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Item 7. Management’s Discussion and Analysis

2023-02-28 compared with 2022-03-01 · 254 added, 272 removed, 566 unchanged (48% of the section changed)

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(1) Ecoservices and (2) Catalyst Technologies (including our 50% interest in the Zeolyst Joint Venture).

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

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

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

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We are a global supplier of finished silica catalysts and catalyst supports necessary to produce high strength and high stiffness plastics used in packaging films, bottles, containers, and other molded applications.

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

In 2021, we served global customers across many end uses and, as of December 31, 2021, operated out of 10 strategically located manufacturing facilities.

This segment includes our 50% interest in the Zeolyst Joint Venture, where we are a leading global supplier of zeolites used for catalysts that help produce renewable fuels, remove nitrogen oxides from diesel engine emissions as well as sulf ur from fuels during the refining process.

In 2022, we served global customers across many end uses and, as of December 31, 2022, operated out of ten strategically located manufacturing facilities.

On December 14, 2020, we completed the sale of our Performance Materials business to Potters Buyer, LLC, an affiliate of The Jordan Company, L.P., for a purchase price of $650 million.

Effective on August 1, 2021, we completed the sale of our Performance Chemicals business to Sparta Aggregator L.P., a partnership with Koch Minerals & Trading, LLC and Cerberus Capital Management, L.P.

for $1.1 billion.

Additionally, our Board of Directors (the “Board”) declared a special cash dividend of $1.80 per share, paid on December 14, 2020 in connection with the sale of our Performance Materials business and declared a special cash dividend of $3.20 per share, paid on August 23, 2021 in connection with the sale of our Performance Chemicals business.

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

Refer to Note 4 and Note 5 of our Consolidated Financial Statements for additional information.

Impact of Russia’s Invasion of Ukraine on our Business and Results

We are continuing to monitor the developments in Russia and Ukraine, as well as the related economic sanctions and export controls imposed on certain industry sectors.

Although the current conflict has created global economic and political uncertainties and affected certain supply chain disruptions, we do not believe we have significant exposure in those countries.

We have no operations in Russia or Ukraine.

We had no sales to customers in Ukraine and our sales to a customer in Russia were immaterial for the year ended December 31, 2022 and have been discontinued.

Sales to this customer in Russia represented 2% of total sales for the years ended December 31, 2021 and 2020, respectively.

We also did not make any purchases from suppliers in Russia or Ukraine.

As Russia’s invasion of Ukraine continues to unfold, we will continue to monitor compliance with sanctions imposed by the U.S.

government and other countries.

Recent Developments

On December 14, 2020, we completed the sale of our Performance Materials business to Potters Buyer, LLC (the “Purchaser”), an affiliate of The Jordan Company, L.P., for a purchase price of $650 million, which was subject to certain adjustments for indebtedness, working capital and cash at the closing of the transaction.

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

Refer to Note 4 to our Consolidated Financial Statements for additional information.

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

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

The Senior Notes were redeemed at a redemption price equal to the sum of 102.88% of the principal amount of the Senior Notes plus accrued and unpaid interest to, but excluding, August 2, 2021.

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

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

Refer to Note 4 to our Consolidated Financial Statements for additional information.

In connection with the closing of the sale of the Performance Chemicals business, we changed our name from “PQ Group Holdings Inc.” to “Ecovyst Inc.”, changed the ticker symbol of our common stock listed on the New York Stock Exchange from “PQG” to “ECVT” and rebranded our former segments from “Refining Services” to “Ecoservices” and “Catalysts” to “Catalyst Technologies.” Financial information presented herein related to the Ecoservices and Catalyst Technologies segments remains unchanged from our previously issued financial statements filed on Form 10-K for the years ended December 31, 2020, 2019 and 2018, respectively.

Impact of COVID-19 on our Business and Results

The spread of COVID-19 and variants of the virus 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, various states, local and foreign governments have issued decrees and orders that have disrupted many businesses and implemented social distancing, travel and other restrictions.

In response to these restrictions, we took a variety of actions at the onset of the pandemic, including an international travel ban, distribution of personal protective equipment to employees, and work-at-home requirements for many of our employees who were not an integral part of our manufacturing operations.

We also implemented and refined our business continuity plans in an effort to minimize operational disruptions.

These measures were in place as of December 31, 2021.

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

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

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

Operations and Supply

Our manufacturing plants require a limited number of on-site employees in order to continue to operate effectively.

We have not experienced any material production issues, but have had limited and temporary shutdowns or slowdowns in some of our facilities.

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

Coronavirus Aid, Relief and Economic Security (“CARES”) Act

On March 27, 2020, the CARES Act was signed into law.

The provisions of the CARES Act provide substantial stimulus and financial assistance measures intended to mitigate the impact of the COVID-19 pandemic, including certain tax relief provisions.

As permitted within the CARES Act, we began deferring payment of the employer portion of social security taxes in the second qua rter and continued to defer through the end of 2020, with 50% of the deferred amount paid during the year December 31, 2021 and the remaining 50% deferred will be paid during December 31, 2022.

This deferral provided approximately $2.0 million in additional liquidity in 2020.

Late in the fourth quarter of 2022, our Ecoservices business was adversely affected by Winter Storm Elliott.

The storm disrupted operations at a number of our sites, impacting production and resulting in unplanned maintenance.

While the storm had a modest impact on fourth quarter 2022 financial results, we expect the majority of the maintenance and repair costs incurred will be realized in the first quarter of 2023.

In addition, we expect that the fourth quarter 2022 production outages will translate into lower availability and sales of virgin sulfuric acid in the first quarter of 2023.

Stock Repurchase Program

In April 2022, our Board of Directors approved and announced a new stock repurchase program authorizing the repurchase of up to $450 million of the Company’s outstanding common stock over the next four years.

This program is expected to be funded using cash on hand and cash generated from operations.

We primarily expect to conduct the repurchase program through negotiated transactions with the Company’s equity sponsors, as well as through open market repurchases or other means, including through Rule 10b-18 trading plans or through the use of other techniques such as

accelerated share repurchases.

The actual timing, number and nature of shares repurchased will depend on a variety of factors, including stock price, trading volume, and general business and market conditions.

The repurchase program does not obligate us to acquire any number of shares in any specific period or at all and may be amended, suspended or discontinued at any time at our discretion.

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 we have made discretionary share repurchases under our share repurchase programs.

Beginning in 2023, these transactions will be subject to the excise tax of the IRA.

Based on our 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.

From the announcement date of the program in April 2022 through December 31, 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 $19.4 million.

Additionally, in connection with secondary offerings of the Company’s common stock in August and November 2022, the Company repurchased 6,500,000 and 8,000,000 shares of its common stock sold in the offerings, respectively, from the underwriters at a price of $8.36 per share and $7.88 per share, respectively, simultaneous with the closing of the respective offerings, for a total of $117.3 million.

As of December 31, 2022, $313.3 million was available for additional share repurchases under the program.

Basis of Presentation

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Our presentation of Adjusted EBITDA and adjusted net income should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

Reconciliations of

adjusted EBITDA and adjusted net income to GAAP net income (loss) are included in the results of operations discussion that follows for each of the respective periods.

Reconciliations of Adjusted EBITDA and adjusted net income to GAAP net income (loss) are included in the results of operations discussion that follows for each of the respective periods.

Key Factors and Trends Affecting Operating Results and Financial Condition

Our Ecoservices and Catalyst Technologies segments' sales have grown primarily due to expansion into new end applications, including emission control catalysts, polymer catalysts, and refining catalysts, as well as continued supply share gains.

Our Ecoservices and Catalyst Technologies segments' sales have grown primarily due to increased demand for our products and services in the markets we serve, expansion into new end use applications, including catalysts used in the production of renewable fuels, polyethylene, and emission control, as well as continued supply share gains and customer contractual pass-through mechanisms.

Sales in our Ecoservices and Catalyst Technologies segments are made on both a purchase order basis and pursuant to long-term contracts.

Overall economic demand has significantly rebounded since the 2020 lows that resulted from the impact of COVID-19.

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

Refineries have seen demand return with increasing miles driven and a general increase in economic activity.

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

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

Sales in our Ecoservices and Catalyst Technologies segments are made on both a purchase order basis and pursuant to long-term contracts.

Higher refinery utilization rates are increasing demand for catalyst and regeneration.

Cost of Goods Sold

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We account for our investments in our equity joint ventures under the equity method.

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

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

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

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Sales increased $209.0 million to $820.2 million.

The increase in sales was primarily due to higher sales volumes and pass-through of higher sulfur pricing.

The higher volumes were a result of strong demand for polyethylene catalyst and higher regeneration services.

The global macroeconomic recovery supported demand across both businesses.

The increase in sales was primarily due to higher average selling prices, including the favorable pass-through of sulfur pricing and higher sales volumes, and increased demands for our products and services.

Gross profit increased $48.0 million to $224.7 million.

The increase in gross profit was primarily due to higher sales volumes across the portfolio and favorable product mix.

These factors more than offset headwinds from higher variable costs and elevated fixed costs driven by Winter Storm Uri in early 2021.

Inflationary factors increased through the year, namely from higher sulfur and energy costs, but customer contractual pass through mechanisms preserved earnings in Ecoservices, while targeted price increases addressed cost pressures in Catalyst Technologies.

The increase in gross profit was primarily due to increased pricing and higher sales volumes across the portfolio.

Inflationary factors increased through the year, namely from higher sulfur, freight and energy indexed costs, but customer contractual pass-through mechanisms preserved earnings in Ecoservices, while targeted price increases helped to mitigate cost pressures in Catalyst Technologies.

Operating Income

Operating income increased $49.8 million to $104.4 million.

The increase in operating income was primarily due to an increase in gross profit for the year ended December 31, 2021.

The increase in operating income was primarily due to an increase in gross profit and l ower selling, general and administrative expenses, partially offset by higher other operating expenses .

Equity in Net Income from Affiliated Companies

Equity in net income of affiliated companies for the year ended December 31, 2021 was $27.7 million, compared with net income of $21.0 million for the year ended December 31, 2020.

The increase was due to higher earnings of $6.4 million generated by the Zeolyst Joint Venture during the year ended December 31, 2021 as compared to the year ended December 31, 2020.

Equity in net income of affiliated companies for the years ended December 31, 2022 and 2021 was $27.7 million.

The following is our consolidated statement of income and a summary of financial results for the years ended December 31, 2022 and 2021.

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Debt extinguishment costs — 26.9 (26.9) (100.0) %

Other (income) expense, net 4.5 (5.0) 9.5 (190.0) %

Other expense, net 0.2 4.5 (4.3) (95.6) %

Income from continuing operations before income taxes and noncontrolling interest 94.7 13.9 80.8 581.3 %

Provision (benefit) for income taxes 12.1 (52.1) 64.2 (123.2) %

Provision for income taxes 24.9 12.1 12.8 105.8 %

Effective tax rate 26.3 % 87.1 %

Net income from continuing operations 1.8 54.3 (52.5) (96.7) %

Net loss from discontinued operations, net of tax (141.4) (336.0) 194.6 (57.9) %

Net loss (139.6) (281.7) 142.1 (50.4) %

Net income (loss) attributable to the noncontrolling interest - discontinued operations $ 0.3 $ (2.9) $ 3.2 (110.3) %

Net loss attributable to Ecovyst Inc.

Net income from continuing operations 69.8 1.8 68.0 NM

Net income (loss) from discontinued operations, net of tax 3.9 (141.4) 145.3 (102.8) %

Net income (loss) 73.7 (139.6) 213.3 (152.8) %

Net income attributable to the noncontrolling interest - discontinued operations — 0.3 (0.3) (100.0) %

Net income (loss) attributable to Ecovyst Inc.

$ 73.7 $ (139.9) $ 213.6 (152.7) %

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Sales in Ecoservices for the year ended December 31, 2022 were $702.5 million, an increase of $202.0 million, or 40.4%, compared to sales of $500.5 million for the year ended December 31, 2021.

The increase in sales was primarily due to higher sales volumes of $29.2 million and higher average selling price of $69.4 million, including pass-through of higher sulfur costs of $49.0 million.

The increase in volumes was due to a higher demand for regeneration services on the recovery from the global pandemic and improved virgin sulfuric acid used in mining and industrial uses , as well as sales related to the Chem32 acquisition .

The favorable pricing was primarily driven by pass-through of higher sulfur costs and higher labor labor and energy indexed costs.

The increase in sales was primarily due to higher average selling price of $178.4 million, including pass-through of higher sulfur costs of $84.8 million, and higher sales volumes of $23.6 million.

The increase in average selling price was due to favorable pricing, which was primarily driven by pass-through of higher sulfur costs and higher labor, freight and energy indexed costs.

The increase in volumes was due to a higher demand for regeneration services during the year and higher sales of virgin sulfuric acid used in mining and industrial uses.

Catalyst Technologies :

Sales in Catalyst Technologies for the year ended December 31, 2022 were $117.7 million, an increase of $7.0 million, or 6.3%, compared to sales of $110.7 million for the year ended December 31, 2021.

The increase in sales was primarily due to higher sales volumes of $14.0 million, higher average selling price from product mix of $1.1 million and the favorable effects of foreign currency translation of $1.6 million.

The increase in volumes was due to the continued strong customer demand for polyethylene catalysts.

The increase in sales was primarily due to the contribution from higher sales volume of $7.1 million and higher average selling prices of $4.6 million, partially offset by the unfavorable effects of foreign currency translation of $4.7 million.

The increase in sales volume was attributable to the continued strong customer demand for polyethylene catalysts and higher sales of niche custom catalysts.

Gross profit for the year ended December 31, 2022 was $224.7 million, an increase of $48.0 million, or 27.2%, compared with $176.7 million for the year ended December 31, 2021.

The increase in gross profit was due to favorable average selling price of $70.5 million and higher volumes of $22.1 million which was offset by unfavorable manufacturing costs of $75.5 million includes $49.0 million of higher sulfur costs.

Favorable customer pricing was primarily a result of higher average selling prices from pass-through costs and product mix.

The increase in volumes was due to an increase in regeneration services, virgin sulfuric acid sales and increased demand for polyethylene catalysts.

The unfavorable change in manufacturing costs were driven by the timing of plant maintenance projects and higher fixed costs from the freezing weather in the Gulf of Mexico .

The increase in gross profit was due to higher average selling prices of aggregating $183.0 million and the contribution from higher sales volume of $22.8 million which were partially offset by unfavorable raw material and manufacturing costs of $152.1 million and a $5.7 million impact associated with a less-favorable product mix.

The unfavorable change in raw materials was driven by higher sulfur costs of approximately $85.0 million and higher natural gas.

The unfavorable change in manufacturing costs were driven by the timing of plant maintenance projects, and higher variable, transportation and fixed costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the year ended December 31, 2021 were $97.8 million, an increase of $16.3 million compared with $81.5 million for the year ended December 31, 2020.

The increase in selling, general and administrative expenses was due to an increase in stock compensation and compensation related expenses, partially offset by lower discretionary spending.

Selling, general and administrative expenses for the year ended December 31, 2022 were $85.3 million, a decrease of $12.5 million compared with $97.8 million for the year ended December 31, 2021.

The decrease in selling, general and administrative expenses was mainly due to a decrease in compensation related costs of $5.2 million and a decrease in stock-based compensation expense of $11.2 million, which consisted of $4.0 million of incremental cost recognized during the year ended December 31, 2021 in connection with the modifications of our equity incentive awards and stock options associated with the special dividend and sale of the Performance Chemicals business in August 2021, with the remaining decrease driven by forfeitures of equity incentive awards in 2022 by former Company executives and employees of the Performance Chemicals business.

This was mostly offset by $3.7 million of income generated during the year ended December 31, 2021 from the transition service agreements entered into as part of the sales of the Performance Materials and Performance Chemicals businesses.

Other Operating Expense, Net

Other operating expense, net for the year ended December 31, 2022 was $35.0 million, an increase of $10.7 million, or 44.0%, compared with $24.3 million for the year ended December 31, 2021.

The increase in o ther operating expense, net was primarily due to an increase in amortization expense from the Chem32 acquisition.

Equity in Net Income of Affiliated Companies

Equity in net income of affiliated companies for the year ended December 31, 2021 was $27.7 million, an increase of $6.7 million, compared with income of $21.0 million for the year ended December 31, 2020.

The increase was primarily due to $33.0 million of earnings generated by the Zeolyst Joint Venture during the year ended December 31, 2021 as compared to $26.7 million for the year ended December 31, 2020, which was a result of higher demand for catalyst used in renewable fuels and emission control catalysts, partially offset by lower specialty and hydrocracking catalyst on timing of customer fixed bed change-outs.

The increase in other operating expense, net was mainly driven by increases of $5.3 million in severance charges associated with former executives and $5.0 million in residual costs from the Performance Chemicals divestiture and other transactions costs.

Equity in Net Income from Affiliated Companies

Equity in net income from affiliated companies for the year ended December 31, 2022 was $27.7 million, in line with the year ended December 31, 2021.

The Zeolyst Joint Venture during the year ended December 31, 2022 as compared to the year ended December 31, 2021, continued to have high demands for hydrocracking and specialty catalyst.

Interest Expense, Net

Interest expense, net for the year ended December 31, 2021 was $37.0 million, a decrease of $13.4 million, as compared with $50.4 million for the year ended December 31, 2020.

The decrease in interest expense was due to lower interest rates on our variable rate debt along with lower average debt balances.

Interest expense, net for the year ended December 31, 2022 was $37.2 million, an increase of $0.2 million, as compared with $37.0 million for the year ended December 31, 2021.

The increase in interest expense was due to higher interest rates on our variable rate debt.

Debt Extinguishment Costs

Debt extinguishment costs for the years ended December 31, 2021 and 2020 were $26.9 million and $25.0 million, respectively.

Effective on August 1, 2021, we completed the sale of our Performance Chemicals business which triggered an obligation to provide partial payment under our existing senior secured term loan facility and pay in full our 5.75% senior notes.

As a result of the required payments, previous unamortized deferred financing costs of $3.1 million and original issue discount of $3.6 million were written off as debt extinguishment costs.

On December 14, 2020, we completed the sale of our Performance Materials business which triggered an obligation to provide partial payment under our existing senior secured term loan facilities.

Debt extinguishment costs for the year ended December 31, 2021 was $26.9 million.

Effective on August 1, 2021, we completed the sale of our Performance Chemicals business which triggered an obligation to provide partial payment under our 2018 Term Loan Facility and pay in full our 5.75% Senior Unsecured Notes.

As a result of the required payments, previous unamortized deferred financing costs of $3.1 million and original issue discount of $3.6 million were written off as debt extinguishment costs.

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

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

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

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

We recorded $2.2 million of new creditor and third-party financing fees as debt extinguishment costs.

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

During the year ended December 31, 2020 , we prepaid $466.1 million of outstanding principal balance on the 2018 Term Loan Facility and a redemption premium of $10.6 million on the 6.75% Senior Secured Notes.

In connection with the 2018 Term Loan Facility prepayment, we wrote off $0.2 million of previously unamortized deferred financing costs and original issue discount of $12.8 million as debt extinguishment costs.

In connection with the 6.75% Senior Secured Notes, we wrote off $2 million of previously unamortized deferred financing costs and original issue discount of $1 million as debt extinguishment costs.

Other (Income) Expense, Net

Other (income) expense, net was expense of $4.5 million for the year ended December 31, 2021, an unfavorable change of $9.5 million, compared with income of $5.0 million for the year ended December 31, 2020.

The change primarily related to $4.7 million of foreign currency losses on the non-permanent intercompany debt denominated in local currency and translated to U.S.

dollars and transactional currency translation in the current year period as compared to foreign currency gain of $5.3 million in the prior year period.

Provision (Benefit) for Income Taxes

The (benefit) provision for income taxes for the year ended December 31, 2021 was a $12.1 million provision compared to a $52.1 million benefit for the year ended December 31, 2020.

Concurrent with, and using a portion of the net cash proceeds from, the divestiture of the Performance Chemicals business in August 2021, we repaid the remaining balance on our 2016 Term Loan Facility and redeemed the 5.75% Senior Unsecured Notes.

In connection with the redemption of the 5.75% Senior Unsecured Notes, we paid a redemption premium of $8.5 million, which was recorded as debt extinguishment costs during the nine months ended September 30, 2021.

We wrote off $0.8 million of unamortized deferred financing costs and $2.4 million of original issue discount related to the 2016 Term Loan Facility and $2.3 million of unamortized deferred financing costs and $1.2 million of original issue discount related to the 5.75% Senior Unsecured Notes as debt extinguishment costs during the nine months ended September 30, 2021.

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

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

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

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

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

Other Expense, Net

Other expense, net was $0.2 million for the year ended December 31, 2022, a favorable change of $4.3 million, compared to $4.5 million for the year ended December 31, 2021.

The change primarily related to $0.5 million in pension plan benefit and $3.7 million favorable change in foreign currency losses in the current year on the non-permanent intercompany debt denominated in local currency and translated to U.S.

Provision for Income Taxes

The provision for income taxes for the year ended December 31, 2022 was a $24.9 million provision compared to a $12.1 million provision for the year ended December 31, 2021.

The effective income tax rate for the year ended December 31, 2022 was 26.3% compared to 87.1% for the year ended December 31, 2021.

The difference between the U.S.

federal statutory income tax rate and our effective income tax rate for the year ended December 31, 2021 was mainly due to the impact of the Global Intangible Low Taxed Income (“GILTI”) provisions of U.S.

tax reform and the impact of intra-period allocation as a result of the Performance Chemicals business being classified as held for sale.

federal statutory income tax rate and our effective income tax rate for the year ended December 31, 2022 was mainly due to the impact of the Section 162(m) deduction limitation for “covered” employees with compensation in excess of $1 million, along with the tax deductibility of stock compensation.

The difference between the U.S.

federal statutory income tax rate and our effective income tax rate for the year ended December 31, 2021 was mainly due to GILTI, foreign tax credit benefit and the impact of intra-period allocation as a result of the Performance Chemicals and Performance Materials businesses being classified as held for sale.

Net Loss Attributable to Ecovyst Inc.

For the foregoing reasons and after the effect of the non-controlling interest in earnings of subsidiaries for each period presented, net loss attributable to Ecovyst Inc.

was $139.9 million for the year ended December 31, 2021 as compared to net income of $278.8 million for the year ended December 31, 2020.

Net Income (Loss) Attributable to Ecovyst Inc.

For the foregoing reasons and after the effect of the non-controlling interest in earnings of subsidiaries for each period presented, net income attributable to Ecovyst Inc.

was $73.7 million for the year ended December 31, 2022 as compared to net loss of $139.9 million for the year ended December 31, 2021.

Adjusted EBITDA

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

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

December 31, Change

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Unallocated corporate expenses (29.0) (38.1) 9.1 (24.0) %

(38.1) (39.1) 1.0 (2.6) %

Total $ 276.8 $ 227.6 $ 49.2 21.6 %

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The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $49.9 million for the year ended December 31, 2021, which includes $27.8 million of equity in net income, excluding $6.5 million of amortization of investment in affiliate step-up, plus $15.6 million of joint venture depreciation, amortization and interest.

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

Ecoservices :

Adjusted EBITDA for the year ended December 31, 2021 was $177.7 million, an increase of $20.5 million, or 13.0%, compared with $157.2 million for the year ended December 31, 2020.

Ecoservices’ adjusted EBITDA increased due to higher demand of regeneration services, favorable pricing, improved cost efficiencies and the benefit of the Chem32 acquisition.

Adjusted EBITDA for the year ended December 31, 2022 was $227.8 million, an increase of $50.1 million, or 28.2%, compared to $177.7 million for the year ended December 31, 2021.

The increase in Ecoservices’ Adjusted EBITDA was the result of higher sales volumes for regeneration services and for virgin sulfuric acid, and higher average selling prices that more than covered higher variable costs.

Catalyst Technologies:

Adjusted EBITDA for the year ended December 31, 2021 was $88.0 million, an increase of $13.5 million, or 18.1%, compared with $74.5 million for the year ended December 31, 2020.

Adjusted EBITDA increased due to improved volume on the continued strong demand for polyethylene catalysts, increased demand for catalyst used in renewable fuels and emission control catalysts along with favorable product mix driving improved Adjusted EBITDA margins.

Adjusted EBITDA for the year ended December 31, 2022 was $78.0 million, a decrease of $10.0 million, or 11.4%, compared with $88.0 million for the year ended December 31, 2021.

Adjusted EBITDA decreased due higher variable costs arising from inflation and supply chain pressures, along with less-favorable product mix during the year.

This was only partially offset by increased volume and higher average selling prices.

A reconciliation of net income attributable to Ecovyst Inc.

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Net income from continuing operations $ 69.8 $ 1.8

Provision (benefit) for income taxes 12.1 (52.1)

Provision for income taxes 24.9 12.1

Interest expense, net 37.2 37.0

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Net loss on asset disposals (c)

Foreign currency exchange loss (gain) (d)

Foreign currency exchange loss (d)

LIFO benefit (e)

2 unchanged sentences

Restructuring, integration and business optimization expenses (g)

Defined benefit plan pension benefit (h)

Adjusted EBITDA $ 276.8 $ 227.6

6 unchanged sentences

(c) When asset disposals occur, we remove the impact of net gain/loss of the disposed asset because such impact primarily reflects the non-cash write-off of long-lived assets no longer in use.

(d) Reflects the exclusion of the foreign currency transaction gains and losses in the statements of income primarily related to the non-permanent intercompany debt denominated in local currency translated to U.S.

(d) Reflects the exclusion of the foreign currency transaction gains and losses in the statements of income related to the non-permanent intercompany debt denominated in local currency translated to U.S.

(e) Represents non-cash adjustments to the Company’s LIFO reserves for certain inventories in the U.S.

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(g) Includes the impact of restructuring, integration and business optimization expenses which are incremental costs that are not representative of our ongoing business operations.

(h) Represents adjustments for defined benefit pension plan (benefit) costs in our statement of income.

(h) Other costs consist of adjustments for defined benefit pension plan (benefit) costs and certain expenses that are not core to our ongoing business operations, including environmental remediation-related costs, capital and franchise taxes.

All of our defined benefit pension plan obligations are under defined benefit pension plans that are frozen.

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

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

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

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to Adjusted Net Income (1)(2)

Net income attributable to Ecovyst Inc.

$ 13.9 $ 12.1 $ 1.8 $ 2.2 $ (52.1) $ 54.3

Net income from continuing operations $ 94.7 $ 24.9 $ 69.8 $ 13.9 $ 12.1 $ 1.8

Amortization of investment in affiliate step-up (b)

3 unchanged sentences

3.6 0.9 2.7 5.7 1.4 4.3

Foreign currency exchange loss (gain) (d)

Foreign currency exchange loss (d)

1.4 0.4 1.0 4.7 1.0 3.7

6 unchanged sentences

11.6 2.8 8.8 3.9 0.7 3.2

Defined benefit plan pension benefit (h)

(0.7) (0.2) (0.5) 1.8 0.7 1.1

3.6 0.9 2.7 3.0 0.7 2.3

Adjusted Net Income, including Impact of Discrete Tax Items 144.4 31.2 113.2 95.3 31.8 63.5

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Adjusted Net Income $ 144.4 $ 31.2 $ 113.2 $ 95.3 $ 25.7 $ 69.6

(1) We define adjusted net inco me as net (loss) income attributable to Ecovyst Inc.

(1) We define adjusted net inco me as net income attributable to Ecovyst Inc.

adjusted for non-operating income or expense and the impact of certain non-cash or other items that are included in net income that we do not consider indicative of our ongoing operating performance.

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

(3) Represents intraperiod allocation rules related to a change in the UK legislature, which increased the UK corporate rate as well as an uncertain tax position related to a foreign entity.

The adjustments to net (loss) income attributable to Ecovyst Inc.

are shown net of applicable statutory tax rates.

(3) Represents intra-period allocation rules related to a change in the UK legislature, which increased the UK corporate rate as well as an uncertain tax position related to a foreign entity.

The adjustments to net income attributable to Ecovyst Inc.

are shown net of each applicable statutory tax rates.

Results of Operations

Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

The following is a summary of our financial performance for the year ended December 31, 2021 compared with the year ended December 31, 2020.

Sales decreased $36.8 million to $495.9 million.

The decrease in sales was primarily due to lower sales volumes and pass-through of lower sulfur pricing.

Gross profit decreased $16.3 million to $150.9 million.

The decrease in gross profit was primarily due to the lower sales volumes partially offset by favorable fixed manufacturing costs.

Sales increased $115.3 million to $611.2 million.

The increase in sales was primarily due to higher sales volumes and pass-through of higher sulfur pricing.

The higher volumes were primarily the result of stronger demand for polyethylene catalysts and higher volume for regeneration services.

The global macroeconomic recovery supported demand across both business segments.

Gross profit increased $25.8 million to $176.7 million.

The increase in gross profit was primarily due to higher sales volumes across the portfolio and favorable product mix.

These factors more than offset headwinds from higher variable costs and elevated fixed costs driven by Winter Storm Uri in early 2021.

Inflationary factors increased through the year, namely from higher sulfur and energy costs, but customer contractual pass-through mechanisms preserved earnings in Ecoservices, while targeted price increases served to mitigate cost pressures in Catalyst Technologies.

Operating Income

Operating income decreased by $14.4 million to $51.6 million.

The decrease in operating income was primarily due to a decrease in gross profit for the year ended December 31, 2020.

Operating income increased by $3.0 million to $54.6 million.

The increase in operating income was primarily due to an increase in gross profit for the year ended December 31, 2021.

Equity in Net Income from Affiliated Companies

Equity in net income of affiliated companies for the year ended December 31, 2020 was $21.0 million, compared with net income of $45.8 million for the year ended December 31, 2019.

The decrease was due to lower earnings of $24.6 million generated by the Zeolyst Joint Venture during the year ended December 31, 2020 as compared to the year ended December 31, 2019.

Equity in net income from affiliated companies for the year ended December 31, 2021 was $27.7 million, compared with net income of $21.0 million for the year ended December 31, 2020.

The increase was due to higher earnings of $6.4 million generated by the Zeolyst Joint Venture during the year ended December 31, 2021 as compared to the year ended December 31, 2020.

The following is our consolidated statement of income and a summary of financial results for the years ended December 31, 2021 and 2020.

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Debt extinguishment costs 26.9 25.0 1.9 7.6 %

Other (income) expense, net (5.0) (1.9) (3.1) 163.2 %

Other expense (income), net 4.5 (5.0) 9.5 (190.0) %

Income from continuing operations before income taxes and noncontrolling interest 13.9 2.2 11.7 531.8 %

(Benefit) provision for income taxes (52.1) 12.3 (64.4) (523.6) %

Provision (benefit) for income taxes 12.1 (52.1) 64.2 (123.2) %

Effective tax rate 87.1 % (2,350.6) %

Net income from continuing operations 1.8 54.3 (52.5) (96.7) %

Net (loss) income from discontinued operations, net of tax (336.0) 49.2 (385.2) (782.9) %

Net (loss) income (281.7) 80.3 (362.0) (450.8) %

Net (loss) income attributable to the noncontrolling interest - discontinued operations $ (2.9) $ 0.8 $ (3.7) (462.5) %

Net (loss) income attributable to Ecovyst Inc.

Net loss from discontinued operations, net of tax (141.4) (336.0) 194.6 (57.9) %

Net loss (139.6) (281.7) 142.1 (50.4) %

Net income (loss) attributable to the noncontrolling interest - discontinued operations 0.3 (2.9) 3.2 (110.3) %

Net loss attributable to Ecovyst Inc.

$ (139.9) $ (278.8) $ 138.9 (49.8) %

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Ecoservices :

Sales in Ecoservices for the year ended December 31, 2020 were $401.9 million, a decrease of $45.2 million, or 10.1%, compared to sales of $447.1 million for the year ended December 31, 2019.

The decrease in sales was primarily due to lower sales volumes of $26.7 million and lower average selling price from pass-through costs of $18.5 million.

The decrease in volumes was due to lower regeneration services demand from refinery utilization rates driven by COVID-19.

The unfavorable pricing was driven by pass-through of lower sulfur costs.

Sales in Ecoservices for the year ended December 31, 2021 were $500.5 million, an increase of $98.6 million, or 24.5%, compared to sales of $401.9 million for the year ended December 31, 2020.

The increase in sales was primarily due to the contribution from higher sales volumes of $29.2 million and higher average selling prices aggregating $69.4 million, including pass-through of higher sulfur costs of $49.0 million.

The favorable pricing was primarily driven by pass-through of higher sulfur costs and higher labor and energy indexed costs.

Catalyst Technologies :

Sales in Catalyst Technologies for the year ended December 31, 2021 were $110.7 million, an increase of $16.7 million, or 17.8%, compared to sales of $94.0 million for the year ended December 31, 2020.

The increase in sales was primarily due to higher sales volumes of $10.6 million, partially offset by lower average selling price from product mix of $1.2 million and the unfavorable effects of foreign currency translation of $1.1 million.

The increase in sales was due to higher customer demand within our polyethylene catalysts product line.

Gross profit for the year ended December 31, 2020 was $150.9 million, a decrease of $16.3 million, or 9.7%, compared with $167.2 million for the y ear ended December 31, 2019.

The decrease in gross profit was due to unfavorable average selling price of $19.7 million and lower volumes of $10.9 million which was partly offset by favorable manufacturing costs of $23.1 million.

Unfavorable customer pricing was primarily a result of pass-through of lower sulfur costs.

The decrease in volumes was due to a decline in sulfuric acid sales which was partially offset by increased customer demand within our polyethylene catalysts product line.

The favorable change in manufacturing costs were driven by the timing of plant maintenance projects.

The increase in volumes was due to continued strong customer demand for polyethylene catalysts.

Gross profit for the year ended December 31, 2021 was $176.7 million, an increase of $25.8 million, or 17.1%, compared with $150.9 million for the y ear ended December 31, 2020.

The increase in gross profit was due to higher average selling prices aggregating $119.5 million and the contribution from higher sales volume of $22.1 million, which was partially offset by unfavorable manufacturing costs of $123.9 million, including approximately $49.0 million of higher sulfur costs.

Favorable customer pricing was primarily a result of higher average selling prices from pass-through costs and product mix.

The increase in volumes was due to an increase in regeneration services, virgin sulfuric acid sales and increased demand for polyethylene catalysts.

The unfavorable change in raw materials were driven by higher sulfur costs of $49.0 million.

The unfavorable change in manufacturing costs were driven by the timing of plant maintenance projects and higher fixed costs arising from the impact of Winter Storm Uri in the Gulf Coast .

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the year ended December 31, 2020 were $81.5 million, a decrease of $2.0 million, or 2.4%, compared with $83.5 million for t he year ended December 31, 2019.

The decrease in selling, general and administrative expenses was due to lower discretionary spending partially offset by an increase in stock compensation expense.

Selling, general and administrative expenses for the year ended December 31, 2021 were $97.8 million, an increase of $16.3 million compared with $81.5 million for t he year ended December 31, 2020.

The increase in selling, general and administrative expenses was due to an increase in stock compensation expense and compensation related expenses, partially offset by lower discretionary spending.

Other Operating Expense, Net

Other operating expense, net for the year ended December 31, 2021 was $24.3 million, an increase of $6.5 million, or 36.5%, compared with $17.8 million for the year ended December 31, 2020.

Other operating expense, net was consistent between both periods.

The increase in o ther operating expense, net was primarily due to an increase in amortization expense from the Chem32 acquisition.

Equity in Net Income of Affiliated Companies

Equity in net income of affiliated companies for the year ended December 31, 2020 was $21.0 million, a decrease of $24.8 million, compared with income of $45.8 million for the year ended December 31, 2019.

The decrease was primarily due to $26.7 million of earnings generated by the Zeolyst Joint Venture during the year ended December 31, 2020 as compared to $52.2 million for the year ended December 31, 2019 which was a result of the timing of hydrocracking catalyst change-outs and lower demand for custom catalysts and emission control catalysts in heavy duty diesel production driven by the COVID-19 pandemic.

The increase was primarily due to $33.0 million of earnings generated by the Zeolyst Joint Venture during the year ended December 31, 2021 as compared to $26.7 million for the year ended December 31, 2020 which was a result of higher demand for catalyst used in renewable fuels and emission control catalysts, partially offset by lower specialty and hydrocracking catalyst on timing of customer fixed bed change-outs.

Interest Expense, Net

Interest ex pense, net for the year ended December 31, 2021 was $37.0 million, a decrease of $13.4 million, as compared with $50.4 million for the year ended December 31, 2020.

The decrease in interest expense was due to lower interest rates on our variable rate debt along with lower average debt balances and a favorable increase in variable versus fixed rate debt.

The decrease in interest expense was due to lower interest rates on our variable rate debt along with lower average debt balances.

Debt Extinguishment Costs

Debt extinguishment costs for the years ended December 31, 2021 and 2020 were $26.9 million and $25.0 million, respectively.

As a result of the required payments, previous unamortized deferred financing costs of $3.1 million and original issue discount of $3.6 million were written off as debt extinguishment costs.

On December 14, 2020, we completed the sale of our Performance Materials business which triggered an obligation to provide partial payment under our existing senior secured term loan facilities.

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

On February 7, 2020, we amended our 2018 Term Loan Facility to reduce the applicable interest rates and extend the maturity of the facility to February 2027.

We recorded $2.2 million of new creditor and third-party financing fees as debt extinguishment costs.

During the year ended December 31, 2019, we prepaid $210.0 million of outstanding principal balance on the 2018 Term Loan Facility (as defined below).

In connection with this prepayment, we wrote off $1.0 million of previously unamortized deferred financing costs and original issue discount of $2.4 million as debt extinguishment costs.

Other (Income) Expense, Net

Other (income) expense, net was income of $5.0 million for the year ended December 31, 2020, a favorable change of $3.1 million, compared with income of $1.9 million for the year ended December 31, 2019.

The change primarily consisted of $5.3 million of foreign currency gains on the non-permanent intercompany debt denominated in local currency and translated to U.S.

dollars and transactional currency translation in the current year period as compared to foreign currency loss of $1.2 million in the prior year period.

(Benefit) Provision for Income Taxes

The (benefit) provision for income taxes for the year ended December 31, 2020 was $52.1 million benefit compared to a $12.3 million provision for the year ended December 31, 2019.

In addition, previously unamortized deferred financing costs of $0.1 million and original issue discount of $0.2 million associated with the 2018 Term Loan Facility were written off as debt extinguishment costs.

In connection with the 6.75% Senior Secured Notes, we wrote off $2 million of previously unamortized deferred financing costs and original issue discount of $1 million as debt extinguishment costs.

Other Expense (Income), Net

Other expense (income), net was expense of $4.5 million for the year ended December 31, 2021, an unfavorable change of $9.5 million, compared with income of $5.0 million for the year ended December 31, 2020.

The change primarily consisted of $4.7 million of foreign currency losses on the non-permanent intercompany debt denominated in local currency and translated to U.S.

dollars and transactional currency translation in the current year period as compared to foreign currency gain of $5.3 million in the prior year period.

Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes for the year ended December 31, 2021 was $12.1 million provision compared to a $52.1 million benefit for the year ended December 31, 2020.

The effective income tax rate for the year ended December 31, 2021 was 87.1% compared to (2,350.6)% for the year ended December 31, 2020.

The difference between the U.S.

federal statutory income tax rate and our effective income tax rate for the year ended December 31, 2020 was mainly due to the impact of the GILTI provisions of U.S.

tax reform, foreign tax credit benefit and the impact of intra-period allocation as a result of the Performance Chemicals and Performance Materials businesses being classified as held for sale.

tax reform and the impact of intra-period allocation as a result of the Performance Chemicals business being classified as held for sale.

The difference between the U.S.

federal statutory income tax rate and our effective income tax rate for the year ended December 31, 2019 was mainly due to state and local taxes, GILTI and the impact of intra-period allocation as a result of the Performance Chemicals and Performance Materials businesses being classified as held for sale.

Net (Loss) Income Attributable to Ecovyst Inc.

federal statutory income tax rate and our effective income tax rate for the year ended December 31, 2020 was mainly due to state and local taxes, GILTI, foreign tax credit benefit and the impact of intra-period allocation as a result of the Performance Chemicals and Performance Materials businesses being classified as held for sale.

Net Loss Attributable to Ecovyst Inc.

For the foregoing reasons and after the effect of the non-controlling interest in earnings of subsidiaries for each period presented, net loss attributable to Ecovyst Inc.

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Adjusted EBITDA

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

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

December 31, Change

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Unallocated corporate expenses (38.1) (39.1) 1.0 (2.6) %

(39.1) (43.3) 4.2 (9.7) %

Total $ 227.6 $ 192.6 $ 35.0 18.2 %

5 unchanged sentences

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $42.5 million for the year ended December 31, 2020, which includes $21.2 million of equity in net income, excluding $6.6 million of amortization of investment in affiliate step-up, plus $14.7 million of joint venture depreciation, amortization and interest.

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

Ecoservices :

Adjusted EBITDA for the year ended December 31, 2020 was $157.2 million, a decrease of $18.4 million, or 10.5%, compared with $175.6 million for the year ended December 31, 2019.

Ecoservices adjusted EBITDA decreased due to lower regeneration services demand as a result of reduced refinery utilization rates, partially offset by fixed and SG&A related cost savings.

Adjusted EBITDA for the year ended December 31, 2021 was $177.7 million, an increase of $20.5 million, or 13.0%, compared with $157.2 million for the year ended December 31, 2020.

Ecoservices adjusted EBITDA increased due to higher regeneration services, favorable pricing, improved cost efficiencies and the benefit of the Chem32 acquisition.

Catalyst Technologies :

Adjusted EBITDA for the year ended December 31, 2020 was $74.5 million, a decrease of $33.3 million, or 30.9%, compared with $107.8 million for the year ended December 31, 2019.

Adjusted EBITDA decreased due to lower volumes in the Zeolyst joint venture and unfavorable inventory absorption due to lower production and inventory depletion to align with expected lower demand.

Adjusted EBITDA for the year ended December 31, 2021 was $88.0 million, an increase of $13.5 million, or 18.1%, compared with $74.5 million for the year ended December 31, 2020.

Adjusted EBITDA increased due to improved volume on the continued strong demand for polyethylene catalysts, increased demand for catalysts used in renewable fuel applications and higher sales of emission control catalysts and more favorable product mix.

A reconciliation of net income attributable to Ecovyst Inc.

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Net income from continuing operations $ 1.8 $ 54.3

Provision for income taxes (52.1) 12.3

Provision (benefit) for income taxes 12.1 (52.1)

Interest expense, net 37.0 50.4

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Net loss on asset disposals (c)

Foreign currency exchange (gain) loss (d)

LIFO (benefit) expense (e)

Foreign currency exchange loss (gain) (d)

LIFO benefit (e)

Transaction and other related costs (f)

1 unchanged sentence

Restructuring, integration and business optimization expenses (g)

Defined benefit plan pension cost (benefit) cost (h)

Adjusted EBITDA $ 227.6 $ 192.6

1 unchanged sentence

Because our Catalyst Technologies segment includes our 50% interest in the Zeolyst Joint Venture, we include an adjustment for our 50% proportionate share of depreciation, amortization and interest expense of the Zeolyst Joint Venture.

(b) Represents the amortization of the fair value adjustments associated with the equity affiliate investment in the Zeolyst Joint Venture as a result of the Business Combination.

(b) Represents the amortization of the fair value adjustments associated with the equity affiliate investment in the Zeolyst Joint Venture as a result of the combination of the businesses of PQ Holdings Inc.

and Eco Services Operations LLC in May 2016 (the “Business Combination”).

We determined the fair value of the equity affiliate investment and the fair value step-up was then attributed to the underlying assets of the Zeolyst Joint Venture.

1 unchanged sentence

(c) When asset disposals occur, we remove the impact of net gain/loss of the disposed asset because such impact primarily reflects the non-cash write-off of long-lived assets no longer in use.

(e) Represents non-cash adjustments to the Company’s LIFO reserves for certain inventories in the U.S.

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(g) Includes the impact of restructuring, integration and business optimization expenses which are incremental costs that are not representative of our ongoing business operations.

(h) Represents adjustments for defined benefit pension plan (benefit) costs in our statement of income.

All of our defined benefit pension plan obligations are under defined benefit pension plans that are frozen.

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

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

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

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5.7 1.4 4.3 4.7 1.2 3.5

Foreign currency exchange (gain) loss (d)

Foreign currency exchange loss (gain) (d)

4.7 1.0 3.7 (5.3) (0.6) (4.7)

LIFO (benefit) expense (e)

LIFO benefit (e)

(1.9) (0.5) (1.4) (5.3) (1.3) (4.0)

4 unchanged sentences

3.9 0.7 3.2 2.0 0.5 1.5

Defined benefit plan pension (benefit) cost (h)

1.8 0.7 1.1 2.4 0.5 1.9

3.0 0.7 2.3 0.4 (0.1) 0.5

Adjusted Net Income, including non-cash GILTI tax and Impact of Discrete Tax Items 50.6 (39.5) 90.1 83.7 21.7 62.0

Impact of non-cash GILTI tax (3)

— — — — (1.0) 1.0

Adjusted Net Income, including Impact of Discrete Tax Items 95.3 31.8 63.5 50.6 (39.5) 90.1

Impact of Discrete Tax Items (3)

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

(3) Amount represents the impact to tax expense in net income before non-controlling interest and the related adjustments to net income associated with the GILTI provisions of the Tax Cuts and Jobs Act of 2017 (“TCJA”).

We were required to record incremental tax provision impact with respect to GILTI as a result of having historical U.S.

net operating loss (“NOL”) amounts to offset the GILTI taxable income inclusion.

This NOL utilization precluded us from recognizing GILTI credits which would otherwise help offset the tax impacts of GILTI.

Beginning with the year ended 2020, we are no longer adjusting for the impact of the GILTI provisions of the TCJA since the NOLs have been fully utilized and GILTI now represents a cash tax impact.

(4) Represents the rate change in the Netherlands related to the Dutch Tax Plan 2019 recorded in net income.

(3) Represents intraperiod allocation rules related to a change in the UK legislature, which increased the UK corporate rate as well as an uncertain tax position related to a foreign entity.

The adjustments to net income attributable to Ecovyst Inc.

are shown net of applicable statutory tax rates.

are shown net of each applicable statutory tax rates.

Financial Condition, Liquidity and Capital Resources

Our primary sources of liquidity consist of cash flow from operations, existing cash balances as well as funds available under our asset based lending revolving credit facility.

Our primary sources of liquidity consist of cash flow from operations, existing cash balances as well as funds available under our asset based lending revolving credit facility (“ABL Facility”).

We expect that ongoing requirements for debt service and capital expenditures will be funded from these sources of funds.

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Our capital expenditures include both maintenance of business, which includes spending on maintenance and health, safety and environmental initiatives as well as growth, which includes spending to drive organic sales growth and cost savings initiatives.

We believe that our existing cash, cash equivalents and cash flows from operations, combined with availability under our asset based lending revolving credit facility, will be sufficient to meet our presently anticipated future cash needs for at least the next 12 months.

We believe that our existing cash, cash equivalents and cash flows from operations, combined with availability under our ABL Facility, will be sufficient to meet our presently anticipated future cash needs for at least the next 12 months.

We may also pursue strategic acquisition opportunities, which may impact our future cash requirements.

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

As of December 31, 2021, we had cash and cash equivalents of $140.9 million and availability of $61.3 million under our asset based lending revolving credit facility, after giving effect to $17.5 million of outstanding letters of credit and no revolving credit facility borrowings, for a total available liquidity of $202.2 million.

We may, from time to time, increase borrowings under our ABL Facility to meet our future cash needs.

As of December 31, 2022, we had cash and cash equivalents of $110.9 million and availability of $59.7 million under our ABL Facility, after giving effect to $4.0 million of outstanding letters of credit and no revolving credit facility borrowings, for a total available liquidity of $170.6 million.

Our ABL Facility has one financial covenant to maintain.

The first ratio compares the total ABL availability against a threshold:

the greater of 10% of the line cap (which is defined as the lesser of our revolving loan commitments and the value of our assets) or $20.0 million.

The greater of this threshold cannot be greater than the total availability of the ABL Facility.

The second ratio compares the ABL Facility availability of the U.S.

revolving credit facility against a $15.0 million threshold.

As of December 31, 2022, we were in compliance with all covenants under our debt agreements.

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.

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, 2022 and 2021, respectively.

Included in our cash and cash equivalents balance as of December 31, 2022 was $17.6 million of cash and cash equivalents held in foreign jurisdictions.

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Principal and interest on long-term debt

As of December 31, 2021, our total indebtedness was $895.5 million, with up to $61.3 million of available borrowings under our asset based lending revolving credit facility.

As of December 31, 2022, our total indebtedness was $886.5 million, with up to $59.7 million of available borrowings under our ABL.

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

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Interest on long-term debt excludes amortization of deferred financing fees and original issue discount.

The actual interest payments may differ materially based on actual amounts of long-term debt outstanding and actual interest rates in future periods.

The actual interest payments may differ materially based on actual amounts of long-term debt outstanding and actual interest rates in future periods, as well as the hedging impact from our interest rate cap agreements.

Subject to approval by our board of directors, we may raise additional capital or borrowings from time to time or seek to refinance our existing debt.

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Net cash provided by operating activities, continuing operations $ 180.4 $ 137.3 $ 140.1

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

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

2022 2021 2020

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Purchases of property, plant and equipment $ (58.9) $ (60.0) $ (54.8)

Proceeds from business divestiture, net of cash and indebtedness 978.4 624.3 —

Proceeds from business divestitures, net of cash — 978.4 624.3

Payments for business divestiture (3.7) — —

Proceeds from sale of assets — — 2.4

1 unchanged sentence

Other, net 0.1 (0.1) (0.1)

Net cash provided by (used in) investing activities, continuing operations $ 875.7 $ 571.8 $ (54.6)

Net cash (used in) provided by investing activities, continuing operations $ (63.0) $ 875.7 $ 571.8

2022 2021 2020

9 unchanged sentences

Cash generated by net income and non-working capital related activities was higher during the year ended December 31, 2022 by $27.2 million compared to the prior year.

Cash used by working capital during the year ended December 31, 2022 was $2.2 million, favorable compared to cash used of $18.1 million for the year ended December 31, 2021.

The increase in cash generated by net income and non-working capital related activities of $27.2 million as compared to the prior year period was primarily due to an increase in gross profit driven by higher sales volumes and higher average selling price.

In the year ended December 31, 2021, the non-working capital activity included debt extinguishment costs.

The $15.9 million increase in cash from working capital as compared to the prior year was primarily due to favorable changes in accounts receivable, inventories, and prepaids, which were offset by unfavorable changes in accounts payable and accrued liabilities.

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

The favorable change in prepaid and other current assets relates to the timing of receivables from related parties, the timing of insurance prepayments, an employee retention credit, and interest receivable on our interest rate caps.

The increase in cash provided by inventory was due to the increase in sales within our Ecoservices and Catalyst Technologies segment in the current year period.

The unfavorable change in accounts payable is due to the increase in sulfur costs and higher purchase volume.

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

Net cash used in investing activities was $63.0 million for the year ended December 31, 2022, compared to net cash provided of $875.7 million during the year ended December 31, 2021.

Cash used in investing activities consisted of $58.9 million and $60.0 million to fund capital expenditures during the years ended December 31, 2022 and 2021, respectively.

During the year ended December 31, 2021, we divested our Performance Chemicals business and received $978.4 million in net proceeds and acquired Chem32 LLC for $42.6 million.

Net cash used in financing activities was $148.1 million for the year ended December 31, 2022, compared to $963.1 million used during the year ended December 31, 2021.

During the year ended December 31, 2021, as a result of the sale of the Performance Chemicals business, net cash used in financing activities was driven by $542.9 million in net repayments of our debt and revolving credit facility and a dividend payment of $3.20 per common share, which resulted in a cash outflow of $435.6 million.

Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

Net cash provided by operating activities was $137.3 million for the year ended December 31, 2021, compared to $140.1 million provided for the year ended December 31, 2020.

Cash generated by net income and non-working capital related activities was higher during the year ended December 31, 2021 by $29.8 million compared to the prior year.

Cash used by working capital during the year ended December 31, 2021 was unfavorable compared to the year ended December 31, 2020.

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

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

The increase in cash provided by inventory was due to the increase in sales within our

Catalyst Technologies segment in the current year period.

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

1 unchanged sentence

Net cash provided by investing activities was $875.7 million for the year ended December 31, 2021, compared to net cash provided of $571.8 million during the year ended December 31, 2020.

Cash used in investing activities primarily consisted of $60.0 million and $54.8 million to fund capital expenditures during the years ended December 31, 2021 and 2020, respectively.

Cash used in investing activities consisted of $60.0 million and $54.8 million to fund capital expenditures during the years ended December 31, 2021 and 2020, respectively.

During the year ended December 31, 2021, we divested our Performance Chemicals business and received $978.4 million in net proceeds and acquired Chem32 LLC for $42.6 million.

During the year ended December 31, 2020, we divested our Performance Materials business and received $624.3 million in net proceeds.

We received proceeds of $2.4 million related to the sale of non-core assets during the year ended December 31, 2020.

Net cash used in financing activities was $963.1 million for the year ended December 31, 2021, compared to net cash used of $720.2 million during the year ended December 31, 2020.

Net cash used in financing activities was primarily driven by $542.9 million and $470.3 million in net repayments of our debt and revolving credit facility made during the years ended December 31, 2021 and 2020, respectively.

During the year ended December 31, 2021, we paid a dividend of $3.20 per common share, which resulted in a cash outflow of $435.6 million.

Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019

Net cash provided by operating activities was $140.1 million for the year ended December 31, 2020, compared to $133.2 million provided for the year ended December 31, 2019.

Cash generated by net income and non-working capital related activities was higher during the year ended December 31, 2020 by $3.0 million compared to the prior year.

Cash provided by working capital during the year ended December 31, 2020 was favorable compared to the year ended December 31, 2019.

Working capital for the year ended December 31, 2020 provided cash of $14.5 million, compared to cash provided of $10.6 million for the year ended December 31, 2019.

The increase in cash generated by net income and non-working capital related activities of $3.0 million as compared to the prior year period was primarily due to a decrease in gross profit driven by lower sales volumes.

The $3.9 million increase in cash from working capital as compared to the prior year was primarily due to unfavorable changes in accrued liabilities and prepaid and other current assets, which were partially offset by favorable changes in accounts receivable, inventories and accounts payable.

The unfavorable change in accrued liabilities was primarily due to the timing of interest and employee-related payments.

The increased cash flow contribution from accounts receivable was driven by the timing of collections on our receivable balances during the current year period versus prior year period.

The favorable change in inventory balances

is due to a reduction in inventory in 2020 compared to an inventory build in 2019.

We increased inventory levels at the end of the 2019 period within our polyethylene catalyst product group to meet sales demand in the 2020 period.

The favorable change in accounts payable is due to timing of capital expenditure payments.

Net cash provided by investing activities was $571.8 million for the year ended December 31, 2020, compared to net cash used of $54.6 million during the year ended December 31, 2019.

Cash used in investing activities primarily consisted of $54.8 million and $55.3 million to fund capital expenditures during the years ended December 31, 2020 and 2019, respectively.

During the year ended December 31, 2020, we sold our Performance Materials business for net cash proceeds of $624.3 million and sold additional assets which generated proceeds of $2.4 million.

Net cash used in financing activities was $720.2 million for the year ended December 31, 2020, compared to net cash used of $214.7 million during the year ended December 31, 2019.

Net cash used in financing activities was primarily driven by $470.3 million and $215.0 million in net repayments of our debt and revolving credit facility made during the years ended December 31, 2020 and 2019, respectively.

During the year ended December 31, 2020, we paid a dividend of $1.80 per common share, which resulted in a cash outflow of $243.7 million.

During the year ended December 31, 2021, we paid a dividend of $3.20 per common share, which resulted in a cash outflow of $435.6 million, from the sale of the Performance Chemicals business.

During the year ended December 31, 2020, we paid a dividend of $1.80 per common share, which resulted in a cash outflow of $243.7 million, from the sale of the Performance Materials business.

(in millions)

the 2018 Term Loan Facility $ — $ 671.7

the 2020 Term Loan Facility — 459.7

the 2021 Term Loan Facility 895.5 —

5.75% Senior Unsecured Notes due 2025 — 295.0

Senior Secured Term Loan Facility due June 2028 (the "2021 Term Loan Facility") $ 886.5 $ 895.5

ABL Facility — —

7 unchanged sentences

Our net debt was $775.6 million, including cash of $110.9 million.

Our total available liquidity as of December 31, 2021 was $202.2 million, which represents our cash on hand of $140.9 million plus our excess availability under our asset based lending revolving credit facility of $61.3 million, after giving effect to $17.5 million of outstanding letters of credit and no revolving credit facility borrowings.

Our total available liquidity as of December 31, 2022 was $170.6 million, which represents our cash on hand of $110.9 million plus our excess availability under our ABL of $59.7 million, after giving effect to $4.0 million of outstanding letters of credit and no revolving credit facility borrowings.

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

Senior Secured Credit Facilities

On May 4, 2016, we entered into senior secured credit facilities (collectively, the “2016 Senior Secured Credit Facilities”) that were comprised of a $1,200.0 million term loan facility consisting of a $900.0 million U.S.

dollar-denominated tranche and a $300.0 million Euro-denominated (or €265.0 million) tranche (the “2016 Term Loan Facility”), and a $200.0 million asset-based revolving credit facility (the “ABL Facility”), which provided for up to $200.0 million in revolving credit borrowings consisting of up to $150.0 million in U.S.

available borrowings, up to $10.0 million in Canadian available borrowings and up to $40.0 million of European available borrowings.

Borrowings under the ABL Facility bear interest at a rate equal to the LIBOR rate or the base rate elected by us at the time of the borrowing plus a margin of between 1.50%-2.00% or 0.50%-1.00%, respectively, depending on availability under the ABL Facility.

In addition, there is an annual commitment fee equal to 0.375%, with a step-down to 0.25% based on the average usage of the revolving credit borrowings available.

On February 8, 2018, we refinanced the 2016 Term Loan Facility with a new $1,267.0 million senior secured term loan facility by entering into the Third Amendment Agreement to the 2016 Term Loan Facility, which amended and restated the 2016 Term Loan Facility.

Pursuant to the Third Amendment Agreement, the 2018 Term Loan Facility accrued interest at a floating rate of LIBOR (with a zero percent minimum LIBOR floor) plus 2.50% per annum and was scheduled to mature in February 2025.

On February 7, 2020, we re-priced the 2018 Term Loan Facility to reduce the applicable interest rate and extend the maturity of the facility to February 2027.

The terms of the facility were substantially consistent following the re-pricing, except that borrowings under the term loan bore interest at a rate equal to a floating rate of LIBOR plus 2.25% per annum.

On May 4, 2016, we entered a $200.0 million senior secured ABL facility, which provided for $200.0 million in revolving credit commitment (the “ABL Facility”).

On March 20, 2020, we amended the ABL Facility to increase the aggregate amount of the revolving loan commitments available by $50.0 million to $250.0 million, consisting of up to $195.0 million in U.S.

1 unchanged sentence

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% and 1.75% or 0.25% to 0.75%, respectively.

On July 22, 2020, we entered into an agreement for a new senior secured term loan facility (the “2020 Term Loan Facility) for an aggregate principal amount of $650.0 million 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 our existing $625.0 million 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, we entered into another agreement for a new senior secured term loan facility (the “2021 Term Loan Facility”) for an aggregate principal amount of $900.0 million 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.

We also amended the ABL Facility (the “2021 ABL Amendment”).

The proceeds from the 2021 Term Loan Facility were used to pay in full the 2020 Term Loan Facility and partially pay the 2018 Term Loan Facility.

The 2021 ABL Amendment amended the aggregate amount of revolving loan commitments available to the borrowers to $100 million, consisting of $90 million in U.S.

In addition, there was annual commitment fee equal to 0.375%, with a step-down to 0.25% based on average usage of the revolving credit borrowings available.

On June 9, 2021, we amended the ABL Facility to decrease the aggregate amount of revolving loan commitments available to $100.0 million, consisting of $90.0 million in U.S.

commitments and $10.0 million in European commitments and extended the maturity date to August 2, 2026.

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

We used a portion of the net cash proceeds to repay the remaining 2018 Term Loan Facility principal amount of $231,363.

As of December 31, 2022, there were no revolving credit borrowings under the ABL Facility.

1 unchanged sentence

We were in compliance with all debt covenants as of December 31, 2022 and 2021, respectively.

We have the ability to request letters of credit under the ABL Facility.

We have the availability to request letters of credit under the ABL Facility.

We had $4.0 million of letters of credit outstanding as of December 31, 2022, which reduce available borrowings under the ABL Facility by such amounts.

6.75% Senior Secured Notes due 2022 - Redeemed in 2020

Concurrent with the Business Combination, we issued $625.0 million 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.

Interest on the 6.75% Senior Secured Notes was payable 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.

The 6.75% Senior Secured Notes were to mature on November 15, 2022.

In July 2020, we entered into an agreement for a new senior secured term loan facility.

The proceeds were used to redeem the 6.75% Senior Secured Notes.

On February 17, 2023, we amended the ABL Facility to replace LIBOR with a secured overnight financing rate (“SOFR”) as the benchmark interest rate with respect to U.S.

dollar-denominated borrowings.

Following this amendment, U.S.

dollar-denominated borrowings under the ABL Facility bear interest at a rate equal to an adjusted SOFR rate or the base rate plus a margin of between 1.25% and 1.75% or 0.25% to 0.75%, respectively.

2021 Term Loan Facility

On June 9, 2021, we entered into an agreement for a senior secured term loan facility (the “2021 Term Loan Facility”) for an aggregate principal amount of $900.0 million, 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, with a maturity date of June 9, 2028.

The proceeds from the 2021 Term Loan Facility were used to repay the 2020 Term Loan Facility (as defined below) in full and partially repay the 2018 Term Loan Facility (as defined below).

On February 9, 2023, we amended the 2021 Term Loan Facility to replace LIBOR with SOFR as the benchmark interest rate.

Following this amendment, the 2021 Term Loan Facility bears interest at an adjusted SOFR rate (with a 0.50% minimum floor) plus 2.75% per annum (or, depending on the Borrower’s first lien net leverage ratio, 2.50%).

2020 Term Loan Facility – Repaid in 2021

On July 22, 2020, we entered into an agreement for a senior secured term loan facility (the “2020 Term Loan Facility”) for an aggregate principal amount of $650.0 million.

The proceeds were used to redeem our existing $625.0 million of 6.75% Senior Secured Notes due 2022 and pay the associated early redemption premiums.

The 2020 Term Loan Facility was fully repaid with the proceeds of the 2021 Term Loan Facility.

2018 Term Loan Facility – Repaid in 2021

On February 8, 2018, we entered into an agreement for a senior secured term loan facility (the “2018 Term Loan Facility”) for an aggregate principal amount of $1,267.0 million.

The 2018 Term Loan Facility was amended on February 7, 2020, partially repaid on June 9, 2021 with a portion of the proceeds of the 2021 Term Loan Facility, and fully repaid on August 1, 2021 with a portion of the proceeds from the sale of our Performance Chemicals business.

5.75% Senior Unsecured Notes due 2025 - Redeemed in 2021

On December 11, 2017, we issued $300.0 million aggregate principal amount of 5.75% Senior Unsecured Notes due 2025 (the “5.75% Senior Unsecured Notes”) in a private placement exempt from the registration requirements of the Securities Act.

The 5.75% Senior Unsecured Notes mature on December 15, 2025.

Interest on the 5.75% Senior Unsecured Notes is to be paid semi-annually on February 15 and August 15, commencing August 15, 2018, at an annual rate of 5.75% per year.

On August 1, 2021, we used a portion of the net cash proceeds from the sale of our Performance Chemicals business to redeem the 5.750% Senior Notes.

On December 11, 2017, we issued $300.0 million aggregate principal amount of 5.75% Senior Unsecured Notes due 2025 (the “5.75% Senior Unsecured Notes”).

The 5.750% Senior Notes were redeemed at a redemption price equal to the sum of 102.875% of the principal amount outstanding plus accrued and unpaid interest to, but excluding, August 2, 2021.

9 unchanged sentences

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

Capital expenditures are higher in the year ended December 31, 2021 as compared to December 31, 2020 as both growth and maintenance expenditures has resumed since COVID-19.

Capital expenditures are lower in the year ended December 31, 2020 as compared to December 31, 2019 as both growth and maintenance expenditures were delayed to align with general market conditions.

Maintenance capital expenditures were higher in the year ended December 31, 2022 as compared to December 31, 2021 due to higher turnaround expenditures.

Growth capital expenditures are lower in the year ended December 31, 2022 as compared to December 31, 2021 due to the completion of several expansion projects in 2021.

Pension Funding

We paid an immaterial amount in cash contributions into our defined benefit pension plans and other postretirement plans in December 31, 2021 and $3.3 million and $5.0 million in 2020 and 2019, respectively.

We paid an immaterial amount in cash contributions into our defined benefit pension plans and other postretirement plans in December 31, 2022 and 2021, respectively and $3.3 million in 2020.

The net periodic pension and postretirement expense was $1.0 million, $0.3 million, and $0.4 million for those same periods, respectively.

2 unchanged sentences

We had $4.0 million and $17.5 million of outstanding letters of credit on our revolver facility as of December 31, 2022 and 2021, respectively.

Critical Accounting Policies

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in conformity with GAAP and our significant accounting policies are described in Note 2 to our consolidated financial statements.

3 unchanged sentences

We review these matters and reflect changes in estimates as appropriate.

We have identified

below the accounting policies, estimates and critical judgment areas that we believe could have a material effect on our financial position, liquidity or results of operations.

We have identified below the accounting policies, estimates and critical judgment areas that we believe could have a material effect on our financial position, liquidity or results of operations.

Revenue Recognition

38 unchanged sentences

If we determine 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, we 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, we bypassed the option to perform the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test for each of our reporting units.

For the annual

assessments in 2022 and 2021, we bypassed the option to perform the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test for each of our reporting units.

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

55 unchanged sentences

We recognize 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 us and may require several years to resolve.

Tax examinations are often complex as tax authorities may disagree with the treatment of items reported by us 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.

9 unchanged sentences

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.

Although achievement of the performance condition is subject to continued service with us, 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.

Although achievement of the performance condition is subject to continued service with us, 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 our restricted stock awards also governs the achievement of the performance vesting condition for our stock options.

13 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis