Ecovyst Inc
For the period ended Jun 30, 2024. Filed Aug 2, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 2, 2024
ECVT$10.49+3.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-03.
0001708035-24-000083
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-02.
0001708035-24-000101
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 139 previous paragraphs and 193 current paragraphs.
88 unchanged; 43 reworded; 43 added; 6 removed; 2 previous and 19 current paragraphs rearranged.
Tables are not compared: 8 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (43)
Current report
With a current imbalance between the production of renewable diesel and current demand, we expect demand may decrease in the near to mid-term for catalyst sales into sustainable fuels. Similarly, given various macro-economic conditions which have adversely impacted sales of heavy-duty diesel vehicles, we have reduced our expectations for sales of emission control catalysts.
Current report
•Sales decreased $1.3 million to $182.8 million. The decrease in sales was primarily due to the result of lower average selling prices due to the pass-through of lower costs in Ecoservices, partially offset by higher sales volume in regeneration services, virgin sulfuric acid and advanced silicas.
Current report
•Gross profit decreased $7.3 million to $53.7 million. The decrease ingross profit was primarily due to lower average selling pricing, partially offset by higher volume and favorable variable costs.
Current report
•Operating income decreased by $5.4 millionto $27.9 million. The decrease inoperating income was due to a decrease in gross profit and other operating expenses, net.
Current report
Ecoservices: Sales in Ecoservices for the three months ended June 30, 2024 were $153.9 million, a decrease of $4.2 million, or 2.7%, compared to sales of $158.1 million for the three months ended June 30, 2023. The decrease in sales was due to lower average selling prices of $17.0 million, inclusive of the negative impact associated with the pass-through of lower sulfur costs of approximately$3 million, partially offset by higher sales volume of $12.8 million.
Current report
Average selling price was lower primarily due to the pass-through of lower costs, including sulfur, natural gas, freight and other variable costs. The increase in sales volume was primarily related to increased demand for regeneration services and virgin sulfuric acid.
Current report
Advanced Materials & Catalysts: Sales in Advanced Materials & Catalysts for the three months ended June 30, 2024 were $28.9 million, an increase of $2.9 million, or 11.2%, compared to sales of $26.0 million for the three months ended June 30, 2023. Of the increase in sales, $2.7 million was associated with higher sales volume and $0.2 million associated with higher average selling prices.
Current report
The increase in sales volume was primarily driven by higher end use demand for niche custom catalysts.
Current report
Gross profit for the three months ended June 30, 2024 was $53.7 million, a decrease of $7.3 million, or 12.0%, compared to $61.0 million for the three months ended June 30, 2023. The decrease in gross profit was primarily due to lower average selling prices of $13.5 million, exclusive of the pass-through of lower sulfur costs, partially offset by favorable variable costs of $1.6 million along with higher sales volume of $7.7 million.
Current report
Average selling prices were lower primarily due to the pass-through of lower costs, including sulfur, natural gas, electricity, and other variable costs. The increase in sales volume was primarily related to higher demand for regeneration services and virgin sulfuric acid.
Current report
Selling, general and administrative expenses for the three months ended June 30, 2024 were $22.7 million, an increase of $1.3 million, compared to $21.4 million for the three months ended June 30, 2023. The increase in selling, general and administrative expenses was primarily due to an increase in other compensation-related expenses of $4.0 million, offset by a decrease $1.2 million in stock compensation due to fewer overall awards granted and outstanding for thethree months ended June 30, 2024 as compared to the prior year period and decrease of $1.3 million in other expenses.
Current report
Other operating expense, net for the three months ended June 30, 2024 was $3.1 million, a decrease of $3.2 million, compared to $6.3 million for the three months ended June 30, 2023. Thedecrease in other operating expense, net was primarily due to a decrease innet loss from asset disposals of $1.2 million, a decrease of $0.9 million in restructuring, integration and business optimization costs and a decrease of $1.1 million in transactions costs. The decrease in restructuring, integration and business optimization costs was primarily driven by lower business optimization costs and the decrease in transactions costs was primarily driven by lower costs associated with share repurchases.
Current report
Equity in net income of affiliated comp anies for the three months ended June 30, 2024 was $1.4 million, compared to $11.4 million for the three months ended June 30, 2023. The decrease was due to $10.0 million of lower earnings from the Zeolyst Joint Venture during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The decrease in earnings from the Zeolyst Joint Venture was due to lower sales volumeof catalyst used in the production of sustainable fuels, emission control catalysts and timing of niche custom catalysts.
Current report
Debt Extinguishment Costs
Current report
Debt extinguishment costs for the three months ended June 30, 2024 were $4.6 million. On June 12, 2024, we amended our existing senior secured term loan facility to reduce the applicable interest rates and extend the maturity of the facility to June 2031. The Company evaluated the terms of the amendment in accordance with ASC 470-50 Debt - Modification and Extinguishment and determined that the amendment was primarily a modification of debt. As a result, we recorded $4.5 million of third-party financing fees as debt extinguishment costs in the condensed consolidated income statement during the three months ended June 30, 2024. In addition, previously unamortized deferred financing costs and original issue discount of $0.1 million associated with the existing senior secured term loan facility were written off as debt extinguishment costs for the three months ended June 30, 2024.
Current report
Other Expense, Net
Current report
Other expense, net for the three months ended June 30, 2024 was $0.4 million, a decrease of $0.2 million, as compared to $0.6 million for the three months ended June 30, 2023. The decrease in other expense, net primarily relates to a decrease of $0.3 million in other taxes.
Current report
Net Income
Current report
Ecoservices: Adjusted EBITDA for the three months ended June 30, 2024 was $49.7 million, a decrease of $10.4 million, or 17.3%, compared to $60.1 million for the three months ended June 30, 2023. Thedecrease in Adjusted EBITDAwas a result of unfavorable net pricing, reflecting the timing and contractual pass-through of certain costs, including energy and other indexed costs and an increase in turnaround and maintenance costs, partially offset by higher sales volume in both regeneration services and virgin sulfuric acid.
Current report
Results of Operations
Current report
Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023
Current report
Highlights
Current report
Sales
Current report
•Gross profit decreased $4.6 million to $92.9 million. The decrease in gross profit was primarily due to lower average selling price, partially offset by favorable variable costs.
Current report
Operating Income
Current report
Sales
Current report
Selling, General and Administrative Expenses
Current report
Other Operating Expense, Net
Current report
Interest Expense, Net
Current report
Debt Extinguishment Costs
Current report
Debt extinguishment costs for thesix months ended June 30, 2024 were$4.6 million. On June 12, 2024, we amended our existing senior secured term loan facility to reduce the applicable interest rates and extend the maturity of the facility to June 2031. The Company evaluated the terms of the amendment in accordance with ASC 470-50 Debt - Modification and Extinguishment and determined that the amendment was primarily a modification of debt. As a result, we recorded $4.5 million of third-party financing fees as debt extinguishment costs in the condensed consolidated income statement during the six months ended June 30, 2024. In addition, previously unamortized deferred financing costs and original issue discount of$0.1 million associated with the existing senior secured term loan facility were written off as debt extinguishment costs for the six months ended June 30, 2024.
Current report
Other Expense, Net
Current report
Provision for Income Taxes
Current report
Net Income
Current report
For the foregoing reasons, net income was $9.5 million for the six months ended June 30, 2024, compared to $24.7 million for the six months ended June 30, 2023.
Current report
Adjusted EBITDA
Current report
(2)The Adjusted EBITDA for the Advanced Materials & Catalysts segment includes our 50% portion of the Adjusted EBITDA from the Zeolyst Joint Venture. The Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment was $12.5 million for the six months ended June 30, 2024, which includes $3.5 million of equity in net income, excluding $2.5 million of amortization of investment in affiliate step-up plus $6.5 million of joint venture depreciation, amortization and interest.
Current report
The Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment was $21.6 million for the six months ended June 30, 2023, which includes $11.6 million of equity in net income, excluding $3.2 million of amortization of investment in affiliate step-up plus $6.8 million of joint venture depreciation, amortization and interest.
Current report
Ecoservices: Adjusted EBITDA for the six months ended June 30, 2024 was $91.2 million, a decrease of $5.7 million, or 5.9%, compared to $96.9 million for the six months ended June 30, 2023. The decrease in Adjusted EBITDA was primarily a result of higher turnaround and maintenance costs and unfavorable net pricing, reflecting the timing and contractual pass-through of certain costs including energy and other indexed costs. This was partially offset by higher sales volume for both virgin sulfuric acid and regeneration services.
Current report
Advanced Materials & Catalysts: Adjusted EBITDA for the six months ended June 30, 2024 was $25.8 million, a decrease of $12.6 million or 32.8%, compared to $38.4 million for the six months ended June 30, 2023. The decrease in Adjusted EBITDA was primarily a result of lower pricing on sales volume within the Zeolyst Joint Venture associated with catalysts used in the production of sustainable fuels, emission control catalysts and timing of niche custom catalysts.
Showing the first 40 of 43 passages. Open the source sections for the rest.
Removed paragraphs (6)
Previous report
Gross Profit
Previous report
•Gross profit increased $2.7 million to $39.2 million. The increase in gross profit was primarily due to lower variable costs and higher sales volume.
Previous report
Gross Profit
Previous report
Other Expense (Income), Net
Previous report
Net Income (Loss)
Previous report
Ecoservices: Adjusted EBITDA for the three months ended March 31, 2024 was $41.5 million, an increase of $4.7 million, or 12.8%, compared to $36.8 million for the three months ended March 31, 2023. The increase in Adjusted EBITDA was primarily a result of higher sales volume for virgin sulfuric acid and for regeneration services.
Reworded paragraphs (43)
Previous wording
This periodic report on Form 10-Q (“Form 10-Q”) includes “forward-looking statements” that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should” and similar expressions are intended to identify these forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short- and long-term business operations and objectives, and financial needs. Examples of forward-looking statements include, but are not limited to, statements we make regarding demand trends, economic effects on our operations and financial results and our liquidity, potential strategic acquisitions or divestitures, the repurchasing, refinancing, or repricing of our debt, and our belief that our current level of operations, cash and cash equivalents, cash flow from operations and borrowings under our credit facilities and other lines of credit will provide us adequate cash to fund working capital requirements, capital expenditure projects, debt service requirements and other requirements for our business for at least the next twelve months.
Current wording
This periodic report on Form 10-Q (“Form 10-Q”) includes “forward-looking statements” that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should” and similar expressions are intended to identify these forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short- and long-term business operations and objectives, and financial needs. Examples of forward-looking statements include, but are not limited to, statements we make regarding demand trends, economic effects on our operations and financial results and our liquidity, potential strategic acquisitions or divestitures, potential increased borrowing under our credit facilities, and our belief that our current level of operations, cash and cash equivalents, cash flow from operations and borrowings under our credit facilities and other lines of credit will provide us adequate cash to fund working capital requirements, capital expenditure projects, debt service requirements and other requirements for our business for at least the next twelve months.
Previous wording
Advanced Materials & Catalysts: We are a global supplier of finished silica catalyst, catalyst supports and functionalized silicas necessary to produce high performing plastics and to enable sustainable chemistry. This segment includes our 50% interest in the Zeolyst Joint Venture, where we are a leading global supplier of specialty zeolites used in catalysts that supports the production of sustainable fuels, remove nitrogen oxides from diesel engine emissions and that are broadly applied in refining and petrochemical processes.
Current wording
Advanced Materials & Catalysts: We are a global supplier of finished silica catalyst, catalyst supports and functionalized silicas necessary to produce high performing plastics and to enable sustainable chemistry through our Advanced Silicas business. This segment also includes our 50% interest in the Zeolyst Joint Venture, where we are a leading global supplier of specialty zeolites used in catalysts that supports the production of sustainable fuels, remove nitrogen oxides from diesel engine emissions and that are broadly applied in refining and petrochemical processes.
Previous wording
On April 27, 2022, the Board approved a stock repurchase program that authorized the Company to purchase up to $450.0 million of the Company’s common stock over the four-year period from the date of approval. For the three months ended March 31, 2024, the Company did not repurchase any of its common stock pursuant to the stock repurchase program. As of March 31, 2024, $234.6 million was available for share repurchases under the program.
Current wording
On April 27, 2022, the Board approved a stock repurchase program that authorized the Company to purchase up to $450.0 million of the Company’s common stock over the four-year period from the date of approval. For the six months ended June 30, 2024, the Company repurchased 552,081 shares on the open market at an average price of $9.05 per share, for a total of $5.0 million excluding brokerage commissions and accrued excise tax. As of June 30, 2024, $229.6 million was available for share repurchases under the program.
Previous wording
For the three months ended March 31, 2023, in connection with a secondary offering of the Company’s common stock by an equity sponsor in March 2023, the Company repurchased 3,000,000 shares of its common stock in the offering from underwriters at price of $9.95 per share concurrently with the close of the offering, for a total of $29.9 million.
Current wording
For the six months ended June 30, 2023, in connection with secondary offerings of the Company’s common stock by an equity sponsor in March and May 2023, the Company repurchased 7,000,000 shares of its common stock in the offerings from underwriters at a weighted average price of $10.48 per share concurrently with the close of the offerings, for a total of $73.4 million, excluding accrued excise tax.
Previous wording
Sales in our Ecoservices and Advanced Materials & Catalysts segments are made on both a purchase order basis and pursuant to long-term contracts.
Current wording
Sales in our Ecoservices and Advanced Materials & Catalysts segments are made on both a purchase order basis and pursuant to long-term contracts. Our Advanced Materials & Catalysts segment may also experience demand fluctuations based upon the timing of some of our customer’s fixed bed catalyst replacements.
Previous wording
Overall, our Ecoservices and Advanced Materials & Catalysts segments continued to benefit from positive demand trends for our products and services in the industries we serve. Strong domestic and export demand for refined products continued to support high refinery utilization rates, while more stringent gasoline standards and growing demand for premium gasoline to power higher-compression and turbo-charged engines continued to drive demand for alkylate and for our regeneration services. In addition, demand for virgin sulfuric acid across a wide range of industrial applications remained favorable.
Current wording
Overall, our Ecoservices and Advanced Materials & Catalysts segments continued to benefit from positive demand trends for our products and services in the industries we serve. For Ecoservices, strong domestic and export demand for refined products continued to support high refinery utilization rates, while more stringent gasoline standards and growing demand for premium gasoline to power higher-compression and turbo-charged engines continued to drive demand for alkylate and for our regeneration services. In addition, demand for virgin sulfuric acid across a wide range of industrial applications remained favorable. For our Advanced Materials & Catalysts segment, global polyethylene demand remained positive, supporting our sales of polyethylene catalysts. Hydrocracking catalyst sales experienced demand fluctuations driven by customer order timing associated by the timing of fixed bed catalyst replacement cycles. In addition, we expect variability in specialty and niche-custom catalyst sales, which tend to be event driven.
Previous wording
As a global business, we are subject to the impact of gains and losses on currency translations, which occur when the financial statements of foreign operations are translated into U.S. dollars. We operate in various geographies with approximately 5% of our sales for the three months ended March 31, 2024 and approximately 6% for the year ended December 31, 2023 in currencies other than the U.S. dollar. Because our consolidated financial results are reported in U.S. dollars, sales or earnings generated in currencies other than the U.S. dollar can result in a significant increase or decrease in the amount of those sales and earnings when translated to U.S. dollars. The foreign currency to which we have the most significant exchange rate exposure is the British pound.
Current wording
As a global business, we are subject to the impact of gains and losses on currency translations, which occur when the financial statements of foreign operations are translated into U.S. dollars. We operate in various geographies with approximately 5% of our sales for the six months ended June 30, 2024 and approximately 6% for the year ended December 31, 2023 in currencies other than the U.S. dollar. Because our consolidated financial results are reported in U.S. dollars, sales or earnings generated in currencies other than the U.S. dollar can result in a significant increase or decrease in the amount of those sales and earnings when translated to U.S. dollars. The foreign currency to which we have the most significant exchange rate exposure is the British pound.
Previous wording
The following is a summary of ourfinancial performance for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.
Current wording
The following is a summary of our financial performance for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.
Previous wording
Equity in Net Income of Affiliated Companies
Current wording
•Equity in net income of affiliated companies for the three months ended June 30, 2024 was $1.4 million, compared to $11.4 million for the three months ended June 30, 2023. The decrease of $10.0 million was due to lower earnings generated by the Zeolyst Joint Venture for the three months ended June 30, 2024, driven by lower sales volume.
Previous wording
The provision for income taxes for the three months ended March 31, 2024 was $1.2 million, compared to a $0.9 million for the three months ended March 31, 2023. The effective income tax rate for the three months ended March 31, 2024 was 49.1%, compared to (180.7)% for the three months ended March 31, 2023.
Current wording
The provision for income taxes for the three months ended June 30, 2024 was $3.1 million, compared to $8.8 million for the three months ended June 30, 2023. The effective income tax rate for the three months ended June 30, 2024 was 27.1%, compared to 25.2% for the three months ended June 30, 2023. The Company’s quarter over quarter effective income tax rate has fluctuated primarily due to an increased discrete tax impact relative to pre-tax book income related to a stock compensation shortfall and a discrete tax benefit associated with state and local tax law changes.
Previous wording
For the foregoing reasons, net income was $1.2 million for the three months ended March 31, 2024, compared to net loss of $1.5 million for the three months ended March 31, 2023.
Current wording
For the foregoing reasons, net income was $8.3 million for the three months ended June 30, 2024, compared to $26.1 million for the three months ended June 30, 2023.
Previous wording
(2)The Adjusted EBITDA for the Advanced Materials & Catalysts segment includes our 50% portion of the Adjusted EBITDA from the Zeolyst Joint Venture. The Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment was $6.9 million for the three months ended March 31, 2024, which includes $2.1 million of equity in net income, excluding $1.6 million of amortization of investment in affiliate step-up plus $3.3 million of joint venture depreciation, amortization and interest.
Current wording
(2)The Adjusted EBITDA for the Advanced Materials & Catalysts segment includes our 50% portion of the Adjusted EBITDA from the Zeolyst Joint Venture. The Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment was $5.6 million for the three months ended June 30, 2024, which includes $1.4 million of equity in net income, excluding $0.9 million of amortization of investment in affiliate step-up plus $3.2 million of joint venture depreciation, amortization and interest.
Previous wording
The Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment was $5.4 million for the three months ended March 31, 2023, which includes $0.2 million of equity in net income, excluding $1.6 million of amortization of investment in affiliate step-up plus $3.6 million of joint venture depreciation, amortization and interest.
Current wording
The Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment was $16.2 million for the three months ended June 30, 2023, which includes $11.4 million of equity in net income, excluding $1.6 million of amortization of investment in affiliate step-up plus $3.2 million of joint venture depreciation, amortization and interest.
Previous wording
Advanced Materials & Catalysts: Adjusted EBITDA for the three months ended March 31, 2024 was $11.1 million, a decrease of $1.9 million or 14.6%, compared to $13.0 million for the three months ended March 31, 2023. The decrease was primarily a result of lower sales volume of advanced silicas used for the production of polyethylene in Advanced Silicas, partially offset by higher sales of catalysts used in sustainable fuel production and growth in customized catalyst applications within the Zeolyst Joint Venture.
Current wording
Advanced Materials & Catalysts: Adjusted EBITDA for the three months ended June 30, 2024 was $14.7 million, a decrease of $10.7 million, or 42.1%, compared to $25.4 million for the three months ended June 30, 2023. The decrease in Adjusted EBITDA was primarily a result of lower sales volume within the Zeolyst Joint Venture associated with catalysts used in the production of sustainable fuels, emission control catalysts and timing of niche custom catalysts, partially offset by higher sales in Advanced Silicas.
Previous wording
A reconciliation of net income (loss) to Adjusted EBITDA is as follows:
Current wording
A reconciliation of net income to Adjusted EBITDA is as follows:
Previous wording
•Sales decreased $0.4 million to $160.5 million. The decrease in sales was primarily due to lower average selling price as a result of the pass-through of lower costs, partially offset by higher sales volume.
Current wording
•Sales decreased $1.6 million to $343.4 million. The decrease in sales was primarily due to lower average selling price as a result of the pass-through of lower costs, partially offset by higher sales volume.
Previous wording
•Operating income increased by $5.2 million to $13.9 million. The increase in operating income was due toan increase in gross profit and lower other operating expenses.
Current wording
•Operating income decreased by $0.2 million to $41.8 million. Thedecrease in operating income was due toa decrease in gross profit and other operating expenses, net.
Previous wording
•Equity in net income of affiliated companies for the three months ended March 31, 2024 was $2.1 million, compared to $0.2 million for the three months ended March 31, 2023. The increase of $1.9 million was due to higher earnings from the Zeolyst Joint Venture during the three months ended March 31, 2024.
Current wording
•Equity in net income of affiliated companies for the six months ended June 30, 2024 was $3.5 million, compared to $11.6 million for the six months ended June 30, 2023. The decrease of $8.1 million was due to lower earnings from the Zeolyst Joint Venture during the six months ended June 30, 2024, driven by lower sales volume.
Previous wording
Ecoservices: Sales in Ecoservices for the three months ended March 31, 2024 were $141.6 million, an increase of $3.8 million, or 2.8%, compared to sales of $137.8 million for the three months ended March 31, 2023. The increase in sales reflects higher sales volume of $20.1 million, partially offset by lower average selling pricing of $16.3 million, before adjusting for the impact of the pass-through of lower sulfur costs of approximately $5 million.
Current wording
Ecoservices: Sales in Ecoservices for the six months ended June 30, 2024 were $295.6 million, a decrease of $0.2 million, or 0.1%, compared to sales of $295.8 million for the six months ended June 30, 2023. The change in sales reflects higher sales volume of $33.1 million, offset by lower average selling pricing of $33.3 million, before adjusting for the impact of the pass-through of lower sulfur costs of approximately $8 million.
Previous wording
Sales volume was higher primarily due to increased virgin sulfuric acid and regeneration services sales for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 which had the adverse impact of Winter Storm Elliott and extended maintenance turnaround activity at our facilities, as well as strong demand for regeneration services in the gulf coast. Average selling price was lower primarily due to the pass-through of lower costs, including sulfur, natural gas, electricity and other variable costs.
Current wording
Sales volume was higher primarily due to increased virgin sulfuric acid and regeneration services sales for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 which had the adverse impact of Winter Storm Elliott and extended maintenance turnaround activity at our facilities in 2023, as well as strong demand for regeneration services in the gulf coast in 2024. Average selling price was lower primarily due to the pass-through of lower costs, including sulfur, natural gas, freight and other variable costs.
Previous wording
Advanced Materials & Catalysts: Sales in Advanced Materials & Catalysts for the three months ended March 31, 2024 were $18.9 million, a decrease of $4.2 million, or 18.2%, compared to sales of $23.1 million for the three months ended March 31, 2023. The decrease in sales was primarily due to lower sales volume of advanced silicas used for the production of polyethylene, whereas sales of finished catalysts used to produce polyethylene increased compared to the three months ended March 31, 2023 on improved demand in the U.S. and China. Sales of polyethylene catalyst supports decreased, largely due to customer order timing and limited destocking.
Current wording
Advanced Materials & Catalysts: Sales in Advanced Materials & Catalysts for the six months ended June 30, 2024 were $47.8 million, a decrease of $1.4 million, or 2.8%, compared to sales of $49.2 million for the six months ended June 30, 2023. The decrease in sales was primarily due to lower sales volume of advanced silicas used for the production of polyethylene compared to the six months ended June 30, 2023.
Previous wording
Gross profit for the three months ended March 31, 2024 was $39.2 million, an increase of $2.7 million, or 7.4%, compared to $36.5 million for the three months ended March 31, 2023. The increase in gross profit is primarily driven by higher sales volume of $3.5 million as well as favorable manufacturing costs of $10.6 million, partially offset by lower average selling prices of $11.4 million, exclusive of the $5 million pass-through of sulfur costs.
Current wording
Gross profit for the six months ended June 30, 2024 was $92.9 million, a decrease of $4.6 million, or 4.7%, compared to $97.5 million for the six months ended June 30, 2023. The decrease in gross profit was primarily driven by lower average selling prices of $25.3 million, exclusive of the approximately $8 million of pass-through of sulfur costs, partially offset by favorable variable costs along with higher sales volume of $11.1 million and unfavorable manufacturing costs of $9.6 million.
Previous wording
The favorable manufacturing costs were primarily driven by lower variable costs.
Current wording
Average selling prices were lower primarily due to the pass-through of lower costs, including sulfur, natural gas, electricity and other variable costs. The higher manufacturing costs were primarily driven by planned maintenance turnaround. The increase in sales volume was primarily related to higher demand for regeneration services and virgin sulfuric acid.
Previous wording
Selling, general and administrative expenses for the three months ended March 31, 2024 were $21.6 million, an increase of $0.5 million, as compared to $21.1 million for the three months ended March 31, 2023. The increase in selling, general and administrative expenses was mainly due to an increase in other compensation-related expenses of $2.0 million, partially offset by a decrease in professional fees of $0.5 million and other expenses of $0.8 million.
Current wording
Selling, general and administrative expenses for the six months ended June 30, 2024 were $44.3 million, an increase of $1.8 million, as compared to $42.5 million for the six months ended June 30, 2023. The increase in selling, general and administrative expenses was mainly due to an increase in other compensation-related expenses of $6.0 million, partially offset by a decrease in stock compensation of $1.6 million, professional fees of $0.6 million and other expenses of $2.0 million.
Previous wording
Other operating expense, net for the three months ended March 31, 2024 was $3.7 million, a decrease of $3.0 million, compared to $6.7 million for the three months ended March 31, 2023. The decrease in other operating expense, net was mainly driven by a decrease of $1.4 million in transaction costs, a decrease of $0.8 million inbusiness optimization costs and a decrease in net losses on asset disposals of $0.5 million.
Current wording
Other operating expense, net for the six months ended June 30, 2024 was $6.8 million, a decrease of $6.2 million, compared to $13.0 million for the six months ended June 30, 2023. Thedecrease in other operating expense, net was mainly driven by a decrease of $2.4 million in transaction costs, a decrease of $1.7 million inrestructuring, integration and business optimization costsand a decrease in net losses on asset disposals of $1.7 million. The decrease in restructuring, integration and business optimization costs was primarily driven by lower business optimization costs and the decrease in transactions costs was primarily associated with the sale of the Performance Chemicals business in 2021 and costs associated with share repurchases.
Previous wording
Equity in net income of affiliated companies for the three months ended March 31, 2024 was $2.1 million, compared to $0.2 million for the three months ended March 31, 2023. The increase was due to higher sales of catalysts used in sustainable fuel and production and sales growth in customized catalyst applications within the Zeolyst Joint Venture during the three months ended March 31, 2024.
Current wording
Equity in net income of affiliated companies for the six months ended June 30, 2024 was $3.5 million, compared to $11.6 million for the six months ended June 30, 2023. The decrease in earnings from the Zeolyst Joint Venture was due to lower sales of catalysts used in the production of sustainable fuels, emission control catalysts and timing of niche custom catalysts.
Previous wording
Interest expense, net forthe three months ended March 31, 2024 was $13.4 million, an increase of $3.5 million, as compared to $9.9 million for the three months ended March 31, 2023. The increase in interest expense, net was primarily due to year over year increase in variable rates, which was partially offset by lower outstanding debt during the three months ended March 31, 2024, as compared tothe three months ended March 31, 2023. This was offset bythe benefits associated with our interest rate caps.
Current wording
Interest expense, net forthe six months ended June 30, 2024 was $26.3 million, an increase of $7.3 million, as compared to $19.0 million for the six months ended June 30, 2023. The increase in interest expense, net was primarily due to year over year increase in variable rates, which was partially offset by lower outstanding debt during the six months ended June 30, 2024, as compared tothe six months ended June 30, 2023. This was offset bythe benefits associated with our interest rate caps.
Previous wording
Other expense (income), net for the three months ended March 31, 2024 was expense of $0.2 million, a decrease of $0.6 million, as compared to income of $0.4 million for the three months ended March 31, 2023. The decrease in other expense, net primarily consisted of unfavorable foreign currency exchange mainly related to the non-permanent intercompany debt denominated in local currency and translated to the U.S. dollar.
Current wording
Other expense, net for the six months ended June 30, 2024 was $0.6 million, an increase of $0.4 million, as compared to $0.2 million for the six months ended June 30, 2023. Theincrease in other expense, net primarily consisted of an increase in foreign currency exchange of $0.8 million mainly related to the non-permanent intercompany debt denominated in local currency and translated to the U.S. dollar, offset by a decrease in pension costs of $0.1 million.
Previous wording
The Company’s effective income tax rate for the three months ended March 31, 2024 was different from the effective tax rate for the three months ended March 31, 2023 primarily due to a stock compensation shortfall recognized discretely in the respective quarters with lower profits before tax in the prior year.
Current wording
The provision for income taxes for the six months ended June 30, 2024 was $4.3 million, compared to $9.7 million for the six months ended June 30, 2023. The effective income tax rate for the six months ended June 30, 2024 was 30.9%, compared to 28.3% for the six months ended June 30, 2023. The Company’s effective income tax rate for the six months ended June 30, 2024 was different from the effective tax rate for the six months ended June 30, 2023 primarily due to an increased discrete tax impact relative to pre-tax book income related to stock compensation shortfall recognized discretely in the respective quarters and a discrete tax expense associated with the recording of accrued penalties and interest on historical uncertain tax positions.
Previous wording
The difference between the U.S. federal statutory income tax rate and the Company’s effective income tax rate for the three months ended March 31, 2024 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation and a discrete tax expense associated with the recording of accrued penalties and interest on historical uncertain tax positions.
Current wording
The difference between the U.S. federal statutory income tax rate and the Company’s effective income tax rate for the six months ended June 30, 2024 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation and a discrete tax expense associated with the recording of accrued penalties and interest on historical uncertain tax positions.
Previous wording
The adjustments to net income are shown net of applicable tax rates of 24.6% and 25.6% for the three months ended March 31, 2024 and 2023, respectively, except equity-based compensation. The tax effect on equity-based compensation is derived by removing the tax effect of any equity-based compensation expense disallowed as a result of its inclusion within IRC Sec. 162(m), and adding the tax effect of equity-based stock compensation shortfall recorded as a discrete item.
Current wording
The adjustments to net income are shown net of applicable tax rates of 25.1% and 26.2% for the six months ended June 30, 2024 and 2023, respectively, except equity-based compensation. The tax effect on equity-based compensation is derived by removing the tax effect of any equity-based compensation expense disallowed as a result of its inclusion within IRC Sec. 162(m), and adding the tax effect of equity-based stock compensation shortfall recorded as a discrete item.
Previous wording
We believe that our existing cash, cash equivalents and cash flows from operations, combined with availability under our ABL Facility, will be sufficient to meet our presently anticipated future cash needs for at least the next twelve months. We may also pursue strategic acquisition or divestiture opportunities, which may impact our future cash requirements. We may, from time to time, increase borrowings under our ABL Facility to meet our future cash needs. As of March 31, 2024, we had cash and cash equivalents of $103.1 million and availability of $70.2 million under our ABL Facility, after giving effect to $4.0 million of outstanding letters of credit, for a total available liquidity of $173.3 million. We did not have any revolving credit facility borrowings as of March 31, 2024. As of March 31, 2024, we were in compliance with all covenants under our debt agreements.
Current wording
We believe that our existing cash and cash equivalents and cash flows from operations, combined with availability under our ABL Facility, will be sufficient to meet our presently anticipated future cash needs for at least the next twelve months. We may also pursue strategic acquisition or divestiture opportunities, which may impact our future cash requirements. We may, from time to time, increase borrowings under our ABL Facility to meet our future cash needs. As of June 30, 2024, we had cash and cash equivalents of $83.3 million and availability of $72.3 million under our ABL Facility, after giving effect to $3.3 million of outstanding letters of credit, for a total available liquidity of $155.6 million. We did not have any revolving credit facility borrowings as of June 30, 2024. As of June 30, 2024, we were in compliance with all covenants under our debt agreements.
Previous wording
Included in our cash and cash equivalents balance as of March 31, 2024 was $11.4 million of cash and cash equivalents in foreign jurisdictions. Depending on foreign cash balances, we have certain flexibility to repatriate funds should the need arise. Should the need arise, we would repatriate the funds in the most tax efficient manner from those subsidiaries. Repatriation of foreign cash is generally not subject to U.S. federal income taxes at the time of cash distribution. However, foreign earnings may still be taxed for state income tax purposes, as well as subject to certain foreign withholding tax obligations, when cash amounts are distributed back to the U.S.
Current wording
Included in our cash and cash equivalents balance as of June 30, 2024 was $14.0 million of cash and cash equivalents in foreign jurisdictions. Depending on foreign cash balances, we have certain flexibility to repatriate funds should the need arise. Should the need arise, we would repatriate the funds in the most tax efficient manner from those subsidiaries. Repatriation of foreign cash is generally not subject to U.S. federal income taxes at the time of cash distribution. However, foreign earnings may still be taxed for state income tax purposes, as well as subject to certain foreign withholding tax obligations, when cash amounts are distributed back to the U.S.
Previous wording
Our liquidity requirements include interest payments related to our debt structure. As reported, our cash interest paid for the three months ended March 31, 2024 and 2023 was approximately $12.6 million and $15.2 million, respectively. Before any impact of hedges, a one percent change in assumed interest rates for our variable interest credit facilities would have an annual impact of approximately $8.8 million on interest expense.
Current wording
Our liquidity requirements include interest payments related to our debt structure. As reported, our cash interest paid for the six months ended June 30, 2024 and 2023 was approximately $33.2 million and $19.4 million, respectively. Before any impact of hedges, a one percent change in assumed interest rates for our variable interest credit facilities would have an annual impact of approximately $8.7 million on interest expense.
Previous wording
We hedge the interest rate fluctuations on debt obligations through interest rate cap agreements. For more information about our interest rate cap agreements, refer to Note 12 — Financial Instrument of our condensed consolidated financials statements included in Part 1, Item 1 — Financial Statements (Unaudited).
Current wording
We hedge the interest rate fluctuations on debt obligations through interest rate cap agreements. For more information about our interest rate cap agreements, refer to Note 12 — Financial Instruments of our condensed consolidated financials statements included in Part 1, Item 1 — Financial Statements (Unaudited).
Previous wording
The Company’s off-balance sheet arrangements include $4.0 million of outstanding letters of credit on our ABL Facility as of March 31, 2024.
Current wording
The Company’s off-balance sheet arrangements include $3.3 million of outstanding letters of credit on our ABL Facility as of June 30, 2024.
Previous wording
Net cash provided by operating activities was $36.5 million for the three months ended March 31, 2024, compared to $4.1 million for the three months ended March 31, 2023. Cash generated by operating activities, other than changes in working capital was higher by $27.2 million during the three months ended March 31, 2024, as compared to the same period in the prior year primarily due to dividends received from the Zeolyst Joint Venture. Theincrease in cash from working capital during the three months ended March 31, 2024 of $5.2 millionwas favorable, compared to the three months ended March 31, 2023 primarily due to favorable changes in prepaids and other current assets and accrued liabilities, offset by unfavorable changes in receivables, inventories and accounts payable.
Current wording
Net cash provided by operating activities was $46.4 million for the six months ended June 30, 2024, compared to $41.1 million for the six months ended June 30, 2023. Cash generated by operating activities, other than changes in working capital, was higher by $9.1 million during the six months ended June 30, 2024, as compared to the same period in the prior year primarily due to dividends received from the Zeolyst Joint Venture offset by debt extinguishment costs. The decrease in cash from working capital during the six months ended June 30, 2024 of $3.8 million was unfavorable compared to the six months ended June 30, 2023 primarily due to unfavorable changes in receivables, inventories and accounts payable, offset by favorable changes in prepaids and other current assets and accrued liabilities.
Previous wording
The favorable change in prepaid and other current assets primarily relates to the timing of miscellaneous receivables and non-trade receivables from related parties. The favorable change in accrued liabilities mainly relates to lower payments for variable employee compensation liabilities partially offset by higher payments for taxes in the current period. The unfavorable change in receivables was driven by the timing of collection of sales. The unfavorable change in inventory was primarily due to the timing of sales orders and inventory build. The unfavorable change in accounts payable was due to the timing of vendor payments.
Current wording
The unfavorable change in receivables was driven by the timing of collection of sales. The unfavorable change in inventory was primarily due to the timing of sales orders and inventory build. The unfavorable change in accounts payable was due to the timing of vendor payments. The favorable change in prepaid and other current assets primarily relates to the timing of miscellaneous and interest receivables and non-trade receivables from related parties. The favorable change in accrued liabilities mainly relates to lower payments for variable employee compensation liabilities partially offset by higher payments for taxes in the current period.
Previous wording
Net cash used in investing activities was $17.4 million for the three months ended March 31, 2024, compared to $18.7 million during the same period in 2023. Cash used in investing activities consisted of $17.4 million and $18.7 million to fund capital expenditures during the three months ended March 31, 2024 and 2023, respectively.
Current wording
Net cash used in investing activities was $36.8 million for the six months ended June 30, 2024, compared to $39.2 million during the same period in 2023. Net cash used in investing activities consisted of $36.6 million and $39.2 million to fund capital expenditures during the six months ended June 30, 2024 and 2023, respectively.
Previous wording
Net cash used in financing activities was $4.2 million for the three months ended March 31, 2024, compared to $33.6 million during the same period in 2023. Net cash used in financing activities was primarily driven by the Company repurchases of common stock of $29.9 million during the three months ended March 31, 2023.
Current wording
Net cash used in financing activities was $14.4 million for the six months ended June 30, 2024, compared to $79.9 million during the same period in 2023. Net cash used in financing activities was primarily driven by the lower repurchases of the Company’s common stock of$68.4 million during the six months ended June 30, 2023.
Showing the first 40 of 43 pairs. Open the source sections for the rest.
Rearranged current paragraphs (19)
Current report — wording carried from elsewhere
Interest expense, net for the three months ended June 30, 2024 was $12.9 million, an increase of $3.7 million, as compared to $9.2 million for the three months ended June 30, 2023. The increase in interest expense, net was primarily due to the year over year increase in variable rates, which was partially offset by lower outstanding debt during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023 and benefits associated with the interest rate caps.
Current report — wording carried from elsewhere
The difference between the U.S. federal statutory income tax rate and the Company’s effective income tax rate for the three months ended June 30, 2024 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation and a discrete tax expense associated with the recording of accrued penalties and interest associated with historical uncertain tax positions.
Current report — wording carried from elsewhere
The adjustments to net income are shown net of applicable tax rates as determined by the calculation of our quarterly tax provision under interim financial reporting for the three months ended June 30, 2024 and June 30, 2023, except for equity-based compensation. The tax effect on equity-based compensation is derived by removing the tax effect of any equity-based compensation expense disallowed as a result of its inclusion within IRC Sec. 162(m), and adding the tax effect of equity-based stock compensation shortfall recorded as a discrete item.
Current report — wording carried from elsewhere
The following is a summary of ourfinancial performance for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.
Current report — wording carried from elsewhere
The following is our unaudited condensed consolidated statements of income and a summary of financial results for the six months ended June 30, 2024 and 2023:
Current report — wording carried from elsewhere
Summarized Adjusted EBITDA information is shown below in the following table:
Current report — wording carried from elsewhere
(1)We define Adjusted EBITDA as EBITDA adjusted for certain items as noted in the reconciliation below. Our management evaluates the performance of our segments and allocates resources based primarily on Adjusted EBITDA. Adjusted EBITDA does not represent cash flow for periods presented and should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flows as a source of liquidity. Adjusted EBITDA may not be comparable with EBITDA or Adjusted EBITDA as defined by other companies.
Current report — wording carried from elsewhere
A reconciliation of net income to Adjusted EBITDA is as follows:
Current report — wording carried from elsewhere
(a)We use Adjusted EBITDA as a performance measure to evaluate our financial results. Because our Advanced Materials & Catalysts segment includes our 50% interest in the Zeolyst Joint Venture, we include an adjustment for our 50% proportionate share of depreciation, amortization and interest expense of the Zeolyst Joint Venture.
Current report — wording carried from elsewhere
(b)Represents the amortization of the fair value adjustments associated with the equity affiliate investment in the Zeolyst Joint Venture as a result of the combination of the businesses of PQ Holdings Inc. and Eco Services Operations LLC in May 2016. We determined the fair value of the equity affiliate investment and the fair value step-up was then attributed to the underlying assets of the Zeolyst Joint Venture. Amortization is primarily related to the fair value adjustments associated with intangible assets, including customer relationships and technical know-how.
Current report — wording carried from elsewhere
(c)When asset disposals occur, we remove the impact of net gain/loss of the disposed asset because such impact primarily reflects the non-cash write-off of long-lived assets no longer in use.
Current report — wording carried from elsewhere
(d)Reflects the exclusion of the foreign currency transaction gains and losses in the statements of income related to the non-permanent intercompany debt denominated in local currency translated to U.S. dollars.
Current report — wording carried from elsewhere
(e)Represents non-cash adjustments to the Company’s LIFO reserves for certain inventories in the U.S. that are valued using the LIFO method, effectively reflecting the results as if these inventories were valued using the FIFO method, which we believe provides a means of comparison to other companies that may not use the same basis of accounting for inventories.
Current report — wording carried from elsewhere
(f)Relates to certain transaction costs, including debt financing, due diligence and other costs related to transactions that are completed, pending or abandoned, that we believe are not representative of our ongoing business operations.
Current report — wording carried from elsewhere
(g)Includes the impact of restructuring, integration and business optimization expenses, which are incremental costs that are not representative of our ongoing business operations.
Current report — wording carried from elsewhere
(h)Other consists of adjustments for items that are not core to our ongoing business operations. These adjustments include environmental remediation and other legal costs, expenses for capital and franchise taxes, and defined benefit pension and postretirement plan (benefits) costs, for which our obligations are under plans that are frozen. Also included in this amount are adjustments to eliminate the benefit realized in cost of goods sold of the allocation of a portion of the contract manufacturing payments under the five-year agreement with the buyer of the Performance Chemicals business to the financing obligation under the failed sale-leaseback. Included in this line-item are rounding discrepancies that may arise from rounding from dollars (in thousands) to dollars (in millions).
Current report — wording carried from elsewhere
Summarized Adjusted Net Income information is shown below in the following table:
Current report — wording carried from elsewhere
(1)We define Adjusted Net Income as net income adjusted for non-operating income or expense and the impact of certain non-cash or other items that are included in net income that we do not consider indicative of our ongoing operating performance. Adjusted Net Income is presented as a key performance indicator as we believe it will enhance a prospective investor’s understanding of our results of operations and financial condition. Adjusted Net Income may not be comparable with net income or Adjusted Net Income as defined by other companies.
Current report — wording carried from elsewhere
(2)Refer to the Adjusted EBITDA notes above for more information with respect to each adjustment.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Our Advanced Materials & Catalysts segment may experience demand fluctuations based upon the timing of some of our customer’s fixed bed catalyst replacements.
Previous report — wording carried elsewhere
Equity in Net Income of Affiliated Companies