Annual and Transition Report (foreign Private Issuer) (20-f)

falseFY0001762459--12-31P1YThe notes are an integral part of these consolidated financial statements.Minority interests owned by Management staff. Eliminates the cash impact of gains on the sale of fixed assets.Eliminates the impact of (1) share-based compensation expenses, (2) losses on the sale of fixed assets, (3) impairment charges, (4) mark-to-market adjustments related to our foreign currency derivatives entered into in connection with certain redenomination transactions not linked to underlying individual transactions as well as the de-recognition of bifurcated embedded derivatives related to certain redemption features of the Opco Notes and Holdco Notes, and (5) valuation adjustments from the revaluation of the earn-out liability initially recognized in 2019.Eliminates net foreign currency transactional gains and losses.Eliminates charges resulting from restructuring activities principally from the Group’s cost reduction efforts. The value for the year ended December 31, 2021 reflects an adjustment to eliminate (1) IPO-related costs linked to the existing equity, (2) professional fees paid to third-party advisors in connection with the implementation of strategic initiatives and (3) the increased expenses of the D&O insurance in connection with the IPO. The values for the years ended December 31, 2020 and 2019 reflect an adjustment to eliminate (1) fees associated with the foreign currency exchange derivatives entered into in conjunction with the Acquisition, (2) professional fees paid to third party advisors in connection with the implementation of strategic initiatives and (3) IPO related costs, linked to the existing equity. Reflects an adjustment to eliminate fees paid to Carlyle. The consulting agreement pursuant to which management fees are paid to Carlyle will terminate on the earlier of (i) the second anniversary of the IPO and (ii) the date upon which Carlyle ceases to own more than ten percent of the outstanding voting securities of the Company. 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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

20-F

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:

001-40007

Atotech Limited

(Exact name of Registrant as specified in its charter)

Bailiwick of Jersey

(Jurisdiction of incorporation)

William Street, West Bromwich

West Midlands

, B70 0BG

United Kingdom

(address of principal executive offices)

Josh McMorrow

Vice President, Group General Counsel and Secretary

Erasmusstrasse 20

10553

Berlin

, Germany

+49 30 349 85 703

(Name, Telephone,

E-mail

and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered, pursuant to Section 12(b) of the Act


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common shares, $0.10 par value per share	ATC	The New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 194,695,832 common shares, $0.10 par value per share.

Indicate by check mark if the registrant is a

well-known

seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of

1934. Yes

☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90

days. Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit

such files

Yes

☒ No ☐

Indicate by chec

k mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Emerging growth company

☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the

Sarbanes-Oxley

Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP ☐	International Financial Reporting Standards as issued		Other ☐
	by the International Accounting Standards Board	☒

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☒

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TABLE OF CONTENTS


Basis of Presentation			1
Forward-Looking Statements			3
PART I			5
Item 1. Identity of Directors, Senior Management and Advisers			5
Item 2. Offer Statistics and Expected Timetable			5
Item 3. Key Information			5
Item 4. Information on the Company			42
Item 4A. Unresolved Staff Comments			54
Item 5. Operating and Financial Review and Prospects			54
Item 6. Directors, Senior Management and Employees			66
Item 7. Major Shareholders and Related Party Transactions			81
Item 8. Financial Information			85
Item 9. The Offer and Listing			86
Item 10. Additional Information			86
Item 11. Quantitative and Qualitative Disclosures About Market Risk			99
Item 12. Description of Securities Other Than Equity Securities			100
PART II			101
Item 13. Defaults, Dividend Arrearages and Delinquencies			101
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds			101
Item 15. Controls and Procedures			101
Item 16A. Audit Committee Financial Expert			101
Item 16B. Code of Ethics			101
Item 16C. Principal Accountant Fees and Services			101
Item 16D. Exemptions from the Listing Standards for Audit Committees			102
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers			102
Item 16F. Change in Registrant’s Certifying Accountant			102
Item 16G. Corporate Governance			102
Item 16H. Mine Safety Disclosure			102
PART III			103
Item 17. Financial Statements			103
Item 18. Financial Statements			103
Item 19. Exhibits			103
SIGNATURES			105
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS			F-1

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BASIS OF PRESENTATION

In this report, unless the context otherwise requires, references to “Company,” “we,” “us,” “its,” “our,” “Company,” and “Atotech” refer to Atotech Limited and its consolidated subsidiaries.

Atotech Limited is a Bailiwick of Jersey company incorporated on December 12, 2018 for purposes of becoming the new holding company of Alpha 2 B.V., a private company with limited liability (

besloten vennootschap met beperkte aansprakelikheid

) incorporated under the laws of the Netherlands with its corporate seat in De Meern and registered with the Dutch chamber of commerce under number 66937442 (“Holdco”) and its subsidiaries. For the year ended December 31, 2019, Atotech Limited had no operations, assets, or liabilities. On January 25, 2020, Atotech Limited became the direct parent of Atotech UK Topco Limited, an indirect parent of Holdco. The Carlyle Group Inc. and its affiliates and all other shareholders of Atotech UK Topco Limited contributed all outstanding equity interests of Atotech UK Topco Limited to Atotech Limited in exchange for an equal number of common shares and preferred shares of Atotech Limited (the “Initial Reorganization”). As a result of the Initial Reorganization, Atotech Limited supersedes Atotech UK Topco Limited as the ultimate parent of the Atotech group. This change had no effect on the presentation of the financial statements and does not constitute a business combination under IFRS 3.

Unless otherwise indicated, (i) financial information included herein for periods following the indirect acquisition by Atotech UK Topco Limited on January 31, 2017 (the “Acquisition”) of all the outstanding equity interests of Atotech B.V., a private company with limited liability (

besloten vennootschap met beperkte aansprakelikheid

) incorporated under the laws of the Netherlands, but prior to January 1, 2020 (the year ended December 31, 2019 being the last fiscal period ended prior to the Initial Reorganization) is that of Atotech UK Topco Limited and (ii) financial information included herein for periods beginning on or after January 1, 2020 is that of Atotech Limited. Unless otherwise indicated, references to “Atotech Limited” are to Atotech UK Topco Limited for periods ended prior to January 1, 2020 and following the Acquisition and are to Atotech Limited for periods beginning on or after January 1, 2020.

On January 25, 2021, we commenced our initial public offering (the “IPO”). In connection with the consummation of the IPO, we issued 64,997,558 additional common shares to existing holders of common shares on a pro rata basis. On February 3, 2021, all outstanding preferred shares of Atotech Limited were converted to common shares with all accrued interest on the preferred shares capitalized and paid out as additional preferred shares substantially concurrently with the reduction in number of preferred shares to an amount that allowed for a

one-for-one

exchange of preferred shares for common shares based on the IPO offering price of $17.00 per common share (collectively, the “Preferred Conversion”). The number of common shares issued per preferred share was 0.0799 common shares per preferred share, resulting in the issuance of 74,243,600 additional common shares. On February 8, 2021, we completed our IPO and issued 29,268,000 common shares to public shareholders. Following the consummation of the IPO, we had 194,664,156 common shares outstanding.

On February 12, 2021, the net proceeds from the IPO, along with $100.0 million of borrowings under a revolving credit facility, were used to repay all $425.0 million aggregate principal amount of our outstanding 6.250% Senior Notes due 2025 (the “Opco Notes”) at a price of 101.563% of the principal amount thereof and all $219.0 million aggregate principal amount of our 8.75%/9.50% Senior PIK Toggle Notes (the “Holdco Notes”) at a price of 101.000% of the principal amount thereof (collectively, the “Redemptions”). The Redemptions resulted in the incurrence of early repayment fees in the amount of $8.8 million and the

de-recognition

of capitalized financing costs and embedded derivatives connected with the indebtedness. In total, we recorded expenses of $75.6 million in the first quarter of 2021 in the consolidated statement of profit or loss, of which only the early repayment fee is cash-effective.

On March 18, 2021, we refinanced (the “Refinancing”) our previous senior secured first lien term loan facility (the “Old Term Loan Facility”) that consisted of a tranche denominated in U.S. dollars (the “Old USD Term Loan Facility”) and a tranche denominated in renminbi, the currency of China (“RMB”) (the “Old RMB Term Loan Facility” and, together with the Old USD Term Loan Facility, the “Old Term Loan Facilities”) as well as our previous senior secured first lien multi-currency revolving credit facility (the “Old Revolving Credit Facility” and, together with the Old Term Loan Facilities, the “Old Senior Secured Credit Facilities”). As a result of the Refinancing, we entered into a new credit agreement, which provides for (i) a U.S. dollar-denominated senior secured term loan facility in an initial aggregate principal amount of $1.35 billion (the “USD Term Loan Facility”),

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(ii) a Euro-denominated senior secured term loan facility in an initial aggregate principal amount of €200.0 million (the “EUR Term Loan Facility” and, together with the USD Term Loan Facility, the “Term Loan Facilities”) and (iii) a senior secured multi-currency revolving credit facility that provides for revolving loans, letters of credit and ancillary facilities pursuant to commitments in an aggregate principal amount of up to $250.0 million (the “Revolving Credit Facility” and, together with the Term Loan Facilities, the “Senior Secured Credit Facilities”). The Refinancing and the Redemptions resulted in the

de-recognition

of capitalized financing costs in the amount of $54.7 million, which had a

non-cash

impact on our statements of comprehensive income/(loss).

MKS Acquisition

As previously disclosed in the Report of Foreign Private Issuer on Form

6-K

filed by us on July 1, 2021, we entered into a definitive agreement (the “Implementation Agreement”) with MKS Instruments, Inc., a Massachusetts corporation (“MKS”), on July 1, 2021 providing for, subject to the terms and conditions of such definitive agreement, the acquisition of Atotech Limited by MKS (the “MKS Acquisition”), which is expected to be implemented by means of a scheme of arrangement under the laws of Jersey (the “Scheme”). As previously disclosed in the Report of Foreign Private Issuer on Form

6-K,

filed on September 28, 2021, we announced the posting of the document setting out, among other things, the terms and conditions of the Scheme (the “Scheme Document”).

As previously disclosed in the Report of Foreign Private Issuer on Form

6-K,

filed on November 3, 2021, the Scheme was approved by the Scheme Shareholders at the Court Meeting and the special resolution to implement the Scheme was passed by the Atotech Shareholders at the General Meeting. As previously disclosed in the Report of Foreign Private Issuer on Form

6-K,

filed on April 1, 2022, the Company, MKS, and Atotech Manufacturing, Inc., an indirect wholly-owned subsidiary of MKS, entered into an amendment to the Implementation Agreement (the “Amendment”), which, among other things, provided for additional time for the satisfaction of certain closing conditions set forth in the Implementation Agreement, including approval of the Acquisition by the Royal Court of Jersey and receipt of certain antitrust regulatory approvals, such that the Long Stop Date (as defined in the Implementation Agreement) shall be extended from March 31, 2022 to September 30, 2022.

As of the date hereof, the MKS Acquisition has received the approval from 12 out of 13 global antitrust regulatory authorities. The parties are continuing to work constructively with the State Administration of Market Regulation in China with respect the remaining regulatory approval. Completion of the MKS Acquisition is also subject to obtaining the required sanction of the Scheme by the Royal Court of Jersey and satisfaction of customary closing conditions. Capitalized terms not defined in this paragraph and the preceding paragraph have the meaning given to such term in the Scheme Document.

Market, Economic, and Industry Data

This annual report includes market, economic, and industry data as well as certain statistics and information relating to our business, markets, and other industry data, which we obtained or extrapolated from industry publications, generated through internal estimates, our review and analysis of market conditions, surveys, customer feedback, and reports provided by various statistics providers, market research organizations, and others. While we believe that such data is reliable, we have not independently verified such data and cannot guarantee the accuracy or completeness thereof. Additionally, we cannot assure you that any of the assumptions underlying these statements are accurate or correctly reflect our position in the industry, and not all of our internal estimates have been verified by any independent sources. Furthermore, we cannot assure you that a third-party using different methods to assemble, analyze, or compute market data would obtain the same results.

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FORWARD-LOOKING

STATEMENTS

Many statements made in this report that are not statements of historical fact, including statements about our beliefs and expectations, are

forward-looking

statements and should be evaluated as such.

Forward-looking

statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies and trends we expect to affect our business. These statements often include words such as “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast,” and other similar expressions. We base these

forward-looking

statements or projections on our current expectations, plans, and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments, and other factors we believe are appropriate under the circumstances and at such time.

As you read and consider this report, you should understand that these statements are not guarantees of future performance or results. The

forward-looking

statements and projections are subject to and involve risks, uncertainties, and assumptions and you should not place undue reliance on these

forward-looking

statements or projections. Although we believe that these

forward-looking

statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the

forward-looking

statements and projections. Factors that may materially affect such

forward-looking

statements and projections include, but are not limited to:

•

the uncertainty of the magnitude, duration, geographic reach, impact on the global economy of the

COVID-19

pandemic, as well as the current and potential travel restrictions,

stay-at-home

orders, and other economic restrictions implemented to address it;

•

uncertainty, downturns, and changes in our target markets;

•

foreign currency exchange rate fluctuations;

•

reduced market acceptance and inability to keep pace with evolving technology and trends;

•

loss of customers;

•

increases in costs or reductions in the supplies of raw materials that may materially adversely affect our business, financial condition, and results of operations;

•

our ability to provide products and services in light of changing environmental, health and safety, product liability, financial, and other legislation and regulation;

•

our failure to compete successfully in product development;

•

our ability to successfully execute our growth initiatives, business strategies, and operating plans;

•

whether the secular trends we expect to drive growth in our business materialize to the degree we expect them to, or at all;

•

material costs relating to environmental and health and safety requirements or liabilities;

•

underfunded defined benefit pension plans;

•

risk that the insurance we maintain may not fully cover all potential exposures;

•

failure to comply with the

anti-corruption

laws of the United States and various international jurisdictions;

•

tariffs, border adjustment taxes, or other adverse trade restrictions and impacts on our customers’ value chains;

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•

political, economic, and legal uncertainties in China, the Chinese government’s control of currency conversion and expatriation of funds, and the Chinese government’s policy on foreign investment in China;

•

regulations around the production and use of chemical substances that affect our products;

•

the United Kingdom’s withdrawal from the European Union;

•

weak intellectual property rights in jurisdictions outside the United States;

•

intellectual property infringement and product liability claims;

•

our substantial indebtedness;

•

our ability to obtain additional capital on commercially reasonable terms may be limited;

•

risks related to our derivative instruments;

•

our ability to attract, motivate, and retain senior management and qualified employees;

•

increased risks to our global operations including, but not limited to, political instability, acts of terrorism, taxation, and unexpected regulatory and economic sanctions changes, including, for example, the recent Russia/Ukraine crisis and resulting sanctions on Russia and its economy, among other things;

•

natural disasters that may materially adversely affect our business, financial condition, and results of operations;

•

the inherently hazardous nature of chemical manufacturing that could result in accidents that disrupt our operations and expose us to losses or liabilities;

•

damage to our brand reputation;

•

Carlyle’s ability to control our common shares;

•

our pending acquisition (the “MKS Acquisition”) by MKS Instruments, Inc. (“MKS”);

•

any statements of belief and any statements of assumptions underlying any of the foregoing;

•

other factors disclosed in this report; and

•

other factors beyond our control.

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PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A. [Reserved]

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

An investment in our common shares involves a high degree of risk. You should consider carefully the following risks, together with the other information contained in this Annual Report on Form

20-F,

before you decide whether to buy our common shares. If any of the events contemplated by the following discussion of risks should occur, our business, results of operations, financial condition, and cash flows could suffer significantly. As a result, the market price of our common shares could decline, and you may lose all or part of your investment. In addition, the risks relating to the

COVID-19

pandemic may also have the effect of significantly heightening many of the other risks associated with our business and an investment in our common shares.

Risks Related to Our Business, Technology, and Industry

Our business and results of operations have been and will, for the foreseeable future, continue to be adversely affected by the

COVID-19

outbreak or other similar outbreaks.

Health concerns arising from the outbreak of a health epidemic or pandemic, including

COVID-19,

have had and will, for the foreseeable future, continue to have, an adverse effect on our business. Our business has been and will, for the foreseeable future, continue to be adversely affected by potential outbreaks of widespread pandemics, including the rise of various strains of coronavirus, such as

COVID-19,

or avian flu or swine flu, such as H1N1, particularly if any such outbreak is located in regions from which we derive a significant amount of revenue or profit. For example, our operations in China experienced disruptions due to

COVID-19,

first identified in Wuhan, Hubei Province, China. As a result of

COVID-19,

authorities around the world have implemented numerous measures to try to contain the disease, such as travel bans and restrictions, quarantines, shelter in place orders and shutdowns, vaccine requirements and mask mandates, among others. Although various jurisdictions are lifting restrictions that were introduced as a result of the

COVID-19

pandemic, it is difficult to predict the speed and impact of any economic recovery. It is similarly difficult to predict the impact of a potential resurgence of

COVID-19

and the

re-imposition

of travel and social distancing restrictions. The number of

COVID-19

cases continues to increase in certain parts of the world and the pandemic has had a detrimental impact on the global economy and the financial markets and economies of many countries, with the ongoing global economic impact remaining difficult to predict. We have taken a number of actions that have impacted and continue to impact our business, including transitioning employees across our offices to remote arrangements and implementing new safety measures at our production facilities. While we believe such actions were necessary and reasonable as a result of the

COVID-19

pandemic, to the extent such actions prove unsuccessful or limit our ability to maintain production capacity in the future, our financial results may be materially and adversely impacted. We believe

COVID-19

has had a negative effect on demand for certain of our products (particularly in our GMF segment), and, in turn, our financial results, including the year ended December 31, 2021. It remains difficult to predict the ongoing impact of

COVID-19

on our business and

COVID-19

may continue to impact our financial results in the future.

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The extent of the future impact of the

COVID-19

pandemic on our operational and financial performance will depend on unpredictable future developments, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the disease or limit its impact, such as vaccine production and distribution, related restrictions on travel, the emergence and severity of new variant strains of

COVID-19

and the duration, timing and severity of the impact on customer spending, including any recession resulting from the pandemic. Similarly, the impact of any governmental response or other stimulus action may have an impact on our financial results, particularly if such response or stimulus is more limited than anticipated by our customers and the global financial markets. An extended period of global supply chain and economic disruption as a result of the

COVID-19

pandemic could have a material negative impact on our business, results of operations, access to sources of liquidity, and financial condition. While many geographies have begun to lift restrictions that were introduced as a result of the

COVID-19

pandemic, the potential for a resurgence of

COVID-19

could result in the

re-imposition

of multiple restrictions, including social distancing measures, shelter in place orders, quarantines or shutdowns, and could prolong the time until normalization of economic activity. Currently, we continue to evaluate our ability to operate in light of recent resurgences of

COVID-19,

including the emergence of new variant strains of

COVID-19

such as the Delta and Omicron variants, which have and may in the future necessitate renewed government restrictions, and the advisability of continuing operations, based on international, federal, state and local guidance, evolving data concerning the pandemic and the best interests of our employees, customers and shareholders. Accordingly, there can be no assurance that any of our facilities will remain open (in full or in part), that our employees that continue to work remotely will return to the office or that our other operations will continue at full or limited capacity. Our financial results may be materially and adversely impacted by a variety of factors that have not yet been determined.

Following the expected reduction in severity of the

COVID-19

pandemic, depending upon its duration and frequency of recurrence, and the governmental policies in response thereto, we may continue to experience materially adverse impacts on our business as a result of its global economic impact, including any recession that may occur or be continuing as a result. We are evaluating the extent to which

COVID-19

has impacted us and our employees, customers, and suppliers, and the extent to which the

COVID-19

pandemic and any related developments are expected to impact us in the future and caution investors that any of those factors could have material and adverse impacts on our current and future business, results of operations, cash flows, and financial condition.

Furthermore, a significant outbreak of any other contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect our operating results. Any of the foregoing could materially and adversely affect our business, financial condition, and results of operations. For further discussion on the impact of

COVID-19

on our business, see Item 5. “

Operating and Financial Review and Prospects—Impact of COVID

-19

on Our Business

.”

We face intense competition and our failure to compete successfully in product development may have an adverse effect on our business, financial condition, and results of operations.

Our industry is highly competitive and most of our product lines compete against product lines from at least two competitors. We encounter competition from numerous and varied competitors in all areas of our business. Further, our products compete not only with similar products manufactured by our competitors, but also against a variety of other alternatives provided by our competitors. Industry consolidation may result in larger, more homogeneous, and potentially stronger competitors in the markets in which we compete.

We compete primarily on the basis of quality, technology, performance, reliability, brand, reputation, range of products, and service and support. We expect our competitors to continue to develop and introduce new products and to enhance their existing products, which could cause a decline in market acceptance of our products. Our competitors may also improve their manufacturing processes or expand their manufacturing capacity, which could make it more difficult or expensive for us to compete successfully. In addition, our competitors could enter into exclusive arrangements with our existing or potential customers or suppliers, which could limit our ability, or make it significantly more expensive, to acquire necessary raw materials or to generate sales.

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Some of our competitors may have greater financial, technical, and marketing resources than we do and may be able to devote greater resources to promoting and selling certain products. Unlike many of our competitors who specialize in a single or limited number of product lines, we have a portfolio of businesses and must allocate resources across those businesses. As a result, we may invest less in certain areas of our business than our competitors invest in competing businesses, and our competitors may therefore have greater financial, technical, and marketing resources available to them with respect to those businesses.

Some of our competitors may also incur fewer expenses than we do in creating, marketing, and selling certain products and may face fewer risks in introducing new products to the market. This circumstance results from the nature of our business model, which is based on providing innovative and

high-quality

products and therefore may require that we spend a proportionately greater amount on research and development (“R&D”) than some of our competitors. If our pricing and other factors are not sufficiently competitive, or if there is an adverse reaction to our product decisions, we may lose market share in certain areas, which could adversely affect our business, financial condition, and results of operations.

Additionally, competitors could benefit from favorable tax regimes or additional governmental grants and subsidies. Certain of our competitors in various countries in which we do business, including China, may be owned by, or affiliated with members of local governments and political entities. These competitors may receive special treatment with respect to regulatory compliance and product registration, while certain of our products, including those based on new technologies, may be delayed, or even prevented from entering into the local market. Further, because many of our competitors are small divisions of large, international businesses, these competitors may have access to greater resources than we do and may therefore be better able to withstand a change in conditions within our industry and throughout the economy as a whole.

Our profitability could suffer if our cost management strategies are unsuccessful or our competitors develop an advantageous cost structure that we cannot match.

Our ability to improve or maintain our profitability is dependent on our ability to successfully manage our costs. Our cost management strategies include maintaining appropriate alignment between the demand for our offerings and our resource capacity and maintaining or improving our sales and marketing and general and administrative costs as a percentage of revenues. If our cost management efforts are not successful, our efficiency may suffer and we may not achieve desired levels of profitability. In addition, we may not be able to implement our cost management efforts in a manner that permits us to realize the cost savings we anticipate in the time, manner, or amount we currently expect, or at all due to a variety of risks, including, but not limited to, difficulties in integrating shared services within our business, higher than expected employee severance or retention costs, higher than expected overhead expenses, delays in the anticipated timing of activities related to our cost savings plans, and other unexpected costs associated with operating our business. If we are not effective in managing our operating costs in response to changes in demand or pricing, or if we are unable to absorb or pass on increases in the compensation of our employees or costs of raw materials, we may not be able to invest in our business in an amount necessary to achieve our planned rates of growth, and our business, financial condition, and results of operations could be materially adversely affected.

It may be possible for our current or future competitors to gain an advantage in product technology, manufacturing technology, or process technology, which may allow them to offer products or services that have a significant advantage over our offerings. Advantages could be in price, capacity, performance, reliability, serviceability, industry standards or formats, brand and marketing, or other attributes. If we do not compete successfully by developing and deploying new

cost-effective

products, processes, and technologies on a timely basis and by adapting to changes in our industry and the global economy, there could be a material adverse effect on our business, financial condition, and results of operations. Similarly, our chemicals are used by manufacturers of component parts for a variety of industries. To the extent these industries become more sensitive to input costs, we may face price pressure. Our ability to respond to such pressures depends on the strength and viability of our internal cost management and pricing programs. Any failure of these programs could have a material adverse effect on our business, financial condition, and results of operations.

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The reputation of our brand is an important Company asset and is key to our ability to remain a trusted supplier of specialty chemistry, equipment, service, and software.

The reputation of our brand is an important Company asset and is key to our ability to remain a trusted supplier of specialty chemistry, equipment, service, and software and to attract and retain customers. Negative publicity regarding our Company or actual, alleged, or perceived issues regarding one of our products or services, particularly given the high

cost-of-failure

nature of our products and services, could harm our relationship with customers. Failure to protect the reputation of our brand may adversely impact our credibility. In addition, in certain jurisdictions we may engage sales agents in connection with the sale of certain of our products and services. It is difficult to monitor whether such agents’ representations of our products and services are accurate. Poor representation of our products and services by agents, or entities acting without our permission, could have a material adverse effect on our reputation and our business, financial condition, and results of operations.

If our products and services do not maintain and/or achieve broad market acceptance, or if we are unable to keep pace with, or adapt to, rapidly changing technology or trends, our business, financial condition, and results of operations could be materially adversely affected.

Our business is dependent on the continued acceptance by our customers of our existing products and services and the value placed on them. If these products and services do not maintain market acceptance, our revenues may decrease. We are also continually investing in new product development to expand our offerings beyond our traditional products and services. Market acceptance of any new products or services may be affected by customer confusion surrounding our introduction of new products and services. Our expansion into new offerings may present increased risks and efforts to expand beyond our traditional products and services may not succeed.

In addition, our business is subject to constant and rapid technological change, product obsolescence, price erosion, evolving standards, short product lifecycles, raw material price fluctuations, and changes in product supply and demand. The specialty chemistry industry is currently affected by localization and a shift in customers’ businesses. The trends and characteristics in these industries may cause significant fluctuations in our results of operations and cash flows and have a material adverse effect on our financial condition. Our growth and success depend upon our ability to enhance our existing products and services and to develop and introduce new products and services to keep pace with such changes and developments and to meet changing customer needs and preferences. However, newer products or services may not achieve market acceptance if current or potential customers do not value the benefits of using our products, do not achieve favorable results using our products, use their budgets for different products, experience difficulties in using our products, or believe that our products are not cutting edge or do not add as much value as our competition’s products. If these newer products and services do not achieve market acceptance, there could be a material adverse effect on our business, financial condition, and results of operations and our profitability could decline. Additionally, changes, including technological changes, in our customers’ products or processes may make our specialty chemistry unnecessary or reduce the quantity of our specialty chemistry needed for a given product, which would reduce the demand for those chemicals. We have had, and may continue to have, customers who find alternative materials or processes and therefore no longer require our products, which would have a material adverse effect on our business, financial condition, and results of operations.

In addition, we may fail to anticipate the impact of new and emerging technology or changes in trends, fail to accurately determine market demand for new products and services, experience cost overruns, delays in delivery or performance problems, or create market confusion by making changes to our existing products and services. If we are not successful in obtaining any required regulatory approval or acceptance for new products or services, demand for our products and services may decline and/or we may not be able to grow our business or growth may occur more slowly than we anticipate. Some of our current or future products or services could also be rendered obsolete as a result of competitive offerings. Furthermore, if our customers deviate from the expected timeline for the introduction of new technology, the sales of our newer products could be adversely affected. Failure to anticipate changes in our customers’ product introduction timelines could have a material adverse effect on our business, financial condition, and results of operations.

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Our direct customers and their direct and indirect customers face numerous competitive challenges, which may materially adversely affect their business and ours.

Factors adversely affecting our direct customers and their direct and indirect customers may also adversely affect us. These factors include:

•

recessionary periods in their markets, including the impact of

COVID-19

on their budgets and financial condition;

•

their inability to adapt to rapidly changing technology and evolving industry standards, which may contribute to short product lifecycles or shifts in their strategies;

•

their inability to develop, market, or gain commercial acceptance of their products, some of which are new and untested;

•

their products becoming commoditized or obsolete;

•

loss of business or a reduction in pricing power experienced by our customers and their direct and indirect customers;

•

the emergence of new business models or more popular products and shifting patterns of demand;

•

a highly competitive consumer products industry, which is often subject to shorter product lifecycles, shifting

end-user

preferences, and higher revenue volatility; and

•

the loss of manufacturing capacity due to tightening environmental legislation and its enforcement.

If our customers or our customers’ direct and indirect customers in the ultimate

end-markets

we serve, including the markets for smartphones, communication infrastructure, cloud computing, automotive surface finishing, and automotive electronics, are unsuccessful in addressing these competitive challenges, their businesses may be materially adversely affected, reducing the demand for our offerings, decreasing our revenues, or altering our production cycles and inventory management—each of which could have a material adverse effect on our business, financial condition, and results of operations.

Our revenue, earnings, and other operating results have fluctuated in the past and may fluctuate in the future.

Our revenue, earnings, and other operating results have fluctuated in the past and may fluctuate in the future. If demand for our products fluctuates as a result of economic conditions or for other reasons, our revenue and profitability could be impacted. Our future operating results will depend on many factors, including the following:

•

business and macroeconomic changes, including downturns in the electronics (“EL”) and general metal finishing (“GMF”) plating markets and the overall global economy;

•

geopolitical changes and instability, including trade disputes and military conflicts, such as the Russia/Ukraine crisis and the resulting sanctions imposed on Russia and its economy;

•

seasonality in both our segments, which generally experience their strongest revenue in the second half of each fiscal year, mostly driven by consumption trends during the holiday season, and their lowest revenue in the first quarter of each fiscal year, mostly driven by the slowdown in production in China as a result of the Chinese New Year, which can result in a sequential decline in our revenues in the first quarter of a fiscal year relative to the fourth quarter of the prior fiscal year;

•

changes in consumer confidence caused by many factors, including changes in interest rates, credit markets, expectations for inflation, unemployment levels, and energy or other commodity prices;

•

fluctuations in demand for our customers’ and their customers’ products;

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our ability to forecast our customers’ demand for our products accurately;

•

our ability to anticipate secular trends that affect demand for our products and the degree to which those trends materialize;

•

our customers’ ability to manage the inventory that they hold and to forecast accurately their demand for our products;

•

our ability to achieve cost savings and improve yields and margins on our new and existing products; and

•

our ability to utilize our capacity efficiently or acquire additional capacity in response to customer demand.

It is likely that our future operating results could be adversely affected by one or more of the factors set forth above or other similar factors. If our future operating results are below the expectations of stock market analysts or our investors, our stock price may decline.

We may be adversely affected by uncertainty, downturns, and changes in the markets that we serve.

Our performance depends on the financial health and strength of our customers, which in turn is dependent on the economic conditions of the markets in which we and our customers operate. Declines or uncertainties in the United States and global economies may lead customers to delay or reduce purchases of our products and services as they take measures to reduce their operating costs, including by delaying the development or launch of new products and brands and/or reducing R&D spending generally.

We are also sensitive to general trends and changes in the key markets we serve. Some of these markets, including the markets for smartphones, communication infrastructure, cloud computing, automotive surface finishing, and automotive electronics, exhibit a high degree of cyclicality. Decisions to purchase our chemistry and equipment are largely the result of the performance of these and other

end-markets.

If demand for output in these

end-markets

decreases, demand for our offerings will decrease as well. Demand for the products produced by customers in our

end-markets

is impacted by numerous factors, including macroeconomic conditions, inflation, prices of commodities, rates of infrastructure spending, consumer confidence and spending, labor conditions, the state of the global supply chain, and fuel costs, among others. Increases or decreases in these variables globally may significantly impact the demand for our offerings and could have a material adverse effect on our business, financial condition, and results of operations. If we are unable to accurately predict demand in our

end-markets

or of the customers we serve, we may be unable to meet our customers’ needs, resulting in the loss of potential sales. Alternatively, we may manufacture excess products, resulting in increased inventories and overcapacity in our manufacturing facilities, increasing our incremental production costs and decreasing our operating margins.

In addition, mergers or consolidations among our customers or original equipment manufacturers (“OEMs”) could reduce the number of our customers and potential customers. For example, in recent years there has been consolidation in certain industries that we serve, and this has led to decreased levels of growth in certain product lines. Continued consolidation could adversely affect our revenues even if these events do not reduce the activities of the consolidated entities. When entities consolidate, overlapping services previously purchased separately are usually purchased only once by the consolidated entity, leading to loss of revenues. In addition, consolidated entities can better negotiate pricing terms while reducing spending on other services that were previously purchased by one of the merged or consolidated entities which may be deemed unnecessary or cancelled. Any such developments among our customers could have a material adverse effect on our business, financial condition, and results of operations.

Foreign currency exchange rate fluctuations and volatility in global currency markets could have a material adverse effect on our business, financial condition, and results of operations.

The presentation currency for our consolidated financial statements is the U.S. dollar. Our international sales and operations expose us to fluctuations in foreign currency exchange rates. These movements in exchange rates may cause our revenues and expenses to fluctuate, impacting our profitability and cash flows and our results generally.

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A significant part of our costs and revenues is denominated in currencies other than the U.S. dollar, with the significant majority of our

non-U.S.

dollar denominated revenues being in RMB and a significant majority of our costs being denominated in Euro.

To mitigate these risks, we regularly evaluate whether to enter into foreign currency hedging from time to time. There can be no assurance that such currency hedging activities would be successful, and any such currency hedging activities themselves would be subject to risk, including risks related to counterparty performance.

Although $226.5 million of our indebtedness is denominated in Euro, as of December 31, 2021, 86% of our debt under the Senior Secured Credit Facilities is denominated in U.S. dollars. Because a majority of our revenues and costs are denominated in currencies other than the U.S. dollar, changes in foreign currency exchange rates, and in particular changes in the value of the Euro, could reduce our ability to service our debt.

These risks related to exchange rate fluctuations and currency volatility may increase in future periods as our operations outside of the United States and Europe continue to expand. Consequently, our business, financial condition, and results of operations may be materially adversely affected by fluctuations in currency exchange rates.

The United Kingdom’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business, which could reduce the price of our common shares.

We are a Jersey company with material business operations in Europe. Following a national referendum and enactment of legislation by the government of the United Kingdom, the United Kingdom formally withdrew from the European Union and ratified a trade and cooperation agreement governing its future relationship with the European Union. The agreement, which entered into force on May 1, 2021 after full ratification by the European Parliament and the Council of the European Union, addresses trade, economic arrangements, law enforcement, judicial cooperation and a governance framework including procedures for dispute resolution, among other things. Because the agreement merely sets forth a framework in many respects and will require complex additional bilateral negotiations between, the United Kingdom and the European Union as both parties continue to work on the rules for implementation, significant political and economic uncertainty remains about how the precise terms of the relationship between the parties will differ from the terms before withdrawal.

These developments, or the perception that any recent developments could occur, have had and may continue to have a material adverse effect on global economic conditions and financial markets, and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Asset valuations, currency exchange rates and credit ratings have been and may continue to be subject to increased market volatility. Lack of clarity about future United Kingdom laws and regulations as the United Kingdom determines which European Union laws to replace or replicate, including financial laws and regulations, tax and free trade agreements, tax and customs laws, intellectual property rights, environmental, health and safety laws and regulations, immigration laws, employment laws, and transport laws could decrease foreign direct investment in the United Kingdom, increase costs, disrupt supply chains, or depress economic activity and restrict our access to capital.

Any of these factors could have a material adverse effect on our business, financial condition, and results of operations and reduce the price of our common shares.

Natural disasters, catastrophes, fire,

man-made

disasters, or other unexpected events could have a material adverse effect on our business, financial condition, and results of operations.

Many of our business activities involve substantial investments in manufacturing facilities. These facilities could be materially damaged by natural disasters, such as floods, tornadoes, hurricanes, and earthquakes, or by fire,

man-made

disasters, such as war or a terrorist attack, or other unexpected events such as adverse weather conditions or other disruptions to our facilities, supply chain, or our customer’s facilities. We could incur uninsured losses and liabilities arising from such events, including damage to our reputation, and/or suffer material losses in operational capacity, which could have a material adverse impact on our business, financial condition, and results of operations.

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Any natural disaster, catastrophe, fire,

man-made

disaster, or other unexpected event could result in personal injury and loss of life, damage to property, and contamination of the environment, which may result in a shutdown of our facilities, suspension of operations, and the imposition of civil or criminal fines, penalties and other sanctions, cleanup costs, and claims by governmental entities or third parties. We are dependent on the continued operation of our production facilities, and the loss or shutdown of operations over an extended period at any of our other major operating facilities could have a material adverse effect on our business, financial condition, and results of operations.

Our revenues and profitability have varied depending on our product, customer, and geographic mix for any given period, which makes it difficult to forecast future operating results.

Our revenues vary among our products and customer groups and markets, and therefore may be different in future periods from historic or current periods. Overall profitability in any given period is dependent in large part on the product, customer, and geographic mix reflected in that period’s revenue. Market trends, competitive pressures, commoditization of products, increased component or shipping costs, foreign currency exchange rates, regulatory conditions, and other factors may result in reductions in our revenues and/or pressure on our profitability in a given period. Given the nature of our business, the impact of these factors on our business and results of operations will likely vary from period to period and from product to product. For example, a change in market trends that results in a decline in demand for

high-margin

products will have a disproportionately greater adverse effect on our profits for that period. Additionally, our equipment sales are subject to greater fluctuation than sales of our chemistry. Because of the varying nature of our product, customer, and geographic mix from period to period, and the corresponding variations in our revenue and profitability, we may experience difficulties in measuring the potential impact of market, regulatory, and other factors on our business. As a result, we may be challenged in our ability to forecast our future operating results. Further, potential future business acquisitions can compound the difficulty in making comparisons between prior, current, and future periods because acquisitions and divestitures, which are not ordinary course events, also affect our profitability and our overall operating results.

The loss of certain customers could adversely affect our overall sales and profitability.

The loss of any one of our most significant customers could have a material adverse effect on our business, financial condition, and results of operations for the affected earnings periods. The principal products purchased by such customers are EL chemistry products used in connection with the manufacturing of electronics components, including printed circuit boards (“PCBs”) and semiconductors (“SCs”), and GMF chemistry products used in the manufacturing of products for the automotive surface finishing, construction equipment, household appliances, fixtures, and heavy machinery industries. Additionally, we have lost customers in Russia in connection with our recent decision to halt all sales to or in Russia. While we believe that the loss of such customers are immaterial to our business, financial condition, and results of operations, to the extent that the military conflict in Ukraine continues or escalates, we may continue to lose customers in and around Russia which, in the aggregate, may have a material adverse effect on our business, financial condition, and results of operations.

For fiscal 2021, our top ten customers represented approximately 27% of our chemistry revenues although no single customer represented more than 6% of our chemistry revenue. Loss of any such customer or any disruption in our relationship with such customers, could result in a reduction of revenue generated by such customers. If we are unable to replace revenue generated by one or more of our major customers, our revenue may significantly decrease, which would have a material adverse effect on our business, financial condition, and results of operations.

We may be required to record an impairment charge on our accounts receivable if we are unable to collect the outstanding balances from our customers.

We frequently sell products and services to customers on credit. We estimate the collectability of our accounts receivable based on our analysis of the accounts receivable, historical bad debts, customer creditworthiness, and current economic trends. We continuously monitor collections from our customers and maintain adequate impairment allowance for doubtful accounts. However, if the bad debts significantly exceed our impairment allowance, we may be required to record an impairment charge and our business, financial condition, and results of operations could be materially adversely affected.

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Our business, financial condition, and results of operations could be adversely affected by decreases in the average selling prices of products in the specialty chemistry industry.

Decreases in the average selling prices of our products may have a material adverse effect on our business, financial condition, and results of operations. Our ability to maintain or increase our profitability will continue to be dependent, in large part, upon our ability to offset decreases in average selling prices by improving production efficiency or by shifting to higher margin chemical products. In the past, we have elected to discontinue selling certain products as a result of sustained material decreases in the selling price of such products and our inability to effectively offset such decrease through shifts in operations. If we are unable to respond effectively to decreases in the average selling prices of our products in the future, our business, financial condition, and results of operations could be materially adversely affected. Further, while we may elect to discontinue products that are significantly affected by such price decreases, we can provide no assurance that any such discontinuation will mitigate the related declines in our financial condition.

Risks Related to Our Operations

Our global operations subject us to increased risks.

We have global operations and, accordingly, our business is subject to risks resulting from differing legal and regulatory requirements, political, social, and economic conditions, and unforeseeable developments in a variety of jurisdictions. We have a significant presence in several major regions, including certain emerging markets such as India and China, and we plan to continue such expansion. Our global operations are subject to the following risks, among others:

•

political instability;

•

acts of terrorism and military actions in response to such acts;

•

wars or military conflicts, such as the Russia/Ukraine crisis;

•

unexpected changes in regulatory environments and government interference in the economy;

•

changes to economic sanctions laws and regulations, including regulatory exemptions that currently authorize certain of our limited dealings involving sanctioned countries or the recent sanctions imposed by the United States and European nations against Russia as a result of the Russia/Ukraine crisis;

•

increasingly stringent laws related to privacy and consumer and data protection, including the E.U. General Data Protection Regulation and U.S. State privacy and security breach notification laws;

•

international trade disputes that could result in tariffs or other protectionist measures;

•

varying tax regimes, including with respect to the imposition of confiscatory taxes, other unexpected taxes, or withholding taxes on remittances and other payments by our partnerships or subsidiaries;

•

differing labor regulations, particularly in Germany and China where we have a significant number of employees;

•

rising wages;

•

foreign exchange controls and restrictions on repatriation of funds;

•

fluctuations in foreign currency exchange rates;

•

inability to collect payments, or seek recourse under, or comply with ambiguous or vague commercial or other laws;

•

difficulty in obtaining, or denial of, export licenses or delay or interruption of the transportation of our products;

•

differing protections for intellectual property rights;

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•

increased risk of cybersecurity incidents and cyberattacks from

third-party

and state actors and privacy violations;

•

the effects of global climate change;

•

difficulties in attracting and retaining qualified management and employees, or rationalizing our workforce;

•

increased credit risk and different financial conditions of customers and distributors may necessitate longer payment cycles of accounts receivable or result in increased bad debt

write-offs

(including due to bankruptcy) or additions to reserves;

•

differing business practices, which may require us to enter into agreements that include

non-standard

terms; and

•

difficulties in penetrating new markets due to entrenched competitors, lack of recognition of our brand, and lack of local acceptance of our products and services.

Our overall success as a global business depends, in part, on our ability to anticipate and effectively manage these risks, but there can be no assurance that we will be able to do so without incurring unexpected costs. If we are not able to manage the risks related to our international operations, our business, financial condition, and results of operations may be materially adversely affected.

Our business in emerging markets requires us to respond to rapid changes in market conditions in these countries. Our overall success as a global business depends, in part, upon our ability to succeed in different legal, regulatory, economic, social, and political conditions. We may not succeed in developing and implementing policies and strategies which will be effective in each location where we do business. Furthermore, any of the foregoing factors or any combination thereof could have a material adverse effect on our business, financial condition, and results of operations.

We may also face difficulties managing and administering an internationally dispersed business. In particular, the management of our personnel across several countries can present logistical and managerial challenges. Additionally, international operations present challenges related to operating under different business cultures and languages. We may have to comply with unexpected changes in foreign laws and regulatory requirements, which could negatively impact our operations and ability to manage our global financial resources. Export controls or other regulatory restrictions could prevent us from shipping our products into and from some markets. Moreover, we may not be able to adequately protect our trademarks and other intellectual property overseas due to uncertainty of laws and enforcement in several countries relating to the protection and enforcement of intellectual property rights. See

“

—

Our efforts to protect our intellectual property may be less effective in some countries where intellectual property rights are not as well protected as in the United States

.” Changes in tax regulations in the United States and other jurisdictions, including under and with respect to bilateral and multilateral tax treaties, or the interpretation thereof, could significantly reduce the financial performance of our foreign operations or the magnitude of their contributions to our overall financial performance. In addition, the interpretation and application of consumer and data protection laws in the United States, Europe, and elsewhere are often uncertain, contradictory, and in flux. For example, the European Union enacted stricter data protection laws in 2018. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, this could result in

government-imposed

fines or orders requiring that we change our data practices, which could have an adverse effect on our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

Supply chain and operational disruptions and volatility in energy and raw material costs could significantly increase costs and expenses and adversely impact the Company’s sales and earnings.

Our manufacturing processes and operations depend on the continued availability of energy and raw materials, the costs of which are subject to worldwide supply and demand as well as other factors beyond our control, including potential legislation to address climate change by reducing greenhouse gas emissions, creating a carbon tax or implementing a cap and trade program which could create increases in costs and price volatility.

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Operational changes and transition to renewable energy sources to meet country,

non-governmental

organization and corporate-level

net-zero

greenhouse gas emissions pledges and related decarbonization technology investments, may require us to make significant capital investments,

re-qualify

its products with certain suppliers, as well as meet additional regulatory and compliance requirements and could result in higher cost and expenses.

Supply chain disruptions, plant and/or power outages, labor shortages and/or strikes,

geo-political

activity, wars, weather events and natural disasters, including hurricanes or flooding, and global health risks or pandemics could seriously harm our operations as well as the operations of our customers and suppliers. Climate change increases the frequency and severity of potential supply chain and operational disruptions from weather events and natural disasters.

In addition, our suppliers may experience capacity limitations in their own operations or may elect to reduce or eliminate certain product lines. To address this risk, generally, we seek to have many sources of supply for key raw materials in order to avoid significant dependence on any one or a few suppliers. In addition, and where the supply market for key raw materials is concentrated, we take additional steps to manage its exposure to supply chain risk and price fluctuations through, among other things, negotiated long-term contracts some which include minimum purchase obligations. However, there can be no assurance that such mitigation efforts will prevent future difficulty in obtaining sufficient and timely delivery of certain raw materials.

We also take actions to offset the effects of higher energy and raw material costs through selling price increases, productivity improvements and cost reduction programs. Success in offsetting higher raw material costs with price increases is largely influenced by competitive and economic conditions and could vary significantly depending on the market served. As a result, volatility in these costs may negatively impact our business, results of operations, financial condition and cash flows.

We are not insured against all potential risks.

To the extent available, we maintain insurance coverage that we believe is customary in our industry. Such insurance does not, however, provide coverage for all liabilities, including certain hazards incidental to our business, and we can provide no assurance that our insurance coverage will be adequate to cover claims that may arise or that we will be able to maintain adequate insurance at rates we consider reasonable. For example, the occurrence of a significant business interruption in the operation of one or more of our key facilities, countries, partners, or systems could result in liability to us that is not insured and therefore could have a material adverse effect on our business, financial condition, and results of operations. In addition, our products are used in or integrated with many

high-risk

end-products

and therefore if such products were involved in a disaster or catastrophic accident, we could be involved in litigation arising out of such incidents and susceptible to significant expenses or losses.

Our ability to use and operate certain portions of our facilities may be limited by the validity of, or a default or termination under, our real property leases.

Certain portions of our facilities are leased from

third-party

landlords, and we expect to lease facilities in the future. The invalidity of, or default or termination under, any of our leases may interfere with our ability to use and operate all or a portion of certain of our facilities, which may have a material adverse effect on our business, financial condition, and results of operations.

Our real property is subject to casualty risks, which may have a material adverse effect on our business, financial condition, and results of operations.

We maintain insurance covering our respective properties, operations, personnel, and businesses as is customary in our industry and as required under our senior secured debt facilities. However, there are certain losses, including losses resulting from terrorist acts, that may be either uninsurable or not economically insurable, in whole or in part. As a result, we cannot assure you that the insurance proceeds will compensate us fully for our losses.

In the event of a total or partial loss affecting any of the real property, certain items of equipment and inventory may not be easily replaced. Accordingly, even though there may be insurance coverage, the extended period needed to obtain replacement units or inventory may cause significant delays, which may have a material adverse effect on our business, financial condition, and results of operations. In addition, certain zoning laws and regulations may prevent rebuilding substantially the same facilities in the event of a casualty, which may have a material adverse effect on our business, financial condition, and results of operations.

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Our real property is subject to condemnation risks, which may have a material adverse effect on our business, financial condition, and results of operations.

It is possible that all or a portion of the real property may become subject to a condemnation proceeding. In such event, we may be compensated for any total or partial loss of property but it is possible that such compensation will be insufficient to fully compensate us for our losses. In addition, a total or partial condemnation may interfere with our ability to use and operate all or a portion of the affected facility, which may have a material adverse effect on our business, financial condition, and results of operations.

Our operations and assets in China are subject to significant political and economic uncertainties.

Changes in Chinese laws and regulations, or their interpretation, or the imposition of unexpected or confiscatory taxation, restrictions on currency conversion, imports and sources of supply, devaluations of currency, or the nationalization or other expropriation of private enterprises could have a material adverse effect on our business, financial condition, and results of operations of our subsidiaries organized under the laws of China. Under its current leadership, the Chinese government has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.

If we repatriate funds from our Chinese operations in order to fund our working capital requirements in jurisdictions outside of China, to pay dividends, or otherwise, we will be required to comply with the procedures and regulations of applicable Chinese law, which may significantly limit our ability to extract cash from our Chinese operations. Furthermore, under the Enterprise Income Tax Law and the regulation on the implementation of the Enterprise Income Tax Law, absent application of a relevant treaty, withholding tax at 10% will normally apply to dividends payable to

non-Chinese

investors which are derived from sources within China. Any changes to these procedures and regulations, or our failure or inability to comply with these or other aspects of these or other procedures and regulations, could prevent us from repatriating funds from our Chinese operations or subject us to other forms of taxation and/or penalties, which could have a material adverse effect on our business, financial condition, and results of operations. Failure to comply with applicable laws, regulations and/or rules in relation to foreign exchange control, including but not limited to the Administrative Regulations on Foreign Exchange of China, could subject us to administrative penalties (such as warnings and/or fines), as well as potential criminal liabilities in severe situations.

The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange, and allocation of resources. While the Chinese economy has experienced significant growth in the past 30 years, growth has been uneven, both geographically and among various sectors of the economy. The Chinese economy may not continue to grow and if there is growth, such growth may not be steady and uniform. If there is a slowdown, such slowdown may have a negative effect on our Chinese business and our business in general. We can provide no assurance that the various macroeconomic measures and monetary policies adopted by the Chinese government to guide economic growth and the allocation of resources will be effective in sustaining the growth rate of the Chinese economy. If Chinese growth stagnates or there is an economic downturn in China, our business, financial condition, and results of operations may be materially adversely affected.

The Chinese government’s control of currency conversion and expatriation of funds may affect our liquidity.

The Chinese government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. Substantially all revenues of our subsidiaries organized under the laws of China are denominated in RMB. Shortages in the availability of foreign currency in China may restrict the ability of our Chinese subsidiaries to remit sufficient foreign currency to pay dividends or to make other payments to us, or otherwise to satisfy their foreign

currency-denominated

obligations. Under existing Chinese foreign exchange regulations, payments of current account items, including profit distributions, interest payments, and

trade-related

payments, can be made in foreign currencies without prior approval from China’s State

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Administration of Foreign Exchange (“SAFE”) by complying with certain procedural requirements, including, among others, submission of relevant documentary evidence of such transactions to designated foreign exchange banks in China for processing of relevant payments. We are required to present relevant documentary evidence of such transactions and conduct such transactions at designated foreign exchange banks in China. However, for any Chinese company, dividends can be declared and paid only out of the retained earnings of that company under Chinese law and may be subject to taxation. In accordance with relevant Chinese laws and provisions in their articles of association, each of our Chinese subsidiaries is required to set aside 10% of its after tax profits based on Chinese accounting standards as statutory reserve until such reserve reaches 50% of its registered capital. As a result, our Chinese subsidiaries may be restricted in their ability to transfer cash outside of China whether in the form of dividends, loans, or advances. These restrictions and requirements could reduce the amount of distributions that we receive from our subsidiaries, which would restrict our ability to fund our operations, generate income, pay dividends, and service our indebtedness.

Furthermore, approval from SAFE or its local branch is required where RMB are to be converted into foreign currencies and remitted out of China for payments of capital account items, such as the repayment of loans denominated in foreign currencies. Without a prior approval from SAFE or its local branch, cash generated from the operations of our Chinese subsidiaries may not be used to repay debt in a currency other than the RMB owed by such subsidiaries to entities outside China, or make other payments of capital account items outside China in a currency other than the RMB. The Chinese government may also at its discretion, restrict access in the future to foreign currencies for current account transactions. In the current regime of stringent regulation of outflow of capital, RMB outflow may face the same level of scrutiny by the Chinese government as the outflow of foreign currencies.

Additionally, because repatriation of funds of our Chinese subsidiaries requires the prior approval of SAFE and/or its authorized bank and/or compliance with certain procedural requirements, such repatriation could be delayed, restricted, or limited. There can be no assurance that the rules and regulations pursuant to which SAFE grants or denies such approval or stipulates the procedural requirements will not change in a way that adversely affects the ability of our Chinese subsidiaries to expatriate funds out of China. Future measures, including any additional requirements to repatriate profits earned in China, may increase our regulatory compliance burden.

Uncertainties presented by the Chinese legal system could limit the legal protections available to us and subject us to legal risks, which could have a material adverse effect on our business, financial condition, and results of operations.

Our operations in China are subject to applicable Chinese laws, rules, and regulations. The Chinese legal system is based on written statutes. Prior court decisions may be cited for reference but have little value as precedents, although the judicial interpretations issued by the Supreme Court of China have binding effect. Additionally, Chinese statutes are often

principle-oriented

and require detailed interpretations by the enforcement bodies to further apply and enforce such laws.

Since 1979, the Chinese government has been developing a comprehensive system of commercial laws, and progress has been made in introducing laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation, and trade. However, China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because some of these laws and regulations are relatively new, and because of the limited volume of published court of arbitration decisions and their nonbinding nature (except for the judicial interpretations issued by the Supreme Court of China), the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the Chinese legal system is based in part on government policies and internal rules, some of which may not be published on a timely basis or at all, and some of which may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since Chinese administrative and court authorities have significant discretion in interpreting and implementing statutory, regulatory, and contractual terms, it may be more difficult to predict the outcome of administrative and court proceedings and the level of legal protection in China than in more developed legal systems. These uncertainties may also impede our ability to enforce the contracts we have entered into in China. As a result, these uncertainties could have a material adverse effect on our business, financial condition, and results of operations.

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Material increases in labor costs in China could have an adverse impact on our business and operating results.

We operate several manufacturing facilities in China. In past years, we have experienced increases in labor costs in our Chinese facilities. We expect increases in the cost of labor in our manufacturing facilities in China will continue to occur in the future. To the extent we are unable to pass on increases in labor costs to our customers by increasing the prices for our products and services, minimum wage increases, or increases in other labor costs could have a material adverse effect on our business, financial condition, and results of operations.

If our land use rights in China are revoked, we would have no operational capabilities in the country.

Under Chinese law, land is owned by the state or rural collective economic organizations. The state issues to the land users the land use right certificate. Land use rights can be revoked and the land users forced to vacate at any time when redevelopment of the land is in the public interest. The public interest rationale is interpreted quite broadly and the process of land appropriation may not be transparent. We have one technology center in Shanghai and another in Guangzhou. We also have one production facility in Guangzhou and developed a second production facility in Yangzhou. These facilities are operated independently from each other and the loss of land use rights at any one facility would not necessarily impact the operations at any other site. However, we rely on these land use rights, and the loss of such rights would have a material adverse effect on our business, financial condition, and results of operations.

Changes in the Chinese government’s policy on foreign investment in China may adversely affect our business and results of operations.

The Foreign Investment Access Special Management Measures (Negative List) (2019 Version) (“Negative List”), which became effective on July 30, 2019, has identified the industrial areas that are restricted or prohibited for foreign investors. The business of our Chinese subsidiaries does not fall within any of such restricted or prohibited areas and their business scope was duly approved by the Chinese foreign investment regulatory authority upon their establishment.

The Negative List may be updated from time to time, and there can be no assurance that the Chinese government will not change its policies in a manner that would render part or all of our business to fall within the restricted or prohibited categories. If we cannot obtain approval from the relevant approval authorities to engage in a business that becomes prohibited or restricted for foreign investors pursuant to any applicable updates under the Negative List, we may be forced to sell or restructure our business in China. If we are forced to adjust our corporate structure or business as a result of changes in government policy on foreign investment, it could adversely affect our reputation, business, financial condition, and results of operations.

The Foreign Investment Law of China (“Foreign Investment Law”) was formally adopted by the National People’s Congress of China on March 15, 2019 and came into effect on January 1, 2020 to replace the

Sino-foreign

Equity Joint Venture Enterprise Law, the

Sino-Foreign

Cooperative Joint Venture Enterprise Law, and the Wholly

Foreign-Invested

Enterprise Law with a single unified law aimed at promoting foreign investment by better protecting the rights and interests of foreign investors and standardizing management of foreign investment. The Foreign Investment Law is formulated to establish regulatory principles governing foreign investment in China, with detailed implementation regulations and rules to be enacted by relevant regulatory authorities. As such, there exist uncertainties regarding the interpretation and implementation of the Foreign Investment Law and the evolution of the regulatory landscape of foreign investment. The proposed Foreign Investment Law imposes enhanced information reporting requirements on foreign investors and the applicable foreign invested entities, and requires reorganization of

foreign-invested

enterprises’ corporate governance for conformity with the Company Law of China. Once enacted, the Foreign Investment Law may have a material impact on certain aspects of our current corporate governance practices and business operations, and may result in an increase in our compliance costs. In addition, and depending on the seriousness of the circumstances, noncompliance with information reporting obligations, concealment of information, and providing misleading or false information could result in monetary fines or criminal charges.

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Risks Related to Government Regulation and Litigation

Our products and our customers are subject to numerous laws regulating the production and use of chemical substances, and some of our products may need to be reformulated or discontinued to comply with these laws and regulations.

As a specialty chemistry manufacturer, we are subject to chemicals approvals, registrations and regulations around the world, including the European Union Registration, Evaluation, Authorisation, and Restriction of Chemicals (“EU REACH”) regulation and, in particular, its Substances of Very High Concern (“SVHC”) program, the Toxic Substances Control Act (“TSCA”) in the United States, and similar laws and regulations in China, Korea, Taiwan, Australia, the Philippines, Canada, and other countries. Some of the laws and regulations applicable to us have changed in recent years to impose new obligations that could also force us to reformulate or discontinue certain of our products.

Governmental, regulatory, and societal demands for increasing levels of product safety and environmental protection are resulting in increased pressure for more stringent regulatory control with respect to the chemical industry. For example, the EU REACH imposes comprehensive compliance obligations and establishes mechanisms to identify and restrict high concern chemicals, and comparable regulatory requirements have now been adopted in several other countries. As another example, in the United States, the core provisions of the TSCA were amended in June 2016 for the first time in nearly 40 years. Among the more significant changes, the amended TSCA mandates risk evaluation of existing “high priority” chemicals and regulatory action to control any “unreasonable risks” identified as a result of such evaluation. In addition, the U.S. Environmental Protection Agency (the “EPA”) must make a no “unreasonable risk” finding before a new chemical can be fully commercialized. These laws and regulations generally create uncertainty about whether any existing chemicals important to our business may be designated for restriction and whether the approval process for any new chemical may be more difficult and costly. These changes could adversely impact our ability to supply certain products to our customers and could also result in compliance obligations, fines, ongoing monitoring and other future business activity restrictions, which could have a material adverse effect on our business, financial condition and operating results.

To the extent we rely on an exemption from a registration requirement or a new chemical approval process, the possibility exists that the exemption may be eliminated or modified, either in general or for a particular type of chemical. In such event, we could incur costs for generating data and coming into compliance, and if a new chemical approval is required, we would face the prospect that without it, we could not continue to sell our impacted products. We track regulatory developments, and in the event we anticipate that an exemption might become unavailable to us, our approach would be to develop, if possible, strategies for minimizing any adverse material impacts to our business. We have also submitted an Authorisation Application for one SVHC—chromium trioxide. The European Union Commission has granted approval for five of the six uses requested, with a decision still pending on the application related to use for functional plating with decorative character. Because of our strong sales in Asia and our current efforts to develop alternative formulations, it is unlikely our business will be materially affected if the remaining application is not granted. The Candidate list of SVHCs contains other chemicals being used by our business, and it is possible that one or more of these chemicals could be designated as SVHCs and subject to Authorisation. In general, we expect to find substances for such chemicals rather than seek Authorisation, but we may decide to submit an Authorisation Application in the future where that makes sense for our business.

Perfluorooctanesulfonic acid (“PFOS”) and other

per-

and polyfluoroaklyl substances (“PFAS”) are chemical agents that have been targeted for risk assessment, restriction, and

high-priority

remediation and are the subject of litigation and governmental investigations in the United States and other countries. While we have developed a suite of products that do not require any PFAS chemicals and, when adopted by the industry, will obviate the need for

PFAS-containing

mist suppressants and wetting agents, we continue to sell a limited number of products that contain permissible levels of PFAS. We have been named as a defendant in a lawsuit related to PFAS and we have received a request for information from, and responded to, a state agency. See Item 8. “

Financial Information—Legal and Arbitration Proceedings

” for more information on the

PFAS-related

lawsuit.

International chemicals regulation requirements, and enforcement of these requirements, may become more stringent in the future and could result in material costs relating to regulatory compliance, liabilities, litigation proceedings, or other impacts, such as restrictions or prohibitions on our products. Future regulatory or other developments could also restrict or eliminate the use of, or require us to make modifications to, our products,

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packaging, manufacturing processes, and technology, which could have a material adverse effect on our business, financial condition, and results of operations. Our production facilities require permits, such as environmental, operating, and

product-related

permits and import/export permits, which are subject to renewal and, in some circumstances, revocation. We may not obtain the necessary permits, existing permits may be discontinued, and any newly issued permits may contain significant and costly new requirements. If a permit for a production facility would not be renewed or would be revoked, the facility may need to be closed temporarily or permanently, which may have a material adverse effect on our business, financial condition, and results of operations. Failure to obtain or maintain permits for our facilities or other failure to comply with applicable environmental regulations could result in the shutdown of, or suspension of operations at, our plants.

Furthermore, changes or tightening of environmental protection laws and regulations in China may also have adverse effects on our business, including by adversely impacting operations efficiency, restricting the scope of our operations, increasing costs associated with the transportation of chemicals, and resulting in higher costs for environmental protection taxes and other expenditures.

Many of our customers are subject to the same or similar environmental regulations. The impact of these regulations on our customers and our customers’ ability to comply with these regulations is outside of our control. However, noncompliance by our customers could have an indirect negative effect on our business. We are monitoring relevant chemical regulatory developments in order to limit the associated risks of new developments by being able to trigger countermeasures, such as alternative products and

phase-outs,

among others, at the right time.

Our financial results may be affected by tariffs, border adjustment taxes or other adverse trade restrictions.

We have global operations, including a significant presence in several major regions, including markets such as India and China. We cannot predict whether the countries in which we operate, or may operate in the future, could become subject to new or additional trade restrictions imposed by the United States or other governments, including the likelihood, type or effect of any such restrictions. The U.S. government imposed various actions regarding trade with China, including levying various tariffs on imports from China, and is contemplating imposing additional actions in the future. In addition, President Trump issued an executive order designed to secure the information and communications technology and services supply chain, which would restrict the acquisition or use in the United States of information and communications technology or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of foreign adversaries. Further, the U.S. Commerce Department has implemented additional restrictions and may implement further restrictions that would affect conducting business with certain Chinese companies. The impact on us from these tariffs and trade restrictions is largely indirect, as our customers who import or export products to and from the United States are subject to the tariffs and trade restrictions and pass on the cost to us. However, we can provide no assurance that we will not be subject to direct tariffs and trade restrictions in the future. Similarly, the impact of these trade restrictions on the global value chains we serve may cause customers to seek other suppliers for our products in different countries, and we may be unable to recapture or replace such customers. Moreover, depending on the duration and implementation of the tariffs, the executive order, and other regulatory actions, these trade restrictions may also adversely affect the development of new technologies and the rollout of

next-generation

networks, including 5G.

There is increased uncertainty with respect to trade relations, including as a result of potential retaliatory tariffs, between the United States and other countries, particularly China and Mexico. The focus on policy reforms that discourage U.S. corporations from outsourcing manufacturing and production activities to foreign jurisdictions, including increased customs restrictions, tariffs, quotas, or the imposition of additional duties and other charges on imports and exports, could change the way we and our customers conduct business, increase our costs, or impede the timely delivery of our products, and have a material adverse effect on our business, financial condition, and results of operations.

The international scope of our operations and our corporate and financing structure may expose us to potentially adverse tax consequences.

We are subject to taxation in, and to the tax laws and regulations of, multiple jurisdictions as a result of the international scope of our operations and our corporate and financing structure. We are also subject to intercompany pricing laws, including those relating to the flow of funds between our companies pursuant to, for example, purchase

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agreements, licensing agreements, or other arrangements. Adverse developments in these laws or regulations, or any change in position regarding the application, administration, or interpretation of these laws or regulations in any applicable jurisdiction, or our inability to comply with all applicable requirements of these laws or regulations due to travel restrictions associated with the

COVID-19

pandemic, or otherwise could have a material adverse effect on our business, financial condition, and results of operations. In addition, the tax authorities in any applicable jurisdiction may disagree with the positions we have taken or intend to take regarding the tax treatment or characterization of any of our activities or transactions, including the tax treatment or characterization of our tax residency or indebtedness. If any applicable tax authorities were to successfully challenge the tax treatment or characterization of any of these, it could result in the disallowance of deductions, the imposition of additional or new taxation in certain jurisdictions, the imposition of withholding taxes on internal deemed transfers or in general, capital gains taxes, the reallocation of income, penalties, or other consequences that could have a material adverse effect on our business, financial condition, and results of operations.

Our failure to comply with trade restrictions such as economic sanctions and export controls could negatively impact our reputation and results of operations.

We are subject to trade restrictions, including economic sanctions and export controls, imposed by governments around the world with jurisdiction over our operations, which prohibit or restrict transactions involving certain designated persons and certain designated countries or territories, including Cuba, Iran, Syria, North Korea, and the Crimea Region of Ukraine. Our failure to successfully comply with these laws and regulations may expose us to reputational harm as well as significant sanctions, including criminal fines, imprisonment, civil penalties, disgorgement of profits, injunctions, debarment from government contracts, and other remedial measures. Investigations of alleged violations can be expensive and disruptive. We maintain policies and procedures designed to comply with these laws and regulations. As part of our business, we may, from time to time, engage in limited sales and transactions involving certain countries that are targets of economic sanctions, provided that such sales and transactions are authorized pursuant to applicable economic sanctions laws and regulations. However, we cannot predict the nature, scope, or effect of future regulatory requirements, including changes that may affect existing regulatory authorizations, and we cannot predict the manner in which existing laws and regulations might be administered or interpreted.

In addition, any perceived or actual breach of compliance by us with respect to applicable laws, rules, and regulations could have a significant impact on our reputation and could cause us to lose existing customers; prevent us from obtaining new customers; negatively impact investor sentiment about our Company; require us to expend significant funds to remedy problems caused by violations and to avert further violations; and expose us to legal risk and potential liability—all of which may have a material adverse effect on our reputation, business, financial condition, and results of operations.

Lastly, we have operations in Eastern Europe, including a subsidiary based in Minsk, Belarus. While neither our operations nor those of our subsidiaries have been directly impacted by the economic sanctions imposed upon individuals in Eastern Europe and Russia, should the situation in Eastern Europe and Russia escalate such that economic sanctions are expanded in these regions, our operations may be impacted, which could have a material adverse effect on our business, financial condition, and results of operations.

Our failure to comply with the

anti-corruption

laws of the United States and various international jurisdictions could negatively impact our reputation and results of operations.

Doing business on a worldwide basis requires us to comply with

anti-corruption

laws and regulations imposed by governments around the world with jurisdiction over our operations, which includes the U.S. Foreign Corrupt Practices Act (“FCPA”) and the U.K. Bribery Act 2010 (“UK Bribery Act”), as well as the laws of the countries where we do business. These laws and regulations may restrict our operations, trade practices, investment decisions, and partnering activities. The FCPA and the UK Bribery Act prohibit us and our officers, directors, employees, and business partners acting on our behalf, including agents (“representatives”), from corruptly offering, promising, authorizing, or providing anything of value to foreign government officials for the purposes of

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influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The UK Bribery Act also prohibits

non-governmental

commercial bribery, soliciting or accepting bribes, and “facilitation payments,” or small payments to

low-level

government officials to expedite routine approvals. We also are subject to the jurisdiction of various governments and regulatory agencies around the world, which may bring our personnel and representatives into contact with foreign government officials responsible for issuing or renewing permits, licenses, or approvals or for enforcing other governmental regulations. In addition, some of the international locations in which we operate lack a developed legal system, and others are perceived to have elevated levels of public corruption. Our global operations expose us to the risk of violating, or being accused of violating,

anti-corruption

laws and regulations.

Other companies, including some that may compete with us, may not be subject to the prohibitions listed above, and therefore may have a competitive advantage over us. We maintain policies and procedures reasonably designed to comply with applicable

anti-corruption

laws and regulations. However, there can be no guarantee that our policies and procedures will effectively prevent violations by our employees or representatives for which we may be held responsible, and any such violation could adversely affect our reputation, business, financial condition, and results of operations. Our failure to successfully comply with these laws and regulations may expose us to reputational harm as well as significant sanctions, including criminal fines, imprisonment, civil penalties, disgorgement of profits, injunctions, and debarment from government contracts, as well as other remedial measures. Investigations of alleged violations can be expensive and disruptive.

We may be adversely affected by changes in legislation and regulation, which may impact how we provide products and services.

We are subject to extensive laws, regulations, and industry standards in the various jurisdictions where we operate, market, and distribute our products, including environmental, health and safety, product regulatory, financial, accounting, and tax laws and regulations, which vary from jurisdiction to jurisdiction. Legislative and regulatory changes that impact us and our customers’ industries may impact how we provide products and services to our customers. It is difficult to predict in what form laws and regulations will be adopted or how they will be construed by the relevant courts, or the extent to which any changes might adversely affect us. Delays in adapting our products and services to legislative and regulatory changes could harm our reputation. Also, we may not be as

well-equipped

to respond to changes in legislation or regulation as some of our competitors or we may become subject to new legislation or regulation with regard to the products and services we offer which could cause us to be prohibited from providing certain services or make provision of affected services more expensive.

Although we have implemented policies and procedures that are designed to ensure compliance with applicable laws, rules, and regulations, there is no guarantee that we will remain in compliance. Any noncompliance could result in civil, criminal and administrative fees, fines, penalties, taxes, interruptions in our operations, and reputational harm for the Company, which may have a material adverse effect on our business, financial condition, and results of operations.

We operate in a litigious environment, which may adversely affect our business, financial condition, and results of operations.

We may become involved in legal actions and claims arising in the ordinary course of business, including litigation regarding employment matters, breach of contract, and other commercial matters. Due to the inherent uncertainty in the litigation process, the resolution of any particular legal proceeding could result in changes to our products and business practices and could have a material adverse effect on our business, financial condition, and results of operations.

We may be liable for damages based on product liability claims brought against our customers in our

end-markets

or from our customers and their employees, and any successful claim for damages could have a material adverse effect on our business, financial condition, and results of operations.

We produce and use hazardous chemicals, the handling and use of which require appropriate procedures and care. As a result of the hazardous nature of some of the products we produce and use, we may face claims relating to incidents that involve our customers’ improper handling, storage, and use of our products.

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In addition, many of our products provide critical performance attributes to our customers’ products that are sold to consumers who could potentially bring product liability suits related to such products. Our sale of these products therefore involves the risk of product liability claims, including class action lawsuits that claim liability for death, injury, or property damage caused by products that we manufacture or that contain our components. If a person were to bring a product liability suit against one of our customers, this customer may attempt to seek contribution from us. A person may also bring a product liability claim directly against us. A successful product liability claim or series of claims against us in excess of our insurance coverage for payments, for which we are not otherwise indemnified, could have a material adverse effect on our business, financial condition, and results of operations. While we endeavor to protect ourselves from such claims and exposures in our contractual negotiations, we can provide no assurance that our efforts in this regard will ultimately protect us from any such claims.

We may incur material costs relating to environmental and health and safety requirements or liabilities, which could have a negative impact on our business, financial condition, and results of operations.

As an international manufacturer and distributor of specialty chemistry and solutions, we are subject to extensive federal, state, local, and foreign environmental, health and safety laws and regulations concerning, among other things, emissions to the air, discharges to land, surface, subsurface strata, wastewater, and storm water discharges, and the generation, use, handling, storage, transportation, treatment, and disposal of hazardous waste and other materials. We are also required to hold numerous environmental permits related to our operations in various jurisdictions. Our operations bear the risk of violations of those laws and permits, and sanctions for violations such as capital expenditure obligations, clean up and removal costs,

long-term

monitoring and maintenance costs, costs of waste disposal, natural resource damages, and payments for property damage and personal injury. Although it is our policy to comply with such laws, permits, and regulations, it is possible that we have not been or may not be at all times in compliance with all these requirements. Many of our products are inherently hazardous. Moreover, our R&D, manufacturing, formulation, and packaging activities involve the use of hazardous materials and the generation of hazardous waste. Furthermore, we cannot eliminate the risk of accidental contamination, discharge, or injury resulting from these materials. As a result, we could in the future incur significant liabilities, including cleanup costs, fines and sanctions, and

third-party

claims for property or natural resource damages or personal injuries, any of which could be material.

Liability under some environmental laws relating to contaminated sites can be joint and several and imposed retroactively, regardless of fault or the legality of the activities that gave rise to the contamination. Some of our current manufacturing facilities and former facilities have an extended history of chemical manufacturing operations or other industrial activities, and contaminants have been detected at some of our sites. We or our predecessors have in the past been, and are currently, required to remediate contamination at several of our current and former sites. In particular, we have finished current soil remediation, further investigation and measurements and final report has been provided to local authorities. Answer and decision from authority is pending and there remains some risk that further investigation and remediation might be necessary.

Chemical manufacturing is inherently hazardous and could result in accidents that disrupt our operations or expose us to significant losses or liabilities.

The hazards associated with chemical manufacturing and the related storage and transportation of raw materials, products, and wastes are inherent in our operations. These hazards could lead to an interruption or suspension of operations and have a material adverse effect on the productivity and profitability of a particular manufacturing facility or on our business as a whole. Potential risks include:

•

storage tank leaks and ruptures;

•

explosions and fires;

•

inclement weather and natural disasters;

•

terrorist attacks;

•

cybersecurity breaches;

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•

mechanical failure;

•

unscheduled downtime;

•

labor difficulties;

•

transportation interruptions; and

•

chemical spills and other discharges or releases of toxic or hazardous substances or gases.

These hazards may result in personal injury and loss of life, damage to property, and contamination of the environment, which may result in a suspension of operations and the imposition of civil or criminal fines, penalties and other sanctions, cleanup costs, and claims by governmental entities or third parties. We are dependent on the continued operation of our production facilities, and the loss or shutdown of operations over an extended period at any of our major operating facilities could have a material adverse effect on our business, financial condition, and results of operations.

Global climate change legislation could negatively impact our results of operations or limit our ability to operate our business.

We operate production facilities in several countries. In many of the countries in which we operate, legislation has been passed or proposed, or legislation is being considered, to limit greenhouse gases through various means, including the capping and trading of emissions credits. Greenhouse gas regulation in the jurisdictions in which we operate could negatively impact our future results from operations through increased costs of production. We may be unable to pass such increased costs on to our customers, which may decrease our revenues and net income and have a material adverse effect on our business, financial condition, and results of operations. In addition, the potential impact of climate change regulation on our customers is highly uncertain and may also materially adversely affect our business, financial condition, and results of operations.

Risks Related to Employee Matters, Managing Growth, and

Relationships with Suppliers and Other Third Parties

If we do not continue to attract, motivate, and retain members of our senior management team and qualified employees, we may not be able to support our operations.

The completion and execution of our strategies depend on the continued service and performance of our senior management team. If we lose key members of our senior management team, we may not be able to effectively manage our transition to a public company or our current and future operations.

In addition, our business depends on our ability to continue to attract, motivate, and retain many skilled employees across all of our business lines. There is a limited pool of employees who have the requisite skills, training, and education. We compete with many businesses and organizations that are seeking skilled individuals, particularly those with experience in technology and the sciences and those with Ph.D.s in technical fields. Competition for professionals across our entire business can be intense, as other companies seek to enhance their positions in the markets we serve. In addition, competition for experienced talent in our faster growing geographic areas outside of Europe continues to intensify, requiring us to increase our focus on attracting and developing highly skilled employees in our most strategically important locations in those areas of the world. As competition for experienced talent grows, we may be forced to increase spending on employee salaries, which could have a material adverse effect on our business, financial condition, and results of operations.

Future organizational changes and the implementation of our cost savings initiatives could also cause our employee attrition rate to increase and may result in significant costs to us in connection with implementing such initiatives. If we are unable to continue to identify or be successful in attracting, motivating, and retaining appropriately qualified personnel, there could be a material adverse effect on our business, financial condition, and results of operations.

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We may be subject to work stoppages, union negotiations, labor disputes, and other matters associated with our labor force, which may adversely impact our operations and cause us to incur incremental costs.

Some of our employees globally are in unions or otherwise covered by labor agreements, including works councils. As of December 31, 2021, approximately 25% of our workforce, excluding employees in China and Mexico, was unionized or otherwise covered by labor agreements. Consequently, we may be subject to potential union campaigns, work stoppages, union negotiations, and other potential labor disputes. Additionally, negotiations with unions or works councils in connection with existing labor agreements may result in significant increases in our cost of labor, divert management’s attention away from operating our business, or break down and result in the disruption of our operations. The occurrence of any of the preceding outcomes could impair our ability to manufacture our products and result in increased costs and/or decreased operating results. Further, we may be impacted by work stoppages at our suppliers or customers that are beyond our control.

We may acquire other businesses which could require significant management attention, disrupt our business, dilute shareholder value, and adversely affect our results of operations.

As part of our business strategy, we may acquire or make investments in complementary companies, products, or technologies. The identification of suitable acquisition candidates is difficult, and we may not be able to complete such acquisitions on favorable terms, if at all. If we do complete future acquisitions, we may not ultimately strengthen our competitive position or achieve our goals and business strategy; we may be subject to claims or liabilities assumed from an acquired company, product, or technology; and any acquisitions we complete could be viewed negatively by our customers, investors, and securities analysts. In addition, if we are unsuccessful at integrating future acquisitions, or the technologies associated with such acquisitions, into our Company, the revenue and results of operations of the combined company could be adversely affected. Any integration process may require significant time and resources, which may disrupt our ongoing business and divert management’s attention, and we may not be able to manage the integration process successfully. We may not successfully evaluate or utilize the acquired technology or personnel, realize anticipated synergies from the acquisition, or accurately forecast the financial impact of an acquisition transaction and integration of such acquisition, including accounting charges. We may have to pay cash, incur debt, or issue equity or

equity-linked

securities to pay for any future acquisitions, each of which could adversely affect our financial condition or the market price of our common shares. The sale of equity or issuance of

equity-linked

debt to finance any future acquisitions could result in dilution to our shareholders. The incurrence of indebtedness would result in increased liabilities and could also include covenants or other restrictions that would impede our ability to manage our operations. The occurrence of any of these risks could harm our business, financial condition and results of operations.

We may be unable to successfully execute on our growth initiatives, business strategies, or operating plans.

We are continually executing on several growth initiatives, strategies, and operating plans designed to enhance our business. In our EL segment, this strategy includes using existing technology to address the

build-out

of 5G infrastructure and leveraging R&D to address new technologies, including

next-generation

smartphones, automotive electronics, cloud computing growth, and adoption of IoT devices. In our GMF segment, this strategy includes obtaining approvals for our chemistry to be used in more corrosion protection applications and leveraging R&D to address tightening environmental regulation.

In addition to these growth strategies, our business plan incorporates certain transformational initiatives, including our enhanced senior leadership team, globalized management structure, renewed focus on customers, optimized R&D, cost management initiatives, and a new incentive structure and may include potential acquisitions.

The anticipated benefits from these strategies and initiatives are based on several assumptions that may prove to be inaccurate, including assumptions as to the key trends that will drive growth in our business. Moreover, we may not be able to successfully complete these growth initiatives, strategies, and operating plans without making additional expenditures or at all. If we are unable to complete these initiatives, strategies, and operating plans, we may not realize all the benefits we currently anticipate, including the growth targets and cost savings we expect to achieve. The anticipated cost savings disclosed elsewhere in this report are presented on a gross basis and do not reflect any expenses that may be required to achieve such cost savings.

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A variety of risks could cause us not to realize some or all the expected benefits. These risks include, among others, delays in the anticipated timing of activities related to such growth initiatives, strategies, and operating plans; the secular trends on which many of our strategies and initiatives are based not materializing or not materializing to the degree expected; increased difficulty and cost in implementing our growth efforts; and the incurrence of other unexpected costs associated with operating the business. Moreover, our continued implementation of these programs may disrupt our operations and performance. Similarly, we may not realize the benefits we currently expect from our comprehensive systems and solutions approach.

If any of the assumptions underlying our growth initiatives prove to be inaccurate or any of the foregoing risks materialize, we may not realize the expected benefits of our initiatives and we may be adversely affected, including as the result of the costs associated with these initiatives. If, for any reason, the benefits we realize are less than our estimates or the implementation of these growth initiatives, strategies, and operating plans adversely affects our operations or cost more or take longer to effectuate than we expect, or if our assumptions, including our assumptions with respect to growth of our

end-markets,

prove inaccurate, our business, financial condition, and results of operations may be materially adversely affected.

Underfunded defined benefit pension plans could have a material adverse effect on our business, financial condition, and results of operations.

We maintain defined benefit pension plans, including in Germany. Various factors, such as changes in actuarial estimates and assumptions (including in relation to life expectancy and rate of return on assets) as well as actual return on assets, can increase the expenses and liabilities of the defined benefit pension plans. The assets and liabilities of the plans must be valued from time to time under applicable funding rules, and as a result we may be required to increase the cash payments in relation to these defined benefit pension plans. To the extent any of these plans are or become in the future underfunded or unfunded, the liabilities in relation to these plans will need to be satisfied from our operating reserves as they mature.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, internal codes of conduct, and insider trading prohibition.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with applicable regulations, to provide accurate information to the United States or other regulators, to comply with manufacturing standards we have established, to comply with federal and state fraud and abuse laws and regulations in the United States and other countries or jurisdictions, to report financial information or data accurately, or to disclose unauthorized activities to us.

It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations, including applicable environmental laws and regulations.

Increases in costs or reductions in the supplies of our specialty and commodity chemicals or precious metals or our manufacturing, testing, and operations processes could materially and adversely affect our business, financial condition, and results of operations.

We use a variety of specialty and commodity chemicals and precious metals in our manufacturing processes, and our most significant raw material input by value is palladium. Our manufacturing operations depend upon obtaining adequate supplies of raw materials on a timely basis. We purchase our major raw materials on a contract or

as-needed

basis from outside sources. The availability and prices of raw materials may be subject to curtailment or change due to, among other things, the financial stability of our suppliers, suppliers’ allocations to other purchasers, interruptions in production by suppliers, new laws or regulations, changes in foreign currency exchange rates, and worldwide price levels. In addition, many of our raw materials and intermediate products are available in the quantities we require from a limited number of suppliers, which makes it more difficult to replace suppliers in the event of any supply disruption. Further, in some cases, we are limited in our ability to purchase certain raw materials from other suppliers by supply agreements that contain certain minimum purchase requirements. Additionally, we can provide no assurance that, as our supply contracts expire, we will be able to renew them or, if they are terminated, that we will be able to obtain replacement supply agreements on terms

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favorable to us. In particular, we rely on a local basis on single principal suppliers of palladium, with whom we have

long-standing

relationships. While we believe there are other suppliers of palladium in each of the regions in which we operate that may meet our needs, we may face difficulty or delays in finding a new supplier should that need arise. Our business, financial condition, and results of operations could be materially adversely affected if we are unable to obtain adequate supplies of raw materials in a timely manner or if the costs of raw materials increase significantly.

From time to time, suppliers may extend lead times, limit supplies, or increase prices due to capacity constraints, environmental limitations, or other factors. In addition, some of the raw materials that we use are derived from petrochemical based feedstocks, and there have been historical periods of rapid and significant upward and downward movements in the prices of these feedstocks. We may not always be able to pass on these price increases, and price increases by our other suppliers, to our customers due to competitive pricing pressure, and, even when we are able to do so, there may be a time delay between increased raw material prices and our ability to increase the prices of our products. Any limitation on, or delay in, our ability to pass on any price increases could have a material adverse effect on our business, financial condition, and results of operations.

In addition to specialty and commodity chemicals and precious metals, our manufacturing, testing, and operations processes, in particular the control software for our own equipment, require specialized software which is available only from a limited number of suppliers. Should the access to software and services from these suppliers be restricted or contracts be terminated, we can provide no assurance that we would be able to immediately replace these services, which could adversely affect our business and operations.

We depend upon our information technology systems, which are subject to interruption and failure.

Our business operations could be disrupted if our information technology systems fail to perform adequately. The efficient operation of our business depends on our information technology systems, some of which are managed by

third-party

service providers. We rely on our information technology systems to effectively manage our business data, communications, supply chain, order entry and fulfillment, and other business processes. The failure of our information technology systems to perform as we anticipate could disrupt our business and could result in transaction errors, processing inefficiencies, and the loss of sales and customers, causing our business and results of operations to suffer. In addition, our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, power outages, systems failures, security breaches,

cyber-attacks,

and viruses. Any such damage or interruption could have a material adverse effect on our business, financial condition, and results of operations.

We have invested and expect to continue to invest in technology security initiatives, information technology risk management, and disaster recovery plans. The cost and operational consequences of implementing, maintaining, and enhancing further data or system protection measures could increase significantly to overcome increasingly frequent, complex, and sophisticated cyber threats. Despite our best efforts, we are at risk from data breaches and system disruptions. Although to date we are unaware of any material data breach or system disruption, including a cyber-attack, we cannot provide any assurances that such events and impacts will not be material in the future. Our efforts to deter, identify, mitigate, and/or eliminate future breaches may require significant additional effort and expense and may not be successful.

We are subject to cyber security risks and may incur increasing costs in an effort to minimize those risks.

Our business employs information technology systems, including some managed by third-party services providers, that allow for the secure storage and transmission of proprietary or confidential information regarding our customers, employees, suppliers and others, including personal identification information. These systems may be subject to computer viruses, malicious software, attacks by hackers, and other forms of cyber intrusions or unauthorized access, any of which can create system disruptions, shutdowns, or unauthorized disclosure of sensitive data. In addition, a security breach that leads to disclosure of information protected by privacy laws could compel us to comply with breach notification requirements under state, national, and federal laws and regulations, potentially resulting in litigation or regulatory action, or otherwise subjecting us to liability under laws that protect personal data. We may not have the resources or technical sophistication to anticipate or prevent rapidly-evolving types of cyber-attacks. Attacks may be targeted at us, our customers and suppliers, or others who have entrusted us with information.

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Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, monitor and test our security controls, train employees, maintain protective systems and contingency plans, contract with service providers to address third-party cybersecurity risks, and engage third-party experts and consultants. Nonetheless, it is impossible to eliminate all cybersecurity risk and thus we remain potentially vulnerable to known or unknown threats. Information security risks have generally increased in recent years because of the increased proliferation, sophistication, and availability of complex malware and hacking tools to carry out

cyber-attacks.

As cyber threats continue to evolve, we may be required to expend additional resources to mitigate new and emerging threats while continuing to enhance our information security capabilities or to investigate and remediate security vulnerabilities. In addition, data and security breaches can also occur as a result of

non-technical

issues, including breach by us or by persons with whom we have commercial relationships that result in the unauthorized release of personal or confidential information. Any compromise or breach of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure, and a loss of confidence in our security measures, which could have an adverse effect on our business, financial condition and results of operations.

Risks Related to Intellectual Property

Our

know-how

and innovations may not be adequately protected.

We believe that our product development, brand recognition and reputation, and the technological and innovative skills of our personnel are essential to establishing and maintaining our leadership position. We rely on a combination of patent, copyright, trademark, trade secrets, confidentiality procedures, technical measures, and contractual agreements with our customers, suppliers, and employees to establish and protect our

know-how

and innovations according to our products and services. If we fail to protect our

know-how

and innovations, our competitive position could suffer, which could adversely affect our business, financial condition, and results of operations.

We may be forced to initiate litigation or other enforcement actions against third parties to protect our

know-how

and innovations as well as defend and enforce our intellectual property rights. Litigating claims related to the enforcement of intellectual property rights is very expensive and can be burdensome in terms of management time and resources, which could adversely affect our business, financial condition, and results of operations. Moreover, the scope of our intellectual property rights may not prevent competitors from designing around such rights.

In some cases, we rely upon unpatented proprietary manufacturing expertise, continuing technological innovation, and other trade secrets to develop and maintain our competitive position. While we generally will enter into confidentiality agreements with our employees and third parties to protect our intellectual property, our confidentiality agreements could be breached and may not provide meaningful protection for our trade secrets or proprietary manufacturing expertise. In addition, adequate remedies may not be available in the event of unauthorized use or disclosure of our trade secrets or manufacturing expertise. Violations by others of our confidentiality agreements and the loss of employees who have specialized knowledge and expertise could harm our competitive position and cause our sales and operating results to decline as a result of increased competition.

In addition, we rely on both registered and unregistered trademarks to protect our name and brands. We can provide no assurance that our pending trademark applications will be approved. Failure by us to adequately maintain the quality of our products and services associated with our trademarks or any loss to the distinctiveness of our trademarks may cause us to lose certain trademark protection, which could result in the loss of goodwill and brand recognition in relation to our name and products. In addition, successful

third-party

challenges to the use of any of our trademarks may require us to rebrand our business or certain products or services associated therewith.

The failure of our patents, applicable intellectual property law, or our confidentiality agreements to protect our intellectual property and other proprietary information, including our

know-how

and innovations relating to processes, apparatuses, technology, trade secrets, trade names and proprietary manufacturing expertise, methods, and compounds, or if we are unsuccessful in our judicial enforcement proceedings, could have a material adverse effect on our competitive advantages, business, financial condition, and results of operations, and could require us to devote resources to advertising and marketing these new brands. Further, we can provide no assurance that competitors will not infringe our trademarks, or that we will have adequate resources to enforce our trademarks.

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From time to time, competitors challenge the validity of our patents and trademarks, and we challenge the validity of their patents and trademarks. Further, our competitors may circumvent our patents or our patents may not be of sufficient scope or strength to provide us with meaningful protection or commercial advantage. We cannot be certain either of successfully defending the validity of our patents and trademarks or of invalidating patents and trademarks of our competitors. Additionally, our patents will all eventually expire, after which we will not be able to prevent our competitors from using our previously patented technologies, which could materially adversely affect any competitive advantage we have stemming from those products and technologies. We also cannot assure that competitors will not infringe our patents, or that we will have adequate resources to enforce our patents.

Our efforts to protect our intellectual property may be less effective in some countries where intellectual property rights are not as well protected as in the United States.

The laws of some countries regarding trademark, patent, copyright, and other intellectual property rights do not protect proprietary rights to the same degree as the laws of the United States and there is a risk that our ability to protect our proprietary rights may not be adequate in these countries. Many companies have encountered significant problems in protecting their proprietary rights against copying or infringement in such countries, some of which are countries in which we intend to operate or to sell our products. In particular, the application of laws governing intellectual property rights in China has historically been less effective than those in other jurisdictions, mainly due to the lack of procedural rules for discovery of evidence, low damage awards, and low rates of criminal penalties against intellectual rights infringements. Accordingly, protection of intellectual property rights in China may not be as effective as other countries. Furthermore, the policing of unauthorized use of proprietary technology is difficult and expensive, and we may need to commence and become involved in expensive and lengthy proceedings to enforce or defend patents issued to us or determine the enforceability, scope, and validity of our proprietary rights or those of others. The experience and capabilities of different courts in handling intellectual property related matters vary, and outcomes are unpredictable. Therefore, it could involve substantial risks to us. If we are unable to adequately protect our intellectual property rights in China or elsewhere, our business, financial condition, and results of operations could be materially adversely affected. In addition, our competitors in China and these other countries may independently develop similar technology or duplicate our products, even if unauthorized, which could potentially reduce our sales in these countries and have a material adverse effect on our business, financial condition, and results of operations.

We have applied for patent protection relating to certain existing and proposed products, processes, and services in certain jurisdictions. While we generally consider applying for patents in those countries where we intend to make, have made, use, or sell patented products, we may not accurately assess all the countries where patent protection will ultimately be desirable. If we fail to timely file a patent application in any such country, we may be precluded from doing so at a later date. Furthermore, we cannot assure you that our pending patent applications will not be challenged by third parties or that such applications will eventually be issued by the applicable patent offices as patents. We also cannot assure you that the patents issued as a result of our foreign patent applications will have the same scope of coverage as our U.S. patents. It is possible that only a limited number of the pending patent applications will result in issued patents, which may have a material adverse effect on our business, financial condition, and results of operations.

We may face intellectual property infringement claims that could be costly to defend and result in our loss of significant rights.

From time to time, we may receive notices from third parties claiming infringement by our products and services of

third-party

patent and other intellectual property rights. As the number of products and services in our markets increases and the functionality of these products and services further overlaps, we may become increasingly subject to claims by a third party that our products and services infringe such party’s intellectual property rights. In addition, there is a growing occurrence of patent suits being brought by organizations that use patents to generate revenues without manufacturing, promoting or marketing products, or investing in R&D in bringing products to markets. These organizations continue to be active and target whole industries as defendants. We may not prevail in any such litigation given the complex technical issues and inherent uncertainties in intellectual property litigation.

If an infringement suit against us is successful, we may be required to compensate the third party bringing the suit either by paying a lump sum or ongoing license fees to be able to continue selling a particular product or service. This type of compensation could be significant. We might also be prevented or enjoined by a court from

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continuing to provide the affected product or service and may be forced to significantly increase our development efforts and resources to redesign such product or service. We may also be required to defend or indemnify any customers who have been sued for allegedly infringing a third party’s patent in connection with using one of our products or services. Responding to intellectual property claims, regardless of the validity, can be

time-consuming

for our personnel and management, result in costly litigation, cause product shipment delays, and harm our reputation, any of which could have a material adverse effect on our business, financial condition, and results of operations.

Risks Related to Our Indebtedness and Other Financial Instruments

Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy and our industry, expose us to interest rate risk to the extent of our variable rate debt, and prevent us from meeting our obligations with respect to our indebtedness.

As of December 31, 2021, we had an aggregate principal amount of $1,574.5 million of outstanding indebtedness, including $4.7 million of local lines of credit; $1,343.3 million of the USD Term Loan Facility; $226.5 million of the EUR Term Loan Facility and excluding

short-term

and

long-term

deferred financing costs of $18.2 million and $64.2 million of lease liabilities. As of December 31, 2021 and the date of this report, we were in compliance with all the covenants under our outstanding debt instruments.

Our substantial indebtedness could have important consequences for you. For example, it could:

•

limit our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions, general corporate purposes, or other purposes;

•

require us to devote a substantial portion of our annual cash flow to the payment of interest on our indebtedness;

•

expose us to the risk of increased interest rates as, over the term of our debt, the interest cost on a significant portion of our indebtedness is subject to changes in interest rates;

•

hinder our ability to adjust rapidly to changing market conditions;

•

limit our ability to secure adequate bank financing in the future with reasonable terms and conditions or at all; and

•

increase our vulnerability to and limit our flexibility in planning for, or reacting to, a potential downturn in general economic conditions or in one or more of our businesses.

We are more leveraged than some of our competitors, which could adversely affect our business plans. A relatively greater portion of our cash flow is used to service debt and other financial obligations. This reduces the funds we have available for working capital, capital expenditures, acquisitions, and other purposes and, given current credit constriction, may make it more difficult for us to make borrowings in the future. Similarly, our relatively greater leverage increases our vulnerability to, and limits our flexibility in planning for, adverse economic and industry conditions and creates other competitive disadvantages compared with other companies with relatively less leverage.

In addition, the agreements governing our Senior Secured Credit Facilities contain affirmative and negative covenants that limit our and certain of our subsidiaries’ ability to engage in activities that may be in our

long-term

best interests. Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all of our indebtedness.

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To service all of our indebtedness, we will require a significant amount of cash, and our ability to generate cash depends on many factors beyond our control.

Our operations are conducted through our subsidiaries and our ability to make cash payments on our indebtedness will depend on the earnings and the distribution of funds from our subsidiaries. None of our subsidiaries, however, is obligated to make funds available to us for payment on our indebtedness. Further, the terms of the instruments governing our indebtedness significantly restrict our subsidiaries from paying dividends and otherwise transferring assets to us. Our ability to make cash payments on and refinance our debt obligations, to fund planned capital expenditures, and to meet other cash requirements will depend on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to financial, business, legislative, regulatory, and other factors beyond our control. We might not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

Our business may not generate sufficient cash flow from operations and future borrowings may not be available under our Senior Secured Credit Facilities in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs, including planned capital expenditures. In such circumstances, we may need to refinance all or a portion of our indebtedness on or before maturity. We may not be able to refinance any of our indebtedness on commercially reasonable terms or at all. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity, or reducing or delaying capital expenditures, strategic acquisitions, investments, and alliances. Such actions, if necessary, may not be effected on commercially reasonable terms or at all. The instruments governing our indebtedness restrict our ability to sell assets and our use of the proceeds from such sales, and we may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.

If we are unable to generate sufficient cash flow or are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest; the lenders under our revolving credit facility could elect to terminate their commitments thereunder; cease making further loans and institute foreclosure proceedings against our assets; and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to obtain waivers from the required lenders under the credit agreement governing our Senior Secured Credit Facilities to avoid being in default. If we breach our covenants under our Senior Secured Credit Facilities or we are in default thereunder and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under the credit agreement governing our Senior Secured Credit Facilities; the lenders could exercise their rights, as described above; and we could be forced into bankruptcy or liquidation.

Despite our current level of indebtedness and restrictive covenants, we and our subsidiaries may incur additional indebtedness, or we may pay dividends in the future. This could further exacerbate the risks associated with our substantial financial leverage.

We and our subsidiaries may incur significant additional indebtedness under the agreements governing our indebtedness. Although the credit agreement governing our Senior Secured Credit Facilities contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to several thresholds, qualifications, and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. Additionally, these restrictions also will not prevent us from incurring obligations that, although preferential to our common shares in terms of payment, do not constitute indebtedness.

In addition, if new debt is added to our and/or our subsidiaries’ debt levels, the related risks that we now face as a result of our leverage would intensify. See Item 5.B. “

Operating and Financial Review and Prospects—Liquidity and Capital Resources—Debt Agreements

.”

We are dependent upon our lenders for financing to execute our business strategy and meet our liquidity needs. If our lenders are unable or unwilling to fund borrowings under their credit commitments or we are unable to borrow, it could have a material adverse effect on our business, financial condition, and results of operations.

We are dependent upon our lenders for financing to execute our business strategy and meet our liquidity needs. If our lenders are unable to fund borrowings under their credit commitments or we are unable to borrow from them for any reason, there could be a material adverse effect on our business, financial condition, and results of

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operations. During periods of volatile credit markets, there is risk that any lenders, even those with strong balance sheets and sound lending practices, could fail or refuse to honor their legal commitments and obligations under existing credit commitments, including, but not limited to, extending credit up to the maximum permitted by a credit facility, allowing access to additional credit features and otherwise accessing capital and/or honoring loan commitments. If our lenders are unable or unwilling to fund borrowings under their revolving credit commitments or we are unable to borrow from them, it could be difficult in such environments to obtain sufficient liquidity to meet our operational needs.

Our ability to obtain additional capital on commercially reasonable terms may be limited.

Our current sources of liquidity to fund ongoing operating requirements consist of cash and cash equivalents, cash we expect to generate from operations and unused capacity available under our revolving credit facility. However, we may need to seek additional financing to compete effectively.

If we are unable to obtain capital on commercially reasonable terms, it could:

•

reduce funds available to us for purposes such as working capital, capital expenditures, research and development, strategic acquisitions, and other general corporate purposes;

•

restrict our ability to introduce new products or exploit business opportunities;

•

increase our vulnerability to economic downturns and competitive pressures in the markets in which we operate; and

•

place us at a competitive disadvantage.

In addition, in July 2017, the United Kingdom’s Financial Conduct Authority which regulates LIBOR, announced that it intends to phase out certain LIBOR benchmarks by the end of 2021. The discontinuation date for submission and publication of rates for certain tenors of USD LIBOR

(1-month,

3-month,

6-month,

and

12-month)

was subsequently extended by the ICE Benchmark Administration (the administor of LIBOR) until June 30, 2023. While the U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, has chosen SOFR as the recommended risk-free reference rate for the U.S. (calculated based on repurchase agreements backed by treasury securities), we cannot currently predict the extent to which this index will gain widespread acceptance for LIBOR. Therefore, while the credit agreement governing our Senior Secured Credit Facilities includes certain provisions that govern the replacement of LIBOR, it is impossible to predict the effect of LIBOR being phased out on our interest expense or cost of capital.

Difficult and volatile conditions in the capital, credit and commodities markets and in the overall economy could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Difficult global economic conditions, including concerns about sovereign debt and significant volatility in the capital, credit, and commodities markets, could have a material adverse effect on our business, financial condition, results of operations, and cash flows. These global economic factors, combined with low levels of business and consumer confidence and high levels of unemployment, precipitated a slow recovery from the global recession and from time to time create a concern about a return to recessionary conditions. These difficult conditions and the overall economy can affect our business in several ways. For example:

•

as a result of the volatility in commodity prices, we may encounter difficulty in achieving sustained market acceptance of past or future price increases, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows;

•

under difficult market conditions, there can be no assurance that borrowings under our revolving credit facility would be available or sufficient, and in such a case, we may not be able to successfully obtain additional financing on reasonable terms, or at all;

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•

in order to respond to market conditions, we may need to seek waivers from various provisions in the credit agreement governing our Senior Secured Credit Facilities, and in such case, there can be no assurance that we can obtain such waivers at a reasonable cost, if at all;

•

market conditions could cause the counterparties to the derivative financial instruments we may use to hedge our exposure to interest rate, commodity, or currency fluctuations to experience financial difficulties and, as a result, our efforts to hedge these exposures could prove unsuccessful and, furthermore, our ability to engage in additional hedging activities may decrease or become more costly; and

•

market conditions could result in our key customers experiencing financial difficulties and/or electing to limit spending, which in turn could result in decreased sales and earnings for us.

In general, downturns in economic conditions can cause fluctuations in demand for our and our customers’ products, product prices, volumes, and margins. Future economic conditions may not be favorable to our industry and future growth in demand for our products, if any, may not be sufficient to alleviate any existing or future conditions of excess industry capacity. A decline in the demand for our products or a shift to lower margin products due to deteriorating economic conditions could have a material adverse effect on our business, financial condition, and results of operations and could also result in impairments of certain of our assets. We do not know if market conditions or the state of the overall economy will maintain its current course, improve, or decline in the near future. We cannot provide assurance that any decline in economic conditions or economic downturn in one or more of the geographic regions in which we sell our products would not have a material adverse effect on our business, financial condition, and results of operations.

Our debt obligations may limit our flexibility in managing our business.

The credit agreement governing our Senior Secured Credit Facilities require us to comply with several customary financial and other restrictive covenants, such as maintaining leverage ratios in certain situations, maintaining insurance coverage, and restricting our ability to make certain investments. See Item 5.B. “

Operating and Financial Review and Prospects—Liquidity and Capital Resources—Debt Agreements

.” These covenants may limit our flexibility in our operations, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness even if we had satisfied our payment obligations. If we were to default on the credit agreement governing our Senior Secured Credit Facilities, or other debt instruments, our business, financial condition, and results of operations would be materially adversely affected.

We face risks related to our derivative instruments.

From time to time, we may utilize derivative instruments to manage fluctuations in interest rates and foreign currency exchange rates. These derivative instruments manage our risk in the form of interest rate swaps and caps, forward hedges, and

cross-currency

and foreign exchange contracts. Periodically, we are required to determine the change in fair value, called the

“mark-to-market,”

of some of these derivative instruments, which could expose us to substantial

mark-to-market

losses or gains if such rates or prices fluctuate materially from the time the derivatives were entered into. Accordingly, volatility in rates or prices may adversely impact our business, financial condition, and results of operations and could impact the cost and effectiveness of our derivative instruments in managing our risks.

Risks Related Our Foreign Private Issuer Status and Ownership of Our Common Shares

Because a significant portion of our operations is conducted through our subsidiaries, we are largely dependent on our receipt of distributions or other payments from our subsidiaries for cash to fund all of our operations and expenses, including to make future dividend payments, if any.

A significant portion of our operations is conducted through our subsidiaries. As a result, our ability to service our debt or to make future dividend payments, if any, is largely dependent on the earnings of our subsidiaries and the payment of those earnings to us in the form of dividends, loans, or advances and through repayment of loans or advances from us. Payments to us by our subsidiaries will be contingent upon our subsidiaries’ earnings and other business considerations and may be subject to statutory or contractual restrictions. We do not currently expect to

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declare or pay dividends on our common shares for the foreseeable future; however, to the extent that we determine in the future to pay dividends on our common shares, the credit agreement governing our Senior Secured Credit Facilities significantly restricts the ability of our subsidiaries to pay dividends or otherwise transfer assets to us. Further, there may be significant tax and other legal restrictions on the ability of foreign subsidiaries to remit money to us.

An active, liquid, and orderly market for our ordinary shares may not be sustained.

Our common shares are listed on the New York Stock Exchange under the symbol “ATC.” However, we can provide no assurance that an active, liquid, and orderly trading market for our common shares will be sustained.

The requirements of being a public company may strain our resources and divert management’s attention.

Following our IPO, we are subject to the reporting requirements of the Exchange Act, the

Sarbanes-Oxley

Act, the listing requirements of the New York Stock Exchange, and other applicable securities rules and regulations. Compliance with these rules and regulations incurs substantial legal and financial compliance costs, makes some activities more difficult,

time-consuming,

or costly, and places increased demand on our systems and resources. The Exchange Act requires, among other things, that we file annual and current reports with respect to our business and operating results. The

Sarbanes-Oxley

Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain disclosure controls and procedures and internal control over financial reporting that meet this standard, significant resources and management oversight are required. As a result, management’s attention may be diverted from other business concerns, which could harm our business and operating results. Although we have already hired additional employees to comply with these requirements, we may need to hire more employees in the future, which will increase our costs and expenses.

In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to continue to invest resources to complying with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from

revenue-generating

activities to compliance activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

The price of our common shares may fluctuate significantly, which may result in the loss of all or part of any investment in our common shares.

The market price of our common shares could fluctuate significantly for various reasons, including:

•

our operating and financial performance and prospects;

•

our quarterly or annual earnings or those of other companies in our industries;

•

the public’s reaction to our press releases, our other public announcements, and our filings with the Securities and Exchange Commission (the “SEC”);

•

changes in, or failure to meet, earnings estimates or recommendations by research analysts who track our common shares or the stock of other companies in our industries;

•

the failure of research analysts to cover our common shares;

•

strategic actions by us, our customers, or our competitors, such as acquisitions or restructurings;

•

increased competition;

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•

new laws or regulations or new interpretations of existing laws or regulations applicable to us;

•

changes in accounting standards, policies, guidance, interpretations, or principles;

•

material litigation or government investigations;

•

default on our indebtedness;

•

changes in general conditions in the U.S. and global economies or financial markets, including those resulting from war, incidents of terrorism, natural disasters, severe weather, or responses to such events;

•

reactions to changes in the markets for the raw materials or key inputs that impact our production or our industries generally;

•

changes in key personnel;

•

sales of common shares by us, Carlyle, or members of our management team;

•

termination or expiration of

lock-up

agreements with our management team and principal shareholders;

•

the granting or exercise of employee stock options;

•

volume of trading in our common shares; and

•

the realization of any risks described under this “

Risk Factors

” section.

In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in the

end-markets

we serve. The changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our common shares could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce our share price and cause you to lose all or part of your investment. Further, in the past, market fluctuations and price declines in a company’s stock have led to securities class action litigations. If such a suit were to arise, it could have a substantial cost and divert our resources regardless of the outcome.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our common shares and trading volume could decline.

The trading market for our common shares depends in part on the research and reports that securities or industry analysts publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who cover us downgrade our common shares or publish inaccurate or unfavorable research about our business, the market price for our common shares would likely decline. If one or more of these analysts cease coverage of our Company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our common shares to decline.

If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired and investors’ views of us could be harmed.

The

Sarbanes-Oxley

Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management and, beginning with the fiscal year ended December 31, 2022, our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the

Sarbanes-Oxley

Act, with auditor attestation of the effectiveness of our internal controls required beginning with our annual report for the fiscal year ended December 31, 2022. If we are not able to comply with the requirements of Section 404 of the

Sarbanes-Oxley

Act, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our common shares could decline and we could be subject to sanctions or investigations by the stock exchange on which we listed our common shares, the SEC, or other regulatory authorities, which would require additional financial and management resources.

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Our ability to successfully implement our business plan and comply with Section 404 of the

Sarbanes-Oxley

Act requires us to be able to prepare timely and accurate financial statements. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures, or controls, may cause our operations to suffer and we may be unable to conclude that our internal control over financial reporting is effective and to obtain an unqualified report on internal controls from our auditors. Moreover, we cannot be certain that these measures would ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. Even if we were to conclude, and our auditors were to concur, that our internal control over financial reporting provided reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS, because of its inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements. This, in turn, could have an adverse impact on trading prices for our common shares, and could adversely affect our ability to access the capital markets.

We are controlled by Carlyle, whose interests in our business may be different than those of other holders of our common shares.

As of the date hereof, Carlyle controls approximately 79% of the outstanding common shares of Atotech Limited, and is able to control our affairs in all cases. Pursuant to a shareholders agreement, a majority of our board of directors (the “Board”) was designated by Carlyle, and Carlyle will continue to have the ability to designate a majority of our directors until it owns less than 25% of the outstanding common shares. See Item 7.B. “

Major Shareholders and Related Party Transactions—Related Party Transactions—Shareholders Agreement

.” As a result, Carlyle or its respective designees to our Board will have the ability to control the appointment of our management, the entering into of mergers, sales of substantially all or all of our assets, and other extraordinary transactions and influence amendments to our memorandum of association and articles of association. So long as Carlyle continues to own a majority of our common shares, they will have the ability to control the vote in any election of directors and will have the ability to prevent any transaction that requires shareholder approval regardless of whether other shareholders believe the transaction is in our best interests.

In any of these matters, the interests of Carlyle may differ from, or conflict with, the interests of other holders of our common shares. Moreover, this concentration of share ownership may also adversely affect the trading price for our common shares to the extent investors perceive disadvantages in owning shares of a company with a controlling shareholder. In addition, since Carlyle owns approximately 79% of our common shares, the price of our common shares may be volatile due to a smaller public float. Carlyle is in the business of making investments in companies and may, from time to time, acquire interests in businesses that directly or indirectly compete with our business, as well as businesses that are our existing or potential suppliers or customers. Carlyle may acquire or seek to acquire assets that we seek to acquire and, as a result, those acquisition opportunities may not be available to us or may be more expensive for us to pursue

We have no plans to pay regular dividends on our common shares.

We have no plans to pay regular dividends on our common shares. We generally intend to utilize our future earnings, if any, to fund our growth and reduce our indebtedness. Any payment of future dividends will be at the discretion of our Board (subject to, and in accordance with, our articles of association) and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends, and other considerations that our Board deems relevant. The Senior Secured Credit Facilities also effectively limit our ability to pay dividends.

The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation.

We are incorporated under Jersey law. The rights of holders of common shares are governed by Jersey law, including the provisions of the Companies (Jersey) Law 1991, as amended (the “Jersey Companies Law”), and by our articles of association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations.

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Future sales of our common shares in the public market could lower our share price, and any additional capital raised by us through the sale of equity or convertible debt securities may dilute existing ownership in us and may adversely affect the market price of our common shares.

We and substantially all of our current shareholders may sell additional common shares in subsequent public offerings. We may also issue additional common shares or convertible debt securities, for a variety of reasons, including to finance future acquisitions. We are authorized to issue 10,000,000,000 common shares and currently have 194,695,832 common shares outstanding.

We cannot predict the size of future issuances of our common shares or the effect, if any, that future issuances and sales of our common shares will have on the market price of our common shares. Sales of substantial amounts of our common shares (including sales pursuant to Carlyle’s registration rights and common shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices for our common shares. See Item 7.B. “

Major Shareholders and Related Party Transactions—Related Party Transactions—Shareholders Agreement

.”

If a U.S. person is treated as owning at least 10% of our common shares, such holder may be subject to adverse U.S. federal income tax consequences.

As a result of the comprehensive U.S. tax reform bill signed into law on December 22, 2017, many of our

non-U.S.

subsidiaries will be classified as “controlled foreign corporations” for U.S. federal income tax purposes due to the expanded application of certain ownership attribution rules within a multinational corporate group. If a U.S. person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our common shares, such person may be treated as a “United States shareholder” with respect to one or more of our controlled foreign corporation subsidiaries. In addition, if our common shares are treated as owned more than 50% by United States shareholders, we would be treated as a controlled foreign corporation. Certain United States shareholders of a controlled foreign corporation may be required to annually report and include in its U.S. taxable income, as ordinary income, its pro rata share of “Subpart F income,” “global intangible

low-taxed

income” and investments in U.S. property by controlled foreign corporations, whether or not we make any distributions to such United States shareholder. An individual United States shareholder generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a corporate United States shareholder with respect to a controlled foreign corporation. A failure by a United States shareholder to comply with its reporting obligations may subject the United States shareholder to significant monetary penalties, loss of foreign tax credits, and may extend the statute of limitations with respect to the United States shareholder’s U.S. federal income tax return for the year for which such reporting was due. We cannot provide any assurances that we will assist investors in determining whether we or any of our

non-U.S.

subsidiaries are controlled foreign corporations or whether any investor is a United States shareholder with respect to any such controlled foreign corporations. We also cannot guarantee that we will furnish to United States shareholders information that may be necessary for them to comply with the aforementioned obligations. United States investors should consult their own advisors regarding the potential application of these rules to their investments in us. The risk of being subject to increased taxation may deter our current shareholders from increasing their investment in us and others from investing in us, which could impact the demand for, and value of, our common shares.

We are a “foreign private issuer” and a “controlled company” within the meaning of the rules of the New York Stock Exchange and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. Accordingly, holders of our common shares do not have the same protections afforded to shareholders of companies that are subject to such requirements.

The corporate governance rules of the New York Stock Exchange require listed companies to have, among other things, a majority of independent board members and independent director oversight of executive compensation, nomination of directors and corporate governance matters. However, as a foreign private issuer, we are permitted to, and we do, follow home country practice in lieu of the above requirements, subject to certain exceptions. As long as we rely on the foreign private issuer exemption for certain of these corporate governance standards, a majority of our Board are not required to be independent directors and our Compensation Committee

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and Nominating and Corporate Governance Committee are not required to be composed entirely of independent directors. Therefore, our Board’s approach to governance may be different from that of a board of directors consisting of a majority of independent directors, and, as a result, management oversight may be more limited than if we were subject to all the corporate governance standards of the New York Stock Exchange.

Carlyle continues to control a majority of the voting power of our outstanding common shares. As a result, we are a “controlled company” within the meaning of the corporate governance standards of the New York Stock Exchange. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

•

the requirement that a majority of the Board consist of independent directors;

•

the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

•

the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

•

the requirement for an annual performance evaluation of the nominating and corporate governance committee and compensation committee.

In the event we no longer qualify as a foreign private issuer, we may utilize these exemptions if we continue to qualify as a “controlled company.” If we do utilize the controlled company exemption, we will not have a majority of independent directors and our Nominating and Corporate Governance and Compensation Committees will not consist entirely of independent directors and such committees will not be subject to annual performance evaluations. Accordingly, holders of our common shares do not have the same protections afforded to shareholders of companies that are subject to all the corporate governance requirements of the New York Stock Exchange.

As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the SEC than a U.S. company. This may limit the information available to holders of our common shares.

As a “foreign private issuer,” we are not subject to all the disclosure requirements applicable to public companies organized within the United States. For example, we are exempt from certain rules under the Exchange Act, that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules under Section 14 of the Exchange Act. In addition, our officers and directors are exempt from the reporting and

“short-swing”

profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, while we expect to submit quarterly interim consolidated financial data to the SEC under cover of the SEC’s Form

6-K,

we will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies and will not be required to file quarterly reports on Form

10-Q

or current reports on Form

8-K

under the Exchange Act. Furthermore, our common shares are not listed and we do not currently intend to list our common shares on any market in the Bailiwick of Jersey, our home country. As a result, we are not subject to the reporting and other requirements of companies listed in the Bailiwick of Jersey. For instance, we are not required to publish quarterly or

semi-annual

financial statements. Accordingly, there may be less publicly available information concerning Atotech Limited than there would be if we were a U.S. public company.

We may lose our foreign private issuer status in the future, which could result in significant additional cost and expense.

We are a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act, however, under Rule 405, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect to us on June 30, 2022.

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In the future, we would lose our foreign private issuer status if a majority of our shareholders, directors or management are U.S. citizens or residents and we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. Although we have elected to comply with certain U.S. regulatory provisions, our loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. For example, the annual report on Form

10-K

requires domestic issuers to disclose executive compensation information on an individual basis with specific disclosure regarding the domestic compensation philosophy, objectives, annual total compensation (base salary, bonus, and equity compensation) and potential payments in connection with change in control, retirement, death or disability, while the annual report on Form

20-F

permits foreign private issuers to disclose compensation information on an aggregate basis. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors, and principal shareholders will become subject to the

short-swing

profit disclosure and recovery provisions of Section 16 of the Exchange Act. We may also be required to modify certain of our policies to comply with good governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.

We may not meet the continued listing standards of the New York Stock Exchange.

The New York Stock Exchange requires companies to fulfill specific requirements in order for their shares to continue to be listed. If our common shares are delisted from the New York Stock Exchange at some later date, our shareholders could find it difficult to sell our common shares. In addition, if our common shares are delisted from the New York Stock Exchange at some later date, we may have our common shares quoted on the Bulletin Board or in the “pink sheets” maintained by the National Quotation Bureau, Inc. The Bulletin Board and the “pink sheets” are generally considered to be less efficient markets than the New York Stock Exchange. In addition, if our common shares are not so listed or are delisted at some later date, our common shares may be subject to the “penny stock” regulations. These rules impose additional sales practice requirements on

broker-dealers

that sell

low-priced

securities to persons other than established customers and institutional accredited investors and require the delivery of a disclosure schedule explaining the nature and risks of the penny stock market. As a result, the ability or willingness of

broker-dealers

to sell or make a market in our common shares might decline. If our common shares are delisted from the New York Stock Exchange at some later date or become subject to the penny stock regulations, it is likely that the price of our common shares would decline and that our shareholders would find it difficult to sell their shares.

It may be difficult to enforce a U.S. judgment against us or our directors and officers outside the United States, or to assert U.S. securities law claims outside of the United States.

Several of our directors and executive officers are not residents of the United States, and the majority of our assets and the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for investors to effect service of process upon us within the United States or other jurisdictions, including judgments predicated upon the civil liability provisions of the federal securities laws of the United States. Additionally, it may be difficult to assert U.S. securities law claims in actions originally instituted outside of the United States. Foreign courts may refuse to hear a U.S. securities law claim because foreign courts may not be the most appropriate forums in which to bring such a claim. Even if a foreign court agrees to hear a claim, it may determine that the law of the jurisdiction in which the foreign court resides, and not U.S. law, is applicable to the claim. Further, if U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a

time-consuming

and costly process, and certain matters of procedure would still be governed by the law of the jurisdiction in which the foreign court resides.

In particular, investors should be aware that there is uncertainty as to whether the courts of the Bailiwick of Jersey would recognize and enforce judgments of U.S. courts obtained against us or our directors or management as well as against the selling shareholder predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States or entertain original actions brought in courts of the Bailiwick of Jersey against us or our directors or officers as well as against the selling shareholder predicated upon the securities laws of the United States or any state in the United States. As a result of the difficulty associated with enforcing a judgment against us, you may not be able to collect any damages awarded by either a U.S. or foreign court.

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Our articles of association include exclusive jurisdiction and forum selection provisions, which may impact the ability of shareholders to bring actions against us or increase the costs of bringing such actions.

Our articles of association provide that the federal courts of the United States shall have exclusive jurisdiction to determine any dispute asserting a cause of action against the Company or any director or officer thereof arising under the United States Securities Act of 1933, as amended. This limitation on the forum in which shareholders may initiate action against us may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable and could increase the costs and inconvenience of pursing claims or otherwise adversely affect a shareholder’s ability to seek monetary or other relief.

A court could decline to enforce these exclusive jurisdiction and forum provisions. If a court were to find these provisions to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

Risks Related to the MKS Acquisition

Completion of the MKS Acquisition is subject to certain conditions, some of which are outside of our control, and if these conditions are not satisfied or waived, the MKS Acquisition will not be completed.

The closing of the MKS Acquisition is subject to certain conditions, including receipt of clearance from antitrust authorities in China and the sanctioning of the Scheme by the Royal Court of Jersey (the “Court”). The requirement to satisfy the aforementioned conditions could delay completion of the MKS Acquisition for a significant period of time or prevent completion from occurring at all. Any delay in completing the MKS Acquisition could cause us not to realize some or all of the benefits that the parties expect to achieve if the MKS Acquisition is successfully completed within the expected timeframe. Further, as a condition to approving the MKS Acquisition, governmental authorities may impose conditions, terms, obligations, or restrictions on the conduct of the parties’ business after the completion of the MKS Acquisition. If the parties were to become subject to any conditions, terms, obligations or restrictions (whether because such conditions, terms, obligations, and restrictions do not rise to the specified level of materiality or because the parties consent to their imposition), it is possible that such conditions, terms, obligations, or restrictions will delay completion of the MKS Acquisition or otherwise adversely affect the parties’ business, financial condition, or operations. Furthermore, governmental authorities may require that the parties divest assets or businesses as a condition to the closing of the MKS Acquisition. If the parties are required to divest assets or businesses, there can be no assurance that we will be able to negotiate such divestitures expeditiously or on favorable terms or that the governmental authorities will approve the terms of such divestitures. There can be no assurance that the conditions to the closing of the MKS Acquisition will be satisfied or, where applicable, waived or that the MKS Acquisition will be completed.

In addition, if the effective time of the Scheme shall not have occurred by September 30, 2022 (subject to certain extension rights), the Implementation Agreement will automatically terminate and the MKS Acquisition will not occur. We and MKS may also terminate the pending acquisition under certain specified circumstances in accordance with the terms of the Implementation Agreement.

Failure to complete the MKS Acquisition could negatively impact the share price and the future business and financial results of the Company.

If the MKS Acquisition is not completed for any reason, including as a result of a failure to obtain all required regulatory approvals, our ongoing business may be adversely affected and, without realizing any of the benefits of having completed the MKS Acquisition, we would be subject to a number of risks, including the following:

•

we are subject to certain restrictions on the conduct of our business prior to completing the MKS Acquisition, which may adversely affect our ability to execute certain of our business strategies going forward if the MKS Acquisition is not completed;

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•

we have incurred and will continue to incur significant costs and fees associated with the proposed MKS Acquisition, such as legal, accounting, financial advisor, and printing fees, regardless of whether the MKS Acquisition is completed;

•

we may experience negative reactions from the financial markets, including negative impacts on our share price;

•

we may experience negative reactions from our customers, regulators, and employees;

•

matters relating to the MKS Acquisition (including integration planning) will require substantial commitments of time and resources by our management, which would otherwise have been devoted to

day-to-day

operations and other opportunities that may have been beneficial to us as an independent company; and

•

as a result of certain limited circumstances as described in further detail in the following risk factor (such as if our board were to withdraw its recommendation of the MKS Acquisition, if our board were to recommend a superior competing offer within 18 weeks after the MKS Acquisition lapsing or being withdrawn, or if we breach certain material obligations in relation to the implementation of the MKS Acquisition and we fail to remedy such breach following notice from MKS), we may be required to pay MKS a termination fee of approximately $154 million or reimburse MKS for certain fees and expenses.

In addition, we could be subject to litigation related to any failure to complete the MKS Acquisition or related to any enforcement proceeding commenced against us or MKS to perform our obligations under the Implementation Agreement. If the MKS Acquisition is not completed, these risks may materialize and may adversely affect our business, financial condition, financial results, and share price.

The Implementation Agreement contains provisions that restrict our ability to pursue alternatives to the MKS Acquisition and, in certain limited circumstances, would require us to pay MKS a termination fee.

Under the Implementation Agreement, we are restricted, subject to certain exceptions and the fiduciary duties of the board of directors, from directly or indirectly soliciting, encouraging or entering into discussions or negotiations relating to a competing acquisition proposal from any third party. If we receive a competing acquisition proposal and our board of directors determines (after consultation with our financial advisors and outside legal counsel in the exercise of their fiduciary duties) that such proposal constitutes a superior proposal, providing that MKS is not willing to revise the terms of the MKS Acquisition to exceed that of the superior proposal following notification of its terms in accordance with the Implementation Agreement, our board of directors may change its recommendation in response to such superior proposal to our shareholders, in which case we would be entitled, upon complying with certain requirements, to terminate the Implementation Agreement in accordance with its terms. If such superior competing proposal is announced with the recommendation of our board at any time prior to the date which is 18 weeks after the lapse or withdrawal of the MKS Acquisition, we may be required to pay MKS approximately $154 million, and to reimburse MKS for its

out-of-pocket

expenses incurred in connection with the MKS Acquisition. These provisions could discourage a third party that may have an interest in acquiring all or a significant part of us from considering or proposing such an acquisition, even if such third party was prepared to enter into a transaction that would be more favorable to us and our shareholders than the MKS Acquisition.

We will incur significant transaction and merger-related costs in connection with the MKS Acquisition.

We have incurred and expect to incur a number of

non-recurring

direct and indirect costs associated with the MKS Acquisition. These costs and expenses include fees paid to financial, legal and accounting advisors, severance and other potential employment-related costs, including payments that may be made to certain of our executives, filing fees, printing expenses, and other related charges. Some of these costs are payable by us regardless of whether the MKS Acquisition is completed. There are also processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the MKS Acquisition. While we have assumed that a certain level of expenses would be incurred in connection with the MKS Acquisition and we continue to assess the magnitude of these costs, there are many factors beyond our control that could affect the total amount or the timing of the integration and implementation expenses. There may also be additional unanticipated significant costs in connection with the MKS Acquisition that we may not recoup.

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We may have difficulty attracting, motivating and retaining executives and other key employees due to uncertainty associated with the MKS Acquisition.

Competition for qualified personnel can be intense. Current and prospective employees of our Company may experience uncertainty about the effect of the MKS Acquisition, which may impair our ability to attract, retain and motivate key management, sales, marketing, manufacturing, technical, and other personnel prior to and following the MKS Acquisition. Employee retention may be particularly challenging during the pendency of the MKS Acquisition, as our employees may experience uncertainty about their future roles with our Company or MKS.

While we may employ the use of certain retention programs, there can be no guarantee that we will prove to be successful. If our key employees depart, we may be required to incur significant costs in identifying, hiring, training, and retaining replacements for departing employees and may lose significant expertise and talent relating to our business. In addition, there could be disruptions to or distractions for our workforce and management associated with activities of labor unions or works councils. Accordingly, no assurance can be given that we will be able to attract or retain key employees as a result of the MKS Acquisition to the same extent that we have been able to attract or retain our own employees in the past.

Our business relationships may be subject to disruption due to uncertainty associated with the MKS Acquisition.

Companies with which we do business may experience uncertainty associated with the MKS Acquisition, including with respect to current or future business relationships with us or MKS. Our business relationships may be subject to disruption as customers, distributors, suppliers, vendors, and others may attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than us or MKS. These disruptions could have an adverse effect on our businesses, financial condition, results of operations, or prospects. The risk and adverse effect of such disruptions could be exacerbated by a delay in completion of the MKS Acquisition.

Item 4. Information on the Company

A. History and Development of the Company

We were incorporated in Jersey and are a public company limited by shares. Our legal name is “Atotech Limited” and our commercial name is “Atotech.” We were incorporated as a private limited company on December 12, 2018 for purposes of becoming the new holding company of Holdco and its subsidiaries and were

re-registered

on February 1, 2021 as a public company. The principal legislation under which we operate, and under which our common share capital has been created, is the Jersey Companies Law.

We are registered with the Jersey Financial Services Commission under number 127906. The headquarters for the Atotech business is located at Erasmusstrasse 20, 10553 Berlin, Germany. Our telephone number is +49 30 349 85 0 and our website is www.atotech.com. Information on, or accessible through, such website is not part of this report, nor is such content incorporated by reference herein. We have included our website address in this report solely for informational purposes. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers, such as us, that file electronically with the SEC at www.sec.gov. Our agent for U.S. federal securities law purposes is Alpha US Bidco, Inc., c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.

On February 4, 2021, our common shares began trading on the New York Stock Exchange.

On July 1, 2021, we entered into the Implementation Agreement providing for our acquisition by MKS. On April 1, 2022, we entered into the Amendment which, among other things, provided for additional time for the satisfaction of certain closing conditions set forth in the Implementation Agreement. See “

Basis of Presentation

” for additional details.

For a description of our principal capital expenditures and divestitures for the three years ended December 31, 2021 and for those currently in progress, see Item 5. “

Operating and Financial Review and Prospects

.”

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B. Business Overview

We are a leading chemicals technology company with significant exposure to several high growth secular trends and a strong presence in electronic materials, including specialty electroplating solutions that deliver chemistry, equipment, service, and software for

high-growth

technology applications. We are a leader in the global EL plating chemistry market, a leader in the global GMF plating chemistry market, and a leading global manufacturer of horizontal plating equipment for PCB production. We are a crucial enabler in the “information age” value chain and our technology is essential to the manufacture of electronics and other critical products. Our solutions are used in a wide variety of attractive

end-markets,

including smartphones, communication infrastructure, cloud computing, big data and consumer electronics, automotive electronics, and automotive surface finishing, as well as in numerous industrial and consumer applications such as heavy machinery and household appliances. We benefit from various secular growth trends such as digitalization, increasing data volumes and processing speed requirements, the growth of the consumer class in emerging markets, increasing environmental regulations, and rising product quality and durability standards.

We are the only major company in our industry that provides both chemistry and equipment, which we sell through both our EL and GMF segments. Our comprehensive systems and solutions approach leverages our unique offering of chemistry, equipment, service, and software. We believe this business model creates a sustainable competitive advantage that helps us achieve deep customer intimacy and allows us to continue to grow our market share and capitalize on positive market growth trends. This approach is supported by our 15

state-of-the-art

global technology centers, which allow us to provide local service around the world and to respond in

real-time

to customer needs. The combination of our comprehensive systems and solutions approach, expansive global manufacturing and sales footprint,

customer-driven

investments in R&D, and superior technical expertise makes us an ideal electroplating and surface finishing solutions partner for our diverse customer base.

Our solutions are

mission-critical

for the PCB, SC, and surface finishing industries, but typically account for less than 1% of total

end-product

cost. Our customers rely on these solutions to increase processing speeds, further miniaturize devices, transform product appearance, and increase product durability. Our direct customers are among the most important suppliers to the world’s leading OEMs in our key

end-markets.

In order to satisfy demanding OEM specifications, we often partner with OEMs and our direct customers to develop comprehensive solutions that embed or

“design-in”

our offerings. The

“designed-in”

nature of our solutions and the associated testing and certification processes, which can last up to five years, lead to high switching costs for our direct customers and OEMs. Our solutions create significant value for our customers by consistently and reliably enabling superior product performance. Our ability to consistently deliver a compelling customer value proposition has led to

long-standing

customer relationships, with an average relationship length of 28 years among our top 25 customers, and underpins our sustainable competitive advantage.

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Our chemistry is found in a variety of everyday products across a wide range of attractive

end-markets:

We believe we are uniquely positioned in the Electronics wet chemistry market, with a strong presence in the

high-end

market segment. The combination of our leading market share, global reach and scale, along with our technology leadership and domain expertise, which has been built over decades, enables us to deliver comprehensive technology solutions to our customers. These solutions, which include proprietary chemistry, equipment, software, and service, are highly differentiated, resulting in higher switching costs, despite accounting for less than 1% of total

end-product

cost.

Our business is defined by an unwavering commitment to R&D with a focus on

high-growth

applications, close customer collaboration, and

market-led

innovation. We believe that we consistently invest more in R&D than our competitors with our fiscal 2021 R&D expense representing 3.5% of revenue for the same period, which does not include Atotech’s investment in its technology centers. This investment enables us to pioneer new

high-value

solutions with reduced commercial risk, while the remainder of our R&D investment is focused on developing

next-generation

technologies, often in partnership with leading OEMs, customers, and universities. Our historical and continued investment in R&D allows us to solve complex technical problems associated with

cutting-edge

product innovations, such as OLED displays, flexible and bendable displays, and advanced driver-assistance systems. In addition, we are developing technologies that support

high-performance

computing used for Artificial Intelligence, big data analytics, and graphics processing for augmented reality and virtual reality.

Our

well-invested

global footprint is comprised of our 15

state-of-the-art

global technology centers, 15 chemistry production facilities, and two equipment production facilities. We believe we have the largest EL and GMF plating presence in Asia, with seven production facilities and eight technology centers, a distinct and crucial element of our business that enables us to capture growth throughout this key region. We serve customers locally in over 40 countries with approximately 4,000 employees, of whom 1,800 are directly engaged in customer support, leveraging their technical expertise in sales, marketing, and service to enhance our customers’ operations, improve existing practices, and enable the rapid commercialization of new products. Of these approximately 1,900 technical experts, several hundred work directly with our customers at their facilities.

We sell our chemistry and equipment to a diverse mix of customers who are typically manufacturers serving global markets, ultimately mitigating our exposure to any individual geography. For fiscal 2021, our top ten customers accounted for approximately 27% of our total chemistry revenue.

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Our Business Segments

Our business operates in two business segments, Electronics and General Metal Finishing, with both offering chemistry, equipment, service, and software globally. Although these segments each have distinct

end-markets

and customers, they both benefit from our centralized functions and global scale. In addition, we leverage our significant R&D spend and resulting innovations, as well as our shared technology centers and production facilities, to benefit from technologies, innovations, best practices, and other key learnings across our product portfolio and segments. This R&D coordination, along with our centralized functions, results in better commercial focus and increased productivity and profitability.

Electronics

Overview

We provide plating chemistry, equipment, service, and software used in the manufacturing of electronics components, including PCBs and SCs, with demand driven by a variety of

end-markets,

including smartphones, communication infrastructure, cloud computing, automotive electronics, and consumer electronics in which we have strong positions. In addition, we have invested and developed solutions that have enabled a new wave of technological innovation, including the next generation of automotive electronics and electronic devices created by our customers and OEMs. Our expansive footprint allows us to serve the global electronics supply chain, as demonstrated by our longstanding relationships with 28 of the top 30 global PCB manufacturers. Our top ten EL customers accounted for approximately 44% of our total EL revenues for fiscal 2021.

Chemistry

Our EL plating chemistry offering is used in the manufacturing of PCBs and SCs to provide electrical conductivity used in devices and components serving mission critical functions in a wide variety of

end-markets

including consumer electronics and automotive applications. Our product portfolio is focused on attractive growth segments of the EL plating chemistry market that involve technologically advanced production processes, including the rapidly evolving semiconductor packaging segment. These

high-value

technology segments include complex applications such as High Density Interconnectors (“HDIs”), Integrated Circuit (“IC”) substrates, and flex or

rigid-flex

PCBs used in smartphones, 5G infrastructure, servers, and automotive electronics. The use of our specialty chemistry in these applications typically requires long approval lead times and faces high switching costs and costs of failure, resulting in our higher margins relative to those of other plating applications. Descriptions of our various products and applications are set forth in the table below:

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Equipment

We manufacture and supply a broad range of horizontal plating equipment to our customers. Our broad range of plating and auxiliary equipment, spare parts, and ancillary services for our EL offering provides us with an advantage over our competitors who provide only chemicals. When our equipment is used in conjunction with our EL plating chemistry offerings, we believe our customers can optimize plating results with better production yields and higher product quality, thus reducing their manufacturing costs and improving

end-product

performance.

We are the #1 global manufacturer of horizontal plating equipment for PCB applications, and we have recently invested in vertical plating technology for PCB applications. While both horizontal and vertical plating equipment enable the deposition of metal layers in solutions, they utilize different methods to transport PCB panels through a plating line. In horizontal plating, PCB panels are transported through a line via rollers, whereas in vertical plating, PCB panels are transferred via baskets. Each process offers advantages depending on the specific PCB manufacturing processes and applications. Historically, we have focused on horizontal plating equipment and gained a decisive competitive advantage in this area. Our horizontal plating equipment reduces consumption of fresh and wastewater, energy, and process chemistry, while also providing superior fluid delivery to the PCB panels, which leads to enhanced process uniformity and quality. Compared to a standard vertical plating line, our Uniplate system is environmentally friendly, reducing wastewater generation by approximately 41%. Due to these benefits, horizontal plating equipment is typically used for higher value PCBs versus standard vertical plating equipment. However, since some of our customers use vertical conveyorized plating equipment for specific applications, our recent investment in vertical conveyorized plating technology enables us to broaden our portfolio and provide them with a comprehensive systems approach, which we expect will drive additional chemistry sales. The following table details our equipment:

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Service

We offer services to our customers, including

on-site

support at our customers’ PCB and SC production facilities. We engage in joint development projects leveraging our technology centers to collaborate with OEMs and direct customers. This customer intimacy allows us to better understand our customers’ production processes and enables us to optimize our solutions, leading to an increase in productivity and process reliability. These projects also allow us to anticipate the industry’s future requirements, which, in turn, helps our customers remain at the forefront of technological advancement. In many instances, we help to set up and run new plating lines, as well as provide manufacturing oversight to ensure that optimal plating results are consistently achieved. With the support of our technology centers worldwide, we can rapidly introduce new and relevant technologies to the market and provide application development, testing, support, and training services. Our analytical and materials science laboratories support customers with the use of

cutting-edge

scientific tools and highly skilled professionals.

Customers

We work directly with, and are certified by, many of the leading global electronics OEMs and are able to satisfy their strictest quality requirements. We partner with OEMs during their product development process to have our process solutions qualified and designed into the product specifications they provide to PCB manufacturers. The PCB manufacturers, our direct customers, supply a diverse group of blue chip OEMs, including Oppo, Samsung, Sony, and Microsoft and SC packaging manufacturers. Quality and technical competence, as well as innovation, R&D, and sustainability are the primary purchasing criteria for our customers. Through a combination of superior solutions and customized

on-site

support we have demonstrated a successful track record of consistently meeting the needs of our customers which has resulted in

long-standing

and deep relationships. We serve 28 of the top 30 of the

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largest PCB manufacturers in the world and have historical or ongoing joint development projects for future technologies and products with 13 of the top 30. The fragmented nature of the PCB customer base provides diversity, which differs from the more concentrated customer base in the SC industry.

Electronics Manufacturing Value Chain

General Metal Finishing

Overview

We supply

specialty-plating

chemistry to approximately 7,000 customer sites globally. We are also one of the market leaders in GMF plating equipment. Our comprehensive systems and solutions generally add the most value for our larger GMF customers who have complex technical requirements. For our other customers, who are often smaller, we provide value by being a

one-stop

shop for all their plating needs, supplying chemistry, auxiliary equipment, and

high-touch

local service. Our solutions not only transform the aesthetics of plastics and metals to create a higher value appearance, but also improve

corrosion-

and

wear-resistance

and environmental sustainability. We believe our comprehensive approach strengthens our ability to win business, providing our customers with enhanced production yields, higher quality results, and improved

end-product

performance, while reducing their manufacturing and warranty costs. Our diverse technology portfolio enables customers to respond quickly to evolving trends in their respective

end-markets.

In addition, we have grown our market share in Asian markets where we anticipate strong demand for our GMF plating chemistry offering going forward. Our top ten GMF customers accounted for approximately 14% of our total chemistry GMF revenues for fiscal 2021.

Chemistry

Our GMF plating chemistry offering comprises specialty plating chemicals used in surface finishing processes for a wide variety of

end-markets

including automotive surface finishing, heavy machinery, household appliances, fixtures, and construction. These metal finishing processes enhance the physical properties of products by providing functional coatings for wear resistance and corrosion protection and transform the aesthetic appearance of products by providing decorative coatings. We focus on applications in which we add significant value, including complex applications for components and safety parts for automotive, heavy machinery and construction, as well as on other applications where our

high-touch

service can significantly improve production outcomes. The use of our specialty chemistry in these applications typically requires long approval lead times and faces high switching costs and costs of failure, resulting in higher margins for us relative to other plating applications. In addition, we have pioneered sustainable technology in our GMF segment, which has been particularly important to our customers in order to ensure compliance with tightening environmental regulations. For example, we were the first company to introduce the trivalent chromium hard chrome plating process, allowing our customers to phase out Chrome VI. Examples of our products and applications are set forth in the table below:

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Equipment

We are one of the market leaders in GMF plating equipment. We manufacture and supply equipment that comprises plating lines and related spare parts and a broad range of auxiliary equipment to our customers. When our equipment is used in conjunction with our specialty chemistry, we believe our customers can optimize plating results with better production yields and higher product quality, thus reducing their manufacturing costs, improving product performance, and ensuring their compliance with environmental regulations. Because of these customer benefits, our equipment sales are usually correlated with significant

follow-on

chemistry sales. Our plating lines contribute to minimized energy consumption, for example, through optimized exhaust air systems and wastewater reduction, efficient pumps, and motors, in combination with advanced control system intelligence. GMF plating equipment is particularly beneficial to our customers facing complex technological requirements such as the plating of shock absorbers at high speed and large quantities. Our auxiliary equipment ranges from ion exchange technologies, metal recovery systems, and membrane anode technology to regeneration and electrodialysis systems. This auxiliary equipment helps our customers reduce consumption of raw materials and generation of waste while increasing their production efficiency. Although we primarily do business with metal plating service providers and suppliers, we have partnered with most major OEMs to deliver comprehensive solutions to meet their evolving technical and design specifications. In addition, we emphasize environmentally friendly products, including our DynaChrome systems, which utilize 70% less water, 30% less chemistry, and 20% less electricity versus standard vertical plating lines. The following table details our equipment and services:

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Service

We offer

on-site

support at our customers’ production facilities and other services to our customers. We engage in joint development projects leveraging our technology centers to collaborate with OEMs and direct customers. This customer intimacy allows us to better understand our customers’ production processes and enables us to optimize our solutions, leading to an increase in productivity and process reliability. These projects also allow us to anticipate the industry’s future requirements, which, in turn, helps our customers to remain at the forefront of technological advancement. In some instances, we help to set up and run new process lines, as well as provide manufacturing oversight to ensure that optimal plating results are consistently achieved. With the support of our technology centers worldwide, we can rapidly introduce new and relevant technologies to the market and provide application development, testing, support, and training services. Our analytical and materials science laboratories support customers with the use of

cutting-edge

scientific tools and highly skilled professionals.

Customers

Within the GMF plating chemistry market, we have a highly diversified customer base of approximately 6,600 customer sites and supply plating chemicals for decorative and functional surface finishing applications across a wide variety of

end-markets.

Our largest

end-market

is automotive surface finishing, where our chemistry supplies the value chain serving all major automotive OEMs. Our products and technologies must be

pre-qualified

by the OEMs, which is a

time-intensive

process that can last up to five years and yields strong and often

long-lasting

client relationships and results in high switching costs for customers. Our customers place a strong emphasis on quality, technical competence, and customer service, including technical support and training. The competitive advantages derived from our technology leadership and intimate customer approach further strengthens our existing relationships and foster new ones. In addition, our dedicated support teams stay in close contact with OEMs and suppliers to address their present and future needs and align our R&D program accordingly.

General Metal Finishing Value Chain

Sales and Marketing

Through our sales and marketing teams, we combine the deep product expertise of our marketing experts with our

front-line

sales staff’s intimate customer knowledge. Our sales and marketing teams are generally structured on a

country-by-country

basis. In addition, for our global key accounts, we employ dedicated managers to provide a single point of contact and more effectively serve these customers. Close customer relationships are key success factors in our EL and GMF segments. As many of our chemistry solutions are designed to meet

customer-specific

needs, sales and marketing activities need to be closely aligned with our service and R&D activities and conducted in close proximity to our customers. In total, we employed approximately 1,900 sales and sales support staff worldwide.

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Procurement

We purchase our raw materials, including chemicals, precious and other metals, equipment, and packaging from a variety of suppliers. One important raw material input is palladium, a largely available precious metal that is traded publicly in a highly liquid market. We manage or mitigate precious metal exposure by passing through price fluctuations to our customers by various commercial arrangements. We care deeply about the quality of our raw materials and thus have

long-standing

relationships with our most trusted suppliers and employ rigorous processes for qualifying new suppliers. The approval process often lasts anywhere from three months to three years, ensuring that we maintain consistent quality and control standards in order to continue to develop products of highest quality that have fostered our

industry-leading

reputation. Together with our R&D teams, we continuously strive to secure and diversify our supply sources. Additionally, we have begun to develop and produce some chemistry

in-house

in order to improve sourcing costs and secure a competitive advantage. Certain items are sourced globally, with local procurement conducted as needed to fulfill individual and unique customer demands. We have strengthened our global procurement function to better leverage our scale and have been

re-negotiating

contracts for chemistry, equipment, and indirect purchases.

Competition

We compete in the global specialty and performance chemicals market. Our market is fairly consolidated with the top three players holding approximately 53% of market share. Our primary multinational competitors include Element Solutions and DuPont. We also compete with regional players, including Uyemura, Coventya, Dipsol, JCU, and Okuno. Our primary equipment competitors are Schmid, PAL, and Manz. We compete primarily based on our product quality, the depth of our product portfolio, our unique systems approach of offering chemicals, equipment, and services, and our global geographic reach.

Seasonality

See Item 5 “

Operating and Financial Review and Prospects—Key Factors Affecting the Components of Our Results of Operations

” for a description of the seasonality of our business.

Health, Safety, and Environmental

We are subject to numerous laws and regulations that govern the protection of the environment and health and safety of our employees. We are committed to achieving and maintaining compliance with all applicable legal requirements including the management and disposal of hazardous substances. We have a strong record of safety and have developed policies and management systems to monitor compliance and ensure the possession of appropriate permits, registrations, or other authorizations.

We believe all of our manufacturing facilities are operated in compliance with existing environmental requirements, in all material respects, including the operating permits required at our facilities. We are also committed to anticipating our customers’ evolving environmental needs. For example, we have developed a suite of products that do not require any PFAS chemicals.

We expect to incur ongoing costs to comply with existing and future requirements. This will continue to be implemented through proper training, communication of policies, procedures and practices, management of internal systems, and ongoing monitoring of legislative and regulatory developments that may affect our operations.

For more information, see Item 3.D. “

Risk Factors—Risks Related to Government Regulation and Litigation—Our products and our customers are subject to numerous laws regulating the production and use of chemical substances, and some of our products may need to be reformulated or discontinued to comply with these laws and regulations.

”

C. Organizational Structure

Our principal subsidiaries as of December 31, 2021 are as follows:

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Legal Name of Subsidiary	Jurisdiction	Proportion of voting rights and shares held (directly or indirectly)
Alpha 2 B.V.	The Netherlands	100%
Alpha 3 B.V.*	The Netherlands	100%
Alpha 4 B.V.	The Netherlands	100%
Alpha 5 B.V.*	The Netherlands	100%
Alpha Germany Bidco GmbH	Germany	100%
Alpha US Bidco, Inc.	United States	100%
Atotech Argentina S.A.	Argentina	98%
Atotech Asia Pacific Ltd.	Hong Kong	100%
Atotech Asset Management GmbH	Germany	100%
Atotech Australia PTY Ltd.	Australia	100%
Atotech Beteiligungs und Management GmbH & Co. KG*	Germany	100%
Atotech Bulgaria EOOD	Bulgaria	100%
Atotech B.V.*	The Netherlands	100%
Atotech Canada Ltd.	Canada	100%
Atotech (China) Chemicals Ltd.*	China	100%
Atotech CZ, a.s.	Czech Republic	100%
Atotech de México S.A. de C.V.*	Mexico	100%
Atotech Deutschland GmbH & Co. KG*	Germany	100%
Atotech Development Center Pte. Ltd.*	India	99.99%
Atotech do Brasil Galvanotécnica Ltda.	Brazil	100%
Atotech España, S.A.*	Spain	100%
Atotech France S.A.	France	99.99%
Atotech Global Services Private Ltd.	India	99.99%
Atotech India Pte. Ltd.*	India	99.99%
Atotech İstanbul Kimya Sanayi Ticaret Limited Şirketi	Turkey	100%
Atotech Italia S.r.l.*	Italy	100%
Atotech Japan K.K.*	Japan	100%
Atotech Korea Ltd.*	Korea	100%
Atotech (Malaysia) Sdn. Bhd.	Malaysia	100%
Atotech Österreich GmbH*	Austria	100%
Atotech (Philippines) Chemicals, Inc.	The Philippines	99.99%
Atotech Poland Sp. z.o.o.	Poland	100%
Atotech Servicios de México S.A. de C.V.*	Mexico	100%
Atotech (Singapore) Chemicals Pte. Ltd. (formerly Atotech S.E.A. Pte. Ltd.)	Singapore	100%
Atotech SK, s.r.o.	Slovakia	100%
Atotech Skandinavien AB	Sweden	100%
Atotech Slovenija d.d.	Slovenia	100%
Atotech Taiwan Ltd*	Taiwan	100%
Atotech (Thailand) Co., Ltd.*	Thailand	99.998%
Atotech Vietnam Co., Ltd.	Vietnam	100%
Atotech UK Ltd.	United Kingdom	100%
Atotech UK Topco Ltd.	United Kingdom	100%
Atotech USA, LLC*	United States	100%
Atotech (Yangzhou) Chemicals Ltd.	China	100%
J-KEM International AB	Sweden	100%
OOO “Atotech-Chemeta”	Russia	100%

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Legal Name of Subsidiary	Jurisdiction	Proportion of voting rights and shares held (directly or indirectly)
Pt. Atotech Indonesia Chemicals	Indonesia	100%
UAB Atotech-Chemeta	Lithuania	100%
Visutech Plating Ltd.	Belarus	100%

*	Denotes a “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X.

D. Property, Plants and Equipment

As of December 31, 2021, we lease or own facilities in approximately 40 countries. We maintain an

asset-light

approach to manufacturing our products, leading to greater flexibility to adjust our production footprint, higher returns on operating assets, and lower operating leverage.

•

Chemistry Production Facilities—We operate 15 chemistry production facilities.

•

Equipment Production Facilities—We operate two equipment production facilities in two countries.

•

Technology Centers—We operate 15 technology centers in 12 countries.

The table below presents summary information regarding our material facilities as of December 31, 2021.


Country	Location	Type of Facility	Owned/Leased
Brazil	Sao Paulo	Technology Center, Production Facility	Owned
Canada	Burlington	Technology Center, Production Facility	Leased
China	Guangzhou(1)	Technology Center, Production Facility	Owned**
China	Shanghai	Technology Center	Owned**
China	Yangzhou	Production Facility	Owned**
Czech Republic	Jablonec	Technology Center, Production Facility	Owned
Germany	Berlin*	Technology Center	Leased
Germany	Feucht	Technology Center, Production Facility	Owned
Germany	Neuruppin	Production Facility	Owned
Germany	Trebur	Technology Center, Production Facility	Leased
India	New Delhi	Technology Center, Production Facility	Owned Owned
Italy	Milan	Technology Center	Owned
Japan	Koda	Production Facility	Owned
Japan	Yokohama*	Technology Center	Leased
Korea	Jangan	Technology Center, Production Facility	Owned**
Malaysia	Penang	Production Facility	Owned**
Mexico	Mexico City	Production Facility	Leased Owned
Republic of Singapore	Singapore	Technology Center	Leased
Slovenia	Podnart	Production Facility	Owned
Taiwan	Guanyin	Technology Center, Production Facility	Owned
United States of America	Rock Hill*	Technology Center, Production Facility	Owned


Location by Region		Number of Facilities
Americas		4
Europe		7
Asia		10

(1)	The Guangzhou, China facility contains a chemistry production facility and an equipment production facility.

*	Denotes a regional headquarter location.

**	Countries where the land remains property of the state and we have a long-term lease agreement (typically 50 years).

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We have two Equipment production facilities in Feucht and Guangzhou. The Facility in Feucht hosts the Equipment Technology Center for all markets. Both facilities are currently at a high level of utilization. We have 16 facilities dedicated to producing specialty plating chemistry, which often host other related services and customer support activities. We have a current installed capacity of 290kT based on a

two-shift,

five-day

working pattern. In 2021, we have a utilization rate between 33% (Yangzhou) and 64% (Neuruppin). The Yangzhou facility only started production in 2021 and will ramp up during the next 24 months. In 2021, we built a new facility in Mexico and sold the exiting site in Mexico City. We will transition to the new facility during 2022. We consider each of the properties in the table above to be adequate for its purpose and suitably utilized according to the individual nature and requirements of the relevant operations.

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

The following discussion summarizes the significant factors affecting our operating results, financial condition, liquidity, and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the audited financial statements and related notes thereto of Atotech Limited and Atotech UK Topco Limited included elsewhere in this report or in our Annual Report on Form 20-F for the fiscal year ended December 31, 2020, filed with the SEC on March 4, 2021.

Please see “

Forward-Looking

Statements.

”

Overview

high-growth

technology applications. We are a crucial enabler in the “information age” value chain and our technology is essential to the manufacture of electronics and other critical products. Our solutions are used in a wide variety of attractive

end-markets,

end-products

that use our plating chemistry, but also increase the amount and value of plating chemistry used in each

end-product,

allowing our growth to outpace underlying

end-market

volume growth.

We are the only major company in our industry that provides chemistry, equipment, service, and software, which we sell through both of our reporting segments: Electronics (“EL”) and General Metal Finishing (“GMF”). Our comprehensive systems and solutions approach leverages our unique offering of chemistry, equipment, service, and software. We believe this business model creates a sustainable competitive advantage that helps us achieve deep customer intimacy and allows us to continue to grow our market share and capitalize on positive market growth trends. This approach is supported by our 15

state-of-the-art

global technology centers, which allow us to provide local service around the world and to respond in

real-time

to customer needs. The combination of our comprehensive systems and solutions approach, expansive global manufacturing and sales footprint,

customer-driven

investments in R&D, and superior technical expertise makes us an ideal electroplating and surface finishing solutions partner for our diverse customer base. This drives

long-lasting

relationships and an

industry-leading

financial profile, with fiscal 2021 EL and GMF Segment Adjusted EBITDA margins of 33.7% and 24.6%, respectively.

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Impact of

COVID-19

on Our Business

For the year ended December 31, 2021, the

COVID-19

pandemic impacted our operating results, primarily in our GMF business segment. We believe market conditions will continue to improve in 2022 for both our EL and GMF segments as markets recover from

COVID-19

impacted conditions experienced in 2020 and 2021. Additionally, as of the date hereof,

COVID-19

has not had a material impact on our capital and financial resources and there has been no change in our ability to comply with our debt covenants and other financial obligations. We have not taken any material reserves in connection with the

COVID-19

pandemic, but we continue to evaluate our reserve position on a quarterly basis and any change in such reserves would be driven by the depth and duration of the pandemic, potential government responses, the speed and manner of the recovery, and the expected impact of these events on our financial results.

Although various jurisdictions are lifting restrictions that were introduced as a result of the

COVID-19

pandemic, it is difficult to predict the speed and impact of any economic recovery. It is similarly difficult to predict the impact of a potential resurgence of

COVID-19

and the

re-imposition

of travel and social distancing restrictions.

We are closely monitoring the continuing

COVID-19

pandemic situation and have established a task force that convenes on a regular basis with the senior management team. The mandate of this task force is to protect the health and safety of our employees, their families, and the communities in which we operate while preserving our operations, mitigating business risks, and otherwise assessing and reacting quickly to changing conditions.

Despite temporary closures of some of our facilities during the year ended December 31, 2020, all business operations as well as financial reporting and internal control systems have remained fully operational during the year ended December 31, 2021. As of the date hereof, all technology centers, manufacturing facilities, and all other facilities are open and operating at full capacity.

Consumer-facing

activities, such as sales and other services that cannot occur

on-site

in-person

due to

COVID-19-related

restrictions, have been transitioned to digital channels, which we believe has enabled us to maintain market share and largely mitigate the impact of travel restrictions.

Basis of Presentation

In this Item 5. “

Operating and Financial Review and Prospects

”

references to our results of operations for periods ended prior to January 1, 2020 refer to the results of operations of Atotech UK Topco Limited and references to our results of operations for periods beginning on or after January 1, 2020 are to Atotech Limited. See “

Basis of Presentation

” at the beginning of this report.

Key Factors Affecting the Components of Our Results of Operations

The following discussion sets forth certain components of our statement of operations and certain factors that impact those items:

Revenues

We generate revenues from the sale of chemistry and equipment across all major geographic areas. Revenues exclude sales taxes and are presented net of discounts, rebates, and reductions. Our revenues are impacted by the following key factors and trends:

•

broad macroeconomic trends and factors, including general economic conditions, the impacts of the

COVID-19

pandemic and governmental responses thereto, economic conditions in the markets in which we operate, consumer preferences, and rising costs of labor;

•

technological advancements in our EL

end-markets,

including the advanced packaging evolution, alternative powertrains, rollout of 5G infrastructure, the adoption of

next-generation

mobile devices and EVs, the proliferation of big data and cloud computing, and the increasing use of IoT connected devices;

•

secular trends in our GMF

end-markets,

including increased plating content per unit as a result of vehicle lightweighting, increasing quality requirements, and premiumization;

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•

increasingly stringent environmental regulations;

•

our ability to pass through changes in the price of raw materials, in particular, palladium, to our customers;

•

our ability to successfully develop and launch new solutions;

•

the discontinuance of any of our products in the future in an effort to optimize our offering to our customers;

•

the escalation of geopolitical instability and deteriorating market conditions associated with the Russia/Ukraine crisis; and

•

fluctuations in foreign currency exchange rates.

Cost of sales, exclusive of depreciation and amortization (“Cost of sales”)

Cost of sales principally consists of the price paid for raw materials, unfinished and finished products, compensation and benefit costs for employees involved in our manufacturing operations, and other cost of sales. Raw materials are valued at their respective purchase prices, net of discounts and rebates, including transportation costs and ancillary expenses.

The key factors that impact our cost of sales as a percentage of our revenues include:

•

changes in the price of raw materials, in particular, palladium;

•

the impact of rising inflation;

•

the mix of products sold during any period; in particular the mix of our revenues between chemistry and equipment;

•

the impact of our operational improvement initiatives

•

freight and material expenses; and

•

inventory allowances.

Depreciation and amortization

Depreciation and amortization consists of capitalized costs incurred in connection with the ownership and operation of all tangible assets, including the depreciation and amortization expense related to the increased carrying value of our fixed assets and identifiable

definite-lived

intangible assets related to the Acquisition. The main tangible items that are depreciated over their useful lives are our recently completed technology centers, our R&D equipment, and our new and existing fully depreciated production facilities. The principal intangible items that are amortized over their useful lives include our developed technology, customer relationships, and trade name portfolio. Additionally, depreciation and amortization includes impairment losses of goodwill.

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Selling, general, and administrative expenses (“SG&A”)

SG&A expenses consist principally of expenditures incurred in connection with the sales and marketing of our products,

third-party

logistics, as well as administrative costs for support functions such as finance, information technology, human resources, and legal

Research and development expenses (“R&D”)

R&D expenses principally consist of costs incurred to develop new products and equipment, processes, and technologies, or to generate improvements to existing products, equipment, or processes.

Restructuring benefit (expenses)

Restructuring expenses mainly consist of expenditures in relation to organizational changes and severance payments. Restructuring benefit reflects the release in subsequent fiscal periods of restructuring provisions.

Interest expense

Interest expense consists of interest on our financial obligations as well as the amortization of debt issuance costs and debt discounts associated with our Senior Secured Credit Facilities, Opco Notes, and Holdco Notes. The majority of our interest expense is not deductible for income tax purposes because we have primarily incurred indebtedness in jurisdictions where we have only immaterial taxable profits from operations.

Other income (expense), net

Other income (expense), net principally consists of gains or losses from foreign currency fluctuations; gains or losses on disposal of property, plant, and equipment; and

mark-to-market

adjustments of our derivatives.

Income taxes

Income taxes include (a) deferred tax, consisting of amounts of income taxes payable or recoverable during future fiscal years for taxable or deductible timing differences and

carry-forward

of unused tax losses, and tax credits and (b) the payable amount of corporate tax, estimated on the basis of the tax rules in force in applicable jurisdictions, and distribution tax on dividends received, or withholding tax, as applicable, including provisions for tax litigations and disputes. We and our subsidiaries are subject to income tax in the various jurisdictions in which we operate. Changes to the debt and equity capitalization of our subsidiaries, and the realignment of the functions performed and risks assumed by the various subsidiaries are among the factors that will determine the future book and taxable income of the respective subsidiary and the Company as a whole.

A. Operating Results

For a discussion of (i) our results of operations, including selected segment information, for the year ended December 31, 2020, including a

year-over-year

comparison between fiscal 2020 and fiscal 2019, and (ii) our liquidity and capital resources for the years ended December 31, 2020 and December 31, 2019, please refer to Item 5. “

Operating and Financial Review and Prospects

” in our Annual Report on Form

20-F

for the fiscal year ended December 31, 2020, filed with the SEC on March 4, 2021.

The following discussion should be read in conjunction with the information contained in the accompanying audited financial statements and related footnotes included elsewhere in this report. Our results of operations set forth below may not necessarily reflect what would have occurred if we had been a standalone entity prior to the Acquisition or what will occur in the future.

The following table was derived from our consolidated statements of operations for the years ended December 31, 2021, 2020 and 2019. See “

—Basis of Presentation

” in this Item 5. This information is provided for a more meaningful comparison between years.

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	Atotech UK Topco Limited			Atotech Limited
($ in millions)	Year ended December 31, 2019			Year ended December 31, 2020			Year ended December 31, 2021
EL Chemistry revenues	$	596.2		$	690.0		$	803.0
EL Equipment revenues		86.7			107.7			178.4
Total EL Segment revenues		682.9			797.7			981.3
GMF Chemistry revenues		469.3			424.0			501.3
GMF Equipment revenues		35.6			12.6			16.5
Total GMF Segment revenues		504.9			436.6			517.8
Revenues		1,187.8			1,234.3			1,499.2
Cost of sales, excluding depreciation and amortization		(488.2	)		(558.0	)		(731.8	)
Depreciation and amortization		(170.1	)		(450.3	)		(181.4	)
Selling, general, and administrative expenses		(277.1	)		(270.2	)		(289.5	)
Research and development expenses		(51.2	)		(54.4	)		(53.3	)
Restructuring (expenses) benefit		(13.4	)		(2.5	)		0.6
Operating profit		187.8			(101.2	)		243.8
Interest expense		(148.9	)		(144.5	)		(107.2	)
Other income (expense), net		23.5			20.6			(52.4	)
Income (loss) before income taxes		62.4			(225.1	)		84.1
Income tax expense		(54.8	)		(64.3	)		(76.6	)
Consolidated net income (loss)	$	7.6		$	(289.4	)		7.5

Fiscal 2021 compared to Fiscal 2020

Revenues

Revenues increased by $264.9 million, or 21.5%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020, reflecting a significant increase in both our business segments. EL segment revenues increased by $183.7 million, or 23.0%, to $981.3 million, while GMF segment revenues were $517.8 million, an increase of $81.2 million, or 18.6%, from the prior year. With regard to product mix, chemistry revenues increased by $190.2 million, or 17.1%, to $1,304.3 million for the year ended December 31, 2021, while equipment revenues of $194.9 million increased by $74.6 million, or 62.0%. Chemistry revenues for the year ended December 31, 2021 were positively impacted by fluctuations in palladium prices, which increased revenues by $22.0 million compared to the year ended December 31, 2020, and a favorable exchange rate effect, which increased revenues by $47.8 million. Excluding the impact of these items, our chemistry revenues increased by $120.3 million, or 10.8%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020. For additional information on the key factors driving the changes in our chemistry revenues within our segments, see “

—Selected Segment Information

” in this Item 5.

Cost of sales, excluding depreciation and amortization

Cost of sales, excluding depreciation and amortization, increased by $173.8 million, or 31.1%, to $731.8 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020, which corresponded with an increase in cost of sales as a percentage of revenues from 45.2% to 48.8% for the applicable years. This increase primarily reflected changes in palladium prices and higher freight and material expenses related to global supply chain disruptions, as well as product mix effects from higher equipment sales.

Depreciation and amortization

Depreciation and amortization decreased by $268.9 million, or 59.7%, to $181.4 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020. This decrease was primarily caused by a GMF goodwill impairment in the amount of $279.5 million in the second quarter of 2020.

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Selling, general, and administrative expenses

SG&A expenses increased by $19.2 million, or 7.1%, to $289.5 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020. This increase was largely attributable to a normalization of travel expenses in some markets, increased share-based payment expenses, inflation, and unfavorable exchange rate translation, but partly offset by efficiency gains.

Research and development expenses

R&D expenses decreased by $1.1 million, or 2.0%, to $53.3 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020. This decrease was attributable to improved utilization of the R&D teams.

Restructuring (expenses) benefit

Restructuring expenses decreased by $3.1 million, or 124.5%, to a restructuring benefit of $0.6 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020. This decrease is mainly related to the utilization of provisions in Germany in the second quarter of 2021.

Interest expense

Interest expense decreased by $37.3 million, or 25.8%, to $107.2 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020. This decrease was primarily attributable to the decrease in our indebtedness as well as the lower interest rate after the refinancing activities in the first quarter of 2021.

Other income (expense), net

Other expenses increased by $73.0 million, or 354.9%, to $52.4 million for the year ended December 31, 2021 as compared to an income of $20.6 million for the year ended December 31, 2020. The increase mainly resulted from the

de-recognition

of positive market values from bifurcated embedded derivatives in our debt instruments in connection with the repayment of debt, as well as changes in fair value of our other derivatives in the amount of $112.1 million, both of which were partially offset by an increase in profit on foreign transactions of $27.8 million largely related to the revaluation of intercompany loans and receivables.

Income tax expense

Income tax expense increased by $12.3 million, or 19.0%, to $76.6 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020. This increase resulted primarily from a higher taxable income which led to higher income tax expenses.

Selected Segment Information

The following table presents revenues by segment and Segment Adjusted EBITDA for the following periods:


	Atotech UK Topco Limited			Atotech Limited
($ in millions)	Year ended December 31, 2019			Year ended December 31, 2020			Year ended December 31, 2021
EL Segment
EL Chemistry revenues	$	596.2		$	690.0		$	803.0
EL Equipment revenues		86.7			107.7			178.4
EL Segment revenues		682.9			797.7			981.3
EL Segment Adjusted EBITDA (1)		241.6			259.0			330.7
EL Segment Adjusted EBITDA margin		35.4	%		32.5	%		33.7	%
GMF Segment
GMF Chemistry revenues	$	469.3		$	424.0		$	501.3
GMF Equipment revenues		35.6			12.6			16.5
GMF Segment revenues		504.9			436.6			517.8
GMF Segment Adjusted EBITDA (1)		138.5			104.9			127.3
GMF Segment Adjusted EBITDA margin		27.4	%		24.0	%		24.6	%

(1)	For additional information regarding Segment Adjusted EBITDA, see note 24 to the audited financial statements included elsewhere in this report.

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Fiscal 2021 compared to Fiscal 2020

Electronics Segment Revenues

EL revenues were $981.3 million for the year ended December 31, 2021 compared to $797.7 million for the year ended December 31, 2020, an increase of $183.7 million, or 23.0%. This increase reflects higher chemistry revenues, which increased $113.0 million, or 16.4%, and higher equipment revenues, which increased $70.7 million, or 65.6%. Chemistry revenues benefited from strong demand from the 5G infrastructure buildout, advanced semiconductor packaging, 5G smartphone replacement cycles, and automotive electronics. Chemistry revenues were also favorably impacted by an increase in palladium prices of $19.3 million, and by a favorable currency translation effect of $32.6 million. Excluding these items, our chemistry revenues increased by $61.1 million, or 8.9%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, mainly reflecting continued demand for our EL chemistry. Equipment revenues benefited from a substantial increase in orders, driven by demand for complex chip packaging technology as well as manufacturing capacity increases for semiconductors and PCBs.

Electronics Segment Adjusted EBITDA

EL Segment Adjusted EBITDA increased $71.7 million, or 27.7%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, driven by higher chemistry volume as well as the successful implementation of several cost saving initiatives. EL Segment Adjusted EBITDA margin increased from 32.5% in the year ended December 31, 2020 to 33.7% in the year ended December 31, 2021. This increase was primarily driven by significantly higher organic revenue, scale effects, and continued cost discipline, partially offset by the dilution from higher palladium prices in the top line, inflationary effects, and product mix.

General Metal Finishing Segment Revenues

GMF revenues were $517.8 million for the year ended December 31, 2021 compared to $436.6 million for the year ended December 31, 2020, an increase of $81.2 million, or 18.6%. This change reflects an increase in chemistry revenues of $77.3 million, or 18.2%, as well as an increase of equipment revenues of $4.0 million, or 31.4%, and was primarily attributable to the recovery from the trough of the

COVID-19

pandemic as well as improved global automotive markets in the first half year, continued constructive sanitary markets, and growing interest in our sustainability-focused suite of solutions. Chemistry revenues were positively impacted by a $2.7 million increase in palladium prices and by a favorable currency translation effect of $15.2 million. Excluding these items, our GMF chemistry revenues increased by $59.4 million, or 14.0%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

General Metal Finishing Segment Adjusted EBITDA

GMF Segment Adjusted EBITDA increased by $22.3 million, or 21.3%, for the year ended December 31, 2021 as compared to the prior year, driven by improving global automotive markets and the recovery from the trough of the

COVID-19

pandemic. Despite higher freight expenses and inflation, GMF Segment Adjusted EBITDA margin increased from 24.0% for the year ended December 31, 2020 to 24.6% for the year ended December 31, 2021, benefitting from improved operating leverage and continued cost controls.

Non-IFRS

Measures

To supplement our financial information presented in accordance with IFRS, we use the following additional

non-IFRS

financial measures to clarify and enhance our understanding of past performance: EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance and allows investors to better assess our operating performance from

period-to-period

by excluding certain items that we believe are not representative of our core business and including certain items that reflect current and future operating performance. We use certain of these financial measures for business planning purposes and for measuring our performance relative to that of our competitors. We utilize Adjusted EBITDA as the primary measure of consolidated financial performance.

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EBITDA consists of consolidated net income (loss) before interest expense, net, income taxes, and depreciation and amortization. Adjusted EBITDA consists of EBITDA adjusted for

(i) non-operating

income or expense, (ii) the impact of certain

non-cash,

or other items that are included in net income and EBITDA that we do not consider indicative of our ongoing operating performance, and (iii) adjustments to reflect the adoption of IFRS 16 “Leases.”

We believe these financial measures are commonly used by investors to evaluate our performance and that of our competitors. However, our use of the terms EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin may vary from that of others in our industry. These financial measures should not be considered as alternatives to operating profit, operating profit margin, consolidated net income (loss), earnings per share, or any other performance measures derived in accordance with IFRS as measures of operating performance.

EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin have important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under IFRS. Some of these limitations are that EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin:

•

do not reflect the significant interest expense on our debt, including the Senior Secured Credit Facilities, the Opco Notes, and Holdco Notes;

•

eliminate the impact of income taxes on our results of operations;

•

exclude depreciation and amortization, which are

non-cash

charges, and assets being depreciated and amortized will often have to be replaced in the future, and EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin do not reflect any expenditures for such replacements; and

•

may be calculated differently by other companies, which limits their usefulness as comparative measures.

We compensate for these limitations by using EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin along with other comparative tools, together with IFRS measurements, to assist in the evaluation of operating performance. Such IFRS measurements include operating profit, operating profit margin, net income (loss), earnings per share, and other performance measures.

In evaluating these financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in this presentation. Our presentation of EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin should also not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

The following table reconciles consolidated net income (loss) to EBITDA and Adjusted EBITDA for the periods presented:


	Atotech UK Topco Limited			Atotech Limited
($ in millions)	Year ended December 31, 2019			Year ended December 31, 2020			Year ended December 31, 2021
Consolidated net income (loss)	$	7.6		$	(289.4	)	$	7.5
Interest expense, net		148.1			142.0			97.2
Income taxes		54.8			64.3			76.6
Depreciation and amortization (excluding impairment charges)		165.4			166.4			177.0
EBITDA		375.9			83.3			358.4
Non-cash adjustments (a)		(10.2	)		250.7			89.7
Gain on disposal of fixed asset (b)		(6.1	)		—			—

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	Atotech UK Topco Limited			Atotech Limited
($ in millions)	Year ended December 31, 2019			Year ended December 31, 2020		Year ended December 31, 2021
Foreign exchange loss, net (c)		(2.4	)		14.8		(13.0	)
Restructuring (d)		13.4			2.5		(0.6	)
Transaction related costs (e)		7.1			7.6		19.9
Management fee (f)		2.4			2.7		2.6
COVID-19 adjustment (g)		—			2.2		0.9
Adjusted EBITDA	$	380.1		$	363.9	$	458.0

(a)

Eliminates the impact of

(1) share-based

compensation expenses, (2) losses on the sale of fixed assets, (3) impairment charges including, for the year ended December 31, 2020, as a result of the negative impact that the

COVID-19

pandemic had on demand for products and services and the resulting impairment testing of GMF goodwill, which resulted in an impairment charge of $279.5 million,

(4) mark-to-market

adjustments related to our foreign currency derivatives entered into in connection with certain redenomination transactions not linked to underlying individual transactions and bifurcated embedded derivatives related to certain redemption features of the Opco Notes and Holdco Notes and (5) valuation adjustments from the revaluation of the

earn-out

liability initially recognized in 2019. The dollar value of these

non-cash

adjustments for each period presented above is set forth below:


	Atotech UK Topco Limited			Atotech Limited
($ in millions)	Year ended December 31, 2019			Year ended December 31, 2020			Year ended December 31, 2021
Share-based compensation	$	0.2		$	0.3		$	9.5
Losses on the sale of fixed assets		0.9			1.5			1.5
Impairment charges		4.7			283.9			4.4
Mark-to-market adjustments		(16.0	)		(35.0	)		77.1
Valuation adjustment		—			—			(2.6	)
Non-cash adjustments	$	(10.2	)	$	250.7		$	89.7

(b)	Eliminates the cash impact of gains on the sale of fixed assets.

(c)	Eliminates net foreign currency transactional gains and losses on balance sheet items.

(d)	Eliminates charges resulting from restructuring activities principally from the Company’s cost reduction efforts.

(e)

The values for the years ended December 31, 2020 and 2019 reflect an adjustment to eliminate (i) fees associated with the foreign currency exchange derivatives entered into in conjunction with the Acquisition, (ii) professional fees paid to

third-party

advisors in connection with the implementation of strategic initiatives and

(iii) IPO-related

costs, linked to the existing equity. The values for the year ended December 31, 2021 reflect an adjustment to eliminate

(1) IPO-related

costs linked to the existing equity, (2) professional fees paid to third-party advisors in connection with the implementation of strategic initiatives and (3) the increased expenses of the D&O insurance in connection with the IPO.

(f)

Reflects an adjustment to eliminate fees paid to Carlyle. The consulting agreement pursuant to which management fees are paid to Carlyle will terminate on the earlier of (i) the second anniversary of the initial public offering and (ii) the date upon which Carlyle ceases to own more than ten percent of the outstanding voting securities of the Company. Management does not view these fees as indicative of the Company’s operational performance and the removal of these fees from Adjusted EBITDA is consistent with the calculation of similar measures under our Senior Secured Credit Facilities, the Holdco Notes Indenture, and the Opco Notes Indenture. See Item 7. “

Major Shareholders and Related Party Transactions

.”

(g)

Eliminates charges in connection with

COVID-19,

including $0.9 million for the year ended December 31, 2021 and $1.7 million for the year ended December 31, 2020 for masks, sanitizers, and other

COVID-19

related expenses at certain plant and office locations as well as $0.5 million of expenses incurred during locally mandated plant shutdowns in China, Malaysia, India, and Mexico for the year ended December 31, 2020.

B. Liquidity and Capital Resources

Our liquidity requirements are principally related to funding our operating expenses, making interest payments under our indebtedness, meeting working capital requirements, and funding capital expenditures. Our capital expenditures during the years ended December 31, 2021, 2020 and 2019 were $56.5 million, $52.8 million and $75.7 million, respectively.

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We anticipate that the cash flows from operations, cash on hand, and availability under the revolving credit facility and our local lines of credit will be sufficient to fund our liquidity requirements. We may also pursue strategic acquisition opportunities, which may impact our future cash requirements and require additional issuances or incurrences of debt. From time to time, we may establish new local lines of credit or utilize existing local lines of credit. We will manage our global cash balances by utilizing available cash management strategies, which may include intercompany agreements, permitted dividends, and hedging. However, our ability to fund our liquidity requirements will depend on our ability to generate and access cash in the future. This is subject to general economic, financial, contractual, competitive, legislative, regulatory, and other factors, some of which are beyond our control, as well as the factors described in Item 3.D. “

Risk Factors

,” including our ability to access cash generated in China as described in Item 3.D. “

Risk Factors—Risks Related to our Business—The Chinese government’s control of currency conversion and expatriation of funds may affect our liquidity

.”

We or our affiliates may, from time to time seek to purchase, repurchase, redeem or otherwise retire our loans through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, tender offers, or otherwise. Such purchases, repurchases, redemptions, exchanges or retirements, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material.

Historical Cash Flows

The following table summarizes our primary sources and uses of cash for the periods indicated:


	Atotech UK Topco Limited			Atotech Limited
($ in millions)	Year ended December 31, 2019			Year ended December 31, 2020			Year ended December 31, 2021
Net cash provided by (used in):
Operating activities	$	134.8		$	160.6		$	213.7
Investing activities	$	(70.3	)	$	(55.0	)	$	(51.0	)
Financing activities	$	(144.6	)	$	(122.0	)	$	(98.4	)

Fiscal 2021 compared to Fiscal 2020

Operating activities

Net cash provided by operating activities was $213.7 million for the year ended December 31, 2021 compared to $160.6 million for the year ended December 31, 2020, an increase of $53.1 million. This increase is primarily the result of the positive business development in the second half of 2021.

Investing activities

Net cash used in investing activities was $51.0 million for the year ended December 31, 2021 compared to net cash used of $55.0 million for the year ended December 31, 2020, a decrease of $4.1 million. This change is primarily due to the proceeds from disposal of assets for the year ended December 31, 2021.

Financing activities

Net cash used in financing activities was $98.4 million for the year ended December 31, 2021 compared to net cash used in financing activities of $122.0 million for the year ended December 31, 2019, a decrease of $23.6 million. This increase was primarily due to the issuance of common shares in connection with our IPO, the repayment of our Old Term Loan Facilities, and the issuance of new borrowings as part of the Refinancing.

Debt Agreements

Our liquidity requirements are significantly impacted by the cash expense associated with servicing our indebtedness. As of December 31, 2021, our principal outstanding indebtedness totaled $1,574.5 million (including $4.7 million of local lines of credit and excluding

short-term

and

long-term

deferred financing costs of $18.2 million

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and $64.2 million of lease liabilities). The following table details our borrowings outstanding as of December 31, 2021 and the associated interest expense, including amortization of debt issuance costs and debt discounts, and average effective interest rates for such borrowings for the year ended December 31, 2021:


($ in millions)	Principal balance as of December 31, 2021		Average annual interest rate, for the year ended December 31, 2021			Interest expense for the year ended December 31, 2021
USD Term Loan Facility	$	1,343.3		3.0	%	$	34.2
EUR Term Loan Facility (1)	$	226.5		2.7	%	$	5.4

(1)	Reflects currency exchange rate in effect at period end.

Senior Secured Credit Facilities

Following the Refinancing, our Senior Secured Credit Facilities consist of our USD Term Loan Facility, our EUR Term Loan Facility, and our Revolving Credit Facility. Our Revolving Credit Facility provides revolving loans and letters of credit pursuant to commitments in an aggregate principal amount of $250.0 million, with borrowing capacity of $232.5 million as of December 31, 2021, after giving effect to $17.5 million of outstanding ancillary facilities for local lines of credit and guarantee obligations.

The Revolving Credit Facility matures in March 2026 and the Term Loan Facilities mature in March 2028. The USD Term Loan Facility amortizes in quarterly installments of 0.25% starting with the fiscal quarter ending September 30, 2021 until maturity, whereby the final installment of the USD Term Loan Facility will be paid on the maturity date in an amount equal to the aggregate unpaid principal amount. Each of the EUR Term Loan Facility and the Revolving Credit Facility does not amortize and each will be paid in full on its respective maturity date.

Borrowings under the USD Term Loan Facility (the “USD Term Loans”) bear interest at a floating rate equal to, at our option, either: 1.50% plus a base rate determined by reference to the higher of the prime lending rate quoted by the administrative agent, the LIBOR rate for an interest period of one month plus 1.00% and the federal funds rate plus 0.50%; or 2.50% plus a LIBOR rate on deposits in U.S. dollars for

one-,

three- or

six-month

periods (or twelve-month or other periods if, at the time of the borrowing, available from all relevant lenders). The LIBOR rate USD Term Loans (as defined in the credit agreement governing our Senior Secured Credit Facilities) are subject to a 0.50% floor and the base rate USD Term Loans are subject to a 0.00% floor.

Borrowings under the EUR Term Loan Facility (the “EUR Term Loans”) bear interest at a floating rate equal to, at our option, either: 1.75% plus a base rate determined by reference to the higher of the prime lending rate quoted by the administrative agent, the EURIBOR rate for an interest period of one month plus 1.00% and the federal funds rate plus 0.50%; or 2.75% plus a EURIBOR rate on deposits in U.S. dollars for

one-,

three- or

six-month

periods (or twelve-month or other periods if, at the time of the borrowing, available from all relevant lenders). The EURIBOR rate is subject to a 0.00% floor and the base rate is subject to a 0.00% floor. When the first lien net leverage ratio is equal to or less than 3.40x, the applicable margin on the EUR Term Loan may be reduced to 1.50% for base rate loans and 2.50% for EURIBOR rate loans. Effective as of November 11, 2021 the applicable margin on the EUR Term decreased from 2.75% by 0.25% to 2.50% based on the first lien net leverage ratio.

When the first lien net leverage ratio is above 3.40x, the applicable margin on the Revolving Credit Facility is 1.00% for base rate loans and 2.00% for LIBOR rate loans. When the first lien net leverage ratio is equal to or less than 3.40x and above 2.90x, the applicable margin on the Revolving Credit Facility is 0.75% for base rate loans and 1.75% for LIBOR rate loans. When the first lien net leverage ratio is equal to or less than 2.90x and above 2.40x, the applicable margin on the Revolving Credit Facility is 0.50% for base rate loans and 1.50% for LIBOR rate loans. When the first lien net leverage ratio is equal to or less than 2.40x and above 1.90x, the applicable margin on the Revolving Credit Facility is 0.50% for base rate loans and 1.25% for LIBOR rate loans. When the first lien net leverage ratio is equal to or below 1.90x, the applicable margin on the Revolving Credit Facility is 0.50% for base rate loans and 1.00% for LIBOR rate loans. As of the date hereof, the applicable margin for the Revolving Credit Facility is 1.00% for base rate loans and 2.00% for LIBOR rate loans. The LIBOR rate borrowings under the Revolving Credit Facility are subject to a 0.00% floor and the base rate borrowings under the Revolving Credit Facility are also subject to a 0.00% floor. We will also pay the lenders a commitment fee on the unused commitments under the Revolving Credit Facility, which will be payable quarterly in arrears. The commitment fee is subject to change depending on our first lien net leverage ratio. As of December 31, 2021, the commitment fee is 0.25% per annum.

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Letters of credit issued under our Revolving Credit Facility are subject to a $75.0 million sublimit. We may use future borrowings under our Revolving Credit Facility to fund working capital and for other general corporate purposes, including permitted acquisitions and other investments, capital expenditures, and restricted payments. Our ability to draw under our Revolving Credit Facility or issue letters of credit thereunder will be conditioned upon, among other things (including the covenants governing our other indebtedness), delivery of required notices, accuracy of the representations and warranties contained in the credit agreement governing our Senior Secured Credit Facilities and the absence of any default or event of default under our Senior Secured Credit Facilities, subject to certain exceptions.

Local Lines of Credit

We have a local line of credit in India and, from time to time, may have lines of credit in other jurisdictions. As of December 31, 2021, we had INR 300.0 million ($4.0 million) outstanding under the local line of credit in India as well as THB 23.0 million ($0.7 million) draw down in Thailand, which in total represents our current bank debt.

C. Research and Development, Patents and Licenses

We employ a global R&D strategy to drive organic and

customer-led

innovation. We have more than 100 employees with Ph.D.s, many of whom work closely with our customers to pursue highly complex projects, translating R&D into customer solutions by creating new technologies and further integrating our existing technology. Integral to our R&D strategy is our investment in and development at our 15 technology centers, which are located strategically around the world. As the hubs for innovation and product development, our technology centers allow us to conduct qualification runs for customers and OEMs

in-house,

enable pilot production programs for our customers, serve as venues for development tests, and function as comprehensive training centers for employees, customers, and OEMs.

We have invested heavily in our R&D capabilities over the last several years, which we believe have positioned us to take advantage of various trends in an innovation intensive market. This investment includes over 500 R&D employees worldwide. We believe our $158.1 million in R&D expenses during the three years ended December 31, 2021, representing 4.1% of total revenue, significantly exceeds that of our competition. Approximately

80-90%

of our annual R&D investments support our existing customers’ product improvement needs and their

short-term

R&D goals. This close collaboration enables us to pioneer new

high-value

solutions while limiting commercial risk, while the remainder of our R&D investment focuses on developing

next-generation

technology.

We hold more than 1,500 global patents with varying remaining durations and 500 pending patent applications. No specific group or groups of intellectual property rights are material to our business. Further, we hold several global trade names and trademark registrations and applications for registration, which we consider to be of value in identifying our products. We seek to protect our proprietary rights through a combination of confidentiality agreements and procedures, as well as through copyright, patent, trademark, and trade secret laws of the United States and international jurisdictions.

D. Trend Information

See Item 5. “

Operating and Financial Review and Prospects

.”

E. Critical Accounting Estimates

Critical accounting policies are those that are most important to the portrayal of our financial condition, results of operations and cash flows, and require management to make difficult, subjective or complex judgments, assumptions and estimates about matters that are inherently uncertain or where judgments, assumptions and estimates are significant. Our management bases its estimates on historical experience and other assumptions that it believes are reasonable based upon information available to us at the time that these judgments, assumptions and estimates are made. We continually evaluate our judgments, estimates and assumptions. Our actual results may differ from the judgments, assumptions and estimates made by our management. To the extent that there are material differences between these judgments, assumptions and estimates (on the one hand) and actual results (on the other hand), our future financial statement presentation, financial condition, results of operation and cash flows may be affected.

We have prepared our audited consolidated financial statements in accordance with IFRS as issued by the IASB and interpretations issued by the Standing Interpretations Committee. The audited consolidated financial statements are presented in U.S. dollars.

In order to provide an understanding regarding the manner in which our management forms its judgments about future events, including the variables underlying our judgments, estimates and assumptions, we summarize our

significant

accounting policies in Note 2 to our audited consolidated financial statements.

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Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

The following table provides information regarding the current members of our Board of Directors and our executive officers as of April 8, 2022.


Name	Age	Position
Geoff Wild	65	Chief Executive Officer and Director
Peter Frauenknecht	56	Chief Financial Officer
Harald Ahnert	50	President—Electronics
Gertjan van der Wal	58	President—General Metal Finishing
Gregor P. Boehm	57	Director
Ronald E. Bruehlman	61	Director
Herman H. Chang	63	Director
Friedel Drees	41	Director
Louise Makin	61	Director

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Shaun Mercer	42	Director
Gregory M. Nikodem	43	Director
Charles W. Shaver	63	Director
Martin W. Sumner	47	Director
Klaus-Günter Vennemann	67	Director

Geoff Wild

Geoff Wild serves as our Chief Executive Officer. He joined Atotech as Chief Executive Officer in March 2017, and he is an experienced global chemicals industry executive, having previously served as the CEO of AZ Electronic Materials, a Carlyle Europe Partners portfolio company until 2012. Mr. Wild currently is a member of the board of directors of CMC Materials Inc. He received his B.Sc. in chemistry from Bath University, UK.

Peter Frauenknecht

Peter Frauenknecht serves as our Chief Financial Officer. He oversees global finance and treasury operations, external and internal reporting, worldwide controlling (financial planning & analysis), enterprise risk management, internal audit, communications and investor relations, the project management office, as well as global IT. Prior to joining Atotech in April 2017, Mr. Frauenknecht served as Chief Financial Officer and executive board member of Constantia Flexibles GmbH. Prior to this, he held various management positions at OSRAM AG/GmbH over a

25-year

period as CFO for various business units and regions, and as Senior Vice President Global Finance, Accounting & Controlling. He received an M.Sc. in business administration from the Ludwig Maximilians University in Munich, Germany and attended Babson College School of Executive Education in Wellesley, Massachusetts. In his previous positions, he worked in the United States, Mexico, and various countries in Europe, and spent considerable time in Asia.

Harald Ahnert

Harald Ahnert serves as our President of Electronics. Mr. Ahnert joined Atotech as a full time employee in 1997 and has 22 years of industry experience. From 2010 until his appointment as Vice President in 2016, later President, Mr. Ahnert oversaw Atotech’s sales activities in Germany, the Netherlands, and Austria as Managing Director. Mr. Ahnert has served Atotech in various positions, including Global Key Account Manager in Electronics and GMF OEM Manager. Mr. Ahnert holds an M.B.A. from the Freie Universität (Free University) in Berlin, Germany.

Gertjan van der Wal

Gertjan van der Wal serves as our President of General Metal Finishing. Mr. van der Wal joined Atotech in 1989 and has 34 years of industry experience. Mr. van der Wal has served Atotech in various positions, including Vice President for Europe and Americas, Managing Director for the Netherlands, Managing Director for the Czech Republic, and Worldwide Business Manager for Decorative Plating / Plating on Plastics. Prior to joining Atotech, Mr. van der Wal was a Manager at the Silver Factory. Mr. van der Wal holds an engineering degree from the Christiaan Huygens School, Rotterdam with a focus on metallurgy and plating.

Gregor P. Boehm

Gregor P. Boehm is a Managing Director of Carlyle and

Co-head

of the Europe Buyout advisory group. He is based in London. Prior to joining Carlyle, Mr. Boehm was a Manager at I.M.M., one of Germany’s leading buyout groups. Prior to that, he was an analyst with Morgan Stanley’s Mergers and Acquisitions department in London. He is currently a member of the Supervisory Board of H.C. Starck GmbH. Mr. Boehm is a graduate of Cologne University and earned his M.B.A. from Harvard Business School.

Ronald E. Bruehlman

Ronald E. Bruehlman is the Chief Financial Officer of IQVIA Holdings Inc. (“IQVIA”). From October 2016 through July 2020, he was Senior Advisor to the CEO of IQVIA, which was formed by the merger of IMS Health Inc. and Quintiles Transnational. Mr. Bruehlman was previously Chief Financial Officer of IMS Health Inc.

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from July 2011 to October 2016. He spent the majority of his career with United Technologies Corporation (“UTC”), serving in a series of financial and business roles from 1988 through 2011, including as Vice President of Business Development from 2009 to 2011, Vice President of Operations Planning & Analysis of UTC Commercial from 2008 to 2010 and Chief Financial Officer of Carrier Corporation, the largest UTC division, from 2005 to 2008. Mr. Bruehlman currently serves as a board member and chairman for

Q-Squared

Solutions LLC. He received his M.B.A. from the University of Chicago Graduate School of Business and his B.S. in Economics, summa cum laude, from the University of Delaware.

Herman H. Chang

Herman Chang is a Managing Director of Carlyle Asia Partners, a group that makes large control and strategic minority investments in Asia. Mr. Chang focuses on the industrial sector. During the past 12 years with Carlyle, Mr. Chang has made investments in companies supplying fiberglass, specialty chemicals, lubricants,

semi-conductors,

electroplating for high density interconnect boards, large seamless steel tubes,

ultra-low

temperature refrigeration, and O2O automotive aftermarket service. He also led the operation enhancement for engineering equipment leasing, satellite service, TV broadcasting, commercial bank, and infant formula companies. Prior to joining Carlyle, Mr. Chang ran a global business unit and the Asia Pacific region for Delphi Automotive. He held positions in products, operations, and general management during his 20 years with General Motors and Delphi Automotive, 11 of which were spent in China/Asia. Mr. Chang formerly served on the board of directors of Yashili International Holdings Ltd, Natural Beauty

Bio-Technology

Limited, and Ta Chong Bank Ltd. He is currently on the board of directors of Tongyi Lubricant, Asia Satellite Telecommunications Holdings Limited, Bowenvale Limited, Shanghai Lantu Information Technology Co., Ltd., and VXI Global Solutions. Mr. Chang received an engineering Ph.D. degree from Northwestern University.

Friedel Drees

Friedel Drees is a Managing Director of Carlyle, where he advises on European buyout opportunities. He is based in the Munich office. Prior to joining Carlyle in 2009, Mr. Drees was a consultant at Bain & Company from 2005 to 2008. He earned a master’s degree and a Ph.D. in finance from the European Business School in

Oestrich-Winkel,

Germany. As a participant of the university’s double degree program with the University of Pittsburgh, he received his M.B.A. from the Katz Graduate School of Business.

Louise Makin

Dame Louise Makin DBE is a

non-executive

director of Intertek Group plc and Theramex Group, (a Pharmaceutical Company focused on women’s health), a

non-executive

director and chair designate of Halma plc, (a FTSE 100 global group of life-saving technology companies), Chair of the 1851 Trust, a Trustee of the Outward Bound Trust, and an Honorary Fellow of St. John’s College, Cambridge. Dr. Makin was Chief Executive Officer of BTG plc from October 2004 to August 2019 where she led the transformation of BTG from $150 million in value, to its acquisition by Boston Scientific for $4.2 billion by successfully acquiring and integrating eight companies into BTG to create a leading Interventional Medicine Business. Prior to BTG, she was at Baxter Healthcare from 2000 first as Vice President, Strategy & Business Development Europe then from 2001, she was President, Biopharmaceuticals Europe of Baxter Healthcare, where she was responsible for Europe, Africa, and the Middle East. From January 2015 to October 2019, Dr. Makin was at Woodford Patient Capital Trust plc, where she served on the Audit and Management Engagement Committees. She also served as Director of Global Ceramics at English China Clay, and started her career at ICI serving in a variety of roles between 1985 and 1998. Dr. Makin has an MBA from the Open University in Milton Keynes, England, and an MA and PhD in Material Sciences from the University of Cambridge (Cantab).

Shaun Mercer

Shaun Mercer was a Managing Director of Carlyle advising on European buyout opportunities from 2005 to 2021. Mr. Mercer is based in London. Mr. Mercer is on the board of directors of Nouryon and Atotech, and was previously engaged with the Boards of Axalta, AZ Electronic Materials, and Ensus. Prior to joining Carlyle, Mr. Mercer was at Morgan Stanley, where he spent four years working in corporate finance and M&A as part of the Global Industrials Group. During this period, he also spent time working in Mumbai, India, managing the investment banking operations of Morgan Stanley Advantage Services. Mr. Mercer received a B.A. with honours from Cambridge University, where he was a Taylor Scholar.

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Gregory M. Nikodem

Gregory Nikodem is a Managing Director of Carlyle focused on U.S. buyout opportunities in the industrial, transportation, and energy sectors. He is currently a member of the board of directors of Nouryon, where he serves as the chair of the audit committee, and he is also a board member of Asplundh Tree Expert. Additionally, he has been involved with Carlyle’s investments in ADT CAPS, Centennial Resources Development, JMC Steel, Accudyne Industries, Veyance Technologies, and WildHorse Resource Development, among others. Prior to joining Carlyle, Mr. Nikodem held a position with Thomas Weisel Partners. Mr. Nikodem received his M.B.A. from the Stanford Graduate School of Business, where he was an Arjay Miller Scholar, and a B.S. in industrial engineering and engineering management from Stanford University.

Charles W. Shaver

Charles W. Shaver has been the Chief Executive Officer of Nouryon since September 2018. Prior to that, he served as Chairman of the Board and Chief Executive Officer of Axalta Coating Systems from 2013 until September 2018. With over 34 years of leadership roles in the global petrochemical, oil, and gas industry, Mr. Shaver was the Chief Executive Officer and President of the TPC Group from June 2004 to June 2012. He also served as Vice President and General Manager for General Chemical, a division of Gentek, from 2001 through 2004, and as a Vice President and General Manager for Arch Chemicals from 1999 through 2001.

Mr. Shaver began his career with The Dow Chemical Company serving in a series of operational, engineering, and business positions from 1980 through 1996. He has an extensive background of leadership roles in a variety of industry organizations, including serving on the American Chemistry Council Board of Directors, the American Chemistry Council Finance Committee, and the National Petrochemical and Refiners Association Board and Executive Committee. Mr. Shaver currently serves as a member of the board of directors for U.S. Silica and the Texas A&M Advisory Board. Mr. Shaver earned his B.S. in Chemical Engineering from Texas A&M University.

Martin W. Sumner

Martin W. Sumner is a Managing Director of Carlyle where he focuses on investment opportunities in the industrial and transportation sectors. Since joining Carlyle in 2003, Mr. Sumner has led or been a key contributor to several of the firm’s investments, including Nouryon, Atotech, WildHorse Resource Development, Axalta Coating Systems, Centennial Resources Development, Allison Transmission, Veyance Technologies, AxleTech International, and United Components, among others. Prior to joining Carlyle, he held positions with Thayer Capital Partners, a private equity firm, and the strategy consulting group of Mercer Management Consulting. He is currently a member of the board of directors of Nouryon. Mr. Sumner received his M.B.A. from Stanford University, where he was an Arjay Miller Scholar, and a B.S. in Economics, magna cum laude, from the Wharton School of the University of Pennsylvania.

Klaus-Günter

Vennemann

Klaus-Günter

Vennemann is a management consultant and a member of the Supervisory Board of Rheinmetall since 2016. Prior to his current position, Mr. Vennemann was Chief Executive Officer of the General Lighting business unit of OSRAM AG in Munich until September 2012. Since October 2012, Mr. Vennemann has worked as a freelance business and management consultant as part of his positions on supervisory boards. Prior to 2012, Mr. Vennemann has held management positions at various companies, including in the United States (as Executive Vice President Operations at Getrag Gears of North America Inc.) and Germany (as Vice President Manufacturing at Getrag GmbH & Cie. KG, and Managing Director at LuK

Fahrzeug-Hydraulik

GmbH & Co. KG, LuK GmbH & Co. oHG, and TRW Fahrwerksysteme GmbH). Mr. Vennemann graduated from the Duisburg Technical School as a state-certified electrical engineer.

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Family Relationships

There are no family relationships between any of the directors. There are no family relationships between any director and any of the senior management of our Company.

Arrangements or Understandings

Certain of our directors are designated by Carlyle pursuant to a shareholders agreement between the Company and Carlyle. See Item 7.B. “

Major Shareholders and Related Party Transactions—Related Party Transactions—Shareholders Agreement

.”

B. Compensation

Executive Officer Remuneration

The following table sets forth the approximate remuneration paid during the year ended December 31, 2021 to our current executive officers.


Name and Principal Position	Year		Total
Geoff Wild, Chief Executive Officer		2021	$	3,750,665
Peter Frauenknecht, Chief Financial Officer		2021	$	1,179,277
Harald Ahnert, President—Electronics		2021	$	769,199
Gertjan van der Wal, President—General Metal Finishing		2021	$	704,054

The compensation for our executive officers is generally comprised of the following elements: base salary, bonus under the Annual Incentive Plan, social security contributions, car allowances, pension contributions, and medical and insurance contributions. For Mr. Wild, the amount also included the value attributed to the acceleration of a portion of his restricted stock units and performance stock units, as described below.

Executive Officer Employment Arrangements

We have entered into employment agreements with each of our executive officers. The material terms and conditions of these agreements are described below.

Geoff Wild

We entered into an employment agreement with Geoff Wild on March 31, 2017 (which has been subsequently amended) pursuant to which he serves as our Chief Executive Officer. The employment agreement had an initial term of two years, and automatically renews for successive

one-year

terms unless either party provides

forty-five

days’ prior written notice to the other party that the agreement shall not be so extended. The employment agreement entitles Mr. Wild to receive an annual base salary and an opportunity to earn an annual discretionary

performance-based

bonus, subject to the achievement of performance goals determined in accordance with our annual bonus plan. Mr. Wild is also entitled to tax preparation assistance and the use of a Company car. The employment agreement also provides that if the terms and conditions of any employment contract of any of our employees are, taken as a whole, more favorable than those in the employment agreement, we must offer to amend the terms of the employment agreement so that they are, taken as a whole, at least as favorable as those of such employee. Mr. Wild is also entitled to an additional bonus on the basis of the return achieved by our main shareholders in connection with a public listing or change in control.

Mr. Wild has also entered into an employment agreement with Atotech (Thailand) Co Ltd., one of our subsidiaries, pursuant to which he serves as its general manager.

In the event that we terminate Mr. Wild’s employment without “cause” (as such term is defined in his employment agreement), his employment terminates as a result of his death or disability, or he resigns for “good reason” (as such term is defined in his employment agreement), subject to his execution of a general release of claims in our favor, Mr. Wild is entitled to a cash termination payment.

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As previously disclosed on a Form

6-K,

MKS announced in October 2021 that Mr. Wild was elected to the board of directors of MKS as a

non-executive

Class III Director of MKS, effective immediately following the closing of the MKS Acquisition. In accordance with subsequent amendments to Mr. Wild’s employment contract, he is entitled to receive cash termination payments and benefits that will become payable upon a qualifying termination of employment that occurs on the date of or within 12 months following a change in control (rather than only within 12 months following a change in control) (a “CIC Qualifying Termination”). Additionally, upon a CIC Qualifying Termination, the notice period for termination is six months.

Mr. Wild has also agreed to refrain from disclosing our confidential information during or at any time following his employment with us and from competing with us or soliciting our employees or customers during his employment and for eighteen months following termination of his employment. Prior to the amendments to his employment contract, Mr. Wild was also entitled to an additional payment if he complied with certain restrictive covenants, payable at the conclusion of the 18 months period following termination during which the restrictive covenants would apply. The amendments provide that, on or following Closing, this payment will be payable 18 months following a CIC Qualifying Termination, without regard to whether Mr. Wild complies with the applicable restrictive covenants.

In addition, in December 2021, we elected to accelerate all of the time-based restricted stock units and the target number of performance-based restricted stock units held by Mr. Wild and settle such awards in cash.

Peter Frauenknecht

We entered into a Managing Director Service Agreement with Peter Frauenknecht effective as of April 10, 2017 pursuant to which he serves as our Chief Financial Officer. The service agreement had an initial term that expired on March 31, 2019, and automatically renews for successive

one-year

terms unless either party provides six months’ prior written notice to the other party that the agreement shall not be so extended. The service agreement entitles Mr. Frauenknecht to receive an annual base salary and an opportunity to earn an annual discretionary

performance-based

bonus, subject to the achievement of performance goals determined in accordance with our annual bonus plan. Mr. Frauenknecht is also entitled to a monthly Company car allowance and a Company fuel card.

In August 2018, we entered into an amendment to the service agreement pursuant to which, among other things, we will make monthly contributions to a defined benefit plan on Mr. Frauenknecht’s behalf.

We entered into a second amendment to the service agreement on January 14, 2020 pursuant to which Mr. Frauenknecht is entitled to a cash termination payment in the event we terminate Mr. Frauenknecht’s employment within 12 months of a change of control, as defined in the service agreement amendment.

Mr. Frauenknecht has agreed to refrain from disclosing our confidential information during or at any time following his employment with us and from competing with us or soliciting our employees or customers during his employment and for 18 months following the termination of his employment. During his compliance with the

post-termination

non-competition

restrictions, he will receive 50% of his total compensation to which he is entitled under the service agreement.

Harald Ahnert

We entered into an employment agreement with Mr. Ahnert, dated January 28, 2020, which was subsequently amended on September 28, 2020. Pursuant to the employment agreement, we employ Mr. Ahnert as our President of Electronics. The employment agreement provides for an annual gross salary. In addition, the employment agreement entitles Mr. Ahnert to participate in our annual bonus program and to participate in a Company pension plan to which we contribute. He is also entitled to a Company car.

Mr. Ahnert has agreed to refrain from disclosing our confidential information during or at any time following his employment with us and from competing with us or soliciting our employees or customers during his employment and for 18 months following the termination of his employment. During his compliance with the

post-termination

non-competition

restrictions, he will receive 50% of his total compensation to which he is entitled under the service agreement.

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Gertjan van der Wal

We entered into a new employment agreement with Mr. van der Wal, effective January 28, 2020, pursuant to which we employ Mr. van der Wal as our President of General Metal Finishing. The employment agreement provides for an annual gross salary and entitles Mr. van der Wal to participate in our annual bonus program. He is also entitled to a Company car. The employment agreement also provides that Mr. van der Wal is entitled to participate in a Company pension plan to which we contribute.

Mr. van der Wal has agreed to refrain from disclosing our confidential information during or at any time following his employment with us and from competing with us or soliciting our employees or customers during his employment and for 18 months following the termination of his employment. During his compliance with the

post-termination

non-competition

restrictions, he will receive 50% of his total compensation to which he is entitled under the service agreement.

Certain Amendments to Employment Arrangements

As previously disclosed on a Form

6-K,

on July 1, 2021, the employment agreements of Harald Ahnert, Peter Frauenknecht, and Gertjan Willem van der Wal were amended to include (or, in the case of Mr. Frauenknecht, to amend existing) change of control-related protections (the “Management Change of Control Amendments”). The Management Change of Control Amendments provide that if the executive’s employment is terminated by us within 12 months after a change of control or if in connection with a change of control, the executive’s employment duties are materially diminished, the executive will be entitled to receive cash termination payments, which are contingent upon the executive’s timely execution of a release of claims. Messrs. Ahnert’s and van der Wal’s Management Change of Control Amendments also provide that if the change of control severance payment is triggered, the notice period for termination is six months. Additionally, the Management Change of Control Amendments increase the amount of consideration payable to each executive during the period he is subject to post-termination

non-competition

restrictions to the greater of (i) 50% of the total remuneration most recently received by the executive under the employment agreement or (ii) 100% of the executive’s most recently received base salary.

Annual Incentive Plan

We sponsor an Annual Incentive Plan that offers our senior management, including our executive officers, the opportunity to earn cash performance bonuses based on a percentage of base salary. Performance goals are set annually and generally relate to corporate performance goals and individual goals.

Equity Compensation Arrangements

We have granted or may grant share options and awards under the following equity award programs (the “Share Plans”): (i) the Atotech UK Topco Limited Option Plan (the “LTIP”), and (ii) an equity participation program to enable certain management members to acquire interests in two pooling vehicles (the “Participants Equity Investment Program”). Additionally, in connection with the IPO, we adopted the 2021 Incentive Award Plan pursuant to which we may grant share options and awards.

LTIP

Pursuant to the LTIP, we have granted to certain of our service providers options covering common shares in the capital of Atotech Limited. Options granted under the LTIP typically become exercisable at an exercise price determined as of the grant date as to a specified portion in connection with certain sales of the common shares in the capital of Atotech Limited by its principal investors, other than sales of securities in the context of an initial public offering or a transfer of securities to an entity controlled by some or all of such principal investors. Options granted under the LTIP typically are only exercisable until the participant’s termination of employment, except that a portion of the option may remain exercisable thereafter in certain circumstances, such as the participant’s death, disability, retirement, sale of the business division in which the participant works, or other reasons as determined by the plan administrator.

In the event of an extraordinary cash distribution or recapitalization of the Company, the plan administrator shall decide an adjustment of the exercise price of the outstanding options to reflect the resulting decrease of the value of the Company. In connection with the Initial Reorganization and the IPO, the outstanding and unexercised options under the LTIP that originally covered shares in the capital of Atotech UK Topco Limited were exchanged for equivalent options covering our common shares.

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Participants Equity Investment Program

Certain members of our management and certain former employees were afforded an opportunity to acquire an indirect ownership interest in Atotech UK Topco Limited (such independent ownership interest having been converted to an indirect ownership interest in Atotech Limited in connection with the Initial Reorganization) through investments in Ato Beteiligung GmbH & Co. Verwaltungs KG, ATO Cayman, L.P. or Zweite Ato Beteiligung GmbH & Co. Verwaltungs KG., each of which we refer to as a Management Investment Partnership, in accordance with the Participants Equity Investment Program. The Management Investment Partnerships were each established to be a management ownership vehicle that holds common shares of the parent of the Atotech group. Members of management who have acquired interests in the Management Investment Partnerships have subscribed for such interests at their then fair value. Prior to the pricing of the IPO, each Management Investment Partnership was wound up, and the common shares held by each such Management Investment Partnership were distributed to each limited partner in proportion to such limited partner’s partnership interest in the applicable Management Investment Partnership. As a result of such distribution, current and former management of the Company hold approximately 3.8% of our common shares directly.

In connection with the distribution of shares by the Management Investment Partnerships, the Company entered into a

Lock-Up

Deed (each, a

“Lock-Up

Deed”) with each member of management receiving common shares in connection with the distributions from the Management Investment Partnerships. Pursuant to the

Lock-Up

Deed and subject to customary exceptions, each party thereto is prohibited from selling the common shares received pursuant to the distributions described above until Carlyle has commenced a sale of common shares held by it pursuant to a registration statement under the Securities Act (excluding any sale by Carlyle in the IPO). Following any such sale, the common shares subject to the

Lock-Up

Deed will be released from the

lock-up

restrictions in proportion to the number of common shares sold by Carlyle pursuant to a registration statement under the Securities Act (including any sale by Carlyle in the IPO), provided such common shares are vested pursuant to the terms of the

Lock-Up

Deed. Each

Lock-Up

Deed provides that 20% of the common shares vest on the first anniversary of their initial acquisition date with an additional 5% vesting each quarter thereafter, subject to a cap of 80%. Upon Carlyle holding less than 25% of the total share capital of the Company, the remaining 20% of common shares covered by the

Lock-Up

Deed will vest. For purposes of determining the initial acquisition date, the initial investment of holders of common shares in the Management Investment Partnership is deemed the initial acquisition date. As of December 31, 2020, approximately 70% of the common shares covered by the

Lock-Up

Deeds were vested.

The following table summarizes the number of common shares or partnership interests indirectly held by the executive officers named in this report as of December 31, 2021 (after giving effect to the dissolution of the Management Investment Partnerships):


Name	Common Shares or Partnership Interests
Geoff Wild		1,916,800
Peter Frauenknecht		871,273
Harald Ahnert		608,891
Gertjan van der Wal		608,891

As of December 31, 2021, such executive officers did not own any options pursuant to the Share Plans.

2021 Incentive Award Plan

Effective February 3, 2021, we adopted and our shareholders approved the 2021 Incentive Award Plan (the “2021 Plan”), under which we may grant cash and

equity-based

incentive awards to eligible employees, directors, and consultants in order to attract, retain, and motivate the persons who make important contributions to our company. The material terms of the 2021 Plan are summarized below.

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As described above, in connection with the Initial Reorganization each option to purchase ordinary shares in the capital of Atotech UK Topco Limited, to the extent then outstanding and unexercised, were automatically, without any action on the part of the holder thereof, converted into an option to purchase our common shares (a “Rollover Option”), on the same terms, conditions, and vesting schedules as previously applied. Upon the effectiveness of the 2021 Plan, the Rollover Options became to the terms and conditions of the 2021 Plan.

Eligibility and Administration

Our employees, consultants, and directors, along with employees and consultants of our subsidiaries, are eligible to receive awards under the 2021 Plan. The 2021 Plan is administered by our Board, which may delegate its duties and responsibilities to one or more committees of our directors and/or officers (referred to collectively as the “plan administrator” below), subject to the limitations imposed under the 2021 Plan, Section 16 of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, stock exchange rules, and other applicable laws. The plan administrator has the authority to take all actions and make all determinations under the 2021 Plan, to interpret the 2021 Plan and award agreements, and to adopt, amend, and repeal rules for the administration of the 2021 Plan as it deems advisable. The plan administrator also has the authority to grant awards, determine which eligible employees, directors and consultants receive awards, and set the terms and conditions of all awards under the 2021 Plan, including any vesting and vesting acceleration provisions, subject to the conditions and limitations in the 2021 Plan.

Shares Available for Awards

Immediately following the IPO, 21,802,385 of our common shares were initially available for issuance under the 2021 Plan. Shares issued upon exercise of the Rollover Options and shares issued in respect of all future awards come out of this pool. No more than 7,540,000 of our common shares are issuable under the 2021 Plan upon the exercise of incentive options. Common shares issued under the 2021 Plan may be authorized but unissued shares, shares purchased on the open market, or treasury shares.

If an award under the 2021 Plan (including the Rollover Options) expires, lapses, or is terminated, exchanged for cash, surrendered, repurchased, redeemed, canceled without having been fully exercised, or forfeited, any unused shares subject to the award will, as applicable, become or again be available for new grants under the 2021 Plan. Awards granted under the 2021 Plan in substitution for any options or other share or

share-based

awards granted by an entity before the entity’s merger or consolidation with us or our acquisition of the entity’s property or shares will not reduce the shares available for grant under the 2021 Plan but may count against the maximum number of common shares that may be issued upon the exercise of incentive options.

ATC

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