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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 September 30, 2023
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
Ecovyst 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)
(484)
617-1200
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading symbolName of each exchange on which registered
Common stock, par value $0.01 per shareECVTNew 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 October 31, 2023 was 116,116,895.
1
Table of Contents

Ecovyst Inc.

INDEX—FORM 10-Q
September 30, 2023
Page

2
Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS (UNAUDITED)

ECOVYST INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
(unaudited)

 
Three months ended
September 30,		Nine months ended
September 30,
2023202220232022
Sales$173,326 $232,533 $518,310 $637,419 
Cost of goods sold120,142 164,864 367,662 462,156 
Gross profit53,184 67,669 150,648 175,263 
Selling, general and administrative expenses16,945 21,460 59,460 67,779 
Other operating expense, net4,310 7,673 17,288 25,101 
Operating income31,929 38,536 73,900 82,383 
Equity in net (income) from affiliated companies(4,708)(3,169)(16,305)(17,422)
Interest expense, net11,811 9,542 30,812 26,880 
Other expense, net361 1,872 543 2,497 
Income before income taxes24,465 30,291 58,850 70,428 
Provision for income taxes7,891 8,966 17,625 21,983 
Net income$16,574 $21,325 $41,225 $48,445 
Net income per share:
Basic income per share$0.14 $0.16 $0.35 $0.36 
Diluted income per share$0.14 $0.16 $0.34 $0.35 
Weighted average shares outstanding:
Basic116,446,085 132,622,105 119,042,161 136,115,598 
Diluted117,374,347 134,096,839 120,417,132 137,666,215 
See accompanying notes to condensed consolidated financial statements.

3
Table of Contents

ECOVYST INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)

 
Three months ended
September 30,		Nine months ended
September 30,
2023202220232022
Net income$16,574 $21,325 $41,225 $48,445 
Other comprehensive income (loss), net of tax:
Pension and postretirement benefits(213)(962)228 (1,040)
Net gain (loss) from hedging activities1,128 9,141 (1,393)27,620 
Foreign currency translation(3,112)(7,207)(99)(17,506)
Total other comprehensive income (loss)(2,197)972 (1,264)9,074 
Comprehensive income$14,377 $22,297 $39,961 $57,519 
See accompanying notes to condensed consolidated financial statements.

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

September 30,
2023		December 31,
2022
ASSETS
Cash and cash equivalents$38,317 $110,920 
Accounts receivable, net83,793 74,758 
Inventories, net48,263 44,362 
Derivative assets16,374 18,510 
Prepaid and other current assets17,570 19,154 
Total current assets204,317 267,704 
Investments in affiliated companies441,769 436,013 
Property, plant and equipment, net580,809 584,889 
Goodwill403,368 403,163 
Other intangible assets, net119,522 129,932 
Right-of-use lease assets26,431 28,265 
Other long-term assets36,609 34,587 
Total assets$1,812,825 $1,884,553 
LIABILITIES
Current maturities of long-term debt$9,000 $9,000 
Accounts payable32,308 40,019 
Operating lease liabilities—current8,503 8,155 
Accrued liabilities50,611 72,229 
Total current liabilities100,422 129,403 
Long-term debt, excluding current portion860,668 865,870 
Deferred income taxes134,828 136,184 
Operating lease liabilities—noncurrent17,871 20,021 
Other long-term liabilities21,180 25,846 
Total liabilities1,134,969 1,177,324 
Commitments and contingencies (Note 15)
EQUITY
Common stock ($0.01 par); authorized shares 450,000,000; issued shares 140,744,045 and 139,571,272 on September 30, 2023 and December 31, 2022, respectively; outstanding shares 116,116,895 and 122,186,238 on September 30, 2023 and December 31, 2022, respectively
1,407 1,396 
Preferred stock ($0.01 par); authorized shares 50,000,000; no shares issued or outstanding on September 30, 2023 and December 31, 2022
— — 
Additional paid-in capital1,099,216 1,091,475 
Accumulated deficit(200,785)(242,010)
Treasury stock, at cost; shares 24,627,150 and 17,385,034 on September 30, 2023 and December 31, 2022, respectively
(226,710)(149,624)
Accumulated other comprehensive income4,728 5,992 
Total equity677,856 707,229 
Total liabilities and equity$1,812,825 $1,884,553 
See accompanying notes to condensed consolidated financial statements.
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ECOVYST INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)


Common
stock		Additional
paid-in
capital 		(Accumulated deficit)Treasury
stock, at
cost 		Accumulated
other
comprehensive
income		Total
Balance, December 31, 2022$1,396 $1,091,475 $(242,010)$(149,624)$5,992 $707,229 
Net loss— — (1,471)— — (1,471)
Other comprehensive loss— — — — (5,759)(5,759)
Repurchases of common shares— — — (29,850)— (29,850)
Tax withholdings on equity award vesting— — — (866)— (866)
Stock compensation expense— 4,756 — — — 4,756 
Shares issued under equity incentive plan, net of forfeitures10 102 — — — 112 
Balance, March 31, 2023$1,406 $1,096,333 $(243,481)$(180,340)$233 $674,151 
Net income— — 26,122 — — 26,122 
Other comprehensive income— — — — 6,692 6,692 
Repurchases of common shares— — — (43,524)— (43,524)
Excise tax on repurchases of common shares— — — (630)— (630)
Stock compensation expense— 4,739 — — — 4,739 
Shares issued under equity incentive plan, net of forfeitures1 213 — — — 214 
Balance, June 30, 2023$1,407 $1,101,285 $(217,359)$(224,494)$6,925 $667,764 
Net income— — 16,574 — — 16,574 
Other comprehensive loss— — — — (2,197)(2,197)
Repurchases of common shares— — — (5,344)— (5,344)
Tax withholdings on equity award vesting— — — (2,506)— (2,506)
Excise tax on repurchases of common shares— — — (8)— (8)
Stock compensation expense— 3,392 — — — 3,392 
Shares issued under equity incentive plan, net of forfeitures— (5,461)— 5,642 — 181 
Balance, September 30, 2023$1,407 $1,099,216 $(200,785)$(226,710)$4,728 $677,856 
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Common
stock		Additional
paid-in
capital		(Accumulated deficit)Treasury
stock, at
cost 		Accumulated
other
comprehensive
income (loss)		Total 
Balance, December 31, 2021$1,378 $1,073,409 $(315,707)$(12,551)$(5,792)$740,737 
Net income— — 7,875 — — 7,875 
Other comprehensive income— — — — 11,378 11,378 
Tax withholdings on equity award vesting— — — (332)— (332)
Stock compensation expense — 5,946 — — — 5,946 
Shares issued under equity incentive plan, net of forfeitures18 9 — — — 27 
Balance, March 31, 2022$1,396 $1,079,364 $(307,832)$(12,883)$5,586 $765,631 
Net income— — 19,245 — — 19,245 
Other comprehensive loss— — — — (3,276)(3,276)
Repurchases of common shares— — — (8,842)— (8,842)
Stock compensation expense— 5,409 — — — 5,409 
Shares issued under equity incentive plan, net of forfeitures— 17 — — — 17 
Balance, June 30, 2022$1,396 $1,084,790 $(288,587)$(21,725)$2,310 $778,184 
Net income— — 21,325 — — 21,325 
Other comprehensive income— — — — 972 972 
Repurchase of common shares— — — (64,869)— (64,869)
Stock compensation expense— 3,872 — — — 3,872 
Shares issued under equity incentive plan, net of forfeitures(1)42 — — — 41 
Balance, September 30, 2022$1,395 $1,088,704 $(267,262)$(86,594)$3,282 $739,525 
See accompanying notes to condensed consolidated financial statements.
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ECOVYST INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine months ended
September 30,
20232022
Cash flows from operating activities:
Net income$41,225 $48,445 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation51,920 48,256 
Amortization10,536 10,547 
Amortization of deferred financing costs and original issue discount1,548 1,515 
Foreign currency exchange (gain) loss(41)2,179 
Deferred income tax provision(1,011)12,454 
Net loss on asset disposals3,326 1,174 
Stock compensation12,547 17,419 
Equity in net income from affiliated companies(16,305)(17,422)
Dividends received from affiliated companies10,000 30,000 
Other, net(5,270)(2,603)
Working capital changes that provided (used) cash:
Receivables(8,939)(28,443)
Inventories(3,909)3,206 
Prepaids and other current assets856 (5,223)
Accounts payable(3,694)1,954 
Accrued liabilities(19,383)(14,133)
Net cash provided by operating activities73,406 109,325 
Cash flows from investing activities:
Purchases of property, plant and equipment(53,642)(39,474)
Payments for business divestiture, net of cash— (3,744)
Business combinations, net of cash acquired— (488)
Other, net— 81 
Net cash used in investing activities(53,642)(43,625)
Cash flows from financing activities:
Draw down of revolving credit facilities14,500 — 
Repayments of revolving credit facilities(14,500)— 
Repayments of long-term debt(6,750)(6,750)
Repurchases of common shares(78,717)(73,711)
Tax withholdings on equity award vesting(3,372)(332)
Repayment of financing obligation(2,087)(1,849)
Other, net457 84 
Net cash used in financing activities(90,469)(82,558)
Effect of exchange rate changes on cash and cash equivalents(1,898)(2,585)
Net change in cash and cash equivalents(72,603)(19,443)
Cash and cash equivalents at beginning of period110,920 140,889 
Cash and cash equivalents at end of period$38,317 $121,446 
For supplemental cash flow disclosures, see Note 19.
See accompanying notes to condensed consolidated financial statements.
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ECOVYST 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
Ecovyst Inc. and subsidiaries (the “Company” or “Ecovyst”) is a leading integrated and innovative global provider of specialty catalysts 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 two uniquely positioned specialty businesses: Ecoservices provides sulfuric acid recycling to the North American refining industry for the production of alkylate and provides on-purpose virgin sulfuric acid for water treatment, mining and industrial applications; and Catalyst Technologies provides finished silica catalysts and catalyst supports necessary to produce high strength and high stiffness plastics and, through the Zeolyst Joint Venture, supplies zeolites used for catalysts that help produce renewable fuels, remove nitrogen oxides from diesel engine emissions as well as sulfur from fuels during the refining process.
The Company’s regeneration services product group, which is a part of the Company’s Ecoservices segment, typically experiences seasonal fluctuations as a result of higher demand for gasoline products in the summer months and lower demand in the winter months. These demand fluctuations result in higher sales and working capital requirements in the second and third quarters.
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 expected results 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, 2022.
Correction of an Error
During the preparation of the condensed consolidated financial statements for the period ended June 30, 2023, the Company identified a presentation error in the components of accumulated other comprehensive income (loss) that originated in the year ended December 31, 2021 and remained uncorrected through the quarter ended March 31, 2023. As a result, the presentation of accumulated other comprehensive income (loss) in Note 5 was corrected by revising the opening balances as follows:

Defined benefit and other postretirement plansNet gain (loss) from hedging activitiesForeign currency translation
As reported, December 31, 2021$14,808 $2,254 $(22,854)
Correction to opening balances(12,640)(1,964)14,604 
Revised, December 31, 2021$2,168 $290 $(8,250)
As reported, December 31, 2022$12,132 $26,636 $(32,776)
Correction to opening balances(12,640)(1,964)14,604 
Revised, December 31, 2022$(508)$24,672 $(18,172)

This classification error within accumulated other comprehensive income (loss) did not impact total accumulated other comprehensive income (loss) for the periods included in these condensed consolidated financial statements. Additionally, there was no impact on the condensed consolidated statements of income and other comprehensive income (loss), condensed consolidated balance sheets and condensed consolidated statements of cash flows for the periods included in these condensed consolidated financial statements. The Company assessed the materiality of this presentation error and concluded it was not material to the Company’s previously issued financial statements.
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ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
Net income for the nine months ended September 30, 2023 increased by $1,390 from adjustments for the Company’s interest rate cap agreements related to prior year interest expense amortization. The impact of this adjustment was not material to the consolidated financial statements for any prior quarterly or annual periods, and is not expected to be material to the current annual period.
2. New Accounting Standards:
Recently Adopted Accounting Standards
In October 2023, the Financial Accounting Standards Board (“FASB”) issued guidance to amend either presentation or disclosure requirements related to fourteen subtopics in the FASB Accounting Standards Codification, that are currently in the SEC Regulation S-X or Regulation S-K. The new guidance was issued in response to the SEC’s ruling on disclosure simplification. For entities subject to existing SEC disclosure requirements, the effective date of each amendment of the topics will be the date that the SEC removes the related disclosure from Regulation S-X or Regulation S-K. The guidance must be applied prospectively, with no early adoption permitted for entities subject to those existing SEC disclosures. The Company is currently evaluating the impact of the new guidance as it pertains to the fourteen subtopics that would impact the business and will apply prospectively once in effect.
In August 2023, the FASB issued guidance for entities that meet the definition of a joint venture or a corporate joint venture, to adopt a new basis of accounting upon the formation of the joint venture. The new guidance requires the initial measurement of contributed net assets and liabilities at fair value on the formation date, recognition of goodwill for the difference between the fair value of the joint venture’s equity and net assets, and disclosures about the nature and financial impact of the transaction. The new guidance requires prospective application and is effective for all joint ventures that are formed on or after January 1, 2025, with early adoption permitted. Joint ventures that formed before January 1, 2025 may elect to retrospectively apply the new guidance. The Company will apply the guidance to any new joint ventures formed after the effective date.
In March 2020 and January 2021, the FASB issued guidance to address certain accounting consequences from the anticipated transition from the use of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The new guidance contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and may be elected over time as reference rate reform activities occur. The time period through which the practical expedients provided in the guidance is available was set to expire on December 31, 2022, but was extended through December 31, 2024 by the FASB in December 2022. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index of the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. In February 2023, the Company amended the 2021 Term Loan Facility (as defined below), the ABL Facility (as defined below) and all existing interest rate caps agreements to replace LIBOR with a secured overnight financing rate (“SOFR”) as the benchmark interest rate. See Note 11 and Note 12 to these condensed consolidated financial statements for additional information. The Company utilized the practical expedients under the guidance with respect to the transition of its debt facilities and interest rate hedging arrangements to SOFR, with no impact to its condensed consolidated financial statements.
In October 2021, the FASB issued guidance that requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with revenue recognition guidance. Under current GAAP, contract assets and contract liabilities acquired in a business combination are recorded by the acquirer at fair value. The new guidance creates an exception to the general recognition and measurement principles related to business combinations, and is expected to result in the acquirer recognizing contract assets and liabilities at the same amounts recorded by the acquiree. The new guidance is effective for business combinations occurring during fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company adopted the new guidance effective January 1, 2023 as required, and will apply the guidance prospectively to business combinations that occur after the adoption date.
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ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
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 16 to these condensed consolidated financial statements.
The Company’s portfolio of products is integrated into a variety of end uses, which are described in the table below.
Key End UsesKey Products
Clean fuels, emission control & other• Refining hydrocracking catalysts
• Emission control catalysts
• Catalysts used in production of renewable fuels
• Catalyst activation
• Aluminum sulfate solution
• Ammonium bisulfite solution
Polymers & engineered plastics• Catalysts for high-density polyethylene and chemicals syntheses
• Antiblocks for film packaging
• Niche custom catalyst
Regeneration and treatment services• Sulfuric acid regeneration services
• Treatment services
Industrial, mining & automotive• Sulfur derivatives for industrial production
• Sulfuric acid for mining
• Sulfuric derivatives for nylon production
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ECOVYST 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 uses, for the three and nine months ended September 30, 2023 and 2022, respectively:
Three months ended September 30, 2023
Ecoservices
Catalyst Technologies(2)
Total
Clean fuels, emission control & other$8,393 $— $8,393 
Polymers & engineered plastics— 25,697 25,697 
Regeneration and treatment services(1)
87,692 — 87,692 
Industrial, mining & automotive51,544 — 51,544 
Total segment sales$147,629 $25,697 $173,326 
Three months ended September 30, 2022
Ecoservices
Catalyst Technologies(2)
Total
Clean fuels, emission control & other$7,991 $— $7,991 
Polymers & engineered plastics— 36,859 36,859 
Regeneration and treatment services(1)
92,676 — 92,676 
Industrial, mining & automotive95,007 — 95,007 
Total segment sales$195,674 $36,859 $232,533 
Nine months ended September 30, 2023
Ecoservices
Catalyst Technologies(2)
Total
Clean fuels, emission control & other$21,559 $— $21,559 
Polymers & engineered plastics— 74,877 74,877 
Regeneration and treatment services(1)
274,529 — 274,529 
Industrial, mining & automotive147,345 — 147,345 
Total segment sales$443,433 $74,877 $518,310 
Nine months ended September 30, 2022
Ecoservices
Catalyst Technologies(2)
Total
Clean fuels, emission control & other$22,474 $— $22,474 
Polymers & engineered plastics— 94,716 94,716 
Regeneration and treatment services(1)
253,793 — 253,793 
Industrial, mining & automotive266,436 — 266,436 
Total segment sales$542,703 $94,716 $637,419 
(1)As described in Note 1 to these condensed consolidated financial statements, the Company experiences seasonal sales fluctuations to customers in the regeneration services product group.
(2)Excludes the Company’s proportionate share of sales from the Zeolyst International and Zeolyst C.V. joint ventures (collectively, the “Zeolyst Joint Venture”) accounted for using the equity method (see Note 9 to these condensed consolidated financial statements for further information).
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ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
4. Fair Value Measurements:
Fair values are based on quoted market prices when available. When market prices are not available, fair values are generally estimated using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality. In instances where there is little or no market activity for the same or similar instruments, the Company estimates fair values using methods, models and assumptions that management believes a hypothetical market participant would use to determine a current transaction price. These valuation techniques involve some level of management estimation and judgment that becomes significant with increasingly complex instruments or pricing models. Where appropriate, adjustments are included to reflect the risk inherent in a particular methodology, model or input used.
The Company’s financial assets and liabilities carried at fair value have been classified based upon a fair value hierarchy. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). The classification of an asset or a liability is based on the lowest level input that is significant to its measurement. For example, a Level 3 fair value measurement may include inputs that are both observable (Levels 1 and 2) and unobservable (Level 3). The levels of the fair value hierarchy are as follows:
•Level 1—Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date. Active markets provide pricing data for trades occurring at least weekly and include exchanges and dealer markets.
•Level 2—Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads and yield curves.
•Level 3—Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date.
The following tables present information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
September 30,
2023		Quoted Prices in
Active Markets
(Level 1) 		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)
Derivative assets:
Interest rate caps (Note 12)$32,178 $— $32,178 $— 
December 31,
2022		Quoted Prices in
Active Markets
(Level 1) 		Significant Other
Observable Inputs
(Level 2) 		Significant
Unobservable Inputs
(Level 3)
Derivative assets:
Interest rate caps (Note 12)$34,374 $— $34,374 $— 
Derivative liabilities:
Interest rate caps (Note 12)$2,071 $— $2,071 $— 

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ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
Derivative contracts
Derivative assets and liabilities can be exchange-traded or traded over-the-counter (“OTC”). The Company generally values exchange-traded derivatives using models that calibrate to market transactions and eliminate timing differences between the closing price of the exchange-traded derivatives and their underlying instruments. OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, model calibration to market transactions, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. When models are used, the selection of a particular model to value an OTC derivative depends on the contractual terms of, and specific risks inherent in, the instrument as well as the availability of pricing information in the market. The Company generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices and rates, forward curves, measures of volatility, and correlations of such inputs. For OTC derivatives that trade in liquid markets, such as forward contracts, swaps and options, model inputs can generally be corroborated by observable market data by correlation or other means, and model selection does not involve significant management judgment.
As of September 30, 2023, the Company had interest rate caps that were fair valued using Level 2 inputs. In addition, the Company applies a credit valuation adjustment to reflect credit risk which is calculated based on credit default swaps. To the extent that the Company’s net exposure under a specific master agreement is an asset, the Company utilizes the counterparty’s default swap rate. If the net exposure under a specific master agreement is a liability, the Company utilizes a default swap rate comparable to Ecovyst. The credit valuation adjustment is added to the discounted fair value to reflect the exit price that a market participant would be willing to receive to assume the Company’s liabilities or that a market participant would be willing to pay for the Company’s assets.
5. Stockholders' Equity:
Accumulated Other Comprehensive Income (Loss)
The following tables present the tax effects of each component of other comprehensive income (loss) for the three and nine months ended September 30, 2023 and 2022, respectively:
Three months ended September 30,
20232022
Pre-tax
amount		Tax benefit/
(expense)		After-tax amountPre-tax
amount		Tax benefit/
(expense)		After-tax amount
Defined benefit and other postretirement plans:
Net prior service credit (cost)$(31)$8 $(23)$(53)$13 $(40)
Net gain (loss)(253)63 (190)(1,226)304 (922)
Benefit plans, net(284)71 (213)(1,279)317 (962)
Net gain (loss) from hedging activities1,247 (119)1,128 12,188 (3,047)9,141 
Foreign currency translation(3,112)— (3,112)(7,207)— (7,207)
Other comprehensive income (loss)$(2,149)$(48)$(2,197)$3,702 $(2,730)$972 
Nine months ended September 30,
20232022
Pre-tax
amount		Tax benefit/
(expense)		After-tax amountPre-tax
amount		Tax benefit/
(expense)		After-tax amount
Defined benefit and other postretirement plans:
Net prior service credit (cost)$(94)$23 $(71)$(158)$39 $(119)
Net gain (loss)398 (99)299 (1,225)304 (921)
Benefit plans, net304 (76)228 (1,383)343 (1,040)
Net gain (loss) from hedging activities(1,998)605 (1,393)36,827 (9,207)27,620 
Foreign currency translation(99)— (99)(17,506)— (17,506)
Other comprehensive income (loss)$(1,793)$529 $(1,264)$17,938 $(8,864)$9,074 

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ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
The following tables present the changes in accumulated other comprehensive income, net of tax, by component for the nine months ended September 30, 2023 and 2022, respectively:
Defined benefit
and other
postretirement
plans 		Net gain (loss)
from hedging
activities		Foreign
currency
translation 		Total 
December 31, 2022$(508)$24,672 $(18,172)$5,992 
Other comprehensive income (loss) before reclassifications207 12,057 (99)12,165 
Amounts reclassified from accumulated other comprehensive income(1)
21 (13,450)— (13,429)
Net current period other comprehensive income (loss)228 (1,393)(99)(1,264)
September 30, 2023$(280)$23,279 $(18,271)$4,728 
December 31, 2021$2,168 $290 $(8,250)$(5,792)
Other comprehensive income (loss) before reclassifications(1,157)27,148 (17,506)8,485 
Amounts reclassified from accumulated other comprehensive income(1)
117 472 — 589 
Net current period other comprehensive income (loss)(1,040)27,620 (17,506)9,074 
September 30, 2022$1,128 $27,910 $(25,756)$3,282 
(1)See the following table for details about these reclassifications. Amounts in parentheses indicate debits.
The following table presents the reclassifications out of accumulated other comprehensive income for the three and nine months ended September 30, 2023 and 2022, respectively:
Details about Accumulated Other
Comprehensive Income Components
Amounts reclassified from Accumulated Other
Comprehensive Income(1)
Affected line item where
Income is presented
Three months ended
September 30,		Nine months ended
September 30,
2023202220232022
Amortization of defined benefit and other postretirement items:
Net prior service (credit) cost$(31)$(53)$(94)$(158)
Other (expense) income(2)
Net (gain) loss21 1 48 3 
Other (expense) income(2)
(10)(52)(46)(155)Total before tax
7 12 25 38 Tax benefit
$(3)$(40)$(21)$(117)Net of tax
Gains and losses on cash flow hedges:
Interest rate caps$6,048 $(29)$17,933 $(627)Interest expense
(1,511)7 (4,483)155 Tax (expense) benefit
$4,537 $(22)$13,450 $(472)Net of tax
Total reclassifications for the period$4,534 $(62)$13,429 $(589)Net of tax
(1)Amounts in parentheses indicate debits to profit/loss.
(2)These accumulated other comprehensive income (loss) components are components of net periodic pension and other postretirement cost (see Note 14 to these condensed consolidated financial statements for additional details).
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
Treasury Stock Repurchases
2022 Stock Repurchase Program
On April 27, 2022, the Board approved a stock repurchase program that authorized the Company to purchase up to $450,000 of the Company’s common stock over the four-year period from the date of approval. Under the plan, the Company is permitted to repurchase shares from time to time for cash in open market transactions or in privately negotiated transactions in accordance with applicable federal securities laws, with the Company determining the timing and the amount of any repurchases based on its evaluation of market conditions, share price and other factors.
During the nine months ended September 30, 2023, the Company repurchased 541,494 shares on the open market at an average price of $9.85 per share, for a total of $5,333, excluding brokerage commissions and accrued excise tax. Additionally, in connection with secondary offerings of the Company’s common stock in March and May 2023, the Company repurchased 7,000,000 shares of its common stock sold in the offerings from the underwriters at a weighted average price of $10.48 per share concurrently with the closing of the offerings, for a total of $73,374, excluding accrued excise tax. As of September 30, 2023, $234,592 was available for additional share repurchases under the program.
During the nine months ended September 30, 2023, the Company accrued excise tax of $638 related to these repurchases, net of shares issued under the Company’s equity incentive program (see Note 17 to these condensed consolidated financial statements). This amount is included in accrued liabilities in the condensed consolidated balance sheet and is treated by the Company as a cost of the treasury stock transactions in equity.
During the nine months ended September 30, 2022, the Company repurchased 1,970,763 shares on the open market at an average price of $9.82 per share, for a total of $19,356, excluding brokerage commissions. Additionally, in connection with a secondary offering of the Company’s common stock in August 2022, the Company repurchased 6,500,000 shares of its common stock sold in the offering from underwriters at a price of $8.36 per share concurrently with the closing of the offering, for a total of $54,316.
Tax Withholdings on Equity Award Vesting
In connection with the vesting of restricted stock awards, restricted stock units and performance stock units, shares of common stock may be delivered to the Company by employees to satisfy withholding tax obligations at the instruction of the employee award holders. These transactions, when they occur, are accounted for as stock repurchases by the Company, with the shares returned to treasury stock at a cost representing the payment by the Company of the tax obligations on behalf of the employees in lieu of shares for the vesting unit. There were 315,635 and 32,058 shares delivered to the Company to cover tax payments for the nine months ended September 30, 2023 and 2022, respectively and the fair value of those shares withheld were $3,372 and $332 for the nine months ended September 30, 2023 and 2022, respectively.
6. Goodwill:
The change in the carrying amount of goodwill for the nine months ended September 30, 2023 is summarized as follows:
 EcoservicesCatalyst TechnologiesTotal
Balance as of December 31, 2022$326,589 $76,574 $403,163 
Foreign exchange impact— 205 205 
Balance as of September 30, 2023$326,589 $76,779 $403,368 
  
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
7. Other Operating Expense, Net:
A summary of other operating expense, net is as follows:
Three months ended
September 30,		Nine months ended
September 30,
2023202220232022
Amortization expense$2,645 $2,632 $7,924 $7,931 
Transaction and other related costs187 1,789 2,811 6,860 
Restructuring, integration and business optimization costs(1)
310 2,338 2,438 8,011 
Net loss on asset disposals1,020 468 3,326 1,174 
Other, net148 446 789 1,125 
$4,310 $7,673 $17,288 $25,101 
(1)During the three and nine months ended September 30, 2022, respectively, the Company’s results were impacted by costs associated with severance charges for certain former executives and employees.
8. Inventories, Net:
Inventories, net are classified and valued as follows:
September 30,
2023		December 31,
2022
Finished products and work in process$44,406 $39,909 
Raw materials3,857 4,453 
$48,263 $44,362 
Valued at lower of cost or market:
LIFO basis$28,157 $25,258 
Valued at lower of cost and net realizable value:
FIFO or average cost basis20,106 19,104 
$48,263 $44,362 
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ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
9. Investments in Affiliated Companies:
The Company accounts for investments in affiliated companies under the equity method. Affiliated companies accounted for on the equity basis as of September 30, 2023 are as follows:
CompanyCountryPercent
ownership
Zeolyst InternationalUSA50%
Zeolyst C.V.Netherlands50%
Following is summarized information of the combined investments(1):
Three months ended
September 30,		Nine months ended
September 30,
2023202220232022
Sales$81,115 $67,043 $236,200 $218,389 
Gross profit22,205 17,794 66,776 70,546 
Operating income12,414 10,228 39,916 44,340 
Net income12,617 9,540 42,189 44,448 
(1)Summarized information of the combined investments is presented at 100%; the Company’s share of the net assets and net income of affiliates is calculated based on the percent ownership specified in the table above.
The Company’s investments in affiliated companies balance as of September 30, 2023 and December 31, 2022 includes net purchase accounting fair value adjustments of $226,215 and $231,017, respectively, related to a prior business combination, consisting primarily of goodwill and intangible assets such as customer relationships, technical know-how and trade names. Consolidated equity in net income from affiliates is net of $1,601 and $4,802 of amortization expense related to purchase accounting fair value adjustments for the three and nine months ended September 30, 2023, respectively. Consolidated equity in net income from affiliates is net of $1,601 and $4,802 of amortization expense related to purchase accounting fair value adjustments for the three and nine months ended September 30, 2022, respectively.
10. Property, Plant and Equipment:
A summary of property, plant and equipment, at cost, and related accumulated depreciation is as follows:
September 30,
2023		December 31,
2022
Land $96,686 $96,659 
Buildings and improvements83,346 82,061 
Machinery and equipment 802,823 751,145 
Construction in progress 47,974 56,448 
1,030,829 986,313 
Less: accumulated depreciation (450,020)(401,424)
$580,809 $584,889 
Depreciation expense was $17,773 and $51,920 for the three and nine months ended September 30, 2023, respectively. Depreciation expense was $16,103 and $48,256 for the three and nine months ended September 30, 2022, respectively.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
11. Long-term Debt:
The summary of long-term debt is as follows:
September 30,
2023		December 31,
2022
Senior Secured Term Loan Facility due June 2028 (the "2021 Term Loan Facility")$879,750 $886,500 
ABL Facility— — 
Total debt879,750 886,500 
Original issue discount(6,496)(7,472)
Deferred financing costs(3,586)(4,158)
Total debt, net of original issue discount and deferred financing costs869,668 874,870 
Less: current portion(9,000)(9,000)
Total long-term debt, excluding current portion$860,668 $865,870 
In February 2023, the Company 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 term SOFR, which includes a credit spread adjustment of 10 basis points (with a 0.50% minimum floor) plus 2.75% per annum (or, depending on the Company’s first lien net leverage ratio, 2.50%). The interest rate on the 2021 Term Loan Facility was 7.97% as of September 30, 2023.
Also in February 2023, the Company amended its senior secured asset-based revolving credit facility (the “ABL Facility”) to replace LIBOR with SOFR as the benchmark interest rate. Following this amendment, the borrowings under the ABL Facility bear interest at a rate equal to an adjusted term SOFR rate or the base rate, which includes a credit spread adjustment of 10 basis points, plus a margin of between 1.25% to 1.75% or 0.25% to 0.75%, respectively. The interest rate on the ABL Facility was 8.75% as of September 30, 2023.
Fair Value of Debt
The fair value of a financial instrument is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. As of September 30, 2023 and December 31, 2022, the fair value of the senior secured term loan facility was $875,351 and $870,986, respectively. The fair value is classified as Level 2 based upon the fair value hierarchy (see Note 4 to these condensed consolidated financial statements for further information on fair value measurements).
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ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
12. Financial Instruments:
The Company uses interest rate related derivative instruments to manage its exposure to changes in interest rates on its variable-rate debt instruments. The Company does not speculate using derivative instruments.
By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is an asset, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is a liability, the Company owes the counterparty and therefore, the Company is not exposed to the counterparty’s credit risk in those circumstances. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with high quality counterparties. The derivative instruments entered into by the Company do not contain credit-risk-related contingent features.
Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates. The market risk associated with the Company’s derivative instruments is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
Use of Derivative Financial Instruments to Manage Interest Rate Risk. The Company is exposed to fluctuations in interest rates on its senior secured credit facilities. Changes in interest rates will not affect the market value of such debt but will affect the Company’s interest payments over the term of the loans. Likewise, an increase in interest rates could have a material impact on the Company’s condensed consolidated statements of cash flows. The Company hedges the interest rate fluctuations on debt obligations through interest rate cap agreements. The Company records these agreements at fair value as assets or liabilities in its condensed consolidated balance sheets. As the derivatives are designated and qualify as cash flow hedges, the gains or losses on the interest rate cap agreements are recorded in stockholders’ equity as a component of other comprehensive income, net of tax. Reclassifications of the gains and losses on the interest rate cap agreements into earnings are recorded as part of interest expense in the condensed consolidated statements of income as the Company makes its interest payments on the hedged portion of its senior secured credit facilities. Fair value is determined based on estimated amounts that would be received or paid to terminate the contracts at the reporting date based on quoted market prices.
The following table provides a summary of the Company’s interest rate cap agreements:
Financial instrumentNumber of instruments
In effect as of September 30, 2023
Current notional amount of instruments in effectAnnuitized premium of instruments in effect
Interest rate cap43$650,000 $24,817 
The current notional amounts of the three interest rate cap agreements in effect at September 30, 2023 are $250,000, $250,000 and $150,000. The Company entered into a $250,000 interest rate cap to mitigate interest rate volatility from August 2022 to October 2024, a $250,000 interest rate cap agreement to mitigate interest rate volatility from September 2023 to October 2025 and a $150,000 interest rate cap agreement to mitigate interest rate volatility from August 2023 to July 2024. The $150,000 interest rate cap agreement will increase to $175,000 to mitigate interest rate volatility from August 2024 to July 2026. The cap rate in effect at September 30, 2023 for all agreements in effect was 1.00%.
The Company has also entered into a forward starting interest rate cap agreement to mitigate interest volatility from November 2024 to October 2026.
In February 2023, the Company amended all existing interest rate cap agreements to replace LIBOR with SOFR as the benchmark interest rate, with all other terms of the agreements remaining the same. This amendment changed the previously annuitized premiums on the existing interest rate cap agreements.
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ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
The fair values of derivative instruments held as of September 30, 2023 and December 31, 2022, respectively are shown below:

Balance sheet locationSeptember 30,
2023		December 31,
2022
Derivative assets
Derivatives designated as cash flow hedges:
Interest rate capsPrepaid and other current assets$16,374 $18,510 
Interest rate capsOther long-term assets15,804 15,864 
Total derivative assets$32,178 $34,374 
Derivative liabilities
Derivatives designated as cash flow hedges:
Interest rate capsOther long-term liabilities$— $2,071 
Total derivative liabilities$— $2,071 

The following table shows the effect of the Company’s derivative instruments designated as cash flow hedges on AOCI for the three and nine months ended September 30, 2023 and 2022, respectively:
Three months ended September 30,
20232022
Location of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized in OCI on derivativesAmount of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized in OCI on derivativesAmount of gain (loss) reclassified from AOCI into income
Interest rate capsInterest (expense) income$7,294 $6,048 $12,159 $(29)
Nine months ended September 30,
20232022
Location of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized in OCI on derivativesAmount of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized in OCI on derivativesAmount of gain (loss) reclassified from AOCI into income
Interest rate capsInterest (expense) income$15,935 $17,933 $36,200 $(627)

The following table shows the effect of the Company’s cash flow hedge accounting on the condensed consolidated statements of income for the three and nine months ended September 30, 2023 and 2022, respectively:
Location and amount of gain (loss) recognized in income on cash flow hedging relationships
Three months ended
September 30,		Nine months ended
September 30,
2023202220232022
Total amounts of income and expense line items presented in the statement of income in which the effects of cash flow hedges are recorded in interest (expense) income$(11,811)$(9,542)$(30,812)$(26,880)
The effects of cash flow hedging:
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