EX-99.2 4 tm2218691d2_ex99-2.htm EXHIBIT 99.2

 

Exhibit 99.2

 

Unaudited Combined Financial Statements of DuPont’s Mobility and Materials business

 

   Page No.
Index to Unaudited Combined Financial Statements of the M&M Business   
Combined Statements of Operations for the three months ended March 31, 2022 and 2021 (unaudited)  2
Combined Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021 (unaudited)  3
Combined Balance Sheets as of March 31, 2022 and 2021 (unaudited)  4
Combined Statements of Cash Flows for the three months ended March 31, 2022 and 2021  5
Combined Statements of Changes in Net Parent Investment for the three months ended December 31, 2022 and 2021 (unaudited)  6
Notes to the Combined Financial Statements (unaudited)  7

 

1

 

 

Mobility & Materials Businesses

 

Combined Statements of Operations (Unaudited)

 

(In millions)
For the three months ended March 31,		  2022   2021 
Net sales  $889   $826 
Cost of sales   682    576 
Research and development expenses   18    19 
Selling, general and administrative expenses   84    81 
Amortization of intangibles   33    33 
Integration and separation costs   96    1 
Equity in (losses) earnings of nonconsolidated affiliates   (1)   3 
Sundry income (expense), net   7    (2)
(Loss) Income before income taxes   (18)   117 
Benefit from income taxes   (4)   (9)
Net (loss) income   (14)   126 
Net income attributable to noncontrolling interests   1    5 
Net (loss) income attributable to Mobility & Materials Businesses  $(15)  $121 

 

See Notes to the Combined Financial Statements.

 

2

 

 

 

Mobility & Materials Businesses

 

Combined Statements of Comprehensive Income (Loss) (Unaudited)

 

(In millions)
For the three months ended March 31,		  2022   2021 
Net (loss) income  $(14)  $126 
Other comprehensive loss, net of tax          
Cumulative translation adjustments   (59)   (70)
Total other comprehensive loss   (59)   (70)
Comprehensive (loss) income   (73)   56 
Comprehensive income attributable to noncontrolling interests, net of tax   1    5 
Comprehensive (loss) income attributable to Mobility & Materials Businesses  $(74)  $51 

 

See Notes to the Combined Financial Statements.

 

3

 

 

Mobility & Materials Businesses

 

Combined Balance Sheets (Unaudited)

 

(In millions)  March 31, 2022   December 31, 2021 
Assets          
Current Assets          
Cash and cash equivalents  $80   $80 
Accounts and notes receivable, net   577    509 
Inventories   785    690 
Prepaid expenses and other current assets   75    57 
Total current assets   1,517    1,336 
Property          
Property, plant and equipment   1,494    1,503 
Less: Accumulated depreciation   497    480 
Property, plant and equipment, net   997    1,023 
Other Assets          
Goodwill   2,093    2,118 
Other intangible assets   1,812    1,851 
Investments and noncurrent receivables   56    67 
Deferred income tax assets   19    22 
Deferred charges and other assets   44    45 
Total Other Assets   4,024    4,103 
Total Assets  $6,538   $6,462 
Liabilities and Equity          
Current Liabilities          
Accounts payable  $531   $463 
Income taxes payable   79    84 
Accrued and other current liabilities   106    139 
Total Current Liabilities   716    686 
Other Noncurrent Obligations          
Deferred income tax liabilities   413    443 
Other noncurrent obligations   60    63 
Total Other Noncurrent Obligations   473    506 
Total Liabilities   1,189    1,192 
Commitments and Contingent Liabilities (Note 8)          
Equity          
Parent company net investment   5,321    5,182 
Accumulated other comprehensive loss   (152)   (93)
Total Mobility & Materials Businesses Equity   5,169    5,089 
Noncontrolling interests   180    181 
Total Equity   5,349    5,270 
Total Liabilities and Equity  $6,538   $6,462 

 

See Notes to the Combined Financial Statements.

 

4

 

 

Mobility & Materials Businesses

 

Combined Statements of Cash Flows (Unaudited)

 

(In millions)
For the three months ended March 31,		  2022   2021 
Operating Activities          
Net (loss) income  $(14)  $126 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:          
Depreciation of property, plant and equipment   25    25 
Amortization of definite-lived intangible assets   33    33 
Stock-based compensation   —    2 
Credit for deferred income tax and other tax related items   (29)   (34)
Equity in losses (earnings) of affiliates   1    (3)
Changes in assets and liabilities:          
Accounts and notes receivable   (77)   (27)
Inventories   (103)   (94)
Accounts payable   83    75 
Other assets and liabilities, net   (62)   (3)
Cash (used in) provided by operating activities   (143)   100 
Investing Activities          
Capital expenditures   (21)   (13)
Cash distributions from equity affiliates   12    — 
Cash used for investing activities   (9)   (13)
Financing Activities          
(Distributions to) contributions from noncontrolling interests   (2)   4 
Net transfers from (to) Parent   154    (90)
Cash provided by (used for) financing activities   152    (86)
Increase in cash and cash equivalents   —    1 
Cash and cash equivalents at beginning of period   80    70 
Cash and cash equivalents at end of period  $80   $71 

 

See Notes to the Combined Financial Statements.

 

5

 

 

Mobility & Materials Businesses

 

Combined Statements of Changes in Net Parent Investment (Unaudited)

 

 

(In millions)  Parent Company
 Net Investment		   Accumulated Other
Comprehensive
Income (Loss)		   Total Mobility &
Materials Businesses
Equity		   Non-controlling
Interests		   Total Equity 
Balance at December 31, 2020  $5,150   $45   $5,195   $171   $5,366 
Net income   121    —    121    5    126 
Other comprehensive loss   —    (70)   (70)   —    (70)
Contributions from noncontrolling interests   —    —    —    4    4 
Net transfers to Parent   (88)   —    (88)   —    (88)
Balance at March 31, 2021  $5,183   $(25)  $5,158   $180   $5,338 
Balance at December 31, 2021  $5,182   $(93)  $5,089   $181   $5,270 
Net (loss) income   (15)   —    (15)   1    (14)
Other comprehensive loss   —    (59)   (59)   —    (59)
Distributions to noncontrolling interests   —    —    —    (2)   (2)
Net transfers from Parent   154    —    154    —    154 
Balance at March 31, 2022  $5,321   $(152)  $5,169   $180   $5,349 

 

See Notes to the Combined Financial Statements.

 

6

 

 

Mobility & Materials Businesses

 

Notes To The Combined Financial Statements (Unaudited)

 

Table of Contents

 

Note     Page
1  Summary of Significant Accounting Policies  8
2  Revenue  9
3  Related Party Transactions  9
4  Sundry Income (Expense), Net  10
5  Income Taxes  10
6  Inventories  11
7  Goodwill and Other Intangible Assets  11
8  Commitments and Contingent Liabilities  12
9  Leases  12
10  Accumulated Other Comprehensive Income (Loss)  12

 

7

 

 

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Interim Financial Statements

 

The accompanying unaudited interim Combined Financial Statements of a majority of DuPont de Nemours, Inc.’s (“DuPont” or “Parent”) historic Mobility & Materials segment, including the Engineering Polymers business and select product lines within the Performance Resins and Advanced Solutions businesses (collectively, the “Mobility & Materials Businesses” or “the Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) . In the opinion of management, the interim Combined Financial Statements reflect all adjustments (including normal recurring accruals) which are considered necessary for the fair statement of the results for the periods presented. Results from interim periods should not be considered indicative of results for the full year. These interim Combined Financial Statements should be read in conjunction with the audited annual Combined Financial Statements and notes thereto for the year ended December 31, 2021, collectively referred to as the “2021 Annual Financial Statements.” The interim Combined Financial Statements include the accounts of the Company and subsidiaries in which a controlling interest is maintained.

 

Transaction Anticipated in the fourth quarter of 2022

 

On February 17, 2022, DuPont entered into a Transaction Agreement (the “Transaction Agreement”) with Celanese Corporation (“Celanese”) to divest the Company. The transaction is expected to close around the end of 2022, subject to customary closing conditions and regulatory approvals.

 

Basis of Presentation

 

Historically, the Company has been managed and operated in the normal course with other businesses of Parent through multiple legal entities that are not dedicated to the Mobility & Materials Businesses. For all periods presented, the Company consisted of several legal entities, previously acquired businesses, as well as businesses with no separate legal status. Separate financial statements of the Company have not historically been prepared for the Company. The interim Combined Financial Statements have been derived from DuPont’s accounting records as if the Company’s operations had been conducted independently from those of DuPont and were prepared on a stand-alone basis in accordance with U.S. generally accepted accounting principles (“GAAP”).

 

The historical results of operations, financial position and cash flows of the Company presented in these interim Combined Financial Statements may not be indicative of what they would have been had the Company actually been an independent stand-alone entity, nor are they necessarily indicative of the Company’s future results of operations, financial position and cash flows.

 

The Company’s interim Combined Statements of Operations and Comprehensive Income (Loss) reflect allocations of general corporate expenses from Parent including, but not limited to, executive management, finance, legal, information technology, employee benefits administration, treasury, risk management, procurement and other shared services, and restructuring and integration and separation activities related to these functions in connection with the merger of the DOW Chemical Company (“Historical Dow”) and E. I. du Pont de Nemours and Company (“Historical EID”) effective August 31, 2017 (the “DWDP Merger”). These allocations were made on the basis of revenue, expenses, headcount or other relevant measures. Management of the Company and Parent consider these allocations to be an overall reasonable reflection of the utilization of services by, or the benefits provided to, the Company, in the aggregate. The allocations may not, however, reflect the expenses the Company would have incurred as a stand-alone company for the periods presented.

 

The Company’s interim Combined Balance Sheets include Parent assets and liabilities that are specifically identifiable or otherwise attributable to the Company, including subsidiaries and affiliates in which Parent has a controlling financial interest or is the primary beneficiary.

 

8

 

 

NOTE 2 — REVENUE

 

Revenue Recognition

 

Products

 

Substantially all of the Company’s revenue is derived from product sales. Product sales consist of sales of the Company’s products to supply manufacturers and distributors. The Company considers purchase orders, which in some cases are governed by master supply agreements, to be a contract with a customer. Contracts with customers are considered to be short-term when the time between order confirmation and satisfaction of the performance obligations is equal to or less than one year.

 

The Company records accounts receivable when the right to consideration becomes unconditional. Trade accounts receivable were $454 million at March 31, 2022 and $388 million at December 31, 2021. Trade accounts receivable are included in “Accounts and notes receivable, net” in the interim Combined Balance Sheets. There were no contract assets or contract liabilities at March 31, 2022 or December 31, 2021.

 

Disaggregation of Revenue

 

The Company disaggregates its revenue from contracts with customers by major product line, as the Company believes it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows.

 

Net Sales by Major Product Line

 

(In millions)
For the three months ended March 31,		  2022   2021 
Advanced Solutions  $147   $166 
Engineering Polymers   587    501 
Performance Resins   155    159 
Total  $889   $826 

 

NOTE 3 — RELATED PARTY TRANSACTIONS

 

Historically, the Company has been managed and operated in the normal course with other businesses of Parent. Accordingly, certain shared costs have been allocated to the Company and reflected as expenses in the stand-alone interim Combined Financial Statements. Management of Parent and the Company considers the allocation methodologies used to be reasonable and appropriate reflections of the historical expenses attributable to the Company for purposes of the stand-alone financial statements. The expenses reflected in the interim Combined Financial Statements may not be indicative of expenses that would be incurred by the Company in the future. All related party transactions approximate prices at cost.

 

Corporate Expense Allocations

 

The Company’s interim Combined Statements of Operations include general corporate expenses of Parent for services provided by Parent for certain support functions that are provided on a centralized basis. These costs were first attributed to the Company if specifically identifiable to its businesses. If not specifically identifiable to the Company’s businesses, these costs have been allocated by using relevant allocation methods, primarily based on sales metrics, consistently for all periods presented.

 

Corporate expense allocations were recorded in the interim Combined Statements of Operations within the following captions:

 

(In millions)
For the three months ended March 31,		  2022   2021 
Selling and administrative expenses  $38   $37 
Research and development expenses   6    6 
Cost of sales   4    3 
Integration and separation costs(1)   96    1 
Total  $144   $47 

 

 

(1) Costs primarily have consisted of financial advisory, information technology, legal, accounting, consulting, and other professional advisory fees associated with the preparation and execution of activities related to strategic initiatives. Costs incurred in the three months ended March 31, 2022 are related to the anticipated divestiture of the Company by the Parent.

 

9

 

 

Parent Company Equity

 

Net transfers from (to) Parent are included within Parent company net investment on the interim Combined Statements of Changes in Net Parent Investment. The components of the net transfers from (to) Parent are as follows:

 

(In millions)
For the three months ended March 31,		  2022   2021 
Cash pooling and general financing activities  $294   $(50)
Less: Corporate cost allocations   144    47 
Less: Benefit from income taxes   (4)   (9)
Total net transfers from (to) Parent per interim Combined Statements of Changes in Net Parent Investment   154    (88)
Stock-based compensation   —    (2)
Net transfers from (to) Parent per interim Combined Statements of Cash Flows  $154   $(90)

 

Sales to and Purchases from Equity Method Investments (“Nonconsolidated affiliates”)

 

Sales to nonconsolidated affiliates, (which included the entities Toray Co., Ltd, DuBay Polymer GmbH, DuP Teijin Films U.K., DuP Teijin Films S.A., Teijin DuPont Films, Inc. and Teijin-DuPont Films, L.P.) were $25 million and $16 million for the three months ended March 31, 2022 and 2021, respectively. Purchases from nonconsolidated affiliates were $14 million for the three months ended March 31, 2022 and 2021. Related party receivables and payables were not material as of March 31, 2022 and December 31, 2021, respectively.

 

NOTE 4 — SUNDRY INCOME (EXPENSE), NET

 

(In millions)
For the three months ended March 31,		  2022   2021 
Foreign exchange gains, net  $7   $1 
Non-operating pension credit   4    3 
Miscellaneous expense, net   (4)   (6)
Sundry income (expense), net  $7   $(2)

 

NOTE 5 — INCOME TAXES

 

During the periods presented in the interim Combined Financial Statements, the Company did not file separate tax returns in the U.S. federal, certain state and local, and certain foreign tax jurisdictions, as the Company was included in the tax grouping of Parent and its affiliate entities within the respective jurisdictions. Benefit from income taxes included in these interim Combined Financial Statements have been calculated using the separate return basis, as if the Company filed separate tax returns. The Company’s Benefit from income taxes as presented in the interim Combined Financial Statements may not be indicative of the income taxes that the Company will generate in the future.

 

The Company’s effective tax rate fluctuates based on, among other factors, the geographic mix of earnings. The tax benefit for the first quarter of 2022 resulted in an effective tax rate on operations of 22.2 percent on a pre-tax loss of $18 million, whereas for the first quarter of 2021, the tax benefit resulted in an effective tax rate of (7.7) percent, on pre-tax income of $117 million. The effective tax rate for the first quarter of 2021 was principally the result of a $30 million tax benefit related to the step-up in tax basis in the goodwill of the Company’s European regional headquarters legal entity.

 

Each year Parent, inclusive of the Company, files hundreds of tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the tax authorities. Positions challenged by the tax authorities may be settled or appealed by the Company. As a result, there is an uncertainty in income taxes recognized in the Company’s financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. The ultimate resolution of such uncertainties is not expected to have a material impact on the Company’s results of operations.

 

10

 

 

NOTE 6 — INVENTORIES

 

(In millions)  March 31, 2022   December 31, 2021 
Finished goods  $503   $446 
Work in process   79    74 
Raw materials   163    130 
Supplies   40    40 
Total inventories  $785   $690 

 

NOTE 7 — GOODWILL AND OTHER INTANGIBLE ASSETS

 

The following table summarizes changes in the carrying amount of goodwill for the three months ended March 31, 2022:

 

(In millions)  Goodwill 
Balance at December 31, 2021  $2,118 
Currency Translation Adjustment   (25)
Balance at March 31, 2022  $2,093 

 

Other Intangible Assets

 

The gross carrying amounts and accumulated amortization of other intangible assets by major class are as follows:

 

   March 31, 2022   December 31, 2021 
(In millions)  Gross
 Carrying
 Amount		   Accumulated
 Amort		   Net   Gross
 Carrying  
Amount		   Accumulated  
Amort		   Net 
Intangible assets with finite lives:                              
Developed technology  $585   $(197)  $388   $585   $(186)  $399 
Customer-related   1,636    (400)   1,236    1,635    (371)   1,264 
Other   9    (1)   8    9    (1)   8 
Total other intangible assets with finite lives  $2,230   $(598)  $1,632   $2,229   $(558)  $1,671 
Intangible assets with indefinite lives:                              
Trademarks/tradenames   180    —    180    180    —    180 
Total other intangible assets with indefinite lives   180    —    180    180    —    180 
Total  $2,410   $(598)  $1,812   $2,409   $(558)  $1,851 

 

The aggregate pre-tax amortization expense for definite-lived intangible assets was $33 million for each of the three month periods ended March 31, 2022 and 2021.

 

11

 

 

NOTE 8 — COMMITMENTS AND CONTINGENT LIABILITIES

 

Litigation

 

The Company is involved in numerous claims and lawsuits, principally in the United States, including various product liability (involving the Company’s current or former products), intellectual property, employment related, and commercial matters. Certain of these matters may purport to be class actions and seek damages in very large amounts. Liabilities related to matters that are not directly attributable to the Company business and for which the Company is not the legal obligor are not recognized within the Company’s interim Combined Financial Statements for any of the periods presented.

 

As of March 31, 2022, the Company had recorded liabilities of approximately $3 million related to the foregoing. Because such matters are subject to inherent uncertainties, and unfavorable rulings or developments could occur, there can be no certainty that the Company will not ultimately incur charges in excess of presently recorded liabilities. Although considerable uncertainty exists, management does not believe it is reasonably possible that the ultimate disposition of these matters will have a material adverse effect on the Company’s results of operations, combined financial position or liquidity. However, the ultimate liabilities could be material to results of operations in the period recognized.

 

NOTE 9 — LEASES

 

Operating lease right of use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. New operating lease assets and liabilities entered into during the three months ended March 31, 2022 and 2021 were $1 million and $9 million, respectively. Supplemental balance sheet information related to leases was as follows:

 

(In millions)  March 31, 2022   December 31, 2021 
Operating Leases          
Operating lease right-of-use assets(1)  $42   $44 
Current operating lease liabilities(2)   7    8 
Noncurrent operating lease liabilities(3)   35    36 
Total operating lease liabilities  $42   $44 

 

 

(1) Included in “Deferred charges and other assets” in the Combined Balance Sheets.

(2) Included in “Accrued and other current liabilities” in the Combined Balance Sheets.

(3) Included in “Other noncurrent obligations” in the Combined Balance Sheets.

 

NOTE 10 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

 

The following table summarizes the activity related to each component of accumulated other comprehensive income (loss):

 

Accumulated Other Comprehensive Income (Loss)

 

(In millions)
For the three months ended March 31,		  Cumulative
Translation Adj		   Total 
2021          
Balance at January 1, 2021  $45   $45 
Other comprehensive loss before reclassifications   (70)   (70)
Net other comprehensive loss  $(70)  $(70)
Balance at March 31, 2021  $(25)  $(25)
2022          
Balance at January 1, 2022  $(93)  $(93)
Other comprehensive loss before reclassifications   (59)   (59)
Net other comprehensive loss  $(59)  $(59)
Balance at March 31, 2022  $(152)  $(152)

 

12