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Business Divestitures | 9 Months Ended
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Sep. 30, 2024
Discontinued Operations and Disposal Groups [Abstract] |
Assets and liabilities held for sale | BUSINESS DIVESTITURES AND ASSETS AND LIABILITIES HELD FOR SALE Divestiture of the Cosmetic Ingredients Business During the third quarter of 2023, the Company announced it had entered into an agreement to sell its Cosmetic Ingredients business, which was a part of the Scent segment. The Company completed the divestiture on April 2, 2024, and received cash proceeds of approximately $841 million. The sale consideration is subject to certain post-closing adjustments, which is primarily related to cash, indebtedness and working capital balances. The following table summarizes the fair value of sale consideration received in connection with the business divestiture:
(DOLLARS IN MILLIONS) |
Cash proceeds from the buyer | $ | 841 |
Direct costs to sell | (10) |
Fair value of sale consideration | $ | 831 |
The Net proceeds received from business disposals presented under Cash flows from investing activities represent the cash portion of the sale consideration, which was determined as the fair value of sale consideration adjusted by the cash transferred to the buyer as part of the transaction. Amounts paid for direct costs to sell are presented under Cash flows from operating activities. The following table summarizes the different components of Net proceeds received from business disposals presented under Cash flows from investing activities:
(DOLLARS IN MILLIONS) |
Cash proceeds from the buyer | $ | 841 |
Cash transferred to the buyer | (32) |
Net Cash flows from investing activities | $ | 809 |
The carrying amount of net assets associated with the business unit, adjusted for currency translation adjustment, was approximately $466 million. The major classes of assets and liabilities sold consisted of the following:
(DOLLARS IN MILLIONS) | April 2, 2024
Assets |
Cash and cash equivalents | $ | 32 |
Trade receivables, net | 18 |
Inventories | 17 |
Property, plant and equipment, net | 7 |
Goodwill | 271 |
Other intangible assets, net | 144 |
Operating lease right-of-use assets | 10 |
Other assets | 11 |
Total assets | 510 |
Liabilities |
Accounts payable | $ | (5) |
Deferred tax liability | (25) |
Other liabilities | (18) |
Total liabilities | (48) |
Equity |
Accumulated other comprehensive income - currency translation adjustment | 4 |
Total equity | 4 |
Carrying value of net asset (adjusted for currency translation adjustment) | $ | 466 |
As a result of the business divestiture, the Company recognized a pre-tax gain of approximately $365 million, subject to certain post-closing adjustments, presented in (Gains) losses on business disposals on the Consolidated Statements of Income and Comprehensive Income (Loss) for the nine months ended September 30, 2024. The total income tax expense/(benefit) recognized was approximately $34 million, with approximately $(7) million that was recognized during the year ended December 31, 2023. Divestiture of the Flavors and Essences UK Business During the third quarter of 2024, the Company completed the divestiture of its Flavors and Essences UK (“F&E”) business, which was a part of the Nourish segment. The Company completed the divestiture on September 1, 2024, and received net cash proceeds of approximately $28 million. The carrying amount of net assets associated with the business unit, adjusted for currency translation adjustment, was approximately $48 million. The majority of net assets sold included intangible assets and goodwill attributable to the F&E business. As part of the business divestiture, the Company recognized a pre-tax loss of approximately $20 million presented in (Gains) losses on business disposals and a tax benefit of approximately $1 million presented in Provision for income taxes on the Consolidated Statements of Income and Comprehensive Income (Loss) for the three and nine months ended September 30, 2024. Divestiture of the Flavors Specialty Ingredients Business The Company completed the divestiture of the Flavors Specialty Ingredients business on August 1, 2023, and received net cash proceeds of approximately $185 million, which included $1 million related to the delayed transfer of the control of specific assets and liabilities of non-U.S. jurisdiction business. In addition, approximately $15 million of proceeds were held in escrow and were released upon satisfaction of certain conditions during the fourth quarter of 2023. Concurrent with the completion of the business divestiture, the Company entered into a supply agreement with the buyer. Based on the terms of the supply agreement, an adjustment of $4 million was made against the fair value of sale consideration. As a result of the business divestiture, the Company recognized a pre-tax loss of approximately $10 million presented in (Gains) losses on business disposals on the Consolidated Statements of Income and Comprehensive Income (Loss) for the three and nine months ended September 30, 2023. There was a net working capital adjustment of $(3) million for the nine months ended September 30, 2024, resulting in a cumulative pre-tax loss of approximately $7 million. Divestiture of a Portion of the Savory Solutions Business The Company completed the divestiture of a Portion of the Savory Solutions business on May 31, 2023, and received net cash proceeds of approximately $821 million. In addition, a receivable of approximately $37 million was recorded which reflected the remaining sale consideration that was received in January 2024. As a result of the divestiture, the Company recognized a pre-tax loss of approximately $10 million presented in (Gains) losses on business disposals on the Consolidated Statements of Income and Comprehensive Income (Loss) for the nine months ended September 30, 2023. There was a net working capital adjustment of $7 million for the three months ended December 31, 2023, resulting in a cumulative pre-tax loss of approximately $3 million. Liquidation of a Business in Russia As part of the liquidation of a business in Russia for the sale of the portion of the Savory Solutions business, the Company recognized a pre-tax loss of approximately $10 million presented in the (Gains) losses on business disposals, and tax benefits of approximately $2 million presented in Provision for income taxes on the Consolidated Statements of Income and Comprehensive Income (Loss) for the nine months ended September 30, 2023. Assets and Liabilities Held for Sale Pharma Solutions During the first quarter of 2024, the Company announced it had entered into an agreement to sell its Pharma Solutions business, that is primarily made up of most businesses within the Company's existing Pharma Solutions reportable operating segment as well as certain adjacent businesses (the “Pharma Solutions disposal group”). The transaction is subject to customary closing conditions and is expected to close in the second quarter of 2025. The sale does not constitute a strategic shift of the Company’s operations and does not, and will not, have major effects on the Company’s operations and financial results. Therefore, the transaction does not meet the discontinued operations criteria. The Company determined that the assets and liabilities of the Pharma Solutions disposal group met the criteria to be presented as “held for sale” during the second quarter of 2024. As a result, at September 30, 2024, such assets and liabilities were classified as held for sale on the Consolidated Balance Sheets. The classification of the Pharma Solutions disposal group as held for sale was considered an event or change in circumstance which required an assessment of the existing Pharma Solutions reporting unit. The Company performed a pre-classification goodwill impairment test and determined that the fair value of the Pharma Solutions reporting unit exceeded the carrying value. The Company engaged an independent third party to determine the fair value of the assets held for sale as of May 1, 2024, based upon the sale price including earn outs expected to be received from the buyer. The fair value of the earn out was based on a Monte Carlo simulation. Goodwill was allocated to the Pharma Solutions disposal group based upon the relative fair value of the businesses included in the disposal group compared to the reporting units to which the businesses relate. The Company then performed a post-classification goodwill impairment test and determined that the fair value was less than the carrying value of the Pharma Solutions disposal group. As such, the Company recorded a non-cash goodwill impairment charge of $64 million which is presented in Impairment of goodwill on the Consolidated Statements of Income and Comprehensive Income (Loss) for the nine months ended September 30, 2024. The Company also performed a goodwill impairment test of the remaining businesses in the Pharma Solutions reporting unit that were not classified as held for sale and determined that the fair value exceeded the carrying value. At September 30, 2024, the Company engaged an independent third-party to determine an updated fair value of the Pharma Solutions disposal group. The Company determined that the fair value of $2,708 million (fair value of $2,740 million less estimated costs to sell of $32 million) of the Pharma Solutions disposal group was less than the carrying value. As such, the Company recorded a loss in the third quarter of 2024 of $22 million to adjust the carrying value of the disposal group to its fair value less cost to sell, bringing the total year-to-date loss to $304 million. This is presented in Loss on assets classified as held for sale on the Consolidated Statements of Income and Comprehensive Income (Loss) for the three and nine months ended September 30, 2024. The Company recorded the loss on classification of held for sale as a valuation allowance on the group of assets held for sale, without allocation to the individual assets or major classes of assets within the group. For the nine months ended September 30, 2024, the Company recognized total income tax benefits of $62 million related to loss on assets classified as held for sale for the Pharma Solutions disposal group. In addition, pursuant to the terms agreed under the 2026 Term Loan Facility, a portion of the net cash proceeds received from the sale of the Pharma Solutions disposal group, when and if completed, must be used to repay our borrowings under the 2026 Term Loan Facility. Therefore, the Company reclassified the 2026 Term Loan Facility balance from “Long-term debt” to “Short-term debt and current portion of long-term debt” (see Note 13). Nitrocellulose During October of 2024, the Company entered into an agreement to sell its nitrocellulose business (including the related industrial park in Germany), which is within the Company's existing Pharma Solutions reportable operating segment. The transaction is subject to customary closing conditions and is expected to close in the second quarter of 2025. The Company determined that the assets and liabilities of the nitrocellulose business met the criteria to be presented as “held for sale” during the third quarter of 2024. As a result, as of September 30, 2024, such assets and liabilities were classified as held for sale on the Consolidated Balance Sheets. The Company determined that, as of September 30, 2024, the fair value less estimated costs to sell of the nitrocellulose business exceeded the underlying carrying value. The sale does not constitute a strategic shift of the Company’s operations and does not, and will not, have major effects on the Company’s operations and financial results. Therefore, the transaction does not meet the discontinued operations criteria. Portion of the Savory Solutions Business in Turkey During the third quarter of 2024, the Company entered into an agreement to sell assets of the Savory Solutions business in Turkey. The transaction is expected to close in the first quarter of 2025. The Company has determined that the assets meet the criteria to be held for sale as of September 30, 2024. The Company recorded a loss of $10 million in the third quarter of 2024 to adjust the carrying value of the assets to its fair value based on the agreed sales price. This is presented in Loss on assets classified as held for sale on the Consolidated Statements of Income and Comprehensive Income (Loss) for the three and nine months ended September 30, 2024. The Company recognized total income tax benefits of $1 million related to loss on assets classified as held for sale for the portion of the Savory Solutions business in Turkey. Carrying Amount of Assets and Liabilities Held for Sale As of December 31, 2023, the assets and liabilities of the Cosmetic Ingredients business met the criteria to be presented as “held for sale”. The Company completed the divestiture on April 2, 2024 and therefore the assets and liabilities of the Cosmetic Ingredients business are not included in the Company's Consolidated Balance Sheets as of September 30, 2024. Included in the Company’s Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 are the following carrying amounts of the assets and liabilities held for sale:
(DOLLARS IN MILLIONS) | September 30, 2024 | December 31, 2023
Assets |  |
Cash and cash equivalents | $ | 2 |  | $ | 26 |
Trade receivables, net | 195 |  | 15 |
Inventories | 286 |  | 18 |
Property, plant and equipment, net | 438 |  | 7 |
Goodwill(1) | 1,264 |  | 276 |
Other intangible assets, net | 1,119 |  | 146 |
Operating lease right-of-use assets | 15 |  | 9 |
Other assets | 109 |  | 9 |
Less: Loss recognized on assets held-for-sale(2) | (314) |  | — |
Total assets held-for-sale | $ | 3,114 |  | $ | 506 |
Liabilities |  |
Accounts payable | $ | 83 |  | $ | 4 |
Deferred tax liability | 63 |  | 24 |
Other liabilities | 158 |  | 18 |
Total liabilities held-for-sale | $ | 304 |  | $ | 46 |
_______________________ (1)The goodwill balance in assets held for sale for the Pharma Solutions disposal group as of September 30, 2024, is presented net of $64 million of goodwill impairment. (2)Includes the impact of $51 million, primarily related to losses on foreign currency translation, expected to be reclassified out of accumulated other comprehensive loss upon close of the sales.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205-20/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 360 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/360/tableOfContent + Details
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