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What changed in Ecovyst Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Ecovyst Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+399 added−494 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-28)

Top changes in Ecovyst Inc.'s 2023 10-K

399 paragraphs added · 494 removed · 335 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

117 edited+19 added−23 removed51 unchanged
Biggest changeSales including Zeolyst JV Total Sales (1) Key End Uses 2022 2021 2020 Significant Growth Drivers Key Products Clean Fuels, Emission Control & Other 14% 19% 18% • Global regulatory requirements to: • Refining hydrocracking catalysts • Remove sulfur from diesel and gasoline • Emission control catalysts • Remove nitrogen oxides from tailpipe emissions • Catalysts used in the production of renewable fuels • Growing demand for renewable fuels • Catalyst activation • Growing demand for ex-situ catalyst activation to support traditional and renewable fuels production • Aluminum sulfate solution • Improve lubricant characteristics to improve fuel efficiencies • Ammonium bisulfite solution • Municipal and industrial water treatment Polymers & Engineered Plastics 15% 17% 19% • Demand for high-density polyethylene used for strengthening and light weighting components • Catalysts for high-density polyethylene and chemicals syntheses • Demand for increased process efficiency and reduction of by-products in production chemicals • Antiblocks for film packaging • Growing demand for recycling of materials • Niche custom catalyst Regeneration and Treatment Services 36% 35% 38% • Increase gasoline octane in order to improve fuel efficiency while lowering vapor pressure and sulfur to regulated levels • Sulfuric acid regeneration services • High industry utilization • Treatment services • Growing demand for applications in hazardous and non-hazardous waste Industrial, Mining & Automotive 35% 29% 25% • Demand for metals and minerals for low carbon technologies and infrastructure • Sulfuric acid for mining • Demand for a wide range of products including construction materials, auto, consumer goods, and chemicals • Sulfur derivatives for industrial production • Recovery in global oil drilling/U.S. copper production • Sulfur derivatives for nylon production 5 (1) Percentage calculations include $132.6 million, $131.3 million and $128.6 million of sales attributable to the Zeolyst JV, which represents 50% of its total sales for each of the years ended December 31, 2022, 2021 and 2020, respectively.
Biggest changeKey End Uses Significant Growth Drivers Key Products Clean Fuels, Emission Control & Other • Global regulatory requirements to: • Refining hydrocracking catalysts • Reduce sulfur from diesel and gasoline • Emission control catalyst supports • Remove nitrogen oxides from tailpipe emissions • Catalyst supports used in the production of sustainable fuels such as renewable diesel • Growing demand for sustainable fuels • Catalyst used in the production of sustainable aviation fuels • Growing demand for ex-situ catalyst activation to support traditional and sustainability fuels production • Catalyst activation • Improve lubricant characteristics to improve fuel efficiencies • Aluminum sulfate solution • Municipal and industrial water treatment • Ammonium bisulfite solution Polyethylene, Polymers & Engineered Plastics • Demand for high-density polyethylene used for strengthening and light weighting components • Catalysts for high-density polyethylene and chemicals syntheses • Demand for durable packaging • Antiblock for film packaging • Growing demand for recycling of materials • Catalyst for advanced recycling Regeneration and Treatment Services • Increase gasoline octane in order to improve fuel efficiency while lowering vapor pressure and sulfur to regulated levels • Sulfuric acid regeneration services • High industry utilization • Treatment services • Growing demand for applications in hazardous and non-hazardous waste Industrial, Mining & Automotive • Demand for metals and minerals for low carbon technologies and infrastructure • Sulfuric acid for mining • Demand for a wide range of products including construction materials, auto, consumer goods, and chemicals • Sulfur derivatives for industrial production • Recovery in global oil drilling/U.S. copper production • Sulfur derivatives for nylon production 4 December 31, 2023 December 31, 2022 December 31, 2021 Key End Uses Sales % of Sales Zeolyst JV Sales (1) % of Zeolyst JV sales (2) Sales % of Sales Zeolyst JV Sales (1) % of Zeolyst JV sales (2) Sales % of Sales Zeolyst JV Sales (1) % of Zeolyst JV sales (2) Clean Fuels, Emission Control & Other Ecovyst $ 29.9 4.0 % $ — — % $ 29.0 4.0 % $ — — % $ 25.7 4.0 % $ — — % Zeolyst Catalyst — — % 127.0 81.0 % — — % 103.4 78.0 % — — % 113.8 87.0 % Polyethylene, Polymers & Engineered Plastics Ecovyst $ 106.2 15.0 % $ — — % $ 117.7 14.0 % $ — — % $ 110.7 18.0 % $ — — % Zeolyst Catalyst — — % 29.5 19.0 % — — % 29.2 22.0 % — — % 17.5 13.0 % Regeneration and Treatment Services Ecovyst $ 354.6 52.0 % $ — — % $ 342.6 42.0 % $ — — % $ 262.0 43.0 % $ — — % Zeolyst Catalyst — — % — — % — — % — — % — — % — — % Industrial, Mining & Automotive Ecovyst $ 200.4 29.0 % $ — — % $ 330.9 40.0 % $ — — % $ 212.8 35.0 % $ — — % Zeolyst Catalyst — — % — — % — — % — — % — — % — — % Total $ 691.1 $ 156.5 $ 820.2 $ 132.6 $ 611.2 $ 131.3 (1) Represents 50% of the Zeolyst Joint Venture (the “Zeolyst Joint Venture” or “Zeolyst JV”) sales for each of the years ended December 31, 2023, 2022, and 2021, respectively.
In the US, all pertinent chemicals have been designated as “active” under the US EPA Frank R. Lautenberg Chemical Safety for the 21st Century Act. At this time, none have been designated as chemicals which the EPA will prioritize and evaluate for regulation.
In the US, all pertinent chemicals have been designated as “active” under the US Frank R. Lautenberg Chemical Safety for the 21st Century Act. At this time, none have been designated as chemicals which the EPA will prioritize and evaluate for regulation.
We believe that stringent fuel efficiency standards that spur the use of high compression engines requiring higher-octane gasoline and continued stringent regulatory requirements for gasoline will continue to encourage strong alklyate production at our refining customers. We believe that our Ecoservices segment is well positioned to benefit from any related growth in demand for alkylate.
We believe that stringent fuel efficiency standards that spur the use of high compression engines requiring higher-octane gasoline and continued stringent regulatory requirements for gasoline will continue to encourage strong alkylate production at our refining customers. We believe that our Ecoservices segment is well positioned to benefit from any related growth in demand for alkylate.
As a result, we believe that our integrated and strategically located network of facilities and end-to-end logistics assets in the United States provide us with a significant competitive advantage and would be costly for our competitors to replicate. Manufacturing We produce regenerated sulfuric acid and virgin sulfuric acid through our furnace operations.
As a result, we believe that our integrated and strategically located network of facilities and end-to-end logistics assets in the United States provide us with a significant competitive advantage and would be costly for our competitors to replicate. 10 Manufacturing We produce regenerated sulfuric acid and virgin sulfuric acid through our furnace operations.
The Zeolyst Joint Venture competes with global catalyst producers such as Grace, BASF, UOP, Axens, and Haldor Topsoe, while at the same time providing many of them customized zeolite solutions for their product offerings. Some direct competition with niche companies exists, including competitors such as Tosoh and Clariant.
The Zeolyst Joint Venture competes with global catalyst producers such as Grace, BASF, UOP, Axens, and Topsoe, while at the same time providing many of them customized zeolite solutions for their product offerings. Some direct competition with niche companies exists, including competitors such as Tosoh and Clariant.
Zeolyst Joint Venture The Zeolyst Joint Venture is a long-standing partnership with Shell Catalysts & Technologies, an affiliate of Royal Dutch Shell plc. or “Shell”, that dates back to 1988 and is focused on the development, manufacture and sale of zeolite-containing catalysts through manufacturing facilities located in Kansas and the Netherlands.
Zeolyst Joint Venture The Zeolyst Joint Venture is a long-standing partnership with Shell Catalysts & Technologies, an affiliate of Royal Dutch Shell plc. or “Shell”, that dates back to 1988 and is focused on the development, manufacture and sale of zeolite-containing catalysts through manufacturing facilities located in Kansas, USA and the Netherlands.
See “Risk Factors—Risks Related to Our Business — If we are unable to pass on increases in raw 13 material prices, including natural gas, to our customers or to retain or replace our key suppliers, our results of operations and cash flows may be negatively affected”.
See “Risk Factors—Risks Related to Our Business — If we are unable to pass on increases in raw material prices, including natural gas, to our customers or to retain or replace our key suppliers, our results of operations and cash flows may be negatively affected”.
The protection afforded, which may also vary from country to country, depends upon the type of subject matter covered by the patent and the scope of the claims of the patent. In most industrial countries, patent protection may be available for new substances and formulations, as well as for unique applications and production processes.
The protection afforded, which may also vary from country to country, depends upon the type of subject matter covered by the patent and the scope of the claims of the patent. 14 In most industrial countries, patent protection may be available for new substances and formulations, as well as for unique applications and production processes.
We conduct Product Stewardship reviews as part of new product development and routinely evaluate product safety risk for raw materials, intermediates, and products. As a chemical company, we are subject to extensive and evolving regulations regarding the manufacturing, processing, distribution, importing, exporting, and labeling of our products and their raw materials.
We conduct Product Stewardship reviews as part of new product development and routinely evaluate product safety risk for raw materials, intermediates, and products. As a chemical company, we are subject to extensive and evolving regulations regarding the manufacturing, processing, distribution, importing, exporting, and labeling of our products and raw materials.
We maintain appropriate information security policies and procedures reasonably designed to ensure the safeguarding of confidential information including, where appropriate, data encryption, access controls and employee awareness training. 14 We own or have rights to a number of patents relating to our products and processes.
We maintain appropriate information security policies and procedures reasonably designed to ensure the safeguarding of confidential information including, where appropriate, data encryption, access controls and employee awareness training. We own or have rights to a number of patents relating to our products and processes.
We apply the principles of the Environmental Management standard of the International Organization for Standardization (ISO 14001) at our facilities throughout the world. For chemical facilities in the United States, we also adhere to the Responsible Care RC14001 Technical Specifications of the American Chemistry Council.
Again, we apply the principles of the Environmental Management standard of the International Organization for Standardization (ISO 14001) at our facilities throughout the world. For chemical facilities in the United States, we also adhere to the Responsible Care RC14001 Technical Specifications of the American Chemistry Council.
We also have 16 pending trademark applications, which include applications in the United States and worldwide. In addition to our registered and applied-for intellectual property portfolio, we also claim ownership of certain trade secrets and proprietary know-how developed by and used in our business.
We also have 20 pending trademark applications, which include applications in the United States and worldwide. In addition to our registered and applied-for intellectual property portfolio, we also claim ownership of certain trade secrets and proprietary know-how developed by and used in our business.
We also use natural gas in our manufacturing process, with our North American facilities benefiting from the plentiful supplies of shale gas. In addition, we have long-term supply relationships with many of our key raw materials suppliers.
We also use natural gas and electricity in our manufacturing process, with our North American facilities benefiting from the plentiful supplies of shale gas. In addition, we have long-term supply relationships with many of our key raw materials suppliers.
Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Performance Indicators” for discussion of our use of non-GAAP financial measures and reconciliations. (2) Percentage calculations exclude $29.0 million in corporate expenses.
Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Performance Indicators” for discussion of our use of non-GAAP financial measures and reconciliations. (2) Percentage calculations exclude $22.0 million in corporate expenses.
Several active and former facilities currently are undergoing investigation and remediation, including sites in Dominguez, CA and Martinez, CA. Environmental Programs . We have comprehensive health, safety and environmental compliance, auditing and management programs in place to assist in our compliance with applicable regulatory requirements and with internal policies and procedures, as appropriate.
Several active and former facilities currently are undergoing investigation and remediation, including sites in Dominguez, CA and Martinez, CA. Environmental Programs We have comprehensive HSE compliance, auditing and management programs in place to assist in our compliance with applicable regulatory requirements and with internal policies and procedures, as appropriate.
Secured Contractual Pass-through of Raw Material Costs Support Stable Margins We have been able to mitigate the impact of raw material or energy price volatility using a variety of mechanisms, including hedging and raw material cost pass-through mechanisms in our sales contracts and other adjustment provisions.
Secured Contractual Pass-through of Raw Material Costs Support Stable Margins We have been able to mitigate the impact of raw material or energy price volatility using a variety of mechanisms, including raw material cost pass-through mechanisms in our sale contracts and other adjustment provisions.
We also produce a catalyst that is used globally for the production of MMA, the monomer for acrylic engineering resins, a clear scratch-resistant plastic used in sheet or molded form to replace glass and as a durable surface coating.
We also produce a catalyst that is used globally for the production of MMA, the monomer for acrylic engineering resins, a clear scratch-resistant plastic used in sheet or molded form to replace glass and as a durable surface coating and produce a catalyst used for the manufacture of bio-butadiene.
We believe we have good relationships with our employees and their respective works councils, unions or other bargaining representatives. This international strength, supported by our core values of integrity and fairness, fosters a rich culture founded on diversity of thought.
We believe we have good relationships with our employees and their respective works councils, unions or other bargaining representatives. This international strength, supported by our core values of SHINE, fosters a rich culture founded on diversity of thought.
Most of our Ecoservices contracts feature minimum volume protection and/or quarterly price adjustments for items such as commodity inputs, labor, the Chemical Engineering Plant Cost Index and natural gas. In 2022, approximately 83% of our Ecoservices segment sales were sold under contracts that included some form of raw material pass-through clause.
Most of our Ecoservices contracts feature minimum volume protection and/or quarterly price adjustments for items such as commodity inputs, labor, the Chemical Engineering Plant Cost Index and natural gas. In 2023, approximately 80% of our Ecoservices segment sales were sold under contracts that included some form of raw material pass-through clause.
These price adjustments generally reflect our Ecoservices actual cost structure in producing sulfuric acid, and tend to provide us with some protection against volatility in labor, fixed costs and raw material pricing. Freight expenses are generally passed through directly to customers. Our products are predominantly inorganic and carbon-free, and are produced from readily available raw materials.
These price adjustments generally reflect our Ecoservices actual cost structure in producing sulfuric acid, and tend to provide us with some protection against volatility in labor, fixed costs and raw material pricing. Freight expenses are generally passed through directly to customers. Our products are produced from readily available raw materials.
While offering products and services that help our customers to advance their own sustainability goals, we also work to advance our commitment to maintain sound environmental, social and governance (“ESG”) practices, policies and procedures. For example, we: • Were awarded a Gold Sustainability Score from EcoVadis for 2023, a third-party sustainability evaluation company.
While offering products and services that help our customers to advance their own sustainability goals, we also work to advance our commitment to maintain sound environmental, social and governance (“ESG”) practices, policies and procedures. For example, we: • Were awarded a 2024 Platinum Sustainability Score from EcoVadis, a third-party sustainability evaluation company.
We combine our expertise in zeolite supply and technology with our partner’s expertise in global refinery catalyst sales and technology. We have a 50% ownership stake in the Zeolyst Joint Venture. We produce specialty zeolites that are precursors for the production of hydrocracking catalyst and other refinery and renewable fuels catalysts.
We combine our expertise in zeolite supply and technology with our partner’s expertise in global refinery catalyst sales and technology. We have a 50% ownership stake in the Zeolyst Joint Venture. We produce zeolites that are precursors for the production of hydrocracking catalyst and sustainable fuels catalysts.
In our Ecoservices segment, approximately 40% of our production capacity serves customers with staggered multi-year commitment contracts with potential for value pricing resets and cost pass-through for our regeneration services product line that enhances sales and margin predictability and stability.
In our Ecoservices segment, approximately 50% of our production capacity serve customers with staggered multi-year commitment contracts with potential for value pricing resets and cost pass-through for our regeneration services product line that enhances sales and margin predictability and stability.
In the European Union, the REACH regulations came into effect in 2007, with implementation rolling out over time. Registered chemicals then can be subject to further evaluation and potential restrictions. Our high-volume chemicals have been registered under REACH; lower-volume chemicals (mainly catalysts) were registered by the applicable 2018 deadline.
In the European Union, the REACH regulations came into effect in 2007, with implementation rolling out over time. Registered chemicals then can be subject to further evaluation and potential restrictions. Our high-volume chemicals have been registered under REACH; lower-volume chemicals (mainly catalysts) were registered by the applicable 2018 deadline. To date, no further testing has been required.
We believe that our products contribute to lower emissions and cleaner air, higher fuel efficiency and cleaner fuels, and help advance the global transition to clean energy. Specifically, our products and solutions help companies in the production of renewable fuels and help to produce vehicles with improved fuel efficiency and cleaner emissions.
We believe that our products contribute to lower emissions and cleaner air, higher fuel efficiency and cleaner fuels, and key enablers to advance the global transition to clean energy. Specifically, our products and solutions help companies in the production of sustainable fuels and help to produce vehicles with improved fuel efficiency and cleaner emissions.
Because these catalysts are highly technical and customized for our customers to produce resins with specific properties, they are often covered under long-term supply agreements and, in some cases, we are a customer’s sole source supplier.
Because these catalysts are highly technical and customized for our customers to manufacture products with specific properties, they are often covered under long-term supply agreements and, in some cases, we are a customer’s sole source supplier.
We maintain multiple suppliers wherever possible and we seek to hedge our exposure to fluctuations in prices for natural gas. Where possible, we also utilize pass-through clauses for raw material and natural gas costs in our customer contracts.
We maintain multiple suppliers wherever possible and we seek to forward purchase to stabilize our exposure to fluctuations in prices for natural gas. Where possible, we also utilize pass-through clauses for raw material and natural gas costs in our customer contracts.
We believe that our global footprint and efficient network of strategically located manufacturing facilities provides us with a strong competitive advantage in serving our customers both globally and regionally, and that it would be costly for our competitors to replicate our network. In our Catalyst Technologies segment, we primarily compete on a global basis.
We believe that our global footprint and efficient network of strategically located manufacturing facilities provides us with a strong competitive advantage in serving our customers both globally and regionally, and that it would be costly for our competitors to replicate our network. 6 In our Advanced Materials & Catalysts segment, we primarily compete on a global basis.
Our governance programs and policies can be found in the Company’s Ethics section of the sustainability webpages, which is routinely updated and includes a description of our enterprise risk management program and our policies on child labor, human trafficking, anti-harassment, antibribery, and cyber security all of which are evaluated by third-parties, including EcoVadis.
Our governance programs and policies can be found on the Company’s sustainability webpages, which is routinely updated and includes a description of our enterprise risk management program and our policies on child labor, human trafficking, anti-harassment, antibribery, and cybersecurity all of which are evaluated by third-parties, including EcoVadis.
The Zeolyst Joint Venture, (formed in 1988 specifically as Zeolyst International and Zeolyst C.V., our 50% owned joint venture with Shell Catalysts & Technologies, an affiliate of Royal Dutch Shell plc. or “Shell”), supplies high technology specialty zeolites and zeolite-based catalysts to customers for the following major end uses: refining (primarily hydrocracking catalyst and dewaxing), petrochemicals, renewable fuels, and emission control systems for both on-road and non-road diesel engines.
The Zeolyst Joint Venture, (formed in 1988 specifically as Zeolyst International and Zeolyst C.V., our 50% owned joint venture with Shell Catalysts & Technologies, an affiliate of Royal Dutch Shell plc. or “Shell”), supplies high technology specialty zeolites and zeolite-based catalysts to customers for refining of oil primarily hydrocracking catalyst and dewaxing, sustainable fuels and emission control systems for both on-road and non-road diesel engines.
The Adjusted EBITDA of our Catalyst Technologies segment includes our 50% portion of the Adjusted EBITDA of our Zeolyst JV. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation” for a description of the treatment of the Zeolyst Joint Venture in our consolidated financial information.
The Adjusted EBITDA of our Advanced Materials & Catalysts segment includes our 50% portion of the Adjusted EBITDA of our Zeolyst JV. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation” for a description of the treatment of the Zeolyst Joint Venture in our consolidated financial information.
Trends for increased alkylate production are being driven by: rising demand for premium gasoline used in smaller, more efficient turbocharged engines, which requires an alkylate content of approximately 35%-45%, as compared to the 12% alkylate content in regular gasoline; the need for more alkylate to meet the minimum octane ratings in regular gasoline following the continued significant share growth of shale oil refining in the U.S.; the full implementation of Tier 3 gasoline sulfur standards in the United States was enacted for 2020, which requires the blending of additional low sulfur high octane gasoline components such as alkylate; and rising gasoline exports, which generally contain no ethanol and will generally require more alkylate to replace the ethanol in order to meet the minimum octane requirements for the destination countries.
We believe recent trends for increased alkylate production are being driven by: rising demand for premium gasoline used in smaller, more efficient turbocharged engines, which requires an alkylate content of approximately 40%-45%, as compared to the approximately 12%-13% alkylate content in regular gasoline; the need for more alkylate to meet the minimum octane ratings in regular gasoline following the continued significant share growth of shale oil refining in the U.S.; the full implementation of Tier 3 gasoline sulfur standards in the United States enacted in 2020, which requires the blending of additional low sulfur high octane gasoline components such as alkylate; and rising gasoline exports, which gasoline generally contains no ethanol and generally requires more alkylate to replace the missing ethanol in order to meet minimum octane requirements in the destination countries.
Our Ecoservices segment is mostly regional due to shipping costs and our customer integration requirements. Our network of facilities is concentrated in the Gulf Coast and the state of California, where more than 60% of the United States refining capacity is located.
Our Ecoservices segment is mostly regional due to shipping costs and our customer integration requirements. Our network of facilities is concentrated in the Gulf Coast and the state of California, where approximately 65% of the United States refining capacity is located.
These long-term relationships have allowed us to innovate together with our customers to meet evolving demands. For example, we have developed zeolite-based catalysts that are an effective and efficient method to reduce pollutants from heavy- and light-duty diesel engines and enable our customers to meet increasingly stringent vehicle emission standards worldwide.
These long-term relationships have allowed us to innovate together with our customers to meet evolving demands. For example, we have developed zeolite-based catalysts that are effective and efficient at reducing pollutants from heavy- and light-duty diesel engines, enabling our customers to meet increasingly stringent vehicle emission standards worldwide.
In the US, our benefit program is designed to help protect the health and financial well-being of our full-time employees and their family members today, offering a choice of several medical & dental plans, as well as vision, flexible spending accounts, short-term and long-term disability insurance and an employee assistance program.
In the United States, our benefit programs are designed to help protect the health and financial well-being of our full-time employees and their family members, offering a choice of several medical & dental plans, as well as vision, flexible spending accounts, short-term and long-term disability insurance and an employee assistance program.
Today, there are women on the leadership teams of each of our businesses as well as in all our functions: R&D, Finance, HSE and Human Resources. 17 In 2022, our sites continued to work to have a positive impact in the communities in which we operate.
Today, there are women on the leadership teams of each of our businesses as well as in our R&D, Finance, E&S and Human Resources functions. 17 In 2023, our sites continued to work to have a positive impact in the communities in which we operate.
We believe that our products and services incorporate innovative environmental and safety solutions to address evolving customer demands, examples of which include the following: • Increased use of plastics as a substitute for heavier and less versatile materials, such as glass and metal, is driving increased global demand for polyethylene capacity expansions and production.
We believe that our products and services incorporate innovative environmental, sustainability and safety solutions to address evolving customer demands, examples of which include the following: • Increased use of polyethylene-based plastics as a substitute for heavier and less versatile materials and increasing consumption of plastics is driving increased global demand for polyethylene production and also capacity expansions.
We provide treatment services for hazardous/non-hazardous industrial wastes (“Treatment Services”) and with the acquisition of Chem 32, LLC (“Chem32”) in March 2021, and we are also a leader in ex situ sulfiding and pre-activation for hydro-processing catalysts, which are used in production of traditional and renewable fuels.
We provide treatment services for hazardous/non-hazardous industrial wastes (“Treatment Services”) and with the acquisition of Chem32 in March 2021, we are also a leader in ex-situ sulfiding and pre-activation for hydro-processing catalysts, which are used in the production of traditional and sustainable fuels.
We believe that our zeolite catalysts can enable selective catalytic reduction technology to reduce the amount of nitrogen oxides in such exhaust gases by more than 90% and is one of the most cost-effective methods to reduce diesel engine emissions. Competition Our Silica Catalysts product group primarily competes with Grace.
We believe that our zeolite catalysts can enable selective catalytic reduction technology to reduce the amount of nitrogen oxides in such exhaust gases by more than 90% and is one of the most cost-effective methods to reduce diesel engine emissions. Competition Our Advanced Silicas product group primarily competes with Grace with the catalyst components used for the production of polyethylene.
As of December 31, 2022, we had $293.1 million of tax deductible intangibles and goodwill with respect to Eco Services Operations LLC, which provides us with cash tax savings as we generate taxable income. Our Business Segments We are a leading, integrated and innovative global provider of specialty catalysts and services.
As of December 31, 2023, we had $206.9 million of tax deductible intangibles and goodwill with respect to Eco Services Operations LLC, which provides us with cash tax savings as we generate taxable income. Our Business Segments We are a leading integrated and innovative global provider of advanced materials, specialty catalysts and services.
We are a leading supplier of zeolite-based catalyst used to remove sulfur in the refinery hydrocracking process, and emission control catalysts used in the heavy- and light-duty diesel industries to reduce nitrogen oxides emissions.
We are a leading supplier of zeolites used for catalysts that support the production of sustainable fuels, zeolite-based catalyst used to remove sulfur in the refinery hydrocracking process and emission control catalysts used in the heavy- and light-duty diesel industries to reduce nitrogen oxides emissions.
The combination of attractive operating margins and generally predictable maintenance capital expenditure requirements provides the ability to produce attractive cash flows. Our Product End Uses The table below summarizes our key end use applications and products, as well as the significant growth drivers in those applications.
We believe the combination of attractive operating margins, growing end uses and generally predictable maintenance capital expenditure requirements improves our ability to generate attractive cash flows. 3 Our Product End Uses The table below summarizes our key end use applications and products, as well as the significant growth drivers in those applications.
The information available at our sustainability web site includes our inaugural sustainability report, our sustainability goals (and how such goals map to the UN Sustainable Development Goals), materiality matrix, letters of assurance, Global Reporting Initiative (GRI) Disclosure and Sustainability Accounting Standards Board (SASB) Index, our HSES Policy Statement, our Corporate Code of Conduct, our Human Rights Policy Statement, a description of our Ethics & Compliance Complaint and Review Process and our Labor Policy.
The information available on our sustainability website includes our sustainability report, our sustainability goals (and how such goals map to the UN Sustainable Development Goals), materiality matrix, letters of assurance, Global Reporting Initiative (GRI) Disclosure and Sustainability Accounting Standards Board (SASB) Index, our Health Safety Environment & Security Policy Statement, our Corporate Code of Conduct, our Human Rights Policy Statement, a description of our Ethics & Compliance Complaint and Review Process and our Labor Policy.
We have a Global Director of Health, Safety and Process Safety Management as well as Regional HSE Specialists and Managers who are embedded in the field and provide HSE expertise and support to operating sites. Certain, larger sites may have dedicated environmental or safety personnel.
We have a Global Director of Health, Safety and Process Safety Management as well as Regional HSE Specialists and Managers who are embedded in the field and provide HSE expertise and support to operating sites.
Regenerated sulfuric acid is produced by thermally decomposing the spent acid in our furnace into a clean gas stream, which is converted into sulfuric acid. Virgin sulfuric acid is produced by burning sulfur and certain sulfur-rich components at high temperatures within a furnace to create a gas stream.
Regenerated sulfuric acid is produced by thermally decomposing the spent acid in our furnace into a clean gas stream, which is converted into sulfuric acid. Virgin sulfuric acid is produced by burning sulfur and certain sulfur-rich components at high temperatures within a furnace to create a gas stream. The chart below summarizes the manufacturing platform for our Ecoservices segment.
Key raw materials for our segments include: Key Raw Materials Segments Sodium hydroxide ("caustic soda") Ecoservices Sulfur Ecoservices Sodium silicate Catalyst Technologies While natural gas is not a direct feedstock for any individual product, we use natural gas powered furnaces to heat raw materials and create the chemical reactions necessary to manufacture our products.
Key raw materials for our segments include: Key Raw Materials Segments Sodium hydroxide (“caustic soda”) Ecoservices Sulfur Ecoservices Sodium silicate Advanced Materials & Catalysts 13 While natural gas is not a direct feedstock for any individual product, we use natural gas powered furnaces to heat raw materials and create the chemical reactions necessary to manufacture our products.
We maintain policies and procedures to monitor and control health, safety, and environmental risks, and to monitor compliance with applicable state, national, and international health, safety, and environmental requirements. We have a strong health, safety, environmental organization. We maintain a staff of professionals who are responsible for environmental, safety, health and product regulatory compliance.
We maintain policies and procedures to monitor and control HSE risks, and to monitor compliance with applicable state, national, and international HSE requirements. We have a strong HSE organization. We maintain a staff of professionals who are responsible for environmental, safety, health and product regulatory compliance. We have implemented a corporate audit program for all of our facilities.
Leading Supply Positions We believe that we maintain a leading supply position for certain products sold within each of our segments, holding what we estimate to be the number one or two supply share position in 2022 for products that generated more than 90% of our sales and our proportionate 50% share of sales attributable to the Zeolyst JV, respectively.
Leading Supply Positions We believe that we maintain a leading supply position for certain products sold within each of our segments, holding what we estimate to be the number one or two supply share position in 2023 for products that generated more than 90% of our sales.
We believe that our products, which are predominantly inorganic, and services contribute to improving the sustainability of the environment. We conduct operations through two reporting segments: (1) Ecoservices and (2) Catalyst Technologies (including our 50% interest in the Zeolyst Joint Venture). 8 The table below summarizes certain information regarding our two reporting segments for the year ended December 31, 2022.
We believe that our products and services contribute to improving the sustainability of the environment. We conduct operations through two reporting segments: (1) Ecoservices and (2) Advanced Materials & Catalysts (including our 50% interest in the Zeolyst Joint Venture). 8 The table below summarizes certain information regarding our two reporting segments for the year ended December 31, 2023.
We proactively seek to attract, incentivize and retain a talented and motivated workforce. Our global succession planning process is designed to provide sufficient talented personnel to fill key leadership, innovation and manufacturing roles well into the future and to better prepare employees for their future at the Company.
Our global succession planning process is designed to provide sufficient talented personnel to fill key leadership, innovation and manufacturing roles well into the future and to better prepare employees for their future at the Company.
To date, no further testing has been required. 19 Since the promulgation of REACH, other countries have enacted or are in the process of implementing similar comprehensive chemical regulations. These programs include the Korea REACH law, which is requiring registration and potential testing of chemicals, and similar programs under development in the UK, Taiwan, Turkey, India, and elsewhere.
Since the promulgation of REACH, other countries have enacted or are in the process of implementing similar comprehensive chemical regulations. These programs include the Korea REACH law, which is requiring registration and potential testing of chemicals, and similar programs implemented in the UK, Taiwan, Turkey, India, and elsewhere.
Environmental Regulations We are subject to extensive, evolving and increasingly stringent national and local environmental laws and regulations, which address, among other things, the following: • emissions to the air; • discharges to soils and surface and subsurface waters; • other releases into the environment; • prevention and remediation of releases into the indoor or outdoor environment; • generation, handling, storage, transportation, treatment and disposal of waste materials; • maintenance of safe conditions in the workplace; • registration and evaluation of chemicals; 18 • production, handling, labeling or use of chemicals used or produced by us; and • stewardship of products after manufacture.
The further information contained on our website is not incorporated herein by reference and is not a part of this Annual Report on Form 10-K. 18 Environmental Regulations We are subject to extensive, evolving and increasingly stringent national, state and/or local environmental laws and regulations, which address, among other things, the following: • emissions to the air; • discharges to soils and surface and subsurface waters; • other releases into the environment; • prevention and remediation of releases into the indoor or outdoor environment; • generation, handling, storage, transportation, treatment and disposal of waste materials; • maintenance of safe conditions in the workplace; • registration and evaluation of chemicals; • production, handling, labeling or use of chemicals used or produced by us; and • stewardship of products after manufacture.
We believe we are a leader in each of our business segments, holding what we estimate to be a number one or number two supply share position for products that generated more than 90% of our 2022 sales and our proportionate 50% share of sales attributable to the Zeolyst JV, respectively.
We believe we are a leader in each of our business segments, holding what we estimate to be a number one or number two supply share position for products that generated more than 90% of our 2023 sales.
As of December 31, 2022, we owned 20 patented inventions in the United States, with 197 patents issued in countries around the world and 40 patent applications pending worldwide. As of December 31, 2022, we also had trademark rights in 50 trademark registrations worldwide, including 5 U.S. trademark registrations.
As of December 31, 2023, we owned 21 patented inventions in the United States, with 175 patents issued in countries around the world and 61 patent applications pending worldwide. As of December 31, 2023, we also had 61 trademark registrations worldwide, including 5 U.S. trademark registrations.
(2) Based on the delivery destination for products sold in 2022. Our Strategy We intend to capitalize on our strong business foundation, sustainability driven innovation and customer partnerships to grow sales, maintain high margins, deploy capital efficiently and generate consistent free cash flow in order to create shareholder value.
Our Strategy We intend to capitalize on our strong business fundamentals, sustainability driven innovation and customer partnerships to grow sales, maintain high margins, deploy capital efficiently and generate consistent free cash flow in order to create shareholder value.
These terms, in line with industry standards, provide us with flexibility in satisfying customers. Strategic and Differentiated Manufacturing Know-how and Supply Chain Global Network Ecoservices’ predecessor company, Stauffer Chemical, was a leader in pioneering the current sulfuric acid regeneration technology in the 1940s.
Strategic and Differentiated Manufacturing Know-how and Supply Chain Global Network Ecoservices’ predecessor company, Stauffer Chemical, was a leader in pioneering the current sulfuric acid regeneration technology in the 1940s.
Research and Development We benefit from the highly-skilled technical capabilities of our employees who are dedicated to new product development. We operate two research and development facilities: one in the United States and one in the United Kingdom. Our research and development activities are directed toward the development of new and improved products, processes, systems and applications for customers.
We operate two research and development facilities: one in the United States and one in the United Kingdom. Our research and development activities are directed toward the development of new and improved products, processes, systems and applications for customers.
Our extensive expertise in zeolite production enables us to manage the production of specialty zeolites. Specialty zeolite catalysts include aromatic catalysts that upgrade aromatic by-product streams, dewaxing catalysts that improve lube oil performance and diesel cold flow performance, and paraffin isomerization catalysts that upgrade olefins to high octane gasoline blending components for refinery and petrochemical customers.
Our extensive expertise in zeolite production enables us to manage the production of specialty zeolites which includes custom catalyst solutions, aromatic, mainly Xylene focused catalysts. dewaxing catalysts that improve lube oil performance, and paraffin isomerization catalysts that upgrade olefins to high octane gasoline blending components for refinery and petrochemical customers.
The Zeolyst Joint Venture is the sole supplier of hydrocracking catalyst to Shell, but a majority of catalyst sales are to third-party refineries. We also provide precursor supports to many of the hydrocracking catalyst suppliers, positioning us as a leading supplier in the global hydrocracking catalyst supply chain.
The Zeolyst Joint Venture is the sole supplier of hydrocracking catalyst to Shell for their own catalyst consumption, however, the majority of sales are to third-party refining customers. We also provide zeolite supports to many of the hydrocracking catalyst suppliers, positioning us as a leading supplier in the global hydrocracking catalyst value chain.
These demand fluctuations results in higher sales and working capital requirements in the second and third quarters. Sustainability Overview Sustainability is intertwined with our daily business and is reinforced through our strategy and values. We strive to create sustainable products that are safe for the environment, and to reduce waste and increase efficiencies for our customers and stakeholders.
Sustainability Overview Sustainability is intertwined with our daily business and is reinforced through our strategy and values. We strive to create sustainable products that are safe for the environment, and to reduce waste and increase efficiencies for our customers and stakeholders.
Long Term Customer Contracts Enhance Sales Predictability and Stability We partner with many of our customers under long-term contract agreements, 100% requirement arrangements and/or specified products for certain license production processes.
In addition, we have long-term contracts and relationships with many of our key raw material suppliers across all of our business segments. 7 Long-Term Customer Contracts Enhance Sales Predictability and Stability We partner with many of our customers under long-term contract agreements, 100% requirement arrangements and/or specified products for certain license production processes.
Given the long lead-time required for product development and commercialization, which can be up to ten years, we work closely and build long-term relationships with our customers. In many cases, our relationships have spanned decades given our ability to meet customized specifications and performance characteristics while also maintaining strict quality standards.
Many of our products require close customer collaboration to address constantly evolving customer application challenges. Given the long lead-time required for product development and commercialization, we work closely and build long-term relationships with our customers. In many cases, our relationships have spanned decades given our ability to meet customized specifications and performance characteristics while also maintaining strict quality standards.
Using tools such as our Supplier Code of Conduct and contractual provisions, we also hold our business partners to these same standards. Our flagship “Success through People” program furthers our strategy by acknowledging our workforce is key to our success. We offer highly competitive salaries, benefits, developmental opportunities and work/life balance.
Using tools such as our Supplier Code of Conduct and contractual provisions, we also hold our business partners to these same standards. We further our people by acknowledging our workforce is key to our success. We offer highly competitive salaries, benefits, developmental opportunities and work/life balance. We proactively seek to attract, incentivize and retain a talented and motivated workforce.
We believe that our long history of operational excellence and proven reliability, technology leadership, strong customer relationships, innovation track record and consistent business execution developed from our industry experience positions us well to execute our business strategy. 4 Our Industry Our industry is characterized by constant development of new products and the need to support customers with new product innovation and technical services.
We believe that our long history of operational excellence and proven reliability, technology leadership, strong customer relationships, innovation track record and consistent business execution developed from our industry experience positions us well to execute our business strategy.
Ecoservices has also applied its expert knowledge in thermal decomposition to provide treatment services for hazardous/non-hazardous wastes, and most recently activate catalysts with our patented Chem32 technology. Our Catalyst Technologies product development and manufacturing technology is customized based on deep silica based and zeolite based material science know-how. Our R&D centers seek to develop fit for purpose catalysts with customers.
Ecoservices has also applied its expert knowledge in thermal decomposition to provide treatment services for hazardous/non-hazardous wastes, and most recently activate catalysts with our patented Chem 32, LLC (“Chem32”) technology acquired in March 2021. Our Advanced Materials & Catalysts product development and manufacturing technology is customized based on deep silica and zeolite-based advanced material science know-how.
The sections that follow provide some highlights of our environmental, social, and governance programs and procedures. 15 Environmental Stewardship. Our products and technologies continue to address our customers’ sustainability challenges, tightening global regulatory standards and changing consumer preferences. In our Ecoservices segment, we provide sulfuric acid regeneration services that avoid significant landfill or deep well disposal.
The sections that follow provide some highlights of our environmental, social, and governance programs and procedures. Environmental Stewardship Our products and technologies continue to address our customers’ sustainability challenges, tightening global regulatory standards and changing consumer preferences.
We believe that our global footprint and efficient network of strategically located manufacturing facilities provide us with a strong competitive advantage in serving our customers both regionally as well as globally.
We believe that our global footprint and efficient network of strategically located manufacturing facilities provide us with a strong competitive advantage in serving our customers both regionally as well as globally. Our products typically constitute a small portion of our customers’ overall end-product costs, yet are critical to product performance.
To help them prepare for their future, we offer a defined contribution savings plan, which includes company contributions. Benefits outside the US are designed to supplement government-provided programs in each country. We actively promote diversity within the Company and seek to have a workforce that reflects the diversity of the societies in which we operate.
To help them prepare for their future, we offer a defined contribution savings plan, which includes company contributions. Benefits outside the United States are designed to supplement government-provided programs in each country.
We seek to act in a socially responsible manner through our various HSE programs as described above, our commitment to building a diverse and inclusive workforce, engagement with and support for the communities where we live and work, and advancement of socially responsible business practices through partnerships and other industry frameworks.
We conduct Product Stewardship reviews as part of new product development and routinely evaluate product safety risk for raw materials, intermediates, and finished products. 16 Social Responsibility, including human capital discussions We seek to act in a socially responsible manner through our various HSE programs as described above, our commitment to building a diverse and inclusive workforce, engagement with and support for the communities where we live and work, and advancement of socially responsible business practices through partnerships and other industry frameworks.
The chart below summarizes the manufacturing platform for our Catalyst Technologies segment. Silica Catalysts Manufacturing Platform 12 Zeolyst Joint Venture Manufacturing Platform Raw Materials Our products are predominantly inorganic and carbon-free, and are produced from readily available raw materials such as sodium silicate and sodium hydroxide (“caustic soda”), which prices have historically been less volatile than oil.
The chart below summarizes the manufacturing platform for our Advanced Materials & Catalysts segment. Advanced Silicas Manufacturing Platform 12 Zeolyst Joint Venture Manufacturing Platform Raw Materials Our products are produced from readily available raw materials such as sodium silicate and sodium hydroxide (“caustic soda”).
We believe that the stability of our margins and cash flows is also aided by long term sales contracts and material cost pass-through. Our ability to enter into favorable contracts and terms with customers is driven by our long history of collaborative relationships and track record of providing value-added products and services.
Our ability to enter into favorable contracts and terms with customers is driven by our long history of collaborative relationships and track record of providing value-added products and services.
In addition, our customer base is diversified, with our top ten customers in 2022 representing approximately 58% of our sales for the year ended December 31, 2022 (including our proportionate 50% share of sales attributable to the Zeolyst JV), and one customer representing 13% or $103.3 million of our sales in both our Ecoservices and Catalyst Technologies businesses during this period.
In addition, our customer base is diversified, with our top ten customers in 2023 representing approximately 60% of our sales for the year ended December 31, 2023, and one customer representing 13% or $91.5 million of our sales in both our Ecoservices and Advanced Materials & Catalysts businesses during this period.
To meet nitrogen oxides (“NOx”) emission control regulations that are expanding globally, many of our zeolite powders are used in an advanced emission control technology called selective catalytic reduction, largely focused on heavy duty diesel (“HDD”) transportation.
To meet nitrogen oxides emission control regulations that are expanding globally, many of our zeolite powders are used in an advanced emission control technology called selective catalytic reduction, largely focused on heavy-duty diesel transportation. This process uses ammonia to react with engine exhaust gases via our catalysts in order to convert nitrogen oxides, a pollutant, into harmless nitrogen and water.
The Zeolyst JV sales are included in both the Clean Fuels, Emission Control & Others and Polymers & Engineered Plastics end uses. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation” for a description of the treatment of the Zeolyst Joint Venture in our consolidated financial information.
Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation” for a description of the treatment of the Zeolyst JV in our consolidated financial information.
The Gold Medal rating score from EcoVadis places us in the 97th percentile of all companies ranked by EcoVadis in our sector peer group; • Maintained an executive level position of Vice President – Environment and Sustainability that reports directly to our CEO; • Created the position of Global Director of Health, Safety and Process Safety Management to oversee the company’s goal-setting and improvement efforts in the areas of health, safety and process safety; • Provided enhanced sustainability information on our website and published our 2021 Sustainability Report, our first as Ecovyst, in June 2022; • Continued work towards our previously announced series of sustainability goals with respect to greenhouse gas emissions, waste management and reduction, product sustainability/R&D investment and company certifications by 2025 and 2030; • Continued steps to implement additional improvements in a number of areas, including health, safety and environmental (“HSE”) performance; commitment to diversity, inclusion and human rights both within our company and in our supply chain; and ethical and lawful business practices; • Further integrated a corporate-wide sustainability software platform, which we are utilizing as an internal, real-time sustainability performance dashboard to enable improved analytics and greater visibility into our sustainability impacts; and • Achieved a 90% performance in our flagship HSE Perfect Days program, which targets at-risk behaviors and celebrates positive HSE performance across the organization on a daily basis.
The Platinum Medal rating from EcoVadis places us among the top 1% (99th percentile) of all companies assessed by EcoVadis over the past twelve months; • Maintained an executive level position of Vice President – Environment and Sustainability that reports directly to our CEO; • Under the leadership of our Global Director of Health, Safety and Process Safety Management, instituted additional health, safety and process safety programs, as well as launched a company-wide employee health and wellness program that covers both physical and mental health; • Provided enhanced sustainability information on our website and published our 2022 Sustainability Report, our second as Ecovyst, in July 2023; • Continued work towards our recently announced series of 2025 and 2030 sustainability goals with respect to fuel usage, power usage, healthy, safety and environment performance, and community engagement; • Introduced our employees to our core values Stewardship, High Standards, Integrity and Engagement (“SHINE”) and in 2023, provided training on these values and provisions of our Code of Conduct, completing training for approximately 99.8% of active employees in 2023; 15 • Continued steps to implement additional improvements in a number of areas, including health, safety and environmental (“HSE”) performance; commitment to diversity, inclusion and human rights both within our company and in our supply chain; and ethical and lawful business practices; • Further integrated a corporate-wide sustainability software platform, which we are utilizing as an internal, real-time sustainability performance dashboard to enable improved analytics and greater visibility into our sustainability impacts; and • Achieved a greater than 90% performance in our flagship HSE Perfect Days program, which targets at-risk behaviors and celebrates positive HSE performance across the organization on a daily basis.
We believe that the strategic locations of our plants in these key refining regions contribute to our highly efficient supply chain networks with our customers, including in some cases captive pipelines connecting us to our refinery customers. Alternatively, product can be shipped by barge, rail and truck. 9 Primary Product Groups Regeneration Services serves a critical need for refining customers.
We believe that the strategic locations of our plants in these key refining regions contribute to our efficient supply chain networks with our customers, including in some cases captive pipelines connecting us to our refinery customers.
This innovation is coupled with consistent product quality and a reliable source of supply, delivered in a safe and environmentally sustainable manner. Products sold to our customers can be high value-add even when they represent a small portion of the overall end product costs, and success can be achieved by helping customers improve their product performance, value, and quality.
Products that we sell to our customers are often high value-add, even when they represent a small portion of the overall end product costs, and we believe success can be achieved by helping customers improve their product performance, value and quality.
Innovation Track Record We believe a key competitive advantage is derived from our depth of expertise in silica, zeolites and catalysts technologies. Further, we have the ability to tailor and scale specialty grades to meet changing demands and technical support for large scale commercialization. Many of our products require close customer collaboration to address constantly evolving customer application challenges.
Innovation Track Record We believe a key competitive advantage is derived from our depth of expertise in creating and modifying advanced materials based on silica and zeolite technologies. We believe we capture value through customer collaboration. We have the ability to tailor and scale custom advanced materials to meet changing demands and to provide technical support for large scale commercialization.
Sulfuric acid serves as a catalyst in the alkylation process. The resulting spent sulfuric acid needs to be regenerated or recycled, which is no longer a core competency of most refiners.
Additionally, product can be shipped to our customers by barge, rail and truck. 9 Primary Product Groups Regeneration Services serves a critical need for refining customers. Sulfuric acid serves as a catalyst in the alkylation process. The resulting spent sulfuric acid needs to be regenerated or recycled, which is no longer a core competency of most refiners.
As an ACC Responsible Care® member company, we continue to monitor and report our health, safety, and environmental metrics annually. Our sustainability metrics, including waste generation and water consumption for 2018 and 2019, were third party assured for the first time in 2020.
In addition, our Vice President Environmental and Sustainability oversees a team of environmental personnel that serve our operating sites. As an ACC Responsible Care® member company, we continue to monitor and report our HSE metrics annually. Our sustainability metrics, including waste generation and water consumption for 2018 through 2022, were third party assured through verification of the data.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur operations are affected directly and indirectly by global regulatory, economic, political and social conditions, including: • new and different legal and regulatory requirements in local jurisdictions; • export duties or import quotas; • domestic and foreign customs and tariffs or other trade barriers, including the threat of escalating trade disputes that may result in higher tariffs; • potential difficulties in staffing and labor disputes; • potential difficulties in managing and obtaining support and distribution for local operations; • increased costs of, and availability of, raw materials, energy, transportation or shipping; • credit risk and financial condition of local customers and distributors; • potential difficulties in protecting intellectual property rights; • risk of nationalization of private enterprises by foreign governments; • potential imposition of restrictions on investments; • the imposition of withholding taxes or other taxes or royalties on our income, or the adoption of other restrictions on foreign trade or investment, including currency exchange controls; • capital controls; • potential difficulties in obtaining and enforcing legal judgments in jurisdictions outside the United States; • potential difficulties in obtaining and enforcing relief in the United States against parties located outside the United States; • potential difficulties in enforcing agreements and collecting receivables; • risks relating to environmental, health and safety matters; • regional conflicts, such as the invasion of Ukraine by Russia; • risks relating to epidemics and pandemics, including effects caused by the spread of COVID-19 (coronavirus), variants thereof and other illnesses such as RSV and influenza; and • local political, economic and social conditions, including the possibility of hyperinflationary conditions and political instability in certain countries.
Biggest changeOur operations are affected directly and indirectly by global regulatory, economic, political and social conditions, including: • new and different legal and regulatory requirements in local jurisdictions; • export duties or import quotas; • domestic and foreign customs and tariffs or other trade barriers, including the threat of escalating trade disputes that may result in higher tariffs and the imposition of trade sanctions against certain countries, persons and entities; • potential difficulties in staffing and labor disputes; • potential difficulties in managing and obtaining support and distribution for local operations; • increased costs of, and availability of, raw materials, energy, transportation or shipping; • credit risk and financial condition of local customers and distributors; • potential difficulties in protecting intellectual property rights; • risk of nationalization of private enterprises by foreign governments; • potential imposition of restrictions on investments; • the imposition of withholding taxes or other taxes or royalties on our income, or the adoption of other restrictions on foreign trade or investment, including currency exchange controls; • capital controls; • potential difficulties in obtaining and enforcing legal judgments in jurisdictions outside the United States; • potential difficulties in obtaining and enforcing relief in the United States against parties located outside the United States; • potential difficulties in enforcing agreements and collecting receivables; • risks relating to environmental, health and safety matters; • regional conflicts, such as the invasion of Ukraine by Russia and the conflict involving Israel and Hamas and potentially other countries in the Middle East; • risks relating to information security and cyber security events; • risks relating to epidemics and pandemics and effects therefrom; and • local political, economic and social conditions, including the possibility of hyperinflationary conditions and political instability in certain countries.
Consequently, the occurrence of one or more of the foregoing factors could have a material adverse effect on our international operations or upon our financial condition, results of operations and cash flows. 21 Our operations and financial results have been and may continue to be adversely affected by general economic conditions.
Consequently, the occurrence of one or more of 21 the foregoing factors could have a material adverse effect on our international operations or upon our financial condition, results of operations and cash flows. Our operations and financial results have been and may continue to be adversely affected by general economic conditions.
We are required by these environmental laws and regulations to obtain registrations, licenses, permits and other approvals in order to operate, to make disclosures to public authorities about our chemical handling and usage activities and to install expensive pollution control and spill containment equipment at our facilities, or to incur other capital expenditures aimed at achieving or maintaining compliance with such laws and regulations.
We are required by these environmental laws and regulations to obtain registrations, licenses, permits and other approvals in order to operate, make disclosures to public authorities about our chemical handling and usage activities and install expensive pollution control and spill containment equipment at our facilities, or incur other capital expenditures aimed at achieving or maintaining compliance with such laws and regulations.
In addition, we may face liability for personal injury, property damage and natural resource damage resulting from environmental conditions attributable to hazardous substance releases at or from facilities we currently own or operate or formerly owned or operated or to which we sent waste.
In addition, we may face liability for personal injury, property damage and/or natural resource damage resulting from environmental conditions attributable to hazardous substance releases at or from facilities we currently own or operate or formerly owned or operated or to which we sent waste.
Our substantial indebtedness, combined with our other financial obligations and contractual commitments, could have important consequences, including: • requiring us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, selling and marketing efforts, product development and other purposes; • increasing our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to our competitors that have relatively less indebtedness; • limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; • increasing our exposure to rising interest rates because certain of our borrowings are at variable interest rates; • restricting us from making investments, strategic acquisitions or causing us to make non-strategic divestitures; and • limiting our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, product development and other corporate purposes.
Our substantial indebtedness, combined with our other financial obligations and contractual commitments, could have important consequences, including: • requiring us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, selling and marketing efforts, product development and other purposes; • increasing our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to our competitors that have relatively less indebtedness; • limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; • increasing our exposure to rising interest rates because certain of our borrowings are at variable interest rates; 34 • restricting us from making investments, strategic acquisitions or causing us to make non-strategic divestitures; and • limiting our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, product development and other corporate purposes.
In addition, our certificate of incorporation provides that if any action the subject matter of which is a Covered Proceeding is filed in a court other than the specified Delaware courts without the approval of our board of directors (each, a “Foreign Action”), the claiming party will be deemed to have consented to (i) the personal jurisdiction of the specified Delaware courts in connection with any action brought in any such courts to enforce the exclusive forum provision described above and (ii) having service of process made upon such claiming party in any such enforcement action by service upon such claiming party’s counsel in the Foreign Action as agent for such claiming party.
In addition, our certificate of incorporation provides that if any action the subject matter of which is a Covered Proceeding is filed in a court other than the specified Delaware courts without the approval of our board of directors (each, a “Foreign Action”), the claiming party will be deemed to have consented to (i) the personal jurisdiction of the 36 specified Delaware courts in connection with any action brought in any such courts to enforce the exclusive forum provision described above and (ii) having service of process made upon such claiming party in any such enforcement action by service upon such claiming party’s counsel in the Foreign Action as agent for such claiming party.
If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting in future periods, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be negatively affected, and we could become subject to investigations by the New York Stock Exchange, on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting in future periods, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be negatively affected, and we could 38 become subject to investigations by the New York Stock Exchange, on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
If we lose the service of any of our key personnel, we may not be able to hire replacements with the same level of industry experience and knowledge necessary to execute our business strategy, which in turn could have a material adverse effect on our business, financial condition, results of operations or cash flows.
If we lose the service of any of our key personnel, we may not be able to hire replacements with the same level of industry experience and knowledge necessary 37 to execute our business strategy, which in turn could have a material adverse effect on our business, financial condition, results of operations or cash flows.
These hazards could expose employees, customers, the community and others to toxic chemicals and other hazards, contaminate the environment, damage property, result in personal injury or death, lead to an interruption or suspension of operations, damage our reputation and adversely affect the productivity and profitability of a particular manufacturing 28 facility or our business as a whole.
These hazards could expose employees, customers, the community and others to toxic chemicals and other hazards, contaminate the environment, damage property, result in personal injury or death, lead to an interruption or suspension of operations, damage our reputation and adversely affect the productivity and profitability of a particular manufacturing facility or our business as a whole.
In such a case, there can be no assurance that alternative technologies exist or that we would be able to obtain such a license on favorable terms. 30 Competitors and third parties may infringe on our patents or violate our intellectual property rights. Defending and enforcing our intellectual property rights can involve litigation and can be expensive and time consuming.
In such a case, there can be no assurance that alternative technologies exist or that we would be able to obtain such a license on favorable terms. Competitors and third parties may infringe on our patents or violate our intellectual property rights. Defending and enforcing our intellectual property rights can involve litigation and can be expensive and time consuming.
We believe the economics of these transactions have been clearly reported, and the appropriate local transfer pricing documentation is contemporaneously available, although tax authorities may propose and potentially sustain adjustments that could result in changes to our mix of earnings in countries with differing statutory tax rates.
We believe the economics of these transactions have been clearly 33 reported, and the appropriate local transfer pricing documentation is contemporaneously available, although tax authorities may propose and potentially sustain adjustments that could result in changes to our mix of earnings in countries with differing statutory tax rates.
Such risks are heightened in our Ecoservices segment, which has operations and customers primarily located in the Gulf Coast, which is susceptible to a heightened risk of hurricanes, and Northern California, which is susceptible to a heightened risk of earthquakes. For example, in December 2022, the operations of our Ecoservices’ Houston and Hammond facilities were disrupted by Winter Storm Elliot.
Such risks are heightened in our Ecoservices segment, which has operations and customers primarily located in the Gulf Coast, which is susceptible to a heightened risk of hurricanes, and in California, which is susceptible to a heightened risk of earthquakes. For example, in December 2022, the operations of our Ecoservices’ Houston and Hammond facilities were disrupted by Winter Storm Elliot.
Release of third party confidential information could materially harm our reputation, affect our relationships with such parties and expose us to liability. Although we have introduced many security measures, including firewalls and information technology security policies, these measures may not offer the appropriate level of security.
Release of third party confidential information could materially harm our reputation, affect our relationships with such parties and expose us to liability. Although we have introduced many security measures, including firewalls and information technology security policies and training, these measures may not offer the appropriate level of security.
As there may be only a limited number of suppliers offering “conflict free” conflict minerals, we cannot be sure that we will be able to obtain necessary conflict minerals from such suppliers in sufficient quantities or at competitive prices. ITEM 1B. UNRESOLVED STAFF COMMENTS. None. 39
As there may be only a limited number of suppliers offering “conflict free” conflict minerals, we cannot be sure that we will be able to obtain necessary conflict minerals from such suppliers in sufficient quantities or at competitive prices. ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
Nevertheless, we may be subject to legal proceedings and claims in the ordinary course of our business, including claims of alleged infringement of the patents or trademarks or infringement or misappropriation of other intellectual property rights of third parties by us or 31 our licensees in connection with their use of our products.
Nevertheless, we may be subject to legal proceedings and claims in the ordinary course of our business, including claims of alleged infringement of the patents or trademarks or infringement or misappropriation of other intellectual property rights of third parties by us or our licensees in connection with their use of our products.
Failure to protect our existing intellectual property rights may allow our competitors to copy our products and may result in the loss of valuable proprietary technologies or other intellectual property. Failure to protect our innovations and trademarks by securing intellectual property rights could also result in our having to pay other companies for infringing on their intellectual property rights.
Failure to protect our existing intellectual property rights may allow our competitors to copy our products and may result in the loss of valuable proprietary technologies or other intellectual property. Failure to protect our innovations and trademarks by securing intellectual property rights could also result in our having to pay other 30 companies for infringing on their intellectual property rights.
We cannot predict with certainty the cost of defense, the cost of prosecution or the ultimate outcome of litigation and other administrative and regulatory proceedings filed by or against us, including remedies or damage awards, and adverse results in any litigation or other administrative and regulatory proceedings may materially harm our business.
We cannot predict with certainty the cost of defense, the cost of prosecution or the ultimate outcome of litigation and other administrative and regulatory proceedings filed by or against us, including remedies or damage awards, and how adverse results in any litigation or other administrative and regulatory proceedings may materially harm our business.
Although we believe it is likely that GHG emissions will continue to be regulated in at least some regions of the United States and in other countries (in addition to the European Union) in the future, we cannot yet predict the form such regulation will take (such as a cap-and-trade program, technology mandate, emissions tax or other regulatory mechanism) or, consequently, estimate the costs that we may be required to incur in respect of such requirements, which could, for example, require that we install emission control equipment, purchase emissions allowances, administer and manage our GHG emissions program or address other regulatory obligations.
Although we believe it is likely that GHG emissions will continue to be regulated in at least some regions of the United States and in other countries (in addition to the European Union) in the future, we cannot yet predict the form such regulation will take (such as a cap-and-trade program, technology mandate, emissions tax or other regulatory mechanism) or, consequently, estimate the costs that we may be required to incur to meet such requirements, which could, for example, require that we install emission control equipment, purchase emissions allowances, administer and manage our GHG emissions program or address other regulatory obligations.
The Consent Decree required Solvay (the owner at the time) to pay a $2 million penalty and spend approximately $34 million on air pollution controls at our facilities, the majority of which was received from customers in contractual arrangements.
The Consent Decree required Solvay (the owner of such facilities at the time) to pay a $2 million penalty and spend approximately $34 million on air pollution controls at our facilities, the majority of which was received from customers in contractual arrangements.
In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding 37 indebtedness we or our subsidiaries incur, including our credit facilities and outstanding notes.
In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur, including our credit facilities and outstanding notes.
These systems can be subject to technical system flaws; power loss; cyber attacks, including viruses, malware, phishing, ransomware, terrorism, and surveillance; unauthorized access; malicious software; intentional or inadvertent data privacy breaches by employees or others with authorized access; hacktivism; ransomware; physical or electronic break-ins; fires or natural disasters; supply chain attacks; and other cyber security issues.
These systems can be subject to technical system flaws; power loss; cyber attacks, including viruses, malware, phishing, ransomware, terrorism, and surveillance; unauthorized access; malicious software; intentional or inadvertent data privacy breaches by employees or others with authorized access; hacktivism; ransomware; physical or electronic break-ins; fires or natural disasters; supply chain attacks; and other cybersecurity issues.
These and other economic factors could adversely impact our business and results of operations. Exchange rate fluctuations could adversely affect our financial condition, results of operations and cash flows. As a result of our international operations, for the year ended December 31, 2022, we generated 6% of our sales and associated expenses in currencies other than U.S. dollars.
These and other economic factors could adversely impact our business and results of operations. Exchange rate fluctuations could adversely affect our financial condition, results of operations and cash flows. As a result of our international operations, for the year ended December 31, 2023, we generated 6% of our sales and associated expenses in currencies other than U.S. dollars.
Litigation based on environmental matters or exposure to hazardous substances in the workplace or from our products could result in significant liability for us. For example, we are currently subject to various asbestos premises liability claims that relate to employee or contractor exposure to asbestos contained in certain building materials at our sites.
Litigation based on environmental matters or exposure to hazardous substances in the workplace or from our products could result in significant liability for us. For example, we are currently subject to various asbestos premises liability claims that relate to a contractor exposure to asbestos contained in certain building materials at our sites.
These impacts may adversely affect our relationships with such employees and third parties and may have an adverse effect on our business reputation, competitiveness, financial condition, results of operations and cash flows, including damage to our operations, employees, or other third parties, resulting in remediation costs, litigation or regulatory actions.
These impacts may adversely affect our relationships with employees, customers and other third parties and may have an adverse effect on our business reputation, competitiveness, financial condition, results of operations and cash flows, including damage to our operations, employees, or other third parties, resulting in remediation costs, litigation or regulatory actions.
An impairment charge would be determined based on the estimated fair value of the assets and any such impairment charge could have a material adverse effect on our results of operations and financial position. We performed our annual impairment test on goodwill on October 1, 2022, and determined there was no goodwill impairment.
An impairment charge would be determined based on the estimated fair value of the assets and any such impairment charge could have a material adverse effect on our results of operations and financial position. We performed our annual impairment test on goodwill on October 1, 2023, and determined there was no goodwill impairment.
We sell catalysts and services that are used in manufacturing processes and as components of, or ingredients in, other products and, as a result, our sales are correlated with and affected by fluctuations in the level of industrial production and manufacturing output and by fluctuations in general economic activity.
We sell advanced materials, catalysts and services that are used in manufacturing processes and as components of, or ingredients in, other products and, as a result, our sales are correlated with and affected by fluctuations in the level of industrial production and manufacturing output and by fluctuations in general economic activity.
A loss of one or more of these customers could adversely impact our profitability. A loss of any significant customer, including a pipeline customer, or a decrease in the provision of products to any significant customer could have an adverse effect on our business until alternative arrangements are secured.
A loss of one or more of these customers could adversely impact our profitability. A loss of any significant customer, including a pipeline customer in our Ecoservices segment, or a decrease in the provision of products to any significant customer could have an adverse effect on our business until alternative arrangements are secured.
If our joint venture partners do not fulfill their obligations, or if differences in views among the joint venture participants results in delayed decisions or failures to agree on major issues, the affected joint venture may not be able to operate according to its business plan.
If our joint venture partners do not fulfill their obligations, or if differences in views among the joint venture participants result in delayed decisions or failures to agree on major issues, the affected joint venture may not be able to operate according to its business plan.
Although we have introduced many security measures, including firewalls and information technology security policies, these measures may not offer the appropriate level of security. We routinely experience attempts by external parties to penetrate and attack our networks and systems.
Although we have introduced many security measures, including firewalls and information 32 technology security policies and training, these measures may not offer the appropriate level of security. We routinely experience attempts by external parties to penetrate and attack our networks and systems.
The price of our common stock could be subject to wide fluctuations in response to a number of factors, including those described elsewhere herein and others such as: • variations in our operating performance and the performance of our competitors; • actual or anticipated fluctuations in our quarterly or annual operating results; • publication of research reports by securities analysts about us, our competitors or our industry; • our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; • additions or departures of key personnel; • strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; • the passage of legislation or other regulatory developments affecting us or our industry; 35 • changes in legislation, regulation and government policy as a result of the U.S. presidential and congressional elections; • speculation in the press or investment community; • changes in accounting principles; • terrorist acts, acts of war or periods of widespread civil unrest; • natural disasters and other calamities; and • changes in general market and economic conditions.
The price of our common stock could be subject to wide fluctuations in response to a number of factors, including those described elsewhere herein and others such as: • variations in our operating performance and the performance of our competitors; • actual or anticipated fluctuations in our quarterly or annual operating results; • publication of research reports by securities analysts about us, our competitors or our industry; • our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; • additions or departures of key personnel; • strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; • the passage of legislation or other regulatory developments affecting us or our industry; • changes in legislation, regulation and government policy as a result of the U.S. presidential and congressional elections; • speculation in the press or investment community; • changes in accounting principles; 35 • sales of substantial amounts of our stock by current stockholders (including stock by insiders or 5% stockholders); • terrorist acts, acts of war or periods of widespread civil unrest; • natural disasters and other calamities; and • changes in general market and economic conditions.
Even though we are generally a materials and services supplier rather than a manufacturer of finished goods, the sale of our products involves the risk of product liability claims and voluntary or government-ordered product recalls.
Even though we are generally an advanced materials and services supplier rather than a manufacturer of finished goods, the sale of our products involves the risk of product liability claims and voluntary or government-ordered product recalls.
For example, certain of the products that we manufacture are used in chemical manufacturing process in our customers’ manufacturing operations and are used in and around other chemical manufacturing facilities and other locations where personal injury or property damage may occur.
For example, certain of the products that we manufacture are used in chemical manufacturing processes in our customers’ manufacturing operations and are used in and around other chemical manufacturing facilities and other locations where personal injury or property damage may occur.
For example, the Inflation Reduction Act (“IRA”) enacted in the U.S. on August 16, 2022 imposes several new taxes that become effective in 2023, including a 1% excise tax on stock repurchases.
For example, the Inflation Reduction Act (“IRA”) enacted in the U.S. on August 16, 2022 imposes several new taxes that became effective in 2023, including a 1% excise tax on stock repurchases.
As a result, we are exposed to corruption-related risk. In addition, we are subject to applicable economic sanctions, export controls, and similar laws and regulations imposed by the U.S. government and other countries. These laws and regulations may restrict our business practices, or the counterparties or regions with which we can trade.
As a result, we are exposed to corruption-related risk. In addition, we are required to comply with applicable economic sanctions, export controls, and similar laws and regulations imposed by the U.S. government and other countries. These laws and regulations may restrict our business practices, or the counterparties or regions with which we can trade.
Should there be infringement claims against our licensees, we could be required to indemnify them for losses resulting from such claims or to refund amounts they have paid to us. Disruption, failure or cyber security breaches affecting or targeting computers and infrastructure used by us or our business partners may adversely impact our business and operations.
Should there be infringement claims against our licensees, we could be required to indemnify them for losses resulting from such claims or to refund amounts they have paid to us. Disruption, failure or cybersecurity breaches affecting or targeting computers and infrastructure used by us or our business partners may adversely impact our business and operations.
As of December 31, 2022, we had established reserves of approximately $0.4 million to cover anticipated expenses at these sites, all of which have reached relatively mature stages of either the investigation, remediation or monitoring process. Actual costs to complete these projects may exceed our current estimates.
As of December 31, 2023, we had established reserves of approximately $0.4 million to cover anticipated expenses at these sites, all of which have reached relatively mature stages of the investigation, remediation or monitoring process. Actual costs to complete these projects may exceed our current estimates.
Although it is our policy and intention not to infringe valid patents of which we are aware, our processes, apparatuses, technology, proprietary manufacturing expertise, methods, compounds and products may infringe on issued patents or infringe or misappropriate other intellectual property rights of others. Accordingly, we continually monitor third-party intellectual property to confirm our freedom to operate.
Although it is our policy and intention not to infringe valid patents of others, our processes, apparatuses, technology, proprietary manufacturing expertise, methods, compounds and products may infringe on issued patents or infringe or misappropriate other intellectual property rights of others. Accordingly, we continually monitor third-party intellectual property to confirm our freedom to operate.
If any of those suppliers is unable to meet its obligations under current supply agreements, we may be forced to pay higher prices to obtain the necessary raw materials.
If any of those suppliers is unable to meet its obligations under current or future supply agreements, we may be forced to pay higher prices to obtain the necessary raw materials.
Current employees are not eligible for any post-retirement health care or life insurance benefits. Costs of these other post-employment benefit plans are dependent upon numerous factors, assumptions and estimates. Risks Related to our Indebtedness Our substantial level of indebtedness could adversely affect our financial condition. We have substantial indebtedness, which as of December 31, 2022, totaled approximately $886.5 million.
Current employees are not eligible for any post-retirement health care or life insurance benefits. Costs of these other post-employment benefit plans are dependent upon numerous factors, assumptions and estimates. Risks Related to our Indebtedness Our substantial level of indebtedness could adversely affect our financial condition. We have substantial indebtedness, which as of December 31, 2023, totaled approximately $877.5 million.
There is risk that a key raw material, chemical or substance, or one of the end products of which our products are a part, may be recharacterized as having a toxicological or health-related impact on the environment, our customers or our employees.
There is risk that a key raw material, chemical or substance, or one of the end products of which our products are a part of or are utilized to make, may be recharacterized as having a toxicological or health-related impact on the environment, our customers or our employees.
As of December 31, 2022, we had current remediation, monitoring and/or maintenance obligations at several of our current or former sites, including Dominguez, California and Martinez, California.
As of December 31, 2023, we had current remediation, monitoring and/or maintenance obligations at several of our current or former sites, including Dominguez, California and Martinez, California.
Excluding contracts with automatic evergreen provisions, approximately 30% of our sulfuric acid volume for the year ended December 31, 2022 was under contracts expiring at the end of 2023 or beyond. In addition, our sulfuric acid regeneration contracts with major refinery customers typically allow for termination with advance notice of one to two years.
Excluding contracts with automatic evergreen provisions, approximately 20% of our sulfuric acid volume for the year ended December 31, 2023 was under contracts expiring at the end of 2024 or beyond. In addition, our sulfuric acid regeneration contracts with major refinery customers typically allow for termination with advance notice of one to two years.
For example, the global economy has experienced extreme volatility and disruptions, including significant volatility in commodity and market prices, including increasing energy prices, volatility in sulfur prices, declines in consumer confidence, declines in economic growth, supply chain interruptions, uncertainty about economic stability, record inflation globally, rising interest rates and the threat of recession.
For example, during the past several years the global economy has experienced extreme volatility and disruptions, including significant volatility in commodity and market prices, including increasing energy prices, volatility in sulfur prices, declines in consumer confidence, declines in economic growth, supply chain interruptions, uncertainty about economic stability, record inflation globally, rising interest rates and the threat of recession.
In addition, broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance, and factors beyond our control may cause our stock price to decline rapidly and unexpectedly. We are exposed to the impact of any global or domestic economic disruption that may occur, including the economic effects of COVID-19.
In addition, broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance, and factors beyond our control may cause our stock price to decline rapidly and unexpectedly. We are exposed to the impact of any global or domestic economic disruption that may occur..
As of December 31, 2022, we operated ten manufacturing facilities. For the year ended December 31, 2022, our foreign subsidiaries accounted for 6% of our sales.
As of December 31, 2023, we operated ten manufacturing facilities. For the year ended December 31, 2023, our foreign subsidiaries accounted for 6% of our sales.
Additionally, the current U.S. administration may seek to tighten current environmental standards and regulations, including, but not limited to, the Corporate Average Fuel Economy standards, which could have a material adverse effect on our sales into the clean fuels, emission control and other industries.
Additionally, current or future U.S. administrations may seek to tighten current environmental standards and regulations, including, but not limited to, the Corporate Average Fuel Economy standards, which could have a material adverse effect on our sales into the clean fuels, emission control and other industries.
See “Business-Intellectual Property.” Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products. Our industry is characterized by vigilant pursuit of intellectual property rights, particularly with respect to our silica catalysts and zeolite catalysts product groups.
See “Business-Intellectual Property.” 31 Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products. Our industry is characterized by vigilant pursuit of intellectual property rights, particularly with respect to our advanced silicas and zeolite catalysts product groups.
As of December 31, 2022, our total reserves associated with environmental remediation and enforcement matters were $0.4 million.
As of December 31, 2023, our total reserves associated with environmental remediation and enforcement matters were $0.4 million.
As of December 31, 2022, 138 of our U.S. unionized employees were covered under collective bargaining agreements that will expire on or before December 31, 2023. Failure to reach agreement with any of our unionized work groups regarding the terms of their collective bargaining agreements or annual pay increases may result in a labor strike, work stoppage or slowdown.
As of December 31, 2023, 137 of our U.S. unionized employees were covered under collective bargaining agreements that will expire on or before December 30, 2024. Failure to reach agreement with any of our unionized work groups regarding the terms of their collective bargaining agreements or annual pay increases may result in a labor strike, work stoppage or slowdown.
Our stock price could be extremely volatile and, as a result, you may not be able to resell your shares at or above the price you paid for them.
Risks Related to our Common Stock Our stock price could be extremely volatile and, as a result, you may not be able to resell your shares at or above the price you paid for them.
Our Catalyst Technologies segment primarily competes with other global producers in the petrochemicals and refining industries such as Grace, BASF, UOP, and Albemarle, as well as other niche competitors such as Tosoh, Axens, and Haldor Topsoe. In our Ecoservices segment, we compete in the North American refining services industry with competitors such as Chemtrade and Veolia.
Our Advanced Materials & Catalysts segment primarily competes with other global producers in the petrochemicals and refining industries such as Grace, BASF, UOP, and Albemarle, as well as other niche competitors such as Tosoh, Axens, and Haldor Topsoe. In our Ecoservices segment, we compete in the North American refining services industry with competitors such as Chemtrade and Veolia.
We purchase significant amounts of raw materials, including precursor products in our Catalyst Technologies business and sulfur in our Ecoservices business, and we purchase significant amounts of natural gas to supply the energy required in our production process.
We purchase significant amounts of raw materials, including precursor products in our Advanced Materials & Catalysts business and sulfur in our Ecoservices business, and we purchase significant amounts of natural gas to supply the energy required in our production process.
We may selectively pursue complementary acquisitions, such as the Chem32 acquisition, and joint ventures, such as the Zeolyst Joint Venture, each of which inherently involves a number of risks and presents financial, managerial and operational challenges, including: • potential disruption of our ongoing business and distraction of management; • difficulty with integration of personnel and financial and other systems; • hiring additional management and other critical personnel; and • increasing the scope, geographic diversity and complexity of our operations. 29 In addition, we may encounter unforeseen obstacles or costs in the integration of acquired businesses.
We may selectively pursue complementary acquisitions, such as the Chem32 acquisition, and joint ventures, such as the Zeolyst Joint Venture, each of which inherently involves a number of risks and presents financial, managerial and operational challenges, including: • potential disruption of our ongoing business and distraction of management; • difficulty with integration of personnel and financial and other systems; • hiring additional management and other critical personnel; and • increasing the scope, geographic diversity and complexity of our operations.
As of December 31, 2022, we owned 20 patented inventions in the United States, with 197 patents issued in countries around the world and 40 patent applications pending worldwide covering such inventions. Some of these patents are licensed to others. In addition, we have acquired certain rights under patents and inventions of others through licenses.
As of December 31, 2023, we owned 21 patented inventions in the United States, with 175 patents issued in countries around the world and 61 patent applications pending worldwide covering such inventions. Some of these patents are licensed to others. In addition, we have acquired certain rights under patents and inventions of others through licenses.
In addition, volatility and disruption in financial markets could adversely affect our sales and results of operations by limiting our customers’ ability to obtain the financing necessary to maintain or expand their own operations.
In addition, volatility and disruption in financial markets could adversely affect our sales and results of operations by limiting our customers’ ability to obtain the financing necessary to maintain or expand their own operations. Unfavorable global economic conditions could adversely affect our business, financial condition, and results of operations.
U.S. federal environmental laws that affect us include the Resource Conservation and Recovery Act (“RCRA”), the Clean Air Act, the Clean Water Act and the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”).
U.S. federal environmental laws that affect us include, but are not limited to, the Resource Conservation and Recovery Act (“RCRA”), the Clean Air Act, the Clean Water Act and the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”).
We depend on good relations with our workforce, and any significant disruptions could adversely affect our operations. As of December 31, 2022, we had 890 employees globally, approximately 45% of which were represented by a union, works council or other employee representative body.
We depend on good relations with our workforce, and any significant disruptions could adversely affect our operations. As of December 31, 2023, we had 911 employees worldwide, approximately 44% of which were represented by a union, works council or other employee representative body.
These potentially disruptive risks include, but are not limited to, the following: • pipeline and storage tank leaks and ruptures; • explosions and fires; • inclement weather and natural disasters; • terrorist attacks; • failure of mechanical, process safety and pollution control equipment; • chemical spills and other discharges or releases of toxic or hazardous substances or gases; • epidemics and pandemics, including effects caused by the spread of COVID-19 (coronavirus) and variants thereof; and • exposure to toxic chemicals.
These potentially disruptive risks include, but are not limited to, the following: • pipeline and storage tank leaks and ruptures; • explosions and fires; • inclement weather and natural disasters; • terrorist attacks; • failure of mechanical, process safety and pollution control equipment; 28 • chemical spills and other discharges or releases of toxic or hazardous substances or gases; • epidemics and pandemics and effects therefrom; and • exposure to toxic chemicals.
Assets available to fund the pension obligations of our plans as of December 31, 2022 were approximately $60.6 million, or approximately $6.3 million less than the measured pension benefit obligation on a GAAP basis.
Assets available to fund the pension obligations of our plans as of December 31, 2023 were approximately $61.6 million, or approximately $4.9 million less than the measured pension benefit obligation on a GAAP basis.
Unfavorable global economic conditions could adversely affect our business, financial condition, and results of operations. Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets.
Our certificate of incorporation imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock other than INEOS and investment funds affiliated with CCMP.
Our certificate of incorporation imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock other than INEOS Limited and investment funds affiliated with CCMP, Capital Advisors, L.P. (“CCMP”), one of our former stockholders.
Although the terms of the agreements governing our outstanding indebtedness contain restrictions on the incurrence of additional indebtedness, such restrictions are subject to a number of important exceptions and indebtedness incurred in compliance with such restrictions could be substantial.
Although the terms of the agreements governing our outstanding indebtedness contain restrictions on the incurrence of additional indebtedness, such restrictions are subject to a number of important exceptions and indebtedness incurred in compliance with such restrictions could be substantial. If we and our restricted subsidiaries incur significant additional indebtedness, the related risks that we face could increase.
Given the scope of the Company's international operations and the fluid and uncertain nature of how the BEPS project might ultimately lead to future legislation, it is difficult to assess how any changes in tax laws would impact the Company's future income tax expense. 33 Our tax returns and other tax matters are subject to examination by local tax authorities and governmental bodies.
Given the scope of the Company's international operations and the fluid and uncertain nature of how the BEPS project might ultimately lead to future legislation, it is difficult to assess how any changes in tax laws would impact the Company's future income tax expense.
A successful claim or series of claims against us could cause reputational harm and have a material adverse effect on our financial condition and results of operations and could result in a loss of one or more customers.
A successful claim or series of claims against us could cause reputational harm and have a material adverse effect on our financial condition and results of operations and could result in a loss of one or more customers. 29 We may engage in strategic acquisitions or dispositions of certain assets or businesses that could affect our business, results of operations, financial condition and liquidity.
For example, as discussed in more detail in “Business-Environmental Regulations” and “Business-Chemical Product Regulation,” we may be materially impacted by regulatory initiatives worldwide with respect to chemical product safety such as the 2016 amendments to the U.S.
For example, as discussed in more detail in “Business-Environmental Regulations” and “Business-Chemical Product Regulation,” we may be materially impacted by regulatory initiatives worldwide with respect to chemical product safety such as the 2016 amendments to the U.S. Toxic Substances Control Act, the E.U. REACH regulation, and/or similar regulations being enacted in other countries (e.g., China REACH; Korea REACH).
A product liability claim or voluntary or government-ordered product recall could result in substantial and unexpected expenditures, affect customer confidence in our products and divert management’s attention from other responsibilities. 25 A product recall or successful product liability claim or series of claims against us in excess of our insurance coverage and for which we are not otherwise indemnified could have a material adverse effect on our business, financial condition, results of operations or cash flows.
A product recall or successful product liability claim or series of claims against us in excess of our insurance coverage and for which we are not otherwise indemnified could have a material adverse effect on our business, financial condition, results of operations or cash flows.
As a result, you may lose your ability to sell your stock for a price in excess of the prevailing market price due to these protective measures, and efforts by stockholders to change the direction or management of the company may be unsuccessful. 36 Our certificate of incorporation designates courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our certificate of incorporation designates courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
In addition to INEOS’s beneficial ownership of a substantial percentage of our common stock, provisions in our certificate of incorporation and bylaws and Delaware law could make it harder for a third party to acquire us, even if doing so might be beneficial to our stockholders.
Provisions in our charter documents and Delaware law may deter takeover efforts that may be beneficial to stockholder value. Provisions in our certificate of incorporation and bylaws and Delaware law could make it harder for a third party to acquire us, even if doing so might be beneficial to our stockholders.
We may also opportunistically pursue dispositions of certain assets and businesses, which may involve material amounts of assets or lines of business, which could adversely affect our results of operations, financial condition and liquidity.
Our acquisition and joint venture strategy may not be received positively by customers, and we may not realize any anticipated benefits from acquisitions or joint ventures. We may also opportunistically pursue dispositions of certain assets and businesses, which may involve material amounts of assets or lines of business, which could adversely affect our results of operations, financial condition and liquidity.
In addition, our ability to make adjustments to control compensation and benefit costs, or otherwise adapt to changing business needs, may be limited by the terms and duration of our collective bargaining agreements. 38 We are subject to certain risks related to litigation filed by or against us, as well as administrative and regulatory proceedings, and adverse results may harm our business.
In addition, our ability to make adjustments to control compensation and benefit costs, or otherwise adapt to changing business needs, may be limited by the terms and duration of our collective bargaining agreements.
Work under the Consent Decree has proceeded since 2007, and all of the significant capital improvements related to the Consent Decree have been completed.
Work under the Consent Decree has proceeded since 2007, and all of the significant capital improvements related to the Consent Decree have been completed. Three of our operating locations have been released from the scope of the Consent Decree and we are seeking release of the other locations covered by the Consent Decree.
If we and our restricted subsidiaries incur significant additional indebtedness, the related risks that we face could increase. 34 The terms of our indebtedness restrict our current and future operations, particularly our ability to respond to change or to take certain actions.
The terms of our indebtedness restrict our current and future operations, particularly our ability to respond to change or to take certain actions.
As technologies evolve and these cyber security attacks become more sophisticated, we may incur significant costs to upgrade or enhance our security measures to protect against such attacks, and we may face difficulties in fully anticipating or implementing adequate preventive measures or mitigating potential harm. 32 Risks Related to our Financial Condition The non-GAAP financial information included in this Form 10-K is presented for informational purposes only and may not be an indication of our financial condition or results of operations in the future .
As technologies evolve and these cyber security attacks become more sophisticated, we may incur significant costs to upgrade or enhance our security measures to protect against such attacks, and we may face difficulties in fully anticipating or implementing adequate preventive measures or mitigating potential harm.
For example, the presence of one or more material liabilities of an acquired company that are unknown to us at the time of acquisition may have a material adverse effect on our business. Our acquisition and joint venture strategy may not be received positively by customers, and we may not realize any anticipated benefits from acquisitions or joint ventures.
In addition, we may encounter unforeseen obstacles or costs in the integration of acquired businesses. For example, the presence of one or more material liabilities of an acquired company that are unknown to us at the time of acquisition may have a material adverse effect on our business.
For the year ended December 31, 2022, our top ten customers represented approximately 58% of our sales (including our proportionate 50% share of sales attributable to the Zeolyst JV) and one single customer represented 13% or $103.3 million of our sales in both Ecoservices and Catalyst Technologies.
For the year ended December 31, 2023, our top ten customers represented approximately 60% of our sales and one single customer represented 13% or $91.5 million of our sales in both Ecoservices and Advanced Materials & Catalysts.
We are in the process of completing a substantial environmentally-driven capital improvement project in 2023 and failure to complete this project or to timely identify and implement other capital projects required to achieve or maintain compliance could expose us to enforcement and penalty.
The failure to timely identify and implement any such capital projects required to achieve or maintain compliance could expose us to enforcement and penalty.
In the event our lenders or noteholders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. Risks Related to our Common Stock CCMP and INEOS continue to have influence over us, which could limit your ability to influence the outcome of key transactions, including a change of control.
In the event our lenders or noteholders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.
We are still in the process of analyzing the impact on earnings as a result of this operational interruption. The insurance that we maintain may not fully cover all potential exposures.
The insurance that we maintain may not fully cover all potential exposures.
Removed
For example, the COVID-19 pandemic and the associated economic downturn affected our financial results during 2020, and the prolonged continuation of the COVID-19 pandemic and the possible spread of COVID-19 variants could result in a sustained or further economic downturn that may continue to affect our operations and financial results.
Added
A product liability claim or voluntary or government-ordered product recall could result in substantial and unexpected expenditures, affect customer confidence in our products and divert management’s attention from other 25 responsibilities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Segment (1) Baton Rouge, Louisiana, United States ES Baytown, Texas, United States ES Dominguez, California, United States ES Delfzijl, The Netherlands (2) CAT Hammond, Indiana, United States ES Houston, Texas, United States ES Kansas City, Kansas, United States (2) CAT Martinez, California, United States ES West Orange, Texas, United States ES Portland, Oregon, United States ES (1) ES: Ecoservices; CAT: Catalyst Technologies.
Biggest changeLocation Segment Baton Rouge, Louisiana, United States Ecoservices Baytown, Texas, United States Ecoservices Dominguez, California, United States Ecoservices Delfzijl, The Netherlands (1) Advanced Materials & Catalysts Hammond, Indiana, United States Ecoservices Houston, Texas, United States Ecoservices Kansas City, Kansas, United States (1) Advanced Materials & Catalysts Martinez, California, United States Ecoservices West Orange, Texas, United States Ecoservices Portland, Oregon, United States Ecoservices (1) We lease a portion of the site to the Zeolyst Joint Venture. 40
Our joint ventures operated out of two facilities located in two countries. The table below presents summary information regarding our principal manufacturing facilities that we own as of December 31, 2022.
Our joint ventures operated out of two facilities located in two countries. The table below presents summary information regarding our principal manufacturing facilities that we own as of December 31, 2023.
ITEM 2. PROPERTIES. Our operating headquarters are located in Malvern, Pennsylvania and our primary research and development facility is in Conshohocken, Pennsylvania. As of December 31, 2022, we had ten manufacturing facilities in two countries. We also had five administrative facilities and two research and development facilities located in two countries.
ITEM 2. PROPERTIES. Our operating headquarters are located in Malvern, Pennsylvania and our primary research and development facility is in Conshohocken, Pennsylvania. As of December 31, 2023, we had ten manufacturing facilities in two countries. We also had five administrative facilities and two research and development facilities located in three countries.
Removed
(2) We lease a portion of the site to the Zeolyst Joint Venture.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe currently believe that there is no litigation pending that is likely to have a material adverse effect on our business. Regardless of the outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 40 PART II
Biggest changeWe currently believe that there is no litigation pending that is likely to have a material adverse effect on our business. Regardless of the outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeTotal Number of Shares of Common Stock Purchased as Part of Publicly Announced Plan or Programs Maximum Number (or Dollar Value) of Shares of Common Stock that May Yet Be Purchased Under the Plans or Programs Total Number of Shares of Common Stock Purchased (1) Average Price Paid per Share of Common Stock (2) October 1, 2022—October 31, 2022 — $ — — $376,328 November 1, 2022—November 30, 2022 8,000,000 $ 7.88 — $313,298 December 1, 2022—December 31, 2022 — $ — — $313,298 Total 8,000,000 (1) In April 2022, our Board of Directors approved and announced a new stock repurchase program authorizing the repurchase of up to $450 million of the Company’s outstanding common stock over the next four years.
Biggest changeTotal Number of Shares of Common Stock Purchased as Part of Publicly Announced Plan or Programs Maximum Number (or Dollar Value) of Shares of Common Stock that May Yet Be Purchased Under the Plans or Programs (3) Total Number of Shares of Common Stock Purchased (1) Average Price Paid per Share of Common Stock (2) October 1, 2023 — October 31, 2023 — $ — — $ 234,592 November 1, 2023 — November 30, 2023 — $ — — $ 234,592 December 1, 2023 — December 31, 2023 — $ — — $ 234,592 Total — 2022 Stock Repurchase Program (1) During the three months ended December 31, 2023, the Company did not repurchase shares on the open market or accrue excise tax related to these repurchases, net of shares issued under the Company’s equity incentive program.
The declaration and payment of any future dividends by our Board of Directors is subject to compliance with the covenants contained in the agreements governing our credit facilities, applicable law and other considerations. See Note 18 to our consolidated financial statements included in this Form 10-K for details regarding covenant restrictions on the payment of dividends under our debt agreements.
The declaration and payment of any future dividends by our Board of Directors is subject to compliance with the covenants contained in the agreements governing our credit facilities, applicable law and other considerations. See Note 16 to our consolidated financial statements included in this Form 10-K for information regarding covenant restrictions on the payment of dividends under our debt agreements.
Stock Performance Graph The graph below shows the cumulative total shareholder return of our common stock for the period from December 31, 2017 to December 31, 2022 as compared to the cumulative total return of the Russell 2000 Total Return Index and the S&P 1500 Specialty Chemicals Index, assuming an investment of $100 made at the respective closing prices on December 31, 2017.
Stock Performance Graph The graph below shows the cumulative total shareholder return of our common stock for the period from December 31, 2018 to December 31, 2023 as compared to the cumulative total return of the Russell 2000 Total Return Index and the S&P 1500 Specialty Chemicals Index, assuming an investment of $100 made at the respective closing prices on December 31, 2018.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information, Holders and Dividends Our common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “ECVT”. As of February 23, 2023, there were 35 shareholders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information, Holders and Dividends Our common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “ECVT”. As of February 23, 2024, there were 11 shareholders of record of our common stock.
As of December 31, 2022, $313.3 million was available for additional share repurchases under the program. (2) Excludes brokerage commissions and other costs of execution.
As of December 31, 2023, $234.6 million was available for additional share repurchases under the program. (2) Excludes brokerage commissions and other costs of execution.
These transactions when they occur are accounted for as stock repurchases by the Company, with the shares returned to treasury stock at a cost representing the payment by the Company of the tax obligations on behalf of the employees in lieu of shares for the vesting unit. There were no such transactions during the three months ended December 31, 2022.
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.
Tax Withholdings 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.
Historically the Company has made discretionary share repurchases under its share repurchase programs. Tax Withholdings (1) 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.
This program is expected to be funded using cash on hand and cash generated from operations. We primarily expect to conduct the repurchase program through negotiated transactions with the Company’s equity sponsors, as well as through open market repurchases or other means, including through Rule 10b-18 trading plans or through the use of other techniques such as accelerated share repurchases.
We primarily expect to conduct the repurchase program through negotiated transactions with the Company’s equity sponsors, as well as through open market repurchases or other means, including through Rule 10b-18 trading plans or through the use of other techniques such as accelerated share repurchases.
The information contained in the graph below is furnished and therefore not to be considered “filed” with the SEC, and is not incorporated by reference into any document that incorporates this Form 10-K by reference. 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 ECVT (formerly PQG) $ 100 $ 90 $ 104 $ 99 $ 88 $ 76 Russell 2000 100 89 112 134 154 122 SP 1500 Spec Chem 100 94 111 129 165 124 41 Issuer Purchases of Equity Securities 2022 Stock Repurchase Program The following table contains information about purchases of our common stock during the fourth quarter of 2022.
The information contained in the graph below is furnished and therefore not to be considered “filed” with the SEC, and is not incorporated by reference into any document that incorporates this Form 10-K by reference. 41 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 ECVT (formerly PQG) $ 100 $ 116 $ 110 $ 98 $ 85 $ 93 Russell 2000 100 126 151 173 138 161 SP 1500 Spec Chem 100 118 138 176 132 152 Issuer Purchases of Equity Securities The following table contains information about purchases of our common stock during the fourth quarter of 2023.
Removed
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.
Added
(3) In April 2022, our Board of Directors approved a stock repurchase program that authorized the Company to purchase up to $450 million of the Company’s common stock over the four-year period from the date of approval. This program is expected to be funded using cash on hand and cash generated from operations.
Removed
Based on the Company’s historical net repurchase activity, the excise tax and the other provisions of the IRA are not expected to have a material impact on the Company’s results of operations or financial position.
Added
There were no such transactions during the three months ended December 31, 2023. 42 ITEM 6. [Reserved]
Removed
During the three months ended December 31, 2022, in connection with a secondary offering of the Company’s common stock in November 2022, the Company repurchased 8,000,000 shares of its common stock sold in the offering from the underwriters at a price of $7.88 per share for a total of $63.0 million.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCash Flow Years ended December 31, 2022 2021 2020 (in millions) Continuing Operations Net cash provided by (used in) Operating activities $ 180.4 $ 137.3 $ 140.1 Investing activities (63.0) 875.7 571.8 Financing activities (148.1) (963.1) (720.2) Discontinued Operations Net cash provided by (used in) Operating activities 6.3 (7.4) 83.5 Investing activities — (40.0) (20.3) Financing activities — (1.1) (2.6) Effect of exchange rate changes on cash, cash equivalents and restricted cash (5.5) 2.3 11.1 Net change in cash, cash equivalents and restricted cash (29.9) 3.7 63.4 Cash, cash equivalents and restricted cash at beginning of period 140.9 137.2 73.9 Cash, cash equivalents and restricted cash at end of period $ 111.0 $ 140.9 $ 137.3 Years ended December 31, 2022 2021 2020 (in millions) Continuing Operations Net income $ 69.8 $ 1.8 $ 54.3 Non-cash and non-operating activities (1) 114.3 156.6 74.6 Changes in working capital (2.2) (18.1) 14.5 Other operating activities (1.5) (3.0) (3.3) Net cash provided by operating activities, continuing operations $ 180.4 $ 137.3 $ 140.1 (1) Includes depreciation, amortization, amortization of deferred financing costs and original issue discount, debt extinguishment costs, foreign currency exchange gains and losses, pension and postretirement healthcare benefit expense and funding, deferred income tax benefit and provision, net losses on asset disposals, stock compensation, equity in net income and dividends received from affiliated companies. 61 Years ended December 31, 2022 2021 2020 (in millions) Continuing Operations Working capital changes that provided (used) cash: Receivables $ 5.4 $ (33.5) $ 7.0 Inventories 9.9 0.6 (3.0) Prepaids and other current assets — (7.8) (1.4) Accounts payable (10.1) 10.0 6.9 Accrued liabilities (7.4) 12.6 5.0 $ (2.2) $ (18.1) $ 14.5 Years ended December 31, 2022 2021 2020 (in millions) Continuing Operations Purchases of property, plant and equipment $ (58.9) $ (60.0) $ (54.8) Proceeds from business divestitures, net of cash — 978.4 624.3 Payments for business divestiture (3.7) — — Proceeds from sale of assets — — 2.4 Business combinations, net of cash acquired (0.5) (42.6) — Other, net 0.1 (0.1) (0.1) Net cash (used in) provided by investing activities, continuing operations $ (63.0) $ 875.7 $ 571.8 Years ended December 31, 2022 2021 2020 (in millions) Continuing Operations Net cash repayments on debt obligations (9.0) (542.9) (470.3) Dividends paid to stockholders — (435.6) (243.7) Other financing activities (139.1) 15.4 (6.2) Net cash used in financing activities, continuing operations $ (148.1) $ (963.1) $ (720.2) 62 The following discussions related to our cash flows are presented on a continuing operations basis, which excludes the cash flows from our former Performance Chemicals and Performance Materials businesses, which are accounted for as discontinued operations.
Biggest changeFinance obligation due withing the next twelve months is $3.2 million. 53 Cash Flow Years ended December 31, 2023 2022 2021 (in millions) Continuing Operations Net cash provided by (used in) Operating activities $ 137.6 $ 180.4 $ 137.3 Investing activities (65.3) (63.0) 875.7 Financing activities (93.5) (148.1) (963.1) Discontinued Operations Net cash provided by (used in) Operating activities — 6.3 (7.4) Investing activities — — (40.0) Financing activities — — (1.1) Effect of exchange rate changes on cash and cash equivalents (1.3) (5.5) 2.3 Net change in cash and cash equivalents (22.5) (29.9) 3.7 Cash and cash equivalents at beginning of period 110.9 140.9 137.2 Cash and cash equivalents at end of period $ 88.4 $ 111.0 $ 140.9 Years ended December 31, 2023 2022 2021 (in millions) Continuing Operations Net income $ 71.2 $ 69.8 $ 1.8 Non-cash and non-working capital related activities (1) 86.6 114.3 156.6 Changes in working capital (20.8) (2.2) (18.1) Other operating activities 0.6 (1.5) (3.0) Net cash provided by operating activities, continuing operations $ 137.6 $ 180.4 $ 137.3 (1) Includes depreciation, amortization, amortization of deferred financing costs and original issue discount, debt extinguishment costs, foreign currency exchange (gain) loss, pension and postretirement healthcare (benefit) expense, deferred income tax provision (benefit), net (gain) loss on asset disposals, stock compensation expense, equity in net income and dividends received from affiliated companies. 54 Years ended December 31, 2023 2022 2021 (in millions) Continuing Operations Working capital changes that provided (used) cash: Receivables $ (6.1) $ 5.4 $ (33.5) Inventories (1.4) 9.9 0.6 Prepaids and other current assets (1.1) — (7.8) Accounts payable 2.4 (10.1) 10.0 Accrued liabilities (14.6) (7.4) 12.6 $ (20.8) $ (2.2) $ (18.1) Years ended December 31, 2023 2022 2021 (in millions) Continuing Operations Purchases of property, plant and equipment $ (65.3) $ (58.9) $ (60.0) Proceeds from business divestitures, net of cash — — 978.4 Payments for business divestiture, net of cash — (3.7) — Business combinations, net of cash acquired — (0.5) (42.6) Other, net — 0.1 (0.1) Net cash (used in) provided by investing activities, continuing operations $ (65.3) $ (63.0) $ 875.7 Years ended December 31, 2023 2022 2021 (in millions) Continuing Operations Cash repayments on debt obligations $ (9.0) $ (9.0) $ (542.9) Dividends paid to stockholders — — (435.6) Repurchases of common shares (78.7) (136.7) — Tax withholdings on equity award vesting (3.4) (0.3) — Repayment of financing obligation (2.8) (2.7) — Other financing activities 0.4 0.6 15.4 Net cash used in financing activities, continuing operations $ (93.5) $ (148.1) $ (963.1) The following discussions related to our cash flows are presented on a continuing operations basis, which excludes the cash flows from our former Performance Chemicals and Performance Materials businesses, which are accounted for as discontinued operations. 55 Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Net cash provided by operating activities was $137.6 million for the year ended December 31, 2023, compared with $180.4 million provided for the year ended December 31, 2022.
However, Adjusted EBITDA reflects our share of the earnings of the Zeolyst Joint Venture that have been recorded as equity in net income from affiliated companies in our consolidated statements of income and includes Zeolyst Joint Venture adjustments on a proportionate basis based on our 50% ownership interest.
However, net income and Adjusted EBITDA reflects our share of the earnings of the Zeolyst Joint Venture that have been recorded as equity in net income from affiliated companies in our consolidated statements of income and includes Zeolyst Joint Venture adjustments on a proportionate basis based on our 50% ownership interest.
Before any impact of hedges, a one percent change in assumed interest rates for our variable interest credit facilities would have an annual impact of approximately $8.9 million on interest expense. The principal balance due in the next twelve months is $9.0 million.
Before any impact of hedges, a one percent change in assumed interest rates for our variable interest credit facilities would have an annual impact of approximately $8.8 million on interest expense. The principal balance due in the next twelve months is $9.0 million.
While natural gas is not a direct feedstock for any product, natural gas powered machinery and equipment are used to heat raw materials and create the chemical reactions necessary to produce end-products. We maintain multiple suppliers wherever possible and structure our customer contracts when possible to allow for the pass-through of raw material and natural gas costs.
While natural gas is not a direct feedstock for any product, natural gas powered machinery and equipment are used to heat raw materials and create the chemical reactions necessary to produce end-products. We maintain multiple suppliers wherever possible and structure our customer contracts when possible to allow for the pass-through of raw material, labor and natural gas costs.
The actual interest payments may differ materially based on actual amounts of long-term debt outstanding and actual interest rates in future periods, as well as the hedging impact from our interest rate cap agreements. 60 Subject to approval by our board of directors, we may raise additional capital or borrowings from time to time or seek to refinance our existing debt.
The actual interest payments may differ materially based on actual amounts of long-term debt outstanding and actual interest rates in future periods, as well as the hedging impact from our interest rate cap agreements. Subject to approval by our board of directors, we may raise additional capital or borrowings from time to time or seek to refinance our existing debt.
The difference between the U.S. federal statutory income tax rate and our effective income tax rate for the year ended December 31, 2022 was mainly due to the impact of the Section 162(m) deduction limitation for “covered” employees with compensation in excess of $1 million, along with the tax deductibility of stock compensation.
The difference between the U.S. federal statutory income tax rate and our effective income tax rate for the year ended December 31, 2022 was mainly due the impact of the Section 162(m) deduction limitation for “covered” employees with compensation in excess of $1 million, along with the tax deductibility of stock compensation.
We determined the fair value of the equity affiliate investment and the fair value step-up was then attributed to the underlying assets of the Zeolyst Joint Venture. Amortization is primarily related to the fair value adjustments associated with fixed assets and intangible assets, including customer relationships and technical know-how.
We determined the fair value of the equity affiliate investment and the fair value step-up was then attributed to the underlying assets of the Zeolyst Joint Venture. Amortization is primarily related to the fair value adjustments associated with intangible assets, including customer relationships and technical know-how.
Adjusted net income is presented as a key performance indicator as we believe it will enhance a prospective investor’s understanding of our results of operations and financial condition. Adjusted net income may not be comparable with net income or adjusted net income as defined by other companies.
Adjusted net income is presented as a key performance indicator as we believe it will enhance a prospective investor’s understanding of our results of operations and financial 51 condition. Adjusted net income may not be comparable with net income or adjusted net income as defined by other companies.
Subsequent reversal of an impairment loss is not permitted. For the purposes of the quantitative goodwill impairment test, we determine the fair value of our reporting units using a combination of a market approach and an income, or discounted cash flow, approach.
Subsequent reversal of an impairment loss is not permitted. 59 For the purposes of the quantitative goodwill impairment test, we determine the fair value of our reporting units using a combination of a market approach and an income, or discounted cash flow, approach.
Although achievement of the performance condition is subject to continued service with us, the terms of awards issued 69 with performance conditions stipulate that the performance vesting condition can be attained for a period of six months following separation from service under certain circumstances, depending on the means of separation from the Company and subject to other factors such as individual separation agreements.
Although achievement of the performance condition is subject to continued service with us, the terms of awards issued with performance conditions stipulate that the performance vesting 61 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.
These demand fluctuations results in higher sales and working capital requirements in the second and third quarter. 45 Foreign Currency As a global business, we are subject to the impact of gains and losses on currency translations, which occur when the financial stat ements of foreign operations are translated into U.S. dollars.
These demand fluctuations results in higher sales and working capital requirements in the second and third quarters. 45 Foreign Currency As a global business, we are subject to the impact of gains and losses on currency translations, which occur when the financial stat ements of foreign operations are translated into U.S. dollars.
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.
Each limits the ability of the Company and its restricted subsidiaries to incur certain indebtedness or liens, merge, consolidate or liquidate, dispose of certain property, make investments or declare or pay dividends, make optional payments, modify certain debt instruments, enter into certain transactions with affiliates, enter into certain sales and leasebacks, and certain other non-financial restrictive covenants.
Most of our Ecoservices contracts feature take-or-pay volume protection and/or quarterly price adjustments for commodity inputs, labor, the Chemical Engineering Index (U.S. chemical plant construction cost index) and natural gas. Over 80% of our Ecoservices segment sales for the year ended December 31, 2022 were under contracts featuring quarterly price adjustments.
Most of our Ecoservices contracts feature take-or-pay volume protection and/or quarterly price adjustments for commodity inputs, labor, the Chemical Engineering Index (U.S. chemical plant construction cost index) and natural gas. Over 80% of our Ecoservices segment sales for the year ended December 31, 2023 were under contracts featuring quarterly price adjustments.
(b) Represents the amortization of the fair value adjustments associated with the equity affiliate investment in the Zeolyst Joint Venture as a result of the combination of the businesses of PQ Holdings Inc. and Eco Services Operations LLC in May 2016 (the “Business Combination”).
(b) Represents the amortization of the fair value adjustments associated with the equity affiliate investment in the Zeolyst Joint Venture as a result of the combination of the businesses of PQ Holdings Inc. and Eco Services Operations LLC in May 2016.
Effective on August 1, 2021, we completed the sale of our Performance Chemicals business to Sparta Aggregator L.P., a partnership with Koch Minerals & Trading, LLC and Cerberus Capital Management, L.P. for $1.1 billion.
Effective on August 1, 2021, we completed the sale of our Performance Chemicals business to Sparta Aggregator L.P., a partnership with Koch Minerals & Trading, LLC and Cerberus Capital Management, L.P.
Demand for the Zeolyst Joint Venture products fluctuates based upon the timing of our customer’s fixed bed catalyst replacements. We share proportionally in the management of our joint ventures with the other parties to each such joint venture.
Demand for the Zeolyst Joint Venture products fluctuates based upon the timing of our customer’s fixed bed catalyst replacements. We share proportionally in the management of our joint venture with the other parties to such joint venture.
For the annual 67 assessments in 2022 and 2021, we bypassed the option to perform the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test for each of our reporting units. The quantitative test identifies both the potential existence of impairment and the amount of impairment loss.
For the annual assessments in 2023 and 2022, we bypassed the option to perform the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test for each of our reporting units. The quantitative test identifies both the potential existence of impairment and the amount of impairment loss.
We believe that our existing cash, cash equivalents and cash flows from operations, combined with availability under our ABL Facility, will be sufficient to meet our presently anticipated future cash needs for at least the next 12 months. We may also pursue strategic acquisition opportunities, which may impact our future cash requirements.
We believe that our existing cash, cash equivalents and cash flows from operations, combined with availability under our ABL Facility, will be sufficient to meet our presently anticipated future cash needs for at least the next twelve months. We may also pursue strategic acquisition or divestiture opportunities, which may impact our future cash requirements.
Adjusted net income consists of net income (loss) attributable to Ecovyst Inc. adjusted for (i) non-operating income or expense and (ii) the impact of certain non-cash, nonrecurring or other items included in net income (loss) that we do not consider indicative of our ongoing operating performance.
Adjusted net income consists of net income (loss) adjusted for (i) non-operating income or expense and (ii) the impact of certain non-cash, nonrecurring or other items included in net income (loss) that we do not consider indicative of our ongoing operating performance.
The results of operations, financial condition, and cash flows for the Performance Materials and Performance Chemicals businesses are presented herein as discontinued operations. Refer to Note 4 and Note 5 of our Consolidated Financial Statements for additional information.
The results of operations, financial condition, and cash flows for the Performance Materials and Performance Chemicals businesses are presented herein as discontinued operations for the 2022 and 2021 periods presented. Refer to Note 4 of our consolidated financial statements for additional information.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Overview We are a leading integrated and innovative global provider of specialty catalysts and services. We believe that our products, which are predominantly inorganic, and services contribute to improving the sustainability of the environment.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Overview We are a leading integrated and innovative global provider of advanced materials, specialty catalysts and services. We believe that our products and services contribute to improving the sustainability of the environment.
We may seek, subject to market conditions and other factors, opportunities to repurchase, refinance or otherwise reprice our debt. ABL Facility On May 4, 2016, we entered a $200.0 million senior secured ABL facility, which provided for $200.0 million in revolving credit commitment (the “ABL Facility”).
We may seek, subject to market conditions and other factors, opportunities to repurchase, refinance or otherwise reprice our debt. 56 ABL Facility On May 4, 2016, we entered a $200.0 million senior secured ABL facility, which provided for $200.0 million in revolving credit commitments.
Our capital expenditures include both maintenance of business, which includes spending on maintenance and health, safety and environmental initiatives as well as growth, which includes spending to drive organic sales growth and cost savings initiatives.
Our capital expenditures include both maintenance of business, which include spending on maintenance and HSE initiatives as well as growth, which includes spending to drive organic sales growth and cost savings initiatives.
Interest payments due within the next twelve months are $59.5 million using the interest rate effective as of December 31, 2022 on our variable interest credit facilities. Interest on long-term debt excludes amortization of deferred financing fees and original issue discount.
Interest payments due within the next twelve months are $70.7 million using the interest rate effective as of December 31, 2023 on our variable interest credit facilities. Interest on long-term debt excludes amortization of deferred financing fees and original issue discount.
Years ended December 31, 2022 2021 2020 (in millions) Maintenance capital expenditures $ 46.9 $ 42.8 $ 36.0 Growth capital expenditures 9.0 19.6 10.2 Total capital expenditures $ 55.9 $ 62.4 $ 46.2 Capital expenditures remained at a level sufficient for required maintenance and certain expansion growth initiatives during these periods.
Years ended December 31, 2023 2022 2021 (in millions) Maintenance capital expenditures $ 54.1 $ 46.9 $ 42.8 Growth capital expenditures 8.1 9.0 19.6 Total capital expenditures $ 62.2 $ 55.9 $ 62.4 57 Capital expenditures remained at a level sufficient for required maintenance and certain expansion growth initiatives during these periods.
Over the course of the next twelve months and beyond, we anticipate making significant cash payments for known contractual and other obligations, including: Principal and interest on long-term debt As of December 31, 2022, our total indebtedness was $886.5 million, with up to $59.7 million of available borrowings under our ABL.
Over the course of the next twelve months and beyond, we anticipate making significant cash payments for known contractual and other obligations, including: Principal and interest on long-term debt As of December 31, 2023, our total indebtedness was $877.5 million, with up to $63.8 million of available borrowings under our ABL.
Our liquidity requirements are significant, primarily due to debt service requirements. As reported, our cash interest expense for the years ended December 31, 2022, 2021 and 2020 was approximately $35.4 million, $59.0 million and $90.3 million, respectively.
Our liquidity requirements are significant, primarily due to debt service requirements. As reported, our cash interest expense for the years ended December 31, 2023, 2022 and 2021 was approximately $42.1 million, $35.4 million and $59.0 million, respectively.
In 2022, we served global customers across many end uses and, as of December 31, 2022, operated out of ten strategically located manufacturing facilities. On December 14, 2020, we completed the sale of our Performance Materials business to Potters Buyer, LLC, an affiliate of The Jordan Company, L.P., for a purchase price of $650 million.
In 2023, we served global customers across many end uses and, as of December 31, 2023, operated out of ten strategically located manufacturing facilities. On December 14, 2020, we completed the sale of our Performance Materials business to Potters Buyer, LLC, an affiliate of The Jordan Company, L.P.
(2) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $50.3 million for the year ended December 31, 2022, which includes $27.9 million of equity in net income, excluding $6.4 million of amortization of investment in affiliate step-up, plus $16.0 million of joint venture depreciation, amortization and interest.
The Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment was $50.3 million for the year ended December 31, 2022, which includes $27.9 million of equity in net income, excluding $6.4 million of amortization of investment in affiliate step-up plus $16.0 million of joint venture depreciation, amortization and interest.
Because our Catalyst Technologies segment includes our 50% interest in the Zeolyst Joint Venture, we include an adjustment for our 50% proportionate share of depreciation, amortization and interest expense of the Zeolyst Joint Venture.
Because our Advanced Materials & Catalysts segment includes our 50% interest in the Zeolyst Joint Venture, we include an adjustment for our 50% proportionate share of depreciation, amortization and interest expense of the Zeolyst Joint Venture.
The second ratio compares the ABL Facility availability of the U.S. revolving credit facility against a $15.0 million threshold. As of December 31, 2022, we were in compliance with all covenants under our debt agreements. The 2021 Term Loan Facility and the ABL Facility contain various non-financial restrictive covenants.
The second ratio compares the ABL Facility availability of the U.S. revolving credit facility against a $15.0 million threshold. As of December 31, 2023, we were in compliance with the financial covenant under the ABL Facility. The 2021 Term Loan Facility and the ABL Facility contain various restrictive covenants.
Strategic decisions involving a particular group of assets may trigger an assessment of the recoverability of the related assets. Such an assessment could result in impairment losses. 68 For further information see Note 16 Goodwill and Other Intangible Assets. Income Taxes We operate within multiple taxing jurisdictions and are subject to tax filing requirements and potential audits within these jurisdictions.
Strategic decisions involving a particular group of assets may trigger an assessment of the recoverability of the related assets. Such an assessment could result in impairment losses. For further information, see Note 14 to these consolidated financial statements. 60 Income Taxes We operate within multiple taxing jurisdictions and are subject to tax filing requirements and potential audits within these jurisdictions.
Adjusted Net Income Summarized adjusted net income information is shown below in the following table: Years ended December 31, 2022 2021 Pre-tax Tax expense (benefit) After-tax Pre-tax Tax expense (benefit) After-tax (in millions) Reconciliation of net income attributable to Ecovyst Inc. to Adjusted Net Income (1)(2) Net income from continuing operations $ 94.7 $ 24.9 $ 69.8 $ 13.9 $ 12.1 $ 1.8 Amortization of investment in affiliate step-up (b) 6.4 1.5 4.9 6.5 1.6 4.9 Debt extinguishment costs — — — 26.9 6.6 20.3 Net loss on asset disposals (c) 3.6 0.9 2.7 5.7 1.4 4.3 Foreign currency exchange loss (d) 1.4 0.4 1.0 4.7 1.0 3.7 LIFO benefit (e) (0.2) (0.1) (0.1) (1.9) (0.5) (1.4) Transaction and other related costs (f) 7.0 1.1 5.9 2.0 0.5 1.5 Equity-based compensation 20.6 (0.1) 20.7 31.8 7.7 24.1 Restructuring, integration and business optimization expenses (g) 11.6 2.8 8.8 3.9 0.7 3.2 Other (h) (0.7) (0.2) (0.5) 1.8 0.7 1.1 Adjusted Net Income, including Impact of Discrete Tax Items 144.4 31.2 113.2 95.3 31.8 63.5 Impact of Discrete Tax Items (3) — — — — (6.1) 6.1 Adjusted Net Income $ 144.4 $ 31.2 $ 113.2 $ 95.3 $ 25.7 $ 69.6 (1) We define adjusted net inco me as net income attributable to Ecovyst Inc. adjusted for non-operating income or expense and the impact of certain non-cash or other items that are included in net income that we do not consider indicative of our ongoing operating performance.
Adjusted Net Income Summarized adjusted net income information is shown below in the following table: Years ended December 31, 2023 2022 Pre-tax Tax expense (benefit) After-tax Pre-tax Tax expense (benefit) After-tax (in millions) Reconciliation of net income to Adjusted Net Income (1)(2) Net income from continuing operations $ 82.0 $ 10.8 $ 71.2 $ 94.7 $ 24.9 $ 69.8 Amortization of investment in affiliate step-up (b) 6.4 1.6 4.8 6.4 1.5 4.9 Net loss on asset disposals (c) 4.1 1.0 3.1 3.6 0.9 2.7 Foreign currency exchange (gain) loss (d) (1.3) (0.3) (1.0) 1.4 0.4 1.0 LIFO expense (benefit) (e) 3.5 0.9 2.6 (0.2) (0.1) (0.1) Transaction and other related costs (f) 3.0 0.8 2.2 7.0 1.1 5.9 Equity-based compensation 16.0 1.5 14.5 20.6 (0.1) 20.7 Restructuring, integration and business optimization expenses (g) 2.7 0.7 2.0 11.6 2.8 8.8 Other (h) 0.8 0.2 0.6 (0.7) (0.2) (0.5) Adjusted Net Income, including Impact valuation allowance release 117.2 17.2 100.0 144.4 31.2 113.2 Impact of valuation allowance release (3) — 10.2 (10.2) — — — Adjusted Net Income $ 117.2 $ 27.4 $ 89.8 $ 144.4 $ 31.2 $ 113.2 (1) We define adjusted net inco me as net income attributable to Ecovyst Inc. adjusted for non-operating income or expense and the impact of certain non-cash or other items that are included in net income that we do not consider indicative of our ongoing operating performance.
We conduct operations through two repor ting segments: (1) Ecoservices and (2) Catalyst Technologies (including our 50% interest in the Zeolyst Joint Venture).
We conduct operations through two repor ting segments: (1) Ecoservices and (2) Advanced Materials & Catalysts (including our 50% interest in the Zeolyst Joint Venture).
(e) Represents non-cash adjustments to the Company’s LIFO reserves for certain inventories in the U.S. that are valued using the LIFO method, which we believe provides a means of comparison to other companies that may not use the same basis of accounting for inventories.
(e) Represents non-cash adjustments to the Company’s LIFO reserves for certain inventories in the U.S. that are valued using the LIFO method, effectively reflecting the results as if these inventories were valued using the FIFO 50 method, which we believe provides a means of comparison to other companies that may not use the same basis of accounting for inventories.
Growth capital expenditures include spending to drive organic sales growth and cost savings initiatives. These capital expenditures represent our “book” capital expenditures for which the company has recorded, but not necessarily paid for the capital expenditures.
Capital Expenditures Maintenance capital expenditures include spending on maintenance of business, health, safety and environmental initiatives. Growth capital expenditures include spending to drive organic sales growth and cost savings initiatives. These capital expenditures represent our “book” capital expenditures for which the company has recorded, but not necessarily paid for the capital expenditures.
When a customer procures goods under this method, we consider the combination of the pricing quote and the purchase order to create enforceable rights and obligations. Absent either a MSA or pricing quote, we consider an individual purchase order to create enforceable rights and obligations.
When a customer procures goods under this method, we consider the combination of the pricing quote and the purchase order to create enforceable rights and obligations.
Net cash used in investing activities was $63.0 million for the year ended December 31, 2022, compared to net cash provided of $875.7 million during the year ended December 31, 2021. Cash used in investing activities consisted of $58.9 million and $60.0 million to fund capital expenditures during the years ended December 31, 2022 and 2021, respectively.
Net cash used in investing activities was $65.3 million for the year ended December 31, 2023, compared to net cash used of $63.0 million during the year ended December 31, 2022. Cash used in investing activities consisted of $65.3 million and $58.9 million to fund capital expenditures during the years ended December 31, 2023 and 2022, respectively.
Restricted stock awards and stock options issued with performance conditions vest based on the occurrence of a defined liquidity event upon which certain investment funds affiliated with CCMP receive proceeds exceeding certain thresholds.
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.
Interest Expense, Net Interest expense, net for the year ended December 31, 2022 was $37.2 million, an increase of $0.2 million, as compared with $37.0 million for the year ended December 31, 2021.
Interest Expense, Net Interest expense, net for the year ended December 31, 2023 was $44.7 million, an increase of $7.5 million, as compared with $37.2 million for the year ended December 31, 2022.
This was only partially offset by increased volume and higher average selling prices. 50 A reconciliation of net income attributable to Ecovyst Inc. to Adjusted EBITDA is as follows: Years ended December 31, 2022 2021 (in millions) Reconciliation of net income attributable to Ecovyst Inc. to Adjusted EBITDA Net income from continuing operations $ 69.8 $ 1.8 Provision for income taxes 24.9 12.1 Interest expense, net 37.2 37.0 Depreciation and amortization 79.2 79.7 EBITDA 211.1 130.6 Joint venture depreciation, amortization and interest (a) 16.0 15.6 Amortization of investment in affiliate step-up (b) 6.4 6.5 Debt extinguishment costs — 26.9 Net loss on asset disposals (c) 3.6 5.7 Foreign currency exchange loss (d) 1.4 4.7 LIFO benefit (e) (0.2) (1.9) Transaction and other related costs (f) 7.0 2.0 Equity-based compensation 20.6 31.8 Restructuring, integration and business optimization expenses (g) 11.6 3.9 Other (h) (0.7) 1.8 Adjusted EBITDA $ 276.8 $ 227.6 (a) We use Adjusted EBITDA as a performance measure to evaluate our financial results.
A reconciliation of net income attributable to Ecovyst Inc. to Adjusted EBITDA is as follows: Years ended December 31, 2023 2022 (in millions) Reconciliation of net income to Adjusted EBITDA Net income from continuing operations $ 71.2 $ 69.8 Provision for income taxes 10.8 24.9 Interest expense, net 44.7 37.2 Depreciation and amortization 84.6 79.2 EBITDA 211.3 211.1 Joint venture depreciation, amortization and interest (a) 13.4 16.0 Amortization of investment in affiliate step-up (b) 6.4 6.4 Net loss on asset disposals (c) 4.1 3.6 Foreign currency exchange (gain) loss (d) (1.3) 1.4 LIFO expense (benefit) (e) 3.5 (0.2) Transaction and other related costs (f) 3.0 7.0 Equity-based compensation 16.0 20.6 Restructuring, integration and business optimization expenses (g) 2.7 11.6 Other (h) 0.8 (0.7) Adjusted EBITDA $ 259.9 $ 276.8 (a) We use Adjusted EBITDA as a performance measure to evaluate our financial results.
Additionally, in connection with secondary offerings of the Company’s common stock in August and November 2022, the Company repurchased 6,500,000 and 8,000,000 shares of its common stock sold in the offerings, respectively, from the underwriters at a price of $8.36 per share and $7.88 per share, respectively, simultaneous with the closing of the respective offerings, for a total of $117.3 million.
Additionally, in connection with secondary offerings of the Company’s common stock in August and November 2022, the Company repurchased 14,500,000 shares of its common stock sold in the offerings from the underwriters at a weighted average price of $8.09 per share concurrently with the closing of the offerings, for a total of $117.3 million.
(f) Relates to certain transaction costs, including debt financing, due diligence and other costs related to transactions that are completed, pending or abandoned, that we believe are not representative of our ongoing business operations.
(f) Relates to certain transaction costs, including debt financing, due diligence and other costs related to transactions that are completed, pending or abandoned, that we believe are not representative of our ongoing business operations. (g) Includes the impact of restructuring, integration and business optimization expenses, which are incremental costs that are not representative of our ongoing business operations.
Currently there is no history in which customers fail to meet the contractual minimum. 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 with our customers.
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 with our customers.
Approximately 6% of our sales for the years ended December 31, 2022 and 2021 in currencies other than the U.S. dollar.
We operate in various geographies with approximately 6% of our sales for the years ended December 31, 2023 and 2022 in currencies other than the U.S. dollar.
Joint Ventures We account for our investments in our equity joint ventures under the equity method. Our joint venture, the Zeolyst Joint Venture, manufactures high performance, specialty, zeolite-based catalysts for use in the polymers and engineered plastics, emission control, refining and petrochemical industries and other areas of the broader chemicals industry.
Joint Ventures We account for our investments in our equity joint ventures under the equity method. Our joint venture, the Zeolyst Joint Venture, manufactures high performance, specialty, zeolite-based catalysts, used in emission control, refining and petrochemical industry applications and by the broader chemicals industry.
Ecoservices: We are a leading provider of sulfuric acid recycling services to North American refineries for the production of alkylate, an essential gasoline component for lowering vapor pressure and increasing octane to meet stringent gasoline specifications and fuel efficiency standards. We are also a leading North American producer of on-purpose virgin sulfuric acid for water treatment, mining, and industrial applications.
Ecoservices: We are a leading provider of sulfuric acid recycling to the North American refining industry for the production of alkylate, an essential gasoline component for lowering vapor pressure and increasing octane to meet stringent gasoline specifications and fuel efficiency standards.
We also did not make any purchases from suppliers in Russia or Ukraine. As Russia’s invasion of Ukraine continues to unfold, we will continue to monitor compliance with sanctions imposed by the U.S. government and other countries. Recent Developments Late in the fourth quarter of 2022, our Ecoservices business was adversely affected by Winter Storm Elliott.
We also did not make any purchases from suppliers in Russia or Ukraine. As Russia’s invasion of Ukraine continues to unfold, we will continue to monitor compliance with sanctions imposed by the U.S. government and other countries. We continue to monitor the developments in the Middle East.
The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $42.5 million for the year ended December 31, 2020, which includes $21.2 million of equity in net income, excluding $6.6 million of amortization of investment in affiliate step-up, plus $14.7 million of joint venture depreciation, amortization and interest.
(2) The Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment was $50.5 million for the year ended December 31, 2023, which includes $30.7 million of equity in net income, excluding $6.4 million of amortization of investment in affiliate step-up plus $13.4 million of joint venture depreciation, amortization and interest.
We identify 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 we will collect the consideration to which we are entitled. 66 Evidence of a contract with a customer 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.
We identify 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 we will collect the consideration to which we are entitled.
Selling, General and Administrative Expenses Selling, general and administrative expenses for the year ended December 31, 2022 were $85.3 million, a decrease of $12.5 million compared with $97.8 million for the year ended December 31, 2021.
Selling, General and Administrative Expenses Selling, general and administrative expenses for the year ended December 31, 2023 were $79.2 million, a decrease of $6.1 million compared with $85.3 million for the year ended December 31, 2022.
Results of Operations Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Highlights The following is a summary of our financial performance for the year ended December 31, 2022 compared with the year ended December 31, 2021. Sales Sales increased $209.0 million to $820.2 million.
Results of Operations Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Highlights The following is a summary of our financial performance for the year ended December 31, 2023 compared with the year ended December 31, 2022. Sales Sales decreased $129.1 million to $691.1 million.
We had no sales to customers in Ukraine and our sales to a customer in Russia were immaterial for the year ended December 31, 2022 and have been discontinued. Sales to this customer in Russia represented 2% of total sales for the years ended December 31, 2021 and 2020, respectively.
We have no operations in Russia or Ukraine. We had no sales to customers in Ukraine and Russia in December 31, 2023 and our sales to a customer in Russia were immaterial for the year ended December 31, 2022 and 2% for the year ended December 31, 2021.
Our net debt was $775.6 million, including cash of $110.9 million. Our total available liquidity as of December 31, 2022 was $170.6 million, which represents our cash on hand of $110.9 million plus our excess availability under our ABL of $59.7 million, after giving effect to $4.0 million of outstanding letters of credit and no revolving credit facility borrowings.
Our total available liquidity as of December 31, 2023 was $152.2 million, which represents our cash on hand of $88.4 million plus our excess availability under our ABL of $63.8 million, after giving effect to $4.0 million of outstanding letters of credit and no revolving credit facility borrowings.
This segment includes our 50% interest in the Zeolyst Joint Venture, where we are a leading global supplier of zeolites used for catalysts that help produce renewable fuels, remove nitrogen oxides from diesel engine emissions as well as sulf ur from fuels during the refining process.
This segment includes our 50% interest in the Zeolyst Joint Venture, where we are a leading global supplier of zeolites used for catalysts that support the production of sustainable fuels, remove nitrogen oxides from diesel engine emissions and are broadly applied in refining and petrochemical processes.
Critical Accounting Policies and Estimates We prepare our consolidated financial statements in conformity with GAAP and our significant accounting policies are described in Note 2 to our consolidated financial statements. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures.
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures.
In addition, there was annual commitment fee equal to 0.375%, with a step-down to 0.25% based on average usage of the revolving credit borrowings available. 64 On June 9, 2021, we amended the ABL Facility to decrease the aggregate amount of revolving loan commitments available to $100.0 million, consisting of $90.0 million in U.S. commitments and $10.0 million in European commitments and extended the maturity date to August 2, 2026.
On June 9, 2021, we amended the ABL Facility a third time to decrease the aggregate amount of revolving loan commitments available to $100.0 million, consisting of $90.0 million in U.S. commitments and $10.0 million in European commitments and extended the maturity date to August 2, 2026.
The increase in sales was primarily due to the contribution from higher sales volume of $7.1 million and higher average selling prices of $4.6 million, partially offset by the unfavorable effects of foreign currency translation of $4.7 million.
The decrease in sales was primarily due to lower sales volume of $24.2 million, partially offset by higher average selling prices of $12.4 million and the effects of foreign currency translation of $0.4 million.
Equity in Net Income of Affiliated Companies Equity in net income of affiliated companies for the year ended December 31, 2021 was $27.7 million, an increase of $6.7 million, compared with income of $21.0 million for the year ended December 31, 2020.
Equity in Net Income from Affiliated Companies Equity in net income from affiliated companies for the year ended December 31, 2023 was $30.6 million, an increase of $2.9 million or 10.5%, compared with $27.7 million for the year ended December 31, 2022.
We have the availability to request letters of credit under the ABL Facility. We had $4.0 million of letters of credit outstanding as of December 31, 2022, which reduce available borrowings under the ABL Facility by such amounts.
Revolving credit borrowings are payable at our option throughout the term of the ABL Facility with the balance due August 2, 2026. We have the availability to request letters of credit under the ABL Facility. We had $4.0 million of letters of credit outstanding as of December 31, 2023, which reduce available borrowings under the ABL Facility by such amounts.
Spent sulfuric acid for our Ecoservices segment is supplied by customers for a nominal charge as part of their contracts. The primary raw materials used in the manufacture of products in our Catalyst Technologies segment include sodium silicate and cesium hydroxide.
The primary raw materials for our Ecoservices segment include spent sulfuric acid, sulfur, acids, bases (including sodium hydroxide, or “caustic soda”), and certain metals. Spent sulfuric acid for our Ecoservices segment is supplied by customers for a nominal charge as part of their contracts.
Certain of our contracts 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 our manufacturing facilities, or monthly reservations of capacity fees.
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 our manufacturing facilities, or monthly reservations of capacity fees. We consider stand-ready provisions and reservation of capacity fees to be performance obligations satisfied over time.
Our exposure to fluctuations in raw materials prices is limited, as the majority of pass-through contract provisions reset based on fluctuations in the underlying raw material price. MSAs in our Ecoservices segment also contain take-or-pay arrangements, whereby the customer would incur a penalty in the form of a shortfall volume fee.
MSAs in the our Ecoservices segment may contain provisions whereby raw materials costs are passed-through to the customer per the terms of their contract. Our exposure to fluctuations in raw materials prices is limited, as the majority of pass-through contract provisions reset based on fluctuations in the underlying raw material price.
The $32.6 million decrease in cash from working capital as compared to the prior year was primarily due to favorable changes in accrued liabilities, inventories, and accounts payables, which were offset by unfavorable changes in accounts receivable and prepaids.
The decrease in cash from working capital during the year ended December 31, 2023 of $18.6 million was unfavorable compared to the year ended December 31, 2022 primarily due to unfavorable changes in receivables, inventories, prepaids and other current assets and accrued liabilities, which were offset by favorable change in accounts payable.
All of our defined benefit pension plan obligations are under defined benefit pension plans that are frozen. Included in this line-item are rounding discrepancies that may arise from rounding from dollars (in thousands) to dollars (in millions).
Included in this line-item are rounding discrepancies that may arise from rounding from dollars (in thousands) to dollars (in millions).
Following this amendment, U.S. dollar-denominated borrowings under the ABL Facility bear interest at a rate equal to an adjusted SOFR rate or the base rate plus a margin of between 1.25% and 1.75% or 0.25% to 0.75%, respectively. 2021 Term Loan Facility On June 9, 2021, we entered into an agreement for a senior secured term loan facility (the “2021 Term Loan Facility”) for an aggregate principal amount of $900.0 million, with an original issue discount of 0.25% and interest at a floating rate of LIBOR (with a 0.50% minimum LIBOR floor) plus 2.75% per annum, with a maturity date of June 9, 2028.
We were in compliance with all debt covenants as of December 31, 2023 and 2022, respectively. 2021 Term Loan Facility On June 9, 2021, we entered into an agreement for a senior secured term loan facility (the “2021 Term Loan Facility”) in an aggregate principal amount of $900.0 million, with an original issue discount of 0.25% and interest at a floating rate of LIBOR (with a 0.50% minimum LIBOR floor) plus 2.75% per annum (or, depending on the Borrower’s first lien net leverage ratio, 2.50%), with a maturity date of June 9, 2028.
Although the current conflict has created global economic and political uncertainties and affected certain supply chain disruptions, we do not believe we have significant exposure in those countries. We have no operations in Russia or Ukraine.
Economic Effects on our Business and Results We continue to monitor the developments in Russia and Ukraine, as well as the related economic sanctions and export controls imposed on certain industry sectors. Although the current conflict has created global economic and political uncertainties and affected certain supply chain disruptions, we do not believe we have significant exposure in those countries.
Debt December 31, 2022 2021 (in millions) Senior Secured Term Loan Facility due June 2028 (the "2021 Term Loan Facility") $ 886.5 $ 895.5 ABL Facility — — Total debt 886.5 895.5 Original issue discount (7.5) (8.8) Deferred financing costs (4.1) (4.9) Total debt, net of original issue discount and deferred financing costs 874.9 881.8 Less: current portion (9.0) (9.0) Total long-term debt, excluding current portion $ 865.9 $ 872.8 As of December 31, 2022 our total debt was $886.5 million excluding the original issue discount of $7.5 million and deferred financing fees of $4.1 million for our senior secured credit facilities and notes.
Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 A discussion of our cash flows for the year ended December 31, 2022 compared to the year ended December 31, 2021 is set forth in Part II, Item 7 of our Form 10-K for the year ended December 31, 2022 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Debt December 31, 2023 2022 (in millions) Senior Secured Term Loan Facility due June 2028 $ 877.5 $ 886.5 ABL Facility — — Total debt 877.5 886.5 Original issue discount (6.2) (7.5) Deferred financing costs (3.4) (4.1) Total debt, net of original issue discount and deferred financing costs 867.9 874.9 Less: current portion (9.0) (9.0) Total long-term debt, excluding current portion $ 858.9 $ 865.9 As of December 31, 2023 our total debt was $877.5 million excluding the original issue discount of $6.2 million and deferred financing fees of $3.4 million for our senior secured credit facilities.
As of December 31, 2022, $313.3 million was available for additional share repurchases under the program. Basis of Presentation Our zeolite catalysts product group operates through the Zeolyst Joint Venture, which we account for as an equity method investment in accordance with accounting principles generally accepted in the United States (“GAAP”).
Basis of Presentation Our zeolite catalysts product group operates through the Zeolyst Joint Venture, which we account for as an equity method investment in accordance with accounting principles generally accepted in the United States (“GAAP”). We do not record sales by the Zeolyst Joint Venture as revenue and such sales are not consolidated within our results of operations.
Ecoservices : Adjusted EBITDA for the year ended December 31, 2022 was $227.8 million, an increase of $50.1 million, or 28.2%, compared to $177.7 million for the year ended December 31, 2021.
Ecoservices : Adjusted EBITDA for the year ended December 31, 2023 was $200.0 million, a decrease of $27.8 million, or 12.2%, compared to $227.8 million for the year ended December 31, 2022.
Provision for Income Taxes The provision for income taxes for the year ended December 31, 2022 was a $24.9 million provision compared to a $12.1 million provision for the year ended December 31, 2021. The effective income tax rate for the year ended December 31, 2022 was 26.3% compared to 87.1% for the year ended December 31, 2021.
The effective income tax rate for the year ended December 31, 2023 was 13.2% compared to 26.3% for the year ended December 31, 2022.
From the announcement date of the program in April 2022 through December 31, 2022, the Company repurchased 1,970,763 shares of its common stock on the open market at an average price of $9.82 per share, for a total of $19.4 million.
As of December 31, 2023, $234.6 million was available for additional share repurchases under the program. During the year-ended December 31, 2022, the Company repurchased 1,970,763 shares on the open market at an average price of $9.82 per share, for a total of $19.4 million, excluding brokerage commissions.
Following this amendment, the 2021 Term Loan Facility bears interest at an adjusted SOFR rate (with a 0.50% minimum floor) plus 2.75% per annum (or, depending on the Borrower’s first lien net leverage ratio, 2.50%). 2020 Term Loan Facility – Repaid in 2021 On July 22, 2020, we entered into an agreement for a senior secured term loan facility (the “2020 Term Loan Facility”) for an aggregate principal amount of $650.0 million.
On February 9, 2023, we amended the 2021 Term Loan Facility to replace LIBOR with SOFR as the benchmark interest rate. Following this amendment, the 2021 Term Loan Facility bears interest at an adjusted SOFR rate (with a 0.50% minimum floor) plus 2.75% per annum (or, depending on the first lien net leverage ratio, 2.50%).
Years ended December 31, Change 2022 2021 $ % (in millions, except percentages) Sales $ 820.2 $ 611.2 $ 209.0 34.2 % Cost of goods sold 595.5 434.5 161.0 37.1 % Gross profit 224.7 176.7 48.0 27.2 % Gross profit margin 27.4 % 28.9 % Selling, general and administrative expenses 85.3 97.8 (12.5) (12.8) % Other operating expense, net 35.0 24.3 10.7 44.0 % Operating income 104.4 54.6 49.8 91.2 % Operating income margin 12.7 % 8.9 % Equity in net income from affiliated companies (27.7) (27.7) — — % Interest expense, net 37.2 37.0 0.2 0.5 % Debt extinguishment costs — 26.9 (26.9) (100.0) % Other expense, net 0.2 4.5 (4.3) (95.6) % Income from continuing operations before income taxes and noncontrolling interest 94.7 13.9 80.8 581.3 % Provision for income taxes 24.9 12.1 12.8 105.8 % Effective tax rate 26.3 % 87.1 % Net income from continuing operations 69.8 1.8 68.0 NM Net income (loss) from discontinued operations, net of tax 3.9 (141.4) 145.3 (102.8) % Net income (loss) 73.7 (139.6) 213.3 (152.8) % Less: Net income attributable to the noncontrolling interest - discontinued operations — 0.3 (0.3) (100.0) % Net income (loss) attributable to Ecovyst Inc. $ 73.7 $ (139.9) $ 213.6 (152.7) % Sales Years ended December 31, Change 2022 2021 $ % (in millions, except percentages) Sales: Ecoservices $ 702.5 $ 500.5 $ 202.0 40.4 % Catalyst Technologies 117.7 110.7 7.0 6.3 % Total sales $ 820.2 $ 611.2 $ 209.0 34.2 % Ecoservices : Sales in Ecoservices for the year ended December 31, 2022 were $702.5 million, an increase of $202.0 million, or 40.4%, compared to sales of $500.5 million for the year ended December 31, 2021.
Years ended December 31, Change 2023 2022 $ % (in millions, except percentages) Sales $ 691.1 $ 820.2 $ (129.1) (15.7) % Cost of goods sold 493.2 595.5 (102.3) (17.2) % Gross profit 197.9 224.7 (26.8) (11.9) % Gross profit margin 28.6 % 27.4 % Selling, general and administrative expenses 79.2 85.3 (6.1) (7.2) % Other operating expense, net 22.0 35.0 (13.0) (37.1) % Operating income 96.7 104.4 (7.7) (7.4) % Operating income margin 14.0 % 12.7 % Equity in net income from affiliated companies (30.6) (27.7) (2.9) 10.5 % Interest expense, net 44.7 37.2 7.5 20.2 % Other expense, net 0.6 0.2 0.4 200.0 % Income from continuing operations before income taxes 82.0 94.7 (12.7) (13.4) % Provision for income taxes 10.8 24.9 (14.1) (56.6) % Effective tax rate 13.2 % 26.3 % Net income from continuing operations 71.2 69.8 1.4 2.0 % Net income from discontinued operations, net of tax — 3.9 (3.9) (100.0) % Net income $ 71.2 $ 73.7 $ (2.5) (3.4) % Sales Years ended December 31, Change 2023 2022 $ % (in millions, except percentages) Sales: Ecoservices $ 584.8 $ 702.5 $ (117.7) (16.8) % Advanced Materials & Catalysts 106.3 117.7 (11.4) (9.7) % Total sales $ 691.1 $ 820.2 $ (129.1) (15.7) % Ecoservices : Sales in Ecoservices for the year ended December 31, 2023 were $584.8 million, a decrease of $117.7 million, or 16.8%, compared with sales of $702.5 million for the year ended December 31, 2022.
As of December 31, 2022, we had cash and cash equivalents of $110.9 million and availability of $59.7 million under our ABL Facility, after giving effect to $4.0 million of outstanding letters of credit and no revolving credit facility borrowings, for a total available liquidity of $170.6 million. Our ABL Facility has one financial covenant to maintain.
We may, from time to time, increase borrowings under our ABL Facility to meet our future cash needs. As of December 31, 2023, we had cash and cash equivalents of $88.4 million and availability of $63.8 million under our ABL Facility, after giving effect to $4.0 million of outstanding letters of credit, for a total available liquidity of $152.2 million.
We consider 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.
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. As described above, our MSAs with our customers may outline prices for individual products or contract provisions.
We identify 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 our contracts have a single performance obligation, which is the promise to transfer individual goods to the customer.
Absent either a MSA or pricing quote, we consider an individual purchase order to create enforceable rights and obligations. 58 We identify 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.
(g) Includes the impact of restructuring, integration and business optimization expenses which are incremental costs that are not representative of our ongoing business operations. 51 (h) Other costs consist of adjustments for defined benefit pension plan (benefit) costs and certain expenses that are not core to our ongoing business operations, including environmental remediation-related costs, capital and franchise taxes.
(h) Other consists of adjustments for items that are not core to our ongoing business operations. These adjustments include environmental remediation and other legal costs, expenses for capital and franchise taxes, and defined benefit pension and postretirement plan (benefits) costs, for which our obligations are under plans that are frozen.
The increase was due to higher earnings of $6.4 million generated by the Zeolyst Joint Venture during the year ended December 31, 2021 as compared to the year ended December 31, 2020. 53 The following is our consolidated statement of income and a summary of financial results for the years ended December 31, 2021 and 2020.
The increase was primarily due to higher sales within the Zeolyst Joint Venture partially offset by the impact of unfavorable fixed cost absorption. 46 The following is our consolidated statement of income and a summary of financial results for the years ended December 31, 2023 and 2022.
Pension Funding We paid an immaterial amount in cash contributions into our defined benefit pension plans and other postretirement plans in December 31, 2022 and 2021, respectively and $3.3 million in 2020. The net periodic pension and postretirement expense was $1.0 million, $0.3 million, and $0.4 million for those same periods, respectively.
The net periodic pension and postretirement expense (benefit) was $0.1 million, $(1.0) million, and $(0.3) million for those same periods, respectively. As of December 31, 2023 and 2022, our pension plans and other post-retirement benefit plans were underfunded by $5.4 million and $6.7 million, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe foreign currency loss realized in the year ended December 31, 2022 was primarily driven by the non-permanent intercompany debt denominated in local currency and translated to U.S. dollars, and was principally non-cash in nature. Interest Rate Risk We are exposed to fluctuations in interest rates on our Senior Secured Credit Facilities.
Biggest changeNet foreign currency exchange gains and losses included in other expense (income), net was a $0.6 million income for the year ended December 31, 2023. The foreign currency loss realized in the year ended December 31, 2023 was primarily driven by the non-permanent intercompany debt denominated in local currency and translated to U.S. dollars, and was principally non-cash in nature.
Concentration of credit risk can result primarily from trade receivables, for example, with certain customers operating in the same industry or customer groups located in the same geographic region. Credit risk related to these 71 types of receivables is managed through credit approval and monitoring procedures.
Concentration of credit risk can result primarily from trade receivables, for example, with certain customers operating in the same industry or customer groups located in the same geographic region. Credit risk related to these types of receivables is managed through credit approval and monitoring procedures.
The exchange rates between these currencies and the U.S. dollar in recent years have fluctuated significantly and may continue to do so in the future. The foreign currency to which we have the most significant exchange rate exposure is the British pound. Sales in this currency represented approximately 5% of our sales during the year ended December 31, 2022.
The exchange rates between these currencies and the U.S. dollar in recent years have fluctuated significantly and may continue to do so in the future. The foreign currency to which we have the most significant exchange rate exposure is the British pound. Sales in this currency represented approximately 5% of our sales during the year ended December 31, 2023.
We operate a geographically diverse business with approximately 6% of our sales during the years ended December 31, 2022 and 2021, respectively, coming from our international operations in currencies other than the U.S. dollar.
We operate a geographically diverse business with approximately 6% of our sales during the years ended December 31, 2023 and 2022, respectively, coming from our international operations in currencies other than the U.S. dollar.
As of December 31, 2022, a 100 basis point increase in assumed interest rates for our variable interest credit facilities, before impact of any hedges, would have an annual impact of approximately $8.9 million on interest expense. We hedge the interest rate fluctuations on debt obligations through interest rate cap agreements.
As of December 31, 2023, a 100 basis point increase in assumed interest rates for our variable interest credit facilities, before impact of any hedges, would have an annual impact of approximately $8.8 million on interest expense. We hedge the interest rate fluctuations on debt obligations through interest rate cap agreements.
We record the fair value of these hedges as assets or liabilities and the related unre alized gains or losses are deferred in stockholders’ equity as a component of other comprehensive income (loss), net of tax. The interest rate caps had a fair value net asset of $32.3 million and $(0.2) million at December 31, 2022 and 2021, respectively.
We record the fair value of these hedges as assets or liabilities and the related unre alized gains or losses are deferred in stockholders’ equity as a component of other comprehensive income (loss), net of tax. The interest rate caps had a fair value net asset of $16.5 million and $32.3 million at December 31, 2023 and 2022, respectively.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Our major market risk exposure is potential losses arising from changing rates and prices regarding foreign currency exchange rate risk, interest rate risk and credit risk. The audit committee of our board of directors regularly reviews foreign exchange and interest rate hedging activity, and monitors compliance with our hedging policy.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Our major market risk exposure is potential losses arising from changing rates and prices regarding foreign currency exchange rate risk, interest rate risk and credit risk. The Company regularly reviews foreign exchange and interest rate activity, and monitors compliance with our hedging policy.
Changes in interest rates will not affect the market value of such debt but will affect the amount of our interest payments over the term of the loans. Likewise, an increase in interest rates could have a material impact on our cash flow.
Interest Rate Risk We are exposed to fluctuations in interest rates on our Senior Secured Credit Facilities. Changes in interest rates will not affect the market value of such debt but will affect the amount of our interest payments over the term of the loans. Likewise, an increase in interest rates could have a material impact on our cash flow.
A 10% change in the average British pound to U.S. dollar exchange rate during the year ended December 31, 2022 would have impacted sales by approximately $3.8 million over the same period, or 0.5% of our total sales, assuming product pricing remained constant.
A 10% change in the average British pound to U.S. dollar exchange rate during the year ended December 31, 2023 would have impacted sales by approximately $3.3 million over the same period, or 0.5% of our total sales, assuming product pricing remained constant. The effect of translating foreign subsidiaries’ balance sheets into U.S. dollars is included in other comprehensive income.
In the year ended December 31, 2022, we wrote off a nominal amount of bad debt on total sales of $820.2 million.
For the year ended December 31, 2023, we wrote off a nominal amount of bad debt on total sales of $691.1 million.
The effect of translating foreign subsidiaries’ balance sheets into U.S. dollars is included in other 70 comprehensive income. The impact of gains and losses on transactions denominated in currencies other than the functional currency of the relevant operations are included in other expense (income), net in the consolidated statements of income.
The impact of gains and losses on transactions denominated in currencies other than the 62 functional currency of the relevant operations are included in other expense (income), net in the consolidated statements of income. Income and expense items are translated at average exchange rates during the year.
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.
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. For more information about our interest rate cap agreements, refer to Note 18 — Financial Instrument of our consolidated financials statements included in Part II, Item 8 — Financial Statements and Supplementary Data.
Removed
Income and expense items are translated at average exchange rates during the year. Net foreign currency exchange gains and losses included in other expense (income), net was a $1.0 million loss for the year ended December 31, 2022.
Removed
In July 2016, we entered into interest rate cap agreements, paying a premium of $1.6 million to mitigate interest rate volatility from July 2016 through July 2020 by employing varying cap rates ranging from 1.50% to 3.00% on $1.0 billion of notional variable debt.
Removed
In November 2018, the Company entered into additional interest rate cap agreements to mitigate interest rate volatility from July 2020 through July 2022, with a cap rate of 3.50% on $500.0 million of notional variable-rate debt and a $0.5 million premium annuitized during the effective period.
Removed
In February 2020, we restructured our $500.0 million notional interest rate cap agreements from July 31, 2020 through July 31, 2022 to lower the interest cap rate to 2.50% with a $0.1 million premium annuitized during the effective period.
Removed
In March 2020, we further restructured our $500.0 million notional interest rate cap agreements from July 31, 2020 through July 31, 2022 to lower the interest rate cap to 0.84% with a $0.9 million premium annuitized during the effective period.
Removed
Including premiums on the original November 2018 agreement and the February and March 2020 restructurings, the total cumulative annuitized premium of $4.4 million will be paid through July 31, 2022 on our interest rate cap agreements.
Removed
In July 2020, we entered into additional interest rate cap agreements to mitigate interest rate volatility from August 2020 to August 2023, with a cap rate of 1.00% on $400.0 million of notional variable-rate debt. In August 2021, PQ Corporation novated $900.0 million of its interest rate caps to Ecovyst Catalyst Technologies LLC.
Removed
In January 2022, the Company entered into two new interest rate cap agreements, with notional amounts of $250.0 million each and cap rates of 1.00% and paid $4.5 million in premiums. The term for one of the interest rate caps is August 2022 through October 2024 and the term for the other is September 2023 through October 2025.
Removed
In November 2022, the Company entered into a new interest rate cap agreement to mitigate interest rate volatility from July 2023 through July 2024, with a cap rate of 1.00% on $150.0 million of notional variable-rate debt and annuitized premium of $5.3 million during the effective period, and mitigate interest rate volatility from July 2024 through July 2026, with a cap rate of 1.00% and 175.0 million notional variable-rate debt and annuitized premium of $6.1 million during the effective period.

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