What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-08 compared with 2023-05-05 · 272 added, 130 removed, 283 unchanged (59% of the section changed)

6 unchanged sentences

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short- and long-term business operations and objectives, and financial needs.

Examples of forward-looking statements include, but are not limited to, statements we make regarding demand trends, and/or Russia’s invasion of Ukraine and related economic effects on our operations and financial results and our liquidity, and our belief that our current level of operations, cash and cash equivalents, cash flow from operations and borrowings under our credit facilities and other lines of credit will provide us adequate cash to fund the working capital, capital expenditure, debt service and other requirements for our business for at least the next twelve months.

Examples of forward-looking statements include, but are not limited to, statements we make regarding demand trends, economic effects on our operations and financial results and our liquidity, and our belief that our current level of operations, cash and cash equivalents, cash flow from operations and borrowings under our credit facilities and other lines of credit will provide us adequate cash to fund the working capital, capital expenditure, debt service and other requirements for our business for at least the next twelve months.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions.

26 unchanged sentences

• disruption, failure or cyber security breaches affecting or targeting computers and infrastructure used by us or our business partners may adversely impact our business and operations;

• the impact of the COVID-19 pandemic on the global economy and financial markets, as well as on our business and our suppliers, and the response of governments and of our company to the outbreak, including variants of the virus and associated containment, remediation and vaccination efforts;

• other factors set forth in Part I, “Item 1A.

Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, as supplemented in “Item 1A, Risk Factors” in our quarterly report on Form 10-Q for the quarter ended March 31, 2023.

Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, as supplemented in “Item 1A, Risk Factors” in our quarterly reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023.

The forward-looking statements included herein are made only as of the date hereof.

7 unchanged sentences

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

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 a leading provider of sulfuric acid recycling to North American refining industry 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.

2 unchanged sentences

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 sulfur from fuels during the refining process.

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 or in Russia for the three months ended March 31, 2023.

Sales to a customer in Russia were immaterial for the three months ended March 31, 2022.

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.

Impact of Winter Storm Elliott

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

The storm disrupted operations at a number of our facilities, impacting production and resulting in unplanned repair and maintenance costs and lower virgin sulfuric acid sales volume.

While the storm had a modest impact on fourth quarter 2022 financial results, the production outages arising from Winter Storm Elliott limited our ability to produce inventory in advance of significant planned turnaround activity and to meet customer demand, resulting in constrained availability and lower sales of virgin sulfuric acid in the first quarter of 2023.

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 four-year period from the date of approval.

For 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 an average price of $9.95 per shar e concurrently with the closing of the offering, for a total of $29.9 million.

As of March 31, 2023, $283.4 million was available for additional share repurchases under the program.

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

For the six months ended June 30, 2023, in connection with secondary offerings of the Company’s common stock in March and May 2023, the Company repurchased 7,000,000 shares of its common stock sold in the offerings from the underwriters at a weighted average price of $10.48 per shar e concurrently with the closing of the offerings, for a total of $73.4 million, excluding accrued excise tax.

As of June 30, 2023, $239.9 million was available for additional share repurchases under the program.

In addition, during the six months ended June 30, 2022, the Company repurchased 893,123 shares on the open market at an average price of $9.88, for a total of $8.8 million.

Key Performance Indicators

2 unchanged sentences

Adjusted EBITDA and adjusted net income are presented as key performance indicators as we believe these financial measures will enhance a prospective investor’s understanding of our results of operations and financial condition.

EBITDA consists of net income (loss) attributable to continuing operations before interest, taxes, depreciation and amortization.

Adjusted EBITDA consists of EBITDA adjusted for (i) non-operating income or expense, (ii) the impact of certain non-cash, nonrecurring or other items included in net income (loss) and EBITDA that we do not consider indicative of our ongoing operating performance, and (iii) depreciation, amortization and interest of our 50% share of the Zeolyst Joint Venture.

Adjusted net income consists of net income (loss) attributable to Ecovyst Inc.

adjusted for (i) non-operating income or expense and (ii) the impact of certain non-cash, nonrecurring or other items included in net income (loss) that we do not consider indicative of our ongoing operating performance.

EBITDA consists of net income attributable to continuing operations before interest, taxes, depreciation and amortization.

Adjusted EBITDA consists of EBITDA adjusted for (i) non-operating income or expense, (ii) the impact of certain non-cash, nonrecurring or other items included in net income and EBITDA that we do not consider indicative of our ongoing operating performance, and (iii) depreciation, amortization and interest of our 50% share of the Zeolyst Joint Venture.

Adjusted net income consists of net income adjusted for (i) non-operating income or expense and (ii) the impact of certain non-cash, nonrecurring or other items included in net income that we do not consider indicative of our ongoing operating performance.

We believe that these non-GAAP financial measures provide investors with useful financial metrics to assess our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business.

3 unchanged sentences

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 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

1 unchanged sentence

Strong domestic and export demand for refined products continued to support high refinery utilization rates, while more stringent gasoline standards and growing demand for premium gasoline to power higher-compression and turbocharged engines continued to drive demand for alkylate and for our regeneration services.

Global polyethylene demand remained positive, driven by the long-term growth in consumer demand for films and packaging, supporting sales of our silica-based catalysts, while increasing demand for renewable fuels and more stringent regulation is renewable fuels and polyethylene, and in emission control applications.

In addition, demand for virgin sulfuric acid across a wide range of industrial applications remained favorable.

However, sales in our Ecoservices segment were impacted primarily by unplanned production downtime at one of our sites, which may adversely impact sales and maintenance costs into the third quarter of 2023.

During the second quarter of 2023, we began to see a slowdown in global polyethylene demand impact the sales of our silica-based catalyst, while still seeing increasing demand for renewable fuels and more stringent regulation in traditional fuels, and in emission control applications.

For the remainder of 2023, we believe weaker demand fundamentals may adversely impact sales of virgin sulfuric acid into nylon production.

In addition, we anticipate declining global polyethylene demand and lower polyethylene production plant operating rates may adversely impact sales of polyethylene catalysts.

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

7 unchanged sentences

The primary raw materials used in the manufacture of products in our Catalyst Technologies segments include sodium silicate and cesium hydroxide.

During the second quarter of 2023, inflationary pressures began to ease, which reduced the cost of goods for sulfur, energy, logistics and other raw materials.

Most of our Ecoservices contracts feature take-or-pay volume protection and/or quarterly price adjustments for commodity inputs, labor, the Chemical Engineering Index (U.S.

1 unchanged sentence

Over 80% of our Ecoservices segment sales for the year ended December 31, 2022 were under contracts featuring quarterly price adjustments.

The price adjustments generally reflect actual costs for producing acid and tend to protect us from volatility in labor, fixed costs and raw material pricing.

adjustments generally reflect actual costs for producing acid and tend to protect us from volatility in labor, fixed costs and raw material pricing.

The take-or-pay volume protection allows us to cover fixed costs through intermittent, temporary production issues at customer refineries.

10 unchanged sentences

As a global business, we are subject to the impact of gains and losses on currency translations, which occur when the financial statements of foreign operations are translated into U.S.

We operate in various geographies with approximately 6% of our sales for the three months ended March 31, 2023 and for the year ended December 31, 2022 in currencies other than the U.S.

We operate in various geographies with approximately 6% of our sales for the six months ended June 30, 2023 and for the year ended December 31, 2022 in currencies other than the U.S.

Because our consolidated financial results are reported in U.S.

3 unchanged sentences

Results of Operations

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

The following is a summary of our financial performance for the three months ended March 31, 2023 compared with the three months ended March 31, 2022.

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

The following is a summary of our financial performance for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.

• Sales decreased $41.1 million to $184.1 million.

The decrease in sales was primarily due to lower sales volume, partially offset by favorable average selling price .

• Gross profit decreased $11.2 million to $36.5 million.

The decrease in gross profit was primarily due to lower sales volume and higher manufacturing costs.

The decrease in sales was primarily due to lower sales volumes and the result of the pass-through of lower sulfur costs within our virgin sulfuric acid product group, offset by higher average selling prices .

• Gro ss profit increased $1.1 million to $61.0 million.

The increase in gross profit was primarily due t o favorable mix and increased pricing, which more than offset higher variable costs and lower sales volume.

Operating Income

• Operating income decreased by $7.8 million to $8.7 million.

The decrease in operating income was due to a decrease in sales and gross profit.

• Operating income increased by $5.9 million to $33.3 million.

The increase in operating income was due to an increase in gross profit and lower selling, general and administrative expenses and other operating expenses.

Equity in Net Income of Affiliated Companies

• Equity in net income of affiliated companies for the three months ended March 31, 2023 was $0.2 million, compared with $5.7 million for the three months ended March 31, 2022.

The decrease of $5.5 million was due to lower sales volume driven by timing of customer orders from the Zeolyst Joint Ventur e during the three months ended March 31, 2023.

The following is our unaudited condensed consolidated statements of income and a summary of financial results for the three months ended March 31, 2023 and 2022:

• Equity in net income of affiliated companies for the three months ended June 30, 2023 was $11.4 million, compared to $8.5 million for the three months ended June 30, 2022.

The increase of $2.9 million was due to higher earnings generated by the Zeolyst Joint Venture for the three months ended June 30, 2023, driven by higher sales volumes of catalyst used in the production of renewable fuels, emission control and hydrocracking catalysts.

The following is our unaudited condensed consolidated statements of income and a summary of financial results for the three months ended June 30, 2023 and 2022:

Three months ended

March 31, Change

June 30, Change

2023 2022 $ %

10 unchanged sentences

Interest expense, net 9.2 8.9 0.3 3.4 %

Other (income) expense, net (0.4) 0.1 (0.5) (500.0) %

(Loss) income before income taxes and noncontrolling interest (0.6) 13.6 (14.2) (104.4) %

Other expense, net 0.6 0.5 0.1 20.0 %

Income before income taxes 34.9 26.5 8.4 31.7 %

Provision for income taxes 8.8 7.3 1.5 20.5 %

Effective tax rate 25.2 % 27.5 %

Net (loss) income attributable to Ecovyst Inc $ (1.5) $ 7.9 $ (9.4) (119.0) %

Net income $ 26.1 $ 19.2 $ 6.9 35.9 %

Three months ended

March 31, Change

June 30, Change

2023 2022 $ %

3 unchanged sentences

Total sales $ 184.1 $ 225.2 $ (41.1) (18.3) %

Sales in Ecoservices for the three months ended June 30, 2023 were $158.1 million, a decrease of $34.9 million, or 18.1%, compared to sales of $193.0 million for the three months ended June 30, 2022.

The decrease in sales was due to lower sales volume of $24.5 million and lower average selling prices of $10.4 million, inclusive of the negative impact associated with the pass-through of lower sulfur costs of approximately $32 million .

The decrease in sales volume was primarily related to the virgin sulfuric acid product group during the quarter.

Lower average selling prices were primarily a result of the pass-through of lower sulfur costs of approximately $32 million within our virgin sulfuric acid product group, partially offset by higher pricing within our regeneration services product group, including the pass-through of higher freight, labor, and energy indexed costs .

Catalyst Technologies:

Sales in Catalyst Technologies for the three months ended June 30, 2023 were $26.0 million, a decrease of $6.2 million, or 19.3%, compared to sales of $32.2 million for the three months ended June 30, 2022.

Of the decrease in sales, $9.3 million was associated with lower sales volume, which was partially offset by higher average selling prices of $3.1 million.

The decrease in sales volumes was primarily driven by lower polyethylene catalysts sales and the absence of certain niche custom catalyst sales used in the production of methyl methacrylate realized in the second quarter of 2022 that did not occur in the second quarter of 2023.

Higher average selling prices was driven by implemented price increases.

Gross profit for the three months ended June 30, 2023 was $61.0 million, an increase of $1.1 million, or 1.8%, compared to $59.9 million for the three months ended June 30, 2022.

The increase in gross profit was due to higher average selling prices, exclusive of the $32 million negative impact associated with the pass-through of lower sulfur costs, and favorable mix, partially offset by lower sales volume and unfavorable manufacturing costs.

The unfavorable change in volumes was primarily a result of lower sales of virgin sulfuric acid, polyethylene catalysts and niche custom catalysts.

Favorable customer pricing was primarily driven by increased prices to cover rising variable costs.

The increase in manufacturing costs was a result of higher variable costs, maintenance and transportation costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended June 30, 2023 were $21.4 million, a decrease of $1.4 million, compared to $22.8 million for the three months ended June 30, 2022.

The decrease in selling, general and administrative expenses was primarily due to a decrease in other compensation-related expenses of $3.4 million, partially offset by an increase in professional fees of $1.4 million.

Other Operating Expense, Net

Other operating expense, net for the three months ended June 30, 2023 was $6.3 million, a decrease of $3.4 million, compared to $9.7 million for the three months ended June 30, 2022.

The decrease in other operating expense, net was mainly driven by $4.4 million of severance charges incurred in the prior period from contracts associated with former executives.

Equity in Net Income of Affiliated Companies

Equity in net income of affiliated comp anies for the three months ended June 30, 2023 was $11.4 million, compared to $8.5 million for the three months ended June 30, 2022.

The increase was due to $2.9 million of higher earnings from the Zeolyst Joint Venture during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

The increase in earnings from the Zeolyst Joint Venture was due to higher sales volumes of catalyst used in the production of renewable fuels, emission control and hydrocracking catalysts .

Interest Expense, Net

Interest expense, net for the three month s ended June 30, 2023 was $9.2 million, an increase of $0.3 million, as compared to $8.9 million for the three months ended June 30, 2022.

The increase in interest expense, net was primarily due to the year over year increase in variable rates, which was partially offset by lower outstanding debt during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022 and benefits associated with the interest rate caps, which included an adjustment related to prior year interest rate amortization.

Other Expense, Net

Other expense, net for the three months ended June 30, 2023 was $0.6 million, a change of $0.1 million, as compared to $0.5 million for the three months ended June 30, 2022.

The decrease in other expense, net primarily relates to higher pension costs of $0.6 million offset by a foreign exchange benefit of $0.7 million as compared to the prior year period.

Provision for Income Taxes

The provision for income taxes for the three months ended June 30, 2023 was $8.8 million, compared to a $7.3 million provision for the three months ended June 30, 2022.

The effective income tax rate for the three months ended June 30, 2023 was 25.2%, compared to 27.5% for the three months ended June 30, 2022.

The Company’s quarter over quarter effective income tax rate has fluctuated primarily due to a reduced discrete tax impact related to a stock compensation shortfall and a discrete tax benefit associated with state and local tax law changes.

The difference between the U.S.

federal statutory income tax rate and the Company’s effective income tax rate for the three months ended June 30, 2023 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation, a discrete tax expense associated with the recording of accrued penalties and interest associated with historical uncertain tax positions, and a discrete tax benefit connected to state and local tax law changes.

For the foregoing reasons, net income was $26.1 million for the three months ended June 30, 2023, compared to $19.2 million for the three months ended June 30, 2022.

Adjusted EBITDA

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

Three months ended

June 30, Change

2023 2022 $ %

(in millions, except percentages)

Segment Adjusted EBITDA:

Ecoservices $ 60.1 $ 60.0 $ 0.1 0.2 %

Sales in Ecoservices for the three months ended March 31, 2023 were $137.8 million, a decrease of $16.2 million, or 10.5%, compared to sales of $154.0 million for the three months ended March 31, 2022.

The decrease in sales reflects lower sales volume of $26.4 million , partially offset by higher average selling pricing of $10.2 million after the pass-through of sulfur costs of approximately $5.2 million.

Sales volume was lower primarily due to lower virgin sulfuric acid sales associated with the adverse impact of Winter Storm Elliott and extended maintenance turnaround activity at one of our facilities, limit our ability to produce inventory in advance of significant planned turnaround activity to meet customer demand during the three months ended March 31, 2023.

Higher average selling prices were driven by favorable pricing in regeneration services, including the pass-through of higher freight, labor, and energy indexed costs partially offset by lower pass-through of sulfur costs in virgin sulfuric acid of $5.2 million.

Catalyst Technologies (2)

Sales in Catalyst Technologies for the three months ended March 31, 2023 were $23.1 million, a decrease of $2.6 million, or 10.1%, compared to sales of $25.7 million for the three months ended March 31, 2022.

25.4 21.4 4.0 18.7 %

Unallocated corporate expenses (6.2) (8.5) 2.3 (27.1) %

Total Adjusted EBITDA $ 79.3 $ 72.9 $ 6.4 8.8 %

(1) We define Segment Adjusted EBITDA as EBITDA adjusted for certain items as noted in the reconciliation below.

Our management evaluates the performance of our segments and allocates resources based primarily on Segment Adjusted EBITDA.

Segment Adjusted EBITDA does not represent cash flow for periods presented and should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flows as a source of liquidity.

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

(2) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment was $16.2 million for the three months ended June 30, 2023, which includes $11.4 million of equity in net income, excluding $1.6 million of amortization of investment in affiliate step-up plus $3.2 million of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment was $14.1 million for the three months ended June 30, 2022, which includes $8.5 million of equity in net income, excluding $1.6 million of amortization of investment in affiliate step-up plus $4.0 million of joint venture depreciation, amortization and interest.

Adjusted EBITDA for the three months ended June 30, 2023 was $60.1 million, an increase of $0.1 million, or 0.2%, compared to $60.0 million for the three months ended June 30, 2022.

The increase in Adjusted EBITDA was a result of favorable pricing for regeneration services, partially offset by lower virgin sulfuric acid sales volume and higher unplanned repair and maintenance costs.

Catalyst Technologies:

Adjusted EBITDA for the three months ended June 30, 2023 was $25.4 million, an increase of $4.0 million, or 18.7%, compared to $21.4 million for the three months ended June 30, 2022.

The increase in Adjusted EBITDA was primarily a result of continued strong pricing, favorable product mix and lower production costs.

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

Three months ended

(in millions)

Reconciliation of net income to Adjusted EBITDA

Net income $ 26.1 $ 19.2

Provision for income taxes 8.8 7.3

Interest expense, net 9.2 8.9

Depreciation and amortization 21.0 19.7

EBITDA 65.1 55.1

Joint venture depreciation, amortization and interest (a)

Amortization of investment in affiliate step-up (b)

Net loss on asset disposals (c)

Foreign currency exchange (gain) loss (d)

LIFO expense (e)

Transaction and other related costs (f)

Equity-based compensation 5.0 5.4

Restructuring, integration and business optimization expenses (g)

Adjusted EBITDA $ 79.3 $ 72.9

(a) We use Adjusted EBITDA as a performance measure to evaluate our financial results.

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 combination of the businesses of PQ Holdings Inc.

and Eco Services Operations LLC in May 2016.

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.

Amortization is primarily related to the fair value adjustments associated with fixed assets and intangible assets, including customer relationships and technical know-how.

(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 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.

that are valued using the LIFO method, effectively reflecting the results as if these inventories were valued using the FIFO method, which we believe provides a means of comparison to other companies that may not use the same basis of accounting for inventories.

(f) Relates to certain transaction costs, including debt financing, due diligence and other costs related to transactions that are completed, pending or abandoned, that we believe are not representative of our ongoing business operations.

(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) Other consists of adjustments for items that are not core to our ongoing business operations.

These adjustments include environmental remediation and other legal costs, expenses for capital and franchise taxes, and defined benefit pension and postretirement plan (benefits) costs, for which our obligations are under plans that are frozen.

Also included in this amount are adjustments to eliminate the benefit realized in cost of goods sold of the allocation of a portion of the contract manufacturing payments under the five-year agreement with the buyer of the Performance Chemicals business to the financing obligation under the failed sale-leaseback.

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

Adjusted Net Income

Summarized adjusted net income information is shown below in the following table:

Three months ended June 30,

Pre-tax Tax expense (benefit) After-tax Pre-tax Tax expense (benefit) After-tax

(in millions)

Reconciliation of net income to Adjusted Net Income (1)(2)

Net income $ 34.9 $ 8.8 $ 26.1 $ 26.5 $ 7.3 $ 19.2

Amortization of investment in affiliate step-up (b)

1.6 0.4 1.2 1.6 0.4 1.2

Net loss on asset disposals (c)

1.1 0.3 0.8 0.6 0.2 0.4

Foreign currency exchange (gain) loss (d)

(0.4) (0.2) (0.2) 0.5 0.1 0.4

LIFO expense (e)

1.1 0.3 0.8 0.2 — 0.2

Transaction and other related costs (f)

1.2 0.3 0.9 0.8 0.2 0.6

Equity-based compensation 5.0 1.0 4.0 5.4 0.7 4.7

Restructuring, integration and business optimization expenses (g)

1.1 0.3 0.8 5.3 1.4 3.9

0.3 0.1 0.2 (0.6) (0.1) (0.5)

Adjusted Net Income $ 45.9 $ 11.3 $ 34.6 $ 40.3 $ 10.2 $ 30.1

(1) We define adjusted net income as net income 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.

Adjusted net income is presented as a key performance indicator as we believe it will enhance a prospective investor’s understanding of our results of operations and financial condition.

Adjusted net income may not be comparable with net income or adjusted net income as defined by other companies.

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

The adjustments to net income are shown net of applicable tax rates as determined by the calculation of our quarterly tax provision under interim financial reporting for the three months ended June 30, 2023 and June 30, 2022, except for the foreign currency exchange (gain) loss and equity-based compensation.

The tax effect on equity-based compensation is derived by removing the tax effect of any equity-based compensation expense disallowed as a result of its inclusion within IRC Sec.

162m, and adding the tax effect of equity-based stock compensation shortfall recorded as a discrete item.

The tax effect of the foreign currency exchange (gain) loss is derived from tax effecting the actual year to date foreign currency exchange (gain) loss by the respective local country statutory rates which is recorded as a discrete item.

Results of Operations

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

The following is a summary of our financial performance for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

• Sales decreased $59.9 million to $345.0 million.

The decrease in sales was primarily due to lower sales volume and the result of the pass-through of lower sulfur costs within our virgin sulfuric acid product group, partially offset by favorable average selling prices.

• Gross profit decreased $10.1 million to $97.5 million.

The decrease in gross profit was primarily due to higher manufacturing costs and lower sales volume, partially offset by higher average selling prices.

Operating Income

• Operating income decreased by $1.9 million to $42.0 million.

The decrease in operating income was due to a decrease in gross profit .

Equity in Net Income of Affiliated Companies

• Equity in net income of affiliated companies for the six months ended June 30, 2023 was $11.6 million, compared to $14.3 million for the six months ended June 30, 2022.

The decrease of $2.7 million was due to lower sales volume driven by timing of customer orders from the Zeolyst Joint Ventur e during the six months ended June 30, 2023.

The following is our unaudited condensed consolidated statements of income and a summary of financial results for the six months ended June 30, 2023 and 2022:

Six months ended

June 30, Change

2023 2022 $ %

(in millions, except percentages)

Sales $ 345.0 $ 404.9 $ (59.9) (14.8) %

Cost of goods sold 247.5 297.3 (49.8) (16.8) %

Gross profit 97.5 107.6 (10.1) (9.4) %

Gross profit margin 28.3 % 26.6 %

Selling, general and administrative expenses 42.5 46.3 (3.8) (8.2) %

Other operating expense, net 13.0 17.4 (4.4) (25.3) %

Operating income 42.0 43.9 (1.9) (4.3) %

Operating income margin 12.2 % 10.8 %

Equity in net (income) from affiliated companies (11.6) (14.3) 2.7 (18.9) %

Interest expense, net 19.0 17.3 1.7 9.8 %

Other expense, net 0.2 0.8 (0.6) (75.0) %

Income before income taxes 34.4 40.1 (5.7) (14.2) %

Provision for income taxes 9.7 13.0 (3.3) (25.4) %

Effective tax rate 28.3 % 32.4 %

Net income $ 24.7 $ 27.1 $ (2.4) (8.9) %

Six months ended

June 30, Change

2023 2022 $ %

(in millions, except percentages)

Ecoservices $ 295.8 $ 347.0 $ (51.2) (14.8) %

Catalyst Technologies 49.2 57.9 (8.7) (15.0) %

Total sales $ 345.0 $ 404.9 $ (59.9) (14.8) %

Ecoservices :

Sales in Ecoservices for the six months ended June 30, 2023 were $295.8 million, a decrease of $51.2 million, or 14.8%, compared to sales of $347.0 million for the six months ended June 30, 2022.

The decrease in sales reflects lower sales volume of $51.0 million and lower average selling pricing of $0.2 million, inclusive of the negative impact associated with the pass-through of sulfur costs of approximately $37 million.

Sales volume was lower primarily due to lower virgin sulfuric acid sales associated with the adverse impact of Winter Storm Elliott earlier in the year and extended maintenance turnaround activity at our facilities, limit our ability to produce inventory in advance of significant planned turnaround activity to meet customer demand during the six months ended June 30, 2023.

Catalyst Technologies:

Sales in Catalyst Technologies for the six months ended June 30, 2023 were $49.2 million, a decrease of $8.7 million, or 15.0%, compared to sales of $57.9 million for the six months ended June 30, 2022.

The decrease in sales was due to lower sales volume of $12.8 million and the unfavorable effects of foreign currency of $0.8 million, partially offset by higher average selling prices of $4.9 million.

The decrease in sales volume was primarily driven by lower polyethylene catalysts sales during the three months ended March 31, 2023, driven in part by the economic sanctions associated with the developments in Russia and Ukraine.

Higher average selling prices during the three months ended March 31, 2023 was driven by implemented price increases.

Gross profit for the three months ended March 31, 2023 was $36.5 million, a decrease of $11.2 million, or 23.5%, compared with $47.7 million for the three months ended March 31, 2022.

The decrease in gross profit reflects a $11.0 million contribution associated with lower sales volumes and higher manufacturing costs of $12.3 million, partially offset by higher average selling prices of $12.1 million.

The decrease in gross profit was driven by lower sales volume in the Ecoservices business, offset by favorable pricing and pass-through of higher variable costs.

The decrease in sales volume was primarily driven by lower polyethylene catalysts sales during the six months ended June 30, 2023 and the timing of customer orders for catalyst used in the production of methyl methacrylate for the six months ended June 30, 2022.

Higher average selling prices during the six months ended June 30, 2023 was driven by implemented price increases.

Gross profit for the six months ended June 30, 2023 was $97.5 million, a decrease of $10.1 million, or 9.4%, compared to $107.6 million for the six months ended June 30, 2022.

The decrease in gross profit reflects lower sales volume of $23.8 million and higher manufacturing costs, exclusive of the $37 million impact associated with lower sulfur costs that are passed through in price, partially offset by higher average selling prices and favorable mix.

The higher manufacturing costs was primarily driven by higher variable costs, transportation costs and costs related to the extended maintenance turnaround.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended March 31, 2023 was $21.1 million, a decrease of $2.4 million as compared to $23.5 million for the three months ended March 31, 2022.

The decrease in selling, general and administrative expenses was mainly due to a decrease in stock-based compensation expense of $3.2 million due to fewer awards granted, lower dividend equivalents, and lower expense for the three months ended March 31, 2023.

Selling, general and administrative expenses for the six months ended June 30, 2023 was $42.5 million, a decrease of $3.8 million, as compared to $46.3 million for the six months ended June 30, 2022.

The decrease in selling, general and administrative expenses was mainly due to a decrease in other compensation-related expenses of $3.4 million and a decrease in stock-based compensation expense of $3.6 million due to fewer overall awards granted and outstanding for the six months ended June 30, 2023 as compared to the prior year period.

This was partly offset by an increase in professional fees of $2.5 million.

Other Operating Expense, Net

Other operating expense, net for the three months e nded March 31, 2023 was $6.7 million, a decrease of $1.0 million, compared with $7.7 million for the three months ended March 31, 2022.

The decrease in other operating expense, net was mainly driven by a decrease of $2.8 million in transactions costs, primarily associated with the sale of the Performance Chemicals business, offset by an increase in net losses on asset disposals of $1.0 million, primarily related to costs associated with Winter Storm Elliott.

Other operating expense, net for the six months e nded June 30, 2023 was $13.0 million, a decrease of $4.4 million, compared to $17.4 million for the six months ended June 30, 2022.

The decrease in other operating expense, net was mainly driven by a decrease of $2.4 million in transactions costs, primarily associated with the sale of the Performance Chemicals business in 2021 and a decrease i n restructuring, integration and business optimization costs driven by severance charges incurred in the prior period from contracts associated with fo rmer executives for $4.4 million, offset by an increase of $1.3 million in business optimization costs.

This was also offset by an increase in net losses on asset disposals of $1.6 million, primarily associated with costs associated with Winter Storm Elliott.

Equity in Net Income of Affiliated Companies

Equity in net income of affiliated companies for the three months ended March 31, 2023 was $0.2 million, compared to $5.7 million for the three months ended March 31, 2022.

The decrease was primarily due to lower earnings from the Zeolyst Joint Ventur e largely due to the comparative timing of customer orders for hydrocracking and specialty catalysts sales during the three months ended March 31, 2023 .

Equity in net income of affiliated companies for the six months ended June 30, 2023 was $11.6 million, compared to $14.3 million for the six months ended June 30, 2022.

The decrease was due to lower earnings from the Zeolyst Joint Ventur e largely due to the comparative timing of customer orders for hydrocracking and lower specialty catalysts sales during the six months ended June 30, 2023 .

Interest Expense, Net

Interest expense, net for the three months ended March 31, 2023 was $9.9 million, an increase of $1.4 million, as compared with $8.5 million for the three months ended March 31, 2022.

The increase in interest expense, net was primarily due to rising interest rates, partially offset by lower debt principal outstanding and the benefits associated with our interest rate caps.

Other (Income) Expense, Net

Other income, net for the three months ended March 31, 2023 was $0.4 million, a decrease of $0.5 million, as compared to other expense, net of $0.1 million for the three months ended March 31, 2022.

The change in other (income) expense, net primarily consisted of foreign currency exchange gains of $1.1 million related to the non-permanent intercompany debt denominated in local currency and translated to the U.S.

This was offset by net periodic pension benefit of $0.6 million for the defined benefit pension and postretirement plans for the three months ended March 31, 2022.

Interest expense, net for the six months ended June 30, 2023 was $19.0 million, an increase of $1.7 million, as compared to $17.3 million for the six months ended June 30, 2022.

The increase in interest expense, net was primarily due to year over year increase in variable rates, which was partially offset by lower outstanding debt during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022 and the benefits associated with our interest rate caps, which included an adjustment related to prior year interest rate amortization.

Other Expense, Net

Other expense, net for the six months ended June 30, 2023 was $0.2 million, a decrease of $0.6 million, as compared to $0.8 million for the six months ended June 30, 2022.

The decrease in other expense, net primarily consisted of favorable foreign currency exchange of $1.8 million mainly related to the non-permanent intercompany debt denominated in local currency and translated to the U.S.

dollar, which was partially offset by higher pension costs of $1.1 million.

Provision for Income Taxes

The provision for income taxes for the three months ended March 31, 2023 was $0.9 million compared to a $5.7 million for the three months ended March 31, 2022.

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 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 provision for income taxes for the six months ended June 30, 2023 was $9.7 million, compared to a $13.0 million for the six months ended June 30, 2022.

The effective income tax rate for the six months ended June 30, 2023 was 28.3%, compared to 32.4% for the six months ended June 30, 2022.

The Company’s effective income tax rate fluctuated primarily due to a reduced discrete tax impact related to a stock compensation shortfall and a discrete tax benefit associated with state and local tax law changes.

The difference between the U.S.

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.

Net (Loss) income Attributable to Ecovyst

For the foregoing reasons, n et loss attributable to Ecovyst was $1.5 million for the three months ended March 31, 2023 compared to net income of $7.9 million for the three months ended March 31, 2022.

federal statutory income tax rate and the Company’s effective income tax rate for the six months ended June 30, 2023 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation, a discrete tax expense associated with the recording of accrued penalties and interest associated with historical uncertain tax positions, and a discrete tax benefit connected to state and local tax law changes.

For the foregoing reasons, n et income was $24.7 million for the six months ended June 30, 2023, compared to $27.1 million for the six months ended June 30, 2022.

Adjusted EBITDA

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

Three months ended

March 31, Change

Six months ended

June 30, Change

2023 2022 $ %

10 unchanged sentences

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

(2) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $5.4 million for the three months ended March 31, 2023, which includes $0.2 million of equity in net income, excluding $1.6 million of amortization of investment in affiliate step-up plus $3.6 million of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $11.5 million for the three months ended March 31, 2022, which includes $5.8 million of equity in net income, excluding $1.6 million of amortization of investment in affiliate step-up plus $4.1 million of joint venture depreciation, amortization and interest.

Adjusted EBITDA for the three months ended March 31, 2023 was $36.8 million, a decrease of $12.5 million, or 25.4%, compared with $49.3 million for the three mo nths ended March 31, 2022.

(2) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $21.6 million for the six months ended June 30, 2023, which includes $11.6 million of equity in net income, excluding $3.2 million of amortization of investment in affiliate step-up plus $6.8 million of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $25.6 million for the six months ended June 30, 2022, which includes $14.3 million of equity in net income, excluding $3.2 million of amortization of investment in affiliate step-up plus $8.1 million of joint venture depreciation, amortization and interest.

Adjusted EBITDA for the six months ended June 30, 2023 was $96.9 million, a decrease of $12.4 million, or 11.3%, compared to $109.3 million for the six mo nths ended June 30, 2022.

The decrease in Adjusted EBITDA was primarily a result of lower virgin sulfuric acid sales volume related to Winter Storm Elliott and the extended maintenance turnaround activity, higher unplanned repair and maintenance costs and costs associated with planned turnaround activity, partially offset by higher pricing for regeneration services.

Catalyst Technologies:

Adjusted EBITDA for the three months ended March 31, 2023 was $13.0 million, a decrease of $4.0 million, or 23.5%, compared with $17.0 million for the three months ended March 31, 2022.

The decrease in Adjusted EBITDA was due to lower volume on timing of customer orders, partially offset by continued strong pricing and favorable product mix.

A reconciliation of net (loss) income to Ecovyst Inc.

to Adjusted EBITDA is as follows:

Three months ended

Adjusted EBITDA for the six months ended June 30, 2023 was $38.4 million, in line with the prior year period as continued strong pricing and favorable product mix offset a decrease in sales volume.

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

Six months ended

(in millions)

Reconciliation of net (loss) income attributable to Ecovyst Inc.

to Adjusted EBITDA

Net (loss) income attributable to Ecovyst Inc.

$ (1.5) $ 7.9

Reconciliation of net income to Adjusted EBITDA

Net income $ 24.7 $ 27.1

Provision for income taxes 9.7 13.0

20 unchanged sentences

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

that are valued using the LIFO method, which we believe provides a means of comparison to other companies that may not use the same basis of accounting for inventories.

6 unchanged sentences

Summarized adjusted net income information is shown below in the following table:

Three months ended March 31,

Six months ended June 30,

Pre-tax amount Tax expense (benefit) After-tax amount Pre-tax amount Tax expense (benefit) After-tax amount

(in millions)

Reconciliation of net (loss) income attributable to Ecovyst Inc.

to Adjusted Net Income (1)(2)

Net (loss) income attributable to Ecovyst Inc.

$ (0.6) $ 0.9 $ (1.5) $ 13.6 $ 5.7 $ 7.9

Reconciliation of net income to Adjusted Net Income (1)(2)

Net income $ 34.4 $ 9.7 $ 24.7 $ 40.1 $ 13.0 $ 27.1

Amortization of investment in affiliate step-up (b)

9 unchanged sentences

Equity-based compensation 9.1 0.8 8.3 12.7 0.4 12.3

4.1 (0.1) 4.2 7.3 (0.3) 7.6

Restructuring, integration and business optimization expenses (g)

2 unchanged sentences

Adjusted Net Income $ 55.2 $ 13.7 $ 41.5 $ 67.5 $ 17.0 $ 50.5

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

Adjusted net income is presented as a key performance indicator as we believe it will enhance a prospective investor’s understanding of our results of operations and financial condition.

1 unchanged sentence

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

(3) Includes tax adjustments for the shortfall in stock compensation.

The adjustments to net income attributable to Ecovyst Inc.

are shown net of applicable tax rates of 25.6% and 24.7% for the three months ended March 31, 2023 and 2022, respectively, except for the foreign currency exchange (gain) loss and equity-based compensation.

The adjustments to net income are shown net of applicable tax rates of 26.2% and 26.0% for the six months ended June 30, 2023 and 2022, respectively, except for the foreign currency exchange (gain) loss and equity-based compensation.

The tax effect on equity-based compensation is derived by removing the tax effect of any equity-based compensation expense disallowed as a result of its inclusion within IRC Sec.

9 unchanged sentences

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

As of March 31, 2023, we had cash and cash equivalents of $61.6 million and availability of $57.3 million under our asset based lending revolving credit facility, after giving effect to $4.1 million of outstanding letters of credit, for a total available liquidity of $118.9 million.

We did not have any revolving credit facility borrowings as of March 31, 2023.

As of March 31, 2023, we were in comp liance with all covenants under our debt agreements.

As of June 30, 2023, we had cash and cash equivalents of $29.2 million and availability of $70.0 million under our asset based lending revolving credit facility, after giving effect to $4.0 million of outstanding letters of credit, for a total available liquidity of $99.2 million.

We did not have any revolving credit facility borrowings as of June 30, 2023.

As of June 30, 2023, we were in comp liance with all covenants under our debt agreements.

Our ABL Facility has one financial covenant with two ratios to maintain.

4 unchanged sentences

revolving credit facility against a $15.0 million threshold.

As of March 31, 2023 , we were in compliance with the financial covenant under the ABL Facility.

As of June 30, 2023 , we were in compliance with the financial covenant under the ABL Facility.

The 2021 Term Loan Facility and the ABL Facility contain various restrictive covenants.

1 unchanged sentence

During such time, the Company is required to maintain a fixed-charge coverage ratio of at least 1.0 to 1.0.

The Company was in compliance with all debt covenants under the 2021 Term Loan Facility and the ABL Facility as of March 31, 2023 .

Included in our cash and cash equivalents balance as of March 31, 2023 was $19.6 million of cash and cash equivalents in foreign jurisdictions.

The Company was in compliance with all debt covenants under the 2021 Term Loan Facility and the ABL Facility as of June 30, 2023 .

Included in our cash and cash equivalents balance as of June 30, 2023 was $12.0 million of cash and cash equivalents in foreign jurisdictions.

Depending on foreign cash balances, we have certain flexibility to repatriate funds should the need arise.

4 unchanged sentences

Our liquidity requirements include interest payments related to our debt structure.

As reported, our cash interest paid for the three months ended March 31, 2023 and 2022 wa s approximately $15.2 million and $8.4 million, respectively.

As reported, our cash interest paid for the six months ended June 30, 2023 and 2022 wa s approximately $19.4 million and $15.8 million, respectively.

Before any impact of hedges, a one percent change in assumed interest rates for our variable interest credit facilities would have an annual impact of approximately $8.8 million on interest expense.

We hedge the interest rate fluctuations on debt obligations through interest rate cap agreements.

As of March 31, 2023, we had a $400.0 million of notional variable-rate debt with a cap rate of 1.00% through August 2023, a $250.0 million of notional variable-rate debt with a cap rate of 1.00% through October 2024, a $250.0 million of notional variable-rate debt with a cap rate of 1.00% through October 2025, a $150.0 million of notional variable-rate debt with a cap rate of 1.00% through July 2026, a $200.0 million of notional variable-rate debt with a cap rate of 1.00% through October 2025, and a $450.0 million of notional variable-rate debt with a cap rate of 1.00% through October 2026.

The Company’s off-balance sheet arrangements include $4.1 million of outstanding letters of credit on our ABL Facility as of March 31, 2023.

Three months ended

For more information about our interest rate cap agreements, refer to Note 12 — Financial Instrument of our condensed consolidated financials statements included in Part 1, Item 1 — Financial Statements (Unaudited).

The Company’s off-balance sheet arrangements include $4.0 million of outstanding letters of credit on our ABL Facility as of June 30, 2023.

Six months ended

(in millions)

7 unchanged sentences

Cash and cash equivalents at end of period $ 29.2 $ 151.2

Three months ended

Six months ended

(in millions)

5 unchanged sentences

(1) Includes depreciation, amortization, amortization of deferred financing costs and original issue discount, foreign currency exchange (gain) loss, deferred income tax provision (benefit), net (gain) loss on asset disposals, stock compensation expense, equity in net income and dividends received from affiliated companies.

Three months ended

Six months ended

(in millions)

6 unchanged sentences

$ (42.4) $ (51.7)

Three months ended

Six months ended

(in millions)

1 unchanged sentence

Payments for business divestiture, net of cash — (3.7)

Other, net — 0.1

Net cash used in investing activities $ (39.2) $ (29.5)

Three months ended

Six months ended

(in millions)

4 unchanged sentences

Net cash used in financing activities $ (79.9) $ (11.9)

Net cash provided by operating activities was $4.1 million for the three months ended March 31, 2023, compared to $6.4 million provided for the three months ended March 31, 2022.

Cash generated by operating activities, other than changes in working capital, was lower during the three months ended March 31, 2023 by $24.4 million compared to the same period in the prior year.

The change in working capital during the three months ended March 31, 2023 was favorable compared to the three months ended March 31, 2022.

Cash used to fund working capital was $18.6 million and $40.7 million for the three months ended March 31, 2023 and 2022, respectively.

The decrease in cash generated by operating activities, other than changes in working capital, was lower by $24.4 million as compared to the prior year period primarily due to an decrease in operating profit and a decrease in dividends received from affiliated companies.

The increase in cash from working capital of $22.1 million as compared to the prior year was primarily due to favorable changes in accounts receivable and accrued liabilities, which was partially offset by unfavorable changes in prepaids and other current assets and accounts payable.

The favorable change in accounts receivable was driven by the timing of sales as well as decreased sales volume.

The favorable change in accrued liabilities mainly relates to higher income tax payments in the prior year period as compared to the current year period.

The unfavorable change in prepaid and other current assets primarily relates to the timing of non-trade receivables from related parties.

Net cash provided by operating activities was $41.1 million for the six months ended June 30, 2023, compared to $52.8 million for the six months ended June 30, 2022.

Cash generated by operating activities, other than changes in working capital was lower by $21.0 million during the six months ended June 30, 2023, as compared to the same period in the prior year primarily due to a decrease in dividends received from affiliated companies.

The increase in cash from working capital during the six months ended June 30, 2023 of $9.3 million was favorable, compared to the six months ended June 30, 2022 primarily due to favorable changes in receivables, which was offset by unfavorable changes in prepaids and other current assets, accounts payable and accrued liabilities.

The favorable change in receivables was driven by the collection of sales.

The unfavorable change in accrued liabilities mainly relates to payments for other compensation-related liabilities in the current period offset by higher income tax payments in the prior period.

The unfavorable change in prepaid and other current assets primarily relates to the timing of non-trade receivables from related parties and an increase in miscellaneous receivables.

The unfavorable change in accounts payable is due to the timing of vendor payments and professional fees.

Net cash used in investing activities was $18.7 million for the three months ended March 31, 2023, compared to net cash used of $14.4 million during the same period in 2022.

Cash used in investing activities consisted of $18.7 million and $10.8 million to fund capital expenditures during the three months ended March 31, 2023 and 2022, respectively.

During the three months ended March 31, 2022, we made an additional payment of $3.7 million related to our divestiture of our Performance Chemicals business representing the final adjustments to the sale price.

Net cash used in financing activities was $33.6 million for the three months ended March 31, 2023, compared to net cash used of $2.6 million during the same period in 2022.

Net cash used in financing activities was primarily driven by the Company repurchases of common stock of $29.9 million during the three months ended March 31, 2023.

Net cash used in investing activities was $39.2 million for the six months ended June 30, 2023, compared to $29.5 million during the same period in 2022.

Cash used in investing activities consisted of $39.2 million and $25.8 million to fund capital expenditures during the six months ended June 30, 2023 and 2022, respectively.

During the six months ended June 30, 2022, we made an additional payment of $3.7 million related to our divestiture of our Performance Chemicals business representing the final adjustments to the sale price.

Net cash used in financing activities was $79.9 million for the six months ended June 30, 2023, compared to $11.9 million during the same period in 2022.

Net cash used in financing activities was primarily driven by the Company repurchases of common stock of $73.4 million during the six months ended June 30, 2023, compared to $7.1 million during the six months ended June 30, 2022.

2023 December 31,

8 unchanged sentences

Total long-term debt, excluding current portion $ 862.4 $ 865.9

As of March 31, 2023, our total debt was $884.3 million, excluding the original issue discount of $7.2 million and deferred financing costs of $4.0 million for our senior secured credit facilities.

Our net debt as of March 31, 2023 was $822.7 million, including cash and cash equivalents of $61.6 million.

As of June 30, 2023, our total debt was $882.0 million, excluding the original issue discount of $6.8 million and deferred financing costs of $3.8 million for our senior secured credit facilities.

Our net debt as of June 30, 2023 was $852.8 million, including cash and cash equivalents of $29.2 million.

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

3 unchanged sentences

These capital expenditures represent our “book” capital expenditures for which the company has recorded, but not necessarily paid for the capital expenditures.

Three months ended

Six months ended

(in millions)

3 unchanged sentences

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

Maintenance capital expenditures were higher in the three months ended March 31, 2023 compared to the three months ended March 31, 2022 due to higher turnaround expenditures and additional expenditures incurred related to Winter Storm Elliott impacting our manufacturing facilities.

Growth capital expenditures were slightly lower in the three months ended March 31, 2023 compared to the three months ended March 31, 2022 due to the completion of several expansion projects in 2022.

Maintenance capital expenditures were higher in the six months ended June 30, 2023, compared to the six months ended June 30, 2022 due to higher turnaround expenditures and additional expenditures incurred related to Winter Storm Elliott impacting our manufacturing facilities.

Growth capital expenditures were slightly lower in the six months ended June 30, 2023, compared to the six months ended June 30, 2022 due to the completion of several expansion projects in 2022.

Critical Accounting Policies and Estimates

8 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-Q

Item 2. Management’s Discussion and Analysis