Annual report [Section 13 and 15(d), not S-K Item 405]

Divestitures

v3.25.0.1
Divestitures
 12 Months Ended
Dec. 31, 2024
Discontinued Operations and Disposal Groups [Abstract]  
Divestitures
4. Divestitures:
Performance Chemicals
On February 28, 2021, the Company entered into a definitive agreement to sell its Performance Chemicals business to Sparta Aggregator L.P. (the “Buyer”), a partnership established by Koch Minerals & Trading, LLC and Cerberus Capital Management, L.P. for a purchase price of $1,100,000 subject to certain adjustments including indebtedness, cash, working capital and transaction expenses. The Company completed the sale of its Performance Chemicals business effective on August 1, 2021. The net cash proceeds to the Company from the sale were $978,449 after certain customary adjustments for indebtedness, working capital and cash at the closing of the transaction. In March 2022, the Company made a payment to the buyer for $3,744, representing the final adjustments to the sale price. The Company classified this payment within net cash used in investing activities – continuing operations in the consolidated statements of cash flows.
During the year ended December 31, 2022, the Company recognized $2,409 of other operating expense, net, $6,311 of benefit for income taxes and $3,902 of net income from discontinued operations, net of tax. This related to the sale of the Performance Chemicals business for an income tax benefit upon the finalization of the Company’s U.S. income tax returns, partially offset by a tax indemnity claim resulting from the transaction.
Financing Obligation
In connection with the divestiture of the Performance Chemicals business, the Company entered into a five-year contract manufacturing agreement effective on August 2, 2021 with PQ Silicas UK Ltd., a subsidiary of the Buyer, related to a facility in Warrington, United Kingdom. Pursuant to this agreement, the Buyer will manufacture and sell advanced silica finished good products to the Company, which are finished good products sold within the Company’s Advanced Materials & Catalysts segment. Additionally, certain machinery, equipment, and other tangible personal property assets identified in the Agreement (“Catalyst Production Assets”) owned by the Buyer will be used exclusively in the manufacture of advanced silica products for the Company. The Company did not meet the requirements for a sale-leaseback transaction as described in Accounting Standards Codification 842-40, Leases - Sale-Leaseback Transactions. Under the failed sale-leaseback accounting model, the Company is deemed under GAAP to still own the Catalyst Production Assets, which the Company must continue to reflect in its consolidated balance sheet and depreciate over the
assets’ remaining useful lives. The Company recorded a financing obligation of £11,648 (equivalent $16,005) as part of this transaction.
The agreement has an initial term of five years, with an option to renew, as well as an “Option Bill of Sale” which provides for the transfer from the Buyer to the Company of the Catalyst Production Assets upon the Company’s exercise of a one-dollar purchase option.
The table below presents the financing obligation assets and liabilities recognized on the consolidated balance sheet as of December 31, 2024 and 2023:
December 31,
Balance Sheet location 2024 2023
Assets
Financing obligation Property, plant and equipment, net $ 14,173  $ 19,878 
Total $ 14,173  $ 19,878 
Liabilities
Current:
Financing obligation Accrued liabilities $ 3,043  $ 2,999 
Noncurrent:
Financing obligation Other long-term liabilities 1,815  4,927 
Total $ 4,858  $ 7,926 
Payments made to the Buyer under the contact manufacturing agreement were $9,171, $8,416 and $7,872 for the years ended December 31, 2024, 2023 and 2022, respectively. Included in these payments were $2,957, $2,847 and $2,692 of principal on the financing obligation for the years ended December 31, 2024, 2023 and 2022, respectively, and $185, $266 and $336 of interest on the financing obligation for the years ended December 31, 2024, 2023 and 2022, respectively. Principal payments are included in financing activities and interest payments are included in operating activities on the Company’s consolidated statement of cash flows.
The remaining lease term is 1.6 years with a weighted average discount rate of 2.86% as of December 31, 2024.
Maturities of the financing obligation as of December 31, 2024 are as follows:
Year Finance
Obligation
2025 $ 3,142 
2026 1,833 
2027 — 
2028 — 
2029 — 
Thereafter — 
Total lease payments 4,975 
Less: Interest 117 
Total lease liabilities (1)
$ 4,858 
(1)     Refer to the table above regarding the Company’s classification of financing obligation in the Company’s consolidated balance sheet as of December 31, 2024.
In addition to the contract manufacturing agreement noted above, the Company also entered into certain supply agreements with the Buyer, as well as a Transition Services Agreement, pursuant to which the Buyer was receiving and performing certain services to provide for the orderly transition of various functions and processes after the closing of the transaction. The services under the Transition Services Agreement include information technology, accounting, tax, financial services, human resources, facilities, and other administrative support services. These services were provided for a period of six months, which ended in January 2022. Billings under the Transition Services Agreement to the Buyer during the year ended December 31, 2022 were immaterial. Those billings are included in selling, general and administrative expenses in the consolidated financial statements for the year ended December 31, 2022.