ITEM 1A. RISK FACTORS
Summary of Risk Factors
Below is a summary of the principal factors that make an investment in our common stock risky, including risks relating to our business and operations, the Spin-off and our ongoing relationship with Honeywell, and our common stock and the securities market. This summary does not address all of the risks that we face. Please review the more detailed discussion in this Annual Report on Form 10-K before making an investment decision.
Risks Relating to Our Business and Operations
• Our limited operating history as an independent, publicly traded company, and our historical consolidated financial information may not predict future results.
• Failure to innovate or adapt to new technologies could adversely affect our profitability.
• Exposure to risks associated with volatile global economic environment and geopolitical conditions.
• Fluctuations in raw material prices, inflation, supply chain disruptions or supplier performance may increase costs or impact our operations.
• Increasingly complex and changing government regulations may require additional costs or product changes.
• Climate change and related regulations or shifts in customer demand could negatively affect our business.
• Negative public or political perceptions of nuclear energy and radioactive materials could adversely affect us.
• Significant international operations expose us to foreign exchange, regulatory, and political risks.
• Tariffs or trade restrictions could negatively affect our business.
• Our outstanding indebtedness could adversely affect our business and financial flexibility.
• We may not be able to obtain additional capital that we need in the future on favorable terms or at all.
• Intense competition may result in pricing pressure, reduced margins, or loss of market share.
• Seasonal and cyclical market conditions may cause variability in financial results and liquidity.
• Concentrations of credit, counterparty, and market risk may adversely affect us.
• Failure to successfully execute or effectively integrate acquisitions or complete potential divestitures.
• We face risks associated with our joint ventures and strategic co-development partnerships.
• Inability to attract or retain qualified personnel could adversely affect our business.
• Risk of exposure to material environmental liabilities from current or predecessor operations.
• Hazards inherent in chemical manufacturing may result in accidents, losses, or reputational harm.
• Significant decommissioning and remediation expenses may arise if we shut down manufacturing or other sites.
• Uncertainty regarding outcomes of litigation, government proceedings and other contingencies.
• Cybersecurity attacks or data privacy or information security breaches could materially impact our business and reputation.
• Material disruptions to operations, including at manufacturing facilities or in IT infrastructure, could affect us.
• Increasing stakeholder focus on sustainability and related disclosures may impact our business and reputation.
• Failure to protect or enforce intellectual property or infringement claims could negatively affect us.
• Changes in tax law, regulation or jurisdictional mix of earnings could adversely affect our tax liabilities.
• We may be required to make significant cash contributions to the defined benefit pension plans that we sponsor.
• Failure to maintain proper and effective internal controls could impair financial reporting and harm our stock price and access to capital.
Risks Relating to the Spin-off
• The Spin-off could result in significant tax liability to Honeywell and its shareowners, and we may be required to indemnify Honeywell for certain taxes.
• We are restricted from certain actions to preserve the intended tax-free treatment of the Spin-off, which may limit our flexibility.
• We may be unable to achieve some or all of the benefits that we expect to achieve from the Spin-off.
• We may not be able to make necessary changes to operate independently and may incur increased costs.
• Potential business conflicts of interest with Honeywell may arise.
• Certain of our directors and employees may have conflicts of interest because of their financial interests in Honeywell.
• Transitioning IT infrastructure post-Spin-off may result in additional costs or business interruptions.
• Restrictions under the Intellectual Property Cross-License Agreement may limit our ability to develop or commercialize certain products or enforce certain intellectual property.
• We assumed and agreed to indemnify Honeywell for certain liabilities, which could negatively impact our financial results.
• The Spin-off and related transactions may expose us to potential liabilities under fraudulent conveyance laws and dividend requirements.
Risks Relating to Our Common Stock and the Securities Market
• Our stock price may fluctuate significantly.
• Future dividends are not guaranteed and may be limited by our indebtedness.
• Your percentage ownership in the Company may be diluted in the future.
• Certain provisions in our governing documents and Delaware law may discourage takeovers.
• Exclusive forum provisions may limit your ability to bring certain legal actions.
Risk Factors
You should carefully consider all of the information in this Annual Report on Form 10-K and each of the risks described below, which we believe are the material risks that we face. Any of the following risks, as well as other risks not currently known to us or that we currently consider immaterial, could materially and adversely affect our business, financial condition, results of operations and cash flows and the actual outcome of matters as to which forward-looking statements are made in this Annual Report on Form 10-K. All forward-looking statements made by us are qualified by the risks described below. Disclosures of risks should not be interpreted to imply that the risks have not already materialized. The following risk factors should not be considered to represent a complete set of all potential risks that could affect us.
Risks Relating to Our Business and Operations
We have limited operating history as an independent, publicly traded company, and our historical consolidated financial information is not necessarily representative of the results we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results.
We derived our historical consolidated financial information from Honeywell’s consolidated financial statements, and this information does not necessarily reflect the results of operations and financial position we would have achieved as an independent, publicly traded company during the periods presented or those that we will achieve in the future. This is primarily because of the following factors:
• Prior to the Spin-off, we operated as part of Honeywell’s broader corporate organization, and Honeywell performed various corporate functions for us. Our historical consolidated financial information reflects allocations of corporate expenses from Honeywell for these and similar functions. These allocations may not reflect the costs we have begun, and will continue, to incur for similar services in the future as an independent publicly traded company.
• We have entered into agreements governing transactions with Honeywell that did not exist prior to the Spin-off, such as Honeywell’s provision of transition and other services and brand licensing agreements, and have undertaken indemnification obligations, which have resulted in, and will cause us to incur, new costs. In connection with the Spin-off, we entered into certain agreements with Honeywell which provide for the performance by each company of various obligations for the benefit of the other for a period of time after the Spin-off. These agreements include a Separation and Distribution Agreement (the “Separation Agreement”), a Transition Services Agreement, a Tax Matters Agreement, an Employee Matters Agreement, an Intellectual Property Cross-License Agreement, a Trademark License Agreement and an Accelerator License Agreement. If Honeywell is unable to satisfy its obligations under these agreements, including its indemnification obligations, our Company could incur operational difficulties or losses. If we do not have in place our own systems and services, and do not have agreements with other providers of these services when the transitional or other agreements terminate, or if we do not implement the new systems or replace Honeywell’s services , we may not be to operate our business effectively, which could our business and have an effect on our business, financial condition and results of operations. These systems and services may also be more expensive to install, implement and operate, or less than the systems and services Honeywell is expected to provide during the transition period.
• The portion of our historical consolidated financial information in respect of time periods prior to the Spin-off does not reflect changes that have occurred as a result of our Spin-off from Honeywell, including changes in the financing, cash management, operations, cost structure and personnel needs of our business. As part of Honeywell, we enjoyed certain benefits from Honeywell’s operating diversity, size, brand, reputation, purchasing power, borrowing leverage and available capital for investments, and we no longer have access to these benefits after the Spin-off. As an independent entity, we may be unable to purchase goods, services and technologies, such as insurance and health care benefits and computer software licenses, or access capital markets on terms as favorable to us as those we obtained as part of Honeywell prior to the Spin-off, and our business, financial condition, results of operations and cash flows may be adversely affected. In addition, our
historical consolidated financial data does not include an allocation of interest expense comparable to the interest expense we have incurred or will incur following the Spin-off, including interest expense in connection with the incurrence of indebtedness at the Company.
Although a portion of our business historically operated as a specialty materials company prior to its consolidation with Honeywell, our current business has limited operating history as an independent, publicly traded company outside the broader Honeywell operating environment. In addition, uncertainty related to our operations following the Spin-off may lead customers and other parties with which we currently do business or may do business in the future to terminate or attempt to negotiate changes in our existing business relationships, or cause them to consider entering into business relationships with parties other than us.
We may face operational inefficiencies as we make changes to our operations to enable us to operate our business independently following the Spin-off. We also face additional costs and demands on management’s time associated with being an independent, publicly traded company, including costs and demands related to corporate governance, investor and public relations and public reporting. In addition, while we were profitable as part of Honeywell, we cannot assure you that our profits will continue at a similar level as we operate as an independent, publicly traded company. For additional information about our past financial performance and the basis of presentation of our Consolidated Financial Statements, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical audited Consolidated Financial Statements, and the Notes thereto, included elsewhere in this Annual Report on Form 10-K.
If we are unable to innovate and successfully introduce new products, or new technologies or processes reduce the demand for our products or the price at which we can sell products, our profitability could be adversely affected.
Our industries and the end-use markets into which we sell our products experience periodic technological changes and product improvements, as well as changes in mandates on or regulation of products and services. For example, certain end markets of our Refrigerants business are in the process of transitioning to regulatory-compliant next-generation LGWP refrigerants and may in the future be impacted by regulations of fluorinated chemistries. Our future growth will depend on our ability to gauge the direction of commercial and technological progress and regulatory change in key end markets, our ability to fund and successfully develop, manufacture and market products in such changing end markets, and our ability to adapt to changing needs and market trends accurately. However, we may be unable to develop new products or technologies, either alone or with third parties, or license intellectual property rights from third parties on a commercially competitive basis. If we fail to keep pace with the evolving technological innovations in our end markets on a competitive basis, including with respect to innovation related to the development of alternative uses for, or application of, products developed that utilize such end-use products, our business, financial condition, results of operations and cash flows could be affected. We also cannot predict whether technological will, in the future, result in a lower demand for our products or affect the competitiveness of our business. We may be required to invest significant resources to adapt to changing technologies, markets, customer behaviors and demands, competitive environments, and laws, regulations or enforcements. We cannot anticipate market acceptance of new products or future products. In addition, we may not the expected benefits associated with new products developed to meet new laws, regulations or enforcements if the implementation of such laws, regulations or enforcements is , and we may face competition from or products in regulated markets.
Our business is exposed to risks associated with the volatile global economic environment and geopolitical conditions.
Adverse changes in economic or geopolitical conditions, particularly in locations where our customers, suppliers, or operations are located, as well as concerns about a range of other external factors, including global trade and global supply chain, developments in energy prices, inflation, interest rates, changes in government monetary or fiscal policies, import or export restrictions, tariffs and other trade barriers and restrictions, political instability or social unrest, labor market challenges, currency exchange rate volatility and a potential economic downturn or recession, could have a material adverse effect on our business, results of operations, cash flows, and financial condition and may adversely impact our ability to provide products and services in a timely manner, or at all, and the demand for
our products and services. High inflation and interest rates increase our cost of capital and could reduce the number of customers who purchase our products and services as credit becomes more expensive or less available. The consequences of geopolitical conflicts, and the confrontation, escalation, or resolution thereof, including the war in Ukraine, conflict in the Middle East, which have resulted in sanctions and other measures imposed by the EU, the U.S., and other countries in response, and possible conflicts that could emerge in other geopolitically sensitive areas, such as the Greater China region, have also caused and may continue to cause disruption and instability in global markets, supply chains and industries that could negatively impact our businesses, results of operations, cash flows, financial condition, and pose reputational risks. In addition, our customers and suppliers could be affected directly by an economic downturn or recession and some could face credit issues or cash flow that could give rise to payment , increased credit risk, , and other financial , which could impact customer demand for our products as well as our ability to manage normal commercial relationships with our customers and suppliers. Depending on their and duration, the effects and consequences of global economic and political conditions could have an impact on our results of operations, cash flows, and financial condition.
Raw material price fluctuations, inflation, scarcity, the ability of key suppliers to meet quality and delivery requirements or catastrophic events can increase the cost of our products and services, impact our ability to meet commitments to customers and cause us to incur significant liabilities.
The cost of raw materials is a key element in the cost of our products. As of December 31, 2025, the majority of our raw material supply was under contract. While we have implemented mitigation strategies designed to reduce the impact of supply chain disruptions, any inability to source necessary materials when and as needed, or to offset material price or labor inflation through increased prices to customers, market-based or long-term fixed price contracts with suppliers, productivity actions or commodity hedges could adversely affect our results of operations, including our ability to meet our production schedules and project deadlines in a timely and efficient manner.
Although our global sourcing teams collaborate closely with supply chain and production leadership to develop strategies that secure adequate raw material supplies, it is difficult to predict what effects shortages or price increases, in addition to other supply chain disruptions, may have in the future. Our ability to manage inventory and meet delivery requirements may be constrained by our suppliers’ inability to scale production and adjust delivery of long-lead time products during times of volatile demand. In addition, the scarcity of certain raw materials, including wet Spar, and/or current or future global economic uncertainty, including inflation and high interest rates, the impact of trade actions (including the imposition of tariffs or other trade actions impacting raw materials we source from global trade counterparties), supply chain and labor disruptions, unemployment rates, banking instability, any U.S. government shutdown, any in the U.S. government’s sovereign credit rating, public health , financial markets, geopolitical and regional , social and potential , may affect the financial of our key suppliers or their access to financing, which may in turn affect their ability to perform their obligations to us. If one or more of our suppliers experiences financial , delivery or other performance , our resulting to fill our supply needs would our ability to fulfill obligations under commercial and government contracts, which could, in turn, result in reduced sales and profits, contract or , and to customer relationships.
In addition, construction or other capital projects at our facilities have in the past resulted and could in the future result in manufacturing delays or increased costs, and our businesses, financial condition, results of operations and cash flows have in the past been and could in the future be adversely impacted by the inability to complete such projects within anticipated time frames or within our cost estimates or if such projects do not result in the anticipated benefits. Further, short-term or sustained increases in demand for our products or services could exceed our manufacturing or service capacity or otherwise strain our supply chain, resulting in our inability to meet demand for our products and services and adverse impacts to our business and operations.
In an effort to reduce the impact of current and future supply chain disruptions, we have implemented short-term and long-term strategies to reduce the impact of such disruptions, including pricing actions, longer-term planning for constrained materials, material supply tracking tools, direct engagement with key suppliers to meet customer demand and development of new or redesigned products that satisfy our product quality controls and engineering qualifications and/or any applicable regulatory requirements. We cannot provide any assurance that our mitigation
strategies will continue to be successful, or that we will be able to alter our strategies or develop new strategies if and as needed.
Our products and operations are subject to numerous and increasingly complex government regulations, which may be subject to change, and compliance with these regulations could require us to incur additional costs or to reformulate or discontinue certain of our products and could have a significant impact on our business, financial condition, results of operations and cash flows.
Our operations are significantly influenced by the regulatory and legislative environment in which we operate. Our products, technologies and services are subject to numerous and increasingly complex, federal, state, local and foreign laws and regulations. This legal framework includes customs regulations, import and international trade laws, export controls, antitrust laws, environmental and chemical manufacturing, regulations and treaties related to security and controlled materials, global climate change, health and safety requirements, zoning and occupancy laws and regulatory record-keeping and reporting obligations; all of which impact the manufacture, import, export, promotion and sale of our products, the operation of our production and distribution facilities, and our relationships with our customers, suppliers, employees and competitors.
Our products and manufacturing processes are also subject to numerous ongoing reviews by certain governmental authorities. Governmental, regulatory and societal demands for increasing levels of product safety (such as chemical composition, packaging and labeling) and environmental protection (such as the management, movement and disposal of hazardous substances and increased societal demand for regulation to reduce greenhouse gas (“GHG”) emissions or otherwise restrict the use of manufacture and use of hazardous substances) are resulting in increased pressure for more stringent regulatory control with respect to the chemical industry. Such regulations include (or may in the future include), but are not limited to:
• U.S.-based regulations, such as the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the RCRA and similar state and global laws for management and remediation of hazardous materials, the Clean Air Act and Clean Water Act and similar state and global laws for the protection of air and water resources, the Toxic Substances Control Act (TSCA) and the American Innovation in Manufacturing Act of 2020, which requires the phase down of certain HFCs by 85% from historic baseline levels by 2036;
• foreign chemical control regulations, such as the EU’s REACH (Registration, Evaluation, Authorization and Restriction of Chemicals), the EU F-Gas Regulation and similar regimes that have now been adopted in several other countries, the Chemical Substances Control Law in Japan, MEP Order No. 12 in China and the Toxic Chemical Substance Control Act in Taiwan for the production and distribution of chemicals in commerce and reporting of potential adverse effects;
• emerging sustainability regulations in the EU and globally, including, but not limited to, the Corporate Sustainability Reporting Directive, its transposition in EU countries, and the EU Taxonomy for sustainability targeted activities;
• numerous other local, state, federal and foreign laws, regulations and enforcements governing materials movement, packaging, labeling and disposal, including bans and moratoria on certain substances and chemicals; and
• other potential future regulations related to fluorinated chemistries or other industries in which we operate, or the strengthening of existing regulations applicable to us, such as the REACH Recast, a large-scale revision of the current REACH regulation that will, among other things, expand the in-scope hazardous substances subject to REACH and strengthen enforcement and auditing processes.
Compliance with all of these regulations and adaptation to changes in our regulatory environment, particularly in, but not limited to, the U.S., the EU and the Greater China region, has in the past required, and may in the future require, us to incur significant costs and capital expenditures, including to maintain comprehensive data management systems, and could lead us to redesign our products or supply chain to ensure compliance with the applicable standards or use different types or sources of materials, which could have an adverse impact on the efficiency of our manufacturing process, the performance of our products, add greater testing lead-times for product
introductions or other similar effects. From time to time, we may face challenges related to regulatory compliance, especially in an ever-changing regulatory landscape, and may be subject to regulatory penalties and other government proceedings, which could have a material adverse effect on our business and financial condition. Any of these changes or challenges could materially alter our market share and reputation, or otherwise have a material adverse effect on our business, financial condition, results of operations and cash flows.
Global climate change and related regulations and changes in customer demand could negatively affect our business, financial condition, results of operations and cash flows.
The effects of climate change could create financial risks to our business. For example, the effects of physical impacts of climate change could disrupt our operations by impacting the availability and cost of materials needed for manufacturing, exacerbate existing risks to our supply chain, disrupt our operations, and increase insurance and other operating costs. These factors may impact our decisions to construct new facilities or maintain existing facilities in areas most prone to physical climate risks. We could also face indirect financial risks passed through the supply chain and disruptions that could result in increased prices for our products and the resources needed to produce them.
The growing focus on addressing global climate change has resulted in more regulations designed to reduce GHG emissions and more customer demand for products and services that have a lower carbon footprint or that help businesses and consumers reduce carbon emissions throughout their value chains. These regulations tend to be implemented under global, national and sub-national climate objectives or policies, and target the global warming potential of refrigerants, energy efficiency and the combustion of fossil fuels. Although we offer and continue to invest in developing solutions that help our customers meet their carbon reduction and sustainability goals, many of our products combust fossil fuels, consume energy and use refrigerants. Regulations and carbon reduction goals which seek to reduce GHG emissions could reduce demand for such products and present a risk to our business. We may be required to further increase R&D and other capital expenditures in order to develop offerings that meet these new regulations, standards and customer demands. There can be no assurance that our new product development efforts will be successful, that our products will be accepted by the market, or that economic returns will reflect our investments in new product development. Moreover, policy initiatives or regulatory changes deemphasizing goals for reducing GHG emissions, including, for example, executive orders issued by the current U.S. administration with respect to climate change and the EPA's draft rule to rescind its prior determination that GHG emissions pose a to public health and welfare, could reduce the demand for products in this area and, in turn, the value of our investments into such products.
We and our customers operate in a politically sensitive environment, and negative public and political perceptions of nuclear energy and radioactive materials could materially and adversely affect us, our customers, and the markets in which we operate.
Successful execution of our Nuclear (AES) business is dependent upon public support for nuclear power, in general, in the U.S. and other countries. The risks associated with uses of radioactive materials at our AES Facility and the public perception of those risks can affect our business. Opposition by third parties can delay or prevent the licensing and construction of new nuclear facilities and in some cases can limit the operation of nuclear facilities. Adverse public reaction to developments in the use of nuclear power could directly affect our business and indirectly affect our customers’ businesses. In addition, journalists, trade press and other third parties, potentially including one or more of the agencies with regulatory jurisdiction over us, may publish statements that negatively affect the public or political perception of us. We may also face adverse public or political perception due to a variety of environmental and social factors, including as relevant standards continue to evolve. Stakeholder and policymaker expectations on such matters are not uniform, and any failure to successfully navigate such expectations may result in various impacts. public opinion or political perceptions or changes in applicable international treaties could result in increased regulatory requirements and costs, reduced access to or higher prices for raw materials and intermediates, or increase the likelihood that our operations are subject to liabilities or . In the past, public reaction, increased regulatory and related contributed to extended licensing and construction periods for new nuclear power plants, sometimes construction schedules by decades or more, or even down operations at already-constructed nuclear power facilities. To the extent that public and/or political perception of the nuclear fuel industry and radioactive materials, or changes in
applicable law, regulations or international treaties, materially and adversely impacts our Nuclear (AES) business, our business, financial condition, results of operations and cash flows may also be materially and adversely impacted. In addition, if we were forced, or otherwise determined, to shut down the AES Facility, we may incur material costs.
A significant percentage of our sales and operations is in non-U.S. jurisdictions and is subject to the economic, political, regulatory, foreign exchange and other risks of international operations.
Our international operations represented approximately 43% of our net sales based on country of origin (or 57% of our net sales including U.S. exports) for the year ended December 31, 2025. Risks related to international operations include exchange control regulations, wage and price controls, fluctuations in foreign currency exchange rates, antitrust regulations, employment regulations, foreign investment laws, import, export and other trade restrictions and barriers (such as tariffs, sanctions and embargoes), differing levels of protection of intellectual property, acts of industrial espionage, violations by our employees of anti-corruption laws (despite our efforts to mitigate such risk), changes in regulations regarding transactions with state-owned enterprises, nationalization of private enterprises, acts of terrorism, acts of war, civil strife, social or political activism, boycotts and our ability to hire and maintain qualified staff and maintain the safety of our employees in these regions. Instability and uncertainties arising from the global geopolitical environment, the impacts of war and other geopolitical events (including, but not limited to, the war in Ukraine, the in the Middle East, and the growing geopolitical tensions in the China region), and the evolving international and domestic political, regulatory and economic landscape, including changes in global trade policies, such as sanctions and trade , and trends such as populism, economic nationalism and sentiment toward multinational companies, as well as the cost of compliance with increasingly complex and often regulations worldwide, can our flexibility in modifying product, marketing, pricing or other strategies for growing our businesses, as well as our ability to productivity and maintain acceptable operating margins.
Existing free trade laws and regulations provide certain beneficial duties and tariffs for qualifying imports and exports. Changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture products or from where we import products or raw materials, either directly or through our suppliers, could have an impact on our competitive position and financial results.
The conflict between Russia and Ukraine has led to sanctions, export and import controls, and trade restrictions by the U.S. and other countries against Russian and Belarusian governments, government-related entities and other entities and individuals. In retaliation, Russia has taken actions against the U.S., the North Atlantic Treaty Organization members, and other nations. The evolving conflict may worsen existing conditions or cause new impacts, such as escalation in other European regions where we operate, increased U.S.-Russia tensions, and other unforeseen effects. These could result in higher costs, operational impacts, and adversely affect our financial position, ability to meet obligations, and overall financial condition. Continued escalation of the conflict may further impact our financial results and other disclosed risk factors.
Operating outside of the U.S. also exposes us to foreign exchange risk, which we monitor and seek to reduce through hedging activities. However, foreign exchange hedging activities bear a financial cost and may not always be available to us or be successful in eliminating such volatility. Finally, we generate significant amounts of cash outside of the U.S. that is invested with financial and non-financial counterparties. While we employ comprehensive controls regarding global cash management to guard against cash or investment loss and to ensure our ability to fund our operations and commitments, a material disruption to the counterparties with whom we transact business could expose us to financial loss.
Operating outside the U.S. also exposes us to additional intellectual property risk. The laws and enforcement practices of certain jurisdictions in which we operate may not protect our intellectual property rights to the same extent as in the U.S. and may impose joint venture, technology transfer, local service or other foreign investment requirements and restrictions that potentially compromise control over our technology and proprietary information. Failure of foreign jurisdictions to protect our intellectual property rights, an inability to effectively enforce such rights in foreign jurisdictions or the imposition of foreign jurisdiction investment or sourcing restrictions or
requirements could result in loss of valuable proprietary information and could impact our competitive position and financial results.
If significant tariffs or other restrictions continue to be placed on foreign imports by the U.S. and related countermeasures are taken by impacted foreign countries, our business, financial condition, results of operations and cash flows could be negatively affected.
The U.S. government has imposed significant tariffs on a wide range of products and other imports into the U.S. and could implement additional tariffs and barriers to trade. If significant tariffs or other restrictions continue to be placed on foreign imports and related countermeasures are taken by impacted foreign countries, our business, financial condition, results of operations and cash flows may be negatively affected. Current tariffs, along with other trade actions, have triggered retaliatory actions by certain affected countries, and other foreign governments may also impose trade measures, including reciprocal tariffs, on other U.S. goods in the future. These tariffs and other trade actions could further increase the cost of, and reduce demand for, our products, which would adversely impact our business. In addition, political tensions as a result of trade policies could reduce trade volume, investment, technological exchange and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets.
We have outstanding indebtedness, and the degree to which we are leveraged could adversely affect our business, financial condition, results of operations and cash flow.
We have outstanding indebtedness, consisting of $1.0 billion of 5.625% Senior Notes due 2033 and a credit agreement (the “Credit Agreement”), which provides for (i) a seven-year senior secured first-lien term B loan facility in an aggregate principal amount of $1.0 billion (the “Term Loan Facility”) and (ii) a five-year senior secured first-lien revolving credit facility with aggregate commitments of $1.0 billion (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”). We have also entered into uncommitted bilateral letter of credit agreements, which provide letter of credit facilities in an aggregate amount of $750 million (the “Sidecar LC Facilities,” and together with the Credit Facilities, the “Senior Credit Facilities”). Our ability to make required payments on or to refinance our indebtedness, including our current debt as well as any future debt that we may incur, will depend on our ability to generate cash in the future from operations, financings or asset sales. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, as well as the risk factors set forth herein. If we are not able to repay or refinance our debt as it becomes due, our Company may be forced to sell assets or take other actions. In addition, our ability to withstand competitive pressures and react to changes in our Company’s industry could be impaired by our debt service obligations. The Credit Agreement contains certain covenants that, among other things, limit the Company and its subsidiaries’ ability to incur additional indebtedness or liens, to of assets, to make certain fundamental changes, enter into restrictive agreements, to make certain investments, loans, , guarantees and acquisitions, to prepay certain indebtedness and to pay dividends, to make other distributions or redemptions/repurchases, in respect of the Company and its subsidiaries’ equity interests, to engage in transactions with affiliates or amend certain material documents.
In addition, the Credit Agreement also contains financial covenants for the benefit of the lenders under the Revolving Credit Facility. Our ability to comply with such covenants and other restrictions may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. A breach of any of these covenants, if applicable, could result in an event of default under the terms of this indebtedness. If an event of default occurred, the lenders would have the right to accelerate the repayment of such debt, and the event of default or acceleration could result in the acceleration of the repayment of any other debt to which a cross-default or cross-acceleration provision applies. We might not have, or be able to obtain, sufficient funds to make these accelerated payments, and lenders could then proceed against any collateral. Any subsequent replacement of the agreements governing such indebtedness or any new indebtedness could have similar or restrictions. The occurrence and ramifications of an event of could affect our business, financial condition, results of operations and cash flows. Moreover, as a result of all of these restrictions, we may be limited in how we conduct our business and pursue our strategy, to raise additional debt financing to operate during general economic or business or to compete effectively or to take of new business .
We may not be able to obtain additional capital that we need in the future on favorable terms or at all.
We may require additional capital in the future to finance our growth and development, upgrade and improve our manufacturing capabilities, implement further marketing and sales activities, fund ongoing R&D activities, satisfy regulatory and environmental compliance obligations and national approvals requirements and meet general working capital needs. Our capital requirements will depend on many factors, including acceptance of and demand for our solutions, the extent to which we invest in new technology and R&D projects and the status and timing of these developments. In addition, our ability to issue debt and/or equity securities, or enter into other financing arrangements, on terms acceptable to us could be adversely affected if there is a material decline in the demand for our products or in the solvency of our customers or suppliers or if there are other significantly unfavorable changes in economic conditions. Volatility in the world financial markets could increase borrowing costs or affect our ability to access the capital markets. These conditions may adversely affect our ability to maintain our credit ratings. If our access to capital were to become constrained significantly, or if costs of capital increased significantly, due to lowered credit ratings, prevailing business conditions, the of the capital markets or other factors, our business, financial condition, results of operations and cash flows could be affected.
Moreover, prior to the Spin-off, we have historically relied on Honeywell for assistance in satisfying our capital requirements. We are no longer able to rely on the earnings, assets, cash flow or credit rating of Honeywell, and Honeywell will not provide funds to finance our capital requirements. We are responsible for obtaining and maintaining sufficient working capital and other funds to satisfy our cash requirements independent of Honeywell, and additional debt or equity financing may not be available to us on terms we find acceptable, or at all. Following the Spin-off, our access to and cost of debt financing may be different from the historical access to and cost of debt financing that was available to Honeywell. Differences in access to and cost of debt financing may result in differences in the margins charged to our Company on debt financings, as well as the amounts of indebtedness, types of financing structures and debt markets that may be available to our Company. In addition, Honeywell has agreed to provide us support through certain parent company guarantees that will remain in place during a transition period of up to 24 months following the Spin-off and as guarantor of or obligor for certain letters of credit and other credit support instruments that have been issued on our behalf during a transition period of up to 12 months following the Spin-off. These arrangements will have to be renegotiated in the future upon their expiration and may require incremental capital or borrowing capacity that might not be readily available on terms we find acceptable.
Even if we are able to obtain financing or access the capital markets as needed in the future, incurring additional debt may significantly increase our interest expense and financial leverage, and our level of indebtedness could restrict our ability to fund future development and acquisition activities. Also, regardless of the terms of our debt or equity financing, our agreements and obligations under the Tax Matters Agreement that address compliance with Section 355 of the Code, may limit our ability to raise capital through the issuance of equity securities. We believe that we have adequate capital resources to meet our projected operating needs, capital expenditures and other cash requirements for the foreseeable future. However, we may need additional capital resources in the future, and if we are unable to obtain sufficient resources for our operating needs, capital expenditures and other cash requirements for any reason, our business, financial condition and results of operations could be adversely affected.
Our ability to make payments on and to refinance any indebtedness, if applicable, will depend on our ability to generate cash from operations, financings or asset sales. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we are not able to repay or refinance our debt as it becomes due, our Company may be forced to sell assets or take other actions. In addition, our ability to withstand competitive pressures and react to changes in our Company’s industry could be impaired by our debt service obligations. Upon the occurrence of certain events of default under any agreements governing our Company’s indebtedness, the holders of such debt may, in some cases, elect to accelerate amounts due thereunder, which could potentially trigger a default or acceleration of our Company’s other debt.
We may be unable to compete successfully in the competitive markets in which we operate and, as a result, we may experience pricing pressure, fewer customer orders, reduced margins and the loss of market share.
We may be unable to compete successfully in the competitive markets in which we operate. In these markets, despite our strong market position, we encounter competition from numerous and varied competitors in all areas of our businesses. Some of our competitors have longer operating histories, greater resources, greater brand recognition (which may be exacerbated by the loss of Honeywell’s brand recognition following the Spin-off) and a larger base of customers than we do. As a result, we may lose business, customers and market share if we are unable to devote greater resources to R&D, manufacturing, formulation, promotion, sale or support of our products, withstand adverse changes in economic conditions or prices of raw materials, and/or maintain competitive pricing. In addition, our competitors could enter into exclusive arrangements with our existing or potential customers or suppliers which could limit our ability to generate sales, acquire necessary raw materials and/or significantly increase costs.
We operate in industries which are fragmented on a global scale and consolidation of our competitors could also place us at a competitive disadvantage and reduce our profitability by jeopardizing the strength of our positions in one or more of our markets, which could adversely affect our business, financial condition, results of operations or cash flow as well as our growth potential.
Our business is subject to both seasonal fluctuations and cyclical market conditions, which could cause variability in our financial results and liquidity.
Our financial results and liquidity are influenced by both the seasonality of our revenue and cash flow and the cyclical nature of the markets for many of our products. For example, the revenue from our RAS segment is subject to seasonal fluctuations, with sales activity generally being highest in the first half of the year, driven in part by seasonal demand and inventory build-up related to warmer weather and maintenance cycles in our Refrigerants business that peaks in the second quarter. Our Building Solutions & Intermediates business typically experiences peak sales in the fourth quarter due to weather conditions and increased construction project activity, and our Healthcare Packaging business experiences peak sales mid-year, ahead of the winter season when medication consumption typically increases. This seasonality across the businesses within our RAS segment impacts the comparison of our financial condition and results of operations on a quarter-by-quarter basis.
Additionally, the markets for certain of our products are cyclical. For example, our ESM segment experiences cyclicality, primarily due to inherently cyclical end markets such as semiconductors and construction. These industries are sensitive to economic fluctuations, with our Electronic Materials business tied to semiconductor fabrication cycles and our Research & Performance Chemicals business influenced by trends in building and infrastructure investment. In these end markets, prolonged periods of reduced investment or demand—such as downturns in semiconductor fabrication spending or construction activity—could adversely affect our performance. The cyclicality of the results in certain of our businesses result in significant fluctuations in profits and cash flow from period to period and over the business cycle.
The combination of seasonal revenue fluctuations and the cyclicality of our markets results in variability in our profits and cash flow from period to period and over the business cycle. This variability can impact our financial results and liquidity, making it challenging to predict our financial performance accurately.
Concentrations of credit, counterparty, and market risk may adversely affect our business, financial condition, results of operations and cash flows.
We maintain long-term contractual relationships with many of our customers, suppliers and other counterparties. While we monitor the financial health of these counterparties, we are exposed to credit and market risks of such counterparties, including those concentrated in the same or similar industries and geographic regions. Changes in political and economic conditions could also lead to concerns about the creditworthiness of counterparties and their ability to pay in the same or similar industry or geography, impacting our ability to renew our long-term contractual arrangements or collect amounts due under these arrangements. Among other factors, geopolitical events, inflation, high interest rates, banking instability, and changes in economic conditions, including an economic downturn or recession, could also result in the credit deterioration or insolvency of a significant counterparty. Any such events could adversely affect our business, financial condition, results of operations and cash flows.
We may be unable to successfully execute or effectively integrate acquisitions or complete potential divestitures.
We regularly review our portfolio of businesses and may pursue inorganic growth through strategic acquisitions or engage in strategic divestitures of assets or businesses. We may not be able to complete transactions on favorable terms, on a timely basis, or at all. In addition, our results of operations and cash flows may be adversely impacted by (i) the failure of any acquired businesses to meet or exceed expected returns, including risk of impairment, or the failure to realize the expected benefits of any divestitures; (ii) the failure to integrate any acquired businesses into the Company on schedule and/or to achieve expected synergies; (iii) the diversion of management’s attention from other business concerns; and (iv) the discovery of unanticipated liabilities, labor relations , cybersecurity , compliance issues or other in acquired businesses for which we contractual protections, insurance or indemnities, or, with regard to businesses, by purchasers to whom we have provided contractual indemnification. Our to execute such transactions could impact our business, financial condition, results of operations and cash flows.
We face risks associated with our joint ventures and strategic co-development partnerships.
We are party to several joint ventures and strategic co-development partnerships in both the U.S. and abroad. Going forward, we may acquire interests in more joint venture enterprises or form other strategic co-development partnerships to execute our business strategy by utilizing our partners’ skills, experiences and resources. These joint ventures and co-development partnerships involve risks that our joint venture or strategic co-development partnerships partners may:
• have economic or business interests or goals that are inconsistent with or adverse to ours;
• take actions contrary to our requests or contrary to our policies or objectives, including actions that may violate applicable law;
• be unable or unwilling to fulfill their obligations under relevant joint venture or other agreements;
• have financial or business difficulties;
• take actions that may harm our reputation; or
• have disputes with us as to the scope of their rights, responsibilities and obligations.
In certain cases, joint ventures and strategic co-development partnerships may present us with a lack of ability to fully control all aspects of their operations, including due to veto rights, and we may not have full visibility with respect to all operations, customer relations and compliance practices, among others.
Our present or future joint venture and strategic co-development partnerships projects may not be successful. We have had, and in the future may have, disputes or encounter other problems with respect to our present or future joint venture or strategic co-development partnerships partners or our joint venture or strategic co-development partnerships agreements may not be effective or enforceable in resolving these disputes or we may not be able to resolve such disputes and solve such problems in a timely manner or on favorable economic terms, or at all. Any failure by us to address these potential disputes or conflicts of interest effectively could have a material adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities.
We depend on the recruitment and retention of qualified personnel, and our failure to attract and retain such personnel could adversely affect our business, financial condition, results of operations and cash flows.
Due to the complex nature of our business, our future performance is highly dependent upon the continued services of our employees and management who have significant industry expertise, including our engineering and design personnel and trained sales force. Our performance is also dependent on the development of additional personnel and the hiring of new qualified engineering, design, manufacturing, marketing, sales and management personnel for our operations. Competition for qualified personnel in our markets is intense, and we may not be successful in attracting or retaining qualified personnel, particularly as a standalone company that may not have the same
reputation or brand recognition as Honeywell. Moreover, we are dependent on the institutional knowledge of our longer-term employees and management with respect to our industries and manufacturing processes, and the transfer of that knowledge to subsequent generations of employees to maintain operational continuity. Furthermore, if we experience a sustained labor shortage or increased turnover rates within our employee base, our costs could increase, such as increased overtime to meet demand and increased wage rates to attract and retain employees, and our ability to meet our production schedules and project deadlines and to otherwise efficiently operate our business could be negatively impacted. The loss of key employees, our inability to attract new qualified employees or adequately train and transfer knowledge to employees, or the delay in hiring key personnel could negatively affect our business, financial condition, results of operations and cash flows.
Our operations and the prior operations of predecessor companies expose us to the risk of material environmental liabilities.
We are subject to potentially material liabilities related to the investigation and cleanup of environmental hazards and to third-party claims of personal injuries or property damages that may arise from hazardous substance releases and exposures. Under certain environmental laws, parties can be liable for contamination resulting from hazardous substances released at current or formerly owned or operated sites or at third-party waste disposal facilities on a joint and several basis and without regard to fault or the legality of the conduct giving rise to the releases. In particular, under the Separation Agreement, we were generally contractually allocated all environmental liabilities associated with the Solstice Advanced Materials business and are required to indemnify Honeywell and its affiliates against any of the liabilities that have been contractually allocated to us. We could incur liabilities under these laws or pursuant to the Separation Agreement arising out of our current and past operations and the operations and properties of predecessor companies (including offsite waste disposal). Legacy sites related to our business are involved in various environmental and remediation obligations due to historic operations. For example, some of our formulating and manufacturing facilities have an extended history of chemical formulating and manufacturing operations or other industrial activities, and contaminants have been detected at some of our sites and offsite disposal locations.
Ultimate environmental costs and liabilities are difficult to predict and may significantly vary from current estimates. To the extent available, we maintain what we believe to be adequate insurance coverage. However, there can be no assurance that we will not incur losses in excess of our current reserves for environmental matters or beyond the limits or outside the terms of any such insurance coverage, or that we will be able to maintain adequate insurance at rates we consider reasonable. In addition, the discovery of additional contaminants, the inability or failure of other liable parties to satisfy their obligations, the imposition of additional cleanup obligations, or the commencement of related third-party claims could result in additional material costs and negatively impact our business, financial condition, results of operations and cash flows.
We are also subject to potentially material liabilities related to the compliance of our operations with the requirements of various federal, state, local and foreign governments that regulate the discharge of materials into the environment and the generation, handling, storage, treatment and disposal of and exposure to hazardous substances. We believe that, as a general matter, our policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and personal injury and that our handling, manufacture, use and disposal of hazardous substances are in accordance with environmental and safety laws and regulations. However, if we are found to be in violation of these laws and regulations, we may be subject to substantial fines, criminal sanctions, trade restrictions, product recalls and public scrutiny and be required to install costly equipment or make operational changes to achieve compliance with such laws and regulations.
In addition, changes in laws, regulations or government enforcement of policies concerning the environment, the discovery of previously unknown contamination or new technology or information related to individual contaminated sites, the establishment of stricter state or federal toxicity standards with respect to certain contaminants, or the imposition of new cleanup requirements or remedial techniques, could require us to incur additional currently unanticipated costs in the future that would have a negative effect on our business, financial condition, results of operations and cash flows.
Chemical manufacturing is inherently hazardous and may result in accidents, which may disrupt our operations or expose us to significant losses, liabilities or reputational harm.
The hazards associated with chemical manufacturing and the related storage and transportation of raw materials, products and wastes are inherent in our operations as our R&D, manufacturing, formulating, packaging and transportation activities involve the use of dangerous, toxic or hazardous materials and the generation of hazardous waste. We cannot eliminate the risk of accidental contamination, discharge or injury resulting from those materials. Also, our suppliers or contract manufacturers may use and/or generate such materials and waste in connection with producing, storing and/or transporting our products. We may be required to indemnify our suppliers, contract manufacturers or waste disposal contractors against damages and other liabilities arising out of the production, handling, storage or transportation of our products or raw materials or the disposal of related wastes. Potential risks include explosions and fires, chemical spills and other discharges or releases of toxic or hazardous substances or gases, or pipeline and storage tank leaks and ruptures. Those hazards may result in personal and of life, to property and contamination of the environment, all or any of which may result in a of operations and the imposition of civil or , and other sanctions, cleanup costs, by governmental entities or third parties and reputational to the Company. The or of operations over an extended period could have a material effect on our business, financial condition, results of operations and cash flows.
We face the risk of significant decommissioning and remediation expense in the event of a shut down of any manufacturing or other site, including sites in respect of which regulators, including the U.S. Nuclear Regulatory Commission (the “NRC”) and EPA (pursuant to the Resource Conservation and Recovery Act (“RCRA”)), may require letters of credit or other financial assurance.
We may incur substantial decommissioning and remediation expenses in the event of a decision to shut down any of our manufacturing sites or the closure of waste treatment, storage and disposal facilities, particularly in relation to our sites that handle hazardous materials or are subject to regulatory oversight. For example, RCRA requires closure and post-closure care activities, such as clean-up and monitoring, for certain hazardous waste management units at end-of-life and the NRC requires certain decommissioning processes when a nuclear facility is closed, including, among other things, reducing residual radioactivity and cleaning up any contamination. The decommissioning requirements regarding the safe dismantling of facilities, disposal of hazardous materials and remediation of the site, may become more stringent over time and may demand time and significant financial resources. The costs associated with decommissioning and remediation can be influenced by several factors, including the level of contamination at the relevant manufacturing site, any changes in environmental regulations or enforcement policies, the availability of decommissioning and remediation technologies and general fluctuations in market prices. to plan for and manage decommissioning and remediation expenses could have a material effect on our business, financial condition, results of operations and cash flows.
Furthermore, regulators, including the NRC and EPA, have required us to procure letters of credit to backstop certain asset retirement obligations, the most significant of which relate to those that would be applicable if the AES Facility were decommissioned in the future. These regulators may increase financial assurance requirements from us in connection with these decommissioning activities to ensure that sufficient funds are available to cover the costs, including the provision of additional letters of credit, surety bonds or other forms of financial guarantees. Ongoing and future compliance with these financial assurance requirements can impact our financial resources and liquidity. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for more information.
We cannot predict with certainty the outcome of litigation matters, government proceedings and other contingencies and uncertainties.
In the ordinary course of business, we may make certain commitments, including representations, warranties and indemnities relating to current and past operations, including those related to divested businesses, and issue guarantees of third-party obligations. We are subject to a number of lawsuits, investigations and disputes (some of which involve substantial amounts claimed) arising from the conduct of our business, including matters relating to commercial transactions, intellectual property and environmental, health and safety matters. For more information
about these legal proceedings, including information regarding various ongoing legal proceedings related to the AES Facility, see Note 20 - Commitments and Contingencies of the Notes to the audited Consolidated Financial Statements. In addition, while we do not believe it to be a probable scenario, if we do not meet certain timing requirements for completing projects partially funded by the Department of Energy, we may be required to pay liquidated damages. See Item 1. “Business—Our Portfolio and Reported Segments—Refrigerants & Applied Solutions Segment” for more information about our agreement with the Department of Energy with respect to the sharing of certain costs in connection with the expansion of our AES Facility.
Our potential liabilities are subject to change over time due to new developments (including new discovery of facts, changes in legislation, and outcomes of similar cases through the judicial system) or changes in assumptions and we may become subject to or be required to pay damage awards or settlements that could have an adverse effect on our business, financial condition, results of operations and cash flows. If we were required to make payments, such payments could be significant and could exceed the amounts we have accrued with respect thereto, adversely affecting our business, financial condition, results of operations and cash flows. While we maintain insurance for certain risks, the amount of our insurance coverage may not be adequate to cover the total amount of all insured claims and liabilities. The incurrence of significant liabilities for which there is no or insufficient insurance coverage could adversely affect our liquidity and financial condition, results of operations and cash flows.
Our business, reputation and financial performance may be materially impacted by cybersecurity attacks or data privacy or information security breaches.
Our business operations, reputation and financial performance are highly dependent on the integrity and security of our information technology (“IT”) infrastructure. Cybersecurity is and will be a critical component of our enterprise risk management program. We face a wide range of global cybersecurity threats and incidents, from uncoordinated individual attempts to gain unauthorized access to sophisticated and targeted attacks known as advanced persistent threats. These threats could be directed at our company, our products, our customers, and our third-party software and service providers, including cloud providers. Our customers, including the U.S. government, increasingly require robust cybersecurity protections and standards in our products and services, which may result in additional costs to comply with such demands. While we have experienced, and expect to continue to experience, these types of threats and incidents, none of them to date have been material to the Company.
Despite deploying measures to deter, prevent, detect, respond to and mitigate these threats (including identity and access controls, data protection, vulnerability assessments, monitoring of our IT networks and systems, and maintenance of backup and protective systems), cybersecurity incidents could still occur and could go undetected and persist for an extended period of time. These incidents, which may be exacerbated by current geopolitical conflicts, could result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information, theft of funds and disruption of business operations. The evolving nature and increasing frequency of cyber , including the use of AI to craft sophisticated attacks, additional in anticipating and such . In addition, as we increase our use of AI tools in our operations, the risk of access to our data and of making or decisions based on our reliance on such tools may increase. If we to , detect or report cybersecurity in a timely manner, we may from financial and other , including to our information, operations, performance, employees and reputation.
We also collect, store and process confidential or sensitive data, including proprietary business information and personal data, which is subject to data privacy and security laws, regulations and contractual obligations. Despite our efforts to protect such data, we may be vulnerable to material security breaches, theft, misplaced or lost data, programming errors or human errors. These vulnerabilities could lead to the compromise of data, improper use of our products, unauthorized access, use, disclosure, modification, or destruction of data, defective products, production downtimes and operational disruptions. Noncompliance with applicable industry standards or legal obligations regarding data privacy and security could result in costs, , or regulatory actions, increased mitigation and remediation expenses, and/or competitive through reputational and could lead customers to select competitors’ products and services. Further, cybersecurity and data protection laws and regulations continue to evolve, and are increasingly demanding, both in the U.S. and globally, which adds compliance complexity and may increase our costs of compliance and us to , monetary ,
regulatory enforcement actions or fines in one or more jurisdictions. While we carry cybersecurity insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
Additionally, our customers, partners, vendors, suppliers, subcontractors and others to whom we entrust confidential data, and on whom we rely to provide products and services, face similar threats and growing requirements, including ones for which others may seek to hold us responsible. While we perform cybersecurity due diligence on our key vendors and service providers, we do not control such third parties and our ability to monitor their cybersecurity is limited. As such, we cannot ensure the cybersecurity measures they take will be sufficient to protect any information we share with them or prevent any disruption arising from a technology failure, cyberattack or other information or security breach, or to enable them to report any such incidents to us in a timely manner. We depend on such parties to implement adequate controls and safeguards to protect against and report cyber incidents. If such parties fail to deter, detect or report cyber in a timely manner, we may from financial and other , including to our information, operations, financial results, performance, employees and reputation.
A material disruption of our operations, particularly at our manufacturing facilities or within our IT infrastructure, could adversely affect our business, financial condition, results of operations and cash flows.
Our facilities, supply chains, distribution systems, and IT systems are subject to catastrophic loss due to natural disasters or other weather-related disruptions, including hurricanes and floods, which may be exacerbated by the effects of climate change, power outages, fires, explosions, terrorism, equipment failures, sabotage, cyber incidents, any potential effects of climate change and adverse weather conditions, including water scarcity and rising sea levels, labor disputes, critical supply failure, inaccurate downtime forecast, political disruption and regional conflicts, public health , like a regional or global pandemic, and other reasons, which can result in consequences, including financial and relationships with customers. We employ IT systems and networks to support the business and rely on them to process, transmit and store electronic information, and to manage or support a variety of business processes and activities. Although preventative measures may help to mitigate , such measures could be or may not be , and to our manufacturing facilities or IT infrastructure from system , , power and energy , telecommunication or utility , cybersecurity , and other events, including at our cloud computing, server, systems and other third party IT service providers, could with our operations, production and shipments, customer and business partner relationships, and impact our reputation. In addition, the insurance we maintain may not be adequate to cover our resulting from any business , including those resulting from a natural or other weather event or a cyber-attack or other security , and recurring extreme weather events or other events could reduce the availability or increase the cost of insurance. Any such material of our operations could affect our business, financial condition, results of operations and cash flows.
We may be impacted by increasing stakeholder interest in public company performance, disclosure, and goal-setting with respect to sustainability matters.
In response to customer, investor, employee, governmental, and other stakeholder interest in sustainability practices, we may establish goals and other objectives related to sustainability matters. Our ability to achieve any goal or objective that we may establish in the future, including with respect to sustainability initiatives, is subject to numerous risks, many of which are outside of our control. Examples of such risks include: (i) the availability and cost of low- or non-carbon-based energy sources and technologies, (ii) evolving regulatory requirements affecting sustainability standards or disclosures, (iii) the availability of suppliers that can meet our sustainability and other standards, and (iv) the impact of our organic growth and of any acquisitions or dispositions of businesses on our operations. In addition, standards for tracking and reporting on sustainability matters have not been harmonized across jurisdictions and continue to evolve. Our processes and controls for reporting of sustainability matters may not always comply with evolving and disparate standards for identifying, measuring and reporting sustainability metrics, our interpretation of reporting standards may differ from those of others, and such standards may change over time, any of which could result in significant revisions to our performance metrics, goals or reported progress in achieving such goals. We may also face increasing scrutiny regarding the accuracy of our sustainability-related
disclosures, and may be subject to claims of “greenwashing” if our disclosures are perceived as misleading or unsubstantiated. On the other hand, some investors may have a negative response to sustainability practices as a result of anti-environmental, social and governance sentiment and may choose not to invest in us, or divest in their holdings of us, as a result of our sustainability practices and initiatives. Furthermore, there are also an increasing number of state- and federal-level anti-environmental, social and governance initiatives in the U.S. that may conflict with other regulatory requirements, resulting in regulatory uncertainty.
If our sustainability practices or business portfolio do not meet evolving regulatory, investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees and our attractiveness as an investment, supplier, business partner or acquiror could be negatively impacted. Our failure or perceived failure to pursue or fulfill our goals, targets and objectives or to satisfy various reporting standards within the timelines we may announce, or at all, could have similar negative impacts and expose us to government enforcement actions and private litigation, including those related to alleged greenwashing. Such events could adversely affect our business, financial condition, results of operations or cash flow.
If our intellectual property were compromised or copied, if our competitors were to develop similar or superior intellectual property or technology or if we fail to maintain, protect, defend or enforce our intellectual property or to be successful in litigation related to our intellectual property or the intellectual property of others, our business, financial condition, results of operations and cash flows could be negatively affected.
Intellectual property rights, including patents, confidential information (including trade secrets and know-how), trademarks and tradenames, are important to our business. We endeavor to protect our intellectual property rights in key jurisdictions in which our products are made, used, sold or imported. Our success depends to a significant degree upon our ability to obtain, maintain and defend or otherwise protect our intellectual property rights. However, in certain jurisdictions, we may be unable to obtain protection for our intellectual property or to successfully defend or enforce our numerous patents, trademarks and other proprietary rights. If third parties expand their manufacturing capacity for refrigerants in China (including in respect of HFOs), third-party infringement of our intellectual property rights may increase. Our patents and other intellectual property rights may expire or be challenged, invalidated, designed around or found to be unenforceable or otherwise compromised. A failure to maintain, protect, defend or enforce our intellectual property could have an effect on our financial condition and results of operations. Similarly, third parties may assert us and our direct and indirect customers, that our products upon, or otherwise third-party intellectual property rights.
We have a variety of unpatented proprietary technologies, including trade secrets and know-how, particularly related to our manufacturing operations, and we believe that such technologies provide us with a competitive advantage. While we have policies, procedures and agreements and, with certain of our projects, employ an intellectual property protection manager to ensure compliance with these protection measures to protect the applicable technologies, these tools may be insufficient to prevent loss of technology or leakage of applicable confidential information or trade secrets, including because these agreements may not be enforceable or, even if they are legally enforceable, we may not have adequate remedies for breaches of such agreements. We also may not be able to readily detect breaches of such procedures or agreements. The failure to protect our unpatented proprietary technology, including know-how and trade secrets, could result in significantly lower revenues, reduced profit margins or loss of market share.
If we must take legal action to maintain, protect, defend or enforce our intellectual property rights, any suits or proceedings could result in significant costs and diversion of resources and management’s attention, and we may not prevail in any such suits or proceedings. We have occasionally received, and may in the future receive, third-party claims alleging infringement of third-party intellectual property rights, which could be costly to defend and could require us to pay damages, limit our future use of certain technologies, harm our brand and reputation, increase our costs and prevent us from offering some services or products. We may decide to settle such claims on unfavorable terms or be required to pay damages, stop providing or using the affected products or services, undertake workarounds or substantial reengineering of our products or services or enter into royalty or licensing agreements, which may include terms that are not commercially acceptable to us. We may receive notices calling upon us to partners, clients, suppliers or distributors third-party under indemnification clauses in our contracts, in respect of intellectual property matters. A to maintain, protect, or enforce our intellectual
property rights could have an adverse effect on our business, financial condition, results of operations and cash flows.
Our U.S. and non-U.S. tax liabilities are dependent, in part, upon the distribution of income among various jurisdictions in which we operate, as well as changes in tax law or regulation.
Our future results of operations could be adversely affected by changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in tax laws, regulations and judicial rulings (or changes in the interpretation thereof), potential taxation of digital services, changes in generally accepted accounting principles, changes in the valuation of deferred tax assets and liabilities, changes in the amount of earnings permanently reinvested offshore, the results of audits and examinations of previously filed tax returns and continuing assessments of our tax exposures, and various other governmental enforcement initiatives. To preserve the intended tax-free treatment to Honeywell and its shareowners of the Spin-off and certain related transactions under the Tax Matters Agreement that we entered into with Honeywell, we are restricted from taking certain actions that could adversely impact the intended tax treatment of the Spin-off and such related transactions. Our tax expense includes estimates of tax reserves and reflects other estimates and assumptions, including assessments of future earnings of the Company, which could impact the valuation of our deferred tax assets. In addition, our future effective tax rates could be subject to volatility or adversely affected by changes in tax laws, regulations, accounting principles or interpretations thereof.
The Organization for Economic Co-operation and Development (“OECD”)/G20 and other invited countries developed a global tax framework inclusive of a 15% global minimum tax under the Pillar Two Global Anti-Base Erosion Rules (“Pillar Two”). On December 15, 2022, the Council of the EU formally adopted the OECD’s framework to achieve a coordinated implementation among EU Member States consistent with EU law. The EU’s Pillar Two Directive effective dates were January 1, 2024, and January 1, 2025, for different aspects of the directive. Other major jurisdictions are actively considering and implementing changes to their tax laws to adopt certain parts of the OECD’s proposals. We have assessed this framework and determined, based upon available guidance, that these changes will not have a material impact on our results of operations. Any future changes in OECD guidance or interpretations, including local country tax legislative changes thereof, could impact our initial assessment; therefore, we will continue to monitor and refine our assessment as further guidance is made available.
We may be required to make significant cash contributions to the defined benefit pension plans that we sponsor.
We sponsor defined benefit pension plans under which certain eligible Company employees earn pension benefits. Plans are established in several countries including the U.S. The Federal Pension Protection Act of 2006, which is generally applicable to U.S. defined benefit pension plans, generally requires that defined benefit pension plans maintain certain capitalization levels. Based on currently available information, we do not expect to be required to make cash contributions to our U.S. defined benefit pension plan within the next 12 months. However, there can be no assurance that we will not be required to make cash contributions in the future to meet the requirements of applicable law. Additionally, as pension liabilities accrue under this defined benefit pension plan, we may be required by law to make future plan contributions. Any such contributions may be material and could adversely affect our business, financial condition, results of operations and cash flows.
If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, our stock price and our ability to access the capital markets could be adversely impacted, and investors’ views of us could be harmed.
The Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, with auditor attestation of the effectiveness of our internal controls, beginning with our annual report on Form 10-K for the year ending December 31, 2026. To comply with these requirements, we may need to upgrade our systems, implement additional financial and management controls, reporting systems and procedures and hire additional accounting and finance
staff. We expect to incur additional annual expenses for the purpose of addressing these and other public-company reporting requirements. If we are unable to upgrade our financial and management controls, reporting systems, IT systems and procedures in a timely and effective fashion, our ability to comply with financial reporting requirements and other rules that apply to reporting companies under the Exchange Act could be impaired. If we are not able to comply with the requirements of Section 404 in a timely manner or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of shares of common stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
Our ability to comply with Section 404 requires us to be able to prepare timely and accurate financial statements. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls may cause our operations to suffer, and we may be unable to conclude that our internal control over financial reporting is effective and to obtain an unqualified report on internal controls from our auditors as required under Section 404 of the Sarbanes-Oxley Act. Moreover, we cannot be certain that these measures would ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. Even if we were to conclude, and our auditors were to concur, that our internal control over financial reporting provided reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, because of its inherent limitations, internal control over financial reporting might not prevent or detect or . This, in turn, could have an impact on trading prices for our shares of common stock and could affect our ability to access the capital markets . See “—Risks Relating to the Spin-off—As we build our IT infrastructure and transition our data to our own systems, we could incur substantial additional costs and experience temporary business , including cybersecurity .”
Risks Relating to the Spin-off
The Spin-off could result in significant tax liability to Honeywell and its shareowners if it is determined to be a taxable transaction and, in certain circumstances, the Company could be required to indemnify Honeywell for material taxes pursuant to indemnification obligations under the Tax Matters Agreement.
Prior to the Spin-off, Honeywell received certain written opinions to the effect that, among other things, the Spin-off qualifies as a transaction that is intended to be tax-free for U.S. federal income tax purposes under the Internal Revenue Code of 1986. The tax opinions relied on certain facts, assumptions, representations and undertakings from Honeywell and the Company, including those regarding the past and future conduct of the companies’ respective businesses and other matters. An opinion of counsel neither binds the IRS nor precludes the IRS or the courts from adopting a contrary position. Therefore, notwithstanding the tax opinions, the IRS could determine that the Spin-off or any of certain related transactions is taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated, or that the Spin-off should be taxable for other reasons, including if the IRS were to disagree with the conclusions in the tax opinions. If the conclusions expressed in the tax opinions are challenged by the IRS, and if the IRS prevails in such challenge, the tax consequences of the Spin-off could be materially less favorable. For more information regarding the tax opinions, see the section of the Company’s final Information Statement, dated as of October 17, 2025, entitled “The Spin-Off—U.S. Federal Income Tax Consequences of the Distribution.”
To preserve the intended tax-free treatment to Honeywell and its shareowners of the Spin-off and certain related transactions under the Tax Matters Agreement that we entered into with Honeywell, we are restricted from taking certain actions that could adversely impact the intended tax treatment of the Spin-off and such related transactions.
To preserve the intended tax-free treatment to Honeywell and its shareowners of the Spin-off and certain related transactions under the Tax Matters Agreement that we entered into with Honeywell, we are restricted from taking certain actions that could adversely impact the intended tax treatment of the Spin-off and certain related transactions. Failure to adhere to such restrictions, including in certain circumstances that may be outside of our control, could result in tax being imposed on Honeywell for which we could bear responsibility and for which we could be
obligated to indemnify Honeywell. In addition, even if we are not responsible for tax liabilities of Honeywell under the Tax Matters Agreement, we nonetheless could potentially be liable under applicable tax law for such liabilities if Honeywell were to fail to pay such taxes. If any tax regulators, foreign or domestic, reach different determinations regarding the intended tax-free treatment of the transaction, we may also experience material adverse tax consequences.
The terms of the Tax Matters Agreement may, furthermore, restrict us from taking certain actions, particularly for the two years following the completion of the Spin-off, including (among other things) the ability to freely issue stock, to merge or agree to merge with a third party, to be acquired or agree to be acquired by certain parties and to raise additional equity capital. Such restrictions could impair our ability to implement strategic initiatives. Also, our indemnity obligation to Honeywell might discourage, delay or prevent a change of control that we or our shareowners may otherwise consider favorable. These restrictions may limit our ability to enter into certain strategic transactions or other transactions that we may believe to be in the best interests of our shareowners or that might increase the value of our business. In addition, under the Tax Matters Agreement, we may be required to indemnify Honeywell against certain tax liabilities as a result of the acquisition of our stock or assets, even if we did not participate in or otherwise facilitate the acquisition. If we are unable to take certain strategic actions as desired, or are required to indemnify Honeywell, our stock price, business, financial condition, results of operations and cash flows could be affected.
We may be unable to achieve some or all of the benefits that we expect to achieve from the Spin-off.
We may be unable to achieve the full strategic and financial benefits expected to result from the Spin-off, or such benefits may be delayed or not occur at all. We believe that as an independent, publicly traded company, we are able to, among other things, design and implement corporate strategies and policies that are better targeted to our business’s areas of strength and differentiation, better focus our financial and operational resources on those specific strategies, create effective incentives for our management and employees that are more closely tied to our business performance, provide investors more flexibility, achieve alignment with a more aligned shareowner base and implement and maintain a capital structure designed to meet our specific needs. We may be unable to achieve some or all of the benefits that we expect to achieve as an independent company in the time we expect, if at all, for a variety of reasons, including: (i) compliance with the requirements of being an independent, publicly traded company require significant amounts of our management’s time and effort, which may management’s attention from operating and growing our business; (ii) we may be more to market fluctuations, actions by activist shareowners, and other events than if we were still a part of Honeywell; (iii) our businesses are less diversified than Honeywell’s businesses prior to the Spin-off, and our results of operations, cash flows, working capital and financing requirements may be subject to higher than prior to the Spin-off; (iv) the actions required to separate Honeywell’s and our respective businesses could our operations; and (v) under the terms of the Tax Matters Agreement, we are restricted from taking certain actions that could cause the Spin-off to to qualify as a tax-free transaction, and these restrictions may limit us for a period of time from pursuing strategic transactions, equity issuances or engaging in other transactions that may increase the value of our business. If we to some or all of the benefits that we expect to as an independent company, or do not them in the time we expect, our stock price, business, financial condition, results of operations and cash flows could be affected.
We may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as an independent, publicly traded company, and we may experience increased costs after the Spin-off.
We have historically operated as part of Honeywell’s corporate organization, and Honeywell has provided us with various corporate functions. Following the Spin-off, Honeywell does not provide us with assistance other than the transition and other services described under “Certain Relationships and Related Party Transactions—Agreements with Honeywell” in the Company’s final Information Statement, dated October 17, 2025. These services do not include every service that we have received from Honeywell in the past, and Honeywell is only obligated to provide the transition services for limited periods following completion of the Spin-off. All of these agreements govern our relationship with Honeywell. We rely on Honeywell to satisfy its performance obligations under these agreements. If we or Honeywell are unable to satisfy our or its respective obligations under these agreements, including
indemnification obligations, we could incur operational difficulties or losses, and our business, results of operations, cash flows, and financial condition could be adversely affected.
Following the cessation of any transition services agreements, we need to provide internally or obtain from unaffiliated third parties the services we will no longer receive from Honeywell. These services include legal, finance, IT, software development, human resources and other infrastructure support, the effective and appropriate performance of which are critical to our operations. Although we have made progress in providing and obtaining such services, we may be unable to replace these services in a timely manner or on terms and conditions as favorable as those we receive from Honeywell. While we have been installing and implementing infrastructure to support certain of our business functions, including accounting and financial reporting, human resources, legal and compliance, communications, and indirect sourcing following the Spin-off, because our business has historically operated as part of the wider Honeywell organization, we may be unable to successfully establish the infrastructure or implement the changes necessary to operate independently, or may incur additional costs that could adversely affect our business. If we are unable to complete our transition effectively, we may incur temporary in business operations. Any in implementing, or operational while implementing, our new infrastructure, or if we to obtain the quality of services necessary to operate effectively or incur costs in obtaining necessary services, our business, financial condition, results of operations and cash flows may be affected.
We may have potential business conflicts of interest with Honeywell with respect to our past and ongoing relationships.
Conflicts of interest may arise with Honeywell in a number of areas relating to our past and ongoing relationships, including:
• labor, tax, employee benefit, indemnification and other matters arising from our Spin-off from Honeywell;
• employee recruiting and retention; and
• business combinations involving our Company.
We may not be able to resolve any potential conflicts and, even if we do so, the resolution may be less favorable to us than if we were dealing with a previously unaffiliated party.
Certain of our directors and employees may have actual or potential conflicts of interest because of their financial interests in Honeywell.
Because of their former positions with Honeywell, certain of our executive officers and directors, including the chairman of our Board of Directors (the “Board” or “Board of Directors”), own equity interests in Honeywell. Continuing ownership of Honeywell shares could create, or appear to create, potential conflicts of interest if our Company and Honeywell face decisions that could have implications for both our Company and Honeywell. We have not currently identified any conflicts of interest; however, potential conflicts of interest could arise in connection with the resolution of any dispute between us and Honeywell regarding the terms of the agreements governing the Spin-off and our relationship with Honeywell. See the section entitled “Relationship with Honeywell” for information about some of these agreements.
Our Code of Business Conduct applies to our directors and executive officers, as well as employees, and is intended to promote honest and ethical conduct, including the handling of actual or apparent conflicts of interests. Further, the Board has also adopted certain governance principles and practices related to actual or potential conflicts of interest. Our Nominating and Governance Committee reviews and oversees any related party transactions for potential conflicts of interest on an ongoing basis, as appropriate. It is also our Board’s practice for any director who has a potential or actual conflict of interest in relation to a particular matter under consideration by the Board to disclose such potential or actual conflict to the Board in advance of the Board’s action on the matter.
As we build our IT infrastructure and transition our data to our own systems, we could incur substantial additional costs and experience temporary business interruptions, including cybersecurity incidents.
Following the Spin-off, we have implemented, or are in the process of implementing, IT infrastructure to support certain of our business functions, including payment systems and systems for enterprise resource planning, accounting and reporting, manufacturing process control, customer service, inventory control and distribution. We may incur substantially higher costs than currently anticipated as we transition from the transactional and operational systems and data centers we used as part of Honeywell to our own systems and infrastructure. Such transitions must also comply with applicable personal data privacy laws. If we are unable to complete these transitions effectively, we may incur temporary interruptions in business operations and/or become more susceptible to cybersecurity incidents. Any delay in implementing or operational interruptions suffered while implementing our new IT infrastructure could disrupt our business and have an adverse effect on our business, financial condition, results of operations and cash flows.
Restrictions under the Intellectual Property Cross-License Agreement may limit our ability to develop and commercialize certain products and services and/or prosecute, maintain and enforce certain intellectual property.
We are dependent to a certain extent on Honeywell to prosecute, maintain and enforce certain of the intellectual property licensed to us under the Intellectual Property Cross-License Agreement. For example, Honeywell is responsible for filing, prosecuting and maintaining (at its discretion) patents that Honeywell licenses to us. Honeywell also has the sole right to enforce its intellectual property, including patents, trade secrets and other know-how licensed to us.
Under the Intellectual Property Cross-License Agreement, if we challenge certain patents licensed to us under such agreement, we could have our rights relating to certain patents or all patents licensed to us terminated. Although we have put appropriate procedures in place to avoid triggering these consequences under the Intellectual Property Cross-License Agreement, there is a risk that challenges to the validity, patentability, enforceability or inventorship of patents that we routinely file may inadvertently trigger these consequences, which could limit our ability to develop and commercialize products and services.
In addition, our use of the intellectual property licensed to us under the Intellectual Property Cross-License Agreement is restricted to certain fields, which could limit our ability to develop and commercialize certain products and services. For example, the licenses granted to us under the agreement do not extend to all fields of use that we may in the future decide to enter into. These restrictions may make it more difficult, time-consuming and/or expensive for us to develop and commercialize certain new products and services, or may result in certain of our products or services being later to market than those of our competitors. If we are unable to develop and commercialize products and services, and prosecute, maintain and enforce intellectual property, as needed, our business, financial condition, operations and cash flows could be adversely impacted.
In connection with the Spin-off, we assumed and agreed to indemnify Honeywell for certain liabilities. If we are required to make payments pursuant to these indemnities, we may need to divert cash to meet those obligations, and our financial results could be negatively impacted. In addition, Honeywell will indemnify us for certain liabilities. These indemnities may not be sufficient to insure us against the full amount of liabilities we incur.
Pursuant to the Separation Agreement, the Employee Matters Agreement, the Tax Matters Agreement and the Trademark License Agreement with Honeywell, we agreed to assume and indemnify Honeywell for certain liabilities, including environmental liabilities associated with the Advanced Materials business, including toxic tort or other hazardous material exposure claims, for uncapped amounts, which may include, among other items, associated defense costs, settlement amounts and judgments. Payments pursuant to these indemnities may be significant and could negatively impact our business, particularly indemnities relating to our actions that could impact the intended tax-free nature of the distribution. Third parties could also seek to hold us responsible for any of the liabilities allocated to Honeywell and those related to discontinued and/or divested businesses and operations of Honeywell. Honeywell agreed to indemnify us for such liabilities, but such indemnities may not be sufficient to protect us against the full amount of such liabilities. Even if we ultimately succeed in recovering from Honeywell any amounts for which we are held liable, we may be temporarily required to bear these losses. Each of these risks
could negatively affect our business, financial condition, results of operations and cash flows. See “Certain Relationships and Related Party Transactions—Agreements with Honeywell—Liabilities” and “Certain Relationships and Related Party Transactions—Agreements with Honeywell—Separation Agreement” in the final Information Statement, dated as of October 17, 2025, for more information.
The Spin-off and related internal restructuring transactions may expose us to potential liabilities arising out of state and federal fraudulent conveyance laws and legal dividend requirements.
The Spin-off could be challenged under various state and federal fraudulent conveyance laws. Fraudulent conveyances or transfers are generally defined to include (a) transfers made or obligations incurred with the actual intent to hinder, delay or defraud current or future creditors or (b) transfers made or obligations incurred for less than reasonably equivalent value when the debtor was insolvent, or that rendered the debtor insolvent, inadequately capitalized or unable to pay its debts as they become due. A creditor or an entity acting on behalf of a creditor (including, without limitation, a trustee or debtor-in-possession in a bankruptcy by us or Honeywell or any of our or its respective subsidiaries) may bring a lawsuit alleging that the Spin-off or any of the related transactions constituted a conveyance. If a court accepts these , it could impose a number of remedies, including, without , the distribution and returning our assets or shares and Honeywell and/or us to liability.
The distribution of our common stock was also subject to state corporate distribution statutes. Under applicable Delaware law, including the Delaware General Corporation Law (the “DGCL”), a corporation may only pay a distribution of common stock to its shareowners if certain conditions are met, including that the distribution is made entirely out of surplus. Although Honeywell made the distribution of our common stock entirely out of surplus and Honeywell obtained a solvency opinion from an independent appraisal firm, we and Honeywell cannot ensure that a court would reach the same conclusion in determining the availability of surplus for the separation and the distribution to Honeywell’s shareowners.
Risks Relating to Our Common Stock and the Securities Market
Our stock price may fluctuate significantly.
The market price of our common stock may fluctuate widely, depending on many factors, some of which may be beyond our control, including:
• actual or anticipated fluctuations in our results of operations due to factors related to our business;
• success or failure of our business strategies;
• competition and industry capacity;
• changes in interest rates and other factors that affect earnings and cash flows;
• our level of indebtedness, our ability to make payments on or service our indebtedness and our ability to obtain financing as needed;
• our ability to continuously satisfy financial covenants associated to any debt transactions and/or agreements;
• our indemnification obligations to Honeywell;
• our ability to retain and recruit qualified personnel;
• our quarterly or annual earnings, or those of other companies in our industry;
• announcements by us or our competitors of significant acquisitions or dispositions;
• changes in accounting standards, policies, guidance, interpretations or principles;
• the failure of securities analysts to cover, or positively cover, our common stock after the Spin-off;
• changes in earnings estimates by securities analysts or our ability to meet those estimates;
• the operating and stock price performance of other comparable companies;
• investor perception of our Company and our industry;
• overall market fluctuations unrelated to our operating performance;
• results from any material litigation or government investigation;
• changes in laws and regulations (including tax laws and regulations) affecting our business;
• changes in capital gains taxes and taxes on dividends affecting shareowners; and
• general economic conditions and other external factors.
Low trading volume for our stock, which may occur if an active trading market is not sustained, among other reasons, would amplify the effect of the above factors on our stock price volatility. In addition, any lack of an active market may make it more difficult for shareowners to sell our shares and could lead to our share price being depressed or volatile.
Should the market price of our shares drop significantly, shareowners may institute securities class action lawsuits against the Company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.
We will evaluate whether to continue to pay cash dividends on our common stock in the future, and the terms of our indebtedness may limit our ability to pay dividends on our common stock or the amount thereof or otherwise engage in actions intended to return capital to our shareowners.
The Company announced payment of its first quarterly dividend in February 2026, payable in March 2026. The Company currently expects quarterly dividends to continue in future periods, although they remain subject to determination and declaration by the Board of Directors. The timing, declaration, amount and payment of any future dividends to shareowners falls within the discretion of our Board of Directors, who will consider, among other things, our financial condition, earnings, sufficiency of distributable reserves, capital needs of our business, opportunities to retain future earnings for use in the operation of our business and to fund future growth, capital requirements, debt service obligations, legal requirements and regulatory constraints. Additionally, the terms of our indebtedness limit our ability to pay cash dividends and to engage in certain other actions intended to return capital to our shareowners, such as engage in stock repurchases. There can be no assurance that we will continue to pay any dividends in the future or that we will engage in any other actions intended to return capital to our shareowners, such as engage in stock repurchases.
Your percentage ownership in the Company may be diluted in the future.
Your percentage ownership in the Company may be diluted in the future because of equity issuances for acquisitions, capital market transactions or otherwise, including equity awards that we grant to our directors, officers and other employees. We have issued our directors, officers, certain of our employees and others certain stock-based awards as part of our ongoing equity compensation program, and some of those persons also received stock-based awards from Honeywell prior to the Spin-off that converted to our stock-based awards. Such awards will have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock. We have issued, and plan to continue to issue, additional stock-based awards, including annual awards, new hire awards, and periodic retention awards, as applicable, to our directors, officers, and other employees under our employee benefits plans as part of our ongoing equity compensation program.
In addition, our Amended and Restated Certificate of Incorporation authorizes us to issue, without the approval of our shareowners, one or more classes or series of preferred stock having such designation, powers, preferences and
relative, participating, optional and other special rights, including preferences over our common stock with respect to dividends and distributions, as our Board of Directors may generally determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. For example, we could grant the holders of preferred stock the right to elect some number of the members of our Board in all events or upon the happening of specified events, or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences that we could assign to holders of preferred stock could affect the residual value of our common stock.
Furthermore, from time to time, we may opportunistically evaluate and pursue acquisition opportunities, including acquisitions for which the consideration thereof may consist partially or entirely of newly issued shares of our common stock and, therefore, such transactions, if consummated, would dilute the voting power and/or reduce the value of our common stock.
Certain provisions in our Amended and Restated Certificate of Incorporation and Amended and Restated By-Laws and Delaware law may discourage takeovers.
Several provisions of our Amended and Restated Certificate of Incorporation, Amended and Restated By-Laws and Delaware law may discourage, delay or prevent a merger or acquisition. These include, among others, provisions that:
• allow our Board to issue preferred stock without shareowner approval;
• provide for staggered terms for directors on our Board for a period following the Spin-off;
• discourage attempts to remove and replace incumbent directors for a period following the Spin-off;
• prevent shareowners from altering the size of our Board for a period following the Spin-off;
• do not permit our shareowners to act by written consent and require that shareowner action must take place at an annual or special meeting of our shareowners, in each case except as such rights may otherwise be provided to holders of preferred stock;
• establish advance notice requirements for shareowner nominations and proposals;
• do not permit shareowners to cumulate votes in the election of directors;
• allow our directors, and not shareowners, to fill vacancies on our Board (including those resulting from an enlargement of the Board);
• limit the persons who may call special meetings of shareowners;
• limit our ability to enter into business combination transactions; and
• discourage attempts to amend anti-takeover provisions in the Amended and Restated Certificate of Incorporation and Amended and Restated By-Laws for a period following the Spin-off.
In addition, following the Spin-off, we are subject to Section 203 of the DGCL. Section 203 of the DGCL provides that, subject to limited exceptions, persons that (without prior Board approval) acquire, or are affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware corporation shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or its affiliate becomes the holder of more than 15% of the corporation’s outstanding voting stock.
We believe these provisions protect our shareowners from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board and by providing our Board with more time to assess any acquisition proposal. These and other provisions of our Amended and Restated Certificate of Incorporation, Amended and Restated By-Laws and Delaware law may discourage, delay or prevent certain types of transactions involving an actual or a threatened acquisition or change in control of the Company, including unsolicited takeover attempts, even
though the transaction may offer our shareowners the opportunity to sell their shares of our common stock at a price above the prevailing market price. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.
Our Amended and Restated By-Laws designate the courts of the State of Delaware or the federal district courts of the U.S., as applicable, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareowners, which could limit our shareowners’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our Amended and Restated By-Laws provide that, in all cases to the fullest extent permitted by law, unless we consent in writing to the selection of an alternative forum, any state or federal court located within the State of Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of the Company, any action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee, shareowner or agent of the Company to the Company or the Company’s shareowners, any action asserting a claim arising pursuant to the DGCL, our Amended and Restated Certificate of Incorporation or our Amended and Restated By-Laws, or any action asserting a claim governed by the internal affairs doctrine. Notwithstanding the foregoing, our Amended and Restated By-Laws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the U.S. shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting solely a cause of action arising under the Securities Act or any rules or regulations promulgated thereunder. These forum provisions do not apply to any action brought to enforce a duty or liability created by the Exchange Act or any rules or regulations promulgated thereunder, to the extent such application would be to law. Our shareowners are not deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder as a result of our forum provisions. The choice of forum provision in our Amended and By-Laws may limit a shareowner’s ability to bring a claim in a judicial forum that it finds for with us or our directors, officers, other employees, shareowners or agents, which may such lawsuits us or our directors, officers, other employees, shareowners or agents. If a court were to find this provision of our Amended and By-Laws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions.
