Ecovyst, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Investments in Affiliated Companies

Investments in Affiliated Companies

12 Months Ended

Dec. 31, 2018

Equity Method Investments and Joint Ventures [Abstract]

11. Investments in Affiliated Companies:

As a result of the Business Combination, the Company acquired investments in affiliated companies accounted for under the equity method. Affiliated companies accounted for on the equity method as of December 31, 2018 are as follows:



Company	Country	Percent Ownership
PQ Silicates Ltd.	Taiwan	50%
Zeolyst International	USA	50%
Zeolyst C.V.	Netherlands	50%
Quaker Holdings	South Africa	49%
Asociacion para el Estudio de las Tecnologias de Equipamiento de Carreteras, S.A. (“Aetec”)	Spain	20%

Following is summarized information of the combined investments⁽¹⁾:



	December 31,
	2018		2017
Current assets	$	215,416	$	213,815
Noncurrent assets	248,288		235,440
Current liabilities	40,536		37,018
Noncurrent liabilities	56		1,417



	Years ended December 31,
	2018		2017		2016
Sales	$	352,599	$	317,197	$	206,072
Gross profit	126,945		132,812		91,761
Operating income	88,508		91,224		67,098
Net income	88,622		94,740		67,332


⁽¹⁾	Summarized information of the combined investments is presented at 100%; the Company’s share of the net assets and net income of affiliates is calculated based on the percent ownership specified in the table above.

The Company’s investments in affiliated companies balance as of December 31, 2018 and 2017 includes net purchase accounting fair value adjustments of $258,066 and $264,700, respectively, related to the Business Combination, consisting primarily of goodwill and intangible assets such as customer relationships, technical know-how and trade names. Consolidated equity in net income (loss) from affiliates is net of $6,634, $8,599 and $36,296 of amortization expense related to purchase accounting fair value adjustments for the years ended December 31, 2018, 2017 and 2016, respectively.

The following table summarizes the activity related to the Company’s investments in affiliated companies balance on the consolidated balance sheets:



	Years ended December 31,
	2018			2017
Balance at beginning of period	$	469,276		$	459,406
Acquisition	—			119
Investments in affiliated companies	5,000			9,000
Equity in net income of affiliated companies	44,245			47,371
Charges related to purchase accounting fair value adjustments	(6,634		)	(8,599		)
Dividends received	(40,890		)	(44,071		)
Foreign currency translation adjustments	(2,786		)	6,050
Balance at end of period	$	468,211		$	469,276

The Company had net receivables due from affiliates of $4,775 and $4,910 as of December 31, 2018 and 2017, respectively, which are included in prepaid and other current assets. Net receivables due from affiliates are generally non-trade receivables. Sales to affiliates were $2,823, $2,853 and $1,587 for the years ended December 31, 2018, 2017 and 2016, respectively. The Company purchased goods of $645, $2,475 and $1,147 from affiliates, which is included in cost of goods sold during the years ended December 31, 2018, 2017 and 2016, respectively.

On December 18, 2013, PQ Holdings and its joint venture, Zeolyst International, entered into a ten year real estate tax abatement agreement with the Unified Government of Wyandotte County, Kansas. The agreement utilizes an Industrial Revenue Bond financing structure to achieve a 75% real estate tax abatement on the value of the improvements that were constructed during the expansion of PQ Holdings and Zeolyst International’s facilities at the jointly-operated Kansas City, Kansas plant. A similar tax abatement agreement has been executed on an annual basis since December 18, 2013 with respect to additional plant expansions during those years. The financing obligations and the industrial bonds receivable have been presented net, as the financing obligations and the industrial bonds meet the criteria for right of setoff conditions under GAAP.