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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-38221
PQ Group Holdings Inc.
Delaware
 
81-3406833
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
300 Lindenwood Drive
 
 
Malvern,
Pennsylvania
 
19355
(Address of principal executive offices)
 
(Zip Code)
(610)
651-4400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange on which registered
Common stock, par value $0.01 per share
PQG
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
  
Accelerated filer
 
 
 
 
 
Non-accelerated filer
 
  
Smaller reporting company
 
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No  
The number of shares of common stock outstanding as of August 5, 2019 was 136,131,303.
 
 
 
 
 


Table of Contents

PQ GROUP HOLDINGS INC.

INDEX—FORM 10-Q
June 30, 2019
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2

Table of Contents

PART IFINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS (UNAUDITED).

PQ GROUP HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
(unaudited)
 
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2019
 
2018
 
2019
 
2018
Sales
$
431,675

 
$
434,713

 
$
790,896

 
$
800,910

Cost of goods sold
316,180

 
326,309

 
594,491

 
614,385

Gross profit
115,495

 
108,404

 
196,405

 
186,525

Selling, general and administrative expenses
43,375

 
43,477

 
84,083

 
84,095

Other operating expense, net
1,819

 
15,873

 
12,558

 
25,187

Operating income
70,301

 
49,054

 
99,764

 
77,243

Equity in net (income) from affiliated companies
(12,300
)
 
(13,666
)
 
(14,364
)
 
(25,518
)
Interest expense, net
28,540

 
27,221

 
57,158

 
56,384

Debt extinguishment costs

 

 

 
5,879

Other expense, net
3,035

 
5,691

 
56

 
10,663

Income before income taxes and noncontrolling interest
51,026

 
29,808

 
56,914

 
29,835

Provision for income taxes
20,307

 
13,649

 
22,754

 
13,120

Net income
30,719

 
16,159

 
34,160

 
16,715

Less: Net income attributable to the noncontrolling interest
145

 
377

 
435

 
719

Net income attributable to PQ Group Holdings Inc.
$
30,574

 
$
15,782

 
$
33,725

 
$
15,996

 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic income per share
$
0.23

 
$
0.12

 
$
0.25

 
$
0.12

Diluted income per share
$
0.23

 
$
0.12

 
$
0.25

 
$
0.12

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
134,142,552

 
133,222,463

 
134,044,972

 
133,188,303

Diluted
135,323,024

 
134,209,740

 
135,107,007

 
134,047,362

See accompanying notes to condensed consolidated financial statements.


3

Table of Contents

PQ GROUP HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
30,719

 
$
16,159

 
$
34,160

 
$
16,715

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Pension and postretirement benefits
(31
)
 
1,375

 
(61
)
 
1,357

Net (loss) gain from hedging activities
(1,167
)
 
553

 
(2,719
)
 
2,736

Foreign currency translation
6,085

 
(29,493
)
 
13,252

 
(20,822
)
Total other comprehensive income (loss)
4,887

 
(27,565
)
 
10,472

 
(16,729
)
Comprehensive income (loss)
35,606

 
(11,406
)
 
44,632

 
(14
)
Less: Comprehensive income (loss) attributable to noncontrolling interests
285

 
(1,167
)
 
890

 
479

Comprehensive income (loss) attributable to PQ Group Holdings Inc.
$
35,321

 
$
(10,239
)
 
$
43,742

 
$
(493
)
 
 
 
 
 
 
 
 
See accompanying notes to condensed consolidated financial statements.


4

Table of Contents

PQ GROUP HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)

 
June 30,
2019
 
December 31,
2018
ASSETS
 
 
 
Cash and cash equivalents
$
82,200

 
$
57,854

Accounts receivable, net
243,744

 
196,770

Inventories, net
275,208

 
264,748

Prepaid and other current assets
35,769

 
39,244

Total current assets
636,921

 
558,616

Investments in affiliated companies
477,287

 
468,211

Property, plant and equipment, net
1,193,178

 
1,208,979

Goodwill
1,258,241

 
1,254,929

Other intangible assets, net
702,062

 
728,436

Right-of-use lease asset
55,095

 

Other long-term assets
118,855

 
108,254

Total assets
$
4,441,639

 
$
4,327,425

LIABILITIES
 
 
 
Notes payable and current maturities of long-term debt
$
10,033

 
$
7,237

Accounts payable
135,595

 
148,365

Operating lease liabilities—current
13,997

 

Accrued liabilities
98,990

 
100,009

Total current liabilities
258,615

 
255,611

Long-term debt, excluding current portion
2,104,649

 
2,106,720

Deferred income taxes
207,021

 
196,124

Operating lease liabilities—noncurrent
39,352

 

Other long-term liabilities
112,650

 
104,825

Total liabilities
2,722,287

 
2,663,280

Commitments and contingencies (Note 17)

 

EQUITY
 
 
 
Common stock ($0.01 par); authorized shares 450,000,000; issued shares 136,355,874 and 135,758,269 on June 30, 2019 and December 31, 2018, respectively; outstanding shares 136,101,083 and 135,592,045 on June 30, 2019 and December 31, 2018, respectively
1,364

 
1,358

Preferred stock ($0.01 par); authorized shares 50,000,000; no shares issued or outstanding on June 30, 2019 and December 31, 2018

 

Additional paid-in capital
1,686,942

 
1,674,703

Retained earnings
57,199

 
25,523

Treasury stock, at cost; shares 254,791 and 166,224 on June 30, 2019 December 31, 2018, respectively
(4,259
)
 
(2,920
)
Accumulated other comprehensive loss
(27,213
)
 
(39,104
)
Total PQ Group Holdings Inc. equity
1,714,033

 
1,659,560

Noncontrolling interest
5,319

 
4,585

Total equity
1,719,352

 
1,664,145

Total liabilities and equity
$
4,441,639

 
$
4,327,425

 
 
 
 
See accompanying notes to condensed consolidated financial statements.

5

Table of Contents

PQ GROUP HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
 
 
 
Common
stock
 
Additional
paid-in
capital
 
Retained
earnings
 
Treasury
stock, at
cost 
 
Accumulated
other
comprehensive
income (loss)
 
Non-
controlling
interest
 
Total
Balance, December 31, 2018, as previously reported
 
$
1,358

 
$
1,674,703

 
$
25,523

 
$
(2,920
)
 
$
(39,104
)
 
$
4,585

 
$
1,664,145

Cumulative effect adjustment from adoption of new accounting standards
 

 

 
(2,049
)
 

 
1,874

 

 
(175
)
Balance, December 31, 2018, as adjusted
 
1,358

 
1,674,703

 
23,474

 
(2,920
)
 
(37,230
)
 
4,585

 
1,663,970

Net income
 

 

 
3,151

 

 

 
290

 
3,441

Other comprehensive income
 

 

 

 

 
5,270

 
315

 
5,585

Repurchases of common shares
 

 

 

 
(1,339
)
 

 

 
(1,339
)
Stock compensation expense
 

 
3,400

 

 

 

 

 
3,400

Shares issued under equity incentive plan, net of forfeitures
 
2

 
213

 

 

 

 

 
215

Balance, March 31, 2019
 
1,360

 
1,678,316

 
26,625

 
(4,259
)
 
(31,960
)
 
5,190

 
1,675,272

Net income
 

 

 
30,574

 

 

 
145

 
30,719

Other comprehensive income
 

 

 

 

 
4,747

 
140

 
4,887

Distributions to noncontrolling interests
 

 

 

 

 

 
(156
)
 
(156
)
Stock compensation expense
 

 
5,370

 

 

 

 

 
5,370

Shares issued under equity incentive plan, net of forfeitures
 
4

 
3,256

 

 

 

 

 
3,260

Balance, June 30, 2019
 
$
1,364

 
$
1,686,942

 
$
57,199

 
$
(4,259
)
 
$
(27,213
)
 
$
5,319

 
$
1,719,352

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common
stock
 
Additional
paid-in
capital
 
Accumulated
deficit
 
Treasury
stock, at
cost 
 
Accumulated
other
comprehensive
income (loss)
 
Non-
controlling
interest 
 
Total 
Balance, December 31, 2017
 
$
1,352

 
$
1,655,114

 
$
(32,777
)
 
$

 
$
4,311

 
$
3,919

 
$
1,631,919

Net income
 

 

 
214

 

 

 
342

 
556

Other comprehensive income
 

 

 

 

 
9,532

 
1,304

 
10,836

Repurchases of common shares
 

 

 

 
(58
)
 

 

 
(58
)
Stock compensation expense
 

 
3,831

 

 

 

 

 
3,831

Balance, March 31, 2018
 
1,352

 
1,658,945

 
(32,563
)
 
(58
)
 
13,843

 
5,565

 
1,647,084

Net income
 

 

 
15,782

 

 

 
377

 
16,159

Other comprehensive loss
 

 

 

 

 
(26,021
)
 
(1,544
)
 
(27,565
)
Distributions to noncontrolling interests
 

 

 

 

 

 
(153
)
 
(153
)
Stock compensation expense
 

 
3,796

 

 

 

 

 
3,796

Shares issued under equity incentive plan
 

 
7

 

 

 

 

 
7

Balance, June 30, 2018
 
$
1,352

 
$
1,662,748

 
$
(16,781
)
 
$
(58
)
 
$
(12,178
)
 
$
4,245

 
$
1,639,328

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to condensed consolidated financial statements.


6

Table of Contents

PQ GROUP HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

 
 
Six months ended
June 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net income
 
$
34,160

 
$
16,715

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation
 
65,535

 
68,865

Amortization
 
25,449

 
26,606

Amortization of inventory step-up
 

 
1,603

Amortization of deferred financing costs and original issue discount
 
2,872

 
3,079

Debt extinguishment costs
 

 
3,755

Foreign currency exchange loss
 
923

 
11,820

Pension and postretirement healthcare benefit expense
 
2,185

 
599

Pension and postretirement healthcare benefit funding
 
(3,632
)
 
(4,040
)
Deferred income tax provision
 
10,844

 
3,128

Net (gain) loss on asset disposals
 
(8,839
)
 
5,904

Stock compensation
 
8,770

 
7,627

Equity in net (income) from affiliated companies
 
(14,364
)
 
(25,518
)
Dividends received from affiliated companies
 
5,072

 
15,890

Net interest income on swaps designated as net investment hedges
 
(4,478
)
 

Other, net
 
(4,356
)
 
(3,924
)
Working capital changes that provided (used) cash, excluding the effect of acquisitions and dispositions:
 
 
 
 
Receivables
 
(46,261
)
 
(54,324
)
Inventories
 
(12,191
)
 
(9,853
)
Prepaids and other current assets
 
2,183

 
(3,612
)
Accounts payable
 
(189
)
 
960

Accrued liabilities
 
(3,691
)
 
(15,142
)
Net cash provided by operating activities
 
59,992

 
50,138

Cash flows from investing activities:
 
 
 
 
Purchases of property, plant and equipment
 
(65,475
)
 
(66,066
)
Business combinations, net of cash acquired
 

 
(1,006
)
Proceeds from sale of product line
 
26,665

 

Net interest proceeds on swaps designated as net investment hedges
 
4,478

 

Other, net
 
475

 
805

Net cash used in investing activities
 
(33,857
)
 
(66,267
)
Cash flows from financing activities:
 
 
 
 
Draw down of revolving credit facilities
 
74,863

 
123,864

Repayments of revolving credit facilities
 
(72,247
)
 
(114,813
)
Issuance of long-term debt
 

 
1,267,000

Debt issuance costs
 

 
(6,395
)
Repayments of long-term debt
 
(5,000
)
 
(1,264,791
)
Stock repurchases
 
(1,339
)
 
(58
)
Proceeds from stock options exercised
 
3,475

 

Other, net
 
(153
)
 
(153
)
Net cash (used in) provided by financing activities
 
(401
)
 
4,654

Effect of exchange rate changes on cash, cash equivalents and restricted cash
 
(1,501
)
 
(1,883
)
Net change in cash, cash equivalents and restricted cash
 
24,233

 
(13,358
)
Cash, cash equivalents and restricted cash at beginning of period
 
59,726

 
67,243

Cash, cash equivalents and restricted cash at end of period
 
$
83,959

 
$
53,885

 
 
 
 
 

For supplemental cash flow disclosures, see Note 21.
See accompanying notes to condensed consolidated financial statements.

7

Table of Contents

PQ GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)



1. Background and Basis of Presentation:
Description of Business
PQ Group Holdings Inc. and subsidiaries (the “Company” or “PQ Group Holdings”) is a leading integrated and innovative global provider of specialty catalysts, materials, chemicals and services. The Company supports customers globally through its strategically located network of manufacturing facilities. The Company believes that its products, which are predominantly inorganic, and services contribute to improving the sustainability of the environment.
The Company has four uniquely positioned specialty businesses: Refining Services provides sulfuric acid recycling to the North American refining industry; Catalysts serves the packaging and engineered plastics and the global refining, petrochemical and emissions control industries; Performance Materials produces transportation reflective safety markings for roads and airports; and Performance Chemicals supplies diverse product end uses, including personal and industrial cleaning products, fuel-efficient tires, surface coatings, and food and beverage products.
Effective March 1, 2019, the Company changed the structure of its internal organization to create the four independent businesses described above in order to promote increased visibility to business unit performance, optimize the Company’s product portfolio and create efficiencies. Previously, the Company had two reportable segments, namely the Environmental Catalysts and Services segment and the Performance Materials and Chemicals segment. Beginning with the quarter ended March 31, 2019, the segment results and disclosures included in the Company’s consolidated financial statements reflect the new segment structure for all periods presented. The changes to the Company’s segment structure affect only the manner in which the results of the Company’s reportable segments were previously reported; there are no changes to the Company’s consolidated balance sheet, statement of income or cash flows for the prior periods. For the purposes of the Company’s goodwill impairment testing, the four new operating segments align with the Company’s reporting units at which level goodwill has been assigned and historically tested for impairment.
Seasonal changes and weather conditions typically affect the Company’s Performance Materials and Refining Services segments. In particular, the Company’s Performance Materials segment generally experiences lower sales and profit in the first and fourth quarters of the year because highway striping projects typically occur during warmer weather months. Additionally, the Company’s Refining Services segment typically experiences similar seasonal fluctuations as a result of higher demand for gasoline products in the summer months. As a result, working capital requirements tend to be higher in the first and second quarters of the year, which can adversely affect the Company’s liquidity and cash flows. Because of this seasonality associated with certain of the Company’s segments, results for any one quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full year.
Basis of Presentation
The condensed consolidated financial statements included herein are unaudited. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations for interim reporting. In the opinion of management, all adjustments of a normal and recurring nature necessary to state fairly the financial position and results of operations have been included. The results of operations are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Other than the update to our lease accounting policies described in Note 12, the Company has continued to follow the accounting policies set forth in those consolidated financial statements.
2. New Accounting Standards:
Recently Adopted Accounting Standards
In February 2016, the Financial Accounting Standards Board (“FASB”) issued guidance (with subsequent targeted amendments) that modifies the accounting for leases. Under the new guidance, a lessee will recognize right-of-use lease assets and lease liabilities for most leases (including those classified under existing GAAP as operating leases, which based on previous standards are not reflected on the balance sheet), but will recognize expenses in a manner that is generally consistent with existing practices. The new guidance also requires companies to provide expanded disclosures regarding leasing arrangements. For public companies, the new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. The new guidance must be adopted using a modified retrospective transition method.

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Table of Contents

PQ GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)


The Company adopted the new lease guidance effective January 1, 2019 as required using the modified retrospective transition method and applied the provisions of the guidance at the effective date with a cumulative-effect adjustment to the opening balance of retained earnings without adjusting the comparative periods presented. The new guidance provides practical expedients and allows for certain policy elections with regard to the Company’s lease population. The Company has elected the short term lease accounting policy and will not record right-of-use lease assets or lease liabilities for leases with an initial term of twelve months or less. Additionally, the Company has elected to utilize the portfolio approach to apply incremental borrowing rates to its leases. The Company has elected the package of practical expedients which provides the Company with the ability to bypass reassessment of the following for leases existing at the date of adoption: (1) whether any existing contracts are, or contain, leases; (2) the lease classification for any existing leases; and (3) initial direct costs for any existing leases. The Company also elected the land easement practical expedient to carry forward existing accounting treatment on existing land easements.
Adoption of the new lease guidance resulted in the recognition of right-of-use lease assets of $60,726, which included $57,832 of right-of-use lease assets related to lease commitments and $2,895 related to the reclassification of favorable lease contracts, and lease liabilities of $58,929. The new guidance had no impact on the Company’s operating results or liquidity upon adoption. Disclosures related to the Company’s leases are included in Note 12 to these condensed consolidated financial statements.
In February 2018, the FASB issued guidance which permits entities to make a one-time election to reclassify the residual (“stranded”) income tax effects included in accumulated other comprehensive income (“AOCI”) to beginning retained earnings as a result of tax reform legislation enacted by the U.S. government on December 22, 2017, namely the Tax Cuts and Jobs Act of 2017 (“TCJA”). The standard is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Prior to the enactment of the tax reform legislation on December 22, 2017, the Company had amounts recorded in AOCI related to its domestic pension, postretirement and supplementary benefit plans and cash flow hedging relationships that were based on pre-enactment tax rates, which were included in AOCI at the adoption date of the new guidance. The Company adopted the new guidance effective January 1, 2019 as required, and elected to reclassify the income tax effects stranded in AOCI related to the change in the U.S. federal corporate income tax rate from the TCJA of $1,874 from AOCI to beginning retained earnings. There were no other income tax effects related to the application of the TCJA that were included in this reclassification. The Company’s accounting policy for releasing income tax effects from AOCI is based on individual units of account.
In June 2018, the FASB issued guidance which conforms the accounting for the issuance of all share-based payments using the same accounting model. Previously, the accounting for share-based payments to non-employees was covered under a different framework than those made to employees. Under the new guidance, awards to both employees and non-employees will essentially follow the same model, with small variations related to determining the term assumption when valuing a non-employee award as well as a different expense attribution model for non-employee awards. The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The Company adopted the new guidance on January 1, 2019 as required, with no material impact on its consolidated financial statements upon adoption.
Accounting Standards Not Yet Adopted
In August 2018, the FASB issued guidance which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The guidance eliminates certain disclosure requirements, including the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year and the effects of a one-percentage point change in assumed health care cost trend rates. The guidance also requires additional disclosure of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The guidance is effective for fiscal years ending after December 15, 2020 with early adoption permitted, and is required to be applied on a retrospective basis to all periods presented. The Company will modify its benefit plan disclosures in accordance with the new guidance upon adoption, and the guidance will not have a material impact on its consolidated financial statements.
In August 2018, the FASB issued guidance which modifies certain disclosure requirements over fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019, including all interim periods within that fiscal year. The Company believes that the new guidance will not have a material impact on its consolidated financial statements.

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PQ GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)


In January 2017, the FASB issued guidance which eliminates the second step from the traditional two-step goodwill impairment test. Under current guidance, an entity performed the first step of the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount; if an impairment loss was indicated, the entity computed the implied fair value of goodwill to determine whether an impairment loss existed, and if so, the amount to recognize. Under the new guidance, an impairment loss is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value (the Step 1 test), with no further testing required. Any impairment loss recognized is limited to the amount of goodwill allocated to the reporting unit. The new guidance is effective for public companies that are Securities and Exchange Commission (“SEC”) registrants for fiscal years beginning after December 15, 2019, with early adoption permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company will apply the guidance prospectively to goodwill impairment tests subsequent to the adoption date.
In June 2016, the FASB issued guidance (with subsequent targeted amendments) that affects loans, trade receivables and any other financial assets that have the contractual right to receive cash. Under the new guidance, an entity is required to recognize expected credit losses rather than incurred losses for financial assets. The new guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company believes that the new guidance will not have a material impact on its consolidated financial statements.
3. Revenue from Contracts with Customers:
Disaggregated Revenue
The Company’s primary means of disaggregating revenues is by reportable segments, which can be found in Note 18 to these condensed consolidated financial statements.
The Company’s portfolio of products are integrated into a variety of end uses, which are described in the table below.
Key End Uses
Key Products
Industrial & process chemicals
• Silicate precursors for the tire industry
 
• Glass beads, or microspheres, for metal finishing end uses
Fuels & emission control
• Refinery catalysts
 
• Emission control catalysts
 
• Catalyst recycling services
 
• Silicate for catalyst manufacturing
Packaging & engineered plastics
• Catalysts for high-density polyethlene and chemicals syntheses
 
• Antiblocks for film packaging
 
• Solid and hollow microspheres for composite plastics
 
• Sulfur derivatives for nylon production
Highway safety & construction
• Reflective markings for roadways and airports
 
• Silica gels for surface coatings
Consumer products
• Silica gels for edible oil and beer clarification
 
• Precipitated silicas, silicates and zeolites for the dentifrice and
 
  dishwasher and laundry detergent applications
Natural resources
• Silicates for drilling muds
 
• Hollow glass beads, or microspheres, for oil well cements
 
• Silicates and alum for water treatment mining
 
• Bleaching aids for paper
 
 

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Table of Contents

PQ GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)


The following tables disaggregate the Company’s sales, by segment and end use, for the three and six months ended June 30, 2019 and 2018:
 
Three months ended June 30, 2019
 
Refining
Services
 
Catalysts
 
Performance Materials
 
Performance Chemicals
 
Total
Industrial & process chemicals
$
21,903

 
$

 
$
12,783

 
$
60,662

 
$
95,348

Fuels & emission control (1)
63,505

 

 

 

 
63,505

Packaging & engineered plastics
14,067

 
20,857

 
17,595

 
14,344

 
66,863

Highway safety & construction (1)

 

 
85,257

 
22,297

 
107,554

Consumer products

 

 

 
65,440

 
65,440

Natural resources
17,815

 

 
3,237

 
15,085

 
36,137

Total segment sales
117,290

 
20,857

 
118,872

 
177,828

 
434,847

Eliminations
(895
)
 
214

 
(104
)
 
(2,387
)
 
(3,172
)
Total
$
116,395

 
$
21,071

 
$
118,768

 
$
175,441

 
$
431,675

 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2019
 
Refining
Services
 
Catalysts
 
Performance Materials
 
Performance Chemicals
 
Total
Industrial & process chemicals
$
40,305

 
$
62

 
$
25,812

 
$
120,313

 
$
186,492

Fuels & emission control (1)
121,195

 

 

 

 
121,195

Packaging & engineered plastics
26,756

 
36,661

 
34,977

 
29,073

 
127,467