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What changed in Element Solutions Inc's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Element Solutions Inc's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+253 added−266 removedSource: 10-K (2025-02-19) vs 10-K (2024-02-21)

Top changes in Element Solutions Inc's 2024 10-K

253 paragraphs added · 266 removed · 208 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe also serve a variety of clean technology customers and as such, may benefit from the upcoming transition to a lower carbon economy. We believe we are in material compliance with environmental laws and regulations applicable to our operations, and consider the liabilities recorded at December 31, 2023 for our various environmental matters to be appropriate.
Biggest changeWe believe we are in material compliance with environmental laws and regulations applicable to our operations, and consider the liabilities recorded at December 31, 2024 for our various environmental matters to be appropriate. For additional information about the risks related to government regulations, please refer to “Item 1A. Risk Factors.” Available Information Our internet website address is www.elementsolutionsinc.com .
We believe our growth in this business will be driven by advanced electronics packaging, necessary to meet the growing needs of high performance computing, artificial intelligence, the internet of things, next-generation wireless communications and the increasing content and complexity of electronics in automotive applications. 2 Products A selection of Electronics' product offerings is presented below: Assembly Solutions Electronic Assembly Materials Electonic assembly materials are used in circuit board and high-performance electronic device assembly.
We believe our growth in this business will be driven by advanced electronics packaging, necessary to meet the growing needs of high performance computing, artificial intelligence, the internet of things, next-generation wireless communications and the increasing content and complexity of electronics in automotive applications. 2 Products A selection of Electronics' product offerings is presented below: Assembly Solutions Electronic Assembly Materials Electronic assembly materials are used in circuit board and high-performance electronic device assembly.
Circuit Formation Products Circuit formation products consist of an assortment of products for defining circuit patterns and bonding conductors to insulating materials. Electronic Materials Electonic materials are specialty products developed for evolving electronic applications, including photovoltaics, memory disk and molded interconnect devices manufacturing as well as lead frame and dielectric plating solutions.
Circuit Formation Products Circuit formation products consist of an assortment of products for defining circuit patterns and bonding conductors to insulating materials. Electronic Materials Electronic materials are specialty products developed for evolving electronic applications, including photovoltaics, memory disk and molded interconnect devices manufacturing as well as lead frame and dielectric plating solutions.
This close proximity to our global customers' local sites enables access to key growth markets and, along with our efficient formulation process, allows for "just in time" supply chain management. We believe that our businesses are not materially dependent upon any single customer with no customer representing 10% or more of our consolidated net sales in 2023, 2022 or 2021.
This close proximity to our global customers' local sites enables access to key growth markets and, along with our efficient formulation process, allows for "just in time" supply chain management. We believe that our businesses are not materially dependent upon any single customer with no customer representing 10% or more of our consolidated net sales in 2024, 2023 or 2022.
For financial and other information about our segments and the geographic areas in which we do business, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7, "Financial Statements and Supplementary Data" in Part II, Item 8, as well as Note 1, "Background and Basis of Presentation" and Note 22, "Segment Information" to our audited Consolidated Financial Statements, all included in this 2023 Annual Report.
For financial and other information about our segments and the geographic areas in which we do business, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7, "Financial Statements and Supplementary Data" in Part II, Item 8, as well as Note 1, "Background and Basis of Presentation" and Note 22, "Segment Information" to our audited Consolidated Financial Statements, all included in this 2024 Annual Report.
The SEC also maintains an internet website available at www.sec.gov that contains reports, proxy and information statements and other information filed by issuers, such as Element Solutions. The information on or linked to our website is not incorporated by reference into, and does not form a part of, this 2023 Annual Report or any of our other SEC filings.
The SEC also maintains an internet website available at www.sec.gov that contains reports, proxy and information statements and other information filed by issuers, such as Element Solutions. The information on or linked to our website is not incorporated by reference into, and does not form a part of, this 2024 Annual Report or any of our other SEC filings.
These core values are the foundation of our organization. We believe they reinforce our strategic objectives and empower our employees when serving and engaging with our customers globally. 6 At December 31, 2023, we employed over 5,300 full-time employees, of which approximately 40% are research and development chemists and experienced technical service and technical sales personnel.
These core values are the foundation of our organization. We believe they reinforce our strategic objectives and empower our employees when serving and engaging with our customers globally. 6 At December 31, 2024, we employed over 5,300 full-time employees, of which approximately 40% are research and development chemists and experienced technical service and technical sales personnel.
We believe our growth in this industry will be primarily driven by increased worldwide automobile production with elevated fashion elements and higher content per vehicle as well as general economic growth. 3 Graphics Solutions - representing approximately 16% of the segment's 2023 net sales .
We believe our growth in this industry will be primarily driven by increased worldwide automobile production with elevated fashion elements and higher content per vehicle as well as general economic growth. 3 Graphics Solutions - representing approximately 16% of the segment's 2024 net sales .
Item 1. Business Unless the context otherwise indicates or requires, all product names, trade names, trademarks, service marks or logos used in this 2023 Annual Report are part of our intellectual property, although the “®” and “TM” trademark designations may have been omitted.
Item 1. Business Unless the context otherwise indicates or requires, all product names, trade names, trademarks, service marks or logos used in this 2024 Annual Report are part of our intellectual property, although the “®” and “TM” trademark designations may have been omitted.
Circuitry Solutions - representing approximately 30% of the segment's 2023 net sales. As a global supplier of chemical formulations to the electronics industry, we design and manufacture proprietary "wet" chemical processes and materials used by our customers to manufacture printed circuit boards and memory storage devices.
Circuitry Solutions - representing approximately 30% of the segment's 2024 net sales. As a global supplier of chemical formulations to the electronics industry, we design and manufacture proprietary "wet" chemical processes and materials used by our customers to manufacture printed circuit boards and memory storage devices.
Semiconductor Solutions - representing approximately 19% of the segment's 2023 net sales. As a global supplier to the semiconductor industry, we provide advanced copper interconnects, die attachment, sintered silver material, adhesives, wafer bump processes and photomask technologies to our customers for integrated circuit fabrication and semiconductor packaging.
Semiconductor Solutions - representing approximately 20% of the segment's 2024 net sales. As a global supplier to the semiconductor industry, we provide advanced copper interconnects, die attachment, sintered silver material, adhesives, wafer bump processes and photomask technologies to our customers for integrated circuit fabrication and semiconductor packaging.
The segment's "wet chemistries" for metallization, surface treatments and solderable finishes form the physical circuitry pathways and its "assembly materials," such as solder, pastes, fluxes and adhesives, join those pathways together. Electronics provides solutions through the following businesses: Assembly Solutions - representing approximately 51% of the segment's 2023 net sales.
The segment's "wet chemistries" for metallization, surface treatments and solderable finishes form the physical circuitry pathways and its "assembly materials," such as solder, pastes, fluxes and adhesives, join those pathways together. Electronics provides solutions through the following businesses: Assembly Solutions - representing approximately 50% of the segment's 2024 net sales.
Energy Solutions - representing approximately 8% of the segment's 2023 net sales. As a global supplier of specialized fluids to the offshore energy industry, we produce water-based hydraulic control fluids for major oil and gas companies and drilling contractors to be used in offshore deep-water production and drilling applications.
Energy Solutions - representing approximately 9% of the segment's 2024 net sales. As a global supplier of specialized fluids to the offshore energy industry, we produce water-based hydraulic control fluids for major oil and gas companies and drilling contractors to be used in offshore deep-water production and drilling applications.
Industrial & Specialty provides solutions through the following businesses: Industrial Solutions - representing approximately 76% of the segment's 2023 net sales. As a global supplier of industrial metal and plastic finishing chemistries, we primarily design and manufacture chemical systems that protect and decorate surfaces.
Industrial & Specialty provides solutions through the following businesses: Industrial Solutions - representing approximately 75% of the segment's 2024 net sales. As a global supplier of industrial metal and plastic finishing chemistries, we primarily design and manufacture chemical systems that protect and decorate surfaces.
At December 31, 2023, 8 we owned, had applications pending, or licensed the rights to, approximately 2,800 domestic and foreign patents, which have remaining lives of varying duration.
At December 31, 2024, 8 we owned, had applications pending, or licensed the rights to, approximately 2,900 domestic and foreign patents, which have remaining lives of varying duration.
In 2023, global donations through our ESI Cares program benefited over 500 charitable organizations, including charities who focus on human rights and humanitarian initiatives, such as Equality Now and Doctors Without Borders USA.
In 2024, global donations through our ESI Cares program benefited over 1,000 charitable organizations, including charities who focus on human rights and humanitarian initiatives, such as Equality Now and Doctors Without Borders USA.
Our semiconductor assembly materials portfolio includes sintered materials, die attach pastes and films, thermal interface materials, adhesives, getters, solder flux and solder pastes. Our Argomax line of advanced sinter technology is used in power semiconductor and solid state lighting markets to improve reliability and device performance. Other key brands include ALPHA, ViaForm, MICROFAB, ATROX, TrueHeight, Staydry, Kester and Compugraphics .
Semiconductor Solutions Semiconductor Assembly Materials Semiconductor assembly materials are sintered materials, die attach pastes and adhesives, thermal interface materials, getters, solder flux, pastes and preforms. Our Argomax line of advanced sinter technology is used in power semiconductor and solid state lighting markets to improve reliability and device performance. Other key brands include ALPHA, ATROX, TrueHeight, Staydry and HiTech .
Semiconductor Solutions Semiconductor Materials & Packaging Applications Semiconductor materials & packaging applications are advanced plating chemistries and assembly materials used for semiconductor chip fabrication and packaging. Our plating portfolio consists of copper, nickel and precious metals used in wafer-level packaging applications as well as damascene metallization used for transistor interconnection.
Wafer Level Packaging Materials Wafer level packaging materials are advanced plating chemistries used for semiconductor chip fabrication and packaging. Our plating portfolio consists of copper, nickel and precious metals used in advanced packaging applications as well as damascene metallization used for transistor interconnection. Key brands include ViaForm , MICROFAB and NOVAFAB .
Continued investment in research and development ensures that we remain ahead of emerging trends and continue to strengthen our strong positions in our market niches.
Research and Development Innovation is a key element of our culture and critical to our success. Continued investment in research and development ensures that we remain ahead of emerging trends and continue to strengthen our strong positions in our market niches.
Acquisitions We may pursue targeted and opportunistic acquisitions in our existing and adjacent end-markets that seek to strengthen our current businesses, expand and diversify our product offerings, and enhance our growth and strategic position.
Acquisitions and Divestitures We may pursue targeted and opportunistic acquisitions in our existing and adjacent end-markets that seek to strengthen our current businesses, expand and diversify our product offerings, and enhance our growth and strategic position as well as divestitures to maximize long-term value creation for our shareholders.
Compliance with SH&E requirements has not had, and in the future is currently not expected to have, a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods.
Compliance with SH&E requirements has not had, and in the future is currently not expected to have, a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods. However, SH&E requirements are gradually becoming more stringent and may cause us to incur additional costs, fines or penalties in the future.
It also focuses on causes important to the environmental and social well-being of these communities, such as The Canopy Project ® , which in 2023 helped us celebrate Earth Day with the planting of trees around the world.
The ESI Foundation further brings our purpose to life with a matching gift program. It also focuses on causes important to the environmental and social well-being of these communities, such as EARTHDAY.ORG's The Canopy Project ® , which in 2024 helped us celebrate Earth Day with the planting of trees around the world.
During 2023, our research and development expenses totaled $68.1 million which includes $15.7 million of research and development costs associated with purchase accounting related to the Kuprion Acquisition. Substantially all research and development activity was performed internally. Competitive Environment Our markets are competitive and subject to rapid changes in technology.
During 2024, our research and development expenses totaled $63.0 million, which included $3.9 million of research and development costs associated with contingent consideration related to the Kuprion Acquisition. Substantially all research and development activity was performed internally. Competitive Environment Our markets are competitive and subject to rapid changes in technology.
We also care for our employees' health and offer benefits and programs designed to support their physical, mental and financial well-being. Diversity, Equity and Inclusion . We are committed to becoming a more inclusive and diverse organization. We believe diversity, equity and inclusion drive innovation, which in turn allows us to compete effectively.
We also care for our employees' health and offer benefits designed to support their physical, mental and financial well-being, including parental leave, healthcare, life insurance and disability coverage programs. Diversity, Equity and Inclusion ("DE&I") . We believe diversity, equity and inclusion drive innovation, which in turn allows us to compete effectively.
In addition, as climate change and other ESG-related treaties, initiatives and programs are adopted and implemented throughout the world, we expect that this trend of increased regulation will continue in the future and there can be no assurance that future material capital expenditures or incremental operating expenses will not be required in order to ensure compliance.
In addition, as climate change and other ESG-related directives, standards and frameworks are adopted and implemented around the world, we will be required to comply with additional SH&E requirements in the future, and there can be no assurance that future capital expenditures or incremental operating expenses required to ensure compliance will not be material.
We understand that the best workforce comes from thriving communities and accordingly invest in our communities to support them. Through our engagement programs, our employees can connect to volunteering opportunities and nonprofit organizations of their choice which support causes they care about, locally and/or globally, including education, humanitarian relief and minorities.
The Company has a longstanding commitment to social impact by supporting communities in which we operate and encouraging the contributions of our employees. Through our engagement programs, our employees can connect to volunteering opportunities and nonprofit organizations of their choice, supporting causes they care about, locally and/or globally, including education, humanitarian relief and minorities.
We routinely train and educate our employees on workplace safety and security, including by hosting an annual Global Safety Day during which our leaders emphasize the importance of safety through seminars, videos and targeted discussions. As part of our safety program, we track injury and illness rates locally and maintain emergency and disaster recovery plans.
As part of our safety program, we host an annual Global Safety Day, which is designed to raise safety awareness through seminars, videos and targeted discussions. We also track injury and illness rates locally and maintain emergency and disaster recovery plans.
As a specialty chemical company, the success of our business is fundamentally connected to the safety of our employees. To promote worker safety, we use comprehensive management tools, including policies, training requirements, best practices and processes, and product safety standards.
As a specialty chemical company, the success of our business is fundamentally connected to the safety of our employees. To promote worker safety, we are committed to training our workforce on workplace safety and security.
In addition, we conduct regular global employee culture surveys to gauge employees' perception of the Company as a place to work as well as their views of leadership, understanding of our culture, and sense of inclusion.
We also track internal KPIs related to career development and internal promotion, and regularly review talent development and succession plans for our functions and segments. In addition, we conduct regular global employee culture surveys to collect feedback on our employees' experience at the Company as well as their views on leadership, understanding of our culture, and sense of inclusion.
With our focus on innovation and service, key elements of our human capital strategy are the attraction, acquisition and engagement of highly-skilled employees. Accordingly, we offer many training opportunities to cultivate talent, improve targeted skills and facilitate internal mobility to create a high-performing and diverse workforce.
With our focus on innovation and service, key elements of our human capital strategy are the attraction, acquisition and engagement of highly-skilled employees. Accordingly, we invest in creating opportunities to help employees grow and build their career through training, professional development and education programs.
For more information on our workforce prosperity efforts, social and community impact and sustainability goals, see the Sustainability section of our website. Research and Development Innovation is a key element of our culture and critical to our success.
For more information on our workforce prosperity efforts, social and community impact and sustainability goals, see our ESG reports and ESG supplements posted on the Sustainability section of our website. The information included in our ESG reports, ESG supplements or sustainability website is not a part of this 2024 Annual Report and is not incorporated by reference.
Kuprion, Inc. is a developer of next-generation nano-copper technology for the semiconductor, circuit board and electronics assembly markets. 1 Business Segments Our operations are organized into two reportable segments: Electronics and Industrial & Specialty. In 2023, we achieved sales of $2.33 billion, to which our Electronics and Industrial & Specialty segments contributed approximately 61% and 39%, respectively.
The transaction is expected to close in the first quarter of 2025, subject to customary closing conditions and adjustments. 1 Business Segments Our operations are organized into two reportable segments: Electronics and Industrial & Specialty. In 2024, we achieved sales of $2.46 billion, to which our Electronics and Industrial & Specialty segments contributed approximately 64% and 36%, respectively.
Our talent program is based on policies designed to ensure fair hiring practices and prevent discrimination and harassment as well as diversity training on a targeted basis. Throughout 2023, we continued to strengthen our hiring initiatives with a focus on candidates historically underrepresented in our industry, including multiethnic backgrounds.
To support this approach, our talent program is based on policies designed to ensure fair hiring practices and prevent discrimination and harassment, as well as diversity training on a targeted basis. In 2024, we continued on our path toward creating an inclusive workplace and adopted a new DE&I goal, which is to increase gender diversity at management-level globally by 2027.
However, current 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, are resulting in increased pressure for more stringent regulatory control with respect to the chemical industry.
These evolving requirements include, without limitation, increasing levels of product safety, such as chemical composition, packaging and labeling, as well as environmental protection, such as the management, movement and disposal of hazardous substances and the clean-up of contaminated properties.
However, climate-related regulations, including those limiting or taxing greenhouse gas (GHG) emissions, may also provide new opportunities for us. We continue to develop technologies to help our facilities and our customers lower energy consumption, improve efficiency and lower emissions.
Climate-related regulations, including those limiting or taxing greenhouse gas (GHG) emissions, may also provide new business opportunities for our company. Enabling sustainability is a pillar of ESI's strategy and our R&D teams collaborate with our product marketing, regulatory and safety teams to lead the development of our sustainable chemistry and processes.
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ViaForm Distribution Rights - On June 1, 2023, we reacquired the right to market and distribute directly (rather than through our exclusive distributor) our ViaForm ® electrochemical deposition products by terminating a long-standing distribution agreement for $200 million, including $170 million paid at closing and a deferred payment of $30.0 million.
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MGS Transaction - On September 1, 2024, we entered into an agreement to sell our flexographic printing plate business, MacDermid Graphics Solutions, for approximately $325 million. MacDermid Graphics Solutions constitutes substantially all of our Graphics Solutions business within our Industrial & Specialty segment.
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The deferred payment and a receivable of $13.5 million were settled in the fourth quarter of 2023. The receivable was settled with $6.1 million of inventory and $7.4 million cash (which reduced the purchase price paid by the cash received).
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This past year, we focused on reducing lost time injuries ("LTI"), by improving our root cause analysis process and closing time for identified findings. As a result, we were able to reduce our LTI rate by nearly 13% in 2024.
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Following the completion of the transaction, we now manage all aspects of the ViaForm® product line in-house, which we believe will result in a more efficient supply chain and improved customer outcomes for leading semiconductor fabricators.
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In 2024, we increased the number of female employees enrolled in our High Potential (HiPo) leadership program, facilitated internal mobility and implemented other initiatives geared toward candidates historically underrepresented in our industry.
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Kuprion Acquisition - On May 19, 2023, we completed the Kuprion Acquisition for $15.9 million, net of cash with potential additional payments in various installments, which are not to exceed $259 million in aggregate, to be made upon the achievement of certain milestones associated with product qualification and revenue through December 31, 2030.
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In addition, we promote further employee connection and engagement through a variety of initiatives, including our employee resource groups (ERGs), which allow discussions of common interest across all businesses and geographies, and which in turn helps us attract and retain diverse candidates. Talent Retention and Development .
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In the first quarter of 2023, operational responsibility of our Films business was transferred from our Graphics Solutions business within our Industrial & Specialty segment to our Circuitry Solutions business in our Electronics segment.
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In 2024, we launched our new ESI Learning Hub, which offers valuable resources and tools to our employees, such as our KITS (Knowledge, Insights & Training Series), an extensive virtual library of topics related to leadership, culture and other important matters at ESI.
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In addition, we transferred certain product lines between our Assembly Solutions business and our Semiconductor Solutions business, both of which are part of our Electronics segment, to align more closely with our current business structure. Historical information has been reclassified to reflect these changes for all periods presented in this 2023 Annual Report.
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Government Regulations As a global specialty chemicals company, we are subject to various, complex and evolving federal, state, local, and international laws and regulations relating to the development, manufacture, sale, and distribution of our products across the countries in which we operate. These regulations include, but are not limited to, those relating to safety, health and environmental (SH&E) matters.
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This led to diverse candidate slates for approximately 90% of our U.S.-based roles. Within the Company, we focused on our female representation in our High Potential (HiPo) leadership program to increase the number of female leaders at ESI.
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In terms of GHG emissions, we develop technologies to help our facilities and our customers lower energy consumption and improve efficiency. We also offer a variety of solutions that enable clean technology and as such, may benefit from the upcoming transition to a lower carbon economy.
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In addition, our newly-created employee resource groups (ERGs), with the assistance of their executive sponsors, support diverse employees and aim to raise awareness of different cultures within the workplace, cultivate diversity as a business strength and support ESI’s talent acquisition strategy to attract and retain diverse candidates. Talent Retention and Development .
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We track internal KPIs related to career development and internal promotion, and regularly review talent development and succession plans for each of our functions and segments to identify and develop a pipeline of talent to maintain business operations.
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The ESI Foundation further brings our purpose to life by matching employee donations to qualified charitable organizations in the communities where our employees live and work.
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In early 2023, we published our latest Environmental, Social and Governance (ESG) report in which we describe, among other ESG initiatives and data, our progress towards our sustainability goals, which include improving occupational health and safety performance and increasing diversity, equity and inclusion.
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Government Regulations As a global manufacturer and distributor of specialty chemicals, our operations are, or may in the future be, subject to extensive domestic and foreign laws, regulations, rules and ordinances relating to safety, health and environmental matters (or SH&E requirements), including product safety, worker health and safety and environmental protection matters, such as discharges of pollutants, the management, handling, generation, emission, release, discharge, treatment, storage and disposal of hazardous substances and wastes and the cleanup of contaminated properties.
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As a result, in the future we may incur significant costs, including cleanup costs for contaminated sites and related fines or penalties, and face third-party claims for property or natural resource damage or personal injuries relating to past or future violations or liabilities.
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Available Information Our internet website address is www.elementsolutionsinc.com .

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFurther, as climate change and other global environmental concerns increase, changes in environmental and climate laws or regulations, in the U.S. and throughout the world, could lead to multiple disparate standards, in the U.S. and in foreign countries in which we operate, that may change over time, which could result in significant revisions to our methodologies for reporting ESG data, previously reported ESG metrics, our current goals, reported progress in achieving such goals, or our ability to achieve such goals in the future.
Biggest changeAs the interpretation and guidance related to these new requirements evolve over time, significant revisions may need to be made to our methodologies for reporting ESG data, previously reported ESG metrics, our existing sustainability goals, reported progress in achieving such goals, or our ability to achieve them in the future.
The availability and prices of raw materials may be subject to curtailment or change due to, among other things, the financial stability of our suppliers, new laws or regulations, protectionist nationalistic trade policies and practices, changes in exchange rates and worldwide price levels.
The availability and prices of raw materials may be subject to curtailment or change due to, among other things, the financial stability of our suppliers, new laws and regulations, protectionist nationalistic trade policies and practices, changes in exchange rates and worldwide price levels.
Other indicators that may signal that an asset has become impaired include changes in our strategy for our overall business or use of acquired assets, unexpected negative industry or economic trends, decreased market 18 capitalization relative to net book values, prolonged decline in the value of our stock price, unanticipated competitive activities, change in consumer demand, loss of key personnel and/or acts by governments and judicial courts.
Other indicators that may signal that an asset has become impaired include changes in our strategy for our overall business or use of acquired assets, unexpected negative industry or economic trends, decreased market capitalization relative to net book values, prolonged decline in the value of our stock price, unanticipated competitive activities, change in consumer demand, loss of key personnel and/or acts by governments and judicial courts.
Our Credit Agreement, the indenture governing our 3.875% USD Notes due 2028 and other debt agreements governing our outstanding debt contain restrictive clauses, which may limit our operational and financial flexibility, including, among other things, our ability to grant liens, pay cash dividends, enter new lines of business, repurchase our shares of common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions.
Our Credit Agreement, the indenture governing our 3.875% USD Notes due 2028 and other debt agreements contain restrictive clauses, which may limit our operational and financial flexibility, including, among other things, our ability to grant liens, pay cash dividends, enter new lines of business, repurchase our shares of common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions.
Paying dividends will depend upon many factors, including our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements and access to capital markets, covenants associated with our Credit Agreement, the indenture governing our 3.875% USD Notes due 2028 and/or other debt obligations, contractual, legal, tax and 20 regulatory restrictions and other factors that the Board may deem relevant.
Paying dividends will depend upon many factors, including our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements and access to capital markets, covenants associated with our Credit Agreement, the indenture governing our 3.875% USD Notes due 2028 and/or other debt obligations, contractual, legal, tax and regulatory restrictions and other factors that the Board may deem relevant.
After we develop a product, we must be able to manufacture appropriate volumes quickly while also managing costs and maintaining the high-quality level that our customers expect. Any delay in the development, forecast, production and/or marketing of a new product could result in us not being among the first to market which could further harm our competitive position.
After we develop a product, we must be able to manufacture appropriate volumes quickly while managing costs and maintaining the high-quality level that our customers expect. Any delay in the development, forecast, production and/or marketing of a new product could result in us not being among the first to market which could further harm our competitive position.
Our offshore business produces water-based hydraulic control fluids for major oil companies and drilling contractors to be used for potentially hazardous offshore deepwater production and drilling applications. Offshore deepwater oil production and drilling 15 are subject to hazards that include blowouts, explosions, fires, collisions, capsizing, sinking and damage or loss to pipeline, subsea or other facilities from severe weather conditions.
Our offshore business produces water-based hydraulic control fluids for major oil companies and drilling contractors to be used for potentially hazardous offshore deepwater production and drilling applications. Offshore deepwater oil production and drilling are subject to hazards that include blowouts, explosions, fires, collisions, capsizing, sinking and damage or loss to pipeline, subsea or other facilities from severe weather conditions.
Additional states, as well as foreign jurisdictions, have enacted or are proposing similar data protection regimes, resulting in a rapidly evolving and uncertain governing landscape. Complying with these various laws and regulations is difficult and could require us to incur substantial costs or change our business practices in a manner adverse to our business.
Additional states, as well as foreign jurisdictions, have enacted or are proposing similar data protection regimes, resulting in a rapidly evolving and uncertain governing 16 landscape. Complying with these various laws and regulations is difficult and could require us to incur substantial costs or change our business practices in a manner adverse to our business.
Our reliance on certain key customers, contract manufacturers and suppliers could adversely affect our overall sales and profitability. Although our business is not materially dependent upon any single customer, the loss of one or more key customers may impair our results of operations for the affected earnings periods.
Our reliance on certain key customers, contract manufacturers, suppliers and distributors could adversely affect our overall sales and profitability. Although our business is not materially dependent upon any single customer, the loss of one or more key customers may impair our results of operations for the affected earnings periods.
Certain organizations, which provide corporate governance and other risk information to stockholders, have developed, and others may in the future develop, scores and ratings to evaluate companies based upon their ESG metrics and disclosures. Certain investors, particularly institutional investors, use these scores to benchmark companies and make investment and/or voting decisions.
Certain organizations, which provide corporate governance and risk information to stockholders, have developed, and others may in the future develop, scores and ratings to evaluate companies based upon their ESG metrics and disclosures. Certain investors, particularly institutional investors, use these scores to benchmark companies and make investment and/or voting decisions.
Further, in the past, market fluctuations and price declines in a company's stock have led to securities class action litigation, which could have a substantial cost and divert management time and resources regardless of their outcome. Future issuances or sales of our common stock may depress the price of our common stock.
Further, in the past, market fluctuations and price declines in a company's stock have led to securities class action litigation, which could have a substantial cost and divert management time and resources regardless of their outcome. Future issuances or sales of our common stock or preferred stock may depress the price of our common stock.
We are likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any material changes and material weaknesses in those internal controls. We have in the past experienced, and in the future may experience again, material weaknesses and potential problems in implementing and maintaining adequate internal controls as required by the SEC.
We are likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any material changes and material weaknesses in those internal controls. We have in the past experienced, and in the future may experience again, material weaknesses and potential problems in implementing and maintaining adequate internal controls as 20 required by the SEC.
Although the majority of our relevant products are currently subject to automatic approval and do not require government licenses to be exported to certain jurisdictions or persons, this may change in the future if these laws and regulations are amended or if new laws or regulations are adopted.
Although the majority of our relevant products are currently subject to automatic approval and do not require government licenses to be exported to certain jurisdictions, entities or persons, this may change in the future if these laws and regulations are amended or if new laws or regulations are adopted.
Our operations are conducted almost entirely through our subsidiaries, and our ability to generate cash to meet our obligations or to pay dividends, if any, is highly dependent on the earnings of, and receipt of funds from, our subsidiaries through dividends or intercompany loans, in particular from MacDermid, Incorporated.
Our operations are conducted almost entirely through our subsidiaries, and our ability to generate cash to meet our debt obligations or to pay dividends, if any, is highly dependent on the earnings of, and receipt of funds from, our subsidiaries through dividends or intercompany loans, in particular from MacDermid, Incorporated.
As a result, we must develop new products and services that offer distinct value to our customers in order to compete successfully. We seek to provide products tailored to the often-unique and evolving needs of our customers which require an ongoing level of innovation.
As a result, we must develop new products and services that offer distinct value to our customers in order to compete successfully. We seek to provide products tailored to the often-unique needs of our customers which require an ongoing level of innovation.
We depend on information technology systems throughout the Company to, among other functions, control our manufacturing processes, process orders and bill, collect and make payments, interact with customers and suppliers, manage inventory and otherwise conduct business.
We depend on information technology systems throughout the Company to, among other functions, control our manufacturing processes, process orders and bill, collect and make payments, interact with customers and suppliers, manage inventory and 18 otherwise conduct business.
As a result, we face certain risks inherent in international trade which may reduce our sales and harm our business, including: • political uncertainties, war, terrorism and other instability risks and their impact on the global economy, market conditions and supply chain operations, including risks caused by the ongoing war between Russia and Ukraine, the Israel-Hamas conflict and other hostilities in the Middle East and the increased tariffs and trade restrictions between China and the U.S.; • changes in global or local economic conditions, including inflation, hyperinflation, fluctuations in interest rates and other increasing price levels in certain sectors, such as energy, impacting availability and cost of goods and services; • fluctuations in currency values and currency exchange rates for countries in, or with which, we conduct business; • changes or uncertainty in international, national or local legal environments, including tax, data handling, privacy, intellectual property, consumer protection, environmental and antitrust laws; • adverse tax consequences, including as a result of changes in taxation and regulatory requirements, transfer pricing practices involving our foreign operations, and additional withholding taxes or other taxes on foreign income; • foreign exchange controls or other currency restrictions and limitation on the movement of funds, potentially leading to the inability to readily repatriate earnings from foreign operations effectively; • natural disasters, extreme weather events, regional or global health concerns, such as the COVID 19 pandemic; • establishing and maintaining relationships with local distributors and OEMs; • governmental regulations and/or sanctions affecting the import and export of products, including global trade barriers, additional taxes, tariff increases, cash repatriation restrictions, retaliations and boycotts between the U.S. and other countries, including Russia and China; • import and export control and licensing requirements; risk of non-compliance with the Foreign Corrupt Practices Act of 1977, U.S. export control and trade sanction laws, SEC rules regarding conflict minerals sourcing and other similar anti-corruption and international trade laws or regulations in other jurisdictions; • greater difficulty in safeguarding intellectual property than in the U.S.; • difficulty in staffing and managing geographically diverse operations and ensuring compliance with our policies and procedures; and • challenges in maintaining an effective internal control environment, including language and cultural differences, varying levels of GAAP expertise and internal control over financial reporting.
As a result, we face certain risks inherent in international trade which may reduce our sales and harm our business, including: • political uncertainties, war, terrorism and other instability risks and their impact on the global economy, market conditions and supply chain operations, including risks caused by the war in Ukraine, the Israel-Hamas conflict and other hostilities in the Middle East, and the increased tariffs and trade restrictions between China and the U.S.; • changes in global or local economic conditions, including inflation, hyperinflation, fluctuations in interest rates and other increasing price levels in certain sectors, such as energy, impacting availability and cost of goods and services; • fluctuations in currency values and currency exchange rates for countries in, or with which, we conduct business; • changes or uncertainty in international, national or local legal environments, including tax, data handling, privacy, intellectual property, consumer protection, environmental and antitrust laws; • adverse tax consequences, including as a result of changes in taxation and regulatory requirements, transfer pricing practices involving our foreign operations, and additional withholding taxes or other taxes on foreign income; • foreign exchange controls or other currency restrictions and limitation on the movement of funds, potentially leading to the inability to readily repatriate earnings from foreign operations effectively; • natural disasters, extreme weather events, regional or global health concerns, such as outbreaks of COVID 19 or its variants; • establishing and maintaining relationships with local distributors and OEMs; • governmental regulations and/or sanctions affecting the import and export of products, including global trade barriers, additional taxes, tariff increases, cash repatriation restrictions, retaliations and boycotts between the U.S. and other countries, including Mexico, Russia and China; • import and export control and licensing requirements; risk of non-compliance with the Foreign Corrupt Practices Act of 1977, U.S. export control and trade sanction laws, SEC rules regarding conflict minerals sourcing and other similar anti-corruption and international trade laws or regulations in other jurisdictions; • greater difficulty in safeguarding intellectual property than in the U.S.; • difficulty in staffing and managing geographically diverse operations and ensuring compliance with our policies and procedures; and • challenges in maintaining an effective internal control environment, including language and cultural differences, varying levels of GAAP expertise and internal control over financial reporting.
Section 203 could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us, which may negatively affect our stock price. Item 1B. Unresolved Staff Comments None.
Section 203 could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us, which may negatively affect our stock price. Item 1B. Unresolved Staff Comments None. 21
Among other impacts, such events could limit our ability to access the quantity and quality of raw materials we need and/or increase the price of these materials as worldwide supply and demand may be seriously impacted.
Among other impacts, these events could limit our ability to access the quantity and quality of raw materials we need and/or increase the price of these materials as worldwide supply and demand may be seriously impacted.
As a result, our success depends to a significant degree on the skills, experience and efforts of our executive management and other key personnel as well as their ability to provide uninterrupted leadership and direction.
As a result, our success depends to a significant degree on the skills, experience and efforts of our executive management and other key personnel as well as their ability to provide uninterrupted leadership and strategic direction.
In turn, these changes could materially alter our market share and reputation, or otherwise have a material adverse effect on our business, financial condition and results of operations. In addition, we have incurred, are incurring and will incur in the future, costs and capital expenditures to comply with environmental, health and safety laws and regulations.
Any of these changes could materially alter our market share and reputation, or otherwise have a material adverse effect on our business, financial condition and results of operations. In addition, we have incurred, are incurring and will incur in the future, costs and capital expenditures to comply with environmental, health and safety laws and regulations.
For example, w e have several product lines that rely on lead-based solder and many others that historically did so. Legal claims have been brought alleging harmful exposures or contamination as a result of lead-based solder, and it is possible that we may face additional claims in the future.
For example, we have several product lines that rely on lead-based solder and many others that historically did so. Legal claims have been brought alleging harmful exposures or contamination as a result of lead-based solder, and it is possible that we may face additional claims in the future.
Item 1A. Risk Factors The following discussion of "risk factors" identifies the material factors that may adversely affect our business, financial condition or results of operations. Potential investors should carefully consider these risks and the other information in this 2023 Annual Report when evaluating our business.
Item 1A. Risk Factors The following discussion of "risk factors" identifies the material factors that may adversely affect our business, financial condition or results of operations. Potential investors should carefully consider these risks and the other information in this 2024 Annual Report when evaluating our business.
Although our Credit Agreement and the indenture governing our 3.875% USD Notes due 2028 contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and indebtedness incurred in compliance with these restrictions could be substantial.
Although our Credit Agreement and the indenture governing our 3.875% USD Notes due 2028 contain restrictions with respect to the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and indebtedness incurred in compliance with these restrictions could be substantial.
Our products and manufacturing processes are also subject to numerous regulations and ongoing reviews by certain governmental authorities.
Our products and manufacturing processes are also subject to numerous ongoing reviews by certain governmental authorities.
Any breaches or compromises of data, and/or misappropriation of information resulting from such disruptions could result in violation of privacy and other laws, litigation, fines, negative publicity, loss of investor confidence, lost sales, business delays, indemnity obligations and/or material costs not covered by insurance, any of which could have a material adverse effect on our business, financial condition or results of operations.
Any such breaches or compromises of data, and/or misappropriation of information could result in violation of privacy and other laws, litigation, fines, negative publicity, loss of investor confidence, lost sales, business delays, indemnity obligations and/or material costs not covered by insurance, any of which could have a material adverse effect on our business, financial condition or results of operations.
For example, several countries where we do business have announced plans to implement global minimum tax regimes based on the Organization for Economic Cooperation and Development's Anti-Base Erosion and Profit Shifting Project.
For example, several countries where we do business have implemented or announced plans to implement global minimum tax regimes based on the Organization for Economic Cooperation and Development's Anti-Base Erosion and Profit Shifting Project.
In this rapidly evolving ESG disclosure context, we may face reputational risk in the event we don't successfully execute our ESG strategy and/or if our ESG disclosures do not meet the expected standards or requirements set by our constituencies.
In this rapidly evolving ESG disclosure context, we may face reputational risk if we don't successfully execute our ESG strategy and/or if our ESG disclosures do not meet the standards or requirements set by our constituencies.
W e are also currently involved in various environmental investigations due to historic operations. Liability under some environmental laws relating to contaminated sites can be joint and several and imposed retroactively, regardless of fault or the legality of the activities that gave rise to the contamination.
We are also currently involved in various environmental investigations due to historic operations. Liability under some environmental laws relating to contaminated sites can be joint and several and imposed retroactively, regardless of fault or the legality of the activities that gave rise to the contamination.
Market trends, competitive pressures, commoditization of products, increased component or shipping costs, regulatory conditions and other factors may also result in reductions in revenue or pressure on the gross profit margins in a given period.
Market trends, competitive pressures, commoditization of products, increased component or shipping costs, increased or prolonged periods of inflation, regulatory conditions and other factors may also result in reductions in revenue or pressure on the gross profit margins in a given period.
Any significant indebtedness incurred by us or our subsidiaries could have the following material consequences: • require us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund acquisitions, working capital, capital expenditures, dividends, research and development efforts and other general corporate purposes; • expose us to the risk of increased interest rates as certain of our borrowings include instruments with variable rates of interest; • increase our cost of borrowing; • increase our vulnerability to general adverse economic and industry conditions; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and • place us at a competitive disadvantage compared to less-leveraged competitors or competitors with comparable debt governed by more favorable terms.
Any significant indebtedness incurred by us or our subsidiaries could have the following material consequences: • require us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund acquisitions, working capital, capital expenditures, dividends, research and development efforts and other general corporate purposes; • expose us to the risk of increased interest rates as certain of our borrowings include instruments with variable rates of interest; • downgrade of our credit rating, which would increase our cost of borrowing and make it more difficult for us to raise capital in the future; • increase our vulnerability to general adverse economic and industry conditions; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and • place us at a competitive disadvantage compared to less-leveraged competitors or competitors with comparable debt governed by more favorable terms.
Higher commodity and energy prices could result from volatility caused by market fluctuations, supply and demand, currency fluctuations, production and transportation disruptions, climate change and weather conditions and other world events.
In addition, higher commodity, shipping, transportation and energy prices could result from volatility caused by market fluctuations, supply and demand, currency fluctuations, production and transportation disruptions, climate change and weather conditions and other world events.
As we upgrade or change systems, we may also experience interruptions in service, loss of data or reduced functionality and other unforeseen material issues, which could adversely impact our ability to provide quotes, receive and fulfill customer orders and otherwise run our business in a timely manner. As a result, our results of operations could be adversely affected.
As we upgrade or change systems, we may also experience interruptions in service, loss of data or reduced functionality and other unforeseen material issues, which could adversely impact our ability to provide quotes, receive and fulfill customer orders and otherwise run our business in a timely manner.
However, a large portion of our net sales (approximately 75% in 2023) are generated from our non-U.S. operations, which means that we have net sales, substantial assets, liabilities and costs denominated in currencies other than the U.S. dollar. To prepare our Consolidated Financial Statements, we must translate those sales, assets, liabilities and expenses into U.S. dollars at then-applicable exchange rates.
However, a large portion of our net sales (approximately 77% in 2024) are generated by our non-U.S. operations, which means that we have net sales, substantial assets, liabilities and costs denominated in currencies other than the U.S. dollar. To prepare our Consolidated Financial Statements, we must translate those sales, assets, liabilities and expenses into U.S. dollars at then-applicable exchange rates.
All of these regulations and these types of changes in our regulatory environment, particularly in, but not limited to, the U.S., the E.U. and China, may require us to re-design 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.
Any of these regulations and changes in our regulatory environment, particularly in, but not limited to, the U.S., the E.U. and China, may require significant resources and data management systems and led us to re-design 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.
Global Regulations Changes in our effective tax rate, tax cost and tax liabilities could adversely affect our financial condition, results of operations and liquidity. In 2023, approximately 75% of our net sales were generated outside of the U.S.
Global Regulations Changes in our effective tax rate, tax cost and tax liabilities could adversely affect our financial condition, results of operations and liquidity. In 2024, approximately 77% of our net sales were generated outside of the U.S.
Decline in the stock price of our common stock may also make it more difficult for us to finance acquisitions with shares of common stock and/or sell additional equity or equity-related securities in future offerings at a time and price we deem necessary or appropriate.
In turn, decline in our stock price may make it more difficult for us to finance acquisitions with shares of common stock and/or sell additional equity or equity-related securities in future offerings at a time and price we deem necessary or appropriate; which all may further depress the price of our common stock.
We have established policies and procedures to assist with our compliance with Economic Sanctions Laws, and we believe we do not unlawfully conduct business in any sanctioned countries.
We have established policies and procedures to support our compliance with Economic Sanctions Laws, and we believe we do not unlawfully conduct business in any sanctioned or restricted countries.
At December 31, 2023, we had $1.15 billion outstanding under the term loans and full availability of our unused borrowing capacity of $369 million, net of letters of credit, under the revolving facility. We and our subsidiaries may incur significant additional indebtedness in the future.
At December 31, 2024, we had $1.04 billion outstanding under the term loans and full availability of our unused borrowing capacity of $368 million, net of letters of credit, under the revolving facility. We and our subsidiaries may incur significant additional indebtedness in the future.
Our products are manufactured, formulated, distributed and sold globally. In 2023, approximately 75% of our net sales were generated from non-U.S. operations.
Our products are manufactured, formulated, distributed and sold globally. In 2024, approximately 77% of our net sales were generated from non-U.S. operations.
Our Credit Agreement provides for senior secured credit facilities in an initial aggregate principal amount of $1.53 billion, consisting of term loans B-2 of $1.15 billion maturing in 2030 and a revolving facility of $375 million maturing in 2027.
Our Credit Agreement provides for senior secured credit facilities in an initial aggregate principal amount of $1.42 billion, consisting of term loans B-3 of $1.04 billion maturing in 2030 and a revolving facility of $375 million maturing in 2027.
For example, the mobile device market, particularly smartphones and tablets, is characterized by rapidly changing market conditions, frequent product introductions and intense competition based on features and price; all of which could impact our sale volumes and margins.
For example, the electronics end markets, such as mobile devices, particularly smartphones and tablets, is characterized by rapidly changing market conditions, frequent product introductions and intense competition based on features and price; all of which could impact our sale volumes and margins.
Our Board of Directors is authorized to create and issue one or more series of preferred stock, and to determine the number of shares constituting the series as well as the designations, powers, preferences, rights, qualifications, limitations and restrictions of each series, including dividend rights, conversion or exchange rights, voting rights, redemption rights and terms and liquidation preferences, without stockholder approval.
In addition, our Board of Directors is authorized to issue preferred stock in one or more series and may determine the terms of such future preferred stock offerings without stockholder approval, such as the number of shares constituting each series as well as their respective designations, powers, preferences, rights, qualifications, limitations and restrictions, including dividend rights, conversion or exchange rights, voting rights, redemption rights and terms, and liquidation preferences.
If we are unable to arrange for sufficient production capacity among our suppliers or contract manufacturers, or if our suppliers or contract manufacturers encounter production, quality, financial or other difficulties (including due to the COVID-19 pandemic, labor or geopolitical disturbances or natural disasters), we may be unable to meet our customers' demands.
If we are unable to arrange for sufficient production capacity among our suppliers or contract manufacturers, or if our suppliers or contract manufacturers encounter production, quality, financial or other difficulties (for example, labor or geopolitical disturbances or natural disasters), we may be unable to meet our customers' demands.
Failure to comply with Economic Sanctions Laws, or allegations of such failure, could lead to investigations and/or actions being taken against us which could materially and adversely affect our reputation and have a material adverse effect on our business, financial condition or results of operations. 16 Changes in data privacy and data protection laws and regulations, or any failure to comply with such laws and regulations, could adversely impact our business.
Failure to comply with Economic Sanctions Laws, or allegations of such failure, could lead to investigations and/or actions being taken against us which could materially and adversely affect our reputation and have a material adverse effect on our business, financial condition or results of operations.
Also, our suppliers or contract manufacturers may use and/or generate hazardous materials in connection with producing 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 or storage of our products or raw materials or the disposal of related wastes.
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 or storage of our products or raw materials or the disposal of related wastes.
Material cybersecurity-related events may materially disrupt our operations and harm our reputation and results of operations. Information technology security threats, including security breaches, computer malware, cyber-attacks and other unauthorized access attempts are increasing, in both frequency and sophistication.
As a result, our competitive position and results of operations could be adversely affected. Material cybersecurity-related events may materially disrupt our operations and harm our reputation and results of operations. Information technology security threats, including security breaches, computer malware, cyber-attacks and other unauthorized access attempts are increasing, in both frequency and sophistication.
Such regulations include the European Union's REACH (Registration, Evaluation, Authorization, and Restriction of Chemicals), which has been a continuing source of compliance obligations and restrictions on certain chemicals, REACH-like regimes, which have now been adopted in several other countries, the E.U. Poison Center Notification (PCN) and the U.S. Toxic Substances Control Act (TSCA).
Such regulations include the European Union's REACH (Registration, Evaluation, Authorization, and Restriction of Chemicals), which mandate compliance obligations and restrictions on certain chemicals; REACH-like regimes, which have now been adopted in several other countries; the E.U. Poison Center Notification (PCN); the U.S.
If we fail to comply with the Credit Agreement covenants, we would be in default under our term loan and revolving credit facilities and, unless we were to 17 obtain waivers from our lenders, the maturity of our outstanding debt could be accelerated, which could adversely impact our results of operations, financial position and cash flows.
If we fail to comply with the Credit Agreement covenants, we would be in default under our term loan and revolving credit facilities and, unless we were to obtain waivers from our lenders, the maturity of our outstanding debt could be accelerated, which could adversely impact our results of operations, financial position and cash flows. 17 We and our subsidiaries may incur significant additional indebtedness in the future, which would result in additional restrictions upon our business and impact our financial condition.
To successfully execute this strategy, we must emphasize the aspects of our core business where demand remains strong, identify and capitalize on organic growth, and innovate by developing new products and services that will enable us to expand beyond our existing technology categories.
To successfully execute this strategy, we must gauge the direction of the commercial and technological progress in our key end-markets, emphasize the aspects of our core business where demand remains strong, identify and capitalize on organic growth, and innovate by developing new products in such changing markets and services that will enable us to expand beyond our existing technology categories.
Our products are subject to numerous, complex government regulations, and compliance with these regulations could require us to incur additional costs or to reformulate or discontinue certain of our products.
Our products and operations are subject to numerous and increasingly complex government regulations, and compliance with these regulations could require us to incur additional costs or to reformulate or discontinue certain of our products. Our products are subject to numerous and increasingly complex federal, state, local and foreign laws and regulations.
To the extent available, we maintain insurance coverage that we believe is customary in this industry. Such insurance does not, however, provide coverage for all liabilities, and there can be no assurance that our insurance coverage will be adequate to cover claims that may arise, or that we will be able to maintain adequate insurance at rates we consider reasonable.
Such insurance does not, however, provide coverage for all liabilities, and there can be no 15 assurance that our insurance coverage will be adequate to cover claims that may arise, or that we will be able to maintain adequate insurance at rates we consider reasonable.
State Department monitors trade restrictions and economic sanctions and impose penalties upon U.S. persons and entities and, in some instances, non-U.S. entities, for conducting activities or transacting business with certain countries, such as recently Russia and Belarus in the context of the Russia-Ukraine conflict as well as governments, entities, or individuals subject to Economic Sanctions Laws.
For example, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. State Department monitors trade restrictions and economic sanctions and impose penalties upon U.S. persons and entities and, in some instances, non-U.S. entities, for conducting activities or transacting business with certain countries as well as governments, entities, or individuals subject to Economic Sanctions Laws.
Passing along these costs to our customers by increasing our prices could result in long-term sales declines or loss of market share if our customers were to find alternative suppliers or choose to reformulate their consumer products to use fewer ingredients which could in turn have an adverse long-term impact on our business, financial condition or results of operations.
Passing along these costs to our customers by increasing our prices could result in long-term sales declines or loss of market share if our customers were to find alternative suppliers or choose to reformulate their products to use fewer ingredients.
Specifically, at December 31, 2023, the following equity-based awards were outstanding: • 3,872,289 RSUs with each RSU representing a contingent right to receive one share of our common stock or, for performance-based RSUs, multiple shares depending upon the underlying performance metrics and our performance during the applicable performance period; and • 384,685 options which, once vested, are exercisable to purchase shares of our common stock, on a one-for-one basis, at any time at the option of the holder.
At December 31, 2024, the aggregate equity-based awards outstanding under both plans were as follows: • 3,939,584 RSUs with each RSU representing a contingent right to receive one share of our common stock or, for performance-based RSUs, multiple shares depending upon the underlying performance metrics and our performance during the applicable performance period; and • 367,704 options which are all vested and exercisable at any time at the option of the holder to purchase shares of our common stock, on a one-for-one basis.
There can be no assurance that our distributors will focus adequate resources on selling our products to end users, or will be successful in selling our products, which could materially adversely affect our business and results of operations. We may not realize the anticipated benefits of acquisitions or divestitures which may adversely affect our existing businesses, reputation and financial condition.
There can be no assurance that our distributors will focus adequate resources on selling our products to end users, or will be successful in selling our products, which could materially adversely affect our business, financial condition or results of operations.
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 research and development, manufacturing, formulating and packaging activities involve the use of hazardous materials and the generation of hazardous waste. We cannot eliminate the risk of accidental contamination, discharge or injury resulting from those materials.
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 research and development, manufacturing, formulating and packaging activities involve the use of dangerous, toxic or hazardous materials and the generation of hazardous waste.
As we are dependent on the continued operation of our production facilities (including third-party manufacturing on a tolling basis), the loss or shutdown of operations over an extended period could have a material adverse effect on our financial condition or results of operations. 14 Because our operations currently use and generate, and have historically used and generated, hazardous materials and waste, we are subject to regulatory oversight and investigation, remediation, and monitoring obligations at our current and former Superfund sites, as well as third-party disposal sites, under federal laws and their state and local analogues, including the Resource Conservation and Recovery Act (RCRA), the Clean Water Act, the Clean Air Act, and the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and analogous foreign laws.
Because our operations currently use and generate, and have historically used and generated, hazardous materials and waste, we are subject to regulatory oversight and investigation, remediation, and monitoring obligations at our current and former Superfund sites, as well as third-party disposal sites, under federal laws and their state and local analogues, including the Resource Conservation and Recovery Act (RCRA), the Clean Water Act, the Clean Air Act, and the Comprehensive 14 Environmental Response, Compensation and Liability Act (CERCLA) and analogous foreign laws.
Regardless of their merit, infringement claims can be time-consuming, divert the time and attention of our management and technical personnel, and result in material litigation costs. 13 Finally, our exposure to risks associated with the use of intellectual property may increase as a result of acquisitions, as we would have an unavoidable lower level of visibility into the development process of any newly acquired technologies and the steps taken to safeguard against the risks of infringing the rights of third parties.
Finally, our exposure to risks associated with the use of intellectual property may increase as a result of acquisitions, as we would have an unavoidable lower level of visibility into the development process of any newly acquired technologies and the steps taken to safeguard against the risks of infringing the rights of third parties.
Current or future insurance arrangements may not provide protection for costs that may arise from such events, particularly if these are catastrophic in nature or occur in combination.
Current or future business continuity plans and insurance arrangements may not provide protection against property damage, loss of business or increased costs that may arise from such events, particularly if these are catastrophic in nature or occur in combination.
Foreign Corrupt Practices Act of 1977, the United Kingdom Bribery Act 2010 and similar anti-bribery laws in other jurisdictions which generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business.
Failure to comply with anti-corruption laws could subject us to penalties and damage our reputation. The U.S. Foreign Corrupt Practices Act of 1977, the United Kingdom Bribery Act 2010 and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business or for other unfair advantages.
In particular, Section 203 of the Delaware General Corporation Law imposes certain restrictions on merger, business combinations and other transactions between us and holders of 15% or more of our common stock.
We are governed by Delaware law, the application of which may have the effect of deterring hostile takeover attempts or a change in control. In particular, Section 203 of the Delaware General Corporation Law imposes certain restrictions on merger, business combinations and other transactions between us and holders of 15% or more of our common stock.
We have completed several acquisitions and divestitures and may in the future pursue additional opportunistic strategic transactions. Our ability to achieve the anticipated benefits of acquisitions or divestitures depends on many factors, including our ability to negotiate favorable terms, close such transactions in a timely and cost-effective manner and successfully integrate any businesses we acquire.
Our ability to achieve the anticipated benefits of acquisitions or divestitures depends on many factors, including our ability to negotiate favorable terms, close such transactions in a timely and cost-effective manner and successfully integrate any businesses we acquire. With respect to acquisitions, we may be exposed to successor liability relating to actions taken before the acquisition date.
All these factors, consumer trends and industry characteristics may impact the demand for our products which may cause significant fluctuations in our results of operations and adversely affect our financial condition and cash flow. 12 Fluctuations in the supply and prices of raw materials and in other costs may negatively impact our business, financial condition or results of operations.
Customers also have found, and may continue to find, alternative materials or processes, which no longer require our products. 12 All these factors, consumer trends and industry characteristics may impact the demand for our products which may cause significant fluctuations in our results of operations and adversely affect our financial condition and cash flow.
Additionally, we rely in some cases upon unpatented proprietary manufacturing expertise, continuing technological innovation and other trade secrets to develop and maintain our competitive position.
The laws of other countries may not protect our intellectual property rights to the same extent as the laws of the U.S. Additionally, we rely in some cases upon unpatented proprietary manufacturing expertise, continuing technological innovation and other trade secrets to develop and maintain our competitive position.
For example, our Board could, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power of our common stockholders or have certain anti-takeover effects. There can be no assurance that we will continue to declare dividends. Future dividends are subject to declaration by our Board of Directors in its sole discretion.
The issuance of preferred stock could affect the rights of our common stockholders or reduce the value of shares of common stock they hold. There can be no assurance that we will continue to declare dividends. Future dividends are subject to declaration by our Board of Directors in its sole discretion.
Under GAAP, we review our intangible assets and long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. For example, considering Graphics Solutions' lower than expected results, we conducted an interim impairment test on this reporting unit in the third quarter of 2023 which resulted in an impairment charge of $80.0 million.
For example, considering Graphics Solutions' lower than expected results, we conducted an interim impairment test on this reporting unit in the third quarter of 2023 which resulted in an impairment charge of $80.0 million.
Evolving environmental and climate laws or regulations could also lead to new or additional investment in product designs, incremental operating expenses and increased environmental expenditures in order to ensure compliance.
Evolving environmental and climate laws or regulations could also lead to new or additional investment in product designs, incremental operating expenses and increased environmental expenditures in order to ensure compliance. We expect these ESG disclosure and regulatory trends to continue, and the ultimate cost related to reporting and, where required, compliance could be material.
Our products are subject to numerous, complex federal, state, local and foreign customs regulations, imports and international trade laws, export control, antitrust laws, environmental and chemicals manufacturing, global climate change, health and safety requirements and zoning and occupancy laws that regulate manufacturers generally or, more particularly, govern the importation, promotion and sale of our products, the operation of our production and warehouse facilities and our relationship with our customers, suppliers, employees and competitors.
This legal framework includes customs regulations, imports and international trade laws, export control, antitrust laws, environmental and chemicals manufacturing, global climate change, health and safety requirements and zoning and occupancy laws; all of which impact the manufacture, import, export, promotion and sale of our products, the operation of our production and warehouse facilities, and our relationship with our customers, suppliers, employees and competitors.
There can be no assurance that we will be able to maintain our existing debt ratings, and failure to do so could adversely affect our cost of funds, liquidity and access to capital markets. Changes in interest rates and exchange rates would increase the cost of servicing our debt and impact our results of operations and financial condition.
There can be no assurance that we will be able to maintain our existing debt ratings, and failure to do so could adversely affect our cost of funds, liquidity and access to capital markets. Any future impairment of our tangible or intangible long-lived assets may materially affect our results of operations.
Failure to protect our existing intellectual property rights, domestically or internationally, may result in the loss of valuable technologies and our competitors offering similar products, potentially resulting in the loss of one or more competitive advances and decreased sales and/or market shares.
Failure to protect our existing intellectual property rights, domestically or internationally, may result in the loss of valuable technologies and competitive advances, and our net sales, market share, financial condition and cash flows may be adversely impacted.
The unavailability or increased prices of raw materials could have a material adverse impact on our business, financial condition or results of operations. We use a variety of specialty and commodity chemicals in our formulation processes, and such formulation operations depend upon obtaining adequate supplies of raw materials on a timely basis from numerous suppliers in various countries.
We use a variety of specialty and commodity chemicals in our formulation processes, and such formulation operations depend upon obtaining adequate supplies of raw materials on a timely basis from numerous suppliers in various countries. We typically purchase our major raw materials under existing supply agreements or on an as-needed basis from outside sources.
Further, the long-term effects of climate change on general economic conditions are unclear, and changes in the supply or demand of our products, or available sources of the raw materials we use in our manufacturing processes, may affect the availability or cost of our products. 21 Any long-term disruption in our ability to timely deliver our products and services to our customers could have a material adverse effect on our business, results of operations and financial condition.
Further, the long-term effects of climate change on general economic conditions are unclear, and changes in the supply or demand of our products, or available sources of the raw materials we use in our manufacturing processes, may affect the availability or cost of our products. We are governed by Delaware law, which has anti-takeover implications.
We expect these ESG disclosure and regulatory trends to continue, and the ultimate cost related to reporting and, where required, compliance could be material. 19 We have numerous equity instruments outstanding that could require the future issuance of additional shares of common stock, which issuance could result in significant dilution of ownership interests and have an adverse effect on our stock price.
We have numerous equity instruments outstanding that could require the future issuance of additional shares of common stock, which issuance could result in significant dilution of ownership interests and have an adverse effect on our stock price. Upon stockholders' approval on June 4, 2024, our 2024 Plan replaced our 2013 Plan, under which no further awards can be granted.
In addition, technological changes in our customers’ products or processes may make certain of our specialty chemicals unnecessary or obsolete. Customers also have found, and may continue to find, alternative materials or processes, which no longer require our products.
In addition, technological changes in our customers’ products, processes or preferences, such as sustainable products, may make certain of our specialty chemicals unnecessary or obsolete.
Under our 2013 Plan, 15,500,000 shares of our common stock were initially reserved for issuance in connection with the vesting of equity-based awards to be granted to our officers, other employees and directors. The issuance of additional shares upon satisfaction of the applicable vesting conditions of these grants could result in a stockholder's percentage ownership being diluted.
However, outstanding awards under our 2013 Plan continue to vest in accordance with their terms and those of the 2013 Plan. Under our new 2024 Plan, an additional 10,000,000 shares were reserved for issuance in connection with the vesting of equity-based awards to be granted to our officers, other employees and directors.
Further, there is a risk that licensing opportunities may not be available to us on acceptable terms, if at all.
Further, there is a risk that licensing 13 opportunities may not be available to us on acceptable terms, if at all. Regardless of their merit, infringement claims can be time-consuming, divert the time and attention of our management and technical personnel, and result in material litigation costs.
Any future impairment of our tangible or intangible long-lived assets may materially affect our results of operations. As a result of our historical acquisitions, as of December 31, 2023, we had approximately $3.22 billion of intangible assets and goodwill.
As a result of our historical acquisitions, as of December 31, 2024, we had approximately $2.86 billion of intangible assets and goodwill. Under GAAP, we review our intangible assets and long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
Sales of substantial amounts of our shares, including sales by our executive officers, directors or significant stockholders, and shares issued in connection with any acquisition, or the perception that such sales or issuance could occur, may adversely affect prevailing market prices for our common stock.
The issuance of substantial amounts of shares of our common stock, including shares issued in connection with acquisitions, could cause significant dilution to holders of our common stock.
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In addition, while progress has been made to contain the COVID-19 pandemic, it remains a global challenge. The pandemic, and the responses of business and governments to the pandemic, have at times resulted in increased border controls or closures, increased transportation costs and increased security threats to our supply chain.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur information security program is led by our Chief Information Security Officer (CISO) who manages a global information security team responsible for assessing and mitigating cyber-related threats. The cybersecurity expertise of our CISO and his team includes information security management roles, hands-on cyber incident response experience, forensic and network intrusion investigations and security risk assessments.
Biggest changeThe cybersecurity expertise of our CISO and his team includes information security management as well as governance, risk and compliance (GRC) roles, hands-on cyber incident response experience, forensic and network intrusion investigations and security risk assessments.
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Our information security program is led by our Chief Information Security Officer (CISO) who manages a global information security team responsible for assessing and mitigating cyber-related threats.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSee Note 6, Property, Plant and Equipment, Net , to the Consolidated Financial Statements included in this 2023 Annual Report for amounts invested in land, buildings, machinery, and equipment, and Note 16, Leases , to the Consolidated Financial Statements included in this 2023 Annual Report for information about our operating lease commitments. 22
Biggest changeSee Note 7, Property, Plant and Equipment, Net , to the Consolidated Financial Statements included in this 2024 Annual Report for amounts invested in land, buildings, machinery, and equipment, and Note 17, Leases , to the Consolidated Financial Statements included in this 2024 Annual Report for information about our operating lease commitments.
Among our two segments, Electronics and Industrial & Specialty utilize 21 and 19 of our manufacturing facilities, respectively, with the remaining 13 manufacturing facilities being shared between the two segments. We believe that all of our significant facilities and equipment are in good condition, well-maintained, adequate for our present operations and utilized for their intended purposes.
Among our two segments, Electronics and Industrial & Specialty utilize 21 and 17 of our manufacturing facilities, respectively, with the remaining 13 manufacturing facilities being shared between the two segments. We believe that all of our significant facilities and equipment are in good condition, well-maintained, adequate for our present operations and utilized for their intended purposes.
We owned 25 of our manufacturing facilities, of which 6 included research facilities, and 4 stand-alone research centers. In addition to the remaining manufacturing and research facilities, we leased the majority of our office, warehouse and other physical locations.
We owned 26 of our manufacturing facilities, of which 6 included research facilities, and 2 stand-alone research centers. In addition to the remaining manufacturing and research facilities, we leased the majority of our office, warehouse and other physical locations.
Item 2. Properties At December 31, 2023, our physical presence included 53 manufacturing sites, of which 12 included research facilities, and 10 stand-alone research centers. Of our manufacturing facilities, 8 were located in the U.S. with the remaining international facilities located primarily in Asia and Europe.
Item 2. Properties At December 31, 2024, our physical presence included 51 manufacturing sites, of which 12 included research facilities, and 9 stand-alone research centers. Of our manufacturing facilities, 8 were located in the U.S. with the remaining international facilities located primarily in Asia and Europe.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, it is possible that, as additional information becomes available, the impact of an adverse determination could have a different effect. For additional information regarding environmental matters and liabilities, see Note 17, Contingencies, Environmental and Legal Matters , to the Consolidated Financial Statements included in this 2023 Annual Report. Item 4. Mine Safety Disclosure Not applicable. 23 Part II
Biggest changeHowever, it is possible that, as additional information becomes available, the impact of an adverse determination could have a different effect. For additional information regarding environmental matters and liabilities, see Note 18, Contingencies, Environmental and Legal Matters , to the Consolidated Financial Statements included in this 2024 Annual Report. 22 Item 4. Mine Safety Disclosure Not applicable. 23 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends We declared and paid cash dividends on our common stock of $77.4 million, $78.4 million and $61.9 million during the years ended December 31, 2023, 2022 and 2021, respectively. On February 13, 2024, our Board declared a cash dividend of $0.08 per outstanding share of our common stock.
Biggest changeDividends We declared and paid cash dividends on our common stock of $78.2 million, $77.4 million and $78.4 million during the years ended December 31, 2024, 2023 and 2022, respectively. On February 12, 2025, our Board declared a cash dividend of $0.08 per outstanding share of our common stock.
Equity Compensation Plan Information The information regarding our equity compensation plans will be included in the 2024 Proxy Statement under the heading "Executive Compensation Tables - Equity Compensation Plan Information," and is incorporated by reference into this 2023 Annual Report. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None. Item 6. [Reserved] 25
Equity Compensation Plan Information The information regarding our equity compensation plans will be included in the 2025 Proxy Statement under the heading "Executive Compensation Tables - Equity Compensation Plan Information," and is incorporated by reference into this 2024 Annual Report. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None. Item 6. [Reserved] 25
Performance Graph The following graph shows a comparison of cumulative total stockholder returns for our common stock, the Standard and Poor's 500 Index and the S&P 500 Specialty Chemicals Index from December 31, 2018 through December 31, 2023, assuming a $100 investment in our common stock on December 31, 2018 and the reinvestment of all dividends thereafter. 24 The stock performance shown on this graph is based on historical data and is not indicative of, or intended to forecast, possible future performance of our common stock.
Performance Graph The following graph shows a comparison of cumulative total stockholder returns for our common stock, the Standard and Poor's 500 Index and the S&P 500 Specialty Chemicals Index from December 31, 2019 through December 31, 2024, assuming a $100 investment in our common stock on December 31, 2019 and the reinvestment of all dividends thereafter. 24 The stock performance shown on this graph is based on historical data and is not indicative of, or intended to forecast, possible future performance of our common stock.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for our Common Stock Our common stock is traded on the New York Stock Exchange under the symbol “ESI.” On February 16, 2024, there were approximately 172 registered holders of record of our common stock, par value $0.01 per share, and the closing price of our common stock was $23.86.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for our Common Stock Our common stock is traded on the New York Stock Exchange under the symbol “ESI.” On February 14, 2025, there were approximately 154 registered holders of record of our common stock, par value $0.01 per share, and the closing price of our common stock was $26.13.
The dividend is expected to be paid on March 15, 2024 to stockholders of record at the close of business on March 1, 2024.
The dividend is expected to be paid on March 17, 2025 to stockholders of record at the close of business on March 3, 2025.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations Change - 2023 vs 2022 Change - 2022 vs 2021 (dollars in millions) 2023 2022 Reported Constant Currency Organic 2021 Reported Constant Currency Organic Net sales $ 2,333.2 $ 2,549.4 (8)% (7)% (5)% $ 2,399.8 6% 13% 5% Cost of sales 1,414.7 1,596.7 (11)% (10)% 1,439.0 11% 19% Gross profit 918.5 952.7 (4)% (2)% 960.8 (1)% 5% Gross margin 39.4 % 37.4 % 200 bps 220 bps 40.0 % (260) bps (300) bps Operating expenses 744.9 627.4 19% 19% 660.9 (5)% (1)% Operating profit 173.6 325.3 (47)% (41)% 299.9 8% 17% Operating margin 7.4 % 12.8 % (540) bps (480) bps 12.5 % 30 bps 40 bps Other expense, net (44.5) (53.3) (16)% (48.2) 11% Income tax expense (13.0) (85.8) (85)% (48.3) 78% Net income from continuing operations 116.1 186.2 (38)% 203.4 (8)% Income from discontinued operations, net of tax 2.1 1.8 19% 0.3 (nm) Net income $ 118.2 $ 188.0 (37)% $ 203.7 (8)% Net income margin 5.1 % 7.4 % (230) bps 8.5 % (110) bps Adjusted EBITDA $ 482.3 $ 526.6 (8)% (6)% $ 524.8 0% 8% Adjusted EBITDA margin 20.7 % 20.7 % 0 bps 20 bps 21.9 % (120) bps (110) bps (nm) Calculation not meaningful. 30 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net Sales Net sales for 2023 decreased 8% on a reported basis, 7% on a constant currency basis and 5% on an organic basis.
Biggest changeFor a reconciliation of "Net income" to Adjusted EBITDA and more information about the adjustments made, see Note 22, Segment Information , to the Consolidated Financial Statements included in this 2024 Annual Report. 29 Results of Operations Change - 2024 vs 2023 Change - 2023 vs 2022 (dollars in millions) 2024 2023 Reported Constant Currency Organic 2022 Reported Constant Currency Organic Net sales $ 2,456.9 $ 2,333.2 5% 7% 4% $ 2,549.4 (8)% (7)% (5)% Cost of sales 1,421.2 1,414.7 0% 2% 1,596.7 (11)% (10)% Gross profit 1,035.7 918.5 13% 14% 952.7 (4)% (2)% Gross margin 42.2 % 39.4 % 280 bps 270 bps 37.4 % 200 bps 220 bps Operating expenses 691.8 744.9 (7)% (6)% 627.4 19% 19% Operating profit 343.9 173.6 98% (nm) 325.3 (47)% (41)% Operating margin 14.0 % 7.4 % 660 bps 680 bps 12.8 % (540) bps (480) bps Other expense, net (56.2) (44.5) 26% (53.3) (16)% Income tax expense (44.8) (13.0) 244% (85.8) (85)% Net income from continuing operations 242.9 116.1 (nm) 186.2 (38)% Income from discontinued operations, net of tax 1.6 2.1 (26)% 1.8 19% Net income $ 244.5 $ 118.2 (nm) $ 188.0 (37)% Net income margin 10.0 % 5.1 % 490 bps 7.4 % (230) bps Adjusted EBITDA $ 534.7 $ 482.3 11% 13% $ 526.6 (8)% (6)% Adjusted EBITDA margin 21.8 % 20.7 % 110 bps 120 bps 20.7 % 0 bps 20 bps (nm) Calculation not meaningful. 30 Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Net Sales Net sales for 2024 increased 5% on a reported basis, 7% on a constant currency basis and 4% on an organic basis.
Other (expense) income, net Other expense, net for 2023 included $7.0 million of charges due to highly inflationary accounting for our operations in Turkey, $2.3 million of debt refinancing costs related to the prepayment of our then existing term loans B-1 and term loans A and $0.1 million of net losses associated with metals derivative contracts ($1.3 million of realized losses and $1.2 million of unrealized gains).
Other expense, net for 2023 included $7.0 million of charges due to highly inflationary accounting for our operations in Turkey, $2.3 million of debt refinancing costs related to the prepayment of our then existing term loans B-1 and term loans A and $0.1 million of net losses associated with metals derivative contracts ($1.3 million of realized losses and $1.2 million of unrealized gains).
We currently expect to continue to pay a cash dividend on a quarterly basis; however, the actual declaration of any cash dividends, as well as their amounts and timing, will 34 be subject to the final determination of our Board of Directors based on factors including our future earnings and cash flow generation.
We currently expect to continue to pay a cash dividend on a quarterly basis; however, the actual declaration of any cash dividends, as well as their amounts and timing, will be subject to the final determination of our Board of Directors based on factors including our future earnings and cash flow generation.
If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, the goodwill impairment loss is calculated as the difference between these amounts, limited to the amount of goodwill allocated to the reporting unit.
If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, the 27 goodwill impairment loss is calculated as the difference between these amounts, limited to the amount of goodwill allocated to the reporting unit.
Comparison of Fiscal Years 2022 and 2021 For the comparison of fiscal years 2022 and 2021, see " Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 " in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our 2022 Annual Report on Form 10-K and incorporated by reference into this 2023 Annual Report.
Comparison of Fiscal Years 2023 and 2022 For the comparison of fiscal years 2023 and 2022, see " Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 " in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our 2023 Annual Report on Form 10-K and incorporated by reference into this 2024 Annual Report.
Management’s Discussion and Analysis of Financial Condition and Results of Operations This Management's Discussion and Analysis of Financial Condition and Results of Operations section should be read in conjunction with “Financial Statements and Supplementary Data” included in Part II, Item 8 of this 2023 Annual Report and our audited Consolidated Financial Statements and notes thereto included elsewhere in this 2023 Annual Report.
Management’s Discussion and Analysis of Financial Condition and Results of Operations This Management's Discussion and Analysis of Financial Condition and Results of Operations section should be read in conjunction with “Financial Statements and Supplementary Data” included in Part II, Item 8 of this 2024 Annual Report and our audited Consolidated Financial Statements and notes thereto included elsewhere in this 2024 Annual Report.
“Overview” and "2023 Highlights" briefly present our business and certain significant events addressed in this section or elsewhere in this 2023 Annual Report. This 2023 Annual Report should be read in its entirety for a complete description of our business and discussion of these events.
“Overview” and "2024 Highlights" briefly present our business and certain significant events addressed in this section or elsewhere in this 2024 Annual Report. This 2024 Annual Report should be read in its entirety for a complete description of our business and discussion of these events.
Such adjustments are recognized in the period in which they are identified. Recent Accounting Pronouncements A summary of recent accounting pronouncements is included in Note 3, Recent Accounting Pronouncements , to the Consolidated Financial Statements included in this 2023 Annual Report.
Such adjustments are recognized in the period in which they are identified. Recent Accounting Pronouncements A summary of recent accounting pronouncements is included in Note 3, Recent Accounting Pronouncements , to the Consolidated Financial Statements included in this 2024 Annual Report.
See Note 2, Summary of Significant Accounting Policies , to the Consolidated Financial Statements included in this 2023 Annual Report for a detailed discussion of the application of these and other accounting policies.
See Note 2, Summary of Significant Accounting Policies , to the Consolidated Financial Statements included in this 2024 Annual Report for a detailed discussion of the application of these and other accounting policies.
Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, applicable restrictions under our various financing arrangements, and other factors. During 2023, approximately 75% of our net sales were generated from non-U.S. operations, and we expect a large portion of our net sales to continue to be generated outside of the U.S.
Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, applicable restrictions under our various financing arrangements, and other factors. During 2024, approximately 77% of our net sales were generated from non-U.S. operations, and we expect a large portion of our net sales to continue to be generated outside of the U.S.
In December 2023 we received proceeds of approximately $1.15 billion from the syndication of our new term loans B-2 which were used to prepay the $1.11 billion term loans B-1 and $150 million term loans A reducing gross debt by $105 million.
In December 2023, we received proceeds of approximately $1.15 billion from the syndication of our term loans B-2 which were used to prepay our then outstanding $1.11 billion term loans B-1 and $150 million term loans A reducing gross debt by $105 million.
Investors are encouraged to review the definitions and reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures included in this 2023 Annual Report and not to rely on any single financial measure to evaluate our business.
Investors are encouraged to review the definitions and reconciliations of these non-GAAP financial 28 measures to their most comparable GAAP financial measures included in this 2024 Annual Report and not to rely on any single financial measure to evaluate our business.
Covenants At December 31, 2023, we were in compliance with the debt covenants contained in the Credit Agreement and the indenture governing our 3.875% USD Notes due 2028. 36
Covenants At December 31, 2024, we were in compliance with the debt covenants contained in the Credit Agreement and the indenture governing our 3.875% USD Notes due 2028.
We anticipate that any future acquisitions would be financed through a combination of cash on hand, availability under our Credit Agreement and/or new debt or equity offerings. Foreign Currency Exposure In 2023, approximately 75% of our net sales originated outside of the U.S. and were denominated in numerous currencies, including the euro, Chinese yuan and British pound.
We anticipate that any future acquisitions would be financed through a combination of cash on hand, availability under our Credit Agreement and/or new debt or equity offerings. Foreign Currency Exposure In 2024, approximately 77% of our net sales originated outside of the U.S. and were denominated in numerous currencies, including the euro and Chinese yuan.
Discount rates of 5.0% and 3.1% were established for the Domestic Pension Plan and Foreign Pension Plans, respectively, at December 31, 2023, compared to rates of 5.2% and 3.5% established for those respective plans at December 31, 2022.
Discount rates of 5.6% and 3.1% were established for the Domestic Pension Plan and Foreign Pension Plans, respectively, at December 31, 2024, compared to rates of 5.0% and 3.1% established for those respective plans at December 31, 2023.
Therefore, fluctuations in foreign exchange rates in any given reporting period may positively or negatively impact our financial performance. Foreign exchange translation negatively impacted our 2023 net sales performance by approximately 1%.
Therefore, fluctuations in foreign exchange rates in any given reporting period may positively or negatively impact our financial performance. Foreign exchange translation negatively impacted our 2024 net sales performance by approximately 2%.
Goodwill Goodwill is tested for impairment at the reporting unit level annually in the fourth quarter, or when events or changes in circumstances indicate that goodwill might be impaired. Our reporting units are determined based upon our organizational structure in place at the date of the goodwill impairment test.
Goodwill Goodwill is tested for impairment at the reporting unit level annually in the fourth quarter, or when events or changes in circumstances indicate that goodwill might be impaired using either a qualitative or quantitative approach. Our reporting units are determined based upon our organizational structure in place at the date of the goodwill impairment test.
This is comprised of a $37.3 million one-time impact of our intention to amend prior U.S. tax returns offset by $3.1 million from the net increase to valuation allowances on foreign tax credit carryforwards. In addition, the election to credit foreign taxes for the 2023 fiscal year resulted in an incremental $8.2 million of tax expense reduction.
This is comprised of a $37.3 million impact of amending prior U.S. tax returns offset by $3.1 million from the increase to the valuation allowances on foreign tax credit carryforwards. In addition, the election to credit foreign taxes for the fiscal 2023 year resulted in an incremental $8.2 million of tax expense reduction.
We may transfer cash from certain international subsidiaries to the U.S. and/or other international subsidiaries when we believe it is cost effective to do so. Of our $289 million of cash and cash equivalents at December 31, 2023, $232 million was held by our foreign subsidiaries.
We may transfer cash from certain international subsidiaries to the U.S. and/or other international subsidiaries when we believe it is cost effective to do so. Of our $359 million of cash and cash equivalents at December 31, 2024, $224 million was held by our foreign subsidiaries.
We used a long-term rate of return on plan assets of 7.0% and 3.6% for our Domestic and Foreign Pension Plans, respectively, to determine our net periodic pension expense for 2023.
We used a long-term rate of return on plan assets of 7.0% and 3.1% for our Domestic and Foreign Pension Plans, respectively, to determine our 36 net periodic pension expense for 2024.
Our tax expense for 2023 was lower than the U.S. statutory tax rate, mainly due to a one-time benefit of $34.2 million related to changing an election to credit foreign taxes from our previous position which was to deduct foreign taxes.
The income tax expense for 2023 was lower than the U.S. statutory rate mainly due to a benefit of $34.2 million related to changing an election to credit foreign taxes from our previous position of deducting foreign taxes.
See Note 12, Financial Instruments , to the Consolidated Financial Statements for further discussion of these derivative instruments. Income Tax The income tax expense for 2023 totaled $13.0 million, as compared to $85.8 million in 2022.
See Note 13, Financial Instruments , to the Consolidated Financial Statements for further discussion of these derivative instruments. Income Tax The income tax expense for 2024 totaled $44.8 million, as compared to $13.0 million in 2023.
A one percent increase in the discount rate would increase the pension plan expense by approximately $0.8 million and decrease the pension benefit obligation by approximately $16.4 million, whereas a one percent decrease in the discount rate would decrease the pension plan expense by approximately $0.7 million and increase the pension benefit obligation by approximately $19.4 million.
A one percent increase in the discount rate would increase the pension plan expense by approximately $0.7 million and decrease the pension benefit obligation by approximately $14.0 million, whereas a one percent decrease in the discount rate would decrease the pension plan expense by approximately $0.9 million and increase the pension benefit obligation by approximately $16.7 million.
We paid $77.4 million of cash dividends on shares of our common stock and $7.7 million for shares of our common stock withheld by the Company to satisfy the tax withholding requirements related to the vesting of RSUs included in "Other, net." During 2022, we paid $151 million in aggregate for the repurchase of shares of our common stock under our stock repurchase program, $78.4 million of cash dividends on shares of our common stock and $24.0 million for shares of our common stock withheld by the Company to satisfy the tax withholding requirements related to the vesting of RSUs included in "Other, net." 35 Pension Plans We maintain "Domestic Pension Plans," which consist of a non-contributory domestic defined benefit pension plan and Supplemental Executive Retirement Plans (SERPs).
During 2023, we also paid $77.4 million of cash dividends on shares of our common stock and $7.7 million for shares of our common stock withheld by the Company to satisfy the tax withholding requirements related to the vesting of RSUs included in "Other, net." Pension Plans We maintain "Domestic Pension Plans," which consist of a non-contributory domestic defined benefit pension plan and Supplemental Executive Retirement Plans (SERPs).
Our investment policies attempt to achieve a mix of approximately 93% of plan investments for liability-matching, 6% for long-term growth, and 1% for near-term benefit payments. The weighted average asset allocation of the Domestic Pension Plan was 89% fixed income holdings, 10% equity securities and derivatives and 1% cash at December 31, 2023.
Our investment policies attempt to achieve a mix of approximately 95% of plan investments for liability-matching, 3% for long-term growth, and 2% for near-term benefit payments. The weighted average asset allocation of the Domestic Pension Plan was 95% fixed income holdings, 3% equity securities and derivatives and 2% cash at December 31, 2024.
Financial Borrowings Credit Facilities and Senior Notes At December 31, 2023, we had $1.93 billion of indebtedness, net of unamortized discounts and debt issuance costs of $17.5 million, which primarily included: • $1.15 billion of term debt arrangements outstanding under our term loans; and • $800 million of 3.875% USD Notes due 2028.
Financial Borrowings Credit Facilities and Senior Notes At December 31, 2024, we had $1.82 billion of indebtedness, net of unamortized discounts and debt issuance costs of $14.8 million, which primarily included: • $1.04 billion of term debt arrangements outstanding under our term loans; and • $800 million of 3.875% USD Notes due 2028.
See Note 7, Goodwill and Intangible Assets, to the Consolidated Financial Statements for further information. Operating expenses for 2023 increased 19% on a reported basis and 19% on a constant currency basis. Excluding the goodwill impairment charge discussed above, operating expenses for 2023 increased 6% on a reported basis and 7% on a constant currency basis.
See Note 8, Goodwill and Intangible Assets, Net, to the Consolidated Financial Statements for further information. Operating expenses for 2024 decreased 7% on a reported basis and 6% on a constant currency basis. Excluding the goodwill impairment charge discussed above, operating expenses for 2024 increased 4% on a reported basis and 5% on a constant currency basis.
Availability under our revolving credit facility and various lines of credit and overdraft facilities totaled $392 million at December 31, 2023 (net of $6.2 million of stand-by letters of credit which reduce our borrowing capacity).
Availability under our revolving credit facility and various lines of credit and overdraft facilities totaled $390 million at December 31, 2024 (net of $7.0 million of stand-by letters of credit which reduce our borrowing capacity).
Operating Expenses Year ended December 31, Change (dollars in millions) 2023 2022 Reported Constant Currency Selling, technical, general and administrative $ 596.8 $ 578.6 3% 4% Research and development 68.1 48.8 40% 40% Goodwill impairment 80.0 — (nm) (nm) Total $ 744.9 $ 627.4 19% 19% Operating expenses as % of net sales Selling, technical, general and administrative 25.6 % 22.7 % 290 bps 270 bps Research and development 2.9 % 1.9 % 100 bps 100 bps Goodwill impairment 3.4 % — % (nm) (nm) Total 31.9 % 24.6 % 730 bps 700 bps (nm) Calculation not meaningful. 32 During the third quarter of 2023, we recorded an impairment charge in our Industrial & Specialty segment of $80.0 million related to our Graphics Solutions reporting unit.
Operating Expenses Year ended December 31, Change (dollars in millions) 2024 2023 Reported Constant Currency Selling, technical, general and administrative $ 628.8 $ 596.8 5% 6% Research and development 63.0 68.1 (8)% (7)% Goodwill impairment — 80.0 (nm) (nm) Total $ 691.8 $ 744.9 (7)% (6)% Operating expenses as % of net sales Selling, technical, general and administrative 25.6 % 25.6 % 0 bps (20) bps Research and development 2.6 % 2.9 % (30) bps (40) bps Goodwill impairment — % 3.4 % (nm) (nm) Total 28.2 % 31.9 % (370) bps (400) bps (nm) Calculation not meaningful. 32 During the third quarter of 2023, we recorded an impairment charge in our Industrial & Specialty segment of $80.0 million related to our Graphics Solutions reporting unit.
Electronics' net sales for 2023 decreased 12% on a reported basis, 10% on a constant currency basis and 7% on an organic basis. • Assembly Solutions : net sales decreased 11% on a reported basis and 2% on an organic basis. Pass-through metals pricing had a negative impact of 8% on reported net sales.
Electronics' net sales for 2024 increased 10% on a reported basis, 12% on a constant currency basis and 7% on an organic basis. • Assembly Solutions : net sales increased 8% on a reported basis and 1% on an organic basis. Pass-through metals pricing had a positive impact of 8% on reported net sales.
The following table reconciles GAAP net sales growth to constant currency and organic net sales growth: Year ended December 31, % Change (dollars in millions) 2023 2022 Reported Net Sales Growth Impact of Currency Constant Currency Pass-Through Metals Pricing Acquisitions Organic Net Sales Growth Electronics: Assembly Solutions $ 726.1 $ 819.5 (11)% 2% (9)% 8% —% (2)% Circuitry Solutions 424.3 503.5 (16)% 2% (14)% —% —% (14)% Semiconductor Solutions 264.3 288.2 (8)% 1% (8)% —% (3)% (11)% Total $ 1,414.7 $ 1,611.2 (12)% 2% (10)% 4% (1)% (7)% Industrial & Specialty: Industrial Solutions $ 699.0 $ 728.3 (4)% 1% (3)% —% (1)% (4)% Graphics Solutions 142.7 143.0 0% (1)% (1)% —% —% (1)% Energy Solutions 76.8 66.9 15% (1)% 14% —% —% 14% Total $ 918.5 $ 938.2 (2)% 1% (2)% —% 0% (2)% Total $ 2,333.2 $ 2,549.4 (8)% 1% (7)% 2% (1)% (5)% NOTE: Totals may not sum due to rounding.
The following table reconciles GAAP net sales growth to constant currency and organic net sales growth: Year ended December 31, % Change (dollars in millions) 2024 2023 Reported Net Sales Growth Impact of Currency Constant Currency Pass-Through Metals Pricing Acquisitions Organic Net Sales Growth Electronics: Assembly Solutions $ 782.8 $ 726.1 8% 2% 10% (8)% —% 1% Circuitry Solutions 470.7 424.3 11% 1% 12% —% —% 12% Semiconductor Solutions 307.9 264.3 17% 1% 18% —% (3)% 14% Total $ 1,561.4 $ 1,414.7 10% 1% 12% (4)% (1)% 7% Industrial & Specialty: Industrial Solutions $ 666.4 $ 699.0 (5)% 2% (2)% —% 0% (2)% Graphics Solutions 146.2 142.7 2% 1% 3% —% —% 3% Energy Solutions 82.9 76.8 8% 0% 8% —% —% 8% Total $ 895.5 $ 918.5 (3)% 2% (1)% —% 0% (1)% Total $ 2,456.9 $ 2,333.2 5% 2% 7% (3)% 0% 4% NOTE: Totals may not sum due to rounding.
The following is a summary of our cash flows provided by (used in) operating, investing and financing activities during the periods indicated: Year Ended December 31, (dollars in millions) 2023 2022 2021 Cash provided by operating activities $ 333.6 $ 295.9 $ 326.0 Cash used in investing activities $ (250.2) $ (75.2) $ (568.9) Cash (used in) provided by financing activities $ (58.7) $ (275.6) $ 290.0 Year Ended December 31, 2023 compared to Year Ended December 31, 2022 Operating Activities The increase in net cash flows provided by operating activities of $37.7 million was primarily driven by lower annual incentive compensation payments and improved management of working capital, partially offset by lower cash operating profits (net income adjusted for non-cash items).
The following is a summary of our cash flows provided by (used in) operating, investing and financing activities during the periods indicated: Year Ended December 31, (dollars in millions) 2024 2023 2022 Cash provided by operating activities $ 362.0 $ 333.6 $ 295.9 Cash used in investing activities $ (73.8) $ (250.2) $ (75.2) Cash used in financing activities $ (206.6) $ (58.7) $ (275.6) Year Ended December 31, 2024 compared to Year Ended December 31, 2023 Operating Activities The increase in net cash flows provided by operating activities of $28.4 million was primarily driven by higher cash operating profits (net income adjusted for non-cash items) partially offset by higher levels of working capital.
Management believes this non-GAAP financial measure provides investors with a more complete understanding of the underlying net sales trends by providing comparable net sales over differing periods on a consistent basis.
Management believes this non-GAAP financial measure provides investors with a more complete understanding of the underlying net sales trends by providing comparable net sales over differing periods on a consistent basis. For a reconciliation of GAAP net sales growth to organic net sales growth, see " Net Sales " within the "Results of Operations" section below.
We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in this assessment. If these estimates and related assumptions change in the future, we may be required to record additional valuation allowances against our deferred tax assets resulting in additional income tax expense.
If these estimates and related assumptions change in the future, we may be required to record additional valuation allowances against our deferred tax assets resulting in additional income tax expense.
In 2023, we achieved net sales of $2.33 billion, to which our Electronics and Industrial & Specialty segments contributed approximately 61% and 39%, respectively.
In 2024, we achieved net sales of $2.46 billion, to which our Electronics and Industrial & Specialty segments contributed approximately 64% and 36%, respectively.
Electronics' consolidated results were negatively impacted by $61.5 million of pass-through metals pricing and positively impacted by $9.8 million of acquisitions and Industrial & Specialty's consolidated results were positively impacted by $3.9 million of acquisitions.
Electronics' consolidated results were positively impacted by $59.7 million of pass-through metals pricing and $8.1 million of acquisitions and Industrial & Specialty's consolidated results were positively impacted by $0.5 million of acquisitions.
The Domestic Pension Plans were underfunded by $8.2 million at December 31, 2023 compared to $16.5 million at December 31, 2022. The increase in the funding position was primarily driven by a $20.8 million return on plan assets partially offset by $8.7 million of interest costs and $4.3 million of actuarial losses due to changes in plan assumptions and experience.
The increase in the funding position was primarily driven by $11.0 million of actuarial gains due to changes in plan assumptions and experience and a $7.1 million return on plan assets partially offset by $8.4 million of interest costs. The Foreign Pension Plans were underfunded by $12.9 million at December 31, 2024 compared to $14.8 million at December 31, 2023.
For a reconciliation of GAAP net sales growth to organic net sales growth, see " Net Sales " within the "Results of Operations" section below. 29 Adjusted EBITDA We define Adjusted EBITDA as EBITDA, excluding the impact of additional items included in GAAP earnings which we believe are not representative or indicative of our ongoing business or are considered to be associated with our capital structure.
Adjusted EBITDA We define Adjusted EBITDA as EBITDA, excluding the impact of additional items included in GAAP earnings which we believe are not representative or indicative of our ongoing business or are considered to be associated with our capital structure.
Liquidity and Capital Resources Our primary sources of liquidity during 2023 were the proceeds from the syndication of our new term loans B of approximately $1.15 billion, the monetization of certain interest rate swaps and cross-currency swaps as well as available cash generated from operations.
Liquidity and Capital Resources Our primary sources of liquidity during 2024 were the proceeds from the syndication of our new term loans B-3 of approximately $1.04 billion as well as available cash generated from operations.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of such change. 28 Tax benefits are recognized for an uncertain tax position when we consider it is more likely than not that the position will be sustained upon examination by a taxing authority or upon completion of the litigation process.
Tax benefits are recognized for an uncertain tax position when we consider it is more likely than not that the position will be sustained upon examination by a taxing authority or upon completion of the litigation process.
The increase in gross margin was primarily due to lower logistics costs and growth in our higher margin Energy Solutions business.
The increase in gross margin was primarily due to growth in our higher margin Energy Solutions business, favorable product mix and lower commodity surcharge-based revenue in our Industrial Solutions business.
For the full year 2024, we expect our capital expenditures to be between $50.0 million and $60.0 million.
For the full year 2025, we expect our capital expenditures to be approximately $65.0 million.
The Foreign Pension Plans were underfunded by $14.8 million at December 31, 2023 compared to $14.5 million at December 31, 2022. We are not required to make any material plan contributions in 2024. While we do not currently anticipate any, additional future material contributions may be required in order to maintain appropriate funding levels within our plans.
We are not required to make any material plan contributions in 2025. While we do not currently anticipate any, additional future material contributions may be required in order to maintain appropriate funding levels within our plans.
Other (Expense) Income, net Year Ended December 31, (dollars in millions) 2023 2022 Interest expense, net $ (49.3) $ (51.2) Foreign exchange gain (loss) 7.9 (5.0) Other (expense) income, net (3.1) 2.9 Total $ (44.5) $ (53.3) Interest expense, net Interest expense, net decreased $1.9 million driven primarily by higher interest income partially offset by the applicable interest related to the $150 million incremental term loans A, which were outstanding from June 2023 through December 18, 2023 when the term loans A were fully prepaid.
Other (Expense) Income, net Year Ended December 31, (dollars in millions) 2024 2023 Interest expense, net $ (56.3) $ (49.3) Foreign exchange gains 25.1 7.9 Other expense, net (25.0) (3.1) Total $ (56.2) $ (44.5) Interest expense, net Interest expense, net increased $7.0 million primarily due to a higher effective interest rate on our term loans B-2 (which were outstanding from December 18, 2023 through October 15, 2024 when the term loans B-2 were fully prepaid) when considering the impact of our interest rate swaps and cross currency swaps, partially offset by higher interest income.
Gross Profit Year Ended December 31, Change (dollars in millions) 2023 2022 Reported Constant Currency Gross profit: Electronics $ 558.2 $ 593.9 (6)% (4)% Industrial & Specialty 360.3 358.8 0% 2% Total $ 918.5 $ 952.7 (4)% (2)% Gross profit margin: Electronics 39.5 % 36.9 % 260 bps 270 bps Industrial & Specialty 39.2 % 38.2 % 100 bps 130 bps Total 39.4 % 37.4 % 200 bps 220 bps Electronics' gross profit for 2023 decreased 6% on a reported basis and 4% on a constant currency basis.
Gross Profit Year Ended December 31, Change (dollars in millions) 2024 2023 Reported Constant Currency Gross profit: Electronics $ 652.5 $ 558.2 17% 18% Industrial & Specialty 383.2 360.3 6% 8% Total $ 1,035.7 $ 918.5 13% 14% Gross profit margin: Electronics 41.8 % 39.5 % 230 bps 220 bps Industrial & Specialty 42.8 % 39.2 % 360 bps 360 bps Total 42.2 % 39.4 % 280 bps 270 bps Electronics' gross profit for 2024 increased 17% on a reported basis and 18% on a constant currency basis.
The discounted cash flows are prepared based upon cash flows at the reporting unit level and involve significant judgments related to future growth rates, gross profit, operating expenses and discount rates, among other considerations, from the vantage point of a market participant.
The cash flow model utilized in the goodwill impairment test involves significant judgments related to future growth rates, gross profit, operating expenses and discount rates, among other considerations from the vantage point of a market participant.
The fair value of a reporting unit is based equally on market multiples and the present value of discounted future cash flows.
For the quantitative test, the Company tests for impairment by comparing the fair value of a reporting unit to its carrying value. The fair value of a reporting unit is based equally on market multiples and the present value of discounted future cash flows. The discounted cash flows are prepared based upon cash flows at the reporting unit level.
See Note 4, Acquisitions, to the Consolidated Financial Statements for further discussion of the research and development costs associated with the Kuprion Acquisition.
This was partially offset by a 2023 expense of $15.7 million for research and development costs associated with the purchase accounting related to the Kuprion Acquisition. See Note 4, Acquisitions, to the Consolidated Financial Statements for further information regarding the Kuprion Acquisition research and development costs.
A valuation allowance is required to be recognized to reduce the recorded deferred tax asset to the amount that will more likely than not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income by jurisdiction during the periods in which those temporary differences become deductible or when carryforwards can be utilized.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income by jurisdiction during the periods in which those temporary differences become deductible or when carryforwards can be utilized. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in this assessment.
Foreign exchange had a negative impact of 2% on reported net sales. The decrease in organic net sales was primarily due to lower SMT volumes due to demand weakness in Asia, primarily China. • Circuitry Solutions : net sales decreased 16% on a reported basis and 14% on an organic basis.
Foreign exchange had a negative impact of 2% on reported net sales. The increase in organic net sales was primarily due to demand improvement in consumer, mobile and computer end markets, offset by weakness in broader industrial and automotive end markets. • Circuitry Solutions : net sales increased 11% on a reported basis and 12% on an organic basis.
We may from time to time seek to repurchase our equity and/or to retire or repurchase our outstanding debt through cash purchases and/or exchanges for equity, in open market purchases, privately negotiated transactions or otherwise.
Our long-term liquidity may be influenced by our ability to borrow additional funds, manage interest rates, renegotiate existing debt and/or raise new equity or debt under terms that are favorable to us. 35 We may from time to time seek to repurchase our equity and/or to retire or repurchase our outstanding debt through cash purchases and/or exchanges for equity, in open market purchases, privately negotiated transactions or otherwise.
See Note 11, Debt , to the Consolidated Financial Statements for further discussion of this prepayment. Foreign exchange gain (loss) For the year ended December 31, 2023, the fluctuations in foreign exchange gain (loss) were primarily driven by the remeasurement of intercompany loans.
Foreign exchange gains For the year ended December 31, 2024, the fluctuations in foreign exchange gains were primarily driven by the remeasurement of intercompany loans.
The reacquired ViaForm Distribution Rights and the Kuprion Acquisition had a positive impact of 3% on reported net sales. Foreign exchange had a negative impact of 1% on reported net sales.
The reacquired ViaForm Distribution Rights and the Kuprion Acquisition had a positive impact of 3% on reported net sales. Foreign exchange had a negative impact of 1% on reported net sales. The increase in organic net sales was primarily due to increased demand for wafer level packaging products in Asia and growth from new customers in power electronics.
Other income, net for 2022 included $2.9 million of charges due to highly inflationary accounting for our operations in Turkey and $0.3 million of net gains associated with metals derivative contracts ($1.6 million of realized gains and $1.3 million of unrealized losses).
Other expense, net Other expense, net for 2024 included an $11.4 million impairment of an available-for-sale debt security, $11.0 million of net losses associated with metals derivative contracts ($15.4 million of realized losses and $4.4 million of unrealized gains) and $2.6 million of charges due to highly inflationary accounting for our operations in Turkey, partially offset by $0.2 million of debt refinancing gains related to the prepayment of our then existing term loans B-2.
Segment Adjusted EBITDA Performance Year Ended December 31, Change (dollars in millions) 2023 2022 Reported Constant Currency Net income: Total $ 118.2 $ 188.0 (37)% Adjusted EBITDA: Electronics $ 317.7 $ 360.7 (12)% (9)% Industrial & Specialty 164.6 165.9 (1)% 1% Total $ 482.3 $ 526.6 (8)% (6)% Net income margin: Total 5.1 % 7.4 % (230) bps Adjusted EBITDA margin: Electronics 22.5 % 22.4 % 10 bps 30 bps Industrial & Specialty 17.9 % 17.7 % 20 bps 50 bps Total 20.7 % 20.7 % 0 bps 20 bps Electronics' Adjusted EBITDA for 2023 decreased 12% on a reported basis and 9% on a constant currency basis.
For additional information see Note 11, Income Taxes , to the Consolidated Financial Statements included in this 2024 Annual Report. 34 Segment Adjusted EBITDA Performance Year Ended December 31, Change (dollars in millions) 2024 2023 Reported Constant Currency Net income: Total $ 244.5 $ 118.2 107% Adjusted EBITDA: Electronics $ 361.5 $ 317.7 14% 16% Industrial & Specialty 173.2 164.6 5% 8% Total $ 534.7 $ 482.3 11% 13% Net income margin: Total 10.0 % 5.1 % 490 bps Adjusted EBITDA margin: Electronics 23.1 % 22.5 % 60 bps 80 bps Industrial & Specialty 19.3 % 17.9 % 140 bps 160 bps Total 21.8 % 20.7 % 110 bps 120 bps Electronics' Adjusted EBITDA for 2024 increased 14% on a reported basis and 16% on a constant currency basis.
However, working capital cycles and/or future repurchases of our common stock and/or acquisitions may require additional funding, which may include future debt and/or equity offerings. Our long-term liquidity may be influenced by our ability to borrow additional funds, manage interest rates, renegotiate existing debt and/or raise new equity or debt under terms that are favorable to us.
However, working capital cycles and/or future repurchases of our common stock and/or acquisitions may require additional funding, which may include future debt and/or equity offerings.
Industrial & Specialty's gross profit for 2023 remained approximately flat on a reported basis and increased 2% on a constant currency basis. The constant currency increase in gross profit was primarily driven by lower raw material costs in the Industrial Solutions business and growth in the Energy Solutions business, partially offset by declines in the Graphics Solutions business.
The constant currency increase in gross profit was primarily driven by lower raw material costs in the Industrial Solutions business combined with higher net sales in the Graphics Solutions and Energy Solutions businesses.
The constant currency decrease was primarily driven by lower gross profits. Industrial & Specialty's Adjusted EBITDA for 2023 decreased 1% on a reported basis and increased 1% on a constant currency basis. The constant currency increase was primarily driven by growth in the Energy Solutions business and easing cost pressures partially offset by declines in the Graphics Solutions business.
The constant currency increase was primarily driven by higher gross profits related to favorable product mix and growth in the Circuitry and Semiconductor Solutions businesses. Industrial & Specialty's Adjusted EBITDA for 2024 increased 5% on a reported basis and 8% on a constant currency basis.
Acquisitions We may pursue targeted and opportunistic acquisitions in our existing or adjacent end-markets that seek to strengthen our current businesses, expand and diversify our product offerings, and enhance our growth and strategic position.
The net proceeds of the new term loans and cash on hand were used to prepay in full our term loans B-2. • Cash Dividends - During the year ended December 31, 2024, approximately $78.2 million was returned to our stockholders in the form of cash dividends. 26 Acquisitions We may pursue targeted and opportunistic acquisitions in our existing or adjacent end-markets that seek to strengthen our current businesses, expand and diversify our product offerings, and enhance our growth and strategic position.
Investing Activities In 2023, we paid approximately $193 million in connection with the reacquired ViaForm Distribution Rights and $15.9 million in connection with the Kuprion Acquisition. In 2022, we paid we paid approximately $23 million in connection with the HSO Acquisition.
Investing Activities In 2024, we paid approximately $15.7 million of higher capital expenditures compared to 2023 due to increased activity on several multi-year growth projects in 2024 as these projects neared completion. In 2023, we paid approximately $193 million in connection with the reacquired ViaForm Distribution Rights and $15.9 million in connection with the Kuprion Acquisition.
The decrease in organic net sales was primarily due to lower demand from mobile phone market customers, primarily in Asia, and a decline in the memory disk end market globally which had a negative 4% impact on organic net sales. • Semiconductor Solutions : net sales decreased 8% on a reported basis and 11% on an organic basis.
Foreign exchange had a negative impact of 1% on reported net sales. The increase in organic net sales was primarily due to increased demand in the AI and data center end markets, electric vehicles in China and the mobile phone end market. • Semiconductor Solutions : net sales increased 17% on a reported basis and 14% on an organic basis.
Financing Activities In the second quarter of 2023, we borrowed $150 million of incremental term loans A under our senior credit facility to finance the reacquired ViaForm Distribution Rights.
During 2024, we also paid $78.2 million of cash dividends on shares of our common stock and $7.6 million for shares of our common stock withheld by the Company to satisfy the tax withholding requirements related to the vesting of RSUs included in "Other, net." In the second quarter of 2023, we borrowed $150 million of incremental term loans A under our senior credit facility to finance the reacquired ViaForm Distribution Rights.
See Note 22, Segment Information , to the Consolidated Financial Statements for the reconciliation of "Net income" to Adjusted EBITDA.
The constant currency increase was primarily driven by higher gross profits related to lower raw material costs and growth in our higher margin Energy Solutions business. See Note 22, Segment Information , to the Consolidated Financial Statements for the reconciliation of "Net income" to Adjusted EBITDA.
Industrial & Specialty's net sales for 2023 decreased 2% on a reported basis, 2% on a constant currency basis and 2% on an organic basis. • Industrial Solutions : net sales decreased 4% on a reported basis and 4% on an organic basis. Acquisitions had a positive impact of 1% on reported net sales.
The prior year was negatively impacted by lower ViaForm sales as we transitioned from our prior distributor. Industrial & Specialty's net sales for 2024 decreased 3% on a reported basis, 1% on a constant currency basis and 1% on an organic basis. • Industrial Solutions : net sales decreased 5% on a reported basis and 2% on an organic basis.
The decrease in organic net sales was primarily due to lower demand from European construction and industrial manufacturing markets partially offset by a significant equipment sale for a new production line under a multi-year 31 chemistry sales agreement with an automotive customer in the third quarter of 2023 which contributed approximately 1% to organic sales. • Graphics Solutions : net sales remained approximately flat on a reported basis and decreased 1% on an organic basis.
Both periods included an equipment sale for a new production line under a multi-year chemistry sales agreement with an automotive customer. 31 • Graphics Solutions : net sales increased 2% on a reported basis and 3% on an organic basis. Foreign exchange had a negative impact of 1% on reported net sales.
The decrease in organic net sales was primarily due to the rationalization of lower-margin packaging customers and the loss of a large newsprint customer, partially offset by new customer wins and cost inflation driving pricing actions. • Energy Solutions : net sales increased 15% on a reported basis and 14% on an organic basis.
The increase in organic net sales was primarily due to increased demand for flexographic plates and new business in Latin America partially offset by lower newspaper net sales. • Energy Solutions : net sales increased 8% on a reported basis and 8% on an organic basis. Foreign exchange had an immaterial impact on reported net sales.
See Note 7, Goodwill and Intangible Assets , to the Consolidated Financial Statements included in this 2023 Annual Report for additional information. Income Taxes We recognize deferred tax assets and liabilities based on the differences between the financial statement basis and the tax basis of assets, liabilities, net operating losses and tax carryforwards.
Income Taxes We recognize deferred tax assets and liabilities based on the differences between the financial statement basis and the tax basis of assets, liabilities, net operating losses and tax carryforwards. A valuation allowance is required to be recognized to reduce the recorded deferred tax asset to the amount that will more likely than not be realized.
The proceeds of this transaction, together with cash on hand, were used to prepay our then existing $1.11 billion term loans B-1 and $150 million term loans A, reducing our gross debt by approximately $105 million.
Financing Activities In October 2024, we received proceeds of approximately $1.04 billion from the syndication of our new term loans B-3 which were used to prepay our then outstanding $1.14 billion term loans B-2 reducing gross debt by $100 million.
Foreign exchange had a positive impact of 1% on reported net sales. The increase in organic net sales was primarily due to increased global production and drilling activity and cost inflation driven pricing actions.
The increase in organic net sales was primarily due to price improvement and a continued increase in drilling and energy production activity from higher utilization rates.
During the third quarter of 2023, given the lower-than-expected results of the Graphics Solutions reporting unit, we determined that it was more likely than not that the fair value of this reporting unit was less than its carrying value.
If we do not perform a qualitative assessment, or if the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company performs a quantitative test.
The constant currency increase was primarily driven by $15.7 million of research and development costs associated with the purchase accounting related to the Kuprion Acquisition, higher personnel costs, $5.5 million of extinguishment costs related to the new term loans and a $5.0 million increase in travel expenses partially offset by $8.4 million of lower stock compensation expense.
The constant currency increase was primarily driven by $19.8 million of higher incentive compensation costs, primarily due to higher accruals associated with increased expectations for strong full year financial results, $12.2 million of costs related to the MGS Transaction, higher personnel costs and $3.9 million of research and development costs associated with contingent consideration for the Kuprion Acquisition in the first quarter of 2024.
The constant currency decrease in gross profit reflects lower net sales in most business lines, partially offset by lower raw material and logistics costs. The increase in gross margin was primarily due to recaptured margin on ViaForm Distribution Rights, lower net sales of products containing pass-through metals in our Assembly business, lower raw material prices and logistics costs.
The increase in gross margin was primarily due to favorable product mix from growth in higher margin products, the recaptured margin on ViaForm Distributions Rights and lower raw material costs. Industrial & Specialty's gross profit for 2024 increased 6% on a reported basis and 8% on a constant currency basis.
Our primary uses of cash and cash equivalents were to pay approximately $1.26 billion of debt outstanding, fund the reacquired ViaForm Distribution Rights and the Kuprion Acquisition, pay dividends, pay capital expenditures and fund operations, including working capital. A portion of our interest rate swaps and cross-currency swaps associated with our term loans mature in January 2025.
Our primary uses of cash and cash equivalents were to prepay approximately $1.14 billion of debt outstanding, pay cash dividends and fund operations including working capital and capital expenditures. Our first significant debt principal payment of approximately $800 million is related to the maturity of our 3.875% USD Notes due 2028.
For additional information see Note 10, Income Taxes , to the Consolidated Financial Statements included in this 2023 Annual Report.
In 2024, the estimated fair value of our reporting units was considered to be substantially in excess of their respective carrying value. See Note 8, Goodwill and Intangible Assets , Net, to the Consolidated Financial Statements included in this 2024 Annual Report for additional information.
Removed
The segment provides specialty chemical solutions through the following businesses: Industrial Solutions, Graphics Solutions and Energy Solutions. 2023 Highlights • ViaForm Distribution Rights - On June 1, 2023, we reacquired the right to market and distribute directly (rather than through our exclusive distributor) our ViaForm ® electrochemical deposition products by terminating a long-standing distribution agreement for $200 million, including $170 million paid at closing and a deferred payment of $30.0 million which was paid in the fourth quarter of 2023.
Added
The segment provides specialty chemical solutions through the following businesses: Industrial Solutions, Graphics Solutions and Energy Solutions. 2024 Corporate Activity • Portfolio Optimization - On September 1, 2024, we agreed to sell our flexographic printing plate business, MacDermid Graphics Solutions, for approximately $325 million.
Removed
Following the completion of the transaction, we now manage all aspects of the ViaForm® product line in-house, which we believe will result in a more efficient supply chain and improved customer outcomes for leading semiconductor fabricators. • Kuprion Acquisition - On May 19, 2023, we completed the Kuprion Acquisition for $15.9 million, net of cash with potential additional payments in various installments to be made upon the achievement of certain milestones associated with product qualification and revenue through December 31, 2030.
Added
MacDermid Graphics Solutions constitutes substantially all of our Graphics Solutions business within our Industrial & Specialty segment.
Removed
Kuprion, Inc. is a developer of next-generation nano-copper technology for the semiconductor, circuit board and electronics assembly markets. 26 • Syndication of $1.15 Billion Term Loans and Debt Reduction - In December 2023, we successfully completed the syndication of $1.15 billion of new term loans B-2, which mature in December 2030.
Added
The transaction is expected to close in the first quarter of 2025, subject to customary closing conditions and adjustments. • Improved Balance Sheet through Debt and Interest Rate Reduction - In October 2024, we completed the syndication of $1.04 billion of new term loans B-3 which resulted in an interest rate reduction of 25 basis points to SOFR plus a spread 1.75% per annum.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+0 added−2 removed8 unchanged
Biggest changeAt December 31, 2023, the aggregate U.S. dollar notional amount of metals futures contracts, none of which were designated as hedges for accounting purposes, totaled $63.8 million.
Biggest changeAt December 31, 2024, the aggregate U.S. dollar notional amount of metals futures contracts, none of which were designated as hedges for accounting purposes, totaled $55.3 million. The fair value of the metals forward contracts at December 31, 2024 was a $3.2 million net current asset and net realized and unrealized losses on such contracts for 2024 totaled $11.0 million.
Generally, our foreign subsidiaries use their local currency as their functional currency; the currency in which they incur operating expenses and collect accounts receivable. Our business is exposed to foreign currency risk from changes in the exchange rate primarily between the U.S. dollar and the following currencies: euro, Chinese yuan and British pound.
Generally, our foreign subsidiaries use their local currency as their functional currency; the currency in which they incur operating expenses and collect accounts receivable. Our business is exposed to foreign currency risk from changes in the exchange rate primarily between the U.S. dollar and the following currencies: euro and Chinese yuan.
At December 31, 2023, we believe that our exposure to counterparty risk was immaterial. Foreign Currency Risk We conduct a significant portion of our business in currencies other than the U.S. dollar, our financial reporting currency. In 2023, approximately 75% of our net sales were generated outside of the U.S.
At December 31, 2024, we believe that our exposure to counterparty risk was immaterial. Foreign Currency Risk We conduct a significant portion of our business in currencies other than the U.S. dollar, our financial reporting currency. In 2024, approximately 77% of our net sales were generated outside of the U.S.
The net result of these hedges was an interest rate of approximately 3.3% at December 31, 2023 on the term loans B-2, which could vary in the future due to changes in the euro and the U.S. dollar exchange rate. See Note 12, Financial Instruments , to the Consolidated Financial Statements included in this 2023 Annual Report for additional information.
The net result of these hedges was an interest rate of approximately 3.0% at December 31, 2024 on the term loans B-3, which could vary in the future due to changes in the euro and the U.S. dollar exchange rate. See Note 13, Financial Instruments , to the Consolidated Financial Statements included in this 2024 Annual Report for additional information.
At December 31, 2023, the aggregate U.S. dollar notional amount of foreign currency forward contracts totaled $93.9 million. None of these foreign currency forward contracts were designated as hedges for accounting purposes.
At December 31, 2024, the aggregate U.S. dollar notional amount of foreign currency forward contracts totaled $104 million. None of these foreign currency forward contracts were designated as hedges for accounting purposes.
These swaps effectively convert our outstanding term loans under the Credit Agreement, which are U.S. dollar denominated debt obligations, into fixed-rate euro-denominated debt through the expiration of the swaps.
We designated the interest rate swaps as cash flow hedges and the cross-currency swaps as net investment hedges. These swaps effectively convert our outstanding term loans under the Credit Agreement, which are U.S. dollar denominated debt obligations, into fixed-rate euro-denominated debt through the expiration of the swaps.
Their fair value at December 31, 2023 was a $0.7 million net current liability, and the net realized and unrealized gains on such contracts for 2023 totaled $0.5 million.
Their fair value at December 31, 2024 was a $0.9 million net current asset, and the net realized and unrealized losses on such contracts for 2024 totaled $4.1 million.
At December 31, 2023, we had total debt of $1.93 billion, net of unamortized discounts and debt issuance costs of $17.5 million, including approximately $1.15 billion of variable interest rate debt based on the one-month Secured Overnight Financing Rate (SOFR).
At December 31, 2024, we had total debt of $1.82 billion, net of unamortized discounts and debt issuance costs of $14.8 million, including approximately $1.04 billion of variable interest rate debt based on the one-month Secured Overnight Financing Rate (SOFR). 37 We use interest rate swaps and cross-currency swaps designed to reduce our exposure to interest rate risk and foreign currency risk.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Item 8. Financial Statements and Supplementary Data See “Index to Consolidated Financial Statements” in this 2024 Annual Report. 38 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Removed
We use interest rate swaps and cross-currency swaps designed to reduce our exposure to interest rate risk and foreign currency risk. We designated the interest rate swaps as cash flow hedges and the cross-currency swaps as net investment hedges.
Removed
The fair value of the metals forward 37 contracts at December 31, 2023 was a $1.2 million net current liability and net realized and unrealized losses on such contracts for 2023 totaled $0.1 million. Item 8. Financial Statements and Supplementary Data See “Index to Consolidated Financial Statements” in this 2023 Annual Report. Item 9.

Other ESI 10-K year-over-year comparisons