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Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-02-28 · 191 added, 432 removed, 388 unchanged (62% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

We are a leading integrated and innovative global provider of specialty catalysts and services.

We believe that our products, which are predominantly inorganic, and services contribute to improving the sustainability of the environment.

We are a leading integrated and innovative global provider of advanced materials, specialty catalysts and services.

We believe that our products and services contribute to improving the sustainability of the environment.

We conduct operations through two repor ting segments:

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

Catalyst Technologies:

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

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

(1) Ecoservices and (2) Advanced Materials & Catalysts (including our 50% interest in the Zeolyst Joint Venture).

We are a leading provider of sulfuric acid recycling to the 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 high quality and high strength virgin sulfuric acid for industrial and mining applications.

We also provide chemical waste handling and treatment services, as well as ex-situ catalyst activation services for the refining and petrochemical industry.

Advanced Materials & Catalysts :

We are a global supplier of finished silica catalyst, catalyst supports and functionalized silicas necessary to produce high performing plastics and to enable sustainable chemistry.

This segment includes our 50% interest in the Zeolyst Joint Venture, where we are a leading global supplier of zeolites used for catalysts that support the production of sustainable fuels, remove nitrogen oxides from diesel engine emissions and are broadly applied in refining and petrochemical processes.

Effective November 28, 2023, the Company renamed the Catalyst Technologies segment to Advanced Materials & Catalysts.

Beginning with the year ended December 31, 2023, the segment results and disclosures included in the Company’s consolidated financial statements reflect the new segment name for all periods presented.

This change to the Company’s segment name does not change the Company’s consolidated balance sheets, statements of income or cash flows for the prior periods or the way the Company’s chief operating decision maker (“CODM”) evaluated the business.

In 2023, we served global customers across many end uses and, as of December 31, 2023, operated out of ten strategically located manufacturing facilities.

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

On December 14, 2020, we completed the sale of our Performance Materials business to Potters Buyer, LLC, an affiliate of The Jordan Company, L.P.

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

for $1.1 billion.

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

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

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

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

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

The results of operations, financial condition, and cash flows for the Performance Materials and Performance Chemicals businesses are presented herein as discontinued operations for the 2022 and 2021 periods presented.

Refer to Note 4 of our consolidated financial statements for additional information.

Economic Effects on our Business and Results

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

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

We have no operations in Russia or Ukraine.

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

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

We had no sales to customers in Ukraine and Russia in December 31, 2023 and our sales to a customer in Russia were immaterial for the year ended December 31, 2022 and 2% for the year ended December 31, 2021.

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

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government and other countries.

Recent Developments

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

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

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

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

We continue to monitor the developments in the Middle East.

Although the Company experienced shipment delays, the impact remained immaterial on our business.

2022 Stock Repurchase Program

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

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

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

accelerated share repurchases.

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

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

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

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

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

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

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

From the announcement date of the program in April 2022 through December 31, 2022, the Company repurchased 1,970,763 shares of its common stock on the open market at an average price of $9.82 per share, for a total of $19.4 million.

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

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.

During the year-ended December 31, 2023, the Company repurchased 541,494 shares on the open market at an average price of $9.85 per share, for a total of $5.3 million, excluding brokerage commissions and accrued excise tax.

Additionally, 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 share concurrently with the closing of the offerings, for a total of $73.4 million, excluding accrued excise tax.

As of December 31, 2023, $234.6 million was available for additional share repurchases under the program.

During the year-ended December 31, 2022, the Company repurchased 1,970,763 shares on the open market at an average price of $9.82 per share, for a total of $19.4 million, excluding brokerage commissions.

Additionally, in connection with secondary offerings of the Company’s common stock in August and November 2022, the Company repurchased 14,500,000 shares of its common stock sold in the offerings from the underwriters at a weighted average price of $8.09 per share concurrently with the closing of the offerings, for a total of $117.3 million.

Basis of Presentation

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We do not record sales by the Zeolyst Joint Venture as revenue and such sales are not consolidated within our results of operations.

However, Adjusted EBITDA reflects our share of the earnings of the Zeolyst Joint Venture that have been recorded as equity in net income from affiliated companies in our consolidated statements of income and includes Zeolyst Joint Venture adjustments on a proportionate basis based on our 50% ownership interest.

However, net income and Adjusted EBITDA reflects our share of the earnings of the Zeolyst Joint Venture that have been recorded as equity in net income from affiliated companies in our consolidated statements of income and includes Zeolyst Joint Venture adjustments on a proportionate basis based on our 50% ownership interest.

Key Performance Indicators

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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.

Adjusted net income consists of net income (loss) 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.

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.

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Key Factors and Trends Affecting Operating Results and Financial Condition

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

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

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

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

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

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

Overall, our Ecoservices and Advanced Materials & Catalysts segments continued to benefit from demand trends for our products and services in the industries we serve.

While sales of our virgin sulfuric acid into the production of nylon intermediates and sales of polyethylene catalysts weakened in the second half of 2023, demand across the balance of product categories, end-uses and customers throughout 2023 remained positive.

Contractual pass-through mechanisms and targeted price increases have served to mitigate the adverse impacts of inflationary pressures in 2023, including higher variable costs on our businesses and supply chain constraints, including limited availability and higher costs for energy, logistics, and other raw materials.

Cost of Goods Sold

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Spent sulfuric acid for our Ecoservices segment is supplied by customers for a nominal charge as part of their contracts.

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

The primary raw materials used in the manufacture of products in our Advanced Materials & Catalysts segment 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.

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While natural gas is not a direct feedstock for any product, natural gas powered machinery and equipment are used to heat raw materials and create the chemical reactions necessary to produce end-products.

We maintain multiple suppliers wherever possible and structure our customer contracts when possible to allow for the pass-through of raw material and natural gas costs.

We maintain multiple suppliers wherever possible and structure our customer contracts when possible to allow for the pass-through of raw material, labor and natural gas costs.

Joint Ventures

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

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

Our joint venture, the Zeolyst Joint Venture, manufactures high performance, specialty, zeolite-based catalysts, used in emission control, refining and petrochemical industry applications and by the broader chemicals industry.

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

We share proportionally in the management of our joint ventures with the other parties to each such joint venture.

We share proportionally in the management of our joint venture with the other parties to such joint venture.

Our regeneration services product group, which is a part of our Ecoservices segment, typically experiences seasonal fluctuations as a result of higher demand for gasoline products in the summer months and lower demand in the winter months.

These demand fluctuations results in higher sales and working capital requirements in the second and third quarter.

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

Foreign Currency

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

Approximately 6% of our sales for the years ended December 31, 2022 and 2021 in currencies other than the U.S.

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

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

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The following is a summary of our financial performance for the year ended December 31, 2023 compared with the year ended December 31, 2022.

Sales increased $209.0 million to $820.2 million.

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

Gross profit increased $48.0 million to $224.7 million.

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

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

Sales decreased $129.1 million to $691.1 million.

The decrease in sales was primarily due to lower sales volume and the pass-through of lower sulfur costs, offset by higher average selling prices, after adjusting for impact of the pass-through of lower sulfur costs.

Gross profit decreased $26.8 million to $197.9 million.

The decrease in gross profit was primarily due to lower sales volume.

Operating Income

Operating income increased $49.8 million to $104.4 million.

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

Operating income decreased $7.7 million to $96.7 million.

The decrease in operating income was primarily due to the decrease in gross profit, offset by l ower selling, general and administrative expenses and other operating expenses .

Equity in Net Income from Affiliated Companies

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

Equity in net income of affiliated companies increased $2.9 million to $30.6 million.

The increase was primarily due to higher sales within the Zeolyst Joint Venture partially offset by the impact of unfavorable fixed cost absorption.

The following is our consolidated statement of income and a summary of financial results for the years ended December 31, 2023 and 2022.

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Interest expense, net 44.7 37.2 7.5 20.2 %

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

Other expense, net 0.6 0.2 0.4 200.0 %

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

Income from continuing operations before income taxes 82.0 94.7 (12.7) (13.4) %

Provision for income taxes 10.8 24.9 (14.1) (56.6) %

Effective tax rate 13.2 % 26.3 %

Net income from continuing operations 69.8 1.8 68.0 NM

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

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

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

Net income (loss) attributable to Ecovyst Inc.

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

Net income from continuing operations 71.2 69.8 1.4 2.0 %

Net income from discontinued operations, net of tax — 3.9 (3.9) (100.0) %

Net income $ 71.2 $ 73.7 $ (2.5) (3.4) %

December 31, Change

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Ecoservices $ 584.8 $ 702.5 $ (117.7) (16.8) %

Catalyst Technologies 117.7 110.7 7.0 6.3 %

Advanced Materials & Catalysts 106.3 117.7 (11.4) (9.7) %

Total sales $ 691.1 $ 820.2 $ (129.1) (15.7) %

Ecoservices :

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

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

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

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

Catalyst Technologies :

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

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

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

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

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

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

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

Sales in Ecoservices for the year ended December 31, 2023 were $584.8 million, a decrease of $117.7 million, or 16.8%, compared with sales of $702.5 million for the year ended December 31, 2022.

The decrease in sales reflects lower sales volume of $52.1 million and the negative impact associated with the pass-through of lower sulfur costs of approximately $86 million, offset by higher average selling pricing of $20.4 million , after adjusting for the impact of the pass-through of lower sulfur costs.

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, extended maintenance turnaround activity at our facilities and lower end use demand of virgin sulfuric acid, primarily in the production of nylon intermediates.

Favorable pricing continued to benefit Ecoservices, driven by higher contractual and index pricing within regeneration services, as well as the pass-through of higher freight costs.

Advanced Materials & Catalysts :

Sales in Advanced Materials & Catalysts for the year ended December 31, 2023 were $106.3 million, a decrease of $11.4 million, or 9.7%, compared with sales of $117.7 million for the year ended December 31, 2022.

The decrease in sales was primarily due to lower sales volume of $24.2 million, partially offset by higher average selling prices of $12.4 million and the effects of foreign currency translation of $0.4 million.

The decrease in sales volume was primarily driven by lower end use demand for polyethylene catalysts and niche custom catalysts during the year ended December 31, 2023.

The higher average selling prices were primarily driven by implemented price increases.

Gross profit for the year ended December 31, 2023 was $197.9 million, a decrease of $26.8 million, or 11.9%, compared with $224.7 million for the year ended December 31, 2022.

The decrease in gross profit is primarily driven by lower sales volume of $30.1 million as well as unfavorable manufacturing costs of $29.5 million, partially offset by favorable average selling prices of $32.8 million, exclusive of the pass-through of sulfur costs.

Sales volume was lower primarily due to lower virgin sulfuric acid sales and lower polyethylene catalysts sales.

The unfavorable manufacturing costs was primarily driven by costs related to the extended maintenance turnaround activity, planned turnaround activity, and higher unplanned repair and maintenance costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the year ended December 31, 2023 were $79.2 million, a decrease of $6.1 million compared with $85.3 million for the year ended December 31, 2022.

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

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

The decrease in selling, general and administrative expenses was mainly due to a decrease in compensation related costs of $6.3 million and a decrease in stock-based compensation expense of $4.6 million driven by fewer overall awards granted and outstanding for the year ended December 31, 2023.

This was partly offset by an increase in professional fees of $3.4 million primarily related to consulting and recruiting charges.

Other Operating Expense, Net

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

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

Other operating expense, net for the year ended December 31, 2023 was $22.0 million, a decrease of $13.0 million, or 37.1%, compared with $35.0 million for the year ended December 31, 2022.

The decrease in other operating expense, net was mainly driven by severance charges incurred in the prior period from contracts associated with fo rmer executives and residual costs from the sale of the Performance Chemicals business and other transactions costs for the year ended December 31, 2022 .

Equity in Net Income from Affiliated Companies

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

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

Equity in net income from affiliated companies for the year ended December 31, 2023 was $30.6 million, an increase of $2.9 million or 10.5%, compared with $27.7 million for the year ended December 31, 2022.

The increase was primarily due to higher sales for hydrocracking, sustainable fuels and emission control catalysts within the Zeolyst Joint Venture partially offset by the impact of unfavorable fixed cost absorption during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Interest Expense, Net

Interest expense, net for the year ended December 31, 2023 was $44.7 million, an increase of $7.5 million, as compared with $37.2 million for the year ended December 31, 2022.

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

Debt Extinguishment Costs

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

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

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

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

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

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

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

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

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

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

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

The increase in interest expense was due to year over year increase in variable rates, which was partially offset by lower outstanding debt for the year ended December 31, 2023 , as compared to the year ended December 31, 2022.

This was offset by 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 was $0.2 million for the year ended December 31, 2022, a favorable change of $4.3 million, compared to $4.5 million for the year ended December 31, 2021.

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

Other expense, net was $0.6 million for the year ended December 31, 2023, an increase of $0.4 million, compared with $0.2 million for the year ended December 31, 2022.

The change primarily related to a $1.6 million change in net gains in foreign currency translation in the current year and a change of $1.1 million in pension plan costs.

Provision for Income Taxes

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

The provision for income taxes for the year ended December 31, 2023 was $10.8 million compared with $24.9 million for the year ended December 31, 2022.

The effective income tax rate for the year ended December 31, 2023 was 13.2% compared to 26.3% for the year ended December 31, 2022.

The difference between the U.S.

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

federal statutory income tax rate and our effective income tax rate for the year ended December 31, 2023 was mainly due to the impact of a valuation allowance release connected to our state investment tax credit carryovers, foreign tax credit benefit, the Section 162(m) deduction limitation for “covered” employees with compensation in excess of $1 million, along with the tax deductibility of stock compensation.

The difference between the U.S.

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

Net Income (Loss) Attributable to Ecovyst Inc.

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

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

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

For the foregoing reasons, net income was $71.2 million for the year ended December 31, 2023 as compared to $73.7 million for the year ended December 31, 2022.

Adjusted EBITDA

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Ecoservices $ 200.0 $ 227.8 $ (27.8) (12.2) %

Catalyst Technologies (2)

Advanced Materials & Catalysts (2)

81.9 78.0 3.9 5.0 %

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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 $50.3 million for the year ended December 31, 2022, which includes $27.9 million of equity in net income, excluding $6.4 million of amortization of investment in affiliate step-up, plus $16.0 million of joint venture depreciation, amortization and interest.

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

(2) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment was $50.5 million for the year ended December 31, 2023, which includes $30.7 million of equity in net income, excluding $6.4 million of amortization of investment in affiliate step-up plus $13.4 million of joint venture depreciation, amortization and interest.

The Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment was $50.3 million for the year ended December 31, 2022, which includes $27.9 million of equity in net income, excluding $6.4 million of amortization of investment in affiliate step-up plus $16.0 million of joint venture depreciation, amortization and interest.

Ecoservices :

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

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

Catalyst Technologies:

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

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

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

Adjusted EBITDA for the year ended December 31, 2023 was $200.0 million, a decrease of $27.8 million, or 12.2%, compared to $227.8 million for the year ended December 31, 2022.

The decrease in Ecoservices’ Adjusted EBITDA was the result of lower sales volumes for virgin sulfuric acid, as well as higher unplanned repair and maintenance costs associated with production downtime at several of our manufacturing sites and the associated impact from Winter Storm Elliott, partially offset by higher average selling prices, excluding the pass-through of lower sulfur costs .

Favorable pricing continued to benefit Ecoservices driven by higher contractual pricing and index pricing within regeneration services as well as the pass through of higher freight costs.

The Winter Storm Elliott and unplanned production downtime drove both lower sales of virgin sulfuric acid as well as higher maintenance costs during the year.

In addition, the lower volume was driven by a decrease in demand for virgin sulfuric acid used in the production of nylon intermediates.

Advanced Materials & Catalysts:

Adjusted EBITDA for the year ended December 31, 2023 was $81.9 million, an increase of $3.9 million, or 5.0%, compared with $78.0 million for the year ended December 31, 2022.

Adjusted EBITDA increased due higher average selling prices from implemented price increases, partially offset by lower volume from decreased demand for polyethylene catalysts and the timing of niche custom catalyst sales.

In addition, within the Zeolyst Joint Venture, strong pricing and higher sales of hydrocracking catalyst, emission control catalyst and catalyst used in the production of sustainable fuels was offset by higher manufacturing costs and the year-over-year impact of prior year unfavorable fixed cost absorption.

A reconciliation of net income attributable to Ecovyst Inc.

1 unchanged sentence

(in millions)

Reconciliation of net income attributable to Ecovyst Inc.

to Adjusted EBITDA

Reconciliation of net income to Adjusted EBITDA

Net income from continuing operations $ 71.2 $ 69.8

5 unchanged sentences

Amortization of investment in affiliate step-up (b)

Debt extinguishment costs — 26.9

Net loss on asset disposals (c)

Foreign currency exchange loss (d)

LIFO benefit (e)

Foreign currency exchange (gain) loss (d)

LIFO expense (benefit) (e)

Transaction and other related costs (f)

3 unchanged sentences

(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.

Because our Advanced Materials & Catalysts 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 (the “Business Combination”).

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.

Amortization is primarily related to the fair value adjustments associated with 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.

1 unchanged sentence

(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.

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

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

(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).

4 unchanged sentences

(in millions)

Reconciliation of net income attributable to Ecovyst Inc.

to Adjusted Net Income (1)(2)

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

Net income from continuing operations $ 82.0 $ 10.8 $ 71.2 $ 94.7 $ 24.9 $ 69.8

1 unchanged sentence

6.4 1.6 4.8 6.4 1.5 4.9

Debt extinguishment costs — — — 26.9 6.6 20.3

Net loss on asset disposals (c)

4.1 1.0 3.1 3.6 0.9 2.7

Foreign currency exchange loss (d)

Foreign currency exchange (gain) loss (d)

(1.3) (0.3) (1.0) 1.4 0.4 1.0

LIFO benefit (e)

LIFO expense (benefit) (e)

3.5 0.9 2.6 (0.2) (0.1) (0.1)

5 unchanged sentences

0.8 0.2 0.6 (0.7) (0.2) (0.5)

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

Impact of Discrete Tax Items (3)

Adjusted Net Income, including Impact valuation allowance release 117.2 17.2 100.0 144.4 31.2 113.2

Impact of valuation allowance release (3)

— 10.2 (10.2) — — —

2 unchanged sentences

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 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

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

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

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

(3) Represents the tax impact of the state tax credit valuation allowance release.

Item is not expected to be recurring.

The adjustments to net income attributable to Ecovyst Inc.

are shown net of each applicable statutory tax rates.

are shown net of each applicable statutory tax rates of 25.4% and 23.9% for the year ended December 31, 2023 and 2022, respectively, except for 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.

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

Results of Operations

Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

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

Sales increased $115.3 million to $611.2 million.

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

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

The global macroeconomic recovery supported demand across both business segments.

Gross profit increased $25.8 million to $176.7 million.

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

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

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

Operating Income

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

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

Equity in Net Income from Affiliated Companies

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

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

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

December 31, Change

2021 2020 $ %

(in millions, except percentages)

Sales $ 611.2 $ 495.9 $ 115.3 23.3 %

Cost of goods sold 434.5 345.0 89.5 25.9 %

Gross profit 176.7 150.9 25.8 17.1 %

Gross profit margin 28.9 % 30.4 %

Selling, general and administrative expenses 97.8 81.5 16.3 20.0 %

Other operating expense, net 24.3 17.8 6.5 36.5 %

Operating income 54.6 51.6 3.0 5.8 %

Operating income margin 8.9 % 10.4 %

Equity in net income from affiliated companies (27.7) (21.0) (6.7) 31.9 %

Interest expense, net 37.0 50.4 (13.4) (26.6) %

Debt extinguishment costs 26.9 25.0 1.9 7.6 %

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

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

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

Effective tax rate 87.1 % (2,350.6) %

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

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

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

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

Net loss attributable to Ecovyst Inc.

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

December 31, Change

2021 2020 $ %

(in millions, except percentages)

Ecoservices $ 500.5 $ 401.9 $ 98.6 24.5 %

Catalyst Technologies 110.7 94.0 16.7 17.8 %

Total sales $ 611.2 $ 495.9 $ 115.3 23.3 %

Ecoservices :

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

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

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

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

Catalyst Technologies :

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

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

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

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

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

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

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

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

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

Selling, General and Administrative Expenses

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

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

Other Operating Expense, Net

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

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

Equity in Net Income of Affiliated Companies

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

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

Interest Expense, Net

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

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

Debt Extinguishment Costs

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

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

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

As a result of the required payments, previous unamortized deferred financing costs of $2.7 million and original issue discount of $5.8 million were written off as debt extinguishment costs.

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

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

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

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

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

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

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

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

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

Other Expense (Income), Net

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

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

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

Provision (Benefit) for Income Taxes

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

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

The difference between the U.S.

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

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

The difference between the U.S.

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

Net Loss Attributable to Ecovyst Inc.

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

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

Adjusted EBITDA

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

December 31, Change

2021 2020 $ %

(in millions, except percentages)

Adjusted EBITDA (1) :

Ecoservices $ 177.7 $ 157.2 $ 20.5 13.0 %

Catalyst Technologies (2)

88.0 74.5 13.5 18.1 %

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

Total $ 227.6 $ 192.6 $ 35.0 18.2 %

(1) We define 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 Adjusted EBITDA.

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.

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 $49.9 million for the year ended December 31, 2021, which includes $27.8 million of equity in net income, excluding $6.5 million of amortization of investment in affiliate step-up plus $15.6 million of joint venture depreciation, amortization and interest.

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

Ecoservices :

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

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

Catalyst Technologies :

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

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

A reconciliation of net income attributable to Ecovyst Inc.

to Adjusted EBITDA is as follows:

(in millions)

Reconciliation of net income attributable to Ecovyst Inc.

to Adjusted EBITDA

Net income from continuing operations $ 1.8 $ 54.3

Provision (benefit) for income taxes 12.1 (52.1)

Interest expense, net 37.0 50.4

Depreciation and amortization 79.7 76.9

EBITDA 130.6 129.5

Joint venture depreciation, amortization and interest (a)

Amortization of investment in affiliate step-up (b)

Debt extinguishment costs 26.9 25.0

Net loss on asset disposals (c)

Foreign currency exchange loss (gain) (d)

LIFO benefit (e)

Transaction and other related costs (f)

Equity-based compensation 31.8 17.2

Restructuring, integration and business optimization expenses (g)

Adjusted EBITDA $ 227.6 $ 192.6

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

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

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

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, 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 and 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.

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

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:

Years ended December 31,

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

(in millions)

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

to Adjusted Net Income (1)(2)

Net income attributable to Ecovyst Inc.

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

Amortization of investment in affiliate step-up (b)

6.5 1.6 4.9 6.6 1.7 4.9

Debt extinguishment costs 26.9 6.6 20.3 25.0 6.3 18.7

Net loss on asset disposals (c)

5.7 1.4 4.3 4.7 1.2 3.5

Foreign currency exchange loss (gain) (d)

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

LIFO benefit (e)

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

Transaction and other related costs (f)

2.0 0.5 1.5 1.1 0.3 0.8

Equity-based compensation 31.8 7.7 24.1 17.2 4.0 13.2

Restructuring, integration and business optimization expenses (g)

3.9 0.7 3.2 2.0 0.5 1.5

1.8 0.7 1.1 2.4 0.5 1.9

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

Impact of Discrete Tax Items (3)

— (6.1) 6.1 — — —

Adjusted Net Income $ 95.3 $ 25.7 $ 69.6 $ 50.6 $ (39.5) $ 90.1

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

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

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.

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

The adjustments to net income attributable to Ecovyst Inc.

are shown net of each applicable statutory tax rates.

A discussion of our performance for the year ended December 31, 2022 compared to the year ended December 31, 2021 is set forth in Part II, Item 7 of our Form 10-K for the year ended December 31, 2022 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Financial Condition, Liquidity and Capital Resources

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

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

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

Our primary liquidity requirements include funding working capital requirements (primarily inventory and accounts receivable, net of accounts payable and other accrued liabilities), debt service requirements and capital expenditures.

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

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

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

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

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

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

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

Our ABL Facility has one financial covenant to maintain.

As of December 31, 2023, we had cash and cash equivalents of $88.4 million and availability of $63.8 million under our ABL Facility, after giving effect to $4.0 million of outstanding letters of credit, for a total available liquidity of $152.2 million.

As of December 31, 2023, we did not have any revolving credit facility borrowings and were in compliance with all covenants under our debt agreements.

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

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

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revolving credit facility against a $15.0 million threshold.

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

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

Each limits the ability of the Borrower and its restricted subsidiaries to incur certain indebtedness or liens, merge, consolidate or liquidate, dispose of certain property, make investments or declare or pay dividends, make optional payments, modify certain debt instruments, enter into certain transactions with affiliates, enter into certain sales and leasebacks, and certain other non-financial restrictive covenants.

As of December 31, 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.

Each limits the ability of the Company and its restricted subsidiaries to incur certain indebtedness or liens, merge, consolidate or liquidate, dispose of certain property, make investments or declare or pay dividends, make optional payments, modify certain debt instruments, enter into certain transactions with affiliates, enter into certain sales and leasebacks, and certain other non-financial restrictive covenants.

The ABL Facility also contains one financial covenant which applies when minimum availability under the ABL Facility exceeds a certain threshold.

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

The Company is in compliance with all debt covenants as of December 31, 2022 and 2021, respectively.

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

We repatriate cash held outside of the United States from certain foreign subsidiaries in order to meet domestic liquidity needs.

Depending on domestic and foreign cash balances, we have certain flexibility to repatriate funds in order to meet domestic liquidity needs.

In certain cases, the repatriation of foreign cash under previous U.S.

tax law had generally been subject to U.S.

income taxes at the time of cash distribution.

Due to the enactment of the TCJA in December 2017, our overseas earnings repatriation will generally no longer be subject to U.S.

federal income taxes at the time of cash distribution.

However, future earnings may still be taxed for foreign and state income tax purposes.

The Company was in compliance with all debt covenants under the 2021 Term Loan Facility and the ABL Facility as of December 31, 2023 and 2022, respectively.

Included in our cash and cash equivalents balance as of December 31, 2023 was $10.7 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.

Should the need arise, we would repatriate the funds in the most tax efficient manner from those subsidiaries.

Repatriation of foreign cash is generally not subject to U.S.

federal income taxes at the time of cash

distribution.

However, foreign earnings may still be taxed for state income tax purposes, as well as subject to certain foreign withholding tax obligations, when cash amounts are distributed back to the U.S.

Over the course of the next twelve months and beyond, we anticipate making significant cash payments for known contractual and other obligations, including:

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Such charges could have a material impact on our financial position, results of operations, or cash flows.

Lease obligations

The Company has operating and finance lease agreements for land, buildings, railcars, vehicles, manufacturing equipment and general office equipment, as well as a financing obligation in connection with a failed-sale-leaseback.

We utilize an incremental borrowing rate over the relevant operating and finance lease terms, which is the rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

We utilize a fixed borrowing rate for the financing obligation.

As of December 31, 2023, our total operating lease liabilities was $24.2 million, with $10.8 million of principal and interest payments made during the year.

Operating lease payments due within the next twelve months is $9.5 million.

As of December 31, 2023, our total finance lease liabilities was $0.1 million as of December 31, 2023, with $0.1 million of principal and interest payments made during the year.

Finance lease payments due withing the next twelve months is $0.1 million.

As of December 31, 2023, our total finance obligation was $7.9 million as of December 31, 2023, with $3.1 million of principal and interest payments made during the year.

Finance obligation due withing the next twelve months is $3.2 million.

2023 2022 2021

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Financing activities — — (1.1)

Effect of exchange rate changes on cash, cash equivalents and restricted cash (5.5) 2.3 11.1

Net change in cash, cash equivalents and restricted cash (29.9) 3.7 63.4

Cash, cash equivalents and restricted cash at beginning of period 140.9 137.2 73.9

Cash, cash equivalents and restricted cash at end of period $ 111.0 $ 140.9 $ 137.3

Effect of exchange rate changes on cash and cash equivalents (1.3) (5.5) 2.3

Net change in cash and cash equivalents (22.5) (29.9) 3.7

Cash and cash equivalents at beginning of period 110.9 140.9 137.2

Cash and cash equivalents at end of period $ 88.4 $ 111.0 $ 140.9

2023 2022 2021

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Net income $ 71.2 $ 69.8 $ 1.8

Non-cash and non-operating activities (1)

Non-cash and non-working capital related activities (1)

86.6 114.3 156.6

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Net cash provided by operating activities, continuing operations $ 137.6 $ 180.4 $ 137.3

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

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

2023 2022 2021

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Proceeds from business divestitures, net of cash — — 978.4

Payments for business divestiture (3.7) — —

Proceeds from sale of assets — — 2.4

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

Business combinations, net of cash acquired — (0.5) (42.6)

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Continuing Operations

Net cash repayments on debt obligations (9.0) (542.9) (470.3)

Cash repayments on debt obligations $ (9.0) $ (9.0) $ (542.9)

Dividends paid to stockholders — — (435.6)

Repurchases of common shares (78.7) (136.7) —

Tax withholdings on equity award vesting (3.4) (0.3) —

Repayment of financing obligation (2.8) (2.7) —

Other financing activities 0.4 0.6 15.4

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Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

Net cash provided by operating activities was $180.4 million for the year ended December 31, 2022, compared to $137.3 million provided for the year ended December 31, 2021.

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

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

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

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

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

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

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

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

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

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

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

Net cash provided by operating activities was $137.6 million for the year ended December 31, 2023, compared with $180.4 million provided for the year ended December 31, 2022.

Cash generated by operating activities, other than changes in working capital was lower by $24.1 million during the year ended December 31, 2023, as compared to the prior year was primarily driven by lower earnings, lower dividends from affiliates, higher cash taxes and cash interest, and unfavorable change in working capital .

The decrease in cash from working capital during the year ended December 31, 2023 of $18.6 million was unfavorable compared to the year ended December 31, 2022 primarily due to unfavorable changes in receivables, inventories, prepaids and other current assets and accrued liabilities, which were offset by favorable change in accounts payable.

The unfavorable change in receivables was driven by the timing of sales orders and collections.

The unfavorable change in inventory was primarily due to the timing of sales orders and inventory build.

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

The unfavorable change in accrued liabilities primarily relates to changes in payments for other compensation-related liabilities in the current period.

The favorable change in accounts payable is due to the timing of vendor payments.

Net cash used in investing activities was $65.3 million for the year ended December 31, 2023, compared to net cash used of $63.0 million during the year ended December 31, 2022.

Cash used in investing activities consisted of $65.3 million and $58.9 million to fund capital expenditures during the years ended December 31, 2023 and 2022, respectively.

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

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

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

During the year ended December 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 $93.5 million for the year ended December 31, 2023, compared with $148.1 million used during the year ended December 31, 2022.

Net cash used in financing activities was driven by fewer repurchases of common stock of $58.0 million in December 31, 2023 compared to December 31, 2022.

Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

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

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

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

Working capital for the year ended December 31, 2021 used cash of $18.1 million, compared to cash provided of $14.5 million for the year ended December 31, 2020.

The increase in cash generated by net income and non-working capital related activities of $29.8 million as compared to the prior year period was primarily due to an increase in gross profit driven by higher sales volumes.

The $32.6 million decrease in cash from working capital as compared to the prior year was primarily due to favorable changes in accrued liabilities, inventories, and accounts payables, which were offset by unfavorable changes in accounts receivable and prepaids.

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

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

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

Catalyst Technologies segment in the current year period.

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

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

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

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

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

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

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

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

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

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

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

A discussion of our cash flows for the year ended December 31, 2022 compared to the year ended December 31, 2021 is set forth in Part II, Item 7 of our Form 10-K for the year ended December 31, 2022 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

(in millions)

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

Senior Secured Term Loan Facility due June 2028 $ 877.5 $ 886.5

ABL Facility — —

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Total long-term debt, excluding current portion $ 858.9 $ 865.9

As of December 31, 2022 our total debt was $886.5 million excluding the original issue discount of $7.5 million and deferred financing fees of $4.1 million for our senior secured credit facilities and notes.

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

As of December 31, 2023 our total debt was $877.5 million excluding the original issue discount of $6.2 million and deferred financing fees of $3.4 million for our senior secured credit facilities.

Our net debt was $789.1 million, including cash and cash equivalents of $88.4 million.

Our total available liquidity as of December 31, 2023 was $152.2 million, which represents our cash on hand of $88.4 million plus our excess availability under our ABL of $63.8 million, after giving effect to $4.0 million of outstanding letters of credit and no revolving credit facility borrowings.

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

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

On May 4, 2016, we entered a $200.0 million senior secured ABL facility, which provided for $200.0 million in revolving credit commitments.

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

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The maturity of the facility was extended to March 20, 2025.

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

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

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

Following the amendment, the borrowings under the amended ABL Facility bore interest at a rate equal to the LIBOR rate or the base rate plus a margin of between 1.25% to 1.75% or 0.25% to 0.75%, respectively.

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

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

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

Revolving credit borrowings are payable at our option throughout the term of the ABL Facility with the balance due August 2, 2026.

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

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

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

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

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

As of December 31, 2023, there were no revolving credit borrowings under the ABL Facility.

Revolving credit borrowings are payable at our option throughout the term of the ABL Facility with the balance due August 2, 2026.

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

We had $4.0 million of letters of credit outstanding as of December 31, 2023, which reduce available borrowings under the ABL Facility by such amounts.

We were in compliance with all debt covenants as of December 31, 2023 and 2022, respectively.

2021 Term Loan Facility

On June 9, 2021, we entered into an agreement for a senior secured term loan facility (the “2021 Term Loan Facility”) for an aggregate principal amount of $900.0 million, with an original issue discount of 0.25% and interest at a floating rate of LIBOR (with a 0.50% minimum LIBOR floor) plus 2.75% per annum, with a maturity date of June 9, 2028.

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

On June 9, 2021, we entered into an agreement for a senior secured term loan facility (the “2021 Term Loan Facility”) in an aggregate principal amount of $900.0 million, with an original issue discount of 0.25% and interest at a floating rate of LIBOR (with a 0.50% minimum LIBOR floor) plus 2.75% per annum (or, depending on the Borrower’s first lien net leverage ratio, 2.50%), with a maturity date of June 9, 2028.

The 2021 Term Loan Facility requires scheduled quarterly amortization payments, each equal to 0.25% of the original principal amount of the loans under the 2021 Term Loan Facility.

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

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

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

2020 Term Loan Facility – Repaid in 2021

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

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

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

2018 Term Loan Facility – Repaid in 2021

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

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

5.75% Senior Unsecured Notes due 2025 - Redeemed in 2021

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

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

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

Capital Expenditures

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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 year ended December 31, 2022 as compared to December 31, 2021 due to higher turnaround expenditures.

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

Maintenance capital expenditures were higher in the year ended December 31, 2023 as compared to December 31, 2022 due to extended turnaround activities and additional expenditures incurred related to Winter Storm Elliott impacting our manufacturing facilities earlier in the year.

Growth capital expenditures are slightly lower in the year ended December 31, 2023 as compared to December 31, 2022 due to the completion of several expansion projects in 2022.

Pension Funding

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

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

We paid an immaterial amount in cash contributions into our defined benefit pension plans and other postretirement plans in December 31, 2023, 2022, and 2021.

The net periodic pension and postretirement expense (benefit) was $0.1 million, $(1.0) million, and $(0.3) million for those same periods, respectively.

As of December 31, 2023 and 2022, our pension plans and other post-retirement benefit plans were underfunded by $5.4 million and $6.7 million, respectively.

Off-Balance Sheet Arrangements

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

We had $4.0 million of outstanding letters of credit on our revolver facility as of December 31, 2023 and 2022, respectively.

Critical Accounting Policies and Estimates

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If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount based on the qualitative assessment, we perform a quantitative goodwill impairment test to identify the potential goodwill impairment and measure the amount of the goodwill impairment loss, if any, to be recognized for that reporting unit.

For the annual

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

For the annual assessments in 2023 and 2022, we bypassed the option to perform the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test for each of our reporting units.

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

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Such an assessment could result in impairment losses.

For further information see Note 16 Goodwill and Other Intangible Assets.

For further information, see Note 14 to these consolidated financial statements.

We operate within multiple taxing jurisdictions and are subject to tax filing requirements and potential audits within these jurisdictions.

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Depending on the award and recipient, the service condition may reflect a cliff vesting provision (e.g., 100% vested upon four years of service) or a graded vesting provision (e.g., 33.3% vested each year over a period of three years).

Restricted stock awards and stock options issued with performance conditions vest based on the occurrence of a defined liquidity event upon which certain investment funds affiliated with CCMP receive proceeds exceeding certain thresholds.

Although achievement of the performance condition is subject to continued service with us, the terms of awards issued

with performance conditions stipulate that the performance vesting condition can be attained for a period of six months following separation from service under certain circumstances, depending on the means of separation from the Company and subject to other factors such as individual separation agreements.

Prior to the Company’s IPO, the Company issued restricted stock awards and stock options with performance conditions that were based on the occurrence of a defined liquidity event upon which certain investment funds affiliated with CCMP receive proceeds exceeding defined thresholds.

Although achievement of the performance condition is subject to continued service with us, the terms of awards issued with performance conditions stipulate that the performance vesting

condition can be attained for a period of six months following separation from service under certain circumstances, depending on the means of separation from the Company and subject to other factors such as individual separation agreements.

The same performance vesting condition for our restricted stock awards also governs the achievement of the performance vesting condition for our stock options.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis