Ecovyst Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) ECOVYST INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per share amounts) (unaudited) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Sales $ 232,533 $ 167,428 $ 637,419 $ 441,004 Cost of goods sold 164,864 113,784 462,156 318,768 Gross profit 67,669 53,644 175,263 122,236 Selling, general and administrative expenses 21,460 24,836 67,779 68,822 Other operating expense, net 7,673 6,314 25,101 16,786 Operating income 38,536 22,494 82,383 36,628 Equity in net (income) from affiliated companies ( 3,169 ) ( 8,758 ) ( 17,422 ) ( 20,723 ) Interest expense, net 9,542 9,005 26,880 28,202 Debt extinguishment costs — 15,185 — 26,902 Other expense (income), net 1,872 ( 218 ) 2,497 3,081 Income (loss) from continuing operations before income taxes and noncontrolling interest 30,291 7,280 70,428 ( 834 ) Provision for income taxes 8,966 2,591 21,983 5,095 Net income (loss) from continuing operations 21,325 4,689 48,445 ( 5,929 ) Net loss from discontinued operations, net of tax — ( 75,872 ) — ( 159,122 ) Net income (loss) 21,325 ( 71,183 ) 48,445 ( 165,051 ) Less: Net income attributable to the noncontrolling interest—discontinued operations — 76 — 333 Net income (loss) attributable to Ecovyst Inc. $ 21,325 $ ( 71,259 ) $ 48,445 $ ( 165,384 ) Income (loss) from continuing operations attributable to Ecovyst Inc. $ 21,325 $ 4,689 $ 48,445 $ ( 5,929 ) Loss from discontinued operations attributable to Ecovyst Inc. — ( 75,948 ) — ( 159,455 ) Net income (loss) attributable to Ecovyst Inc. $ 21,325 $ ( 71,259 ) $ 48,445 $ ( 165,384 ) Net income (loss) per share: Basic income (loss) per share—continuing operations $ 0.16 $ 0.03 $ 0.36 $ ( 0.04 ) Diluted income (loss) per share—continuing operations $ 0.16 $ 0.03 $ 0.35 $ ( 0.04 ) Basic loss per share—discontinued operations $ — $ ( 0.56 ) $ — $ ( 1.17 ) Diluted loss per share—discontinued operations $ — $ ( 0.55 ) $ — $ ( 1.17 ) Basic income (loss) per share $ 0.16 $ ( 0.52 ) $ 0.36 $ ( 1.22 ) Diluted income (loss) per share $ 0.16 $ ( 0.52 ) $ 0.35 $ ( 1.22 ) Weighted average shares outstanding: Basic 132,622,105 136,129,591 136,115,598 136,111,555 Diluted 134,096,839 137,354,427 137,666,215 136,111,555 See accompanying notes to condensed consolidated financial statements. 3 Table of Contents ECOVYST INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (unaudited) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Net income (loss) $ 21,325 $ ( 71,183 ) $ 48,445 $ ( 165,051 ) Other comprehensive income (loss), net of tax: Pension and postretirement benefits ( 962 ) 4,833 ( 1,040 ) 4,748 Net gain from hedging activities 9,141 460 27,620 1,638 Foreign currency translation ( 7,207 ) ( 7,884 ) ( 17,506 ) 418 Total other comprehensive income (loss) 972 ( 2,591 ) 9,074 6,804 Comprehensive income (loss) 22,297 ( 73,774 ) 57,519 ( 158,247 ) Less: Comprehensive income attributable to noncontrolling interests — 740 — 1,056 Comprehensive income (loss) attributable to Ecovyst Inc. $ 22,297 $ ( 74,514 ) $ 57,519 $ ( 159,303 ) See accompanying notes to condensed consolidated financial statements. 4 Table of Contents ECOVYST INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) (unaudited) September 30, 2022 December 31, 2021 ASSETS Cash and cash equivalents $ 121,446 $ 140,889 Accounts receivable, net 106,969 80,802 Inventories, net 49,729 53,813 Prepaid and other current assets 46,070 16,165 Total current assets 324,214 291,669 Investments in affiliated companies 426,663 446,074 Property, plant and equipment, net 581,425 596,231 Goodwill 401,152 406,139 Other intangible assets, net 132,347 145,617 Right-of-use lease assets 29,712 30,115 Other long-term assets 36,282 15,374 Total assets $ 1,931,795 $ 1,931,219 LIABILITIES Current maturities of long-term debt $ 9,000 $ 9,000 Accounts payable 52,026 51,860 Operating lease liabilities—current 8,576 8,306 Accrued liabilities 65,071 75,915 Total current liabilities 134,673 145,081 Long-term debt, excluding current portion 867,604 872,839 Deferred income taxes 148,022 126,749 Operating lease liabilities—noncurrent 21,024 21,719 Other long-term liabilities 20,947 24,094 Total liabilities 1,192,270 1,190,482 Commitments and contingencies (Note 17) EQUITY Common stock ($ 0.01 par); authorized shares 450,000,000 ; issued shares 139,485,868 and 137,820,971 on September 30, 2022 and December 31, 2021, respectively; outstanding shares 130,100,834 and 136,938,758 on September 30, 2022 and December 31, 2021, respectively 1,395 1,378 Preferred stock ($ 0.01 par); authorized shares 50,000,000 ; no shares issued or outstanding on September 30, 2022 and December 31, 2021 — — Additional paid-in capital 1,088,704 1,073,409 Accumulated deficit ( 267,262 ) ( 315,707 ) Treasury stock, at cost; shares 9,385,034 and 882,213 on September 30, 2022 and December 31, 2021, respectively ( 86,594 ) ( 12,551 ) Accumulated other comprehensive income (loss) 3,282 ( 5,792 ) Total equity 739,525 740,737 Total liabilities and equity $ 1,931,795 $ 1,931,219 See accompanying notes to condensed consolidated financial statements. 5 Table of Contents ECOVYST INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) (unaudited) Common stock Additional paid-in capital (Accumulated deficit) Treasury stock, at cost Accumulated other comprehensive income (loss) Non- controlling interest Total Balance, December 31, 2021 $ 1,378 $ 1,073,409 $ ( 315,707 ) $ ( 12,551 ) $ ( 5,792 ) $ — $ 740,737 Net income — — 7,875 — — — 7,875 Other comprehensive income — — — — 11,378 — 11,378 Tax withholdings on equity award vesting — — — ( 332 ) — — ( 332 ) Stock compensation expense — 5,946 — — — — 5,946 Shares issued under equity incentive plan, net of forfeitures 18 9 — — — — 27 Balance, March 31, 2022 $ 1,396 $ 1,079,364 $ ( 307,832 ) $ ( 12,883 ) $ 5,586 $ — $ 765,631 Net income — — 19,245 — — — 19,245 Other comprehensive loss — — — — ( 3,276 ) — ( 3,276 ) Repurchases of common shares — — — ( 8,842 ) — — ( 8,842 ) Stock compensation expense — 5,409 — — — — 5,409 Shares issued under equity incentive plan, net of forfeitures — 17 — — — — 17 Balance, June 30, 2022 $ 1,396 $ 1,084,790 $ ( 288,587 ) $ ( 21,725 ) $ 2,310 $ — $ 778,184 Net income — — 21,325 — — — 21,325 Other comprehensive income — — — — 972 — 972 Repurchases of common shares — — — ( 64,869 ) — — ( 64,869 ) Stock compensation expense — 3,872 — — — — 3,872 Shares issued under equity incentive plan, net of forfeitures ( 1 ) 42 — — — — 41 Balance, September 30, 2022 $ 1,395 $ 1,088,704 $ ( 267,262 ) $ ( 86,594 ) $ 3,282 $ — $ 739,525 6 Table of Contents Common stock Additional paid-in capital (Accumulated deficit) Treasury stock, at cost Accumulated other comprehensive loss Non- controlling interest Total Balance, December 31, 2020 $ 1,371 $ 1,477,859 $ ( 175,758 ) $ ( 11,081 ) $ ( 15,265 ) $ 53 $ 1,277,179 Net (loss) income — — ( 92,635 ) — — 117 ( 92,518 ) Other comprehensive loss — — — — ( 2,745 ) ( 394 ) ( 3,139 ) Tax withholdings on equity award vesting — — — ( 1,470 ) — — ( 1,470 ) Distributions to noncontrolling interests — — — — — ( 516 ) ( 516 ) Stock compensation expense — 6,877 — — — — 6,877 Shares issued under equity incentive plan, net of forfeitures 7 63 — — — — 70 Balance, March 31, 2021 $ 1,378 $ 1,484,799 $ ( 268,393 ) $ ( 12,551 ) $ ( 18,010 ) $ ( 740 ) $ 1,186,483 Net (loss) income — — ( 1,490 ) — — 140 ( 1,350 ) Other comprehensive income — — — — 12,081 453 12,534 Distributions to noncontrolling interests — — — — — ( 593 ) ( 593 ) Stock compensation expense — 7,499 — — — — 7,499 Shares issued under equity incentive plan, net of forfeitures — 36 — — — — 36 Balance, June 30, 2021 $ 1,378 $ 1,492,334 $ ( 269,883 ) $ ( 12,551 ) $ ( 5,929 ) $ ( 740 ) $ 1,204,609 Net (loss) income — — ( 71,259 ) — — 76 ( 71,183 ) Other comprehensive income (loss) — — — — ( 3,255 ) 664 ( 2,591 ) Dividends paid on common stock ($ 3.20 per share) — ( 435,593 ) — — — — ( 435,593 ) Stock compensation expense — 11,961 — — — — 11,961 Shares issued under equity incentive plan, net of forfeitures — 113 — — — — 113 Balance, September 30, 2021 $ 1,378 $ 1,068,815 $ ( 341,142 ) $ ( 12,551 ) $ ( 9,184 ) $ — $ 707,316 See accompanying notes to condensed consolidated financial statements. 7 Table of Contents ECOVYST INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Nine months ended September 30, 2022 2021 Cash flows from operating activities: Net income (loss) $ 48,445 $ ( 165,051 ) Net loss from discontinued operations — 159,122 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 48,256 49,902 Amortization 10,547 10,182 Amortization of deferred financing costs and original issue discount 1,515 1,409 Debt extinguishment costs — 12,818 Foreign currency exchange loss 2,179 4,803 Pension and postretirement healthcare benefit ( 814 ) ( 1,811 ) Deferred income tax provision 12,454 4,256 Net loss on asset disposals 1,174 4,535 Stock compensation 17,419 22,837 Equity in net income from affiliated companies ( 17,422 ) ( 20,723 ) Dividends received from affiliated companies 30,000 20,000 Other, net ( 1,789 ) 8,515 Working capital changes that provided (used) cash, excluding the effect of acquisitions and dispositions: Receivables ( 28,443 ) ( 33,830 ) Inventories 3,206 6,120 Prepaids and other current assets ( 5,223 ) ( 8,405 ) Accounts payable 1,954 10,096 Accrued liabilities ( 14,133 ) 7,511 Net cash provided by operating activities, continuing operations 109,325 92,286 Net cash used by operating activities, discontinued operations — ( 7,420 ) Net cash provided by operating activities 109,325 84,866 Cash flows from investing activities: Purchases of property, plant and equipment ( 39,474 ) ( 44,648 ) Proceeds from business divestiture, net of cash — 980,350 Payments for business divestiture, net of cash ( 3,744 ) — Business combinations, net of cash acquired ( 488 ) ( 42,782 ) Other, net 81 ( 8 ) Net cash (used in) provided by investing activities, continuing operations ( 43,625 ) 892,912 Net cash used in investing activities, discontinued operations — ( 40,943 ) Net cash (used in) provided by investing activities ( 43,625 ) 851,969 Cash flows from financing activities: Issuance of long-term debt, net of discount — 897,750 Debt issuance costs — ( 1,293 ) Repayments of long-term debt ( 6,750 ) ( 1,428,613 ) Debt prepayment fees — ( 8,481 ) Proceeds from failed sale-leaseback — 14,590 Dividends paid to stockholders — ( 435,593 ) Repurchases of common shares ( 73,711 ) — Tax withholdings on equity award vesting ( 332 ) ( 1,470 ) Proceeds from stock options exercised 84 223 Repayment of financing obligations ( 1,849 ) ( 486 ) Other, net — ( 104 ) Net cash used in financing activities, continuing operations ( 82,558 ) ( 963,477 ) Net cash used in financing activities, discontinued operations — ( 1,144 ) Net cash used in financing activities ( 82,558 ) ( 964,621 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 2,585 ) ( 4,681 ) Net change in cash and cash equivalents ( 19,443 ) ( 32,467 ) Cash and cash equivalents at beginning of period 140,889 137,219 Cash and cash equivalents at end of period $ 121,446 $ 104,752 For supplemental cash flow disclosures, see Note 21. See accompanying notes to condensed consolidated financial statements. 8 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 1. Background and Basis of Presentation: Description of Business Ecovyst Inc. and subsidiaries (the “Company” or “Ecovyst”) 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. On December 14, 2020, the Company completed the sale of its Performance Materials business, and on August 1, 2021, the Company completed the sale of its Performance Chemicals business. The financial results of these businesses are presented as discontinued operations in the condensed consolidated financial statements for the 2021 period presented. See Note 3 to these condensed consolidated financial statements for more information on these transactions. 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 the Zeolyst Joint Venture, supplies zeolites used for catalysts that help produce renewable fuels, remove nitrogen oxides 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 condensed consolidated financial statements, unless otherwise indicated, are on a continuing operations basis. Basis of Presentation The condensed consolidated financial statements included herein are unaudited. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations for interim reporting. In the opinion of management, all adjustments of a normal and recurring nature necessary to state fairly the financial position and results of operations have been included. The results of operations are not necessarily indicative of the expected results for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Reclassification and Correction of an Error During the preparation of the condensed consolidated financial statements for the period ended September 30, 2022, the Company identified a presentation error in the condensed consolidated statements of comprehensive income for the 2021 comparable periods presented. The presentation of comprehensive income (loss) inadvertently omitted the release of accumulated other comprehensive income (loss) related to foreign currency translation and deferred pension and postretirement benefit plan losses in conjunction with the sale of the Company’s Performance Chemicals business. There was no impact on the condensed consolidated statements of income, condensed consolidated balance sheets and condensed consolidated statements of cash flows. The presentation of other comprehensive income (loss) for the three and nine months ended September 30, 2021, was corrected for the additional comprehensive loss of $ 7,093 , of which $ 943 of comprehensive income was attributed to noncontrolling interest. Additionally, Note 6 was corrected for this presentation error. The Company assessed the materiality of the error and concluded it was not material to the Company’s previously issued financial statements, including the consolidated financial statements for the year ended December 31, 2021. The previously disclosed disposal of business presented in accumulated other comprehensive income (loss) has been reclassified to other comprehensive income (loss) in the condensed consolidated statement of stockholders’ equity. 9 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 2. New Accounting Standards: Recently Adopted Accounting Standards 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 the new disclosures required on an annual basis, and can be applied either prospectively or retrospectively. The Company adopted the new guidance on January 1, 2022 and will include the disclosures as required in its annual reporting with respect to any government assistance or grants subject to the scope of the guidance to the extent material. Accounting Standards Not Yet Adopted 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 matches the index of the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. During the year ended December 31, 2021, the FASB extended the guidance adoption date to June 30, 2023. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. 3. Divestitures: Performance Materials Divestiture Upon the close of the Performance Materials divestiture transaction on December 14, 2020, the Company entered into a Transition Services Agreement with the buyer pursuant to which the buyer received 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 included information technology, accounting, tax, financial services, human resources, facilities, and other administrative support services. These services were provided for a period of nine months, with three 30-day extensions available. The Company billed $ 253 and $ 3,314 under the Transition Services Agreement to the buyer during the three and nine months ended September 30, 2021, respectively. Those billings were included in selling, general and administrative expenses on the condensed consolidated financial statements for the nine months ended September 30, 2021. During the three months ended September 30, 2021, the Company incurred transaction costs of $ 264 and stock-based compensation expense of $ 1,194 , and an associated tax benefit of $ 339 related to the Performance Materials divestiture, which was included in loss from discontinued operations, net of tax. During the nine months ended September 30, 2021, the Company incurred transaction costs of $ 1,794 and stock-based compensation expense of $ 2,477 , and an associated tax benefit of $ 1,045 related to the Performance Materials divestiture, which was included in loss from discontinued operations, net of tax. 10 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 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 $ 1,100,000 , subject to certain adjustments including indebtedness, cash, working capital and transaction expenses. The Company completed the sale of the Performance Chemicals business on August 1, 2021. Prior to the close of the transaction, the disposal group was tested for recoverability at each of the balance sheet dates subsequent to meeting the discontinued operations criteria, and the Company recognized an estimated disposal loss of $ 13,990 and $ 109,584 during the three and six months ended June 30, 2021, respectively, which was included in net loss from discontinued operations, net of tax on the condensed consolidated statement of income. For the nine months ended September 30, 2021, the loss on the sale of the Performance Chemicals business was $ 157,539 , which was included in net (loss) income from discontinued operations, net of tax in the Company’s condensed consolidated statements. The following is a reconciliation of the loss recorded on the sale: Net proceeds received from the sale of the Performance Chemicals business $ 980,350 Transaction costs ( 35,402 ) Net assets derecognized ( 1,102,487 ) Loss on sale of the Performance Chemicals business $ ( 157,539 ) During the year ended December 31, 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. T he final pre-tax loss on the sale was $ 150,230 , which was 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. In March 2022, the Company made a payment to the buyer for $ 3,744 , representing the final adjustments to the sale price. The Company classified the payment within net cash used in investing activities – continuing operations in the condensed consolidated statements of cash flows. 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 $ 33,052 within net loss from discontinued operations, net of tax on the condensed consolidated statement of income. 11 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) The following table summarizes the results of discontinued operations related to the Performance Chemicals business for the three and nine months ended September 30, 2021: Three months ended September 30, 2021 Nine months ended September 30, 2021 Sales $ 54,973 $ 389,870 Cost of goods sold 39,582 284,220 Selling, general and administrative expenses 6,552 29,758 Goodwill impairment charge — 75,080 Other operating (income) expense, net ( 18,993 ) 10,337 Loss on sale of the Performance Chemicals business 123,035 157,539 Operating loss ( 95,203 ) ( 167,064 ) Equity in net (income) from affiliated companies ( 25 ) ( 111 ) Interest expense, net (1) 1,916 10,730 Other expense (income), net 153 ( 6,210 ) Loss from discontinued operations before income tax ( 97,247 ) ( 171,473 ) Benefit for income taxes ( 22,494 ) ( 15,576 ) Loss from discontinued operations, net of tax $ ( 74,753 ) $ ( 155,897 ) (1) 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 . Prior to the Company’s debt refinancing in June 2021, the Company’s outstanding term loan facilities had mandatory 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 income attributable to the noncontrolling interest related to the Performance Chemicals business, net of tax was $ 76 and $ 333 for the three and nine months ended September 30, 2021, respectively . Net loss attributable to Ecovyst Inc., related to the Performance Chemicals business, net of tax was $( 74,829 ) and $( 156,230 ) for the three and nine months ended September 30, 2021, respectively . 4. Revenue from Contracts with Customers: Disaggregated Revenue The Company’s primary means of disaggregating revenues is by reportable segments, which can be found in Note 18 to these condensed consolidated financial statements. The Company’s portfolio of products is 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 • Regeneration services for alkylate production 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 12 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) The following tables disaggregate the Company’s sales, by segment and end use, for the three and nine months ended September 30, 2022 and 2021: Three months ended September 30, 2022 Ecoservices Catalyst Technologies (2) Total Industrial & process chemicals $ 41,252 $ — $ 41,252 Fuels & emission control (1) 88,532 — 88,532 Packaging & engineered plastics 29,707 36,859 66,566 Natural resources 36,183 — 36,183 Total segment sales $ 195,674 $ 36,859 $ 232,533 Three months ended September 30, 2021 Ecoservices Catalyst Technologies (2) Total Industrial & process chemicals $ 23,297 $ 5 $ 23,302 Fuels & emission control (1) 67,644 — 67,644 Packaging & engineered plastics 23,315 29,873 53,188 Natural resources 23,294 — 23,294 Total segment sales $ 137,550 $ 29,878 $ 167,428 Nine months ended September 30, 2022 Ecoservices Catalyst Technologies (2) Total Industrial & process chemicals $ 116,257 $ — $ 116,257 Fuels & emission control (1) 243,358 — 243,358 Packaging & engineered plastics 87,801 94,716 182,517 Natural resources 95,287 — 95,287 Total segment sales $ 542,703 $ 94,716 $ 637,419 Nine months ended September 30, 2021 Ecoservices Catalyst Technologies (2) Total Industrial & process chemicals $ 58,581 $ 5 $ 58,586 Fuels & emission control (1) 191,630 — 191,630 Packaging & engineered plastics 48,916 82,490 131,406 Natural resources 59,382 — 59,382 Total segment sales $ 358,509 $ 82,495 $ 441,004 (1) As described in Note 1 to these condensed consolidated financial statements, the Company experiences seasonal s ales fluctuations to customers in the fuels & emission control end use. (2) Excludes the Company’s proportionate share of sales from the Zeolyst International and Zeolyst C.V. joint ventures (collectively, the “Zeolyst Joint Venture”) accounted for using the equity method (see Note 11 to these condensed consolidated financial statements for further information). 13 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 5. 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 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 September 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. September 30, 2022 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative assets: Interest rate caps (Note 14) $ 35,991 $ — $ 35,991 $ — December 31, 2021 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative assets: Interest rate caps (Note 14) $ 1,080 $ — $ 1,080 $ — Derivative liabilities: Interest rate caps (Note 14) $ 1,288 $ — $ 1,288 $ — 14 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 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. As of September 30, 2022, th e Company had interest rate c aps th at were 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. 6. Stockholders' Equity: Accumulated Other Comprehensive Income (Loss) The stockholders’ equity footnote disclosures have been revised to include the impact of discontinued operations on pensions and postretirement benefits and foreign currency translation for the three and nine months ended September 30, 2021 in other comprehensive income (loss) and accumulated other comprehensive income (loss). See Note 1 to these condensed consolidated financial statements for further information on the reclassification and correction of errors in historical presentation. 15 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) The following tables present the tax effects of each component of other comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021: Three months ended September 30, 2022 2021 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 loss $ 2 $ ( 1 ) $ 1 $ 5,041 $ ( 1,297 ) $ 3,744 Amortization of prior service credit ( 53 ) 13 ( 40 ) ( 58 ) 14 ( 44 ) Settlement (loss) gain ( 1,228 ) 305 ( 923 ) 1,507 ( 374 ) 1,133 Benefit plans, net ( 1,279 ) 317 ( 962 ) 6,490 ( 1,657 ) 4,833 Net gain from hedging activities 12,188 ( 3,047 ) 9,141 613 ( 153 ) 460 Foreign currency translation (1) ( 7,207 ) — ( 7,207 ) ( 12,391 ) 4,507 ( 7,884 ) Other comprehensive income $ 3,702 $ ( 2,730 ) $ 972 $ ( 5,288 ) $ 2,697 $ ( 2,591 ) Nine months ended September 30, 2022 2021 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 loss $ 3 $ ( 1 ) $ 2 $ 5,044 $ ( 1,298 ) $ 3,746 Amortization of prior service credit ( 158 ) 39 ( 119 ) ( 174 ) 43 ( 131 ) Settlement (loss) gain ( 1,228 ) 305 ( 923 ) 1,507 ( 374 ) 1,133 Benefit plans, net ( 1,383 ) 343 ( 1,040 ) 6,377 ( 1,629 ) 4,748 Net gain from hedging activities 36,827 ( 9,207 ) 27,620 2,184 ( 546 ) 1,638 Foreign currency translation (1) ( 17,506 ) — ( 17,506 ) ( 6,536 ) 6,954 418 Other comprehensive income $ 17,938 $ ( 8,864 ) $ 9,074 $ 2,025 $ 4,779 $ 6,804 (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 the three and nine months ended September 30, 2021, for which the tax effect is based on the applicable U.S. deferred income tax rate. See Note 14 to these condensed consolidated financial statements for information regarding the Company’s cross-currency interest rate swaps, which were settled in March 2021. 16 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) The following table presents the changes in accumulated other comprehensive income (loss), net of tax, by component for the nine months ended September 30, 2022 and 2021: Defined benefit and other postretirement plans Net gain (loss) from hedging activities Foreign currency translation Total December 31, 2021 $ 11,072 $ 2,254 $ ( 19,118 ) $ ( 5,792 ) Other comprehensive (loss) income before reclassifications ( 1,157 ) 27,148 ( 17,506 ) 8,485 Amounts reclassified from accumulated other comprehensive income (1) 117 472 — 589 September 30, 2022 $ 10,032 $ 29,874 $ ( 36,624 ) $ 3,282 December 31, 2020 $ 5,278 $ ( 660 ) $ ( 19,883 ) $ ( 15,265 ) Other comprehensive income (loss) before reclassifications 877 1,425 11,474 13,776 Amounts reclassified from accumulated other comprehensive income (1) 3,871 213 ( 11,779 ) ( 7,695 ) September 30, 2021 $ 10,026 $ 978 $ ( 20,188 ) $ ( 9,184 ) (1) See the following table for details about these reclassifications. Amounts in parentheses indicate debits. The following table presents the reclassifications out of accumulated other comprehensive income for the three and nine months ended September 30, 2022 and 2021: Details about Accumulated Other Comprehensive Income Components Amounts Reclassified from Accumulated Other Comprehensive Income (1) Affected Line Item where Income is Presented Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Amortization of defined benefit and other postretirement items: Prior service credit $ ( 53 ) $ ( 58 ) $ ( 158 ) $ ( 174 ) Other income (expense) (2) Actuarial gains 1 2 3 4 Other income (expense) (2) Release of actuarial losses — ( 3,717 ) — ( 3,717 ) Net loss from discontinued operations, net of tax ( 52 ) ( 3,773 ) ( 155 ) ( 3,887 ) Total before tax 12 ( 11 ) 38 16 Tax benefit (expense) $ ( 40 ) $ ( 3,784 ) $ ( 117 ) $ ( 3,871 ) Net of tax Gains and losses on cash flow hedges: Interest rate caps $ ( 29 ) $ ( 104 ) $ ( 627 ) $ ( 283 ) Interest expense 7 26 155 70 Tax benefit $ ( 22 ) $ ( 78 ) $ ( 472 ) $ ( 213 ) Net of tax Release of foreign currency translation $ — $ 11,779 $ — $ 11,779 Net loss from discontinued operations, net of tax Total reclassifications for the period $ ( 62 ) $ 7,917 $ ( 589 ) $ 7,695 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 16 to these condensed consolidated financial statements for additional details). 17 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) Treasury Stock Repurchases 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. 2020 Stock Repurchase Program On March 12, 2020, the Company’s Board of Directors (the “Board”) approved a plan to purchase up to $ 50,000 of the Company’s common stock under a stock repurchase program approved by the Board. Under the plan, the Company could 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 determined the timing and the amount of any repurchases based on its evaluation of market conditions, share price and other factors. The stock repurchase program expired in March 2022, with no repurchases made in 2022 through the expiration of the program, no r during the three or nine months ended September 30, 2021. 2022 Stock Repurchase Program On April 27, 2022, the Board approved a stock repurchase program that permits the Company to purchase up to $ 450,000 of the Company’s common stock over the next four years . Under the plan, the Company can 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. During the nine months ended September 30, 2022, the Company repurchased 1,970,763 shares of its common stock on the open market at an average price of $ 9.82 per share, for a total of $ 19,356 . Additionally, in connection with a secondary offering of the Company’s common stock in August 2022 , the Company repurchased 6,500,000 shares of its common stock sold in the offering from underwriters at a price of $ 8.36 per share simultaneous with the closing of the offering, for a total of $ 54,316 . As of September 30, 2022, $ 376,328 was available for additional share repurchases under the program. There were no repurchases during September 2022. 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. There were no shares delivered to the Company to cover tax payments for the three months ended September 30, 2022 and 2021, and the fair value of the shares withheld to cover tax payments were $ 332 and $ 1,470 for the nine months ended September 30, 2022 and 2021, respectively. Dividends Paid On August 4, 2021, the 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 3 of these condensed consolidated financial statements for additional details on the sale of the Performance Chemicals business. 18 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 7. 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. Based in Orange, Texas, Chem32 is a leader in ex situ pre-sulfiding and pre-activation for hydro-processing catalysts. 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. A portion of the holdback was settled in September 2022 for a payment of $ 488 , with $ 512 of the holdback remaining as of September 30, 2022. Chem32 is reported as part of the Ecoservices segment. The Company believes that the Acquisition will offer a more robust portfolio of services within the refining industry by leveraging the Company’s existing relationships, therefore contributing to a total purchase price that resulted in the recognition of $ 14,778 of goodwill, which was deductible for tax purposes. During the nine months ended September 30, 2022 , the Company recorded an immaterial adjustment between goodwill and deferred tax liabilities related to the final tax purchase price allocation. See Note 8 to these condensed consolidated financial statements for further information. The following table sets forth the calculation of the purchase price to the identifiable net assets acquired with respect to the Acquisition, which was complete as of December 31, 2021 : Purchase Price Allocation Cash paid, net of cash acquired $ 42,639 Holdback 1,000 Total consideration, net of cash acquired $ 43,639 Recognized amounts of identifiable assets acquired and liabilities assumed: Receivables $ 1,368 Inventories 204 Prepaid and other current assets 351 Property, plant and equipment 5,046 Other intangible assets 22,100 Other long-term assets 187 Fair value of assets acquired 29,256 Accounts payable 207 Accrued liabilities 188 Fair value of net identifiable assets acquired 28,861 Goodwill 14,778 $ 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’s cost of goods sold for the nine months ended September 30, 2021 includes a pre-tax charge of $ 148 of additional amortization expense related to identified intangible assets, which would have been recorded during the reporting period if the adjustments to the provisional amounts had been recognized as of the Closing Date. The Company’s other operating expense, net for the nine months ended September 30, 2021 includes a pre-tax charge of $ 1,108 of additional amortization expense related to identified intangible assets, which would have been recorded during the reporting period if the adjustments to the provisional amounts had been recognized as of the Closing Date. 19 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) The valuation of intangibles assets acquired and the related weighted-average amortization periods were 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 Contracts 700 5 Trade names 1,600 10 Total intangible assets subject to amortization $ 22,100 Net sales and net income attributable to Chem32 during the period from the Closing Date through September 30, 2021 were immaterial. Pro forma financial information has not been presented as it is immaterial for the three and nine months ended September 30, 2021. Acquisition and integration costs were $ 680 for the nine months ended September 30, 2021 and are included in other operating expense, net in the Company’s consolidated statement of income. 8. Goodwill: The change in the carrying amount of goodwill for the nine months ended September 30, 2022 is summarized as follows: Ecoservices Catalyst Technologies Total Balance as of December 31, 2021 $ 326,670 $ 79,469 $ 406,139 Goodwill adjustments (1) ( 81 ) — ( 81 ) Foreign exchange impact — ( 4,906 ) ( 4,906 ) Balance as of September 30, 2022 $ 326,589 $ 74,563 $ 401,152 (1) During the nine months ended September 30, 2022 , the Company recorded an adjustment of $ 81 between goodwill and deferred tax liabilities related to the final tax purchase price allocation for the Chem32 acquisition. 9. Other Operating Expense, Net: A summary of other operating expense, net is as follows: Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Amortization expense $ 2,632 $ 3,294 $ 7,931 $ 7,669 Transaction and other related costs 1,789 538 6,860 1,620 Restructuring, integration and business optimization costs (1) 1,322 78 6,421 2,408 Net loss on asset disposals 468 2,156 1,174 4,535 Other, net 1,462 248 2,715 554 $ 7,673 $ 6,314 $ 25,101 $ 16,786 (1) During the three months ended September 30, 2022 and the nine months ended September 30, 2022 and 2021 , respectively, the Company’s results were impacted by costs associated with severance charges for certain executives and employees. 20 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 10. Inventories, Net: Inventories, net are classified and valued as follows: September 30, 2022 December 31, 2021 Finished products and work in process $ 43,337 $ 46,894 Raw materials 6,392 6,919 $ 49,729 $ 53,813 Valued at lower of cost or market: LIFO basis $ 24,304 $ 33,330 Valued at lower of cost and net realizable value: FIFO or average cost basis 25,425 20,483 $ 49,729 $ 53,813 11. Investments in Affiliated Companies: The Company accounts for investments in affiliated companies under the equity method. Affiliated companies accounted for on the equity basis as of September 30, 2022 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) : Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Sales $ 67,043 $ 76,195 $ 218,389 $ 218,459 Gross profit 17,794 28,981 70,546 77,048 Operating income 10,228 20,414 44,340 51,576 Net income 9,540 20,717 44,448 51,204 (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 September 30, 2022 and December 31, 2021 includes net purchase accounting fair value adjustments of $ 232,617 and $ 237,419 , 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 $ 1,601 and $ 4,802 of amortization expense related to purchase accounting fair value adjustments for the three and nine months ended September 30, 2022, respectively. Consolidated equity in net income from affiliates is net of $ 1,601 and $ 4,879 of amortization expense related to purchase accounting fair value adjustments for the three and nine months ended September 30, 2021, respectively. 21 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 12. Property, Plant and Equipment: A summary of property, plant and equipment, at cost, and related accumulated depreciation is as follows: September 30, 2022 December 31, 2021 Land $ 96,391 $ 97,047 Buildings and improvements 80,932 77,851 Machinery and equipment 730,495 714,435 Construction in progress 58,476 45,952 966,294 935,285 Less: accumulated depreciation ( 384,869 ) ( 339,054 ) $ 581,425 $ 596,231 Depreciation expense was $ 16,103 and $ 48,256 for the three and nine months ended September 30, 2022, respectively. Depreciation expense was $ 16,369 and $ 49,902 for the three and nine months ended September 30, 2021, respectively. 13. Long-term Debt: The summary of long-term debt is as follows: September 30, 2022 December 31, 2021 Senior Secured Term Loan Facility due June 2028 $ 888,750 $ 895,500 ABL Facility — — Total debt 888,750 895,500 Original issue discount ( 7,798 ) ( 8,762 ) Deferred financing costs ( 4,348 ) ( 4,899 ) Total debt, net of original issue discount and deferred financing costs 876,604 881,839 Less: current portion ( 9,000 ) ( 9,000 ) Total long-term debt, excluding current portion $ 867,604 $ 872,839 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 September 30, 2022 and December 31, 2021, the fair value of the senior secured term loan facility was $ 844,312 and $ 894,381 , respectively. The fair value is classified as Level 2 based upon the fair value hierarchy (see Note 5 to these condensed consolidated financial statements for further information on fair value measurements). 14. 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. 22 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 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 condensed consolidated statements of cash flows. 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 condensed consolidated balance sheets. 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 condensed 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 November 2018, the Company entered into interest rate cap agreements to mitigate interest 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 was $ 4,410 . 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. The cap rate in effect at September 30, 2022 was 1.00 % associated with the $ 400,000 of notional variable-rate debt. The total annuitized premium on the $ 400,000 of notional variable-rate debt was $ 137 . In August 2021, PQ Corporation novated $ 900,000 of its interest rate caps to Ecovyst Catalyst Technologies LLC. Other than the novation, there were no other changes to the interest rate caps in connection with the novation. In January 2022, the Company entered into two new forward starting interest rate cap agreements, with notional amounts of $ 250,000 each and with a cap rate of 1.00 %. The term for one of these interest rate caps is July 2022 through October 2024 and the term for the other is September 2023 through October 2025. The total cumulative annuitized premium is $ 4,450 . The cap rate in effect at September 30, 2022 was 1.00 %. Use of Derivative Financial Instruments to Manage Foreign Currency Risk. The Company is exposed to risks related to its net investments in foreign operations due to fluctuations in foreign currency exchange rates, particularly between the United States dollar and the Euro. In February 2018, the Company entered into multiple cross-currency interest rate swap arrangements with an aggregate notional amount of € 280,000 to hedge this exposure on the net investments of certain of its Euro-denominated subsidiaries in its Performance Materials and Performance Chemicals businesses. The Company recorded these swap agreements at fair value as assets or liabilities in its condensed consolidated balance sheet. As the derivatives are designated and qualify as net investment hedges, changes in the fair value of the swaps attributable to changes in the spot exchange rates are recognized in cumulative translation adjustment (“CTA”) within OCI and are held there until the hedged net investments are sold or substantially liquidated. 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. 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. In March 2021, as a result of the divestitures of the Performance Materials and Performance Chemicals businesses, the Company settled its 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 net cash used in investing activities, discontinued operations in the Company’s condensed consolidated statement of cash flows for the nine months ended September 30, 2021, as the underlying subsidiary subject to the net investment hedging relationship is part of the Performance Chemicals business. 23 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) The fair values of derivative instruments held as of September 30, 2022 and December 31, 2021 are shown below: Balance sheet location September 30, 2022 December 31, 2021 Derivative assets: Derivatives designated as cash flow hedges: Interest rate caps Prepaid and other current assets $ 17,347 $ — Interest rate caps Other long-term assets 18,644 1,080 Total derivative assets $ 35,991 $ 1,080 Derivative liabilities: Derivatives designated as cash flow hedges: Interest rate caps Accrued liabilities $ — $ 1,288 Total derivative liabilities $ — $ 1,288 The following tables show the effect of the Company’s derivative instruments designated as cash flow hedges on AOCI for the three and nine months ended September 30, 2022 and 2021: Three months ended September 30, 2022 2021 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 Interest rate caps Interest (expense) income $ 12,159 $ ( 29 ) $ 510 $ ( 104 ) Nine months ended September 30, 2022 2021 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 Interest rate caps Interest (expense) income $ 36,200 $ ( 627 ) $ 1,901 $ ( 283 ) 24 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) The following tables show the effect of the Company’s cash flow hedge accounting on the condensed consolidated statements of income for the three and nine months ended September 30, 2022 and 2021: Three months ended September 30, 2022 2021 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 $ ( 164,864 ) $ ( 9,542 ) $ ( 113,784 ) $ ( 9,005 ) Interest contracts: Amount of loss reclassified from AOCI into income — ( 29 ) — ( 104 ) Nine months ended September 30, 2022 2021 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 $ ( 462,156 ) $ ( 26,880 ) $ ( 318,768 ) $ ( 28,202 ) Interest contracts: Amount of loss reclassified from AOCI into income — ( 627 ) — ( 283 ) The amount of unrealized losses in AOCI related to the Company’s cash flow hedges that is expected to be reclassified to the condensed consolidated statement of income over the next twelve months is $ 275 as of September 30, 2022. The following table shows the effect of the Company’s net investment hedges on AOCI and the condensed consolidated statements of income for the three and nine months ended September 30, 2021: Amount of pre-tax gain recognized in OCI on derivative Location of gain (loss) reclassified from AOCI into income Amount of gain reclassified from AOCI into income Location of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing) Amount of gain recognized in income on derivative (amount excluded from effectiveness testing) Three months ended September 30, 2021 Three months ended September 30, 2021 Three months ended September 30, 2021 Cross-currency interest rate swaps $ — Net (loss) income from discontinued operations, net of tax $ 9,754 Interest (expense) income $ — Amount of pre-tax gain recognized in OCI on derivative Location of gain (loss) reclassified from AOCI into income Amount of gain reclassified from AOCI into income Location of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing) Amount of gain recognized in income on derivative (amount excluded from effectiveness testing) Nine months ended September 30, 2021 Nine months ended September 30, 2021 Nine months ended September 30, 2021 Cross-currency interest rate swaps $ 9,787 Net (loss) income from discontinued operations, net of tax $ 9,754 Interest (expense) income $ 545 25 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 15. Income Taxes: The effective income tax rate for the three months ended September 30, 2022 was 29.6 % compared to 35.6 % for the three months ended September 30, 2021. The effective income tax rate for the nine months ended September 30, 2022 was 31.2 % compared to ( 610.9 )% for the nine months ended September 30, 2021. The Company’s effective income tax rate has fluctuated primarily due to changes in income mix, discrete impacts related to intraperiod allocation revaluation of deferred tax assets and liabilities as a result of the divestiture of the Performance Chemicals business, tax rate changes and changes in foreign exchange gains and losses, which create permanent differences in certain jurisdictions. The difference between the U.S. federal statutory income tax rate and the Company’s effective income tax rate for the nine months ended September 30, 2022 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation, and a discrete tax expense associated with the Employee Retention Credit. The difference between the U.S. federal statutory income tax rate and the Company’s effective income tax rate for the nine months ended September 30, 2021 was mainly due to state and local taxes, discrete tax impacts related to intra-period allocation revaluation of deferred tax assets and liabilities as a result of the divestiture of the Performance Chemicals business, tax rate changes, and the tax effect of permanent differences related to foreign currency exchange gain or loss. On August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law. Among other things, the IRA imposes a 15% corporate alternative minimum tax for certain large corporations with average annual adjusted financial statement income in excess of $1 billion, for tax years beginning after December 31, 2022, levies a 1% excise tax on net stock repurchases after December 31, 2022, and provides tax incentives to promote clean energy. Historically, during the year we have made discretionary share repurchases. Beginning in 2023, these purchases would be subject to the excise tax. Based on the historical net repurchase activity the excise tax and the other provisions of the IRA are not expected to have a material impact on our results of operations or financial position. However, we are still in the process of analyzing the provisions of the IRA. 16. Benefit Plans: The following tables present the components of net periodic expense (benefit) for the Company-sponsored defined benefit pension and postretirement plans, which cover certain employees and retirees located in the U.S. Defined Benefit Pension Plans Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Interest cost $ 681 $ 551 $ 1,888 $ 1,652 Expected return on plan assets ( 380 ) ( 1,093 ) ( 2,599 ) ( 3,280 ) Settlement loss (gain) recognized 38 ( 26 ) 38 ( 26 ) Net periodic expense (benefit) $ 339 $ ( 568 ) $ ( 673 ) $ ( 1,654 ) Other Postretirement Benefit Plan Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Interest cost $ 5 $ 4 $ 13 $ 13 Amortization of prior service credit ( 53 ) ( 58 ) ( 158 ) ( 174 ) Amortization of net loss 1 2 3 4 Net periodic benefit $ ( 47 ) $ ( 52 ) $ ( 142 ) $ ( 157 ) 26 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 17. Commitments and Contingent Liabilities: There is a risk of environmental impact in the Company’s 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 condensed consolidated financial statements. 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. 18. Reportable Segments: Summarized financial information for the Company’s reportable segments is shown in the following table: Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Sales: Ecoservices $ 195,674 $ 137,550 $ 542,703 $ 358,509 Catalyst Technologies (1) 36,859 29,878 94,716 82,495 Total $ 232,533 $ 167,428 $ 637,419 $ 441,004 Adjusted EBITDA: (2) Ecoservices $ 64,110 $ 51,920 $ 173,435 $ 125,372 Catalyst Technologies (3) 19,272 25,441 57,676 64,623 Unallocated corporate expenses ( 7,945 ) ( 7,986 ) ( 23,543 ) ( 25,641 ) Total $ 75,437 $ 69,375 $ 207,568 $ 164,354 (1) Excludes the Company’s proportionate share of sales from the Zeolyst International and Zeolyst C.V. joint ventures (collectively, the “Zeolyst Joint Venture”) accounted for using the equity method (see Note 11 to these condensed consolidated financial statements for further information). The proportionate share of sales excluded is $ 27,773 and $ 92,656 for the three and nine months ended September 30, 2022, respectively. The proportionate share of sales excluded is $ 32,820 and $ 94,984 for the three and nine months ended September 30, 2021, 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 $ 8,704 for the three months ended September 30, 2022, which includes $ 3,187 of equity in net income plus $ 1,601 of amortization of investment in affiliate step-up and $ 3,917 of joint venture depreciation, amortization and interest. The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $ 34,306 for the nine months ended September 30, 2022, which includes $ 17,500 of equity in net income plus $ 4,802 of amortization of investment in affiliate step-up and $ 12,004 of joint venture depreciation, amortization and interest. The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $ 14,493 for the three months ended September 30, 2021, which includes $ 8,780 of equity in net income plus $ 1,601 of amortization of investment in affiliate step-up and $ 4,112 of joint venture depreciation, amortization and interest. The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $ 37,085 for the nine months ended September 30, 2021, which includes $ 20,794 of equity in net income plus $ 4,879 of amortization of investment in affiliate step-up and $ 11,412 of joint venture depreciation, amortization and interest. 27 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) A reconciliation of net income (loss) to Ecovyst to Adjusted EBITDA is as follows: Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Reconciliation of net income (loss) from continuing operations to Adjusted EBITDA Net income (loss) from continuing operations $ 21,325 $ 4,689 $ 48,445 $ ( 5,929 ) Provision for income taxes 8,966 2,591 21,983 5,095 Interest expense, net 9,542 9,005 26,880 28,202 Depreciation and amortization 19,599 20,599 58,803 60,084 EBITDA 59,432 36,884 156,111 87,452 Joint venture depreciation, amortization and interest 3,917 4,112 12,004 11,412 Amortization of investment in affiliate step-up 1,601 1,601 4,802 4,879 Debt extinguishment costs — 15,185 — 26,902 Net loss on asset disposals 468 2,156 1,174 4,535 Foreign exchange losses 1,030 922 2,179 4,803 LIFO benefit ( 436 ) ( 1,295 ) ( 4 ) ( 1,998 ) Transaction and other related costs 1,789 538 6,860 1,620 Equity-based compensation 4,740 10,193 17,419 22,837 Restructuring, integration and business optimization expenses 1,322 78 6,421 2,408 Defined benefit pension plan expense (benefit) 292 ( 1,029 ) ( 814 ) ( 2,219 ) Other 1,282 30 1,416 1,723 Adjusted EBITDA $ 75,437 $ 69,375 $ 207,568 $ 164,354 19. 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 September 30, 2022, 9,501,030 shares of common stock were available for issuance under the plan. The Company settles these awards through the issuance of new shares. Restricted Stock Units and Performance Stock Units Restricted Stock Units During the nine months ended September 30, 2022, the Company granted 2,779,690 restricted stock units under its equity incentive plan. 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 for the awards granted during the nine months ended September 30, 2022, generally requires approximately one year of service for members of the Company’s board of directors and approximately three years of service for employees. The awards granted during the nine months ended September 30, 2022 also included a special grant for certain employees based on service which cliff vests on July 1, 2023. The value of the restricted stock units granted during the nine months ended September 30, 2022 was 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. 28 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) Performance Stock Units 2022 Grants During the nine months ended September 30, 2022, the Company granted 295,132 performance stock units (at target) under its equity incentive plan. The performance stock units granted during the nine months ended September 30, 2022 provide the recipients with the right to receive shares of common stock dependent on the achievement of a total shareholder return (“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, 2022 through December 31, 2024. 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 receive 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, 2024, which will occur subsequent to the end of the performance period and after the Company files its annual consolidated financial statements for the year ending December 31, 2024. The TSR goal 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 the 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 $ 8.82 weighted average fair value of the awards granted during the nine months ended September 30, 2022, with the following weighted average assumptions: Expected dividend yield — % Risk-free interest rate 1.51 % Expected volatility 44.51 % Expected term (in years) 2.91 2019 Grants During the nine months ended September 30, 2022, the Compensation Committee of the Company’s Board certified the achievement of the performance metrics for the three-year period ended December 31, 2021, related to the performance stock units granted during the year ended December 31, 2019. These awards provided 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, with each award holder eligible to earn a percentage of the target number of shares granted to the holder, ranging from zero to 200 %. The awards vested during the nine months ended September 30, 2022 at 100 % of target. Award Activity The following table summarizes the activity for the Company’s restricted stock units and performance stock units for the nine months ended September 30, 2022: Restricted Stock Units Performance Stock Units 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, 2021 2,507,421 $ 15.68 1,117,555 $ 16.91 Granted 2,779,690 $ 10.28 295,132 $ 8.82 Vested ( 1,325,654 ) $ 15.67 ( 496,442 ) $ 15.41 Forfeited ( 973,308 ) $ 12.59 ( 165,807 ) $ 12.46 Nonvested as of September 30, 2022 2,988,149 $ 11.67 750,438 $ 15.70 29 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) Stock-Based Compensation Expense For the three months ended September 30, 2022 and 2021, stock-based compensation expense for the Company was $ 4,740 and $ 10,193 , respectively. The associated income tax benefit recognized in the statements of income for the three months ended September 30, 2022 and 2021 was $ 1,162 and $ 2,494 , respectively. For the nine months ended September 30, 2022 and 2021, stock-based compensation expense for the Company was $ 17,419 and $ 22,837 , respectively. The associated income tax benefit recognized in the statements of income for the nine months ended September 30, 2022 and 2021 was $ 4,271 and $ 5,589 , respectively. As of September 30, 2022, unrecognized compensation cost was $ 21,755 for restricted stock units and $ 3,083 for performance stock units considered probable of vesting. The weighted-average period over which these costs are expected to be recognized at September 30, 2022 was 1.46 years for the restricted stock units and 1.46 years for the performance stock units. Activity related to the Company’s stock options and restricted stock awards was not material for the nine months ended September 30, 2022. 20. 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. 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: Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Weighted average shares outstanding – Basic 132,622,105 136,129,591 136,115,598 136,111,555 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 1,474,734 1,224,836 1,550,617 — Weighted average shares outstanding – Diluted 134,096,839 137,354,427 137,666,215 136,111,555 30 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) Basic and diluted income (loss) per share are calculated as follows: Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Numerator: Income (loss) from continuing operations attributable to Ecovyst Inc. $ 21,325 $ 4,689 $ 48,445 $ ( 5,929 ) Loss from discontinued operations attributable to Ecovyst Inc. — ( 75,948 ) — ( 159,455 ) Net income (loss) attributable to Ecovyst Inc. $ 21,325 $ ( 71,259 ) $ 48,445 $ ( 165,384 ) Denominator: Weighted average shares outstanding – Basic 132,622,105 136,129,591 136,115,598 136,111,555 Weighted average shares outstanding – Diluted 134,096,839 137,354,427 137,666,215 136,111,555 Net income (loss) per share: Basic income (loss) per share - continuing operations $ 0.16 $ 0.03 $ 0.36 $ ( 0.04 ) Diluted income (loss) per share - continuing operations $ 0.16 $ 0.03 $ 0.35 $ ( 0.04 ) Basic loss per share - discontinued operations $ — $ ( 0.56 ) $ — $ ( 1.17 ) Diluted loss per share - discontinued operations $ — $ ( 0.55 ) $ — $ ( 1.17 ) Basic income (loss) per share $ 0.16 $ ( 0.52 ) $ 0.36 $ ( 1.22 ) Diluted income (loss) per share $ 0.16 $ ( 0.52 ) $ 0.35 $ ( 1.22 ) The table below presents the details of the Company’s weighted average equity-based awards outstanding during each respective period that were excluded from the calculation of diluted earnings per share: Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Restricted stock awards with performance only targets not yet achieved 505,439 828,967 574,048 852,822 Stock options with performance only targets not yet achieved 300,788 375,733 316,187 376,448 Anti-dilutive restricted stock awards, restricted stock units and performance stock units 487,322 — 19,306 — Anti-dilutive stock options 751,539 — 788,509 4,221 Restricted stock awards and stock options with performance only vesting conditions were 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. 31 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 21. Supplemental Cash Flow Information: With the exception of operating leases, the following table presents supplemental cash flow information for the consolidated Company: Nine months ended September 30, 2022 2021 Cash paid during the period for: Income taxes, net of refunds $ 24,367 $ 13,520 Interest (1) 24,390 43,115 Non-cash investing activity: Capital expenditures acquired on account but unpaid as of the period end 4,993 3,052 Right-of-use assets obtained in exchange for new lease liabilities (non-cash): Operating leases 6,187 7,946 (1) Cash paid for interest is shown net of capitalized interest for the periods presented and excludes $ 2,307 of net interest proceeds on swaps designated as net investment hedges for the nine months ended September 30, 2021, which are included within cash flows from investing activities, discontinued operations in the Company’s condensed consolidated statements of cash flows. 22. Subsequent Events: The Company has evaluated subsequent events since the balance sheet date and determined that there are no additional items to disclose. 32 Table of Contents