filings.toolsItem 16. FORM 10-K SUMMARY
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Item 16. FORM 10-K SUMMARY
None.
| Qnity Electronics, Inc. Signatures |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
QNITY ELECTRONICS, INC.
Registrant
Date: February 26, 2026
| By: | /s/ MICHAEL G. GOSS | |||||||||||||
| Name: | Michael G. Goss | |||||||||||||
| Title: | Interim Chief Financial Officer | |||||||||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title(s) | Date | |||||||||||||||
| /s/ JON D. KEMP | Chief Executive Officer and Director (Principal Executive Officer) | February 26, 2026 | |||||||||||||||
| Jon D. Kemp | |||||||||||||||||
| /s/ MICHAEL G. GOSS | Interim Chief Financial Officer | February 26, 2026 | |||||||||||||||
| Michael G. Goss | (Principal Financial Officer and Principal Accounting Officer) | ||||||||||||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:
| Signature | Title(s) | Date | |||||||||||||||
| /s/ MARK A. BLINN | Chair of the Board of Directors | February 26, 2026 | |||||||||||||||
| Mark A. Blinn | |||||||||||||||||
| /s/ DR. SHUMEET BANERJI | Director | February 26, 2026 | |||||||||||||||
| Dr. Shumeet Banerji | |||||||||||||||||
| /s/ TERRENCE R. CURTIN | Director | February 26, 2026 | |||||||||||||||
| Terrence R. Curtin | |||||||||||||||||
| /s/ KARIN DE BONDT | Director | February 26, 2026 | |||||||||||||||
| Karin De Bondt | |||||||||||||||||
| /s/ BYRON GREEN | Director | February 26, 2026 | |||||||||||||||
| Byron Green | |||||||||||||||||
| /s/ DR. KRISTINA M. JOHNSON | Director | February 26, 2026 | |||||||||||||||
| Dr. Kristina M. Johnson | |||||||||||||||||
| /s/ ANNE NOONAN | Director | February 26, 2026 | |||||||||||||||
| Anne Noonan | |||||||||||||||||
| /s/ DR. YI HYON PAIK | Director | February 26, 2026 | |||||||||||||||
| Dr. Yi Hyon Paik | |||||||||||||||||
| /s/ STEVEN M. STERIN | Director | February 26, 2026 | |||||||||||||||
| Steven M. Sterin | |||||||||||||||||
Qnity Electronics, Inc.
Index to the Consolidated Financial Statements
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Qnity Electronics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Qnity Electronics, Inc. and its subsidiaries (the "Company") as of December 31, 2025 and 2024, and the related consolidated statements of operations, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2025 appearing under Item 15(a)(2) (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition – Product Sales
As described in Notes 1 and 3 to the consolidated financial statements, the Company’s total net sales were $4,754 million for the year ended December 31, 2025, of which a majority relates to product sales. Product sales consist of sales to supply manufacturers and distributors. Revenue is recognized when the customer obtains control of the product, which occurs at a point in time, usually upon shipment, and in an amount that reflects the consideration which the Company expects to receive in exchange for those goods.
The principal consideration for our determination that performing procedures relating to revenue recognition for product sales is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others (i) testing revenue recognized for a sample of product sales transactions by obtaining and inspecting source documents, such as purchase orders, invoices, proof of shipment or delivery, and cash receipts, where applicable, and (ii) confirming a sample of outstanding customer invoice balances as of December 31, 2025 and, for confirmations not returned, obtaining and inspecting source documents, such as purchase orders, invoices, proof of shipment or delivery, and subsequent cash receipts, where applicable.
F-2
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 26, 2026
We have served as the Company’s auditor since 2024.
F-3
Qnity Electronics, Inc.
Consolidated Statements of Operations
| (In millions, except for per share amounts) For the years ended December 31, | 2025 | 2024 | 2023 | ||||||||
| Net sales | $ | 4,754 | $ | 4,335 | $ | 4,035 | |||||
| Cost of sales | 2,559 | 2,339 | 2,280 | ||||||||
| Research and development expenses | 354 | 314 | 303 | ||||||||
| Selling, general and administrative expenses | 620 | 603 | 533 | ||||||||
| Amortization of intangibles | 207 | 232 | 262 | ||||||||
| Restructuring and asset related charges - net | 20 | 8 | 52 | ||||||||
| Acquisition, integration and separation costs | 25 | — | — | ||||||||
| Equity in earnings of nonconsolidated affiliates | 47 | 37 | 16 | ||||||||
| Interest expense | 65 | — | — | ||||||||
| Other income (expense) - net | 11 | 25 | 11 | ||||||||
| Income before income taxes | $ | 962 | $ | 901 | $ | 632 | |||||
| Provision for income taxes | 233 | 177 | 99 | ||||||||
| Net income | $ | 729 | $ | 724 | $ | 533 | |||||
| Net income attributable to noncontrolling interests | 37 | 31 | 26 | ||||||||
| Net income available for Qnity common stockholders | $ | 692 | $ | 693 | $ | 507 | |||||
| Per common share data: | |||||||||||
| Earnings per common share - basic | $ | 3.30 | $ | 3.31 | $ | 2.42 | |||||
| Earnings per common share - diluted | $ | 3.30 | $ | 3.31 | $ | 2.42 | |||||
| Weighted-average common shares outstanding - basic | 209.6 | 209.4 | 209.4 | ||||||||
| Weighted-average common shares outstanding - diluted | 209.8 | 209.4 | 209.4 |
See Notes to the Consolidated Financial Statements.
F-4
Qnity Electronics, Inc.
Consolidated Statements of Comprehensive Income
| (In millions) For the years ended December 31, | 2025 | 2024 | 2023 | ||||||||
| Net income | $ | 729 | $ | 724 | $ | 533 | |||||
| Other comprehensive income (loss), net of tax | |||||||||||
| Cumulative translation adjustments | 216 | (183) | (38) | ||||||||
| Pension and other post-employment benefit plans | (2) | 6 | (2) | ||||||||
| Total other comprehensive income (loss) | $ | 214 | $ | (177) | $ | (40) | |||||
| Comprehensive income | $ | 943 | $ | 547 | $ | 493 | |||||
| Comprehensive income attributable to noncontrolling interests, net of tax | 39 | 23 | 22 | ||||||||
| Comprehensive income attributable to Qnity | $ | 904 | $ | 524 | $ | 471 |
See Notes to the Consolidated Financial Statements.
F-5
Qnity Electronics, Inc.
Consolidated Balance Sheets
| (In millions, except share and par value amounts) | December 31, 2025 | December 31, 2024 | ||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 915 | $ | 166 | ||||
| Accounts and notes receivable - net | 992 | 682 | ||||||
| Inventories - net | 661 | 597 | ||||||
| Prepaid and other current assets | 70 | 38 | ||||||
| Total current assets | $ | 2,638 | $ | 1,483 | ||||
| Property | ||||||||
| Property, plant and equipment | 3,151 | 2,669 | ||||||
| Less: Accumulated depreciation | 1,450 | 1,121 | ||||||
| Property, plant and equipment - net | $ | 1,701 | $ | 1,548 | ||||
| Other Assets | ||||||||
| Goodwill | 7,522 | 7,379 | ||||||
| Other intangible assets | 1,111 | 1,286 | ||||||
| Investments and noncurrent receivables | 402 | 394 | ||||||
| Deferred income tax assets | 42 | 42 | ||||||
| Deferred charges and other assets | 654 | 141 | ||||||
| Total other assets | $ | 9,731 | $ | 9,242 | ||||
| Total Assets | $ | 14,070 | $ | 12,273 | ||||
| Liabilities and Equity | ||||||||
| Current Liabilities | ||||||||
| Short-term borrowings | 24 | — | ||||||
| Accounts payable | 680 | 528 | ||||||
| Income taxes payable | 150 | 161 | ||||||
| Accrued and other current liabilities | 502 | 150 | ||||||
| Total current liabilities | $ | 1,356 | $ | 839 | ||||
| Long-Term Debt | 4,003 | — | ||||||
| Other Noncurrent Liabilities | ||||||||
| Deferred income tax liabilities | 273 | 259 | ||||||
| Pension and other post-employment benefits - noncurrent | 80 | 65 | ||||||
| Other noncurrent obligations | 992 | 214 | ||||||
| Total other noncurrent liabilities | $ | 1,345 | $ | 538 | ||||
| Total Liabilities | $ | 6,704 | $ | 1,377 | ||||
| Commitments and contingent liabilities (Note 15) | ||||||||
| Stockholders' Equity | ||||||||
| Common stock (authorized 1,666,666,667 shares of $0.01 par value each; issued 2025: 209,479,173 shares; 2024: 0 shares) | 2 | — | ||||||
| Preferred stock (authorized 1 share of $1.50 million par value; issued 2025: 1 share; 2024: 0 shares) | 2 | — | ||||||
| Additional paid-in capital | 7,286 | — | ||||||
| Retained earnings | 18 | — | ||||||
| Parent company net investment | — | 11,058 | ||||||
| Accumulated other comprehensive loss | (213) | (414) | ||||||
| Total Qnity equity | $ | 7,095 | $ | 10,644 | ||||
| Noncontrolling interests | 271 | 252 | ||||||
| Total equity | $ | 7,366 | $ | 10,896 | ||||
| Total Liabilities and Equity | $ | 14,070 | $ | 12,273 |
See Notes to the Consolidated Financial Statements.
F-6
Qnity Electronics, Inc.
Consolidated Statements of Cash Flows
| (In millions) For the years ended December 31, | 2025 | 2024 | 2023 | ||||||||
| Operating Activities | |||||||||||
| Net income | $ | 729 | $ | 724 | $ | 533 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation of property, plant and equipment | 169 | 162 | 141 | ||||||||
| Amortization of definite-lived intangible assets | 207 | 232 | 262 | ||||||||
| Stock-based compensation | 20 | 13 | 13 | ||||||||
| Credit for deferred income tax and other tax related items | (79) | (81) | (79) | ||||||||
| Net gain on sales of assets | (1) | (16) | (8) | ||||||||
| Restructuring and asset related charges - net | 20 | 8 | 52 | ||||||||
| Net periodic pension benefit cost | 9 | 5 | 10 | ||||||||
| Periodic benefit plan contributions | (10) | (4) | (10) | ||||||||
| Earnings of nonconsolidated affiliates less dividends received | (5) | 4 | 11 | ||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts and notes receivable | (12) | (53) | 12 | ||||||||
| Inventories | (51) | (84) | 86 | ||||||||
| Other assets | (395) | 39 | (40) | ||||||||
| Accounts payable | 119 | 78 | (54) | ||||||||
| Accrued and other current liabilities | 108 | 39 | (96) | ||||||||
| Other noncurrent liabilities | 385 | (33) | 63 | ||||||||
| Income tax liabilities | 60 | 28 | (14) | ||||||||
| Cash provided by operating activities | $ | 1,273 | $ | 1,061 | $ | 882 | |||||
| Investing Activities | |||||||||||
| Capital expenditures | (285) | (200) | (231) | ||||||||
| Proceeds from sales of property and other assets | — | 15 | 5 | ||||||||
| Other investing activities, net | — | 13 | — | ||||||||
| Cash used for investing activities | $ | (285) | $ | (172) | $ | (226) | |||||
| Financing Activities | |||||||||||
| Proceeds from issuance of Company stock | 1 | — | — | ||||||||
| Proceeds from issuance of Preferred stock | 2 | — | — | ||||||||
| Distributions to noncontrolling interests | (21) | (17) | (18) | ||||||||
| Dividends paid to stockholders | (13) | — | — | ||||||||
| Net transfers to Parent | (4,229) | (831) | (610) | ||||||||
| Proceeds from issuance of long-term debt | 4,100 | — | — | ||||||||
| Payments for debt issuance costs | (88) | — | — | ||||||||
| Cash used for financing activities | $ | (248) | $ | (848) | $ | (628) | |||||
| Effect of exchange rate changes on cash and cash equivalents | 9 | (14) | (4) | ||||||||
| Increase in cash and cash equivalents | $ | 749 | $ | 27 | $ | 24 | |||||
| Cash and cash equivalents at beginning of the period | $ | 166 | $ | 139 | $ | 115 | |||||
| Cash and cash equivalents at end of period | $ | 915 | $ | 166 | $ | 139 |
| (In millions) For the years ended December 31, | 2025 | 2024 | 2023 | ||||||||
| Supplemental cash flow information | |||||||||||
| Cash paid during the year for: | |||||||||||
| Interest, net of amounts capitalized | $ | — | $ | — | $ | — | |||||
| Income taxes, net of refunds | $ | 94 | $ | 62 | $ | 80 |
See Notes to the Consolidated Financial Statements.
F-7
Qnity Electronics, Inc.
Consolidated Statements of Equity
| In millions | Common Stock | Preferred Stock | Additional Paid-in Capital | Retained Earnings | Parent Company Net Investment | Accumulated Other Comp (Loss) Income | Non-controlling Interests | Total Equity | ||||||||||||||||||
| 2023 | ||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | — | $ | — | $ | — | $ | — | $ | 11,273 | $ | (209) | $ | 242 | $ | 11,306 | ||||||||||
| Net income | — | — | — | — | 507 | — | 26 | 533 | ||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (36) | (4) | (40) | ||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | (18) | (18) | ||||||||||||||||||
| Net transfers to Parent | — | — | — | — | (597) | — | — | (597) | ||||||||||||||||||
| Balance at December 31, 2023 | $ | — | $ | — | $ | — | $ | — | $ | 11,183 | $ | (245) | $ | 246 | $ | 11,184 | ||||||||||
| 2024 | ||||||||||||||||||||||||||
| Net income | — | — | — | — | 693 | — | 31 | 724 | ||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (169) | (8) | (177) | ||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | (17) | (17) | ||||||||||||||||||
| Net transfers to Parent | — | — | — | — | (818) | — | — | (818) | ||||||||||||||||||
| Balance at December 31, 2024 | $ | — | $ | — | $ | — | $ | — | $ | 11,058 | $ | (414) | $ | 252 | $ | 10,896 | ||||||||||
| 2025 | ||||||||||||||||||||||||||
| Net income | — | — | — | 47 | 645 | — | 37 | 729 | ||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | 212 | 2 | 214 | ||||||||||||||||||
| Dividends ($0.14 per common share) | — | — | — | (29) | — | — | — | (29) | ||||||||||||||||||
| Stock-based compensation | — | — | 7 | — | — | — | — | 7 | ||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | (21) | (21) | ||||||||||||||||||
| Net transfers to Parent | — | — | — | — | (4,224) | — | — | (4,224) | ||||||||||||||||||
| Initial capitalization of Qnity, Inc. from Parent Company Net Investment | 2 | 2 | 7,475 | — | (7,479) | — | — | — | ||||||||||||||||||
| Separation-related adjustments | — | — | (198) | — | — | (11) | — | (209) | ||||||||||||||||||
| Other | — | — | 2 | — | — | — | 1 | 3 | ||||||||||||||||||
| Balance at December 31, 2025 | $ | 2 | $ | 2 | $ | 7,286 | $ | 18 | $ | — | $ | (213) | $ | 271 | $ | 7,366 |
See Notes to the Consolidated Financial Statements.
F-8
Qnity Electronics, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
F-9
NOTE 1 - BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
Qnity's Spin -Off
On May 22, 2024, DuPont announced its plan to separate Qnity from DuPont into an independent publicly traded company (the “Separation”). On November 1, 2025 (the "Separation and Distribution Date"), DuPont completed the Separation through a pro-rata distribution of one share of Qnity common stock for every two shares of DuPont common stock held at the close of business on the record date of October 22, 2025 (the "Distribution"). As a result of the Distribution, as of the Separation and Distribution Date, Qnity became an independent, publicly traded company, and Qnity common stock commenced trading on the New York Stock Exchange under the symbol "Q" at the start of trading on November 3, 2025.
Principles of Consolidation
The accompanying Consolidated Financial Statements of Qnity Electronics, Inc. ("Qnity” or the "Company”) were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The significant accounting policies described below, together with the other notes that follow, are an integral part of the Consolidated Financial Statements.
The Consolidated Financial Statements include the accounts of the Company and subsidiaries in which a controlling interest is maintained. For those consolidated subsidiaries in which the Company's ownership is less than 100%, the outside stockholders' interests are shown as noncontrolling interests. Investments in affiliates over which the Company has the ability to exercise significant influence but does not have a controlling interest are accounted for under the equity method.
Basis of Presentation
The annual periods ending December 31, 2024, and 2023 and the period from January 1 through November 1, 2025 (the “pre-Separation periods”) reflect allocations of certain DuPont corporate, infrastructure and shared services expenses using a variety of allocation methodologies that are appropriate for the type of allocated expense. Where possible, these charges were allocated based on direct usage, with the remainder allocated on a pro rata basis of headcount, gross profit, asset or other allocation methodologies that are considered to be a reasonable reflection of the utilization of services provided or the benefit received by Qnity during the periods presented.
Cash and cash equivalents held by DuPont at the corporate level during the pre-Separation periods were not attributable to the Company for any of the periods presented due to DuPont’s centralized approach to cash management and the financing of its operations. Only cash amounts specifically held by Qnity are reflected in the Consolidated Balance Sheet. DuPont’s debt was not attributed to the Company for any of the periods presented because DuPont’s borrowings are not the legal obligation of Qnity. The only third-party debt obligations included in the Consolidated Financial Statements are those for which the legal obligor is a legal entity of Qnity. Interest expense associated with DuPont's debt was not attributed to the Company for any of the periods presented as Qnity is not the legal obligor of DuPont's third-party debt. The interest expense included in the Consolidated Financial Statements is the amount which relates to third-party debt obligations for which the legal obligor is a legal entity of Qnity.
Transfers of cash, both to and from DuPont’s centralized cash management system prior to Separation, are reflected as a component of Net Parent investment in the Consolidated Balance Sheet and as financing activities in the accompanying Consolidated Statement of Cash Flows. In addition, Net Parent investment in the Consolidated Balance Sheet represents the accumulation of the Company’s net income (loss) over time and net non-trade intercompany transactions between Qnity and DuPont (for example, investments from DuPont or distributions to DuPont).
As a result of the allocations and carve-out methodologies used to prepare the Consolidated Financial Statements for the pre-Separation periods, the results may not be indicative of the Company’s future performance, and may not reflect the results of operations, financial position and cash flows Qnity would have achieved if it had been a separate, standalone company during the pre-Separation periods.
The income tax provisions included in these Consolidated Financial Statements for the pre-Separation periods were calculated using the separate return basis, as if Qnity filed separate tax returns. The calculation of income taxes on a hypothetical separate return basis requires a considerable amount of judgment and use of both estimates and allocations; pre-Separation current and deferred taxes may not be reflective of the actual tax balances subsequent to the Separation. Current income tax liabilities including amounts for unrecognized tax benefits related to Qnity’s activities included in the Parent’s income tax returns were assumed to be immediately settled with Parent through the Net Parent investment account in the Consolidated Balance Sheet and reflected in Net transfers to Parent in the Consolidated Statement of Cash Flows during these periods.
F-10
Use of Estimates in Financial Statement Preparation
The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company’s Consolidated Financial Statements include amounts that are based on management’s best estimates and judgments. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash equivalents represent investments with maturities of three months or less from time of purchase. They are carried at cost plus accrued interest, which approximates fair value.
Fair Value Measurements
Under the accounting guidance for fair value measurements and disclosures, a fair value hierarchy was established that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The Company uses the following valuation techniques to measure fair value for its assets and liabilities:
| Level 1 | – | Quoted market prices in active markets for identical assets or liabilities; | ||||||
| Level 2 | – | Significant other observable inputs (e.g. quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs); | ||||||
| Level 3 | – | Unobservable inputs for the asset or liability, which are valued based on management's estimates of assumptions that market participants would use in pricing the asset or liability. |
Foreign Currency Translation
The Company's worldwide operations utilize the U.S. dollar ("USD") or local currency as the functional currency, where applicable. The Company identifies its separate and distinct foreign entities and groups the foreign entities into two categories: 1) extension of the parent or foreign subsidiaries operating in a hyper-inflationary environment (USD functional currency) and 2) self-contained (local functional currency). If a foreign entity does not align with either category, factors are evaluated and a judgment is made to determine the functional currency.
For foreign entities where the USD is the functional currency, all foreign currency-denominated asset and liability amounts are re-measured into USD at end-of-period exchange rates, except for inventories, prepaid expenses, property, plant and equipment, goodwill, other intangible assets and other non-monetary items, which are re-measured at historical rates. Foreign currency income and expenses are re-measured at average exchange rates in effect during the year, except for expenses related to balance sheet amounts re-measured at historical exchange rates. Exchange gains and losses arising from re-measurement of foreign currency-denominated monetary assets and liabilities are included in income in the period in which they occur.
For foreign entities where the local currency is the functional currency, assets and liabilities denominated in local currencies are translated into USD at end-of-period exchange rates and the resultant translation adjustments are reported, net of their related tax effects, as a component of accumulated other comprehensive income (loss) in equity. Assets and liabilities denominated in other than the local currency are re-measured into the local currency prior to translation into USD and the resultant exchange gains or losses are included in income in the period in which they occur. Income and expenses are translated into USD at average exchange rates in effect during the period.
The Company changes the functional currency of its separate and distinct foreign entities only when significant changes in economic facts and circumstances indicate clearly that the functional currency has changed.
F-11
Inventories
The Company's inventories are valued at the lower of cost or net realizable value. Elements of cost in inventories include raw materials, direct labor and manufacturing overhead. Supplies are valued at cost or net realizable value, whichever is lower; cost is determined by the average cost method. The Company establishes allowances for obsolescence of inventory based upon quality considerations and assumptions about future demand and market conditions.
In periods of abnormally low production, certain fixed costs normally absorbed into inventory are recorded directly to cost of sales in the period incurred.
Property, Plant and Equipment
Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is based on the estimated service lives of depreciable assets and is calculated using the straight-line method. Fully depreciated assets are retained in property and accumulated depreciation accounts until they are removed from service. When assets are surrendered, retired, sold, or otherwise disposed of, their gross carrying values and related accumulated depreciation are removed from the Consolidated Balance Sheets and included in determining gain or loss on such disposals.
Goodwill and Other Intangible Assets
The Company records goodwill when the purchase price of a business acquisition exceeds the estimated fair value of net identified tangible and intangible assets acquired. Goodwill is tested for impairment at the reporting unit level annually during the fourth quarter, or more frequently when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value.
When testing goodwill for impairment, the Company has the option to first perform qualitative testing to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the Company chooses not to complete a qualitative assessment for a given reporting unit or if the initial assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is required. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recognized in the amount by which the carrying value of the reporting unit exceeds its fair value, limited to the amount of goodwill at the reporting unit. The Company determines fair values for each of the reporting units using a combination of the income approach and market approach. Under the income approach, fair value is determined based on the net present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. Under the market approach, the Company selects peer sets based on close competitors and reviews the EBITDA multiples to determine the fair value. When applicable, third-party purchase offers may be utilized to measure fair value. The Company applies a weighting to the market approach and income approach to determine the fair value. See Note 13 for further information on goodwill.
Definite-lived intangible assets are amortized over their estimated useful lives, generally on a straight-line basis for periods ranging primarily from 1 to 20 years. The Company continually evaluates the reasonableness of the useful lives of these assets.
Impairment and Disposals of Long-Lived Assets
The Company evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances indicate the carrying value may not be recoverable. The carrying value of a long-lived asset group is considered for impairment when the total projected undiscounted cash flows from the assets are separately identifiable and are less than its carrying value. In that event, a loss would be recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset group. The Company's fair value methodology is an estimate of fair market value which is made based on prices of similar assets or other valuation methodologies, including present value techniques. Long-lived assets to be disposed of by sale, if material, are classified as held for sale and reported at the lower of carrying amount or fair value less cost to sell, and depreciation is ceased. Long-lived assets to be disposed of other than by sale are classified as held and used until they are disposed. Depreciation is recognized over the remaining useful life of the assets.
F-12
Acquisitions
In accordance with ASC 805, Business Combinations, acquisitions are recorded using the acquisition method of accounting. The Company includes the operating results of acquired entities from their respective dates of acquisition. The Company recognizes and measures the identifiable assets acquired and liabilities assumed as of the acquisition date fair value, where applicable. The excess, if any, of total consideration transferred in a business combination over the fair value of identifiable assets acquired and liabilities assumed is recognized as goodwill. Costs incurred as a result of a business combination other than costs related to the issuance of debt or equity securities are recorded in the period the costs are incurred.
Leases
The Company determines whether an arrangement is a lease at the inception of the arrangement based on the terms and conditions in the contract, in accordance with ASC 842, Leases. A contract contains a lease if there is an identified asset and the Company has the right to control the asset. Operating lease right-of-use ("ROU") assets are included in "Deferred charges and other assets" on the Consolidated Balance Sheets. Operating lease liabilities are included in "Accrued and other current liabilities" and "Other noncurrent obligations" on the Consolidated Balance Sheets. Finance lease ROU assets are included in "Property, plant and equipment - net" and the corresponding lease liabilities are included in "Long-term debt" or "Short-term borrowings" on the Consolidated Balance Sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide the lessor's implicit rate, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments. Lease terms include options to extend the lease when it is reasonably certain those options will be exercised. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component for all asset classes. Additionally, for certain equipment leases, the portfolio approach is applied to account for the operating lease ROU assets and lease liabilities. In the Consolidated Statements of Operations, lease expense for operating lease payments is recognized on a straight-line basis over the lease term. For finance leases, interest expense is recognized on the lease liability and the ROU asset is amortized over the lease term.
The Company has leases in which it is the lessor, these leases are classified as operating leases and lessor revenue and related expenses are not significant to the Company’s Consolidated Balance Sheets or Consolidated Statement of Operations. Lease income is recorded in "Selling, general, and administrative expenses" and "Research and development expenses". See Note 16 for additional information regarding the Company's leases.
Debt Issuance Costs
Debt issuance costs and discounts are presented as a reduction of "Long-term debt" and are amortized and included in "Interest expense" on the Company's Consolidated Statements of Operations over the term on the related debt using the effective interest method.
Long-Term Debt
Long-term debt is presented net of unamortized debt issuance costs and is recorded in "Long-Term Debt" in the Consolidated Balance Sheets.
Derivative Instruments
Derivative instruments are reported in the Consolidated Balance Sheets at their fair values. The Company utilizes derivatives to manage exposures to foreign currency exchange rates and commodity prices. Changes in the fair values of derivative instruments that are not designated as hedges are recorded in current period earnings. For derivative instruments designated as cash flow hedges, the gain or loss is reported in accumulated other comprehensive income (loss) ("AOCI") until it is cleared to earnings during the same period in which the hedged item affects earnings.
In the event that a derivative designated as a hedge of a firm commitment or an anticipated transaction is terminated prior to the maturation of the hedged transaction, the net gain or loss in AOCI generally remains in AOCI until the item that was hedged affects earnings. If a hedged transaction matures, or is sold, extinguished, or terminated prior to the maturity of a derivative designated as a hedge of such transaction, gains or losses associated with the derivative through the date the transaction matured are included in the measurement of the hedged transaction and the derivative is reclassified as for trading purposes. Derivatives designated as hedges of anticipated transactions are reclassified for trading purposes if the anticipated transaction is no longer probable.
F-13
For derivative instruments designated as net investment hedges, the gain or loss is reported as a component of Other comprehensive income (loss) and recorded in AOCI. The gain or loss will be subsequently reclassified into net earnings when the hedged net investment is either sold or substantially liquidated.
Indemnifications
The Company is contractually allocated, and directly pays or indemnifies DuPont for, the Applicable Qnity Percentage of certain liabilities as outlined within the Separation and Distribution Agreement and the Legacy Liabilities Assignment Agreement, by and between DuPont de Nemours, Inc. and Qnity Electronics, Inc., dated as of November 1, 2025 (the “Separation and Distribution Agreement” and “Legacy Liabilities Assignment Agreement”, respectively). Indemnification liabilities are recorded when it is probable that a loss has been incurred and the amount of the loss is reasonably estimable. In addition, DuPont will indemnify the Company for certain liabilities as outlined within the Separation and Distribution Agreement. The Company recognizes an indemnification asset when recovery of amounts owed from DuPont is probable and the amount is reasonably estimable.
Revenue Recognition
The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for the arrangements that the Company determines are within the scope of Revenue from Contracts with Customers (Topic 606), the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. See Note 3 for additional information on revenue recognition.
Cost of Sales
Cost of sales primarily includes the cost of manufacture and delivery, ingredients or raw materials, direct salaries, wages and benefits and overhead, non-capitalizable costs associated with capital projects and other operational expenses. No amortization of intangibles is included within costs of sales.
Research and Development
Research and development costs are expensed as incurred. Research and development expense includes costs (primarily consisting of employee costs, materials, contract services, research agreements, and other external spend) relating to the discovery and development of new products, and enhancement of existing products.
Selling, General and Administrative Expenses
Selling, general and administrative expenses primarily include selling and marketing expenses, commissions, functional costs, and business management expenses.
Acquisition, Integration and Separation Costs
Acquisition, integration and separation costs primarily consist of financial advisory, information technology, legal, accounting, consulting, other professional advisory fees and other contractual transaction payments associated with the preparation and execution of activities related to strategic initiatives.
Litigation
Accruals for legal matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Legal costs, such as outside counsel fees and expenses, are charged to expense in the period incurred.
Restructuring and Asset Related Charges
Charges for restructuring programs generally include targeted actions involving employee severance and related benefit costs, contract termination charges, and asset related charges, which include impairments or accelerated depreciation/amortization of long-lived assets associated with such actions. Employee severance and related benefit costs are provided to employees under the Company’s ongoing benefit arrangements. These charges are accrued during the period when management commits to a plan of termination and it becomes probable that employees will be entitled to benefits at amounts that can be reasonably estimated. Contract termination charges primarily reflect costs to terminate a contract before the end of its term or costs that will continue to be incurred under the contract for its remaining term without economic benefit to the Company. Asset related charges reflect impairments to long-lived assets and indefinite-lived intangible assets no longer deemed recoverable and depreciation/amortization of long-lived assets, which is accelerated over their remaining economic lives.
F-14
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using enacted tax rates. The effect of a change in tax rates on deferred tax assets or liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes the financial statement effects of an uncertain income tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. The Company accrues for other tax contingencies, such as indemnifications, when it is probable that a liability to a taxing authority has been incurred and the amount of the contingency can be reasonably estimated. The current portion of uncertain income tax positions is included in "Income taxes payable" and the long-term portion is included in "Other noncurrent obligations" in the Consolidated Balance Sheets.
Stock-Based Compensation
The Company grants stock-based compensation awards that vest over a specified period or upon employees meeting certain performance and/or retirement eligibility criteria. The fair value of equity instruments issued to employees is measured on the grant date. The fair value of liability instruments issued to employees is measured at the end of each quarter. The fair value of equity and liability instruments is expensed over the vesting period or, in the case of retirement, from the grant date to the date on which retirement eligibility provisions have been met and additional service is no longer required. The Company estimates expected forfeitures based on historical forfeiture rates.
Preferred Stock
In connection with the Separation, the Company issued to DuPont one share of Series A Preferred Stock, with a $1,500,000 par value, which was then contributed to a noncharitable purpose trust. The Series A Preferred Stock ranks senior to common stock for dividends and liquidation and includes limited protective voting rights requiring the holder’s consent for certain charter, bylaw, and capital‑structure changes. Because the instrument is perpetual and contains no redemption features, it is presented within stockholders’ equity, and cumulative dividends at an 8% annual rate are deducted from income available to common shareholders when computing earnings per share.
Certain items have been reclassified to conform to current period presentation.
NOTE 2 - RECENT ACCOUNTING GUIDANCE
Recently Adopted Accounting Guidance
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09") to improve transparency and disclosure requirements for the rate reconciliation, income taxes paid and other tax disclosures. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, on a prospective basis, with retrospective application being permitted. The Company implemented the new disclosures, on a prospective basis, as required for the year ended December 31, 2025. See Note 7 for more information.
Accounting Guidance Issued But Not Adopted at December 31, 2025
In November 2024, the FASB issued Accounting Standards Update No. 2024-03, "Income Statement: Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures" ("ASU 2024-03") to improve disclosures about the nature of expenses within line items on the statements of operations. The amendments in ASU 2024-03 are effective for the Company's 2027 annual report and subsequent interim periods; however, early adoption is permitted. The amendments can be applied prospectively or retrospectively to all periods presented. The Company is currently evaluating the impact of adopting this guidance.
In September 2025, the FASB issued Accounting Standards Update No. 2025-06, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” (“ASU 2025-06”) to modernize the accounting for internal-use software costs and improve operability of the guidance across different software development project stages. The amendments in ASU 2025-06 are effective for the Company’s 2028 annual and quarterly reports; however, early adoption is permitted. The amendments can be applied prospectively, retrospectively, or using a modified transition approach. The Company is currently evaluating the impact of adopting this guidance.
F-15
In December 2025, the FASB issued Accounting Standards Update No. 2025-10, “Government Grants (Topic 832) - Accounting for Government Grants Received by Business Entities” (“ASU 2025-10”) to establish the accounting for a government grant received by a business entity, including guidance for grants related to assets and income. The amendments in ASU 2025-10 are effective for the Company’s 2029 annual and quarterly reports; however, early adoption is permitted. The amendments can be applied via a modified prospective, modified retrospective, or standard retrospective approach. The Company is currently evaluating the impact of adopting this guidance.
NOTE 3 - REVENUE
Revenue Recognition
Products
Substantially all of Qnity's revenue is derived from product sales. Product sales consist of sales of Qnity's products to supply manufacturers and distributors. Qnity 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.
Revenue from product sales is recognized when the customer obtains control of the Company’s product, which occurs at a point in time, usually upon shipment, with payment terms typically in the range of 30 to 60 days after invoicing depending on business and geographic region. The Company elected the practical expedient to not adjust the amount of consideration for the effects of a significant financing component for all instances in which the period between payment and transfer of the goods will be one year or less. When the Company performs shipping and handling activities after the transfer of control to the customer (e.g., when control transfers prior to shipment), these are considered fulfillment activities, and accordingly, the costs are accrued when the related revenue is recognized. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. The Company elected to use the practical expedient to expense cash and non-cash sales incentives as the amortization period for the costs to obtain the contract would have been one year or less. The transaction price includes estimates for reductions in revenue from customer rebates and rights of return on product sales. These amounts are estimated based upon the most likely amount of consideration to which the customer will be entitled. All estimates are based on historical experience, anticipated performance, and the Company’s best judgment at the time to the extent it is probable, that a significant reversal of revenue recognized will not occur. All estimates for variable consideration are reassessed periodically.
Net sales to Samsung Electronics Co., Ltd accounted for 11%, 12%, and 12% of total net sales for each of the years ended December 31, 2025, 2024 and 2023, respectively. Additionally, net sales to Taiwan Semiconductor Manufacturing Company Limited (TSMC) accounted for 8%, 7%, and 6% of total net sales for the years ended December 31, 2025, 2024 and 2023, respectively. The majority of revenues for both customers relate to the Semiconductor Technologies segment. See Note 22 for more information.
F-16
Disaggregation of Revenue
The Company disaggregates its revenue from contracts with customers by segment and geographic region, as the Company believes it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows. Sales are attributed to geographic regions based on customer location.
| Net Sales by Segment | For the Year Ended December 31, | ||||||||||
| In millions | 2025 | 2024 | 2023 | ||||||||
| Semiconductor Technologies | $ | 2,642 | $ | 2,450 | $ | 2,251 | |||||
| Interconnect Solutions | 2,112 | 1,885 | 1,784 | ||||||||
| Total | $ | 4,754 | $ | 4,335 | $ | 4,035 |
| Net Sales by Segment by Geographic Region | For the Year Ended December 31, | ||||||||||
| 2025 | |||||||||||
| Semiconductor Technologies | Interconnect Solutions | Total | |||||||||
| In millions | |||||||||||
| Americas: | $ | 293 | $ | 336 | $ | 629 | |||||
| United States | 290 | 301 | 591 | ||||||||
| Other Americas 1 | 3 | 35 | 38 | ||||||||
| EMEA 2 | 206 | 172 | 378 | ||||||||
| Asia Pacific: | 2,143 | 1,604 | 3,747 | ||||||||
| China | 713 | 857 | 1,570 | ||||||||
| Rest of Asia Pacific: | 1,430 | 747 | 2,177 | ||||||||
| South Korea | 617 | 108 | 725 | ||||||||
| Taiwan | 535 | 172 | 707 | ||||||||
| Other | 278 | 467 | 745 | ||||||||
| Total | $ | 2,642 | $ | 2,112 | $ | 4,754 |
| Net Sales by Segment by Geographic Region | For the Year Ended December 31, | ||||||||||
| 2024 | |||||||||||
| Semiconductor Technologies | Interconnect Solutions | Total | |||||||||
| In millions | |||||||||||
| Americas: | $ | 274 | $ | 285 | $ | 559 | |||||
| United States | 271 | 257 | 528 | ||||||||
| Other Americas 1 | 3 | 28 | 31 | ||||||||
| EMEA 2 | 197 | 161 | 358 | ||||||||
| Asia Pacific: | 1,979 | 1,439 | 3,418 | ||||||||
| China | 656 | 801 | 1,457 | ||||||||
| Rest of Asia Pacific: | 1,323 | 638 | 1,961 | ||||||||
| South Korea | 596 | 103 | 699 | ||||||||
| Taiwan | 458 | 137 | 595 | ||||||||
| Other | 269 | 398 | 667 | ||||||||
| Total | $ | 2,450 | $ | 1,885 | $ | 4,335 |
F-17
| Net Sales by Segment by Geographic Region | For the Year Ended December 31, | ||||||||||
| 2023 | |||||||||||
| Semiconductor Technologies | Interconnect Solutions | Total | |||||||||
| In millions | |||||||||||
| Americas: | $ | 310 | $ | 272 | $ | 582 | |||||
| United States | 308 | 247 | 555 | ||||||||
| Other Americas 1 | 2 | 25 | 27 | ||||||||
| EMEA 2 | 198 | 169 | 367 | ||||||||
| Asia Pacific: | 1,743 | 1,343 | 3,086 | ||||||||
| China | 496 | 706 | 1,202 | ||||||||
| Rest of Asia Pacific: | 1,247 | 637 | 1,884 | ||||||||
| South Korea | 562 | 115 | 677 | ||||||||
| Taiwan | 381 | 131 | 512 | ||||||||
| Other | 304 | 391 | 695 | ||||||||
| Total | $ | 2,251 | $ | 1,784 | $ | 4,035 |
1.Includes Canada and Latin America.
2.Europe, Middle East and Africa.
Contract Balances
From time to time, the Company enters into arrangements in which it receives payments from customers based upon contractual billing schedules. The Company records accounts receivables when the right to consideration becomes unconditional. Contract liabilities primarily reflect deferred revenue from advance payment for product that the Company has received from customers. The Company classifies deferred revenue as current or noncurrent based on the timing of when the Company expects to recognize revenue.
Revenue recognized for the years ended December 31, 2025 and 2024 from amounts included in contract liabilities at the beginning of the period was insignificant. The Company did not recognize any asset impairment charges related to contract assets during the period. The Company will begin recognizing its deferred revenue when the project associated with the revenue that was deferred is completed and commercial production begins, currently expected in 2027.
| Contract Balances | December 31, 2025 | December 31, 2024 | ||||||
| In millions | ||||||||
| Accounts receivable - trade 1 | $ | 656 | $ | 580 | ||||
| Deferred revenue - current 2 | $ | 1 | $ | 1 | ||||
| Deferred revenue - non-current 3 | $ | 46 | $ | 35 |
1.Included in "Accounts and notes receivable - net" in the Consolidated Balance Sheets.
2.Included in "Accrued and other current liabilities" in the Consolidated Balance Sheets.
3.Included in "Other noncurrent obligations" in the Consolidated Balance Sheets.
NOTE 4 - RESTRUCTURING AND ASSET RELATED CHARGES - NET
The Company records restructuring liabilities that represent nonrecurring charges in connection with restructuring programs in order to simplify certain organizational structures and operations, including operations related to transformational projects such as divestitures and acquisitions. Charges for restructuring programs relate to severance and related benefits and asset related charges, which include asset impairments, were $20 million, $8 million and $52 million for the years ended December 31, 2025, 2024 and 2023, respectively. The entirety of these charges related to DuPont-approved restructuring programs that were initiated prior to the Separation. These charges were recorded in "Restructuring and asset related charges - net" in the Consolidated Statements of Operations. The total liability related to restructuring programs was $5 million and $3 million at December 31, 2025 and December 31, 2024, respectively, recorded in "Accrued and other current liabilities" in the Consolidated Balance Sheets. Refer to Note 22 for the breakout of restructuring and asset related charges incurred by segment.
F-18
NOTE 5 - RELATIONSHIP WITH DUPONT
On the Separation and Distribution Date, Qnity became an independent publicly traded company and DuPont ceased to be a related party on that date. In connection with the Separation, we and/or certain of our subsidiaries entered into several agreements with DuPont and/or certain of its subsidiaries as of the Separation and Distribution Date. These agreements included, but were not limited to, the following:
-
Separation and Distribution Agreement (the "Separation and Distribution Agreement") - This agreement establishes the principal terms of the Separation, including the transfer of assets and liabilities, the mechanics of the distribution, and the overall framework for the ongoing relationship between the Company and DuPont.
-
Tax Matters Agreement - This agreement allocates responsibility between the parties for taxes attributable to periods before and after the Separation and governs the administration of tax matters, tax filings, audits, and related indemnification obligations.
-
Employee Matters Agreement - This agreement sets forth the allocation of employees and employee‑related liabilities between the parties and addresses matters relating to compensation, benefits, incentive plans, and post‑Separation employee transitions.
-
Transition Services Agreements - This agreement provides for certain transitional support services to be supplied by one party to the other for a limited period following the Separation to ensure operational continuity, including services such as information technology, human resources, finance, and other shared functions.
-
ESL Cost Sharing Agreement - This agreement establishes the framework for allocating and sharing costs associated with the Experimental Station facility (the "Experimental Station") by the Company and DuPont following the Separation.
-
Other agreements governing aspects of the Company’s relationship with DuPont following the Separation including the Intellectual Property Cross-License Agreement and Legacy Liabilities Assignment Agreement, among others.
Prior to Separation, Qnity had been managed and operated in the normal course with other businesses of DuPont. Accordingly, certain shared costs had been allocated to Qnity and reflected as expenses in the stand-alone Consolidated Financial Statements. Management considers the allocation methodologies used to be reasonable and appropriate reflections of the pre-Separation expenses attributable to Qnity for purposes of the stand-alone financial statements. The expenses reflected in the Consolidated Financial Statements may not be indicative of expenses that will be incurred by Qnity in the future. All transactions with DuPont approximate prices at cost.
Corporate Expense Allocations
Qnity’s Consolidated Statements of Operations include general corporate expenses of DuPont for services provided by DuPont for certain support functions that were provided on a centralized basis prior to Separation. These costs were allocated using relevant allocation methods, primarily based on sales metrics.
Corporate expense allocations prior to Separation were recorded in the Consolidated Statements of Operations within the following captions:
| In millions | For the Year Ended December 31, | ||||||||||
| 2025 | 2024 | 2023 | |||||||||
| Selling, general and administrative expenses | $ | 186 | $ | 222 | $ | 210 | |||||
| Cost of sales | 28 | 41 | 33 | ||||||||
| Research and development expenses | 32 | 36 | 38 | ||||||||
| Acquisition, integration and separation costs | 8 | — | — | ||||||||
| Restructuring | 11 | 7 | 15 | ||||||||
| Total corporate expense allocations | $ | 265 | $ | 306 | $ | 296 |
F-19
Parent Company Equity
Net transfers to Parent are included within Parent company net investment on the Consolidated Statements of Changes in Equity. The components of the net transfers to Parent are as follows:
| In millions | For the Year Ended December 31, | ||||||||||
| 2025 | 2024 | 2023 | |||||||||
| Cash pooling and general financing activities | $ | (3,718) | $ | (254) | $ | (123) | |||||
| Less: Corporate cost allocations | 265 | 306 | 296 | ||||||||
| Less: Taxes deemed settled with Parent | 241 | 258 | 178 | ||||||||
| Total net transfers to Parent per Consolidated Statements of Changes in Equity | $ | (4,224) | $ | (818) | $ | (597) | |||||
| Stock-based compensation | (14) | (13) | (13) | ||||||||
| Other1 | 9 | — | — | ||||||||
| Net transfers to Parent per Consolidated Statements of Cash Flows | $ | (4,229) | $ | (831) | $ | (610) |
1.Other primarily includes non-cash net asset transfers from Parent to Qnity related to the Separation that were not previously included under the carve-out basis of presentation.
Additionally, the Company recognized other net non-cash financing activities of $198 million through the “Separation-related adjustments” line item in the Consolidated Statements of Equity for the year ended December 31, 2025 related to indemnifications with DuPont and the ESL Cost Sharing Agreement.
NOTE 6 - SUPPLEMENTARY INFORMATION
| Other Income (Expense) - Net | |||||||||||||||||
| (In millions) For the years ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| Net gain on sales of assets | $ | 1 | $ | 16 | $ | 8 | |||||||||||
| Non-operating pension credits (costs) | 2 | 1 | (2) | ||||||||||||||
| Interest income | 4 | — | — | ||||||||||||||
| Foreign exchange (losses) gains, net | (4) | 5 | (1) | ||||||||||||||
| Indirect legacy benefits (costs), net | 5 | — | — | ||||||||||||||
| Miscellaneous income - net | 3 | 3 | 6 | ||||||||||||||
| Other income (expense) - net | $ | 11 | $ | 25 | $ | 11 |
Accrued and Other Current Liabilities
| In millions | December 31, 2025 | December 31, 2024 | ||||||
| Accrued payroll | $ | 162 | $ | 93 | ||||
| Current indemnification liabilities 1 | 183 | — | ||||||
| Other 2 | 157 | 57 | ||||||
| Total accrued and other current liabilities | $ | 502 | $ | 150 |
- Related to current portion of indemnification liabilities, primarily to DuPont. For additional information on these matters, refer to Note 5.
2.No other component of “Accrued and other current liabilities” was more than 5% of total current liabilities at December 31, 2025 and 2024
F-20
NOTE 7 - INCOME TAXES
The Company operated as part of DuPont until completion of the spin off on November 1, 2025. Therefore, prior to that date, Qnity did not file separate tax returns in the U.S. federal, certain state and local, and certain foreign tax jurisdictions, as Qnity was included in the tax grouping of DuPont and its affiliate entities within the respective jurisdictions. The Company will file a separate tax return in these jurisdictions for the remainder of fiscal year 2025. The Company expects to file income tax returns on a standalone basis in most other foreign jurisdictions in which it operates for the full fiscal year 2025. Provision for income taxes included in these Consolidated Financial Statements have been calculated using the separate return basis, as if Qnity filed separate tax returns for the entirety of each of the periods presented. Prior to the spin off, the Company’s operations were calculated on a carve-out basis. Qnity’s Provision for income taxes as presented in the Consolidated Financial Statements may not be indicative of the income taxes that Qnity will generate in the future.
| Geographic Allocation of Income (Loss) and Provision for Income Taxes | 2025 | 2024 | 2023 | ||||||||
| (In millions) For the years ended December 31, | |||||||||||
| Income (loss) before income taxes | |||||||||||
| Domestic | $ | (222) | $ | (161) | $ | (171) | |||||
| Foreign | 1,184 | 1,062 | 803 | ||||||||
| Income before income taxes | $ | 962 | $ | 901 | $ | 632 | |||||
| Current tax expense | |||||||||||
| Federal | $ | 12 | $ | 14 | $ | 6 | |||||
| State and local | 4 | 4 | 2 | ||||||||
| Foreign | 296 | 240 | 170 | ||||||||
| Total current tax expense | $ | 312 | $ | 258 | $ | 178 | |||||
| Deferred tax benefit | |||||||||||
| Federal | $ | (61) | $ | (58) | $ | (55) | |||||
| State and local | (8) | (5) | (6) | ||||||||
| Foreign | (10) | (18) | (18) | ||||||||
| Total deferred tax benefit | $ | (79) | $ | (81) | $ | (79) | |||||
| Provision for income taxes | 233 | 177 | 99 | ||||||||
| Net income | $ | 729 | $ | 724 | $ | 533 |
F-21
| Reconciliation to U.S. Statutory Rate | 2025 | |||||||
| (In millions) For the year ended December 31, | Amount | Rate | ||||||
| U.S. Federal Statutory Tax Rate | $ | 202 | 21.0 | % | ||||
| State and Local Income Taxes, Net of Federal Income Tax Effect1 | (4) | (0.4) | ||||||
| Foreign Tax Effects | ||||||||
| China | ||||||||
| Statutory tax rate difference between China and United States | 11 | 1.1 | ||||||
| Investment based benefits | (13) | (1.3) | ||||||
| Withholding tax | 17 | 1.7 | ||||||
| Other | (1) | (0.1) | ||||||
| Japan | ||||||||
| Statutory tax rate difference between Japan and United States | 12 | 1.2 | ||||||
| Other | (1) | (0.1) | ||||||
| Singapore | ||||||||
| Statutory tax rate difference between Singapore and United States | (15) | (1.5) | ||||||
| Investment based benefits | (49) | (5.0) | ||||||
| Qualified domestic minimum top up tax | 41 | 4.2 | ||||||
| Other | 1 | 0.1 | ||||||
| Other Foreign Jurisdictions | 3 | 0.3 | ||||||
| Effects of Cross-Border Tax Laws | (3) | (0.3) | ||||||
| Tax Credits | (8) | (0.8) | ||||||
| Changes in Valuation Allowances | 3 | 0.3 | ||||||
| Nontaxable or Nondeductible Items | 8 | 0.8 | ||||||
| Changes in Unrecognized Tax Benefits | 33 | 3.4 | ||||||
| Other Adjustments | (4) | (0.4) | ||||||
| Effective Tax Rate | $ | 233 | 24.2 | % |
1.State taxes in California and Massachusetts made up the majority (greater than 50 percent) of the tax effect in this category.
| Reconciliation to U.S. Statutory Rate | 2024 | 2023 | ||||||
| For the years ended December 31, | ||||||||
| Statutory U.S. federal income tax rate | 21.0 | % | 21.0 | % | ||||
| Equity earning effect | (0.3) | (0.1) | ||||||
| Foreign income taxed at rates other than the statutory U.S. federal income tax rate2 | (0.3) | (2.0) | ||||||
| U.S. tax effect of foreign earnings and dividends | 0.2 | 0.2 | ||||||
| Unrecognized tax benefits | 0.4 | (0.6) | ||||||
| State and local income taxes, net of federal income tax effect | (0.1) | (0.5) | ||||||
| Change in valuation allowance | 0.3 | — | ||||||
| Tax credits | (1.4) | (1.5) | ||||||
| Foreign-derived intangible income (FDII) | (0.2) | — | ||||||
| Other - net | — | (0.8) | ||||||
| Effective tax rate | 19.6 | % | 15.7 | % |
- Includes an expense of $36 million in connection with the settlement of an international tax audit for the year ended December 31, 2024.
F-22
| Cash paid for income taxes (net of refunds) 1 | 2025 | ||||
| (In millions) For the year ended December 31, | |||||
| Federal | $ | — | |||
| State and local | — | ||||
| Foreign | |||||
| Japan | 19 | ||||
| South Korea | 18 | ||||
| China | 33 | ||||
| Taiwan | 13 | ||||
| Czech Republic | 5 | ||||
| Other foreign | 6 | ||||
| Total foreign | 94 | ||||
| Total cash paid for income taxes (net of refunds)1 | $ | 94 |
1.Cash taxes represent the amount reported by Qnity for the first ten months, under the carve-out basis of presentation as part of the DuPont consolidated group, and the amount for the last two months as a separate taxpayer.
| Deferred Tax Balances at December 31, | 2025 | 2024 | ||||||
| (In millions) | ||||||||
| Deferred tax assets: | ||||||||
| Lease liability | $ | 113 | $ | 28 | ||||
| Research and development | 110 | 127 | ||||||
| Tax losses and credit carryforwards | 63 | 77 | ||||||
| Goodwill | 35 | 9 | ||||||
| Pension and postretirement benefit obligations | 24 | 25 | ||||||
| Inventory | 11 | 7 | ||||||
| Other accruals and reserves | 10 | 10 | ||||||
| Other - net | 10 | 8 | ||||||
| Gross deferred tax assets | $ | 376 | $ | 291 | ||||
| Valuation allowances 1 | (72) | (43) | ||||||
| Total deferred tax assets | $ | 304 | $ | 248 | ||||
| Deferred tax liabilities: | ||||||||
| Intangibles | (207) | (239) | ||||||
| Property | (120) | (111) | ||||||
| Operating lease assets | (112) | (27) | ||||||
| Investments | (93) | (88) | ||||||
| Total deferred tax liabilities | $ | (532) | $ | (465) | ||||
| Total net deferred tax liability | $ | (228) | $ | (217) |
1.Primarily related to recorded tax benefits and the non-realizability of tax losses and credit carryforwards from operations in the United States, Europe, and Asia Pacific.
| Operating Loss and Tax Credit Carryforwards | Deferred Tax Asset | |||||||
| (In millions) As of December 31, | 2025 | 2024 | ||||||
| Operating loss carryforwards | ||||||||
| Expire within 5 years | $ | 10 | $ | 4 | ||||
| Expire after 5 years or indefinite expiration | 31 | 45 | ||||||
| Total operating loss carryforwards | $ | 41 | $ | 49 | ||||
| Tax credit carryforwards | ||||||||
| Expire within 5 years | $ | — | $ | 1 | ||||
| Expire after 5 years or indefinite expiration | 22 | 27 | ||||||
| Total tax credit carryforwards | $ | 22 | $ | 28 | ||||
| Total Operating Loss and Tax Credit Carryforwards | $ | 63 | $ | 77 |
F-23
| Total Gross Unrecognized Tax Benefits | 2025 | 2024 | 2023 | ||||||||
| (In millions), For the years ended December 31, | |||||||||||
| Total unrecognized tax benefits at January 1, | $ | 45 | $ | 44 | $ | 52 | |||||
| Decreases related to positions taken on items from prior years | — | (1) | (2) | ||||||||
| Increases related to positions taken on items from prior years | 11 | — | — | ||||||||
| Increases related to positions taken in the current year | 20 | 2 | 2 | ||||||||
| Settlement of uncertain tax positions with tax authorities | — | — | (8) | ||||||||
| Increases through equity due to spin-off | 21 | — | — | ||||||||
| Total unrecognized tax benefits at December 31, | $ | 97 | $ | 45 | $ | 44 | |||||
| Total unrecognized tax benefits that, if recognized, would impact the effective tax rate | $ | 90 | $ | 45 | $ | 44 | |||||
| Total amount of interest and penalties (benefit) recognized in "Provision for (benefit from) income taxes" | $ | 4 | $ | 4 | $ | 3 | |||||
| Total accrual for interest and penalties associated with unrecognized tax benefits | $ | 16 | $ | 11 | $ | 7 |
Qnity files tax returns in the various national, state and local income taxing jurisdictions in which it operates, either as a separate taxpayer or as a member of DuPont’s consolidated income tax return in periods prior to the spin off. 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 Qnity. As a result, there is an uncertainty in income taxes recognized in Qnity’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 Qnity’s results of operations.
Tax years that remain subject to examination for Qnity’s major tax jurisdictions are shown below:
| Tax Years Subject to Examination by Major Tax Jurisdiction at December 31, 2025 | Earliest Open Year | ||||
| Jurisdiction | |||||
| China | 2014 | ||||
| Japan | 2018 | ||||
| Korea | 2020 | ||||
| Singapore | 2019 | ||||
| Taiwan | 2019 | ||||
| United Kingdom | 2021 | ||||
| United States: | |||||
| Federal income tax | 2012 | ||||
| State and local income tax | 2011 |
The Company has not recorded deferred tax liabilities with respect to undistributed earnings of foreign subsidiaries and related companies that are deemed to be permanently invested. In addition to the U.S. federal tax imposed by the Tax Cuts and Jobs Act (the “Act”) on all accumulated unrepatriated earnings through December 31, 2017, the Act introduced additional U.S. federal tax on foreign earnings, effective as of January 1, 2018. The undistributed foreign earnings at December 31, 2025 may still be subject to certain taxes upon repatriation, primarily where foreign withholding taxes apply. It is not practicable to calculate the unrecognized deferred tax liability on undistributed foreign earnings due to the complexity of the hypothetical calculation.
F-24
NOTE 8 - EARNINGS PER SHARE CALCULATIONS
On the Separation and Distribution Date, approximately 209 million shares of the Company's common stock, par value $0.01 per share, were distributed to DuPont shareholders of record as of October 22, 2025. This share amount is being utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Separation as all common stock was owned by DuPont prior to the Separation. For all periods presented prior to the Separation, it is assumed that there are no dilutive equity instruments as there were no equity awards of Qnity outstanding prior to the Separation. Therefore, the calculation of basic and diluted earnings per share is the same for those periods. Subsequent to Separation, actual basic share counts and diluted share counts were utilized for the calculation.
The following tables provide earnings per share calculations for the years ended December 31, 2025, 2024 and 2023:
| Net Income for Earnings Per Share Calculations - Basic & Diluted In millions | 2025 | 2024 | 2023 | ||||||||
| Net income | $ | 729 | $ | 724 | $ | 533 | |||||
| Net income attributable to noncontrolling interests | 37 | 31 | 26 | ||||||||
| Net income attributable to common stockholders | $ | 692 | $ | 693 | $ | 507 | |||||
| Earnings attributable to common stockholders - basic | $ | 3.30 | $ | 3.31 | $ | 2.42 | |||||
| Earnings attributable to common stockholders - diluted | $ | 3.30 | $ | 3.31 | $ | 2.42 |
| Share Count Information Shares in millions | 2025 | 2024 | 2023 | ||||||||
| Weighted-average common shares - basic | 209.6 | 209.4 | 209.4 | ||||||||
| Plus dilutive effect of equity compensation plans | 0.2 | — | — | ||||||||
| Weighted-average common shares - diluted | 209.8 | 209.4 | 209.4 | ||||||||
| Stock option, restricted stock units and performance-based restricted stock units excluded from EPS calculations1 | 0.1 | — | — |
1.These outstanding options to purchase shares of common stock, restricted stock units and performance based restricted stock units were excluded from the calculation of diluted earnings per share because the effect of including them would have been antidilutive.
NOTE 9 - ACCOUNTS AND NOTES RECEIVABLE - NET
Accounts receivable are carried at amounts that approximate fair value.
| In millions | December 31, 2025 | December 31, 2024 | ||||||
| Accounts receivable – trade 1 | $ | 656 | $ | 580 | ||||
| Current indemnification assets 2 | 205 | — | ||||||
| Other 3 | 131 | 102 | ||||||
| Total accounts and notes receivable - net | $ | 992 | $ | 682 |
1.Accounts receivable – trade is net of allowances of $2 million at December 31, 2025 and 2024. Allowances are equal to the estimated uncollectible amounts and current expected credit loss. That estimate is based on historical collection experience, current economic and market conditions, and review of the current status of customers' accounts.
2.Related to current portion of indemnification receivables from DuPont. For additional information on these matters, refer to Note 5.
3.Other includes receivables in relation to value added tax, general sales tax and other taxes, notes receivable and other receivables. No individual group represents more than 10% of total receivables for the periods presented.
NOTE 10 - INVENTORIES - NET
| In millions | December 31, 2025 | December 31, 2024 | ||||||
| Finished goods | $ | 292 | $ | 242 | ||||
| Work in process | 221 | 209 | ||||||
| Raw materials | 145 | 147 | ||||||
| Supplies | 27 | 27 | ||||||
| Less: Inventory reserves | 24 | 28 | ||||||
| Total inventories - net | $ | 661 | $ | 597 |
F-25
NOTE 11 - PROPERTY, PLANT AND EQUIPMENT - NET
| Estimated Useful Lives (Years) | December 31, 2025 | December 31, 2024 | |||||||||||||||
| In millions | |||||||||||||||||
| Land and land improvements | 1 | - | 25 | $ | 73 | $ | 71 | ||||||||||
| Buildings | 1 | - | 50 | 679 | 596 | ||||||||||||
| Machinery, equipment, and other | 1 | - | 25 | 2,211 | 1,808 | ||||||||||||
| Construction in progress | 188 | 194 | |||||||||||||||
| Total property, plant and equipment | $ | 3,151 | $ | 2,669 | |||||||||||||
| Total accumulated depreciation | $ | (1,450) | $ | (1,121) | |||||||||||||
| Total property, plant and equipment - net | $ | 1,701 | $ | 1,548 |
| In millions | 2025 | 2024 | 2023 | ||||||||
| Depreciation expense | $ | 169 | $ | 162 | $ | 141 |
NOTE 12 - NONCONSOLIDATED AFFILIATES
The Company's investments in companies accounted for using the equity method ("nonconsolidated affiliates") are recorded in "Investments and other noncurrent receivables" in the Consolidated Balance Sheets. The Company's net investment in nonconsolidated affiliates at December 31, 2025 and December 31, 2024 is $386 million and $382 million, respectively.
The Company's dividends received from nonconsolidated affiliates is shown in the following table:
| Dividends Received from Nonconsolidated Affiliates | 2025 | 2024 | 2023 | |||||||||||
| (In millions) For the years ended December 31, | ||||||||||||||
| Dividends from nonconsolidated affiliates | $ | 43 | $ | 41 | $ | 27 |
The Company had an ownership interest in three nonconsolidated affiliates, with each ownership interest representing 50% at December 31, 2025.
At December 31, 2025 and 2024, the Company had a note payable to Hitachi Chem DuP Microsystems LLC (the “Related Party Note Payable”) of $53 million and $31 million, respectively. This note payable arises from an arrangement in which Parent manages the daily domestic cash position resulting from the normal cash operations of Hitachi Chem DuP Microsystems LLC. Under this arrangement, both parties may loan funds to one another based on the cash position of Hitachi Chem DuP Microsystems LLC.
Sales to nonconsolidated affiliates represented less than 1% of total net sales for the years ended December 31, 2025, 2024 and 2023. Purchases from nonconsolidated affiliates represented less than 1% of “Cost of sales” for the years ended December 31, 2025, 2024 and 2023.
NOTE 13 - GOODWILL AND OTHER INTANGIBLE ASSETS
The following table summarizes changes in the carrying amount of goodwill for the years ended December 31, 2025 and 2024:
| In millions | Semiconductor Technologies | Interconnect Solutions | Total | ||||||||
| Balance at December 31, 2023 | $ | 4,487 | $ | 2,969 | $ | 7,456 | |||||
| Currency Translation Adjustment | (34) | (46) | (80) | ||||||||
| Other | — | 3 | 3 | ||||||||
| Balance at December 31, 2024 | $ | 4,453 | $ | 2,926 | $ | 7,379 | |||||
| Currency Translation Adjustment | 89 | 54 | 143 | ||||||||
| Balance at December 31, 2025 | $ | 4,542 | $ | 2,980 | $ | 7,522 |
F-26
Annual Goodwill Impairment Testing
Effective in the first quarter of 2025, in anticipation of the Separation, DuPont realigned its segment structure. The realignment of DuPont’s segments served as a triggering event requiring the Company to perform an impairment analysis related to goodwill prior to and subsequent to the realignment. As part of the realignment, the Company assessed and redefined certain reporting units, including reallocation of goodwill on a relative fair value basis, as applicable, to the reporting units impacted. Goodwill impairment analyses were then performed for reporting units impacted and no impairments were identified.
As part of its annual impairment test at October 1, 2025, the Company performed qualitative testing on its two reporting units. The results of the qualitative assessments indicated that it is not more likely than not that the fair values of the two reporting units were less than their carrying values.
Other Intangible Assets
The gross carrying amounts and accumulated amortization of other intangible assets with finite lives, by major class are as follows:
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||
| In millions | Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||
| Intangible assets with finite lives: | ||||||||||||||||||||
| Developed technology | $ | 544 | $ | (349) | $ | 195 | $ | 605 | $ | (357) | $ | 248 | ||||||||
| Trademarks | 55 | (38) | 17 | 55 | (34) | 21 | ||||||||||||||
| Customer-related | 2,125 | (1,226) | 899 | 2,353 | (1,336) | 1,017 | ||||||||||||||
| Total other intangible assets | $ | 2,724 | $ | (1,613) | $ | 1,111 | $ | 3,013 | $ | (1,727) | $ | 1,286 |
During the fiscal year 2025, the Company retired fully amortized assets of $74 million of developed technology intangible assets and $273 million of customer-related intangible assets. During the fiscal year 2024, the Company retired fully amortized assets of $65 million of developed technology intangible assets and $27 million of trademark intangible assets.
The following table provides the net carrying value of other intangible assets by segment:
| Net Intangibles | December 31, 2025 | December 31, 2024 | ||||||
| In millions | ||||||||
| Semiconductor Technologies | $ | 264 | $ | 314 | ||||
| Interconnect Solutions | 847 | 972 | ||||||
| Total | $ | 1,111 | $ | 1,286 |
The aggregate pre-tax amortization expense for intangible assets was $207 million, $232 million and $262 million, for the years ended December 31, 2025, 2024, and 2023, respectively.
Total estimated amortization expense for the next five fiscal years is as follows:
| Estimated Amortization Expense | |||||
| In millions | |||||
| 2026 | $ | 199 | |||
| 2027 | $ | 169 | |||
| 2028 | $ | 143 | |||
| 2029 | $ | 109 | |||
| 2030 | $ | 89 |
F-27
NOTE 14 - SHORT-TERM BORROWINGS, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES
The following tables summarize the Company's short-term borrowings, long-term debt and finance lease obligations:
| Short-Term Borrowings | December 31, 2025 | December 31, 2024 | ||||||
| (In millions) | ||||||||
| Long-term debt due within one year | $ | 24 | $ | — | ||||
| Long-Term Debt | December 31, 2025 | December 31, 2024 | ||||||||||||
| In millions | Amount | Weighted Average Rate | Amount | Weighted Average Rate | ||||||||||
| Promissory notes and debentures: | ||||||||||||||
| Secured Notes due 2032 | $ | 1,000 | 5.750 | % | $ | — | — | % | ||||||
| Unsecured Notes due 2033 | 750 | 6.250 | % | — | — | % | ||||||||
| Other facilities: | ||||||||||||||
| Senior secured term loan facility due 2032 | 2,350 | 5.698 | % | — | — | % | ||||||||
| Less: Unamortized debt discount and issuance costs | 73 | — | ||||||||||||
| Less: Long-term debt due within one year | 24 | — | ||||||||||||
| Total | $ | 4,003 | $ | — |
The Secured Notes
On August 15, 2025, Qnity issued $1 billion aggregate principal amount of 5.750% senior secured notes due 2032 (the "Secured Notes"), pursuant to an indenture dated as of August 15, 2025 (the “Secured Notes Indenture”), by and between Qnity and U.S. Bank Trust Company, National Association, as trustee (the "Secured Notes Trustee"), collateral agent and paying agent. The Secured Notes mature on August 15, 2032 and bear interest at a rate of 5.750% per year. Interest on the Secured Notes is payable on February 15 and August 15 of each year, beginning on February 15, 2026.
The Secured Notes are jointly and severally and unconditionally guaranteed on a senior secured basis by each Qnity subsidiary that is a borrower, or guarantees indebtedness, under Qnity’s Senior Secured Credit Facilities. Upon the consummation of the Separation (or, with respect to the foreign collateral, the day after the consummation of the Separation), the Secured Notes and related guarantees were secured, subject to permitted liens and certain other exceptions, by first priority liens on substantially the same collateral that secure Qnity’s obligations under its Senior Secured Credit Facilities. The Secured Notes and related guarantees are secured on a pari passu basis with the Senior Secured Credit Facilities.
At any time prior to August 15, 2028, Qnity may redeem some or all of the Secured Notes at a price equal to 100% of the principal amount thereof to be redeemed, plus a “make-whole” premium plus accrued and unpaid interest, if any, to, but not including, the redemption date. In addition, Qnity may redeem some or all of the Secured Notes at any time on or after August 15, 2028 at specified prices, plus accrued and unpaid interest, if any, up to, but not including, the redemption date. Qnity may also redeem up to 40% of the aggregate principal amount of the Secured Notes at any time on or prior to August 15, 2028 using the net proceeds from certain equity offerings at 105.750%, plus accrued and unpaid interest, if any, up to, but not including, the redemption date. If Qnity experiences certain kinds of changes in control, Qnity must offer to repurchase the Secured Notes at a price equal to 101% of the principal amount of the Secured Notes, plus accrued and unpaid interest, if any, to, but not including, the repurchase date.
The Secured Notes Indenture includes certain covenants on the actions of Qnity and its restricted subsidiaries relating to debt incurrence, liens, restricted payments, assets sales and transactions with affiliates, changes in control, and mergers or sales of all or substantially all of Qnity’s assets. The Secured Notes Indenture provides for customary events of default (subject, in certain cases, to customary grace periods), which include nonpayment on the Secured Notes, breach of covenants in the Secured Notes Indenture, payment defaults or acceleration of other indebtedness over a specified threshold, failure to pay certain judgments over a specified threshold and certain events of bankruptcy and insolvency. Generally, if an event of default occurs, the Secured Notes Trustee or holders of at least 30% of the aggregate principal amount of all then outstanding Secured Notes may declare the principal, premium, if any, interest and any other monetary obligations on all of the then outstanding Secured Notes to be due and payable immediately.
F-28
The Unsecured Notes
On August 15, 2025, Qnity issued $750 million aggregate principal amount of 6.250% senior unsecured notes due 2033 (the “Unsecured Notes” and, together with the Secured Notes, the “Notes”) pursuant to an indenture dated as of August 15, 2025 (the “Unsecured Notes Indenture”), by and between Qnity and U.S. Bank Trust Company, National Association, as trustee (the “Unsecured Notes Trustee”) and paying agent, dated as of August 15, 2025. The Unsecured Notes mature on August 15, 2033 and bear interest at a rate of 6.250% per year. Interest on the Unsecured Notes is payable on February 15 and August 15 of each year, beginning on February 15, 2026.
The Unsecured Notes are jointly and severally and unconditionally guaranteed on a senior unsecured basis by each Qnity subsidiary that is a borrower, or guarantees indebtedness, under Qnity’s Senior Secured Credit Facilities.
At any time prior to August 15, 2028, Qnity may redeem some or all of the Unsecured Notes at a price equal to 100% of the principal amount thereof to be redeemed, plus a “make-whole” premium plus accrued and unpaid interest, if any, to, but not including, the redemption date. In addition, Qnity may redeem some or all of the Unsecured Notes at any time on or after August 15, 2028 at specified prices, plus accrued and unpaid interest, if any, to, but not including, the redemption date. Qnity may also redeem up to 40% of the aggregate principal amount of the Unsecured Notes at any time on or prior to August 15, 2028 using the net proceeds from certain equity offerings at 106.250%, plus accrued and unpaid interest, if any, to, but not including, the redemption date. If Qnity experiences certain kinds of changes in control, Qnity must offer to repurchase the Unsecured Notes at a price equal to 101% of the principal amount of the Unsecured Notes, plus accrued and unpaid interest, if any, to, but not including, the repurchase date.
The Unsecured Notes Indenture includes certain covenants on the actions of Qnity and its restricted subsidiaries relating to debt incurrence, liens, restricted payments, assets sales, and transactions with affiliates, changes in control, and mergers or sales of all or substantially all of Qnity’s assets. The Unsecured Notes Indenture provides for customary events of default (subject, in certain cases, to customary grace periods), which include nonpayment on the Unsecured Notes, breach of covenants in the Unsecured Notes Indenture, payment defaults or acceleration of other indebtedness over a specified threshold, failure to pay certain judgments over a specified threshold and certain events of bankruptcy and insolvency. Generally, if an event of default occurs, the Unsecured Notes Trustee or holders of at least 30% of the aggregate principal amount of all then outstanding Unsecured Notes may declare the principal, premium, if any, interest and any other monetary obligations on all of the then outstanding Unsecured Notes to be due and payable immediately.
Senior Secured Credit Facilities
On October 31, 2025 in connection with the Separation, the Company entered into a credit agreement (the "Credit Agreement") providing for (a) a five-year revolving credit facility in the aggregate committed amount of $1.25 billion (up to $100 million of such revolving facility is available for the issuance of letters of credit) (the "Senior Secured Revolving Facility"), and (b) a seven-year term loan facility in the aggregate principal amount of $2.35 billion (the "Senior Secured Term Loan Facility" and, together with the Senior Secured Revolving Facility, the "Senior Secured Credit Facilities"). The full amount of the Senior Secured Term Loan Facility, $2.35 billion, was funded on October 31, 2025, and paid directly to DuPont, along with the proceeds from the issuance of the Notes, in the form of a cash dividend in connection with the Separation.
The borrowings under the Senior Secured Credit Facilities bear interest at a rate per annum equal to either of the following, plus, in each case, an applicable margin: (a) the base rate or (b) term Secured Overnight Financing Rate ("SOFR"). The applicable margin for borrowings under the Senior Secured Revolving Facility ranges from 0.25% to 1.25% with respect to base rate borrowings and 1.25% to 2.25% with respect to term SOFR borrowings, in each case, based on the Company's consolidated first lien net leverage ratio. The applicable margin for borrowings under the Senior Secured Term Loan Facility is 1.00% with respect to base rate borrowings and 2.00% with respect to term SOFR borrowings.
The Company has scheduled amortization payments under the Senior Secured Term Loan Facility in equal quarterly installments in an annual amount equal to 1.00% of the original principal amount of the term loans payable on the last day of each calendar quarter, with the unpaid balance being due and payable at maturity.
The Credit Agreement contains a number of negative covenants that, among other things and subject to certain exceptions, may restrict Qnity’s ability and the ability of each of our restricted subsidiaries to: incur additional indebtedness (including guarantees thereof); create liens on, sell or otherwise dispose of Qnity assets; enter into mergers, consolidations and other fundamental changes; make certain investments or acquisitions; engage in sale-leaseback transactions; repurchase Qnity common stock, pay dividends or make similar distributions or other restricted payments on Qnity capital stock; repay certain indebtedness; engage in certain affiliate transactions; and enter into agreements that restrict Qnity’s ability to create liens, pay dividends or make loan repayments.
F-29
With respect to the Senior Secured Revolving Facility, the related credit agreement requires that Qnity maintain, on a quarterly basis, a consolidated first lien net leverage ratio not to exceed 4.50:1.00, tested at the end of each fiscal quarter, subject to an increase of 0.50:1.00 in connection with the consummation of certain material acquisitions (defined in a customary manner) and applicable to the fiscal quarter in which such acquisition is consummated and the four consecutive full fiscal quarters thereafter. There were no drawdowns under the Senior Secured Revolving Facility during the year ended December 31, 2025. Outstanding letters of credit under the Senior Secured Revolving Facility were $12 million.
The Credit Agreement also contains representations and warranties, affirmative covenants and events of default, in each case, usual and customary for facilities and transactions of this type. As of December 31, 2025, the Company was in compliance with all applicable covenants included in the terms of its debt arrangements.
Principal payments of long-term debt for the five succeeding fiscal years and thereafter are as follows:
| Maturities of Long-Term Debt for Next Five Years and Thereafter at December 31, 2025 | Total | ||||
| In millions | |||||
| 2026 | $ | 24 | |||
| 2027 | 24 | ||||
| 2028 | 24 | ||||
| 2029 | 24 | ||||
| 2030 | 24 | ||||
| Thereafter | 3,980 | ||||
| Total maturities on long-term debt | $ | 4,100 |
The estimated fair value of the Company's long-term borrowings was determined using Level 2 inputs within the fair value hierarchy. Based on quoted market prices for the same or similar issues, or on current rates offered to the Company for debt of the same remaining maturities, the fair value of the Company's long-term borrowings, including long-term debt due within one year, was $4,154 million at December 31, 2025.
Uncommitted Credit Facilities and Outstanding Letters of Credit
Unused bank credit lines on uncommitted credit facilities were approximately $339 million at December 31, 2025. These lines are available to support short-term liquidity needs and general corporate purposes including letters of credit. Outstanding letters of credit and credit lines under these uncommitted credit facilities were approximately $31 million at December 31, 2025. These letters of credit support commitments made in the ordinary course of business.
NOTE 15 - COMMITMENTS AND CONTINGENT LIABILITIES
Litigation Matters
In the normal course of business, the Company is involved from time to time in various arbitrations, lawsuits, claims and other actions with respect to patent infringement claims, employment claims, including alleged wage and hour violations, and commercial claims.
The Company accrues for such matters where losses are deemed probable and reasonably estimable. There are other matters involving the Company for which a loss is deemed remote or reasonably possible, and, as a result, associated accruals have not been established. It is reasonably possible that some of these matters could result in future payments or costs in excess of the amounts accrued at December 31, 2025, but such excess amounts cannot be reasonably estimated. It is the opinion of the Company’s management that the possibility is remote that the aggregate of all such claims and lawsuits will have a material adverse impact on the results of operations, financial condition and cash flows of the Company.
Certain Indemnification Obligations to DuPont
In connection with the Separation, Qnity has been contractually allocated, and directly pays or indemnifies DuPont for, the Applicable Qnity Percentage of certain liabilities, including current or future funding obligations of DuPont under the Memorandum of Understanding ("MOU"), legacy PFAS liabilities and liabilities related to businesses and operations of DuPont that were previously discontinued or divested. On December 2, 2025, Qnity and DuPont determined and agreed, pursuant to the Separation and Distribution Agreement, that the Applicable Qnity Percentage is 44%. Indemnification liabilities have been determined and recorded based on this Applicable Qnity Percentage and in accordance with the applicable provisions in the Separation and Distribution Agreement and the and the Legacy Liabilities Assignment Agreement (including adjustments therein related to estimated income tax benefits arising from the liabilities allocated to us). These liabilities were recorded as a reduction to "Additional paid-in capital" in the Consolidated Balance Sheets as of the Separation and Distribution Date.
F-30
As of December 31, 2025, the Company has recorded indemnification liabilities related to the legacy liabilities detailed above of $80 million within “Accrued and other current liabilities” and $110 million within “Other noncurrent obligations” within the Consolidated Balance Sheets. It is reasonably possible that the potential exposure of these indemnifications could range up to $86 million above the amount accrued at December 31, 2025. It is also possible that the Company could incur additional costs or losses that may be material to its financial condition and its cash flows beyond those amounts accrued for or believed to be reasonably possible at this time. Such excess amounts cannot be reasonably estimated.
Liabilities under the MOU
On January 22, 2021, DuPont, Corteva, Inc. ("Corteva"), EIDP Inc. (formerly known as E. I. du Pont de Nemours and Company) (“EIDP”) and The Chemours Company ("Chemours") entered into the MOU in which the parties have agreed to share certain costs associated with qualified potential future liabilities. The MOU will be in effect until the earlier to occur of (i) December 31, 2040, (ii) the day on which the aggregate amount of Qualified Spend, as defined in the MOU, is equal to $4 billion or (iii) a termination in accordance with the terms of the MOU.
The parties have agreed that, during the term of the MOU, Qualified Spend up to $4 billion will be borne 50% by Chemours and 50% by DuPont and Corteva. DuPont will bear 71% and Corteva will bear 29% of their 50% of Qualified Spend; accordingly, DuPont’s portion of the $2 billion is approximately $1.4 billion.
As of December 31, 2025, DuPont has borne Qualified Spend of approximately $700 million and has recorded an indemnification liability for probable and reasonably estimable future Qualified Spend of $185 million. Qnity has recorded an indemnification liability for such probable and reasonably estimable future Qualified Spend of $75 million which represents Applicable Qnity Percentage of 44% of DuPont's after-tax liability.
New Jersey
On August 3, 2025, DuPont, together with Chemours and Corteva and its subsidiary, EIDP, agreed to a proposed Judicial Consent Order (the “Consent Order”) with the State of New Jersey to resolve outstanding claims by the state pending against the companies related to legacy use of a wide variety of substances of concern for an aggregate cash settlement payment to the state of $875 million, payable over a period of 25 years. The first of the scheduled annual payments will be due within 30 days of Court approval of the Consent Order, but no earlier than January 31, 2026.
As of December 31, 2025, DuPont maintains a pre-tax charge of $177 million related to the proposed Consent Order. The Company has recorded $66 million for our contractually allocated portion of the recorded pre-tax charge. Additionally, DuPont recorded interest accretion of $9 million during the year ended December 31, 2025, resulting in a liability of $186 million as of December 31, 2025. Qnity has recorded $3 million for its contractually allocated portion of this accreted interest. We will share in the ongoing costs of maintaining a reserve fund in the event the remedial funding source for a site has been exhausted and the party responsible is not otherwise performing the required remediation.
Contingent upon the settlement being approved by the Court, DuPont and Corteva will purchase Chemours’ interest in future, if any, insurance proceeds related to PFAS claims. DuPont and Corteva will make the purchase by contributing a total of $150 million into an escrow fund (the “NJ Insurance Escrow”) to be applied to Chemours’ share of the settlement. In exchange, Chemours shall assign to DuPont and Corteva its rights to $150 million of PFAS-related insurance proceeds plus a fee equal to the lesser of (a) $35 million, or (b) $3 million plus interest (at prime minus 2%) on the unrecovered fraction of $150 million, until Chemours’ share of insurance recoveries fully recoups the purchase price.
The Company’s contractually allocated cash contribution in respect of the NJ Insurance Escrow will be $47 million, contingent upon the settlement being approved by the Court. The Company will also receive the Applicable Qnity Percentage of any insurance proceeds related to PFAS claims recovered.
The obligations of DuPont set forth in this section relating to the Settlement, including the cash payments, any remediation obligations (and related liabilities), and the establishment and maintenance of the reserve fund, and the purchase of Chemours’ interest in future insurance proceeds related to PFAS claims, in each case constitute, liabilities contractually allocated between us and DuPont based their respective Applicable Percentage under the Separation and Distribution Agreement. Accordingly, Qnity will indemnify DuPont, or remit directly to the relevant third party, the amount owed in respect of our share of such liabilities.
Other
As of December 31, 2025, DuPont has recorded liabilities related to business and operations, historical activities of DuPont, including environmental liabilities, and its present and former subsidiaries, for which the Company has recorded $46 million for its contractually allocated portion.
F-31
Guarantees
The Company entered into a cost sharing agreement (the “ESL Cost Sharing Agreement”) relating to the sharing of certain ownership and operating expenses at Experimental Station, where we will also be leasing space from DuPont under a separate operating lease. Under the ESL Cost Sharing Agreement, DuPont and Qnity will be responsible for 60% and 40%, respectively, of certain costs and expenses that exceed the net revenues received by DuPont from certain third parties at Experimental Station. While the term of the ESL Cost Sharing Agreement will be perpetual, DuPont will be required to use commercially reasonable efforts to mitigate such ownership and operating expenses, and Qnity will not be responsible for the extent of any increase in Experimental Station ownership or operating expenses due to DuPont’s loss of rent from Qnity that may result if we terminate our separate operating lease at the site and DuPont is unable to secure a new tenant for our space. We will also not be responsible for any increase in Experimental Station ownership and operating expenses that may result from any decrease in use of space at Experimental Station by DuPont or its subsidiaries following the Spin-Off. The Company determined that our stand-ready obligation to reimburse DuPont under this agreement represents a guarantee under ASC 460 and recorded a liability within "Other noncurrent obligations" in the Consolidated Balance Sheets of $70 million as of the Separation Date as part of our distribution accounting in separation from DuPont based on our estimate of fair value. These liabilities were recorded as a reduction to "Additional paid-in capital" in the Consolidated Balance Sheets as of the Separation and Distribution Date. The Company has not been required to make a payment under this agreement to date. The carrying value of this liability at December 31, 2025, approximates the amount recorded at Separation.
NOTE 16 - LEASES
The Company has operating leases for real estate, fleet, and certain machinery and equipment. The Company’s leases have remaining lease terms of approximately 1 year to 19 years. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend the lease when it is reasonably certain that the Company will exercise that option. Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable lease payments are not presented as part of the initial ROU asset or lease liability.
The components of lease cost for operating leases for the years ended December 31, 2025, 2024 and 2023 were as follows:
| In millions | 2025 | 2024 | 2023 | ||||||||
| Operating lease cost | $ | 44 | $ | 44 | $ | 41 | |||||
| Variable lease cost 1 | 6 | 3 | 4 | ||||||||
| Less: Sublease income 2 | 2 | — | — | ||||||||
| Total lease cost | $ | 48 | $ | 47 | $ | 45 |
1.Variable lease cost excludes costs that have been capitalized into inventory of approximately $15 million in each year presented.
2.Reflects income associated with subleases, not inclusive of all lessor arrangements disclosed below.
Operating cash flows from operating leases were $42 million, $40 million, and $38 million for the year ended December 31, 2025, 2024 and 2023, respectively.
New operating lease assets and liabilities entered into during the year ended December 31, 2025, 2024 and 2023 were $410 million, $11 million and $83 million, respectively. Of the operating leases entered into during the year ended December 31, 2025, approximately $347 million relate to facilities leased from DuPont following the Separation. Supplemental balance sheet information related to leases was as follows:
| In millions | December 31, 2025 | December 31, 2024 | ||||||
| Operating Leases | ||||||||
| Operating lease right-of-use assets 1 | $ | 493 | $ | 127 | ||||
| Current operating lease liabilities 2 | 43 | 30 | ||||||
| Noncurrent operating lease liabilities 3 | 455 | 100 | ||||||
| Total operating lease liabilities | $ | 498 | $ | 130 |
1.Included in "Deferred charges and other assets" in the Consolidated Balance Sheets.
2.Included in "Accrued and other current liabilities" in the Consolidated Balance Sheets.
3.Included in "Other noncurrent obligations" in the Consolidated Balance Sheets.
F-32
Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide the lessor’s implicit rate, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments.
| Lease Term and Discount Rate for Operating Leases | December 31, 2025 | December 31, 2024 | ||||||
| Weighted-average remaining lease term (years) | 12.6 | 7.2 | ||||||
| Weighted-average discount rate | 4.60 | % | 4.01 | % |
Maturities of lease liabilities were as follows:
| Maturity of Lease Liabilities at December 31, 2025 | Operating Leases | ||||
| In millions | |||||
| 2026 | $ | 65 | |||
| 2027 | 57 | ||||
| 2028 | 49 | ||||
| 2029 | 45 | ||||
| 2030 | 44 | ||||
| 2031 and thereafter | 414 | ||||
| Total lease payments | $ | 674 | |||
| Less: Interest | 176 | ||||
| Present value of lease liabilities | $ | 498 |
NOTE 17 - STOCKHOLDERS' EQUITY
Common Stock
The following table provides a reconciliation of Qnity Common Stock for the year ended December 31, 2025:
| Common Stock | Issued | |||||||
| In thousands | ||||||||
| Balance at November 3, 2025 (Separation and Distribution Date) | 209,444 | |||||||
| Issued | 35 | |||||||
| Balance at December 31, 2025 | 209,479 |
The Company did not hold any shares of Common Stock in treasury and no shares were repurchased or retired during the year ended December 31, 2025.
Retained Earnings
There are no significant restrictions limiting the Company's ability to pay dividends. Dividends declared and paid to common stockholders during the years ended December 31, 2025 are summarized in the following table:
| Dividends Declared and Paid | 2025 | |||||||
| In millions | ||||||||
| Dividends declared to common stockholders | $ | 29 | ||||||
| Dividends paid to common stockholders | $ | 13 | ||||||
F-33
Accumulated Other Comprehensive Loss
The following table summarizes the activity related to each component of AOCI for the years ended December 31, 2025, 2024 and 2023:
| Accumulated Other Comprehensive Loss | Cumulative Translation Adj | Pension and OPEB | Total | ||||||||||||||
| In millions | |||||||||||||||||
| 2023 | |||||||||||||||||
| Balance at January 1, 2023 | $ | (226) | $ | 17 | $ | (209) | |||||||||||
| Other comprehensive loss | (34) | (2) | (36) | ||||||||||||||
| Balance at December 31, 2023 | $ | (260) | $ | 15 | $ | (245) | |||||||||||
| 2024 | |||||||||||||||||
| Other comprehensive (loss) income | (175) | 6 | (169) | ||||||||||||||
| Balance at December 31, 2024 | $ | (435) | $ | 21 | $ | (414) | |||||||||||
| 2025 | |||||||||||||||||
| Other comprehensive income (loss) before reclassifications | 214 | (4) | 210 | ||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | — | 2 | 2 | ||||||||||||||
| Other comprehensive income (loss) | $ | 214 | $ | (2) | $ | 212 | |||||||||||
| Separation-related adjustments | — | (11) | (11) | ||||||||||||||
| Balance at December 31, 2025 | $ | (221) | $ | 8 | $ | (213) |
The tax effects on the net activity related to each component of other comprehensive loss were not significant for the years ended December 31, 2025, 2024 and 2023.
NOTE 18 - PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
As a result of the Separation and in connection with the Separation and Distribution Agreement and Employee Matters Agreement, Qnity assumed benefit obligations and related plan assets relating to certain DuPont non-U.S. pension and OPEB plans. These obligations were assumed into newly established plans set up in the month leading up to the separation. As a result of the transfer at Separation, approximately $312 million of obligations offset by approximately $299 million of plan assets, were transferred to Qnity.
Defined Benefit Pension Plans
Qnity offers both funded and unfunded contributory and noncontributory defined benefit pension plans in certain non-U.S. jurisdictions.
Qnity's funding policy is consistent with the funding requirements of each country's laws and regulations. Pension coverage for employees of Qnity's non-U.S. consolidated subsidiaries is provided, to the extent deemed appropriate, through separate plans. Obligations under such plans are funded by depositing funds with trustees, covered by insurance contracts, or remain unfunded. The benefits under these plans are based primarily on years of service and employees' pay near retirement. During 2025, the Company contributed $10 million to its benefit plans. Qnity expects to contribute approximately $6 million to its benefit plans in 2026.
The weighted-average assumptions used to determine benefit obligations and net periodic benefit costs for all plans are summarized in the table below:
| Weighted-Average Assumptions for Pension Plans | Benefit Obligations at December 31, | Net Periodic Costs for the Years Ended | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2023 | |||||||||||||
| Discount rate | 4.15 | % | 3.69 | % | 3.30 | % | 3.10 | % | 3.25 | % | |||||||
| Interest crediting rate for applicable benefits | 1.75 | % | 1.75 | % | 1.75 | % | 2.00 | % | 2.25 | % | |||||||
| Rate of compensation increase | 3.03 | % | 3.90 | % | 3.39 | % | 3.92 | % | 3.96 | % | |||||||
| Expected return on plan assets | N/A | N/A | 3.45 | % | 4.10 | % | 3.33 | % |
F-34
Other Post-employment Benefit Plans
The company provides medical, dental and life insurance benefits to certain pensioners and survivors in the U.S. and foreign locations. The associated plans for retiree benefits are unfunded and the cost of the approved claims is paid from company funds. In comparison to the Company’s defined benefit pension plans, the Company’s other post-employment benefit plans are not significant. The total other post-employment benefits projected benefit obligation was $13 million as of December 31, 2025 and zero as of December 31, 2024.
Assumptions
The Company determines the expected long-term rate of return on plan assets by performing a detailed analysis of key economic and market factors driving historical returns for each asset class and formulating a projected return based on factors in the current environment. Factors considered include, but are not limited to, inflation, real economic growth, interest rate yield, interest rate spreads, and other valuation measures and market metrics.
Service cost and interest cost for all other plans are determined on the basis of the discount rates derived in determining those plan obligations. The discount rates utilized to measure the majority of pension obligations are based on the Aon AA corporate bond yield curves applicable to each country at the measurement date. The Company utilizes the mortality tables and generational mortality improvement scales, where available, developed in each of the respective countries in which the Company holds plans.
Summarized information on the Company’s pension and other postretirement benefit plans is as follows:
| Change in Projected Benefit Obligations of All Plans | 2025 | 2024 | ||||||
| In millions | ||||||||
| Change in projected benefit obligations: | ||||||||
| Benefit obligations at beginning of year | $ | 165 | $ | 186 | ||||
| Service cost | 6 | 5 | ||||||
| Interest cost | 7 | 6 | ||||||
| Actuarial changes in assumptions and experience | (9) | (13) | ||||||
| Benefits paid | (15) | (9) | ||||||
| Obligations assumed from parent at separation | 312 | — | ||||||
| Settlement | (74) | — | ||||||
| Effect of foreign exchange rates | 19 | (10) | ||||||
| Benefit obligations at end of year | $ | 411 | $ | 165 |
| Change in Plan Assets and Funded Status of All Plans | 2025 | 2024 | ||||||
| In millions | ||||||||
| Change in plan assets: | ||||||||
| Fair value of plan assets at beginning of year | $ | 114 | $ | 124 | ||||
| Actual return on plan assets | 18 | (2) | ||||||
| Employer contributions | 10 | 4 | ||||||
| Benefits paid | (16) | (9) | ||||||
| Assets assumed from parent at separation | 299 | — | ||||||
| Settlement | (82) | — | ||||||
| Effect of foreign exchange rates | 14 | (3) | ||||||
| Fair value of plan assets at end of year | $ | 357 | $ | 114 | ||||
| Funded status: | ||||||||
| Plans with plan assets | $ | (5) | $ | (24) | ||||
| All other plans | (49) | (27) | ||||||
| Funded status at end of year | $ | (54) | $ | (51) |
F-35
The following tables summarize the amounts recognized in the Consolidated Balance Sheets for all significant plans:
| Amounts Recognized in the Consolidated Balance Sheets for All Significant Plans | December 31, 2025 | December 31, 2024 | ||||||
| In millions | ||||||||
| Amounts recognized in the Consolidated Balance Sheets: | ||||||||
| Deferred charges and other assets | $ | 29 | $ | 15 | ||||
| Accrued and other current liabilities | (3) | (1) | ||||||
| Pensions and other post-employment benefits - non-current | (80) | (65) | ||||||
| Net amount recognized | $ | (54) | $ | (51) | ||||
| Pretax amounts recognized in accumulated other comprehensive loss (income): | ||||||||
| Net gain | $ | (9) | $ | (25) | ||||
| Prior service credit | (2) | — | ||||||
| Net amount recognized | $ | (11) | $ | (25) |
The decrease in the Company’s actuarial gains for the year ended December 31, 2025 and the increase in actuarial gains for the year ended December 31, 2024 were primarily due to the changes in weighted-average discount rates.
The accumulated benefit obligation for all pension plans was $385 million and $158 million at December 31, 2025 and 2024, respectively.
| Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets | December 31, 2025 | December 31, 2024 | ||||||
| In millions | ||||||||
| Accumulated benefit obligations | $ | 98 | $ | 82 | ||||
| Fair value of plan assets | $ | 37 | $ | 25 |
| Pension Plans with Projected Benefit Obligations in Excess of Plan Assets | December 31, 2025 | December 31, 2024 | ||||||
| In millions | ||||||||
| Projected benefit obligations | $ | 108 | $ | 97 | ||||
| Fair value of plan assets | $ | 37 | $ | 31 |
| Net Periodic Benefit Costs for All Significant Plans for the Years Ended December 31, | 2025 | 2024 | 2023 | ||||||||
| In millions | |||||||||||
| Net Periodic Benefit Costs: | |||||||||||
| Service cost | $ | 6 | $ | 5 | $ | 9 | |||||
| Interest cost | 7 | 6 | 6 | ||||||||
| Expected return on plan assets | (6) | (6) | (5) | ||||||||
| Amortization of unrecognized net gain | (1) | — | — | ||||||||
| Settlement | 3 | — | — | ||||||||
| Net periodic benefit costs - Total | $ | 9 | $ | 5 | $ | 10 | |||||
| Changes in plan assets and benefit obligations recognized in other comprehensive loss: | |||||||||||
| Net (gain) loss | $ | (5) | $ | (6) | $ | 2 | |||||
| Amortization of unrecognized gain | 1 | — | — | ||||||||
| Settlement loss | 3 | — | — | ||||||||
| Impact of obligations from parent assumed at separation | 16 | — | — | ||||||||
| Effect of foreign exchange rates | (4) | (1) | 1 | ||||||||
| Total recognized in other comprehensive loss (income) | $ | 11 | $ | (7) | $ | 3 | |||||
| Total recognized in net periodic benefit costs (credits) and other comprehensive loss (income) | $ | 20 | $ | (2) | $ | 13 |
F-36
Estimated Future Benefit Payments
The estimated future benefit payments as of December 31, 2025, reflecting expected future service, as appropriate, are presented in the following table:
| Estimated Future Benefit Payments at December 31, 2025 | |||||
| In millions | |||||
| 2026 | $ | 26 | |||
| 2027 | 27 | ||||
| 2028 | 26 | ||||
| 2029 | 28 | ||||
| 2030 | 29 | ||||
| Years 2031-2035 | 142 | ||||
| Total | $ | 278 |
Plan Assets
Plan assets consist primarily of pooled investment vehicles, other investments such as private market securities and interest-earning cash balances, and alternative investments such as insurance contracts. At December 31, 2025, plan assets totaled $357 million.
The Company establishes strategic asset allocation percentage targets and appropriate benchmarks for significant asset classes with the aim of achieving a prudent balance between return and risk. Strategic asset allocations in other countries are selected in accordance with the laws and practices of those countries. Where appropriate, asset liability studies are utilized in this process. The assets are managed by professional investment firms unrelated to the Company. Pension trust funds are permitted to enter into certain contractual arrangements generally described as derivative instruments. Derivatives are primarily used to reduce specific market risks, hedge currency and adjust portfolio duration and asset allocation in a cost-effective manner.
Equity securities primarily included investments in large- and small-cap companies located in both developed and emerging markets around the world. Global equity securities include varying market capitalization levels. U.S. equity investments are primarily large-cap companies. Fixed income securities included investment and non-investment grade corporate bonds of companies diversified across industries, U.S. treasuries, non-U.S. developed market securities, U.S. agency mortgage-backed securities, emerging market securities and fixed income related funds. Global fixed income investments include corporate-issued, government-issued and asset-backed securities. Corporate debt investments include a range of credit risk and industry diversification. Alternative investments primarily included investments in various insurance contracts. Pooled investment vehicles and hedge funds primarily included funds investing in publicly traded equities, fixed income securities, and other diversified alternative strategies. Other investments included private market securities and cash and cash equivalents.
The weighted-average target allocation for plan assets of the Company’s pension plans is summarized as follows:
| Target Allocation for Plan Assets at December 31, 2025 | Qnity | ||||
| Asset Category | |||||
| Equity securities | 2 | % | |||
| Fixed income securities | 2 | ||||
| Alternative investments | 6 | ||||
| Hedge funds | 67 | ||||
| Other investments | 23 | ||||
| Total | 100 | % |
Fair value calculations may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
For pension plan assets classified as Level 1 measurements (measured using quoted prices in active markets), total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.
F-37
For pension plan assets classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and quality checks.
For pension plan assets classified as Level 3 measurements, total fair value is based on significant unobservable inputs including assumptions where there is little, if any, market activity for the investment. Valuations of the investments are provided by investment managers or fund managers. These valuations are reviewed for reasonableness based on applicable sector, benchmark and company performance. Valuations of insurance contracts are contractually determined and are based on exit price valuations or contract value. Adjustments to valuations are made where appropriate.
Certain pension plan assets are held in funds where fair value is based on an estimated net asset value per share (or its equivalent) as of the most recently available fund financial statements which are received on a monthly or quarterly basis. These valuations are reviewed for reasonableness based on applicable sector, benchmark and company performance. Adjustments to valuations are made where appropriate to arrive at an estimated net asset value per share at the measurement date. Where available, audited annual financial statements are obtained and reviewed for the investments as support for the manager’s investment valuation. These funds are not classified within the fair value hierarchy.
The following table summarizes the basis used to measure the Company’s pension plan assets at fair value for the years ended December 31, 2025 and 2024:
| Basis of Fair Value Measurements | December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||
| In millions | Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||
| Cash and cash equivalents | $ | 34 | $ | 34 | $ | — | $ | — | $ | 25 | $ | 25 | $ | — | $ | — | ||||||||||
| Equity securities: | ||||||||||||||||||||||||||
| U.S. equity securities | $ | 2 | $ | 2 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Non - U.S. equity securities | 9 | 9 | — | — | — | — | — | — | ||||||||||||||||||
| Total equity securities | $ | 11 | $ | 11 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Fixed income securities: | ||||||||||||||||||||||||||
| Debt - government-issued | $ | 6 | $ | — | $ | 6 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Debt - corporate-issued | 1 | — | 1 | — | — | — | — | — | ||||||||||||||||||
| Total fixed income securities | $ | 7 | $ | — | $ | 7 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Alternative investments: | ||||||||||||||||||||||||||
| Insurance contracts | 20 | — | — | 20 | 89 | — | — | 89 | ||||||||||||||||||
| Other Investments: | ||||||||||||||||||||||||||
| Pooled Investment Vehicles | $ | 5 | $ | — | $ | 5 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Other investments | 6 | 6 | — | — | — | — | — | |||||||||||||||||||
| Total other investments | $ | 11 | $ | — | $ | 11 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Total | $ | 83 | $ | 45 | $ | 18 | $ | 20 | $ | 114 | $ | 25 | $ | — | $ | 89 | ||||||||||
| Investments measured at net asset value: | ||||||||||||||||||||||||||
| Pooled investment vehicles & hedge funds | 234 | — | ||||||||||||||||||||||||
| Private market securities | 39 | — | ||||||||||||||||||||||||
| Total investments measured at net asset value | $ | 273 | $ | — | ||||||||||||||||||||||
| Items to reconcile to fair value of plan assets: | ||||||||||||||||||||||||||
| Plan receivables 1 | 1 | — | ||||||||||||||||||||||||
| Total | $ | 357 | $ | 114 |
1.Primarily receivables for investments sold.
F-38
The following table summarizes the changes in the fair value of Level 3 pension plan assets for the years ended December 31, 2025 and 2024:
| Fair Value Measurement of Level 3 Pension Plan Assets | Insurance Contracts | ||||||||||
| In millions | |||||||||||
| Balance at Jan 1, 2024 | $ | 101 | |||||||||
| Actual return on assets: | |||||||||||
| Relating to assets held at Dec 31, 2024 | (7) | ||||||||||
| Purchases, sales and settlements, net | (5) | ||||||||||
| Transfers out of Level 3 1 | — | ||||||||||
| Balance at Dec 31, 2024 | $ | 89 | |||||||||
| Actual return on assets: | |||||||||||
| Relating to assets held at Dec 31, 2025 | (2) | ||||||||||
| Purchases, sales and settlements, net | (77) | ||||||||||
| Assets transferred from DuPont | 10 | ||||||||||
| Balance at Dec 31, 2025 | $ | 20 |
Defined Contribution Plans
The Company provides defined contribution benefits to its employees. The most significant is the U.S. Retirement Savings Plan (“the Plan”), which covers all U.S. regular full-time employees. The purpose of the Plan is to provide retirement savings benefits for employees. The Plan is a tax qualified contributory profit sharing plan, with cash or deferred arrangement and any eligible employee of the Company may participate. Currently, the Company contributes 100% of the first 6% of the employee’s contribution election and also contributes 3% of each eligible employee’s eligible compensation regardless of the employee’s contribution. Qnity’s matching contributions vest immediately upon contribution. The 3% nonmatching employer contribution vests after employees complete three years of service. The Company’s matching contributions to the Plan were $17 million in 2025, $21 million in 2024, and $22 million in 2023. The Company’s nonmatching contributions to the Plan were $11 million in both 2025 and 2024, and $12 million in 2023. In total, the Company’s contributions to the Plan were $28 million in 2025, $32 million in 2024, and $34 million in 2023.
In addition, the Company made contributions to other defined contribution plans in both 2025 and 2024 in the amount of $16 million, and $20 million in 2023.
NOTE 19 - STOCK-BASED COMPENSATION
The Company adopted the Qnity Electronics, Inc. Equity and Incentive Plan ("EIP") in connection with the Separation. Under the EIP, the Company may grant options, stock appreciation rights ("SARs"), restricted shares, restricted stock units ("RSUs"), share bonuses, other share-based awards, cash awards, conversion awards, each as defined within the EIP, or any combination of the foregoing. Under the EIP, a maximum of 16 million shares of common stock are available for award as December 31, 2025.
Outstanding DuPont-denominated equity awards at the time of Separation were converted using the conversion ratio that was determined in accordance with the Employee Matters Agreement. The awards have the same terms and conditions under the applicable plans and award agreements prior to the Separation transactions. The conversion of equity awards resulted in incremental modification expense of less than $1 million.
The Company recognized share-based compensation expense of $20 million for the year ended December 31, 2025 and $13 million for each of the years ended December 31, 2024 and 2023. The income tax benefits related to stock-based compensation arrangements was $4 million for the year ended December 31, 2025 and $3 million for each of the years ended December 31, 2024 and 2023.
Total unrecognized pretax compensation cost related to nonvested stock option awards of $21 million at December 31, 2025, is expected to be recognized over a weighted-average period of 2.9 years. Total unrecognized pretax compensation cost related to RSUs and performance based stock units ("PSUs") of $58 million at December 31, 2025, is expected to be recognized over a weighted average period of 2.3 years. The total fair value of RSUs and PSUs under the EIP vested in the year ended December 31, 2025 was $1 million. The weighted average grant-date fair value of RSUs and PSUs granted under the EIP during 2025 was $97.98.
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Qnity Electronics, Inc. Equity and Incentive Plan
EIP Stock Options
The exercise price of shares subject to option is equal to the market price of the Company's stock on the date of grant. Stock option awards generally vest over a three-year period and expire 10 years after the grant date.
The Company uses the Black-Scholes option pricing model to determine the fair value of stock option awards and the assumptions set forth in the table below. The weighted-average assumptions used to calculate total stock-based compensation are included in the following table:
| EIP Weighted-Average Assumptions | 2025 | ||||
| Dividend yield | 0.3 | % | |||
| Expected volatility | 42.5 | % | |||
| Risk-free interest rate | 3.72 | % | |||
| Expected life of stock options granted during period (years) | 6.0 |
The Company determines the dividend yield by dividing the annualized dividend on Qnity's common stock by the option exercise price. Expected volatility was derived from a blended historical and implied volatility of peer companies as Qnity does not have sufficient historical volatility based on the expected term of the underlying options. The risk-free interest rate is determined by reference to the yield on an outstanding U.S. Treasury note with a term equal to the expected life of the option granted. Expected life is determined using a simplified approach, calculated as the mid-point between the vesting period and the contractual life of each vesting tranche of the award.
The following table summarizes stock option activity for 2025 under the EIP:
| EIP Stock Options | Number of Shares (in thousands) | Weighted Average Exercise Price (per share) | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands) | ||||||||||
| Outstanding at January 1, 2025 | — | $ | — | |||||||||||
| Awards converted from DuPont plans | 330 | $ | 83.27 | |||||||||||
| Granted | 599 | $ | 80.28 | |||||||||||
| Exercised | (9) | $ | 79.01 | |||||||||||
| Forfeited/Expired | — | $ | — | |||||||||||
| Outstanding at December 31, 2025 | 920 | $ | 81.36 | 7.83 | $ | 2,098 | ||||||||
| Exercisable at December 31, 2025 | 321 | $ | 83.39 | 3.91 | $ | 1,276 |
| Additional Information about EIP Stock Options 1 | |||||
| In millions, except per share amounts | 2025 | ||||
| Weighted-average fair value per share of options granted 1 | $ | 36.14 | |||
| Total compensation expense for stock options plans 2 | $ | 1 | |||
| Related tax benefit 2 | $ | — |
-
No stock options were granted by the Company out of the EIP plan in 2024 and 2023.
-
These amounts represent life to date.
The aggregate intrinsic values in the table above represent the total pretax intrinsic value (the difference between the closing stock price on the last trading day of 2025 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options at year end.
EIP Restricted Stock Units and Performance Based Stock Units
The Company grants RSUs to certain employees that generally vest over a three-year period and, upon vesting, settle one-for-one into Qnity common stock. The fair value of all RSUs is based upon the market price of the underlying common stock as of the grant date.
The Company grants PSUs to senior leadership under the EIP. Vesting occurs over a three-year period for PSUs granted and is based upon achieving certain metrics over a three-year performance period. The actual award is delivered as Qnity common stock. The weighted-average grant-date fair value of the PSUs is based upon the market price of the underlying common stock as of the grant date and estimated using a Monte Carlo simulation.
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Nonvested awards of RSUs and PSUs are shown below:
| EIP RSUs and PSUs | Number of Shares (in thousands) | Weighted Average Grant Date Fair Value (per share) | ||||||
| Nonvested at January 1, 2025 | — | $ | — | |||||
| Awards converted from DuPont plans | 454 | $ | 89.38 | |||||
| Granted | 315 | $ | 97.98 | |||||
| Vested | (15) | $ | 84.18 | |||||
| Forfeited | (1) | $ | 83.33 | |||||
| Nonvested at December 31, 2025 | 753 | $ | 93.08 |
NOTE 20 - FINANCIAL INSTRUMENTS
The following table summarizes the fair value of financial instruments at December 31, 2025 and December 31, 2024:
| Fair Value of Financial Instruments | December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||
| In millions | Cost | Gain | Loss | Fair Value | Cost | Gain | Loss | Fair Value | ||||||||||||||||||
| Cash equivalents | $ | 143 | $ | — | $ | — | $ | 143 | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Derivatives relating to: | ||||||||||||||||||||||||||
| Foreign currency 1,2 | — | 14 | — | 14 | — | — | — | — | ||||||||||||||||||
| Total derivatives | $ | — | $ | 14 | $ | — | $ | 14 | $ | — | $ | — | $ | — | $ | — |
1.Classified as "Prepaid and other current assets" and "Accrued and other current liabilities" in the Consolidated Balance Sheets.
2.Presented net of cash collateral where master netting arrangements allow.
Derivative Instruments
Objectives and Strategies for Holding Derivative Instruments
In the ordinary course of business, the Company may enter into contractual arrangements (derivatives) to reduce its exposure to foreign currency, interest rate and commodity price risks. Derivative programs have procedures and controls and are approved by the Corporate Financial Risk Management Committee, consistent with the Company's financial risk management policies and guidelines. These programs reflect varying levels of exposure coverage and time horizons based on an assessment of risk.
The Company's financial risk management procedures also address counterparty credit approval, limits and routine exposure monitoring and reporting. The counterparties to these contractual arrangements are major financial institutions and major commodity exchanges. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company utilizes collateral support annex agreements with certain counterparties to limit its exposure to credit losses. The Company anticipates performance by counterparties to these contracts and therefore no material loss is expected. Market and counterparty credit risks associated with these instruments are regularly reported to management.
The notional amounts of the Company's derivative instruments were as follows:
| Notional Amounts | December 31, 2025 | December 31, 2024 | ||||||
| In millions | ||||||||
| Derivatives not designated as hedging instruments: | ||||||||
| Foreign currency contracts 1 | $ | (1,046) | $ | — | ||||
- Presented net of contracts bought and sold.
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Derivatives not Designated in Hedging Relationships
Foreign Currency Contracts
The Company routinely uses forward exchange contracts to reduce its net exposure, by currency, related to foreign currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. The netting of such exposures precludes the use of hedge accounting; however, the required revaluation of the forward contracts and the associated foreign currency-denominated monetary assets and liabilities intends to achieve a minimal earnings impact, after taxes. The Company also uses foreign currency exchange contracts to offset a portion of the Company's exposure to certain foreign currency-denominated revenues so that gains and losses on the contracts offset changes in the USD value of the related foreign currency-denominated revenues.
Foreign currency derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency-denominated assets and liabilities. The amount charged on a pretax basis related to foreign currency derivatives not designated as a hedge, which was included in “Other income (expense) - net” in the Consolidated Statements of Operations, was zero for each of the years ended December 31, 2025, 2024 and 2023.
NOTE 21 - FAIR VALUE MEASUREMENTS
Fair Value Measurements on a Recurring Basis
The following tables summarize the basis used to measure certain assets and liabilities at fair value on a recurring basis:
| Basis of Fair Value Measurements on a Recurring Basis of Significant Other Observable Inputs (Level 2) | December 31, 2025 | December 31, 2024 | ||||||
| In millions | ||||||||
| Assets at fair value: | ||||||||
| Cash equivalents 1 | $ | 143 | $ | — | ||||
| Derivatives relating to: 2 | ||||||||
| Foreign currency contracts 3 | 16 | — | ||||||
| Total assets at fair value | $ | 159 | $ | — | ||||
| Liabilities at fair value: | ||||||||
| Derivatives relating to: 2 | ||||||||
| Foreign currency contracts 3 | 2 | — | ||||||
| Total liabilities at fair value | $ | 2 | $ | — |
1.Time deposits included in "Cash and cash equivalents" in the Consolidated Balance Sheets are held at amortized cost, which approximates fair value.
2.See Note 20 for the classification of derivatives in the Consolidated Balance Sheets.
3.Assets and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the Consolidated Balance Sheets. The offsetting counterparty and cash collateral amounts were $2 million and zero, respectively, for both assets and liabilities as of December 31, 2025.
For assets and liabilities classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability, or by using observable market data points of similar, more liquid securities to imply the price. For time deposits classified as held-to-maturity investments and reported at amortized cost, fair value is based on an observable interest rate for similar securities. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and quality checks.
For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates, commodity prices, swap rates, interest rates and implied volatility obtained from various market sources. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance/quality checks.
There were no transfers between Levels 1 and 2 during the years ended December 31, 2025 and December 31, 2024.
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NOTE 22 - SEGMENTS AND GEOGRAPHIC REGIONS
The Company's segments are aligned with the market verticals they serve, while maintaining integration and innovation strengths within strategic value chains. The Company's Chief Executive Officer is its CODM. Effective in the first quarter of 2025, in anticipation of the Separation, DuPont and Qnity realigned their segment structure. As a result of this realignment, Qnity consists of two operating and reportable segments: Semiconductor Technologies (“Semi”) and Interconnect Solutions (“ICS”). All periods presented have been adjusted to conform to the current segment reporting structure. This realignment is consistent with how the CODM now assesses performance. Major products by segment include: Semi (which includes chemical mechanical planarization (“CMP”) pads and slurries, photoresists, functional sub-layers, advanced overcoats, post-CMP cleaners, post-Etch residue removers and emerging cleans) and ICS (which includes copper pillar plating, copper redistribution layer, solder bump plating, under bump metallization, photoresists, packaging dielectrics, gap fillers, phase change, specialty thermal interface materials, thermally conductive insulators, copper plating solutions, dry film photoresists, laminates and polyimide films). The Company operates globally in substantially all of its product lines. Transfers of products between operating segments are generally valued at cost, to the extent such transfers are applicable.
The Company's measure of profit/loss for segment reporting purposes is Adjusted Operating EBITDA as this is the manner in which the CODM assesses performance and allocates resources. The CODM utilizes Adjusted Operating EBITDA to assess financial performance and allocate resources by comparing actual results to historical and previously forecasted results. Beginning with this reporting period, the Company refers to the previously disclosed “Operating EBITDA” metric as “Adjusted Operating EBITDA". This represents a change in name only. The Company defines Adjusted Operating EBITDA as earnings (i.e., “Income (loss) before income taxes”) before interest, depreciation, amortization, non-operating pension and other post-employment benefits / charges, and foreign exchange gains / losses, indirect legacy costs, and adjusted for significant items. Reconciliations of these measures are provided on the following pages.
Long-lived assets are attributed to geographic regions based on asset location.
| Long-lived Assets by Geographic Region | December 31, | |||||||
| In millions | 2025 | 2024 | ||||||
| Americas: | $ | 1,099 | $ | 1,013 | ||||
| United States | 1,061 | 977 | ||||||
| Other Americas 1 | 38 | 36 | ||||||
| EMEA 2 | 28 | 28 | ||||||
| Asia Pacific: | 574 | 507 | ||||||
| Taiwan | 215 | 193 | ||||||
| South Korea | 150 | 131 | ||||||
| China | 98 | 85 | ||||||
| Other Asia Pacific | 111 | 98 | ||||||
| Total | $ | 1,701 | $ | 1,548 |
1.Includes Canada and Latin America.
2.Europe, Middle East and Africa.
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| Segment Revenue, Significant Segment Expenses and Segment Adjusted Operating EBITDA | For the years ended December 31, | |||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (In millions) | Semiconductor Technologies | Interconnect Solutions | Semiconductor Technologies | Interconnect Solutions | Semiconductor Technologies | Interconnect Solutions | ||||||||||||||
| Segment net sales | $ | 2,642 | $ | 2,112 | $ | 2,450 | $ | 1,885 | $ | 2,251 | $ | 1,784 | ||||||||
| Less 1: | ||||||||||||||||||||
| Cost of sales | $ | 1,324 | $ | 1,230 | $ | 1,220 | $ | 1,119 | $ | 1,137 | $ | 1,143 | ||||||||
| Selling, general and administrative expenses | 274 | 295 | 267 | 276 | 239 | 257 | ||||||||||||||
| Research and development expenses | 222 | 130 | 194 | 118 | 184 | 119 | ||||||||||||||
| Amortization of intangibles & other segment items 2 | 51 | 152 | 49 | 176 | 68 | 186 | ||||||||||||||
| Add: | ||||||||||||||||||||
| Equity in earnings (losses) of nonconsolidated affiliates | $ | 48 | $ | (1) | $ | 40 | $ | (3) | $ | 21 | $ | (5) | ||||||||
| Depreciation and amortization 3 | 126 | 235 | 124 | 255 | 133 | 259 | ||||||||||||||
| Segment Adjusted Operating EBITDA | $ | 945 | $ | 539 | $ | 884 | $ | 448 | $ | 777 | $ | 333 |
1.The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker.
2.Other segment items include immaterial other gains or losses and miscellaneous income and expenses.
3.Depreciation is a reconciling item to segment Adjusted Operating EBITDA as it is included within Cost of sales, Selling, general and administrative expenses and Research and development expenses.
| Reconciliation of Segment Adjusted Operating EBITDA to Income before income taxes | For the years ended December 31, | |||||||||||||
| (In millions) | 2025 | 2024 | 2023 | |||||||||||
| Semiconductor Technologies Segment Adjusted Operating EBITDA | $ | 945 | $ | 884 | $ | 777 | ||||||||
| Interconnect Solutions Segment Adjusted Operating EBITDA | 539 | 448 | 333 | |||||||||||
| Reportable Segment Adjusted Operating EBITDA | $ | 1,484 | $ | 1,332 | $ | 1,110 | ||||||||
| + | Corporate Adjusted Operating EBITDA | $ | (43) | $ | (25) | $ | (27) | |||||||
| - | Depreciation and amortization | 376 | 394 | 403 | ||||||||||
| + | Interest income 1 | 2 | — | — | ||||||||||
| - | Interest expense | 65 | — | — | ||||||||||
| + | Non-operating pension/OPEB benefit credits (costs) 1 | 2 | 1 | (2) | ||||||||||
| + | Foreign exchange (losses) gains, net 1 | (4) | 5 | (1) | ||||||||||
| + | Indirect legacy benefits (costs) - net | 5 | — | — | ||||||||||
| + | Significant items charge | (43) | (18) | (45) | ||||||||||
| Income before income taxes | $ | 962 | $ | 901 | $ | 632 |
1.The twelve months ended December 31, 2025 excludes accrued interest income earned on employee retention credits. Refer to details of significant items below.
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The following tables summarize the pre-tax impact of significant items that are excluded from Adjusted Operating EBITDA above:
| Significant Items for the Year Ended December 31, 2025 | Semiconductor Technologies | Interconnect Solutions | Corporate | Total | ||||||||||
| In millions | ||||||||||||||
| Acquisition, integration and separation costs 1 | $ | — | $ | — | $ | (25) | $ | (25) | ||||||
| Restructuring and asset related charges - net 2 | (3) | (4) | (13) | (20) | ||||||||||
| Employee retention credit 3 | 2 | — | — | 2 | ||||||||||
| Total | $ | (1) | $ | (4) | $ | (38) | $ | (43) |
-
Acquisition, integration and separation costs primarily related to financial advisory, accounting, consulting, and other professional advisory fees related to the Separation.
-
Includes restructuring actions and asset related charges. See Note 4 for additional information.
-
Reflects the accrued interest earned on employee retention credits and is recorded in “Interest income” within the “Other income (expense) - net” line item in the Company’s Consolidated Financial Statements.
| Significant Items for the Year Ended December 31, 2024 | Semiconductor Technologies | Interconnect Solutions | Corporate | Total | ||||||||||
| In millions | ||||||||||||||
| Restructuring and asset related charges - net 1 | $ | (1) | $ | (11) | $ | 4 | $ | (8) | ||||||
| Legal costs 2 | (23) | — | — | (23) | ||||||||||
| Gain on licensing agreement 3 | 13 | — | — | 13 | ||||||||||
| Total | $ | (11) | $ | (11) | $ | 4 | $ | (18) |
-
Includes restructuring actions and asset related charges. See Note 4 for additional information.
-
Reflects legal settlement charges relating to an intellectual property matter.
-
Reflects the license fee income received under an intellectual property license agreement.
| Significant Items for the Year Ended December 31, 2023 | Semiconductor Technologies | Interconnect Solutions | Corporate | Total | ||||||||||
| In millions | ||||||||||||||
| Restructuring and asset related charges - net 1 | $ | — | $ | (13) | $ | (39) | $ | (52) | ||||||
| Gain on divestiture 2 | — | — | 7 | 7 | ||||||||||
| Total | $ | — | $ | (13) | $ | (32) | $ | (45) |
-
Includes restructuring actions and asset related charges. See Note 4 for additional information.
-
Reflected in “Other income (expense) - net”.
| Segment and Corporate & Other Information | Semiconductor Technologies | Interconnect Solutions | Corporate | Total | ||||||||||
| In millions | ||||||||||||||
| For the Year Ended December 31, 2025 | ||||||||||||||
| Total assets | $ | 7,022 | $ | 5,594 | $ | 1,454 | $ | 14,070 | ||||||
| Investment in nonconsolidated affiliates | 375 | 11 | — | 386 | ||||||||||
| Capital expenditures | 146 | 114 | 15 | 275 | ||||||||||
| For the Year Ended December 31, 2024 | ||||||||||||||
| Total assets | $ | 6,520 | $ | 5,270 | $ | 483 | $ | 12,273 | ||||||
| Investment in nonconsolidated affiliates | 370 | 12 | — | 382 | ||||||||||
| Capital expenditures | 88 | 95 | 29 | 212 | ||||||||||
| For the Year Ended December 31, 2023 | ||||||||||||||
| Total assets | $ | 6,561 | $ | 5,482 | $ | 473 | $ | 12,516 | ||||||
| Investment in nonconsolidated affiliates | 370 | 16 | — | 386 | ||||||||||
| Capital expenditures | 121 | 70 | 26 | 217 | ||||||||||
| Capital Expenditure Reconciliation to Statements of Cash Flows | 2025 | 2024 | 2023 | ||||||||
| In millions | |||||||||||
| Segment and Corporate Totals | $ | 275 | $ | 212 | $ | 217 | |||||
| Other 1 | 10 | (12) | 14 | ||||||||
| Total cash used for capital expenditures | $ | 285 | $ | 200 | $ | 231 |
1.Reflects the incremental cash spent or unpaid on capital expenditures; total capital expenditures are presented on a cash basis.
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NOTE 23 - SUBSEQUENT EVENTS
Share Repurchase Authorization
On February 20, 2026, the Company's Board of Directors approved a share repurchase authorization of up to $500 million of common stock (the "$500M Authorization"). Under the $500M Authorization, repurchases of common stock may be effected from time to time, either on the open market (including pre-set trading plans), in privately negotiated transactions, or other transactions in accordance with applicable securities laws. The $500M Authorization has no expiration date and will terminate once the authorized amount of shares have been repurchased and retired or when terminated by the Board of Directors. The timing and amount of repurchases under the program will depend on a variety of factors.
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Previous: Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES