Ecovyst Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process, designed by, or under the supervision of the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions and dispositions of assets; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures are made only in accordance with management and board authorizations; and providing reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria for effective internal control over financial reporting described in the “Internal Control-Integrated Framework” (2013) set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on the assessment, management concluded that, as of December 31, 2023, our internal control over financial reporting was effective based on those criteria. The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included in Item 8. Changes in Internal Control Over Financial Reporting No changes in our internal control over financial reporting occurred during the quarter ended December 31, 2023 that materially affected, or which are reasonably likely to materially affect, our internal control over financial reporting. 64 ITEM 9B. OTHER INFORMATION. Trading Arrangements During the year ended December 31, 2023, none of the Company’s directors or executive officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each item is defined in Item 408(a) of Regulation S-K. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The information required by this Item 10 will be included in our 2024 Proxy Statement, which we intend to file with the SEC within 120 days of our December 31, 2023 fiscal year end, and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item 11 will be included in our 2024 Proxy Statement, which we intend to file with the SEC within 120 days of our December 31, 2023 fiscal year end, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The information required by this Item 12 will be included in our 2024 Proxy Statement, which we intend to file with the SEC within 120 days of our December 31, 2023 fiscal year end, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. The information required by this Item 13 will be included in our 2024 Proxy Statement, which we intend to file with the SEC within 120 days of our December 31, 2023 fiscal year end, and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. The information required by this Item 14 will be included in our 2024 Proxy Statement, which we intend to file with the SEC within 120 days of our December 31, 2023 fiscal year end, and is incorporated herein by reference. 65 PART IV ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES. (a) The following documents are filed as part of this report: (1) and (2) The response to this portion of Item 15 is submitted as a separate section of this report beginning on page F-1. All other schedules have been omitted as inapplicable or are not required, or because the required information is included in the consolidated financial statements or accompanying notes. (3) The exhibits filed as part of this report are listed in the accompanying index. Incorporated by Reference Exhibit No. Exhibit Description Filed Herewith Form File No. Exhibit Filing Date 2.1 Stock Purchase Agreement, dated as of October 15, 2020, by and among PQ Corporation and Potters Buyer, LLC 8-K 001-38221 2.1 10/16/2020 2.2 Stock Purchase Agreement, dated as of February 28, 2021, by and among PQ Group Holdings Inc. and Sparta Aggregator L.P. 8-K 001-38221 2.1 03/04/2021 2.3 Amendment No. 1 to Stock Purchase Agreement, dated as of June 24, 2021, by and among PQ Group Holdings Inc. and Sparta Aggregator L.P. 8-K 001-38221 2.1 6/30/2021 2.4 Amendment No. 2 to Stock Purchase Agreement, dated as of July 12, 2021, by and among PQ Group Holdings Inc. and Sparta Aggregator L.P. 8-K 001-38221 2.1 7/15/2021 3.1 Second Restated Certificate of Incorporation 10-Q 001-38221 3.1 11/14/2017 3.2 Certificate of Amendment of Certificate of Incorporation 8-K 001-38221 3.1 8/3/2021 3.3 Certificate of Correction of Certificate of Amendment of Certificate of Incorporation 10-Q 001-38221 3.3 11/9/2021 3.4 Second Amended and Restated Bylaws of Ecovyst Inc. 8-K 001-38221 3.2 8/3/2021 4.1 Indenture, dated as of May 4, 2016, among PQ Corporation, as Issuer, the Guarantors from time to time party thereto and Wells Fargo Bank, National Association, as Trustee and Collateral Agent, including the form of Global Note attached as Exhibit A thereto S-1 333-218650 4.2 6/9/2017 4.2 Indenture, dated as of December 11, 2017, among PQ Corporation, as Issuer, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee 8-K 001-38221 4.1 12/13/2017 4.3 Description of Ecovyst Inc.’s common stock 10-K 001-38221 4.3 3/1/2022 10.1 Partnership Agreement, dated as of February 1, 1988, by and between PQ Corporation and Shell Polymers and Catalysts Enterprises Inc. S-1/A 333-218650 10.10 8/14/2017 10.2 First Amendment to Partnership Agreement, dated January 1, 1993, by and among PQ Corporation, Shell Catalyst Ventures Inc. and CRI Zeolites Inc. S-1/A 333-218650 10.11 8/14/2017 10.3 Second Amendment to Partnership Agreement, dated October 18, 2002, by and between PQ Corporation and Shell Catalyst Ventures Inc. S-1/A 333-218650 10.12 8/14/2017 10.4 Third Amendment to Partnership Agreement, dated January 1, 2005, by and between PQ Corporation and CRI Zeolites Inc. S-1/A 333-218650 10.13 8/14/2017 10.5 Form of Amended and Restated Stockholders Agreement between PQ Group Holdings Inc. and certain stockholders of PQ Group Holdings Inc. S-1/A 333-218650 10.5 9/1/2017 66 Incorporated by Reference Exhibit No. Exhibit Description Filed Herewith Form File No. Exhibit Filing Date 10.6* Ecovyst Inc. 2017 Omnibus Incentive Plan, as Amended and Restated S-8 333-262180 4.1 1/14/2022 10.7* Form of Stock Option Award Agreement under the Ecovyst Inc. 2017 Omnibus Incentive Plan, as Amended and Restated 10-K 001-38221 10.7 3/1/2022 10.8* Form of Restricted Stock Award Agreement under the Ecovyst Inc. 2017 Omnibus Incentive Plan, as Amended and Restated 10-K 001-38221 10.8 3/1/2022 10.9* Form of Restricted Stock Unit Award Agreement under the Ecovyst Inc. 2017 Omnibus Incentive Plan, as Amended and Restated 10-K 001-38221 10.9 3/1/2022 10.10* Form of 2019 Performance Stock Unit Award Agreement under the Ecovyst Inc. 2017 Omnibus Incentive Plan, as Amended and Restated 10-K 001-38221 10.1 3/1/2022 10.11* Form of 2020 Performance Stock Unit Award Agreement under the Ecovyst Inc. 2017 Omnibus Incentive Plan, as Amended and Restated 10-K 001-38221 10.11 3/1/2022 10.12* PQ Group Holdings Inc. Stock Incentive Plan S-1 333-218650 10.6 6/9/2017 10.13* Form of Nonqualified Stock Option Award Agreement under the PQ Group Holdings Inc. Stock Incentive Plan S-1 333-218650 10.7 6/9/2017 10.14* Form of Restricted Stock Agreement under the PQ Group Holdings Inc. Stock Incentive Plan S-1 333-218650 10.8 6/9/2017 10.15* Form of Director and Officer Indemnification Agreement S-1/A 333-218650 10.9 9/1/2017 10.16* Severance Agreement, dated September 25, 2017, by and between PQ Corporation and Joseph S. Koscinksi 10-K 001-38221 10.37 2/27/2020 10.17 Term Loan Credit Agreement, dated as of June 9, 2021 among CPQ Midco I Corporation, PQ Corporation, Ecovyst Catalyst Technologies LLC, Eco Services Operations Corp., Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the lenders from time to time party thereto, with Citibank, N.A., Credit Suisse Loan Funding LLC, BofA Securities, Inc., Deutsche Bank Securities Inc., Goldman Sachs Bank USA, KeyBanc Capital Markets Inc. and Truist Securities, Inc., as Joint Lead Arrangers and Joint Bookrunners 8-K 001-38221 10.1 6/11/2021 10.18 Third Amendment Agreement, dated as of June 9, 2021, to the ABL Credit Agreement, dated as of May 4, 2016, by and among PQ Corporation, CPQ Midco I Corporation, the Canadian Borrowers from time to time party thereto, the European Borrowers from time to time party thereto, the Lenders from time to time party thereto and Citibank, N.A., as Administrative Agent and Issuing Bank, with Citigroup Global Markets Inc., Credit Suisse Loan Funding LLC, Bank of America, N.A., Deutsche Bank Securities Inc., Goldman Sachs Bank USA, KeyBanc Capital Markets Inc. and Truist Securities, Inc., as Joint Lead Arrangers and Joint Bookrunners 8-K 001-38221 10.2 6/11/2021 10.19* Amendment to Form of Director and Officer Indemnification Agreement 10-Q 001-38221 10.3 8/9/2021 10.20* Form of Ecovyst Inc. Director and Officer Indemnification Agreement 10-Q 001-38221 10.4 8/9/2021 67 Incorporated by Reference Exhibit No. Exhibit Description Filed Herewith Form File No. Exhibit Filing Date 10.21* Form of 2021 Performance Stock Unit Award Agreement under the Ecovyst Inc. 2017 Omnibus Incentive Plan, as Amended and Restated 10-K 001-38221 10.38 3/1/2022 10.22 * Severance Agreement, dated December 16, 2022, between Ecovyst Catalyst Technologies LLC and Kurt J. Bitting 8-K 001-38221 10.1 12/16/2022 10.23* Severance Agreement, dated December 16, 2022, between Ecovyst Catalyst Technologies LLC and Michael Feehan 8-K 001-38221 10.2 12/16/2022 10.24* Amended and Restated Severance Agreement, dated December 16, 2022, between Ecovyst Catalyst Technologies LLC and Joseph S. Koscinski 8-K 001-38221 10.3 12/16/2022 10.25 First Amendment Agreement, dated February 9, 2023 to the Term Loan Credit Agreement, dated June 9, 2021, by and among Ecovyst Catalyst Technologies LLC , Ecovyst Midco II Inc, Eco Services Operations Corp and Credit Suisse AG 10-K 001-38221 10.27 2/28/2023 10.26 Fourth Amendment, dated February 17, 2023 to the ABL Credit Agreement, dated May 4, 2016 by and among Ecovyst Catalyst Technologies LLC, Ecovyst Catalyst Technologies UK Limited, Ecovyst Midco II Inc. and Citibank, N.A. 10-K 001-38221 10.28 2/28/2023 10.27* Letter of employment, dated July 19, 2022, between Ecoservices and George L. Vann 10-K 001-38221 10.3 2/28/2023 10.28* Letter of employment, dated November 28, 2022, between Ecovyst Catalyst Technologies LLC and Paul Whittleston 10-K 001-38221 10.31 2/28/2023 21.1 Subsidiaries of Ecovyst Inc. X 23.1 Consent of PricewaterhouseCoopers LLP related to the consolidated financial statements and financial statement schedule of Ecovyst Inc. as of December 31, 2023 and 2022 and for each of the three years in the period ended December 31, 2023 X 23.2 Consent of PricewaterhouseCoopers LLP related to the financial statements of Zeolyst International as of December 31, 2023 and 2022 and for each of the three years in the period ended December 31, 2023 X 31.1 Certification of Chief Executive Officer of Ecovyst Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 31.2 Certification of Chief Financial Officer of Ecovyst Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 32.1 Certification of Chief Executive Officer of Ecovyst Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 32.2 Certification of Chief Financial Officer of Ecovyst Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 97.1 Policy relating to Recovery of Erroneously Awarded Compensation X 68 Incorporated by Reference Exhibit No. Exhibit Description Filed Herewith Form File No. Exhibit Filing Date 101 The following financial statements from the Annual Report on Form 10-K of Ecovyst Inc. for the year ended December 31, 2023, formatted in Inline XBRL: (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags X 104 The cover page from the Annual Report on Form 10-K of Ecovyst Inc. for the year ended December 31, 2023, formatted in Inline XBRL X * Management contract or compensatory plan ITEM 16. FORM 10-K SUMMARY. None. 69 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ECOVYST INC. Date: February 29, 2024 By: /s/ MICHAEL FEEHAN Michael Feehan Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer) 70 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ KURT J. BITTING Chief Executive Officer and Director February 29, 2024 Kurt J. Bitting (Principal Executive Officer) /s/ MICHAEL FEEHAN Vice President and Chief Financial Officer February 29, 2024 Michael Feehan /s/ KEVIN M. FOGARTY Chairperson of the Board February 29, 2024 Kevin M. Fogarty /s/ DAVID A. BRADLEY Director February 29, 2024 David A. Bradley /s/ BRYAN K. BROWN Director February 29, 2024 Bryan K. Brown /s/ ANNA CATALANO Director February 29, 2024 Anna Catalano /s/ ROBERT COXON Director February 29, 2024 Robert Coxon /s/ KYLE VANN Director February 29, 2024 Kyle Vann /s/ SUSAN F. WARD Director February 29, 2024 Susan F. Ward 71 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ECOVYST INC. AND SUBSIDIARIES Audited Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) F- 2 Consolidated Statements of Income for the Years Ended December 31, 202 3 , 202 2 and 202 1 F- 5 Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 202 3 , 202 2 and 202 1 F- 6 Consolidated Balance Sheets as of December 31, 202 3 and 202 2 F- 7 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 202 3 , 202 2 and 202 1 F- 8 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 3 , 202 2 and 202 1 F- 9 Notes to Consolidated Financial Statements F- 11 Schedule I—Parent Company Financial Information F- 70 ZEOLYST INTERNATIONAL Audited Financial Statements Report of Independent Auditors F- 74 Statements of Operations and Accumulated Earnings for the Years Ended December 31, 202 3 , 202 2 and 202 1 F- 76 Balance Sheets as of December 31, 2023 and 2022 F- 77 Statements of Changes in Partners’ Capital for the Years Ended December 31, 202 3 , 202 2 and 202 1 F- 78 Statements of Cash Flows for the Years Ended December 31, 202 3 , 202 2 and 202 1 F- 79 Notes to the Financial Statements F- 80 F-1 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Ecovyst Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Ecovyst Inc. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of income, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and schedule I – parent company financial information as of December 31, 2023 and 2022 and for each of the three years in the period ended December 31, 2023 appearing on the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. F-2 Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Goodwill Impairment Assessment — Advanced Materials & Catalysts Reporting Unit As described in Notes 2 and 14 to the consolidated financial statements, goodwill associated with the Company’s Advanced Materials & Catalysts reporting unit was $77.9 million as of December 31, 2023. Management is required to test goodwill associated with each of its reporting units for impairment at least annually and whenever events or circumstances indicate that it is more likely than not that goodwill may be impaired. Management performs its annual goodwill impairment test as of October 1. Goodwill is tested for impairment at the reporting unit level. If the carrying value of a reporting unit exceeds its implied fair value, an impairment charge is recognized. Management determined the fair value of its reporting units using a split between a market approach and an income, or discounted cash flow, approach. In applying the market approach, management estimates reporting unit market approach fair value using publicly traded comparable company values and applies the selected market multiples to each reporting unit’s trailing twelve months adjusted EBITDA. Management estimates reporting unit income-based fair value using the discounted cash flow approach, which requires use of significant assumptions including revenue growth rates and discount rate. The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Advanced Materials & Catalysts reporting unit is a critical audit matter are (i) the significant judgment by management when determining the fair value of the Advanced Materials & Catalysts reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to market multiples, revenue growth rates, and discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. F-3 Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Advanced Materials & Catalysts reporting unit. These procedures also included, among others, (i) testing management’s process for determining the fair value of the reporting unit; (ii) evaluating the appropriateness of the market and income approaches; (iii) evaluating the reasonableness of the significant assumptions used by management related to market multiples, revenue growth rates, and discount rate; and (iv) testing the completeness and accuracy of the underlying data used in the market and income approaches. Evaluating management’s significant assumptions related to revenue growth rates involved evaluating whether the assumption was reasonable considering (i) the current and past performance of the Advanced Materials & Catalysts reporting unit; (ii) consistency with external market and industry data; and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the market and income approaches and (ii) the reasonableness of the market multiples and discount rate significant assumptions. /s/ PricewaterhouseCoopers LLP Philadelphia, Pennsylvania February 29, 2024 We have served as the Company’s auditor since 2015. F-4 ECOVYST INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per share amounts) Years ended December 31, 2023 2022 2021 Sales $ 691,118 $ 820,159 $ 611,201 Cost of goods sold 493,153 595,529 434,540 Gross profit 197,965 224,630 176,661 Selling, general and administrative expenses 79,215 85,334 97,781 Other operating expense, net 22,100 34,911 24,273 Operating income 96,650 104,385 54,607 Equity in net (income) from affiliated companies ( 30,624 ) ( 27,725 ) ( 27,737 ) Interest expense, net 44,730 37,217 36,990 Debt extinguishment costs — — 26,902 Other expense, net 605 158 4,511 Income before income taxes 81,939 94,735 13,941 Provision for income taxes 10,785 24,940 12,147 Net income from continuing operations 71,154 69,795 1,794 Net income (loss) from discontinued operations, net of tax — 3,902 ( 141,410 ) Net income (loss) 71,154 73,697 ( 139,616 ) Less: Net income attributable to the noncontrolling interest - discontinued operations — — 333 Net income (loss) attributable to Ecovyst Inc. $ 71,154 $ 73,697 $ ( 139,949 ) Income from continuing operations attributable to Ecovyst Inc. $ 71,154 $ 69,795 $ 1,794 Income (loss) from discontinued operations attributable to Ecovyst Inc. — 3,902 ( 141,743 ) Net income (loss) attributable to Ecovyst Inc. $ 71,154 $ 73,697 $ ( 139,949 ) Net income (loss) per share: Basic income per share—continuing operations $ 0.60 $ 0.52 $ 0.01 Diluted income per share—continuing operations $ 0.60 $ 0.52 $ 0.01 Basic income (loss) per share—discontinued operations $ — $ 0.03 $ ( 1.04 ) Diluted income (loss) per share—discontinued operations $ — $ 0.03 $ ( 1.03 ) Basic income (loss) per share $ 0.60 $ 0.55 $ ( 1.03 ) Diluted income (loss) per share $ 0.60 $ 0.55 $ ( 1.02 ) Weighted average shares outstanding: Basic 118,367,214 133,601,322 136,167,384 Diluted 119,487,709 135,088,172 137,708,931 See accompanying notes to consolidated financial statements. F-5 ECOVYST INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Years ended December 31, 2023 2022 2021 Net income (loss) $ 71,154 $ 73,697 $ ( 139,616 ) Other comprehensive income (loss), net of tax: Pension and postretirement benefits 1,120 ( 2,676 ) 9,530 Net gain (loss) from hedging activities ( 12,126 ) 24,382 2,914 Foreign currency translation 4,056 ( 9,922 ) ( 2,248 ) Total other comprehensive income (loss) ( 6,950 ) 11,784 10,196 Comprehensive income (loss) 64,204 85,481 ( 129,420 ) Less: Comprehensive income attributable to noncontrolling interests — — 333 Comprehensive income (loss) attributable to Ecovyst Inc. $ 64,204 $ 85,481 $ ( 129,753 ) See accompanying notes to consolidated financial statements. F-6 ECOVYST INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) December 31, 2023 December 31, 2022 ASSETS Cash and cash equivalents $ 88,365 $ 110,920 Accounts receivable, net 81,314 74,758 Inventories, net 45,115 44,362 Derivative assets 13,419 18,510 Prepaid and other current assets 17,774 19,154 Total current assets 245,987 267,704 Investments in affiliated companies 440,198 436,013 Property, plant and equipment, net 576,904 584,889 Goodwill 404,470 403,163 Other intangible assets, net 116,550 129,932 Right-of-use lease assets 24,281 28,265 Other long-term assets 29,361 34,587 Total assets $ 1,837,751 $ 1,884,553 LIABILITIES Current maturities of long-term debt $ 9,000 $ 9,000 Accounts payable 40,195 40,019 Operating lease liabilities—current 8,193 8,155 Accrued liabilities 61,693 72,229 Total current liabilities 119,081 129,403 Long-term debt, excluding current portion 858,946 865,870 Deferred income taxes 115,791 136,184 Operating lease liabilities—noncurrent 16,030 20,021 Other long-term liabilities 22,439 25,846 Total liabilities 1,132,287 1,177,324 Commitments and contingencies (Note 23) EQUITY Common stock ($ 0.01 par); authorized shares 450,000,000 ; issued shares 140,744,045 and 139,571,272 on December 31, 2023 and 2022, respectively; outstanding shares 116,116,895 and 122,186,238 on December 31, 2023 and 2022, respectively 1,407 1,396 Preferred stock ($ 0.01 par); authorized shares 50,000,000 ; no shares issued or outstanding on December 31, 2023 and 2022, respectively — — Additional paid-in capital 1,102,581 1,091,475 Accumulated deficit ( 170,856 ) ( 242,010 ) Treasury stock, at cost; shares 24,627,150 and 17,385,034 on December 31, 2023 and 2022, respectively ( 226,710 ) ( 149,624 ) Accumulated other comprehensive (loss) income ( 958 ) 5,992 Total equity 705,464 707,229 Total liabilities and equity $ 1,837,751 $ 1,884,553 See accompanying notes to consolidated financial statements. F-7 ECOVYST INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except share data) Shares of Common stock Common stock Additional paid-in capital Accum. deficit Shares of Treasury stock Treasury stock, at cost Accum. other comp. income (loss) Non-control ling interest Total Balance, December 31, 2020 137,102,143 $ 1,371 $ 1,477,859 $ ( 175,758 ) ( 783,586 ) $ ( 11,081 ) $ ( 15,265 ) $ 53 $ 1,277,179 Net (income) loss — — — ( 139,949 ) — — — 333 ( 139,616 ) Other comprehensive income — — — — — — 9,473 723 10,196 Tax withholdings on equity award vesting — — — — ( 98,627 ) ( 1,470 ) — — ( 1,470 ) Distributions to noncontrolling interests — — — — — — — ( 1,109 ) ( 1,109 ) Dividends paid on common stock ($ 3.20 per share) — — ( 435,593 ) — — — — — ( 435,593 ) Stock compensation expense — — 30,404 — — — — — 30,404 Shares issued under equity incentive plan, net of forfeitures 718,828 7 739 — — — — — 746 Balance, December 31, 2021 137,820,971 1,378 1,073,409 ( 315,707 ) ( 882,213 ) ( 12,551 ) ( 5,792 ) — 740,737 Net income — — — 73,697 — — — — 73,697 Other comprehensive income — — — — — — 11,784 — 11,784 Repurchases of common shares — — — — ( 16,470,763 ) ( 136,741 ) — — ( 136,741 ) Tax withholdings on equity award vesting — — — — ( 32,058 ) ( 332 ) — — ( 332 ) Stock compensation expense — — 17,469 — — — — — 17,469 Shares issued under equity incentive plan, net of forfeitures 1,750,301 18 597 — — — — — 615 Balance, December 31, 2022 139,571,272 1,396 1,091,475 ( 242,010 ) ( 17,385,034 ) ( 149,624 ) 5,992 — 707,229 Net income — — — 71,154 — — — — 71,154 Other comprehensive loss — — — — — — ( 6,950 ) — ( 6,950 ) Repurchases of common shares — — — — ( 7,541,494 ) ( 78,718 ) — — ( 78,718 ) Tax withholdings on equity award vesting — — — — ( 315,635 ) ( 3,372 ) — — ( 3,372 ) Excise tax on repurchases of common shares — — — — — ( 638 ) — — ( 638 ) Stock compensation expense — — 16,252 — — — — — 16,252 Shares issued under equity incentive plan, net of forfeitures 1,172,773 11 ( 5,146 ) — 615,013 5,642 — — 507 Balance, December 31, 2023 140,744,045 $ 1,407 $ 1,102,581 $ ( 170,856 ) ( 24,627,150 ) $ ( 226,710 ) $ ( 958 ) $ — $ 705,464 See accompanying notes to consolidated financial statements. F-8 ECOVYST INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years ended December 31, 2023 2022 2021 Cash flows from operating activities: Net income (loss) $ 71,154 $ 73,697 $ ( 139,616 ) Net (income) loss from discontinued operations — ( 3,902 ) 141,410 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 70,551 65,121 65,955 Amortization 14,047 14,042 13,786 Amortization of deferred financing costs and original issue discount 2,076 2,031 1,907 Debt extinguishment costs — — 21,166 Foreign currency exchange (gain) loss ( 589 ) 978 4,716 Deferred income tax (benefit) provision ( 17,072 ) 1,652 4,548 Net loss on asset disposals 4,137 3,594 5,666 Stock compensation 16,031 20,632 31,838 Equity in net (income) from affiliated companies ( 30,624 ) ( 27,725 ) ( 27,737 ) Dividends received from affiliated companies 28,000 35,000 35,000 Other, net 647 ( 2,660 ) ( 3,232 ) Working capital changes that provided (used) cash, excluding the effect of acquisitions and dispositions: Receivables ( 6,093 ) 5,503 ( 33,476 ) Inventories ( 1,399 ) 9,902 631 Prepaids and other current assets ( 985 ) 5 ( 7,827 ) Accounts payable 2,351 ( 10,127 ) 10,006 Accrued liabilities ( 14,635 ) ( 7,448 ) 12,597 Net cash provided by operating activities, continuing operations 137,597 180,295 137,338 Net cash provided by (used in) operating activities, discontinued operations — 6,311 ( 7,420 ) Net cash provided by operating activities 137,597 186,606 129,918 Cash flows from investing activities: Purchases of property, plant and equipment ( 65,335 ) ( 58,870 ) ( 60,045 ) Proceeds from business divestitures, net of cash — — 978,449 Payments for business divestiture, net of cash — ( 3,744 ) — Business combinations, net of cash acquired — ( 488 ) ( 42,639 ) Other, net — 81 ( 12 ) Net cash (used in) provided by investing activities, continuing operations ( 65,335 ) ( 63,021 ) 875,753 Net cash used in investing activities, discontinued operations — — ( 40,021 ) Net cash (used in) provided by investing activities ( 65,335 ) ( 63,021 ) 835,732 F-9 Years ended December 31, 2023 2022 2021 Cash flows from financing activities: Draw down of revolving credit facilities 14,500 — — Repayments of revolving credit facilities ( 14,500 ) — — Issuance of long-term debt, net of original issue discount and financing fees — — 897,750 Debt issuance costs — — ( 1,293 ) Repayments of long-term debt ( 9,000 ) ( 9,000 ) ( 1,430,863 ) Debt prepayment fees — — ( 8,481 ) Proceeds from financing obligation — — 16,005 Dividends paid to stockholders — — ( 435,593 ) Repurchases of common shares ( 78,717 ) ( 136,741 ) — Tax withholdings on equity award vesting ( 3,372 ) ( 332 ) ( 1,470 ) Repayments of financing obligation ( 2,847 ) ( 2,692 ) ( 1,435 ) Other, net 438 579 2,291 Net cash used in financing activities, continuing operations ( 93,498 ) ( 148,186 ) ( 963,089 ) Net cash used in financing activities, discontinued operations — — ( 1,144 ) Net cash used in financing activities ( 93,498 ) ( 148,186 ) ( 964,233 ) Effect of exchange rate changes on cash and cash equivalents ( 1,319 ) ( 5,368 ) 2,253 Net change in cash and cash equivalents ( 22,555 ) ( 29,969 ) 3,670 Cash and cash equivalents at beginning of period 110,920 140,889 137,219 Cash and cash equivalents at end of period $ 88,365 $ 110,920 $ 140,889 For supplemental cash flow disclosures, see Note 25. See accompanying notes to consolidated financial statements. F-10 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 1. Background and Basis of Presentation: Description of Business Ecovyst Inc. and subsidiaries (the “Company” or “Ecovyst”) is a leading integrated and innovative global provider of advanced materials, specialty catalysts and services. The Company supports customers globally through its strategically located network of manufacturing facilities. The Company believes that its products and services contribute to improving the sustainability of the environment. Basis of Presentation On December 14, 2020, the Company completed the sale of its Performance Materials business for $ 650,000 . The financial results of this business are presented as discontinued operations in the consolidated financial statements for the 2021 period presented. On August 1, 2021, the Company completed the sale of its Performance Chemicals business for $ 1,100,000 . The financial results of this business are presented as discontinued operations in the consolidated financial statements for the 2022 and 2021 periods presented. See Note 4 to these consolidated financial statements for further information on these transactions. The Company has two uniquely positioned specialty businesses: Ecoservices provides sulfuric acid recycling to the North American refining industry for the production of alkylate and provides high quality and high strength virgin sulfuric acid for industrial and mining applications; and Advanced Materials & Catalysts provides finished silica catalysts, catalyst supports and functionalized silicas necessary to produce high performing plastics and to enable sustainable chemistry, and through the Zeolyst Joint Venture, innovates and supplies zeolites used in catalysts that support the production of sustainable fuels, remove nitrogen oxides from diesel engine emissions and that 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 CODM evaluated the business. The Company’s regeneration services product group, which is a part of the Company’s Ecoservices segment, typically experiences seasonal fluctuations as a result of higher demand for gasoline products in the summer months and lower demand in the winter months. These demand fluctuations result in higher sales and working capital requirements in the second and third quarters. The notes to the consolidated financial statements, unless otherwise indicated, are on a continuing operations basis. F-11 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 2. Summary of Significant Accounting Policies: Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its controlled subsidiaries. Investments in affiliated companies are recorded at cost plus the Company’s equity in their undistributed earnings. All intercompany transactions have been eliminated. Foreign Currency Translation. All assets and liabilities of foreign subsidiaries and affiliated companies are translated to U.S. dollars using exchange rates in effect at the balance sheet date. Income and expense items are translated at average exchange rates during the year. Adjustments resulting from translation of the balance sheets and statements of income are included in stockholders’ equity as part of accumulated other comprehensive income (loss), and are included in earnings only upon the sale or liquidation of the underlying foreign subsidiary or affiliated company. Foreign currency transaction gains and losses are recognized in earnings based on differences between foreign currency exchange rates on the transaction date and on the settlement date. Adjustments resulting from translation of certain intercompany loans, which are not considered permanent and are denominated in foreign currencies, are included in other expense (income), net in the consolidated statements of income. The Company considers intercompany loans to be of a permanent or long-term nature if management expects and intends that the loans will not be repaid. For the years ended December 31, 2023, 2022 and 2021, all intercompany loan arrangements were determined to be non-permanent based on management’s intention as well as actual lending and repayment activity. Therefore, the foreign currency transaction gains or losses associated with the int ercompany loans were recorded in the consolidated statements of income for the years ended December 31, 2023, 2022 and 2021. Net foreign currency exchange (gains) and losses included in other expense (income), net were $( 589 ), $ 978 and $ 4,716 for the years ended December 31, 2023, 2022 and 2021 , respectively. The n et foreign currency (gains) and losses realized during these years were primarily driven by the non-permanent intercompany debt denominated in local currency and translated to U.S. dollars. Cash and Cash Equivalents. Cash and cash equivalents include highly liquid investments with original terms to maturity of 90 days or less from the time of purchase. Restricted Cash. Restricted cash, which is restricted as to withdrawal or usage, is classified separately from cash and cash equivalents on the Company’s consolidated balance sheets. The Company had no restricted cash balances as of December 31, 2023 and 2022. Accounts Receivable and Allowance for Credit Losses. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for credit losses is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable and is reviewed during each reporting period over their contractual life. The Company recognizes an allowance for credit losses based on historical collection experience, current regional economic and market conditions, the aging of accounts receivable and assessments of current creditworthiness of customers. Account balances are charged against the allowance when the Company believes it is probable that the associated receivables will not be recovered. If the financial condition of the Company’s customers were to deteriorate resulting in an impairment of their ability to make payments, additional allowances may be required. The Company does not have any off-balance sheet credit exposure related to its customers. The Company’s allowance for credit losses was not material as of December 31, 2023 and 2022. Inventories. Certain domestic inventories are stated at the lower of cost or market and valued using the last-in, first-out (“LIFO”) method. All other inventories are stated at the lower of cost or net realizable value and valued using the weighted average cost or first-in, first-out (“FIFO”) methods. Property, Plant and Equipment. Property, plant and equipment are carried at cost and include expenditures for new facilities, major renewals and betterments. The Company capitalizes the cost of furnace rebuilds as part of property, plant and equipment. Maintenance, repairs and minor renewals are charged to expense as incurred. The Company capitalizes certain internal costs associated with the implementation of purchased software. When property, plant and equipment is retired or otherwise disposed of, the net carrying amount is eliminated with any gain or loss on disposition recognized in earnings at that time. F-12 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Depreciation is provided on the straight-line method based on the estimated useful lives of the assets, which generally range from 15 to 33 years for buildings and improvements and 3 to 10 years for machinery and equipment. Leasehold improvements are depreciated using the straight-line method based on the shorter of the useful life of the improvement or remaining lease term. The Company capitalizes the interest cost associated with the development and construction of significant new plant and equipment and depreciates that amount over the lives of the related assets. Capitalized interest recorded during the years ended December 31, 2023, 2022 and 2021 was $ 1,964 , $ 1,442 and $ 1,235 , respectively. Lea ses . The Company has operating and finance lease agreements with remaining lease terms as of December 31, 2023 of up to 18 years, including leases of land, buildings, railcars, vehicles, manufacturing equipment and general office equipment. Some leases include options to terminate or extend for one or more years. These options are incorporated in the Compan y’s lease term when it is reasonably certain that the option will be exercised. Some leases include options to purchase, which the Company assesses under the guidance to determine if these leases should be classified as finance lease agreements. When the Company enters into an arrangement, at inception, the Company determines if the arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. Some of the Company’s lease arrangements contain lease components (e.g. minimum rent payments) and non-lease components (e.g. maintenance). The Company accounts for the lease and non-lease components separately based on the estimated standalone price of each component. Certain of the Company’s lease agreements include rental payments that are adjusted periodically for an index or rate and these are initially measured using the index or rate in effect at the commencement date. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company recognizes a right-of-use lease asset and lease liability at the lease commencement date based on the present value of the remaining lease payments over the lease term. The Company assesses its leasing arrangements to determine the rate implicit in the lease arrangement. Historically, the Company’s leasing arrangements do not contain the information necessary to determine the rate implicit in the lease. As such, the Company utilizes its incremental borrowing rate over the relevant lease term, 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. The incremental borrowing rate is determined at the lease commencement date and is developed utilizing a readily available market interest rate curve adjusted for the Company’s credit quality. The Company has elected to use a portfolio approach to apply its incremental borrowing rate to individual leases based on lease term and geographic jurisdiction. Short-term leases, which have an initial term of twelve months or less, are not recorded on the Company’s balance sheet. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense for financing leases is bifurcated into two components, with the amortization expense component of the right-of-use asset recognized on a straight-line basis and the interest expense component recognized using the effective interest method over the lease term. The amortization expense component of the right-of-use lease asset is included in cost of goods sold and in selling, general and administrative expenses and the interest expense component is included in interest expense, net on the consolidated statements of income. Spare Parts. Spare parts are maintained by the Company’s facilities to keep machinery and equipment in working order. Spare parts are capitalized and included in other long-term assets. Spare parts are measured at cost and are not depreciated or expensed until utilized; however, reserves may be provided on aged spare parts. When a spare part is utilized as part of an improvement to property, plant and equipment, the carrying value is depreciated over the applicable life once placed in service. Otherwise, the spare part is expensed and charged as a cost of production when utilized. Investments in Affiliated Companies. Investments in affiliated companies are accounted for using the equity method of accounting if the investment provides the Company with the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if the Company’s ownership interest in the voting stock of the investee ranges between 20% and 50%, although other factors, such as representation on the investee’s board of directors and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investments in equity-method investees are F-13 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) recorded in the consolidated balance sheets as investments in affiliated companies, and the Company’s share of the investees’ earnings or losses, together with other than temporary impairments in value, is recorded as equity in net income from affiliated companies in the consolidated statements of income. Any differences between the Company’s cost of an equity method investment and the underlying equity in the net assets of the investment, such as fair value step-ups resulting from acquisitions, are accounted for according to their nature and impact the amounts recognized as equity in net income from affiliated companies in the consolidated statements of income. The Company evaluates all distributions received from its equity method investments using the nature of distribution approach. Under this approach, the Company evaluates the nature of activities of the investee that generated the distribution. The distributions received are either classified as a return on investment, which is presented as a component of operating activities on the Company’s consolidated statements of cash flows, or as a return of investment, which is presented as a component of investing activities on the Company’s consolidated statements of cash flows. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period. Goodwill and Intangible Assets. Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. The Company is required to test goodwill associated with each of its reporting units for impairment at least annually and whenever events or circumstances indicate that it is more likely than not that goodwill may be impaired. The Company performs its annual goodwill impairment test as of October 1. Goodwill is tested for impairment at the reporting unit level. In performing tests for goodwill impairment, the Company is able to use its discretion to first perform an optional qualitative assessment about the likelihood of the carrying value of a reporting unit exceeding its fair value. The qualitative assessment need not be applied to all reporting units. If the Company determines 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, the Company will 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 2023 and 2022, the Company bypassed the option to perform the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test for each of its reporting units. The quantitative test identifies both the potential existence of impairment and the amount of impairment loss. In applying the quantitative test, the Company calculates and compares the reporting unit’s estimated fair value to its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, goodwill is not impaired. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value. An impairment loss cannot exceed the carrying value of goodwill assigned to a reporting unit and the loss establishes a new basis in the goodwill. Subsequent reversal of an impairment loss is not permitted. For intangible assets other than goodwill, definite-lived intangible assets are amortized over their respective estimated useful lives. Intangible assets with indefinite lives are not amortized, but rather are tested for impairment at least annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of the intangible asset below its carrying amount. The Company tests its indefinite-lived intangible assets as of October 1 of each year in conjunction with its annual goodwill impairment test. Impairment Assessment of Long-Lived Assets. The Company performs an impairment review of property, plant and equipment and definite-lived intangible assets when facts and circumstances indicate that the carrying value of an asset or asset group may not be recoverable from its undiscounted future cash flows. When evaluating long-lived assets for impairment, if the carrying amount of an asset or asset group is found not to be recoverable, a potential impairment loss may be recognized. An impairment loss is measured by comparing the carrying amount of the asset or asset group to its fair value. Fair value is determined using quoted market prices when available, or other techniques including discounted cash flows. The Company’s estimates of future cash flows involve assumptions concerning future operating performance, economic conditions and technological changes that may affect the future useful lives of the assets. F-14 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Derivative Financial Instruments. The Company utilizes certain derivative financial instruments to enhance its ability to manage risk, including exposure to interest rate fluctuations that exist as part of ongoing business operations. Derivative instruments are entered into for periods consistent with the related underlying exposures and do not constitute positions independent of those exposures. All derivatives designated as hedges are recognized on the consolidated balance sheets at fair value. The Company may designate a derivative as a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge), a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge), a foreign currency fair-value or cash-flow hedge (foreign currency hedge), or a hedge of a net investment in a foreign operation (net investment hedge). The Company’s hedging strategies include derivatives designated as cash flow hedges and net investment hedges. Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash flow hedge are recorded in other comprehensive income and subsequently reclassified into earnings in the same period(s) in which the hedged transaction affects earnings. Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a hedge of a net investment in a foreign operation are recorded in the foreign currency translation adjustment account within accumulated other comprehensive income, where the associated gains and losses will remain until such time that the hedged net investment (foreign subsidiary) is sold or liquidated. Changes in the fair value of a derivative that is not designated or does not qualify as a hedge are recorded in the consolidated statements of income. Cash flows from derivative instruments are reported in the same cash flow category as the cash flows from the items being hedged. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. The Company also formally assesses whether each hedging relationship is highly effective in achieving offsetting changes in fair values or cash flows of the hedged item during the period, both at the inception of the hedge and on an ongoing basis. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly-effective hedge, hedge accounting is discontinued with respect to that derivative prospectively. Fair Value Measurements. The Company measures fair value using the guidelines under U.S. generally accepted accounting principles (“GAAP”). An asset’s fair value is defined as the price at which the asset could be exchanged in a current transaction between market participants. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a market participant, not the amount that would be paid to settle the liability with the creditor. The carrying values of cash, accounts receivable, accounts payable and accrued liabilities approximate fair value due to the short-term nature of these items. See Note 6 to these consolidated financial statements for further information regarding the application of fair value measurements and Note 16 regarding the fair value of debt. Treasury Stock. The Company records repurchases of its common stock for treasury at cost. Upon the reissuance of the Company’s common stock from treasury, differences between the proceeds from reissuance and the average cost of the treasury stock are credited or charged to capital in excess of par value to the extent of prior credits related to the reissuance of treasury stock. If no such credits exist, the differences are charged to retained earnings. See Note 7 of these consolidated financial statements for further information regarding the Company’s treasury stock repurchases. Revenue Recognition. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under its agreements, the Company performs the following steps: (i) identification of the contract with the customer; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company identifies a contract when an agreement with a customer creates legally enforceable rights and obligations, which occurs when a contract has been approved by both parties, the parties are committed to perform their respective obligations, each party’s rights and payment terms are clearly identified, commercial substance exists and it is probable that the Company will collect the consideration to which it is entitled. F-15 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The Company may offer rebates to customers who have reached a specified volume of optional purchases. The Company recognizes rebates given to customers as a reduction of revenue based on an allocation of the cost of honoring rebates earned and claimed to each of the underlying revenue transactions that result in progress by the customer toward earning the rebate. Rebates are recognized at the time revenue is recorded. The Company measures the rebate obligation based on the estimated amount of sales that will result in a rebate at the adjusted sales price per the respective sales agreement. Shipping and Handling. Amounts billed to a customer in a sale transaction related to shipping and handling, if any, represent revenues earned for the goods provided and are classified as revenue. Costs related to shipping and handling of products shipped to customers are classified as cost of goods sold. See Note 5 of these consolidated financial statements for disclosures regarding the recognition of revenue for shipping and handling costs that are billed to customers. Research and Development. Research and development costs of $ 7,797 , $ 7,232 and $ 7,499 for the years ended December 31, 2023, 2022 and 2021, respectively, were expensed as incurred and reported in selling, general and administrative expenses in the consolidated statements of income. Income Taxes. The Company operates within multiple taxing jurisdictions and is subject to tax filing requirements and potential audits within these jurisdictions. The Company uses the asset and liability method in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, using statutory tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. The Company evaluates its deferred tax assets each period to ensure that estimated future taxable income will be sufficient in character (e.g., capital gain versus ordinary income treatment), amount and timing, to result in their realizability. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets, unless it is more likely than not that those assets will be realized. Generally, APB 23 of ASC Topic 740, Income Taxes (“ASC 740”), provides guidance with respect to establishing deferred income taxes on earnings from foreign subsidiaries, to the extent that these earnings are considered to be available for repatriation. Further, ASC 740-30 requires that deferred taxes be established with respect to the earnings of a foreign subsidiary, unless existing tax law provides a means by which the investment in a subsidiary can be recovered tax-free. The Company has determined that it is able to repatriate the non-permanently reinvested earnings of its foreign subsidiaries in a tax-free manner. As such, the Company is able to assert, for purposes of ASC 740-30, that no deferred income taxes are needed with respect to earnings from foreign subsidiaries. The Company recognizes a financial statement benefit for positions taken for tax return purposes when it will be more likely than not (i.e. greater than 50%) that the positions will be sustained upon tax examination, based solely on the technical merits of the tax positions. Otherwise, no tax benefit is recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. Tax examinations are often complex as tax authorities may disagree with the treatment of items reported by the Company and may require several years to resolve. These accrued liabilities represent a provision for taxes that are reasonably expected to be incurred on the basis of available information but which are not certain. Environmental Expenditures. Environmental expenditures that pertain to current operations or to future revenues are expensed or capitalized consistent with the Company’s capitalization policy for property, plant and equipment. Expenditures that result from the remediation of an existing condition caused by past operations and that do not contribute to current or future revenues are expensed. Liabilities are recognized for remedial activities when the remediation is probable and the cost can be reasonably estimated. Recoveries of expenditures for environmental remediation are recognized as assets only when recovery is deemed probable. See Note 23 to these consolidated financial statements for further information regarding commitments and contingencies. Deferred Financing Costs. Financing costs incurred in connection with the issuance of long-term debt are deferred and presented as a direct reduction from the related debt instruments on the Company’s consolidated balance sheets. Deferred financing costs are amortized as interest expense using the effective interest method over the respective terms of the associated debt instruments. F-16 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Stock-Based Compensation. The Company applies the fair value based method to account for stock options, restricted stock awards, restricted stock units and performance stock units issued in connection with its equity incentive plans. Stock-based compensation expense is recognized on a straight-line basis over the vesting periods of the respective awards, and the Company accounts for forfeitures of equity incentive awards as they occur. In connection with the vesting of restricted stock awards, restricted stock units and performance stock units, shares of common stock may be delivered to the Company by employees to satisfy withholding tax obligations at the instruction of the employee award holders. These transactions when they occur are accounted for as stock repurchases by the Company, with the shares returned to treasury stock at a cost representing the payment by the Company of the tax obligations on behalf of the employees in lieu of shares for the vesting event. See Note 21 to these consolidated financial statements regarding compensation expense associated with the Company’s equity incentive awards. Pensions and Postretirement Benefits. The Company sponsors two funded defined benefit pension plans that cover certain employees. Benefits for the plans are generally based on average final pay and years of service. The Company’s funding policy is to fund the minimum required contributions consistent with statutory requirements based on actuarial computations utilizing the projected unit credit method of calculation. The pension plans’ assets include equity and fixed income securities. Certain assumptions are made regarding the occurrence of future events affecting pension costs, such as mortality, withdrawal, disa blement and retirement, changes in compensation and benefits, and discount rates to reflect the time value of money. The major elements in determining pension income and expense are pension liability discount rates and the expected return on plan assets. The Company references rates of return on high quality, fixed income investments when estimating the discount rate, and the expected period over which payments will be made based upon historical experience. The long-term rate of return used to calculate the expected return on plan assets is the average rate of return estimated to be earned on invested funds for providing pension benefits. In addition to pension benefits, the Company provides certain health care benefits for employees who meet age, participation and length of service requirements at retirement. The Company uses explicit assumptions using the best estimates available of the plan’s future experience. Principal actuarial assumptions include: discount rates, present value factors, retirement age, participation rates, mortality rates, cost trend rates, Medicare reimbursement rates and per capita claims cost by age. Current interest rates as of the measurement date are used for discount rates in present value calculations. The Company also has defined contribution plans covering domestic employees of the Company and certain subsidiaries. Contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company and legal counsel evaluate the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a loss has been incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed, including the approximate term, how the guarantee arose, and the events or circumstances that would require the guarantor to perform under the guarantee. Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-17 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Correction of Errors. Correction of errors have been made to the historical presentation of the consolidated financial statements and the notes accompanying the consolidated financial statements. During the preparation of the condensed consolidated financial statements for the period ended June 30, 2023, the Company identified a presentation error in the components of accumulated other comprehensive income (loss) that originated in the year ended December 31, 2021 and remained uncorrected through the quarter ended March 31, 2023. As a result, the presentation of accumulated other comprehensive income (loss) in Note 7 was corrected by revising the opening balances as follows: Defined benefit and other postretirement plans Net gain (loss) from hedging activities Foreign currency translation As reported, December 31, 2021 $ 14,808 $ 2,254 $ ( 22,854 ) Correction to opening balances ( 12,640 ) ( 1,964 ) 14,604 Revised, December 31, 2021 $ 2,168 $ 290 $ ( 8,250 ) As reported, December 31, 2022 $ 12,132 $ 26,636 $ ( 32,776 ) Correction to opening balances ( 12,640 ) ( 1,964 ) 14,604 Revised, December 31, 2022 $ ( 508 ) $ 24,672 $ ( 18,172 ) This classification error within accumulated other comprehensive income (loss) did not impact total accumulated other comprehensive income (loss) for the periods included in these consolidated financial statements. Additionally, there was no impact on the consolidated statements of income and other comprehensive income (loss), consolidated balance sheets and consolidated statements of cash flows for the periods included in these consolidated financial statements. The Company assessed the materiality of this presentation error and concluded it was not material to the Company’s previously issued financial statements. Net income for the year ended December 31, 2023 increased by $ 1,390 from adjustments for the Company’s interest rate cap agreements related to prior year interest expense amortization, $ 840 from adjustments related to prior year sales rebate reserves and $ 2,776 from adjustments for the Company’s equity in net income of affiliated companies related to revised Zeolyst International historical results offset by $ 1,301 from other adjustments. The $ 3,705 total net impact of these adjustment was not material to the consolidated financial statements for any prior quarterly or annual periods or the current annual period. F-18 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 3. New Accounting Standards: Accounting Standards Not Yet Adopted In December 2023, the Financial Accounting Standards Board (“FASB”) issued guidance to improve disclosures related to incomes taxes. This new guidance requires public business entities to disaggregate information on the effective tax rate reconciliation and income taxes paid to provide greater transparency. Public business entities will be required to provide additional information in specified categories related to effective tax rate reconciliation in tabular form and provide income taxes paid by jurisdictions, with further disaggregation needed if amounts exceed 5% of the total. The new guidance is effective for fiscal years beginning after December 15, 2024. The Company will adopt the new guidance effective January 1, 2025 as required. In November 2023, the FASB issued guidance to improve the disclosures related to public business entities reportable segments. This new guidance requires entities to provide information regarding significant segment expenses, especially those segment expenses that are regularly reported to the Company’s chief operating decision maker (the Company’s Chief Executive Officer), or CODM. The guidance also require public entities to disclose the nature, type and amounts of other segment items by reportable segment. Public business entities will also have to report all annual disclosures about segments profits or losses that are required by ASC 280 on an interim basis, including the significant segment expenses and other segment items. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company will adopt the new guidance effective January 1, 2024 as required. In October 2023, the FASB issued guidance to amend either presentation or disclosure requirements related to fourteen subtopics in the FASB Accounting Standards Codification, that are currently in the SEC Regulation S-X or Regulation S-K. The new guidance was issued in response to the SEC’s ruling on disclosure simplification. For entities subject to existing SEC disclosure requirements, the effective date of each amendment of the topics will be the date that the SEC removes the related disclosure from Regulation S-X or Regulation S-K. The guidance must be applied prospectively, with no early adoption permitted for entities subject to those existing SEC disclosures. The Company is currently evaluating the impact of the new guidance as it pertains to the fourteen subtopics that would impact the business and will apply prospectively once in effect. In August 2023, the FASB issued guidance for entities that meet the definition of a joint venture or a corporate joint venture, to adopt a new basis of accounting upon the formation of the joint venture. The new guidance requires the initial measurement of contributed net assets and liabilities at fair value on the formation date, recognition of goodwill for the difference between the fair value of the joint venture’s equity and net assets, and disclosures about the nature and financial impact of the transaction. The new guidance requires prospective application and is effective for all joint ventures that are formed on or after January 1, 2025, with early adoption permitted. Joint ventures that formed before January 1, 2025 may elect to retrospectively apply the new guidance. The Company will apply the guidance to any new joint ventures formed after the effective date. Accounting Standards Recently Adopted In October 2021, the FASB issued guidance that requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with revenue recognition guidance. Under current GAAP, contract assets and contract liabilities acquired in a business combination are recorded by the acquirer at fair value. The new guidance creates an exception to the general recognition and measurement principles related to business combinations, and is expected to result in the acquirer recognizing contract assets and liabilities at the same amounts recorded by the acquiree. The new guidance is effective for business combinations occurring during fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company adopted the new guidance effective January 1, 2023 as required, and will apply the guidance prospectively to business combinations that occur after the adoption date. F-19 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) In March 2020 and January 2021, the FASB issued guidance to address certain accounting consequences from the anticipated transition from the use of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The new guidance contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and may be elected over time as reference rate reform activities occur. The time period through which the practical expedients provided in the guidance is available was set to expire on December 31, 2022, but was extended through December 31, 2024 by the FASB in December 2022. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index of the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. In February 2023, the Company amended the 2021 Term Loan Facility (as defined below), the ABL Facility (as defined below) and all existing interest rate caps agreements to replace LIBOR with a secured overnight financing rate (“SOFR”) as the benchmark interest rate. See Note 16 and Note 18 to these consolidated financial statements for further information. The Company utilized the practical expedients under the guidance with respect to the transition of its debt facilities and interest rate hedging arrangements to SOFR, with no impact to its consolidated financial statements. 4. Divestitures: Performance Materials On December 14, 2020, the Company completed the sale of its Performance Materials business to Potters Buyer, LLC (the “Purchaser”), an affiliate of The Jordan Company, L.P., for a purchase price of $ 650,000 . The net cash proceeds to the Company from the sale were $ 624,256 after certain customary adjustments for indebtedness, working capital and cash at the closing of the transaction. The Company classified the proceeds within net cash provided by (used in) investing activities – continuing operations in the consolidated statements of cash flows and used the net proceeds from the sale as well as cash on hand to pay down debt and issue a special cash dividend of $ 1.80 per share to stockholders. During the year ended December 31, 2021 , the Company incurred transaction costs of $ 2,054 and stock-based compensation expense of $ 1,970 , and an associated tax benefit of $ 988 related to the Performance Materials divestiture, as well as a provision to return benefit of $ 5,429 related to the filing of the 2020 tax returns filed in the fourth quarter of 2021, which is included in loss from discontinued operations, net of tax. Upon the close of the transaction, the Company entered into a Transition Services Agreement with the Purchaser pursuant to which the Purchaser was receiving certain services to provide for the orderly transition of various functions and processes after the closing of the transaction. The services under the Transition Services Agreement include information technology, accounting, tax, financial services, human resources, facilities, and other administrative support services. These services were provided at cost for a period of nine months following the close of the transaction. The Company billed $ 3,314 under the Transition Services Agreement to the Purchaser during the year ended December 31, 2021. Those billings are included in selling, general and administrative expenses on the consolidated financial statements. Additionally, in connection with the transaction, the Company entered into various supply agreements with the Purchaser. Cash flows associated with these transition services and supply agreements were not material to the Company’s results of operations. F-20 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Performance Chemicals On February 28, 2021, the Company entered into a definitive agreement to sell its Performance Chemicals business to Sparta Aggregator L.P. (the “Buyer”), a partnership established by Koch Minerals & Trading, LLC and Cerberus Capital Management, L.P. for a purchase price of $ 1,100,000 subject to certain adjustments including indebtedness, cash, working capital and transaction expenses. The Company completed the sale of its Performance Chemicals business effective on August 1, 2021. The net cash proceeds to the Company from the sale were $ 978,449 after certain customary adjustments for indebtedness, working capital and cash at the closing of the transaction. The Company classified the proceeds within net cash provided by (used in) investing activities – continuing operations in the consolidated statements of cash flows and used the net proceeds from the sale as well as cash on hand to pay down debt and issue a special cash dividend of $ 3.20 per share to stockholders. Prior to the closing of the transaction, the di sposal group was tested for recoverability as of each of the balance sheet dates since meeting the discontinued operations criteria, and the Company recognized an estimated disposal loss of $ 109,584 during the year ended December 31, 2021, which was included in net loss from discontinued operati ons, net of tax on the consolidated statements of income for the respective periods. During the year ended December 31, 2021, the Company incurred transaction costs of $ 35,402 and stock-based compensation expense of $ 5,691 in connection with the sale, which is included in loss from discontinued operations, net of tax. The final pre-tax loss on the sale of the Performance Chemicals business was $ 150,230 , which is included in net (loss) income from discontinued operations, net of tax in the Company’s consolidated statements of income for the year ended December 31, 2021 . The following is a reconciliation of the loss recorded on the sale: Net proceeds received from the sale of the Performance Chemicals business $ 978,449 Transaction costs ( 35,402 ) Net assets derecognized ( 1,093,277 ) Loss on sale of the Performance Chemicals business $ ( 150,230 ) In connection with the sale of the Performance Chemicals business and the related loss, as noted above, the Company has recognized a tax benefit of $ 37,255 within net loss from discontinued operations, net of tax on the consolidated statement of income for the year ended December 31, 2021. In March 2022, the Company made a payment to the buyer for $ 3,744 , representing the final adjustments to the sale price. The Company classified the payment within net cash used in investing activities – continuing operations in the consolidated statements of cash flows. During the year ended December 31, 2022, the Company recognized $ 3,902 of net income from discontinued operations, net of tax, related to the sale of the Performance Chemicals business for an income tax benefit upon the finalization of the Company’s U.S. income tax returns, partially offset by a tax indemnity claim resulting from the transaction. F-21 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The following table summarizes the results of discontinued operations related to Performance Chemicals for the periods presented: Years ended December 31, 2022 2021 Sales $ — $ 389,870 Cost of goods sold — 284,220 Selling, general and administrative expenses — 29,856 Goodwill impairment charge — 75,080 Other operating expense, net (1) 2,409 14,765 Loss on sale of the Performance Chemicals business — 150,230 Operating loss ( 2,409 ) ( 164,281 ) Equity in net income from affiliated companies — ( 111 ) Interest expense, net (2) — 10,730 Other income, net — ( 6,210 ) Loss from discontinued operations before income tax ( 2,409 ) ( 168,690 ) Benefit for income taxes ( 6,311 ) ( 24,886 ) Loss from discontinued operations, net of tax $ 3,902 $ ( 143,804 ) (1) The Company reclassified transaction costs that were previously recorded to this line item and included those charges in the line item Loss on sale of the Performance Chemicals business during the year ended December 31, 2021 . (2) Upon the close of the transaction, the Company used a portion of the net proceeds to repay a portion of its outstanding debt amounting to $ 526,363 . Refer to Note 16 for additional details on the repayment of outstanding debt. Prior to the Company’s debt refinancing in June 2021, the Company’s outstanding term loan facilities had required refinancing of debt with repayment provisions. As a result, interest expense has been allocated to discontinued operations on the basis of the Company’s total repayment of $ 526,363 . Net income attributable to the noncontrolling interest related to the Performance Chemicals business, net of tax was $ 333 for the year ended December 31, 2021. Net loss attributable to Ecovyst Inc., related to the Performance Chemicals business, net of tax was $( 144,137 ) for the year ended December 31, 2021. Financing Obligation In connection with the divestiture of the Performance Chemicals business, the Company entered into a five-year contract manufacturing agreement effective on August 2, 2021 with PQ Silicas UK Ltd., a subsidiary of the Buyer, related to a facility in Warrington, United Kingdom. Pursuant to this agreement, the Buyer will manufacture and sell advanced silica finished good products to the Company, which are finished good products sold within the Company’s Advanced Materials & Catalysts segment. Additionally, certain machinery, equipment, and other tangible personal property assets identified in the Agreement (“Catalyst Production Assets”) owned by the Buyer will be used exclusively in the manufacture of advanced silica products for the Company. The Company did not meet the requirements for a sale-leaseback transaction as described in Accounting Standards Codification 842-40, Leases - Sale-Leaseback Transactions. Under the failed sale-leaseback accounting model, the Company is deemed under GAAP to still own the Catalyst Production Assets, which the Company must continue to reflect in its consolidated balance sheet and depreciate over the F-22 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) assets’ remaining useful lives. For the year ended December 31, 2021 , the Company recorded a financing obligation of £ 11,648 (equivalent $ 16,005 ). The table below presents the financing obligation assets and liabilities recognized on the consolidated balance sheet as of December 31, 2023 and 2022: Classification December 31, 2023 December 31, 2022 Assets Financing obligation Property, plant and equipment, net $ 19,878 $ 20,084 Total $ 19,878 $ 20,084 Liabilities Current: Financing obligation Accrued liabilities $ 2,999 $ 2,770 Noncurrent: Financing obligation Other long-term liabilities 4,927 7,532 Total $ 7,926 $ 10,302 Based on the estimated fair market value of the Catalyst Production Assets, the failed sale-leaseback accounting treatment resulted in an allocation of $ 16,005 of the cash proceeds from the sale to cash flows from financing activities in the consolidated statement of cash flows for the year ended December 31, 2021, due to the requirement to treat this portion of the proceeds as though it were the result of a financing obligation. The agreement has an initial term of five years, with an option to renew, as well as an “Option Bill of Sale” which provides for the transfer from the Buyer to the Company of the Catalyst Production Assets upon the Company’s exercise of a one-dollar purchase option. Payments made to the Buyer under the contact manufacturing agreement were $ 8,416 , $ 7,872 and $ 3,395 for the years ended December 31, 2023, 2022 and 2021, respectively . Included in these payments were $ 2,847 , $ 2,692 and $ 1,435 of principal on the financing obligation for the years ended December 31, 2023, 2022 and 2021, respectively, and $ 266 , $ 336 and $ 185 of interest on the financing obligation for the years ended December 31, 2023 , 2022 and 2021 , respectively. Principal payments are included in financing activities and interest payments are included in operating activities on the Company’s consolidated statement of cash flows. The remaining lease term is 2.6 years with a weighted average discount rate of 2.86 % as of December 31, 2023. F-23 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Maturities of the financing obligation as of December 31, 2023 are as follows: Year Finance Obligation 2024 $ 3,186 2025 3,186 2026 1,860 2027 — 2028 — Thereafter — Total lease payments 8,232 Less: Interest 306 Total lease liabilities (1) $ 7,926 (1) Refer to the table above regarding the Company’s classification of financing obligation in the Company’s consolidated balance sheet as of December 31, 2023. In addition to the contract manufacturing agreement noted above, the Company also entered into certain supply agreements with the Buyer, as well as a Transition Services Agreement, pursuant to which the Buyer was receiving and performing certain services to provide for the orderly transition of various functions and processes after the closing of the transaction. The services under the Transition Services Agreement include information technology, accounting, tax, financial services, human resources, facilities, and other administrative support services. These services were provided for a period of six months, which ended in January 2022. Billings under the Transition Services Agreement to the Buyer during the years ended December 31, 2022 and 2021 were immaterial. T hose billings are included in selling, general and administrative expenses on the consolidated financial statements for the years ended December 31, 2022 and 2021 . F-24 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 5. Revenue from Contracts with Customers: Revenue Recognition Model As described in Note 2, the Company applies the five-step revenue recognition model to each contract with its customers. Evidence of a contract between the Company and its customers may take the form of a master service agreement (“MSA”), a MSA in combination with an underlying purchase order, a combination of a pricing quote with an underlying purchase order or an individual purchase order received from a customer. The Company and certain of its customers enter into MSAs that establish the terms, including prices, under which orders to purchase goods may be placed. In cases where the MSA contains a distinct order for goods or contains an enforceable minimum quantity to be purchased by the customer, the Company considers the MSA to be evidence of a contract between the Company and its customer as the MSA creates enforceable rights and obligations. In cases where the MSA does not contain a distinct order for goods, the Company’s contract with a customer is the purchase order issued under the MSA. Customers of the Company may also negotiate orders via pricing quotes, which typically detail product pricing, delivery terms and payment information. When a customer procures goods under this method, the Company considers the combination of the pricing quote and the purchase order to create enforceable rights and obligations. Absent either a MSA or pricing quote, the Company considers an individual purchase order remitted by a customer to create enforceable rights and obligations. The Company identifies a performance obligation in a contract for each promised good that is separately identifiable from other promises in the contract and for which the customer can benefit from the good. The majority of the Company’s contracts have a single performance obligation, which is the promise to transfer individual goods to the customer. Single performance obligations are satisfied according to the shipping terms noted within the MSA or purchase order. The Company has certain contracts that include multiple performance obligations under which the purchase price for each distinct performance obligation is defined in the contract. These distinct performance obligations may include stand-ready provisions, which are arrangements to provide a customer assurance that they will have access to output from the Company’s manufacturing facilities, or monthly reservations of capacity fees. The Company considers stand-ready provisions and reservation of capacity fees to be performance obligations satisfied over time. Revenues related to stand-ready provisions and reservation of capacity fees are recognized on a ratable basis throughout the contract term and billed to the customer on a monthly basis. Revenue from product sales are recorded at the sales price, which includes estimates of variable consideration for which reserves are established and which result from discounts, returns or other allowances that are offered within contracts between the Company and its customers. The Company recognizes revenues when performance obligations under the terms of a contract with its customer are satisfied, which generally occurs at a point in time by transferring control of a product to the customer. The Company determines the point in time when a customer obtains control of a product and the Company satisfies the performance obligation by considering factors including when the Company has a right to payment for the product, the customer has legal title to the product, the Company has transferred possession of the product, the customer has assumed the risks and rewards of ownership of the product and the customer has accepted the product. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The Company does not have any significant payment terms as payment is received at, or shortly after, the point of sale. F-25 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Ecoservices Contracts between the Company’s Ecoservices segment and its customers are typically evidenced by entering into a MSA which generally has a term in excess of one year. Though each MSA is unique, the terms may include performance obligations such as stand-ready provisions and minimum purchase requirements. MSAs within the Ecoservices segment may contain raw material pricing adjustments which are typically based on a commodity index or Ecoservices’ cost to acquire the commodity. The Company’s exposure to fluctuations in raw material prices is limited, as the majority of pass-through contract provisions reset based on fluctuations in the underlying raw material price. These raw material pass-through provisions reset on a periodic basis and prospectively adjust the raw material cost component of the goods sold to the customer. The Company accounts for the raw material costs on a prospective basis, as the price changes affect the future consideration of the sale of goods. Stand-ready provisions within these contracts are billed on a monthly basis, as the performance obligation resets on a monthly basis and does not carry-over to the following month. Certain of the Company’s Ecoservices MSAs contain minimum purchase requirements that expire within the calendar year. The Company reviews each contract with minimum purchase requirements to determine if the customer will meet the provisions within the current calendar year. During the years ended December 31, 2023, 2022 and 2021, there have been no material issues in which Ecoservices customers failed to meet their contractual obligations. Advanced Materials & Catalysts The Company’s Advanced Materials & Catalysts segment sells customized products to its customers through its Advanced Silicas product group. These customized products are reformulations of existing Advanced Materials & Catalysts products, tailored to meet individual customer specifications. Prior to entering into an arrangement, the Company will allow a customer to obtain a sample of goods to ensure that it meets their needs. The customer will enter into a long-term supply arrangement that outlines the specification of the products to be sold and contains terms and conditions under which purchase orders are issued. These supply arrangements typically have a duration from one to ten years . Although the duration of these supply arrangements are in excess of one year, a contract is formed between the Company and its customer upon receipt of a purchase order. Contract Assets and Liabilities A contract asset is a right to consideration in exchange for goods that the Company has transferred to a customer when that right is conditional on something other than the passage of time. A contract liability exists when the Company receives consideration in advance of the fulfillment of its performance obligations. The Company has no contract assets or material contract liabilities recorded on its consolidated balance sheets as of December 31, 2023 and 2022, respectively. Practical Expedients and Accounting Policy Elections The Company has elected to use certain practical expedients and has made certain accounting policy elections as permitted under the revenue recognition guidance. The majority of the Company’s contracts with customers are based on an individual purchase order or a MSA in combination with an individual purchase order; thus, the duration of these contracts are for one year or less. As described above, the Company’s performance obligations reset either monthly or at the end of the calendar year. The Company has made an accounting policy election to omit certain disclosures related to these performance obligations, as the initial term of the Company’s performance obligations are for a term of one year or less. The Company uses an output method to recognize revenues related to performance obligations satisfied over time. These performance obligations, as described above, are satisfied within a calendar year. As such, the Company has elected to utilize the “as-invoiced” practical expedient, which permits the Company to recognize revenue in the amount to which it has a right to invoice the customer, provided that the amount corresponds directly with the value provided by the performance obligation as completed to date. When the Company performs shipping and handling activities after the transfer of control to the customer (e.g. when control transfers prior to delivery), they are considered fulfillment activities as opposed to separate performance obligations, and the Company recognizes revenue upon the transfer of control to the customer. Accordingly, the costs F-26 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) associated with these shipping and handling activities are accrued when the related revenue is recognized under the Company’s policy election. The Company does not utilize sales-based commissions plans, and as a result, the Company does not capitalize any costs which could be considered incremental costs of obtaining a contract. Sales, value added and other taxes the Company collects concurrent with revenue producing activities are excluded from revenues. Disaggregated Revenue The Company’s primary means of disaggregating revenues is by reportable segments, which can be found in Note 13 to these consolidated financial statements. The Company’s portfolio of products is integrated into a variety of end uses, which are described in the table below. Key End Uses Key Products Clean fuels, emission control & other • Refining hydrocracking catalysts • Emission control catalyst supports • Catalyst supports used in production of sustainable fuels such as renewable diesel • Catalyst used in the production of sustainable aviation fuels • Catalyst activation • Aluminum sulfate solution • Ammonium bisulfite solution Polyethylene, polymers & engineered plastics • Catalysts for high-density polyethylene and chemicals syntheses • Antiblock for film packaging • Catalyst for advanced recycling Regeneration and treatment services • Sulfuric acid regeneration services • Treatment services Industrial, mining & automotive • Sulfuric acid for mining • Sulfur derivatives for industrial production • Sulfuric derivatives for nylon production F-27 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The following tables disaggregate the Company’s sales, by segment and end uses, for the years ended December 31, 2023, 2022 and 2021, respectively: Year ended December 31, 2023 Ecoservices Advanced Materials & Catalysts (2) Total Clean fuels, emission control & other $ 29,850 $ — $ 29,850 Polyethylene, polymers & engineered plastics — 106,273 106,273 Regeneration and treatment services (1) 354,606 — 354,606 Industrial, mining & automotive 200,388 — 200,388 Total segment sales $ 584,844 $ 106,273 $ 691,117 Year ended December 31, 2022 Ecoservices Advanced Materials & Catalysts (2) Total Clean fuels, emission control & other $ 28,966 $ — $ 28,966 Polyethylene, polymers & engineered plastics — 117,687 117,687 Regeneration and treatment services (1) 342,645 — 342,645 Industrial, mining & automotive 330,861 — 330,861 Total segment sales $ 702,472 $ 117,687 $ 820,159 Year ended December 31, 2021 Ecoservices Advanced Materials & Catalysts (2) Total Clean fuels, emission control & other $ 25,673 $ — $ 25,673 Polyethylene, polymers & engineered plastics — 110,688 110,688 Regeneration and treatment services (1) 262,026 — 262,026 Industrial, mining & automotive 212,814 — 212,814 Total segment sales $ 500,513 $ 110,688 $ 611,201 (1) As described in Note 1 to these consolidated financial statements, the Company experiences seasonal sales fluctuations to customers in the regeneration services product group. (2) Excludes the Company’s proportionate share of sales from the Zeolyst International and Zeolyst C.V. joint ventures (collectively, the “Zeolyst Joint Venture”) accounted for using the equity method (see Note 10 to these consolidated financial statements for further information). F-28 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 6. Fair Value Measurements: Fair values are based on quoted market prices when available. When market prices are not available, fair values are generally estimated using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality. In instances where there is little or no market activity for the same or similar instruments, the Company estimates fair values using methods, models and assumptions that management believes a hypothetical market participant would use to determine a current transaction price. These valuation techniques involve some level of management estimation and judgment that becomes significant with increasingly complex instruments or pricing models. Where appropriate, adjustments are included to reflect the risk inherent in a particular methodology, model or input used. The Company’s financial assets and liabilities carried at fair value have been classified based upon a fair value hierarchy. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). The classification of an asset or a liability is based on the lowest level input that is significant to its measurement. For example, a Level 3 fair value measurement may include inputs that are both observable (Levels 1 and 2) and unobservable (Level 3). The levels of the fair value hierarchy are as follows: • Level 1—Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date. Active markets provide pricing data for trades occurring at least weekly and include exchanges and dealer markets. • Level 2—Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads and yield curves. • Level 3—Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date. The following tables present information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of December 31, 2023 and 2022, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. December 31, 2023 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative assets: Interest rate caps (Note 18) $ 19,021 $ — $ 19,021 $ — Derivative liabilities: Interest rate caps (Note 18) $ 2,496 $ — $ 2,496 $ — December 31, 2022 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative assets: Interest rate caps (Note 18) $ 34,374 $ — $ 34,374 $ — Derivative liabilities: Interest rate caps (Note 18) $ 2,071 $ — $ 2,071 $ — F-29 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Derivative contracts Derivative assets and liabilities can be exchange-traded or traded over-the-counter (“OTC”). The Company generally values exchange-traded derivatives using models that calibrate to market transactions and eliminate timing differences between the closing price of the exchange-traded derivatives and their underlying instruments. OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, model calibration to market transactions, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. When models are used, the selection of a particular model to value an OTC derivative depends on the contractual terms of, and specific risks inherent in, the instrument as well as the availability of pricing information in the market. The Company generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices and rates, forward curves, measures of volatility, and correlations of such inputs. For OTC derivatives that trade in liquid markets, such as forward contracts, swaps and options, model inputs can generally be corroborated by observable market data by correlation or other means, and model selection does not involve significant management judgment. As of December 31, 2023, the Company had interest rate caps that were fair valued using Level 2 inputs. In addition, the Company applies a credit valuation adjustment to reflect credit risk which is calculated based on credit default swaps. To the extent that the Company’s net exposure under a specific master agreement is an asset, the Company utilizes the counterparty’s default swap rate. If the net exposure under a specific master agreement is a liability, the Company utilizes a default swap rate comparable to Ecovyst. The credit valuation adjustment is added to the discounted fair value to reflect the exit price that a market participant would be willing to receive to assume the Company’s liabilities or that a market participant would be willing to pay for the Company’s assets. 7. Stockholders' Equity: Accumulated Other Comprehensive Income (Loss) The stockholders’ equity footnote disclosures have been revised to correct a presentation error in the components of accumulated other comprehensive income (loss) for the years ended December 31, 2022 and 2021. See Note 2 to these consolidated financial statements for further information on the reclassification and correction of errors in historical presentation. The following table presents the components of accumulated other comprehensive income (loss), net of tax, as of December 31, 2023 and 2022: December 31, 2023 2022 Amortization and unrealized gains on pension and postretirement plans, net of tax of $( 4,344 ) and $( 4,078 ) $ 612 $ ( 508 ) Net changes in fair values of derivatives, net of tax of $( 4,385 ) and $( 9,057 ) 12,546 24,672 Foreign currency translation adjustments, net of tax of $ 8,177 and $ 8,177 ( 14,116 ) ( 18,172 ) Accumulated other comprehensive (loss) income $ ( 958 ) $ 5,992 F-30 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The following table presents the tax effects of each component of other comprehensive income (loss) for the years ended December 31, 2023, 2022 and 2021: Years ended December 31, 2023 2022 2021 Pre-tax amount Tax benefit/ (expense) After-tax amount Pre-tax amount Tax benefit/ (expense) After-tax amount Pre-tax amount Tax benefit/ (expense) After-tax amount Defined benefit and other postretirement plans: Net gain (loss) $ 1,511 $ ( 297 ) $ 1,214 $ ( 3,344 ) $ 826 $ ( 2,518 ) $ 12,976 $ ( 3,272 ) $ 9,704 Net prior service cost ( 125 ) 31 ( 94 ) ( 210 ) 52 ( 158 ) ( 232 ) 58 ( 174 ) Benefit plans, net 1,386 ( 266 ) 1,120 ( 3,554 ) 878 ( 2,676 ) 12,744 ( 3,214 ) 9,530 Net (loss) gain from hedging activities ( 17,312 ) 5,186 ( 12,126 ) 33,194 ( 8,812 ) 24,382 3,885 ( 971 ) 2,914 Foreign currency translation (1) 4,056 — 4,056 ( 9,922 ) — ( 9,922 ) ( 9,202 ) 6,954 ( 2,248 ) Other comprehensive (loss) income $ ( 11,870 ) $ 4,920 $ ( 6,950 ) $ 19,718 $ ( 7,934 ) $ 11,784 $ 7,427 $ 2,769 $ 10,196 (1) The income tax benefit included in other comprehensive income for the year ended December 31, 2021 is attributed to the portion of foreign currency translation associated with the Company’s cross-currency interest rate swaps, for which the tax effect was based on the applicable U.S. deferred income tax rate. In March 2021, as a result of the Performance Materials and Performance Chemicals divestitures, the Company settled its cross-currency swaps. The following table presents the changes in accumulated other comprehensive income (loss), net of tax, by component for the years ended December 31, 2023 and 2022: Defined benefit and other postretirement plans Net gain (loss) from hedging activities Foreign currency translation Total December 31, 2021 $ 2,168 $ 290 $ ( 8,250 ) $ ( 5,792 ) Other comprehensive income (loss) before reclassifications ( 2,832 ) 23,868 ( 9,922 ) 11,114 Amounts reclassified from accumulated other comprehensive income (1) 156 514 — 670 Net current period other comprehensive income (loss) ( 2,676 ) 24,382 ( 9,922 ) 11,784 December 31, 2022 ( 508 ) 24,672 ( 18,172 ) 5,992 Other comprehensive income (loss) before reclassifications 1,085 5,031 4,056 10,172 Amounts reclassified from accumulated other comprehensive income (1) 35 ( 17,157 ) — ( 17,122 ) Net current period other comprehensive income (loss) 1,120 ( 12,126 ) 4,056 ( 6,950 ) December 31, 2023 $ 612 $ 12,546 $ ( 14,116 ) $ ( 958 ) (1) See the following table for details about these reclassifications. Amounts in parentheses indicate debits. F-31 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The following table presents the reclassifications out of accumulated other comprehensive income for the years ended December 31, 2023 and 2022. Details about Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income (1) Affected Line Item in the Statements of Income Years ended December 31, 2023 2022 Amortization of defined benefit and other postretirement plans: Net prior service credit $ ( 125 ) $ ( 210 ) Other (expense) income (2) Net loss 59 3 Other (expense) income (2) ( 66 ) ( 207 ) Total before tax 31 51 Tax benefit $ ( 35 ) $ ( 156 ) Net of tax Gains and losses on cash flow hedges: Interest rate caps $ 22,731 $ ( 683 ) Interest expense ( 5,574 ) 169 Tax benefit (expense) 17,157 ( 514 ) Net of tax Total reclassifications for the period $ 17,122 $ ( 670 ) Net of tax (1) Amounts in parentheses indicate debits to profit/loss. (2) These accumulated other comprehensive income (loss) components are components of net periodic pension and other postretirement cost (see Note 20 to these consolidated financial statements for further information). Treasury Stock Repurchases 2020 Stock Repurchase Program On March 12, 2020, the Company’s Board of Directors (the “Board”) approved a plan to purchase up to $ 50,000 of the Company’s common stock under a stock repurchase program approved by the Board. Under the plan, the Company could repurchase shares from time to time for cash in open market transactions or in privately negotiated transactions in accordance with applicable federal securities laws. The Company determined the timing and the amount of any repurchases based on its evaluation of market conditions, share price and other factors. The stock repurchase program expired in March 2022, with no repurchases made in 2022 through the expiration of the program, no r during the year ended December 31, 2021. 2022 Stock Repurchase Program On April 27, 2022, the Board approved a stock repurchase program that authorized the Company to purchase up to $ 450,000 of the Company’s common stock over the four -year period from the date of approval. Under the plan, the Company is permitted to repurchase shares from time to time for cash in open market transactions or in privately negotiated transactions in accordance with applicable federal securities laws, with the Company determining the timing and the amount of any repurchases based on its evaluation of market conditions, share price and other factors. 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 $ 5,333 , 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 $ 73,373 , excluding accrued excise tax. As of December 31, 2023, $ 234,592 was available for additional share repurchases under the program. F-32 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The Company accrued excise tax of $ 638 related to these repurchases, net of shares issued under the Company’s equity incentive program during the year ended December 31, 2023 (see Note 19 to these consolidated financial statements for further information). This amount is included in accrued liabilities in the consolidated balance sheet and is treated by the Company as a cost of the treasury stock transactions in equity. 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 $ 19,356 , 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 underwriters at a weighted average price of $ 8.09 per share concurrently with the closing of the offerings, for a total of $ 117,346 . Tax Withholdings on Equity Award Vesting In connection with the vesting of restricted stock awards, restricted stock units and performance stock units, shares of common stock may be delivered to the Company by employees to satisfy withholding tax obligations at the instruction of the employee award holders. These transactions, when they occur, are accounted for as stock repurchases by the Company, with the shares returned to treasury stock at a cost representing the payment by the Company of the tax obligations on behalf of the employees in lieu of shares for the vesting unit. There were 315,635 and 32,058 shares delivered to the Company to cover tax payments for the year ended December 31, 2023 and2022 , respectively and the fair value of those shares withheld to cover tax payments were $ 3,372 and $ 332 for the years ended December 31, 2023 and 2022 , respectively. Dividends Paid On August 4, 2021, the Company’s Board declared a special cash dividend of $ 3.20 per share, using after tax cash proceeds from the sale of the Performance Chemicals business. The dividend was paid on August 23, 2021 to the Company’s stockholders of record at the close of business on August 12, 2021. See Note 4 of these consolidated financial statements for f urther information. 8. Other Operating Expense, Net: A summary of other operating expense, net is as follows: Years ended December 31, 2023 2022 2021 Amortization expense $ 10,565 $ 10,562 $ 10,321 Transaction and other related costs 2,954 6,988 2,268 Restructuring, integration and business optimization costs (1) 2,655 11,566 3,866 Net loss on asset disposals 4,137 3,594 5,666 Other, net 1,789 2,201 2,152 $ 22,100 $ 34,911 $ 24,273 (1) During the year ended December 31, 2022, the Company’s results were impacted by costs associated with severance charges for certain former executives and employees. The severance charges were not related to a specific restructuring plan of the Company, but rather were incurred primarily in connection with the leadership transition in April 2022 and the retirement of several executives. F-33 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 9. Inventories, Net: Inventories, net are classified and valued as follows: December 31, 2023 2022 Finished products and work in process $ 41,658 $ 39,909 Raw materials 3,457 4,453 $ 45,115 $ 44,362 Valued at lower of cost or market: LIFO basis $ 24,815 $ 25,258 Valued at lower of cost and net realizable value: FIFO or average cost basis 20,300 19,104 $ 45,115 $ 44,362 The domestic inventory acquired as part of a previous business combination is valued based on the LIFO method. Therefore, the fair value allocated to the acquired LIFO inventory was treated as the new base inventory value. If inventories valued under the LIFO basis had been valued using the FIFO method, inventories would have been $ 3,529 and $ 7,002 lower than reported as of December 31, 2023 and 2022, respectively, driven primarily by the purchase accounting fair value step-up of the LIFO inventory base value associated with the business combination. 10. Investments in Affiliated Companies: The Company accounts for investments in affiliated companies under the equity method. Affiliated companies accounted for on the equity basis as of December 31, 2023 are as follows: Company Country Percent Ownership Zeolyst International USA 50 % Zeolyst C.V. Netherlands 50 % Following is summarized information of the combined investments (1) : December 31, 2023 2022 Current assets $ 291,825 $ 278,330 Noncurrent assets 183,717 196,775 Current liabilities 36,799 47,407 Noncurrent liabilities 5,797 16,000 F-34 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) December 31, 2023 2022 2021 Sales $ 345,002 $ 306,511 $ 296,416 Gross profit 107,865 105,693 101,069 Operating income 70,783 67,169 66,978 Net income 74,053 68,255 68,433 (1) Summarized information of the combined investments is presented at 100%; the Company’s share of the net assets and net income of affiliates is calculated based on the percent ownership specified in the table above. The Company’s investments in affiliated companies balance as of December 31, 2023 and 2022 includes net purchase accounting fair value adjustments of $ 224,614 and $ 231,017 , respectively, related to a prior business combination, consisting primarily of goodwill and intangible assets such as customer relationships, technical know-how and trade names. Consolidated equity in net income from affiliates is net of $ 6,403 , $ 6,402 and $ 6,480 of amortization expense related to purchase accounting fair value adjustments for the years ended December 31, 2023, 2022 and 2021, respectively. The following table summarizes the activity related to the Company’s investments in affiliated companies balance on the consolidated balance sheets: December 31, 2023 2022 Balance at beginning of period $ 436,013 $ 446,074 Equity in net income of affiliated companies 37,027 34,128 Charges related to purchase accounting fair value adjustments ( 6,403 ) ( 6,402 ) Dividends received ( 28,000 ) ( 35,000 ) Foreign currency translation adjustments 1,561 ( 2,787 ) Balance at end of period $ 440,198 $ 436,013 The Company had receivables due from affiliates of $ 3,231 and $ 3,861 as of December 31, 2023 and 2022, respectively, which are included in prepaid and other current assets. The Company had payables from affiliates of $ 1,351 and $ 322 as of December 31, 2023 and 2022, respectively, which is included in accrued liabilities. Receivables and payables due from affiliates are generally non-trade. Sales to affiliates were $ 2,457 , $ 5,915 and $ 3,643 for the years ended December 31, 2023, 2022 and 2021, respectively. Purchases from affiliates were immaterial during the years ended December 31, 2023, 2022 and 2021. On December 18, 2013, the Company and its joint venture, Zeolyst International, entered into a ten year real estate tax abatement agreement with the Unified Government of Wyandotte County in Kansas City, Kansas. The agreement utilizes an Industrial Revenue Bond (“IRB”) financing structure to achieve a 75 % real estate tax abatement on the value of the improvements that were constructed during the expansion of the Company and Zeolyst International’s facilities at the jointly-operated Kansas City, Kansas plant. A similar tax abatement agreement has been executed on an annual basis since December 18, 2013 with respect to additional plant expansions during those years. During the year ended December 31, 2019, the original IRB financing structure from December 2013 was exhausted. In order to fund future plant expansions, the Company entered into an additional IRB financing structure on December 19, 2019 with similar terms and conditions, which also provides for 75 % real estate tax abatement on the value of future improvements. The financing obligations and the industrial bonds receivable have been presented net, as the financing obligations and the industrial bonds meet the criteria for right of set off conditions under GAAP. F-35 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 11. Property, Plant and Equipment: A summary of property, plant and equipment, at cost, and related accumulated depreciation is as follows: December 31, 2023 2022 Land $ 96,833 $ 96,659 Buildings and improvements 84,860 82,061 Machinery and equipment 820,509 751,145 Construction in progress 42,000 56,448 1,044,202 986,313 Less: accumulated depreciation ( 467,298 ) ( 401,424 ) $ 576,904 $ 584,889 Depreciation expense was $ 70,551 , $ 65,121 and $ 65,955 for the years ended December 31, 2023, 2022 and 2021, respectively. 12. Leases: Operating lease costs of $ 10,828 , $ 10,318 and $ 9,825 are included in cost of goods sold and in selling, general and administrative expenses on the consolidated statements of income for the years ended December 31, 2023, 2022 and 2021, respectively. Finance lease costs of $ 77 , $ 36 and $ 37 are included in cost of goods sold and in selling, general, and administrative expenses on the consolidated statement of income for the years ended December 31, 2023 2022 and 2021, respectively. Lease income is not material to the results of operations for the years ended December 31, 2023, 2022 and 2021, respectively. The table below presents the operating and finance leases right-of-use assets and liabilities recognized on the consolidated balance sheet as of December 31, 2023 and 2022: Classification December 31, 2023 December 31, 2022 Assets Operating lease Right-of-use lease assets $ 24,281 $ 28,265 Finance lease Property, plant and equipment, net 1,269 1,422 Total leased assets $ 25,550 $ 29,687 Liabilities Current: Operating lease Operating lease liabilities—current $ 8,193 $ 8,155 Finance lease Accrued liabilities 70 86 Noncurrent: Operating lease Operating lease liabilities—noncurrent 16,030 20,021 Finance lease Other long-term liabilities 28 101 Total leased liabilities $ 24,321 $ 28,363 F-36 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The Company’s weighted average remaining lease term and weighted average discount rate for operating and financing leases as of December 31, 2023 and 2022 are as follows: December 31, 2023 December 31, 2022 Weighted average remaining lease term (in years): Operating leases 3.96 4.45 Finance leases 1.33 2.29 Weighted average discount rate: Operating leases 5.95 % 5.24 % Finance leases 3.91 % 3.10 % Maturities of lease liabilities as of December 31, 2023 are as follows: Year Operating Leases Finance Leases 2024 $ 9,539 $ 78 2025 6,916 23 2026 5,068 — 2027 3,672 — 2028 1,154 — Thereafter 1,014 — Total lease payments 27,363 101 Less: Interest ( 3,140 ) ( 3 ) Total lease liabilities (1) $ 24,223 $ 98 (1) Refer to the above table regarding the Company’s right-of-use lease assets and lease liabilities for the classification of lease liabilities in the Company’s consolidated balance sheet as of December 31, 2023. The following table presents other information related to the Company’s operating and finance leases and the impact on the Company’s consolidated statement of cash flows: Years ended December 31, 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Payments on operating leases included in operating cash flows $ 10,813 $ 10,327 Interest payments under finance leases included in operating cash flows 5 3 Principal payments under finance leases included in financing cash flows 72 33 Right-of-use assets obtained in exchange for new lease liabilities (non-cash): Operating leases 8,105 7,462 F-37 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 13. Reportable Segments: The Company has organized its business around two operating segments based on the review of discrete financial results for each of the operating segments by the CODM, for performance assessment and resource allocation purposes. Each of the Company’s operating segments represents a reportable segment under GAAP. The Company’s reportable segments are organized based on the nature and economic characteristics of the Company’s products. The Company’s two reportable segments are as follows: (1) Ecoservices provides sulfuric acid recycling to the North American refining industry for the production of alkylate and provides on-purpose virgin sulfuric acid for water treatment, mining, and industrial applications; and (2) Advanced Materials & Catalysts serves the polymers and engineered plastics and the global refining, petrochemical and emissions control industries. The Advanced Materials & Catalysts segment includes equity in net income from Zeolyst International and Zeolyst C.V. (collectively, the “Zeolyst Joint Venture”), each of which are 50/50 joint ventures with CRI Zeolites Inc. (a wholly-owned subsidiary of Royal Dutch Shell). The Zeolyst Joint Venture is accounted for using the equity method in the Company’s consolidated financial statements (see Note 10 to these consolidated financial statements for further information). Company management evaluates the Advanced Materials & Catalysts segment’s performance, including the Zeolyst Joint Venture, on a proportionate consolidation basis. Accordingly, the revenues and expenses used to compute the Advanced Materials & Catalysts segment’s adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) include the Zeolyst Joint Venture’s results of operations on a proportionate basis based on the Company’s 50% ownership level. Since the Company uses the equity method of accounting for the Zeolyst Joint Venture, these items are eliminated when reconciling to the Company’s consolidated results of operations. The Company’s management evaluates the operating results of each reportable segment based upon Adjusted EBITDA. Adjusted EBITDA consists of EBITDA, which is a measure defined as net income before interest, income taxes, depreciation and amortization (each of which is included in the Company’s consolidated statements of income), and adjusted for certain items as discussed below. Corporate overhead costs are not included in segment results as they relate to corporate-based responsibilities and decisions and are not included in the internal measures of segment operating performance used by the Company to measure the underlying performance of the operating segments. F-38 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Summarized financial information for the Company’s reportable segments is shown in the following table: Years ended December 31, 2023 2022 2021 Sales: Ecoservices $ 584,845 $ 702,472 $ 500,513 Advanced Materials & Catalysts (1) 106,273 117,687 110,688 Total $ 691,118 $ 820,159 $ 611,201 Adjusted EBITDA: (2) Ecoservices $ 199,966 $ 227,760 $ 177,672 Advanced Materials & Catalysts (3) 81,892 77,978 88,028 Adjusted EBITDA from reportable segments $ 281,858 $ 305,738 $ 265,700 (1) Excludes the Company’s proportionate share of sales from the Zeolyst Joint Venture accounted for using the equity method. The proportionate share of sales excluded is $ 156,481 , $ 132,588 and $ 131,332 for the years ended December 31, 2023, 2022 and 2021, respectively. (2) The Company defines Adjusted EBITDA as EBITDA adjusted for certain items as noted in the reconciliation below. Management evaluates the performance of its segments and allocates resources based on several factors, of which the primary measure is Adjusted EBITDA. Adjusted EBITDA should not be considered as an alternative to net income as an indicator of the Company’s operating performance. Adjusted EBITDA as defined by the Company may not be comparable with EBITDA or Adjusted EBITDA as defined by other companies. (3) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment is $ 50,490 for the year ended December 31, 2023, which includes $ 30,695 of equity in net income plus $ 6,403 of amortization of investment in affiliate step-up plus $ 13,392 of joint venture depreciation, amortization and interest. The Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment is $ 50,331 for the year ended December 31, 2022, which includes $ 27,931 of equity in net income plus $ 6,403 of amortization of investment in affiliate step-up plus $ 15,997 of joint venture depreciation, amortization and interest. The Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment is $ 49,872 for the year ended December 31, 2021, which includes $ 27,827 of equity in net income plus $ 6,480 of amortization of investment in affiliate step-up plus $ 15,565 of joint venture depreciation, amortization and interest. F-39 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) A reconciliation of income from continuing operations before income taxes to Adjusted EBITDA from reportable segments is as follows: Years ended December 31, 2023 2022 2021 Reconciliation of income from continuing operations before income taxes to Adjusted EBITDA from reportable segments Income from continuing operations before income taxes $ 81,939 $ 94,735 $ 13,941 Interest expense, net 44,730 37,217 36,990 Depreciation and amortization 84,598 79,163 79,741 Unallocated corporate expenses 21,990 29,042 38,089 Joint venture depreciation, amortization and interest 13,392 15,997 15,565 Amortization of investment in affiliate step-up 6,403 6,402 6,480 Debt extinguishment costs — — 26,902 Net loss on asset disposals 4,137 3,594 5,666 Foreign currency exchange loss (gain) ( 1,340 ) 1,388 4,716 LIFO benefit 3,473 ( 165 ) ( 1,931 ) Transaction and other related costs 2,954 6,988 2,009 Equity-based compensation 16,031 20,632 31,838 Restructuring, integration and business optimization expenses 2,655 11,566 3,866 Other 896 ( 821 ) 1,828 Adjusted EBITDA from reportable segments $ 281,858 $ 305,738 $ 265,700 The Company’s consolidated results include equity in net income from affiliated companies of $ 30,624 , $ 27,725 and $ 27,737 for the years ended December 31, 2023, 2022, and 2021, respectively. This is primarily comprised of equity in net income of $ 30,695 , $ 27,931 and $ 27,827 in the Advanced Materials & Catalysts segment from the Zeolyst Joint Venture for the years ended December 31, 2023, 2022 and 2021, respectively. The Company’s equity in net income from affiliated companies in the consolidated results includes amortization expense related to purchase accounting fair value adjustments associated with the Zeolyst Joint Venture as a result of a prior business combination. Capital expenditures for the Company’s reportable segments are shown in the following table: Years ended December 31, 2023 2022 2021 Capital expenditures: Ecoservices $ 53,705 $ 47,770 $ 43,561 Advanced Materials & Catalysts (1) 8,441 8,194 15,997 Corporate (2) 3,189 2,906 487 Capital expenditures per the consolidated statements of cash flows $ 65,335 $ 58,870 $ 60,045 (1) Excludes the Company’s proportionate share of capital expenditures from the Zeolyst Joint Venture. (2) Includes corporate capital expenditures, the cash impact from changes in capital expenditures in accounts payable and capitalized interest. F-40 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Total assets by segment are not disclosed by the Company because the information is not prepared or used by the CODM to assess performance and to allocate resources. Sales by geographic area are presented in the following table. Sales are attributed to countries based upon location of products shipped. Years ended December 31, 2023 2022 2021 Sales (1) : United States $ 649,652 $ 774,119 $ 571,587 Foreign countries 41,466 46,040 39,614 Total $ 691,118 $ 820,159 $ 611,201 (1) Except for the United States, no sales in an individual country exceeded 10% of the Company’s total sales. The Company sold products through its Ecoservices and Advanced Materials & Catalysts segments to single customer, which accounted for 13.2 %, 12.3 % and 12.6 % of the Company’s total sales as of December 31, 2023, 2022, and 2021 respectively. Long-lived assets by geographic area is presented in the following table. Long-lived assets includes property, plant and equipment, net and right-of-use lease assets. December 31, 2023 2022 Long-lived assets: United States $ 575,536 $ 587,726 Foreign countries 25,649 25,428 Total $ 601,185 $ 613,154 F-41 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 14. Goodwill and Other Intangible Assets: The changes in the carrying amount of goodwill for the years ended December 31, 2023 and 2022 is summarized as follows: Ecoservices Advanced Materials & Catalysts Total Balance as of December 31, 2021 $ 326,670 $ 79,469 $ 406,139 Goodwill adjustments (1) ( 81 ) — ( 81 ) Foreign exchange impact — ( 2,895 ) ( 2,895 ) Balance as of December 31, 2022 326,589 76,574 403,163 Foreign exchange impact — 1,307 1,307 Balance as of December 31, 2023 $ 326,589 $ 77,881 $ 404,470 (1) During the year ended December 31, 2022, the Company recorded an adjustment of $ 81 between goodwill and deferred tax liabilities related to the final tax purchase price allocation for the Chem32 LLC acquisition. The Company completed its annual goodwill impairment assessments as of October 1, 2023 and 2022. For the annual assessments, the Company bypassed the option to perform the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test for each of its reporting units. The quantitative test identifies both the potential existence of impairment and the amount of impairment loss. For each of the October 1, 2023 and 2022 assessments, the Company identified two reporting units, which align with the Company’s operating segments. The Company determined the fair value of its reporting units using a split between a market approach and an income, or discounted cash flow, approach. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company estimates reporting unit market approach fair value using publicly traded comparable company values and applies the selected market multiples to each reporting unit’s trailing twelve months adjusted EBITDA. The Company estimates reporting unit income-based fair value using the discounted cash flow approach. This approach requires use of significant assumptions about future cash flows and based on management’s assessment of a number of factors. Such factors include reporting unit revenue growth rates from implementation of strategic plans, operating margin growth rates, the perpetual growth rate, and the weighted average cost of capital, as well as the reporting unit’s recent performance and management’s ability to execute on planned future strategic initiatives. Discount rate assumptions are based on an assessment of the risk inherent in those future cash flows. As of October 1, 2023, the fair values of each of the Company’s reporting units exceeded their respective carrying values and therefore, no goodwill impairment exists for the year ended December 31, 2023. In addition to the annual goodwill impairment assessment, the Company also performed the annual impairment test over its other indefinite-lived intangible assets as of October 1, 2023 and 2022. The fair values of the Company’s indefinite-lived trade names and trademarks were in excess of their carrying amounts as of the respective testing dates, and as such, there was no further impairment of the Company’s indefinite-lived intangible assets for the years ended December 31, 2023 and 2022. F-42 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Gross carrying amounts and accumulated amortization for intangible assets other than goodwill are as follows: December 31, 2023 December 31, 2022 Gross Carrying Amount Accumulated Amortization Net Balance Gross Carrying Amount Accumulated Amortization Net Balance Technical know-how $ 55,350 $ ( 27,472 ) $ 27,878 $ 54,880 $ ( 23,822 ) $ 31,058 Customer relationships 130,912 ( 76,634 ) 54,278 130,636 ( 66,669 ) 63,967 Non-compete agreements 700 ( 397 ) 303 700 ( 257 ) 443 Trademarks 7,521 ( 3,844 ) 3,677 7,387 ( 3,283 ) 4,104 Trade names 1,600 ( 453 ) 1,147 1,600 ( 293 ) 1,307 Total definite-lived intangible assets 196,083 ( 108,800 ) 87,283 195,203 ( 94,324 ) 100,879 Indefinite-lived trade names 25,367 — 25,367 25,153 — 25,153 In-process research and development 3,900 — 3,900 3,900 — 3,900 Total intangible assets $ 225,350 $ ( 108,800 ) $ 116,550 $ 224,256 $ ( 94,324 ) $ 129,932 The Company amortizes technical know-how over periods that range from ten years to twenty years , customer relationships over periods that range from ten years to fifteen years , non-compete agreements over five years , trademarks over fifteen years , and trade names over ten years . In-process research and development intangible assets are considered indefinite-lived until such time as the associated projects are completed, at which time amortization commences on the assets, or abandoned, which results in the impairment of the assets. Amortization expense related to technical know-how is included in cost of goods sold in the consolidated statements of income and was $ 3,482 , $ 3,480 and $ 3,465 for the years ended December 31, 2023, 2022 and 2021, respectively. Amortization expense related to customer relationships, non-compete agreements, trademarks, and trade names is included in other operating expense, net in the consolidated statements of income and was $ 10,565 , $ 10,562 and $ 10,321 for the years ended December 31, 2023, 2022 and 2021, respectively. Estimated future aggregate amortization expense of intangible assets is as follows: Year Amount 2024 $ 14,068 2025 14,068 2026 12,912 2027 12,370 2028 12,222 Thereafter 21,643 Total estimated future aggregate amortization expense $ 87,283 F-43 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 15. Accrued Liabilities: The following table summarizes the components of accrued liabilities as follows: December 31, 2023 2022 Compensation and bonus $ 16,594 $ 30,890 Interest 11,976 10,493 Property tax 3,657 2,123 Income taxes 7,708 4,412 Finance lease and financing obligation liabilities 3,069 2,855 Dividends payable 641 4,062 Other 18,048 17,394 $ 61,693 $ 72,229 16. Long-term Debt: The summary of long-term debt is as follows: December 31, 2023 2022 Senior Secured Term Loan Facility due June 2028 (the "2021 Term Loan Facility") $ 877,500 $ 886,500 ABL Facility — — Total debt 877,500 886,500 Original issue discount ( 6,162 ) ( 7,472 ) Deferred financing costs ( 3,392 ) ( 4,158 ) Total debt, net of original issue discount and deferred financing costs 867,946 874,870 Less: current portion ( 9,000 ) ( 9,000 ) Total long-term debt, excluding current portion $ 858,946 $ 865,870 ABL Facility On May 4, 2016, PQ Corporation (“PQ Corp”), an indirect, wholly owned subsidiary of the Company prior to the closing of the sale of the Performance Chemical business entered into a $ 200,000 senior secured asset-based revolving credit facility (the “ABL Facility”), which provided for $ 200,000 revolving credit commitments. On March 20, 2020, PQ Corp amended its existing ABL Facility to increase the aggregate amount of the revolving loan commitments available by $ 50,000 to $ 250,000 , consisting of up to $ 195,000 in U.S. commitments, up to $ 15,000 in Canadian commitments and up to $ 40,000 in European commitments. The maturity of the facility was extended to March 20, 2025. 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. F-44 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) On June 9, 2021, PQ Corp and Ecovyst LLC (as defined below) entered into a third amendment agreement (the “ABL Amendment”), which amended its ABL Credit Agreement, dated as of May 4, 2016 (the “ABL Credit Agreement” and, as amended by the ABL Amendment, the “Amended ABL Credit Agreement”). The ABL Amendment, among other things, following the sale of Performance Chemicals, decreased the aggregate amount of revolving loan commitments available to the borrowers thereunder by an aggregate amount of $ 150,000 to $ 100,000 , consisting of $ 90,000 in U.S. commitments and $ 10,000 in European commitments and extended the maturity date with respect to borrowings under the Amended ABL Credit Agreement to August 2, 2026. On February 17, 2023, the Company amended the ABL Facility to replace LIBOR with SOFR as the benchmark interest rate. Following this amendment, the borrowings under the ABL Facility bear interest at a rate equal to an adjusted term SOFR rate or the base rate, which includes a credit spread adjustment of 10 basis points, plus a margin of between 1.25 % to 1.75 % or 0.25 % to 0.75 %, respectively. The interest rate on the ABL Facility was 8.75 % as of December 31, 2023. As of December 31, 2023, there were no revolving credit borrowings outstanding under the ABL Facility. Revolving credit borrowings are payable at the option of the Borrower throughout the term of the ABL Facility with the balance due August 2, 2026. The Company has the ability to request letters of credit under the ABL Facility. The Company had $ 4,043 of letters of credit outstanding as of December 31, 2023, which reduce available borrowings under the ABL Facility by such amounts. The obligations of the Borrower under the ABL Facility are guaranteed by the same U.S. subsidiary guarantors that guarantee the 2021 Term Loan Facility (as described below) and the obligations of the European Borrowers under the ABL Facility are guaranteed by a certain European subsidiary of the Borrower. The obligations of the borrowers and guarantors under the ABL Facility are secured (i) by a first-priority security interest in, among other things, substantially all of their receivables, inventory, deposit accounts and other collateral securing the ABL Facility on a first-priority basis and (ii) by a second-priority security interest in the property and assets of the Borrower and the U.S. subsidiary guarantors that secure the 2021 Term Loan Facility. In addition, the ABL Facility is secured by the equity interests in, and substantially all of the assets of, certain foreign guarantors in connection with the Euro-denominated availability. The ABL Facility and the 2021 Term Loan Facility contain various 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. 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 was in compliance with all debt covenants as of December 31, 2023 and 2022, respectively. 2021 Term Loan Facility On June 9, 2021, PQ Corp and Ecovyst Catalyst Technologies LLC (“Ecovyst LLC” and, following the closing of the sale of the Performance Chemicals business, the “Borrower”), an indirect, wholly owned subsidiary of the Company, entered into an agreement (the “2021 Credit Agreement”) for the 2021 Term Loan Facility in an aggregate principal amount of $ 900,000 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 %). 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 of the 2021 Term Loan Facility were used to pay in full the 2020 Term Loan Facility, partially pay the 2018 Term Loan Facility and pay the associated fees and expenses. On February 9, 2023, the Company amended the 2021 Term Loan Facility to replace LIBOR with SOFR as the benchmark interest rate. Following this amendments, 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 %). The interest rate on the 2021 Term Loan Facility was 7.98 % as of December 31, 2023. F-45 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) As of December 31, 2023, the 2021 Term Loan Facility accrued interest at a floating rate of SOFR plus 2.50 % per annum and is scheduled to mature in June 2028. The Company may at any time or from time to time voluntarily prepay loans under the 2021 Term Loan Facility in whole or in part without premium or penalty. The 2021 Term Loan Facility requires mandatory prepayments from (i) 50 % of “Excess Cash Flow” (as defined in the 2021 Credit Agreement) on an annual basis with step downs to lower percentages based on the Borrower’s leverage ratio, if applicable, (ii) net cash proceeds from the issuance or incurrence of certain indebtedness and (iii) net cash proceeds received from certain non-ordinary course disposition of assets and casualty events to the extent such net cash proceeds were not reinvested in the Company’s business within a certain specified time period. Prepayments are applied to remaining amortization installments in direct order of maturity. The remaining principal balance of the term loans are due upon maturity. The 2021 Term Loan Facility is guaranteed by Ecovyst Catalyst Technologies LLC and Ecoservices Operations Corp, subsidiaries of the Company. The obligations under the Term Facility are secured (i) by a first-priority security interest in, among other things, a pledge of substantially all of the Borrower’s and the guarantors’ assets (other than collateral securing the ABL Facility on a first-priority basis) and (ii) by a second-priority security interest in receivables, inventory, deposit accounts and other collateral of the Borrower and the U.S. subsidiary guarantors securing the ABL Facility. Fair Value of Debt The fair value of a financial instrument is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. As of December 31, 2023 and 2022, the fair value of the senior secured term loan was $ 876,403 and $ 870,986 , respectively. The fair value is classified as Level 2 based upon the fair value hierarchy (see Note 6 to these consolidated financial statements for further information on fair value measurements). Aggregate Long-term Debt Maturities The aggregate long-term debt maturities are: Year Amount 2024 $ 9,000 2025 9,000 2026 9,000 2027 9,000 2028 841,500 $ 877,500 F-46 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 17. Other Long-term Liabilities: The following table summarizes the components of other long-term liabilities as follows: December 31, 2023 2022 Pension plan liabilities $ 4,937 $ 6,250 Other postretirement benefit plan liabilities 457 428 Derivative liabilities 2,496 2,071 Finance lease and financing obligation liabilities 4,955 7,633 Reserve for uncertain tax positions 9,523 8,215 Other 71 1,249 $ 22,439 $ 25,846 18. Financial Instruments: The Company uses interest rate related derivative instruments to manage its exposure to changes in interest rates on its variable-rate debt instruments. The Company does not speculate using derivative instruments. By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is an asset, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is a liability, the Company owes the counterparty and therefore, the Company is not exposed to the counterparty’s credit risk in those circumstances. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with high quality counterparties. The derivative instruments entered into by the Company do not contain credit-risk-related contingent features. Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates. The market risk associated with the Company’s derivative instruments is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. Use of Derivative Financial Instruments to Manage Interest Rate Risk. The Company is exposed to fluctuations in interest rates on its senior secured credit facilities. Changes in interest rates will not affect the market value of such debt but will affect the Company’s interest payments over the term of the loans. Likewise, an increase in interest rates could have a material impact on the Company’s consolidated statements of cash flows. The Company hedges the interest rate fluctuations on debt obligations through interest rate cap agreements. The Company records these agreements at fair value as assets or liabilities in its consolidated balance sheets. As the derivatives are designated and qualify as cash flow hedges, the gains or losses on the interest rate cap agreements are recorded in stockholders’ equity as a component of other comprehensive income, net of tax. Reclassifications of the gains and losses on the interest rate cap agreements into earnings are recorded as part of interest expense in the consolidated statements of income as the Company makes its interest payments on the hedged portion of its senior secured credit facilities. Fair value is determined based on estimated amounts that would be received or paid to terminate the contracts at the reporting date based on quoted market prices. The following table provides a summary of the Company’s interest rate cap agreements: Financial instrument Number of instruments In effect as of December 31, 2023 Current notional amount of instruments in effect Annuitized premium of instruments in effect Interest rate cap 4 3 $ 650,000 $ 24,817 F-47 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The current notional amounts of the three interest rate cap agreements in effect at December 31, 2023 are $ 250,000 , $ 150,000 and $ 250,000 . The Company entered into a $ 250,000 interest rate cap to mitigate interest rate volatility from August 2022 to October 2024, a $ 150,000 interest rate cap agreement to mitigate interest rate volatility from August 2023 to July 2026, and a $ 250,000 interest rate cap agreement to mitigate interest rate volatility from September 2023 to October 2025. The $ 150,000 interest rate cap agreement will increase to $ 175,000 to mitigate interest rate volatility from August 2024 to July 2026. The cap rates in effect at December 31, 2023 was 1.00 %. The Company has also entered into a forward starting interest rate cap agreements to mitigate interest volatility from November 2024 to October 2026. In February 2023, the Company amended all existing interest rate cap agreements to replace LIBOR with SOFR as the benchmark interest rate, with all other terms of the agreements remaining the same. This amendment changed the previously annuitized premiums on the existing interest rate cap agreements. The fair values of derivative instruments held as of December 31, 2023 and 2022, respectively are shown below: December 31, Balance sheet location 2023 2022 Derivative assets Derivatives designated as cash flow hedges: Interest rate caps Prepaid and other current assets $ 13,419 $ 18,510 Interest rate caps Other long-term assets 5,602 15,864 Total derivative assets $ 19,021 $ 34,374 Derivative liabilities Derivatives designated as cash flow hedges: Interest rate caps Other long-term liabilities $ 2,496 $ 2,071 Total derivative liabilities $ 2,496 $ 2,071 The following table shows the effect of the Company’s derivative instruments designated as cash flow hedges on accumulated other comprehensive income (loss) and the consolidated statements of income for the years ended December 31, 2023, 2022 and 2021, respectively: Years ended December 31, 2023 2022 2021 Location of gain (loss) reclassified from AOCI into income Amount of gain (loss) recognized in OCI on derivatives Amount of gain (loss) reclassified from AOCI into income Amount of gain (loss) recognized in OCI on derivatives Amount of gain (loss) reclassified from AOCI into income Amount of gain (loss) recognized in OCI on derivatives Amount of gain (loss) reclassified from AOCI into income Interest rate caps Interest (expense) income $ 5,419 $ 22,731 $ 32,510 $ ( 683 ) $ 3,441 $ ( 444 ) F-48 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The following table shows the effect of the Company’s cash flow hedge accounting on the consolidated statements of income for the years ended December 31, 2023, 2022 and 2021, respectively: Location and amount of gain (loss) recognized in income on cash flow hedging relationships Years ended December 31, 2023 2022 2021 Total amounts of income and expense line items presented in the statement of income in which the effects of cash flow hedges are recorded in interest (expense) income $ ( 44,730 ) $ ( 37,217 ) $ ( 36,990 ) The effects of cash flow hedging: Gain (loss) on cash flow hedging relationships: Interest contracts: Amount of gain (loss) reclassified from AOCI into income 22,731 ( 683 ) ( 444 ) The amount of unrealized losses in AOCI related to the Company’s cash flow hedges that is expected to be reclassified to the consolidated statement of income over the next twelve months is $ 9,712 as of December 31, 2023. 19. Income Taxes: Income before income taxes within or outside the United States are shown below: Years ended December 31, 2023 2022 2021 Domestic $ 73,774 $ 86,695 $ 6,185 Foreign 8,165 8,040 7,756 Total $ 81,939 $ 94,735 $ 13,941 F-49 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The provision for income taxes as shown in the accompanying consolidated statements of income consists of the following: Years ended December 31, 2023 2022 2021 Current: Federal $ 21,647 $ 18,210 $ 2,469 State 3,695 3,100 1,813 Foreign 2,515 1,978 3,317 27,857 23,288 7,599 Deferred: Federal ( 3,644 ) 4,544 ( 1,813 ) State ( 11,993 ) ( 2,288 ) 2,551 Foreign ( 1,435 ) ( 604 ) 3,810 ( 17,072 ) 1,652 4,548 Provision for income taxes $ 10,785 $ 24,940 $ 12,147 A reconciliation of income tax expense at the U.S. federal statutory income tax rate to actual income tax expense is as follows: Years ended December 31, 2023 2022 2021 Tax at statutory rate $ 17,207 $ 19,894 $ 2,928 State income taxes, net of federal income tax benefit 748 248 3,942 Changes in uncertain tax positions 985 558 877 State credit - valuation allowance release ( 10,203 ) — — Rate changes ( 101 ) — 5,209 Stock compensation 1,803 1,876 197 Compensation disallowance under 162(m) 2,344 3,146 466 Foreign tax credits ( 848 ) — ( 759 ) Research and development tax credits ( 400 ) ( 366 ) ( 620 ) Other, net ( 750 ) ( 416 ) ( 93 ) Provision for income taxes $ 10,785 $ 24,940 $ 12,147 F-50 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Deferred tax assets (liabilities) are comprised of the following: December 31, 2023 2022 Deferred tax assets: Net operating loss carryforwards $ 14,680 $ 13,705 Interest disallowance carryforward 1,169 228 Pension 569 879 Operating lease liability 5,940 6,873 Other 10,806 10,653 State credits 14,659 13,773 Foreign withholding tax credits 9,083 9,083 Valuation allowance ( 18,325 ) ( 30,615 ) 38,581 24,579 Deferred tax liabilities: Depreciation $ ( 66,816 ) $ ( 70,400 ) Inventory ( 3,427 ) ( 3,039 ) Intangibles ( 67,250 ) ( 63,873 ) Operating lease right-of-use assets ( 5,954 ) ( 6,763 ) Other ( 8,675 ) ( 15,910 ) ( 152,122 ) ( 159,985 ) Net deferred tax liabilities $ ( 113,541 ) $ ( 135,406 ) Under the tax laws of various jurisdictions in which we operate, deductions or credits that cannot be fully utilized for tax purposes during the year may be carried forward, subject to statutory limitations, to reduce taxable income or taxes payable in a future year. As of December 31, 2023, the Company has indefinite carryforwards of $ 9,083 foreign withholding tax credits. The Company has recorded a full valuation allowance against the foreign withholding tax credits as it is more likely than not that the benefit from these foreign tax credits will never be realized. The Company has $ 14,659 of deferred tax assets related to state tax credits, which are subject to a 16-year carryforward period. The Company expects to fully utilize its state tax credits before each expiration, as a result the Company has released the valuation allowance associated with its state tax credits. As of December 31, 2023, the valuation allowance associated with its state tax credits is $ 0 . The Company has $ 14,680 of deferred tax assets related to state net operating losses and foreign losses, which are subject to various carryforward periods of 5 to 20 years or an indefinite carryforward period. A partial valuation allowance of $ 9,242 has been recorded due to the expected expiration of these state net operating losses before they are able to be utilized. The change in net deferred tax liabilities for the years ended December 31, 2023 and 2022 was primarily related to the release of a state tax credit valuation allowance, differences between book and tax basis depreciation, activity connected to book amortization of intangible assets with no corresponding tax basis reducing those deferred tax liabilities, activity with respect to tax deductible goodwill, activity with respect to interest rate caps recorded against other comprehensive income, and activity with respect to stock compensation. F-51 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The net change in the total valuation allowance was a decrease of $ 12,290 in 2023. The valuation allowance at December 31, 2023 was related to state and foreign net operating loss carryforwards and foreign withholding tax credits that, in the judgment of management, are not more likely than not to be realized. In assessing the ability to realize deferred tax assets, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considered the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies that are prudent in making this assessment. In order to fully realize deferred tax assets, the Company will need to generate future taxable income prior to the expiration of the net operating loss and credit carryforwards. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. The cumulative unremitted earnings of foreign subsidiaries outside the United States are considered permanently reinvested, for which no withholding taxes have been provided. Such earnings are expected to be reinvested indefinitely and, as a result, no deferred tax liability has been recognized with regard to such earnings. Determination of the deferred withholding tax liability on these unremitted earnings is not practicable. Undistributed earnings of foreign subsidiaries and related companies that are deemed to be indefinitely reinvested amounted to $ 198,580 at December 31, 2023. The following table summarizes the activity related to the Company’s gross unrecognized tax benefits. The amounts listed in the below table also represents the total unrecognized tax benefits that, if recognized, would impact the effective tax rate as of December 31, 2023 and 2022, respectively: Years ended December 31, 2023 2022 Balance at beginning of period $ 7,787 $ 7,787 Increases related to prior year tax positions 323 — Balance at end of period $ 8,110 $ 7,787 To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period for which the event occurs requiring the adjustment. The total amount of interest and penalties recognized in provision for income taxes on continuing operations was $ 855 and $ 558 for the years ended December 31, 2023 and 2022, respectively. The Company recorded cumulative accrued interest and penalties amounting to $ 1,413 as of December 31, 2023 in other long-term liabilities on its consolidated balance sheets. The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. The following describes the open tax years, by significant tax jurisdiction, as of December 31, 2023: Jurisdiction Period United States-Federal 2007-2023 United States-State 2007-2023 Given that the Company has utilized state net operating loss in the current and prior years, the statute for examination by the state taxing authorities will typically remain open for a period following the use of such net operating loss carryforwards, extending the period for examination beyond the years indicated above. F-52 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) As of December 31, 2023, it is reasonably possible that the Company may recognize approximately $ 8,023 of previously net unrecognized tax benefits, excluding interest and penalties, related to various U.S. federal tax positions, primarily due to the expiration of statutes of limitations within the next twelve months. As of December 31, 2023 and 2022, the Company no longer has a federal net operating loss or foreign tax credit carryforward. Cash payments for income taxes, net of refunds, are as follows: Years ended December 31, 2023 2022 2021 Domestic $ 21,973 $ 13,277 $ 549 Foreign 464 359 69 $ 22,437 $ 13,636 $ 618 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 the Company has made discretionary share repurchases under its share repurchase programs. Beginning in 2023, these transactions will be subject to the excise tax of the IRA. See Note 7 for information on the accrued excise tax related to these stock repurchases. 20. Benefit Plans: The Company sponsors two funded defined benefit pension plans that cover certain employees. Benefits for the plans are generally based on average final pay and years of service. The Company’s funding policy is to fund the minimum required contributions consistent with statutory requirements based on actuarial computations utilizing the projected unit credit method of calculation. The Company sponsors an unfunded plan to provide health care benefits to certain retired employees. The plan pays a stated percentage of medical expenses reduced by deductibles and other coverage and obligations are paid out of the Company’s operations. The Company uses a December 31 measurement date for all of its defined benefit pension and postretirement medical plans. Of the Company’s two defined benefit pension plans, the Eco Services Hourly Pension Plan was frozen to future accruals as of December 31, 2020, and the Eco Services Pension Equity Plan was frozen to future accruals as of December 31, 2016. The retiree healthcare plan was closed to new retirees effective July 1, 2017. The Company no longer has a defined benefit pension plan covering its employees at a foreign subsidiary, as the plan was converted to a defined contribution plan during the year ended December 31, 2021. F-53 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Defined Benefit Pension Plans The following tables summarize changes in the benefit obligation, plan assets and funded status of the Company’s defined benefit pension plans as well as the components of net periodic benefit cost, including key assumptions: December 31, 2023 2022 Change in benefit obligation: Benefit obligation at beginning of period $ 66,879 $ 86,465 Interest cost 3,453 2,569 Plan settlements ( 2,543 ) ( 862 ) Benefits paid ( 2,798 ) ( 2,552 ) Actuarial losses/(gains) 1,565 ( 18,741 ) Benefit obligation at end of the period 66,556 66,879 Change in plan assets: Fair value of plan assets at beginning of period $ 60,629 $ 82,914 Actual return on plan assets 6,330 ( 18,871 ) Plan settlements ( 2,543 ) ( 862 ) Benefits paid ( 2,798 ) ( 2,552 ) Fair value of plan assets at end of the period 61,618 60,629 Funded status of the plans (underfunded) $ ( 4,938 ) $ ( 6,250 ) The total actuarial losses for the year ended December 31, 2023 was $ 1,565 , which was driven by decreases in the discount rates of $ 1,365 and declines in general demographic experience of $ 200 . The total actuarial gains for the year ended December 31, 2022 was $ 18,741 , which was driven by increases in the discount rates of $ 18,641 and increase in general demographic experience of $ 100 . F-54 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Amounts recognized in the consolidated balance sheets consist of: December 31, 2023 2022 Noncurrent liability $ ( 4,937 ) $ ( 6,250 ) Accumulated other comprehensive income (loss), net of tax 567 ( 509 ) Net amount recognized $ ( 4,370 ) $ ( 6,759 ) Amounts recognized in accumulated other comprehensive income (loss) consist of: December 31, 2023 2022 Net (loss) gain $ 751 $ ( 1,039 ) Gross amount recognized 751 ( 1,039 ) Deferred income taxes ( 184 ) 530 Net amount recognized $ 567 $ ( 509 ) Components of net periodic benefit cost consist of: U.S. Foreign Years ended December 31, Year ended December 31, 2023 2022 2021 2021 Interest cost $ 3,453 $ 2,569 $ 2,210 $ 255 Expected return on plan assets ( 3,305 ) ( 3,433 ) ( 4,360 ) ( 255 ) Settlement loss (gain) recognized 61 38 ( 26 ) 2,084 Net periodic expense (benefit) $ 209 $ ( 826 ) $ ( 2,176 ) $ 2,084 All components of net periodic benefit cost other than service cost are presented within other expense (income), net in the Company’s consolidated statements of income. Components of other changes in plan assets and benefit obligations recognized in other comprehensive income consists of: December 31, 2023 2022 Net (gain) loss $ ( 1,461 ) $ 3,563 Amortization or settlement recognition of net loss ( 61 ) ( 38 ) Total recognized in other comprehensive (income) loss ( 1,522 ) 3,525 Total recognized in net periodic benefit cost and other comprehensive (income) loss $ ( 1,313 ) $ 2,699 The net amount of projected benefit obligation and plan assets for all underfunded plans was $ 4,938 and $ 6,250 as of December 31, 2023 and 2022, respectively, and was classified as noncurrent liabilities. F-55 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The following table presents selected information about the Company’s pension plans with projected benefit obligations and accumulated benefit obligations in excess of plan assets: December 31, 2023 2022 Projected benefit obligation $ 66,555 $ 66,879 Accumulated benefit obligation 66,555 66,879 Fair value of plan assets 61,618 60,629 Significant weighted average assumptions used in determining the pension obligations include the following: December 31, 2023 2022 Discount rate 5.17 % 5.40 % Rate of compensation increase (1) N/A N/A Significant weighted average assumptions used in determining net periodic benefit cost include the following: U.S. Foreign Years ended December 31, Year ended December 31, 2023 2022 2021 2021 Discount rate 5.39 % 2.90 % 2.50 % 1.20 % Expected return on assets 5.74 % 4.90 % 5.60 % 1.20 % Rate of compensation increase (1) N/A N/A N/A 1.75 % (1) Includes only plans not frozen to benefit accruals for the respective periods. The discount rate was determined by utilizing a yield curve model. The model develops a spot rate curve based on the yields available from a broad-based universe of high quality corporate bonds. The discount rate is then set as the weighted average spot rate, using the respective plan’s expected benefit cash flows as the weights. The investment objective for the plans is to generate returns sufficient to meet future obligations. The strategy to meet the objective includes generating attractive returns using higher returning assets such as equity securities and balancing risk using less volatile assets such as fixed income securities. The plans invest in an allocation of assets across the two broadly-defined financial asset categories of equity and fixed income securities. The target allocations for the plan assets across the two U.S. plans are as follows: 35 % equity securities and 65 % fixed income investments for the Eco Services Pension Equity Plan; and 30 % equity securities and 70 % fixed income investments for the Eco Services Hourly Pension Plan. The Company classifies plan assets based upon a fair value hierarchy where each asset within the hierarchy is based on the lowest level input that is significant to its measurement. The fair value hierarchy consists of three levels as follows: • Level 1—Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date. Active markets provide pricing data for trades occurring at least weekly and include exchanges and dealer markets. Level 1 assets primarily include investments in publicly traded equity securities and mutual funds. These securities (or the underlying investments of the funds) are actively traded and valued using quoted prices for identical securities from the market exchanges. • Level 2—Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, F-56 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) spreads and yield curves. Level 2 assets primarily consist of fixed-income securities and commingled funds that are not actively traded or whose underlying investments are valued using observable marketplace inputs. The fair value of plan assets invested in fixed-income securities is generally determined using valuation models that use observable inputs such as interest rates, bond yields, low-volume market quotes and quoted prices for similar assets. Plan assets that are invested in commingled funds are valued using a unit price or net asset value (“NAV”) that is based on the underlying investments of the fund. • Level 3—Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date. Level 3 assets include investments covered by insurance contracts and real estate funds valued using significant unobservable inputs. The following tables set forth by level, within the fair value hierarchy, plan assets at fair value: December 31, 2023 Total Level 1 Level 2 Level 3 Cash and cash equivalents $ 264 $ 264 $ — $ — Equity securities: U.S. investment funds 11,539 11,539 — — International investment funds 7,546 7,546 — — Fixed income securities: Government securities 11,691 11,691 — — Corporate bonds 30,578 30,578 — — Total $ 61,618 $ 61,618 $ — $ — December 31, 2022 Total Level 1 Level 2 Level 3 Cash and cash equivalents $ 244 $ 244 $ — $ — Equity securities: U.S. investment funds 11,435 11,435 — — International investment funds 7,803 7,803 — — Fixed income securities: Government securities 16,209 16,209 — — Corporate bonds 24,938 24,938 — — Total $ 60,629 $ 60,629 $ — $ — F-57 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid: Year Amount 2024 $ 8,156 2025 4,434 2026 4,505 2027 4,523 2028 4,714 Years 2029-2033 22,815 The Company expects to contribute $ 1,680 to its pension plans in 2024. Other Postretirement Benefit Plan The following tables summarize changes in the benefit obligation, plan assets and funded status of the Company’s other postretirement benefit plan as well as the components of net periodic benefit cost, including key assumptions: December 31, 2023 2022 Change in benefit obligation: Benefit obligation at beginning of period $ 446 $ 624 Interest cost 24 18 Benefits paid ( 1 ) ( 1 ) Premiums paid ( 3 ) ( 3 ) Actuarial loss/(gain) 9 ( 192 ) Benefit obligation at end of period 475 446 Change in plan assets: Employer contributions $ 4 $ 4 Benefits paid ( 1 ) ( 1 ) Premiums paid ( 3 ) ( 3 ) Fair value of plan assets at end of period — — Funded status of the plan (underfunded) $ ( 475 ) $ ( 446 ) The actuarial loss for the year ended December 31, 2023 was $ 9 , which was driven by decreases in the discount rates. The actuarial gain for the year ended December 31, 2022 was $ 192 , which was driven by increases in the discount rates. Amounts recognized in the consolidated balance sheets consist of: December 31, 2023 2022 Current liability $ ( 18 ) $ ( 18 ) Noncurrent liability ( 457 ) ( 428 ) Accumulated other comprehensive income (loss), net of tax 79 ( 299 ) Net amount recognized $ ( 396 ) $ ( 745 ) F-58 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Amounts recognized in accumulated other comprehensive income consist of: December 31, 2023 2022 Prior service credit $ 30 $ 154 Net gain (loss) 75 80 Gross amount recognized 105 234 Deferred income taxes ( 26 ) ( 533 ) Net amount recognized $ 79 $ ( 299 ) Components of net periodic benefit cost consist of: Years ended December 31, 2023 2022 2021 Interest cost $ 24 $ 18 $ 17 Amortization of prior service credit ( 125 ) ( 210 ) ( 232 ) Amortization of net (gain) loss ( 2 ) 3 5 Net periodic benefit $ ( 103 ) $ ( 189 ) $ ( 210 ) All components of net periodic benefit cost other than service cost are presented within other expense (income), net in the Company’s consolidated statements of income. Components of other changes in plan assets and benefit obligations recognized in other comprehensive income consists of: December 31, 2023 2022 Net loss (gain) $ 9 $ ( 192 ) Amortization of prior service credit 125 210 Amortization or settlement recognition of net gain (loss) 2 ( 3 ) Total recognized in other comprehensive income 136 15 Total recognized in net periodic benefit cost and other comprehensive loss (income) $ 33 $ ( 174 ) The discount rate used in determining the other postretirement benefit plan obligation was 5.20 % and 5.50 % as of December 31, 2023 and 2022, respectively. The discount rate used in determining net periodic benefit cost was 5.50 %, 2.90 % and 2.60 % for the years ended December 31, 2023, 2022 and 2021, respectively. There was no rate of interest crediting rate, as there are no cash balance accounts associated with this plan. F-59 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid: Year Amount 2024 $ 19 2025 20 2026 21 2027 23 2028 24 Years 2028-2032 150 The Company expects to contribute $ 18 to the retiree health plan in 2024. There are no expected Medicare subsidy receipts expected in future periods. Defined Contribution Plans The Company also has defined contribution plans covering domestic employees of the Company and a foreign subsidiary. The Company recorded expenses of $ 7,015 , $ 7,113 and $ 7,097 related to these plans for the years ended December 31, 2023, 2022 and 2021, respectively. 21. Stock-Based Compensation: The Company has an equity incentive plan under which it grants common stock awards to employees, directors and affiliates of the Company. As of December 31, 2023, 9,498,538 shares of common stock were available for issuance under the plan. The Company historically has settled these awards through the issuance of new shares. Beginning on July 1, 2023, the Company commenced reissuing shares from treasury in connection with the settlement of awards under its equity incentive plan. Modifications Sale of Performance Chemicals As described in Note 7 to these consolidated financial statements, the Company’s Board of Directors declared a special cash dividend of $ 3.20 per share to stockholders of record as of the close of business on August 12, 2021. The dividend declaration also included a dividend equivalent for all unvested restricted stock units, performance stock units and restricted stock awards (collectively, the “awards”) as of August 23, 2021 equal to $ 3.20 per award. Additionally, the Company’s Board of Directors approved a reduction in the strike price on all outstanding vested and unvested stock options by the amount of the dividend payment. Further, with respect to stock options and awards held by employees of Performance Chemicals at the time of the sale (see Note 4 to these consolidated financial statements for further information), the Company’s Board of Directors approved modifications to the post-termination stock option exercise, and stock option and award vesting periods. The modifications provided that all stock options held by Performance Chemicals employees that were vested as of the date of the sale are eligible to be exercised for a period of one year from the date of the sale. Additionally, modifications to unvested stock options and awards allowed holders to continue to vest in those instruments under the original terms of the instruments for a period of up to one year from the date of sale, depending on the award. The terms of the modifications to the Performance Chemicals awards are contingent upon the employee providing continued service to the Buyer. The modifications impacted all holders of the Company’s stock options and awards, and along with modifications for a retired executive during the same period, resulted in incremental stock-based compensation expense recognized at the time of the modifications of $ 6,667 during the year ended December 31, 2021. Of this amount, $ 2,635 was included in loss from discontinued operations, net of tax on the Company’s consolidated statements of income. F-60 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Stock Options The Company has issued stock options to purchase Ecovyst Inc. common stock as part of its equity incentive compensation program. There are various vesting conditions associated with stock options issued prior to the launch of the Company’s initial public offering (“IPO”) in September 2017, including satisfaction of certain service and/or performance based conditions. Subsequent to the IPO, the Company’s stock option grants have been subject to graded vesting conditions based on service. The maximum contractual term of the Company’s stock options is ten years . The following table summarizes the activity of common stock options for the period from December 31, 2020 through the year ended December 31, 2023: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2020 2,173,331 $ 9.84 (1) Exercised ( 208,500 ) $ 3.56 Forfeited ( 39,996 ) $ 3.53 Expired ( 40,484 ) $ 14.52 Outstanding at December 31, 2021 1,884,351 $ 6.99 (2) Exercised ( 199,970 ) $ 3.06 Forfeited ( 51,860 ) $ 3.98 Expired ( 111,524 ) $ 11.97 Outstanding at December 31, 2022 1,520,997 $ 7.24 Exercised ( 197,941 ) $ 2.58 Forfeited ( 284,956 ) $ 3.39 Expired ( 328,677 ) $ 12.36 Outstanding at December 31, 2023 709,423 $ 7.73 3.14 $ 2,322 Exercisable at December 31, 2023 709,423 $ 7.73 3.14 $ 2,322 (1) On December 14, 2020, the Company’s Board of Directors declared a special cash dividend of $ 1.80 per share to the stockholders of record at the close of business on December 31, 2020, using after tax cash proceeds and cash on hand from the sale of the Performance Materials business. This reflects the impact of the reduction in the strike price on all outstanding vested and unvested stock options by $ 1.80 per share. (2) Reflects the impact of the reduction in the strike price on all outstanding vested and unvested stock options by $ 3.20 per share as described above. The aggregate intrinsic value per the above table represents the difference between the fair value the Company’s common stock on the last trading day of the reporting period (determined in accordance with the plan terms) and the exercise price of in-the-money stock options multiplied by the respective number of stock options as of that date. The total intrinsic value of stock options exercised were $ 1,693 , $ 1,306 , and $ 1,767 during the years ended December 31, 2023, 2022 and 2021 respectively. Additionally, cash proceeds received by the Company from the exercise of stock options were no t material for the years ended December 31, 2023, 2022 and 2021 respectively. There were no stock option awards granted during the years ended December 31, 2023, 2022 and 2021. The Company uses the Black-Scholes option pricing model to determine the fair value of its stock option grants. F-61 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Restricted Stock Awards, Restricted Stock Units and Performance Stock Units Restricted Stock Awards The Company has granted restricted stock awards subject to vesting conditions based on (1) service only, (2) performance only, or (3) a combination of service and performance conditions, dependent on which event occurs first. The vesting requirements for the majority of these awards were based upon the achievement of a performance condition. As defined in the award agreements, each award subject to the performance condition fully vests upon 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 the Company, 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 the Company’s restricted stock awards also governs the achievement of the performance vesting condition for the Company’s stock options. As of December 31, 2023, all of the Company’s outstanding unvested restricted stock awards were subject to the performance vesting condition. In addition to restricted stock awards, the Company has granted restricted stock units and performance stock units as part of its equity incentive compensation program. Restricted Stock Units Each restricted stock unit provides the recipient with the right to receive a share of common stock subject to graded vesting terms based on service, which generally requires one year of service for members of the Company’s board of directors and three years of service for employees. The value of the restricted stock units granted by the Company is based on the average of the high and low trading prices of the Company’s common stock on the NYSE on the preceding trading day, in accordance with the Company’s policy for valuing such awards. Compensation expense related to the restricted stock units is recognized on a straight-line basis over the respective vesting period. Performance Stock Units 2023 Grants During the year ended December 31, 2023, the Company granted 721,537 performance stock units (at target) under its equity incentive plan. The performance stock units granted during the year ended December 31, 2023 provide the recipients with the right to receive shares of common stock dependent on the achievement of a TSR goal, and are generally subject to the provision of service through the vesting date of the award. The performance period for the TSR goal is measured based on a three-year performance period from January 1, 2023 through December 31, 2025. The TSR goal is based on the Company’s actual TSR percentage increase over the performance period. Depending on the Company’s performance relative to the TSR goal, each performance stock unit award recipient is eligible to receive a percentage of the target number of shares granted to the recipient, ranging from zero to 200 %. The performance stock units, to the extent earned, will vest on the date the Compensation Committee certifies the achievement of the performance metric for the three-year period ending December 31, 2025 which will occur subsequent to the end of the performance period and after the Company files its annual consolidated financial statements for the year ending December 31, 2025. The Company used a Monte Carlo simulation to estimate the $ 12.27 weighted average fair value of the awards for the year ended December 31, 2023. F-62 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 2022 Grants During the year ended December 31, 2022, the Company granted 295,132 performance stock units (at target) under its equity incentive plan. The performance stock units granted during the year ended December 31, 2022 provide the recipients with the right to receive shares of common stock dependent on the achievement of a TSR goal, and are generally subject to the provision of service through the vesting date of the award. The performance period for the TSR goal is measured based on a three-year performance period from January 1, 2022 through December 31, 2024. The TSR goal is based on the Company’s actual TSR percentage increase over the performance period. Depending on the Company’s performance relative to the TSR goal, each performance stock unit award recipient is eligible to receive a percentage of the target number of shares granted to the recipient, ranging from zero to 200 %. The performance stock units, to the extent earned, will vest on the date the Compensation Committee certifies the achievement of the performance metric for the three-year period ending December 31, 2024, which will occur subsequent to the end of the performance period and after the Company files its annual consolidated financial statements for the year ending December 31, 2024. The Company used a Monte Carlo simulation to estimate the $ 8.82 weighted average fair value of the awards. 2021 Grants The Company granted 211,985 performance stock units (at target) during the year ended December 31, 2021 that provide the recipients with the right to receive shares of common stock dependent on the achievement of a TSR goal, and are generally subject to the provision of service through the vesting date of the award. The performance period for the TSR goal is measured based on a three-year performance period from January 1, 2021 through December 31, 2023. The TSR goal is based on the Company’s actual TSR percentage increase over the performance period. Depending on the Company’s performance relative to the TSR goal, each performance stock unit award recipient is eligible to earn a percentage of the target number of shares granted to the recipient, ranging from zero to 200 %. The performance stock units, to the extent earned, will vest on the date the Compensation Committee certifies the achievement of the performance metric for the three-year period ending December 31, 2023, which will occur subsequent to the end of the performance period and after the Company files its annual consolidated financial statements for the year ending December 31, 2023. The Company used a Monte Carlo simulation to estimate the $ 13.21 weighted average fair value of the awards. 2020 Grants In March 2023, the Compensation Committee certified the achievement of the performance metrics for the three-year period ending December 31, 2022, related to the performance stock units (“PSUs”) granted during the year ended December 31, 2020. Fifty percent of the target number of such PSUs could be earned depending on performance against a Company-specific financial performance target, and 50 % of the target number of such PSUs could be earned depending on performance against a TSR goal, subject to the provision of service through the vesting date of the awards. The Company-specific financial performance target and the TSR goal were measured independently of each other, and each PSU award recipient was eligible to earn a percentage of the target number of shares granted to the recipient, ranging from zero to 200 %. The awards vested during the year ended December 31, 2023 as follows: 53.3 % of target with respect to the portion of the PSU award subject to the Company-specific financial measure, and 56.0 % of target with respect to the portion of the PSU award subject to the TSR goal. Weighted Average Assumptions The following table shows the weighted average assumptions for each of the unvested grants: 2023 Grants 2022 Grants 2021 Grants Expected dividend yield — % — % — % Risk-free interest rate 3.80 % 1.51 % 0.20 % Expected volatility 48.82 % 44.51 % 41.70 % Expected term (in years) 2.96 2.91 2.95 F-63 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Award Activity The following table summarizes the activity of restricted stock awards, restricted stock units and performance stock units for the period from December 31, 2020 through the year ended December 31, 2023: Restricted Stock Awards Restricted Stock Units Performance Stock Units Number of Shares Weighted Average Grant Date Fair Value (per share) Number of Units Weighted Average Grant Date Fair Value (per share) Number of Units Weighted Average Grant Date Fair Value (per share) Nonvested as of December 31, 2020 897,015 $ 13.80 (1) 1,841,139 $ 16.14 965,736 (2) $ 17.69 Granted — $ — 1,697,623 $ 15.39 211,985 $ 13.21 Vested — $ — ( 773,619 ) $ 16.00 — $ — Forfeited ( 263,291 ) $ 15.31 (1) ( 257,722 ) $ 16.03 ( 60,166 ) $ 17.11 Nonvested as of December 31, 2021 633,724 $ 15.84 (1) 2,507,421 $ 15.68 1,117,555 (2) $ 16.91 Granted — $ — 2,779,690 $ 10.28 295,132 $ 8.82 Vested ( 84,903 ) $ 8.83 ( 1,550,969 ) $ 15.08 ( 496,442 ) $ 15.41 Forfeited ( 271,765 ) $ 15.84 ( 1,271,424 ) $ 12.27 ( 276,713 ) $ 12.33 Nonvested as of December 31, 2022 277,056 $ 15.66 2,464,718 $ 11.73 639,532 (2) $ 16.32 Granted 5,081 $ 9.84 1,195,835 $ 9.84 721,537 $ 12.28 Vested ( 5,081 ) $ 9.84 ( 1,436,301 ) $ 11.84 ( 200,204 ) $ 20.16 Forfeited ( 277,056 ) $ 15.66 ( 261,424 ) $ 11.27 ( 201,648 ) $ 18.57 Nonvested as of December 31, 2023 — $ — 1,962,828 $ 10.55 959,217 (2) $ 11.84 (1) Reflects the impact of the modification on all unvested restricted stock awards as described above. (2) Based on target. The total fair value of restricted stock awards that vested during the years ended December 31, 2023, 2022 and 2021 was $ 50 , $ 749 and zero , respectively. The total fair value of restricted stock units that vested during the years ended December 31, 2023, 2022 and 2021 was $ 17,008 , $ 15,579 and $ 11,507 , respectively. The total fair value of performance stock units that vested during the years ended December 31, 2023, 2022 and 2021 was $ 4,035 , $ 5,277 and zero , respectively. Stock-Based Compensation Expense For the years ended December 31, 2023, 2022 and 2021, total stock-based compensation expense for the Company on a continuing operations basis was $ 16,031 , $ 20,632 and $ 31,838 , respectively. The associated income tax benefit recognized in the consolidated statements of income for the years ended December 31, 2023, 2022 and 2021 was $ 1,826 , $ 2,799 and $ 7,735 , respectively. As of December 31, 2023, there was no unrecognized compensation cost related to nonvested restricted stock awards subject to service vesting conditions. As of December 31, 2023, unrecognized compensation cost was $ 9,760 for restricted stock units and $ 6,360 for performance stock units. The weighted-average period over which these costs are expected to be recognized at December 31, 2023 is 1.69 years for the restricted stock units and 2.08 years for the performance stock units. No expense has been recognized for any stock options subject to the performance condition for the years ended December 31, 2023, 2022 and 2021, and no expense has been recognized for any restricted stock awards subject to the performance condition for the years ended December 31, 2023 and 2022, as the performance-based criteria was not achieved nor considered probable of achievement. F-64 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 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. If an exit event occurs that exceeded the defined threshold, then all of these restricted stock awards and stock options of the Company vest 100 %, with no potential for partial vesting or excess achievement. If an exit event or events occurs with no further possibility of meeting the defined threshold, then all of the Company’s restricted stock awards and stock options subject to the performance vesting condition will be forfeited. In addition to the defined liquidity event, subsequent to the Company’s IPO, the performance vesting condition can also be achieved if the average closing trading price of the Company’s common stock on the NYSE over any consecutive ten-day trading period equals or exceeds a price that would be equivalent to the achievement of the threshold proceeds to CCMP, a former stockholder. When a liquidity event occurred on March 7, 2023, the investment funds affiliated with CCMP received proceeds that did not exceed the defined thresholds. As a result, all of the Company’s restricted stock awards and stock options subject to the performance condition were forfeited and cancelled. See Note 22 to these consolidated financial statements for further information on the number of restricted stock awards and stock options outstanding subject to performance-based vesting. 22. Earnings per Share: Basic earnings per share is calculated as income (loss) available to common stockholders, divided by the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding during the period for the computation of basic earnings per share excludes restricted stock awards that have legally been issued but are nonvested during the period, as the sale of these shares is prohibited pending satisfaction of certain vesting conditions by the award recipients in order to earn the rights to the shares (see Note 21 to these consolidated financial statements for further information regarding outstanding nonvested restricted stock awards). Diluted earnings per share is calculated as income (loss) available to common stockholders, divided by the weighted average number of common and potential common shares outstanding during the period, if dilutive. Potential common shares reflect (1) unvested restricted stock awards and restricted stock units with service vesting conditions, (2) performance stock units with vesting conditions considered probable of achievement and (3) options to purchase common stock, all of which have been included in the diluted earnings per share calculation using the treasury stock method. The reconciliation from basic to diluted weighted average shares outstanding is as follows: Years ended December 31, 2023 2022 2021 Weighted average shares outstanding – Basic 118,367,214 133,601,322 136,167,384 Dilutive effect of unvested common shares and restricted stock units with service conditions, performance stock units considered probable of vesting and assumed stock option exercises and conversions 1,120,495 1,486,850 1,541,547 Weighted average shares outstanding – Diluted 119,487,709 135,088,172 137,708,931 F-65 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Basic and diluted income (loss) per share are calculated as follows: Years ended December 31, 2023 2022 2021 Numerator: Income from continuing operations attributable to Ecovyst Inc. $ 71,154 $ 69,795 $ 1,794 Income (loss) from discontinued operations attributable to Ecovyst Inc. — 3,902 ( 141,743 ) Net income (loss) attributable to Ecovyst Inc. $ 71,154 $ 73,697 $ ( 139,949 ) Denominator: Weighted average shares outstanding – Basic 118,367,214 133,601,322 136,167,384 Weighted average shares outstanding – Diluted 119,487,709 135,088,172 137,708,931 Net income (loss) per share: Basic income per share - continuing operations $ 0.60 $ 0.52 $ 0.01 Diluted income per share - continuing operations $ 0.60 $ 0.52 $ 0.01 Basic income (loss) per share - discontinued operations $ — $ 0.03 $ ( 1.04 ) Diluted income (loss) per share - discontinued operations $ — $ 0.03 $ ( 1.03 ) Basic income (loss) per share $ 0.60 $ 0.55 $ ( 1.03 ) Diluted income (loss) per share $ 0.60 $ 0.55 $ ( 1.02 ) The table below presents the details of the Company’s weighted average equity-based awards outstanding during each respective year that were excluded from the calculation of diluted earnings per share: Years ended December 31, 2023 2022 2021 Restricted stock awards with performance only targets not yet achieved — 539,688 839,432 Stock options with performance only targets not yet achieved 51,526 309,984 373,105 Anti-dilutive restricted stock units and performance stock units 286,729 20,497 6,214 Anti-dilutive stock options 508,623 776,594 244,473 Restricted stock awards and stock options with performance only vesting conditions were not included in the dilution calculation, as the performance targets have not been achieved nor were probable of achievement as of the end of the respective periods. These awards and stock options were canceled on March 7, 2023 (see Note 21 of these consolidated financial statements for further information). Certain stock options to purchase shares of common stock were excluded from the computation of diluted earnings per share for the respective periods because the options’ exercise price was greater than the average market price of the common shares. These stock options and anti-dilutive awards are not included in the dilution calculation, as their inclusion would have the effect of increasing diluted income per share or reducing diluted loss per share. F-66 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 23. Commitments and Contingent Liabilities: Environmental Contingencies There is a risk of environmental impact in the Company’s manufacturing operations. The Company’s environmental policies and practices are designed to comply with existing laws and regulations and to minimize the possibility of significant environmental impact. The Company is also subject to various other lawsuits and claims with respect to matters such as governmental regulations, labor and other actions arising out of the normal course of business. All claims that are probable and reasonably estimable have been accrued for in the Company’s consolidated financial statements. When these matters are ultimately concluded and determined, the Company believes that there will be no material adverse effect on its consolidated financial position, results of operations or liquidity. The Company has recorded a reserve of $ 313 and $ 306 as of December 31, 2023 and 2022, respectively, to address remaining subsurface remedial and wetlands/marsh management activities at the Company’s Martinez, CA site. Although currently a sulfuric acid regeneration plant, the site originally was operated by Mountain Copper Company (“Mococo”) as a copper smelter. Also, the site sold iron pyrite to various customers and allowed their customers to deposit waste iron pyrite cinder and slag on the site. The property is adjacent to Peyton Slough, where Mococo had a permitted discharge point from its process. In 1997, the San Francisco Bay Regional Water Quality Control Board (“RWQCB”) required characterization and remediation of Peyton Slough for Copper, Zinc and Acidic Soils. Various remediation activities were undertaken and completed, and the site has received final concurrence from the Army Corps with respect to the completed work. The RWQCB has agreed that Ecoservices, has achieved the goals for vegetative cover. The current marsh condition is being sustained by the opening and subsequent closing of the tide gates on a periodic basis. The Company is continuing to indicate to the RWQCB that a plan to involve impacted stakeholders and to work towards development of an alliance for operating, maintaining and funding the tide gates is appropriate. The Company is currently in the process of applying for modified permits for the long-term maintenance of Peyton Slough. As of December 31, 2023 and 2022, the Company has recorded a reserve of $ 121 and $ 102 , respectively, for subsurface remediation, including the Soil Vapor Extraction Project, at the Company’s Dominguez, CA site. In the 1980s and 1990s, the EPA and the Los Angeles Regional Water Quality Control Board conducted investigations of the site due to historic chlorinated pesticide and chlorinated solvent use. Soil and groundwater beneath the site were impacted by chlorinated solvents and associated breakdown products, petroleum hydrocarbons, chlorinated pesticides and metals. A Corrective Measures Plan approved in October 2011 requires (1) soil vapor extraction (“SVE”) in affected areas, (2) covering of unpaved areas containing pesticide impacted soil, and (3) annual groundwater monitoring of the perched water-bearing zone. Annual groundwater sampling and soil vapor monitoring indicates that the SVE system has been effective in reducing subsurface contaminant levels. The Company is moving in the direction of rendering the SVE system dormant and potentially closing this matter within the next few years following rebound testing, including the preparation of cleanup goals as requested by the California Department of Toxic Substances Control. Letters of Credit At December 31, 2023, the Company had outstanding letters of credit of $ 4,043 . Letters of credit are guarantees of payment to third parties. The Company’s letters of credit are used primarily as collateral for various items, including environmental, energy and insurance payments. The letters of credit are supported by the Company’s ABL facility. F-67 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 24. Related Party Transactions: The Company maintains certain policies and procedures for the review, approval and ratification of related party transactions to ensure that all transactions with selected parties are fair, reasonable and in the Company’s best interests. All significant relationships and transactions are separately identified by management if they meet the definition of a related party or a related party transaction. Related party transactions include transactions that occurred during the year, or are currently proposed, in which the Company was or will be a participant, and for which any related person had or will have a direct or indirect material interest. All related party transactions are reviewed, approved and documented by the appropriate level of the Company’s management in accordance with these policies and procedures. Joint Venture Agreement The Company entered into a joint venture agreement (the “ZI Partnership Agreement”) in 1988 with Shell Catalysts & Technologies, an affiliate of Royal Dutch Shell plc, to form Zeolyst International, a 50/50 joint venture partnership (the “Partnership”). Under the terms of the ZI Partnership Agreement, the Partnership leases certain land used in its Kansas City production facilities from Ecovyst. This lease, which has been recorded as an operating lease, provided for rental payments to the Company of $ 310 , $ 310 and $ 310 during the years ended December 31, 2023, 2022 and 2021, respectively. The terms of this lease are evergreen as long as the ZI Partnership Agreement is in place. The Partnership had $ 236 sales to the Company during the year ended December 31, 2023, while no sales were made to the Company during the years December 31, 2022 and 2021, respectively. The Partnership purchases certain of its raw materials from the Company and is charged for various manufacturing costs incurred at the Company’s Kansas City production facility. The amount of these costs charged to the Partnership were $ 20,594 , $ 23,699 and $ 21,778 for the years ended December 31, 2023, 2022 and 2021, respectively. Certain administrative, marketing, engineering, management-related, and research and development services are provided to the Partnership by the Company. During the years ended December 31, 2023, 2022 and 2021, the Partnership was charged $ 14,758 , $ 13,908 and $ 11,406 , respectively, for these services. In addition, the Partnership was charged certain product demonstration costs of $ 1,819 , $ 1,621 and $ 924 during the years ended December 31, 2023, 2022 and 2021, respectively. These charges to the Partnership are recorded as reductions in either cost of goods sold or selling, general and administrative expenses in the consolidated statements of income, depending on the nature of the expenditures. As of December 31, 2023 and 2022, the Company had an accounts receivable from the Partnership of $ 3,164 and $ 2,636 . As of December 31, 2023 and 2022, there were no accounts payable with the Partnership. Other From time to time, the Company makes sales to and purchases raw materials from portfolio companies of funds that are affiliated with INEOS Capital Partners. The Company had sales of $ 3,395 , $ 10,880 and $ 3,923 to companies affiliated with INEOS Capital Partners during the years ended December 31, 2023, 2022, and December 31, 2021, respectively. Purchases of raw materials from companies affiliated with INEOS Capital Partners were immaterial for the years ended December 31, 2023, 2022 and 2021. F-68 ECOVYST INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) 25. Supplemental Cash Flow Information: The following table presents supplemental cash flow information for the Company, which includes activity from both continuing and discontinued operations: Years ended December 31, 2023 2022 2021 Cash paid during the year for: Income taxes, net of refunds $ 22,437 $ 25,556 $ 11,843 Interest (1) 42,081 35,370 59,040 Non-cash investing activity: Capital expenditures acquired on account but unpaid as of the year end 3,427 4,653 6,116 Non-cash financing activities (2) : Accrued excise tax on share repurchases (Note 7) 638 — — (1) Cash paid for interest is shown net of capitalized interest and includes the cash received or paid on the Company’s interest rate cap agreements designated as cash flow hedges for the periods presented. Cash paid for interest also excludes $ 2,307 of net interest proceeds on swaps designated as net investment hedges for the year ended December 31, 2021, which was included within cash flows from investing activities, discontinued operations in the Company’s consolidated statements of cash flows. (2) For the supplemental non-cash information on lease liabilities arising from obtaining right-of-use lease assets, see Note 12 to these consolidated financial statements for further information. 26. Subsequent Events: The Company has evaluated subsequent events since the balance sheet date and determined that there are no additional matters to disclose. F-69 Table of Contents SCHEDULE I ECOVYST INC. AND SUBSIDIARIES (PARENT) CONDENSED FINANCIAL INFORMATION CONDENSED STATEMENTS OF INCOME (in thousands) Years ended December 31, 2023 2022 2021 Stock compensation expense $ 16,031 $ 20,632 $ 39,523 Equity in net (income) loss from subsidiaries ( 87,185 ) ( 94,329 ) 100,426 Net income (loss) 71,154 73,697 ( 139,949 ) Other comprehensive income (loss), net of tax: Pension and postretirement benefits 1,120 ( 2,676 ) 9,530 Net gain (loss) from hedging activities ( 12,126 ) 24,382 2,914 Foreign currency translation 4,056 ( 9,922 ) ( 2,248 ) Total other comprehensive income ( 6,950 ) 11,784 10,196 Comprehensive income (loss) $ 64,204 $ 85,481 $ ( 129,753 ) See accompanying notes to condensed financial statements. F-70 Table of Contents SCHEDULE I ECOVYST INC. AND SUBSIDIARIES (PARENT) CONDENSED FINANCIAL INFORMATION CONDENSED BALANCE SHEETS (in thousands, except share and per share amounts) December 31, 2023 December 31, 2022 ASSETS Investment in subsidiaries $ 705,464 $ 707,229 Total assets $ 705,464 $ 707,229 LIABILITIES Total liabilities $ — $ — STOCKHOLDERS' EQUITY Common stock ( 0.01 par); authorized shares 450,000,000 ; issued shares 140,744,045 and 139,571,272 on December 31, 2023 and 2022, respectively; outstanding shares 116,116,895 and 122,186,238 on December 31, 2023 and 2022, respectively 1,407 1,396 Preferred stock ( 0.01 par); authorized shares 50,000,000 ; no shares issued or outstanding on December 31, 2023 and 2022, respectively — — Additional paid-in capital 1,102,581 1,091,475 Accumulated deficit ( 170,856 ) ( 242,010 ) Treasury stock, at cost; shares 24,627,150 and 17,385,034 on December 31, 2023 and 2022, respectively ( 226,710 ) ( 149,624 ) Accumulated other comprehensive (loss) income ( 958 ) 5,992 Total equity 705,464 707,229 Total liabilities and equity $ 705,464 $ 707,229 See accompanying notes to condensed financial statements. F-71 Table of Contents SCHEDULE I ECOVYST INC. AND SUBSIDIARIES (PARENT) CONDENSED FINANCIAL INFORMATION CONDENSED STATEMENTS OF CASH FLOWS (in thousands) Years ended December 31, 2023 2022 2021 Cash flows from operating activities: Net income (loss) $ 71,154 $ 73,697 $ ( 139,949 ) Adjustments to reconcile net income to net cash provided by operating activities: Equity in net income from subsidiaries ( 87,185 ) ( 94,329 ) 100,426 Stock compensation expense 16,031 20,632 39,523 Net cash provided by operating activities — — — Cash flows from investing activities: Distribution from subsidiaries — — 435,593 Net cash provided by investing activities — — 435,593 Cash flows from financing activities: Dividends paid to stockholders — — ( 435,593 ) Net cash used in financing activities — — ( 435,593 ) Effect of exchange rate changes on cash and cash equivalents — — — Net change in cash and cash equivalents — — — Cash and cash equivalents at beginning of period — — — Cash and cash equivalents at end of period of continuing operations $ — $ — $ — See accompanying notes to condensed financial statements. F-72 Table of Contents SCHEDULE I ECOVYST INC. AND SUBSIDIARIES (PARENT) CONDENSED FINANCIAL INFORMATION NOTES TO CONDENSED SCHEDULE I 1. Description of Ecovyst Inc. and Subsidiaries Ecovyst Inc. (“Ecovyst” or the “Parent Company”) is a holding company that conducts substantially all of its business operations through its wholly owned subsidiary, Ecovyst Catalyst Technologies LLC. As specified in certain of Ecovyst Catalyst Technologies LLC’s debt agreements, there are restrictions on the ability of Ecovyst Catalyst Technologies LLC to make payments to its stockholder, Ecovyst, on behalf of its equity interests (refer to Note 16 to the Ecovyst consolidated financial statements for further information regarding Ecovyst debt). 2. Basis of Presentation The accompanying condensed Parent Company financial statements are required in accordance with Rule 4-08(e)(3) of Regulation S-X. These condensed financial statements have been presented on a “parent-only” basis and are not the general-purpose financial statements of Ecovyst. Under a parent-only presentation, the Parent Company’s investment in its consolidated subsidiary is recorded based upon its proportionate share of the subsidiary’s net assets, similar to presenting it under the equity method of accounting. Under the equity method, the investment in subsidiary is stated at cost plus contributions and equity in undistributed income (loss) of the subsidiary, less distributions received since the date of acquisition. These parent-only financial statements should be read in conjunction with Ecovyst’s audited consolidated financial statements and the accompanying notes thereto. 3. Stock-Based Compensation Refer to Note 21 of the notes to the Ecovyst consolidated financial statements for a description of stock-based compensation. 4. Dividends Paid On August 4, 2021, Ecovyst’s Board of Directors declared a special cash dividend of $ 3.20 per share, using the after tax cash proceeds from the sale of the Performance Chemicals business. The dividend was paid on August 23, 2021 to the Company’s stockholders of record at the close of business on August 12, 2021. F-73 Table of Contents Report of Independent Auditors To the Management Committee of Zeolyst International Opinion We have audited the accompanying financial statements of Zeolyst International (the “Partnership”), which comprise the balance sheets as of December 31, 2023 and 2022, and the related statements of operations and accumulated earnings, of changes in partners’ capital and of cash flows for the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “financial statements”). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Partnership and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Emphasis Of Matter As discussed within Footnote 15 to the financial statements, the Partnership has significant related party transactions. Our opinion is not modified with respect to this matter. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Partnership’s ability to continue as a going concern for one year after the date the financial statements are available to be issued. Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with US GAAS, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control. Accordingly, no such opinion is expressed. F-74 Table of Contents • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Partnership's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. /s/ PricewaterhouseCoopers LLP Philadelphia, Pennsylvania February 29, 2024 F-75 Table of Contents ZEOLYST INTERNATIONAL STATEMENTS OF OPERATIONS AND ACCUMULATED EARNINGS (in thousands) Years ended December 31, 2023 2022 2021 Sales $ 312,963 $ 265,060 $ 262,664 Cost of goods sold 212,513 154,498 161,485 Gross profit 100,450 110,562 101,179 Selling, general and administrative expenses (SG&A) 37,203 38,462 33,965 Other operating (income) expense, net (217) (31) 20 Operating income 63,464 72,131 67,194 Interest expense (income), net (453) 270 144 Other expense (income), net (497) 510 988 Net income 64,414 71,351 66,062 Accumulated earnings at beginning of year 266,089 264,738 248,676 Dividends paid (56,000) (70,000) (50,000) Accumulated earnings at end of year $ 274,503 $ 266,089 $ 264,738 See accompanying notes to financial statements. F-76 Table of Contents ZEOLYST INTERNATIONAL BALANCE SHEETS (in thousands) December 31, 2023 December 31, 2022 ASSETS Cash $ 8,417 $ 5,408 Trade receivables, net: Receivables from third parties 70,562 43,363 Receivables from affiliates 43,260 42,622 Inventories 114,822 137,363 Other current assets 1,783 4,733 Total current assets 238,844 233,489 Property, plant and equipment, net 105,211 115,782 Intangible assets 3,900 4,950 Right-of-use lease asset 5,708 5,831 Other long-term assets 7,083 3,504 Total assets $ 360,746 $ 363,556 LIABILITIES Trade accounts payable $ 9,349 $ 8,224 Accounts payable to affiliates 12,178 14,206 Operating lease liability—current 109 109 Accrued liabilities 4,078 4,277 Total current liabilities 25,714 26,816 Operating lease liability—noncurrent 5,599 5,721 Revolver — 10,000 Total liabilities 31,313 42,537 Commitments and contingencies (Note 14) PARTNERS’ CAPITAL Contributed capital 54,930 54,930 Accumulated earnings 274,503 266,089 Net partners’ capital 329,433 321,019 Total liabilities and partners' capital $ 360,746 $ 363,556 See accompanying notes to financial statements. F-77 Table of Contents ZEOLYST INTERNATIONAL STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (in thousands) Contributed capital Accumulated earnings Net partners' capital Ecovyst, Inc.: Balance, December 31, 2020 $ 27,465 $ 124,338 $ 151,803 Dividends paid (25,000) (25,000) Net income 33,031 33,031 Balance, December 31, 2021 $ 27,465 $ 132,369 $ 159,834 Dividends paid (35,000) (35,000) Net income 35,676 35,676 Balance, December 31, 2022 $ 27,465 $ 133,045 $ 160,510 Dividends paid (28,000) (28,000) Net income 32,207 32,207 Balance, December 31, 2023 $ 27,465 $ 137,252 $ 164,717 Shell Catalysts & Technologies: Balance, December 31, 2020 $ 27,465 $ 124,338 $ 151,803 Dividends paid (25,000) (25,000) Net income 33,031 33,031 Balance, December 31, 2021 $ 27,465 $ 132,369 $ 159,834 Dividends paid (35,000) (35,000) Net income 35,676 35,676 Balance, December 31, 2022 $ 27,465 $ 133,045 $ 160,510 Dividends paid (28,000) (28,000) Net income 32,207 32,207 Balance, December 31, 2023 $ 27,465 $ 137,252 $ 164,717 Total partners' capital at December 31, 2021 $ 54,930 $ 264,738 $ 319,668 Total partners' capital at December 31, 2022 $ 54,930 $ 266,089 $ 321,019 Total partners' capital at December 31, 2023 $ 54,930 $ 274,504 $ 329,434 See accompanying notes to financial statements. F-78 Table of Contents ZEOLYST INTERNATIONAL STATEMENTS OF CASH FLOWS (in thousands) Years ended December 31, 2023 2022 2021 Cash flows from operating activities: Net income $ 64,414 $ 71,351 $ 66,062 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 16,282 20,393 18,460 Loss (gain) on sale or disposal of capital assets 79 37 (5) Amortization of deferred financing fees 33 51 45 Net change in returns allowance — 37 340 Net change in inventory reserve 1,319 300 (96) Other (3,597) (3,326) — Working capital changes that provided (used) cash: Receivables, including affiliates (25,010) (15,675) (37,238) Inventories 21,222 (24,764) (15,229) Other current assets 90 (747) (532) Accounts payable, including affiliates (1,352) (6,207) 1,328 Other current liabilities (198) (2,571) 3,883 Net cash provided by operating activities 73,282 38,879 37,018 Cash flows from investing activities: Purchases of property, plant and equipment (4,273) (3,122) (5,054) Net cash used in investing activities (4,273) (3,122) (5,054) Cash flows from financing activities: Draw down of revolver 20,000 46,000 — Payments on revolver (30,000) (36,000) — Revolver re-financing payments — — (150) Payments of cash dividends (56,000) (70,000) (50,000) Net cash used in financing activities (66,000) (60,000) (50,150) Net change in cash 3,009 (24,243) (18,186) Cash at beginning of period 5,408 29,651 47,837 Cash at end of period $ 8,417 $ 5,408 $ 29,651 Non-cash investing activity: Capital expenditures acquired on account but unpaid $ 1,518 $ 1,066 $ 1,969 See accompanying notes to financial statements. F-79 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) 1. Organization: Zeolyst International is a Kansas general partnership (“Partnership”) by and between Ecovyst Catalyst Technologies LLC (“Ecovyst”) and Shell Catalysts & Technologies (formerly referred to as CRI Zeolites Inc. (“CRI”)), a Royal Dutch Shell affiliate (collectively, the “Partners”) formed pursuant to a Partnership Agreement dated February 1, 1988, as amended (“the Agreement”). Pursuant to a Contribution, Assignment, and Assumption Agreement dated July 29, 2021 (the “Contribution Agreement”) by and between Ecovyst and PQ Corporation (“PQ”), PQ transferred and Ecovyst assumed PQ’s interest in the Partnership and the Agreement. The percentage interests as of December 31, 2023 and 2022 are as follows: Ecovyst 50% Shell Catalysts & Technologies 50% The Partnership was formed pursuant to the Kansas Uniform Partnership Act. The Agreement specifies that the partners share equally in capital contributions. The Agreement states that the profits and losses of the Partnership will be allocated in accordance with the partners’ interests in the Partnership. The intent of the Partnership is to develop, manufacture, and sell zeolites and zeolite-containing catalysts. The Partnership has significant transactions with its partners and related affiliates. See Note 15 for further information on related party transactions. 2. Partnership Business: The Partnership manufactures zeolites and zeolytic catalysts that are used by refiners to capture impurities in the processing of petroleum based feed streams while increasing value. The selectivity and activity of zeolites used for this purpose can improve yields and have a general life cycle of 3-4 years. As a result, a significant portion of the Partnership’s customer base tends to change on an annual basis. A significant percentage of the base materials purchased for the Partnership’s manufacturing process are acquired from related parties. In addition, a significant portion of the Partnership’s sales are transacted through Shell Catalysts & Technologies (“Shell”). The Partnership compensates Shell with a 2% sales commission or royalty fee on specific sales transactions. 3. Summary of Significant Accounting Policies: These financial statements have been prepared in accordance with generally accepted accounting principles. These financial statements are accounted for on a historical cost basis and do not reflect the results of any purchase accounting adjustments recorded in the Partners’ respective financial statements. Cash and Cash Equivalents. Cash and cash equivalents include investments with original terms to maturity of 90 days or less from the time of purchase. Restricted Cash. Restricted cash, which is restricted as to withdrawal or usage, is classified separately from cash and cash equivalents on the Partnership’s balance sheets. The Partnership had no restricted cash balances as of December 31, 2023 and 2022. Trade Accounts Receivables and Allowance for Doubtful Accounts. Trade accounts receivables are recorded at the invoiced amount and do not bear interest. The Partnership maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Allowances for doubtful accounts are based on historical experience and known factors regarding specific customers. If the financial condition of the Partnership’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances would be required. Account balances are charged off against the allowance when it is probable the receivable will not be recovered. Inventories. Inventories are stated at the lower of cost or net realizable value, valued on the first-in, first-out (“FIFO”) method. The Partnership establishes reserves for slow-moving and obsolete inventory. F-80 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) Property, Plant and Equipment. Property, plant, and equipment are carried at cost and include expenditures for new facilities and major renewals and betterments. Interest is capitalized on capital projects as applicable. Maintenance, repairs and minor renewals are charged to expense as incurred. When assets are sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in the results of operations. Depreciation is generally provided on the straight-line method based on estimated useful lives of the assets, ranging up to 33 years for buildings and improvements and 10 years for machinery and equipment. We perform an impairment review of property, plant and equipment and other long-lived assets when events and circumstances indicate that those assets may be impaired by comparing the carrying amount of the assets to their fair value. Fair value is determined using quoted market prices where available, or other techniques including discounted cash flows. The Partnership’s estimates of future cash flows involve assumptions concerning future operating performance, economic conditions, and technological changes that may affect the future useful lives of the assets. Leases . The Partnership has an evergreen land lease agreement with a remaining lease term of 28 years as of December 31, 2023. Accounting Standards Codification Topic 842, Leases (“ASC 842”), does not provide definitive guidance as to determining the length of evergreen leasing arrangements. As such, the Partnership estimated the term of the lease agreement to be commensurate with the estimated useful life of the buildings located on the land that is being leased. Upon adoption of ASC 842 on January 1, 2019, the Partnership assigned a 33 year life to the land lease agreement. When the Partnership enters into an arrangement, at inception, the Partnership determines if the arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. The Partnership’s lease arrangement only contains lease components. The Partnership’s lease agreement does not contain any material residual value guarantees or material restrictive covenants. The Partnership recognizes a right-of-use lease asset and lease liability at the lease commencement date based on the present value of the remaining lease payments over the lease term. The Partnership was unable to readily determine the discount rate implicit in the lease agreement in accordance with the policy. As such, the Partnership utilized its incremental borrowing rate over the relevant lease term, 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. Short-term leases, which have an initial term of twelve months or less, are not recorded on the Partnership’s balance sheet. Lease expense for the operating lease is recognized on a straight-line basis over the lease term. The amortization expense component of the right-of-use lease asset is included in cost of goods sold and in selling, general and administrative expenses on the accompanying statements of operations and accumulated earnings. Intangibles and Other Long-term Assets. Other long-term assets primarily include intangible assets, at cost and spare parts. In May 2017, the Partnership made a $6,500 strategic investment for license of materials-based solutions for catalytic and separations processes. In April 2018, the Partnership made a $4,000 strategic investment to buy down royalty obligations related to certain license agreements. The Partnership amortizes these intangible assets over a ten-year period and includes the expense in selling, general and administrative expenses on the accompanying statements of operations and accumulated earnings. These investments are accounted for under the cost method of accounting. The Partnership incurred intangible asset related amortization expense of $1,050 for the years ended December 31, 2023, 2022 and 2021, respectively, related to these investments. F-81 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) Estimated future aggregate amortization expense of intangible assets is as follows: Year Amount 2024 $ 1,050 2025 1,050 2026 1,050 2027 617 2028 133 Thereafter — Total estimated future aggregate amortization expense $ 3,900 Revenue Recognition. In determining the appropriate amount of revenue to be recognized as the Partnership fulfills its obligations under its agreements, the Partnership performs the following steps: (i) identification of the contract with the customer; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Partnership satisfies each performance obligation. The Partnership identifies a contract when an agreement with a customer creates legally enforceable rights and obligations, which occurs when a contract has been approved by both parties, the parties are committed to perform their respective obligations, each party’s rights and payment terms are clearly identified, commercial substance exists and it is probable that the Partnership will collect the consideration to which it is entitled. The Partnership may recognize revenue from bill-and-hold arrangements initiated by a customer. Under these bill-and-hold arrangements, a customer pays for the goods, but does not take physical possession immediately. The Partnership considers satisfaction of performance obligations when they have finished manufacturing the products based on the agreed upon specifications in accordance with the order. These products are custom made to each customer’s specifications and cannot be made available for use with another customer’s order. Once the goods have been segregated in a designated space in the warehouse and the customer has been invoiced, title to the goods and risk of loss has transferred to the customer. The customers have access to their products to inspect and can take possession of even prior to the scheduled delivery dates. The Partnership may offer rebates to customers who have reached a specified volume of optional purchases. The Partnership recognizes rebates given to customers as a reduction of revenue based on an allocation of the cost of honoring rebates earned and claimed to each of the underlying revenue transactions that result in progress by the customer toward earning the rebate. Rebates are recognized at the time revenue is recorded. The Partnership measures the rebate obligation based on the estimated amount of sales that will result in a rebate at the adjusted sales price per the respective sales agreement. The Partnership recognizes revenue when all essential elements of the sales order have shipped and both title and risk of loss has passed to the customer. Hydrocracking and specialty catalyst orders are typically filled by a number of individual shipments, and those shipments may span the end of a fiscal quarter or year. If a portion of the order has not shipped and it is essential to the functionality of the customer’s end use, revenue is recognized when the order is completed. A shipment is considered essential if each individual shipment has no value to the customer on a stand-alone basis and if the remaining shipment is not considered inconsequential and perfunctory. The Partnership currently reserves 2% of the Hydrocracking catalyst sales due to a clause in the contract that allows customers to return up to 5% of the unused products they purchase within 90 days, and based on historical experience. The total sales returns reserve was $1,052 for the years ended December 31, 2023 and 2022, respectively. Shipping and Handling Costs. The Partnership classifies costs related to shipping and handling of products shipped to customers as cost of goods sold. F-82 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) Research and Development: Research and development costs of $15,388, $15,102 and $13,068 for the years ended December 31, 2023, 2022 and 2021, respectively, were expensed as incurred and reported in selling, general and administrative expenses in the accompanying statements of operations and accumulated earnings. Costs include salaries, contractor fees, building costs, utilities and administrative expenses. Foreign Exchange Transactions. The functional currency of the Partnership is the U.S. Dollar. The Partnership enters into transactions that are denominated in other currencies. Gains and losses on foreign currency transactions are included in other (income) / expense, net on the accompanying statements of operations and accumulated earnings. Foreign exchange (gain) loss of $(67), $1,049 and $1,551 were recognized for the years ended December 31, 2023, 2022 and 2021, respectively. Fair Value Measurements. The Partnership’s financial assets and liabilities are reflected in the financial statements at amortized cost which approximates fair market value. Fair value is defined as the price at which an asset could be exchanged in a current transaction between willing market participants. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a market participant, not the amount that would be paid to settle the liability with a creditor. The Partnership’s cash balances approximate fair value due to their short-term maturity. Use of Estimates. The preparation of the Partnership’s financial statements in conformity with generally accepted accounting principles requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Revision of Previously Issued Financial Statements. During the preparation of the financial statements for the year ended December 31, 2023, the Partnership identified an error in prior period cost of goods sold. Although the Partnership has determined that this error did not have a material impact on its previously issued financial statements, it has revised the accompanying financial statements to correct for this error and to reflect the associated decrease in cost of goods sold of $4.9 million and $3.0 million for the years ended December 31, 2022 and December 31, 2021, respectively. In connection with this revision, the Partnership also corrected other immaterial errors in the prior periods, including certain errors that had previously been adjusted for as out of period corrections in the period identified. The revisions had no net impact on cash flows from operating, investing or financing activities in the accompanying statements of cash flows. The applicable notes to the accompanying financial statements have also been revised to correct for these errors. The following table summarizes the effect of the revisions on the affected line items within the accompanying statements of operations and accumulated earnings: Year ended December 31, 2022 Year ended December 31, 2021 As reported Adjustment As revised As reported Adjustment As revised Cost of goods sold 159,367 $ (4,869) $ 154,498 161,593 $ (108) $ 161,485 Gross profit 105,693 4,869 110,562 101,071 108 101,179 Operating income 67,262 4,869 72,131 67,086 108 67,194 Net income 66,482 4,869 71,351 65,954 108 66,062 Accumulated earnings at beginning of year 262,204 2,534 264,738 246,250 2,426 248,676 Accumulated earnings at end of year 258,686 7,403 266,089 262,204 2,534 264,738 F-83 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) The following table summarizes the effect of the revisions on the affected line items within the balance sheets: December 31, 2022 As reported Adjustment As revised ASSETS Inventories $ 138,135 $ (772) $ 137,363 Total current assets 234,261 (772) 233,489 Total assets 364,328 (772) 363,556 LIABILITIES Trade accounts payable 16,399 (8,175) 8,224 Total current liabilities 34,991 (8,175) 26,816 Total liabilities 50,712 (8,175) 42,537 PARTNERS’ CAPITAL Accumulated earnings 258,686 7,403 266,089 Net partners’ capital 313,616 7,403 321,019 Total liabilities and partners' capital 364,328 (772) 363,556 4. Recently Issued Accounting Standards: In October 2023, the Financial Accounting Standards Board (the “FASB”) issued guidance to amend either presentation or disclosure requirements related to fourteen subtopics in the FASB Accounting Standards Codification, that are currently in the SEC Regulation S-X or Regulation S-K. The new guidance was issued in response to the SEC’s ruling on disclosure simplification. For entities subject to existing SEC disclosure requirements, the effective date of each amendment of the topics will be the date that the SEC removes the related disclosure from Regulation S-X or Regulation S-K. The guidance must be applied prospectively, with no early adoption permitted for entities subject to those existing SEC disclosures. The Partnership is currently evaluating the impact of the new guidance as it pertains to the fourteen subtopics that would impact the business and will apply prospectively once in effect. In March 2020 and January 2021, the FASB issued guidance to address certain accounting consequences from the anticipated transition from the use of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The new guidance contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and may be elected over time as reference rate reform activities occur. The time period through which the practical expedients provided in the guidance is available was set to expire on December 31, 2022, but was extended through December 31, 2024 by the FASB in December 2022. During the year ended December 31, 2020, the Partnership elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based on matches the index of the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. In March 2023, the Partnership amended the revolving line to replace LIBOR with a secured overnight financing rate (“SOFR”) as the benchmark interest rate. See Note 11 to these accompanying financial statements for further information. F-84 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) 5. Revenue from Contracts with Customers: The Partnership applies the five-step revenue recognition model to each contract with its customers. Evidence of a contract between the Partnership and its customers may take the form of a master service agreement (“MSA”), a MSA in combination with an underlying purchase order, a combination of a pricing quote with an underlying purchase order or an individual purchase order received from a customer. The Partnership and certain of its customers enter into MSAs that establish the terms, including prices, under which orders to purchase goods may be placed. In cases where the MSA contains a distinct order for goods or contains an enforceable minimum quantity to be purchased by the customer, the Partnership considers the MSA to be evidence of a contract between the Partnership and its customer as the MSA creates enforceable rights and obligations. In cases where the MSA does not contain a distinct order for goods, the Partnership’s contract with a customer is the purchase order issued under the MSA. Customers of the Partnership may also negotiate orders via pricing quotes, which typically detail product pricing, delivery terms and payment information. When a customer procures goods under this method, the Partnership considers the combination of the pricing quote and the purchase order to create enforceable rights and obligations. Absent either a MSA or pricing quote, the Partnership considers an individual purchase order to create enforceable rights and obligations. The Partnership identifies a performance obligation in a contract for each promised good that is separately identifiable from other promises in the contract and for which the customer can benefit from the good. The Partnership’s contracts have a single performance obligation, which is the promise to transfer individual goods to the customer. Single performance obligations are satisfied according to the shipping terms noted within the MSA or purchase order. As described above, the Partnership’s MSAs with its customers may outline prices for individual products or contract provisions. Revenue from product sales are recorded at the sales price, which includes estimates of variable consideration for which reserves are established and which result from discounts, returns or other allowances that are offered within contracts between the Partnership and its customers. The Partnership recognizes revenues when performance obligations under the terms of a contract with its customer are satisfied, which generally occurs at a point in time by transferring control of a product to the customer. The Partnership determines the point in time when a customer obtains control of a product and the Partnership satisfies the performance obligation by considering factors including when the Partnership has a right to payment for the product, the customer has legal title to the product, the Partnership has transferred possession of the product, the customer has assumed the risks and rewards of ownership of the product and the customer has accepted the product. Revenue is measured as the amount of consideration the Partnership expects to receive in exchange for transferring goods. The Partnership does not have any significant payment terms as payment is received at, or shortly after, the point of sale. Contract Assets and Liabilities A contract asset is a right to consideration in exchange for goods that the Partnership has transferred to a customer when that right is conditional on something other than the passage of time. A contract liability exists when the Partnership receives consideration in advance of performance obligations. The Partnership has not recorded any contract assets or contract liabilities on its balance sheet as of December 31, 2023 and 2022. Practical Expedients and Accounting Policy Elections The Partnership has elected to use certain practical expedients and has made certain accounting policy elections as permitted under the new revenue recognition guidance. Certain of the Partnership’s contracts with customers are based on an individual purchase order; thus, the duration of these contracts are for one year or less. The Partnership has made an accounting policy election to omit certain disclosures related to remaining performance obligations for contracts which have an initial term of one year or less. The Partnership uses an output method to recognize revenues related to performance obligations. These performance obligations, as described above, are satisfied within a calendar year. As such, the Partnership has elected to utilize the “as-invoiced” practical expedient, which permits the Partnership to recognize revenue in the amount to which it has a right to invoice the customer, provided that the amount corresponds directly with the value provided by the performance obligation as completed to date. F-85 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) When the Partnership performs shipping and handling activities after the transfer of control to the customer (e.g. when control transfers prior to delivery), they are considered fulfillment activities as opposed to separate performance obligations, and the Partnership recognizes revenue upon the transfer of control to the customer. Accordingly, the costs associated with these shipping and handling activities are accrued when the related revenue is recognized under the Partnership’s policy election. The Partnership expenses incremental costs of obtaining a contract as incurred if the expected amortization period of the asset that the Partnership would have recognized is one year or less. Sales, value added and other taxes the Partnership collects concurrent with revenue producing activities are excluded from revenues. Disaggregated Revenue The following table disaggregates the Partnership’s sales by end use for the years ended December 31, 2023, 2022, and 2021: Years ended December 31, 2023 2022 2021 Clean fuels, emission control & other $ 254,066 $ 206,907 $ 227,586 Polyethylene, polymers & engineered plastics 58,897 58,153 35,078 Total $ 312,963 $ 265,060 $ 262,664 6. Accounts Receivable and Allowance for Doubtful Accounts: The components of accounts receivable are as follows: December 31, 2023 2022 Trade accounts receivable $ 114,874 $ 87,037 Allowance (1,052) (1,052) $ 113,822 $ 85,985 7. Inventories: Inventories were classified is as follows: December 31, 2023 2022 Finished products and work in process $ 106,483 $ 127,203 Raw materials and containers 8,339 10,160 $ 114,822 $ 137,363 F-86 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) 8. Property, Plant and Equipment: A summary of property, plant and equipment, at cost, and related accumulated depreciation is as follows: December 31, 2023 2022 Buildings and improvements $ 69,647 $ 68,580 Machinery and equipment 218,146 213,612 Construction in progress 2,441 3,834 290,234 286,026 Less: accumulated depreciation (185,023) (170,244) $ 105,211 $ 115,782 Depreciation expense was $15,217, $19,254 and $17,197 for the years ended December 31, 2023, 2022, and 2021, respectively. Disposal of assets reduced PP&E and accumulated depreciation by $521, $1,014, and $192, respectively with $79 loss for the year ended December 31, 2023, and a $37 loss and a $5 gain to earnings for the years ended December 31, 2022 and 2021, respectively. 9. Leases: Operating lease costs of $310 are included in cost of goods sold on the accompanying statements of operations and accumulated earnings for the years ended December 31, 2023, 2022 and 2021, respectively. Cash payments on operating leases included in operating cash flows was $310 for the years ended December 31, 2023, 2022, and 2021, respectively. The remaining lease term is 28 years with a weighted average discount rate of 3.25%. The current portion of the lease liability is included on the Partnership’s balance sheets in other current liabilities. There was no finance lease costs for the year ended December 31, 2023. Maturities of lease liabilities as of December 31, 2023 are as follows: Year Operating Lease 2024 $ 310 2025 310 2026 310 2027 310 2028 310 Thereafter 7,130 Total lease payments 8,680 Less: Interest (2,972) Total lease liabilities $ 5,708 F-87 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) 10. Accrued Liabilities: A summary of accrued liabilities is as follows: December 31, 2023 2022 Royalties and license fees $ 2,111 $ 1,597 Commissions 1,212 1,519 Rebates 124 823 Property tax 211 204 Other 420 134 $ 4,078 $ 4,277 11. Revolver: On March 2, 2016, the Partnership entered into a five-year revolving line of credit facility of $60,000, which carries an initial interest rate of LIBOR or the base rate plus an interest margin of 0.75% per annum. On May 26, 2020, this agreement was amended to extend the term to May 25, 2022. On November 30, 2021, this agreement was amended again to extend the term to November 29, 2026. The interest rate on the facility was LIBOR or the base rate plus an interest margin of 1.00% per annum. On March 13, 2023, the Partnership amended the revolving line to replace LIBOR with SOFR as the benchmark interest rate. Following this amendment, the revolving line of credit facility will bear interest at an adjusted term SOFR rate or the base rate plus an interest margin of 1.00% per annum. As of December 31, 2023, availability under this agreement was $60,000. A commitment fee is paid to the bank for this agreement. The revolving credit agreement contains certain restrictions and covenants that require the Partnership to maintain a minimum partners’ equity, as defined, of $200,000 plus 10% of net income, and a minimum EBITDA of $40,000 on a last twelve month basis measured quarterly. The Partnership was in compliance with all covenants during 2023. Cash payments for interest were approximately $157, $306 and $150 for the years ended December 31, 2023, 2022 and 2021, respectively. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction. The carrying amount of the revolving line of credit approximates fair value because it is a short term liquidity tool to fund operations, which is drawn down and paid back with cash generated from operations. F-88 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) 12. Partners’ Contributions: In accordance with the Agreement, in the event that cash flow from operations is insufficient to meet the Partnership’s requirements, following a majority vote by the Management Committee of the Partnership to request capital from the partners, the partners will provide additional capital to enable the Partnership to meet its obligations. No such contributions were made during the years ended December 31, 2023, 2022, or 2021 as the Partnership had the ability to finance operations through cash flow from operations and borrowings under the Partnership’s revolving line of credit facility. 13. Income Taxes: As a partnership, Zeolyst International is not liable for the payment of taxes on income in the U.S. Net income and losses are allocated to the respective partners on an annual basis, and it is the partners’ responsibility to pay income taxes, if any, thereon according to their respective tax positions. 14. Commitments and Contingent Liabilities: In 1998, the Partnership entered into a ten year tolling agreement (“the Tolling Agreement”) with Shell, a related party, for the manufacture of specialty extruded products. Effective January 2004, the 1998 Tolling Agreement was replaced by a new evergreen ten-year tolling agreement. Both parties can terminate this agreement without cause with twenty-four months’ notice. By letter dated January 19, 2024, Shell provided a notice of termination of the Tolling Agreement effective twenty-four months from the date of such letter. The parties are currently negotiating a possible new agreement to replace the Tolling Agreement. The Partnership pays Shell a daily charge rate based on the actual days of production. This charge is included in cost of goods sold and totaled $28,698, $20,134 and $19,617 for the years ended December 31, 2023, 2022 and 2021, respectively. In addition, for certain capital expenditures, that are beneficial to the Partnership, the parties will mutually agree on future adjustments to the daily charge rates or propose an alternative method of the Partnership’s contribution to those costs. During 2007, the Partnership entered into a License Agreement with a third party to obtain exclusive licensing rights to use the technology in the manufacturing, using and selling of Powder catalyst and Shaped catalyst. The consideration for the licensing rights includes (1) a down payment of $3,200 payable in six annual installments to acquire the product license, and (2) royalty payments at a rate of 10% of the Powder and Shaped Net Sale price during the royalty period. As of December 31, 2021, the partnership has paid in full the $3,200 down payment. The product license intangible is being amortized over the life of the agreement on a straight-line basis, which is estimated to be 15 years. The royalty period of 10 years began in 2013, immediately after the date on which the Partnership had cumulatively produced the first 250 metric tons of Powder and Shaped catalyst. If at the end of the Royalty Period, the cumulative royalties actually paid by the Partnership is less than $3,000, the Partnership will be obligated to pay the difference between the $3,000 and the actual cumulative royalty amount. The agreement ended in 2022 and the Partnership paid $216 in March 2022. Amortization expense of $89 and $213 was recognized for the years ended December 31, 2022 and 2021, respectively. There were no liabilities recorded related this agreement for the year ended in December 31, 2022. 15. Related Party Transactions: The Partnership maintains certain policies and procedures for the review, approval, and ratification of related party transactions. All significant relationships and transactions are separately identified by management if they meet the definition of a related party or a related party transaction. Related party transactions include transactions that occurred during the year, in which the Partnership was or will be a participant and which any related person had or will have a direct or indirect material interest. Due to the nature of the Partnership, material related party transactions are identified on a transaction-based approach. The types of transactions identified and reviewed include, but are not limited to, sales of products, purchases of inventory, tolling costs, sales and marketing costs, research and development, and management-related fees. All related party transactions are reviewed, approved and documented by the appropriate level of the Partnership’s management in accordance with these policies and procedures. F-89 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) Ecovyst Pursuant to the Contribution Agreement, PQ transferred and Ecovyst assumed PQ’s interest in a Lease Agreement by and between PQ and the Partnership dated February 1, 1988 (the “Lease”) pursuant to which the Partnership leases certain land used in its Kansas City production facilities, and PQ transferred to Ecovyst the land underlying the Partnership’s Kansas City production facility. The Lease, which has been recorded as an operating lease, provided for rental payments of $310 for the years ended December 31, 2023, 2022 and 2021, respectively. The rent expense is included in the cost of goods sold line item in the accompanying statements of operations and accumulated earnings. The term of the Lease continues as long as the Agreement is in effect. The Partnership purchases certain of its raw materials from Ecovyst and is charged for various manufacturing costs incurred at the Ecovyst Kansas City production facility. The amount of these costs charged to the Partnership by Ecovyst during the years ended December 31, 2023, 2022 and 2021 were $20,594, $23,699 and $21,778, respectively. These costs are a component of production costs and are included in the cost of goods sold line item in the accompanying statements of operations and accumulated earnings when the inventory is sold. Certain administrative, marketing, engineering, management-related, and research and development services are provided to the Partnership by Ecovyst. During the years ended December 31, 2023, 2022 and 2021, the Partnership was charged by Ecovyst $14,758, $13,908 and $11,406, respectively, for these services. These amounts are included in the selling, general and administrative line item in the accompanying statements of operations and accumulated earnings. In addition, certain product demonstration costs of $1,819, $1,621 and $924 during the years ended December 31, 2023, 2022 and 2021, respectively, were recorded in the cost of goods sold line of the accompanying statements of operations and accumulated earnings. The Partnership recognized $236 sales to Ecovyst for the year ended December 31, 2023, while no sales were made to Ecovyst during the years ended December 31, 2022 and 2021, respectively. As of December 31, 2023 and 2022, the accounts payable to affiliates consisted of $3,164 and $2,636 due to Ecovyst. As of December 31, 2023 and 2022, there were no trade receivables due from Ecovyst. On December 18, 2013, PQ and ZI, entered into a real estate tax abatement agreement with the Unified Government of Wyandotte County and Kansas City, Kansas, assigned by PQ to Ecovyst in 2021, that will utilize an Industrial Revenue Bond financing structure to achieve a 75% real estate tax abatement on the value of the improvements that will be constructed during the expansion of Ecovyst’s and ZI’s facilities at the jointly-operated Kansas City, Kansas plant. During the year ended December 31, 2020, the original IRB financing structure from December 2013 was exhausted. In order to fund future plant expansions, the Partnership entered into an additional IRB financing structure with similar terms and conditions, which also provides for 75% real estate tax abatements on the value of future improvements. The financing obligations and the industrial bonds receivable have been presented net, as the financing obligations and the industrial bonds meet the criteria for right of setoff conditions under GAAP. Shell Catalysts & Technologies Shell Catalysts & Technologies include CRI, Criterion, Shell Development Company, Shell Research and Technology Center-Amsterdam, CRI Center Marketing Asia Pacific, Shell International Oil Products, CRI Belgium, CRI Technology Services and Royal Dutch Shell affiliates. As described in Note 2, a significant portion of the Partnership’s sales are transacted through Shell. During the years ended December 31, 2023, 2022 and 2021, the Partnership recognized sales transacted through Shell of $133,618, $108,584 and $78,892, respectively. The Partnership purchases certain of its raw materials and is charged for tolling, customer distribution and packaging costs incurred by Shell. The amount of these costs charged to the Partnership during the years ended December 31, 2023, 2022 and 2021 were $32,282, $23,799 and $24,590, respectively. These costs are a component of production costs and are included in the cost of goods sold line item in the accompanying statements of operations and accumulated earnings when the inventory is sold. Certain engineering, management-related, broker-related, and research and development services are provided to the Partnership by Shell. During the years ended December 31, 2023, 2022 and 2021, the Partnership was charged $20,699, $19,554 and $16,927, respectively, for these services. These amounts are included in the selling, general and administrative line item in the accompanying statements of operations and accumulated earnings. As of December 31, 2023 and 2022, the accounts payable to affiliates balance consisted of $9,014 and $11,570, respectively, due to Shell. Included in trade accounts receivable as of December 31, 2023 and 2022 was $36,149 and $36,030, respectively, of receivables related to sales transacted through Shell, as described above. F-90 Table of Contents ZEOLYST INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (in thousands) Zeolyst C.V. Zeolyst C.V. is a limited partnership formed in 1993 pursuant to a joint venture agreement between PQ Zeolites B.V. and Shell for the purpose of the production of Zeolite powders. The Partnership entered into an agreement with Zeolyst C.V. to purchase Zeolite powders manufactured by Zeolyst C.V. Under the terms of the agreement, products manufactured by Zeolyst C.V. are supplied solely to the Partnership. The Partnership has performed a qualitative and quantitative analysis and concluded that for Zeolyst C.V. for which it holds a variable interest but will not absorb a majority of the expected losses or residual returns, the Partnership is not the primary beneficiary and therefore, this VIE was not consolidated in the Partnership’s financial statements. The Partnership has no unfunded commitments or guarantees as a result of its involvement with Zeolyst C.V. The total carrying value of assets and liabilities for Zeolyst C.V was $114,797 and $11,284 as of December 31, 2023 and was $110,776 and $12,695 as of December 31, 2022, respectively. The Partnership currently does not have any exposure to any losses by Zeolyst C.V. The Partnership has purchased $48,906, $39,027 and $54,366 through the sales agreement during the years ended December 31, 2023, 2022 and 2021, respectively. These costs are a component of production costs and are included in the cost of goods sold line item in the accompanying statements of operations and accumulated earnings when the inventory is sold. As of December 31, 2023 and 2022, the accounts receivable from affiliates balance consisted of $7,111 and $6,592, respectively, due from Zeolyst C.V. As of December 31, 2023 and 2022, there were no accounts payable due to Zeolyst C.V. 16. Subsequent Events: The Partnership has evaluated subsequent events from the balance sheet date through February 29, 2024 and determined there are no further items to disclose. F-91