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Performance Chemicals Divestiture | 12 Months Ended
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Dec. 31, 2021
Discontinued Operations and Disposal Groups [Abstract] |
Performance Chemicals Divestiture | 5. Performance Chemicals Divestiture: On February 28, 2021, the Company entered into a 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 a purchase price of $1,100,000 subject to certain adjustments including indebtedness, cash, working capital and transaction expenses. The Company completed the sale of its Performance Chemicals business effective on August 1, 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 Company classified the proceeds within net cash provided by (used in) investing activities – continuing operations in the consolidated statements of cash flows and used the net proceeds from the sale as well as cash on hand to pay down debt and issue a special cash dividend of $3.20 per share to stockholders. Prior to the closing of the transaction, the di sposal group was tested for recoverability as of each of the balance sheet dates since meeting the discontinued operations criteria, and the Company recognized an estimated disposal loss of $109,584 during the year ended December 31, 2021, which was included in net loss from discontinued operati ons, net of tax on the consolidated statements of income for the respective periods. During the year ended December 31, 2021, the Company incurred transaction costs of $35,402 and stock-based compensation expense of $5,691 in connection with the sale, which is included in loss from discontinued operations, net of tax. The final pre-tax loss on the sale of the Performance Chemicals business was $150,230, which is 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, 2021. The following is a reconciliation of the loss recorded on the sale:
Net proceeds received from the sale of the Performance Chemicals business |  | $ | 978,449 |
Transaction costs |  | (35,402) |
Net assets derecognized |  | (1,093,277) |
Loss on sale of the Performance Chemicals business |  | $ | (150,230) |
In connection with the sale of the Performance Chemicals business and the related loss, as noted above, the Company has recognized a tax benefit of $37,255 within net loss from discontinued operations, net of tax on the consolidated statement of income. The following table summarizes the results of discontinued operations related to Performance Chemicals for the periods presented:
| Years ended December 31,
| 2021 |  | 2020 |  |
Sales | $ | 389,870 |  |  | $ | 614,704 |  |  |
Cost of goods sold | 284,220 |  |  | 492,302 |  |  |
Selling, general and administrative expenses | 29,856 |  |  | 43,749 |  |  |
Goodwill impairment charge | 75,080 |  |  | 260,000 |  |  |
Other operating expense, net(1) | 14,765 |  |  | 33,144 |  |  |
Loss on sale of the Performance Chemicals business | 150,230 |  |  | — |  |  |
Operating (loss) income | (164,281) |  |  | (214,491) |  |  |
Equity in net income from affiliated companies | (111) |  |  | (172) |  |  |
Interest expense, net (2) | 10,730 |  |  | 16,570 |  |  |
Other income, net | (6,210) |  |  | (1,089) |  |  |
(Loss) income from discontinued operations before income tax | (168,690) |  |  | (229,800) |  |  |
(Benefit) Provision for income taxes | (24,886) |  |  | 3,943 |  |  |
(Loss) income from discontinued operations, net of tax | $ | (143,804) |  |  | $ | (233,743) |  |  |
(1) The Company reclassified transaction costs that were previously recorded to this line item and included those charges in the line item Loss on sale of the Performance Chemicals business during the years ended December 31, 2021 and 2020. (2) Upon the close of the transaction, the Company used a portion of the net proceeds to repay a portion of its outstanding debt amounting to $526,363. Refer to Note 18 for additional details on the repayment of outstanding debt. Prior to the Company’s debt refinancing in June 2021, the Company’s outstanding term loan facilities had required refinancing of debt with repayment provisions. As a result, interest expense has been allocated to discontinued operations on the basis of the Company’s total repayment of $526,363. Net (loss) income attributable to the noncontrolling interest related to the Performance Chemicals business, net of tax was $333 and $(3,198) for the years ended December 31, 2021 and 2020, respectively. Net (loss) income attributable to Ecovyst Inc., related to the Performance Chemicals business, net of tax was $(144,137) and $(230,545) for the years ended December 31, 2021 and 2020, respectively. The following table summarizes the assets and liabilities of discontinued operations at December 31, 2020 and 2019, respectively:
|  | December 31, 2020 |  | December 31, 2019
ASSETS |  |  |  |
Cash and cash equivalents |  | $ | 22,153 |  |  | $ | 17,736 |
Accounts receivables, net |  | 87,202 |  |  | 86,627 |
Inventories, net |  | 74,647 |  |  | 86,732 |
Prepaid and other current assets |  | 21,088 |  |  | 24,131 |
Current assets held for sale |  | $ | 205,090 |  |  | $ | 215,226 |
Investments in affiliated companies |  | $ | 324 |  |  | $ | 1,476 |
Property, plant and equipment, net |  | 391,524 |  |  | 401,595 |
Goodwill(1) |  | 326,173 |  |  | 583,075 |
Other intangible assets, net |  | 388,857 |  |  | 406,656 |
Right-of-use lease assets |  | 19,296 |  |  | 24,093 |
Other long-term assets |  | 23,269 |  |  | 17,688 |
Long-term assets held for sale |  | $ | 1,149,443 |  |  | $ | 1,434,583 |
LIABILITIES |  |  |  |
Notes payable and current maturities of long-term debt |  | $ | — |  |  | $ | — |
Accounts payable |  | 74,728 |  |  | 76,482 |
Operating lease liabilities—current |  | 8,479 |  |  | 6,341 |
Accrued liabilities |  | 25,330 |  |  | 26,182 |
Current liabilities held for sale |  | $ | 108,537 |  |  | $ | 109,005 |
Deferred income taxes |  | $ | 49,690 |  |  | $ | 47,848 |
Operating lease liabilities—noncurrent |  | 10,047 |  |  | 16,182 |
Other long-term liabilities |  | 95,617 |  |  | 72,538 |
Long-term liabilities held for sale |  | $ | 155,354 |  |  | $ | 136,568 |
(1) The Company applied the market approach to estimate the fair value of the Performance Chemicals business, which is consistent with the accounting policies described in Note 2 and the valuation techniques described in Note 15. In applying the market approach, the Company estimated the fair value using publicly traded comparable company values and applied the selected market multiples to a trailing twelve months adjusted EBITDA. As a result, the Company recorded an additional goodwill impairment charge of $75,080 in the first quarter of 2021 related to the Performance Chemicals business. In connection with the divestiture of the Performance Chemicals business, the Company entered into a five year contract manufacturing agreement effective on August 2, 2021 with PQ Silicas UK Ltd., a subsidiary of the Buyer, related to a facility in Warrington, United Kingdom. Pursuant to this agreement, the Buyer will manufacture and sell silica catalyst finished good products to the Company, which are finished good products sold within the Company’s Catalyst Technologies segment. Additionally, certain machinery, equipment, and other tangible personal property assets identified in the Agreement (“Catalyst Production Assets”) owned by the Buyer will be used exclusively in the manufacture of silica catalyst products for the Company. The Company does not meet the requirements for a sale-leaseback transaction as described in Accounting Standards Codification 842-40, Leases - Sale-Leaseback Transactions. Under the failed-sale-leaseback accounting model, the Company is deemed under GAAP to still own the Catalyst Production Assets, which the Company must continue to reflect in its consolidated balance sheet and depreciate over the assets’ remaining useful lives. For the year ended December 31, 2021, the Company recorded a financing lease liability of £11,648 (equivalent $16,005). The current portion of the obligation are included in accrued liabilities and the long term portion in other long term liabilities on the consolidated financial statements. Based on the estimated fair market values of the Catalyst Production Assets, the failed-sale-leaseback accounting treatment resulted in a loss of $16,005 due to the requirement to treat a certain amount of the pre-tax cash proceeds from the divestiture as though it were the result of a financing obligation. The agreement has an initial term of five years, with an option to renew, as well as an “Option Bill of Sale” which provides for the transfer from the Buyer to the Company of the Catalyst Production Assets upon the Company’s exercise of a one-dollar purchase option. Payments made to the Buyer under the contact manufacturing agreement were $3,395 for the year ended December 31, 2021. In addition to the contract manufacturing agreement noted above, the Company also entered into certain supply agreements with the Buyer, as well as a Transition Services Agreement, pursuant to which the Buyer is receiving and performing certain services to provide for the orderly transition of various functions and processes after the closing of the transaction. The services under the Transition Services Agreement include information technology, accounting, tax, financial services, human resources, facilities, and other administrative support services. These services are provided for a period of six months, which ended in January 2022. Billings under the Transition Services Agreement to the Buyer during the year ended December 31, 2021 were immaterial. T hose billings are included in selling, general and administrative expenses on the consolidated financial statements for the year ended December 31, 2021.

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