[PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) This section presents the unaudited condensed consolidated financial statements for PQ Group Holdings Inc., including statements of income, comprehensive income, balance sheets, stockholders' equity, and cash flows, along with detailed notes. Key financial highlights for Q1 2020 include a significant decrease in net income attributable to the company, a comprehensive loss, and an increase in total debt, while cash and cash equivalents improved. The notes provide context on business operations, accounting policies, segment performance, and the initial impact of COVID-19 [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Condensed Consolidated Statements of Income | Metric | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------- | | Sales | $361,598 | $359,221 | +0.7% | | Cost of goods sold | $272,999 | $278,311 | -1.9% | | Gross profit | $88,599 | $80,910 | +9.5% | | Operating income | $23,359 | $29,463 | -20.8% | | Income before income taxes and noncontrolling interest | $1,936 | $5,888 | -67.1% | | Net income | $509 | $3,441 | -85.2% | | Net income attributable to PQ Group Holdings Inc. | $224 | $3,151 | -92.9% | | Basic income per share | $0 | $0.02 | -100% | | Diluted income per share | $0 | $0.02 | -100% | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income | Metric | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | | :------------------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net income | $509 | $3,441 | | Other comprehensive income (loss), net of tax: | | | | Pension and postretirement benefits | $(15) | $(30) | | Net loss from hedging activities | $(529) | $(1,552) | | Foreign currency translation | $(46,355) | $7,167 | | Total other comprehensive income (loss) | $(46,899) | $5,585 | | Comprehensive income (loss) | $(46,390) | $9,026 | | Comprehensive income (loss) attributable to PQ Group Holdings Inc. | $(43,187) | $8,421 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | Change | | :------------------------------------ | :------------------------------ | :------------------------------- | :----- | | Cash and cash equivalents | $107,667 | $72,284 | +$35,383 | | Total current assets | $611,083 | $568,591 | +$42,492 | | Total assets | $4,296,871 | $4,320,845 | -$23,974 | | Total current liabilities | $246,354 | $269,468 | -$23,114 | | Long-term debt, excluding current portion | $1,961,687 | $1,899,196 | +$62,491 | | Total liabilities | $2,555,731 | $2,535,527 | +$20,204 | | Total equity | $1,741,140 | $1,785,318 | -$44,178 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Condensed Consolidated Statements of Stockholders' Equity | Equity Component | Balance, Dec 31, 2019 (in thousands) | Net Income (in thousands) | Other Comprehensive Income (in thousands) | Repurchases of Common Shares (in thousands) | Stock Compensation Expense (in thousands) | Balance, March 31, 2020 (in thousands) | | :--------------------------------- | :----------------------------------- | :------------------------ | :---------------------------------------- | :------------------------------------------ | :---------------------------------------- | :------------------------------------- | | Common stock | $1,369 | — | — | — | — | $1,373 | | Additional paid-in capital | $1,696,899 | — | — | — | $5,920 | $1,702,996 | | Retained earnings | $103,013 | $224 | — | — | — | $103,237 | | Treasury stock, at cost | $(6,483) | — | — | $(3,889) | — | $(10,372) | | Accumulated other comprehensive income (loss) | $(15,348) | — | $(43,411) | — | — | $(58,759) | | Noncontrolling interest | $5,868 | $285 | $(3,488) | — | — | $2,665 | | Total | $1,785,318 | $509 | $(46,899) | $(3,889) | $5,920 | $1,741,140 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | Change (YoY) | | :---------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------- | | Net cash provided by operating activities | $4,531 | $26,838 | -$22,307 | | Net cash used in investing activities | $(22,198) | $(29,267) | +$7,069 | | Net cash provided by (used in) financing activities | $58,301 | $(2,552) | +$60,853 | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | $(4,263) | $(660) | -$3,603 | | Net change in cash, cash equivalents and restricted cash | $36,371 | $(5,641) | +$42,012 | | Cash, cash equivalents and restricted cash at end of period | $110,288 | $54,085 | +$56,203 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Background and Basis of Presentation](index=10&type=section&id=Note%201.%20Background%20and%20Basis%20of%20Presentation) - PQ Group Holdings Inc. operates four specialty businesses: Refining Services, Catalysts, Performance Materials, and Performance Chemicals, providing inorganic products and services globally[24](index=24&type=chunk) - The Performance Materials and Refining Services segments experience seasonal fluctuations, with lower sales and profit in Q1 and Q4 for Performance Materials (due to warmer weather for highway striping) and higher demand for gasoline products in summer months for Refining Services. This seasonality leads to higher working capital requirements in Q1 and Q2[24](index=24&type=chunk) - The COVID-19 pandemic did not have a material adverse impact on the company's results of operations for the three months ended March 31, 2020, though the company continues to monitor its effects[26](index=26&type=chunk) [Note 2. New Accounting Standards](index=10&type=section&id=Note%202.%20New%20Accounting%20Standards) - Adopted new FASB guidance on expected credit losses (effective Jan 1, 2020) with no material impact[27](index=27&type=chunk) - Adopted new FASB guidance modifying fair value measurement disclosures (effective Jan 1, 2020) with no impact on disclosures as no Level 3 assets/liabilities or transfers occurred[30](index=30&type=chunk) - Adopted new FASB guidance eliminating the second step of the goodwill impairment test (effective Jan 1, 2020), applying it prospectively[30](index=30&type=chunk) - Evaluating new FASB guidance to simplify income tax accounting, effective for fiscal years beginning after December 15, 2020[31](index=31&type=chunk) [Note 3. Revenue from Contracts with Customers](index=12&type=section&id=Note%203.%20Revenue%20from%20Contracts%20with%20Customers) Disaggregated Sales by Segment and End Use (Three Months Ended March 31, 2020 vs 2019) | End Use | Refining Services (2020) | Catalysts (2020) | Performance Materials (2020) | Performance Chemicals (2020) | Total (2020) | Refining Services (2019) | Catalysts (2019) | Performance Materials (2019) | Performance Chemicals (2019) | Total (2019) | | :-------------------------------- | :----------------------- | :--------------- | :--------------------------- | :--------------------------- | :----------- | :----------------------- | :--------------- | :--------------------------- | :--------------------------- | :----------- | | Industrial & process chemicals | $19,359 | $47 | $12,123 | $59,833 | $91,362 | $18,402 | $276 | $13,028 | $59,652 | $91,358 | | Fuels & emission control | $55,710 | — | $40 | — | $55,750 | $57,690 | — | — | — | $57,690 | | Packaging & engineered plastics | $10,734 | $24,817 | $17,471 | $14,275 | $67,297 | $12,689 | $15,590 | $17,382 | $14,730 | $60,391 | | Highway safety & construction | — | — | $32,643 | $20,190 | $52,833 | — | — | $27,360 | $21,938 | $49,298 | | Consumer products | — | — | — | $64,026 | $64,026 | — | — | — | $68,509 | $68,509 | | Natural resources | $14,887 | — | $3,292 | $15,955 | $34,134 | $17,063 | — | $3,319 | $15,633 | $36,015 | | **Total Sales (after eliminations)** | **$99,765** | **$24,817** | **$65,515** | **$171,501** | **$361,598** | **$104,957** | **$15,590** | **$61,041** | **$177,633** | **$359,221** | - The company recognized **$1,269 thousand** in revenue from a contract liability related to the sale of a sulfate salts product line during Q1 2020, with **$5,175 thousand** remaining as deferred revenue[39](index=39&type=chunk) [Note 4. Fair Value Measurements](index=13&type=section&id=Note%204.%20Fair%20Value%20Measurements) - Fair value measurements are classified into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[44](index=44&type=chunk) Fair Value Measurements (March 31, 2020 vs December 31, 2019) | Asset/Liability | March 31, 2020 (in thousands) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | December 31, 2019 (in thousands) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | | :--------------------------- | :---------------------------- | :--------------------- | :--------------------- | :--------------------- | :------------------------------- | :--------------------- | :--------------------- | :--------------------- | | **Assets:** | | | | | | | | | | Derivative contracts | $10,604 | — | $10,604 | — | $3,928 | — | $3,928 | — | | Restoration plan assets | $3,435 | $3,435 | — | — | $4,199 | $4,199 | — | — | | **Total Assets** | **$14,039** | **$3,435** | **$10,604** | **—** | **$8,127** | **$4,199** | **$3,928** | **—** | | **Liabilities:** | | | | | | | | | | Derivative contracts | $5,217 | — | $5,217 | — | $12,415 | — | $12,415 | — | - Restoration plan assets are valued using Level 1 inputs (quoted prices in active markets) and include stock and fixed income mutual funds held in a Rabbi trust[47](index=47&type=chunk) - Derivative contracts (interest rate caps, natural gas swaps, cross-currency swaps) are fair valued using Level 2 inputs, with credit valuation adjustments based on credit default swaps[48](index=48&type=chunk) [Note 5. Stockholders' Equity](index=16&type=section&id=Note%205.%20Stockholders%27%20Equity) Components of Other Comprehensive Income (Loss), Net of Tax (Three Months Ended March 31, 2020 vs 2019) | Component | 2020 After-tax amount (in thousands) | 2019 After-tax amount (in thousands) | | :---------------------------------------- | :----------------------------------- | :----------------------------------- | | Defined benefit and other postretirement plans, net | $(15) | $(30) | | Net loss from hedging activities | $(529) | $(1,552) | | Foreign currency translation | $(46,355) | $7,167 | | **Total Other Comprehensive Income (Loss)** | **$(46,899)** | **$5,585** | - The accumulated other comprehensive loss **increased** from **$(15,348) thousand** at December 31, 2019, to **$(58,759) thousand** at March 31, 2020, primarily due to a **$(42,867) thousand** foreign currency translation loss before reclassifications[52](index=52&type=chunk) - The Board of Directors authorized a **$50 million** stock repurchase program in March 2020, valid until March 2022. By March 31, 2020, the company repurchased **211,700 shares** for **$2,059 thousand**, with **$47,941 thousand** remaining[57](index=57&type=chunk) [Note 6. Asset Swap Transaction](index=19&type=section&id=Note%206.%20Asset%20Swap%20Transaction) - On February 19, 2020, the company entered into a non-cash asset swap, exchanging its ThermoDrop® product line assets for a beads business (inventory, production equipment, two manufacturing facilities) from a thermoplastic producer[58](index=58&type=chunk) - A preliminary loss on disposal of **$9,907 thousand** was recognized during Q1 2020, included in other operating expense, net[61](index=61&type=chunk) - The acquisition of the beads business resulted in the recognition of **$5,764 thousand** in goodwill, assigned to the Performance Materials segment, aimed at expanding geographic footprint and achieving synergies[61](index=61&type=chunk) [Note 7. Goodwill](index=21&type=section&id=Note%207.%20Goodwill) Goodwill Carrying Amount by Segment (March 31, 2020 vs December 31, 2019) | Segment | Balance as of Dec 31, 2019 (in thousands) | Goodwill Recognized (in thousands) | Foreign Exchange Impact (in thousands) | Balance as of March 31, 2020 (in thousands) | | :---------------------- | :---------------------------------------- | :------------------------- | :------------------------------------- | :---------------------------------------- | | Refining Services | $311,892 | — | — | $311,892 | | Catalysts | $78,611 | — | $(1,438) | $77,173 | | Performance Materials | $275,919 | $5,764 | $(1,745) | $279,938 | | Performance Chemicals | $593,383 | — | $(13,652) | $579,731 | | **Total** | **$1,259,805** | **$5,764** | **$(16,835)** | **$1,248,734** | [Note 8. Other Operating Expense, Net](index=22&type=section&id=Note%208.%20Other%20Operating%20Expense%2C%20Net) Other Operating Expense, Net (Three Months Ended March 31, 2020 vs 2019) | Expense Type | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Amortization expense | $8,637 | $8,664 | | Transaction and other related costs | $1,869 | — | | Restructuring and other related costs | $1,989 | — | | Net loss on asset disposals | $9,420 | $820 | | Other, net | $27 | $1,255 | | **Total Other Operating Expense, Net** | **$21,942** | **$10,739** | - The net loss on asset disposals of **$9,420 thousand** in Q1 2020 includes a **$9,907 thousand** loss from the asset swap and a **$672 thousand** gain from the sale of interest in the Quaker Holdings joint venture[65](index=65&type=chunk) [Note 9. Inventories, Net](index=22&type=section&id=Note%209.%20Inventories%2C%20Net) Inventories, Net (March 31, 2020 vs December 31, 2019) | Inventory Type | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Finished products and work in process | $217,426 | $222,940 | | Raw materials | $47,616 | $58,005 | | **Total Inventories, Net** | **$265,042** | **$280,945** | [Note 10. Investments in Affiliated Companies](index=22&type=section&id=Note%2010.%20Investments%20in%20Affiliated%20Companies) - The company accounts for investments in affiliated companies under the equity method, including **50%** ownership in PQ Silicates Ltd., Zeolyst International, and Zeolyst C.V[67](index=67&type=chunk) - In March 2020, the company sold its **49%** interest in the Quaker Holdings joint venture, receiving a liquidating dividend of **$729 thousand** and **$1,032 thousand** from the sale of shares[69](index=69&type=chunk) Summarized Combined Investments Information (Three Months Ended March 31, 2020 vs 2019) | Metric | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | | :----------------- | :----------------------------------------------- | :----------------------------------------------- | | Sales | $71,207 | $68,094 | | Gross profit | $31,139 | $19,414 | | Operating income | $21,009 | $9,207 | | Net income | $20,035 | $9,240 | [Note 11. Property, Plant and Equipment](index=23&type=section&id=Note%2011.%20Property%2C%20Plant%20and%20Equipment) Property, Plant and Equipment, Net (March 31, 2020 vs December 31, 2019) | Asset Type | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------- | :------------------------------ | :------------------------------- | | Land | $176,502 | $183,117 | | Buildings | $220,898 | $221,449 | | Machinery and equipment | $1,226,748 | $1,236,531 | | Construction in progress | $76,375 | $82,687 | | Less: accumulated depreciation | $(552,644) | $(537,014) | | **Total Property, Plant and Equipment, Net** | **$1,147,879** | **$1,186,770** | - Depreciation expense was **$33,501 thousand** for the three months ended March 31, 2020, compared to **$33,154 thousand** for the same period in 2019[70](index=70&type=chunk) [Note 12. Long-term Debt](index=24&type=section&id=Note%2012.%20Long-term%20Debt) Long-term Debt Summary (March 31, 2020 vs December 31, 2019) | Debt Type | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :---------------------------------------------------- | :------------------------------ | :------------------------------- | | Term Loan Facility | $947,497 | $947,497 | | 6.75% Senior Secured Notes due 2022 | $625,000 | $625,000 | | 5.75% Senior Unsecured Notes due 2025 | $295,000 | $295,000 | | ABL Facility | $63,989 | — | | Other | $65,283 | $64,629 | | **Total debt** | **$1,996,769** | **$1,932,126** | | Less: current portion | $(8,489) | $(7,766) | | **Total long-term debt, excluding current portion** | **$1,961,687** | **$1,899,196** | - The Term Loan Facility was amended in Q1 2020 to reduce interest rates (LIBOR plus **2.25%**) and extend maturity to February 7, 2027, resulting in **$2,188 thousand** of new financing costs and **$325 thousand** of written-off deferred financing costs/original issue discount as debt extinguishment costs[76](index=76&type=chunk) - The ABL Facility was amended on March 20, 2020, **increasing** revolving loan commitments by **$50 million** to **$250 million**, reducing interest rates, and extending maturity to March 20, 2025[77](index=77&type=chunk) [Note 13. Financial Instruments](index=24&type=section&id=Note%2013.%20Financial%20Instruments) - The company uses interest rate derivatives (caps), commodity derivatives (natural gas swaps), and foreign currency derivatives (cross-currency interest rate swaps) to manage market risks, not for speculation[78](index=78&type=chunk) - Natural gas swaps are designated as cash flow hedges, with gains/losses recorded in OCI and reclassified to cost of goods sold when inventory is sold. As of March 31, 2020, **3.1 million MMBTU** notional quantity remains through December 2021[81](index=81&type=chunk) - Interest rate cap agreements are cash flow hedges, with gains/losses recorded in OCI and reclassified to interest expense. In Q1 2020, the company restructured **$500 million** notional variable-rate debt interest rate cap agreements to lower the cap rate to **0.84%** (from **2.50%**) through July 2022, incurring an additional **$900 thousand** premium[81](index=81&type=chunk) Fair Values of Derivative Instruments (March 31, 2020 vs December 31, 2019) | Derivative Type | Balance Sheet Location | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--------------------------------- | :--------------------------------------- | :------------------------------ | :------------------------------- | | **Derivative Assets:** | | | | | Cross-currency interest rate swaps | Prepaid and other current assets | $5,234 | $3,928 | | Cross-currency interest rate swaps | Other long-term assets | $5,370 | — | | **Total Derivative Assets** | | **$10,604** | **$3,928** | | **Derivative Liabilities:** | | | | | Natural gas swaps | Accrued liabilities | $995 | $813 | | Interest rate caps | Accrued liabilities | $1,073 | $420 | | Natural gas swaps | Other long-term liabilities | $386 | $226 | | Interest rate caps | Other long-term liabilities | $2,763 | $2,822 | | Cross-currency swaps | Other long-term liabilities | — | $8,134 | | **Total Derivative Liabilities** | | **$5,217** | **$12,415** | [Note 14. Income Taxes](index=27&type=section&id=Note%2014.%20Income%20Taxes) Effective Income Tax Rate (Three Months Ended March 31, 2020 vs 2019) | Metric | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--------------------- | :-------------------------------- | :-------------------------------- | | Provision for income taxes | $1,427 | $2,447 | | Effective tax rate | 73.7% | 41.6% | - The **effective tax rate** for Q1 2020 was **73.7%**, up from **41.6%** in Q1 2019, mainly due to permanent differences from foreign currency exchange gain/loss, GILTI impacts, discrete tax impacts of the asset swap, pre-tax losses with no associated tax benefit, and state taxes[89](index=89&type=chunk) - The company elected to treat taxes incurred from GILTI provisions as a current-period expense and uses the tax law ordering approach for assessing deferred tax assets[92](index=92&type=chunk) [Note 15. Benefit Plans](index=28&type=section&id=Note%2015.%20Benefit%20Plans) Defined Benefit Pension Plans - Net Periodic Expense (Benefit) (Three Months Ended March 31, 2020 vs 2019) | Component | U.S. 2020 (in thousands) | U.S. 2019 (in thousands) | Foreign 2020 (in thousands) | Foreign 2019 (in thousands) | | :--------------------------------- | :----------------------- | :----------------------- | :-------------------------- | :-------------------------- | | Service cost | $192 | $219 | $997 | $806 | | Interest cost | $2,152 | $2,507 | $707 | $833 | | Expected return on plan assets | $(3,331) | $(2,757) | $(810) | $(603) | | Amortization of net loss | — | — | $41 | — | | Amortization of prior service cost | — | — | $6 | — | | **Net periodic expense (benefit)** | **$(987)** | **$(31)** | **$941** | **$1,036** | Supplemental Retirement Plans - Net Periodic Expense (Three Months Ended March 31, 2020 vs 2019) | Metric | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | | :----------------------- | :----------------------------------------------- | :----------------------------------------------- | | Interest cost | $86 | $121 | | **Net periodic expense** | **$86** | **$121** | Other Postretirement Benefit Plans - Net Periodic Expense (Benefit) (Three Months Ended March 31, 2020 vs 2019) | Metric | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | | :--------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Service cost | — | $3 | | Interest cost | $24 | $38 | | Amortization of prior service credit | $(58) | $(33) | | Amortization of net gain | $(7) | $(8) | | **Net periodic expense (benefit)** | **$(41)** | **—** | [Note 16. Commitments and Contingent Liabilities](index=29&type=section&id=Note%2016.%20Commitments%20and%20Contingent%20Liabilities) - The company faces environmental impact risks in chemical manufacturing and is subject to various lawsuits and claims (personal injury, product liability, waste disposal)[97](index=97&type=chunk) - Management believes existing accruals are adequate and that these matters will not materially adversely affect the company's consolidated financial position, results of operations, or liquidity[97](index=97&type=chunk) [Note 17. Reportable Segments](index=30&type=section&id=Note%2017.%20Reportable%20Segments) Segment Sales (Three Months Ended March 31, 2020 vs 2019) | Segment | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | Change (YoY) | | :---------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------- | | Refining Services | $100,690 | $105,844 | -4.8% | | Catalysts | $24,864 | $15,866 | +56.7% | | Performance Materials | $65,569 | $61,089 | +7.3% | | Performance Chemicals | $174,279 | $180,462 | -3.4% | | **Total Sales (after eliminations)** | **$361,598** | **$359,221** | **+0.7%** | Segment Adjusted EBITDA (Three Months Ended March 31, 2020 vs 2019) | Segment | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | Change (YoY) | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------- | | Refining Services | $37,183 | $39,731 | -6.4% | | Catalysts | $22,667 | $18,127 | +25.0% | | Performance Materials | $13,507 | $10,515 | +28.4% | | Performance Chemicals | $40,474 | $42,673 | -5.2% | | **Total Segment Adjusted EBITDA** | **$113,831** | **$111,046** | **+2.5%** | - Adjusted EBITDA for the Zeolyst Joint Venture (included in Catalysts segment) was **$13,725 thousand** in Q1 2020, up from **$8,357 thousand** in Q1 2019, driven by **increased** equity in net income and joint venture depreciation, amortization, and interest[100](index=100&type=chunk) [Note 18. Stock-Based Compensation](index=31&type=section&id=Note%2018.%20Stock-Based%20Compensation) - Total stock-based compensation expense for Q1 2020 was **$5,920 thousand**, up from **$3,400 thousand** in Q1 2019[109](index=109&type=chunk) - In Q1 2020, the company granted **1,144,072 restricted stock units** (service-based vesting) and **456,311 performance stock units** (**50%** financial target, **50%** TSR goal over three years)[105](index=105&type=chunk) - Unrecognized compensation cost for nonvested restricted stock units and performance stock units was **$31,661 thousand** and **$13,709 thousand**, respectively, as of March 31, 2020, to be recognized over weighted-average periods of **2.04** and **2.4 years**[109](index=109&type=chunk) Stock-Based Compensation Activity (Three Months Ended March 31, 2020) | Award Type | Nonvested as of Dec 31, 2019 (Number of Units) | Granted (Number of Units) | Vested (Number of Units) | Forfeited (Number of Units) | Nonvested as of March 31, 2020 (Number of Units) | | :-------------------- | :--------------------------------------------- | :------------------------ | :----------------------- | :-------------------------- | :----------------------------------------------- | | Restricted Stock Units | 1,628,436 | 1,144,072 | (431,755) | (77,848) | 2,262,905 | | Performance Stock Units | 550,676 | 456,311 | — | (31,069) | 975,918 | [Note 19. Earnings per Share](index=34&type=section&id=Note%2019.%20Earnings%20per%20Share) Earnings Per Share (Three Months Ended March 31, 2020 vs 2019) | Metric | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--------------------------- | :-------------------------------- | :-------------------------------- | | Net income attributable to PQ Group Holdings Inc. | $224 | $3,151 | | Weighted average shares outstanding – Basic | 135,240,897 | 133,946,308 | | Weighted average shares outstanding – Diluted | 136,086,082 | 134,894,354 | | Basic income per share | $0 | $0.02 | | Diluted income per share | $0 | $0.02 | - Anti-dilutive awards, including restricted stock awards, stock options with performance-only targets not yet achieved, and other anti-dilutive stock options, were excluded from diluted EPS calculations[115](index=115&type=chunk) [Note 20. Supplemental Cash Flow Information](index=36&type=section&id=Note%2020.%20Supplemental%20Cash%20Flow%20Information) Supplemental Cash Flow Information (Three Months Ended March 31, 2020 vs 2019) | Metric | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | | :---------------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Cash paid for income taxes, net of refunds | $10,346 | $4,387 | | Cash paid for interest | $19,973 | $23,740 | | Capital expenditures acquired on account but unpaid | $11,660 | $15,391 | | Right-of-use assets obtained for new lease liabilities | $1,850 | $508 | Reconciliation of Cash, Cash Equivalents and Restricted Cash (March 31, 2020 vs 2019) | Metric | March 31, 2020 (in thousands) | March 31, 2019 (in thousands) | | :---------------------------------------------------------------------------------------------------- | :------------------------------ | :------------------------------ | | Cash and cash equivalents | $107,667 | $52,341 | | Restricted cash included in prepaid and other current assets | $2,621 | $1,744 | | **Total cash, cash equivalents and restricted cash shown in condensed consolidated statements of cash flows** | **$110,288** | **$54,085** | [Note 21. Subsequent Events](index=36&type=section&id=Note%2021.%20Subsequent%20Events) - No additional items to disclose from subsequent events evaluation since the balance sheet date[119](index=119&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=37&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2020, compared to the prior year. It highlights the slight **increase** in sales but a significant **decrease** in net income, largely influenced by an asset swap loss, debt extinguishment costs, and foreign currency impacts. The discussion also details the anticipated near-term effects of the COVID-19 pandemic on demand, operations, and liquidity, as well as segment-specific performance and key financial metrics like Adjusted EBITDA and Adjusted Net Income [Forward-looking Statements](index=37&type=section&id=Forward-looking%20Statements) - The report contains forward-looking statements regarding future events, financial results, business strategy, and financial needs, identified by words like "believe," "may," "will," "estimate," "continue," "anticipate," "intend," and "expect"[122](index=122&type=chunk) - Key risks and uncertainties include the impact of the COVID-19 pandemic, local business risks, general economic conditions, exchange rate fluctuations, legal and regulatory compliance, technological changes, raw material prices, competition, customer non-payment, seasonal fluctuations, and substantial indebtedness[122](index=122&type=chunk)[124](index=124&type=chunk) - The company does not undertake any obligation to publicly update forward-looking statements after the Form 10-Q filing date[124](index=124&type=chunk) [Overview](index=39&type=section&id=Overview) - PQ Group Holdings Inc. is a leading global provider of specialty catalysts, materials, chemicals, and services, with products predominantly inorganic and contributing to environmental sustainability[125](index=125&type=chunk) - The company operates through four reporting segments: Refining Services, Catalysts (including Zeolyst Joint Venture), Performance Materials, and Performance Chemicals[125](index=125&type=chunk) - Each segment serves distinct markets: Refining Services (sulfuric acid recycling), Catalysts (silica catalysts, zeolites for emission control), Performance Materials (transportation reflective safety markings), and Performance Chemicals (sodium silicates for industrial and consumer uses)[125](index=125&type=chunk) [Impact of COVID-19 on our Business and Results](index=39&type=section&id=Impact%20of%20COVID-19%20on%20our%20Business%20and%20Results) - The COVID-19 pandemic did not materially impact businesses in Q1 2020, but near-term demand is expected to **decrease** for certain products due to ongoing restrictions[129](index=129&type=chunk) - Anticipated demand impacts include reduced sulfuric acid demand in Refining Services, weaker demand for engineered glass materials and highway safety products outside the U.S. in Performance Materials, and lower demand for sodium silicate in industrial applications and consumer products in Performance Chemicals[129](index=129&type=chunk)[130](index=130&type=chunk) - Manufacturing operations continue as essential businesses, but limited and temporary shutdowns/slowdowns, production delays due to employee absenteeism, and minor raw material disruptions have occurred[131](index=131&type=chunk) - To strengthen liquidity, the company drew **$64.0 million** on its revolving credit facility, resulting in **$107.7 million** cash and **$236.3 million** total available liquidity as of March 31, 2020[132](index=132&type=chunk) - The Term Loan Facility and ABL Facility were amended to reduce interest rates and extend maturities, with no significant debt maturities before November 2022. The CARES Act had no material impact on Q1 2020 financial statements[132](index=132&type=chunk)[133](index=133&type=chunk) [Stock Repurchase Program](index=42&type=section&id=Stock%20Repurchase%20Program) - A **$50.0 million** share repurchase program was authorized by the Board of Directors on March 12, 2020, valid for **24 months**[136](index=136&type=chunk) - As of March 31, 2020, **211,700 shares** were repurchased for **$2.1 million** at an average price of **$9.73**, with **$47.9 million** remaining available under the program[136](index=136&type=chunk) [Key Performance Indicators](index=42&type=section&id=Key%20Performance%20Indicators) - Adjusted EBITDA and Adjusted Net Income are non-GAAP financial measures used for evaluating operating performance, business planning, and competitive comparison[137](index=137&type=chunk) - Adjusted EBITDA is defined as EBITDA adjusted for non-operating income/expense, certain non-cash/nonrecurring items, and the company's **50%** share of Zeolyst Joint Venture's depreciation, amortization, and interest[137](index=137&type=chunk) - Adjusted Net Income is defined as net income attributable to PQ Group Holdings adjusted for non-operating income/expense and certain non-cash/nonrecurring items[137](index=137&type=chunk) [Key Factors and Trends Affecting Operating Results and Financial Condition](index=42&type=section&id=Key%20Factors%20and%20Trends%20Affecting%20Operating%20Results%20and%20Financial%20Condition) [Sales](index=42&type=section&id=Sales_KeyFactors) - Sales in Refining Services and Catalysts segments have **grown** due to expansion into new end applications (emission control, polymer, refining catalysts) and supply share gains[138](index=138&type=chunk) - Performance Materials and Performance Chemicals segments have historically stable demand, with **growth** from new applications (personal care, consumer cleaning) and highway safety spending[138](index=138&type=chunk) - The COVID-19 pandemic is expected to **decrease** near-term demand for certain products, primarily in Refining Services and Performance Chemicals, and to a lesser extent in Catalysts and Performance Materials[138](index=138&type=chunk) [Cost of Goods Sold](index=43&type=section&id=Cost%20of%20Goods%20Sold) - Cost of goods sold comprises variable product costs (raw materials, energy, packaging), fixed manufacturing expenses, depreciation, and freight[140](index=140&type=chunk) - Refining Services contracts often include take-or-pay volume protection and quarterly price adjustments for commodity inputs, labor, and natural gas, covering over **90%** of 2019 sales[140](index=140&type=chunk) - Approximately **50%** of North American silicate sales (Performance Chemicals) include raw material pass-through clauses, with a **3-9 month** time lag for price changes[140](index=140&type=chunk) - The company hedges natural gas price exposure in the U.S. and makes forward purchases in various regions to mitigate volatility[140](index=140&type=chunk) [Joint Ventures](index=43&type=section&id=Joint%20Ventures) - Investments in equity joint ventures, including the largest, Zeolyst Joint Venture, are accounted for under the equity method[141](index=141&type=chunk) - The Zeolyst Joint Venture produces high-performance, specialty, zeolite-based catalysts for emission control, refining, petrochemical, and broader chemicals industries[141](index=141&type=chunk) [Seasonality](index=43&type=section&id=Seasonality) - Performance Materials segment experiences lower sales and profit in Q1 and Q4 due to highway striping projects occurring in warmer weather[142](index=142&type=chunk) - Refining Services segment experiences seasonal fluctuations due to higher gasoline demand in summer months[142](index=142&type=chunk) - Seasonality results in higher working capital requirements in the first and second quarters, potentially affecting liquidity and cash flows[142](index=142&type=chunk) [Foreign Currency](index=43&type=section&id=Foreign%20Currency) - Approximately **40%** of the company's sales are in currencies other than the U.S. dollar, leading to exposure to foreign currency translation gains and losses[143](index=143&type=chunk) - Significant exchange rate exposure exists for the Euro, British pound, Canadian dollar, Brazilian real, and Mexican peso[143](index=143&type=chunk) [Results of Operations (Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019)](index=43&type=section&id=Results%20of%20Operations%20(Three%20Months%20Ended%20March%2031%2C%202020%20Compared%20to%20the%20Three%20Months%20Ended%20March%2031%2C%202019)) [Highlights](index=43&type=section&id=Highlights) - Sales **increased** by **$2.4 million** to **$361.6 million**, primarily due to higher sales volumes, partially offset by lower sulfur pricing pass-through and unfavorable foreign currency translation[146](index=146&type=chunk) - Gross profit **increased** by **$7.7 million** to **$88.6 million**, mainly due to **increased** sales volumes, partially offset by unfavorable foreign currency translation[147](index=147&type=chunk) - Operating income **decreased** by **$6.0 million** to **$23.4 million**, driven by a loss from an asset swap arrangement, partially offset by **increased** gross profit[148](index=148&type=chunk) - Equity in net income of affiliated companies **increased** by **$6.3 million** to **$8.4 million**, primarily due to higher earnings from the Zeolyst Joint Venture[149](index=149&type=chunk) [Sales](index=45&type=section&id=Sales_Results) Sales by Segment (Three Months Ended March 31, 2020 vs 2019) | Segment | 2020 Sales (in millions) | 2019 Sales (in millions) | Change ($M) | Change (%) | | :---------------------- | :----------------------- | :----------------------- | :---------- | :--------- | | Refining Services | $100.7 | $105.8 | $(5.1) | (4.8)% | | Catalysts | $24.9 | $15.9 | $9.0 | 56.6% | | Performance Materials | $65.5 | $61.1 | $4.4 | 7.2% | | Performance Chemicals | $174.3 | $180.5 | $(6.2) | (3.4)% | | **Total Sales** | **$361.6** | **$359.2** | **$2.4** | **0.7%** | - Refining Services sales **decreased** by **$5.1 million** (**4.8%**) due to lower average selling prices from the pass-through of lower sulfur pricing, partially offset by **increased** sales volumes[152](index=152&type=chunk) - Catalysts sales **increased** by **$9.0 million** (**56.6%**) due to higher customer demand for polyolefin catalysts and timing of methyl methacrylate catalyst orders[152](index=152&type=chunk) - Performance Materials sales **increased** by **$4.4 million** (**7.2%**) due to **increased** demand for North American highway safety products, favorable weather, and price increases, partially offset by unfavorable foreign currency translation[153](index=153&type=chunk)[155](index=155&type=chunk) - Performance Chemicals sales **decreased** by **$6.2 million** (**3.4%**) due to lower sales volumes in consumer products and unfavorable foreign currency translation, partially offset by higher average selling prices and favorable mix[155](index=155&type=chunk) [Gross Profit](index=47&type=section&id=Gross%20Profit_Results) Gross Profit (Three Months Ended March 31, 2020 vs 2019) | Metric | 2020 (in millions) | 2019 (in millions) | Change ($M) | Change (%) | | :----------- | :----------------- | :----------------- | :---------- | :--------- | | Gross profit | $88.6 | $80.9 | $7.7 | 9.5% | - The **increase** in gross profit was primarily due to **increased** sales volumes (**$14.4 million**) and favorable manufacturing costs (**$4.1 million**), partially offset by unfavorable product mix (**$5.7 million**), customer pricing (**$3.8 million**), and foreign currency translation (**$1.2 million**)[156](index=156&type=chunk) [Selling, General and Administrative Expenses](index=47&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses_Results) Selling, General and Administrative Expenses (Three Months Ended March 31, 2020 vs 2019) | Metric | 2020 (in millions) | 2019 (in millions) | Change ($M) | Change (%) | | :----------------------------------------- | :----------------- | :----------------- | :---------- | :--------- | | Selling, general and administrative expenses | $43.3 | $40.7 | $2.6 | 6.4% | - The **increase** in SG&A expenses was primarily due to an **increase** in stock compensation expense[157](index=157&type=chunk) [Other Operating Expense, Net](index=47&type=section&id=Other%20Operating%20Expense%2C%20Net_Results) Other Operating Expense, Net (Three Months Ended March 31, 2020 vs 2019) | Metric | 2020 (in millions) | 2019 (in millions) | Change ($M) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :---------- | :--------- | | Other operating expense, net | $21.9 | $10.8 | $11.1 | 102.8% | - The **increase** was due to a loss incurred from an asset swap arrangement and **increased** transaction-related costs[158](index=158&type=chunk) [Equity in Net Income of Affiliated Companies](index=47&type=section&id=Equity%20in%20Net%20Income%20of%20Affiliated%20Companies_Results) Equity in Net Income of Affiliated Companies (Three Months Ended March 31, 2020 vs 2019) | Metric | 2020 (in millions) | 2019 (in millions) | Change ($M) | Change (%) | | :----------------------------------------- | :----------------- | :----------------- | :---------- | :--------- | | Equity in net (income) from affiliated companies | $(8.4) | $(2.1) | $(6.3) | 300.0% | - The **increase** was primarily due to **$6.3 million** of higher earnings from the Zeolyst Joint Venture, driven by **increased** sales of emission control catalysts[159](index=159&type=chunk) [Interest Expense, Net](index=47&type=section&id=Interest%20Expense%2C%20Net_Results) Interest Expense, Net (Three Months Ended March 31, 2020 vs 2019) | Metric | 2020 (in millions) | 2019 (in millions) | Change ($M) | Change (%) | | :-------------------- | :----------------- | :----------------- | :---------- | :--------- | | Interest expense, net | $24.5 | $28.6 | $(4.1) | (14.3)% | - The **decrease** in interest expense was due to lower average debt balances, mainly from prior year prepayments on the Term Loan Facility[160](index=160&type=chunk) [Debt Extinguishment Costs](index=47&type=section&id=Debt%20Extinguishment%20Costs_Results) Debt Extinguishment Costs (Three Months Ended March 31, 2020 vs 2019) | Metric | 2020 (in millions) | 2019 (in millions) | Change ($M) | Change (%) | | :------------------------ | :----------------- | :----------------- | :---------- | :--------- | | Debt extinguishment costs | $2.5 | — | $2.5 | — | - Debt extinguishment costs of **$2.5 million** in Q1 2020 resulted from amending the senior secured term loan facility, including **$2.2 million** in new financing fees and **$0.3 million** write-off of unamortized deferred financing costs and original issue discount[161](index=161&type=chunk) [Other Expense, Net](index=48&type=section&id=Other%20Expense%2C%20Net_Results) Other (Income) Expense, Net (Three Months Ended March 31, 2020 vs 2019) | Metric | 2020 (in millions) | 2019 (in millions) | Change ($M) | Change (%) | | :------------------------ | :----------------- | :----------------- | :---------- | :--------- | | Other (income) expense, net | $2.9 | $(3.0) | $5.9 | (196.7)% | - The change was primarily due to **$3.3 million** of foreign currency losses in Q1 2020, compared to **$2.7 million** of foreign currency gains in Q1 2019, driven by fluctuations in non-permanent intercompany debt[163](index=163&type=chunk) [Provision for Income Taxes](index=48&type=section&id=Provision%20for%20Income%20Taxes_Results) Provision for Income Taxes (Three Months Ended March 31, 2020 vs 2019) | Metric | 2020 (in millions) | 2019 (in millions) | Change ($M) | Change (%) | | :------------------------ | :----------------- | :----------------- | :---------- | :--------- | | Provision for income taxes | $1.4 | $2.4 | $(1.0) | (41.7)% | | Effective tax rate | 73.7% | 41.6% | | | - The **effective tax rate** **increased** to **73.7%** in Q1 2020 from **41.6%** in Q1 2019, primarily due to income shifts in jurisdictions with differing rates, GILTI impacts, foreign exchange gains/losses, discrete tax impacts from the asset swap, pre-tax losses with no associated tax benefit, and state taxes[164](index=164&type=chunk) [Net Income Attributable to PQ Group Holdings](index=48&type=section&id=Net%20Income%20Attributable%20to%20PQ%20Group%20Holdings_Results) Net Income Attributable to PQ Group Holdings Inc. (Three Months Ended March 31, 2020 vs 2019) | Metric | 2020 (in millions) | 2019 (in millions) | Change ($M) | Change (%) | | :----------------------------------------- | :----------------- | :----------------- | :---------- | :--------- | | Net income attributable to PQ Group Holdings Inc. | $0.2 | $3.2 | $(3.0) | (93.8)% | - The significant **decrease** in net income attributable to PQ Group Holdings Inc. was due to the combined effects of **increased** other operating expenses, debt extinguishment costs, foreign currency losses, partially offset by higher gross profit and equity in net income from affiliates[165](index=165&type=chunk) [Adjusted EBITDA (by segment)](index=48&type=section&id=Adjusted%20EBITDA%20(by%20segment)) Total Adjusted EBITDA (Three Months Ended March 31, 2020 vs 2019) | Metric | 2020 (in millions) | 2019 (in millions) | Change ($M) | Change (%) | | :---------------------- | :----------------- | :----------------- | :---------- | :--------- | | Total Adjusted EBITDA | $103.1 | $101.0 | $2.1 | 2.1% | Segment Adjusted EBITDA (Three Months Ended March 31, 2020 vs 2019) | Segment | 2020 (in millions) | 2019 (in millions) | Change ($M) | Change (%) | | :---------------------- | :----------------- | :----------------- | :---------- | :--------- | | Refining Services | $37.2 | $39.7 | $(2.5) | (6.3)% | | Catalysts | $22.7 | $18.1 | $4.6 | 25.4% | | Performance Materials | $13.5 | $10.5 | $3.0 | 28.6% | | Performance Chemicals | $40.5 | $42.7 | $(2.2) | (5.2)% | | **Total Segment Adjusted EBITDA** | **$113.8** | **$111.0** | **$2.8** | **2.5%** | - Refining Services Adjusted EBITDA **decreased** due to higher raw material usage and production costs[169](index=169&type=chunk) - Catalysts Adjusted EBITDA **increased** due to higher customer demand for polyolefin, methyl methacrylate, and pressure products catalyst groups, partially offset by unfavorable inventory absorption[169](index=169&type=chunk) - Performance Materials Adjusted EBITDA **increased** due to **increased** demand for North American highway safety products and favorable weather conditions[169](index=169&type=chunk) - Performance Chemicals Adjusted EBITDA **decreased** due to lower volumes sold to the consumer products end use and the strengthening of the U.S. dollar[169](index=169&type=chunk) [Adjusted Net Income](index=52&type=section&id=Adjusted%20Net%20Income) Adjusted Net Income (Three Months Ended March 31, 2020 vs 2019) | Metric | 2020 After-tax (in millions) | 2019 After-tax (in millions) | Change ($M) | | :-------------------------------- | :--------------------------- | :--------------------------- | :---------- | | Net income attributable to PQ Group Holdings Inc. | $0.2 | $3.2 | $(3.0) | | Amortization of investment in affiliate step-up | $1.1 | $1.6 | $(0.5) | | Debt extinguishment costs | $1.6 | — | $1.6 | | Net loss on asset disposals | $7.1 | $0.5 | $6.6 | | Foreign currency exchange loss (gain) | $1.0 | $(2.0) | $3.0 | | LIFO expense | $(0.2) | $6.5 | $(6.7) | | Transaction and other related costs | $1.3 | $0.1 | $1.2 | | Equity-based compensation | $3.8 | $2.2 | $1.6 | | Restructuring, integration and business optimization expenses | $1.3 | $0.5 | $0.8 | | Defined benefit pension plan (benefit) cost | $(0.1) | $0.6 | $(0.7) | | Other | $0.7 | $0.6 | $0.1 | | Impact of non-cash GILTI tax | $3.9 | $3.7 | $0.2 | | **Adjusted Net Income** | **$21.7** | **$17.5** | **$4.2** | - The non-cash GILTI tax impact is excluded from core operations as it does not affect cash taxes (due to available U.S. NOLs) and foreign tax credits are expected to offset GILTI impacts once NOLs are exhausted[177](index=177&type=chunk)[179](index=179&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=53&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) [Cash Flow](index=53&type=section&id=Cash%20Flow) Net Cash Flow Summary (Three Months Ended March 31, 2020 vs 2019) | Cash Flow Activity | 2020 (in millions) | 2019 (in millions) | Change ($M) | | :---------------------------------------------------- | :----------------- | :----------------- | :---------- | | Net cash provided by operating activities | $4.5 | $26.8 | $(22.3) | | Net cash used in investing activities | $(22.1) | $(29.2) | $7.1 | | Net cash provided by (used in) financing activities | $58.2 | $(2.5) | $60.7 | | Net change in cash, cash equivalents and restricted cash | $36.4 | $(5.6) | $42.0 | - The **decrease** in operating cash flow was primarily due to unfavorable working capital changes, including higher accounts receivable and prepaid assets, and lower accrued liabilities[186](index=186&type=chunk) - Investing activities included **$28.1 million** in capital expenditures in Q1 2020 (down from **$33.6 million** in Q1 2019) and **$2.4 million** from the sale of a non-core asset[186](index=186&type=chunk) - Financing activities were significantly boosted by **$64.7 million** in net borrowings under revolving credit facilities in Q1 2020[186](index=186&type=chunk) [Debt](index=56&type=section&id=Debt) Total Debt (March 31, 2020 vs December 31, 2019) | Debt Type | March 31, 2020 (in millions) | December 31, 2019 (in millions) | | :---------------------------------------------------- | :--------------------------- | :------------------------------ | | Term Loan Facility | $947.5 | $947.5 | | 6.75% Senior Secured Notes due 2022 | $625.0 | $625.0 | | 5.75% Senior Unsecured Notes due 2025 | $295.0 | $295.0 | | ABL Facility | $64.0 | — | | Other | $65.3 | $64.6 | | **Total debt** | **$1,996.8** | **$1,932.1** | - Net debt as of March 31, 2020, was **$1,889.1 million**, including cash and cash equivalents of **$107.7 million**[188](index=188&type=chunk) - The company had **$128.6 million** available under its ABL revolving credit facility and was in compliance with all debt covenants as of March 31, 2020[180](index=180&type=chunk) - Interest rate caps are in place on **$1.0 billion** of notional variable debt at a **3.00%** cap rate through July 2020, and on **$500.0 million** at a **0.84%** cap rate from July 2020 through July 2022[180](index=180&type=chunk) [Capital Expenditures](index=57&type=section&id=Capital%20Expenditures) Capital Expenditures (Three Months Ended March 31, 2020 vs 2019) | Type | 2020 (in millions) | 2019 (in millions) | Change ($M) | | :--------------------------- | :----------------- | :----------------- | :---------- | | Maintenance capital expenditures | $12.9 | $18.5 | $(5.6) | | Growth capital expenditures | $3.8 | $6.7 | $(2.9) | | **Total capital expenditures** | **$16.7** | **$25.2** | **$(8.5)** | - Maintenance capital expenditures **decreased** due to fewer plant maintenance projects, and growth capital expenditures **decreased** due to reduced spending on production facility capacity enhancement[190](index=190&type=chunk) [Pension Funding](index=57&type=section&id=Pension%20Funding) - Cash contributions to defined benefit pension and other post-retirement plans were **$3.2 million** in Q1 2020, compared to **$3.4 million** in Q1 2019[191](index=191&type=chunk) [Off-Balance Sheet Arrangements](index=57&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company had **$18.8 million** of outstanding letters of credit on its ABL Facility as of March 31, 2020[192](index=192&type=chunk) [Contractual Obligations](index=57&type=section&id=Contractual%20Obligations) - No significant changes to contractual obligations since December 31, 2019, except for amendments to the Term Loan Facility and ABL Facility[192](index=192&type=chunk) - The Term Loan Facility amendment is anticipated to reduce annual interest payments by **$2.4 million** at current interest rates[192](index=192&type=chunk) [Critical Accounting Policies and Estimates](index=57&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - No material changes in critical accounting policies and estimates from those described in the Annual Report on Form 10-K[193](index=193&type=chunk) - Goodwill and indefinite-lived intangible assets are tested for impairment annually (October 1) or more frequently if circumstances change[195](index=195&type=chunk) - As of October 1, 2019, the fair values of all four reporting units (Refining Services, Catalysts, Performance Materials, Performance Chemicals) exceeded their carrying amounts by **179%**, **67%**, **27%**, and **18%** respectively[195](index=195&type=chunk) - Management believes fair values still exceed carrying values as of March 31, 2020, but will continue to monitor for potential future impairments, especially given the impact of the COVID-19 pandemic on economic **growth**, customer demand, and supply chains[195](index=195&type=chunk) [Goodwill and Intangible Assets](index=57&type=section&id=Goodwill%20and%20Intangible%20Assets) - Goodwill and indefinite-lived intangible assets are tested for impairment annually (October 1) using a combination of market and discounted cash flow approaches[195](index=195&type=chunk) - Key assumptions for fair value estimation include operating margin/revenue **growth** rates, weighted average cost of capital, perpetual **growth** rate, and market multiples[195](index=195&type=chunk) - As of October 1, 2019, fair values exceeded carrying amounts for Refining Services (**179%**), Catalysts (**67%**), Performance Materials (**27%**), and Performance Chemicals (**18%**)[195](index=195&type=chunk) - No interim goodwill or intangible asset impairment assessments were considered necessary at March 31, 2020, but the company will continue to monitor for potential future impacts from the COVID-19 pandemic[195](index=195&type=chunk) [Accounting Standards Not Yet Adopted](index=59&type=section&id=Accounting%20Standards%20Not%20Yet%20Adopted_Critical) - For accounting standards not yet adopted, refer to Note 2 of the condensed consolidated financial statements[196](index=196&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=59&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company manages market risks related to foreign currency, interest rates, commodity prices, and credit through hedging activities, which are regularly reviewed by the audit committee. No material changes in overall market risk were reported from the Annual Report on Form 10-K, except for further restructuring of interest rate cap agreements in Q1 2020 to lower the cap rate on a portion of its variable-rate debt - Major market risk exposures include foreign currency exchange rate risk, interest rate risk, commodity price risk, and credit risk[197](index=197&type=chunk) - The audit committee regularly reviews foreign exchange, interest rate, and commodity hedging activity and monitors compliance with the hedging policy, avoiding speculative use of financial instruments[197](index=197&type=chunk) - No material changes in market risks were reported from the Annual Report on Form 10-K, other than the interest rate risk adjustments[197](index=197&type=chunk) [Interest Rate Risk](index=59&type=section&id=Interest%20Rate%20Risk) - In February and March 2020, the company restructured **$500.0 million** notional interest rate cap agreements (effective July 31, 2020, through July 31, 2022) to lower the interest cap rate to **0.84%** (from **2.50%**)[198](index=198&type=chunk) - These restructurings involved additional premiums of **$0.1 million** (February) and **$0.9 million** (March), bringing the total cumulative annuitized premium to **$4.4 million** to be paid through July 31, 2022[198](index=198&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=59&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, assessed the effectiveness of the company's disclosure controls and procedures as of March 31, 2020, concluding they were effective at a reasonable assurance level. The shift to remote work due to the COVID-19 pandemic has not materially impacted the internal control over financial reporting, with appropriate resources provided to personnel - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2020[199](index=199&type=chunk)[201](index=201&type=chunk) - The shift to remote work for most office and management personnel due to COVID-19 has not materially affected internal control over financial reporting, and appropriate resources have been provided[202](index=202&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=59&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Disclosure controls and procedures are designed to ensure timely recording, processing, summarizing, and reporting of information required under the Exchange Act[201](index=201&type=chunk) - Based on evaluation, the CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2020[201](index=201&type=chunk) [Changes in Internal Control Over Financial Reporting](index=60&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - The shift to remote work for most office and management personnel due to the COVID-19 pandemic has not materially affected the company's internal control over financial reporting[202](index=202&type=chunk) - No other material changes in internal control over financial reporting occurred during the quarter ended March 31, 2020[202](index=202&type=chunk) [PART II—OTHER INFORMATION](index=61&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=61&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various legal claims and proceedings typical of its business, including those related to personal injury, product liability, and environmental matters. Management believes that no current litigation is likely to have a material adverse effect on the company's financial position, results of operations, or liquidity - The company is subject to various legal claims and proceedings, including personal injury, product liability, waste disposal, and environmental matters, arising in the normal course of business[205](index=205&type=chunk) - Management believes no pending litigation is likely to have a material adverse effect on the business, consolidated financial position, results of operations, or liquidity[205](index=205&type=chunk) [ITEM 1A. RISK FACTORS](index=61&type=section&id=ITEM%201A.%20RISK%20FACTORS) The COVID-19 pandemic presents significant and rapidly evolving risks to the company's operations, including potential **decreases** in product demand (especially in Refining Services and Performance Chemicals), disruptions in raw material supply, and production delays due to employee absenteeism or facility shutdowns. The full extent and duration of these impacts remain uncertain - The COVID-19 pandemic may adversely affect the company's operations, with unpredictable future negative effects, and the longer it persists, the more material the ultimate effects are likely to be[206](index=206&type=chunk) - Expected near-term impacts include **decreased** demand for products in Refining Services (reduced sulfuric acid demand due to lower gasoline demand) and Performance Chemicals (lower sodium silicate demand, decline in consumer spending)[206](index=206&type=chunk) - Disruptions in raw material availability (e.g., glass cullet suppliers suspending operations) and production delays due to employee absenteeism or potential facility shutdowns are also risks[206](index=206&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=62&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) In Q1 2020, the company purchased common stock from employees to cover tax withholding obligations and initiated a new **$50 million** share repurchase program, under which it repurchased **$2.1 million** worth of shares by March 31, 2020 Common Stock Purchases (Three Months Ended March 31, 2020) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Shares Purchased Under Publicly Announced Plans or Programs | Maximum Value Remaining Under Plans (in thousands) | | :--------------------------------- | :------------------------------- | :--------------------------- | :---------------------------------------------------------- | :------------------------------------------------- | | January 1, 2020 - January 31, 2020 | 109,564 | $16.70 | N/A | N/A | | February 1, 2020 - February 29, 2020 | — | — | N/A | N/A | | March 1, 2020 - March 31, 2020 | 211,700 | $9.73 | 211,700 | $47,941 | - Shares purchased in January were from employees to satisfy income tax withholding obligations related to restricted stock vesting[209](index=209&type=chunk) - The March repurchases were part of a **$50 million** share repurchase program authorized on March 12, 2020, with **$47.9 million** remaining as of March 31, 2020[209](index=209&type=chunk) [ITEM 6. EXHIBITS](index=63&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits accompanying the Quarterly Report on Form 10-Q, including key amendment agreements for credit facilities, stock incentive plan documents, required certifications from executive officers, and financial statements formatted in Inline XBRL - Exhibits include the First Amendment Agreement to the ABL Credit Agreement (March 20, 2020), Form of Performance Stock Unit Award Agreement, and the Amended and Restated 2017 Omnibus Incentive Plan[211](index=211&type=chunk) - Certifications from the CEO and CFO (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act) are included[211](index=211&type=chunk) - The report includes Inline XBRL formatted financial statements and document/entity information[211](index=211&type=chunk) [SIGNATURES](index=64&type=section&id=SIGNATURES) The Quarterly Report on Form 10-Q was officially signed on May 11, 2020, by Michael Crews, Executive Vice President and Chief Financial Officer of PQ Group Holdings Inc - The report was signed on May 11, 2020, by Michael Crews, Executive Vice President and Chief Financial Officer of PQ Group Holdings Inc[216](index=216&type=chunk)

Sales Performance - Total sales attributable to the Zeolyst Joint Venture for the year ended December 31, 2019, were $170.3 million, representing 50% of its total sales[1]. - For the year ended December 31, 2019, total sales reached $1,567.1 million, with Performance Chemicals contributing 43.7% of total sales at $685.1 million[40]. - Fuels & Emission Controls accounted for 22% of total sales in 2019, driven by global regulatory requirements to reduce nitrogen oxides and sulfur emissions[2]. - Consumer Products represented 15% of total sales, with growth driven by the demand for environmentally friendly chemical additives[2]. - Highway Safety & Construction sales were 18% of total sales, supported by the demand for enhanced visibility in road markings[2]. - Industrial & Process Chemicals made up 20% of total sales, with demand in the tire industry for reduced rolling resistance[2]. - The Refining Services segment generated sales of $447.1 million, accounting for 28.5% of total sales, with an adjusted EBITDA of $175.6 million, representing 34.1% of total adjusted EBITDA[40]. - Approximately 25% of the company's sales for the year ended December 31, 2019, were derived from its top 10 customers, with no single customer representing more than 4% of total sales[116]. - About 19% of the company's sales for the year ended December 31, 2019, were from products sold into highway safety applications, making them sensitive to government budget allocations[118]. Market Position and Competition - In 2019, the company held an estimated number one supply share position in the U.S. for sulfuric acid regeneration, based on sales volume exceeding 50%[28]. - The company has developed zeolite-based catalysts to help customers meet stringent vehicle emission standards worldwide[30]. - The Silica Catalysts product group competes primarily with W.R. Grace, while the Zeolyst Joint Venture faces competition from global producers like BASF and UOP[52]. - The company’s strategic presence in the Gulf Coast and California enhances its competitive advantage in the North American refining services industry[44]. - The company faces significant competition from large international producers and smaller regional competitors, which could adversely affect its financial condition and results of operations[113]. Financial Stability and Risks - The company maintained stable margins and cash flow generation despite changing macroeconomic cycles, supported by long-term sales contracts and material cost pass-through[37]. - The company has a substantial indebtedness totaling approximately $1,932.1 million as of December 31, 2019, which could limit operational flexibility and increase vulnerability to economic conditions[109]. - The company reported $245.1 million of net operating losses for U.S. federal income tax purposes, providing cash tax savings as taxable income is generated[37]. - The company’s cash flow generation is supported by disciplined capital investment and tax attributes, enhancing overall financial stability[37]. - The company is exposed to risks from non-payment or non-performance by customers, which could materially affect its business and financial condition[114]. - The company may face challenges in passing on increases in raw material prices to customers, which could negatively impact profitability[110]. - The company is exposed to product liability claims and recalls, which could result in unexpected expenditures and affect consumer confidence[123]. Research and Development - The company operates six research and development facilities globally, focusing on new product development and customer collaboration[80]. - The company is investing significantly in research and development for new products, but there is a risk of technical or market failure, which could impact competitive positioning[106]. - As of December 31, 2019, the company owned 50 patented inventions in the U.S. and had approximately 326 patents issued worldwide[81]. Environmental and Regulatory Compliance - The company has implemented a sustainability function and hired a dedicated sustainability manager in 2019[85]. - The company is subject to extensive environmental regulations, with potential liabilities for contamination and noncompliance that could significantly impact financial condition[127]. - Existing and proposed regulations to limit greenhouse gas emissions may lead to significant additional operating and capital expenses for the company[131]. - The company has established reserves of approximately $6.6 million for environmental remediation and enforcement matters[129]. Employee and Labor Relations - As of December 31, 2019, the company had 3,279 employees worldwide, with 1,491 in the United States and 956 in Europe[86]. - Approximately 50% of the company's employees were represented by a union or other employee representative body[86]. - The company employs 3,279 employees globally, with approximately 50% represented by unions, and labor disputes could disrupt operations[149]. Strategic Initiatives and Acquisitions - Strategic acquisitions and joint ventures, such as the Business Combination and Zeolyst Joint Venture, may present financial and operational challenges, including integration difficulties[137]. - The company may opportunistically pursue asset dispositions, which could adversely affect its financial condition and liquidity[139]. Currency and Market Risks - The company generated 40% of its sales in currencies other than U.S. dollars for the year ended December 31, 2019, exposing it to currency transaction risks[100]. - The company has experienced economic loss due to foreign currency exchange rate fluctuations, impacting financial results[100]. Miscellaneous Risks - The company may face damages from customer claims if products fail to meet quality specifications, which could harm its reputation and financial condition[136]. - The company is currently subject to various asbestos premises liability claims related to employee or contractor exposure, which could result in significant liability[150]. - Information technology risks, including cyber attacks and data breaches, could materially disrupt operations and harm financial condition[147].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38221 PQ Group Holdings Inc. Delaware 81-3406833 (State or other jurisdiction of incorporation or organiz ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38221 PQ Group Holdings Inc. Delaware 81-3406833 (State or other jurisdiction of incorporation or organization ...

PART I FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited condensed consolidated financial statements for Q1 2019 show sales of **$359.2 million** and net income of **$3.2 million**, up from **$0.2 million** in Q1 2018 [Condensed Consolidated Statements of Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q1 2019 sales slightly decreased to **$359.2 million**, while gross profit increased to **$80.9 million** and net income rose significantly to **$3.15 million** Financial Performance (Three months ended March 31) | Financial Metric | Three months ended March 31, 2019 (in thousands) | Three months ended March 31, 2018 (in thousands) | | :--- | :--- | :--- | | Sales | $359,221 | $366,197 | | Gross Profit | $80,910 | $78,121 | | Operating Income | $29,463 | $28,189 | | Net Income Attributable to PQ Group Holdings Inc. | $3,151 | $214 | | Diluted Income Per Share | $0.02 | $— | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$4.38 billion** as of March 31, 2019, with new lease guidance recognizing **$57.2 million** in right-of-use assets Balance Sheet Summary (as of) | Balance Sheet Item | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $52,341 | $57,854 | | Total current assets | $570,332 | $558,616 | | Total assets | $4,382,276 | $4,327,425 | | Long-term debt, excluding current portion | $2,103,070 | $2,106,720 | | Total liabilities | $2,707,004 | $2,663,280 | | Total equity | $1,675,272 | $1,664,145 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities increased to **$26.8 million** in Q1 2019, while investing and financing activities used **$29.3 million** and **$2.6 million** respectively Cash Flow Activities (Three months ended March 31) | Cash Flow Activity | Three months ended March 31, 2019 (in thousands) | Three months ended March 31, 2018 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $26,838 | $22,035 | | Net cash used in investing activities | ($29,267) | ($33,135) | | Net cash (used in) provided by financing activities | ($2,552) | $5,384 | | Net change in cash, cash equivalents and restricted cash | ($5,641) | ($7,227) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's reorganization into four segments and the adoption of new lease accounting standards, recognizing right-of-use assets and liabilities - Effective March 1, 2019, the company reorganized into **four independent business segments**: Refining Services, Catalysts, Performance Materials, and Performance Chemicals[27](index=27&type=chunk) - New lease guidance adopted January 1, 2019, led to recognition of **$60.7 million** in right-of-use lease assets and **$58.9 million** in lease liabilities[32](index=32&type=chunk) Segment Sales Performance (Q1) | Segment | Sales (Q1 2019, in thousands) | Sales (Q1 2018, in thousands) | | :--- | :--- | :--- | | Refining Services | $105,844 | $100,714 | | Catalysts | $15,866 | $16,473 | | Performance Materials | $61,089 | $62,742 | | Performance Chemicals | $180,462 | $189,963 | | **Total** | **$363,261** | **$369,892** | Segment Adjusted EBITDA (Q1) | Segment | Adjusted EBITDA (Q1 2019, in thousands) | Adjusted EBITDA (Q1 2018, in thousands) | | :--- | :--- | :--- | | Refining Services | $39,731 | $35,532 | | Catalysts | $18,127 | $22,889 | | Performance Materials | $10,515 | $12,058 | | Performance Chemicals | $42,673 | $45,094 | | **Total Segment Adjusted EBITDA** | **$111,046** | **$115,573** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q1 2019 sales decreased by **1.9%** to **$359.2 million**, while gross profit increased by **3.6%** to **$80.9 million**, and total Adjusted EBITDA decreased by **6.4%** to **$101.0 million** - Sales decreased by **$7.0 million (1.9%)** to **$359.2 million** in Q1 2019, driven by lower volumes and unfavorable currency, partially offset by higher pricing[126](index=126&type=chunk)[131](index=131&type=chunk) - Gross profit increased by **$2.8 million (3.6%)** to **$80.9 million**, primarily due to favorable pricing and product mix[127](index=127&type=chunk)[135](index=135&type=chunk) - Equity in net income from affiliated companies decreased by **$9.8 million**, mainly due to lower earnings from the Zeolyst Joint Venture[129](index=129&type=chunk)[138](index=138&type=chunk) Segment Performance (Q1 2019 vs Q1 2018 Change) | Segment Performance | Q1 2019 vs Q1 2018 Change | | :--- | :--- | | **Sales** | | | Refining Services | ▲ 5.1% due to higher prices and favorable mix | | Catalysts | ▼ 3.6% due to lower volumes and unfavorable currency | | Performance Materials | ▼ 2.6% due to unfavorable currency and lower volumes | | Performance Chemicals | ▼ 5.0% due to unfavorable currency and lower volumes | | **Adjusted EBITDA** | | | Refining Services | ▲ 11.8% driven by contract renewals | | Catalysts | ▼ 21.0% from lower sales to fuels and emission control industries | | Performance Materials | ▼ 13.2% due to higher manufacturing costs in Europe | | Performance Chemicals | ▼ 5.3% due to lower volumes and stronger U.S. dollar | - Total available liquidity as of March 31, 2019, was **$222.5 million**, comprising **$52.3 million** in cash and **$170.2 million** from its asset-based lending facility[156](index=156&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes occurred in the company's market risk exposures, including foreign currency, interest rate, commodity, and credit risks, since the 2018 Annual Report - No material changes in foreign exchange, interest rate, commodity, or credit risks have occurred since the 2018 Annual Report on Form 10-K[172](index=172&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2019, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were **effective** at a reasonable assurance level as of March 31, 2019[174](index=174&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter[175](index=175&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any litigation expected to have a material adverse effect on its business operations - The company believes no pending litigation is likely to have a material adverse effect on its business[177](index=177&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's 2018 Annual Report on Form 10-K - No material changes have occurred to the risk factors described in the company's Annual Report on Form 10-K[178](index=178&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2019, **88,567** common shares were received from employees for tax withholding related to restricted stock unit vesting - In January 2019, **88,567** common shares were delivered by employees to satisfy tax withholding obligations from restricted stock unit vesting[179](index=179&type=chunk)[180](index=180&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including award agreements, employment letters, and CEO/CFO certifications - Exhibits include CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 and 906, along with various employment and award agreements[181](index=181&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38221 | --- | --- | |----------------------------------------------------------------------------|---------------- ...