Investments in Affiliated Companies |
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| Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments in Affiliated Companies |
10. 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 December 31, 2024 are as follows:
Following is summarized information of the combined investments(1):
(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 December 31, 2024 and 2023 includes net purchase accounting fair value adjustments of $155,138 and $224,614, respectively, related to the 2016 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 $3,761, $6,403 and $6,402 of amortization expense related to purchase accounting fair value adjustments for the years ended December 31, 2024, 2023 and 2022, respectively. During the year ended December 31, 2024, the Company recognized a $65,000 other than temporary impairment charge on its investment in the Zeolyst Joint Venture to reduce the carrying value of the Company’s investment to its estimated fair value. This impairment was an adjustment to the goodwill and trade name components of the purchase accounting fair value adjustments recorded as a result of the 2016 business combination.
The Company had receivables due from affiliates of $2,794 and $3,231 as of December 31, 2024 and 2023, respectively, which were included in prepaid and other current assets in the consolidated balance sheets. The Company had payables from affiliates of $929 and $1,351 as of December 31, 2024 and 2023, which were included in accrued liabilities in the consolidated balance sheets. Receivables and payables due from affiliates are generally non-trade.
Sales to affiliates were $3,811, $2,457 and $5,915 for the years ended December 31, 2024, 2023 and 2022, respectively. There were no purchases from affiliates during the years ended December 31, 2024 and 2022, respectively and $236 for the year ended December 31, 2023.
The Advanced Materials & Catalysts segment includes equity in net income from Zeolyst International and Zeolyst C.V. (collectively, the “Zeolyst Joint Venture”), each of which are 50/50 joint ventures with CRI Zeolites Inc. (a wholly-owned subsidiary of Royal Dutch Shell). The Zeolyst Joint Venture is accounted for using the equity method in the Company’s consolidated financial statements. The Company’s management evaluates the Advanced Materials & Catalysts segment’s performance, including the Zeolyst Joint Venture, on a proportionate consolidation basis.
The Company’s equity in net income from affiliated companies in the consolidated results includes amortization expense related to purchase accounting fair value adjustments associated with the Zeolyst Joint Venture as a result of the 2016 business combination. The Company’s consolidated results include equity in net income from affiliated companies of $15,112, $30,624 and $27,725 for the years ended December 31, 2024, 2023 and 2022, respectively. This represents the primary component of equity in net income in the Advanced Materials & Catalysts segment from the Zeolyst Joint Venture.
During the year ended December 31, 2024, the Company recognized an other than temporary impairment charge of $65,000 on its investment in the Zeolyst Joint Venture, specifically related to our investment in Zeolyst International, to reduce the carrying value of the Company’s investment to its estimated fair value. This impairment was a partial reduction to the goodwill and trade name components of the purchase accounting fair value adjustments recorded as a result of the 2016 business combination. The Company estimated the fair value of the investment using a combination of an income and market value approach, using level 3 inputs. The Company estimated market approach fair value using publicly traded comparable company values and applied a control premium and the selected market multiples to the investee’s trailing twelve months Adjusted EBITDA. The Company estimated income-based fair value using the discounted cash flow approach. This approach requires the use of significant assumptions about future cash flows and is based on management’s assessment of a number of factors. The key assumptions include revenue growth rates, operating margin growth rates, the perpetual growth rate, selling, general and administrative expenses growth rates and the weighted average cost of capital, as well as the investee’s recent performance and its ability to execute on planned future strategic initiatives. Discount rate assumptions are based on an assessment of the risk inherent in those future cash flows. The fair value declined primarily due to the demand outlook for catalyst materials used in emission control applications and the production of sustainable fuels, which has resulted in revised projections of future operating results.
The following table summarizes the activity related to the Company’s investments in affiliated companies balance on the consolidated balance sheets:
In December 2013 and annually thereafter, the Company and its joint venture, Zeolyst International, entered into ten year real estate tax abatement agreements with the Unified Government of Wyandotte County in Kansas City, Kansas (the “Unified Government”). The agreements utilize an Industrial Revenue Bond (“IRB,” “IRBs”) financing structure to achieve a 75% real estate tax abatement on the value of the improvements that were constructed during the expansion of the then-current fiscal year to the Company and Zeolyst International’s facilities at the jointly-operated Kansas City, Kansas plant. The IRB financing structure requires the Company to lease its rights to the facility improvements to the Unified Government, which leases the improvements back to the Company. The Company’s rental payments under the sub-leases of the improvements are equal to the amount of the interest payable on the IRBs that the Unified Government sells to the Company. The Company’s sublease payment obligations and the IRB interest payment receivables have been
presented net, as the sublease rental payment obligations and the IRB interest payment receivables meet the criteria for right of set off conditions under GAAP.
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