Solstice Advanced Materials Inc.

    SOLS ·NASDAQ ·Chemicals & Allied Products ·Inc. in DE
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    data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .

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    From 10-Q filed 2026-07-30 (period ending 2026-06-30).


    ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of Solstice Advanced Materials Inc. and its consolidated subsidiaries (“Solstice,” “Solstice Advanced Materials,” “we,” “us,” “our,” or the “Company”) for the three and six months ended June 30, 2026. The financial information as of June 30, 2026 should be read in conjunction with the Consolidated Financial Statements for the year ended December 31, 2025, contained in our 2025 Annual Report on Form 10-K.
    OVERVIEW
    Business Overview
    Solstice is a global, differentiated advanced materials company and a leading global provider of refrigerants, blowing agents, conversion services for the nuclear energy sector, semiconductor materials, protective fibers and healthcare packaging. We operate through two segments, reported as Refrigerants & Applied Solutions (“RAS”) and Electronic & Specialty Materials (“ESM”). Our business is recognized as an industry innovator as well as a technology and quality leader, supported by some of the industry’s most well-known brands.
    Our RAS segment is a leading manufacturer of low global warming potential (“LGWP”) refrigerants, blowing agents, solvents, and aerosol materials, as well as conversion services for the nuclear energy sector. RAS serves the end markets of cooling, air conditioning and refrigeration (“HVAC/R”), automotive, nuclear energy, building and appliance insulation, and healthcare. RAS products include, among others, LGWP refrigerants, blowing agents, aerosol propellants, cleaning solvents, high-barrier pharmaceutical packaging materials and conversion services for nuclear energy providers. Our products are distributed and sold through well-known brands like Solstice, Genetron, and Aclar.
    Our ESM segment is a leading provider of electronic materials, high-strength fibers and laboratory life science chemicals. ESM primarily serves the semiconductor, defense, pharmaceutical and construction end markets. ESM products include, among others, sputtering targets, lightweight high-strength fibers and high-purity life science solutions. Our products are distributed and sold through well-known brands like Spectra, Fluka, and Hydranal.
    The Company serves over 3,000 customers across a wide range of end markets in approximately 120 countries and territories. Our global presence included 20 manufacturing sites and four standalone research and development (“R&D”) sites as of June 30, 2026.
    Proposed Acquisition of Element Solutions Inc
    On July 6, 2026, Solstice entered into an Agreement and Plan of Merger (the “Merger Agreement”) to acquire Element Solutions Inc (“Element Solutions”) in a cash-and-stock transaction pursuant to which Element Solutions stockholders will receive, for each share of Element Solutions common stock, $10.00 in cash and 0.500 shares of Solstice common stock. The transactions contemplated pursuant to the Merger Agreement are referred to as the “Transactions”.
    In connection with entering into the Merger Agreement, Solstice entered into a commitment letter providing among other things, financing for the Transactions in the form of an initial $4.685 billion bridge commitment from Goldman Sachs Bank USA and Goldman Sachs Lending Partners LLC. Solstice intends to obtain permanent debt financing in the form of a senior secured term loan B facility and unsecured notes in public or private offering(s) prior to the closing of the Transactions. Solstice intends to use any such financing in addition to cash from its balance sheet to fund the cash consideration payable at closing of the Transactions. The receipt of financing by Solstice is not a condition to Solstice’s obligation to consummate the Transactions.
    See Note 16 – Subsequent Events for additional information regarding the Transactions.

    27

    Organization Information
    On October 30, 2025 (“the “Spin-off date”), Honeywell International Inc. (“Honeywell”) completed the Spin-off of Solstice by means of a pro rata distribution (the “Distribution”), which was intended to be tax-free for U.S. federal tax purposes, of all of the issued and outstanding Solstice Advanced Materials common shares to Honeywell’s shareowners of record as of the close of business on October 17, 2025 (the “Record Date”), at which time each holder of Honeywell's common shares received one Solstice Advanced Materials common share for every four Honeywell common shares held as of the close of business on the Record Date, resulting in the Distribution of 158,727,456 of the Company’s common shares to Honeywell shareowners. Upon completion of the Distribution, on October 30, 2025, the Company commenced “regular way” trading as an independent public company under the ticker symbol “SOLS” on The Nasdaq Stock Market (“Nasdaq”). Following the Distribution, Honeywell does not beneficially own any Solstice Advanced Materials common shares.
    Relationship with Honeywell
    We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
    Prior to the Spin-off date, the accompanying combined financial statements were derived from the consolidated financial statements and accounting records of Honeywell and presented on a standalone basis as if the Company’s operations had been conducted independently from Honeywell, which includes all revenues and costs directly attributable to the Solstice Advanced Materials business and an allocation of expenses related to certain Honeywell corporate functions. These expenses were allocated to the Solstice Advanced Materials business based on a proportion of net sales and may not be indicative of the actual expense that would have been incurred had Solstice operated as an independent, standalone entity, nor are they indicative of future expenses of the Company. All significant intercompany balances between Solstice and Honeywell prior to the Spin-off date were included within Net Parent investment on the accompanying financial statements.
    Following the Spin-off date, the Company’s financial statements have been prepared on a consolidated financial basis and include the accounts of the Company and those of its subsidiaries and any variable interest entities for which the Company is the primary beneficiary. All significant transactions between Solstice entities were eliminated and any transactions with Honeywell or its subsidiaries are now recorded as third-party transactions.
    The Company classifies certain expenses related to the Spin-off, as well as related to potential or completed acquisitions and divestitures (if any) as Transaction-related costs in the Consolidated Statements of Operations. The Transaction-related costs related to the Spin-off include one-time and non-recurring expenses associated with the separation and stand-up of functions required to operate as a standalone public entity. These non-recurring costs primarily relate to legal, accounting, consulting and other professional service fees, system implementation costs, business and facilities separation, marketing development related to our brand and other matters.
    In connection with the Spin-off from Honeywell, Solstice entered into a Tax Matters Agreement with Honeywell. If the Merger Agreement is terminated under certain specified circumstances, including pursuant to a competing proposal or in the event that Honeywell revokes its consent pursuant to the Tax Matters Agreement entered into between the Company and Honeywell, or otherwise seeks to prohibit the Mergers, the Company may be required to pay Element Solutions a termination fee of $385.0 million or $513 million. If the Merger Agreement is terminated under certain specified circumstances, Element Solutions may be required to pay the Company a termination fee of $376.0 million.
    For additional information regarding our agreements with Honeywell, see Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Relationship with Honeywell” included within our 2025 Annual Report on Form 10-K.


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    Macroeconomic Conditions
    The global macroeconomic environment during the period remained volatile, driven by elevated geopolitical tensions, including ongoing conflicts in Ukraine and the Middle East, as well as heightened trade and diplomatic frictions among major economies. These conditions contributed to uncertainty in global markets, foreign currency volatility, and fluctuations in energy and commodity prices. Geopolitical tension and evolving trade and tariff policies continued to disrupt global supply chains, resulting in higher input costs and periodic supply constraints. We continue to monitor macroeconomic and geopolitical developments including heightened trade tensions, economic and trade policy uncertainty, and inflationary risks.
    Mitigation strategies remain crucial to meet customer demand in this evolving environment. Our mitigation strategies include supply chain simplification, continued alignment to local supply sources, pricing actions and dual source strategies, long-term strategies for constrained materials, direct engagement with key suppliers, and new supplier development. Strong relationships with strategic primary and secondary suppliers allow us to collaborate to reliably source key components and raw materials, develop new products, commit our resources to assist certain suppliers, and at times, alter designs of existing products. We believe these mitigation strategies enable us to reduce supply risk, foster new product innovation, and expand our market presence. Additionally, due to the stringent quality controls and product qualification we perform on any new or altered product, these mitigation strategies have not impacted, and we do not expect them to impact, product quality or reliability.
    To date, our strategies have helped minimize our exposure to these conditions. However, if we are not successful in sustaining or executing mitigation strategies, these macroeconomic conditions could have a material adverse effect on our results of operations, cash flows or financial condition.
    29

    RESULTS OF OPERATIONS
    Income Statement
    For the three months ended June 30, 2026 compared with the three months ended June 30, 2025
    For The Three Months Ended June 30,Percentage of Net Sales For The Three Months Ended June 30,Percentage Change
    (dollars in millions)20262025202620252026 vs. 2025
    Net sales$1,148 $1,033 100 %100 %11 %
    Cost, expenses and other
    Total cost of products and services sold778 671 68 %65 %16 %
    Gross profit370 361 32 %35 %2 %
    Research and development expenses25 23 2 %2 %11 %
    Selling, general and administrative expenses123 105 11 %10 %17 %
    Transaction-related costs25 30 2 %3 %(18)%
    Other expense (income)(2)2 — %— %(222)%
    Interest and other financial charges23 2 2 %— %NM
    Total costs, expenses and other972 833 85 %81 %17 %
    Income before taxes176 199 15 %19 %(12)%
    Income tax expense42 101 4 %10 %(59)%
    Effective tax rate23.7 %50.5 %NMNM(27)%
    Net income
    		134 99 12 %10 %36 %
    Less: Net income attributable to noncontrolling interest
    		15 2 1 %— %697 %
    Net income attributable to Solstice Advanced Materials
    		$119 $97 10 %9 %23 %
    ______________
    NM - not meaningful
    Net Sales
    The following table sets forth the factors contributing to year-over-year changes in our net sales for the three months ended June 30, 2026.
    For The Three Months Ended June 30,
    Change in net sales from prior period2026 vs. 2025
    Volume7.0 %
    Price3.6 %
    Foreign currency translation0.6 %
    Total % change in net sales11.2 %
    A discussion of Net sales by reportable segment can be found under the “Segment Results” section within this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
    30

    Net sales increased by $115 million or 11% primarily due to volume growth of $58 million and favorable pricing of $31 million in the RAS segment, as well as volume growth of $14 million and favorable pricing of $6 million in the ESM segment.
    Cost of product and services sold increased by $107 million or 16% primarily driven by volume increases and inflation in raw materials in the RAS segment.
    Research and development expenses increased by $2 million or 11% driven by continued investment in innovation across the portfolio of offerings such as Spectra Y and next-generation molecules; Selling, general and administrative expenses increased by $18 million or 17% driven by an increase in employee-related expenses, primarily in connection with additional headcount necessary to operate as an independent public company; Transaction-related costs decreased by $6 million or 18% driven by a decrease in professional advisory services fees incurred after the Spin-off, partially offset by expenses incurred in connection with potential strategic transactions; Other expense (income) had a favorable change of $4 million driven primarily by lower foreign currency losses in the current period compared to the prior period; and Interest and other financial charges increased by $22 million driven by the issuance of debt in connection with the Spin-off in the second half of 2025.
    Income tax expense decreased by $59 million. The effective tax rate in 2026 was lower than the effective tax rate in 2025 as a result of nondeductible transaction costs and incremental frictional tax costs related to the Spin-off from Honeywell in the prior-year period. See Note 5 – Income Taxes of the Notes to the Consolidated Financial Statements for additional information on the effective tax rate.
    For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
    For The Six Months Ended June 30, Percentage of Net Sales For The Six Months Ended June 30,Percentage Change
    (dollars in millions)20262025202620252026 vs. 2025
    Net sales$2,139 $1,930 100 %100 %11 %
    Cost, expenses and other
    Total cost of products and services sold1,453 1,248 68 %65 %16 %
    Gross profit687 682 32 %35 %1 %
    Research and development expenses53 45 2 %2 %18 %
    Selling, general and administrative expenses230 198 11 %10 %16 %
    Transaction-related costs47 58 2 %3 %(18)%
    Other expense (income)(9)(9)— %— %1 %
    Interest and other financial charges53 3 2 %— %NM
    Total costs, expenses and other1,827 1,543 85 %80 %18 %
    Income before taxes312 387 15 %20 %(19)%
    Income tax expense73 148 3 %8 %(51)%
    Effective tax rate23.5 %38.2 %NMNM(15)%
    Net income239 239 11 %12 %— %
    Less: Net income attributable to noncontrolling interest35 8 2 %— %340 %
    Net income attributable to Solstice Advanced Materials$204 $231 10 %12 %(12)%
    ______________
    NM - not meaningful
    31

    Net Sales
    The following table sets forth the factors contributing to year-over-year changes in our net sales for the six months ended June 30, 2026.
    For The Six Months Ended June 30,
    Change in net sales from prior period2026 vs. 2025
    Volume6.2 %
    Price3.0 %
    Foreign currency translation1.6 %
    Total % change in net sales10.8 %
    A discussion of Net sales by reportable segment can be found under the “Segment Results” section within this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
    Net sales increased by $209 million or 11% primarily due to volume growth of $95 million, favorable pricing of $52 million and favorable foreign currency impacts of $22 million in the RAS segment, as well as volume growth of $26 million, favorable foreign currency impacts of $9 million and favorable pricing of $6 million in the ESM segment.
    Cost of product and services sold increased by $205 million or 16% primarily driven by volume increases and inflation in raw materials in both the RAS and ESM segments.
    Research and development expenses increased by $8 million or 18% driven by continued investment in innovation across the portfolio of offerings such as Spectra Y and next-generation molecules; Selling, general and administrative expenses increased by $32 million or 16% driven by an increase in employee-related expenses, primarily in connection with additional headcount necessary to operate as an independent public company; Transaction-related costs decreased by $11 million or 18% driven by a decrease in professional advisory services fees incurred after the Spin-off, partially offset by expenses incurred in connection with potential strategic transactions; Other expense (income) remained relatively flat; and Interest and other financial charges increased by $50 million driven by the issuance of debt in connection with the Spin-off in the second half of 2025.
    Income tax expense decreased by $75 million. The effective tax rate in 2026 was lower than the effective tax rate in 2025 as a result of nondeductible transaction costs and incremental frictional tax costs related to the Spin-off from Honeywell in the prior-year period. See Note 5 – Income Taxes of the Notes to the Consolidated Financial Statements for additional information on the effective tax rate.
    SEGMENT RESULTS
    We manage and report our operating results through two reportable segments: Refrigerants & Applied Solutions (RAS) and Electronic & Specialty Materials (ESM). The remainder of our operations are presented in Corporate and All Other, which is not a reportable business segment.
    Segment Adjusted EBITDA is the primary measure of segment profitability used by our Chief Operating Decision Maker. We define Segment Adjusted EBITDA as segment net income excluding income taxes, general corporate unallocated expense, depreciation, amortization, interest and other financial charges, remeasurement of foreign currencies, stock-based compensation expense, nonoperating pension expense (income), transaction-related costs, repositioning charges, asset retirement obligations accretion, asset impairment charges, litigation costs and insurance settlements (net of recoveries), gains and losses on disposal of assets, and certain other items that are otherwise of an unusual or non-recurring nature.
    32

    Refrigerants & Applied Solutions
    Net Sales
    The following sets forth the net sales for our RAS segment for the three months ended June 30, 2026 and 2025.
    33

    The following sets forth the net sales for our RAS segment for the six months ended June 30, 2026 and 2025.
    The following table sets forth the net sales, Segment Adjusted EBITDA, and Segment Adjusted EBITDA margin amounts for our RAS segment for the three and six months ended June 30, 2026 and 2025.
    For The Three Months Ended June 30,For The Six Months Ended June 30,
    (Dollars in millions)2026202520262025
    Net sales$850 $756 $1,561 $1,392 
    Segment Adjusted EBITDA280 298 522 548 
    Segment Adjusted EBITDA margin32.9 %39.4 %33.5 %39.4 %
    The following table sets forth the reported and organic net sales growth in our RAS segment’s net sales for the three and six months ended June 30, 2026 compared with the prior year periods.
    For The Three Months Ended June 30,For The Six Months Ended June 30,
    2026 vs. 20252026 vs. 2025
    Total % change in net sales12.5 %12.1 %
    Foreign currency translation(0.7)%(1.5)%
    Acquisitions, divestitures and other, net— %— %
    Organic sales percentage(1)
    		11.8 %10.6 %
    ______________
    (1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for definition of Organic sales percentage.

    34

    For the three months ended June 30, 2026 compared with the three months ended June 30, 2025
    RAS net sales increased by $94 million or 13% primarily driven by volume growth of $58 million, mainly as a result of the ongoing transition to LGWP refrigerants and volume increases in nuclear. Favorable pricing of $31 million also contributed to the increase, primarily driven by higher pricing in the stationary end market.
    Segment Adjusted EBITDA decreased by $18 million or 6% and Segment Adjusted EBITDA margin decreased 6% primarily driven by timing of current year plant turnaround activity and production incentive credits in the prior year. These decreases were partially offset by volume growth and favorable pricing.
    For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
    RAS net sales increased by $169 million or 12% primarily driven by volume growth of $95 million, mainly as a result of the ongoing transition to LGWP refrigerants and volume increases in nuclear. Favorable pricing of $52 million, primarily driven by higher pricing in the stationary end market, and favorable currency translation impacts on net sales of $22 million also contributed to the increase.
    Segment Adjusted EBITDA decreased by $26 million or 5% and Segment Adjusted EBITDA margin decreased 6% primarily driven by inflation of raw material costs and higher R&D expenses.
    Electronic & Specialty Materials
    Net Sales
    The following sets forth the net sales for our ESM segment for the three months ended June 30, 2026 and 2025.
    35

    The following sets forth the net sales for our ESM segment for the six months ended June 30, 2026 and 2025.
    The following table sets forth the net sales, Segment Adjusted EBITDA, and Segment Adjusted EBITDA margin amounts for our ESM segment for the three and six months ended June 30, 2026 and 2025.
    For The Three Months Ended June 30,For The Six Months Ended June 30,
    (Dollars in millions)2026202520262025
    Net sales$298 $277 $579 $538 
    Segment Adjusted EBITDA64 52 123 105 
    Segment Adjusted EBITDA margin21.6 %18.8 %21.2 %19.5 %
    The following table sets forth the reported and organic net sales growth in our ESM segment’s net sales for the three and six months ended June 30, 2026 compared with the prior year periods.
    For The Three Months Ended June 30,For The Six Months Ended June 30,
    2026 vs. 20252026 vs. 2025
    Total % change in net sales7.7 %7.6 %
    Foreign currency translation(0.4)%(1.7)%
    Acquisitions, divestitures and other, net— %— %
    Organic sales percentage(1)
    		7.3 %5.9 %
    _____________
    (1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for definition of Organic sales percentage.
    36

    For the three months ended June 30, 2026 compared with the three months ended June 30, 2025
    ESM net sales increased by $21 million or 8%. The increase was primarily driven by volume growth of $14 million, mainly due to volume increases in electronic materials related to stronger memory demand in the semiconductor end market. Favorable pricing of $6 million also contributed to the increase.
    Segment Adjusted EBITDA increased by $12 million or 24% and Segment Adjusted EBITDA margin increased 3% primarily driven by volume growth in Electronic Materials and productivity.
    For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
    ESM net sales increased by $41 million or 8%. The increase was primarily driven by volume growth of $26 million, mainly due to volume increases in electronic materials related to stronger memory demand in the semiconductor end market. Favorable currency translation impacts on net sales of $9 million and favorable pricing of $6 million also contributed to the increase.
    Segment Adjusted EBITDA increased by $18 million or 17% and Segment Adjusted EBITDA margin increased 2% primarily driven by volume growth in Electronic Materials, improved pricing, and productivity.
    Corporate and All Other
    Corporate and All Other costs increased by $8 million or 18% and $28 million or 36% for the three and six months ended June 30, 2026 compared to the prior year periods, respectively, due to an increase in selling, general and administrative expenses, primarily due to higher employee-related expenses as a result of additional headcount necessary to operate as an independent public company.
    NON-GAAP FINANCIAL MEASURES
    We use non-GAAP financial measures to supplement the financial measures prepared in accordance with U.S. GAAP. These include (1) Organic sales percentage, (2) Adjusted EBITDA and (3) Adjusted EBITDA margin.
    Below are definitions and reconciliations of certain non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends. Management believes these non-GAAP financial measures provide investors with a meaningful measure of its performance period to period, align the measures to how management evaluates performance internally, and make it easier for investors to compare our performance to peers. These measures should be considered in addition to, and not as replacements for, the most directly comparable U.S. GAAP measure. The non-GAAP financial measures we use are as follows:
    Organic sales percentage: The Company defines organic sales percentage as the year-over-year change in reported sales relative to the comparable period, excluding the impact on sales from foreign currency translation and acquisitions, net of divestitures, for the first 12 months following the transaction date. We believe this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.
    For The Three Months Ended June 30,For The Six Months Ended June 30,
    2026 vs. 20252026 vs. 2025
    Total % change in net sales11.2 %10.8 %
    Foreign currency translation(0.6)%(1.6)%
    Acquisitions, divestitures and other, net— %— %
    Organic sales percentage10.6 %9.2 %
    37

    Adjusted EBITDA and Adjusted EBITDA margin: The Company defines Adjusted EBITDA as net income excluding income taxes, depreciation, amortization, interest and other financial charges, remeasurement of foreign currencies, stock-based compensation expense, nonoperating pension expense (income), transaction-related costs, repositioning charges, asset retirement obligations accretion, asset impairment charges, litigation costs and insurance settlements (net of recoveries), gains and losses on disposal of assets, and certain other items that are otherwise of an unusual or non-recurring nature. The Company defines Adjusted EBITDA margin as Adjusted EBITDA divided by Net sales. We believe these measures are useful to investors as they provide greater transparency with respect to supplemental information used by management in its financial and operational decision making, as well as understanding ongoing operating trends. The table below reconciles Net income, the most directly comparable U.S. GAAP measure, to the Company’s non-GAAP measure of Adjusted EBITDA for the three and six months ended June 30, 2026 and 2025.

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    Recent SEC filings

    • 2026-08-27 8-K Material Agreement Entered; Material Agreement Terminated; Regulation FD Disclosure; Other Events; Financial Statements and Exhibits
    • 2026-07-30 8-K Earnings Release; Financial Statements and Exhibits
    • 2026-07-30 10-Q Quarterly Report
    • 2026-07-27 8-K Material Agreement Entered; Financial Statements and Exhibits
    • 2026-07-17 8-K Other Events; Financial Statements and Exhibits
    • 2026-07-07 8-K Material Agreement Entered; Other Events; Financial Statements and Exhibits
    • 2026-05-06 8-K Earnings Release; Financial Statements and Exhibits
    • 2026-05-06 10-Q Quarterly Report
    • 2026-04-27 8-K Other Events; Financial Statements and Exhibits
    • 2026-02-25 8-K Officer/Director Change; Financial Statements and Exhibits
    • 2026-02-20 8-K Shareholder Director Nominations; Other Events
    • 2026-02-19 10-K Annual Report
    • 2026-02-11 8-K Earnings Release; Other Events; Financial Statements and Exhibits
    • 2025-11-13 10-Q Quarterly Report
    • 2025-11-06 8-K Earnings Release; Financial Statements and Exhibits