Ecovyst Inc

1. Organization:

Zeolyst International is a Kansas general partnership (“Partnership”) by and between Ecovyst Catalyst Technologies LLC (“Ecovyst”) and Shell Catalysts & Technologies (formerly referred to as CRI Zeolites Inc. (“CRI”)), a Royal Dutch Shell affiliate (collectively, the “Partners”) formed pursuant to a Partnership Agreement dated February 1, 1988, as amended (“the Agreement”). Pursuant to a Contribution, Assignment, and Assumption Agreement dated July 29, 2021 (the “Contribution Agreement”) by and between Ecovyst and PQ Corporation (“PQ”), PQ transferred and Ecovyst assumed PQ’s interest in the Partnership and the Agreement.

The percentage interests as of December 31, 2023 and 2022 are as follows:

The Partnership was formed pursuant to the Kansas Uniform Partnership Act. The Agreement specifies that the partners share equally in capital contributions. The Agreement states that the profits and losses of the Partnership will be allocated in accordance with the partners’ interests in the Partnership. The intent of the Partnership is to develop, manufacture, and sell zeolites and zeolite-containing catalysts.

The Partnership has significant transactions with its partners and related affiliates. See Note 15 for further information on related party transactions.

2. Partnership Business:

The Partnership manufactures zeolites and zeolytic catalysts that are used by refiners to capture impurities in the processing of petroleum based feed streams while increasing value. The selectivity and activity of zeolites used for this purpose can improve yields and have a general life cycle of 3-4 years. As a result, a significant portion of the Partnership’s customer base tends to change on an annual basis. A significant percentage of the base materials purchased for the Partnership’s manufacturing process are acquired from related parties. In addition, a significant portion of the Partnership’s sales are transacted through Shell Catalysts & Technologies (“Shell”). The Partnership compensates Shell with a 2% sales commission or royalty fee on specific sales transactions.

3. Summary of Significant Accounting Policies:

These financial statements have been prepared in accordance with generally accepted accounting principles. These financial statements are accounted for on a historical cost basis and do not reflect the results of any purchase accounting adjustments recorded in the Partners’ respective financial statements.

Cash and Cash Equivalents. Cash and cash equivalents include investments with original terms to maturity of 90 days or less from the time of purchase.

Restricted Cash. Restricted cash, which is restricted as to withdrawal or usage, is classified separately from cash and cash equivalents on the Partnership’s balance sheets. The Partnership had no restricted cash balances as of December 31, 2023 and 2022.

Trade Accounts Receivables and Allowance for Doubtful Accounts. Trade accounts receivables are recorded at the invoiced amount and do not bear interest. The Partnership maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Allowances for doubtful accounts are based on historical experience and known factors regarding specific customers. If the financial condition of the Partnership’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances would be required. Account balances are charged off against the allowance when it is probable the receivable will not be recovered.

Inventories. Inventories are stated at the lower of cost or net realizable value, valued on the first-in, first-out (“FIFO”) method. The Partnership establishes reserves for slow-moving and obsolete inventory.

Property, Plant and Equipment. Property, plant, and equipment are carried at cost and include expenditures for new facilities and major renewals and betterments. Interest is capitalized on capital projects as applicable. Maintenance, repairs and minor renewals are charged to expense as incurred. When assets are sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in the results of operations.

Depreciation is generally provided on the straight-line method based on estimated useful lives of the assets, ranging up to 33 years for buildings and improvements and 10 years for machinery and equipment.

We perform an impairment review of property, plant and equipment and other long-lived assets when events and circumstances indicate that those assets may be impaired by comparing the carrying amount of the assets to their fair value. Fair value is determined using quoted market prices where available, or other techniques including discounted cash flows. The Partnership’s estimates of future cash flows involve assumptions concerning future operating performance, economic conditions, and technological changes that may affect the future useful lives of the assets.

Leases. The Partnership has an evergreen land lease agreement with a remaining lease term of 28 years as of December 31, 2023. Accounting Standards Codification Topic 842, Leases (“ASC 842”), does not provide definitive guidance as to determining the length of evergreen leasing arrangements. As such, the Partnership estimated the term of the lease agreement to be commensurate with the estimated useful life of the buildings located on the land that is being leased. Upon adoption of ASC 842 on January 1, 2019, the Partnership assigned a 33 year life to the land lease agreement.

When the Partnership enters into an arrangement, at inception, the Partnership determines if the arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. The Partnership’s lease arrangement only contains lease components. The Partnership’s lease agreement does not contain any material residual value guarantees or material restrictive covenants.

The Partnership recognizes a right-of-use lease asset and lease liability at the lease commencement date based on the present value of the remaining lease payments over the lease term. The Partnership was unable to readily determine the discount rate implicit in the lease agreement in accordance with the policy. As such, the Partnership utilized its incremental borrowing rate over the relevant lease term, which is the rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Short-term leases, which have an initial term of twelve months or less, are not recorded on the Partnership’s balance sheet.

Lease expense for the operating lease is recognized on a straight-line basis over the lease term. The amortization expense component of the right-of-use lease asset is included in cost of goods sold and in selling, general and administrative expenses on the accompanying statements of operations and accumulated earnings.

Intangibles and Other Long-term Assets. Other long-term assets primarily include intangible assets, at cost and spare parts. In May 2017, the Partnership made a $6,500 strategic investment for license of materials-based solutions for catalytic and separations processes. In April 2018, the Partnership made a $4,000 strategic investment to buy down royalty obligations related to certain license agreements. The Partnership amortizes these intangible assets over a ten-year period and includes the expense in selling, general and administrative expenses on the accompanying statements of operations and accumulated earnings. These investments are accounted for under the cost method of accounting. The Partnership incurred intangible asset related amortization expense of $1,050 for the years ended December 31, 2023, 2022 and 2021, respectively, related to these investments.

Estimated future aggregate amortization expense of intangible assets is as follows:

Revenue Recognition. In determining the appropriate amount of revenue to be recognized as the Partnership fulfills its obligations under its agreements, the Partnership performs the following steps: (i) identification of the contract with the customer; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Partnership satisfies each performance obligation.

The Partnership identifies a contract when an agreement with a customer creates legally enforceable rights and obligations, which occurs when a contract has been approved by both parties, the parties are committed to perform their respective obligations, each party’s rights and payment terms are clearly identified, commercial substance exists and it is probable that the Partnership will collect the consideration to which it is entitled.

The Partnership may recognize revenue from bill-and-hold arrangements initiated by a customer. Under these bill-and-hold arrangements, a customer pays for the goods, but does not take physical possession immediately. The Partnership considers satisfaction of performance obligations when they have finished manufacturing the products based on the agreed upon specifications in accordance with the order. These products are custom made to each customer’s specifications and cannot be made available for use with another customer’s order. Once the goods have been segregated in a designated space in the warehouse and the customer has been invoiced, title to the goods and risk of loss has transferred to the customer. The customers have access to their products to inspect and can take possession of even prior to the scheduled delivery dates.

The Partnership may offer rebates to customers who have reached a specified volume of optional purchases. The Partnership recognizes rebates given to customers as a reduction of revenue based on an allocation of the cost of honoring rebates earned and claimed to each of the underlying revenue transactions that result in progress by the customer toward earning the rebate. Rebates are recognized at the time revenue is recorded. The Partnership measures the rebate obligation based on the estimated amount of sales that will result in a rebate at the adjusted sales price per the respective sales agreement.

The Partnership recognizes revenue when all essential elements of the sales order have shipped and both title and risk of loss has passed to the customer. Hydrocracking and specialty catalyst orders are typically filled by a number of individual shipments, and those shipments may span the end of a fiscal quarter or year. If a portion of the order has not shipped and it is essential to the functionality of the customer’s end use, revenue is recognized when the order is completed. A shipment is considered essential if each individual shipment has no value to the customer on a stand-alone basis and if the remaining shipment is not considered inconsequential and perfunctory.

The Partnership currently reserves 2% of the Hydrocracking catalyst sales due to a clause in the contract that allows customers to return up to 5% of the unused products they purchase within 90 days, and based on historical experience. The total sales returns reserve was $1,052 for the years ended December 31, 2023 and 2022, respectively.

Shipping and Handling Costs. The Partnership classifies costs related to shipping and handling of products shipped to customers as cost of goods sold.

Research and Development: Research and development costs of $15,388, $15,102 and $13,068 for the years ended December 31, 2023, 2022 and 2021, respectively, were expensed as incurred and reported in selling, general and administrative expenses in the accompanying statements of operations and accumulated earnings. Costs include salaries, contractor fees, building costs, utilities and administrative expenses.

Foreign Exchange Transactions. The functional currency of the Partnership is the U.S. Dollar. The Partnership enters into transactions that are denominated in other currencies. Gains and losses on foreign currency transactions are included in other (income) / expense, net on the accompanying statements of operations and accumulated earnings. Foreign exchange (gain) loss of $(67), $1,049 and $1,551 were recognized for the years ended December 31, 2023, 2022 and 2021, respectively.

Fair Value Measurements. The Partnership’s financial assets and liabilities are reflected in the financial statements at amortized cost which approximates fair market value. Fair value is defined as the price at which an asset could be exchanged in a current transaction between willing market participants. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a market participant, not the amount that would be paid to settle the liability with a creditor. The Partnership’s cash balances approximate fair value due to their short-term maturity.

Use of Estimates. The preparation of the Partnership’s financial statements in conformity with generally accepted accounting principles requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Revision of Previously Issued Financial Statements.

During the preparation of the financial statements for the year ended December 31, 2023, the Partnership identified an error in prior period cost of goods sold. Although the Partnership has determined that this error did not have a material impact on its previously issued financial statements, it has revised the accompanying financial statements to correct for this error and to reflect the associated decrease in cost of goods sold of $4.9 million and $3.0 million for the years ended December 31, 2022 and December 31, 2021, respectively. In connection with this revision, the Partnership also corrected other immaterial errors in the prior periods, including certain errors that had previously been adjusted for as out of period corrections in the period identified.

The revisions had no net impact on cash flows from operating, investing or financing activities in the accompanying statements of cash flows. The applicable notes to the accompanying financial statements have also been revised to correct for these errors.

The following table summarizes the effect of the revisions on the affected line items within the accompanying statements of operations and accumulated earnings:

The following table summarizes the effect of the revisions on the affected line items within the balance sheets:

4. Recently Issued Accounting Standards:

In October 2023, the Financial Accounting Standards Board (the “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 Partnership 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 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 Partnership 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 on matches the index of the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. In March 2023, the Partnership amended the revolving line to replace LIBOR with a secured overnight financing rate (“SOFR”) as the benchmark interest rate. See Note 11 to these accompanying financial statements for further information.

5. Revenue from Contracts with Customers:

The Partnership applies the five-step revenue recognition model to each contract with its customers. Evidence of a contract between the Partnership 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 Partnership 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 Partnership considers the MSA to be evidence of a contract between the Partnership 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 Partnership’s contract with a customer is the purchase order issued under the MSA. Customers of the Partnership 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 Partnership 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 Partnership considers an individual purchase order to create enforceable rights and obligations.

The Partnership 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 Partnership’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.

As described above, the Partnership’s MSAs with its customers may outline prices for individual products or contract provisions. 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 Partnership and its customers.

The Partnership 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 Partnership determines the point in time when a customer obtains control of a product and the Partnership satisfies the performance obligation by considering factors including when the Partnership has a right to payment for the product, the customer has legal title to the product, the Partnership 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 Partnership expects to receive in exchange for transferring goods. The Partnership does not have any significant payment terms as payment is received at, or shortly after, the point of sale.

Contract Assets and Liabilities

A contract asset is a right to consideration in exchange for goods that the Partnership has transferred to a customer when that right is conditional on something other than the passage of time. A contract liability exists when the Partnership receives consideration in advance of performance obligations. The Partnership has not recorded any contract assets or contract liabilities on its balance sheet as of December 31, 2023 and 2022.

Practical Expedients and Accounting Policy Elections

The Partnership has elected to use certain practical expedients and has made certain accounting policy elections as permitted under the new revenue recognition guidance. Certain of the Partnership’s contracts with customers are based on an individual purchase order; thus, the duration of these contracts are for one year or less. The Partnership has made an accounting policy election to omit certain disclosures related to remaining performance obligations for contracts which have an initial term of one year or less.

The Partnership uses an output method to recognize revenues related to performance obligations. These performance obligations, as described above, are satisfied within a calendar year. As such, the Partnership has elected to utilize the “as-invoiced” practical expedient, which permits the Partnership 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 Partnership 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 Partnership 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 Partnership’s policy election. The Partnership expenses incremental costs of obtaining a contract as incurred if the expected amortization period of the asset that the Partnership would have recognized is one year or less. Sales, value added and other taxes the Partnership collects concurrent with revenue producing activities are excluded from revenues.

Disaggregated Revenue

The following table disaggregates the Partnership’s sales by end use for the years ended December 31, 2023, 2022, and 2021:

6. Accounts Receivable and Allowance for Doubtful Accounts:

The components of accounts receivable are as follows:

7. Inventories:

Inventories were classified is as follows:

8. Property, Plant and Equipment:

A summary of property, plant and equipment, at cost, and related accumulated depreciation is as follows:

Depreciation expense was $15,217, $19,254 and $17,197 for the years ended December 31, 2023, 2022, and 2021, respectively. Disposal of assets reduced PP&E and accumulated depreciation by $521, $1,014, and $192, respectively with $79 loss for the year ended December 31, 2023, and a $37 loss and a $5 gain to earnings for the years ended December 31, 2022 and 2021, respectively.

9. Leases:

Operating lease costs of $310 are included in cost of goods sold on the accompanying statements of operations and accumulated earnings for the years ended December 31, 2023, 2022 and 2021, respectively. Cash payments on operating leases included in operating cash flows was $310 for the years ended December 31, 2023, 2022, and 2021, respectively. The remaining lease term is 28 years with a weighted average discount rate of 3.25%. The current portion of the lease liability is included on the Partnership’s balance sheets in other current liabilities. There was no finance lease costs for the year ended December 31, 2023.

Maturities of lease liabilities as of December 31, 2023 are as follows:

10. Accrued Liabilities:

A summary of accrued liabilities is as follows:

11. Revolver:

On March 2, 2016, the Partnership entered into a five-year revolving line of credit facility of $60,000, which carries an initial interest rate of LIBOR or the base rate plus an interest margin of 0.75% per annum. On May 26, 2020, this agreement was amended to extend the term to May 25, 2022. On November 30, 2021, this agreement was amended again to extend the term to November 29, 2026. The interest rate on the facility was LIBOR or the base rate plus an interest margin of 1.00% per annum. On March 13, 2023, the Partnership amended the revolving line to replace LIBOR with SOFR as the benchmark interest rate. Following this amendment, the revolving line of credit facility will bear interest at an adjusted term SOFR rate or the base rate plus an interest margin of 1.00% per annum.

As of December 31, 2023, availability under this agreement was $60,000. A commitment fee is paid to the bank for this agreement.

The revolving credit agreement contains certain restrictions and covenants that require the Partnership to maintain a minimum partners’ equity, as defined, of $200,000 plus 10% of net income, and a minimum EBITDA of $40,000 on a last twelve month basis measured quarterly. The Partnership was in compliance with all covenants during 2023.

Cash payments for interest were approximately $157, $306 and $150 for the years ended December 31, 2023, 2022 and 2021, respectively.

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction. The carrying amount of the revolving line of credit approximates fair value because it is a short term liquidity tool to fund operations, which is drawn down and paid back with cash generated from operations.

12. Partners’ Contributions:

In accordance with the Agreement, in the event that cash flow from operations is insufficient to meet the Partnership’s requirements, following a majority vote by the Management Committee of the Partnership to request capital from the partners, the partners will provide additional capital to enable the Partnership to meet its obligations. No such contributions were made during the years ended December 31, 2023, 2022, or 2021 as the Partnership had the ability to finance operations through cash flow from operations and borrowings under the Partnership’s revolving line of credit facility.

13. Income Taxes:

As a partnership, Zeolyst International is not liable for the payment of taxes on income in the U.S. Net income and losses are allocated to the respective partners on an annual basis, and it is the partners’ responsibility to pay income taxes, if any, thereon according to their respective tax positions.

14. Commitments and Contingent Liabilities:

In 1998, the Partnership entered into a ten year tolling agreement (“the Tolling Agreement”) with Shell, a related party, for the manufacture of specialty extruded products. Effective January 2004, the 1998 Tolling Agreement was replaced by a new evergreen ten-year tolling agreement. Both parties can terminate this agreement without cause with twenty-four months’ notice. By letter dated January 19, 2024, Shell provided a notice of termination of the Tolling Agreement effective twenty-four months from the date of such letter. The parties are currently negotiating a possible new agreement to replace the Tolling Agreement. The Partnership pays Shell a daily charge rate based on the actual days of production. This charge is included in cost of goods sold and totaled $28,698, $20,134 and $19,617 for the years ended December 31, 2023, 2022 and 2021, respectively. In addition, for certain capital expenditures, that are beneficial to the Partnership, the parties will mutually agree on future adjustments to the daily charge rates or propose an alternative method of the Partnership’s contribution to those costs.

During 2007, the Partnership entered into a License Agreement with a third party to obtain exclusive licensing rights to use the technology in the manufacturing, using and selling of Powder catalyst and Shaped catalyst. The consideration for the licensing rights includes (1) a down payment of $3,200 payable in six annual installments to acquire the product license, and (2) royalty payments at a rate of 10% of the Powder and Shaped Net Sale price during the royalty period. As of December 31, 2021, the partnership has paid in full the $3,200 down payment. The product license intangible is being amortized over the life of the agreement on a straight-line basis, which is estimated to be 15 years. The royalty period of 10 years began in 2013, immediately after the date on which the Partnership had cumulatively produced the first 250 metric tons of Powder and Shaped catalyst. If at the end of the Royalty Period, the cumulative royalties actually paid by the Partnership is less than $3,000, the Partnership will be obligated to pay the difference between the $3,000 and the actual cumulative royalty amount. The agreement ended in 2022 and the Partnership paid $216 in March 2022. Amortization expense of $89 and $213 was recognized for the years ended December 31, 2022 and 2021, respectively. There were no liabilities recorded related this agreement for the year ended in December 31, 2022.

15. Related Party Transactions:

The Partnership maintains certain policies and procedures for the review, approval, and ratification of related party transactions. All significant relationships and transactions are separately identified by management if they meet the definition of a related party or a related party transaction. Related party transactions include transactions that occurred during the year, in which the Partnership was or will be a participant and which any related person had or will have a direct or indirect material interest. Due to the nature of the Partnership, material related party transactions are identified on a transaction-based approach. The types of transactions identified and reviewed include, but are not limited to, sales of products, purchases of inventory, tolling costs, sales and marketing costs, research and development, and management-related fees. All related party transactions are reviewed, approved and documented by the appropriate level of the Partnership’s management in accordance with these policies and procedures.

Ecovyst

Pursuant to the Contribution Agreement, PQ transferred and Ecovyst assumed PQ’s interest in a Lease Agreement by and between PQ and the Partnership dated February 1, 1988 (the “Lease”) pursuant to which the Partnership leases certain land used in its Kansas City production facilities, and PQ transferred to Ecovyst the land underlying the Partnership’s Kansas City production facility. The Lease, which has been recorded as an operating lease, provided for rental payments of $310 for the years ended December 31, 2023, 2022 and 2021, respectively. The rent expense is included in the cost of goods sold line item in the accompanying statements of operations and accumulated earnings. The term of the Lease continues as long as the Agreement is in effect. The Partnership purchases certain of its raw materials from Ecovyst and is charged for various manufacturing costs incurred at the Ecovyst Kansas City production facility. The amount of these costs charged to the Partnership by Ecovyst during the years ended December 31, 2023, 2022 and 2021 were $20,594, $23,699 and $21,778, respectively. These costs are a component of production costs and are included in the cost of goods sold line item in the accompanying statements of operations and accumulated earnings when the inventory is sold. Certain administrative, marketing, engineering, management-related, and research and development services are provided to the Partnership by Ecovyst. During the years ended December 31, 2023, 2022 and 2021, the Partnership was charged by Ecovyst $14,758, $13,908 and $11,406, respectively, for these services. These amounts are included in the selling, general and administrative line item in the accompanying statements of operations and accumulated earnings. In addition, certain product demonstration costs of $1,819, $1,621 and $924 during the years ended December 31, 2023, 2022 and 2021, respectively, were recorded in the cost of goods sold line of the accompanying statements of operations and accumulated earnings.

The Partnership recognized $236 sales to Ecovyst for the year ended December 31, 2023, while no sales were made to Ecovyst during the years ended December 31, 2022 and 2021, respectively. As of December 31, 2023 and 2022, the accounts payable to affiliates consisted of $3,164 and $2,636 due to Ecovyst. As of December 31, 2023 and 2022, there were no trade receivables due from Ecovyst.

On December 18, 2013, PQ and ZI, entered into a real estate tax abatement agreement with the Unified Government of Wyandotte County and Kansas City, Kansas, assigned by PQ to Ecovyst in 2021, 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 Ecovyst’s and ZI’s facilities at the jointly-operated Kansas City, Kansas plant. During the year ended December 31, 2020, the original IRB financing structure from December 2013 was exhausted. In order to fund future plant expansions, the Partnership entered into an additional IRB financing structure with similar terms and conditions, which also provides for 75% real estate tax abatements on the value of future improvements. The financing obligations and the industrial bonds receivable have been presented net, as the financing obligations and the industrial bonds meet the criteria for right of setoff conditions under GAAP.

Shell Catalysts & Technologies

Shell Catalysts & Technologies include CRI, Criterion, Shell Development Company, Shell Research and Technology Center-Amsterdam, CRI Center Marketing Asia Pacific, Shell International Oil Products, CRI Belgium, CRI Technology Services and Royal Dutch Shell affiliates. As described in Note 2, a significant portion of the Partnership’s sales are transacted through Shell. During the years ended December 31, 2023, 2022 and 2021, the Partnership recognized sales transacted through Shell of $133,618, $108,584 and $78,892, respectively. The Partnership purchases certain of its raw materials and is charged for tolling, customer distribution and packaging costs incurred by Shell. The amount of these costs charged to the Partnership during the years ended December 31, 2023, 2022 and 2021 were $32,282, $23,799 and $24,590, respectively. These costs are a component of production costs and are included in the cost of goods sold line item in the accompanying statements of operations and accumulated earnings when the inventory is sold. Certain engineering, management-related, broker-related, and research and development services are provided to the Partnership by Shell. During the years ended December 31, 2023, 2022 and 2021, the Partnership was charged $20,699, $19,554 and $16,927, respectively, for these services. These amounts are included in the selling, general and administrative line item in the accompanying statements of operations and accumulated earnings.

As of December 31, 2023 and 2022, the accounts payable to affiliates balance consisted of $9,014 and $11,570, respectively, due to Shell. Included in trade accounts receivable as of December 31, 2023 and 2022 was $36,149 and $36,030, respectively, of receivables related to sales transacted through Shell, as described above.

Zeolyst C.V.

Zeolyst C.V. is a limited partnership formed in 1993 pursuant to a joint venture agreement between PQ Zeolites B.V. and Shell for the purpose of the production of Zeolite powders. The Partnership entered into an agreement with Zeolyst C.V. to purchase Zeolite powders manufactured by Zeolyst C.V. Under the terms of the agreement, products manufactured by Zeolyst C.V. are supplied solely to the Partnership. The Partnership has performed a qualitative and quantitative analysis and concluded that for Zeolyst C.V. for which it holds a variable interest but will not absorb a majority of the expected losses or residual returns, the Partnership is not the primary beneficiary and therefore, this VIE was not consolidated in the Partnership’s financial statements. The Partnership has no unfunded commitments or guarantees as a result of its involvement with Zeolyst C.V.

The total carrying value of assets and liabilities for Zeolyst C.V was $114,797 and $11,284 as of December 31, 2023 and was $110,776 and $12,695 as of December 31, 2022, respectively. The Partnership currently does not have any exposure to any losses by Zeolyst C.V. The Partnership has purchased $48,906, $39,027 and $54,366 through the sales agreement during the years ended December 31, 2023, 2022 and 2021, respectively. These costs are a component of production costs and are included in the cost of goods sold line item in the accompanying statements of operations and accumulated earnings when the inventory is sold.

As of December 31, 2023 and 2022, the accounts receivable from affiliates balance consisted of $7,111 and $6,592, respectively, due from Zeolyst C.V. As of December 31, 2023 and 2022, there were no accounts payable due to Zeolyst C.V.

16. Subsequent Events:

The Partnership has evaluated subsequent events from the balance sheet date through February 29, 2024 and determined there are no further items to disclose.