Annual report pursuant to Section 13 and 15(d)

Revenue from Contracts with Customers

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Revenue from Contracts with Customers
 12 Months Ended
Dec. 31, 2020
Revenue from Contract with Customer [Abstract]  
Revenue from Contracts with Customers
5. Revenue from Contracts with Customers:
Revenue Recognition Model
As described in Note 2, the Company applies the five-step revenue recognition model to each contract with its customers.
Evidence of a contract between the Company and its customers may take the form of a master service agreement (“MSA”), a MSA in combination with an underlying purchase order, a combination of a pricing quote with an underlying purchase order or an individual purchase order received from a customer. The Company and certain of its customers enter into MSAs that establish the terms, including prices, under which orders to purchase goods may be placed. In cases where the MSA contains a distinct order for goods or contains an enforceable minimum quantity to be purchased by the customer, the Company considers the MSA to be evidence of a contract between the Company and its customer as the MSA creates enforceable rights and obligations. In cases where the MSA does not contain a distinct order for goods, the Company’s contract with a customer is the purchase order issued under the MSA. Customers of the Company may also negotiate orders via pricing quotes, which typically detail product pricing, delivery terms and payment information. When a customer procures goods under this method, the Company considers the combination of the pricing quote and the purchase order to create enforceable rights and obligations. Absent either a MSA or pricing quote, the Company considers an individual purchase order remitted by a customer to create enforceable rights and obligations.
The Company identifies a performance obligation in a contract for each promised good that is separately identifiable from other promises in the contract and for which the customer can benefit from the good. The majority of the Company’s contracts have a single performance obligation, which is the promise to transfer individual goods to the customer. Single performance obligations are satisfied according to the shipping terms noted within the MSA or purchase order. The Company has certain contracts that include multiple performance obligations under which the purchase price for each distinct performance obligation is defined in the contract. These distinct performance obligations may include stand-ready provisions, which are arrangements to provide a customer assurance that they will have access to output from the Company’s manufacturing facilities, or monthly reservations of capacity fees. The Company considers stand-ready provisions and reservation of capacity fees to be performance obligations satisfied over time. Revenues related to stand-ready provisions and reservation of capacity fees are recognized on a ratable basis throughout the contract term and billed to the customer on a monthly basis.
As described above, the Company’s MSAs with its customers may outline prices for individual products or contract provisions. MSAs in the Company’s Performance Chemicals and Refining Services segments may contain provisions whereby raw material costs are passed-through to the customer per the terms of their contract. The Company’s exposure to fluctuations in raw material prices is limited, as the majority of pass-through contract provisions reset based on fluctuations in the underlying raw material price. MSAs in the Company’s Refining Services segment also contain take-or-pay arrangements, whereby the customer would incur a penalty in the form of a volume shortfall fee. During the year ended December 31, 2020, some customers fell short of monthly orders due to the pandemic and take-or-pay were acted upon. In 2019, there have been no issues in which Refining Services customers failed to meet their contractual obligations. Revenue from product sales are recorded at the sales price, which includes estimates of variable consideration for which reserves are established and which result from discounts, returns or other allowances that are offered within contracts between the Company and its customers.
The Company recognizes revenues when performance obligations under the terms of a contract with its customer are satisfied, which generally occurs at a point in time by transferring control of a product to the customer. The Company determines the point in time when a customer obtains control of a product and the Company satisfies the performance obligation by considering factors including when the Company has a right to payment for the product, the customer has legal title to the product, the Company has transferred possession of the product, the customer has assumed the risks and rewards of ownership of the product and the customer has accepted the product. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The Company does not have any significant payment terms as payment is received at, or shortly after, the point of sale.
Refining Services
Contracts between the Company’s Refining Services segment and its customers are typically evidenced by entering into a MSA which generally has a term in excess of one year. Though each MSA is unique, the terms may include performance obligations such as stand-ready provisions and minimum purchase requirements. Stand-ready provisions within these contracts are billed on a monthly basis, as the performance obligation resets on a monthly basis and does not carry-over to the following month. Certain of the Company’s Refining Services MSAs contain minimum purchase requirements that expire within the calendar year. The Company reviews each contract with minimum purchase requirements to determine if the customer will meet the provisions within the current calendar year. During the years ended December 31, 2020 and 2019, there have been no issues in which Refining Services customers failed to meet their contractual obligations. Contracts within Refining Services may also contain raw material pricing adjustments which are typically based on a commodity index or Refining Services’ cost to acquire the commodity. These raw material pass-through provisions reset on a periodic basis and prospectively adjust the raw material cost component of the goods sold to the customer. The Company accounts for the raw material costs on a prospective basis, as the price changes affect the future consideration of the sale of goods.
Catalysts
The Company’s Catalysts segment sells customized products to its customers. These customized products are reformulations of existing Catalysts products, tailored to meet individual customer specifications. Prior to entering into an arrangement, the Company will allow a customer to obtain a sample of goods to ensure that it meets their needs. The customer will enter into a long-term supply arrangement that outlines the specification of the products to be sold and contains terms and conditions under which purchase orders are issued. These supply arrangements typically have a duration from one to ten years. Although the duration of these supply arrangements are in excess of one year, a contract is formed between the Company and its customer upon receipt of a purchase order.
Performance Chemicals
Contracts between the Company’s Performance Chemicals segment and its customers are typically evidenced by entering into a supply arrangement that outlines the specification of the products to be sold and contains terms and conditions under which purchase orders are issued. Certain Performance Chemicals supply arrangements may contain raw material pricing adjustments which are typically based on a commodity index. These raw material pass-through provisions reset on a periodic basis and prospectively adjust the raw material cost component of the goods sold to the customer. The Company accounts for the raw material pass-through costs on a prospective basis, as the price changes affect the future consideration of the sale of goods.
Contract Assets and Liabilities
A contract asset is a right to consideration in exchange for goods that the Company has transferred to a customer when that right is conditional on something other than the passage of time. A contract liability exists when the Company receives consideration in advance of the fulfillment of its performance obligations. The Company has no contract assets recorded on its consolidated balance sheets as of December 31, 2020 and 2019, respectively.
The Company recognized a €10,216 ($11,486) contract liability associated with the sale of its magnesium silicate product line in July 2020, of which €9,202 ($11,318) of deferred revenue remained as of December 31, 2020. The Company recognized revenue of €1,014 ($1,197) related to this contract liability during the year ended December 31, 2020. Refer to Note 8 of these condensed consolidated financial statements for additional information related to the sale of the product line.
The Company recognized a $9,000 contract liability associated with the sale of a portion of its sulfate salts product line in June 2019, of which $2,070 and $6,450 of deferred revenue remained as of December 31, 2020 and 2019, respectively. The Company recognized revenue of $4,374 and $2,550 related to this contract liability during the year ended December 31, 2020 and 2019, respectively. Refer to Note 8 of these consolidated financial statements for additional information related to the sale of the product line.
Practical Expedients and Accounting Policy Elections
The Company has elected to use certain practical expedients and has made certain accounting policy elections as permitted under the new revenue recognition guidance. The majority of the Company’s contracts with customers are based on an individual purchase order; thus, the duration of these contracts are for one year or less. As described above, the Company’s performance obligations reset either monthly or at the end of the calendar year. The Company has made an accounting policy election to omit certain disclosures related to these performance obligations, as the initial term of the Company’s performance obligations are for a term of one year or less.
The Company uses an output method to recognize revenues related to performance obligations satisfied over time. These performance obligations, as described above, are satisfied within a calendar year. As such, the Company has elected to utilize the “as-invoiced” practical expedient, which permits the Company to recognize revenue in the amount to which it has a right to invoice the customer, provided that the amount corresponds directly with the value provided by the performance obligation as completed to date.
When the Company performs shipping and handling activities after the transfer of control to the customer (e.g. when control transfers prior to delivery), they are considered fulfillment activities as opposed to separate performance obligations, and the Company recognizes revenue upon the transfer of control to the customer. Accordingly, the costs associated with these shipping and handling activities are accrued when the related revenue is recognized under the Company’s policy election. The Company does not utilize sales-based commissions plans, and as a result, the Company does not capitalize any costs which could be considered incremental costs of obtaining a contract. Sales, value added and other taxes the Company collects concurrent with revenue producing activities are excluded from revenues.
Disaggregated Revenue
The Company’s primary means of disaggregating revenues is by reportable segment, which can be found in Note 14 to these 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
• Silica gels for surface coatings
Fuels & emission control • Refinery catalysts
• Emission control catalysts
• Catalyst recycling services
Packaging & engineered plastics • Catalysts for high-density polyethlene and chemicals syntheses
• Antiblocks for film packaging
• Sulfur derivatives for nylon production
• Silicate precursors for catalysts used in plastics manufacturing
• Silicate for catalyst manufacturing
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
• Silicates and alum for water treatment mining
• Bleaching aids for paper
The following table disaggregates the Company’s sales, by segment and end use, for the years ended December 31, 2020, 2019 and 2018:
Year ended December 31, 2020
Refining Services Catalysts Performance Chemicals Total
Industrial & process chemicals $ 70,648  $ 125  $ 279,296  $ 350,069 
Fuels & emission control(1)
225,042  —  —  225,042 
Packaging & engineered plastics 38,772  93,882  47,451  180,105 
Consumer products —  —  235,792  235,792 
Natural resources 67,451  —  52,165  119,616 
Total segment sales 401,913  94,007  614,704  1,110,624 
Inter-segment sales eliminations (3,256) (5) —  (3,261)
Total $ 398,657  $ 94,002  $ 614,704  $ 1,107,363 
Year ended December 31, 2019
Refining Services Catalysts Performance Chemicals Total
Industrial & process chemicals $ 80,661  $ 96  $ 299,651  $ 380,408 
Fuels & emission control(1)
252,294  —  —  252,294 
Packaging & engineered plastics 48,056  85,571  51,725  185,352 
Consumer products —  —  260,495  260,495 
Natural resources 66,070  —  58,692  124,762 
Total segment sales 447,081  85,667  670,563  1,203,311 
Inter-segment sales eliminations (3,397) —  —  (3,397)
Total $ 443,684  $ 85,667  $ 670,563  $ 1,199,914 
Year ended December 31, 2018
Refining Services Catalysts Performance Chemicals Total
Industrial & process chemicals $ 77,866  $ 86  $ 315,827  $ 393,779 
Fuels & emission control(1)
246,452  —  —  246,452 
Packaging & engineered plastics 59,168  72,013  53,623  184,804 
Consumer products —  —  272,187  272,187 
Natural resources 72,076  —  62,865  134,941 
Total segment sales 455,562  72,099  704,502  1,232,163 
Inter-segment sales eliminations (3,237) —  —  (3,237)
Total $ 452,325  $ 72,099  $ 704,502  $ 1,228,926 

(1)    As described in Note 1, the Company experiences seasonal sales fluctuations to customers in the fuels & emission control end use.