~~See accompanying notes to condensed consolidated financial statements.~~

~~PQ GROUP HOLDINGS INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~(in thousands)~~

~~(unaudited)~~

Three months ended
September 30, Nine months ended
September 30,
2017 2016 2017 2016
Net loss $ (3,016 ) $ (9,606 ) $ (7,001 ) $ (89,685 )
Other comprehensive income (loss), net of tax:
Pension and postretirement benefits (20 ) 162
(223 ) 486
Net (loss) gain from hedging activities (301 ) 201
(3,326 ) 1,302
Foreign currency translation 18,850
1,286
60,492
(7,919 )
Total other comprehensive income (loss) 18,529
1,649
56,943
(6,131 )
Comprehensive income (loss) 15,513
(7,957 ) 49,942
(95,816 )
Less: Comprehensive income (loss) attributable to noncontrolling interests 82
(165 ) 661
(165 )
Comprehensive income (loss) attributable to PQ Group Holdings Inc. $ 15,431
$ (7,792 ) $ 49,281
$ (95,651 )

~~See accompanying notes to condensed consolidated financial statements.~~

~~PQ GROUP HOLDINGS~~ECOVYST INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)


	Common stock		Additional paid-in capital		(Accumulated deficit)		Treasury stock, at cost		Accumulated other comprehensive income (loss)		Non- controlling interest		Total
Balance, December 31, 2021	$	1,378	$	1,073,409	$	(315,707)	$	(12,551)	$	(5,792)	$	—	$	740,737
Net income	—		—		7,875		—		—		—		7,875
Other comprehensive income	—		—		—		—		11,378		—		11,378


Tax withholdings on equity award vesting	—		—		—		(332)		—		—		(332)
Stock compensation expense	—		5,946		—		—		—		—		5,946
Shares issued under equity incentive plan, net of forfeitures	18		9		—		—		—		—		27
Balance, March 31, 2022	$	1,396	$	1,079,364	$	(307,832)	$	(12,883)	$	5,586	$	—	$	765,631
Net income	—		—		19,245		—		—		—		19,245
Other comprehensive loss	—		—		—		—		(3,276)		—		(3,276)
Repurchases of common shares	—		—		—		(8,842)		—		—		(8,842)

Stock compensation expense	—		5,409		—		—		—		—		5,409
Shares issued under equity incentive plan, net of forfeitures	—		17		—		—		—		—		17
Balance, June 30, 2022	$	1,396	$	1,084,790	$	(288,587)	$	(21,725)	$	2,310	$	—	$	778,184
Net income	—		—		21,325		—		—		—		21,325
Other comprehensive income	—		—		—		—		972		—		972
Repurchases of common shares	—		—		—		(64,869)		—		—		(64,869)



Stock compensation expense	—		3,872		—		—		—		—		3,872
Shares issued under equity incentive plan, net of forfeitures	(1)		42		—		—		—		—		41
Balance, September 30, 2022	$	1,395	$	1,088,704	$	(267,262)	$	(86,594)	$	3,282	$	—	$	739,525

Table of Contents

Common
stock Additional
paid-in
capital Accumulated deficit
Treasury
stock, at
cost
Accumulated
other
comprehensive
income (loss) Non-controlling
interest Total
Balance, December 31, 2016 $ 73
$ 1,167,137
$ (90,380 ) $ (239 ) $ (53,711 ) $ 5,064
$ 1,027,944
Net income (loss) —
—
(7,408 ) —
—
407
(7,001 )
Stock split and conversion 989
(1,228 ) —
239
—
—
—
Other comprehensive income (loss) —
—
—
—
56,689
254
56,943
Dividend distribution —
—
—
—
—
(785 ) (785 )
Stock compensation expense —
3,869
—
—
—
—
3,869
Balance, September 30, 2017 $ 1,062
$ 1,169,778
$ (97,788 ) $ —
$ 2,978
$ 4,940
$ 1,080,970

Common
stock Additional
paid-in
capital Accumulated
deficit
Treasury
stock, at
cost
Accumulated
other
comprehensive
income (loss)
Non-controlling
interest

Total
Balance, December 31, 2015 $ —
$ 245,279
$ (10,634 ) $ —
$ 648
$ —
$ 235,293
Business Combination 73
912,127
—
—
—
6,569
918,769
Net income (loss) —
—
(90,410 ) —
—
725
(89,685 )
Other comprehensive income (loss) —
—
—
—
(5,518 ) (613 ) (6,131 )
Stock repurchase —
—
—
(2,540 ) —
—
(2,540 )
Equity contribution —
6,486
—
114
—
—
6,600
Dividend distribution —
—
—
—
—
(476 ) (476 )
Stock compensation expense —
2,666
—
2,237
—
—
4,903
Balance, September 30, 2016 $ 73
$ 1,166,558
$ (101,044 ) $ (189 ) $ (4,870 ) $ 6,205
$ 1,066,733



	Common stock		Additional paid-in capital		(Accumulated deficit)		Treasury stock, at cost		Accumulated other comprehensive loss		Non- controlling interest		Total
Balance, December 31, 2020	$	1,371	$	1,477,859	$	(175,758)	$	(11,081)	$	(15,265)	$	53	$	1,277,179
Net (loss) income	—		—		(92,635)		—		—		117		(92,518)
Other comprehensive loss	—		—		—		—		(2,745)		(394)		(3,139)

Tax withholdings on equity award vesting	—		—		—		(1,470)		—		—		(1,470)
Distributions to noncontrolling interests	—		—		—		—		—		(516)		(516)
Stock compensation expense	—		6,877		—		—		—		—		6,877
Shares issued under equity incentive plan, net of forfeitures	7		63		—		—		—		—		70
Balance, March 31, 2021	$	1,378	$	1,484,799	$	(268,393)	$	(12,551)	$	(18,010)	$	(740)	$	1,186,483
Net (loss) income	—		—		(1,490)		—		—		140		(1,350)
Other comprehensive income	—		—		—		—		12,081		453		12,534
Distributions to noncontrolling interests	—		—		—		—		—		(593)		(593)
Stock compensation expense	—		7,499		—		—		—		—		7,499
Shares issued under equity incentive plan, net of forfeitures	—		36		—		—		—		—		36
Balance, June 30, 2021	$	1,378	$	1,492,334	$	(269,883)	$	(12,551)	$	(5,929)	$	(740)	$	1,204,609
Net (loss) income	—		—		(71,259)		—		—		76		(71,183)
Other comprehensive income (loss)	—		—		—		—		(3,255)		664		(2,591)
Dividends paid on common stock ($3.20 per share)	—		(435,593)		—		—		—		—		(435,593)

Stock compensation expense	—		11,961		—		—		—		—		11,961
Shares issued under equity incentive plan, net of forfeitures	—		113		—		—		—		—		113
Balance, September 30, 2021	$	1,378	$	1,068,815	$	(341,142)	$	(12,551)	$	(9,184)	$	—	$	707,316

See accompanying notes to condensed consolidated financial statements.

Table of Contents

~~PQ GROUP HOLDINGS~~

ECOVYST INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine months ended September 30,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	48,445	$	(165,051)
Net loss from discontinued operations	—		159,122
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	48,256		49,902
Amortization	10,547		10,182

Amortization of deferred financing costs and original issue discount	1,515		1,409

Debt extinguishment costs	—		12,818

Foreign currency exchange loss	2,179		4,803
Pension and postretirement healthcare benefit	(814)		(1,811)

Deferred income tax provision	12,454		4,256
Net loss on asset disposals	1,174		4,535

Stock compensation	17,419		22,837
Equity in net income from affiliated companies	(17,422)		(20,723)
Dividends received from affiliated companies	30,000		20,000

Other, net	(1,789)		8,515
Working capital changes that provided (used) cash, excluding the effect of acquisitions and dispositions:
Receivables	(28,443)		(33,830)
Inventories	3,206		6,120
Prepaids and other current assets	(5,223)		(8,405)
Accounts payable	1,954		10,096
Accrued liabilities	(14,133)		7,511

Net cash provided by operating activities, continuing operations	109,325		92,286
Net cash used by operating activities, discontinued operations	—		(7,420)
Net cash provided by operating activities	109,325		84,866

Cash flows from investing activities:
Purchases of property, plant and equipment	(39,474)		(44,648)

Proceeds from business divestiture, net of cash	—		980,350
Payments for business divestiture, net of cash	(3,744)		—
Business combinations, net of cash acquired	(488)		(42,782)




Other, net	81		(8)
Net cash (used in) provided by investing activities, continuing operations	(43,625)		892,912
Net cash used in investing activities, discontinued operations	—		(40,943)
Net cash (used in) provided by investing activities	(43,625)		851,969

Cash flows from financing activities:



Issuance of long-term debt, net of discount	—		897,750

Debt issuance costs	—		(1,293)
Repayments of long-term debt	(6,750)		(1,428,613)
Debt prepayment fees	—		(8,481)
Proceeds from failed sale-leaseback	—		14,590
Dividends paid to stockholders	—		(435,593)
Repurchases of common shares	(73,711)		—
Tax withholdings on equity award vesting	(332)		(1,470)

Proceeds from stock options exercised	84		223
Repayment of financing obligations	(1,849)		(486)
Other, net	—		(104)
Net cash used in financing activities, continuing operations	(82,558)		(963,477)
Net cash used in financing activities, discontinued operations	—		(1,144)
Net cash used in financing activities	(82,558)		(964,621)

Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,585)		(4,681)
Net change in cash and cash equivalents	(19,443)		(32,467)
Cash and cash equivalents at beginning of period	140,889		137,219
Cash and cash equivalents at end of period	$	121,446	$	104,752

Nine months ended
September 30,
2017 2016
Cash flows from operating activities:
Net loss $ (7,001 ) $ (89,685 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation 89,987
60,173
Amortization 39,148
25,429
Acquisition accounting valuation adjustments on inventory sold 871
23,518
Amortization of deferred financing costs and original issue discount 6,626
4,443
Debt extinguishment costs 253
7,182
Debt modification creditor fees capitalized —
(1,932 )
Foreign currency exchange loss 21,612
6,240
Pension and postretirement healthcare benefit expense 2,642
2,741
Pension and postretirement healthcare benefit funding (7,525 ) (2,258 )
Deferred income tax (benefit) expense (12,447 ) 18,741
Net loss on asset disposals 6,419
2,288
Supplemental pension plan mark-to-market gain (708 ) (393 )
Stock compensation 3,869
4,904
Equity in net (income) loss from affiliated companies (24,879 ) 9,309
Dividends received from affiliated companies 19,071
136
Working capital changes that provided (used) cash, excluding the effect of business combinations:
Receivables (28,900 ) 3,483
Inventories 4,897
13,832
Prepaids and other current assets (6,000 ) (824 )
Accounts payable (9,044 ) (7,332 )
Accrued liabilities 13,460
10,125
Other, net (2,535 ) (812 )
Net cash provided by operating activities 109,816
89,308
Cash flows from investing activities:
Purchases of property, plant and equipment (90,229 ) (69,798 )
Investment in affiliated companies (9,000 ) —
Change in restricted cash, net 12,135
(6,199 )
Loan receivable under the New Markets Tax Credit Arrangement (6,221 ) (7,823 )
Business combinations, net of cash acquired (41,572 ) (1,777,740 )
Other, net 391
—
Net cash used in investing activities (134,496 ) (1,861,560 )
Cash flows from financing activities:
Draw down of revolver 302,725
118,000
Repayments of revolver (270,088 ) (125,000 )
Issuance of long-term debt under the New Market Tax Credit arrangement 8,820
11,000
Issuance of long-term debt, net of original issue discount and financing fees —
1,172,980
Issuance of long-term notes, net of original issue discount and financing fees —
1,123,777
Debt issuance costs (1,205 ) (5,397 )
Repayments of long-term debt (10,289 ) (475,998 )
Interest hedge premium —
(1,551 )
Equity contribution —
6,600
Stock repurchase —
(2,540 )
Distributions to noncontrolling interests (785 ) (476 )
Net cash provided by financing activities 29,178
1,821,395
Effect of exchange rate changes on cash and cash equivalents (6,402 ) (2,375 )
Net change in cash and cash equivalents (1,904 ) 46,768
Cash and cash equivalents at beginning of period 70,742
25,155
Cash and cash equivalents at end of period $ 68,838
$ 71,923
Supplemental cash flow information:
Cash paid for taxes $ 21,005
$ 10,740
Cash paid for interest $ 118,793
$ 56,932
Non-cash investing activity:
Capital expenditures acquired on account but unpaid as of the period end $ 12,924
$ 14,875
Non-cash financing activity:
Equity consideration for the Business Combination $ —
$ 910,800
Debt assumed in the Business Combination $ —
$ 22,911
Debt assumed in the Acquisition $ 16,609
$ —
For supplemental cash flow disclosures, see Note 21.

See accompanying notes to condensed consolidated financial statements.

~~PQ GROUP HOLDINGS~~

Table of Contents

ECOVYST INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(unaudited)

1. Background and Basis of Presentation:

Description of Business

~~PQ Group Holdings~~Ecovyst Inc.and subsidiaries (the “Company” or ~~“PQ Group Holdings”~~“Ecovyst”) ~~conducts operations~~is a leading integrated and innovative global provider of specialty catalysts and services. The Company supports customers globally through ~~two principal segments: (1)~~its strategically located network of manufacturing facilities. The Company believes that its products, which are predominantly inorganic, and services contribute to improving the sustainability of the environment.

On December 14, 2020, the Company completed the sale of its Performance Materials ~~& Chemicals: a fully integrated, global leader~~business, and on August 1, 2021, the Company completed the sale of its Performance Chemicals business. The financial results of these businesses are presented as discontinued operations in ~~silicate technology, producing sodium silicate,~~the condensed consolidated financial statements for the 2021 period presented. See Note 3 to these condensed consolidated financial statements for more information on these transactions.

The Company has two uniquely positioned specialty ~~silicas, zeolites, spray dry silicates, magnesium silicate, and other high performance chemical products used in a variety of end-uses such as adsorbents~~businesses: Ecoservices provides sulfuric acid recycling to the North American refining industry for surface coatings, clarifying agents for beverages, cleaning and personal care products and engineered glass products for use in highway safety, polymer additives, metal finishing and electronics end uses; and (2) Environmental Catalysts & Services: a leading global innovator and producer of silica catalysts used in the production of ~~high-density polyethylene (“HDPE”), methyl methacrylate (“MMA”), specialty zeolite-based catalysts sold to the emissions control industry, the petrochemical industry~~alkylate and ~~other areas of the broader chemicals industry and a merchant~~provides on-purpose virgin sulfuric acid ~~producer operating a network of plants serving a variety of end uses, including~~for water treatment, mining and industrial applications; and Catalyst Technologies provides finished silica catalysts and catalyst supports necessary to produce high strength and high stiffness plastics and, through the ~~oil refining, nylon, mining, general industrial and chemical industries.~~

The Company experiences some seasonality, primarily with respect to the performance materials and refining services product groups. With respect to the performance materials product group, sales and earnings are generally higherZeolyst Joint Venture, supplies zeolites used for catalysts that help produce renewable fuels, remove nitrogen oxides from diesel engine emissions as well as sulfur from fuels during the ~~second and third quarters of the year as highway striping projects typically occur during warmer weather months. Additionally, the~~ refining process.

The Company’s regeneration services product group, which is a part of the Company’s Ecoservices segment, typically experiences ~~similar~~ seasonal fluctuations as a result of higher demand for gasoline products in the summer months and lower demand in the winter months. ~~As a~~These demand fluctuations result in higher sales and working capital requirements ~~tend to be higher in the first and fourth quarters of the year, while higher cash generation occurs~~ in the second and third ~~quarters of the year.~~quarters.

~~Basis of Presentation~~

On August 17, 2015, the Company, PQ Holdings Inc. (“PQ Holdings”), Eco Services Operations LLC (“Eco Services”), certain investment funds affiliated with CCMP Capital Advisors, LLC (now known as CCMP Capital Advisors, LP; “CCMP”), and stockholders of PQ Holdings and Eco Services entered into a reorganization and transaction agreement pursuant to which the companies consummated a series of transactions to reorganize and combine the businesses of PQ Holdings and Eco Services (the “Business Combination”), under a new holding company, PQ Group Holdings Inc. The ~~Business Combination was consummated on May 4, 2016.~~

In accordance with accounting principles generally accepted in the United States (“GAAP”), Eco Services is the accounting predecessor to PQ Group Holdings. Certain investment funds affiliated with CCMP held a controlling interest position in Eco Services priornotes to the Business Combination. In addition, certain investment funds affiliated with CCMP owned a non-controlling interest in PQ Holdings prior to the Business Combination and the merger with Eco Services constituted a change in control under the PQ Holdings credit agreements and bond indenture that were in place at the time of the Business Combination. Therefore, Eco Services is deemed to be the accounting acquirer. These condensed consolidated financial statements, unless otherwise indicated, are ~~the continuation~~on a continuing operations basis.

Basis of ~~Eco Services’ business prior to the Business Combination.~~Presentation

The condensed consolidated financial statements included herein are unaudited. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with ~~GAAP~~accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations for interim reporting. In the opinion of management, all adjustments of a normal and recurring nature necessary to state fairly the financial position and results of operations have been included. The results of operations are not necessarily indicative of the expected results ~~to be expected~~ for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s ~~prospectus dated~~Annual Report on Form 10-K for the year ended December 31, 2021.

Reclassification and Correction of an Error

During the preparation of the condensed consolidated financial statements for the period ended September ~~28, 2017, as filed~~30, 2022, the Company identified a presentation error in the condensed consolidated statements of comprehensive income for the 2021 comparable periods presented. The presentation of comprehensive income (loss) inadvertently omitted the release of accumulated other comprehensive income (loss) related to foreign currency translation and deferred pension and postretirement benefit plan losses in conjunction with the ~~SEC pursuant~~sale of the Company’s Performance Chemicals business. There was no impact on the condensed consolidated statements of income, condensed consolidated balance sheets and condensed consolidated statements of cash flows. The presentation of other comprehensive income (loss) for the three and nine months ended September 30, 2021, was corrected for the additional comprehensive loss of $7,093, of which $943 of comprehensive income was attributed to ~~Rule 424(b) under the Securities Act of 1933, as amended.~~noncontrolling interest. Additionally, Note 6 was corrected for this presentation error. The Company ~~has continued~~assessed the materiality of the error and concluded it was not material to ~~follow~~ the ~~accounting policies set forth in those~~Company’s previously issued financial statements, including the consolidated financial ~~statements.~~statements for the year ended December 31, 2021.

~~Prior~~The previously disclosed disposal of business presented in accumulated other comprehensive income (loss) has been reclassified to September 22, 2017, the Company had two classes of common stock designated as Class A and Class B common stock. On September 22, 2017, the Company reclassified its Class A common stock into common stock and then effected a 8.8275-for-1 split of its common stock. On September 28, 2017, the Company converted each outstanding share of Class B common stock into 8.8275 shares of common stock plus an additional number of shares determined by dividing the unreturned paid-in capital amount of such Class B common stock, or $113.74 per share, by $17.50, the initial public offering price of a share of our common stockother comprehensive income (loss) in the ~~Company’s initial public offering (“IPO”), rounded to the nearest whole share. Holders~~condensed consolidated statement of ~~Class B common stock did not receive any cash payments from the Company in connection with the conversion~~stockholders’ equity.

Table of ~~the Class B common stock.~~Contents

On October 3, 2017, the Company completed its IPO whereby it issued 29,000,000 shares of its common stock at an initial public offering price of $17.50 per share. The shares began trading on the New York Stock Exchange on September 29, 2017. The aggregate

~~PQ GROUP HOLDINGS~~ECOVYST INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(unaudited)

proceeds received by the Company from the offering were approximately $480,525, net of underwriting discounts, commissions and estimated offering expenses. The net proceeds were used to repay existing indebtedness as further described in Note 20.

2. New Accounting Standards:

Recently Adopted Accounting Standards

In ~~October 2016,~~November 2021, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued guidance ~~which eliminates the deferral of the tax effects of intra-entity transfers of an asset~~that requires entities to provide certain disclosures when they (1) have received government assistance and (2) use a grant or contribution accounting model by analogy to other ~~than inventory. Previous~~accounting guidance. Previously, there was no guidance under GAAP ~~prohibited the recognition of current~~on recognizing or measuring government grants to business entities. The new guidance does not provide any additional guidance on this topic; rather, it only provides guidance on required disclosures for business entities that receive government assistance and deferred income taxes for an intra-entity asset transfer until the asset had been sold to an outside party which has resulted in diversity in practice and increased complexity within financial reporting. For public companies, theapply another grant or contribution accounting framework by analogy. The new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company early adopted the guidance effective January 1, 2017. The guidance did not have a material impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued guidance that includes targeted improvements to the accounting for employee stock-based compensation. The updates in the guidance include changes in the income tax consequences, balance sheet classification and cash flow statement reporting of stock-based payment transactions. The guidance also includes certain modifications applicable only to nonpublic entities. For public companies,2021 with the new ~~guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those years. The Company adopted this new guidance as~~disclosures required on ~~January 1, 2017, with no material impact upon adoption to the Company’s consolidated financial statements. On a prospective~~an annual basis, ~~from the adoption date, the Company will record all tax effects related to stock-based compensation through the statement of operations,~~ and ~~all tax-related cash flows resulting from stock-based award payments will~~can be reported as operating activities in the statement of cash flows. The Company made an accounting policy election under the new guidance to account for forfeitures of stock-based compensation awards as they occur.

~~In July 2015, the FASB issued new guidance that changes the measurement principle for inventory from the lower of cost~~applied either prospectively or market to the lower of cost or net realizable value. The amendments in this guidance do not apply to inventory that is measured using LIFO or the retail inventory method; rather, the amendments apply to all other inventory, which includes inventory that is measured using FIFO or average cost. Within the scope of this new guidance, an entity should measure inventory at the lower of cost or net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation, which is consistent with existing GAAP.retrospectively. The Company adopted the new guidance on January 1, ~~2017~~2022 and will include the disclosures as ~~required. The~~required in its annual reporting with respect to any government assistance or grants subject to the scope of the guidance ~~did not have a material impact on~~to the ~~Company’s consolidated financial statements.~~extent material.

Accounting Standards Not Yet Adopted

In ~~August 2017,~~October 2021, the FASB issued ~~amendments intended to better align hedge accounting with an entities risk management activities. The amendments expand hedge accounting for non-financial~~guidance that requires contract assets and financial risk components and revise the measurement methodologies to better align with an entities risk management activities. Separate presentation of hedge ineffectiveness is eliminated to provide greater transparency of the full impact of hedging by requiring presentation of the results of the hedged item and hedging instrumentcontract liabilities acquired in a ~~single financial statement line item. In addition,~~business combination to be recognized and measured by the ~~amendments reduce complexity~~acquirer on the acquisition date in accordance with revenue recognition guidance. Under current GAAP, contract assets and contract liabilities acquired in a business combination are recorded by ~~simplifying~~ the ~~manner~~acquirer at fair value. The new guidance creates an exception to the general recognition and measurement principles related to business combinations, and is expected to result in ~~which assessments of hedge effectiveness may be performed.~~the acquirer recognizing contract assets and liabilities at the same amounts recorded by the acquiree. The new guidance is effective for ~~public companies for annual periods~~business combinations occurring during fiscal years beginning after December 15, ~~2018,~~2022, including interim periods within those ~~years. Early~~fiscal years, with early adoption permitted. The Company is ~~permitted, and~~currently evaluating the impact of the new guidance, ~~should~~which would only be applied prospectively to business combinations upon the ~~presentation and disclosure~~adoption of the guidance. ~~The Company is evaluating the impact that the new guidance will have on its consolidated financial statements.~~

In ~~May 2017,~~March 2020 and January 2021, the FASB issued guidance to ~~clarify which changes~~address certain accounting consequences from the anticipated transition from the use of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Under the new guidance, an entity should not account for the effects of a change in a share-based payment award using modification accounting unless the fair value, vesting conditions and classification as either a liability or equity are all the same with respect to the award immediately prior to modification and the modified award itself.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 ~~effective for annual periods beginning after~~optional and may be elected over time as reference rate reform activities occur. During the year ended December ~~15, 2017, including interim periods within those years. Early adoption is permitted,~~31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the ~~new guidance should be applied prospectively~~assessments of effectiveness for future LIBOR-indexed cash flows to awards modified on or after the adoption date. Based on the Company’s existing policies regarding the application of modification accounting to its share-based payment awards, the Company does not believeassume that the ~~new guidance~~index upon which future hedged transactions will ~~have a material impact on its consolidated financial statements.~~

~~In March 2017,~~be based matches the ~~FASB issued guidance to improve~~index of the corresponding derivatives. Application of these expedients preserves the presentation of ~~net periodic pension cost~~derivatives consistent with past presentation. During the year ended December 31, 2021, the FASB extended the guidance adoption date to June 30, 2023. The Company continues to evaluate the impact of the guidance and ~~net periodic postretirement benefit cost (collectively, “pension costs”). Under current GAAP, there are several components~~may apply other elections as applicable as additional changes in the market occur.

3. Divestitures:

Performance Materials Divestiture

Upon the close of ~~pension costs~~the Performance Materials divestiture transaction on December 14, 2020, the Company entered into a Transition Services Agreement with the buyer pursuant to which ~~are presented net~~the buyer received certain services to ~~arrive at pension costs as~~provide for the orderly transition of various functions and processes after the closing of the transaction. The services under the Transition Services Agreement included information technology, accounting, tax, financial services, human resources, facilities, and other administrative support services. These services were provided for a period of nine months, with three 30-day extensions available. The Company billed $253 and $3,314 under the Transition Services Agreement to the buyer during the three and nine months ended September 30, 2021, respectively. Those billings were included in selling, general and administrative expenses on the ~~income statement~~condensed consolidated financial statements for the nine months ended September 30, 2021.

During the three months ended September 30, 2021, the Company incurred transaction costs of $264 and ~~disclosed in the notes. As part~~stock-based compensation expense of ~~this amendment~~$1,194, and an associated tax benefit of $339 related to the ~~existing guidance, the service cost component of pension costs will be bifurcated from the other components and~~Performance Materials divestiture, which was included in loss from discontinued operations, net of tax. During the ~~same line item~~nine months ended September 30, 2021, the Company incurred transaction costs of $1,794 and stock-based compensation expense of $2,477, and an associated tax benefit of $1,045 related to the ~~income statement as compensation costs are reported. The remaining components will be reported together below operating income on the income~~Performance Materials divestiture, which was included in loss from discontinued operations, net of tax.

Table of Contents

~~PQ GROUP HOLDINGS~~

ECOVYST INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(unaudited)

Performance Chemicals Divestiture

~~statement, either as~~On February 28, 2021, the Company entered into a ~~separate line item or combined with another line item on~~definitive agreement to sell its Performance Chemicals business to Sparta Aggregator L.P. (the “Buyer”), a partnership established by Koch Minerals & Trading, LLC and Cerberus Capital Management, L.P., for $1,100,000, subject to certain adjustments including indebtedness, cash, working capital and transaction expenses. The Company completed the ~~income statement and disclosed. Additionally, with respect to capitalization to inventory, fixed assets, etc., only the service cost component will be eligible for capitalization upon adoption~~sale of the guidance. The new guidance is effective for public companies for annual periods beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted. The amendments should be applied retrospectively upon adoption with respectPerformance Chemicals business on August 1, 2021.

Prior to the ~~presentation~~close of the ~~service and other cost components~~transaction, the disposal group was tested for recoverability at each of pension costs in the income statement, and prospectively for the capitalization of the service cost component in assets. The Company is evaluating the impact that the new guidance will have on its consolidated financial statements.

In January 2017, the FASB issued guidance which eliminates the second step from the traditional two-step goodwill impairment test. Under current guidance, an entity performed the first step of the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount; if an impairment loss was indicated, the entity computed the implied fair value of goodwill to determine whether an impairment loss existed, and if so, the amount to recognize. Under the new guidance, an impairment loss is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value (the Step 1 test), with no further testing required. Any impairment loss recognized is limited to the amount of goodwill allocated to the reporting unit. The new guidance is effective for public companies that are SEC registrants for fiscal years beginning after December 15, 2019, with early adoption permitted for goodwill impairment tests performed on testing dates after January 1, 2017. All entities are required to apply the guidance prospectively to goodwill impairment tests subsequent to adoption of the standard. The Company is evaluating the impact that the new guidance will have on its consolidated financial statements.

In January 2017, the FASB issued guidance which clarifies the definition of a business and provides revised criteria and a framework to determine whether an integrated set of assets and activities is a business. For public companies, the new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted. The Company is evaluating the impact that the new guidance will have on its consolidated financial statements.

In November 2016, the FASB issued guidance which clarifies the classification and presentation of changes in restricted cash on the statement of cash flows. The updates in the guidance require that the statement of cash flows explain the change during the period in the total of cash, cash equivalents and restricted cash when reconciling the beginning-of-period and end-of-period total amounts. The updates also require a reconciliation between cash, cash equivalents and restricted cash presented on the balance sheet dates subsequent to meeting the ~~total~~discontinued operations criteria, and the Company recognized an estimated disposal loss of $13,990 and $109,584 during the three and six months ended June 30, 2021, respectively, which was included in net loss from discontinued operations, net of tax on the condensed consolidated statement of income.

For the nine months ended September 30, 2021, the loss on the sale of the same amounts presented on the statement of cash flows. For public companies, the new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted, and the new guidance should be applied retrospectively to each period presented. The Company is evaluating the impact that the new guidance will have on its consolidated financial statements. As of September 30, 2017, the Company had $1,645 of restricted cashPerformance Chemicals business was $157,539, which was included in ~~prepaid and other current assets on its balance sheet related to its New Market Tax Credit financing arrangements as well as other small restricted cash balances.~~

~~In August 2016, the FASB issued guidance which clarifies the classification~~net (loss) income from discontinued operations, net of certain cash receipts and cash payments in the statement of cash flows, including debt prepayment or extinguishment costs and distributions from certain equity method investees. For public companies, the new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, and the new guidance should be applied retrospectively to each period presented. The Company is evaluating the impact that the new guidance will have on its consolidated financial statements.

In February 2016, the FASB issued guidance that amends the accounting for leases. Under the new guidance, a lessee will recognize assets and liabilities for most leases (including those classified under existing GAAP as operating leases, which based on current standards are not reflected on the balance sheet), but will recognize expenses similar to current lease accounting. For public companies, the new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted. The new guidance must be adopted using a modified retrospective transition and provides for certain practical expedients. The Company is currently evaluating the impact that the new guidance will have on its consolidated financial statements. The Company has operating lease agreements for which it expects to recognize right of use assets and corresponding liabilities on its balance sheet upon adoption of the new guidance. A complete discussion of these leases is includedtax in the Company’s ~~audited~~condensed consolidated ~~financial~~statements. The following is a reconciliation of the loss recorded on the sale:


Net proceeds received from the sale of the Performance Chemicals business	$	980,350
Transaction costs	(35,402)
Net assets derecognized	(1,102,487)
Loss on sale of the Performance Chemicals business	$	(157,539)

During the year ended December 31, 2021, the net cash proceeds to the Company from the sale were $978,449 after certain customary adjustments for indebtedness, working capital and cash at the closing of the transaction. The final pre-tax loss on the sale was $150,230, which was included in net (loss) income from discontinued operations, net of tax in the Company’s consolidated statements of income for the year ended December 31, ~~2016~~2021. In March 2022, the Company made a payment to the buyer for $3,744, representing the final adjustments to the sale price. The Company classified the payment within net cash used in ~~Note 20, Commitments and Contingent Liabilities.~~investing activities – continuing operations in the condensed consolidated statements of cash flows.

In ~~May 2014,~~connection with the FASB issued accounting guidance (with subsequent targeted amendments) that will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. The core principlesale of the ~~guidance is that revenue~~Performance Chemicals business and the related loss, as noted above, the Company has recognized a tax benefit of $33,052 within net loss from ~~a transaction or event that arises from a contract with a customer should reflect~~discontinued operations, net of tax on the consideration to which an entity expects to be entitled in exchange for goods or services provided. To achieve that core principle, the new guidance sets forth a five-step revenue recognition model that will need to be applied consistently to all contracts with customers, except those that are within the scopecondensed consolidated statement of ~~other topics in the Accounting Standards Codification (“ASC”). Also required are enhanced disclosures to help users~~income.

Table of financial statements better understand the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. The enhanced disclosures include qualitative and quantitative information about contracts with customers, significantContents

~~PQ GROUP HOLDINGS~~ECOVYST INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(unaudited)

~~judgments made in applying~~The following table summarizes the ~~revenue guidance, and assets recognized~~results of discontinued operations related to the ~~costs to obtain or fulfill a contract. For public companies,~~Performance Chemicals business for the ~~new requirements are effective for annual reporting periods beginning after December 15, 2017, including interim periods within those years. The Company is reviewing its key revenue streams~~three and ~~assessing~~nine months ended September 30, 2021:


	Three months ended September 30, 2021		Nine months ended September 30, 2021

Sales	$	54,973	$	389,870
Cost of goods sold	39,582		284,220
Selling, general and administrative expenses	6,552		29,758
Goodwill impairment charge	—		75,080
Other operating (income) expense, net	(18,993)		10,337
Loss on sale of the Performance Chemicals business	123,035		157,539
Operating loss	(95,203)		(167,064)
Equity in net (income) from affiliated companies	(25)		(111)
Interest expense, net (1)	1,916		10,730
Other expense (income), net	153		(6,210)
Loss from discontinued operations before income tax	(97,247)		(171,473)
Benefit for income taxes	(22,494)		(15,576)
Loss from discontinued operations, net of tax	$	(74,753)	$	(155,897)

(1)Upon the ~~underlying customer contracts within the framework~~close of the ~~new guidance. The~~transaction, the Company ~~has evaluated~~used a portion of the ~~key aspects~~net proceeds to repay a portion of its ~~revenue streams for impact under~~outstanding debt amounting to $526,363. Prior to the ~~new guidance and is currently performing~~Company’s debt refinancing in June 2021, the Company’s outstanding term loan facilities had mandatory repayment provisions. As a ~~detailed analysis of its customer agreements~~result, interest expense has been allocated to quantify the potential changes under the guidance. The Company believes that the guidance will not have a material impact on its existing revenue recognition practices, but there are new robust disclosure requirements that will have an impactdiscontinued operations on the basis of the Company’s ~~reporting.~~ total repayment of $526,363.

Net income attributable to the noncontrolling interest related to the Performance Chemicals business, net of tax was $76 and $333 for the three and nine months ended September 30, 2021, respectively. Net loss attributable to Ecovyst Inc., related to the Performance Chemicals business, net of tax was $(74,829) and $(156,230) for the three and nine months ended September 30, 2021, respectively.

4. Revenue from Contracts with Customers:

Disaggregated Revenue

The ~~Company anticipates adopting the new guidance~~Company’s primary means of disaggregating revenues is by reportable segments, which can be found in Note 18 to these condensed consolidated financial statements.

The Company’s portfolio of products is integrated into a variety of end uses, which are described in the ~~first quarter~~table below.


Key End Uses			Key Products
Industrial & process chemicals			• Sulfur derivatives for industrial production
			• Treatment services
Fuels & emission control			• Refining hydrocracking catalysts
			• Emission control catalysts
			• Regeneration services for alkylate production
Packaging & engineered plastics			• Catalysts for high-density polyethylene and chemicals syntheses
			• Antiblocks for film packaging
			• Sulfur derivatives for nylon production
Natural resources			• Sulfur derivatives for mining

Table of ~~2018 as required,~~Contents

ECOVYST INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and ~~expects~~per share amounts)

(unaudited)

The following tables disaggregate the Company’s sales, by segment and end use, for the three and nine months ended September 30, 2022 and 2021:


	Three months ended September 30, 2022
	Ecoservices		Catalyst Technologies(2)		Total
Industrial & process chemicals	$	41,252	$	—	$	41,252
Fuels & emission control(1)	88,532		—		88,532
Packaging & engineered plastics	29,707		36,859		66,566
Natural resources	36,183		—		36,183
Total segment sales	$	195,674	$	36,859	$	232,533



	Three months ended September 30, 2021
	Ecoservices		Catalyst Technologies(2)		Total
Industrial & process chemicals	$	23,297	$	5	$	23,302
Fuels & emission control(1)	67,644		—		67,644
Packaging & engineered plastics	23,315		29,873		53,188
Natural resources	23,294		—		23,294
Total segment sales	$	137,550	$	29,878	$	167,428


	Nine months ended September 30, 2022
	Ecoservices		Catalyst Technologies(2)		Total
Industrial & process chemicals	$	116,257	$	—	$	116,257
Fuels & emission control(1)	243,358		—		243,358
Packaging & engineered plastics	87,801		94,716		182,517
Natural resources	95,287		—		95,287
Total segment sales	$	542,703	$	94,716	$	637,419



	Nine months ended September 30, 2021
	Ecoservices		Catalyst Technologies(2)		Total
Industrial & process chemicals	$	58,581	$	5	$	58,586
Fuels & emission control(1)	191,630		—		191,630
Packaging & engineered plastics	48,916		82,490		131,406
Natural resources	59,382		—		59,382
Total segment sales	$	358,509	$	82,495	$	441,004

(1)As described in Note 1 to ~~implement~~these condensed consolidated financial statements, the ~~guidance under~~Company experiences seasonal sales fluctuations to customers in the ~~modified retrospective transition~~fuels & emission control end use.

(2)Excludes the Company’s proportionate share of sales from the Zeolyst International and Zeolyst C.V. joint ventures (collectively, the “Zeolyst Joint Venture”) accounted for using the equity method (see Note 11 to these condensed consolidated financial statements for further information).

Table of ~~adoption.~~Contents

3.ECOVYST INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(unaudited)

5. Fair Value Measurements:

Fair values are based on quoted market prices when available. When market prices are not available, fair values are generally estimated using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality. In instances where there is little or no market activity for the same or similar instruments, the Company estimates fair values using methods, models and assumptions that management believes a hypothetical market participant would use to determine a current transaction price. These valuation techniques involve some level of management estimation and judgment that becomes significant with increasingly complex instruments or pricing models. Where appropriate, adjustments are included to reflect the risk inherent in a particular methodology, model or input used.

The Company’s financial assets and liabilities carried at fair value have been classified based upon a fair value hierarchy. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). The classification of an asset or a liability is based on the lowest level input that is significant to its measurement. For example, a Level 3 fair value measurement may include inputs that are both observable (Levels 1 and 2) and unobservable (Level 3). The levels of the fair value hierarchy are as follows:

•Level 1—Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date. Active markets provide pricing data for trades occurring at least weekly and include exchanges and dealer markets.

•Level 2—Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads and yield curves.

•Level 3—Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date.

The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.


	September 30, 2022		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative assets:
Interest rate caps (Note 14)	$	35,991	$	—	$	35,991	$	—


	December 31, 2021		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative assets:
Interest rate caps (Note 14)	$	1,080	$	—	$	1,080	$	—



Derivative liabilities:
Interest rate caps (Note 14)	$	1,288	$	—	$	1,288	$	—

As of September 30, 2017
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Derivative contracts $ 1,098
$ —
$ 1,098
$ —
Restoration plan assets 5,566
5,566
—
—
Total $ 6,664
$ 5,566
$ 1,098
$ —

Liabilities:
Derivative contracts $ 58
$ —
$ 58
$ —

Table of Contents

~~PQ GROUP HOLDINGS~~ECOVYST INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(unaudited)

As of December 31, 2016
Quoted Prices in
Active Markets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Assets:
Derivative contracts $ 6,434
$ —
$ 6,434
$ —
Restoration plan assets 5,594
5,594
—
—
Total $ 12,028
$ 5,594
$ 6,434
$ —

~~Restoration plan assets~~

The fair values of the Company’s restoration plan assets are determined through quoted prices in active markets. Restoration plan assets are assets held in a Rabbi trust to fund the obligations of the Company’s defined benefit supplementary retirement plans and include various stock and fixed income mutual funds. See Note 15 to these condensed consolidated financial statements regarding defined supplementary retirement plans.

Derivative contracts

Derivative assets and liabilities can be exchange-traded or traded over-the-counter (“OTC”). The Company generally values exchange-traded derivatives using models that calibrate to market transactions and eliminate timing differences between the closing price of the exchange-traded derivatives and their underlying instruments. OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, model calibration to market transactions, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. When models are used, the selection of a particular model to value an OTC derivative depends on the contractual terms of, and specific risks inherent in, the instrument as well as the availability of pricing information in the market. The Company generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices and rates, forward curves, measures of volatility, and correlations of such inputs. For OTC derivatives that trade in liquid markets, such as forward contracts, swaps and options, model inputs can generally be corroborated by observable market data by correlation or other means, and model selection does not involve significant management judgment.

~~The~~As of September 30, 2022, the Company ~~has~~had interest rate ~~caps and natural gas caps and swaps that are~~caps that were fair valued using Level 2 inputs. In addition, the Company applies a credit valuation adjustment to reflect credit risk which is calculated based on credit default swaps. To the extent that the Company’s net exposure under a specific master agreement is an asset, the Company utilizes the counterparty’s default swap rate. If the net exposure under a specific master agreement is a liability, the Company utilizes a default swap rate comparable to ~~PQ Group Holdings.~~Ecovyst. The credit valuation adjustment is added to the discounted fair value to reflect the exit price that a market participant would be willing to receive to assume the Company’s liabilities or that a market participant would be willing to pay for the Company’s assets. As

6. Stockholders' Equity:

Accumulated Other Comprehensive Income (Loss)

The stockholders’ equity footnote disclosures have been revised to include the impact of discontinued operations on pensions and postretirement benefits and foreign currency translation for the three and nine months ended September 30, ~~2017~~2021 in other comprehensive income (loss) and ~~December 31, 2016,~~accumulated other comprehensive income (loss). See Note 1 to these condensed consolidated financial statements for further information on the ~~credit valuation adjustment resulted~~reclassification and correction of errors in ~~a minimal change in the fair value~~historical presentation.

Table of ~~the derivatives.~~Contents

~~PQ GROUP HOLDINGS~~ECOVYST INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(unaudited)

~~4. Accumulated Other Comprehensive Income (Loss):~~

The following ~~table presents~~tables present the tax effects of each component of other comprehensive income (loss) for the three and nine months ended September 30, ~~2017~~2022 and ~~2016:~~2021:

Three months ended September 30,
2017 2016
Pre-tax
amount Tax
benefit /
(expense) After-tax
amount Pre-tax
amount Tax
benefit /
(expense) After-tax
amount
Defined benefit and other postretirement plans
Amortization and unrealized losses $ (33 ) $ 13
$ (20 ) $ 162
$ —
$ 162
Benefit plans, net (33 ) 13
(20 ) 162
—
162
Net loss (gain) from hedging activities (486 ) 185
(301 ) 324
(123 ) 201
Foreign currency translation 21,343
(2,493 ) 18,850
1,930
(644 ) 1,286
Other comprehensive income (loss) $ 20,824
$ (2,295 ) $ 18,529
$ 2,416
$ (767 ) $ 1,649


	Three months ended September 30,
	2022						2021
	Pre-tax amount		Tax benefit/ (expense)		After-tax amount		Pre-tax amount		Tax benefit/ (expense)		After-tax amount
Defined benefit and other postretirement plans:
Amortization of net loss	$	2	$	(1)	$	1	$	5,041	$	(1,297)	$	3,744
Amortization of prior service credit	(53)		13		(40)		(58)		14		(44)
Settlement (loss) gain	(1,228)		305		(923)		1,507		(374)		1,133
Benefit plans, net	(1,279)		317		(962)		6,490		(1,657)		4,833
Net gain from hedging activities	12,188		(3,047)		9,141		613		(153)		460
Foreign currency translation(1)	(7,207)		—		(7,207)		(12,391)		4,507		(7,884)
Other comprehensive income	$	3,702	$	(2,730)	$	972	$	(5,288)	$	2,697	$	(2,591)

	Nine months ended September 30,
	2022						2021
	Pre-tax amount		Tax benefit/ (expense)		After-tax amount		Pre-tax amount		Tax benefit/ (expense)		After-tax amount
Defined benefit and other postretirement plans:
Amortization of net loss	$	3	$	(1)	$	2	$	5,044	$	(1,298)	$	3,746
Amortization of prior service credit	(158)		39		(119)		(174)		43		(131)
Settlement (loss) gain	(1,228)		305		(923)		1,507		(374)		1,133
Benefit plans, net	(1,383)		343		(1,040)		6,377		(1,629)		4,748
Net gain from hedging activities	36,827		(9,207)		27,620		2,184		(546)		1,638
Foreign currency translation(1)	(17,506)		—		(17,506)		(6,536)		6,954		418
Other comprehensive income	$	17,938	$	(8,864)	$	9,074	$	2,025	$	4,779	$	6,804

Nine months ended September 30,
2017 2016
Pre-tax
amount Tax
benefit /
(expense) After-tax
amount Pre-tax
amount Tax
benefit /
(expense) After-tax
amount
Defined benefit and other postretirement plans
Amortization and unrealized losses $ (261 ) $ 38
$ (223 ) $ 486
$ —
$ 486
Benefit plans, net (261 ) 38
(223 ) 486
—
486
Net loss (gain) from hedging activities (5,373 ) 2,047
(3,326 ) 2,100
(798 ) 1,302
Foreign currency translation 69,202
(8,710 ) 60,492
(9,605 ) 1,686
(7,919 )
Other comprehensive income (loss) $ 63,568
$ (6,625 ) $ 56,943
$ (7,019 ) $ 888
$ (6,131 )

(1)The ~~following table presents the change~~income tax benefit or expense included in ~~accumulated~~ other comprehensive income ~~(loss), net~~is attributed to the portion of ~~tax, by component~~foreign currency translation associated with the Company’s cross-currency interest rate swaps for the three and nine months ended September 30, ~~2017 and 2016:~~2021, for which the tax effect is based on the applicable U.S. deferred income tax rate. See Note 14 to these condensed consolidated financial statements for information regarding the Company’s cross-currency interest rate swaps, which were settled in March 2021.

Defined benefit
and other
postretirement
plans
Net gain (loss)
from hedging
activities
Foreign
currency
translation

Total
December 31, 2016 $ 7,513
$ 4,557
$ (65,781 ) $ (53,711 )
Other comprehensive income (loss) before reclassifications (322 ) (3,404 ) 60,238
56,512
Amounts reclassified from accumulated other comprehensive income^(a)
99
78
—
177
Net current period other comprehensive income (loss) (223 ) (3,326 ) 60,238
56,689
September 30, 2017 $ 7,290
$ 1,231
$ (5,543 ) $ 2,978

December 31, 2015 $ 648
$ —
$ —
$ 648
Other comprehensive income (loss) before reclassifications 486
591
(7,306 ) (6,229 )
Amounts reclassified from accumulated other comprehensive income^(a)
—
711
—
711
Net current period other comprehensive income (loss) 486
1,302
(7,306 ) (5,518 )
September 30, 2016 $ 1,134
$ 1,302
$ (7,306 ) $ (4,870 )

Table of Contents

~~—————~~


^(a)	~~See the following table for details about these reclassifications.~~

~~PQ GROUP HOLDINGS~~ECOVYST INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(unaudited)

The following table presents the changes in accumulated other comprehensive income (loss), net of tax, by component for the nine months ended September 30, 2022 and 2021:


	Defined benefit and other postretirement plans		Net gain (loss) from hedging activities		Foreign currency translation		Total
December 31, 2021	$	11,072	$	2,254	$	(19,118)	$	(5,792)
Other comprehensive (loss) income before reclassifications	(1,157)		27,148		(17,506)		8,485
Amounts reclassified from accumulated other comprehensive income(1)	117		472		—		589

September 30, 2022	$	10,032	$	29,874	$	(36,624)	$	3,282

December 31, 2020	$	5,278	$	(660)	$	(19,883)	$	(15,265)
Other comprehensive income (loss) before reclassifications	877		1,425		11,474		13,776
Amounts reclassified from accumulated other comprehensive income(1)	3,871		213		(11,779)		(7,695)

September 30, 2021	$	10,026	$	978	$	(20,188)	$	(9,184)

(1)See the following table for details about these reclassifications. Amounts in parentheses indicate debits.

The following table presents the reclassifications out of accumulated other comprehensive income ~~(loss)~~ for the three and nine months ended September 30, ~~2017~~2022 and ~~2016.~~ 2021:


Details about Accumulated Other Comprehensive Income Components	Amounts Reclassified from Accumulated Other Comprehensive Income(1)								Affected Line Item where Income is Presented
	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Amortization of defined benefit and other postretirement items:
Prior service credit	$	(53)	$	(58)	$	(158)	$	(174)	Other income (expense)(2)
Actuarial gains	1		2		3		4		Other income (expense)(2)
Release of actuarial losses	—		(3,717)		—		(3,717)		Net loss from discontinued operations, net of tax
	(52)		(3,773)		(155)		(3,887)		Total before tax
	12		(11)		38		16		Tax benefit (expense)
	$	(40)	$	(3,784)	$	(117)	$	(3,871)	Net of tax

Gains and losses on cash flow hedges:
Interest rate caps	$	(29)	$	(104)	$	(627)	$	(283)	Interest expense


	7		26		155		70		Tax benefit
	$	(22)	$	(78)	$	(472)	$	(213)	Net of tax

Release of foreign currency translation	$	—	$	11,779	$	—	$	11,779	Net loss from discontinued operations, net of tax



Total reclassifications for the period	$	(62)	$	7,917	$	(589)	$	7,695	Net of tax

(1)Amounts in ~~parenthesis~~parentheses indicate debits to profit/loss.

(2)These accumulated other comprehensive income (loss) components are components of net periodic pension and other postretirement cost (see Note 16 to these condensed consolidated financial statements for additional details).

Details about Accumulated Other
Comprehensive Income Components

Amount Reclassified from
Accumulated Other
Comprehensive Income
Affected Line Item in the
Statement Where Net
Income is Presented
Three months ended
September 30, Nine months ended
September 30,
2017 2016 2017 2016
Defined benefit and other postretirement plans
Amortization of prior service cost $ 20
$ —
$ 60
$ —
(a)
Amortization of net gain (loss) 19
—
58
—
(a)
39
—
118
—
Total before tax
(6 ) —
(19 ) —
Tax (expense) benefit
$ 33
$ —
$ 99
$ —
Net of tax

Net gain (loss) from hedging activities
Interest rate caps $ 13
$ (2 ) $ 22
$ (2 ) Interest expense
Natural gas swaps 94
420
104
1,148
Cost of goods sold
107
418
126
1,146
Total before tax
(41 ) (159 ) (48 ) (435 ) Tax (expense) benefit
$ 66
$ 259
$ 78
$ 711
Net of tax

Total reclassifications for the period $ 99
$ 259
$ 177
$ 711
Net of tax

Table of Contents

~~—————~~


^(a)	These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost (see Note 15 to these condensed consolidated financial statements for additional details).

~~5. Acquisition:~~

On June 12, 2017 (the “Closing Date”), the Company acquired the facilities of Sovitec Mondial S.A. (“Sovitec”) located in Belgium, Spain, Argentina and France as part of a stock transaction (the “Acquisition”) for $41,572 in cash, excluding assumed debt. Based in Fleurus, Belgium, Sovitec is a high quality producer of engineered glass products used in transportation safety, metal finishing and polymer additives.

The Acquisition was accounted for using the acquisition method of accounting. Under the acquisition method, the purchase price was allocated to the identifiable net assets acquired based on the fair values of the identifiable assets acquired and liabilities assumed as of the Closing Date. The excess of the purchase price over the fair values of the identifiable net assets acquired was recorded to goodwill.

~~PQ GROUP HOLDINGS~~ECOVYST INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(unaudited)

Treasury Stock Repurchases

The ~~following table sets forth~~Company records repurchases of its common stock for treasury at cost. Upon the ~~calculation and preliminary allocation~~reissuance of the ~~purchase price~~Company’s common stock from treasury, differences between the proceeds from reissuance and the average cost of the treasury stock are credited or charged to capital in excess of par value to the ~~identifiable net assets acquired with respect~~extent of prior credits related to the ~~Acquisition:~~reissuance of treasury stock. If no such credits exist, the differences are charged to retained earnings.

2020 Stock Repurchase Program

Total consideration, net of cash acquired $ 41,572

Recognized amounts of identifiable assets acquired and liabilities assumed:
Receivables $ 14,305
Inventories 7,645
Prepaid and other current assets 230
Property, plant and equipment 9,020
Other long-term assets 129

Fair value of assets acquired 31,329
Current debt (6,420 )
Accounts payable (10,748 )
Long-term debt (10,189 )
Other long-term liabilities (154 )

Fair value of net assets acquired 3,818
Goodwill 37,754
$ 41,572

~~The valuation~~On March 12, 2020, the Company’s Board of Directors (the “Board”) approved a plan to purchase up to $50,000 of the ~~identifiable assets~~Company’s common stock under a stock repurchase program approved by the Board. Under the plan, the Company could repurchase shares from time to time for cash in open market transactions or in privately negotiated transactions in accordance with applicable federal securities laws. The Company determined the timing and ~~liabilities included~~the amount of any repurchases based on its evaluation of market conditions, share price and other factors. The stock repurchase program expired in March 2022, with no repurchases made in 2022 through the expiration of the program, nor during the three or nine months ended September 30, 2021.

2022 Stock Repurchase Program

On April 27, 2022, the Board approved a stock repurchase program that permits the Company to purchase up to $450,000 of the Company’s common stock over the next four years. Under the plan, the Company can repurchase shares from time to time for cash in open market transactions or in privately negotiated transactions in accordance with applicable federal securities laws. The Company will determine the timing and the amount of any repurchases based on its evaluation of market conditions, share price and other factors.

During the nine months ended September 30, 2022, the Company repurchased 1,970,763 shares of its common stock on the open market at an average price of $9.82 per share, for a total of $19,356. Additionally, in connection with a secondary offering of the Company’s common stock in August 2022, the Company repurchased 6,500,000 shares of its common stock sold in the ~~table above is preliminary~~offering from underwriters at a price of $8.36 per share simultaneous with the closing of the offering, for a total of $54,316.

As of September 30, 2022, $376,328 was available for additional share repurchases under the program. There were no repurchases during September 2022.

Tax Withholdings on Equity Award Vesting

In connection with the vesting of restricted stock awards, restricted stock units and ~~is subject~~performance stock units, shares of common stock may be delivered to ~~change, as~~ the Company ~~is in~~by employees to satisfy withholding tax obligations at the process of evaluating the information required to determine the fair values of certain identifiable assets and liabilities acquired, including inventory, property, plant and equipment, and intangible assets. An increased portioninstruction of the ~~purchase price allocated~~employee award holders. These transactions, when they occur, are accounted for as stock repurchases by the Company, with the shares returned to treasury stock at a cost representing the payment by the Company of the tax obligations on behalf of the employees in lieu of shares for the vesting unit. There were no shares delivered to the ~~identifiable net assets acquired will reduce the amount recognized for goodwill and may result in increased cost of goods sold, depreciation and/or amortization expense. Adjustments~~Company to the provisional amounts during the measurement period that result in changes to depreciation, amortization or other income effects will be recognized in the reporting period(s) in which the adjustments are determined.

The Company’s condensed consolidated financial statements include Sovitec’s results of operations for the period from the Closing Date through September 30, 2017. Net sales and net income attributable to Sovitec during this period are included in the Company’s condensed consolidated statement of operations and total $13,490 and $644, respectively,cover tax payments for the three months ended September 30, ~~2017,~~2022 and ~~$17,194~~2021, and ~~$1,148, respectively,~~the fair value of the shares withheld to cover tax payments were $332 and $1,470 for the nine months ended September 30, ~~2017. Acquisition costs~~2022 and 2021, respectively.

Dividends Paid

On August 4, 2021, the Board declared a special cash dividend of ~~$737 and $2,065 are included in other operating expense, net in~~$3.20 per share, using after tax cash proceeds from the ~~Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2017, respectively.~~

The Company believes that the Acquisition will enable it to offer a more comprehensive, cost-effective and high-quality portfolio of products and services to its customers worldwide when, combined with anticipated synergies within its existing business, contributed to a total purchase price that resulted in the recognition of goodwill. Allsale of the ~~goodwill~~Performance Chemicals business. The dividend was ~~assigned~~paid on August 23, 2021 to the Company’s ~~Performance Materials and Chemicals segment. The goodwill associated with~~stockholders of record at the ~~Acquisition is not deductible for tax purposes.~~

~~Pro Forma Financial Information~~

~~The unaudited pro forma financial information for the three months ended September 30, 2016 and the nine months ended September 30, 2017 and 2016 has been derived from the Company’s historical~~close of business on August 12, 2021. Refer to Note 3 of these condensed consolidated financial statements ~~and prepared to give effect to~~for additional details on the ~~Acquisition, assuming that the Acquisition occurred on January 1, 2016. The unaudited pro forma consolidated results of operations are provided for illustrative purposes only and are not indicative~~sale of the ~~Company’s actual consolidated results~~Performance Chemicals business.

Table of operations had the Acquisition been made as of January 1, 2016. The unaudited pro forma results of operations do not reflect any operating efficiencies or potential cost savings which may result from the Acquisition. The results of operations for the three months ended September 30, 2017 include the operating results of the combined company for the full period and therefore, there is no pro forma presentation included in the table below.Contents

~~PQ GROUP HOLDINGS~~ECOVYST INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(unaudited)

7. Acquisition:

On March 1, 2021 (the “Closing Date”), the Company completed the acquisition of Chem32, LLC (“Chem32”) as part of a stock transaction (the “Acquisition”) for $44,000 in cash. Based in Orange, Texas, Chem32 is a leader in ex situ pre-sulfiding and pre-activation for hydro-processing catalysts. The net cash paid by the Company was $42,639, after certain customary adjustments for indebtedness, working capital, cash and a holdback amount pursuant to the agreement. A portion of the holdback was settled in September 2022 for a payment of $488, with $512 of the holdback remaining as of September 30, 2022.

Three months ended September 30, Nine months ended
September 30,
2016 2017 2016
(unaudited)
Pro forma sales $ 381,065
$ 1,130,454
$ 772,549
Pro forma net loss (8,289 ) (6,511 ) (88,300 )

~~Certain non-recurring charges included~~Chem32 is reported as part of the Ecoservices segment. The Company believes that the Acquisition will offer a more robust portfolio of services within the refining industry by leveraging the Company’s existing relationships, therefore contributing to a total purchase price that resulted in the ~~Company’s results~~ recognition of ~~operations~~$14,778 of goodwill, which was deductible for tax purposes. During the nine months ended September 30, ~~2017 were allocated~~2022, the Company recorded an immaterial adjustment between goodwill and deferred tax liabilities related to the respective prior year periods for pro forma purposes. For the nine months ended September 30, 2017, non-recurring charges allocated to the prior year period include transaction fee charges of $2,065 which were excluded from the pro forma net loss for the nine months ended September 30, 2017.

~~6. Business Combination:~~

~~As described in~~final tax purchase price allocation. See Note 18 to these condensed consolidated financial statements ~~on May 4, 2016,~~for further information.

The following table sets forth the ~~Company, PQ Holdings, Eco Services, certain investment funds affiliated with CCMP and certain other stockholders~~calculation of ~~PQ Holdings and Eco Services completed~~ the ~~Business Combination. Eco Services is the accounting predecessor to PQ Group Holdings. Certain investment funds affiliated with CCMP held a controlling interest position in Eco Services prior~~purchase price to the ~~Business Combination. In addition, certain investment funds affiliated~~identifiable net assets acquired with ~~CCMP owned a noncontrolling interest in PQ Holdings prior~~respect to the Business Combination and the merger with Eco constituted a change in control under the various PQ Holdings credit agreements and bond indenture. Therefore, Eco Services is deemed to be the accounting acquirer. These condensed consolidated financial statements are the continuation of Eco Services’ business prior to the Business Combination.

Total consideration for the Business Combination included $1,777,740 of cash, $910,800 of equity in the acquired PQ Holdings entities and $1,401 of assumed stock awards of PQ Holdings. The fair value of the equity considerationAcquisition, which was ~~determined based on an estimated enterprise value using a market approach~~complete as of the date of the Business Combination, reduced by borrowings to arrive at the fair value of equity. The existing PQ Holdings credit facilities were not legally assumed as part of the Business Combination and the extinguishment of the debt concurrent with the Business Combination was included as part of the consideration transferred.December 31, 2021:

The Company’s condensed consolidated financial statements include PQ Holdings results of operations from May 4, 2016 through September 30, 2016. Net sales and net loss attributable to PQ Holdings during this period are included in the Company’s condensed consolidated statement of operations and total $276,726 and $29,070 for the three months ended September 30, 2016 and $462,097 and $122,497 for the nine months ended September 30, 2016. Acquisition costs of $896 and $1,398 are included in other operating expense, net in the Company’s consolidated statement of operations for the three and nine months ended September 30, 2016, respectively.


	Purchase Price Allocation
Cash paid, net of cash acquired	$	42,639
Holdback	1,000
Total consideration, net of cash acquired	$	43,639

Recognized amounts of identifiable assets acquired and liabilities assumed:
Receivables	$	1,368
Inventories	204
Prepaid and other current assets	351
Property, plant and equipment	5,046
Other intangible assets	22,100
Other long-term assets	187
Fair value of assets acquired	29,256

Accounts payable	207
Accrued liabilities	188



Fair value of net identifiable assets acquired	28,861
Goodwill	14,778
	$	43,639

In accordance with the requirements of the purchase method of accounting for acquisitions, accounts receivable and inventories were recorded at fair market value. As of the Closing Date, the fair value ~~(which~~of accounts receivable approximated historical cost. The gross contractual amount of accounts receivable at the Closing Date was $1,368, of which there was no amount deemed uncollectible. Fair value of inventory is defined as estimated selling prices less the sum of (a) costs of disposal and (b) a reasonable profit allowance for the selling effort of the acquiring ~~entity),~~entity, which ~~was $58,683 higher than~~ the ~~historical cost.~~ Company determined acquired cost equaled fair value of the inventory acquired.

The Company’s cost of goods sold includes a pre-tax charge of $5,804 and $23,518 for the three and nine months ended September 30, 2016, respectively, relating to the portion of the step-up on inventory sold during the period. A separate portion of the fair value step-up related to the domestic inventory accounted for under the LIFO method was included in inventory on the consolidated balance sheet as of December 31, 2016 as part of the new LIFO base layer on the acquired inventory.

~~Pro Forma Financial Information~~

~~The unaudited pro forma financial information~~ for the nine months ended September 30, 2016 has been derived from the Company’s historical consolidated financial statements and prepared to give effect to the Business Combination, assuming that the Business Combination occurred on January 1, 2015. These pro forma adjustments primarily relate to incremental depreciation expense on the step up2021 includes a pre-tax charge of ~~fixed assets,~~$148 of additional amortization ~~of acquired intangibles, higher cost of goods sold related to the sale of revalued inventory, incremental interest~~ expense related to identified intangible assets, which would have been recorded during the ~~additional debt that needed~~reporting period if the adjustments to ~~fund~~ the Business Combination, and the estimated impact of these adjustments on the Company’s tax provision. The unaudited pro forma consolidated results of operations are provided for illustrative purposes only and are not indicativeprovisional amounts had been recognized as of the Closing Date. The Company’s ~~actual consolidated results of operations had the Business Combination been made as of January 1, 2015. The unaudited pro forma results of operations do not reflect any~~other operating ~~efficiencies or potential cost savings which may result from the Business Combination. The results of operations~~expense, net for the ~~three~~nine months ended September 30, ~~2016 include~~2021 includes a pre-tax charge of $1,108 of additional amortization expense related to identified intangible assets, which would have been recorded during the ~~operating results~~reporting period if the adjustments to the provisional amounts had been recognized as of the ~~combined company for the full period and therefore, there is no pro forma presentation included in the table below.~~Closing Date.

Table of Contents

~~PQ GROUP HOLDINGS~~

ECOVYST INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(unaudited)

The valuation of intangibles assets acquired and the related weighted-average amortization periods were as follows:


	Amount		Weighted-Average Expected Useful Life (in years)
Intangible assets subject to amortization:
Customer relationships	$	16,000	10
Technical know-how	3,800		10
Contracts	700		5
Trade names	1,600		10
Total intangible assets subject to amortization	$	22,100

Nine months ended September 30, 2016
(unaudited)
Pro forma sales $ 1,080,310
Pro forma net loss (55,985 )

~~Certain non-recurring charges included in~~Net sales and net income attributable to Chem32 during the ~~Company’s results of operations~~period from the Closing Date through September 30, 2021 were immaterial. Pro forma financial information has not been presented as it is immaterial for the three and nine months ended September 30, 2021. Acquisition and integration costs were $680 for the nine months ended September 30, ~~2016 were allocated to~~2021 and are included in other operating expense, net in the ~~respective prior year periods for pro forma purposes. For the nine months ended September 30, 2016, non-recurring charges allocated to the prior year period include a debt prepayment penalty~~Company’s consolidated statement of ~~$26,250, refinancing charges of $4,616 and transaction fee charges of $714, all of which are excluded from the pro forma net loss for the nine months ended September 30, 2016.~~income.

~~7. Goodwill~~8. Goodwill:

The ~~changes~~change in the carrying amount of goodwill for the nine months ended September 30, ~~2017~~2022 is summarized as follows:


	Ecoservices		Catalyst Technologies		Total
Balance as of December 31, 2021	$	326,670	$	79,469	$	406,139

Goodwill adjustments(1)	(81)		—		(81)
Foreign exchange impact	—		(4,906)		(4,906)
Balance as of September 30, 2022	$	326,589	$	74,563	$	401,152

(1) During the nine months ended September 30, 2022, the Company recorded an adjustment of $81 between goodwill and deferred tax liabilities related to the final tax purchase price allocation for the Chem32 acquisition.

~~On August 28, 2017, in anticipation~~

Table of the arrival of Hurricane Harvey, we shut down our Houston and Baytown refining services facilities in coordination with our refinery partners. We restarted our Houston facility on September 3, 2017 and our Baytown facility on September 24, 2017 and both have returned to normal operation. We believe that the operational interruption at these facilities negatively impacted our sales for the three and nine months ending September 30, 2017 by $5.6 million and our Adjusted EBITDA for the same periods by $4.7 million. We maintain business interruption insurance coverage and we expect to submit claims under such policy. However, there is no assurance that such impacts will be offset in whole or in part by recoveries under any such insurance claims in a timely manner or at all. We do not expect that these operational interruptions will have a material adverse affect on our business, financial condition or results of operations.Contents

~~Pro Forma Results of Operations~~

In addition to the analysis of historical results of operations, we have prepared unaudited supplemental pro forma results of operations for the nine months ended September 30, 2016. The unaudited pro forma statements of operations reflect pro forma adjustments to the results of PQ Group Holdings to give effect to the Business Combination and the related financing transactions as if they had occurred on January 1, 2015. The unaudited pro forma adjustments include:

~~elimination of intercompany sales between legacy PQ and legacy Eco;~~

~~adjustments to depreciation expense related to the step-up in fair value of property, plant and equipment;~~

~~adjustments to amortization expense related to the step-up in fair value of definite-lived intangible assets;~~

~~removal of non-recurring adjustments related to the step-up in the fair value of inventory;~~

~~adjustments to stock compensation expense to reflect charges as they relate to our new capital structure;~~

~~adjustments related to the amortization of the step-up in fair value of property, plant, equipment and definite-lived intangible assets related to our Zeolyst Joint Venture;~~

~~adjustments to interest expense related to the senior secured term loan facility;~~

~~adjustments related to the write-off of existing deferred financing fees, original issue discounts and prepayment penalties; and~~

~~the tax effect of the aforementioned adjustments, including the effect related to the change in tax status of Eco from a limited liability company to a C-corporation.~~

The unaudited pro forma statements of operations have been prepared in accordance with Article 11 of Regulation S-X by combining the historical results of operations of legacy Eco and legacy PQ for the periods prior to May 4, 2016 and should be read in conjunction with our historical consolidated financial statements and related notes thereto included elsewhere in this Form 10-Q.

The unaudited pro forma statements of operations have been prepared for illustrative purposes only and are not necessarily indicative of the combined results of operations that would have been realized had the pro forma transactions been completed as of the dates indicated, nor are they meant to be indicative of any anticipated future results of operations. The unaudited pro forma adjustments are based upon available information and assumptions we believe are factually supportable, directly attributable to the Business Combination and the related financing transactions, and with respect to the statement of operations, expected to have a continuing impact on our business, and that we believe are reasonable under the circumstances. In addition, the unaudited pro forma statements of operations do not include any pro forma adjustments to reflect expected cost savings or restructuring actions which may be achievable or the impact of any non-recurring activity and transaction-related costs.

We believe that the unaudited pro forma statements of operations are a useful presentation of our results of operations as they provide comparative information, period-over-period, on a more comparable basis.

Results of Operations

Three Months Ended September 30, ~~2017~~2022 Compared to the Three Months Ended September 30, ~~2016~~2021

Highlights

The following is a summary of our financial performance for the three months ended September 30, ~~2017~~2022 compared with the three months ended September 30, ~~2016.~~

2021.

Sales

~~Net sales~~•Sales increased ~~$21.8~~$65.1 million to ~~$391.8~~$232.5 million. The increase in sales was primarily due to organic growth driven by favorable price and mix, and the contribution of $13.5 million of sales related to our recent Sovitec acquisition, which was completed on June 12, 2017. These factors more than offset the negative impact onhigher sales volumes ~~from Hurricane Harvey, which caused a temporary shutdown~~and higher average selling prices, including the favorable pass-through of ~~two refining services plants in southeast Texas.~~sulfur pricing.

Gross Profit

~~Gross~~•Gross profit increased ~~$7.2~~$14.1 million to ~~$102.5~~$67.7 million. ~~Our~~The increase in gross profit was primarily due ~~to organic growth driven~~to higher sales volumes and favorable pricing, partially offset by ~~favorable price and mix, as well as the gross profit contributed by the Sovitec acquisition for the three months ended September 30, 2017.~~increased manufacturing costs.

Operating Income

•Operating income increased by ~~$2.2~~$16.0 million to ~~$46.5~~$38.5 million. ~~Our~~The increase in operating income ~~increased~~was due to ~~the Sovitec acquisition and the margins generated by the~~an increase in ~~customer pricing for the three months ended September 30, 2017.~~gross profit and lower selling, general and administrative expenses, partially offset by higher other operating expenses.

Equity in Net Income of Affiliated Companies

•Equity in net income of affiliated companies for the three months ended September 30, ~~2017~~2022 was ~~$10.3~~$3.2 million, compared ~~with a $4.6~~to $8.8 million ~~loss~~ for the three months ended September 30, ~~2016.~~2021. The ~~increase~~decrease of $5.6 million was due to ~~$4.2 million of~~lower earnings generated by ~~our~~the Zeolyst Joint Venture ~~and $10.4 million of lower amortization of investment in affiliate inventory step-up costs incurred~~ for the three months ended September 30, ~~2017.~~2022, driven by lower sales volumes within the joint venture.

Table of Contents

The following is our unaudited condensed consolidated ~~statement~~statements of ~~operations~~income and a summary of financial results for the three months ended September 30, ~~2017~~2022 and ~~2016:~~2021:


	Three months ended September 30,						Change
	2017			2016			$			%			Three months ended September 30,						Change
	Unaudited			Unaudited									2022			2021			$		%
	(in millions, except percentages)												(in millions, except percentages)
Sales	$	391.8		$	370.0		$	21.8		5.9	%	Sales	$	232.5		$	167.4		$	65.1	38.9	%
Cost of goods sold	289.3			274.7			14.6			5.3	%	Cost of goods sold	164.8			113.8			51.0		44.8	%
Gross profit	102.5			95.3			7.2			7.6	%	Gross profit	67.7			53.6			14.1		26.3	%
Gross profit margin	26.2		%	25.8		%						Gross profit margin	29.1		%	32.0		%
Selling, general and administrative expenses	36.2			36.0			0.2			0.6	%	Selling, general and administrative expenses	21.5			24.8			(3.3)		(13.3)	%
Other operating expense, net	19.8			15.0			4.8			32.0	%	Other operating expense, net	7.7			6.3			1.4		22.2	%
Operating income	46.5			44.3			2.2			5.0	%	Operating income	38.5			22.5			16.0		71.1	%
Operating income margin	11.9		%	12.0		%						Operating income margin	16.6		%	13.4		%
Equity in net (income) loss of affiliated companies	(10.3		)	4.6			(14.9		)	(323.9	)%
Equity in net (income) from affiliated companies												Equity in net (income) from affiliated companies	(3.2)			(8.8)			5.6		(63.6)	%
Interest expense, net	49.1			48.6			0.5			1.0	%	Interest expense, net	9.5			9.0			0.5		5.6	%
Debt extinguishment costs	0.5			—			0.5			—	%	Debt extinguishment costs	—			15.2			(15.2)		(100.0)	%
Other expense, net	5.1			4.2			0.9			21.4	%
Income (loss) before income taxes and noncontrolling interest	2.1			(13.1		)	15.2			(116.0	)%
Provision for (benefit) income taxes	5.2			(3.5		)	8.7			(248.6	)%
Other expense (income), net												Other expense (income), net	1.9			(0.2)			2.1		NM
Income before income taxes and noncontrolling interest												Income before income taxes and noncontrolling interest	30.3			7.3			23.0		315.1	%
Provision for income taxes												Provision for income taxes	9.0			2.6			6.4		246.2	%
Effective tax rate	239.9		%	26.9		%						Effective tax rate	29.6		%	35.6		%
Net loss	(3.1		)	(9.6		)	6.5			(67.7	)%
Less: Net income attributable to the noncontrolling interest	0.3			0.4			(0.1		)	(25.0	)%
Net loss attributable to PQ Group Holdings Inc.	$	(3.4	)	$	(10.0	)	$	6.6		(66.0	)%
Net income from continuing operations												Net income from continuing operations	21.3			4.7			16.6		353.2	%
Net loss from discontinued operations, net of tax												Net loss from discontinued operations, net of tax	—			(75.9)			75.9		(100.0)	%
Net income (loss)												Net income (loss)	21.3			(71.2)			92.5		(129.9)	%
Less: Net income attributable to the noncontrolling interest—discontinued operations												Less: Net income attributable to the noncontrolling interest—discontinued operations	—			0.1			(0.1)		(100.0)	%
Net income (loss) attributable to Ecovyst Inc.												Net income (loss) attributable to Ecovyst Inc.	$	21.3		$	(71.3)		$	92.6	(129.9)	%

Sales


	Three months ended September 30,				Change
	2022		2021		$		%
	(in millions, except percentages)
Sales:
Ecoservices	$	195.7	$	137.5	$	58.2	42.3	%
Catalyst Technologies	36.8		29.9		6.9		23.1	%
Total sales	$	232.5	$	167.4	$	65.1	38.9	%

Historical
Three months ended
September 30,
Change
2017 2016
$

%

(in millions, except percentages)
Net Sales:
Performance Chemicals $ 175.5
$ 167.8
$ 7.7
4.6 %
Performance Materials 104.4
90.2
14.2
15.7 %
Eliminations (2.8) (1.9) (0.9) 47.4 %
Performance Materials & Chemicals $ 277.1
$ 256.1
$ 21.0
8.2 %

Silica Catalyst $ 15.1
$ 21.0
$ (5.9 ) (28.1 )%
Refining Services 100.4 93.3 7.1 7.6 %
Environmental Catalysts & Services 115.5 114.3 1.2 1.1 %

Inter-segment sales eliminations (0.8) (0.4) (0.4) 100.0 %

Total net sales $ 391.8
$ 370.0
$ 21.8
5.9 %

~~Performance Materials & Chemicals:~~Ecoservices: Sales in ~~performance materials and chemicals~~Ecoservices for the three months ended September 30, ~~2017~~2022 were ~~$277.1~~$195.7 million, an increase of ~~$21.0~~$58.2 million, or ~~8.2%~~42.3%, compared to sales of ~~$256.1~~$137.5 million for the three months ended September 30, ~~2016.~~2021. The increase in sales was ~~primarily~~ due to ~~$13.5 million related to the Sovitec acquisition, favorable effects of foreign currency exchange of $4.5 million,~~ higher average selling ~~price and favorable customer mix~~prices of ~~$2.6~~$53.3 million and ~~slightly~~a $4.9 million contribution from higher sales volumes.

~~The higher~~Higher average selling ~~price was principally~~prices were primarily a result of ~~customer mix, favorable U.S. dollar denominated sales~~the pass-through of higher sulfur costs of $28.3 million within our virgin sulfuric acid product group and ~~U.S. dollar cost pass through pricing~~the pass-through of other raw material costs within our regenerations services product group. The increase in ~~certain foreign locations. The favorable effects of foreign currency were~~volumes was primarily driven by strong demand for regeneration services during the ~~stronger Euro compared to the U.S. dollar.~~quarter.

~~Environmental Catalysts & Services:~~Catalyst Technologies: Sales in ~~environmental catalysts and services~~Catalyst Technologies for the three months ended September 30, ~~2017~~2022 were ~~$115.5~~$36.8 million, an increase of ~~$1.2~~$6.9 million, or ~~1.1%~~23.1%, compared to sales of ~~$114.3~~$29.9 million for the three months ended September 30, ~~2016. The~~2021. Of the increase in sales, $9.9 million was ~~primarily due to~~associated with higher ~~average selling price and customer mix of $6.1 million, which was~~sales volumes, driven by demand for our polyethylene catalysts, partially offset by ~~lower volumes~~price of ~~$4.9~~$0.3 million and unfavorable foreign exchange of $2.7 million.

The higher average selling price and customer mix was driven by the higher realization from sulfuric acid regeneration contract renewals partly offset by unfavorable virgin sulfuric acid pricing due to the mix

Table of customers. The decrease in volumes was driven by lower chemical catalysts sales due to record methyl methacrylate sales volumes in the prior year and the negative impact of Hurricane Harvey on sulfuric acid regeneration sales, which was partially offset by stronger virgin sulfuric acid sales volumes due to the timing of customer plant turnarounds.Contents

Gross Profit

Gross profit for the three months ended September 30, ~~2017~~2022 was ~~$102.5~~$67.7 million, an increase of ~~$7.2~~$14.1 million, or ~~7.6%~~26.3%, compared with ~~$95.3~~$53.6 million for the ~~three~~three months ended September 30, ~~2016.~~2021. The increase in gross profit was due to higher sales volumes, which accounted for $13.6 million of the increase, and higher average selling ~~price~~prices of ~~$8.7~~$53.0 million, ~~and $4.5 million in gross profit contributed from the Sovitec acquisition,~~ which ~~was~~were partially offset by ~~higher depreciation expense~~unfavorable manufacturing costs of ~~$3.0 million, unfavorable product mix of $2.2~~$47.8 million and ~~lower volumes of $1.7 million.~~a $4.7 million impact associated with a less-favorable sales mix.

The ~~higher average selling price~~favorable change in volumes was a result of increased demand for our polyethylene catalysts, niche custom catalysts, and regeneration services. Favorable customer ~~mix~~pricing was primarily driven by increased prices to cover rising variable costs, including the pass-through of sulfur, labor index and energy costs within our Ecoservices business. The increase in manufacturing costs was a result of higher ~~realization from sulfuric acid regeneration contract renewals partly offset by unfavorable virgin sulfuric acid pricing due to the mix of customers. This was partly offset by unfavorable product mix~~variable costs, maintenance and ~~volumes due to higher methyl methacrylate sales in the prior year as well as the negative impact of Hurricane Harvey.~~transportation costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended September 30, ~~2017~~2022 were ~~$36.2~~$21.5 million, a ~~slight increase~~decrease of ~~$0.2~~$3.3 million compared with ~~$36.0~~$24.8 million for the three months ended September 30, ~~2016.~~2021. The decrease in selling, general and administrative expenses was primarily due to a decrease in stock-based compensation expense of $5.5 million, which consisted of $4.0 million of incremental cost recognized during the three months ended September 30, 2021 in connection with the modifications of our equity incentive awards and stock options associated with the special dividend and sale of the Performance Chemicals business in August 2021, with the remaining decrease driven by forfeitures of equity incentive awards in 2022 by former Company executives and employees of the Performance Chemicals business. This was partially offset by higher other compensation-related expenses of $1.2 million and net increases in other costs of $1.0 million.

Other Operating Expense, Net

Other operating expense, net for the three months ended September 30, ~~2017~~2022 was ~~$19.8~~$7.7 million, an increase of ~~$4.8~~$1.4 million, compared with ~~$15.0~~$6.3 million for the three months ended September 30, ~~2016.~~2021. The increase in other operating expense, net was ~~due to increased losses on~~mainly driven by severance charges incurred from contracts associated with former executives incurred in the ~~sale of assets and restructuring and plant closure costs, offset by lower severance and transaction costs related to the Business Combination.~~current period $1.2 million.

Equity in Net Income of Affiliated Companies

Equity in net income of affiliated ~~companies~~companies for the three months ended September 30, ~~2017~~2022 was ~~$10.3~~$3.2 million, compared ~~with a loss of $4.6~~to $8.8 million for the three months ended September 30, ~~2016.~~2021. The ~~increase~~decrease was primarily due to ~~an increase of $4.2~~$5.7 million of lower earnings ~~generated by our~~from the Zeolyst Joint Venture during the three months ended September 30, ~~2017 and $10.4 million of lower amortization on~~2022 as compared to the ~~fair value step-up of inventory and other underlying assets of our Zeolyst Joint Venture.~~three months ended September 30, 2021. The ~~increase~~decrease in earnings ~~generated by our~~from the Zeolyst Joint Venture was due to ~~higher~~lower sales volumes for our hydrocracking and specialty ~~catalyst sales of aromatic and dewaxing catalysts and an increase in hydrocracking volumes to the oil refining industry.~~catalysts.

Interest Expense, Net

Interest expense, net for the three ~~months~~months ended September 30, ~~2017~~2022 was ~~$49.1~~$9.5 million, an increase of $0.5 million, as compared with ~~$48.6~~$9.0 million for the three months ended September 30, ~~2016.~~2021. The increase in interest expense, net was primarily due to the year over year increase in variable rate debt, which was partially offset by lower outstanding debt during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021.

Debt Extinguishment Costs

Debt extinguishment costs for the three months ended September 30, ~~2017~~2021 were ~~$0.5~~$15.2 million. On

Concurrent with, and using a portion of the net cash proceeds from, the divestiture of the Performance Chemicals business in August ~~7, 2017,~~2021, we ~~re-priced~~repaid the ~~existing U.S. dollar-denominated tranche~~remaining balance on our 2016 Term Loan Facility and ~~existing Euro-denominated tranche~~redeemed the Senior Notes. In connection with the redemption of ~~our term loans to reduce~~ the ~~applicable interest rates. The company~~Senior Notes, we paid a redemption premium of $8.5 million, which was recorded ~~$0.2 million of new creditor and third-party financing fees~~ as debt extinguishment ~~costs. In addition, previous~~costs during the three months ended September 30, 2021. We wrote off $0.8 million of unamortized deferred financing costs ~~of $0.1~~and $2.4 million ~~and~~of original issue discount related to the 2016 Term Loan Facility and $2.3 million of ~~$0.2~~unamortized deferred financing costs and $1.2 million ~~associated with~~of original issue discount related to the ~~old debt were written off~~Senior Notes as debt extinguishment ~~costs.~~costs during the three months ended September 30, 2021.

Table of Contents

Other Expense (Income), Net

Other expense (income), net for the three months ended September 30, ~~2017~~2022 was ~~$5.1~~expense of $1.9 million, ~~an increase~~a change of ~~$0.9~~$2.1 million, as compared with ~~$4.2~~income of $0.2 million for the three months ended September 30, ~~2016.~~2021. The change in other expense, net primarily consisted of ~~an increase~~a lower net periodic benefit for the defined benefit pension and postretirement plans of ~~$1.8 million of foreign currency losses, which was partially offset by~~ $0.9 million and increases in ~~lower professional fees.~~other net costs of $1.2 million.

Provision ~~(Benefit)~~ for Income Taxes

The provision for income taxes for the three months ended September 30, ~~2017~~2022 was ~~$5.2~~$9.0 million compared to a ~~$3.5~~$2.6 million ~~benefit~~provision for the three months ended September 30, ~~2016.~~2021. The effective income tax rate for the three months ended September 30, ~~2017~~2022 was ~~239.9%~~29.6% compared to ~~26.9%~~35.6% for the three months ended September 30, ~~2016.~~2021.

The difference between the U.S. federal statutory income tax rate and ~~our~~the Company’s effective income tax rate for the three months ended September 30, ~~2017 and 2016~~2022 was mainly due to ~~the tax effect of our foreign currency exchange loss recognized as~~state and local taxes, a discrete ~~item for~~shortfall tax expense related to stock compensation, and a discrete tax expense associated with the purposes of calculating the effective tax rate as well as the tax effect of repatriating foreign earnings back to the U.S. as dividends, partially offset by lower tax rates in foreign jurisdictions as compared to the U.S. federal tax rate, state taxes and foreign withholding taxes.Employee Retention Credit.

Net ~~Loss~~Income (Loss) Attributable to ~~PQ Group Holdings~~Ecovyst

~~For the foregoing reasons and after~~After the effect of the non-controlling interest in earnings of subsidiaries for each period presented, net ~~loss~~income attributable to ~~PQ Group Holdings~~Ecovyst was ~~$3.4~~$21.3 million for the three months ended September 30, ~~2017~~2022 compared with a net loss of ~~$10.0~~$71.3 million for the three months ended September 30, ~~2016.~~

2021.

Adjusted EBITDA

Summarized Segment Adjusted EBITDA information is shown below in the following table:


	Three months ended September 30,				Change
	2022		2021		$		%
	(in millions, except percentages)
Segment Adjusted EBITDA:(1)
Ecoservices	$	64.1	$	51.9	$	12.2	23.5	%
Catalyst Technologies(2)	19.3		25.5		(6.2)		(24.3)	%
Unallocated corporate expenses	(8.0)		(8.0)		—		—	%
Total Adjusted EBITDA	$	75.4	$	69.4	$	6.0	8.6	%

Three months ended
September 30, Change
2017 2016 $ %
Segment Adjusted EBITDA ⁽¹⁾:

Performance Materials & Chemicals $ 65.9
$ 64.6
$ 1.3
2.0 %
Environmental Catalysts & Services ⁽²⁾
61.9
56.4
5.5
9.8 %
Total Segment Adjusted EBITDA⁽³⁾
127.8
121.0
6.8
5.6 %
Unallocated corporate costs (7.9 ) (7.4 ) (0.5 ) 6.8 %
Total Adjusted EBITDA ⁽³⁾
$ 119.9
$ 113.6
$ 6.3
5.5 %


⁽¹⁾			We define Segment 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 Segment Adjusted EBITDA. Segment 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. Segment Adjusted EBITDA may not be comparable with EBITDA or Adjusted EBITDA as defined by other companies.

⁽²⁾

The Adjusted EBITDA from our Zeolyst Joint Venture included in the environmental catalyst and services segment is $14.4 million for the three months ended September 30, 2017, which includes $10.2 million of equity in net income plus $1.7 million of amortization of investment in affiliate step-up plus $2.6 million of joint venture depreciation, amortization and interest. The Adjusted EBITDA from our Zeolyst Joint Venture included in the environmental catalyst and services segment is $10.3 million for the three months ended September 30, 2016, which includes $4.7 million of equity in net loss plus $12.3 million of amortization of investment in affiliate step-up plus $2.7 million of joint venture depreciation, amortization and interest.


⁽³⁾	~~Our total Segment Adjusted EBITDA differs from our total consolidated Adjusted EBITDA due to unallocated corporate expenses.~~

(1)We define Segment 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 Segment Adjusted EBITDA. Segment 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. Segment Adjusted EBITDA may not be comparable with EBITDA or Adjusted EBITDA as defined by other companies.

(2)The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment was $8.7 million for the three months ended September 30, 2022, which includes $3.2 million of equity in net income, excluding $1.6 million of amortization of investment in affiliate step-up plus $3.9 million of joint venture depreciation, amortization and interest. The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment was $14.5 million for the three months ended September 30, 2021, which includes $8.8 million of equity in net income, excluding $1.6 million of amortization of investment in affiliate step-up plus $4.1 million of joint venture depreciation, amortization and interest.

Ecoservices:Adjusted EBITDA for the three months ended September 30, ~~2017~~2022 was ~~$119.9~~$64.1 million, an increase of ~~$6.3~~$12.2 million, or ~~5.5%~~23.5%, compared with ~~$113.6~~$51.9 million for the three months ended September 30, ~~2016.~~2021. The increase in Adjusted EBITDA was a result of favorable regeneration services and virgin sulfuric acid pricing that more than covered higher variable costs, along with increased demand for regeneration services during the quarter.

~~Performance Materials & Chemicals:~~Catalyst Technologies: Adjusted EBITDA for the three months ended September 30, ~~2017~~2022 was ~~$65.9~~$19.3 million, ~~an increase~~a decrease of ~~$1.3~~$6.2 million, or ~~2.0%~~24.3%, compared with ~~$64.6~~$25.5 million for the three months ended September 30, ~~2016.~~

2021. The ~~increase~~decrease in Adjusted EBITDA was ~~due to earnings contributed by the Sovitec acquisition~~primarily a result of ~~$2.0 million~~unfavorable product mix and higher production costs, partially offset by higher ~~manufacturing costs to support the start-up~~sales volumes.

Table of ~~the ThermoDrop® production facility and higher non-pass through raw materials costs.~~Contents

~~Environmental Catalysts & Services:~~ ~~Adjusted EBITDA for the three months ended September 30, 2017 was $61.9 million, an increase of $5.5 million, or 9.8%, compared with $56.4 million for the three months ended September 30, 2016.~~

The increase in Adjusted EBITDA was driven primarily by the higher realization from sulfuric acid regeneration contract renewals and higher Zeolyst Joint Venture volumes driven by specialty catalyst sales of aromatic and dewaxing catalysts as well as hydrocracking sales to the oil markets. This was partly offset by the timing of plant turnaround costs and costs incurred due to Hurricane Harvey.

A reconciliation of ~~Segment~~net income from continuing operations to Adjusted EBITDA ~~to net loss attributable to PQ Group Holdings~~ is as follows:


	Three months ended September 30,
	2022		2021
	(in millions)
Reconciliation of net income from continuing operations to Adjusted EBITDA
Net income from continuing operations	$	21.3	$	4.7
Provision for income taxes	9.0		2.6
Interest expense, net	9.5		9.0
Depreciation and amortization	19.6		20.6
EBITDA	59.4		36.9
Joint venture depreciation, amortization and interest(a)	3.9		4.1
Amortization of investment in affiliate step-up(b)	1.6		1.6

Debt extinguishment costs	—		15.2
Net loss on asset disposals(c)	0.5		2.2
Foreign currency exchange loss(d)	1.0		0.9
LIFO benefit(e)	(0.4)		(1.3)

Transaction and other related costs(f)	1.8		0.5
Equity-based compensation	4.7		10.2
Restructuring, integration and business optimization expenses(g)	1.3		0.1
Defined benefit pension expense (benefit)(h)	0.3		(1.0)
Other(i)	1.3		—
Adjusted EBITDA	$	75.4	$	69.4

Three months ended
September 30,
2017 2016
Reconciliation of net loss attributable to PQ Group Holdings Inc. to Segment Adjusted EBITDA
Net loss attributable to PQ Group Holdings Inc. $ (3.4 ) $ (10.0 )
Provision for (benefit from) income taxes 5.2
(3.5 )
Interest expense, net 49.1
48.6
Depreciation and amortization 45.9
43.6
EBITDA 96.8
78.7
Joint venture depreciation, amortization and interest ^(a)
2.6
2.7
Amortization of investment in affiliate step-up ^(b)
1.7
12.3
Amortization of inventory step-up ^(c)
—
5.8
Debt extinguishment costs 0.5
—
Net loss on asset disposals ^(d)
3.5
0.6
Foreign currency exchange loss ^(e)
5.3
3.2
Non-cash revaluation of inventory, including LIFO 0.8
0.3
Management advisory fees ^(f)
1.3
1.3
Transaction related costs ^(g)
1.0
1.7
Equity-based and other non-cash compensation 1.0
1.1
Restructuring, integration and business optimization expenses ^(h)
5.0
2.8
Defined benefit plan pension cost ⁽ⁱ⁾
0.8
1.2
Other ^(j)
(0.4 ) 1.9
Adjusted EBITDA 119.9
113.6

Unallocated corporate expenses 7.9
7.4
Total Segment Adjusted EBITDA $ 127.8
$ 121.0


^(a)			We use Adjusted EBITDA as a performance measure to evaluate our financial results. Because our environmental catalysts and services segment includes our 50% interest in our Zeolyst Joint Venture, we include an adjustment for our 50% proportionate share of depreciation, amortization and interest expense of our Zeolyst Joint Venture.

^(b)

(a)We use Adjusted EBITDA as a performance measure to evaluate our financial results. Because our Catalyst Technologies 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.

(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 fixed assets and intangible assets, including customer relationships and technical know-how.

(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.

(d)Reflects the exclusion of the foreign currency transaction gains and losses in the statements of income, which primarily relates to the non-permanent intercompany debt denominated in local currency translated to U.S. dollars.

(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, which we believe provides a means of comparison to other companies that may not use the same basis of accounting for inventories.

(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.

(g)Includes the impact of restructuring, integration and business optimization expenses which are incremental costs that are not representative of our ongoing business operations.

(h)Represents adjustments for defined benefit pension plan (benefit) costs in our statements of income. All of our defined benefit pension plan obligations are under defined benefit pension plans that are frozen. As such, we do not view such income or expenses as core to our ongoing business operations.

(i)Other costs consist of certain expenses that are not core to our ongoing business operations, including environmental remediation-related costs, capital and franchise taxes. Included in this line-item are rounding discrepancies that may arise from rounding from dollars (in thousands) to dollars (in millions).

Table of Contents

Represents the amortization of the fair value adjustments associated with the equity affiliate investment in our Zeolyst Joint Venture as a result of the Business Combination. We determined the fair value of the equity affiliate investment and the fair value step-up was then attributed to the underlying assets of our Zeolyst Joint Venture. Amortization is primarily related to the fair value adjustments associated with inventory, fixed assets and intangible assets, such as customer relationships, formulations and product technology.


^(c)	~~As a result of the Business Combination, there was a step-up in the fair value of inventory at PQ Holdings, which is amortized through cost of goods sold in the income statement.~~


^(d)	We do not have a history of significant asset disposals. However, 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.


^(e)	Reflects the exclusion of the negative or positive transaction gains and losses of foreign currency in the income statement primarily related to the Euro denominated term loan and the non-permanent intercompany debt denominated in local currency translated to U.S. dollars.


^(f)	Reflects consulting fees paid to CCMP and affiliates of INEOS for consulting services that include certain financial advisory and management services. These payments ceased upon the closing of our initial public offering.


^(g)	Relates to certain transaction costs described in our condensed consolidated financial statements for the quarter ended September 30, 2017 as well as other costs related to several transactions that are completed, pending or abandoned and that we believe are not representative of our ongoing business operations.


^(h)	Includes the impact of restructuring, integration and business optimization expenses that are related to specific, one-time items, including severance for a reduction in force and post-merger integration costs that are not expected to recur.

⁽ⁱ⁾

Represents adjustments for defined benefit pension plan costs in our income statement. More than two-thirds of our defined benefit pension plan obligations are under defined benefit pension plans that are frozen and the remaining obligations primarily relate to plans operated in certain of our non-U.S. locations that, pursuant to jurisdictional requirements, cannot be frozen. As such, we do not view such expenses as core to our ongoing business operations.

^(j)

Other costs consist of certain expenses that are not core to our ongoing business operations and are generally related to specific, one-time items, including environmental remediation-related costs associated with the legacy operations of our business prior to the Business Combination, capital and franchise taxes, non-cash asset retirement obligation accretion and the initial implementation of procedures to comply with Section 404 of the Sarbanes-Oxley Act.

Adjusted Net Income

Summarized adjusted net income information is shown below in the following table:


	Three months ended September 30,
	2022						2021
	Pre-tax		Tax expense (benefit)		After-tax		Pre-tax		Tax expense (benefit)		After-tax
	(in millions)
Reconciliation of net income from continuing operations to Adjusted Net Income(1)(2)


Net income attributable to Ecovyst Inc.	$	30.3	$	9.0	$	21.3	$	7.3	$	2.6	$	4.7
Amortization of investment in affiliate step-up(b)	1.6		0.5		1.1		1.6		0.5		1.1

Debt extinguishment costs	—		—		—		15.2		4.4		10.8
Net loss on asset disposals(c)	0.5		0.2		0.3		2.2		0.5		1.7
Foreign currency exchange loss(d)	1.0		0.2		0.8		0.9		0.2		0.7
LIFO benefit(e)	(0.4)		(0.1)		(0.3)		(1.3)		(0.4)		(0.9)

Transaction and other related costs(f)	1.8		0.5		1.3		0.5		0.2		0.3
Equity-based compensation	4.7		0.1		4.6		10.2		2.9		7.3
Restructuring, integration and business optimization expenses(g)	1.3		0.4		0.9		0.1		0.1		—
Defined benefit pension plan expense (benefit)(h)	0.3		0.1		0.2		(1.0)		(0.3)		(0.7)
Other(i)	1.3		0.4		0.9		—		—		—
Adjusted Net Income, including Intraperiod allocation	$	42.4	$	11.3	$	31.1	$	35.7	$	10.7	$	25.0
Intraperiod allocation for restating discontinued operations(3)	—		—		—		—		(0.5)		0.5

Adjusted Net Income	$	42.4	$	11.3	$	31.1	$	35.7	$	10.2	$	25.5

Three months ended
September 30,
2017 2016
Reconciliation of net loss attributable to PQ Group Holdings Inc. to Adjusted Net Income ^{(1) (2)}

Net loss attributable to PQ Group Holdings Inc. $ (3.4 ) $ (10.0 )
Amortization of investment in affiliate step-up ^(b)
1.0
7.5
Amortization of inventory step-up ^(c)
—
3.6
Debt extinguishment costs 0.3
—
Net loss on asset disposals ^(d)
2.1
0.4
Foreign currency exchange loss ^(e)
5.2
4.3
Non-cash revaluation of inventory, including LIFO 0.5
0.2
Management advisory fees ^(f)
0.8
0.8
Transaction related costs ^(g)
0.6
1.0
Equity-based and other non-cash compensation 0.7
0.7
Restructuring, integration and business optimization expenses ^(h)
2.9
1.8
Defined benefit plan pension cost ⁽ⁱ⁾
0.5
0.8
Other ^(j)
—
1.2
Adjusted net income $ 11.2
$ 12.3


⁽¹⁾			We define adjusted net income as net loss attributable to PQ Group Holdings 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.

⁽²⁾

(1)We define adjusted net income as net income attributable to Ecovyst 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.

(2)Refer to the Adjusted EBITDA notes above for more information with respect to each adjustment.

(3)Due to the sale of the Performance Chemicals business, the tax rates used to value deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) needs to be adjusted. Given it is a direct result of the sale of discontinued operations and the need to adjust the tax rates arose because of discontinued operations, the impact of revaluing the reporting entity’s DTAs and DTLs are reflected in continuing operations.

~~Refer to the Adjusted EBITDA notes above for more information with respect to each adjustment.~~

The adjustments to net ~~loss~~income attributable to ~~PQ Group Holdings~~Ecovyst Inc. are shown net of applicable tax rates ~~which range between 34.6% and 42.1%~~as determined by the calculation of our quarterly tax provision under interim financial reporting for the three months ended September 30, ~~2017~~2022 and September 30, ~~2016,~~2021, except for the foreign currency exchange loss, impacts of tax rate changes and the effects of the sale of assets for which the ~~tax is~~taxes are calculated as a discrete ~~item~~items using the applicable statutory income tax rates.

Table of Contents

Results of Operations

~~Historical and Pro Forma—~~Nine Months Ended September 30, ~~2017~~2022 Compared to the Nine Months Ended September 30, ~~2016 (the Pro Forma Discussion Compares the Historical Nine Months Ended September 30, 2017 to the Pro Forma Nine Months Ended September 30, 2016)~~2021

Highlights

The following is a summary of our financial performance for the nine months ended September 30, ~~2017~~2022 compared with the nine months ended September 30, ~~2016.~~2021.

Sales

~~Historical:~~ ~~Net sales~~•Sales increased ~~$372.6~~$196.4 million to ~~$1,114.0~~$637.4 million. The increase in sales was primarily due to ~~the inclusion of $818.2 million of legacy PQ~~higher sales in our results of operations for the nine months ended September 30, 2017 as compared to $462.1 million of legacy PQ sales included in our results of operations for the period of May 4, 2016 through September 30, 2016.

~~Pro Forma:~~ ~~Net sales increased $33.7 million to $1,114.0 million. The increase in sales was primarily due to the inclusion of $17.2 million of sales related to the Sovitec acquisition~~volumes and higher average ~~customer~~selling prices, ~~and mix for~~including the ~~nine months ended September 30, 2017.~~

favorable pass-through of sulfur pricing.

Gross Profit

~~Historical:~~ •Gross profit increased ~~$109.0~~$53.1 million to ~~$292.7~~$175.3 million. ~~Our~~The increase in gross profit was primarily due to the inclusion of $196.1 million of legacy PQ gross profit in our results of operations for the nine months ended September 30, 2017 as compared to $91.6 million of legacy PQ gross profit included in our results of operations for the period of May 4, 2016 through September 30, 2016.

~~Pro Forma:~~ ~~Gross profit increased $3.6 million to $292.7 million. Our increase in gross profit was primarily due to~~ higher ~~pricing~~sales volume and ~~the earnings contributed by the Sovitec acquisition, which was~~favorable pricing, partially offset by increased ~~depreciation and higher~~ manufacturing ~~costs for the nine months ended September 30, 2017.~~

costs.

Operating Income

~~Historical:~~ •Operating income increased by ~~$70.5~~$45.8 million to ~~$139.6~~$82.4 million. Our increase in operating income was primarily due to the inclusion of $61.2 million of legacy PQ operating income in our results of operations for the nine months ended September 30, 2017 as compared to the inclusion of $19.9 million of legacy PQ operating income in our results of operations for the period of May 4, 2016 through September 30, 2016. The increase in operating income was ~~also~~ due to an increase in gross profit and lower selling, general and administrative expenses, ~~due to cost reduction initiatives and lower~~partially offset by higher other operating ~~expense, net from lower restructuring and severance related charges.~~

~~Pro forma:~~ Operating income increased by $17.9 million to $139.6 million. Our operating income increased due to the Sovitec acquisition, the margins generated by customer pricing increases and the result of cost reduction measures for the nine months ended September 30, 2017.

expenses.

Equity in Net Income of Affiliated Companies

~~Historical:~~ •Equity in net income of affiliated companies for the nine months ended September 30, ~~2017~~2022 was ~~$24.9~~$17.4 million, compared with ~~a loss of $9.3~~$20.7 million for the nine months ended September 30, ~~2016.~~2021. The ~~increase~~decrease of $3.3 million was due to ~~an increase in~~lower earnings ~~of $15.9 million~~ generated by ~~our~~the Zeolyst Joint ~~Venture~~Venture during the nine months ended September 30, ~~2017 as compared to~~2022, driven by lower sales volumes within the joint venture.

Table of Contents

The following is our unaudited condensed consolidated statements of income and a summary of financial results for the nine months ended September 30, ~~2016~~2022 and ~~$17.7~~2021:


	Nine months ended September 30,						Change
	2022			2021			$		%
	(in millions, except percentages)
Sales	$	637.4		$	441.0		$	196.4	44.5	%
Cost of goods sold	462.2			318.8			143.4		45.0	%
Gross profit	175.3			122.2			53.1		43.5	%
Gross profit margin	27.5		%	27.7		%
Selling, general and administrative expenses	67.8			68.8			(1.0)		(1.5)	%
Other operating expense, net	25.1			16.8			8.3		49.4	%
Operating income	82.4			36.6			45.8		125.1	%
Operating income margin	12.9		%	8.3		%
Equity in net (income) from affiliated companies	(17.4)			(20.7)			3.3		(15.9)	%
Interest expense, net	26.9			28.2			(1.3)		(4.6)	%
Debt extinguishment costs	—			26.9			(26.9)		(100.0)	%
Other expense, net	2.5			3.1			(0.6)		(19.4)	%
Income (loss) before income taxes and noncontrolling interest	70.4			(0.9)			71.3		NM
Provision for income taxes	22.0			5.1			16.9		331.4	%
Effective tax rate	31.2		%	(610.9)		%
Net income (loss) from continuing operations	48.4			(6.0)			54.4		(906.7)	%
Net loss from discontinued operations, net of tax	—			(159.1)			159.1		(100.0)	%
Net income (loss)	48.4			(165.1)			213.5		(129.3)	%

Less: Net income attributable to the noncontrolling interest—discontinued operations	—			0.3			(0.3)		(100.0)	%
Net income (loss) attributable to Ecovyst Inc.	$	48.4		$	(165.4)		$	213.8	(129.3)	%

Sales


	Nine months ended September 30,				Change
	2022		2021		$		%
Sales:	(in millions, except percentages)
Ecoservices	$	542.7	$	358.5	$	184.2	51.4	%
Catalyst Technologies	94.7		82.5		12.2		14.8	%



Total sales	$	637.4	$	441.0	$	196.4	44.5	%

Ecoservices: Sales in Ecoservices for the nine months ended September 30, 2022 were $542.7 million, an increase of $184.2 million, or 51.4%, compared to sales of $358.5 million for the nine months ended September 30, 2021. The increase in sales reflects a $146.5 million increase associated with higher average selling prices and a $37.7 million contribution from higher sales volumes. Higher average selling prices benefited from favorable pricing, including the pass-through of higher freight, labor, and energy indexed costs, as well as the pass-through of higher sulfur costs of $87.2 million. Sales volumes increased in both regeneration services and virgin sulfuric acid driven in large part by demand recovery.

Catalyst Technologies: Sales in Catalyst Technologies for the nine months ended September 30, 2022 were $94.7 million, an increase of $12.2 million, or 14.8%, compared to sales of $82.5 million for the nine months ended September 30, 2021. The increase in sales was driven by demand for our polyethylene catalysts and higher average selling prices.

Table of Contents

Gross Profit

Gross profit for the nine months ended September 30, 2022 was $175.3 million, an increase of $53.1 million, or 43.5%, compared with $122.2 million for the nine months ended September 30, 2021. The increase in gross profit reflects a $39.6 million contribution associated with higher sales volumes, and higher average selling prices of $151.9 million, which were partially offset by higher manufacturing costs of $127.9 million and a $10.5 million impact associated with less favorable product mix.

The increase in gross profit was driven by favorable pricing, including the pass through of higher variable and sulfur costs, along with higher volume demand in both the Ecoservices and Catalyst Technologies businesses. Rising inflation costs on raw materials, energy, and transportation primarily drove the higher manufacturing costs that were more than offset in price.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ended September 30, 2022 was $67.8 million, a decrease of $1.0 million as compared to $68.8 million for the nine months ended September 30, 2021. The decrease in selling, general and administrative expenses was due to a decrease in stock-based compensation expense of $5.4 million, which consisted of $4.0 million of ~~lower amortization on~~incremental cost recognized during the ~~fair value step-up~~nine months ended September 30, 2021 in connection with the modifications of our equity incentive awards and stock options associated with the special dividend and sale of the ~~underlying assets~~Performance Chemicals business in August 2021, with the remaining decrease driven by forfeitures of ~~our Zeolyst Joint Venture.~~

equity incentive awards in 2022 by former Company executives and employees of the Performance Chemicals business. This was mostly offset by $3.4 million of income generated during the nine months ended September 30, 2021 from the transition service agreements entered into as part of the sales of the Performance Materials and Performance Chemicals businesses, and net decreases in other costs of $1.0 million.

Other Operating Expense, Net

~~Pro Forma:~~ Other operating expense, net for the nine months ended September 30, 2022 was $25.1 million, an increase of $8.3 million, compared with $16.8 million for the nine months ended September 30, 2021. The increase in other operating expense, net was mainly driven by increases of $3.4 million in severance charges associated with former executives and $5.9 million in residual costs from the Performance Chemicals divestiture and other transactions costs.

Equity in Net Income of Affiliated Companies

Equity in net income of affiliated companies for the nine months ended September 30, ~~2017~~2022 was ~~$24.9~~$17.4 million, compared ~~with income of $8.9~~to $20.7 million for the nine months ended September 30, ~~2016.~~2021. The ~~increase in~~decrease was primarily due to $3.3 million of lower earnings ~~generated by our~~from the Zeolyst Joint ~~Venture was due to higher sales in the emission control, dewaxing and aromatics end markets, partly offset by lower hydrocracking volumes to the oil refining industry.~~

~~The following is our condensed consolidated statement of operations and a summary of financial results, presented on a historical and pro forma basis, for~~Venture during the nine months ended September 30, ~~2017 and 2016. The historical results of operations include legacy Eco~~2022.

Interest Expense, Net

Interest expense, net for ~~all periods presented and legacy PQ for~~ the nine months ended September 30, ~~2017 and the period~~2022 was $26.9 million, a decrease of May 4, 2016 through September 30, 2016. The unaudited pro forma results of operations reflect pro forma adjustments to the results of PQ Group Holdings to give effect to the Business Combination and the related financing transactions$1.3 million, as ~~if they had occurred on January 1, 2015.~~

Historical Historical Pro Forma
Nine Months Ended
September 30, Change Nine Months Ended
September 30, Change
2017 2016 $ % 2017 2016 $ %
(in millions, except percentages)
Sales $ 1,114.0
$ 741.4
$ 372.6
50.3 % $ 1,114.0
$ 1,080.3
$ 33.7
3.1 %
Cost of goods sold 821.3
557.7
263.6
47.3 % 821.3
791.2
30.1
3.8 %
Gross profit 292.7
183.7
109.0
59.3 % 292.7
289.1
3.6
1.2 %
Gross profit margin 26.3 % 24.8 % 26.3 % 26.8 %
Selling, general and administrative expenses 105.9
74.0
31.9
43.1 % 105.9
111.5
(5.6 ) (5.0 )%
Other operating expense, net 47.2
40.6
6.6
16.3 % 47.2
55.9
(8.7 ) (15.6 )%
Operating income 139.6
69.1
70.5
102.0 % 139.6
121.7
17.9
14.7 %
Operating income margin
12.5 % 9.3 % 12.5 % 11.3 %
Equity in net (income) loss of affiliated companies (24.9 ) 9.3
(34.2 ) (367.7 )% (24.9 ) (8.9 ) (16.0 ) 179.8 %
Interest expense, net 144.0
94.4
49.6
52.5 % 144.0
142.6
1.4
1.0 %
Debt extinguishment costs 0.5
11.9
(11.4 ) (95.8 )% 0.5
—
0.5
— %
Other expense, net 21.7
7.2
14.5
201.4 % 21.7
1.7
20.0
1,176.5 %
Loss before income taxes and noncontrolling interest (1.7 ) (53.7 ) 52.0
(96.8 )% (1.7 ) (13.7 ) 12.0
(87.6 )%
Provision for income taxes 5.3
36.0
(30.7 ) (85.3 )% 5.3
42.3
(37.0 ) (87.5 )%
Effective tax rate -304.2 % -67.1 % -304.2 % -308.4 %
Net loss (7.0 ) (89.7 ) 82.7
(92.2 )% (7.0 ) (56.0 ) 49.0
(87.5 )%
Less: Net income attributable to the noncontrolling interest 0.4
0.7
(0.3 ) (42.9 )% 0.4
1.4
(1.0 ) (71.4 )%
Net loss attributable to PQ Group Holdings Inc. $ (7.4 ) $ (90.4 ) $ 83.0
(91.8 )% $ (7.4 ) $ (57.4 ) $ 50.0
(87.1 )%

~~Sales~~

Historical Pro Forma
Nine Months Ended
September 30,
Change
Nine Months Ended
September 30,
Change
2017 2016
$

%

2017 2016
$

%

(in millions, except percentages)
Net Sales:
Performance Chemicals $ 515.5
$ 278.9
$ 236.6
84.8 % $ 515.5
$ 505.3
$ 10.2
2.0 %
Performance Materials 257.7
154.1
103.6
67.2 % 257.7
238.9
18.8
7.8 %
Eliminations (7.3) (3.1) (4.2) 135.5 % (7.3) (6.1) (1.2) 21.0 %
Performance Materials & Chemicals $ 765.9
$ 429.9
$ 336.0
78.2 % $ 765.9
$ 738.1
$ 27.8
3.7 %

Silica Catalyst $ 52.3
$ 33.1
$ 19.2
58.0 % $ 52.3
$ 64.3
$ (12.0 ) (18.7 )%
Refining Services 298.5 279.3 19.2 6.9 % 298.5 279.3 19.2 6.9 %
Environmental Catalysts & Services 350.8 312.4 38.4 12.3 % 350.8 343.6 7.2 2.1 %

Inter-segment sales eliminations (2.7) (0.9) (1.8) 200.0 % (2.7) (1.4) (1.3) 79.5 %

Total net sales $ 1,114.0
$ 741.4
$ 372.6
50.3 % $ 1,114.0
$ 1,080.3
$ 33.7
3.1 %

~~Historical Sales~~

~~Sales for the nine months ended September 30, 2017 were $1,114.0 million, an increase of $372.6 million, or 50.3%,~~ compared ~~to sales of $741.4~~with $28.2 million for the nine months ended September 30, ~~2016.~~ 2021. The ~~increase~~decrease in ~~sales within our performance materials and chemicals segment~~interest expense, net was primarily due to lower debt balances, partially offset by rising variable interest rates.

Debt Extinguishment Costs

Debt extinguishment costs were $26.9 million for the ~~inclusion~~nine months ended September 30, 2021.

Concurrent with, and using a portion of ~~legacy PQ sales~~the net cash proceeds from, the divestiture of ~~$818.2~~the Performance Chemicals business in August 2021, we repaid the remaining balance on our 2016 Term Loan Facility and redeemed the Senior Notes. In connection with the redemption of the Senior Notes, we paid a redemption premium of $8.5 million, ~~in our results of operations for~~which was recorded as debt extinguishment costs during the nine months ended September 30, ~~2017 as compared to legacy PQ sales~~2021. We wrote off $0.8 million of ~~$462.1~~unamortized deferred financing costs and $2.4 million ~~in our results~~ of ~~operations for the period of May 4, 2016 through September 30, 2016. The increase in sales within our environmental catalysts and services segment was due~~original issue discount related to the ~~inclusion~~2016 Term Loan Facility and $2.3 million of ~~legacy PQ sales~~unamortized deferred financing costs and $1.2 million of ~~$52.3 million in our results of operations for~~original issue discount related to the Senior Notes as debt extinguishment costs during the nine months ended September 30, ~~2017~~2021.

In June 2021, we entered into an agreement for a new senior secured term loan facility and used the proceeds to repay a portion of our existing term loan facilities. As a result of this transaction, we recorded $5.7 million of new creditor and third-party financing costs as ~~compared to $33.1 million of legacy PQ sales in our results of operations for~~debt extinguishment costs during the period of May 4, 2016 through September 30, 2016 and an increase of $19.2 million in our refining services product group. The increase in our refining services product group was primarily driven by higher average selling prices of $12.6 million and increased volumes of $6.6 million. The increase in average selling price was driven by the higher realization from sulfuric acid regeneration contract renewals and the increase in volumes was due to an increased demand for virgin sulfuric acid.

~~Pro Forma Sales~~

~~Performance Materials & Chemicals:~~ ~~Sales in performance materials and chemicals for the nine~~three months ended September 30, 2017 were $765.9 million, an increase of $27.8 million, or 3.7%, compared to sales of $738.1 million for the nine months ended September 30, 2016. The increase in sales was primarily due to the Sovitec acquisition, which contributed $17.2 million in sales, higher average selling price and customer mix of $9.3 million and favorable volumes of $3.6 million, which was partially offset by the unfavorable effects of foreign currency translation of $2.4 million.

The higher average selling price was principally a result of favorable U.S. dollar denominated sales and U.S. dollar cost pass through pricing in certain foreign locations. The increase in volumes within performance materials and chemicals was primarily driven by higher sodium silicate industrial demand and an increased silicas demand in the personal care industry, which was partially offset by lower North America highway sales as well as lower conductive sales volumes due to timing of product life cycles in the electronics markets. The stronger U.S. dollar compared to the British pound unfavorably impacted our sales which was partly offset by a stronger Brazilian Real which favorably impacted our sales.

~~Environmental Catalysts & Services:~~ Sales in environmental catalysts and services for the nine months ended September 30, 2017 were $350.8 million, an increase of $7.2 million, or 2.1%, compared to sales of $343.6 million for the nine months ended September 30, 2016. The increase in sales was primarily due to higher average selling price and customer mix of $14.9 million, which was partially offset by lower volumes of $6.8 million and the unfavorable effects of foreign currency translation of $0.9 million.

lower chemical catalysts sales due to record methyl methacrylate sales volumes in the prior year and lower high-density polyethylene demand, which was partially offset by stronger virgin sulfuric acid sales volumes due to the timing of our customer’s plant turnarounds.

~~Gross Profit~~

~~Historical:~~ Gross profit for the nine months ended September 30, 2017 was $292.7 million, an increase of $109.0 million, or 59.3%, compared with $183.7 million for the nine months ended September 30, 2016. The increase in gross profit was due to $196.1 million attributable to the inclusion of legacy PQ gross profit in our results of operations for the nine months ended September 30, 2017 as compared to legacy PQ gross profit of $91.6 million in our results of operations for the period of May 4, 2016 through September 30, 2016 and an increase of $11.0 million from our refining services product group. The increase in our refining services gross profit was due to favorable pricing of $12.6 million and higher volumes of $4.7 million, which was partially offset by higher manufacturing2021. In addition, previous unamortized deferred financing costs of ~~$4.9~~$1.7 million and ~~higher depreciation expense~~original issue discount of ~~$1.4 million.~~$3.7 million associated with the previously outstanding debt were written off as debt extinguishment costs.

~~The favorable pricing was due~~In June 2021, we amended our ABL Credit Agreement to ~~higher realization from sulfuric acid regeneration contract renewals. The increase in volume was driven by higher virgin sulfuric acid shipments to~~decrease the ~~mining industry.~~

~~Pro Forma:~~ ~~Gross profit for~~aggregate amount of revolving loan commitments and extend the nine months ended September 30, 2017 was $292.7 million, an increase of $3.6 million, or 1.2%, compared with $289.1 million for the nine months ended September 30, 2016. The increase in gross profit was due to favorable pricing of $24.2 million, $4.7 million related to the Sovitec acquisition and higher volumes of $2.9 million, which was partially offset by higher depreciation expense of $14.6 million, higher manufacturing costs of $9.0 million, unfavorable product mix of $3.2 million and the unfavorable effects of foreign currency translation of $1.4 million.

~~The greater average selling price was~~maturity date. As a result of the positive impact of U.S. dollar denominated sales and U.S. dollar pass through pricing in certain foreign locations and higher realization from sulfuric acid regeneration customer contracts, partially offset by unfavorable virgin sulfuric acid customer mix. Higher manufacturing costs were primarily driven by increased costs to support the start-up of the ThermoDrop® production facility for which the product offering was released for sale towards the end of the second quarter of 2017, and higher production and labor inflation costs. The unfavorable product mix is due to the effect of higher methyl methacrylate sales volumes through the nine months ended September 30, 2016.

~~Selling, General and Administrative Expenses~~

~~Historical:~~ Selling, general and administrative expenses for the nine months ended September 30, 2017 were $105.9 million, an increase of $31.9 million, or 43.1%, compared with $74.0 million for the nine months ended September 30, 2016. The increase in selling, general and administrative expenses was due to $89.8 million attributable to the inclusion of legacy PQ selling, general and administrative expenses in our results of operations for the nine months ended September 30, 2017 as compared to legacy PQ selling, general and administrative expenses of $49.1 million in our results of operations for the period of May 4, 2016 through September 30, 2016. This was partly offset by $8.7amendment, we wrote off $0.6 million of ~~lower selling, general and administrative expenses~~unamortized deferred financing costs as ~~a result~~debt extinguishment costs.

Table of ~~cost reduction initiatives.~~Contents

~~Pro Forma:~~ Selling, general and administrative expenses for the nine months ended September 30, 2017 were $105.9 million, a decrease of $5.6 million, or 5.0%, compared with $111.5 million for the nine months ended September 30, 2016. The reduction in selling, general and administrative expenses primarily related to our cost reduction initiatives.

Other ~~Operating~~ Expense, Net

~~Historical:~~Other ~~operating~~ expense, net for the nine months ended September 30, ~~2017~~2022 was ~~$47.2~~ $2.5 million, ~~an increase~~a decrease of ~~$6.6~~$0.6 million, ~~or 16.3%,~~as compared ~~with $40.6~~to $3.1 million for the nine months ended September 30, ~~2016.~~2021. The increase in other operating expense, net was due to $35.7 million attributable to the inclusion of legacy PQ other operating expense, net in our results of operations for the nine months ended September 30, 2017 as compared to legacy PQ other operating expense, net of $22.6 million in our results of operations for the period of May 4, 2016 through September 30, 2016. Included in other operating expense, net was an increase in losses on the sale of assets of $2.1 million, which was partly offset by $6.8 million of lower restructuring and severance related costs and $2.8 million in lower transaction related costs.

~~Pro Forma:~~ ~~Other operating expense, net for the nine months ended September 30, 2017 was $47.2 million, a~~ decrease of $8.7 million, or 15.6%, compared with $55.9 million for the nine months ended September 30, 2016. The decrease in other operating expense, net was due to $10.5 million of lower restructuring and severance related costs associated with the Business Combination and $1.3 million of lower environmental remediation charges, which were offset by $3.3 million in restructuring and plant closure costs incurred during the nine months ended September 30, 2017.

~~Equity in Net Income of Affiliated Companies~~

~~Historical:~~ Equity in net income of affiliated companies for the nine months ended September 30, 2017 was $24.9 million, an increase of $34.2 million, compared with a loss of $9.3 million for the nine months ended September 30, 2016. The increase was primarily due to $31.0 million of earnings generated by our Zeolyst Joint Venture during the nine months ended September 30, 2017 as compared

to $15.1 million for the period of May 4, 2016 through September 30, 2016 and $17.7 million of lower amortization expense on the fair value step-up of the underlying assets of our Zeolyst Joint Venture.

~~Pro Forma:~~ Equity in net income of affiliated companies for the nine months ended September 30, 2017 was $24.9 million, an increase of $16.0 million, compared with income of $8.9 million for the nine months ended September 30, 2016. The increase in earnings generated by our Zeolyst Joint Venture was due to higher sales for emission control and increased sales of aromatic catalysts.

~~Interest Expense, Net~~

~~Historical:~~ Interest expense, net for the nine months ended September 30, 2017 was $144.0 million, an increase of $49.6 million, as compared with $94.4 million for the nine months ended September 30, 2016. Interest expense increased primarily due to higher third-party interest expense under our debt structure compared to the legacy Eco debt structure on a stand-alone basis.

~~Pro Forma:~~ ~~Interest expense, net for the nine months ended September 30, 2017 was $144.0 million, an increase of $1.4 million, as compared with $142.6 million for the nine months ended September 30, 2016.~~

~~Debt Extinguishment Costs~~

~~Historical:~~ Debt extinguishment costs for the nine months ended September 30, 2017 and 2016 were $0.5 million and $11.9 million, respectively. On August 7, 2017, we re-priced the existing U.S. dollar-denominated tranche and existing Euro-denominated trance of our term loans to reduce the applicable interest rates. The company recorded $0.2 million of new creditor and third-party financing fees as debt extinguishment costs. In addition, previous unamortized deferred financing costs of $0.1 million and original issue discount of $0.2 million associated with the old debt were written off as debt extinguishment costs. On May 4, 2016, and concurrently with the consummation of the Business Combination, the company refinanced its existing credit facilities. The company recorded $4.6 million of new creditor and third-party financing fees as debt extinguishment costs. In addition, previous unamortized deferred financing costs of $6.3 million and original issue discount of $1.0 million associated with the old debt were written off as debt extinguishment costs.

~~Other Expense, Net~~

~~Historical:~~ Other expense, net was $21.7 million for the nine months ended September 30, 2017, an unfavorable change of $14.5 million, compared with other expense, net of $7.2 million for the nine months ended September 30, 2016. The change in other expense, net primarily consisted of ~~$21.5 million of~~ foreign currency ~~losses for~~exchange of $2.6 million related to the ~~nine months ended September 30, 2017 as compared~~non-permanent intercompany debt denominated in local currency and translated to ~~foreign currency losses~~the U.S. dollar, partially offset by a lower net periodic benefit of ~~$6.2~~$1.1 million for the ~~nine months ended September 30, 2016.~~

~~Pro Forma:~~ Other expense, net was $21.7 million for the nine months ended September 30, 2017, an unfavorable change of $20.0 million, compared with other expense, net of $1.7 million for the nine months ended September 30, 2016. The change in other income, net primarily consisted of $21.5 million of foreign currency losses for the nine months ended September 30, 2017 as compared to foreign currency losses of $0.9 million for the nine months ended September 30, 2016.defined benefit pension and postretirement plans.

Provision for Income Taxes

~~Historical:~~The provision for income taxes for the nine months ended September 30, ~~2017~~2022 was ~~$5.3~~$22.0 million compared to a ~~$36.0~~$5.1 million ~~provision~~ for the nine months ended September 30, ~~2016.~~2021. The effective income tax rate for the nine months ended September 30, ~~2017~~2022 was ~~(304.2)%~~31.2% compared to ~~(67.1)~~(610.9)% forthe nine months ended September 30, ~~2016.~~ 2021.

The Company’s effective income tax rate fluctuates primarily due to GILTI, discrete impacts of the divestiture of the Performance Chemicals business, and tax rate changes.

The difference between the U.S. federal statutory income tax rate and ~~our~~the Company’s effective income tax rate for the nine months ended September 30, ~~2017~~2022 was mainly due to ~~the tax effect of our foreign currency exchange loss recognized as~~state and local taxes, a discrete ~~item for the purposes of calculating the effective~~shortfall tax ~~rate as well as the tax effect of repatriating foreign earnings back~~expense related to ~~the U.S. as dividends, partially offset by lower tax rates in foreign jurisdictions as compared to the U.S. federal tax rate, foreign withholdings taxes, state taxes~~stock compensation, and non-deductible transaction costs. The difference between the U.S. federal statutory income tax rate and our effective income tax rate for the nine months ended September 30, 2016 was mainly due to the tax effect of our foreign currency exchange loss recognized as a discrete ~~item for~~tax expense associated with the purposes of calculating the effective tax rate as well as the tax effect of repatriating foreign earnings back to the U.S. as dividends, partially offset by lower tax rates in foreign jurisdictions as compared to the U.S. federal tax rate, foreign withholding taxes, state taxes, non-deductible transaction costs, and change in tax status of legacy Eco. Prior to the Business Combination on May 4, 2016, legacy Eco was a single member limited liability company and taxed as a partnership for federal and state income tax purposes. As such, all income tax liabilities and/or benefits of legacy Eco were passed through to its members. Because legacy Eco was taxed as a partnership, it did not record deferred taxes on the basis difference on its financial statements. Following the Business Combination on May 4, 2016, legacy Eco had a change in tax status and is now taxed as a C-Corporation subject to federal and state corporate level income taxes at prevailing corporate rates. Minimal taxes were recorded on the book losses incurred by legacy Eco during the periods preceding the Business Combination included in the nine months ended September 30, 2016, causing the fluctuation to the Company’s effective income tax rate in comparison to the taxes recorded for the nine months ended September 30, 2016.

~~Pro Forma:~~ The provision for income taxes for the nine months ended September 30, 2017 was $5.3 million compared to a $42.3 million provision for the nine months ended September 30, 2016. The effective income tax rate for the nine months ended September 30, 2017 was (304.2)% compared to (308.4)% for the nine months ended September 30, 2016. The difference between the U.S. federal

statutory income tax rate and our effective income tax rate for the nine months ended September 30, 2017 was mainly due to the tax effect of our foreign currency exchange loss recognized as a discrete item for the purposes of calculating the effective tax rate as well as the tax effect of repatriating foreign earnings back to the U.S. as dividends, partially offset by lower tax rates in foreign jurisdictions as compared to the U.S. federal tax rate, state taxes and foreign withholdings taxes. The difference between the U.S. federal statutory income tax rate and our effective income tax rate for the nine months ended September 30, 2016 was mainly due to the tax effect of our foreign currency exchange loss recognized as a discrete item for the purposes of calculating the effective tax rate as well as the tax effect of repatriating foreign earnings back to the U.S. as dividends, partially offset by lower tax rates in foreign jurisdictions as compared to the U.S. federal tax rate, foreign withholding taxes, state taxes, non-deductible transaction costs, and change in tax status of legacy Eco. Prior to the Business Combination on May 4, 2016, legacy Eco was a single member limited liability company and taxed as a partnership for federal and state income tax purposes. As such, all income tax liabilities and/or benefits of legacy Eco were passed through to its members. Because legacy Eco was taxed as a partnership, it did not record deferred taxes on the basis difference on its financial statements. Following the Business Combination on May 4, 2016, legacy Eco had a change in tax status and is now taxed as a C-Corporation subject to federal and state corporate level income taxes at prevailing corporate rates. Minimal taxes were recorded on the book losses incurred by legacy Eco during the periods preceding the Business Combination included in the nine months ended September 30, 2016, causing the fluctuation to the Company’s effective income tax rate in comparison to the taxes recorded for the nine months ended September 30, 2016.Employee Retention Credit.

Net ~~Loss~~Income (Loss) Attributable to ~~PQ Group Holdings~~Ecovyst

~~Historical:~~ ~~For the foregoing reasons and after~~After the effect of the non-controlling interest in earnings of subsidiaries for ~~each~~the period ~~presented,~~ending September 30, 2021, net ~~loss~~income attributable to ~~PQ Group Holdings Inc.~~Ecovyst was ~~$7.4~~$48.4 million for the nine months ended September 30, ~~2017 as~~2022 compared ~~to a~~with net loss of ~~$90.4~~$165.4 million for the nine months ended September 30, ~~2016.~~2021.

~~Pro Forma:~~ For the foregoing reasons and after the effect of the non-controlling interest in earnings of subsidiaries for each period presented, net loss attributable to PQ Group Holdings Inc. was $7.4 million for the nine months ended September 30, 2017 as compared to a net loss of $57.4 million for the nine months ended September 30, 2016.

~~Historical and Pro Forma~~ Adjusted EBITDA

Summarized ~~historical and pro forma Segment~~ Adjusted EBITDA information is shown below in the following table:


	Nine months ended September 30,				Change
	2022		2021		$		%
	(in millions, except percentages)
Adjusted EBITDA:(1)
Ecoservices	$	173.4	$	125.4	$	48.0	38.3	%
Catalyst Technologies(2)	57.7		64.6		(6.9)		(10.7)	%
Unallocated corporate expenses	(23.5)		(25.6)		2.1		(8.2)	%
Total	$	207.6	$	164.4	$	43.2	26.3	%

Historical Pro Forma
Nine Months Ended
September 30, Change
2017 2016 $ %
Segment Adjusted EBITDA ⁽¹⁾:

Performance Materials & Chemicals $ 184.8
$ 184.3
$ 0.5
0.3 %
Environmental Catalysts & Services ⁽²⁾
182.6
160.0
22.6
14.1 %
Total Segment Adjusted EBITDA ⁽³⁾
367.4
344.3
23.1
6.7 %
Unallocated corporate costs (23.5 ) (22.8 ) (0.7 ) 3.1 %
Total Adjusted EBITDA ⁽³⁾
$ 343.9
$ 321.5
$ 22.4
7.0 %


⁽¹⁾			We define Segment 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 Segment Adjusted EBITDA. Segment 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. Segment Adjusted EBITDA may not be comparable with EBITDA or Adjusted EBITDA as defined by other companies.

⁽²⁾

The Adjusted EBITDA from the Zeolyst Joint Venture included in the environmental catalyst and services segment is $39.7 million for the nine months ended September 30, 2017, which includes $24.6 million of equity in net income plus $6.9 million of amortization of investment in affiliate step-up plus $8.1 million of joint venture depreciation, amortization and interest. The pro forma Adjusted EBITDA from the Zeolyst Joint Venture included in the environmental catalyst and services segment is $31.9 million for the nine months ended September 30, 2016, which includes $8.7 million of equity in net income plus $15.3 million of amortization of investment in affiliate step-up plus $7.9 million of joint venture depreciation, amortization and interest.


⁽³⁾	~~Our total Segment Adjusted EBITDA differs from our total consolidated Adjusted EBITDA due to unallocated corporate expenses.~~

(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.

(2)The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $34.3 million for the nine months ended September 30, 2022, which includes $17.5 million of equity in net income, excluding $4.8 million of amortization of investment in affiliate step-up plus $12.0 million of joint venture depreciation, amortization and interest. The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $37.1 million for the nine months ended September 30, 2021, which includes $20.8 million of equity in net income, excluding $4.9 million of amortization of investment in affiliate step-up plus $11.4 million of joint venture depreciation, amortization and interest.

Ecoservices:Adjusted EBITDA for the nine months ended September 30, ~~2017~~2022 was ~~$343.9~~$173.4 million, an increase of ~~$22.4~~$48.0 million, or ~~7.0%~~38.3%, compared with ~~$321.5~~$125.4 million ~~on a pro forma basis~~ for the nine ~~months~~months ended September 30, ~~2016.~~2021. The increase in Adjusted EBITDA was a result of higher volumes, favorable pricing covering rising input costs, including the pass-through of higher sulfur costs, higher raw material and maintenance costs.

~~Performance Materials & Chemicals:~~

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Catalyst Technologies: Adjusted EBITDA for the nine months ended September 30, ~~2017~~2022 was ~~$184.8~~$57.7 million, ~~an increase~~a decrease of ~~$0.5~~$6.9 million, or ~~0.3%~~10.7%, compared with ~~$184.3~~$64.6 million ~~on a pro forma basis~~ for the nine months ended September 30, ~~2016.~~

2021. The ~~increase~~decrease in Adjusted EBITDA was due to ~~stronger demand in North America industrials~~a less-favorable product mix, as well as higher input and ~~earnings from the Sovitec acquisition partly~~energy production costs, partially offset by ~~start-up costs for the new ThermoDrop® production facility.~~

~~Environmental Catalysts & Services:~~ Adjusted EBITDA for the nine months ended September 30, 2017 was $182.6 million, an increase of $22.6 million, or 14.1%, compared with $160.0 million on a pro forma basis for the nine months ended September 30, 2016.

~~The increase in Adjusted EBITDA was driven primarily by higher pricing from renegotiated regeneration services contracts and increased earnings generated by our Zeolyst Joint Venture due to~~ higher sales volumes ~~of aromatic catalyst~~ and ~~catalyst sales for emission control.~~average selling prices.

A reconciliation of ~~Segment~~net income (loss) from continuing operations to Adjusted EBITDA ~~and pro forma Segment Adjusted EBITDA to net loss and pro forma net loss attributable to PQ Group Holdings~~ is as follows:


	Nine months ended September 30,
	2022		2021
	(in millions)
Reconciliation of net income (loss) from continuing operations to Adjusted EBITDA
Net income (loss) from continuing operations	$	48.4	$	(6.0)
Provision for income taxes	22.0		5.1
Interest expense, net	26.9		28.2
Depreciation and amortization	58.8		60.1
EBITDA	156.1		87.4
Joint venture depreciation, amortization and interest(a)	12.0		11.4
Amortization of investment in affiliate step-up(b)	4.8		4.9

Debt extinguishment costs	—		26.9
Net loss on asset disposals(c)	1.2		4.5
Foreign currency exchange loss(d)	2.2		4.8
LIFO benefit(e)	—		(2.0)

Transaction and other related costs(f)	6.9		1.6
Equity-based compensation	17.4		22.8
Restructuring, integration and business optimization expenses(g)	6.4		2.4
Defined benefit pension plan benefit(h)	(0.8)		(2.2)
Other(i)	1.4		1.9
Adjusted EBITDA	$	207.6	$	164.4

Historical Pro Forma
Nine Months Ended
September 30,
2017 2016
Reconciliation of net loss attributable to PQ Group Holdings Inc. to Segment Adjusted EBITDA
Net loss attributable to PQ Group Holdings Inc. $ (7.4 ) $ (57.4 )
Provision for income taxes 5.3
42.3
Interest expense, net 144.0
142.6
Depreciation and amortization 129.1
123.2
EBITDA 271.0
250.7
Joint venture depreciation, amortization and interest ^(a)
8.1
7.9
Amortization of investment in affiliate step-up ^(b)
6.9
15.3
Amortization of inventory step-up ^(c)
0.9
5.8
Debt extinguishment costs 0.5
—
Net loss on asset disposals ^(d)
6.4
2.9
Foreign currency exchange loss ^(e)
21.6
1.0
Non-cash revaluation of inventory, including LIFO 3.2
0.8
Management advisory fees ^(f)
3.8
4.0
Transaction related costs ^(g)
5.3
5.3
Equity-based and other non-cash compensation 3.9
4.4
Restructuring, integration and business optimization expenses ^(h)
8.0
16.2
Defined benefit plan pension cost ⁽ⁱ⁾
2.2
4.0
Other ^(j)
2.1
3.2
Adjusted EBITDA 343.9
321.5

Unallocated corporate expenses 23.5
22.8
Total Segment Adjusted EBITDA $ 367.4
$ 344.3


^(a)			We use Adjusted EBITDA as a performance measure to evaluate our financial results. Because our environmental catalysts and services segment includes our 50% interest in our Zeolyst Joint Venture, we include an adjustment for our 50% proportionate share of depreciation, amortization and interest expense of our Zeolyst Joint Venture.

^(b)

(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.

(d)Reflects the exclusion of the foreign currency transaction gains and losses in the statements of income, primarily related to the non-permanent intercompany debt denominated in local currency translated to U.S. dollars.

(g)Includes the impact of restructuring, integration and business optimization expenses which are incremental costs that are not representative of our ongoing business operations.

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^(c)	~~As a result of the Business Combination, there was a step-up in the fair value of inventory at PQ Holdings, which is amortized through cost of goods sold in the income statement.~~


^(d)	We do not have a history of significant asset disposals. However, 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.


^(e)	Reflects the exclusion of the negative or positive transaction gains and losses of foreign currency in the income statement primarily related to the Euro denominated term loan and the non-permanent intercompany debt denominated in local currency translated to U.S. dollars.


^(f)	Reflects consulting fees paid to CCMP and affiliates of INEOS for consulting services that include certain financial advisory and management services. These payments ceased as of the closing of our initial public offering.


^(g)	Relates to certain transaction costs described elsewhere in our consolidated financial statements as well as other costs related to several transactions that are either completed, pending or abandoned and that we believe are not representative of our ongoing business operations.


^(h)	Includes the impact of restructuring, integration and business optimization expenses that are related to specific, one-time items, including severance for a reduction in force and post-merger integration costs that are not expected to recur.

⁽ⁱ⁾

^(j)

Adjusted Net Income

Summarized adjusted net income information is shown below in the following table:


	Nine months ended September 30,
	2022						2021
	Pre-tax		Tax expense (benefit)		After-tax		Pre-tax		Tax expense (benefit)		After-tax
	(in millions)
Reconciliation of net income (loss) from continuing operations to Adjusted Net Income(1)(2)


Net income (loss) attributable to Ecovyst Inc.	$	70.4	$	22.0	$	48.4	$	(0.9)	$	5.1	$	(6.0)
Amortization of investment in affiliate step-up(b)	4.8		1.3		3.5		4.9		1.4		3.5

Debt extinguishment costs	—		—		—		26.9		7.5		19.4
Net loss on asset disposals(c)	1.2		0.3		0.9		4.5		1.2		3.3
Foreign currency exchange loss(d)	2.2		0.4		1.8		4.8		1.3		3.5
LIFO benefit(e)	—		—		—		(2.0)		(0.6)		(1.4)

Transaction and other related costs(f)	6.9		1.7		5.2		1.6		0.5		1.1
Equity-based compensation(3)	17.4		0.6		16.8		22.8		6.4		16.4
Restructuring, integration and business optimization expenses(g)	6.4		1.8		4.6		2.4		0.7		1.7
Defined benefit pension plan benefit(h)	(0.8)		(0.2)		(0.6)		(2.2)		(0.6)		(1.6)
Other(i)	1.4		0.4		1.0		1.9		0.6		1.3
Adjusted Net Income, including Intraperiod allocation	$	109.9	$	28.3	$	81.6	$	64.7	$	23.5	$	41.2

Intraperiod allocation for restating discontinued operations(4)	—		—		—		—		(5.3)		5.3
Adjusted Net Income	$	109.9	$	28.3	$	81.6	$	64.7	$	18.2	$	46.5

Historical Pro Forma
Nine Months Ended
September 30,
2017 2016
Reconciliation of net loss attributable to PQ Group Holdings Inc. to Adjusted Net Income ^{(1) (2)}

Net loss attributable to PQ Group Holdings Inc. $ (7.4 ) $ (57.4 )
Amortization of investment in affiliate step-up ^(b)
4.0
9.4
Amortization of inventory step-up ^(c)
0.5
3.6
Debt extinguishment costs 0.3
—
Net loss on asset disposals ^(d)
3.7
1.8
Foreign currency exchange loss ^(e)
14.9
2.5
Non-cash revaluation of inventory, including LIFO 1.9
0.5
Management advisory fees ^(f)
2.2
2.4
Transaction related costs ^(g)
3.1
3.2
Equity-based and other non-cash compensation 2.2
2.7
Restructuring, integration and business optimization expenses ^(h)
4.6
9.9
Defined benefit plan pension cost ⁽ⁱ⁾
1.3
2.5
Other ^(j)
1.2
2.0
Adjusted net income $ 32.5
$ (16.9 )


⁽¹⁾			We define adjusted net income as net loss attributable to PQ Group Holdings 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.

⁽²⁾

(2)Refer to the Adjusted EBITDA notes above for more information with respect to each adjustment.

(3)Includes tax adjustments for the shortfall in stock compensation.

(4)Due to the sale of the Performance Chemicals business, the tax rates used to value deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) needs to be adjusted. Given it is a direct result of the sale of discontinued operations and the need to adjust the tax rates arose because of discontinued operations, the impact of revaluing the reporting entity’s DTAs and DTLs are reflected in continuing operations.

~~Refer to the Adjusted EBITDA notes above for more information with respect to each adjustment.~~

The adjustments to net ~~loss~~income attributable to ~~PQ Group Holdings~~Ecovyst Inc. are shown net of applicable tax rates of ~~42.1%~~27.7% and ~~38.8%~~28.0% for the nine months ended September 30, ~~2017~~2022 and ~~September 30, 2016,~~2021, respectively, except for the foreign currency exchange loss, ~~for which~~equity-based compensation, transactions and other related costs, and discrete impacts of the ~~tax is calculated as a discrete item using~~divestiture of the ~~applicable statutory income tax rates.~~Performance Chemicals business.

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Financial Condition, Liquidity and Capital Resources

Our primary sources of liquidity consist of cash ~~flow~~flows from operations, existing cash balances as well as funds available under our asset based lending revolving credit facility. We expect that ongoing requirements for debt service and capital expenditures will be funded from these sources of funds. Our primary liquidity requirements include funding working capital requirements (primarily inventory and accounts receivable, net of accounts payable and other accrued liabilities), debt service requirements and capital expenditures. Our capital expenditures include both maintenance of business, which include spending on maintenance ~~of business~~ and health, safety ~~environmental initiatives~~ and ~~cost savings~~environmental initiatives as well as ~~expansion,~~growth, which includes spending to drive organic sales ~~growth. As reported for the nine months ended September 30, 2017, we spent approximately $66.7 million in maintenance capital expenditures~~growth and $18.2 million in expansion capital expenditures. For the nine months ended September 30, 2016, we spent approximately $55.9 million in maintenance capital expenditures and $19.5 million in expansion capital expenditures.cost savings initiatives.

We believe that our existing cash, cash equivalents and cash flows from operations, combined with availability under our asset based lending revolving credit facility, will be sufficient to meet our presently anticipated future cash needs for at least the next 12twelve months. We may also pursue strategic acquisition or divestiture opportunities, ~~which~~which may impact our future cash requirements. We may, from time to time, increase borrowings under our asset based lending revolving credit facility to meet our future cash needs. As of September 30, ~~2017,~~2022, we had cash and cash equivalents of ~~$68.8~~$121.4 million and availability of ~~$140.6~~$77.6 million under our asset based lending revolving credit facility, after giving effect to ~~$19.6~~$4.0 million of outstanding letters of credit, ~~and $35.0 million of revolving credit facility borrowings,~~ for a total available liquidity of ~~$209.4~~$199.0 million.

We did not have any revolving credit facility borrowings as of September 30, 2022. As of September 30, ~~2017, our total indebtedness was $2,703.1 million,~~2022, we were in compliance with ~~up to $140.6 million of available borrowings~~all covenants under our ~~asset based lending revolving credit facility.~~ debt agreements.

We held an immaterial balance of cash and cash equivalents in foreign jurisdictions as of September 30, 2022. We continue to repatriate cash held outside of the United States from certain foreign subsidiaries in order to meet domestic liquidity needs. Depending on domestic and foreign cash balances, we have certain flexibility to repatriate funds in order to meet those needs. Specifically, we have an intercompany loan structure in place with foreign subsidiaries that allows us to repatriate foreign cash in a 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.

Our liquidity requirements ~~are significant, primarily due~~include interest payments related to our debt ~~service requirements.~~structure. As reported, our cash interest ~~expense~~paid for the nine months ended September 30, ~~2017~~2022 and ~~2016 was~~2021 was approximately ~~$118.8~~$24.4 million and ~~$56.9~~$43.1 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 ~~$18.1~~$8.9 million on interest expense.

~~On October 3, 2017,~~ We hedge the interest rate fluctuations on debt obligations through interest rate cap agreements. As of September 30, 2022, we ~~completed the initial public offering of our common stock and issued and sold 29,000,000 shares of our common stock at~~had a public offering price of $17.50 per share, for aggregate gross proceeds of $507.5 million. The aggregate net proceeds received by us from the offering were approximately $480.5 million, net of underwriting discounts of $24.1 million and offering expenses of $2.9 million, net of reimbursements. The net proceeds were used to repay $446.2 million in aggregate principal amount of PQ Corporation’s Floating Rate Senior Unsecured Notes due 2022, together with accrued and unpaid interest and applicable redemption premiums. We recorded approximately $40.5$400.0 million of notional variable-rate debt ~~extinguishment costs related to the repayment~~with a cap rate of ~~the Floating Rate Senior Unsecured Notes due 2022 in~~1.00% through August 2023, a $250.0 million of notional variable-rate debt with a cap rate of 1.00% through October ~~2017. We anticipate the redemption~~2024 and a $250.0 million of ~~the Floating Rate Senior Unsecured Notes will reduce our annual interest expense by approximately $53.9 million.~~notional variable-rate debt with a cap rate of 1.00% through October 2025.

~~Our ability to make payments on and to refinance our indebtedness will depend~~The Company’s off-balance sheet arrangements include $4.0 million of outstanding letters of credit on our ability to generate cash in the future. We believe that our cash on hand, together with cash from operations and, if required, borrowings under our asset based lending revolving credit facility, will be sufficient for our cash requirements for the next twelve months.ABL Facility as of September 30, 2022.

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Cash Flow


	Nine months ended September 30,
	2022		2021
	(in millions)
Continuing Operations
Net cash provided by (used in):
Operating activities	$	109.3	$	92.3
Investing activities	(43.6)		892.9
Financing activities	(82.6)		(963.5)
Discontinued Operations
Net cash used in:
Operating activities	—		(7.4)
Investing activities	—		(40.9)
Financing activities	—		(1.1)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2.6)		(4.7)
Net change in cash and cash equivalents	(19.5)		(32.4)
Cash and cash equivalents at beginning of period	140.9		137.2


Cash, cash equivalents and restricted cash at end of period of continuing operations	$	121.4	$	104.8


	Nine months ended September 30,
	2022		2021
	(in millions)
Continuing Operations
Net income	$	48.4	$	(6.0)
Non-cash and non-working capital related activities(1)	106.2		110.0
Changes in working capital	(42.5)		(18.5)
Other operating activities	(2.8)		6.8
Net cash provided by operating activities, continuing operations	$	109.3	$	92.3

(1)Includes depreciation, amortization, amortization of deferred financing costs and original issue discount, foreign currency exchange gains and losses, deferred income tax provision (benefit), net (gains) losses on asset disposals, stock compensation expense and equity in net income and dividends received from affiliated companies.


	Nine months ended September 30,
	2022		2021
	(in millions)
Continuing Operations
Working capital changes that (used) provided cash:
Receivables	$	(28.4)	$	(33.8)
Inventories	3.2		6.1
Prepaids and other current assets	(5.2)		(8.4)
Accounts payable	2.0		10.1
Accrued liabilities	(14.1)		7.5

	$	(42.5)	$	(18.5)

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Nine Months Ended
September 30,
2017 2016
(in millions)
Net cash provided by (used in)
Operating activities $ 109.8
$ 89.3
Investing activities (134.5 ) (1,861.6 )
Financing activities 29.2
1,821.4
Effect of exchange rate changes on cash and cash equivalents (6.4 ) (2.4 )
Net change in cash and cash equivalents (1.9 ) 46.7
Cash and cash equivalents at beginning of period 70.7
25.2
Cash and cash equivalents at end of period $ 68.8
$ 71.9


	Nine months ended September 30,
	2022		2021
	(in millions)
Continuing Operations
Purchases of property, plant and equipment	$	(39.5)	$	(44.6)

Proceeds from business divestiture, net of cash	—		980.4
Payments for business divestiture, net of cash	(3.7)		—
Business combinations, net of cash acquired	(0.5)		(42.8)




Other, net	0.1		(0.1)
Net cash (used in) provided by investing activities, continuing operations	$	(43.6)	$	892.9


	Nine months ended September 30,
	2022		2021
	(in millions)
Continuing Operations

Net cash borrowings (repayments) on debt obligations	$	(6.8)	$	(532.1)
Proceeds from failed sale lease-back	—		14.6
Dividends paid to stockholders	—		(435.6)
Repurchases of common shares	(73.7)		—
Tax withholdings on equity award vesting	(0.3)		(1.5)
Repayment of financing obligations	(1.8)		(0.5)
Other	—		(8.4)
Net cash used in financing activities, continuing operations	$	(82.6)	$	(963.5)

Nine Months Ended
September 30,
2017 2016
(in millions)
Working capital changes that provided (used) cash:
Receivables $ (28.9 ) $ 3.5
Inventories 4.9
13.8
Prepaids and other current assets (6.0 ) (0.8 )
Accounts payable (9.0 ) (7.3 )
Accrued liabilities 13.5
10.1
Other, net (2.5 ) (0.8 )
$ (28.0 ) $ 18.5

The following discussions related to our cash flows are presented on a continuing operations basis, which excludes the cash flows from our Performance Materials and Performance Chemicals businesses accounted for as discontinued operations during the nine months ended September 30, 2021.

Net cash provided by operating activities was ~~$109.8~~$109.3 million for the nine months ended September 30, ~~2017,~~2022, compared to ~~$89.3~~$92.3 million provided for the nine months ended September 30, ~~2016.~~2021. Cash generated by operating ~~earnings after giving effect to non-cash items recognized~~activities, other than changes in ~~the income statement during the period~~working capital, was higher during the nine months ended September 30, ~~2017~~2022 by ~~$67.1~~$41.1 million compared to the same period in the prior year. ~~Cash provided by~~The change in working capital during the nine months ended September 30, ~~2017~~2022 was unfavorable compared to the nine months ended September 30, ~~2016. Working~~2021. Cash used to fund working capital ~~for the nine months ended September 30, 2017 used cash of $28.0~~was $42.5 million ~~compared to cash provided of~~and $18.5 million for the nine months ended September 30, ~~2016.~~2022 and 2021, respectively.

The increase in cash generated by operating ~~earnings after giving effect to non-cash items of $67.1~~activities, other than changes in working capital, was higher by $41.1 million as compared to the prior year period ~~was~~ primarily due to the inclusion of legacy PQ cash from operations for the nine months ended September 30, 2017 as compared to the period from May 4, 2016 through September 30, 2016 in the prior year. This resulted in a decrease in our net loss of $82.7 million, an increase ~~of $43.5 million of depreciation~~in operating profit and ~~amortization expense, $18.9 million of~~an increase in dividends received from affiliated ~~companies and $15.4 million of foreign currency losses, which was partially offset~~companies. Prior year cash generated by $34.2 million of net income from affiliated companies, $31.2 million of deferred income tax benefits, $22.6 million in lower acquisition accounting valuation adjustments on inventory sold and $5.4 million of pension and postretirement plan net funding.operating activities includes debt extinguishment costs.

The decrease in cash from working capital of ~~$46.5~~$24.0 million as compared to the prior year was primarily due to ~~the inclusion of legacy PQ working capital for the nine months ended September 30, 2017 as compared to the period from May 4, 2016 through September 30, 2016 in the prior year. This resulted in~~ unfavorable changes in inventories, accounts ~~receivable, inventory, prepaid~~payable, and ~~other current assets and accounts payable. The unfavorable change was~~accrued liabilities which were partially offset by favorable changes in ~~accrued liabilities.~~accounts receivables and prepaids and other current assets.

~~In addition to the inclusion of a full period of legacy PQ working capital, the unfavorable~~The favorable change in accounts receivable was ~~a result~~driven by the timing of ~~higher accounts receivables from higher current year pricing and volumes.~~sales as well as decreased sales volume. The unfavorable change in inventory was ~~driven by~~due to the inflation costs on raw materials and finished goods, where as cash provided in prior period was due to the timing of sales orders and inventory ~~build for our new ThermoDrop® product offering.~~build. The unfavorable change in accounts payable is due to the timing of vendor payments ~~for~~as well as higher capital ~~expenditures, timing of plant turnaround costs and higher raw material costs.~~spending. The ~~favorable~~unfavorable change in accrued liabilities ~~is primarily due~~relates to ~~the timing of accrued interest under our new debt structure.~~changes in various expense accruals.

Net cash used in investing activities was ~~$134.5~~$43.6 million for the nine months ended September 30, ~~2017,~~2022, compared to cash ~~used~~provided of ~~$1,861.6~~$892.9 million during the same period in ~~2016. Current year uses~~2021. Cash used in investing activities consisted of ~~cash include~~ utilizing ~~$90.2~~$39.5 million and $44.6 million to fund capital expenditures during the nine months ended September 30, 2022 and ~~$41.6~~2021, respectively. During the nine months ended September 30, 2021, we divested our Performance Chemicals business and received $980.4 million in net proceeds and acquired Chem32, LLC for $42.8 million. During the nine months ended September 30, 2022, we made an additional payment related to ~~fund~~our divestiture of our Performance Chemicals business representing the ~~Sovitec acquisition. Prior year uses~~final adjustments to the sale price of ~~cash include utilizing $1,777.7 million to fund the Business Combination and $69.8 million to fund capital expenditures.~~$3.7 million.

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Net cash ~~provided by~~used in financing activities was ~~$29.2~~$82.6 million for the nine months ended September 30, ~~2017,~~2022, compared to net cash ~~provided~~used of ~~$1,821.4~~$963.5 million during the same period in ~~2016. The change~~2021. Net cash used in ~~cash from~~ financing activities was primarily driven by ~~the~~

~~issuance~~$6.8 million of ~~$2,296.8~~debt repayment charges, repurchases of common stock of $73.7 million, ~~in debt, net~~and repayments of financing ~~fees, related~~obligation principal of $1.8 million for the nine months ended September 30, 2022. During the nine months ended September 30, 2021, we used the proceeds from the divestiture of the Performance Chemicals business to ~~the Business Combination in the prior year, partially offset by $465.7~~repay approximately $526.4 million ~~in lower~~of outstanding debt, ~~repayments~~pay a special dividend of $435.6 million and ~~$39.6 million in net revolver borrowings in the current year.~~pay a redemption premium on our debt of $8.5 million.

Debt

September 30,
2017 December 31,
2016
(in millions)
Term Loan Facility (U.S. dollar denominated) $ 918.5
$ 925.4
Term Loan Facility (Euro denominated) 331.4
297.3
6.75% Senior Secured Notes due 2022 625.0
625.0
Floating Rate Senior Unsecured Notes due 2022 525.0
525.0
8.5% Senior Notes due 2022 200.0
200.0
ABL Facility 35.0
—
Other 68.2
45.2
Total debt 2,703.1
2,617.9
Original issue discount (26.5)
(28.5)
Deferred financing costs (24.8)
(27.3)
Total debt, net of original issue discount and deferred financing costs 2,651.8
2,562.1
Less: current portion (54.3)
(14.5)
Total long-term debt $ 2,597.5
$ 2,547.6


	September 30, 2022		December 31, 2021
	(in millions)
Senior Secured Term Loan Facility due June 2028	$	888.8	$	895.5
ABL Facility	—		—

Total debt	888.8		895.5
Original issue discount	(7.8)		(8.8)
Deferred financing costs	(4.3)		(4.9)
Total debt, net of original issue discount and deferred financing costs	876.7		881.8
Less: current portion	(9.0)		(9.0)
Total long-term debt, excluding current portion	$	867.7	$	872.8

As of September 30, ~~2017,~~2022, our total debt was ~~$2,703.1~~$888.8 million, ~~including $16.4 million of other foreign debt and $51.8 million of notes payable for the NMTC financing and~~ excluding the original issue discount of ~~$26.5~~$7.8 million and deferred financing fees of ~~$24.8~~$4.3 million for our senior secured credit facilities. Our net debt as of September 30, ~~2017~~2022 was ~~$2,703.7~~$767.4 million, ~~excluding $16.4 million~~including cash and cash equivalents of ~~other foreign debt and $51.8 million of NMTC notes payable, and net of cash of $68.8~~$121.4 million. We may seek, subject to market conditions and other factors, opportunities to repurchase, refinance or otherwise reprice our debt.

Capital Expenditures

Maintenance capital expenditures include spending on maintenance of business, ~~cost savings initiatives and~~ health, safety and environmental initiatives. ~~Expansion~~Growth capital expenditures include spending to drive organic sales ~~growth.~~growth and cost savings initiatives. These capital expenditures represent our “book” capital expenditures for which the company has recorded, but not necessarily paid for the capital expenditures.


	Nine Months Ended September 30,					Nine months ended September 30,
	2017		2016			2022		2021
	(in millions)					(in millions)
Maintenance capital expenditures	$	66.7	$	55.9	Maintenance capital expenditures	$	31.5	$	29.3
Expansion capital expenditures	18.2		19.5
Growth capital expenditures					Growth capital expenditures	6.0		8.8
Total capital expenditures	$	84.9	$	75.4	Total capital expenditures	$	37.5	$	38.1

Capital expenditures remained at a level sufficient for required maintenance and certain expansion growth initiatives during these periods.

~~Pension Funding~~

~~We paid $7.5 million and $2.3 million~~ Maintenance capital expenditures were slightly higher in ~~cash contributions into our defined benefit pension plans and other post-retirement plans during~~ the nine months ended September 30, ~~2017 and 2016, respectively. The periodic pension expense was $2.6 million and $2.7 million for those same periods, respectively.~~

~~Off–Balance Sheet Arrangements~~

~~We had $19.6 million of outstanding letters of credit on our revolver facility as of~~2022 compared to the nine months ended September 30, ~~2017.~~2021 due to higher turnaround expenditures. Growth capital expenditures were slightly lower in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, due to the completion of several expansion projects in 2021.

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Critical Accounting Policies and Estimates

We prepare our condensed consolidated financial statements in conformity with GAAP and our significant accounting policies are described in Note 2 to our audited consolidated financial statements included in our ~~Prospectus filed pursuant to Rule 424(b)(4) with the SEC~~Annual Report on ~~October 2, 2017.~~Form 10-K. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. We base our estimates and judgments on historical experience and other relevant factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We evaluate our critical accounting estimates, assumptions and judgments on an ongoing basis.

There has been no material change in our critical accounting policies and use of estimates from those described ~~under~~in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations,” included in our ~~Prospectus filed pursuant to Rule 424(b)(4) with the SEC~~Annual Report on ~~October 2, 2017.~~Form 10-K.

Accounting Standards Not Yet Adopted

~~Refer to~~See Note 2 into our ~~September 30, 2017~~ unaudited condensed consolidated financial statements for a ~~description~~discussion of ~~recent~~recently issued accounting ~~standards.~~standards and their effect on us.


~~ITEM 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Our major market risk exposure is potential losses arising from changing rates and prices regarding foreign currency exchange rate risk, interest rate risk, commodity price risk and credit risk. The audit committee of our board of directors regularly reviews foreign exchange, interest rate and commodity hedging activity and monitors compliance with our hedging policy. We do not use financial instruments for speculative purposes, and we limit our hedging activity to the underlying economic exposure.

There ~~has~~have been no material ~~change~~changes in the foreign exchange risk, interest rate risk, commodity risk or credit risk discussed in ~~“Management’s Discussion~~Item 7A., “Quantitative and ~~Analysis of Financial Condition and Results of Operations”~~Qualitative Disclosures about Market Risk,” included in our ~~Prospectus filed pursuant to Rule 424(b)(4) with the SEC~~Annual Report on ~~October 2, 2017.~~Form 10-K.


~~ITEM 4.~~	~~CONTROLS AND PROCEDURES.~~

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, ~~2017,~~2022, the end of the period covered by this Quarterly Report on Form 10-Q.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, asas of such date, our disclosure controls and procedures were ~~effective.~~effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting occurred during the quarter ended September 30, 2022 that materially affected, or which are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II—OTHER INFORMATION


~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~

ITEM 1. LEGAL PROCEEDINGS.

From time to time we may be subject to various legal claims and proceedings incidental to the normal conduct of business, relating to such matters as personal injury, product liability and warranty claims, waste disposal practices, release of chemicals into the environment and other matters that may arise in the ordinary course of our business. We currently believe that there is no litigation pending that is likely to have a material adverse effect on our business. Regardless of the outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. ~~Refer~~

ITEM 1A. RISK FACTORS.

“Item 1A, Risk Factors” in our Annual Report on Form 10-K, as supplemented by “Item 1A, Risk Factors” in our quarterly report on Form 10-Q for the quarter ended March 31, 2022, which we refer to ~~Note 16~~as the First Quarter From 10-Q, and by “Item 1A, Risk Factors” in our quarterly report on Form 10-Q for the quarter ended June 30, 2022, which we refer to as the Second Quarter Form 10-Q, includes a discussion of our ~~September 30, 2017 unaudited condensed consolidated financial statements for additional~~risk factors. The information ~~regarding~~should be read in conjunction with, the ~~Company’s legal proceedings.~~


~~ITEM 1A.~~	~~RISK FACTORS~~

risk factors disclosed in our Annual Report on Form 10-K, as supplemented by our First and Second Quarter Form 10-Q. There ~~has~~have been no material ~~change~~changes from the risk factors described in our ~~Prospectus filed pursuant~~Annual Report on Form 10-K, as supplemented by our First and Second Quarter Form 10-Q.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table contains information about purchases of our common stock during the third quarter of 2022:


	Total Number of Shares of Common Stock Purchased(1)	Average Price Paid per Share of Common Stock (2)		Total Number of Shares of Common Stock Purchased as Part of Publicly Announced Plan or Programs	Maximum Number (or Dollar Value) of Shares of Common Stock that May Yet Be Purchased Under the Plans or Programs (in thousands)

July 1, 2022—July 31, 2022	1,077,640	$	9.77	1,077,640	$	430,644
August 1, 2022—August 31, 2022	6,500,000	$	8.36	6,500,000	$	376,328
September 1, 2022—September 30, 2022	—	$	—	—	$	376,328
Total	7,577,640

(1)In April 2022, our Board of Directors approved and announced a new stock repurchase program authorizing the repurchase of up to ~~Rule 424(b)(4)~~$450 million of the Company’s outstanding common stock over the next four years. This program is expected to be funded using cash on hand and cash generated from operations. We primarily expect to conduct the repurchase program through negotiated transactions with the ~~SEC~~Company’s equity sponsors, as well as through open market repurchases or other means, including through Rule 10b-18 trading plans or through the use of other techniques such as accelerated share repurchases. The actual timing, number and nature of shares repurchased will depend on ~~October 2, 2017.~~a variety of factors, including stock price, trading volume, and general business and market conditions. The repurchase program does not obligate us to acquire any number of shares in any specific period or at all and may be amended, suspended or discontinued at any time at our discretion.

On August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law. Among other things, the IRA imposes a 15% corporate alternative minimum tax for certain large corporations with average annual adjusted financial statement income in excess of $1 billion for tax years beginning after December 31, 2022, levies a 1% excise tax on net stock repurchases after December 31, 2022, and provides tax incentives to promote clean energy. Historically, during the year we have made discretionary share repurchases. Beginning in 2023, these purchases would be subject to the excise tax. Based on the historical net repurchase activity the excise tax and the other provisions of the IRA are not expected to have a material impact on our results of operations or financial position. However, we are still in the process of analyzing the provisions of the IRA.

During the three months ended September 30, 2022, the Company repurchased 1,077,640 shares of its common stock on the open market at an average price of $9.77 per share, for a total of $10.5 million. Additionally, in connection with a secondary offering of the Company’s common stock in August 2022, the Company repurchased 6,500,000 shares of its common stock sold in the offering from the underwriters at a price of $8.36 per share simultaneous with the closing of the offering, for a total of $54.3 million. As of September 30, 2022, $376.3 million was available for additional share repurchases under the program. There were no repurchases during September 2022.

(2)Excludes brokerage commissions and other costs of execution.

Table of Contents

ITEM 6. EXHIBITS.

The following exhibits are being filed or furnished as part of this Quarterly Report on Form 10-Q:


Exhibit No.			Description

~~ITEM 2.~~31.1			~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.~~ Certification of Chief Executive Officer of Ecovyst Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Chief Financial Officer of Ecovyst Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification of Chief Executive Officer of Ecovyst Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification of Chief Financial Officer of Ecovyst Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101			The following materials from the Quarterly Report on Form 10-Q of Ecovyst Inc. for the quarter ended September 30, 2022, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Income, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, (vi) Notes to Condensed Consolidated Financial Statements and (vii) document and entity information, tagged as blocks of text and including detailed tags
104			The cover page from the Quarterly Report on Form 10-Q of Ecovyst Inc. for the quarter ended September 30, 2022, formatted in Inline XBRL and included as Exhibit 101

~~Recent Sales~~

Table of ~~Unregistered Securities~~Contents

~~During the three months ended September 30, 2017, and after giving effect~~SIGNATURES

Pursuant to the automatic conversion of our Class B common stock into shares of our common stock in connection with the initial public offering, we issued an aggregate of 24,750 shares of our common stock subject to vesting conditions under the PQ Group Holdings Inc. Stock Incentive Plan. The shares were issued without registration in reliance on the exemptions afforded by Section 4(a)(2)requirements of the Securities Exchange Act ~~and Rule 701 promulgated thereunder.~~

~~Use~~ of ~~Proceeds from Initial Public Offering of Common Stock~~

~~On September 28, 2017, our Registration Statement~~1934, the registrant has duly caused this report to be signed on ~~Form S-1, as amended (File No. 333-218650), relating to our initial public offering of 29,000,000 shares of common stock was declared effective~~its behalf by the SEC. On October 3, 2017, we closed the sale of 29,000,000 shares of our common stock at a price of $17.50. Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC served as joint book-running managers of the offering. The offering commenced on September 28, 2017 and closed on October 3, 2017.undersigned thereunto duly authorized.

We raised a total of $507.5 million in gross proceeds in the initial public offering, or approximately $480.5 million in net proceeds after deducting underwriting discounts and commissions of $24.1 million and $2.9 million of offering-related expenses, net of reimbursements. On October 3, 2017, all of the net proceeds from the offering were used to redeem $446.2 million in aggregate principal amount of PQ Corporation’s Floating Rate Senior Unsecured Notes due 2022 (the “Floating Rate Senior Unsecured Notes”), together with accrued and unpaid interest, and applicable redemption premiums. Andrew Currie, a member of our board of directors, held $4.0 million in principal amount of the Floating Rate Senior Unsecured Notes, and, as a result, received a portion of the net proceeds from the initial public offering.


			Ecovyst Inc.

Date:	November 4, 2022	By:	/s/ MICHAEL FEEHAN
			Michael Feehan
			Vice President and Chief Financial Officer
			(Duly Authorized Officer and Principal Financial and Accounting Officer)


~~ITEM 6.~~	~~EXHIBITS.~~

~~The following exhibits are being filed or furnished as part of this Quarterly Report on Form 10-Q:~~



~~Exhibit No.~~	~~Description~~
~~3.1~~	~~Second Restated Certificate of Incorporation of PQ Group Holdings Inc.~~
~~3.2~~	~~Amended and Restated Bylaws of PQ Group Holdings Inc. (Incorporated by reference to Exhibit 3.2 of the Company’s Third Amendment to its Registration Statement on Form S-1 dated September 1, 2017.)~~
~~31.1~~	~~Certification of Chief Executive Officer of PQ Group Holdings Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
~~31.2~~	~~Certification of Chief Financial Officer of PQ Group Holdings Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
~~32.1~~	~~Certification of Chief Executive Officer of PQ Group Holdings Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~
~~32.2~~	~~Certification of Chief Financial Officer of PQ Group Holdings Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~
~~101.INS~~	~~XBRL Instance Document.~~
~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document.~~
~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document.~~
~~101.DEF~~	~~XBRL Taxonomy Definition Linkbase Document.~~
~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document.~~
~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document.~~

~~SIGNATURES~~

~~Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.~~



			~~PQ GROUP HOLDINGS INC.~~

~~Date:~~	~~November 13, 2017~~	~~By:~~	~~/s/ MICHAEL CREWS~~
			~~Michael Crews~~
			~~Executive Vice President and Chief Financial Officer~~
			~~(Duly Authorized Officer and Principal Financial and Accounting Officer)~~



~~Delaware~~		~~81-3406833~~
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~	~~(I.R.S. Employer~~ ~~Identification No.)~~

~~300 Lindenwood Drive~~ ~~Valleybrooke Corporate Center~~ ~~Malvern, Pennsylvania~~	~~19355~~
~~(Address of principal executive offices)~~	~~(Zip Code)~~



		Page
PART I			FINANCIAL INFORMATION
Item 1.			Financial Statements (Unaudited)
			~~Condensed Consolidated Balance Sheets~~		3
	Condensed Consolidated Statements of ~~Operations~~Income	43
			Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~		54
			Condensed Consolidated Balance Sheets		5
			Condensed Consolidated Statements of Stockholders’ Equity		6
			Condensed Consolidated Statements of Cash Flows		78
			Notes to Condensed Consolidated Financial Statements		89
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		3033
Item 3.			Quantitative and Qualitative Disclosures About Market Risk		5253
Item 4.			Controls and Procedures		5253

PART II			OTHER INFORMATION
Item 1.			Legal Proceedings		5354
Item 1A.			Risk Factors		5354
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds		5354
~~Item 6.~~			~~Exhibits~~	54

	~~SIGNATURES~~	55


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Sales	$	232,533	$	167,428	$	637,419	$	441,004
Cost of goods sold	164,864		113,784		462,156		318,768
Gross profit	67,669		53,644		175,263		122,236
Selling, general and administrative expenses	21,460		24,836		67,779		68,822
Other operating expense, net	7,673		6,314		25,101		16,786
Operating income	38,536		22,494		82,383		36,628
Equity in net (income) from affiliated companies	(3,169)		(8,758)		(17,422)		(20,723)
Interest expense, net	9,542		9,005		26,880		28,202
Debt extinguishment costs	—		15,185		—		26,902
Other expense (income), net	1,872		(218)		2,497		3,081
Income (loss) from continuing operations before income taxes and noncontrolling interest	30,291		7,280		70,428		(834)
Provision for income taxes	8,966		2,591		21,983		5,095
Net income (loss) from continuing operations	21,325		4,689		48,445		(5,929)
Net loss from discontinued operations, net of tax	—		(75,872)		—		(159,122)
Net income (loss)	21,325		(71,183)		48,445		(165,051)

Less: Net income attributable to the noncontrolling interest—discontinued operations	—		76		—		333
Net income (loss) attributable to Ecovyst Inc.	$	21,325	$	(71,259)	$	48,445	$	(165,384)

Income (loss) from continuing operations attributable to Ecovyst Inc.	$	21,325	$	4,689	$	48,445	$	(5,929)
Loss from discontinued operations attributable to Ecovyst Inc.	—		(75,948)		—		(159,455)
Net income (loss) attributable to Ecovyst Inc.	$	21,325	$	(71,259)	$	48,445	$	(165,384)

Net income (loss) per share:
Basic income (loss) per share—continuing operations	$	0.16	$	0.03	$	0.36	$	(0.04)
Diluted income (loss) per share—continuing operations	$	0.16	$	0.03	$	0.35	$	(0.04)
Basic loss per share—discontinued operations	$	—	$	(0.56)	$	—	$	(1.17)
Diluted loss per share—discontinued operations	$	—	$	(0.55)	$	—	$	(1.17)
Basic income (loss) per share	$	0.16	$	(0.52)	$	0.36	$	(1.22)
Diluted income (loss) per share	$	0.16	$	(0.52)	$	0.35	$	(1.22)

Weighted average shares outstanding:
Basic	132,622,105		136,129,591		136,115,598		136,111,555
Diluted	134,096,839		137,354,427		137,666,215		136,111,555


	September 30, 2017			December 31, 2016				September 30, 2022		December 31, 2021
ASSETS							ASSETS
Cash and cash equivalents	$	68,838		$	70,742		Cash and cash equivalents	$	121,446	$	140,889
Receivables, net	212,018			160,581
Inventories	235,921			227,048
Accounts receivable, net							Accounts receivable, net	106,969		80,802
Inventories, net							Inventories, net	49,729		53,813
Prepaid and other current assets	29,010			34,307			Prepaid and other current assets	46,070		16,165

Total current assets	545,787			492,678			Total current assets	324,214		291,669
Investments in affiliated companies	479,366			459,406			Investments in affiliated companies	426,663		446,074
Property, plant and equipment, net	1,209,047			1,181,388			Property, plant and equipment, net	581,425		596,231
Goodwill	1,306,547			1,241,429			Goodwill	401,152		406,139
Other intangible assets, net	800,423			816,573			Other intangible assets, net	132,347		145,617
Right-of-use lease assets							Right-of-use lease assets	29,712		30,115
Other long-term assets	74,433			68,197			Other long-term assets	36,282		15,374

Total assets	$	4,415,603		$	4,259,671		Total assets	$	1,931,795	$	1,931,219
LIABILITIES							LIABILITIES
Notes payable and current maturities of long-term debt	$	54,255		$	14,481
Current maturities of long-term debt							Current maturities of long-term debt	$	9,000	$	9,000
Accounts payable	129,793			128,478			Accounts payable	52,026		51,860
Operating lease liabilities—current							Operating lease liabilities—current	8,576		8,306
Accrued liabilities	112,788			99,433			Accrued liabilities	65,071		75,915

Total current liabilities	296,836			242,392			Total current liabilities	134,673		145,081
Long-term debt	2,597,481			2,547,717
Long-term debt, excluding current portion							Long-term debt, excluding current portion	867,604		872,839
Deferred income taxes	319,738			318,463			Deferred income taxes	148,022		126,749
Operating lease liabilities—noncurrent							Operating lease liabilities—noncurrent	21,024		21,719
Other long-term liabilities	120,578			123,155			Other long-term liabilities	20,947		24,094

Total liabilities	3,334,633			3,231,727			Total liabilities	1,192,270		1,190,482
Commitments and contingencies (Note 16)
Commitments and contingencies (Note 17)							Commitments and contingencies (Note 17)
EQUITY							EQUITY
Common stock ($0.01 par); authorized shares 450,000,000; issued shares 106,219,759 and 106,452,330 on September 30, 2017 and December 31, 2016, respectively; outstanding shares 104,109,932 and 103,947,887 on September 30, 2017 and December 31, 2016, respectively	1,062			73
Preferred stock ($0.01 par); authorized shares 50,000,000; no shares issued or outstanding on September 30, 2017 and December 31, 2016	—			—
Common stock ($0.01 par); authorized shares 450,000,000; issued shares 139,485,868 and 137,820,971 on September 30, 2022 and December 31, 2021, respectively; outstanding shares 130,100,834 and 136,938,758 on September 30, 2022 and December 31, 2021, respectively							Common stock ($0.01 par); authorized shares 450,000,000; issued shares 139,485,868 and 137,820,971 on September 30, 2022 and December 31, 2021, respectively; outstanding shares 130,100,834 and 136,938,758 on September 30, 2022 and December 31, 2021, respectively	1,395		1,378
Preferred stock ($0.01 par); authorized shares 50,000,000; no shares issued or outstanding on September 30, 2022 and December 31, 2021							Preferred stock ($0.01 par); authorized shares 50,000,000; no shares issued or outstanding on September 30, 2022 and December 31, 2021	—		—
Additional paid-in capital	1,169,778			1,167,137			Additional paid-in capital	1,088,704		1,073,409
Accumulated deficit	(97,788		)	(90,380		)	Accumulated deficit	(267,262)		(315,707)
Treasury stock, at cost; shares 21,519 on December 31, 2016	—			(239		)
Treasury stock, at cost; shares 9,385,034 and 882,213 on September 30, 2022 and December 31, 2021, respectively							Treasury stock, at cost; shares 9,385,034 and 882,213 on September 30, 2022 and December 31, 2021, respectively	(86,594)		(12,551)
Accumulated other comprehensive income (loss)	2,978			(53,711		)	Accumulated other comprehensive income (loss)	3,282		(5,792)
Total PQ Group Holdings Inc. equity	1,076,030			1,022,880
Noncontrolling interest	4,940			5,064

Total equity	1,080,970			1,027,944			Total equity	739,525		740,737
Total liabilities and equity	$	4,415,603		$	4,259,671		Total liabilities and equity	$	1,931,795	$	1,931,219



	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Sales	$	391,829		$	369,979		$	1,114,027		$	741,446
Cost of goods sold	289,270			274,680			821,342			557,748
Gross profit	102,559			95,299			292,685			183,698
Selling, general and administrative expenses	36,169			36,003			105,907			74,017
Other operating expense, net	19,833			15,042			47,156			40,630
Operating income	46,557			44,254			139,622			69,051
Equity in net (income) loss from affiliated companies	(10,257		)	4,616			(24,879		)	9,309
Interest expense	49,079			48,610			144,041			94,362
Debt extinguishment costs	453			—			453			11,858
Other expense, net	5,126			4,170			21,739			7,194
Income (loss) before income taxes and noncontrolling interest	2,156			(13,142		)	(1,732		)	(53,672		)
Provision for (benefit from) income taxes	5,172			(3,536		)	5,269			36,013
Net loss	(3,016		)	(9,606		)	(7,001		)	(89,685		)
Less: Net income attributable to the noncontrolling interest	329			411			407			725
Net loss attributable to PQ Group Holdings Inc.	$	(3,345	)	$	(10,017	)	$	(7,408	)	$	(90,410	)

Net loss per common share:
Basic loss per share	$	(0.03	)	$	(0.10	)	$	(0.07	)	$	(1.10	)
Diluted loss per share	$	(0.03	)	$	(0.10	)	$	(0.07	)	$	(1.10	)

Weighted average shares outstanding:
Basic	104,096,837			103,783,719			104,020,180			81,986,221
Diluted	104,096,837			103,783,719			104,020,180			81,986,221


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	~~(610) 651-4400~~ ~~(Registrant’s telephone number, including area code)~~


~~ITEM 1.~~ Item 6.	~~FINANCIAL STATEMENTS (UNAUDITED).~~ Exhibits	55

	SIGNATURES	56



	As of September 30, 2017		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Derivative contracts	$	1,098	$	—	$	1,098	$	—
Restoration plan assets	5,566		5,566		—		—
Total	$	6,664	$	5,566	$	1,098	$	—

Liabilities:
Derivative contracts	$	58	$	—	$	58	$	—



	As of December 31, 2016		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Derivative contracts	$	6,434	$	—	$	6,434	$	—
Restoration plan assets	5,594		5,594		—		—
Total	$	12,028	$	5,594	$	6,434	$	—



Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income												Affected Line Item in the Statement Where Net Income is Presented
	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Defined benefit and other postretirement plans
Amortization of prior service cost	$	20		$	—		$	60		$	—		(a)
Amortization of net gain (loss)	19			—			58			—			(a)
	39			—			118			—			Total before tax
	(6		)	—			(19		)	—			Tax (expense) benefit
	$	33		$	—		$	99		$	—		Net of tax

Net gain (loss) from hedging activities
Interest rate caps	$	13		$	(2	)	$	22		$	(2	)	Interest expense
Natural gas swaps	94			420			104			1,148			Cost of goods sold
	107			418			126			1,146			Total before tax
	(41		)	(159		)	(48		)	(435		)	Tax (expense) benefit
	$	66		$	259		$	78		$	711		Net of tax

Total reclassifications for the period	$	99		$	259		$	177		$	711		Net of tax



Total consideration, net of cash acquired	$	41,572

Recognized amounts of identifiable assets acquired and liabilities assumed:
Receivables	$	14,305
Inventories	7,645
Prepaid and other current assets	230
Property, plant and equipment	9,020
Other long-term assets	129

Fair value of assets acquired	31,329
Current debt	(6,420		)
Accounts payable	(10,748		)
Long-term debt	(10,189		)
Other long-term liabilities	(154		)

Fair value of net assets acquired	3,818
Goodwill	37,754
	$	41,572



	Nine months ended September 30, 2016
	(unaudited)
Pro forma sales	$	1,080,310
Pro forma net loss	(55,985		)



	Performance Materials & Chemicals		Environmental Catalysts & Services		Total
Balance as of December 31, 2016	$	852,506	$	388,923	$	1,241,429
Goodwill recognized	37,754		—		37,754
Foreign exchange impact	25,189		2,175		27,364
Balance as of September 30, 2017	$	915,449	$	391,098	$	1,306,547



			~~FORM 10-Q~~


⁽¹⁾			Transaction and other related costs primarily include acquisition costs directly attributable to the Acquisition (see Note 5 to these condensed consolidated financial statements for further information) and the Business Combination (see Note 6 to these condensed consolidated financial statements for further information), as well as other business development costs.


	September 30, 2022		December 31, 2021
Finished products and work in process	$	43,337	$	46,894
Raw materials	6,392		6,919
	$	49,729	$	53,813
Valued at lower of cost or market:
LIFO basis	$	24,304	$	33,330
Valued at lower of cost and net realizable value:
FIFO or average cost basis	25,425		20,483
	$	49,729	$	53,813



	September 30, 2017			December 31, 2016
Term Loan Facility (U.S. dollar denominated)	$	918,473		$	925,430
Term Loan Facility (Euro denominated)	331,368			297,317
6.75% Senior Secured Notes due 2022	625,000			625,000
Floating Rate Senior Unsecured Notes due 2022	525,000			525,000
8.5% Senior Notes due 2022	200,000			200,000
ABL Facility	35,000			—
Other	68,207			45,223
Total debt	2,703,048			2,617,970
Original issue discount	(26,470		)	(28,497		)
Deferred financing costs	(24,842		)	(27,275		)
Total debt, net of original issue discount and deferred financing costs	2,651,736			2,562,198
Less: current portion	(54,255		)	(14,481		)
Total long-term debt	$	2,597,481		$	2,547,717



	Balance sheet location	September 30, 2017		December 31, 2016
Asset derivatives:
Derivatives designated as cash flow hedges:
Natural gas swaps	Current assets	$	—	$	573
Interest rate caps	Current assets	9		—
Natural gas swaps	Other long-term assets	7		58
Interest rate caps	Other long-term assets	1,082		5,803
Total asset derivatives		$	1,098	$	6,434
Liability derivatives:
Derivatives designated as cash flow hedges:
Natural gas swaps	Accrued liabilities	$	58	$	—
Total liability derivatives		$	58	$	—



	U.S.						Foreign
	Three months ended September 30,						Three months ended September 30,
	2017			2016			2017			2016
Service cost	$	305		$	547		$	859		$	792
Interest cost	2,536			2,522			1,339			837
Expected return on plan assets	(3,061		)	(3,104		)	(1,111		)	(769		)
Net periodic expense (benefit)	$	(220	)	$	(35	)	$	1,087		$	860


⁽²⁾	~~The Company eliminates intersegment sales when reconciling to the Company’s consolidated statements of operations.~~


⁽³⁾	The Company defines Adjusted EBITDA as EBITDA adjusted for certain items as noted in the reconciliation below. Management evaluates the performance of its segments and allocates resources based on several factors, of which the primary measure is Adjusted EBITDA. Adjusted EBITDA should not be considered as an alternative to net income as an indicator of the Company’s operating


⁽⁴⁾ Expected dividend yield			The Adjusted EBITDA from the Zeolyst Joint Venture included in the environmental catalyst and services segment is $14,398 for the three months ended September 30, 2017, which includes $10,151 of equity in net income plus $1,658 of amortization of investment in affiliate step-up plus $2,563 of joint venture depreciation, amortization and interest. The Adjusted EBITDA from the Zeolyst Joint Venture included in the environmental catalyst and services segment is $10,316 for the three months ended September 30, 2016, which includes $4,683 of equity in net loss plus $12,291 of amortization of investment in affiliate step-up plus $2,690 of joint venture depreciation, amortization and interest. The Adjusted EBITDA from the Zeolyst Joint Venture included in the environmental catalyst and services segment is $39,690 for the nine months ended September 30, 2017, which includes $24,594 of equity in net income plus $6,941 of amortization of investment in affiliate step-up plus $8,073 of joint venture depreciation, amortization and interest. The Adjusted EBITDA from the Zeolyst Joint Venture included in the environmental catalyst and services segment is $19,962 for the nine months ended September 30, 2016, which includes $9,213 of equity in net loss plus $24,606 of amortization of investment in affiliate step-up plus $4,534 of joint venture depreciation, amortization and interest.			—		%

Risk-free interest rate		1.51	%
Expected volatility		44.51	%
Expected term (in years)		2.91

⁽⁵⁾	~~Total Segment Adjusted EBITDA differs from the Company’s consolidated Adjusted EBITDA due to unallocated corporate expenses.~~


	Restricted Stock Units			Performance Stock Units
	Number of Units	Weighted Average Grant Date Fair Value (per share)		Number of Units	Weighted Average Grant Date Fair Value (per share)
Nonvested as of December 31, 2021	2,507,421	$	15.68	1,117,555	$	16.91
Granted	2,779,690	$	10.28	295,132	$	8.82
Vested	(1,325,654)	$	15.67	(496,442)	$	15.41
Forfeited	(973,308)	$	12.59	(165,807)	$	12.46
Nonvested as of September 30, 2022	2,988,149	$	11.67	750,438	$	15.70



	Legacy Eco Restructuring Plan			Performance Materials Plant Closure		Total Restructuring Charges
Balance at December 31, 2016	$	1,643		$	—	$	1,643
Restructuring charges	830			3,868		4,698
Cash payments	(1,971		)	—		(1,971		)
Balance at September 30, 2017	$	502		$	3,868	$	4,370


~~ITEM 2.~~	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.



	Historical
	Three months ended September 30,				Change
	2017		2016		$			%
	(in millions, except percentages)
Net Sales:
Performance Chemicals	$	175.5	$	167.8	$	7.7		4.6	%
Performance Materials	104.4		90.2		14.2			15.7	%
Eliminations	(2.8)		(1.9)		(0.9)			47.4	%
Performance Materials & Chemicals	$	277.1	$	256.1	$	21.0		8.2	%

Silica Catalyst	$	15.1	$	21.0	$	(5.9	)	(28.1	)%
Refining Services	100.4		93.3		7.1			7.6	%
Environmental Catalysts & Services	115.5		114.3		1.2			1.1	%

Inter-segment sales eliminations	(0.8)		(0.4)		(0.4)			100.0	%

Total net sales	$	391.8	$	370.0	$	21.8		5.9	%



	Historical											Historical			Pro Forma
	Nine Months Ended September 30,						Change					Nine Months Ended September 30,						Change
	2017			2016			$			%		2017			2016			$			%
	(in millions, except percentages)
Sales	$	1,114.0		$	741.4		$	372.6		50.3	%	$	1,114.0		$	1,080.3		$	33.7		3.1	%
Cost of goods sold	821.3			557.7			263.6			47.3	%	821.3			791.2			30.1			3.8	%
Gross profit	292.7			183.7			109.0			59.3	%	292.7			289.1			3.6			1.2	%
Gross profit margin	26.3		%	24.8		%						26.3		%	26.8		%
Selling, general and administrative expenses	105.9			74.0			31.9			43.1	%	105.9			111.5			(5.6		)	(5.0	)%
Other operating expense, net	47.2			40.6			6.6			16.3	%	47.2			55.9			(8.7		)	(15.6	)%
Operating income	139.6			69.1			70.5			102.0	%	139.6			121.7			17.9			14.7	%
Operating income margin	12.5		%	9.3		%						12.5		%	11.3		%
Equity in net (income) loss of affiliated companies	(24.9		)	9.3			(34.2		)	(367.7	)%	(24.9		)	(8.9		)	(16.0		)	179.8	%
Interest expense, net	144.0			94.4			49.6			52.5	%	144.0			142.6			1.4			1.0	%
Debt extinguishment costs	0.5			11.9			(11.4		)	(95.8	)%	0.5			—			0.5			—	%
Other expense, net	21.7			7.2			14.5			201.4	%	21.7			1.7			20.0			1,176.5	%
Loss before income taxes and noncontrolling interest	(1.7		)	(53.7		)	52.0			(96.8	)%	(1.7		)	(13.7		)	12.0			(87.6	)%
Provision for income taxes	5.3			36.0			(30.7		)	(85.3	)%	5.3			42.3			(37.0		)	(87.5	)%
Effective tax rate	-304.2		%	-67.1		%						-304.2		%	-308.4		%
Net loss	(7.0		)	(89.7		)	82.7			(92.2	)%	(7.0		)	(56.0		)	49.0			(87.5	)%
Less: Net income attributable to the noncontrolling interest	0.4			0.7			(0.3		)	(42.9	)%	0.4			1.4			(1.0		)	(71.4	)%
Net loss attributable to PQ Group Holdings Inc.	$	(7.4	)	$	(90.4	)	$	83.0		(91.8	)%	$	(7.4	)	$	(57.4	)	$	50.0		(87.1	)%



	September 30, 2017		December 31, 2016
	(in millions)
Term Loan Facility (U.S. dollar denominated)	$	918.5	$	925.4
Term Loan Facility (Euro denominated)	331.4		297.3
6.75% Senior Secured Notes due 2022	625.0		625.0
Floating Rate Senior Unsecured Notes due 2022	525.0		525.0
8.5% Senior Notes due 2022	200.0		200.0
ABL Facility	35.0		—
Other	68.2		45.2
Total debt	2,703.1		2,617.9
Original issue discount	(26.5)		(28.5)
Deferred financing costs	(24.8)		(27.3)
Total debt, net of original issue discount and deferred financing costs	2,651.8		2,562.1
Less: current portion	(54.3)		(14.5)
Total long-term debt	$	2,597.5	$	2,547.6