnership pays CRI Belgium a daily charge rate based on the actual days of production. This charge is included in related party cost of goods sold and totaled $19,617, $15,700 and $27,811 for the years ended December 31, 2021, 2020 and 2019, respectively. In addition, for certain capital expenditures, that are beneficial to the Partnership, the parties will mutually agree on future adjustments to the daily charge rates or propose an alternative method of the Partnership’s contribution to those costs. During 2007, the Partnership entered into a License Agreement with a third party to obtain exclusive licensing rights to use the technology in the manufacturing, using and selling of Powder catalyst and Shaped catalyst. The consideration for the licensing rights includes (1) a down payment of $3,200 payable in six annual installments to acquire the product license, and (2) royalty payments at a rate of 10% of the Powder and Shaped Net Sale price during the royalty period. As of December 31, 2021, the partnership has paid in full the $3,200 down payment. The product license intangible is being amortized over the life of the agreement on a straight-line basis, which is estimated to be 15 years. Amortization expense of $213 was recognized in 2021, 2020 and 2019. The royalty period of 10 years began in 2013, immediately after the date on which the Partnership had cumulatively produced the first 250 metric tons of Powder and Shaped catalyst. If at the end of the Royalty Period, the cumulative of running royalties actually paid by the Partnership is less than $3,000, the Partnership will be obligated to pay the difference between the $3,000 and the actual cumulative running royalty amount. As of December 31, 2021 and 2020 there were $200 and $200, respectively, liabilities recorded related to this agreement. 15. Related Party Transactions: Policies and Procedures The Partnership maintains certain policies and procedures for the review, approval, and ratification of related party transactions. All significant relationships and transactions are separately identified by management if they meet the definition of a related party or a related party transaction. Related party transactions include transactions that occurred during the year, in which the Partnership was or will be a participant and which any related person had or will have a direct or indirect material interest. Due to the nature of the Partnership, material related party transactions are identified on a transaction-based approach. The types of transactions identified and reviewed include, but are not limited to, sales of products, purchases of inventory, tolling costs, sales and marketing costs, research and development, and management-related fees. All related party transactions are reviewed, approved and documented by the appropriate level of the Partnership’s management in accordance with these policies and procedures. Ecovyst Pursuant to the Contribution Agreement, PQ transferred and Ecovyst assumed PQ’s interest in a Lease Agreement by and between PQ and the Partnership dated February 1, 1988 (the “Lease”) pursuant to which the Partnership leases certain land used in its Kansas City production facilities, and PQ transferred to Ecovyst the land underlying the Partnership’s Kansas City production facility. The Lease, which has been recorded as an operating lease, provided for rental payments of $310, $310, and $305 for the years ended December 31, 2021, 2020 and 2019, respectively. The rent expense is included in the related party cost of goods sold line item in the accompanying statements of operations. The term of the Lease continues as long as the Agreement is in effect. The Partnership purchases certain of its raw materials from Ecovyst and is charged for various manufacturing costs incurred at the Ecovyst Kansas City production facility. The amount of these costs charged to the Partnership by PQ and Ecovyst during the years ended December 31, 2021, 2020 and 2019 were $21,778, $16,065 and $19,976, respectively. These costs are a component of production costs and are included in the related party cost of goods sold line item in the accompanying statements of operations when the inventory is sold. Certain administrative, marketing, engineering, management-related, and research and development services are provided to the Partnership by Ecovyst. During the years ended December 31, 2021, 2020 and 2019, the Partnership was charged by PQ and Ecovyst $11,406, $12,229 and $12,871, respectively, for these services. These amounts are included in the related party selling, general and administrative line item in the accompanying statements of F-96 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) operations. In addition, certain product demonstration costs of $924, $1,853 and $2,204 during the years ended December 31, 2021, 2020 and 2019, respectively, were recorded in the related party cost of goods sold line of the accompanying statements of operations. The Partnership recognized sales to PQ and Ecovyst of $0, $861, and $803 to a wholly owned subsidiary of PQ in the years ended December 31, 2021, 2020, and 2019, respectively. As of December 14, 2020 PQ divested its ownership of this subsidiary. The Partnership reported activity prior to the date of sale as related party. Subsequent to the date of sale, the Partnership includes this activity as third party. At December 31, 2021 and 2020, the accounts payable to affiliates consisted of $2,943 due to Ecovyst and $2,166 due to PQ. Included in trade accounts receivable at December 31, 2021 and 2020 was $0 due from Ecovyst and $0 due from PQ, respectively. On December 18, 2013, PQ and ZI, entered into a real estate tax abatement agreement with the Unified Government of Wyandotte County and Kansas City, Kansas, assigned by PQ to Ecovyst in 2021, that will utilize an Industrial Revenue Bond financing structure to achieve a 75% real estate tax abatement on the value of the improvements that will be constructed during the expansion of Ecovyst’s and ZI’s facilities at the jointly-operated Kansas City, Kansas plant. During the year ended December 31, 2020, the original IRB financing structure from December 2013 was exhausted. In order to fund future plant expansions, the Company entered into an additional IRB financing structure with similar terms and conditions, which also provides for 75% real estate tax abatements on the value of future improvements. 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 setoff conditions under GAAP. CRI and Royal Dutch Shell Affiliates Royal Dutch Shell affiliates include CRI, Criterion, Shell Development Company, Shell Research and Technology Center-Amsterdam, CRI Center Marketing Asia Pacific, Shell International Oil Products, CRI Belgium and CRI Technology Services. As described in Note 2, a significant portion of the Partnership’s sales are transacted through Criterion. During the years ended December 31, 2021, 2020 and 2019 the Partnership recognized sales transacted through Criterion of $78,892, $126,677 and $178,148, respectively. The Partnership purchases certain of its raw materials and is charged for tolling, customer distribution and packaging costs incurred by Criterion. The amount of these costs charged to the Partnership during the years ended December 31, 2021, 2020 and 2019 were $24,590, $21,686 and $38,988, respectively. These costs are a component of production costs and are included in the related party cost of goods sold line item in the accompanying statements of operations when the inventory is sold. Certain engineering, management-related, broker-related, and research and development services are provided to the Partnership by CRI and Royal Dutch Shell affiliates. During the years ended December 31, 2021, 2020 and 2019, the Partnership was charged $16,927, $19,975 and $24,214, respectively, for these services. These amounts are included in the related party selling, general and administrative line item in the accompanying statements of operations. At December 31, 2021 and 2020, the accounts payable to affiliates balance consisted of $9,498 and $6,727, respectively, due to CRI and Shell affiliates. Included in trade accounts receivable at December 31, 2021 and 2020 was $42,138 and $9,132, respectively, of receivables related to sales transacted through Criterion, as described above. Zeolyst C.V. Zeolyst C.V. is a limited partnership formed in 1993 pursuant to a joint venture agreement between PQ Zeolites B.V. and CRI for the purpose of the production of Zeolite powders. The Partnership entered into an agreement with Zeolyst C.V. to purchase Zeolite powders manufactured by Zeolyst C.V. Under the terms of the agreement, products manufactured by Zeolyst C.V. are supplied solely to the Partnership. The Partnership has performed a qualitative and quantitative analysis and concluded that for Zeolyst C.V. for which it holds a variable interest but will not absorb a majority of the expected losses or residual returns, the Partnership is not the primary beneficiary and therefore, this VIE was not consolidated in the Partnership’s consolidated financial statements. The Partnership has no unfunded commitments or guarantees as a result of its involvement with Zeolyst C.V. The total carrying value of assets and liabilities for Zeolyst C.V was $109,050 and $7,150 as of December 31, 2021 and was $135,717 and $6,688 as of December 31, 2020, respectively. The Partnership currently does not have any exposure to any losses by Zeolyst C.V. F-97 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) The Partnership has purchased $54,366, $43,104 and $50,968 through the sales agreement during the years ended December 31, 2021, 2020 and 2019, respectively. These costs are a component of production costs and are included in the related party cost of goods sold line item in the accompanying statements of operations when the inventory is sold. At December 31, 2021 and 2020, the accounts payable to affiliates balance consisted of $4,990 and $12,173, respectively, due to Zeolyst C.V. 16. Subsequent Events: In preparing these financial statements, management has evaluated events and transactions for potential recognition or disclosure through March 1, 2022, the date the financial statements were available to be issued. During the period from January 1, 2022 through March 1, 2022, the Partnership had no material subsequent events that were not reflected in the financial statements. F-98