Ecovyst, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Investments in Affiliated Companies

Investments in Affiliated Companies

12 Months Ended

Dec. 31, 2017

Equity Method Investments and Joint Ventures [Abstract]

10. Investments in Affiliated Companies:

As a result of the Business Combination, the Company acquired investments in affiliated companies accounted for under the equity method. Affiliated companies accounted for on the equity method as of December 31, 2017 are as follows:



Company	Country	Percent Ownership
PQ Silicates Ltd.	Taiwan	50%
Zeolyst International	USA	50%
Zeolyst C.V.	Netherlands	50%
Quaker Holdings	South Africa	49%

Following is summarized information of the combined investments¹:



	December 31,
	2017		2016
Current assets	$	213,815	$	207,997
Noncurrent assets	235,440		212,144
Current liabilities	37,018		44,741
Noncurrent liabilities	1,417		1,384



	Year Ended December 31, 2017		Period from May 4, 2016 to December 31, 2016
Net sales	$	317,197	$	206,072
Gross profit	132,812		91,761
Operating income	91,224		67,098
Net income	94,740		67,332

¹Summarized information of the combined investments is presented at 100%; the Company’s share of the net assets and net income of affiliates is calculated based on the percent ownership specified in the table above.

The Company’s investments in affiliated companies balance as of December 31, 2017 and 2016 includes net purchase accounting fair value adjustments of $264,700 and $273,300, respectively, related to the Business Combination, consisting primarily of goodwill and intangible assets such as customer relationships, technical know-how and trade names. Consolidated equity in net income (loss) from affiliates is net of $8,599 and $36,296 of amortization expense related to purchase accounting fair value adjustments for the years ended December 31, 2017 and 2016, respectively.

The following table summarizes the activity related to the Company’s investments in affiliated companies balance on the consolidated balance sheets:



	Years ended December 31,
	2017			2016
Balance at beginning of period	$	459,406		$	—
Business Combination	—			472,994
Acquisition	119			—
Investments in affiliated companies	9,000			—
Equity in net income of affiliated companies	47,371			33,684
Charges related to purchase accounting fair value adjustments	(8,599		)	(36,296		)
Dividends received	(44,071		)	(7,636		)
Foreign currency translation adjustments	6,050			(3,340		)
Balance at end of period	$	469,276		$	459,406

The Company had net receivables due from affiliates of $4,910 and $4,196 as of December 31, 2017 and 2016, respectively, which are included in prepaid and other current assets. Net receivables due from affiliates are generally non-trade receivables. Sales to affiliates were $2,853 and $1,587 for the years ended December 31, 2017 and 2016, respectively. The Company purchased goods of $2,475 and $1,147 from affiliates, which is included in cost of goods sold during the years ended December 31, 2017 and 2016, respectively.

On December 18, 2013, PQ Holdings and its joint venture, Zeolyst International, entered into a real estate tax abatement agreement with the Unified Government of Wyandotte County and Kansas City, Kansas that will utilize an Industrial Revenue Bond financing structure to achieve a 75% real estate tax abatement on the value of the improvements that will be constructed during the expansion of PQ Holdings and Zeolyst International’s facilities at the jointly-operated Kansas City, Kansas plant. The financing obligation and the industrial bond receivable have been presented net, as the financing obligation and the industrial bond meet the criteria for right of setoff conditions under GAAP.