What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-05 compared with 2022-11-04 · 198 added, 515 removed, 487 unchanged (59% of the section changed)

4 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Sales $ 160,874 $ 179,714

6 unchanged sentences

Interest expense, net 9,832 8,450

Debt extinguishment costs — 15,185 — 26,902

Other expense (income), net 1,872 ( 218 ) 2,497 3,081

Income (loss) from continuing operations before income taxes and noncontrolling interest 30,291 7,280 70,428 ( 834 )

Other (income) expense, net ( 427 ) 140

(Loss) income before income taxes ( 524 ) 13,595

Provision for income taxes 947 5,720

Net income (loss) from continuing operations 21,325 4,689 48,445 ( 5,929 )

Net loss from discontinued operations, net of tax — ( 75,872 ) — ( 159,122 )

Net income (loss) 21,325 ( 71,183 ) 48,445 ( 165,051 )

Net income attributable to the noncontrolling interest—discontinued operations — 76 — 333

Net income (loss) attributable to Ecovyst Inc.

$ 21,325 $ ( 71,259 ) $ 48,445 $ ( 165,384 )

Income (loss) from continuing operations attributable to Ecovyst Inc.

$ 21,325 $ 4,689 $ 48,445 $ ( 5,929 )

Loss from discontinued operations attributable to Ecovyst Inc.

— ( 75,948 ) — ( 159,455 )

Net income (loss) attributable to Ecovyst Inc.

Net (loss) income attributable to Ecovyst Inc.

$ ( 1,471 ) $ 7,875

Net income (loss) per share:

Basic income (loss) per share—continuing operations $ 0.16 $ 0.03 $ 0.36 $ ( 0.04 )

Diluted income (loss) per share—continuing operations $ 0.16 $ 0.03 $ 0.35 $ ( 0.04 )

Basic loss per share—discontinued operations $ — $ ( 0.56 ) $ — $ ( 1.17 )

Diluted loss per share—discontinued operations $ — $ ( 0.55 ) $ — $ ( 1.17 )

Basic income (loss) per share $ 0.16 $ ( 0.52 ) $ 0.36 $ ( 1.22 )

Diluted income (loss) per share $ 0.16 $ ( 0.52 ) $ 0.35 $ ( 1.22 )

Net (loss) income per share:

Basic (loss) income per share $ ( 0.01 ) $ 0.06

Diluted (loss) income per share $ ( 0.01 ) $ 0.06

Weighted average shares outstanding:

6 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

Net (loss) income attributable to Ecovyst Inc.

$ ( 1,471 ) $ 7,875

Net income (loss) $ 21,325 $ ( 71,183 ) $ 48,445 $ ( 165,051 )

Other comprehensive income (loss), net of tax:

Pension and postretirement benefits ( 24 ) ( 39 )

Net gain from hedging activities 9,141 460 27,620 1,638

Net (loss) gain from hedging activities ( 7,920 ) 13,722

Foreign currency translation 2,185 ( 2,305 )

Total other comprehensive income (loss) 972 ( 2,591 ) 9,074 6,804

Comprehensive income (loss) 22,297 ( 73,774 ) 57,519 ( 158,247 )

Comprehensive income attributable to noncontrolling interests — 740 — 1,056

Comprehensive income (loss) attributable to Ecovyst Inc.

Total other comprehensive (loss) income ( 5,759 ) 11,378

Comprehensive (loss) income attributable to Ecovyst Inc.

$ ( 7,230 ) $ 19,253

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

2023 December 31,

2 unchanged sentences

Inventories, net 45,828 44,362

Derivative assets 15,996 18,510

Prepaid and other current assets 31,301 19,154

20 unchanged sentences

authorized shares 450,000,000 ;

issued shares 139,485,868 and 137,820,971 on September 30, 2022 and December 31, 2021, respectively;

outstanding shares 130,100,834 and 136,938,758 on September 30, 2022 and December 31, 2021, respectively

issued shares 140,604,563 and 139,571,272 on March 31, 2023 and December 31, 2022, respectively;

outstanding shares 120,124,260 and 122,186,238 on March 31, 2023 and December 31, 2022, respectively

Preferred stock ($ 0.01 par);

authorized shares 50,000,000 ;

no shares issued or outstanding on September 30, 2022 and December 31, 2021

no shares issued or outstanding on March 31, 2023 and December 31, 2022

Additional paid-in capital 1,096,333 1,091,475

1 unchanged sentence

Treasury stock, at cost;

shares 9,385,034 and 882,213 on September 30, 2022 and December 31, 2021, respectively

shares 20,480,303 and 17,385,034 on March 31, 2023 and December 31, 2022, respectively

( 180,340 ) ( 149,624 )

Accumulated other comprehensive income (loss) 3,282 ( 5,792 )

Accumulated other comprehensive income 233 5,992

Total equity 674,151 707,229

8 unchanged sentences

comprehensive

income (loss) Non-

interest Total

Balance, December 31, 2022 $ 1,396 $ 1,091,475 $ ( 242,010 ) $ ( 149,624 ) $ 5,992 $ 707,229

Net income — — 7,875 — — — 7,875

Other comprehensive income — — — — 11,378 — 11,378

Tax withholdings on equity award vesting — — — ( 332 ) — — ( 332 )

Stock compensation expense — 5,946 — — — — 5,946

Shares issued under equity incentive plan, net of forfeitures 18 9 — — — — 27

Balance, March 31, 2022 $ 1,396 $ 1,079,364 $ ( 307,832 ) $ ( 12,883 ) $ 5,586 $ — $ 765,631

Net income — — 19,245 — — — 19,245

Net loss — — ( 1,471 ) — — ( 1,471 )

Other comprehensive loss — — — — ( 5,759 ) ( 5,759 )

Repurchases of common shares — — — ( 29,850 ) — ( 29,850 )

Stock compensation expense — 5,409 — — — — 5,409

Shares issued under equity incentive plan, net of forfeitures — 17 — — — — 17

Balance, June 30, 2022 $ 1,396 $ 1,084,790 $ ( 288,587 ) $ ( 21,725 ) $ 2,310 $ — $ 778,184

Net income — — 21,325 — — — 21,325

Other comprehensive income — — — — 972 — 972

Repurchases of common shares — — — ( 64,869 ) — — ( 64,869 )

Tax withholdings on equity award vesting — — — ( 866 ) — ( 866 )

Stock compensation expense — 4,756 — — — 4,756

Shares issued under equity incentive plan, net of forfeitures 10 102 — — — 112

Balance, September 30, 2022 $ 1,395 $ 1,088,704 $ ( 267,262 ) $ ( 86,594 ) $ 3,282 $ — $ 739,525

Balance, March 31, 2023 $ 1,406 $ 1,096,333 $ ( 243,481 ) $ ( 180,340 ) $ 233 $ 674,151

stock Additional

2 unchanged sentences

comprehensive

interest Total

income (loss) Total

Balance, December 31, 2021 $ 1,378 $ 1,073,409 $ ( 315,707 ) $ ( 12,551 ) $ ( 5,792 ) $ 740,737

Net (loss) income — — ( 92,635 ) — — 117 ( 92,518 )

Other comprehensive loss — — — — ( 2,745 ) ( 394 ) ( 3,139 )

Net income — — 7,875 — — 7,875

Other comprehensive income — — — — 11,378 11,378

Tax withholdings on equity award vesting — — — ( 332 ) — ( 332 )

Distributions to noncontrolling interests — — — — — ( 516 ) ( 516 )

Stock compensation expense — 5,946 — — — 5,946

1 unchanged sentence

Balance, March 31, 2022 $ 1,396 $ 1,079,364 $ ( 307,832 ) $ ( 12,883 ) $ 5,586 $ 765,631

Net (loss) income — — ( 1,490 ) — — 140 ( 1,350 )

Other comprehensive income — — — — 12,081 453 12,534

Distributions to noncontrolling interests — — — — — ( 593 ) ( 593 )

Stock compensation expense — 7,499 — — — — 7,499

Shares issued under equity incentive plan, net of forfeitures — 36 — — — — 36

Balance, June 30, 2021 $ 1,378 $ 1,492,334 $ ( 269,883 ) $ ( 12,551 ) $ ( 5,929 ) $ ( 740 ) $ 1,204,609

Net (loss) income — — ( 71,259 ) — — 76 ( 71,183 )

Other comprehensive income (loss) — — — — ( 3,255 ) 664 ( 2,591 )

Dividends paid on common stock ($ 3.20 per share)

— ( 435,593 ) — — — — ( 435,593 )

Stock compensation expense — 11,961 — — — — 11,961

Shares issued under equity incentive plan, net of forfeitures — 113 — — — — 113

Balance, September 30, 2021 $ 1,378 $ 1,068,815 $ ( 341,142 ) $ ( 12,551 ) $ ( 9,184 ) $ — $ 707,316

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine months ended

September 30,

Three months ended

Cash flows from operating activities:

Net income (loss) $ 48,445 $ ( 165,051 )

Net loss from discontinued operations — 159,122

Net (loss) income attributable to Ecovyst Inc.

$ ( 1,471 ) $ 7,875

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

2 unchanged sentences

Amortization of deferred financing costs and original issue discount 508 497

Debt extinguishment costs — 12,818

Foreign currency exchange loss 2,179 4,803

Foreign currency exchange (gain) loss ( 437 ) 647

Pension and postretirement healthcare benefit 8 ( 553 )

5 unchanged sentences

Other, net ( 3,783 ) ( 6,841 )

Working capital changes that provided (used) cash, excluding the effect of acquisitions and dispositions:

Working capital changes that provided (used) cash:

Receivables 8,364 ( 10,386 )

3 unchanged sentences

Accrued liabilities ( 14,084 ) ( 27,911 )

Net cash provided by operating activities, continuing operations 109,325 92,286

Net cash used by operating activities, discontinued operations — ( 7,420 )

Net cash provided by operating activities 4,114 6,423

1 unchanged sentence

Purchases of property, plant and equipment ( 18,698 ) ( 10,750 )

Proceeds from business divestiture, net of cash — 980,350

Payments for business divestiture, net of cash — ( 3,744 )

Business combinations, net of cash acquired ( 488 ) ( 42,782 )

Other, net — 81

Net cash (used in) provided by investing activities, continuing operations ( 43,625 ) 892,912

Net cash used in investing activities, discontinued operations — ( 40,943 )

Net cash (used in) provided by investing activities ( 43,625 ) 851,969

Net cash used in investing activities ( 18,698 ) ( 14,413 )

Cash flows from financing activities:

Issuance of long-term debt, net of discount — 897,750

Debt issuance costs — ( 1,293 )

Repayments of long-term debt ( 2,250 ) ( 2,250 )

Debt prepayment fees — ( 8,481 )

Proceeds from failed sale-leaseback — 14,590

Dividends paid to stockholders — ( 435,593 )

Repurchases of common shares ( 29,850 ) —

Tax withholdings on equity award vesting ( 866 ) ( 332 )

Proceeds from stock options exercised 84 223

Repayment of financing obligations ( 1,849 ) ( 486 )

Repayment of financing obligation ( 701 ) —

Other, net 97 27

Net cash used in financing activities, continuing operations ( 82,558 ) ( 963,477 )

Net cash used in financing activities, discontinued operations — ( 1,144 )

Net cash used in financing activities ( 33,570 ) ( 2,555 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 2,585 ) ( 4,681 )

Effect of exchange rate changes on cash and cash equivalents ( 1,147 ) ( 596 )

Net change in cash and cash equivalents ( 49,301 ) ( 11,141 )

11 unchanged sentences

The Company believes that its products, which are predominantly inorganic, and services contribute to improving the sustainability of the environment.

On December 14, 2020, the Company completed the sale of its Performance Materials business, and on August 1, 2021, the Company completed the sale of its Performance Chemicals business.

The financial results of these businesses are presented as discontinued operations in the condensed consolidated financial statements for the 2021 period presented.

See Note 3 to these condensed consolidated financial statements for more information on these transactions.

The Company has two uniquely positioned specialty businesses:

3 unchanged sentences

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

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

Basis of Presentation

4 unchanged sentences

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Reclassification and Correction of an Error

During the preparation of the condensed consolidated financial statements for the period ended September 30, 2022, the Company identified a presentation error in the condensed consolidated statements of comprehensive income for the 2021 comparable periods presented.

The presentation of comprehensive income (loss) inadvertently omitted the release of accumulated other comprehensive income (loss) related to foreign currency translation and deferred pension and postretirement benefit plan losses in conjunction with the sale of the Company’s Performance Chemicals business.

There was no impact on the condensed consolidated statements of income, condensed consolidated balance sheets and condensed consolidated statements of cash flows.

The presentation of other comprehensive income (loss) for the three and nine months ended September 30, 2021, was corrected for the additional comprehensive loss of $ 7,093 , of which $ 943 of comprehensive income was attributed to noncontrolling interest.

Additionally, Note 6 was corrected for this presentation error.

The Company assessed the materiality of the error and concluded it was not material to the Company’s previously issued financial statements, including the consolidated financial statements for the year ended December 31, 2021.

The previously disclosed disposal of business presented in accumulated other comprehensive income (loss) has been reclassified to other comprehensive income (loss) in the condensed consolidated statement of stockholders’ equity.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

New Accounting Standards:

Recently Adopted Accounting Standards

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

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

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

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

The new guidance is effective for fiscal years beginning after December 15, 2021 with the new disclosures required on an annual basis, and can be applied either prospectively or retrospectively.

The Company adopted the new guidance on January 1, 2022 and will include the disclosures as required in its annual reporting with respect to any government assistance or grants subject to the scope of the guidance to the extent material.

Accounting Standards Not Yet Adopted

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

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

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

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

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

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

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

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

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

The time period through which the practical expedients provided in the guidance is available was set to expire on December 31, 2022, but was extended through December 31, 2024 by the FASB in December 2022.

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

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

During the year ended December 31, 2021, the FASB extended the guidance adoption date to June 30, 2023.

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

Divestitures:

Performance Materials Divestiture

Upon the close of the Performance Materials divestiture transaction on December 14, 2020, the Company entered into a Transition Services Agreement with the buyer pursuant to which the buyer received certain services to provide for the orderly transition of various functions and processes after the closing of the transaction.

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

These services were provided for a period of nine months, with three 30-day extensions available.

The Company billed $ 253 and $ 3,314 under the Transition Services Agreement to the buyer during the three and nine months ended September 30, 2021, respectively.

Those billings were included in selling, general and administrative expenses on the condensed consolidated financial statements for the nine months ended September 30, 2021.

During the three months ended September 30, 2021, the Company incurred transaction costs of $ 264 and stock-based compensation expense of $ 1,194 , and an associated tax benefit of $ 339 related to the Performance Materials divestiture, which was included in loss from discontinued operations, net of tax.

During the nine months ended September 30, 2021, the Company incurred transaction costs of $ 1,794 and stock-based compensation expense of $ 2,477 , and an associated tax benefit of $ 1,045 related to the Performance Materials divestiture, which was included in loss from discontinued operations, net of tax.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Performance Chemicals Divestiture

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

(the “Buyer”), a partnership established by Koch Minerals & Trading, LLC and Cerberus Capital Management, L.P., for $ 1,100,000 , subject to certain adjustments including indebtedness, cash, working capital and transaction expenses.

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

Prior to the close of the transaction, the disposal group was tested for recoverability at each of the balance sheet dates subsequent to meeting the discontinued operations criteria, and the Company recognized an estimated disposal loss of $ 13,990 and $ 109,584 during the three and six months ended June 30, 2021, respectively, which was included in net loss from discontinued operations, net of tax on the condensed consolidated statement of income.

For the nine months ended September 30, 2021, the loss on the sale of the Performance Chemicals business was $ 157,539 , which was included in net (loss) income from discontinued operations, net of tax in the Company’s condensed consolidated statements.

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

Net proceeds received from the sale of the Performance Chemicals business $ 980,350

Transaction costs ( 35,402 )

Net assets derecognized ( 1,102,487 )

Loss on sale of the Performance Chemicals business $ ( 157,539 )

During the year ended December 31, 2021, the net cash proceeds to the Company from the sale were $ 978,449 after certain customary adjustments for indebtedness, working capital and cash at the closing of the transaction.

T he final pre-tax loss on the sale was $ 150,230 , which was included in net (loss) income from discontinued operations, net of tax in the Company’s consolidated statements of income for the year ended December 31, 2021.

In March 2022, the Company made a payment to the buyer for $ 3,744 , representing the final adjustments to the sale price.

The Company classified the payment within net cash used in investing activities – continuing operations in the condensed consolidated statements of cash flows.

In connection with the sale of the Performance Chemicals business and the related loss, as noted above, the Company has recognized a tax benefit of $ 33,052 within net loss from discontinued operations, net of tax on the condensed consolidated statement of income.

In February 2023, the Company amended the 2021 Term Loan Facility, the ABL Facility and all existing interest rate caps agreements to replace LIBOR with a secured overnight financing rate (“SOFR”) as the benchmark interest rate.

See Notes 11 and 12 to these condensed consolidated financial statements for additional information.

The Company utilized the practical expedients under the guidance with respect to the transition of its debt facilities and interest rate hedging arrangements to SOFR, with no impact to its condensed consolidated financial statements.

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

The Company adopted the new guidance effective January 1, 2023 as required, and will apply the guidance prospectively to business combinations that occur after the adoption date.

AND SUBSIDIARIES

1 unchanged sentence

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

The following table summarizes the results of discontinued operations related to the Performance Chemicals business for the three and nine months ended September 30, 2021:

Three months ended

September 30, 2021 Nine months ended

September 30, 2021

Sales $ 54,973 $ 389,870

Cost of goods sold 39,582 284,220

Selling, general and administrative expenses 6,552 29,758

Goodwill impairment charge

Other operating (income) expense, net ( 18,993 ) 10,337

Loss on sale of the Performance Chemicals business 123,035 157,539

Operating loss ( 95,203 ) ( 167,064 )

Equity in net (income) from affiliated companies ( 25 ) ( 111 )

Interest expense, net (1)

Other expense (income), net 153 ( 6,210 )

Loss from discontinued operations before income tax ( 97,247 ) ( 171,473 )

Benefit for income taxes ( 22,494 ) ( 15,576 )

Loss from discontinued operations, net of tax $ ( 74,753 ) $ ( 155,897 )

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

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

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

Net income attributable to the noncontrolling interest related to the Performance Chemicals business, net of tax was $ 76 and $ 333 for the three and nine months ended September 30, 2021, respectively .

Net loss attributable to Ecovyst Inc., related to the Performance Chemicals business, net of tax was $( 74,829 ) and $( 156,230 ) for the three and nine months ended September 30, 2021, respectively .

Revenue from Contracts with Customers:

3 unchanged sentences

Key End Uses Key Products

Industrial & process chemicals • Sulfur derivatives for industrial production

• Treatment services

Fuels & emission control • Refining hydrocracking catalysts

Clean fuels, emission control & other • Refining hydrocracking catalysts

• Emission control catalysts

• Regeneration services for alkylate production

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

• Catalysts used in production of renewable fuels

• Catalyst activation

• Aluminum sulfate solution

• Ammonium bisulfite solution

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

• Antiblocks for film packaging

• Sulfur derivatives for nylon production

Natural resources • Sulfur derivatives for mining

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The following tables disaggregate the Company’s sales, by segment and end use, for the three and nine months ended September 30, 2022 and 2021:

Three months ended September 30, 2022

Ecoservices Catalyst Technologies (2)

Industrial & process chemicals $ 41,252 $ — $ 41,252

Fuels & emission control (1)

88,532 — 88,532

Packaging & engineered plastics 29,707 36,859 66,566

Natural resources 36,183 — 36,183

Total segment sales $ 195,674 $ 36,859 $ 232,533

Three months ended September 30, 2021

Ecoservices Catalyst Technologies (2)

Industrial & process chemicals $ 23,297 $ 5 $ 23,302

Fuels & emission control (1)

67,644 — 67,644

Packaging & engineered plastics 23,315 29,873 53,188

Natural resources 23,294 — 23,294

Total segment sales $ 137,550 $ 29,878 $ 167,428

Nine months ended September 30, 2022

• Niche custom catalyst

Regeneration and treatment services • Sulfuric acid regeneration services

• Treatment services

Industrial, mining & automotive • Sulfur derivatives for industrial production

• Sulfuric acid for mining

• Sulfuric derivatives for nylon production

The following tables disaggregate the Company’s sales, by segment and end uses, for the three months ended March 31, 2023 and 2022, respectively:

Three months ended March 31, 2023

Ecoservices Catalyst Technologies (2)

Industrial & process chemicals $ 116,257 $ — $ 116,257

Fuels & emission control (1)

Clean fuels, emission control & other $ 4,740 $ — $ 4,740

Polymers & engineered plastics — 23,134 23,134

Regeneration and treatment services (1)

88,344 — 88,344

Packaging & engineered plastics 87,801 94,716 182,517

Natural resources 95,287 — 95,287

Industrial, mining & automotive 44,656 — 44,656

Total segment sales $ 137,740 $ 23,134 $ 160,874

Nine months ended September 30, 2021

Three months ended March 31, 2022

Ecoservices Catalyst Technologies (2)

Industrial & process chemicals $ 58,581 $ 5 $ 58,586

Fuels & emission control (1)

Clean fuels, emission control & other $ 7,096 $ — $ 7,096

Polymers & engineered plastics — 25,654 25,654

Regeneration and treatment services (1)

73,973 — 73,973

Packaging & engineered plastics 48,916 82,490 131,406

Natural resources 59,382 — 59,382

Industrial, mining & automotive 72,991 — 72,991

Total segment sales $ 154,060 $ 25,654 $ 179,714

(1) As described in Note 1 to these condensed consolidated financial statements, the Company experiences seasonal s ales fluctuations to customers in the fuels & emission control end use.

(1) As described in Note 1 to these condensed consolidated financial statements, the Company experiences seasonal s ales fluctuations to customers in the regeneration services product group.

(2) Excludes the Company’s proportionate share of sales from the Zeolyst International and Zeolyst C.V.

20 unchanged sentences

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

The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

September 30,

The following tables present information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

2023 Quoted Prices in

6 unchanged sentences

Interest rate caps (Note 12) $ 26,512 $ — $ 26,512 $ —

Derivative liabilities:

Interest rate caps (Note 12) $ 3,815 $ — $ 3,815 $ —

2022 Quoted Prices in

19 unchanged sentences

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

As of September 30, 2022, th e Company had interest rate c aps th at were fair valued using Level 2 inputs.

As of March 31, 2023, th e Company had interest rate c aps th at were fair valued using Level 2 inputs.

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

4 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

The stockholders’ equity footnote disclosures have been revised to include the impact of discontinued operations on pensions and postretirement benefits and foreign currency translation for the three and nine months ended September 30, 2021 in other comprehensive income (loss) and accumulated other comprehensive income (loss).

See Note 1 to these condensed consolidated financial statements for further information on the reclassification and correction of errors in historical presentation.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The following tables present the tax effects of each component of other comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021:

Three months ended September 30,

amount Tax benefit/

(expense) After-tax amount Pre-tax

amount Tax benefit/

(expense) After-tax amount

Defined benefit and other postretirement plans:

Amortization of net loss $ 2 $ ( 1 ) $ 1 $ 5,041 $ ( 1,297 ) $ 3,744

Amortization of prior service credit ( 53 ) 13 ( 40 ) ( 58 ) 14 ( 44 )

Settlement (loss) gain ( 1,228 ) 305 ( 923 ) 1,507 ( 374 ) 1,133

Benefit plans, net ( 1,279 ) 317 ( 962 ) 6,490 ( 1,657 ) 4,833

Net gain from hedging activities 12,188 ( 3,047 ) 9,141 613 ( 153 ) 460

Foreign currency translation (1)

( 7,207 ) — ( 7,207 ) ( 12,391 ) 4,507 ( 7,884 )

Other comprehensive income $ 3,702 $ ( 2,730 ) $ 972 $ ( 5,288 ) $ 2,697 $ ( 2,591 )

Nine months ended September 30,

The following table presents the tax effects of each component of other comprehensive (loss) income for the three months ended March 31, 2023 and 2022, respectively:

Three months ended March 31,

amount Tax benefit/

5 unchanged sentences

Amortization of prior service credit ( 31 ) 8 ( 23 ) ( 53 ) 13 ( 40 )

Settlement (loss) gain ( 1,228 ) 305 ( 923 ) 1,507 ( 374 ) 1,133

Benefit plans, net ( 32 ) 8 ( 24 ) ( 52 ) 13 ( 39 )

Net gain from hedging activities 36,827 ( 9,207 ) 27,620 2,184 ( 546 ) 1,638

Net (loss) gain from hedging activities ( 10,303 ) 2,383 ( 7,920 ) 18,296 ( 4,574 ) 13,722

Foreign currency translation 2,185 — 2,185 ( 2,305 ) — ( 2,305 )

( 17,506 ) — ( 17,506 ) ( 6,536 ) 6,954 418

Other comprehensive income $ 17,938 $ ( 8,864 ) $ 9,074 $ 2,025 $ 4,779 $ 6,804

(1) The income tax benefit or expense included in other comprehensive income is attributed to the portion of foreign currency translation associated with the Company’s cross-currency interest rate swaps for the three and nine months ended September 30, 2021, for which the tax effect is based on the applicable U.S.

deferred income tax rate.

See Note 14 to these condensed consolidated financial statements for information regarding the Company’s cross-currency interest rate swaps, which were settled in March 2021.

Other comprehensive (loss) income $ ( 8,150 ) $ 2,391 $ ( 5,759 ) $ 15,939 $ ( 4,561 ) $ 11,378

AND SUBSIDIARIES

1 unchanged sentence

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

The following table presents the changes in accumulated other comprehensive income (loss), net of tax, by component for the nine months ended September 30, 2022 and 2021:

The following table presents the changes in accumulated other comprehensive income, net of tax, by component for the three months ended March 31, 2023 and 2022, respectively:

Defined benefit

7 unchanged sentences

24 ( 526 ) — ( 502 )

September 30, 2022 $ 10,032 $ 29,874 $ ( 36,624 ) $ 3,282

Net current period other comprehensive (loss) income ( 24 ) ( 7,920 ) 2,185 ( 5,759 )

March 31, 2023 $ 12,108 $ 18,716 $ ( 30,591 ) $ 233

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

1 unchanged sentence

Amounts reclassified from accumulated other comprehensive income (1)

3,871 213 ( 11,779 ) ( 7,695 )

September 30, 2021 $ 10,026 $ 978 $ ( 20,188 ) $ ( 9,184 )

Net current period other comprehensive (loss) income ( 39 ) 13,722 ( 2,305 ) 11,378

March 31, 2022 $ 11,033 $ 15,976 $ ( 21,423 ) $ 5,586

(1) See the following table for details about these reclassifications.

Amounts in parentheses indicate debits.

The following table presents the reclassifications out of accumulated other comprehensive income for the three and nine months ended September 30, 2022 and 2021:

The following table presents the reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2023 and 2022, respectively:

Details about Accumulated Other Comprehensive

4 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Amortization of defined benefit and other postretirement items:

Prior service credit $ ( 53 ) $ ( 58 ) $ ( 158 ) $ ( 174 ) Other income (expense) (2)

Actuarial gains 1 2 3 4 Other income (expense) (2)

Release of actuarial losses — ( 3,717 ) — ( 3,717 ) Net loss from discontinued operations, net of tax

Prior service credit $ ( 31 ) $ ( 53 ) Other expense (2)

Actuarial gains ( 1 ) 1 Other (expense) income (2)

( 32 ) ( 52 ) Total before tax

12 ( 11 ) 38 16 Tax benefit (expense)

8 13 Tax benefit

$ ( 24 ) $ ( 39 ) Net of tax

1 unchanged sentence

Interest rate caps $ 698 $ ( 683 ) Interest expense

7 26 155 70 Tax benefit

( 172 ) 169 Tax (expense) benefit

$ 526 $ ( 514 ) Net of tax

Release of foreign currency translation $ — $ 11,779 $ — $ 11,779 Net loss from discontinued operations, net of tax

Total reclassifications for the period $ 502 $ ( 553 ) Net of tax

5 unchanged sentences

Treasury Stock Repurchases

The Company records repurchases of its common stock for treasury at cost.

Upon the reissuance of the Company’s common stock from treasury, differences between the proceeds from reissuance and the average cost of the treasury stock are credited or charged to capital in excess of par value to the extent of prior credits related to the reissuance of treasury stock.

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

2022 Stock Repurchase Program

On March 12, 2020, the Company’s Board of Directors (the “Board”) approved a plan to purchase up to $ 50,000 of the Company’s common stock under a stock repurchase program approved by the Board.

Under the plan, the Company could repurchase shares from time to time for cash in open market transactions or in privately negotiated transactions in accordance with applicable federal securities laws.

The Company determined the timing and the amount of any repurchases based on its evaluation of market conditions, share price and other factors.

The stock repurchase program expired in March 2022, with no repurchases made in 2022 through the expiration of the program, no r during the three or nine months ended September 30, 2021.

2022 Stock Repurchase Program

On April 27, 2022, the Board approved a stock repurchase program that permits the Company to purchase up to $ 450,000 of the Company’s common stock over the next four years .

On April 27, 2022, the Board approved a stock repurchase program that permits the Company to purchase up to $ 450,000 of the Company’s common stock over the four -year period from the date of approval.

Under the plan, the Company can repurchase shares from time to time for cash in open market transactions or in privately negotiated transactions in accordance with applicable federal securities laws.

The Company will determine the timing and the amount of any repurchases based on its evaluation of market conditions, share price and other factors.

During the nine months ended September 30, 2022, the Company repurchased 1,970,763 shares of its common stock on the open market at an average price of $ 9.82 per share, for a total of $ 19,356 .

Additionally, in connection with a secondary offering of the Company’s common stock in August 2022 , the Company repurchased 6,500,000 shares of its common stock sold in the offering from underwriters at a price of $ 8.36 per share simultaneous with the closing of the offering, for a total of $ 54,316 .

As of September 30, 2022, $ 376,328 was available for additional share repurchases under the program.

There were no repurchases during September 2022.

During the three months ended March 31, 2023, in connection with a secondary offering of the Company’s common stock in March 2023 , the Company repurchased 3,000,000 shares of its common stock sold in the offering from the underwriter at a price of $ 9.95 per share concurrently with the closing of the offering, for a total of $ 29,850 .

As of March 31, 2023, $ 283,448 was available for additional share repurchases under the program.

Tax Withholdings on Equity Award Vesting

1 unchanged sentence

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

There were no shares delivered to the Company to cover tax payments for the three months ended September 30, 2022 and 2021, and the fair value of the shares withheld to cover tax payments were $ 332 and $ 1,470 for the nine months ended September 30, 2022 and 2021, respectively.

Dividends Paid

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

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

Refer to Note 3 of these condensed consolidated financial statements for additional details on the sale of the Performance Chemicals business.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

A portion of the holdback was settled in September 2022 for a payment of $ 488 , with $ 512 of the holdback remaining as of September 30, 2022.

Chem32 is reported as part of the Ecoservices segment.

The Company believes that the Acquisition will offer a more robust portfolio of services within the refining industry by leveraging the Company’s existing relationships, therefore contributing to a total purchase price that resulted in the recognition of $ 14,778 of goodwill, which was deductible for tax purposes.

During the nine months ended September 30, 2022 , the Company recorded an immaterial adjustment between goodwill and deferred tax liabilities related to the final tax purchase price allocation.

See Note 8 to these condensed consolidated financial statements for further information.

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

Price Allocation

Cash paid, net of cash acquired $ 42,639

Holdback 1,000

Total consideration, net of cash acquired $ 43,639

Recognized amounts of identifiable assets acquired and liabilities assumed:

Receivables $ 1,368

Inventories 204

Prepaid and other current assets 351

Property, plant and equipment 5,046

Other intangible assets 22,100

Other long-term assets 187

Fair value of assets acquired 29,256

Accounts payable 207

Accrued liabilities 188

Fair value of net identifiable assets acquired 28,861

Goodwill 14,778

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

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

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

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

The Company’s cost of goods sold for the nine months ended September 30, 2021 includes a pre-tax charge of $ 148 of additional amortization expense related to identified intangible assets, which would have been recorded during the reporting period if the adjustments to the provisional amounts had been recognized as of the Closing Date.

The Company’s other operating expense, net for the nine months ended September 30, 2021 includes a pre-tax charge of $ 1,108 of additional amortization expense related to identified intangible assets, which would have been recorded during the reporting period if the adjustments to the provisional amounts had been recognized as of the Closing Date.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Amount Weighted-Average

Expected Useful Life

Intangible assets subject to amortization:

Customer relationships $ 16,000 10

Technical know-how 3,800 10

Contracts 700 5

Trade names 1,600 10

Total intangible assets subject to amortization $ 22,100

Net sales and net income attributable to Chem32 during the period from the Closing Date through September 30, 2021 were immaterial.

Pro forma financial information has not been presented as it is immaterial for the three and nine months ended September 30, 2021.

Acquisition and integration costs were $ 680 for the nine months ended September 30, 2021 and are included in other operating expense, net in the Company’s consolidated statement of income.

The change in the carrying amount of goodwill for the nine months ended September 30, 2022 is summarized as follows:

There were 95,269 and 32,058 shares delivered to the Company to cover tax payments for the three months ended March 31, 2023 and 2022, respectively and the fair value of those shares withheld were $ 866 and $ 332 for the three months ended March 31, 2023 and 2022, respectively.

The change in the carrying amount of goodwill for the three months ended March 31, 2023 is summarized as follows:

Ecoservices Catalyst Technologies Total

Balance as of December 31, 2022 $ 326,589 $ 76,574 $ 403,163

Goodwill adjustments (1)

( 81 ) — ( 81 )

Foreign exchange impact — 599 599

Balance as of September 30, 2022 $ 326,589 $ 74,563 $ 401,152

(1) During the nine months ended September 30, 2022 , the Company recorded an adjustment of $ 81 between goodwill and deferred tax liabilities related to the final tax purchase price allocation for the Chem32 acquisition.

Balance as of March 31, 2023 $ 326,589 $ 77,173 $ 403,762

Other Operating Expense, Net:

1 unchanged sentence

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Amortization expense $ 2,637 $ 2,656

1 unchanged sentence

Restructuring, integration and business optimization costs 1,023 382

1,322 78 6,421 2,408

Net loss on asset disposals 1,178 133

1 unchanged sentence

$ 6,716 $ 7,763

(1) During the three months ended September 30, 2022 and the nine months ended September 30, 2022 and 2021 , respectively, the Company’s results were impacted by costs associated with severance charges for certain executives and employees.

AND SUBSIDIARIES

3 unchanged sentences

Inventories, net are classified and valued as follows:

September 30,

2023 December 31,

9 unchanged sentences

The Company accounts for investments in affiliated companies under the equity method.

Affiliated companies accounted for on the equity basis as of September 30, 2022 are as follows:

Affiliated companies accounted for on the equity basis as of March 31, 2023 are as follows:

Company Country Percent

3 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Sales $ 55,897 $ 66,683

4 unchanged sentences

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

The Company’s investments in affiliated companies balance as of September 30, 2022 and December 31, 2021 includes net purchase accounting fair value adjustments of $ 232,617 and $ 237,419 , respectively, related to a prior business combination, consisting primarily of goodwill and intangible assets such as customer relationships, technical know-how and trade names.

Consolidated equity in net income from affiliates is net of $ 1,601 and $ 4,802 of amortization expense related to purchase accounting fair value adjustments for the three and nine months ended September 30, 2022, respectively.

Consolidated equity in net income from affiliates is net of $ 1,601 and $ 4,879 of amortization expense related to purchase accounting fair value adjustments for the three and nine months ended September 30, 2021, respectively.

The Company’s investments in affiliated companies balance as of March 31, 2023 and December 31, 2022 includes net purchase accounting fair value adjustments of $ 229,416 and $ 231,017 , respectively, related to a prior business combination, consisting primarily of goodwill and intangible assets such as customer relationships, technical know-how and trade names.

Consolidated equity in net income from affiliates is net of $ 1,601 and $ 1,601 of amortization expense related to purchase accounting fair value adjustments for the three months ended March 31, 2023 and 2022, respectively.

AND SUBSIDIARIES

3 unchanged sentences

A summary of property, plant and equipment, at cost, and related accumulated depreciation is as follows:

September 30,

2023 December 31,

6 unchanged sentences

$ 583,703 $ 584,889

Depreciation expense was $ 16,103 and $ 48,256 for the three and nine months ended September 30, 2022, respectively.

Depreciation expense was $ 16,369 and $ 49,902 for the three and nine months ended September 30, 2021, respectively.

Depreciation expense was $ 16,692 and $ 16,011 for the three months ended March 31, 2023 and 2022, respectively.

Long-term Debt:

The summary of long-term debt is as follows:

September 30,

2023 December 31,

Senior Secured Term Loan Facility due June 2028 $ 888,750 $ 895,500

Senior Secured Term Loan Facility due June 2028 (the "2021 Term Loan Facility") $ 884,250 $ 886,500

ABL Facility — —

5 unchanged sentences

Total long-term debt, excluding current portion $ 864,128 $ 865,870

In February 2023, the Company 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 term SOFR, which includes a credit spread adjustment of 10 basis points (with a 0.50 % minimum floor) plus 2.75 % per annum (or, depending on the Company’s first lien net leverage ratio, 2.50 %).

The interest rate on the 2021 Term Loan Facility was 7.325 % as of March 31, 2023.

Also in February 2023, the Company amended its senior secured asset-based revolving credit facility (the “ABL Facility”) to replace LIBOR with SOFR as the benchmark interest rate.

Following this amendment, the borrowings under the ABL Facility bear interest at a rate equal to an adjusted term SOFR rate or the base rate, which includes a credit spread adjustment of 10 basis points, plus a margin of between 1.25 % to 1.75 % or 0.25 % to 0.75 %, respectively.

The interest rate on the ABL Facility was 8.50 % as of March 31, 2023.

Fair Value of Debt

The fair value of a financial instrument is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.

As of September 30, 2022 and December 31, 2021, the fair value of the senior secured term loan facility was $ 844,312 and $ 894,381 , respectively.

As of March 31, 2023 and December 31, 2022, the fair value of the senior secured term loan facility was $ 876,513 and $ 870,986 , respectively.

The fair value is classified as Level 2 based upon the fair value hierarchy (see Note 4 to these condensed consolidated financial statements for further information on fair value measurements).

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Financial Instruments:

9 unchanged sentences

The market risk associated with the Company’s derivative instruments is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Use of Derivative Financial Instruments to Manage Interest Rate Risk.

4 unchanged sentences

The Company records these agreements at fair value as assets or liabilities in its condensed consolidated balance sheets.

As the derivatives are designated and qualify as cash flow hedges, the gains or losses on the interest rate cap agreements are recorded in stockholders’ equity as a component of OCI, net of tax.

As the derivatives are designated and qualify as cash flow hedges, the gains or losses on the interest rate cap agreements are recorded in stockholders’ equity as a component of other comprehensive income, net of tax.

Reclassifications of the gains and losses on the interest rate cap agreements into earnings are recorded as part of interest expense in the condensed consolidated statements of income as the Company makes its interest payments on the hedged portion of its senior secured credit facilities.

Fair value is determined based on estimated amounts that would be received or paid to terminate the contracts at the reporting date based on quoted market prices.

In November 2018, the Company entered into interest rate cap agreements to mitigate interest volatility from July 2020 through July 2022, with a cap rate of 3.50 % on $ 500,000 of notional variable-rate debt and a $ 3,380 premium annuitized during the effective period.

In February 2020, the Company restructured these agreements to lower the interest cap rate to 2.50 % with an incremental $ 130 premium annuitized during the effective period.

In March 2020, the Company again amended such interest rate cap agreements to lower the cap rate to 0.84 % and paid an additional $ 900 premium annuitized during the effective period.

The term and notional amount remained unchanged, and the total cumulative annuitized premium on the $ 500,000 of notional variable-rate debt was $ 4,410 .

In July 2020, the Company entered into additional interest rate cap agreements to mitigate interest rate volatility from August 2020 to August 2023, with a cap rate of 1.00 % on $ 400,000 of notional variable-rate debt.

The cap rate in effect at September 30, 2022 was 1.00 % associated with the $ 400,000 of notional variable-rate debt.

The total annuitized premium on the $ 400,000 of notional variable-rate debt was $ 137 .

In August 2021, PQ Corporation novated $ 900,000 of its interest rate caps to Ecovyst Catalyst Technologies LLC.

Other than the novation, there were no other changes to the interest rate caps in connection with the novation.

In January 2022, the Company entered into two new forward starting interest rate cap agreements, with notional amounts of $ 250,000 each and with a cap rate of 1.00 %.

The term for one of these interest rate caps is July 2022 through October 2024 and the term for the other is September 2023 through October 2025.

The total cumulative annuitized premium is $ 4,450 .

The cap rate in effect at September 30, 2022 was 1.00 %.

Use of Derivative Financial Instruments to Manage Foreign Currency Risk.

The Company is exposed to risks related to its net investments in foreign operations due to fluctuations in foreign currency exchange rates, particularly between the United States dollar and the Euro.

In February 2018, the Company entered into multiple cross-currency interest rate swap arrangements with an aggregate notional amount of € 280,000 to hedge this exposure on the net investments of certain of its Euro-denominated subsidiaries in its Performance Materials and Performance Chemicals businesses.

The Company recorded these swap agreements at fair value as assets or liabilities in its condensed consolidated balance sheet.

As the derivatives are designated and qualify as net investment hedges, changes in the fair value of the swaps attributable to changes in the spot exchange rates are recognized in cumulative translation adjustment (“CTA”) within OCI and are held there until the hedged net investments are sold or substantially liquidated.

Upon such sale or liquidation, the amount recognized in CTA is reclassified to earnings and reported in the same line item as the gain or loss on the liquidation of the net investments.

Changes in the fair value of the swaps attributable to the cross-currency basis spread are excluded from the assessment of hedge effectiveness and are recorded in current period earnings.

In March 2021, as a result of the divestitures of the Performance Materials and Performance Chemicals businesses, the Company settled its cross-currency swaps.

At the date of settlement, the total notional value of the cross-currency swaps was $ 311,380 .

The Company paid $ 13,170 in cash to settle the swaps, which is included in net cash used in investing activities, discontinued operations in the Company’s condensed consolidated statement of cash flows for the nine months ended September 30, 2021, as the underlying subsidiary subject to the net investment hedging relationship is part of the Performance Chemicals business.

In November 2018, the Company entered into an interest rate cap agreement to mitigate interest volatility from July 2020 through July 2022, with a cap rate of 3.50 % on $ 500,000 of notional variable-rate debt and a $ 3,380 premium annuitized during the effective period.

In February 2020, the Company restructured this agreement to lower the interest cap rate to 2.50 % with an incremental $ 130 premium annuitized during the effective period.

In March 2020, the Company again amended such interest rate cap agreement to lower the cap rate to 0.84 % for an additional $ 900 premium annuitized during the effective period.

The term and notional amount remained unchanged, with a total cumulative annuitized premium on the $ 500,000 of notional variable-rate debt of $ 4,410 .

In July 2020, the Company entered into an additional interest rate cap agreement to mitigate interest rate volatility from September 2020 to August 2023, with a cap rate of 1.00 % on $ 400,000 of notional variable-rate debt and a $ 416 premium annuitized during the effective period.

The cap rate in effect at March 31, 2023 was 1.00 %.

In January 2022, the Company entered into two new forward starting interest rate cap agreements, with a cap rate of 1.00 % on $ 250,000 of notional variable-rate debt each and a $ 9,953 of total premium annuitized during the effective period.

The term for one interest rate cap is August 2022 through October 2024 and the term for the other interest rate cap is September 2023 through October 2025.

The cap rate for the interest rate cap in effect at March 31, 2023 was 1.00 %.

In November 2022, the Company entered into a new forward starting interest rate cap agreement to mitigate interest rate volatility from August 2023 through July 2024, with a cap rate of 1.00 % on $ 150,000 of notional variable-rate debt and mitigate interest rate volatility from August 2024 through July 2026, with a cap rate of 1.00 % on $ 175,000 of notional variable-rate debt.

The $ 150,000 of notional variable-debt has $ 5,372 premium annuitized during the effective period and the $ 175,000 of notional variable-rate debt has $ 12,445 premium annuitized during the effective period.

In February 2023, the Company amended all interest rate cap agreements to replace LIBOR with SOFR as the benchmark interest rate, with all other terms of the agreements remaining the same.

This amendment changed the previously annuitized premiums on the existing interest rate cap agreements.

This resulted in a reduction in the premium annuitized on the $ 400,000 of notional variable-debt of $ 172 , a reduction in the premium annuitized on the $ 250,000 of notional variable-debt of $ 2,022 , a reduction in the premium annuitized on the $ 150,000 of notional variable-debt of $ 281 and a reduction in the premium annuitized on the $ 175,000 of notional variable-debt of $ 651 .

AND SUBSIDIARIES

1 unchanged sentence

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

The fair values of derivative instruments held as of September 30, 2022 and December 31, 2021 are shown below:

Balance sheet location September 30,

In May 2023, the Company entered into two new forward starting interest rate cap agreements to mitigate interest rate volatility from November 2024 through October 2025, with a cap rate of 1.00 % on $ 200,000 of notional variable-rate debt and mitigate interest rate volatility from November 2025 through October 2026, with a cap rate of 1.00 % on $ 450,000 of notional variable-rate debt.

The $ 200,000 of notional variable-debt has $ 4,258 premium annuitized during the effective period and the $ 450,000 of notional variable-rate debt has $ 9,555 premium annuitized during the effective period.

The fair values of derivative instruments held as of March 31, 2023 and December 31, 2022, respectively are shown below:

Balance sheet location March 31,

2023 December 31,

6 unchanged sentences

Derivatives designated as cash flow hedges:

Interest rate caps Accrued liabilities $ — $ 1,288

Interest rate caps Other long-term liabilities 3,815 2,071

Total derivative liabilities $ 3,815 $ 2,071

The following tables show the effect of the Company’s derivative instruments designated as cash flow hedges on AOCI for the three and nine months ended September 30, 2022 and 2021:

Three months ended September 30,

Location of gain (loss) reclassified from AOCI into income Amount of gain (loss) recognized in OCI on derivatives Amount of gain (loss) reclassified from AOCI into income Amount of gain (loss) recognized in OCI on derivatives Amount of gain (loss) reclassified from AOCI into income

Interest rate caps Interest (expense) income $ 12,159 $ ( 29 ) $ 510 $ ( 104 )

Nine months ended September 30,

The following table shows the effect of the Company’s derivative instruments designated as cash flow hedges on AOCI for the three months ended March 31, 2023 and 2022, respectively:

Three months ended March 31,

Interest rate caps Interest (expense) income $ ( 9,605 ) $ 698 $ 17,612 $ ( 683 )

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The following tables show the effect of the Company’s cash flow hedge accounting on the condensed consolidated statements of income for the three and nine months ended September 30, 2022 and 2021:

Three months ended September 30,

Cost of goods sold Interest (expense)

income Cost of goods sold Interest (expense)

Total amounts of income and expense line items presented in the statement of income in which the effects of cash flow hedges are recorded $ ( 164,864 ) $ ( 9,542 ) $ ( 113,784 ) $ ( 9,005 )

Interest contracts:

Amount of loss reclassified from AOCI into income — ( 29 ) — ( 104 )

Nine months ended September 30,

Cost of goods sold Interest (expense)

income Cost of goods sold Interest (expense)

Total amounts of income and expense line items presented in the statement of income in which the effects of cash flow hedges are recorded $ ( 462,156 ) $ ( 26,880 ) $ ( 318,768 ) $ ( 28,202 )

The following table shows the effect of the Company’s cash flow hedge accounting on the condensed consolidated statements of income for the three months ended March 31, 2023 and 2022, respectively:

Three months ended March 31,

Total amounts of income and expense line items presented in the statement of income in which the effects of cash flow hedges are recorded in interest (expense) income $ ( 9,832 ) $ ( 8,450 )

The effects of cash flow hedging:

Gain (loss) on cash flow hedging relationships:

Interest contracts:

Amount of loss reclassified from AOCI into income — ( 627 ) — ( 283 )

The amount of unrealized losses in AOCI related to the Company’s cash flow hedges that is expected to be reclassified to the condensed consolidated statement of income over the next twelve months is $ 275 as of September 30, 2022.

The following table shows the effect of the Company’s net investment hedges on AOCI and the condensed consolidated statements of income for the three and nine months ended September 30, 2021:

Amount of pre-tax gain recognized in OCI on derivative Location of gain (loss) reclassified from AOCI into income Amount of gain reclassified from AOCI into income Location of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing) Amount of gain recognized in income on derivative (amount excluded from effectiveness testing)

Three months ended

September 30, 2021 Three months ended

September 30, 2021

Cross-currency interest rate swaps $ — Net (loss) income from discontinued operations, net of tax $ 9,754 Interest (expense) income $ —

Nine months ended

September 30, 2021 Nine months ended

September 30, 2021

Cross-currency interest rate swaps $ 9,787 Net (loss) income from discontinued operations, net of tax $ 9,754 Interest (expense) income $ 545

Amount of gain (loss) reclassified from AOCI into income 698 ( 683 )

AND SUBSIDIARIES

2 unchanged sentences

Income Taxes:

The effective income tax rate for the three months ended September 30, 2022 was 29.6 % compared to 35.6 % for the three months ended September 30, 2021.

The effective income tax rate for the nine months ended September 30, 2022 was 31.2 % compared to ( 610.9 )% for the nine months ended September 30, 2021.

The Company’s effective income tax rate has fluctuated primarily due to changes in income mix, discrete impacts related to intraperiod allocation revaluation of deferred tax assets and liabilities as a result of the divestiture of the Performance Chemicals business, tax rate changes and changes in foreign exchange gains and losses, which create permanent differences in certain jurisdictions.

The effective income tax rate for the three months ended March 31, 2023 was ( 180.7 )% compared to 42.1 % for the three months ended March 31, 2022.

The Company’s effective income tax rate has fluctuated primarily due to the discrete impact related to a shortfall of stock compensation tax deduction which outweighed the tax benefit from the pre-tax loss during the quarter.

The difference between the U.S.

federal statutory income tax rate and the Company’s effective income tax rate for the nine months ended September 30, 2022 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation, and a discrete tax expense associated with the Employee Retention Credit.

federal statutory income tax rate and the Company’s effective income tax rate for the three months ended March 31, 2023 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation and a discrete tax expense associated with the recording of accrued penalties and interest associated with historical uncertain tax positions.

The difference between the U.S.

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

On August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law.

Among other things, the IRA imposes a 15% corporate alternative minimum tax for certain large corporations with average annual adjusted financial statement income in excess of $1 billion, for tax years beginning after December 31, 2022, levies a 1% excise tax on net stock repurchases after December 31, 2022, and provides tax incentives to promote clean energy.

Historically, during the year we have made discretionary share repurchases.

Beginning in 2023, these purchases would be subject to the excise tax.

Based on the historical net repurchase activity the excise tax and the other provisions of the IRA are not expected to have a material impact on our results of operations or financial position.

However, we are still in the process of analyzing the provisions of the IRA.

federal statutory income tax rate and the Company’s effective income tax rate for the three months ended March 31, 2022 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation and a discrete tax expense associated with the Employee Retention Credit.

Benefit Plans:

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Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Interest cost $ 871 $ 604

Expected return on plan assets ( 837 ) ( 1,110 )

Settlement loss (gain) recognized 38 ( 26 ) 38 ( 26 )

Net periodic expense (benefit) $ 34 $ ( 506 )

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September 30, Nine months ended

September 30,

2022 2021 2022 2021

Interest cost $ 6 $ 4

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Net periodic benefit $ ( 26 ) $ ( 48 )

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Commitments and Contingent Liabilities:

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When these matters are ultimately concluded and determined, the Company believes that there will be no material adverse effect on its consolidated financial position, results of operations or liquidity.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Reportable Segments:

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Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Ecoservices $ 137,740 $ 154,060

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12,989 16,975

Unallocated corporate expenses ( 7,945 ) ( 7,986 ) ( 23,543 ) ( 25,641 )

Total $ 75,437 $ 69,375 $ 207,568 $ 164,354

Adjusted EBITDA from reportable segments $ 49,776 $ 66,316

(1) Excludes the Company’s proportionate share of sales from the Zeolyst International and Zeolyst C.V.

joint ventures (collectively, the “Zeolyst Joint Venture”) accounted for using the equity method (see Note 9 to these condensed consolidated financial statements for further information).

The proportionate share of sales excluded is $ 27,773 and $ 92,656 for the three and nine months ended September 30, 2022, respectively.

The proportionate share of sales excluded is $ 32,820 and $ 94,984 for the three and nine months ended September 30, 2021, respectively.

The proportionate share of sales excluded is $ 22,074 and $ 28,977 for the three months ended March 31, 2023 and 2022, respectively.

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

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

(3) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $ 8,704 for the three months ended September 30, 2022, which includes $ 3,187 of equity in net income plus $ 1,601 of amortization of investment in affiliate step-up and $ 3,917 of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $ 34,306 for the nine months ended September 30, 2022, which includes $ 17,500 of equity in net income plus $ 4,802 of amortization of investment in affiliate step-up and $ 12,004 of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $ 14,493 for the three months ended September 30, 2021, which includes $ 8,780 of equity in net income plus $ 1,601 of amortization of investment in affiliate step-up and $ 4,112 of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $ 37,085 for the nine months ended September 30, 2021, which includes $ 20,794 of equity in net income plus $ 4,879 of amortization of investment in affiliate step-up and $ 11,412 of joint venture depreciation, amortization and interest.

(3) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $ 5,436 for the three months ended March 31, 2023, which includes $ 226 of equity in net income plus $ 1,601 of amortization of investment in affiliate step-up and $ 3,609 of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $ 11,474 for the three months ended March 31, 2022, which includes $ 5,787 of equity in net income plus $ 1,601 of amortization of investment in affiliate step-up and $ 4,087 of joint venture depreciation, amortization and interest.

AND SUBSIDIARIES

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

A reconciliation of net income (loss) to Ecovyst to Adjusted EBITDA is as follows:

A reconciliation of (loss) income before income taxes to Adjusted EBITDA is as follows:

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

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

Net income (loss) from continuing operations $ 21,325 $ 4,689 $ 48,445 $ ( 5,929 )

Provision for income taxes 8,966 2,591 21,983 5,095

Reconciliation of (loss) income before income taxes to Adjusted EBITDA

(Loss) income before income taxes $ ( 524 ) $ 13,595

Interest expense, net 9,832 8,450

Depreciation and amortization 20,197 19,546

EBITDA 59,432 36,884 156,111 87,452

Unallocated corporate expenses 6,926 7,076

Joint venture depreciation, amortization and interest 3,609 4,087

Amortization of investment in affiliate step-up 1,601 1,601

Debt extinguishment costs — 15,185 — 26,902

Net loss on asset disposals 1,178 133

Foreign exchange losses 1,030 922 2,179 4,803

LIFO benefit ( 436 ) ( 1,295 ) ( 4 ) ( 1,998 )

Foreign exchange (gain) loss ( 738 ) 647

LIFO expense 1,399 245

Transaction and other related costs 1,434 4,281

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Restructuring, integration and business optimization expenses 1,023 382

Defined benefit pension plan expense (benefit) 292 ( 1,029 ) ( 814 ) ( 2,219 )

Other ( 229 ) ( 1,021 )

Adjusted EBITDA $ 75,437 $ 69,375 $ 207,568 $ 164,354

Adjusted EBITDA from reportable segments $ 49,776 $ 66,316

Stock-Based Compensation:

The Company has an equity incentive plan under which it grants common stock awards to employees, directors and affiliates of the Company.

At September 30, 2022, 9,501,030 shares of common stock were available for issuance under the plan.

At March 31, 2023, 9,158,811 shares of common stock were available for issuance under the plan.

The Company settles these awards through the issuance of new shares.

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Restricted Stock Units

During the nine months ended September 30, 2022, the Company granted 2,779,690 restricted stock units under its equity incentive plan.

Each restricted stock unit provides the recipient with the right to receive a share of common stock subject to graded vesting terms based on service, which for the awards granted during the nine months ended September 30, 2022, generally requires approximately one year of service for members of the Company’s board of directors and approximately three years of service for employees.

The awards granted during the nine months ended September 30, 2022 also included a special grant for certain employees based on service which cliff vests on July 1, 2023.

The value of the restricted stock units granted during the nine months ended September 30, 2022 was based on the average of the high and low trading prices of the Company’s common stock on the NYSE on the preceding trading day, in accordance with the Company’s policy for valuing such awards.

During the three months ended March 31, 2023, the Company granted 1,104,690 restricted stock units under its equity incentive plan.

Each restricted stock unit provides the recipient with the right to receive a share of common stock subject to graded vesting terms based on service, which for the awards granted during the three months ended March 31, 2023, generally requires approximately one year of service for members of the Company’s board of directors and approximately three years of service for employees.

The value of the restricted stock units granted during the three months ended March 31, 2023 was based on the average of the high and low trading prices of the Company’s common stock on the NYSE on the preceding trading day, in accordance with the Company’s policy for valuing such awards.

Compensation expense related to the restricted stock units is recognized on a straight-line basis over the respective vesting period.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Performance Stock Units

During the nine months ended September 30, 2022, the Company granted 295,132 performance stock units (at target) under its equity incentive plan.

The performance stock units granted during the nine months ended September 30, 2022 provide the recipients with the right to receive shares of common stock dependent on the achievement of a total shareholder return (“TSR”) goal, and are generally subject to the provision of service through the vesting date of the award.

During the three months ended March 31, 2023, the Company granted 703,440 performance stock units (at target) under its equity incentive plan.

The performance stock units granted during the three months ended March 31, 2023 provide the recipients with the right to receive shares of common stock dependent on the achievement of a total shareholder return (“TSR”) goal, and are generally subject to the provision of service through the vesting date of the award.

The performance period for the TSR goal is measured based on a three -year performance period from January 1, 2023 through December 31, 2025.

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Depending on the Company’s performance relative to the TSR goal, each performance stock unit award recipient is eligible to receive a percentage of the target number of shares granted to the recipient, ranging from zero to 200 %.

The performance stock units, to the extent earned, will vest on the date the Company’s compensation and governance committee certifies the achievement of the performance metric for the three-year period ending December 31, 2024, which will occur subsequent to the end of the performance period and after the Company files its annual consolidated financial statements for the year ending December 31, 2024.

The performance stock units, to the extent earned, will vest on the date the Compensation Committee of the Company’s Board of Directors (“Compensation Committee”) certifies the achievement of the performance metric for the three -year period ending December 31, 2025, which will occur subsequent to the end of the performance period and after the Company files its annual consolidated financial statements for the year ending December 31, 2025.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The TSR goal is considered a market condition as opposed to a vesting condition.

Because a market condition is not considered a vesting condition, it is reflected in the grant date fair value of the award and the associated compensation cost based on the fair value of the award is recognized over the performance period, regardless of whether the Company actually achieves the market condition or the level of achievement, as long as service is provided by the recipient.

The Company used a Monte Carlo simulation to estimate the $ 8.82 weighted average fair value of the awards granted during the nine months ended September 30, 2022, with the following weighted average assumptions:

The Company used a Monte Carlo simulation to estimate the $ 12.28 weighted average fair value of the awards granted during the three months ended March 31, 2023, with the following weighted average assumptions:

Expected dividend yield — %

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Expected term (in years) 2.96

During the nine months ended September 30, 2022, the Compensation Committee of the Company’s Board certified the achievement of the performance metrics for the three-year period ended December 31, 2021, related to the performance stock units granted during the year ended December 31, 2019.

These awards provided the recipients with the right to receive shares of common stock dependent on the achievement of two Company-specific financial performance targets and the provision of service through the vesting date, with each award holder eligible to earn a percentage of the target number of shares granted to the holder, ranging from zero to 200 %.

The awards vested during the nine months ended September 30, 2022 at 100 % of target.

During the three months ended March 31, 2023, the Compensation Committee certified the achievement of the performance metrics for the three-year period ended December 31, 2022, related to the performance stock units (“PSUs”) granted during the year ended December 31, 2020.

Fifty percent of the target number of such PSUs could be earned depending on performance against a Company-specific financial performance target, and 50 % of the target number of such PSUs could be earned depending on performance against a TSR goal, subject to the provision of service through the vesting date of the awards.

The Company-specific financial performance target and the TSR goal were measured independently of each other, and each PSU award recipient was eligible to earn a percentage of the target number of shares granted to the recipient, ranging from zero to 200 %.

The awards vested during the three months ended March 31, 2023 as follows:

53.3 % of target with respect to the portion of the PSU award subject to the Company-specific financial measure, and 56.0 % of target with respect to the portion of the PSU award subject to the TSR goal.

Award Activity

The following table summarizes the activity for the Company’s restricted stock units and performance stock units for the nine months ended September 30, 2022:

The following table summarizes the activity for the Company’s restricted stock units and performance stock units for the three months ended March 31, 2023:

Restricted Stock Units Performance Stock Units

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Forfeited ( 160,316 ) $ 10.96 ( 183,864 ) $ 19.50

Nonvested as of September 30, 2022 2,988,149 $ 11.67 750,438 $ 15.70

Nonvested as of March 31, 2023 2,587,191 $ 10.55 958,904 (1) $ 11.87

(1) Based on target.

During the three months ended March 31, 2023, the Company also granted 5,081 restricted stock awards with a weighted average grant date fair value of $ 9.84 per share that immediately vested.

AND SUBSIDIARIES

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Stock-Based Compensation Expense

For the three months ended September 30, 2022 and 2021, stock-based compensation expense for the Company was $ 4,740 and $ 10,193 , respectively.

The associated income tax benefit recognized in the statements of income for the three months ended September 30, 2022 and 2021 was $ 1,162 and $ 2,494 , respectively.

For the nine months ended September 30, 2022 and 2021, stock-based compensation expense for the Company was $ 17,419 and $ 22,837 , respectively.

The associated income tax benefit recognized in the statements of income for the nine months ended September 30, 2022 and 2021 was $ 4,271 and $ 5,589 , respectively.

As of September 30, 2022, unrecognized compensation cost was $ 21,755 for restricted stock units and $ 3,083 for performance stock units considered probable of vesting.

The weighted-average period over which these costs are expected to be recognized at September 30, 2022 was 1.46 years for the restricted stock units and 1.46 years for the performance stock units.

Activity related to the Company’s stock options and restricted stock awards was not material for the nine months ended September 30, 2022.

For the three months ended March 31, 2023 and 2022, stock-based compensation expense for the Company was $ 4,068 and $ 7,294 , respectively.

The associated income tax benefit based on the applicable statutory rate recognized in the condensed consolidated statements of income for the three months ended March 31, 2023 and 2022 was $ 973 and $ 1,788 , respectively.

Performance-based restricted stock awards and performance-based stock options would vest only on the achievement with respect to shares of our common stock of an average closing trading price equal or exceeding, in any ten trading-day period, the lowest amount which, when multiplied by the number of shares of our common stock then held by investment funds affiliated with CCMP Capital Advisors, LP (“CCMP”) and added to the aggregate net proceeds received by investment funds affiliated with CCMP with respect to their shares of capital stock of the Company, would yield a quotient of equal or greater than two when divided by the equity investment in the Company by investment funds affiliated with CCMP (such quotient, the “MOI Target”).

On March 7, 2023, all of the outstanding performance-based stock options ( 284,956 options) and performance-based restricted shares ( 277,056 shares) that would vest upon the achievement of the MOI Target were canceled due to the failure of the MOI Target to be achieved upon the sale by investment funds affiliated with CCMP of all of their remaining shares of our common stock.

No expense had previously been recognized for either the restricted stock awards or the stock options subject to this performance condition, as the condition was not achieved nor was previously considered probable of achievement.

As of March 31, 2023, unrecognized compensation cost was $ 19,668 for restricted stock units and $ 8,827 for performance stock units considered probable of vesting.

The weighted-average period over which these costs are expected to be recognized at March 31, 2023 was 1.62 years for the restricted stock units and 2.62 years for the performance stock units.

Earnings per Share:

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September 30,

2022 2021 2022 2021

Weighted average shares outstanding – Basic 122,178,867 137,684,773

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

Basic and diluted income (loss) per share are calculated as follows:

Basic and diluted (loss) income per share are calculated as follows:

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Income (loss) from continuing operations attributable to Ecovyst Inc.

$ 21,325 $ 4,689 $ 48,445 $ ( 5,929 )

Loss from discontinued operations attributable to Ecovyst Inc.

— ( 75,948 ) — ( 159,455 )

Net income (loss) attributable to Ecovyst Inc.

Net (loss) income attributable to Ecovyst Inc.

$ ( 1,471 ) $ 7,875

1 unchanged sentence

Weighted average shares outstanding – Diluted 122,178,867 138,749,065

Net income (loss) per share:

Basic income (loss) per share - continuing operations $ 0.16 $ 0.03 $ 0.36 $ ( 0.04 )

Diluted income (loss) per share - continuing operations $ 0.16 $ 0.03 $ 0.35 $ ( 0.04 )

Basic loss per share - discontinued operations $ — $ ( 0.56 ) $ — $ ( 1.17 )

Diluted loss per share - discontinued operations $ — $ ( 0.55 ) $ — $ ( 1.17 )

Basic income (loss) per share $ 0.16 $ ( 0.52 ) $ 0.36 $ ( 1.22 )

Diluted income (loss) per share $ 0.16 $ ( 0.52 ) $ 0.35 $ ( 1.22 )

Net (loss) income per share:

Basic (loss) income per share $ ( 0.01 ) $ 0.06

Diluted (loss) income per share $ ( 0.01 ) $ 0.06

The table below presents the details of the Company’s weighted average equity-based awards outstanding during each respective period that were excluded from the calculation of diluted earnings per share:

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Restricted stock awards with performance only targets not yet achieved 505,439 828,967 574,048 852,822

Stock options with performance only targets not yet achieved 300,788 375,733 316,187 376,448

Anti-dilutive restricted stock awards, restricted stock units and performance stock units 487,322 — 19,306 —

Restricted stock awards with performance only targets not achieved 200,096 613,903

Stock options with performance only targets not achieved 208,968 326,689

Anti-dilutive restricted stock units and performance stock units (1)

Anti-dilutive stock options (1)

695,777 807,301

(1) Does not include 1,044,098 of restricted stock units and performance stock units, and 352,771 of stock options, for the three months ended March 31, 2023 due to the net loss attributable to Ecovyst Inc.

for the period.

Restricted stock awards and stock options with performance only vesting conditions were not included in the dilution calculation, as the performance targets have not been achieved nor were probable of achievement as of the end of the respective periods.

Certain stock options to purchase shares of common stock were excluded from the computation of diluted earnings per share for the respective periods, because the combination of the options’ exercise price and remaining unamortized stock-based compensation expense was greater than the average market price of the common shares.

Anti-dilutive awards are not included in the dilution calculation, as their inclusion would have the effect of increasing diluted income per share.

These awards and stock options were canceled on March 7, 2023 (see Note 17 to these condensed consolidated financial statements for additional information).

Certain stock options to purchase shares of common stock were excluded from the computation of diluted earnings per share for the respective periods because the options’ exercise price was greater than the average market price of the common shares.

These stock options and anti-dilutive awards are not included in the dilution calculation, as their inclusion would have the effect of increasing diluted income per share or reducing diluted loss per share.

AND SUBSIDIARIES

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Supplemental Cash Flow Information:

With the exception of operating leases, the following table presents supplemental cash flow information for the consolidated Company:

Nine months ended

September 30,

T he following table presents supplemental cash flow information for the Company:

Three months ended

Cash paid during the period for:

Income taxes, net of refunds $ 136 $ 10,662

24,390 43,115

Interest 15,185 8,363

Non-cash investing activity:

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Operating leases 1,621 2,955

(1) Cash paid for interest is shown net of capitalized interest for the periods presented and excludes $ 2,307 of net interest proceeds on swaps designated as net investment hedges for the nine months ended September 30, 2021, which are included within cash flows from investing activities, discontinued operations in the Company’s condensed consolidated statements of cash flows.

Subsequent Events:

The Company has evaluated subsequent events since the balance sheet date and determined that there are no additional items to disclose.

In May 2023, the Company entered into two new forward starting interest rate cap agreements for $ 200,000 of notional variable-debt and $ 450,000 of notional variable-debt .

See Note 12 to these condensed consolidated financial statements for additional details.

Other than this item, the Company has evaluated subsequent events since the balance sheet date and determined that there are no additional items to disclose.

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

What changed 10-Q

Item 1. Financial Statements