UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
FORM 10-Q
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20202021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-38196
DUPONT DE NEMOURS, INC.
(Exact name of registrant as specified in its charter)
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| Delaware | | 81-1224539 | |
| State or other jurisdiction of incorporation or organization | | (I.R.S. Employer Identification No.) | |
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| 974 Centre Road | Building 730 | Wilmington | Delaware | | 19805 | |
| (Address of Principal Executive Offices) | | (Zip Code) | |
(302) 774-3034
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
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| | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, par value $0.01 per share | DD | New York Stock Exchange |
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 ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
☑ Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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| Large Accelerated Filer | | ☑ | | Accelerated filer | | ¨ |
| Non-accelerated filer | | ¨ | | Smaller reporting company | | ☐ |
| | | | | Emerging growth company | | ☐ |
If an emerging growth company, 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 is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☑ No
The registrant had 733,797,258532,142,336 shares of common stock, $0.01 par value, outstanding at May 1, 2020.April 30, 2021.
DuPont de Nemours, Inc.
QUARTERLY REPORT ON FORM 10-Q
For the quarterly period ended March 31, 20202021
TABLE OF CONTENTS
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| Item 1. | | |
| Item 1A. | | |
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Throughout this Quarterly Report on Form 10-Q, except as otherwise noted by the context, the terms "DuPont" or "Company" used herein mean DuPont de Nemours, Inc. and its consolidated subsidiaries. On June 1, 2019, DowDuPont Inc. changed its registered name to DuPont de Nemours, Inc. (“DuPont”) (for certain events prior to June 1, 2019, the Company may be referred to as DowDuPont). Beginning on June 3, 2019, the Company's common stock is traded on the New York Stock Exchange under the ticker symbol "DD"."DD."
On April 1, 2019, the Company completed the separation of itsthe materials science business into a separate and independent public company by way of a distributionthrough the spin-off of Dow Inc., (“Dow”) through a pro rata dividend in-kind of all of the then-issued and outstanding shares ofincluding Dow’s common stocksubsidiary The Dow Chemical Company (the “Dow Distribution”). On June 1, 2019, the Company completed the separation of itsthe agriculture business into a separate and independent public company by way of a distributionthrough the spin-off of Corteva, Inc. (“Corteva”) through a pro rata dividend in-kind of allincluding Corteva’s subsidiary E. I. du Pont de Nemours and Company (“EID”), (the “Corteva Distribution and together with the Dow Distribution, the “DWDP Distributions”).
On February 1, 2021 the Company completed the divestiture of the then-issuedNutrition & Biosciences (“N&B”) business to International Flavors & Fragrance Inc. (“IFF”) in a Reverse Morris Trust transaction (the “N&B Transaction”) that resulted in IFF issuing shares to DuPont stockholders.
The financial position of DuPont as of March 31, 2021 and outstanding shares of Corteva’s common stock (the “Corteva Distribution”).
FollowingDecember 31, 2020 and the Corteva Distribution, DuPont holds the specialty products business as continuing operations. The results of operations of DuPont for the three months ended March 31, 20192021 and 2020 present the historical financial results of Dow and CortevaN&B as discontinued operations. The cash flows and comprehensive income related to Dow and CortevaN&B have not been segregated and are included in the interim Consolidated Statements of Cash Flows and interim Consolidated Statements of Comprehensive Income, respectively, for the applicable period.all periods presented. Unless otherwise indicated, the information in the notes to the interim Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of Dow or Corteva.N&B.
On December 15, 2019,March 8, 2021, DuPont and International Flavors & Fragrances Inc. ("IFF") announced entry into a definitive agreementsagreement to combine DuPont’s Nutrition & Biosciencesacquire the Laird Performance Materials business, (the "N&B Business") with IFF in a transaction that would result in IFF issuing shares to DuPont shareholders. The transaction is expected to close by the end of the first quarter of 2021, subject to regulatory approval by IFF shareholders and other customary closing conditions, including regulatory approvals and receipt by DuPont of an opinion of tax counsel.(the “proposed Laird PM Acquisition”).
DuPontTM and all products, unless otherwise noted, denoted with TM, SM or ® are trademarks, service marks or registered trademarks of affiliates of DuPont de Nemours, Inc.
FORWARD-LOOKING STATEMENTS
This communication contains "forward-looking statements" within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "target," and similar expressions and variations or negatives of these words.
Forward-looking statements address matters that are, to varying degrees, uncertain and subject to risks, uncertainties and assumptions, many of which that are beyond DuPont's control, that could cause actual results to differ materially from those expressed in any forward-looking statements. Forward-looking statements are not guarantees of future results. Some of the important factors that could cause DuPont's actual results to differ materially from those projected in any such forward-looking statements include, but are not limited to: (i) the parties’ ability to meetachieve expectations regarding the timing, completion, integration, and accounting and tax treatments ofrelated to the proposed transactionLaird PM Acquisition; (ii) the ability to achieve expected benefits, synergies and operating efficiencies in connection with IFF;the proposed Laird PM Acquisition within the expected time frames or at all or to successfully integrate the Laird Performance Materials business; (iii) ability to achieve anticipated tax treatments in connection with the N&B Transaction or the DWDP Distributions; (iv) changes in relevant tax and other laws, (ii) failure to obtain necessary regulatory approvals, approvallaws; (v) indemnification of IFF’s shareholders, anticipated tax treatment or any required financing or to satisfy anycertain legacy liabilities of EID in connection with the other conditions to the proposed transaction with IFF, (iii) the possibility that unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies that could impact the value, timing or pursuit of the proposed transaction with IFF, (iv) risks and costs and pursuit and/or implementation of the separation of the N&B Business, including timing anticipated to complete the separation, any changes to the configuration of businesses included in the separation if implemented, (v)Corteva Distribution; (vi) risks and costs related to the Dow Distributionperformance under and impact of the cost sharing arrangement by and between DuPont, Corteva, Distribution (together, the “Distributions”) including (a) with respect to achieving all expected benefits from the Distributions; (b) the incurrence of significant costs in connection with the Distributions, including costs to service debt incurred by theand The Chemours Company to establish the relative credit profiles of Corteva, Dow and DuPont and increased costs related to supply, service and other arrangements that, prior to the Dow Distribution, were between entities under the common control of DuPont; (c) indemnification of certain legacy liabilities of E. I. du Pont de Nemours and Company ("Historical EID") in connection with the Corteva Distribution; and (d) potential liability arising from fraudulent conveyance and similar laws in connection with the Distributions; (vi)future eligible PFAS costs; (vii) failure to effectively manage acquisitions, divestitures, alliances, joint ventures and other portfolio changes, including meeting conditions under the Letter Agreement entered in connection with the Corteva Distribution, related to the transfer of certain levels of assets and businesses; (vii)(viii) uncertainty as to the long-term value of DuPont common stock; (viii) potential inability or reduced access to the capital markets or increased cost of borrowings, including as a result of a
credit rating downgrade (ix) risks and uncertainties related to the novel coronavirus (COVID-19) and the responses thereto (such as voluntary and in some cases, mandatory quarantines as well as shut downs and other restrictions on travel and commercial, social and other activities) on DuPont’s business, results of operations, access to sources of liquidity and financial condition which depend on highly uncertain and unpredictable future developments, including, but not limited to, the duration and spread of the COVID-19 outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions resume resume; and (x) other risks to DuPont's business, operationsoperations; each as further discussed in detail in and results of operations including from: failure to develop and market new products and optimally manage product life cycles; ability, cost and impact on business operations, including the supply chain, of responding to changes in market acceptance, rules, regulations and policies and failure to respond to such changes; outcome of significant litigation, environmental matters and other commitments and contingencies; failure to appropriately manage process safety and product stewardship issues; global economic and capital market conditions, including the continued availability of capital and financing, as well as inflation, interest and currency exchange rates; changes in political conditions, including tariffs, trade disputes and retaliatory actions; impairment of goodwill or intangible assets; the availability of and fluctuations in the cost of energy and raw materials; business or supply disruption, including in connection with the Distributions; ability to effectively manage costs as the company’s portfolio evolves; security threats, such as acts of sabotage, terrorism or war, global health concerns and pandemics, natural disasters and weather events and patterns which could or could continue to result in a significant operational event for DuPont, adversely impact demand or production; ability to discover, develop and protect new technologies and to protect and enforce DuPont's intellectual property rights; unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management's response to any of the aforementioned factors. These risks are and will be more fully discussed in DuPont's current, quarterlyannual report on Form 10-K for the year ended
December 31, 2020 and annualits subsequent reports on Form 10-Q and other filings made with the U.S. Securities and Exchange Commission, in each case, as may be amended from time to time in future filings with the SEC. While the list of factors presented here is considered representative, no such list should be considered a complete statement of all potential risks and uncertainties.Form 8-K. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business or supply chain disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on DuPont’s consolidated financial condition, results of operations, credit rating or liquidity. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. DuPont assumes no obligation to publicly provide revisions or updates to any forward-looking statements whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. A detailed discussion of some of the significant risks and uncertainties which may cause results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors” in (Part I, Item 1A) of DuPont’s 2019 Annual Report on Form 10-K and in (Part II, Item 1A) of this report for the three-month period ended on March 31, 2020 on Form 10-Q.
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| PART I - FINANCIAL INFORMATION |
ITEM 1. FINANCIAL STATEMENTS
DuPont de Nemours, Inc.
Consolidated Statements of Operations
| | | | Three Months Ended March 31, | | Three Months Ended March 31, |
| In millions, except per share amounts (Unaudited) | 2020 | 2019 | In millions, except per share amounts (Unaudited) | 2021 | 2020 |
| Net sales | $ | 5,221 |
| $ | 5,414 |
| Net sales | $ | 3,976 | | $ | 3,670 | |
| Cost of sales | 3,318 |
| 3,621 |
| Cost of sales | 2,512 | | 2,319 | |
| Research and development expenses | 236 |
| 267 |
| Research and development expenses | 156 | | 173 | |
| Selling, general and administrative expenses | 633 |
| 726 |
| Selling, general and administrative expenses | 456 | | 482 | |
| Amortization of intangibles | 533 |
| 256 |
| Amortization of intangibles | 167 | | 178 | |
| Restructuring and asset related charges - net | 404 |
| 71 |
| Restructuring and asset related charges - net | 2 | | 398 | |
| Goodwill impairment charge | 533 |
| — |
| Goodwill impairment charge | 0 | | 533 | |
| Integration and separation costs | 197 |
| 611 |
| Integration and separation costs | 6 | | 123 | |
| Equity in earnings of nonconsolidated affiliates | 39 |
| 40 |
| Equity in earnings of nonconsolidated affiliates | 26 | | 39 | |
| Sundry income (expense) - net | 211 |
| 84 |
| Sundry income (expense) - net | 16 | | 212 | |
| Interest expense | 183 |
| 151 |
| Interest expense | 146 | | 171 | |
| Loss from continuing operations before income taxes | (566 | ) | (165 | ) | |
| Provision for (benefit from) income taxes on continuing operations | 44 |
| (91 | ) | |
| Loss from continuing operations, net of tax | (610 | ) | (74 | ) | |
| Income from discontinued operations, net of tax | — |
| 646 |
| |
| Net (loss) income | (610 | ) | 572 |
| |
| Income (loss) from continuing operations before income taxes | | Income (loss) from continuing operations before income taxes | 573 | | (456) | |
| Provision for income taxes on continuing operations | | Provision for income taxes on continuing operations | 32 | | 94 | |
| Income (loss) from continuing operations, net of tax | | Income (loss) from continuing operations, net of tax | 541 | | (550) | |
| Income (loss) from discontinued operations, net of tax | | Income (loss) from discontinued operations, net of tax | 4,857 | | (60) | |
| Net income (loss) | | Net income (loss) | 5,398 | | (610) | |
| Net income attributable to noncontrolling interests | 6 |
| 51 |
| Net income attributable to noncontrolling interests | 4 | | 6 | |
| Net (loss) income available for DuPont common stockholders | $ | (616 | ) | $ | 521 |
| |
| Net income (loss) available for DuPont common stockholders | | Net income (loss) available for DuPont common stockholders | $ | 5,394 | | $ | (616) | |
| | | |
| | | |
| Per common share data: | | | Per common share data: | | |
| Loss per common share from continuing operations - basic | $ | (0.83 | ) | $ | (0.11 | ) | |
| Earnings per common share from discontinued operations - basic | — |
| 0.80 |
| |
| (Loss) Earnings per common share - basic | $ | (0.83 | ) | $ | 0.69 |
| |
| Loss per common share from continuing operations - diluted | $ | (0.83 | ) | $ | (0.11 | ) | |
| Earnings per common share from discontinued operations - diluted | — |
| 0.80 |
| |
| (Loss) Earnings per common share - diluted | $ | (0.83 | ) | $ | 0.69 |
| |
| Earnings (loss) per common share from continuing operations - basic | | Earnings (loss) per common share from continuing operations - basic | $ | 0.89 | | $ | (0.75) | |
| Earnings (loss) per common share from discontinued operations - basic | | Earnings (loss) per common share from discontinued operations - basic | 8.03 | | (0.08) | |
| Earnings (loss) per common share - basic | | Earnings (loss) per common share - basic | $ | 8.92 | | $ | (0.83) | |
| Earnings (loss) per common share from continuing operations - diluted | | Earnings (loss) per common share from continuing operations - diluted | $ | 0.89 | | $ | (0.75) | |
| Earnings (loss) per common share from discontinued operations - diluted | | Earnings (loss) per common share from discontinued operations - diluted | 8.01 | | (0.08) | |
| Earnings (loss) per common share - diluted | | Earnings (loss) per common share - diluted | $ | 8.90 | | $ | (0.83) | |
| | | | |
| Weighted-average common shares outstanding - basic | 738.6 |
| 750.0 |
| Weighted-average common shares outstanding - basic | 604.8 | | 738.6 | |
| Weighted-average common shares outstanding - diluted | 738.6 |
| 750.0 |
| Weighted-average common shares outstanding - diluted | 606.3 | | 738.6 | |
See Notes to the Consolidated Financial Statements.
DuPont de Nemours, Inc.
Consolidated Statements of Comprehensive Income
|
| | | | | | |
| | Three Months Ended March 31, |
| In millions (Unaudited) | 2020 | 2019 |
| Net (loss) income | $ | (610 | ) | $ | 572 |
|
| Other comprehensive income (loss), net of tax | | |
| Unrealized gains (losses) on investments | — |
| 67 |
|
| Cumulative translation adjustments | (404 | ) | (97 | ) |
| Pension and other post employment benefit plans | 2 |
| 135 |
|
| Derivative instruments | — |
| (75 | ) |
| Total other comprehensive (loss) income | (402 | ) | 30 |
|
| Comprehensive (loss) income | (1,012 | ) | 602 |
|
| Comprehensive (loss) income attributable to noncontrolling interests, net of tax | (2 | ) | 57 |
|
| Comprehensive (loss) income attributable to DuPont | $ | (1,010 | ) | $ | 545 |
|
| | | | | | | | |
| Three Months Ended March 31, |
| In millions (Unaudited) | 2021 | 2020 |
| Net income (loss) | $ | 5,398 | | $ | (610) | |
| Other comprehensive (loss) income, net of tax | | |
| | |
| Cumulative translation adjustments | (484) | | (404) | |
| Pension and other post-employment benefit plans | 12 | | 2 | |
| Split-off of N&B | 258 | | 0 | |
| | |
| Total other comprehensive loss | (214) | | (402) | |
| Comprehensive income (loss) | 5,184 | | (1,012) | |
| Comprehensive loss attributable to noncontrolling interests, net of tax | (3) | | (2) | |
| Comprehensive income (loss) attributable to DuPont | $ | 5,187 | | $ | (1,010) | |
See Notes to the Consolidated Financial Statements.
DuPont de Nemours, Inc.
Condensed Consolidated Balance Sheets
| | | In millions, except share amounts (Unaudited) | March 31, 2020 | December 31, 2019 | In millions, except share amounts (Unaudited) | March 31, 2021 | December 31, 2020 |
| Assets | | | Assets | | |
| Current Assets | | | Current Assets | | |
| Cash and cash equivalents | $ | 1,748 |
| $ | 1,540 |
| Cash and cash equivalents | $ | 4,384 | | $ | 2,544 | |
| Marketable securities | | Marketable securities | 2,001 | | 0 | |
| Accounts and notes receivable - net | 3,869 |
| 3,802 |
| Accounts and notes receivable - net | 2,609 | | 2,421 | |
| Inventories | 4,410 |
| 4,319 |
| Inventories | 2,499 | | 2,393 | |
| Other current assets | 365 |
| 338 |
| Other current assets | 184 | | 181 | |
| Assets held for sale | | Assets held for sale | 863 | | 810 | |
| Assets of discontinued operations | | Assets of discontinued operations | 0 | | 20,659 | |
| Total current assets | 10,392 |
| 9,999 |
| Total current assets | 12,540 | | 29,008 | |
| Investments | | |
| Investments in nonconsolidated affiliates | 1,227 |
| 1,204 |
| |
| Other investments | 24 |
| 24 |
| |
| Noncurrent receivables | 31 |
| 32 |
| |
| Total investments | 1,282 |
| 1,260 |
| |
| Property, plant and equipment - net of accumulated depreciation (March 31, 2020 - $5,189; December 31, 2019 - $4,969) | 9,912 |
| 10,143 |
| |
| Property, plant and equipment - net of accumulated depreciation (March 31, 2021 - $4,359; December 31, 2020 - $4,256) | | Property, plant and equipment - net of accumulated depreciation (March 31, 2021 - $4,359; December 31, 2020 - $4,256) | 6,744 | | 6,867 | |
| Other Assets | | | Other Assets | | |
| Goodwill | 32,317 |
| 33,151 |
| Goodwill | 18,511 | | 18,702 | |
| Other intangible assets | 12,834 |
| 13,593 |
| Other intangible assets | 7,857 | | 8,072 | |
| Restricted cash | | Restricted cash | 0 | | 6,206 | |
| Investments and noncurrent receivables | | Investments and noncurrent receivables | 1,059 | | 1,047 | |
| Deferred income tax assets | 210 |
| 236 |
| Deferred income tax assets | 177 | | 190 | |
| Deferred charges and other assets | 1,040 |
| 1,014 |
| Deferred charges and other assets | 916 | | 812 | |
| Total other assets | 46,401 |
| 47,994 |
| Total other assets | 28,520 | | 35,029 | |
| Total Assets | $ | 67,987 |
| $ | 69,396 |
| Total Assets | $ | 47,804 | | $ | 70,904 | |
| Liabilities and Equity | | | Liabilities and Equity | | |
| Current Liabilities | | | Current Liabilities | | |
| Short-term borrowings and finance lease obligations | $ | 3,925 |
| $ | 3,830 |
| Short-term borrowings and finance lease obligations | $ | 1,997 | | $ | 1 | |
| Accounts payable | 2,846 |
| 2,934 |
| Accounts payable | 2,219 | | 2,222 | |
| Income taxes payable | 340 |
| 240 |
| Income taxes payable | 189 | | 169 | |
| Accrued and other current liabilities | 1,434 |
| 1,342 |
| Accrued and other current liabilities | 1,129 | | 1,084 | |
| Liabilities related to assets held for sale | | Liabilities related to assets held for sale | 133 | | 140 | |
| Liabilities of discontinued operations | | Liabilities of discontinued operations | 0 | | 8,610 | |
| Total current liabilities | 8,545 |
| 8,346 |
| Total current liabilities | 5,667 | | 12,226 | |
| Long-Term Debt | 13,618 |
| 13,617 |
| Long-Term Debt | 10,625 | | 15,611 | |
| Other Noncurrent Liabilities | | | Other Noncurrent Liabilities | | |
| Deferred income tax liabilities | 3,314 |
| 3,514 |
| Deferred income tax liabilities | 1,918 | | 2,053 | |
| Pension and other post employment benefits - noncurrent | 1,155 |
| 1,172 |
| |
| Pension and other post-employment benefits - noncurrent | | Pension and other post-employment benefits - noncurrent | 1,040 | | 1,110 | |
| Other noncurrent obligations | 1,238 |
| 1,191 |
| Other noncurrent obligations | 849 | | 834 | |
| Total other noncurrent liabilities | 5,707 |
| 5,877 |
| Total other noncurrent liabilities | 3,807 | | 3,997 | |
| Total Liabilities | $ | 27,870 |
| $ | 27,840 |
| Total Liabilities | 20,099 | | 31,834 | |
| Commitments and contingent liabilities | | | Commitments and contingent liabilities | 0 | 0 |
| Stockholders' Equity | | | Stockholders' Equity | | |
| Common stock (authorized 1,666,666,667 shares of $0.01 par value each; issued 2020: 733,793,781 shares; 2019: 738,564,728 shares) | 7 |
| 7 |
| |
| Common stock (authorized 1,666,666,667 shares of $0.01 par value each; issued 2021: 532,090,582 shares; 2020: 734,204,054 shares) | | Common stock (authorized 1,666,666,667 shares of $0.01 par value each; issued 2021: 532,090,582 shares; 2020: 734,204,054 shares) | 5 | | 7 | |
| Additional paid-in capital | 50,605 |
| 50,796 |
| Additional paid-in capital | 49,964 | | 50,039 | |
| (Accumulated deficit) Retained earnings | (9,251 | ) | (8,400 | ) | |
| Accumulated other comprehensive loss | (1,810 | ) | (1,416 | ) | |
| Accumulated deficit | | Accumulated deficit | (22,618) | | (11,586) | |
| Accumulated other comprehensive (loss) income | | Accumulated other comprehensive (loss) income | (163) | | 44 | |
| Total DuPont stockholders' equity | 39,551 |
| 40,987 |
| Total DuPont stockholders' equity | 27,188 | | 38,504 | |
| Noncontrolling interests | 566 |
| 569 |
| Noncontrolling interests | 517 | | 566 | |
| Total equity | 40,117 |
| 41,556 |
| Total equity | 27,705 | | 39,070 | |
| Total Liabilities and Equity | $ | 67,987 |
| $ | 69,396 |
| Total Liabilities and Equity | $ | 47,804 | | $ | 70,904 | |
See Notes to the Consolidated Financial Statements.
DuPont de Nemours, Inc.
Consolidated Statements of Cash Flows
| | | | Three Months Ended March 31, | | Three Months Ended March 31, |
| In millions (Unaudited) | 2020 | 2019 | In millions (Unaudited) | 2021 | 2020 |
| Operating Activities | | | Operating Activities | | |
| Net (loss) income | $ | (610 | ) | $ | 572 |
| |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Net income (loss) | | Net income (loss) | $ | 5,398 | | $ | (610) | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | |
| Depreciation and amortization | 772 |
| 1,520 |
| Depreciation and amortization | 391 | | 772 | |
| Credit for deferred income tax and other tax related items | (164 | ) | (368 | ) | Credit for deferred income tax and other tax related items | (105) | | (164) | |
| Earnings of nonconsolidated affiliates less than (in excess of) dividends received | (31 | ) | 767 |
| |
| Net periodic pension benefit (credit) cost | 7 |
| (8 | ) | |
| Earnings of nonconsolidated affiliates in excess of dividends received | | Earnings of nonconsolidated affiliates in excess of dividends received | (20) | | (31) | |
| Net periodic pension benefit cost | | Net periodic pension benefit cost | 2 | | 7 | |
| Pension contributions | (26 | ) | (153 | ) | Pension contributions | (26) | | (26) | |
| Net gain on sales of assets, businesses and investments | (197 | ) | (43 | ) | |
| Net gain on sales and split-offs of assets, businesses and investments | | Net gain on sales and split-offs of assets, businesses and investments | (4,982) | | (197) | |
| Restructuring and asset related charges - net | 404 |
| 287 |
| Restructuring and asset related charges - net | 4 | | 404 | |
| Goodwill impairment charge | 533 |
| — |
| Goodwill impairment charge | 0 | | 533 | |
| Amortization of merger-related inventory step-up | — |
| 205 |
| |
| | Other net loss | 49 |
| 93 |
| Other net loss | 53 | | 49 | |
| Changes in assets and liabilities, net of effects of acquired and divested companies: | | | Changes in assets and liabilities, net of effects of acquired and divested companies: | | |
| Accounts and notes receivable | (134 | ) | (1,643 | ) | Accounts and notes receivable | (228) | | (134) | |
| Inventories | (134 | ) | (194 | ) | Inventories | (174) | | (134) | |
| Accounts payable | 236 |
| (732 | ) | Accounts payable | 92 | | 236 | |
| Other assets and liabilities, net | 13 |
| (277 | ) | Other assets and liabilities, net | (27) | | 13 | |
| Cash provided by operating activities | 718 |
| 26 |
| Cash provided by operating activities | 378 | | 718 | |
| Investing Activities | | | Investing Activities | | |
| Capital expenditures | (481 | ) | (1,139 | ) | Capital expenditures | (283) | | (481) | |
| Investment in gas field developments | — |
| (25 | ) | |
| | Proceeds from sales of property and businesses, net of cash divested | 427 |
| 125 |
| Proceeds from sales of property and businesses, net of cash divested | 31 | | 427 | |
| Acquisitions of property and businesses, net of cash acquired | (73 | ) | — |
| Acquisitions of property and businesses, net of cash acquired | (11) | | (73) | |
| Proceeds from sale of ownership interests in nonconsolidated affiliates | — |
| 21 |
| |
| | Purchases of investments | (1 | ) | (189 | ) | Purchases of investments | (2,001) | | (1) | |
| Proceeds from sales and maturities of investments | — |
| 212 |
| |
| Other investing activities, net | 4 |
| (5 | ) | Other investing activities, net | 4 | | 4 | |
| Cash used for investing activities | (124 | ) | (1,000 | ) | Cash used for investing activities | (2,260) | | (124) | |
| Financing Activities | | | Financing Activities | | |
| Changes in short-term notes payable | 69 |
| 798 |
| Changes in short-term notes payable | 0 | | 69 | |
| Proceeds from issuance of long-term debt | 25 |
| 1,000 |
| Proceeds from issuance of long-term debt | 0 | | 25 | |
| Proceeds from issuance of long-term debt transferred to IFF at split-off | | Proceeds from issuance of long-term debt transferred to IFF at split-off | 1,250 | | 0 | |
| Payments on long-term debt | (1 | ) | (363 | ) | Payments on long-term debt | (3,000) | | (1) | |
| Purchases of common stock | (232 | ) | (1,579 | ) | Purchases of common stock | (500) | | (232) | |
| Proceeds from issuance of Company stock | 34 |
| 63 |
| Proceeds from issuance of Company stock | 90 | | 34 | |
| Employee taxes paid for share-based payment arrangements | (12 | ) | (76 | ) | Employee taxes paid for share-based payment arrangements | (15) | | (12) | |
| Distributions to noncontrolling interests | (6 | ) | (11 | ) | Distributions to noncontrolling interests | (19) | | (6) | |
| Dividends paid to stockholders | (222 | ) | (851 | ) | Dividends paid to stockholders | (161) | | (222) | |
| Debt extinguishment costs | — |
| (13 | ) | |
| | Cash transferred to IFF at split-off | | Cash transferred to IFF at split-off | (100) | | 0 | |
| Other financing activities, net | 1 |
| — |
| Other financing activities, net | (3) | | 1 | |
| Cash used for financing activities | (344 | ) | (1,032 | ) | Cash used for financing activities | (2,458) | | (344) | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (45 | ) | 50 |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (37) | | (45) | |
| Increase (Decrease) in cash, cash equivalents and restricted cash | 205 |
| (1,956 | ) | |
| (Decrease) increase in cash, cash equivalents and restricted cash | | (Decrease) increase in cash, cash equivalents and restricted cash | (4,377) | | 205 | |
| Cash, cash equivalents and restricted cash from continuing operations, beginning of period | 1,577 |
| 8,591 |
| Cash, cash equivalents and restricted cash from continuing operations, beginning of period | 8,767 | | 1,569 | |
| Cash, cash equivalents and restricted cash from discontinued operations, beginning of period | — |
| 5,431 |
| Cash, cash equivalents and restricted cash from discontinued operations, beginning of period | 8 | | 8 | |
| Cash, cash equivalents and restricted cash at beginning of period | 1,577 |
| 14,022 |
| Cash, cash equivalents and restricted cash at beginning of period | 8,775 | | 1,577 | |
| Cash, cash equivalents and restricted cash from continuing operations, end of period | 1,782 |
| 6,862 |
| Cash, cash equivalents and restricted cash from continuing operations, end of period | 4,398 | | 1,776 | |
| Cash, cash equivalents and restricted cash from discontinued operations, end of period | — |
| 5,204 |
| Cash, cash equivalents and restricted cash from discontinued operations, end of period | 0 | | 6 | |
| Cash, cash equivalents and restricted cash at end of period | $ | 1,782 |
| $ | 12,066 |
| Cash, cash equivalents and restricted cash at end of period | $ | 4,398 | | $ | 1,782 | |
DuPont de Nemours, Inc.
Consolidated Statements of Equity
| | | In millions (Unaudited) | Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comp Loss | Unearned ESOP | Treasury Stock | Non-controlling Interests | Total Equity | In millions (Unaudited) | Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comp Loss | | Treasury Stock | Non-controlling Interests | Total Equity |
| Balance at December 31, 2018 | $ | 8 |
| $ | 81,976 |
| $ | 30,257 |
| $ | (12,394 | ) | $ | (134 | ) | $ | (5,421 | ) | $ | 1,608 |
| $ | 95,900 |
| |
| Adoption of accounting standards | — |
| — |
| (111 | ) | — |
| — |
| — |
| — |
| (111 | ) | |
| Net income | — |
| — |
| 521 |
| — |
| — |
| — |
| 51 |
| 572 |
| |
| Other comprehensive income | — |
| — |
|
|
| 30 |
| — |
| — |
| 6 |
| 36 |
| |
| Dividends ($1.56 per common share) | — |
| — |
| (1,176 | ) | — |
| — |
| — |
| — |
| (1,176 | ) | |
| Common stock issued/sold | — |
| 63 |
| — |
| — |
| — |
| — |
| — |
| 63 |
| |
| Stock-based compensation and allocation of ESOP shares | — |
| 102 |
| — |
| — |
| 29 |
| — |
| — |
| 131 |
| |
| Distributions to non-controlling interests | — |
| — |
| — |
| — |
| — |
| — |
| (11 | ) | (11 | ) | |
| Purchases of treasury stock | — |
| — |
| — |
| — |
| — |
| (1,579 | ) | — |
| (1,579 | ) | |
| Other | — |
| — |
| (5 | ) | — |
| — |
| — |
| — |
| (5 | ) | |
| Balance at March 31, 2019 | $ | 8 |
| $ | 82,141 |
| $ | 29,486 |
| $ | (12,364 | ) | $ | (105 | ) | $ | (7,000 | ) | $ | 1,654 |
| $ | 93,820 |
| |
| | | |
| Balance at December 31, 2019 | $ | 7 |
| $ | 50,796 |
| $ | (8,400 | ) | $ | (1,416 | ) | $ | — |
| $ | — |
| $ | 569 |
| $ | 41,556 |
| Balance at December 31, 2019 | $ | 7 | | $ | 50,796 | | $ | (8,400) | | $ | (1,416) | | | $ | 0 | | $ | 569 | | $ | 41,556 | |
| Adoption of accounting standards | — |
| — |
| (3 | ) | — |
| — |
| — |
| — |
| (3 | ) | Adoption of accounting standards | — | | — | | (3) | | — | | | — | | — | | (3) | |
| Net (loss) income | — |
| — |
| (616 | ) | — |
| — |
| — |
| 6 |
| (610 | ) | Net (loss) income | — | | — | | (616) | | — | | | — | | 6 | | (610) | |
| Other comprehensive loss | — |
| — |
| — |
| (394 | ) | — |
| — |
| (8 | ) | (402 | ) | |
| Other comprehensive income | | Other comprehensive income | — | | — | | | (394) | | | — | | (8) | | (402) | |
| Dividends ($0.30 per common share) | — |
| (222 | ) | — |
| — |
| — |
| — |
| — |
| (222 | ) | Dividends ($0.30 per common share) | — | | (222) | | — | | — | | | — | | — | | (222) | |
| Common stock issued/sold | — |
| 34 |
| — |
| — |
| — |
| — |
| — |
| 34 |
| Common stock issued/sold | — | | 34 | | — | | — | | | — | | — | | 34 | |
| Stock-based compensation | — |
| 30 |
| — |
| — |
| — |
| — |
| — |
| 30 |
| Stock-based compensation | — | | 30 | | — | | — | | | — | | — | | 30 | |
| Distributions to non-controlling interests | — |
| — |
| — |
| — |
| — |
| — |
| (6 | ) | (6 | ) | Distributions to non-controlling interests | — | | — | | — | | — | | | — | | (6) | | (6) | |
| Purchases of treasury stock | — |
| — |
| — |
| — |
| — |
| (232 | ) | — |
| (232 | ) | Purchases of treasury stock | — | | — | | — | | — | | | (232) | | — | | (232) | |
| Retirement of treasury stock | — |
| — |
| (232 | ) | — |
| — |
| 232 |
| — |
| — |
| Retirement of treasury stock | — | | — | | (232) | | — | | | 232 | | — | | — | |
| Other | — |
| (33 | ) | — |
| — |
| — |
| — |
| 5 |
| (28 | ) | Other | — | | (33) | | — | | — | | | — | | 5 | | (28) | |
| Balance at March 31, 2020 | $ | 7 |
| $ | 50,605 |
| $ | (9,251 | ) | $ | (1,810 | ) | $ | — |
| $ | — |
| $ | 566 |
| $ | 40,117 |
| Balance at March 31, 2020 | $ | 7 | | $ | 50,605 | | $ | (9,251) | | $ | (1,810) | | | $ | 0 | | $ | 566 | | $ | 40,117 | |
| | Balance at December 31, 2020 | | Balance at December 31, 2020 | $ | 7 | | $ | 50,039 | | $ | (11,586) | | $ | 44 | | | $ | 0 | | $ | 566 | | $ | 39,070 | |
| Net income | | Net income | — | | — | | 5,394 | | — | | | — | | 4 | | 5,398 | |
| Other comprehensive loss | | Other comprehensive loss | — | | — | | — | | (207) | | | — | | (7) | | (214) | |
| Dividends ($0.30 per common share) | | Dividends ($0.30 per common share) | — | | (161) | | — | | — | | | — | | — | | (161) | |
| Common stock issued/sold | | Common stock issued/sold | — | | 90 | | — | | — | | | — | | — | | 90 | |
| Stock-based compensation | | Stock-based compensation | — | | (4) | | — | | — | | | — | | — | | (4) | |
| Distributions to non-controlling interests | | Distributions to non-controlling interests | — | | — | | — | | — | | | — | | (19) | | (19) | |
| Purchases of treasury stock | | Purchases of treasury stock | — | | — | | — | | — | | | (500) | | — | | (500) | |
| Retirement of treasury stock | | Retirement of treasury stock | — | | — | | (500) | | — | | | 500 | | — | | 0 | |
| Split-off of N&B | | Split-off of N&B | (2) | | — | | (15,926) | | | | — | | (27) | | (15,955) | |
| | Balance at March 31, 2021 | | Balance at March 31, 2021 | $ | 5 | | $ | 49,964 | | $ | (22,618) | | $ | (163) | | | $ | 0 | | $ | 517 | | $ | 27,705 | |
See Notes to the Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the interim statements reflect all adjustments (including normal recurring accruals) which are considered necessary for the fair statement of the results for the periods presented. Results from interim periods should not be considered indicative of results for the full year. These interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019,2020, collectively referred to as the “2019“2020 Annual Report.” The interim Consolidated Financial Statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained.
Impact of the Novel Coronavirus (“COVID-19”) Pandemic
The COVID-19 pandemic has resulted in significant economic disruption and continues to adversely impact the broader global economy. The extent of the impact on the Company's operational and financial performance will depend on future developments, including, but not limited to, the duration and spread of the outbreak and its impact on the Company's customers and suppliers. As of the date of issuance of these interim Consolidated Financial Statements, the full extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.
Basis of Presentation
Effective August 31, 2017, pursuant to the merger of equals transaction contemplated by the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017 ("Merger Agreement"), The Dow Chemical Company ("Historical Dow"TDCC") and E. I. du Pont de Nemours and Company ("Historical EID") each merged with subsidiaries of DowDuPont Inc. ("DowDuPont") and, as a result, Historical DowTDCC and Historical EID became subsidiaries of DowDuPont (the "Merger""DWDP Merger"). Prior to the Merger, DowDuPont did not conduct any business activities other than those required for its formation and matters contemplated by the Merger Agreement. Historical Dow was determined to be the accounting acquirer in the Merger.
Except as otherwise indicated by the context, the term "Historical Dow""TDCC" includes Historical Dow and its consolidated subsidiaries, "Historical EID" includes Historical EIDTDCC and its consolidated subsidiaries and "Dow Silicones" means Dow Silicones Corporation, a wholly owned subsidiary of Historical Dow."EID" includes EID and its consolidated subsidiaries.
Distributions
Effective as of 5:00 p.m. onOn April 1, 2019, the Company completed the separation of itsthe materials science business into a separate and independent public company by way of a distributionthrough the spin-off of Dow Inc., (“Dow”) through a pro rata dividend in-kind of all of the then-issued and outstanding shares ofincluding Dow’s common stock (the “Dow Common Stock”), to holders of the Company’s common stock (the “DowDuPont common stock”), as of the close of business on March 21, 2019subsidiary TDCC (the “Dow Distribution”).
Effective as of 12:01 a.m. on On June 1, 2019, the Company completed the separation of itsthe agriculture business into a separate and independent public company by way of a distributionthrough the spin-off of Corteva, Inc. (“Corteva”) through a pro rata dividend in-kind of all of the then-issued and outstanding shares ofincluding Corteva’s common stocksubsidiary EID, (the “Corteva Common Stock”), to holders of the Company’s common stock as of the close of business on May 24, 2019 (the “Corteva Distribution”Distribution" and together with the Dow Distribution, the “Distributions”“DWDP Distributions”).
Following the Corteva Distribution, DuPont holds the specialty products business.business as continuing operations. On June 1, 2019, DowDuPont changed its registered name from "DowDuPont Inc." to "DuPont de Nemours, Inc." doing business as "DuPont." Beginning on June 3, 2019, the Company's common stock is traded on the NYSE under the ticker symbol "DD"."DD."
N&B Transaction
On February 1, 2021, DuPont completed the separation and distribution of the Nutrition & Biosciences business segment (the "N&B Business"), and merger of Nutrition & Biosciences, Inc. (“N&B”), a DuPont subsidiary formed to hold the N&B Business, with a subsidiary of International Flavors & Fragrances Inc. ("IFF"). The distribution was effected through an exchange offer (the “Exchange Offer”) and the consummation of the Exchange Offer was followed by the merger of N&B with a wholly owned subsidiary of IFF, with N&B surviving the merger as a wholly owned subsidiary of IFF (the “N&B Merger” and, together with the Exchange Offer, the “N&B Transaction”). See Note 2 for more information.
The financial position of DuPont as of March 31, 2021 and December 31, 2020 and the results of operations of DuPont for the three months ended March 31, 20192021 and 2020 present the historical financial results of Dow and CortevaN&B as discontinued operations. The cash flows and comprehensive income related to Dow and CortevaN&B have not been segregated and are included in the interim Consolidated Statements of Cash Flows and interim Consolidated Statements of Comprehensive Income, respectively, for the applicable period.all periods presented. Unless otherwise indicated, the information in the notes to the interim Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of Dow or Corteva.N&B.
2021 Segment Realignment
Immediately following the separation and distribution of the N&B Business, the Company made changes to its management and reporting structure (the “2021 Segment Realignment”) (see Note 22 for additional details). The reporting changes have been retrospectively reflected for all periods presented.
NOTE 2 - ACQUISITIONS AND DIVESTITURES
Laird Performance Materials
On December 15, 2019,March 8, 2021, the Company announced that it had entered into a definitive agreementsagreement with Advent International to separate and combine the Nutrition & Biosciences business segment (the "N&B Business") with International Flavors & Fragrances Inc. ("IFF") in a tax-efficient Reverse Morris Trust transaction, (the "Proposed N&B Transaction").acquire Laird Performance Materials for $2.3 billion. The transactionacquisition is expected to close byin the end of the firstthird quarter of 2021, subject to approval by IFF shareholdersregulatory approvals and other customary closing conditions, including regulatory approvals and receipt bywill be part of the Electronic & Industrials segment. The Company intends to pay for the acquisition from existing cash balances.
On February 1, 2021, DuPont of an opinion of tax counsel. The financial resultscompleted the separation and distribution of the N&B Business, are includedand merger of N&B, a DuPont subsidiary formed to hold the N&B Business, with a subsidiary of IFF. The distribution was effected through an exchange offer where, on the terms and subject to the conditions of the Exchange Offer, eligible participating DuPont stockholders had the option to tender all, some or none of their shares of common stock, par value $0.01 per share, of DuPont (the “DuPont Common Stock”) for a number of shares of common stock, par value $0.01 per share, of N&B (the “N&B Common Stock”) and which resulted in continuing operations forall shares of N&B Common Stock being distributed to DuPont stockholders that participated in the periods presented.
NOTE 2 - RECENT ACCOUNTING GUIDANCE
Recently Adopted Accounting Guidance
In June 2016,Exchange Offer. The consummation of the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): MeasurementExchange Offer was followed by the merger of Credit Losses on Financial Instruments,N&B with a wholly owned subsidiary of IFF, with N&B surviving the merger as a wholly owned subsidiary of IFF (the “N&B Merger” and, associated ASUs relatedtogether with the Exchange Offer, the “N&B Transaction”). The N&B Transaction was subject to Topic 326. The new guidance introducesIFF shareholder approval, customary regulatory approvals, tax authority rulings including a favorable private letter ruling from the current expected credit loss (“CECL”) model,U.S. Internal Revenue Service which requires organizations to record an allowance for credit losses for certain financial instruments and financial assets, including trade receivables, based on expected losses rather than incurred losses. Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflectsconfirms the entity’s current estimate of credit losses expectedN&B Transaction to be incurred over the lifefree of U.S. federal income tax, and expiration of the financial instrument. This update became effectivepublic exchange offer. DuPont does not have an ownership interest in IFF as a result of the N&B Transaction.
In the Exchange Offer, DuPont accepted approximately 197.4 million shares of its common stock in exchange for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.
The Company adopted the new standard in the first quarterabout 141.7 million shares of 2020, which required a modified retrospective transition approach, applying the new standard's cumulative-effect adjustment atN&B Common Stock as of the date of initial adoption. This cumulative-effect has been reflected asthe N&B Transaction. As a result, DuPont reduced its common stock outstanding by 197.4 million shares of January 1, 2020 and prior periods have not been restated. The impactDuPont Common Stock. In the N&B Merger, each share of initial adoptionN&B Common Stock was not material to the Company’s interim Condensed Consolidated Balance Sheet, interim Consolidated Statements of Operations, and interim Consolidated Statement of Cash Flows.
NOTE 3 - DIVESTITURES
Separation Agreements
In connection with the Dow Distribution and the Corteva Distribution, the Company entered into certain agreements that, among other things, effected the separations, provides for the allocation of assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) among DuPont, Dow, and Corteva (together, the “Parties” and each a “Party”), and provides a framework for DuPont’s relationship with Dow and Corteva following the Distributions. Effective April 1, 2019, the Parties enteredautomatically converted into the following agreements:right to receive one share of IFF common stock, par value $0.125 per share, based on the Separation and Distribution Agreement; the Tax Matters Agreement; the Employee Matters Agreement; and the Intellectual Property Cross-License Agreement (the “DuPont-Dow IP Cross-License Agreement”). In addition to the agreements above, DuPont has entered into certain various supply agreements with Dow. These agreements provide for different pricing than the historical intercompany and intracompany practices prior to the Distributions.
Effective June 1, 2019, in connection with the Corteva Distribution, DuPont and Corteva entered into the following agreements: the Intellectual Property Cross-License Agreement (the “DuPont-Corteva IP Cross-License Agreement”); the Letter Agreement; and the Amended and Restated Tax Matters Agreement.
Materials Science Division
On April 1, 2019, DowDuPont completed the separation of its Materials Science businesses, including the businesses and operations that comprised the Company's former Performance Materials & Coating, Industrial Intermediates & Infrastructure and the Packaging & Specialty Plastics segments, (the "Materials Science Division") through the consummationterms of the Dow Distribution.
On April 1, 2019, prior to the Dow Distribution, the Company contributed $2,024 million in cash to Dow.
The results of operations of the Materials Science DivisionN&B are presented as discontinued operations as summarized below:
| | | | Three Months Ended
March 31, 2019 | | Three Months Ended March 31, 2021 | Three Months Ended
March 31, 2020 |
| In millions | In millions |
| Net sales | $ | 10,867 |
| Net sales | $ | 507 | | $ | 1,551 | |
| Cost of sales | 8,917 |
| Cost of sales | 352 | | 999 | |
| Research and development expenses | 163 |
| Research and development expenses | 21 | | 63 | |
| Selling, general and administrative expenses | 329 |
| Selling, general and administrative expenses | 44 | | 151 | |
| Amortization of intangibles | 116 |
| Amortization of intangibles | 38 | | 355 | |
| Restructuring and asset related charges - net | 157 |
| Restructuring and asset related charges - net | 1 | | 6 | |
| Integration and separation costs | 44 |
| Integration and separation costs | 149 | | 74 | |
| Equity in earnings of nonconsolidated affiliates | (13 | ) | |
| Sundry income (expense) - net | 99 |
| Sundry income (expense) - net | (2) | | (1) | |
| Interest expense | 240 |
| Interest expense | 13 | | 12 | |
| Income from discontinued operations before income taxes | 987 |
| |
| Provision for income taxes on discontinued operations | 261 |
| |
| Income from discontinued operations, net of tax | 726 |
| |
| Income from discontinued operations attributable to noncontrolling interests, net of tax | 37 |
| |
| Income from discontinued operations attributable to DuPont stockholders, net of tax | $ | 689 |
| |
| Loss from discontinued operations before income taxes | | Loss from discontinued operations before income taxes | (113) | | (110) | |
| Benefit from income taxes on discontinued operations | | Benefit from income taxes on discontinued operations | (21) | | (50) | |
| Loss from discontinued operations, net of tax | | Loss from discontinued operations, net of tax | (92) | | (60) | |
| Non-taxable gain on split-off | | Non-taxable gain on split-off | 4,954 | | 0 | |
| Income (loss) from discontinued operations attributable to DuPont stockholders, net of tax | | Income (loss) from discontinued operations attributable to DuPont stockholders, net of tax | $ | 4,862 | | $ | (60) | |
The following table presents depreciation, amortization, and capital expenditures of the discontinued operations related to the Materials Science Division:N&B:
| | | | | | | | |
| Three Months Ended March 31, 2021 | Three Months Ended
March 31, 2020 |
| In millions |
| Depreciation and amortization | $ | 63 | | $ | 427 | |
| Capital expenditures | $ | 27 | | $ | 92 | |
| | |
|
| | | |
| | Three Months Ended
March 31, 2019 |
| In millions |
| Depreciation and amortization | $ | 744 |
|
| Capital expenditures | $ | 597 |
|
13
Agriculture Division
On June 1, 2019, the Company completed the separationThe carrying amount of its Agriculture business, including the businessesmajor classes of assets and liabilities that were included in discontinued operations that comprised the Company's former Agriculture segment (the "Agriculture Division"), through the consummationat December 31, 2020 related to N&B consist of the Corteva Distribution.following:
| | | | | |
| In millions | December 31, 2020 |
| Assets | |
| Accounts and notes receivable - net | $ | 1,130 | |
| Inventories | 1,333 | |
| Other current assets | 65 | |
| Investments and noncurrent receivables | 36 | |
| Property, plant, and equipment - net | 3,118 | |
| Goodwill | 11,542 | |
| Other intangible assets - net | 3,072 | |
| Deferred income tax assets | 44 | |
| Deferred charges and other assets | 319 | |
| Total assets of discontinued operations | $ | 20,659 | |
| Liabilities | |
| Short-term borrowings and finance lease obligations | $ | 4 | |
| Accounts Payable | 742 | |
| Income taxes payable | 36 | |
| Accrued and other current liabilities | 301 | |
| Long-term debt | 6,195 | |
| Deferred income tax liabilities | 852 | |
| Pension and other post employment benefits - noncurrent | 238 | |
| Other noncurrent obligations | 242 | |
| Total liabilities of discontinued operations | $ | 8,610 | |
In 2019, prior to the distribution of Corteva, the Company contributed $7,139 million in cash to Corteva, a portion of which was used to retire indebtedness of Historical EID.
The results of operations of the Agriculture Division are presented as discontinued operations as summarized below:
|
| | | |
| | Three Months Ended
March 31, 2019 |
| In millions |
| Net sales | $ | 3,368 |
|
| Cost of sales | 2,192 |
|
| Research and development expenses | 287 |
|
| Selling, general and administrative expenses | 617 |
|
| Amortization of intangibles | 102 |
|
| Restructuring and asset related charges - net | 59 |
|
| Integration and separation costs | 158 |
|
| Equity in earnings of nonconsolidated affiliates | (1 | ) |
Sundry income (expense) - net | 65 |
|
| Interest expense | 63 |
|
| Income from discontinued operations before income taxes | (46 | ) |
Provision for income taxes on discontinued operations | 34 |
|
| Income from discontinued operations, net of tax | (80 | ) |
| Income from discontinued operations attributable to noncontrolling interests, net of tax | 10 |
|
| Income from discontinued operations attributable to DuPont stockholders, net of tax | $ | (90 | ) |
The following table presents depreciation, amortization, and capital expenditures of the discontinued operations related to the Agriculture Division:
|
| | | |
| | Three Months Ended
March 31, 2019 |
| In millions |
| Depreciation and amortization | $ | 249 |
|
| Capital expenditures | $ | 222 |
|
Indemnifications
In connection with the Distributions, DowN&B Transaction and Corteva indemnifyin accordance with the terms of the N&B Transaction Agreements, defined below, prior to consummation of the Exchange Offer and the N&B Merger, DuPont received a one-time cash payment of approximately $7.3 billion, (the "Special Cash Payment"), which is subject to post-closing adjustment pursuant to the terms of the N&B Separation and Distribution Agreement. The special cash payment was partially funded by an offering of $6.25 billion of senior unsecured notes (the “N&B Notes Offering”). The net proceeds of approximately $6.2 billion from the N&B Notes Offering were deposited into an escrow account and at December 31, 2020, are reflected as restricted cash in the Company’s interim Condensed Consolidated Balance Sheets. In order to fund the remainder of the Special Cash Payment, on February 1, 2021, N&B borrowed $1.25 billion under a senior unsecured term loan agreement (the "N&B Term Loan"). The obligations and liabilities associated with the N&B Notes Offering and the N&B Term Loan were separated from the Company against,on February 1, 2021 upon consummation of the N&B Transaction. The obligations and liabilities of $6.2 billion associated with the N&B Notes Offering are classified as "Liabilities of discontinued operations" in the Company's interim Condensed Consolidated Balance Sheets.
The Company recognized a non-taxable gain of approximately $4,954 million on the N&B Transaction. The gain is recorded in "Income (loss) from discontinued operations, net of tax" in the Company's interim Consolidated Statements of Operations for the three months ended March 31, 2021.
N&B Transaction Agreements
In connection with the N&B Transaction, effective December 15, 2019, the Company, as previously discussed, entered into the following agreements:
•A Separation and Distribution Agreement, subsequently amended and joined by Neptune Merger Sub II Inc., a subsidiary of IFF on January 22, 2021, and as amended further on February 1, 2021 (as amended, the “N&B Separation and Distribution Agreement”) with N&B and IFF, which, among other things, governs the separation of the N&B Business from DuPont indemnifies Dow and Corteva against certain litigation, environmental, income taxes, workers'other post-closing obligations between DuPont and N&B related thereto;
•An Agreement and Plan of Merger, (the “N&B Merger Agreement”) with N&B, IFF and Neptune Merger Sub I Inc., governing the N&B Merger and related matters; and
•An Employee Matters Agreement, subsequently amended on January 22, 2021, (as amended, the “N&B Employee Matters Agreement Agreement”), with N&B and IFF, which, among other things, allocates among the parties the pre- and post-closing liabilities in respect of the current and former employees of the N&B Business (including liabilities in respect of employee compensation and other liabilities that arose priorbenefit plans).
In connection with the closing of the N&B Transaction, and effective February 1, 2021, the Company entered into the following agreements:
•DuPont, N&B and certain of their subsidiaries entered into an Intellectual Property Cross-License Agreement (the “N&B IP Cross-License Agreement”). The IP Cross-License Agreement sets forth the terms and conditions under which the applicable parties may use in their respective businesses certain know-how (including trade secrets), copyrights, design rights, software, and patents, allocated to another party pursuant to the Distributions, as applicable. The term of this indemnification is indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. At March 31, 2020, the indemnified assets were $134 million within "Accounts and notes receivable, net" and $141 million within "Deferred charges and other assets" and indemnified liabilities were $80 million within "Accrued and other current liabilities" and $95 million within "Other noncurrent obligations."
Refer to Note 13 for additional information regarding treatment of litigation and environmental related matters under theN&B Separation and Distribution Agreement, and pursuant to which N&B may use certain standards retained by DuPont. All licenses under the LetterIP Cross-License Agreement are non-exclusive, worldwide, and royalty-free; and
•DuPont, N&B and IFF entered into a Tax Matters Agreement (the “N&B Tax Matters Agreement”), which governs the parties’ rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, the preservation of the expected tax-free status of the transactions contemplated by the N&B Separation and Distribution Agreement, and other matters regarding taxes. See Note 6 for additional information on the N&B Tax Matters Agreement.
Assets Held for Sale
In October 2020, the Company entered into a definitive agreement to sell its Biomaterials business unit, which includes the Company's equity method investment in DuPont Tate & Lyle Bio Products. In January 2021, the Company entered into separate definitive agreements to sell its Clean Technologies and Solamet® businesses. These divestitures, subject to regulatory approval and customary closing conditions, are expected to close in the second half of 2021 and generate in aggregate pre-tax cash proceeds of about $920 million. The Company also signed a non-binding letter of intent to sell Chestnut Run labs, a portion of the Company's Chestnut Run campus. This transaction is expected to close within one year.
The assets and liabilities associated with the Biomaterials and Clean Technologies businesses met the held for sale criteria at December 31, 2020, and the assets and liabilities associated with the Solamet® business and Chestnut Run labs met the held for sale criteria at March 31, 2021. The Biomaterials, Clean Technologies and Solamet® businesses are reported in Corporate.
The following table summarizes the carrying value of the major assets and liabilities of the Biomaterials, Clean Technologies, and Solamet® business units and Chestnut Run labs as of March 31, 2021 (collectively, the “Held for Sale Disposal Group”) and the Biomaterials and Clean Technologies business units as of December 31, 2020:
| | | | | | | | |
| In millions | March 31, 2021 | December 31, 2020 |
| Assets | | |
| Accounts and notes receivable - net | $ | 68 | | $ | 63 | |
| Inventories | 72 | | 75 | |
| Other current assets | 36 | | 35 | |
| Investments and noncurrent receivables | 166 | | 164 | |
| Property, plant and equipment - net | 83 | | 34 | |
| Goodwill | 267 | | 267 | |
| Other intangible assets | 168 | | 168 | |
| Deferred charges and other assets | 3 | | 4 | |
| Assets held for sale | $ | 863 | | $ | 810 | |
| Liabilities | | |
| Accounts payable | $ | 44 | | $ | 40 | |
| Income taxes payable | 3 | | 1 | |
| Accrued and other current liabilities | 40 | | 50 | |
| Deferred income tax liabilities | 29 | | 30 | |
| Pension and other post-employment benefits - noncurrent | 1 | | 1 | |
| Other noncurrent obligations | 16 | | 18 | |
| Liabilities related to assets held for sale | $ | 133 | | $ | 140 | |
Sale of Compound Semiconductor Solutions
In the first quarter of 2020, the Company completed the sale of its Compound Semiconductor Solutions business unit, a part of the Electronics & ImagingIndustrial segment, to SK Siltron. The proceeds received in the first quarter of 2020 related to the sale of the business were approximately $420 million. The sale resulted inFor the three months ended March 31,2020, a pre-tax gain of $197 million ($102 million net of tax) was recorded in "Sundry income (expense) - net" in the Company's interim Consolidated Statements of Operations for the three months ended March 31, 2020.Operations.
Integration and Separation Costs
Integration and separation costs for continuing operations to date primarily have consistedconsist of financial advisory, information technology, legal, accounting, consulting, and other professional advisory feesfees. In the first quarter of 2021, these costs were primarily associated with the preparation andexecution of activities related to strategic initiatives including the divestiture of the Held for Sale Disposal Group. In the first quarter of 2020, these costs were primarily associated with the execution of activities related to the post-DWDP Merger post-Merger integration and the Distributions, and beginning in the fourth quarter of 2019, the intended separation of the Nutrition & Biosciences business.DWDP Distributions.
These costs are recorded within "Integration and separation costs" within the interim Consolidated Statements of Operations.
| | | | | | | | |
| Three Months Ended March 31, |
| In millions | 2021 | 2020 |
| Integration and separation costs | $ | 6 | | $ | 123 | |
|
| | | | | | |
| | Three Months Ended March 31, |
| In millions | 2020 | 2019 |
| Integration and separation costs | $ | 197 |
| $ | 611 |
|
NOTE 43 - REVENUE
Revenue Recognition
Products
Substantially all of DuPont's revenue is derived from product sales. Product sales consist of sales of DuPont's products to supply manufacturers and distributors. DuPont considers purchase orders, which in some cases are governed by master supply agreements, to be a contract with a customer. Contracts with customers are considered to be short-term when the time between order confirmation and satisfaction of the performance obligations is equal to or less than one year.
Disaggregation of Revenue
The Company disaggregates its revenue from contracts with customers by segment and business or major product line and geographic region, as the Company believes it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows.
|
| | | | | | |
| Net Trade Revenue by Segment and Business or Major Product Line | Three Months Ended March 31, |
| In millions | 2020 | 2019 |
| Image Solutions | $ | 148 |
| $ | 154 |
|
| Interconnect Solutions | 266 |
| 238 |
|
| Semiconductor Technologies | 470 |
| 433 |
|
| Electronics & Imaging | $ | 884 |
| $ | 825 |
|
| Food & Beverage | $ | 738 |
| $ | 755 |
|
| Health & Biosciences | 605 |
| 570 |
|
| Pharma Solutions | 208 |
| 210 |
|
| Nutrition & Biosciences | $ | 1,551 |
| $ | 1,535 |
|
| Healthcare & Specialty | $ | 359 |
| $ | 384 |
|
| Industrial & Consumer | 266 |
| 308 |
|
| Mobility Solutions | 519 |
| 625 |
|
| Transportation & Industrial | $ | 1,144 |
| $ | 1,317 |
|
| Safety Solutions | $ | 631 |
| $ | 665 |
|
| Shelter Solutions | 348 |
| 357 |
|
| Water Solutions | 297 |
| 261 |
|
| Safety & Construction | $ | 1,276 |
| $ | 1,283 |
|
| Biomaterials | $ | 34 |
| $ | 59 |
|
| Clean Technologies | 60 |
| 65 |
|
| DuPont Teijin Films | 43 |
| 37 |
|
| Photovoltaic & Advanced Materials | 229 |
| 254 |
|
Sustainable Solutions 1 | — |
| 39 |
|
| Non-Core | $ | 366 |
| $ | 454 |
|
| Total | $ | 5,221 |
| $ | 5,414 |
|
•Within Electronics & Industrial (formerly known as Electronics & Imaging) realigned product lines to include businesses formerly in Transportation & Industrial and renamed the Image Solutions product lines as Industrial Solutions;
•Renamed Safety & Construction as Water & Protection;
•Realigned certain businesses from the former Non-Core segment and renamed product lines within Mobility & Materials (formerly known as Transportation & Industrial) as Advanced Solutions, Engineering Polymers, and Performance Resins.
| | | | | | | | |
| Net Trade Revenue by Segment and Business or Major Product Line | Three Months Ended March 31, |
| In millions | 2021 | 2020 |
| Industrial Solutions | $ | 458 | | $ | 412 | |
| Interconnect Solutions | 330 | | 266 | |
| Semiconductor Technologies | 512 | | 437 | |
| Electronics & Industrial | $ | 1,300 | | $ | 1,115 | |
| Safety Solutions | $ | 637 | | $ | 631 | |
| Shelter Solutions | 360 | | 348 | |
| Water Solutions | 331 | | 297 | |
| Water & Protection | $ | 1,328 | | $ | 1,276 | |
| Advanced Solutions | $ | 382 | | $ | 306 | |
| Engineering Polymers | 497 | | 519 | |
| Performance Resins | 336 | | 266 | |
| Mobility & Materials | $ | 1,215 | | $ | 1,091 | |
Corporate 1 | $ | 133 | | $ | 188 | |
| Total | $ | 3,976 | | $ | 3,670 | |
1. The Sustainable Solutions business wasCorporate net sales reflect activity of to be divested in the third quarter of 2019.and previously divested businesses.
| | | | | | | | |
| Net Trade Revenue by Geographic Region | Three Months Ended March 31, |
| In millions | 2021 | 2020 |
| U.S. & Canada | $ | 1,051 | | $ | 1,152 | |
EMEA 1 | 830 | | 791 | |
| Asia Pacific | 1,950 | | 1,581 | |
| Latin America | 145 | | 146 | |
| Total | $ | 3,976 | | $ | 3,670 | |
1.Europe, Middle East and Africa.
|
| | | | | | |
| Net Trade Revenue by Geographic Region | Three Months Ended March 31, |
| In millions | 2020 | 2019 |
| U.S. & Canada | $ | 1,742 |
| $ | 1,776 |
|
EMEA 1 | 1,271 |
| 1,380 |
|
| Asia Pacific | 1,913 |
| 1,945 |
|
| Latin America | 295 |
| 313 |
|
| Total | $ | 5,221 |
| $ | 5,414 |
|
| |
1. | Europe, Middle East and Africa. |
Contract Balances
From time to time, the Company enters into arrangements in which it receives payments from customers based upon contractual billing schedules. The Company records accounts receivables when the right to consideration becomes unconditional. Contract assets include amounts related to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. Contract liabilities primarily reflect deferred revenue from advance payment for product that the Company has received from customers. The Company classifies deferred revenue as current or noncurrent based on the timing of when the Company expects to recognize revenue.
Revenue recognized in the first three months of 20202021 from amounts included in contract liabilities at the beginning of the period was approximately $14 million (approximately $10 million inand the first three months of 2019). The amount of contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional waswere insignificant. The Company did not recognize any asset impairment charges related to contract assets during the period.
| | | | | | | | |
| Contract Balances | March 31, 2021 | December 31, 2020 |
| In millions |
Accounts and notes receivable - trade 1 | $ | 2,077 | | $ | 1,911 | |
| | |
Deferred revenue - current 2 | $ | 32 | | $ | 16 | |
Deferred revenue - noncurrent 3 | $ | 20 | | $ | 21 | |
1.Included in "Accounts and notes receivable - net" in the interim Condensed Consolidated Balance Sheets.
2.Included in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets.
3.Included in "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets.
|
| | | | | | |
| Contract Balances | March 31, 2020 | December 31, 2019 |
| In millions |
Accounts and notes receivable - trade 1 | $ | 3,156 |
| $ | 3,007 |
|
Contract assets - current 2 | $ | 32 |
| $ | 35 |
|
Deferred revenue - current 3 | $ | 69 |
| $ | 43 |
|
Deferred revenue - noncurrent 4 | $ | 29 |
| $ | 34 |
|
| |
1. | Included in "Accounts and notes receivable - net" in the interim Condensed Consolidated Balance Sheets. |
| |
2. | Included in "Other current assets" in the interim Condensed Consolidated Balance Sheets. |
| |
3. | Included in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets. |
| |
4. | Included in "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets. |
NOTE 54 - RESTRUCTURING AND ASSET RELATED CHARGES - NET
Charges for restructuring programs and asset related charges, which includes other asset impairments, were $404$2 million for the three months ended March 31, 2020 ($712021 and $398 million for the three months ended March 31, 2019).2020. These charges were recorded in "Restructuring and asset related charges - net" in the interim Consolidated Statements of Operations. The total liability related to restructuring programs was $230$55 million at March 31, 2020 ($1622021 and $96 million at December 31, 2019).2020, recorded in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets. Restructuring activity consists of the following:following programs:
2020 Restructuring Program
In the first quarter of 2020, the Company approved restructuring actions designed to capture near-term cost reductions and to further simplify certain organizational structures in anticipation of the expected closure of the Proposed N&B Transaction (the "2020 Restructuring Program"). As a result of these actions, theThe Company expects to record totalrecorded pre-tax restructuring charges up to $180of $170 million comprised of $125 millioninception-to-date, consisting of severance and related benefit costs $50of $118 million ofand asset related charges and $5 million of costs related to contract terminations. For$52 million.
The following tables summarize the three months ended March 31, 2020, DuPont recorded a pre-tax chargecharges related to the 2020 Restructuring Program inProgram:
| | | | | | | | |
| Three Months Ended March 31, |
| In millions | 2021 | 2020 |
| Severance and related benefit costs | $ | 0 | | $ | 90 | |
| Asset related charges | 2 | | 15 | |
| Total restructuring and asset related charges - net | $ | 2 | | $ | 105 | |
| | | | | | | | | |
| 2020 Restructuring Program Charges by Segment | Three Months Ended March 31, | |
| In millions | 2021 | 2020 | |
| Electronics & Industrial | $ | 0 | | $ | 4 | | |
| Water & Protection | 0 | | 20 | | |
| Mobility & Materials | 0 | | 24 | | |
Corporate | 2 | | 57 | | |
| Total | $ | 2 | | $ | 105 | | |
The following table summarizes the amount of $111 million, recognized in "Restructuring and assetactivities related charges - net" into the Company's interim Consolidated Statement of Operations, comprised of $96 million of severance and related benefit costs and $15 million of asset related charges. At March 31, 2020 totalRestructuring Program:
| | | | | | | | | | | | | |
| 2020 Restructuring Program | Severance and Related Benefit Costs | Asset Related Charges | Total | | |
| In millions |
| Reserve balance at December 31, 2020 | $ | 62 | | $ | 0 | | $ | 62 | | | |
| Year-to-date restructuring charges | $ | 0 | | $ | 2 | | $ | 2 | | | |
| Charges against the reserve | 0 | | (2) | | (2) | | | |
| Cash payments | $ | (26) | | $ | 0 | | $ | (26) | | | |
| Reserve balance at March 31, 2021 | $ | 36 | | $ | 0 | | $ | 36 | | | |
Total liabilities related to the 2020 Restructuring Program were $96$36 million for severanceat March 31, 2021 and related benefit costs, recognized$62 million at December 31, 2020, respectively, and recorded in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets.
The following table summarizes the charges incurred by segment related to the 2020 Restructuring Program:Program is considered substantially complete.
|
| | | |
| 2020 Restructuring Program Charges by Segment | Three Months Ended March 31, 2020 |
| In millions |
| Electronics & Imaging | $ | 4 |
|
| Nutrition & Biosciences | 6 |
|
| Transportation & Industrial | 24 |
|
| Safety & Construction | 20 |
|
| Non-Core | — |
|
Corporate | 57 |
|
| Total | $ | 111 |
|
The Company expects actions related to this program to be substantially complete by the end of 2020.
2019 Restructuring Program
During the second quarter of 2019 and in connection with the ongoing integration activities, DuPont approved restructuring actions to simplify and optimize certain organizational structures following the completion of the DWDP Distributions (the "2019 Restructuring Program"). The Company has recorded pre-tax restructuring charges of $156$124 million inception-to-date, consisting of severance and related benefit costs of $122$97 million and asset related charges of $34$27 million.
The Company incurred charges for severance and related benefit costs of $18 millionTotal liabilities related to the 2019 Restructuring Program during the three months endedwere $6 million at March 31, 2020. These charges consisted of $12021 and $14 million related to the Transportation & Industrial segment and $17 million related to Corporate.
The following table summarizes the activities related to the 2019 Restructuring Program:
|
| | | |
| 2019 Restructuring Program | Severance and Related Benefit Costs |
| In millions |
| Reserve balance at December 31, 2019 | $ | 86 |
|
| Current quarter restructuring charges | 18 |
|
| Non-cash compensation | (6 | ) |
| Cash payments | (23 | ) |
| Reserve balance at March 31, 2020 | $ | 75 |
|
At Marchat December 31, 2020, the $75 million for severancerespectively, and related benefit costs was includedrecorded in "Accrued and other current liabilities" ($86 million at December 31, 2019) in the interim Condensed Consolidated Balance Sheets. The Company expects actions related to this program to be2019 Restructuring Program is considered substantially complete in the second quarter of 2020.complete.
DowDuPont Cost Synergy Program
In September and November 2017, the Company approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the "Synergy Program"), which was designed to integrate and optimize the organization following the DWDP Merger and in preparation for the Distributions of Dow and Corteva. The portions of the charges, costs and expenses attributable to integration and optimization within the Agriculture and Materials Science Divisions are reflected in discontinued operations.DWDP Distributions. The Company has recorded pre-tax restructuring charges attributable to the continuing operations of DuPont of $490$346 million inception-to-date, consisting of severance and related benefit costs of $215$138 million, asset related charges of $209$159 million and contract termination charges of $66 million related to charges.$49 million.
The following tables summarize the charges incurredTotal liabilities related to the DowDuPont Cost Synergy Program:
|
| | | | | | |
| | Three Months Ended March 31, |
| In millions | 2020 | 2019 |
| Severance and related benefit costs | $ | — |
| $ | 43 |
|
| Contract termination charges | 5 |
| 16 |
|
| Asset related charges | — |
| 13 |
|
Total restructuring and asset related charges - net 1,2 | $ | 5 |
| $ | 72 |
|
1. The charges for the three months endedProgram were $13 million at March 31, 2020 include $52021 and $20 million related to Safety and Construction.
2. The charges for the three months ended March 31, 2019 include $27 million related to Nutrition & Biosciences, $2 million related to Safety and Construction, $44 million related to Corporate, and a benefit of $1 million related to Non Core.
Charges for the three months ended Marchat December 31, 2020, respectively, and 2019 include $5 million and $71 million, respectively, recognized in "Restructuring and asset related charges - net." The charge for the three months ended March 31, 2019 also includes $1 million recognized in "Equity in earnings of nonconsolidated affiliates" in the interim Consolidated Statements of Operations.
The following table summarizes the activities related to the DowDuPont Cost Synergy Program:
|
| | | | | | | | | |
| DowDuPont Cost Synergy Program | Severance and Related Benefit Costs | Contract Termination Charges | Total |
| In millions |
| Reserve balance at December 31, 2019 | $ | 74 |
| $ | 2 |
| $ | 76 |
|
| Current quarter restructuring charges | — |
| 5 |
| 5 |
|
| Cash payments | (22 | ) | — |
| (22 | ) |
| Reserve balance at March 31, 2020 | $ | 52 |
| $ | 7 |
| $ | 59 |
|
At March 31, 2020, the $59 million was includedrecorded in "Accrued and other current liabilities" ($76 million at December 31, 2019) in the interim Condensed Consolidated Balance Sheets. The DowDuPont Cost Synergy Program is considered substantially complete at March 31, 2020.complete.
Asset Impairments
The Company reviews and evaluates its long-lived assets for impairment when events and changes in circumstances indicate that the related carrying amount of such assets may not be recoverable and may exceed their fair value. For purposes of determining impairment, assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.
In the first quarter of 2020, expectations of proceeds related to certain potential divestitures within the Non-Core segmentCorporate gave rise to fair value indicators and, thus, triggering events requiring the Company to perform a recoverability assessment related to its biomaterialsBiomaterials business unit. The Company performed a long-lived asset impairment test and determined that, based on undiscounted cash flows, the carrying amount of certain long-lived assets was not recoverable. Accordingly, the Company estimated the fair value of these assets using a market approach utilizing Level 3 unobservable inputs. As a result, the Company recognized a $270 million pre-tax impairment charge recorded within “Restructuring and asset related charges - net” in the interim Consolidated Statements of Operation for the three months ended March 31, 2020 with the charge impacting definite-lived intangible assets and property, plant, and equipment.
NOTE 65 - SUPPLEMENTARY INFORMATION
| | | Sundry Income (Expense) - Net | Three Months Ended March 31, | Sundry Income (Expense) - Net | Three Months Ended March 31, | |
| In millions | 2020 | 2019 | In millions | 2021 | 2020 | |
| Non-operating pension and other post employment benefit (OPEB) credits | $ | 11 |
| $ | 21 |
| |
| Non-operating pension and other post-employment benefit (OPEB) credits | | Non-operating pension and other post-employment benefit (OPEB) credits | $ | 12 | | $ | 11 | | |
| Interest income | 2 |
| 40 |
| Interest income | 2 | | 2 | | |
Net gain on divestiture and sales of other assets and investments 1,2 | 197 |
| 53 |
| |
Foreign exchange (losses) gains, net | (8 | ) | (61 | ) | |
Miscellaneous income (expenses) - net 3 | 9 |
| 31 |
| |
Net gain on divestiture and sales of other assets and investments 1 | | Net gain on divestiture and sales of other assets and investments 1 | 27 | | 197 | | |
Foreign exchange losses, net | | Foreign exchange losses, net | (9) | | (3) | | |
| Miscellaneous (expenses) income - net 2 | | Miscellaneous (expenses) income - net 2 | (16) | | 5 | | |
| Sundry income (expense) - net | $ | 211 |
| $ | 84 |
| Sundry income (expense) - net | $ | 16 | | $ | 212 | | |
1.The three months ended March 31, 2021 reflects income of $24 million related to the gain on sale of assets within the Electronics & Industrial segment. The three months ended March 31, 2020 reflects income of $197 million related to the gain on sale of the Compound Semiconductor Solutions business unit within the Electronics & ImagingIndustrial segment.
2. The three months ended March 31, 20192021 includes incomean impairment charge of $51approximately $15 million related to a saleChestnut Run labs, which is part of assets within the Electronics & Imaging segment.Held for Sale Disposal Group.
3. Miscellaneous income (expenses) - net for the three months ended March 31, 2019 includes $26 million related to licensing income within the Safety & Construction segment.
Cash, Cash Equivalents and Restricted Cash
From time to time, the Company is required to set aside funds for various activities that arise in the normal course of business. These funds typically have legal restrictions associated with them and are deposited in an escrow account or held in a separately identifiable account by the Company. Historical EID entered into a trust agreement in 2013 (as amended and restated in 2017), establishing and requiring Historical EID to fund a trust (the "Trust") for cash obligations under certain non-qualified benefit and deferred compensation plans upon a change in control event as defined in the Trust agreement. Under the Trust agreement, the consummation of the Merger was a change in control event. After the distribution of Corteva, the Trust assets related to Corteva employees were transferred to a new trust for Corteva (the "Corteva Trust"). As a result, the Trust currently held by DuPont relates to funding obligations to DuPont employees. At MarchDecember 31, 2020, the Company had approximately $6.2 billion recorded within non-current “Restricted cash” in the Consolidated Balance Sheet. The restricted cash relates to net proceeds received from an offering of $34 million ($37 million at December 31, 2019) included in "Other current assets"$6.25 billion of senior unsecured notes (the "N&B Notes Offering") associated with the N&B transaction. On February 1, 2021 this amount was released from escrow as part of the N&B Transaction and is no longer restricted. The liability from the N&B Notes Offering was classified as "Liabilities of discontinued operations" in the Company's interim Condensed Consolidated Balance Sheets which was completely attributed to the Trust.
Accrued and Other Current Liabilities
"Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets were $1,434 million at March 31, 2020 and $1,342 million atSheet as of December 31, 2019. No component2020. See Note 2 for further discussion of "Accrued and other current liabilities" was more than 5 percentthe Company's divestiture of total current liabilities at March 31, 2020. Accrued payroll, which is a component of "Accrued and other current liabilities," was $479 million at December 31, 2019. No other component of "Accrued and other current liabilities" was more than 5 percent of total current liabilities at December 31, 2019.the N&B business.
NOTE 76 - INCOME TAXES
For periods between the Merger and the Distributions, DuPont's consolidated federal income tax group and consolidated tax return included the Dow and Corteva entities. Generally, the consolidated tax liability of the DuPont U.S. tax group for each year was apportioned among the members of the consolidated group in accordance with the terms of the Amended and Restated Tax Matters Agreement. DuPont, Corteva and Dow intend that to the extent Federal and/or State corporate income tax liabilities are reduced through the utilization of tax attributes of the other, settlement of any receivable and payable generated from the use of the other party’s sub-group attributes will be in accordance with the Amended and Restated Tax Matters Agreement.
The Company's effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attributes. The effective tax rate on continuing operations for the first quarter of 2020 was (7.8) percent, compared with an effective tax rate of 55.2 percent for the first quarter of 2019. The effective tax rate for the first quarter of 2020 was principally the result of the non-tax-deductible goodwill impairment charge impacting the Non-core segment. See Note 11 for more information regarding the goodwill impairment charge.
Each year the Company files hundreds of tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the tax authorities. Positions challenged by the tax authorities may be settled or appealed by the Company. As a result, there is an uncertainty in income taxes recognized in the Company’s financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. The ultimate resolution of such uncertainties is not expected to have a material impact on the Company's results of operations.
Certain internal distributions and reorganizations that occurred in preparation for the N&B Transaction qualified as tax-free transactions under the applicable sections of the Internal Revenue Code. If the aforementioned transactions were to fail to qualify for non-recognition treatment for U.S. federal income tax purposes, then the Company could be subject to significant tax liability. In connection with the closing of the N&B Transaction, DuPont, N&B and IFF entered into the N&B Tax Matters Agreement. Under the N&B Tax Matters Agreement, the Company would generally be allocated such liability and not be indemnified, unless certain non-qualifying actions are undertaken by N&B or IFF. To the extent that the Company is responsible for any such liability, there could be a material adverse impact on the Company's business, financial condition, results of operations and cash flows in future reporting periods.
For periods between the DWDP Merger and the DWDP Distributions, DuPont's consolidated federal income tax group and consolidated tax return included the Dow and Corteva entities. Generally, the consolidated tax liability of the DuPont U.S. tax group for each year was apportioned among the members of the consolidated group in accordance with the terms of the Amended and Restated DWDP Tax Matters Agreement. DuPont, Corteva and Dow intend that to the extent Federal and/or State corporate income tax liabilities are reduced through the utilization of tax attributes of the other, settlement of any receivable and payable generated from the use of the other party’s sub-group attributes will be in accordance with the Amended and Restated DWDP Tax Matters Agreement.
NOTE 87 - EARNINGS PER SHARE CALCULATIONS
The following tables provide earnings per share calculations for the three months ended March 31, 20202021 and 2019:2020:
| | | | | | | | |
| Net Income for Earnings Per Share Calculations - Basic & Diluted | Three Months Ended March 31, |
| In millions | 2021 | 2020 |
| Income (loss) from continuing operations, net of tax | $ | 541 | | $ | (550) | |
| Net income from continuing operations attributable to noncontrolling interests | 4 | | 6 | |
| | |
| | |
| Income (loss) from continuing operations attributable to common stockholders | $ | 537 | | $ | (556) | |
| Income (loss) from discontinued operations, net of tax | 4,857 | | (60) | |
| Net income from discontinued operations attributable to noncontrolling interests | 0 | | 0 | |
| Income (loss) from discontinued operations attributable to common stockholders | 4,857 | | (60) | |
| Net income (loss) attributable to common stockholders | $ | 5,394 | | $ | (616) | |
|
| | | | | | |
| Net Income for Earnings Per Share Calculations - Basic & Diluted | Three Months Ended March 31, |
| In millions | 2020 | 2019 |
| Loss from continuing operations, net of tax | $ | (610 | ) | $ | (74 | ) |
| Net income from continuing operations attributable to noncontrolling interests | 6 |
| 4 |
|
Net income from continuing operations attributable to participating securities 1 | — |
| 1 |
|
| Loss from continuing operations attributable to common stockholders | $ | (616 | ) | $ | (79 | ) |
| Income from discontinued operations, net of tax | — |
| 646 |
|
| Net income from discontinued operations attributable to noncontrolling interests | — |
| 47 |
|
| Income from discontinued operations attributable to common stockholders | — |
| 599 |
|
| Net (loss) income attributable to common stockholders | $ | (616 | ) | $ | 520 |
|
| | | | | | | | |
| Earnings Per Share Calculations - Basic | Three Months Ended March 31, |
| Dollars per share | 2021 | 2020 |
| |
| | |
| Earnings (loss) from continuing operations attributable to common stockholders | $ | 0.89 | | $ | (0.75) | |
| Earnings (loss) from discontinued operations, net of tax | 8.03 | | (0.08) | |
Earnings (loss) attributable to common stockholders 2 | $ | 8.92 | | $ | (0.83) | |
| | | | | | | | |
| Earnings Per Share Calculations - Diluted | Three Months Ended March 31, |
| Dollars per share | 2021 | 2020 |
| Earnings (loss) from continuing operations attributable to common stockholders | $ | 0.89 | | $ | (0.75) | |
| Earnings (loss) from discontinued operations, net of tax | 8.01 | | (0.08) | |
Earnings (loss) attributable to common stockholders 2 | $ | 8.90 | | $ | (0.83) | |
|
| | | | | | |
| Earnings Per Share Calculations - Basic | Three Months Ended March 31, |
| Dollars per share | 2020 | 2019 |
| Loss from continuing operations attributable to common stockholders | $ | (0.83 | ) | $ | (0.11 | ) |
| Income from discontinued operations, net of tax | — |
| 0.80 |
|
| Net (loss) income attributable to common stockholders | $ | (0.83 | ) | $ | 0.69 |
|
| | | | | | | | |
Share Count Information | Three Months Ended March 31, |
| Shares in millions | 2021 | 2020 |
| Weighted-average common shares - basic | 604.8 | | 738.6 | |
| Plus dilutive effect of equity compensation plans | 1.5 | | 0 | |
| | |
| Weighted-average common shares - diluted | 606.3 | | 738.6 | |
Stock options and restricted stock units excluded from EPS calculations 1 | 2.2 | | 6.4 | |
|
| | | | | | |
| Earnings Per Share Calculations - Diluted | Three Months Ended March 31, |
| Dollars per share | 2020 | 2019 |
| Loss from continuing operations attributable to common stockholders | $ | (0.83 | ) | $ | (0.11 | ) |
| Income from discontinued operations, net of tax | — |
| 0.80 |
|
| Net (loss) income attributable to common stockholders | $ | (0.83 | ) | $ | 0.69 |
|
|
| | | | |
Share Count Information | Three Months Ended March 31, |
| Shares in millions | 2020 | 2019 |
| Weighted-average common shares - basic | 738.6 |
| 750.0 |
|
| Plus dilutive effect of equity compensation plans | — |
| — |
|
| Weighted-average common shares - diluted | 738.6 |
| 750.0 |
|
Stock options and restricted stock units excluded from EPS calculations 2 | 6.4 |
| 6.4 |
|
| |
1. | Historical Dow restricted stock units are considered participating securities due to Historical Dow's practice of paying dividend equivalents on unvested shares. |
2. 1.These outstanding options to purchase shares of common stock and restricted stock units were excluded from the calculation of diluted earnings per share because the effect of including them would have been antidilutive.
NOTE 8 - ACCOUNTS AND NOTES RECEIVABLE - NET
| | | | | | | | |
| In millions | March 31, 2021 | December 31, 2020 |
Accounts receivable – trade 1 | $ | 2,015 | | $ | 1,850 | |
| Notes receivable – trade | 62 | | 61 | |
Other 2 | 532 | | 510 | |
| Total accounts and notes receivable - net | $ | 2,609 | | $ | 2,421 | |
1.Accounts receivable – trade is net of allowances of $33 million at March 31, 2021 and at December 31, 2020. Allowances are equal to the estimated uncollectible amounts and current expected credit loss. That estimate is based on historical collection experience, current economic and market conditions, and review of the current status of customers' accounts.
2.Other includes receivables in relation to value added tax, fair value of derivative instruments, indemnification assets, and general sales tax and other taxes. No individual group represents more than ten percent of total receivables.
NOTE 9 - INVENTORIES
| | | | | | | | |
| Inventories | March 31, 2021 | December 31, 2020 |
| In millions |
| Finished goods | $ | 1,526 | | $ | 1,503 | |
| Work in process | 552 | | 515 | |
| Raw materials | 294 | | 251 | |
| Supplies | 127 | | 124 | |
| Total inventories | $ | 2,499 | | $ | 2,393 | |
|
| | | | | | |
| Inventories | March 31, 2020 | December 31, 2019 |
| In millions |
| Finished goods | $ | 2,731 |
| $ | 2,621 |
|
| Work in process | 858 |
| 855 |
|
| Raw materials | 589 |
| 599 |
|
| Supplies | 232 |
| 244 |
|
| Total inventories | $ | 4,410 |
| $ | 4,319 |
|
21NOTE 10 - PROPERTY, PLANT, AND EQUIPMENT
| | | | | | | | | | | | | | | | | | |
| Estimated Useful Lives (Years) | March 31, 2021 | | December 31, 2020 |
| In millions |
| Land and land improvements | 1 | - | 25 | $ | 619 | | | $ | 682 | |
| Buildings | 1 | - | 50 | 2,038 | | | 2,031 | |
| Machinery, equipment, and other | 1 | - | 25 | 7,211 | | | 7,127 | |
| Construction in progress | | | | 1,235 | | | 1,283 | |
| Total property, plant and equipment | | | | $ | 11,103 | | | $ | 11,123 | |
| Total accumulated depreciation | | | | $ | 4,359 | | | $ | 4,256 | |
| Total property, plant and equipment - net | | | | $ | 6,744 | | | $ | 6,867 | |
| | | | | | | | |
| Three Months Ended March 31, |
| In millions | 2021 | 2020 |
| Depreciation expense | $ | 161 | | $ | 168 | |
NOTE 1011 - NONCONSOLIDATED AFFILIATES
The Company's investments in companies accounted for using the equity method ("nonconsolidated affiliates"), by classification are recorded in "Investments and other noncurrent receivables" in the interim Condensed Consolidated Balance Sheets, areSheets.
The Company's net investment in nonconsolidated affiliates is shown in the following table:
| | | | | | | | |
| Investments in Nonconsolidated Affiliates | March 31, 2021 | December 31, 2020 |
| In millions |
| Investments and other noncurrent receivables | $ | 902 | | $ | 889 | |
| Accrued and other current liabilities | (69) | | (71) | |
| Net investment in nonconsolidated affiliates | $ | 833 | | $ | 818 | |
|
| | | | | | |
| Investments in Nonconsolidated Affiliates | Mar 31, 2020 | Dec 31, 2019 |
| In millions |
| Investments in nonconsolidated affiliates | $ | 1,227 |
| $ | 1,204 |
|
| Accrued and other current liabilities | (84 | ) | (85 | ) |
| Other noncurrent obligations | (351 | ) | (358 | ) |
| Net investment in nonconsolidated affiliates | $ | 792 |
| $ | 761 |
|
The Company maintained an ownership interest in 2114 nonconsolidated affiliates at March 31, 2020. The following table reflects the Company's principal nonconsolidated affiliates and its ownership interest (direct and indirect) for each at March 31, 2020:2021.
|
| | | |
| Country | Ownership Interest |
| March 31, 2020 |
The HSC Group: | | |
DC HSC Holdings LLC
1
| United States | 50.0 | % |
Hemlock Semiconductor L.L.C. | United States | 50.1 | % |
| |
1. | DC HSC Holdings LLC holds an 80.5 percent indirect ownership interest in Hemlock Semiconductor Operations LLC. |
Sales to nonconsolidated affiliates represented less than 2 percent and 3 percent of total net sales for the three months ended March 31, 2021 and 2020, and 2019.respectively. Sales to nonconsolidated affiliates arefor the three months ended March 31, 2020 were primarily related to the sale of trichlorosilane, a raw material used in the production of polycrystalline silicon, to the HSC Group.Group, prior to the TCS/Hemlock Disposal in the third quarter of 2020. Sales of this raw material to the HSC Group are reflected in Non-Core.Corporate. Purchases from nonconsolidated affiliates represented approximately 2less than 4 percent of “Cost of sales” for the three months ended March 31, 20202021 and 2019.2020.
HSC Group
The following table reflects the carrying value of the HSC Group investments at March 31, 2020 and December 31, 2019:
|
| | | | | | | |
| Investment in the HSC Group | | Investment |
| In millions | Balance Sheet Classification | Mar 31, 2020 | Dec 31, 2019 |
| Hemlock Semiconductor L.L.C. | Other noncurrent obligations | $ | (351 | ) | $ | (358 | ) |
| DC HSC Holdings LLC | Investments in nonconsolidated affiliates | $ | 97 |
| $ | 87 |
|
The following is summarized financial information for the Company's principal nonconsolidated equity method investments. The amounts shown below represent 100 percent of these equity method investments' results of operations:
|
| | | | | | |
| Results of Operations | Three Months Ended March 31, |
| In millions | 2020 | 2019 |
Revenues 1 | $ | 185 |
| $ | 185 |
|
Cost of sales 1 | $ | 127 |
| $ | 107 |
|
| Income from continuing operations | $ | 40 |
| $ | 63 |
|
| Net income attributed to entities | $ | 35 |
| $ | 52 |
|
| |
1. | Includes sales and cost of sales of $22 million and $21 million for the three months ended March 31, 2020 and 2019, respectively, that have not been eliminated between Hemlock Semiconductor L.L.C and DC HSC Holdings in the presentation of the summarized income statement information above. |
NOTE 1112 - GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amounts of goodwill during the three months ended March 31, 20202021 were as follows:
| | | | | | | | | | | | | | |
| Electronics & Industrial | Water & Protection | Mobility & Materials | Total |
| In millions |
| Balance at December 31, 2020 | $ | 8,458 | | $ | 6,969 | | $ | 3,275 | | $ | 18,702 | |
| Currency Translation Adjustment | (61) | | (88) | | (50) | | (199) | |
| Other | 0 | | 0 | | 8 | | 8 | |
| Balance at March 31, 2021 | $ | 8,397 | | $ | 6,881 | | $ | 3,233 | | $ | 18,511 | |
|
| | | | | | | | | | | | | | | | | | |
| | Elect. & Imaging | Nutrition & Biosciences | Transp. & Industrial | Safety & Const. | Non-Core | Total |
| In millions |
Balance at December 31, 2019 | $ | 7,092 |
| $ | 11,012 |
| $ | 6,931 |
| $ | 6,711 |
| $ | 1,405 |
| $ | 33,151 |
|
| Acquisitions | — |
| — |
| — |
| 53 |
| — |
| 53 |
|
| Divestitures | (199 | ) | — |
| — |
| — |
| — |
| (199 | ) |
| Impairments | — |
| — |
| — |
| — |
| (533 | ) | (533 | ) |
| Currency Translation Adjustment | (11 | ) | (111 | ) | (25 | ) | (26 | ) | — |
| (173 | ) |
| Measurement Period Adjustments | — |
| — |
| — |
| 18 |
| — |
| 18 |
|
| Balance at March 31, 2020 | $ | 6,882 |
| $ | 10,901 |
| $ | 6,906 |
| $ | 6,756 |
| $ | 872 |
| $ | 32,317 |
|
The Company tests goodwill for impairment annually during the fourth quarter as of October 1, or more frequently when events or changes in circumstances indicate that fair value is below carrying value. As a result of the related acquisition method of accounting in connection with the DWDP Merger, Historical EID’s assets and liabilities were measured at fair value resulting in increases to the Company’s goodwill and other intangible assets. The fair value valuation increased the risk that declines in financial projections, including changes to key assumptions, could have a material, negative impact on the fair value of the Company’s reporting units and assets, and therefore could result in an impairment.
ExpectationsThe 2021 Segment Realignment served as a triggering event requiring the Company to perform an impairment analysis related to goodwill carried by its reporting units as of February 1, 2021, prior to the realignment. As part of the 2021 Segment Realignment, the Company assessed and re-defined certain reporting units effective February 1, 2021, including reallocation of goodwill on a relative fair value basis, as applicable, to new reporting units identified. Goodwill impairment analyses were then performed for the new reporting units identified in the Electronics & Industrial and Mobility & Materials segments impacted by the 2021 Segment Realignment. No impairments were identified as a result of the analyses described above.
In the first quarter of 2020, expectations of proceeds related to certain potential divestitures within the Non-Core segmentCorporate gave rise to fair value indicators and, thus, served as triggering events requiring the Company to perform impairment analyses related to goodwill. As part of the analysis, the Company determined that the fair value of its Photovoltaic and Advanced Materials (“PVAM”) reporting unit was below its carry value resulting in an impairment charge to goodwill. Valuations of the PVAM reporting unit under a combination of the market approach and income approach reflect softening conditions in photovoltaics markets as compared to prior estimates. In connection with this analysis, the Company recorded a pre-tax, non-cash impairment charge of $533 million for the three months ended March 31, 2020 impacting the Non-Core segment.within Corporate.
The Company's analysis usesanalyses above used the discounted cash flow model (a form of the income approach) utilizing Level 3 unobservable inputs. The Company’s significant assumptions in this analysisthese analyses include, but are not limited to, future cash flow projections, the weighted average cost of capital, the terminal growth rate, and the tax rate.rates. The Company’s estimates of future cash flows are based on current regulatory and economic climates, recent operating results, and planned business strategies. These estimates could be negatively affected by changes in federal, state, or local regulations or economic downturns. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from the Company’s estimates. If the Company’s ongoing estimates of future cash flows are not met, the Company may have to record additional impairment charges in future periods. As referenced, the Company also uses a form of the market approach. As such, the Company believes the current assumptions and estimates utilized are both reasonable and appropriate.
COVID-19 continues to adversely impact the broader global economy and has caused significant volatility in financial markets. If there is a of lack of recovery or further global softening in certain markets, mainly in which the Transportation & Industrial segment operates in such as automotive, oil & gas and select industrial end-markets, or a sustained decline in the value of the Company's common stock, the Company may be required to perform additional impairment assessments for its goodwill, other intangibles, and long-lived assets, the results of which could result in material impairment charges.
Other Intangible Assets
The gross carrying amounts and accumulated amortization of other intangible assets by major class are as follows: | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | December 31, 2020 |
| In millions | Gross
Carrying
Amount | Accum Amort | Net | Gross Carrying Amount | Accum Amort | Net |
| Intangible assets with finite lives: | | | | | | |
| Developed technology | $ | 2,763 | | $ | (1,181) | | $ | 1,582 | | $ | 2,844 | | $ | (1,220) | | $ | 1,624 | |
| Trademarks/tradenames | 1,095 | | (453) | | 642 | | 1,095 | | (440) | | 655 | |
| Customer-related | 6,979 | | (2,423) | | 4,556 | | 7,075 | | (2,361) | | 4,714 | |
| Other | 130 | | (82) | | 48 | | 131 | | (81) | | 50 | |
| Total other intangible assets with finite lives | $ | 10,967 | | $ | (4,139) | | $ | 6,828 | | $ | 11,145 | | $ | (4,102) | | $ | 7,043 | |
| Intangible assets with indefinite lives: | | | | | | |
| Trademarks/tradenames | 1,029 | | — | | 1,029 | | 1,029 | | — | | 1,029 | |
| Total other intangible assets | 1,029 | | — | | 1,029 | | 1,029 | | — | | 1,029 | |
| Total | $ | 11,996 | | $ | (4,139) | | $ | 7,857 | | $ | 12,174 | | $ | (4,102) | | $ | 8,072 | |
|
| | | | | | | | | | | | | | | | | | |
| | March 31, 2020 | December 31, 2019 |
| In millions | Gross Carrying Amount | Accum Amort | Net | Gross Carrying Amount | Accum Amort | Net |
| Intangible assets with finite lives: | | | | | | |
| Developed technology | $ | 4,356 |
| $ | (1,523 | ) | $ | 2,833 |
| $ | 4,343 |
| $ | (1,361 | ) | $ | 2,982 |
|
| Trademarks/tradenames | 2,416 |
| (755 | ) | 1,661 |
| 2,433 |
| (455 | ) | 1,978 |
|
| Customer-related | 8,920 |
| (2,339 | ) | 6,581 |
| 8,986 |
| (2,229 | ) | 6,757 |
|
| Other | 300 |
| (214 | ) | 86 |
| 303 |
| (98 | ) | 205 |
|
| Total other intangible assets with finite lives | $ | 15,992 |
| $ | (4,831 | ) | $ | 11,161 |
| $ | 16,065 |
| $ | (4,143 | ) | $ | 11,922 |
|
| Intangible assets with indefinite lives: | | | | | | |
| Trademarks/tradenames | 1,673 |
| — |
| 1,673 |
| 1,671 |
| — |
| 1,671 |
|
| Total other intangible assets | 1,673 |
| — |
| 1,673 |
| 1,671 |
| — |
| 1,671 |
|
| Total | $ | 17,665 |
| $ | (4,831 | ) | $ | 12,834 |
| $ | 17,736 |
| $ | (4,143 | ) | $ | 13,593 |
|
As part of the 2021 Segment Realignment, the Company reallocated its intangible assets with indefinite lives to align with the new segment structure. This served as a triggering event requiring the Company to perform an impairment analysis related to intangible assets with indefinite lives carried by its existing Electronics & Imaging and Transportation & Industrial segments as of February 1, 2021, prior to the realignment. Subsequent to the realignment the Company realigned intangible assets with indefinite lives as applicable to align the intangible assets with indefinite lives with the new segment structure. Impairment analyses were then performed for the intangible assets with indefinite lives carried by the Electronics & Industrial and Mobility & Materials segments. No impairments were identified as a result of the analyses described above.
During the first quarter of 2020, the Company recorded non-cash impairment charges related to definite-lived intangible assets impacting the Non-Core segment.Corporate. See Note 54 for further discussion.
The following table provides the net carrying value of other intangible assets by segment:
| | | | | | | | |
| Net Intangibles by Segment | March 31, 2021 | December 31, 2020 |
| In millions |
| Electronics & Industrial | $ | 2,528 | | $ | 2,611 | |
| Water & Protection | 2,855 | | 2,920 | |
| Mobility & Materials | 2,474 | | 2,541 | |
| Total | $ | 7,857 | | $ | 8,072 | |
|
| | | | | | |
| Net Intangibles by Segment | Mar 31, 2020 | Dec 31, 2019 |
| In millions |
| Electronics & Imaging | $ | 1,764 |
| $ | 1,833 |
|
| Nutrition & Biosciences | 3,989 |
| 4,377 |
|
| Transportation & Industrial | 3,524 |
| 3,590 |
|
| Safety & Construction | 3,048 |
| 3,082 |
|
| Non-Core | 509 |
| 711 |
|
| Total | $ | 12,834 |
| $ | 13,593 |
|
The following table provides information regarding amortization expense related to other intangible assets:
|
| | | | | | |
| Amortization Expense | Three Months Ended March 31, |
| In millions | 2020 | 2019 |
| Other intangible assets | $ | 533 |
| $ | 256 |
|
Total estimated amortization expense for the remainder of 20202021 and the five succeeding fiscal years is as follows:
| | | | | |
| Estimated Amortization Expense | |
| In millions | |
| Remainder of 2021 | $ | 482 | |
| 2022 | $ | 628 | |
| 2023 | $ | 603 | |
| 2024 | $ | 581 | |
| 2025 | $ | 535 | |
| 2026 | $ | 516 | |
|
| | | |
| Estimated Amortization Expense | |
| In millions | |
| 2020 | $ | 1,595 |
|
| 2021 | $ | 1,008 |
|
| 2022 | $ | 968 |
|
| 2023 | $ | 925 |
|
| 2024 | $ | 826 |
|
| 2025 | $ | 789 |
|
NOTE 1213 - SHORT-TERM BORROWINGS, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES
The Company's long-term debt due within one year at March 31, 2021 and December 31, 2020 was $1,997 million and $1 million, respectively.
The following table summarizes the Company's finance lease obligations and long-term debt:
| | | | | | | | | | | | | | |
| Long-Term Debt | March 31, 2021 | December 31, 2020 |
| In millions | Amount | Weighted Average Rate | Amount | Weighted Average Rate |
| Promissory notes and debentures: | | | | |
Final maturity 2021 1 | $ | 2,000 | | 2.17 | % | $ | 0 | | 0 | % |
Final maturity 2023 2 | 2,800 | | 3.89 | % | 4,800 | | 3.18 | % |
Final maturity 2025 2 | 1,850 | | 4.49 | % | 1,850 | | 4.49 | % |
Final maturity 2026 and thereafter 2 | 6,050 | | 5.13 | % | 6,050 | | 5.13 | % |
| Other facilities: | | | | |
| Term loan due 2022 | 0 | | 0 | % | 3,000 | | 1.25 | % |
| Finance lease obligations | 2 | | | 2 | | |
| Less: Unamortized debt discount and issuance costs | 80 | | | 90 | | |
Less: Long-term debt due within one year 1, 3 | 1,997 | | | 1 | | |
| Total | $ | 10,625 | | | $ | 15,611 | | |
1.Represents May 2020 Notes.
2. Represents senior unsecured notes (the "2018 Senior Notes"), which are senior unsecured obligations of the Company.
3. Presented net of current portion of unamortized debt issuance costs.
Principal Payments of long-term debt for the remainder of 2021 and the five succeeding fiscal years are as follows:
| | | | | | | | | | | | | | |
| Maturities of Long-Term Debt for Next Five Years at March 31, 2021 | Total |
| In millions |
| Remainder of 2021 | $ | 2,000 | |
| 2022 | $ | 0 | |
| 2023 | $ | 2,800 | |
| 2024 | $ | 0 | |
| 2025 | $ | 1,850 | |
| 2026 | $ | 0 | |
The estimated fair value of the Company's long-term borrowings was determined using Level 2 inputs within the fair value hierarchy, as described in Note 21. Based on quoted market prices for the same or similar issues, or on current rates offered to the Company for debt of the same remaining maturities, the fair value of the Company's long-term borrowings, not including long-term debt due within one year, was $12,617 million and $18,336 million at March 31, 2021 and December 31, 2020, respectively.
Available Committed Credit Facilities
The following table summarizes the Company's credit facilities:
| | | | | | | | | | | | | | | | | |
| Committed and Available Credit Facilities at March 31, 2021 | | |
| In millions | Effective Date | Committed Credit | Credit Available | Maturity Date | Interest |
Revolving Credit Facility, Five-year | May 2019 | $ | 3,000 | | $ | 2,978 | | May 2024 | Floating Rate |
| 364-day Revolving Credit Facility | April 2020 | 1,000 | | 1,000 | | April 2021 | Floating Rate |
| Total Committed and Available Credit Facilities | | $ | 4,000 | | $ | 3,978 | | | |
On April 15, 2021, the Company entered into an updated $1 billion 364-day revolving credit facility (the “2021 $1B Revolving Credit Facility") as the $1 billion 364-day revolving credit facility entered in April 2020 (the “2020 $1B Revolving Credit Facility") expired mid-April. As of the effectiveness of the 2021 $1B Revolving Credit Facility, the 2020 $1B Revolving Credit Facility was terminated. The $1B Revolving Credit facility may be used for general corporate purposes.
N&B Transaction
As part of the N&B Transaction, the Company received a Special Cash Payment of approximately $7.3 billion. The Special Cash Payment was partially funded by the N&B Notes Offering, which was completed on September 16, 2020. In order to fund
the remainder of the Special Cash Payment, immediately prior to the consummation of the N&B Transaction, N&B borrowed $1.25 billion under the N&B Term Loan on February 1, 2021. The obligations and liabilities associated with the N&B Notes Offering and the N&B Term Loan were separated from the Company on February 1, 2021 upon consummation of the N&B Transaction. See Note 2for more information.
May Debt Offering
On May 1, 2020, the Company completed an underwritten public offering of senior unsecured notes (the “Notes”“May 2020 Notes”) in the aggregate principal amount of $2 billion of 2.169 percent fixed rate Notes due May 1, 2023 (the “May Debt Offering”). The proceeds fromconsummation of the N&B Transaction triggered the special mandatory redemption feature of the May Debt Offering are expected to be used byand on May 3, 2021, the Company to repay orprovided notice that it will redeem the Company’s $0.5 billionMay 2020 Notes on May 13, 2021. The Company will use proceeds from the Special Cash Payment to redeem the May 2020 Notes in floating rate notes due November 2020full together with accrued and $1.5 billion of 3.77 percent fixed-rate notes due November 2020unpaid interest.
(collectively, the “2020 Notes”). Upon consummation of the Proposed N&B Transaction,
Term Loan Facilities
On February 1, 2021, the Company will be required to mail a noticeterminated its fully drawn term loan facilities in the aggregate principle amount of redemption to holders of$3 billion (the "Term Loan Facilities"). The termination triggered the Notes, with a copy to the Trustee, setting forth the date of redemption of all of the Notes on the date (“Special Mandatory Redemption Date”) that is the later of (i) three (3) Business Days after the consummation of the Proposed N&B Transaction and (ii) May 1, 2021. On the Special Mandatory Redemption Date, the Company will be required to redeem all of the Notes at a redemption price equal to 100%repayment of the aggregate outstanding principal amount of the Notes$3 billion, plus accrued and unpaid interest if any, up to but excludingthrough and including January 31, 2021. The Company funded the repayment with proceeds from the Special Mandatory Redemption Date. Cash Payment.
Uncommitted Credit Facilities and Outstanding Letters of Credit
Unused bank credit lines on uncommitted credit facilities were $749 million at March 31, 2021. These lines are available to support short-term liquidity needs and general corporate purposes including letters of credit. Outstanding letters of credit were $138 million at March 31, 2021. These letters of credit support commitments made in the ordinary course of business.
Debt Covenants and Default Provisions
The Indenture also contains certainCompany's indenture covenants include customary limitations on the Company’s abilityliens, sale and leaseback transactions, and mergers and consolidations, subject to incur lienscertain limitations. The 2018 Senior Notes and enter into sale lease-back transactions, as well asMay 2020 Notes also contain customary events of default.
Revolving Credit Facility
In June 2019, the Company entered into a $750 million, 364-day revolving credit facility (the "Old 364-Day Revolving Credit Facility"). In March 2020, the Company drew down on the Old 364-Daydefault provisions. The Five-Year Revolving Credit Facility inand the aggregate principal amount of $250 million. In April 2020 the Company repaid the $250 million draw on the Old 364-Day Revolving Credit Facility with interest. On and effective as of April 16, 2020, the Company entered into a new $1.0 billion 364-day revolving credit facility (the “$1B Revolving Credit Facility"). As of the effectiveness of the $1B Revolving Credit Facility contain a financial covenant requiring that the Old 364-Day Revolving Credit Facilityratio of Total Indebtedness to Total Capitalization for the Company and its consolidated subsidiaries not exceed 0.60. At March 31, 2021, the Company was terminated.
Nutrition & Biosciences Financingin compliance with this financial covenant. There were no material changes to the debt covenants and default provisions at March 31, 2021.
In connection with the Proposed N&B Transaction, DuPont and Nutrition & Biosciences, Inc. (presently a wholly owned subsidiary
In January 2020, N&B Inc. entered into a senior unsecured term loan agreement in the amount of $1.25 billion split evenly between three- and five-year facilities. As a result of entry into the term loan agreement, the commitments under the Bridge Commitment Letter were reduced to $6.25 billion.
NOTE 1314 - COMMITMENTS AND CONTINGENT LIABILITIES
Litigation and Environmental Matters
As of March 31, 2020,2021, the Company had recordedhas liabilities of $24$18 million associated with litigation matters and $77 million associated with environmental matters. These recordedincluding non-PFAS liabilities includeretained, assumed or indemnified under the Company’s indemnification obligations to each of Dow and Corteva.
Under theDWDP Separation and Distribution Agreement discussed below.
In addition, DuPont has liabilities including cost and expenses, associated with litigation and environmental matters that primarilyof $11 million related to the materials science business,remaining settlement of the agriculture business orOhio MDL, discussed below, and of $62 million in connection with the specialty products business were generally allocatedcost sharing arrangement related to or retained by Dow,future eligible PFAS costs, discussed below, between The Chemours Company (“Chemours”), Corteva, orEID and the Company, respectively, through retention, assumption or indemnification. Related to the foregoing, at March 31, 2020, DuPont has recorded (i) a liability of $35 million (althoughCompany. Management believes that it is reasonably possible the Company could incur eligible PFAS costs in excess of the amounts accrued, but any such losses are not estimable at this time due to various reasons, including, among others, that the ultimate cost could range upunderlying matters are in their early stages and have significant factual issues to $108 million above the amount accrued) for retained or assumed environmental liabilities, (ii) a liability of $3 million for retained or assumed litigation liabilities, and (iii) an indemnification liability related to legal and environmental matters of $58 million.be resolved. Eligible PFAS costs are included in PFAS Stray Liabilities associated with discontinued and/or divested operations and businesses of Historical Dow generally were allocated to or retained by Dow. The allocation of liabilities associated with the discontinued and/or divested operations and businesses of Historical EID is discussed below.
Discontinued and/or Divested Operations and Businesses ("DDOB") Liabilities of Historical EID
Under the DWDP Separation and Distribution Agreement and the Letter Agreement between Corteva and DuPont, DDOB liabilities of Historical EID primarily related to Historical EID’s agriculture business were allocated to or retained by Corteva and those primarily related to Historical EID’s specialty products business were allocated to or retained by the Company. Historical EID DDOB liabilities not primarily related to Historical EID’s agriculture business or specialty products business (“Stray Liabilities”), are allocated as follows:
•Generally, indemnifiable losses as defined in the DWDP Separation and Distribution Agreement, (“Indemnifiable Losses”) for Stray Liabilities, to the extent they do not arise out of actions related to or resulting from the development, testing, manufacture or sale of PFAS, defined below, (“Non-PFAS Stray Liabilities”) that are known as of April 1, 2019 are borne by Corteva up to a specified amount set forth in the schedules to the Separation and Distribution Agreement and/or Letter Agreement. Non-PFAS Stray Liabilities in excess of such specified amounts and any Non-PFAS Stray Liabilities not listed in the schedules to the DWDP Separation and Distribution Agreement or Letter Agreement are borne by Corteva and/or DuPont up to separate, aggregate thresholds of $200 million each to the extent Corteva or DuPont, as applicable, incurs an Indemnifiable Loss. Once Corteva’s or DuPont’s $200 million threshold is met, the other would generally bear all Non-PFAS Stray Liabilities until meeting its $200 million threshold. After the respective $200 million thresholds are met, DuPont will bear 71 percent of such losses and Corteva will bear 29 percent of such losses. While DuPont believes it is probable that it will incur a liability related to Non-PFAS Stray Liabilities discussed below, such liability is not reasonably estimable at March 31, 2021. Therefore, at March 31, 2021, DuPont has not recorded an accrual related to Non-PFAS Liabilities.
•Generally, Corteva and the Company will each bear 50 percent of the first $300 million (up to $150 million each) for Indemnifiable Losses arising out of actions to the extent related to or resulting from the development, testing, manufacture or sale of per- or polyfluoroalkyl substances, which include collectively perfluorooctanoic acids and its ammonium salts (“PFOA”), perfluorooctanesulfonic acid (“PFOS”) and perfluorinated chemicals and compounds (“PFCs”) (all such substances, “PFAS” and such Stray Liabilities referred to as “PFAS Stray Liabilities”). Indemnifiable Losses to the extent related to PFAS Stray Liabilities in excess of $300 million generally will be borne 71 percent by the Company and 29 percent by Corteva,, unless either Corteva or DuPont has met its $200 million threshold.threshold described above. In that event, the other company would bear all PFAS Stray Liabilities until that company meets its $200 million threshold, at which point DuPont will bear 71 percent of such losses and Corteva will bear 29 percent of such losses. Indemnifiable Losses to the extent related to PFAS Stray Liabilities in excess of $300 million generally will be borne 71 percent by the Company and 29 percent by Corteva.
•Indemnifiable Losses incurred by the companies in relation to PFAS Stray Liabilities up to $300 million (e.g., up to $150 million each) will be applied to each company’s respective $200 million threshold.
Non-PFASIndemnifiable Losses, as defined in the DWDP Separation and Distribution Agreement, include, among other things, attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense of Stray Liabilities
While DuPont believes it is probable that it will incur a liability related to Non-PFAS Stray Liabilities, such liability is not reasonably estimable at March 31, 2020. Therefore, at March 31, 2020, DuPont has not recorded an accrual related to Non-PFAS Liabilities.
PFAS Stray Liabilities
DuPont expects to continue to incur directly and as Indemnifiable Losses and/or qualified spend (as defined below), costs and expenses related to litigation defense, such as attorneys’ fees and expenses and court costs, in connection with the mattersStray Liabilities described below, which the Company will expense as incurred inbelow. In accordance with its accounting policy for litigation matters.matters, the Company will expense such litigation defense costs as incurred which could be significant to the Company’s financial condition and/or cash flows in the period.
Chemours SuitEven when the Company believes the probability of loss or of an adverse unappealable final judgment is remote, the Company may consider settlement of these matters, and may enter into settlement agreements, if it believes settlement is in the best interest of the Company, including avoidance of future distraction and litigation defense cost, and its shareholders.
PFAS Stray Liabilities: Future Eligible PFAS Costs
On July 1, 2015, Historical EID completed the separation of Historical EID’s Performance Chemicals segment through the spinoffspin-off of all the issued and outstanding stock of The Chemours Company (“Chemours”) to holders of Historical EID common stock.stock (the “Chemours Separation”). In connection with the spin, Historicalspin-off, EID and Chemours entered into a Separation Agreement (as amended, the "Chemours Separation Agreement"). Pursuant to the Chemours Separation Agreement, Chemours is obligated to indemnify Historical EID, including its current or former affiliates, against certain litigation, environmental and other liabilities that arose prior to the Chemours Separation. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments.
Agreement. In 2017, Historical EID and Chemours amended the Chemours Separation Agreement (as amended, the “Chemours Separation Agreement”) to provide for a limited sharing of potential future liabilities related to alleged historical releases of PFOA liabilities for a five-year period that began on July 6, 2017.
On January 22, 2021, the Company, Corteva, EID and Chemours entered into a binding Memorandum of Understanding (the “MOU”), pursuant to which the parties have agreed to release certain claims that had been raised by Chemours including any claims arising out of or resulting from the process and manner in which EID structured or conducted the Chemours Separation, and any other claims that challenge the Chemours Separation or the assumption of Chemours Liabilities (as defined in the Chemours Separation Agreement) by Chemours and the allocation thereof, subject in each case to certain exceptions set forth in the MOU. In connection with the MOU, the confidential arbitration process regarding certain claims by Chemours was terminated in February 2021. The amended agreement provides that during that five-year period,parties have further agreed not to bring any future, additional claims regarding the Chemours will annually paySeparation Agreement or the first $25 millionMOU outside of future PFOA liabilities and, if that amount is exceeded, Historical EID will pay any excess amount uparbitration.
Pursuant to the next $25 million,MOU, the parties have agreed to share certain costs associated with Chemours annually bearing any excesspotential future liabilities above that amount. If Historical EID were requiredrelated to payalleged historical releases of certain PFAS, including PFOA, liabilities pursuantout of pre-July 1, 2015 conduct (“eligible PFAS costs”) until the earlier to occur of (i) December 31, 2040, (ii) the amended agreement, fifty percentday on which the aggregate amount of such obligation would be borne byqualified spend (as defined in the CompanyMOU) is equal to $4 billion or (iii) a termination in accordance with the Letterterms of the MOU. This sharing arrangement replaces the cost sharing arrangement between EID and Chemours established pursuant to the Chemours Separation Agreement. In connection with
The parties have agreed that, during the foregoing,term of this sharing arrangement, Chemours will bear 50 percent of any qualified spend and the Company hasand Corteva shall bear 50 percent of any qualified spend. The Company’s and Corteva’s share of qualified spend shall not recorded or paid a PFOA liability. Atexceed $2 billion in the endaggregate. After the term of the five-year period, this limited sharing agreement will expire, andarrangement, Chemours’ indemnification obligations under the Chemours Separation Agreement willwould continue unchanged.
On May 13, 2019, Chemours filed suitunchanged, subject in each case to certain exceptions set forth in the Delaware CourtMOU.
In order to support and manage any potential future eligible PFAS costs, the parties have also agreed to establish an escrow account. The MOU provides that (1) no later than each of Chancery against Historical EID, CortevaSeptember 30, 2021 and the Company inSeptember 30, 2022, Chemours shall deposit $100 million into an attempt to limit its responsibility for the litigationescrow account and environmental liabilities allocated to and assumed by Chemours under the Chemours Separation Agreement. Chemours is asking the court to rewrite the Chemours Separation Agreement by either limiting Chemours’ liabilities or, alternatively, ordering the return to Chemours of all or a portion of a $3.91 billion dividend that Chemours paid to Historical EID, Chemours’ then-sole-shareholder, just prior to the spin of Chemours. DuPont and Corteva acting jointly, filed a motion to dismissshall together deposit $100 million in the lawsuit for lackaggregate into an escrow account and (2) no later than September 30 of subject matter jurisdictioneach subsequent year through and initiatedincluding 2028, Chemours shall deposit $50 million into an arbitration of the dispute as required under the Chemours Separation Agreement. In December 2019, following argument, the Delaware Court of Chancery stayed arbitration pending resolution of the motion to dismiss. On March 30, 2020, the Court of Chancery granted the motion to dismissescrow account and rejected Chemours’ arguments in their entirety. Chemours filed a notice of appeal on April 17, 2020 and may file a motion to stay the arbitration process pending consideration of such an appeal by the Delaware Supreme Court. In the interim, the confidential arbitration process will proceed.
Indemnifiable Losses related to the Chemours suit are PFAS Stray Liabilities subject to the sharing arrangement between DuPont and Corteva described above. The Company believesshall together deposit $50 million in the probability of a final unappealable judgment of liability with respectaggregate into an escrow account. Subject to the terms and conditions set forth in the MOU, each party may be permitted to defer funding in any year (excluding 2021). Additionally, if on December 31, 2028, the balance of the escrow account (including interest) is less than $700 million, Chemours suitwill make 50 percent of the deposits and DuPont and Corteva together will make 50 percent of the deposits necessary to restore the balance of the escrow account to $700 million. Such payments will be remote;made in a series of consecutive annual equal installments commencing on September 30, 2029 pursuant to the defendants continue to vigorously defend full indemnity rightsescrow account replenishment terms as set forth in the ChemoursMOU.
All funding obligations of the Company and Corteva under this sharing arrangement, whether in respect of escrow funding or in respect of qualified spend, will be allocated between the Company and Corteva in accordance with the terms of the DWDP Separation and Distribution Agreement and the terms of the Letter Agreement.
PFAS Matters
Historical EID isFuture charges, if any, associated with the MOU would be recognized over the term of the agreement as a party to legal proceedings relatingcomponent of income from discontinued operations to the use of PFOAextent liabilities become probable and PFCs by its former Performance Chemicals segment. Indemnifiable Losses relatedestimable.
The parties have agreed to PFAS liabilities allocatedcooperate in good faith to and assumed by Chemours underenter into additional agreements reflecting the Chemours Separation Agreement generally are PFAS Stray Liabilities subject to the sharing arrangement between DuPont and Corteva, described above.
Generally, Chemours, with reservations, including as to alleged fraudulent conveyance and voidable transactions, is defending and indemnifying Historical EIDterms set forth in the PFAS Matters discussed below. Although Chemours has refused the tender of the Company’s defenseMOU in the actions in which the Company has been named, DuPont believes it is remote that it will ultimately incur a liability in connection with these PFAS Matters.second quarter of 2021.
Ohio MDL Personal Injury and Other PFAS ActionsCases
DuPont, which was formed after the spin-off of Chemours by EID, is not named in the personal injury and other PFAS actions discussed below.
Personal Injury
In 2004, Historical EID settled a West Virginia state court class action, Leach v. DuPont, which alleged that PFOA from Historical EID’s former Washington Works facility had contaminated area drinking water supplies and affected the health of area residents. Historical EID has residual liabilities under the Leach settlement related to providing PFOA water treatment to six area water districts and private well users and to fund, through an escrow account, up to $235 million for a medical monitoring program for eligible class members.
Members of the Leach class have standing to pursue personal injury claims for just six health conditions that an expert panel appointed under the Leach settlement reported in 2012 had a “probable link” (as defined in the settlement) with PFOA: pregnancy-induced hypertension, including preeclampsia; kidney cancer; testicular cancer; thyroid disease; ulcerative colitis; and
diagnosed high cholesterol. In 2017, Chemours and Historical EID each paid $335 million to settle the multi-district litigation in the U.S. District Court for the Southern District of Ohio (“Ohio MDL”), thereby resolving claims of about 3,550 plaintiffs alleging injury from exposure to PFOA in drinking water. The 2017 settlement did not resolve claims of Leach class members who did not have claims in the Ohio MDL or whose claims are based on diseases first diagnosed after February 11, 2017. About 80 claimsSince the 2017 settlement about 100 additional cases alleging personal injury, including kidney and testicular cancer claims, have been filed since the 2017 settlement. These claimsor noticed and are currently pending in the Ohio MDL.
On January 21, 2021, EID and Chemours entered into settlement agreements with plaintiffs’ counsel representing the Ohio MDL plaintiffs providing for a settlement of cases and claims in the Ohio MDL, except as noted below (the “Settlement”). The first two cases, onetotal settlement amount is $83 million in cash with each of the Company and EID contributing $27 million and Chemours contributing $29 million. At March 31, 2021 the Company had paid $16 million of its $27 million contribution; the remainder was paid in April 2021. The Settlement was entered into solely by way of compromise and settlement and is not in any way an admission of liability or fault by the Company, Corteva, EID or Chemours. In connection with the Settlement, in April 2021 the plaintiffs filed a motion to terminate the Ohio MDL. The case captioned “Abbott v E. I. du Pont de Nemours and Company” is not included in the Settlement and the other “Swartz v. E. I. du Pont de Nemours and Company”, involving a testicular cancer and a kidney cancer claim, respectively, proceeded to trial in January 2020. is presently pending appeal.
In the Abbott case, the jury returned a verdict in March 2020 against Historical EID, awarding $50 million in compensatory damages to the plaintiff and his wife, who claimed that exposure to PFOA in drinking water caused him to develop testicular cancer. HistoricalIn March 2021, the trial judge entered an order denying EID’s post-trial motions for a reduction in the verdict amount for Mr. Abbott but reduced Mrs. Abbott’s verdict for loss of consortium from $10 million to $250,000, reducing the total verdict to $40.25 million. EID will appealhas appealed the verdict. The plaintiffs also sought but were not awarded punitive damages. In the Swartz matter, the jury could not reach a verdict. Therefore, the court declared a mistrial and the matter will be retried at a later date. The trials in the cases originally scheduled for June 2020 have been postponed to August 2020 due to the COVID-19 pandemic.
Natural Resource Damage Claims and Other Claims for Environmental Damages
In addition to the actions described above, there are about 100several cases alleging damages to natural resources, the environment, water, and/or property as well as various other allegations. DuPont isand Corteva are named as a defendant in certainmost of thesethe actions as discussed below. Such actions include additional claims based on allegations that the transfer by EID of certain PFAS liabilities to Chemours prior to the Chemours Separation resulted in a fraudulent conveyance or voidable transaction. With the exception of the fraudulent conveyance claims, which are excluded from the MOU, legal fees, expenses, costs, and any potential liabilities for eligible PFAS costs presented by the following matters will be shared as defined in the MOU between Chemours, EID, Corteva and DuPont.
Drinking WaterNatural Resource Damage Matters
Since May 2017, a number of municipal water districts and state attorneys general have filed lawsuits against HistoricalDuPont, Corteva, EID, Chemours, 3M, and others, claiming environmental contamination of public water systems by certain PFAS compounds. Such actions are currently pending in Ohio, Michigan, New Jersey, New Hampshire, New York,Jersey, North Carolina, Ohio and Vermont. Generally, the states raise common law tort claims and seek economic impact damages for alleged harm to natural resources, punitive damages, and present and future costs to cleanup contamination from certain PFAS compounds, and to abate the alleged nuisance.
DuPont is a named party in the New Jersey suit Most of these actions include fraudulent transfer claims related to its site in Parlin, New Jersey. In addition, the New Jersey Attorney General and New Jersey State Department of Environmental Protection filed two directives, one of which names DuPont. The directives seek information on the historical and current use of PFAS. DuPont is also a named party to the Vermont suitChemours Separation and the Michigan suit. The amended complaints inDowDuPont separations.
Additionally, DuPont has engaged with the New Jersey and Vermont cases and the complaint filed by Michigan include additionalState of Delaware regarding potential similar causes of action based on allegations that the transfer by Historical EID of certainfor PFAS liabilities to Chemours prior to spinning off Chemours resulted in a fraudulent conveyance or voidable transaction.and other contaminants.
LawsuitsOther PFAS Environmental Matters
Several additional lawsuits have been filed by residents, and severallocal water districts, and private water companies against Historical EID, Chemours, Corteva, DuPont and Chemoursothers in New York, federalNew Jersey, and state courts, includingCalifornia generally alleging contamination of water systems due to the release of PFAS compounds. These suits seek compensatory and punitive damages, as well as present and future costs to clean up the alleged contamination. This includes a putative class action alleging exposure to PFOAfiled in the Northern District of New York on behalf of all individuals who, as of December 1, 2015, are or were owners of real property located in the Village of Hoosick Falls, New York and who obtain their drinking water from third-party defendant manufacturing operations and seekinga privately owned well which has allegedly been contaminated by PFAS. The plaintiffs seek compensatory consequential and punitive damages as well as medical monitoring. The certification of the class is currently pending before the court.
Additionally, there are several actions that have been filed in New Jersey and New York on behalf of residents who allege personal injuries due to exposure to PFAS in their drinking water. These lawsuits generally seek compensatory and punitive damages stemming from those alleged injuries and medical monitoring.
Aqueous Film Forming Foam
Beginning in April 2019, several dozen lawsuits involving water contamination arising from the use of PFAS-containing aqueous firefighting foams (“AFFF”) were filed against EID, Chemours, 3M and other AFFF manufacturers and in different parts of the country. Most were consolidated in multi-district litigation docket in federal district court in South Carolina (the
“SC MDL”). Many of those cases also name DuPont as a defendant. Those actions largely seek remediation of the alleged PFAS contamination in and around military bases and airports as well as medical monitoring of affected residents. The first 10 bellwether cases have been selected by the court, all of which are water district contamination cases.
As of March 31, 2021, approximately 1,020 personal injury cases have been filed directly in the SC MDL and attorneys’ fees, expensesassert claims on behalf of individual firefighters and interest.others who allege that exposure to PFAS in firefighting foam caused them to develop cancer, including kidney and testicular cancer. DuPont has been named as a defendant in most of these personal injury AFFF cases. DuPont is seeking the dismissal of DowDuPont and DuPont from these actions. EID and the Company have never made or sold AFFF, perfluorooctanesulfonic acid ("PFOS") or PFOS containing products.
OtherAdditionally, a case filed by a former firefighter is pending in the Southern District of Ohio seeking certification of a nationwide class of individuals who have detectable levels of PFAS in their blood serum. The suit was filed against 3M and several other defendants in addition to Chemours and EID. The complaint specifically seeks, among other things, the creation of a “PFAS Science Panel” to study the effects of PFAS, but expressly states that the class does not seek compensatory damages for personal injuries. In February 2020, the court denied the defendants' motion to transfer this case to the SC MDL. The decision of whether to certify the class is currently pending before the court.
North Carolina PFAS Actions
There are several actions pending in federal court against Historical EID and Chemours, relating to discharges of PFCs, including GenX, into the Cape Fear River. GenX is a polymerization processing aid and a replacement for PFOA introduced by Historical EID which Chemours continues to manufacture at its Fayetteville Works facility in Bladen County, North Carolina. One of these actions is a consolidated putative class action that asserts claims for damages and other relief on behalf of putative classes of property owners and residents in areas near or who draw drinking water from the Cape Fear River. Another action is a consolidated action brought by various North Carolina water authorities, including the Cape Fear Public Utility Authority and Brunswick County, that seek actual and punitive damages as well as injunctive relief. In addition, an action is pending in North Carolina state court on behalf of about 100200 plaintiffs who own wells and property near the Fayetteville Works facility. The plaintiffs seek damages for nuisance allegedly caused by releases of certain PFCs from the site.
Aqueous Film Forming Foam
BeginningIn the third quarter 2020, 3 lawsuits were filed in April 2019, several dozenNorth Carolina state court against Chemours, EID, Corteva and DuPont. The lawsuits involving water contamination arisingseek damages for alleged personal injuries to more than 100 individuals due to alleged exposure to PFOA and GenX originating from the use of PFAS-containing aqueous firefighting foams (“AFFF”) were filed against Historical EID, Chemours, 3M and other AFFF manufacturers and in different parts of the country. Most were consolidated in multi-district litigation docket in federal district court in South Carolina (the “SC MDL”). Many of those casesFayetteville Works plant. These lawsuits also name DuPont as a defendant. Those actions largely seek remediation of the alleged PFAS contamination in and around military bases and airports as well as medical monitoring of affected residents.
As of the latter part of April 2020, approximately 600 personal injury cases have been filed directly in the SC MDL and assert claims on behalf of individual firefighters and others who allege that exposure to PFAS in firefighting foam caused them to develop cancer, including kidney and testicular cancer. DuPont has been named as a defendant in approximately 565 personal injury AFFF cases. DuPont is seeking the dismissal of DowDuPont and DuPont from these actions. Historical EID and the Company have never made or sold aqueous film forming foam, PFOS or PFOS containing products.
Additionally, a case filed by a former firefighter is pending in the Southern District of Ohio seeking certification of a nationwide class of individuals who have detectable levels of PFAS in their blood serum. The suit was filed against 3M and several other defendants in addition to Chemours and Historical EID. The complaint specifically seeks, among other things, the creation of a “PFAS Science Panel” to study the effects of PFAS, but expressly states that the class does not seek compensatory damages for personal injuries. In February 2020, the court denied the defendants' motion toinclude fraudulent transfer this caseallegations related to the SC MDL.Chemours Separation.
Other Litigation Matters
In addition to the specific matters described above, the Company is party to other claims and lawsuits arising out of the normal course of business with respect to product liability, patent infringement, governmental regulation, contract and commercial litigation, and other actions. Certain of these actions may purport to be class actions and seek damages in very large amounts. It is the opinion of the Company’s management that the possibility is remote that the aggregate of all such other claims and lawsuits will have a material adverse impact on the results of operations, financial condition and cash flows of the Company.
Environmental Matters
Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. At March 31, 2020,2021, the Company had accrued obligations of $77$82 million for probable environmental remediation and restoration costs, inclusive of $35$37 million retained and assumed following the DWDP Distributions and $42$45 million of indemnified liabilities. These obligations are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to $171$172 million above the amount accrued at March 31, 2020.2021. Consequently, it is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on the Company’s results of operations, financial condition and cash flows. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration. At December 31, 2019,2020 the Company had accrued obligations of $77$80 million for probable environmental remediation and restoration costs.
Pursuant to the DWDP Separation and Distribution Agreement, the Company is required to indemnify certain clean-up responsibilities and associated remediation costs. The accrued environmental obligations of $77$45 million as of March 31, 20202021 includes amount for which the Company indemnifies Dow and Corteva. At March 31, 2020,2021, the Company has indemnified Dow and Corteva $8 million and $34$37 million, respectively.
Indemnifications
In connection with the ongoing divestitures and transactions, the Company has indemnified and has been indemnified by respective parties against certain liabilities that may arise in connection with these transactions and business activities prior to the completion of the respective transactions. The term of these indemnifications, which typically pertain to environmental, tax and product liabilities, is generally indefinite. At March 31, 2021, the indemnification assets were $80 million within "Accounts and notes receivable - net" and $228 million within "Deferred charges and other assets" and the indemnification liabilities were $160 million within "Accrued and other current liabilities" and $140 million within "Other noncurrent obligations" within the Consolidated Balance Sheets.
Guarantees
Obligations for Equity Affiliates & Others
The Company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates and customers. At March 31, 20202021 and December 31, 2019,2020, the Company had directly guaranteed $185$180 million and $187$189 million, respectively, of such obligations. These amounts represent the maximum potential amount of future (undiscounted) payments that the Company could be required to make under the guarantees. The Company would be required to perform on these guarantees in the event of default by the guaranteed party.
The Company assesses the payment/performance risk by assigning default rates based on the duration of the guarantees. These default rates are assigned based on the external credit rating of the counterparty or through internal credit analysis and historical default history for counterparties that do not have published credit ratings. For counterparties without an external rating or available credit history, a cumulative average default rate is used.
In certain cases, the Company has recourse to assets held as collateral, as well as personal guarantees from customers. Assuming liquidation, these assets are estimated to cover approximately 10 percent ofAt March 31, 2021, no collateral was held by the $21 million of guaranteed obligations of customers. Company.
The following table provides a summary of the final expiration year and maximum future payments for each type of guarantee: |
| | | | |
| Guarantees at March 31, 2020 | Final Expiration Year | Maximum Future Payments |
| In millions |
Obligations for customers 1: | | |
| Bank borrowings | 2020 | $ | 21 |
|
Obligations for non-consolidated affiliates 2: | | |
| Bank borrowings | 2020 | $ | 164 |
|
| Total guarantees | | $ | 185 |
|
| | | | | | | | |
| Guarantees at March 31, 2021 | Final Expiration Year | Maximum Future Payments |
| In millions |
Obligations for customers 1: | | |
| Bank borrowings | 2021 | $ | 15 | |
Obligations for non-consolidated affiliates 2: | | |
| Bank borrowings | 2021 | $ | 165 | |
| Total guarantees | | $ | 180 | |
1. Existing guarantees for select customers, as part of contractual agreements. The terms of the guarantees are equivalent to the terms of the customer loans that are primarily made to finance customer invoices. Of the totalAt March 31, 2021, all maximum future payments $21 million had terms less than a year.
2. Existing guarantees for non-consolidated affiliates' liquidity needs in normal operations.
NOTE 1415 - OPERATING LEASES
Operating lease costs for the three months ended March 31, 2021 and 2020 and 2019 were $42$29 million and $44$31 million, respectively. Operating cash flows from operating leases were $42$29 million and $41$31 million for the three months ended March 31, 20202021 and 2019,2020, respectively.
Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. New operating lease assets and liabilities entered into during the three months ended March 31, 2021 and 2020 were $57$22 million and immaterial for the three months ended March 31, 2019.$53 million, respectively. Supplemental balance sheet information related to leases was as follows:
| | | | | | | | |
| In millions | March 31, 2021 | December 31, 2020 |
| Operating Leases | | |
Operating lease right-of-use assets 1 | $ | 416 | | $ | 423 | |
Current operating lease liabilities 2 | 98 | | 117 | |
Noncurrent operating lease liabilities 3 | 320 | | 308 | |
| Total operating lease liabilities | $ | 418 | | $ | 425 | |
1.Included in "Deferred charges and other assets" in the interim Condensed Consolidated Balance Sheet.
2.Included in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheet.
3.Included in "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheet.
Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide the lessor’s implicit rate, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments.
| | | | | | | | |
| Lease Term and Discount Rate for Operating Leases | March 31, 2021 | December 31, 2020 |
| Weighted-average remaining lease term (years) | 7.63 | 6.78 |
| Weighted average discount rate | 2.06 | % | 2.41 | % |
Maturities of lease liabilities were as follows:
| | | | | |
| Maturity of Lease Liabilities at March 31, 2021 | Operating Leases |
| In millions |
| Remainder of 2021 | $ | 83 | |
| 2022 | 91 | |
| 2023 | 70 | |
| 2024 | 51 | |
| 2025 | 30 | |
| 2026 and thereafter | 133 | |
| Total lease payments | $ | 458 | |
| Less: Interest | 40 | |
| Present value of lease liabilities | $ | 418 | |
In connection with the N&B Distribution, DuPont entered into leasing agreements with IFF, whereby DuPont is leasing certain properties, including office spaces and R&D laboratories to IFF. These leases are classified as operating leases and lessor income and related expenses are not significant to the Company's interim Consolidated Balance Sheet or interim Consolidated Statement of Operations.
|
| | | | | | |
| In millions | March 31, 2020 | December 31, 2019 |
| Operating Leases | |
| |
Operating lease right-of-use assets 1 | $ | 589 |
| $ | 556 |
|
Current operating lease liabilities 2 | 143 |
| 138 |
|
Noncurrent operating lease liabilities 3 | 444 |
| 416 |
|
| Total operating lease liabilities | $ | 587 |
| $ | 554 |
|
| |
1. | Included in "Deferred charges and other assets" in the interim Condensed Consolidated Balance Sheet. |
| |
2. | Included in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheet. |
| |
3. | Included in "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheet. |
NOTE 1516 - STOCKHOLDERS' EQUITY
As part of the Exchange Offer from the N&B Transaction, the Company accepted and retired approximately 197.4 million shares of its common stock in exchange for about 141.7 million shares of N&B Common Stock. As a result, the Company reduced its common stock outstanding by 197.4 million shares of DuPont Common Stock as of February 1, 2021.
Share Repurchase Program
On June 1, 2019, the Company's Board of Directors approved a new $2 billion share buyback program ("2019 Share Buyback Program"), which expires on June 1, 2021. During the first quarter, the Company repurchased and retired 6.16.8 million shares for $232 million.$500 million under the 2019 Share Buyback Program. At March 31, 2020,2021, the Company had repurchased and retired 16.9a total of 23.7 million shares under this program at a total cost of $982 million.$1.5 billion.
In the first quarter of 2021, the Company's Board of Directors authorized a new $1.5 billion share buyback program, which expires on June 30, 2022 ("2021 Share Buyback Program"). The Company expects to repurchase shares under the 2021 Share Buyback Program after the completion of the 2019 Share Buyback Program.
Accumulated Other Comprehensive Loss
The following table summarizes the activity related to each component of accumulated other comprehensive loss ("AOCL") for the three months ended March 31, 20202021 and 2019:2020:
| | | | | | | | | | | | | | | |
| Accumulated Other Comprehensive Loss | | Cumulative Translation Adj | Pension and OPEB | Derivative Instruments | Total |
| In millions |
| 2020 | | | | | |
| Balance at January 1, 2020 | | $ | (1,070) | | $ | (345) | | $ | (1) | | $ | (1,416) | |
| Other comprehensive loss before reclassifications | | (396) | | (2) | | 0 | | (398) | |
| Amounts reclassified from accumulated other comprehensive loss | | 0 | | 4 | | 0 | | 4 | |
| Net other comprehensive income (loss) | | $ | (396) | | $ | 2 | | $ | 0 | | $ | (394) | |
| Balance at March 31, 2020 | | $ | (1,466) | | $ | (343) | | $ | (1) | | $ | (1,810) | |
| 2021 | | | | | |
| Balance at January 1, 2021 | | $ | 470 | | $ | (425) | | $ | (1) | | $ | 44 | |
| Other comprehensive (loss) income before reclassifications | | (477) | | 8 | | 0 | | (469) | |
| Amounts reclassified from accumulated other comprehensive loss | | 0 | | 4 | | 0 | | 4 | |
| Split-off of N&B reclassification adjustment | | 184 | | 73 | | 1 | | 258 | |
| Net other comprehensive (loss) income | | $ | (293) | | $ | 85 | | $ | 1 | | $ | (207) | |
| Balance at March 31, 2021 | | $ | 177 | | $ | (340) | | $ | 0 | | $ | (163) | |
|
| | | | | | | | | | | | | | | |
| Accumulated Other Comprehensive Loss | Unrealized Gains (Losses) on Investments | Cumulative Translation Adj | Pension and OPEB | Derivative Instruments | Total |
| In millions |
| 2019 | | | | | |
Balance at January 1, 2019 | $ | (51 | ) | $ | (3,785 | ) | $ | (8,476 | ) | $ | (82 | ) | $ | (12,394 | ) |
| Other comprehensive income (loss) before reclassifications | 68 |
| (79 | ) | (7 | ) | (65 | ) | (83 | ) |
| Amounts reclassified from accumulated other comprehensive loss | (1 | ) | (18 | ) | 142 |
| (10 | ) | 113 |
|
| Net other comprehensive income (loss) | $ | 67 |
| $ | (97 | ) | $ | 135 |
| $ | (75 | ) | $ | 30 |
|
| Balance at March 31, 2019 | $ | 16 |
| $ | (3,882 | ) | $ | (8,341 | ) | $ | (157 | ) | $ | (12,364 | ) |
| 2020 | | | | | |
| Balance at January 1, 2020 | $ | — |
| $ | (1,070 | ) | $ | (345 | ) | $ | (1 | ) | $ | (1,416 | ) |
| Other comprehensive loss before reclassifications | — |
| (396 | ) | (2 | ) | — |
| (398 | ) |
| Amounts reclassified from accumulated other comprehensive loss | — |
| — |
| 4 |
| — |
| 4 |
|
| Net other comprehensive (loss) income | $ | — |
| $ | (396 | ) | $ | 2 |
| $ | — |
| $ | (394 | ) |
| Balance at March 31, 2020 | $ | — |
| $ | (1,466 | ) | $ | (343 | ) | $ | (1 | ) | $ | (1,810 | ) |
The tax effects on the net activity related to each component of other comprehensive income (loss) were not material for the three months ended March 31, 20202021 and 2019 were as follows:2020.
|
| | | | | | |
| Tax Benefit (Expense) | Three Months Ended March 31, |
| In millions | 2020 | 2019 |
| Unrealized gains (losses) on investments | $ | — |
| $ | (18 | ) |
| Cumulative translation adjustments | — |
| (1 | ) |
| Pension and other post employment benefit plans | (1 | ) | (32 | ) |
| Derivative instruments | — |
| 24 |
|
| Tax expense from income taxes related to other comprehensive income items | $ | (1 | ) | $ | (27 | ) |
A summary of the reclassifications out of AOCL for the three months ended March 31, 20202021 and 20192020 is provided as follows:
| | | Reclassifications Out of Accumulated Other Comprehensive Loss | Three Months Ended
March 31, | Income Classification | Reclassifications Out of Accumulated Other Comprehensive Loss | Three Months Ended
March 31, | Income Classification |
| In millions | 2020 | 2019 | In millions | 2021 | 2020 |
| Unrealized gains on investments | $ | — |
| $ | (1 | ) | See (1) below | |
| Tax expense (benefit) | — |
| — |
| See (2) below | |
| After tax | $ | — |
| $ | (1 | ) | | |
| | Cumulative translation adjustments | $ | — |
| $ | (18 | ) | See (3) below | Cumulative translation adjustments | $ | 184 | | $ | — | | See (1) below |
| Pension and other post employment benefit plans | $ | 3 |
| $ | 167 |
| See (4) below | |
| Tax expense (benefit) | 1 |
| (25 | ) | See (2) below | |
| Pension and other post-employment benefit plans | | Pension and other post-employment benefit plans | $ | 106 | | $ | 3 | | See (1) below |
| Tax (benefit) expense | | Tax (benefit) expense | (29) | | 1 | | See (1) below |
| After tax | $ | 4 |
| $ | 142 |
| | After tax | $ | 77 | | $ | 4 | | |
| Derivative Instruments | $ | — |
| $ | (11 | ) | See (5) below | Derivative Instruments | $ | 1 | | $ | 0 | | See (1) below |
| Tax expense | — |
| 1 |
| See (2) below | |
| After tax | $ | — |
| $ | (10 | ) | | |
| | Total reclassifications for the period, after tax | $ | 4 |
| $ | 113 |
| | Total reclassifications for the period, after tax | $ | 262 | | $ | 4 | | |
1. "Net sales"The activity for the three months ended March 31, 2021 is classified within "Income (loss) from discontinued operations, net of tax" and "Sundry income (expense) - net."
2.net" as part of the N&B Transaction and continuing operations, respectively. The activity for the three months ended March 31, 2020 is classified within the "Sundry income (expense) - net" and "Provision for income taxes on continuing operations."operations" lines.
3. "Sundry income (expense) - net."33
4. These AOCL components are included in the computation
5. "Cost of sales," "Sundry income (expense) - net" and "Interest expense."
NOTE 1617 - NONCONTROLLING INTERESTS
Ownership interests in the Company's subsidiaries held by parties other than the Company are presented separately from the Company's equity in the interim Condensed Consolidated Balance Sheets as "Noncontrolling interests." The amountamounts of consolidated net income attributable to the Company and the noncontrolling interests isare both presented on the face of the interim Consolidated Statements of Operations.
The following table summarizes the activity for equity attributable to noncontrolling interests for the three months ended March 31, 20202021 and 2019:2020:
| | | | | | | | |
| Noncontrolling Interests | Three Months Ended March 31, |
| In millions | 2021 | 2020 |
| Balance at beginning of period | $ | 566 | | $ | 569 | |
| Net income attributable to noncontrolling interests | 4 | | 6 | |
| Distributions to noncontrolling interests | (19) | | (6) | |
| | |
| | |
| | |
| | |
| | |
| | |
| Cumulative translation adjustments | (7) | | (8) | |
| Split-off of N&B | (27) | | 0 | |
| Other | 0 | | 5 | |
| Balance at end of period | $ | 517 | | $ | 566 | |
|
| | | | | | |
| Noncontrolling Interests | Three Months Ended March 31, |
| In millions | 2020 | 2019 |
| Balance at beginning of period | $ | 569 |
| $ | 1,608 |
|
| Net income attributable to noncontrolling interests | 6 |
| 51 |
|
| Distributions to noncontrolling interests | (6 | ) | (11 | ) |
| Cumulative translation adjustments | (8 | ) | 7 |
|
| Other | 5 |
| (1 | ) |
| Balance at end of period | $ | 566 |
| $ | 1,654 |
|
NOTE 1718 - PENSION PLANS AND OTHER POST EMPLOYMENTPOST-EMPLOYMENT BENEFITS
A summary of the Company's pension plans and other post employmentpost-employment benefits can be found in Note 2019 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Historical Dow2020.
On February 1, 2021, the Company's net underfunded balance was reduced by $232 million after certain assets and Historical EID did not merge their defined benefit pension and other post employment benefitobligations were separated from the Company to N&B plans effective as a resultpart of the Merger.N&B Transaction.
The following sets forth the components of the Company's net periodic benefit (credit) cost for defined benefit pension plans and other post employment benefits:plans:
| | | Net Periodic Benefit (Credit) Cost for All Plans | Three Months Ended March 31, | Net Periodic Benefit (Credit) Cost for All Plans | Three Months Ended March 31, |
| In millions | 2020 | 2019 | In millions | 2021 | 2020 |
| Defined Benefit Pension Plans: | | | Defined Benefit Pension Plans: | | |
Service cost 1 | $ | 18 |
| $ | 131 |
| Service cost 1 | $ | 15 | | $ | 18 | |
Interest cost 2 | 14 |
| 447 |
| Interest cost 2 | 11 | | 14 | |
Expected return on plan assets 3 | (28 | ) | (713 | ) | Expected return on plan assets 3 | (28) | | (28) | |
Amortization of prior service credit 4 | (1 | ) | (6 | ) | Amortization of prior service credit 4 | (1) | | (1) | |
Amortization of net loss 5 | 4 |
| 133 |
| Amortization of net loss 5 | 3 | | 4 | |
| Net periodic benefit (credit) cost - total | $ | 7 |
| $ | (8 | ) | |
| Less: Net periodic benefit (credit) cost - discontinued operations | — |
| (4 | ) | |
| Net periodic benefit credit - continuing operations | $ | 7 |
| $ | (4 | ) | |
| Other Post Employment Benefits: | | | |
Service cost 1 | $ | — |
| $ | 4 |
| |
Interest cost 2 | — |
| 37 |
| |
Amortization of net gain 5 | — |
| (6 | ) | |
Curtailment/settlement 6 | | Curtailment/settlement 6 | 2 | | 0 | |
| Net periodic benefit cost - total | $ | — |
| $ | 35 |
| Net periodic benefit cost - total | $ | 2 | | $ | 7 | |
| Less: Net periodic benefit (credit) cost - discontinued operations | — |
| 34 |
| |
| Less: Net periodic benefit cost - discontinued operations | | Less: Net periodic benefit cost - discontinued operations | 1 | | 4 | |
| Net periodic benefit cost - continuing operations | $ | — |
| $ | 1 |
| Net periodic benefit cost - continuing operations | $ | 1 | | $ | 3 | |
|
1. The service cost from continuing operations was $16$13 million and $14 million for the three months ended March 31, 2019.2021 and 2020, respectively.
2. The activityinterest cost from OPEBscontinuing operations was immaterial.$11 million and $13 million for the three months ended March 31, 2021 and 2020, respectively.
| |
2. | The interest cost from continuing operations was $21 million for the three months ended March 31, 2019. The activity from OPEBs was immaterial. |
3. The expected return on plan assets from continuing operations was $43$27 million and $26 million for the three months ended March 31, 2019. The activity from OPEBs was immaterial.2021 and 2020, respectively.
4. The amortization of prior service credit from continuing operations was immateriala gain of $1 million for both the three months ended March 31, 2019 for both pensions2021 and OPEBs.2020.
5. The amortization of unrecognized net loss from continuing operations was $3 million for both the three months ended March 31, 2021 and 2020.
6. The curtailment and settlement costs from continuing operations was $2 million for the three months ended March 31, 2019. The activity2021. There were no curtailment or settlement costs from OPEBscontinuing operations for the three months ended March 31, 2020.
Activity related to other post-employment benefits was immaterial.
considered immaterial for both the current and comparative periods. The continuing operations portion of the net periodic benefit (credit) cost, other than the service cost component, is included in "Sundry income (expense) - net" in the interim Consolidated Statements of Operations.
DuPont expects to make additional contributions in the aggregate of approximately $60$75 million by year-end 2020.2021.
NOTE 1819 - STOCK-BASED COMPENSATION
A summary of the Historical Dow and Historical DuPontCompany's stock-based compensation plans can be found in Note 2120 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Historical Dow2020.
In the second quarter of 2020, the stockholders of DuPont approved the 2020 Equity and Historical EID did not merge their equity incentive plans asIncentive Plan (the "2020 Plan") which allows the Company to grant options, share appreciation rights, restricted shares, restricted stock units ("RSUs"), share bonuses, other share-based awards, cash awards, or a resultcombination of the Merger. The Historical Dow and Historical EID stock-based compensation plans were assumed byforegoing. Under the Company and remained in place with the ability to grant and issue DowDuPont2020 Plan, a maximum of 18 million shares of common stock until the Distributions.
Immediately following the Corteva Distribution,are available for award as of March 31, 2021. In June of 2019, DuPont adopted the DuPont Omnibus Incentive Plan ("DuPont OIP") which provides for equity-based and cash incentive awards to certain employees, directors, independent contractors and consultants in the form of stock options, restricted stock units ("RSUs")RSUs and performance-based restricted stock units ("PSUs"). Upon adoption of the DuPont OIP, the Historical Dow and Historical EID plans were maintained and rolled into the DuPont OIP as separate subplans. The equity awards under these subplans have the same terms and conditions that were applicable to the awards under the Historical Dow and Historical EID plans immediately prior to the Distributions. All new awards will be granted by the OIP. Under the DuPont OIP, a maximum of 102 million shares of common stock are available for award as of March 31, 2020.2021.
DuPont recognized share-based compensation expense in continuing operations of $41$17 million and $21$38 million for the three months ended March 31, 20202021 and 2019,2020, respectively. The income tax benefits related to stock-based compensation arrangements were $9$3 million and $4$8 million for the three months ended March 31, 20202021 and 2019,2020, respectively.
In the first quarter of 2020,2021, the Company granted 1.00.6 million RSUs, 0.80.6 million stock options and 0.30.4 million PSUs. The weighted-average fair values per share associated with the grants were $53.49$72.88 per RSU, $8.84$16.92 per stock option and $50.23$78.23 per PSU. The stock options had a weighted-average exercise price per share of $53.50.$72.98.
At the time of the N&B Distribution, outstanding, unvested share-based compensation awards that were denominated in DuPont common stock and held by N&B Employees were terminated and reissued as equity awards issued under the IFF stock plan.
NOTE 1920 - FINANCIAL INSTRUMENTS
The following table summarizes the fair value of financial instruments at March 31, 20202021 and December 31, 2019:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value of Financial Instruments | March 31, 2021 | December 31, 2020 |
| In millions | Cost | Gain | Loss | Fair Value | Cost | Gain | Loss | Fair Value |
Cash equivalents | $ | 3,246 | | $ | 0 | | $ | 0 | | $ | 3,246 | | $ | 1,105 | | $ | 0 | | $ | 0 | | $ | 1,105 | |
Restricted cash equivalents 1 | $ | 14 | | $ | 0 | | $ | 0 | | $ | 14 | | $ | 6,223 | | $ | 0 | | $ | 0 | | $ | 6,223 | |
| Marketable securities | $ | 2,001 | | $ | 0 | | $ | 0 | | $ | 2,001 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| | | | | | | | |
| Total cash equivalents, restricted cash equivalents and marketable securities | $ | 5,261 | | $ | 0 | | $ | 0 | | $ | 5,261 | | $ | 7,328 | | $ | 0 | | $ | 0 | | $ | 7,328 | |
| Long-term debt including debt due within one year | $ | (12,622) | | $ | 0 | | $ | (2,002) | | $ | (14,624) | | $ | (15,612) | | $ | 0 | | $ | (2,725) | | $ | (18,337) | |
| Derivatives relating to: | | | | | | | | |
Foreign currency 2 | — | | 13 | | (10) | | 3 | | — | | 4 | | (13) | | (9) | |
| Total derivatives | $ | — | | $ | 13 | | $ | (10) | | $ | 3 | | $ | — | | $ | 4 | | $ | (13) | | $ | (9) | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value of Financial Instruments | March 31, 2020 | December 31, 2019 |
| In millions | Cost | Gain | Loss | Fair Value | Cost | Gain | Loss | Fair Value |
Cash equivalents | $ | 771 |
| $ | — |
| $ | — |
| $ | 771 |
| $ | 417 |
| $ | — |
| $ | — |
| $ | 417 |
|
Restricted cash equivalents 1 | $ | 34 |
| $ | — |
| $ | — |
| $ | 34 |
| $ | 37 |
| $ | — |
| $ | — |
| $ | 37 |
|
| Total cash and restricted cash equivalents | $ | 805 |
| $ | — |
| $ | — |
| $ | 805 |
| $ | 454 |
| $ | — |
| $ | — |
| $ | 454 |
|
| Long-term debt including debt due within one year | $ | (15,620 | ) | $ | 38 |
| $ | (1,209 | ) | $ | (16,791 | ) | $ | (15,618 | ) | $ | — |
| $ | (1,633 | ) | $ | (17,251 | ) |
| Derivatives relating to: | | | | | | | | |
Foreign currency 2 | — |
| 12 |
| (11 | ) | 1 |
| — |
| 6 |
| (7 | ) | (1 | ) |
| Total derivatives | $ | — |
| $ | 12 |
| $ | (11 | ) | $ | 1 |
| $ | — |
| $ | 6 |
| $ | (7 | ) | $ | (1 | ) |
| |
1. | Classified as "Other current assets" in the interim Condensed Consolidated Balance Sheets. |
| |
2. | Presented net of cash collateral where master netting arrangements allow. |
2.Presented net of cash collateral where master netting arrangements allow.
Derivative Instruments
Objectives and Strategies for Holding Derivative Instruments
In the ordinary course of business, the Company enters into contractual arrangements (derivatives) to reduce its exposure to foreign currency, and interest rate and commodity price risks. The Company has established a variety of derivative programs to be utilized for financial risk management. These programs reflect varying levels of exposure coverage and time horizons based on an assessment of risk.
Derivative programs have procedures and controls and are approved by the Corporate Financial Risk Management Committee, consistent with the Company's financial risk management policies and guidelines. Derivative instruments used are forwards, options, futures and swaps. As of the first quarter of 2020,2021, the Company has not designated any derivatives or non-derivatives as hedging instruments.
The Company's financial risk management procedures also address counterparty credit approval, limits and routine exposure monitoring and reporting. The counterparties to these contractual arrangements are major financial institutions and major commodity exchanges. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company utilizes collateral support annex agreements with certain counterparties to limit its exposure to credit losses. The Company anticipates performance by counterparties to these contracts and therefore no material loss is expected. Market and counterparty credit risks associated with these instruments are regularly reported to management.
The notional amounts of the Company's derivative instruments were as follows:
| | | | | | | | |
| Notional Amounts | March 31, 2021 | Dec 31, 2020 |
| In millions |
| Derivatives not designated as hedging instruments: | | |
Foreign currency contracts 1 | $ | 84 | | $ | (304) | |
| | |
|
| | | | | | |
| Notional Amounts | March 31, 2020 | Dec 31, 2019 |
| In millions |
| Derivatives not designated as hedging instruments: | | |
Foreign currency contracts 1 | $ | (344 | ) | $ | 26 |
|
| Commodity contracts | $ | 12 |
| $ | 11 |
|
| |
1. | Presented net of contracts bought and sold. |
Derivatives not Designated in Hedging Relationships
Foreign Currency Contracts
The Company routinely uses forward exchange contracts to reduce its net exposure, by currency, related to foreign currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. The netting of such exposures precludes the use of hedge accounting; however, the required revaluation of the forward contracts and the associated foreign currency-denominated monetary assets and liabilities intends to achieve a minimal earnings impact, after taxes. The Company may use foreign currency exchange contracts to offset a portion of the Company's
exposure to certain foreign currency-denominated revenues so that gains and losses on the contracts offset changes in the USD value of the related foreign currency-denominated revenues.
Commodity Contracts
The Company utilizes options, futures and swaps that are not designated as hedging instruments to reduce exposure to commodity price fluctuations on purchases of inventory such as soybeans, soybean oil and soybean meal.
Fair Value of Derivative Instruments
Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the interim Condensed Consolidated Balance Sheets. The presentation of the Company's derivative assets and liabilities is as follows:
|
| | | | | | | | | | |
| | March 31, 2020 |
| In millions | Balance Sheet Classification | Gross | Counterparty and Cash Collateral Netting 1 | Net Amounts Included in the Consolidated Balance Sheet |
| Asset derivatives: | | | | |
| Derivatives not designated as hedging instruments: | | | | |
| Foreign currency contracts | Other current assets | $ | 34 |
| $ | (22 | ) | $ | 12 |
|
| Total asset derivatives | | $ | 34 |
| $ | (22 | ) | $ | 12 |
|
| | | | | |
| Liability derivatives: | | | | |
| Derivatives not designated as hedging instruments: | | | | |
| Foreign currency contracts | Accrued and other current liabilities | $ | 33 |
| $ | (22 | ) | $ | 11 |
|
| Total liability derivatives | | $ | 33 |
| $ | (22 | ) | $ | 11 |
|
|
| | | | | | | | | | |
| | December 31, 2019 |
| In millions | Balance Sheet Classification | Gross | Counterparty and Cash Collateral Netting 1 | Net Amounts Included in the Consolidated Balance Sheet |
| Asset derivatives: | | | | |
| Derivatives not designated as hedging instruments: | | | | |
| Foreign currency contracts | Other current assets | $ | 16 |
| $ | (10 | ) | $ | 6 |
|
| Total asset derivatives | | $ | 16 |
| $ | (10 | ) | $ | 6 |
|
| | | | | |
| Liability derivatives: | | | | |
| Derivatives not designated as hedging instruments: | | | | |
| Foreign currency contracts | Accrued and other current liabilities | $ | 17 |
| $ | (10 | ) | $ | 7 |
|
| Total liability derivatives | | $ | 17 |
| $ | (10 | ) | $ | 7 |
|
| |
1. | Counterparty and cash collateral amounts represent the estimated net settlement amount when applying netting and set-off rights included in master netting arrangements between the Company and its counterparties and the payable or receivable for cash collateral held or placed with the same counterparty. |
Effect of Derivative Instruments
Foreign currency derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency-denominated assets and liabilities. The amount charged on a pre-tax basis related to foreign currency derivatives not designated as a hedge, which was included in “Sundry income (expense) - net” in the interim Consolidated Statements of Operations, was a gainloss of $4$20 million for the three months ended March 31, 20202021 ($474 million lossgain for the monthsmonth ended March 31, 2019)2020). The income statement effects of other derivatives were immaterial.
Reclassification from AOCL
The Company does not expect to reclassify gains or losses related to foreign currency contracts from AOCL to income within the next 12 months and there are currently no such amounts included within AOCL.
NOTE 2021 - FAIR VALUE MEASUREMENTS
Fair Value Measurements on a Recurring Basis
The following tables summarize the basis used to measure certain assets and liabilities at fair value on a recurring basis:
| | | | | | | |
| Basis of Fair Value Measurements on a Recurring Basis at March 31, 2021 | Significant Other Observable Inputs
(Level 2) | | |
| In millions |
| Assets at fair value: | | | |
Cash equivalents and restricted cash equivalents 1 | $ | 3,260 | | | |
Marketable securities 2 | 2,001 | | | |
Derivatives relating to: 3 | | | |
Foreign currency contracts 4 | 20 | | | |
| Total assets at fair value | $ | 5,281 | | | |
| Liabilities at fair value: | | | |
Long-term debt including debt due within one year 5 | $ | 14,624 | | | |
Derivatives relating to: 3 | | | |
Foreign currency contracts 4 | 17 | | | |
| Total liabilities at fair value | $ | 14,641 | | | |
|
| | | |
| Basis of Fair Value Measurements on a Recurring Basis at March 31, 2020 | Significant Other Observable Inputs (Level 2) |
| In millions |
| Assets at fair value: | |
Cash equivalents and restricted cash equivalents 1 | $ | 805 |
|
Derivatives relating to: 2 | |
| Foreign currency contracts | 34 |
|
| Total assets at fair value | $ | 839 |
|
| Liabilities at fair value: | |
Long-term debt including debt due within one year 3 | $ | 16,791 |
|
Derivatives relating to: 2 | |
| Foreign currency contracts | 33 |
|
| Total liabilities at fair value | $ | 16,824 |
|
2. Primarily time deposits with maturities of greater than three months at time of acquisition.
3. See Note 20 for the classification of derivatives in the interim Condensed Consolidated Balance Sheets.
4. Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the Consolidated Balance Sheets. The offsetting counterparty and cash collateral netting amounts were $7 million for both assets and liabilities as of March 31, 2021.
5. Fair value is based on quoted market prices for the same or similar issues, or on current rates offered to the company for debt of the same remaining maturities and terms.
| | | | | |
| Basis of Fair Value Measurements on a Recurring Basis at December 31, 2020 | Significant Other Observable Inputs
(Level 2) |
| In millions |
| Assets at fair value: | |
Cash equivalents and restricted cash equivalents 1 | $ | 7,328 | |
| |
1. | Treasury bills, time deposits, and money market funds included in "Cash and cash equivalents" and money market funds included in "Other current assets" in the interim Condensed Consolidated Balance Sheets and held at amortized cost, which approximates fair value. |
Derivatives relating to: 2 | |
2.Foreign currency contracts 3 | See Note 19 for the classification of derivatives in the interim Condensed Consolidated Balance Sheets. |
| 13 | |
3.Total assets at fair value | Fair$ | 7,341 | |
| Liabilities at fair value: | |
Long-term debt including debt due within one year 4 | $ | 18,337 | |
Derivatives relating to: 2 | |
Foreign currency contracts 3 | 22 | |
Total liabilities at fair value is based on quoted market prices for the same or similar issues, or on current rates offered to the company for debt of the same remaining maturities and terms. | $ | 18,359 | |
|
| | | |
| Basis of Fair Value Measurements on a Recurring Basis at December 31, 2019 | Significant Other Observable Inputs (Level 2) |
| In millions |
| Assets at fair value: | |
Cash equivalents and restricted cash equivalents 1 | $ | 454 |
|
Derivatives relating to: 2 | |
| Foreign currency contracts | 16 |
|
| Total assets at fair value | $ | 470 |
|
| Liabilities at fair value: | |
Long-term debt including debt due within one year 3 | $ | 17,251 |
|
Derivatives relating to: 2 | |
| Foreign currency contracts | 17 |
|
| Total liabilities at fair value | $ | 17,268 |
|
1. Treasury bills, time deposits, and money market funds included in "Cash and cash equivalents" and money market funds included in "Other current assets" in the interim Condensed Consolidated Balance Sheets and held at amortized cost, which approximates fair value.
2. See Note 1920 for the classification of derivatives in the interim Condensed Consolidated Balance SheetsSheets.
3. Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the Consolidated Balance Sheets. The offsetting counterparty and cash collateral netting amounts were $9 million for both assets and liabilities as of December 31, 2020.
4. Fair value is based on quoted market prices for the same or similar issues, or on current rates offered to the company for debt of the same remaining maturities and terms.
2020 Fair Value Measurements on a Nonrecurring Basis
During the first quarter of 2020, the Company recorded impairment charges related to goodwill and long-lived assets within the Non-Core segment.Biomaterials business unit. See Notes 11 and 5Note 4 for further discussion of thesethis fair value measurements.measurement.
NOTE 2122 - SEGMENTS AND GEOGRAPHIC REGIONS
In the first quarter of 2020, in preparation for the Proposed N&B Transaction, DuPont changed its management and reporting structure to realign costs associated with its polysaccharides pre-commercial activities from the Non-Core segment to the N&B segment. The reporting changes have been retrospectively reflected in the segment results for all periods presented.
Prior to April 1, 2019, the Company's measure of profit / loss for segment reporting purposes is pro forma Operating EBITDA as this is the manner in which the Company's chief operating decision maker ("CODM") assessed performance and allocates resources. The Company defines pro forma Operating EBITDA as pro forma earnings (i.e. pro forma "Income (loss) from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / other post employment benefits (“OPEB”) / charges, and foreign exchange gains/losses, excluding the impact of costs historically allocated to the materials science and agriculture businesses that did not meet the criteria to be recorded as discontinued operations and adjusted for significant items. Effective April 1, 2019, the Company's measure of profit/loss for segment reporting purposes is Operating EBITDA as this is the manner in which the Company's chief operating decision maker ("CODM") assesses performance and allocates resources. The Company defines Operating EBITDA as earnings (i.e., “Income from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / OPEB benefits / charges, and foreign exchange gains / losses, adjusted for significant items. Reconciliations of these measures are provided on the following pages.
Pro forma adjustments were determinedEffective February 1, 2021, in accordanceconjunction with Article 11the closing of Regulation S-X. Pro forma financial information is based on the Consolidated Financial Statements of DuPont, adjustedN&B Transaction, the Company completed the 2021 Segment Realignment resulting in a change to give effect toits management and reporting structure. These changes resulted in the impactfollowing:
•Realignment of certain items directly attributablebusinesses from Transportation & Industrial to Electronics & Imaging
•Dissolution of the Distributions, and the Term Loan Facilities, the 2018 Senior Notes and the Funding CP Issuance (together, the "Financings"), including the use of proceeds from such Financings (collectively the "Transactions"). The historical consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the Transactions, (2) factually supportable and (3) with respect to the statements of operations, expected to have a continuing impact on the results. Events that are not expected to have a continuing impact on the combined results are excluded from the pro forma adjustments. Those pro forma adjustments include the impact of various supply agreements entered into in connectionNon-Core segment with the Dow Distribution ("supply agreements")businesses to be divested and are adjustmentspreviously divested reflected in Corporate
•Realignment of the remaining Non-Core businesses to "CostTransportation & Industrial
In addition, the following name changes occurred:
•Electronics & Imaging was renamed Electronics & Industrial
•Transportation & Industrial was renamed Mobility & Materials
•Safety & Construction was renamed Water & Protection
The reporting changes have been retrospectively reflected in the segment results for all periods presented.
| | | | | | | | | | | | | | | | | |
| Segment Information | Elect. & Industrial | Water & Protection | Mobility & Materials | Corporate 1 | Total |
| In millions |
| Three Months Ended March 31, 2021 | | | | | |
| Net sales | $ | 1,300 | | $ | 1,328 | | $ | 1,215 | | $ | 133 | | $ | 3,976 | |
Operating EBITDA 2 | $ | 436 | | $ | 355 | | $ | 278 | | $ | (22) | | $ | 1,047 | |
| Equity in earnings of nonconsolidated affiliates | $ | 9 | | $ | 12 | | $ | 3 | | $ | 2 | | $ | 26 | |
| Three months ended March 31, 2020 | | | | | |
| Net sales | $ | 1,115 | | $ | 1,276 | | $ | 1,091 | | $ | 188 | | $ | 3,670 | |
Operating EBITDA 2 | $ | 327 | | $ | 357 | | $ | 215 | | $ | 8 | | $ | 907 | |
| Equity in earnings of nonconsolidated affiliates | $ | 9 | | $ | 7 | | $ | 1 | | $ | 22 | | $ | 39 | |
1.Corporate includes activity of sales." Pro formato be divested and previously divested businesses.
2.A reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA for the three months ended March 31, 2019 has been adjusted to reflect the supply agreements if they had been effective January 1, 2018 as they are included in the measure of profit/loss reviewed by the CODM in order to show meaningful comparability among periods while assessing performance and making resource allocation decisions. There were no pro forma adjustments for the three months ended March 31, 2020.is provided below.
|
| | | | | | | | | | | | | | | | | | | | | |
| Segment Information | Elect. & Imaging | Nutrition & Biosciences | Transp. & Industrial | Safety & Const. | Non-Core | Corp. | Total |
| In millions |
| Three Months Ended March 31, 2020 | | | | | | | |
| Net sales | $ | 884 |
| $ | 1,551 |
| $ | 1,144 |
| $ | 1,276 |
| $ | 366 |
| $ | — |
| $ | 5,221 |
|
Operating EBITDA 1 | $ | 253 |
| $ | 385 |
| $ | 308 |
| $ | 368 |
| $ | 42 |
| $ | (35 | ) | $ | 1,321 |
|
| Equity in earnings of nonconsolidated affiliates | $ | 9 |
| $ | — |
| $ | 1 |
| $ | 7 |
| $ | 22 |
| $ | — |
| $ | 39 |
|
| Three months ended March 31, 2019 | | | | | | | |
| Net sales | $ | 825 |
| $ | 1,535 |
| $ | 1,317 |
| $ | 1,283 |
| $ | 454 |
| $ | — |
| $ | 5,414 |
|
Pro forma operating EBITDA 1 | $ | 288 |
| $ | 349 |
| $ | 373 |
| $ | 374 |
| $ | 98 |
| $ | (52 | ) | $ | 1,430 |
|
Equity in earnings of nonconsolidated affiliates 2 | $ | 3 |
| $ | — |
| $ | — |
| $ | 8 |
| $ | 30 |
| $ | — |
| $ | 41 |
|
| |
1. | A reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA and pro forma Operating EBITDA, as applicable, is provided below. |
| |
2. | Represents equity in earnings (losses) of nonconsolidated affiliates included in pro forma Operating EBITDA, the Company's measure of profit/loss for segment reporting purposes, which excludes significant items. Accordingly, the Non-Core segment presented above excludes a restructuring charge of $1 million which is presented in "Equity in earnings of nonconsolidated affiliates" in the Company's interim Consolidated Statement of Operations. |
| | | | | | | | | | | |
| Reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA for the Three Months Ended March 31, 2021 and 2020 | Three Months Ended March 31, |
| In millions | 2021 | 2020 |
| Income (Loss) from continuing operations, net of tax | $ | 541 | | $ | (550) | |
| + | Provision for income taxes on continuing operations | 32 | | 94 | |
| Income (Loss) from continuing operations before income taxes | $ | 573 | | $ | (456) | |
| + | Depreciation and amortization | 328 | | 345 | |
| - | Interest income 1 | 2 | | 2 | |
| + | Interest expense | 146 | | 171 | |
| - | Non-operating pension/OPEB benefit 1 | 12 | | 11 | |
| - | Foreign exchange losses, net 1 | (9) | | (3) | |
| - | Significant items | (5) | | (857) | |
| Operating EBITDA | $ | 1,047 | | $ | 907 | |
1.Included in "Sundry income (expense) - net."
|
| | | | | | |
| Reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA for the Three Months Ended March 31, 2020 and 2019 | Three Months Ended March 31, |
| In millions | 2020 | 2019 |
| Loss from continuing operations, net of tax | $ | (610 | ) | $ | (74 | ) |
| + Provision for (benefit from) income taxes on continuing operations | 44 |
| (91 | ) |
| Loss from continuing operations before income taxes | $ | (566 | ) | $ | (165 | ) |
+ Pro forma adjustments 1 | — |
| 122 |
|
| + Depreciation and amortization | 772 |
| 527 |
|
- Interest income 2 | 2 |
| 40 |
|
+ Interest expense 3 | 173 |
| 180 |
|
- Non-operating pension/OPEB benefit 2 | 11 |
| 21 |
|
- Foreign exchange gains (losses), net 2 | (8 | ) | (61 | ) |
+ Costs historically allocated to the materials science and agriculture businesses 4 | — |
| 256 |
|
- Significant items 5 | (947 | ) | (510 | ) |
Operating EBITDA 1 | $ | 1,321 |
| $ | 1,430 |
|
1. For the three months ended March 31, 2019, operating EBITDA is on a pro forma basis. The pro forma adjustment reflects the net pro forma impact of items directly attributable to the Transactions, as applicable.
| |
2. | Included in "Sundry income (expense) - net." |
3. The three months ended March 31, 2020 excludes N&B financing fee amortization. Refer to details of significant items below.
4. Costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with ASC 205.
5. The significant items for the three months ended March 31, 2020, are presented on an as reported basis. The adjusted significant items for the three months ended March 31, 2019 are presented on a pro forma basis.
The significant items for the three months ended March 31, 2020, are presented on an as reported basis. The adjusted significant items for the three months ended March 31, 2019 are presented on a pro forma basis. The following tables summarize the pre-tax impact of significant items by segment that are excluded from Operating EBITDA and pro forma Operating EBITDA above: |
| | | | | | | | | | | | | | | | | | | | | |
| Significant Items by Segment for the Three Months Ended March 31, 2020 | Elect. & Imaging | Nutrition & Biosciences | Transp. & Industrial | Safety & Construction | Non-Core | Corporate | Total |
| In millions |
Integration and separation costs 1 | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | (197 | ) | $ | (197 | ) |
Restructuring and asset related charges - net 2 | (4 | ) | (6 | ) | (25 | ) | (25 | ) | — |
| (74 | ) | (134 | ) |
Goodwill impairment charge 3 | — |
| — |
| — |
| — |
| (533 | ) | — |
| (533 | ) |
Asset impairment charges 4 | — |
| — |
| — |
| — |
| (270 | ) | — |
| (270 | ) |
Gain on divestiture 5 | 197 |
| — |
| — |
| — |
| — |
| — |
| 197 |
|
N&B financing fee amortization 6 | — |
| — |
| — |
| — |
| — |
| (10 | ) | (10 | ) |
| Total | $ | 193 |
| $ | (6 | ) | $ | (25 | ) | $ | (25 | ) | $ | (803 | ) | $ | (281 | ) | $ | (947 | ) |
| | | | | | | | | | | | | | | | | |
| Significant Items by Segment for the Three Months Ended March 31, 2021 | Elect. & Industrial | Water & Protection | Mobility & Materials | Corporate | Total |
| In millions |
Integration and separation costs 1 | $ | 0 | | $ | 0 | | $ | 0 | | $ | (6) | | $ | (6) | |
Restructuring and asset related charges - net 2 | 0 | | 0 | | 0 | | (2) | | (2) | |
Gain on divestiture 3 | 2 | | 0 | | 0 | | 1 | | 3 | |
| Total | $ | 2 | | $ | 0 | | $ | 0 | | $ | (7) | | $ | (5) | |
1. Integration and separation costs related to strategic initiatives including the post-Merger integration and the intended separationdivestiture of the N&B Business.Held for Sale Disposal Group.
2. Includes Board approved restructuring plans and asset related charges. See Note 54 for additional information.
3. Reflected in "Sundry income (expense) - net."
| | | | | | | | | | | | | | | | | |
| Significant Items by Segment for the Three Months Ended March 31, 2020 | Elect. & Industrial | Water & Protection | Mobility & Materials | Corporate | Total |
| In millions |
Integration and separation costs 1 | $ | 0 | | $ | 0 | | $ | 0 | | $ | (123) | | $ | (123) | |
Restructuring and asset related charges - net 2 | (4) | | (25) | | (25) | | (74) | | (128) | |
Goodwill impairment charge 3 | 0 | | 0 | | 0 | | (533) | | (533) | |
Asset impairment charges 4 | 0 | | 0 | | 0 | | (270) | | (270) | |
Gain on divestiture 5 | 197 | | 0 | | 0 | | 0 | | 197 | |
| Total | $ | 193 | | $ | (25) | | $ | (25) | | $ | (1,000) | | $ | (857) | |
1. Integration and separation costs related to the post-DWDP Merger integration and the DWDP Distributions.
2. Includes Board approved restructuring plans and asset related charges. See Note 4 for additional information.
3. See Note 1112 for additional information.
4. See Note 54 for additional information.
5. Reflected in "Sundry income (expense) - net." Refer toSee Note 32 for additional information.
6. Reflected in "Interest expense" and relates to the intended separation of the N&B Business.
|
| | | | | | | | | | | | | | | | | | | | | |
| Adjusted Significant Items by Segment for the Three Months Ended March 31, 2019 (Pro Forma) | Elect. & Imaging | Nutrition & Biosciences | Transp. & Industrial | Safety & Construction | Non-Core | Corporate | Total |
| In millions |
Integration and separation costs 1 | — |
| — |
| — |
| — |
| — |
| $ | (438 | ) | $ | (438 | ) |
Restructuring and asset related charges - net 2 | — |
| (27 | ) | — |
| (2 | ) | 1 |
| (44 | ) | (72 | ) |
| Total | $ | — |
| $ | (27 | ) | $ | — |
| $ | (2 | ) | $ | 1 |
| $ | (482 | ) | $ | (510 | ) |
| |
1. | Integration and separation costs related to the Merger, post-Merger integration and business separation activities. |
| |
2. | Includes Board approved restructuring plans and asset related charges. See Note 5 for additional information. |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s discussion and analysis of financial condition and results of operations is provided as a supplement to, and should be read in conjunction with, the interim Consolidated Financial Statements and related notes to enhance the understanding of the Company’s operations and present business environment. Components of management’s discussion and analysis of financial condition and results of operations include:
•Recent Developments
•Result of Operations
•Segment Results
•Changes in Financial Condition
Overview
As of March 31, 2021, the Company has $6.9 billion of working capital and approximately $6.4 billion in cash, cash equivalents, and marketable securities. The Company expects its cash, cash equivalents, and marketable securities, cash generated from operations, and ability to access the debt capital markets to provide sufficient liquidity and financial flexibility to meet the liquidity requirements associated with its continued operations. The Company continually assesses its liquidity position, including possible sources of incremental liquidity, in light of the current economic environment, capital market conditions and Company performance.
On February 1, 2021, DuPont completed the separation and distribution of the Nutrition & Biosciences business segment (the "N&B Business"), and merger of Nutrition & Biosciences, Inc. (“N&B”), a DuPont subsidiary formed to hold the N&B Business, with a subsidiary of International Flavors & Fragrances Inc. ("IFF"). The distribution was effected through an exchange offer (the “Exchange Offer”) where, on the terms and subject to the conditions of the Exchange Offer, eligible participating DuPont stockholders had the option to tender all, some or none of their shares of common stock, par value $0.01 per share, of DuPont (the “DuPont Common Stock”) for a number of shares of common stock, par value $0.01 per share, of N&B (the “N&B Common Stock”) and which resulted in all shares of N&B Common Stock being distributed to DuPont stockholders that participated in the Exchange Offer. The consummation of the Exchange Offer was followed by the merger of N&B with a wholly owned subsidiary of IFF, with N&B surviving the merger as a wholly owned subsidiary of IFF (the “N&B Merger” and, together with the Exchange Offer, the “N&B Transaction”). In connection with and in accordance with the terms of the N&B Transaction, prior to consummation of the Exchange Offer and the N&B Merger, DuPont received a one-time cash payment of approximately $7.3 billion, (the "Special Cash Payment"), which is subject to post-closing adjustment pursuant to the terms of the N&B Separation and Distribution Agreement. The company used a portion of the proceeds to retire its $3 billion term loan facilities on February 1, 2021 and will use the proceeds to fund the redemption, in accordance with their terms, of the $2 billion May 2020 Notes issuance. See discussion below and within “Liquidity and Capital Resources” for more information.
DWDP Merger and DWDP Distributions
Effective August 31, 2017, pursuant to the merger of equals transactionstransaction contemplated by the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017 ("Merger Agreement"), The Dow Chemical Company ("Historical Dow"TDCC") and E. I. du Pont de Nemours and Company ("Historical EID") each merged with subsidiaries of DowDuPont Inc. ("DowDuPont") and, as a result, Historical DowTDCC and Historical EID became subsidiaries of DowDuPont (the "Merger""DWDP Merger"). Prior to the Merger, DowDuPont did not conduct any business activities other than those required for its formation and matters contemplated by the Merger Agreement. Historical Dow was determined to be the accounting acquirer in the Merger.
DowDuPont completed a series of internal reorganizations and realignment steps in order to separate into three, independent, publicly traded companies - one for each of its agriculture, materials science and specialty products businesses. DowDuPont formed two wholly owned subsidiaries: Dow Inc. ("Dow", formerly known as Dow Holdings Inc.), to serve as a holding company for its materials science business, and Corteva, Inc. ("Corteva"), to serve as a holding company for its agriculture business.
Effective as of 5:00 p.m. onOn April 1, 2019, DowDuPontthe Company completed the separation of itsthe materials science business into a separate and independent public company by way of a distributionthrough the spin-off of Dow through a pro rata dividend in-kind of all of the then-issued and outstanding shares ofInc., including Dow’s common stock, par value $0.01 per share (the “Dow Common Stock”), to holders of the Company’s common stock, par value $0.01 per share (the “DowDuPont common stock”), as of the close of business on March 21, 2019subsidiary TDCC (the “Dow Distribution”).
Effective as of 12:01 a.m. on On June 1, 2019, DuPont de Nemours, Inc. (formerly known as DowDuPont Inc.),the Company completed the separation of itsthe agriculture business into a separate and independent public company by way of a distributionthrough the spin-off of Corteva through a pro rata dividend in-kind of all of the then-issued and outstanding shares ofincluding Corteva’s common stock, par value $0.01 per sharesubsidiary EID, (the “Corteva Common Stock”), to holders of the Company’s common stock, par value $0.01 per share, as of the close of business on May 24, 2019 (the “Corteva Distribution”Distribution and together with the Dow Distribution, the “Distributions”“DWDP Distributions”).
Following the Corteva Distribution, the Company holds the specialty products business.business as continuing operations. On June 1, 2019, DowDuPont changed its registered name from "DowDuPont Inc." to "DuPont de Nemours, Inc." doing business as "DuPont" (the "Company"). Beginning on June 3, 2019, the Company's common stock is traded on the NYSE under the ticker symbol "DD"."DD."
N&B Transaction
The financial position of DuPont as of March 31, 2021 and December 31, 2020 and the results of operations of DuPont for the three months ended March 31, 20192021 and 2020 present the historical financial results of Dow and CortevaN&B as discontinued operations. The cash flows and comprehensive income related to Dow and CortevaN&B have not been segregated and are included in the interim Consolidated Statements of Cash Flows and interim Consolidated Statements of Comprehensive Income, respectively, for the applicable period.all periods presented. Unless otherwise indicated, the information in the notes to the interim Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of Dow or Corteva.
The statements of operations and pro forma statements of operations included in this report and as discussed below include costs previously allocatedN&B. See Note 2 to the materials scienceinterim Consolidated Financial Statements for additional information on the N&B Transaction.
2021 Segment Realignment
Immediately following the separation and agriculture businesses that did not meetdistribution of the definition of expenses related to discontinued operations in accordance with Financial Accounting Standards Codification 205, "Presentation of Financial Statements" ("ASC 205") and thus are reflected in the Company's results of continuing operations. A significant portion of these costs relate to Historical Dow and consist of leveraged services provided through service centers, as well as other corporate overhead costs related to information technology, finance, manufacturing, research & development, sales & marketing, supply chain, human resources, sourcing & logistics, legal and communications, public affairs & government affairs functions. These costs are no longer incurred byN&B Business, the Company following the Distributions.
RECENT DEVELOPMENTS
COVID-19
The novel coronavirus (“COVID-19”) pandemic has resulted in significant economic disruption2021 Segment Realignments
Effective February 1, 2021, immediately following the separation and continues to adversely impact the broader global economy, including certaindistribution of the Company’s customers and suppliers. Given the dynamic nature of this situation,N&B Business, the Company cannot reasonably estimatecompleted the impacts2021 Segment Realignment and made changes to its management and reporting structure. These changes include the following:
• Realignment of COVID-19 on its financial condition, results of operations or cash flows into the foreseeable future. The ultimate extent of the effects of the COVID-19 pandemic on the Company is highly uncertain and will depend on future developments, and such effects could exist for an extended period of time even after the pandemic subsides.
During the first quarter of 2020, the Company benefitedcertain businesses from COVID-19 related demand in certain markets, principally personal protection, food & beverage, health & wellness and electronics. Although management currently expects strong demand from these certain markets to continue into the second quarter of 2020, the COVID-19 pandemic is expected to continue to significantly adversely impact demand in automotive, oil & gas, and select industrial end-markets. In response to this uncertainty, the Company is delaying certain capital investments in select sectors, and idling production at several manufacturing sites, predominantly production plants in the Transportation & Industrial segment.to Electronics & Imaging;
• Realignment of the remaining Non-Core businesses to Transportation & Industrial.
In addition, in responsethe following name changes occurred:
• Electronics & Imaging is renamed Electronics & Industrial;
• Transportation & Industrial is renamed Mobility & Materials;
• Safety & Construction is renamed Water & Protection.
The reporting changes have been retrospectively reflected for all periods presented. See to COVID-19 related market disruptionNotes 3 and uncertainties,22 to the Company has proactively taken steps to enhance its liquidity position. interim Consolidated Financial Statements for additional information.
Divestitures
In April 2020,January 2021, the Company entered into a $1.0 billion 364-day revolving credit facility (the “$1B Revolving Credit Facility") that replaces its $750 million 364-day revolving credit facility (the “Old 364-Day Revolving Credit Facility”), and completed a public underwritten offering of $2 billion of 2.169 percent fixed rate notes due May 1, 2023 (the “May Debt Offering”). Refer to Liquidity and Capital Resources for more information.
Nutrition & Biosciences Financing
On December 15, 2019, the Company entered intoseparate definitive agreements to separatesell its Clean Technologies and combine the Nutrition & Biosciences business segment (the "N&B Business") with International Flavors & Fragrances Inc. ("IFF") in a tax-efficient Reverse Morris Trust transaction, (the "Proposed N&B Transaction"). In the first quarter of 2020, DuPontSolamet® businesses for about $680 million. These divestitures, subject to regulatory approval and Nutrition & Biosciences, Inc. (presently a wholly owned subsidiary of DuPont) (“N&B Inc.”) entered into a senior unsecured term loan agreementcustomary closing conditions, are expected to close in the amountsecond half of $1.25 billion split evenly between three- and five-year facilities. As2021. The Company also signed a resultnon-binding letter of entry intointent to sell Chestnut Run labs, a portion of the term loan agreement, the commitments under the Bridge Commitment Letter were reduced to $6.25 billion. The remaining $6.25 billionCompany's Chestnut Run campus. This transaction is expected to be funded through the N&B Notes Offering and/or the Bridge Loans. The proceeds from drawdowns on the term loan facilities and the N&B Notes Offering, if any, and/or Bridge Loans would be used to make a one-time $7.3 billion cash payment, subject to adjustment, to DuPont (the "Special Cash Payment") and to pay the related transaction fees and expenses. The commitments under the Bridge Letter and the availability of funding under the term loan are subject to customary closing conditions including among others, the satisfaction of substantially all the conditionsclose within one year. See Note 2 to the consummation of the proposed transaction with IFF.
2020 Restructuring Program
During the first quarter of 2020, the Company approved restructuring actions designed to capture near-term cost reductions following the expected closure of the Proposed N&B Transaction (the "2020 Restructuring Program"). For the three months ended March 31, 2020, the Company recorded a pre-tax charge related to the 2020 Restructuring Program of $111 million, recognized in "Restructuring and asset related charges - net" in the Company's interim Consolidated Financial Statements of Operations. At March 31, 2020, total liabilities related to the program were $96 million. Future cash payments related to the 2020 Restructuring Program are anticipated to be up to $130 million primarily related to the payment of severance and related benefits and contract termination charges.
Divestitures
Share Buyback Program
In the first quarter of 2020,2021, the Company's Board of Directors authorized a new $1.5 billion share buyback program, which expires on June 30, 2022 ("2021 Share Buyback Program"). The Company completedexpects to repurchase shares under the sale of its Compound Semiconductor Solutions business unit, a part2021 Share Buyback Program after the completion of the Electronics & Imaging segment, to SK Siltron. Proceeds received in the first quarter of 2020 from the sale of the business were approximately $420 million. The sale resulted in a pre-tax gain of $197 million ($102 million net of tax) which was recorded in "Sundry income (expense) - net" in the Company's interim Consolidated Statements of Operations. Refer to Note 3 of the interim Consolidated Financial Statements.2019 Share Buyback Program.
Non-Core Impairments
During the three months ended March 31, 2020, the Company was required to perform interim impairment tests of its goodwill and long-lived assets as expectations of proceeds related to certain potential divestitures within the Non-Core segment gave rise to fair value indicators and, thus, served as triggering events. As a result of the analysis performed, the Company recorded pre-tax, non-cash impairment charges related to goodwill of $533 million. The charges were recognized in "Goodwill impairment charge" in the interim Consolidated Statements of Operations. Refer to Note 11 of the interim Consolidated Financial Statements. The Company also recorded pre-tax, non-cash impairment charges of $270 million related to long-lived assets. The charges were
recognized in “Restructuring and asset related charges - net” in the interim Consolidated Statements of Operations. Refer to Note 5 of the interim Consolidated Financial Statements.
Dividends
On February 12, 2020,18, 2021, the Board of Directors declared a first quarter dividend of $0.30 per share, paid on March 16, 2020,15, 2021, to shareholders of record on February 28, 2020.March 1, 2021.
On April 29, 2020,28, 2021, the Company announced that its Board declared a second quarter dividend of $0.30 per share payable on June 15, 2020,2021, to shareholders of record on May 29, 2020.28, 2021.
SELECTED FINANCIAL DATA
|
| | | | | | |
| | Three Months Ended |
| In millions, except per share amounts | March 31, 2020 | March 31, 2019 |
| Net sales | $ | 5,221 |
| $ | 5,414 |
|
| | | |
| Cost of sales | $ | 3,318 |
| $ | 3,621 |
|
| Percent of net sales | 63.6 | % | 66.9 | % |
| | | |
| Research and development expenses | $ | 236 |
| $ | 267 |
|
| Percent of net sales | 4.5 | % | 4.9 | % |
| | | |
| Selling, general and administrative expenses | $ | 633 |
| $ | 726 |
|
| Percent of net sales | 12.1 | % | 13.4 | % |
| | | |
| Effective tax rate - continuing operations | (7.8 | )% | 55.2 | % |
| | | |
| Net (loss) income available for DuPont common stockholders | $ | (616 | ) | $ | 521 |
|
| | | |
| Earnings per common share – basic | $ | (0.83 | ) | $ | 0.69 |
|
| Earnings per common share – diluted | $ | (0.83 | ) | $ | 0.69 |
|
RESULTS OF OPERATIONS
| | | | | | | | |
| Summary of Sales Results | Three Months Ended |
| In millions | March 31, 2021 | March 31, 2020 |
| Net sales | $ | 3,976 | | $ | 3,670 | |
| | |
|
| | | | | | |
| Summary of Sales Results | Three Months Ended |
| In millions | March 31, 2020 | March 31, 2019 |
| Net sales | $ | 5,221 |
| $ | 5,414 |
|
The following table summarizes sales variances by segment and geographic region from the prior year:
| | | | | | | | | | | | | | | | | |
| Sales Variances by Segment and Geographic Region |
| Percentage change from prior year | Three Months Ended March 31, 2021 |
| Local Price & Product Mix | Currency | Volume | Portfolio & Other | Total |
| Electronics & Industrial | (1) | % | 3 | % | 15 | % | — | % | 17 | % |
| Water & Protection | — | | 3 | | 1 | | — | | 4 | |
| Mobility & Materials | 1 | | 3 | | 7 | | — | | 11 | |
| Corporate | 1 | | 1 | | (4) | | (27) | | (29) | |
| Total | — | % | 3 | % | 7 | % | (2) | % | 8 | % |
| U.S. & Canada | — | % | — | % | (4) | % | (5) | % | (9) | % |
EMEA 1 | (2) | | 7 | | — | | — | | 5 | |
| Asia Pacific | 1 | | 3 | | 19 | | — | | 23 | |
| Latin America | 6 | | (7) | | — | | — | | (1) | |
| Total | — | % | 3 | % | 7 | % | (2) | % | 8 | % |
|
| | | | | | | | | | |
| Sales Variances by Segment and Geographic Region |
| Percentage change from prior year | Three Months Ended March 31, 2020 |
| Local Price & Product Mix | Currency | Volume | Portfolio & Other | Total |
| Electronics & Imaging | (1 | )% | (1 | )% | 9 | % | — | % | 7 | % |
| Nutrition & Biosciences | 2 |
| (2 | ) | 1 |
| — |
| 1 |
|
| Transportation & Industrial | (4 | ) | (1 | ) | (8 | ) | — |
| (13 | ) |
| Safety & Construction | 2 |
| (1 | ) | (4 | ) | 2 |
| (1 | ) |
| Non-Core | 2 |
| — |
| (12 | ) | (9 | ) | (19 | ) |
| Total | — | % | (1 | )% | (2 | )% | (1 | )% | (4 | )% |
| U.S. & Canada | — | % | — | % | (2 | )% | — | % | (2 | )% |
EMEA 1 | 1 |
| (3 | ) | (5 | ) | (1 | ) | (8 | ) |
| Asia Pacific | (1 | ) | (1 | ) | — |
| — |
| (2 | ) |
| Latin America | 2 |
| (3 | ) | (3 | ) | (2 | ) | (6 | ) |
| Total | — | % | (1 | )% | (2 | )% | (1 | )% | (4 | )% |
| |
1. | Europe, Middle East and Africa. |
The Company reported net sales for the three months ended March 31, 20202021 of $5.2$4.0 billion, down 4up 8 percent from $5.4$3.7 billion for the three months ended March 31, 2019,2020, due to a 27 percent decreaseincrease in volume and a 13 percent unfavorablefavorable currency impact andoffset by a 12 percent decline in portfolio actions. Local price and product mix remained flat. Volume declined across all geographic regions with the exception ofThe volume growth was focused in Asia Pacific where it remained flat.offset by declines in U.S. & Canada. Volume declinedgrew across all segments, with the exception of Electronics & Imaging (up 9 percent) and Nutrition & Biosciences (up 1the held for sale businesses in Corporate (down 4 percent). The most notable volume decrease wereincrease was in TransportationElectronics & Industrial (down 8 percent) and Non-Core (down 12(up 15 percent). Currency was down 1up 3 percent compared with the same period last year, driven primarily by EMEA (up 7 percent) and Asia Pacific currencies (down(up 3 percent). Portfolio and other changes contributed 1offset sales growth with a 2 percent of the sales decrease which impacted Non-CoreCorporate (down 927 percent). Local price was flat compared with the same period last year. Local price increased in Latin America (up 26 percent) and EMEAAsia Pacific (up 1 percent) and in all segments except Transportation & Industrial (down 4 percent) and Electronics & Imaging (down 1 percent).
Cost of Sales
Cost of sales was $3.3$2.5 billion for the three months ended March 31, 2020, down2021, up from $3.6$2.3 billion for the three months ended March 31, 2019.2020. Cost of sales decreasedincreased for the three months ended March 31, 20202021 primarily due to lowerincreased sales volume cost synergies,and currency impacts, and the absence of costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with ASC 205 and therefore remained as costs of continuing operations for periods prior to the Distributions.impacts.
Cost of Sales as a percentage of net sales for the three months ended March 31, 2020 was 64 percent compared with 6763 percent for the three months ended March 31, 2019.2021 and March 31, 2020.
Research and Development Expenses ("R&D")
R&D expenses totaled $236$156 million in the first quarter of 2020,2021, down from $267$173 million in the first quarter of 2019.2020. R&D as a percentage of net sales was 4 percent and 5 percent for the three months ended March 31, 20202021 and 2019.
The decrease for the three months ended March 31, 2020, as compared with the same periods of the prior year was primarily due to the absence of R&D costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with ASC 205 and therefore remained as costs of continuing operations for periods prior to the Distributions.
Selling, General and Administrative Expenses ("SG&A")
SG&A expenses were $633 million in the first quarter of 2020, down from $726 million in the first quarter of 2019. SG&A as a percentage of net sales was 12 percent and 13 percent for the three months ended March 31, 2020 and 2019, respectively. The decrease for the three months ended March 31, 20202021 as compared with the same period of the prior year was primarily due to the absence of SG&A costs previously allocated to the materials scienceproductivity actions and agriculture businesses that did not meet the definition of expensestemporary cost reductions related to discontinued operationsCOVID-19.
Selling, General and Administrative Expenses ("SG&A")
SG&A expenses were $456 million in accordancethe first quarter of 2021, down from $482 million in the first quarter of 2020. SG&A as a percentage of net sales was 11 percent and 13 percent for the three months ended March 31, 2021 and 2020, respectively. The decrease for the three months ended March 31, 2021 as compared with ASC 205the same period of the prior year was primarily due to productivity actions and therefore remained as costs of continuing operations for periods prior to the Distributions.reduced spending.
Amortization of Intangibles
Amortization of intangibles was $533$167 million in the first quarter of 2020, up2021, down from $256$178 million in the first quarter of 2019. The increase was primarily due2020. See Note 12 to the amortizationConsolidated Financial Statements for additional information on intangible assets.
Restructuring and Asset Related Charges - Net
Restructuring and asset related charges - net were $404$2 million in the first quarter of 2020, up2021, down from $71$398 million in the first quarter of 2019.2020. The activity in the first quarter of 2021 is due to a $2 million charge related to the 2020 Restructuring Program. The activity in the first quarter of 2020 included a $270 million impairment charge related to long-lived assets in the Non-Core segment,Corporate, a $111$105 million charge related to the 2020 Restructuring Program, $18 million charge related to the 2019 Restructuring Program and a $5 million charge related to the DowDuPont Cost Synergy Program (the “Synergy Program”). The charges in the first quarter of 2019 related to the Synergy Program. See Note 54 to the interim Consolidated Financial Statements for additional information.
Goodwill Impairment Charge
Goodwill impairment charge was $533 million inThere were no goodwill related impairments for the three months ended March 31, 2020.2021. For the three months ended March 31, 2020, goodwill impairment charge was $533 million. The goodwill impairment charge relates to the Non-Core segment. There were no goodwill related impairmentsbusinesses to be divested in the same period of 2019.2021 which are included in Corporate. See Note 1112 to the interim Consolidated Financial Statements for additional information.
Integration and Separation Costs
Integration and separation costs, which primarily reflectconsist of financial advisory, information technology, legal, accounting, consulting, and other professional advisory fees. In the first quarter of 2021, these costs were primarily associated with the execution of activities related to strategic initiatives including the post-Merger integration,divestiture of the Held for Sale Disposal Group. In the first quarter of 2020, these costs were primarily associated with the execution of activities related to the Distributions,post-DWDP Merger integration and during 2020, the intended separation of the Nutrition & Biosciences business,DWDP Distributions. These costs were $197$6 million in the first quarter of 2020,2021, down from $611$123 million in the first quarter of 2019.2020. The decline was primarily related to the timing of the post-DWDP Merger integration activities and the DWDP Distributions.
Equity in Earnings of Nonconsolidated Affiliates
The Company's share of the earnings of nonconsolidated affiliates was $26 million in the first quarter of 2021, down from $39 million in the first quarter of 2020, down from $40 million in the first quarter of 2019.2020. The decrease is primarily due to lower equity earnings fromthe sale of the HSC Group.Group in the third quarter of 2020.
Sundry Income (Expense) - Net
Sundry income (expense) - net includes a variety of income and expense items such as foreign currency exchange gains or losses, interest income, dividends from investments, gains and losses on sales of investments and assets, non-operating pension and other post employmentpost-employment benefit plan credits or costs, and certain litigation matters. Sundry income (expense) - net in the first quarter of 20202021 was income of $211$16 million compared with income of $84$212 million in the first quarter of 2019.2020. The first quarter of 2021 included benefits related to the sale of assets within the Electronics & Industrial segment of $24 million and income related to non-operating pension and other post-employment benefit credits of $12 million, partially offset by an impairment charge related to the held for sale classification of Chestnut Run labs of $15 million and foreign currency exchange losses of $9 million. The first quarter of 2020 included benefits related to salesales of the Compound Semiconductor Solutions business unit of $197 million income related to non-operating pension and other post employment benefit credits of $11 million and miscellaneous income of $9 million, partially offset by foreign currency exchange losses of $8 million. The first quarter of 2019 included benefits related to sales of assets of $53 million, interest income of $40 million, miscellaneous income of $31 million and income related to non-operating pension and other post employmentpost-employment benefit credits of $21 million, partially offset by foreign currency exchange losses of $61$11 million.
Interest Expense
Interest expense was $183$146 million and $151$171 million for the three months ended March 31, 20202021 and 2019,2020, respectively. The increasedecrease primarily relates to financing facilities that were drawn after March 31, 2019 for the Company to operate on a stand-alone basis and completematurity of the capital structuresNovember 2020 Notes, the early repayment of Corteva and Dow in advance of their respective separations, which include the $3.0 billion Term Loan Facilities, and absence of commercial paper borrowings, partially offset by financing costs related to the DuPont Commercial Paper Program.May Debt Offering. Refer to Note 13 to the interim Consolidated Financial Statements for additional information.
Provision for Income Taxes on Continuing Operations
The Company's effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attribute. The effective tax rate on continuing operations for the first quarter of 20202021 was (7.8)5.6 percent, compared with an effective tax rate of 55.2(20.6) percent for the first quarter of 2019.2020. The effective tax rate for the first quarter of 2021 was principally the result of a $59 million tax benefit related to the step-up in tax basis in the goodwill of the Company’s European regional headquarters legal entity. The effective tax rate for the first quarter of 2020 was principally the result of the non-tax-deductible goodwill impairment charge impacting the Non-core segment.Corporate.
SUPPLEMENTAL UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following supplemental unaudited pro forma financial information (the “unaudited pro forma financial statements”) is derived from DuPont’s Consolidated Financial Statements, adjusted to give effect to certain events directly attributable to the Distributions. In contemplation of the Distributions and to achieve the respective credit profiles of each of the current companies, in the fourth quarter of 2018, DowDuPont borrowed $12.7 billion under the 2018 Senior Notes and entered the Term Loan Facilities with an aggregate principal amount of $3.0 billion. Additionally, DuPont issued approximately $1.4 billion in commercial paper in May 2019 in anticipation of the Corteva Distribution (the “Funding CP Issuance” together with the 2018 Senior Notes and the Term Loan Facilities, the "Financings"). The unaudited pro forma financial statements for the three months ended March 31, 2019 were prepared in accordance with Article 11 of Regulation S-X. The historical consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the Distributions and the Financings (collectively the "Transactions"), (2) factually supportable and (3) with respect to the statements of operations, expected to have a continuing impact on the results. The unaudited pro forma statements of operations for the three months ended March 31, 2019 give effect to the pro forma events as if they had been consummated on January 1, 2018. There were no pro forma adjustments for the three months ended March 31, 2020.
Restructuring or integration activities or other costs following the Distributions that may be incurred to achieve cost or growth synergies of DuPont are not reflected. The unaudited pro forma income statements provides shareholders with summary financial information and historical data that is on a basis consistent with how DuPont reports current financial information.
The unaudited pro forma financial statements are presented for informational purposes only, and do not purport to represent what DuPont's results of operations or financial position would have been had the Transactions occurred on the dates indicated, nor do they purport to project the results of operations or financial position for any future period or as of any future date.
|
| | | | | | | | | |
Unaudited Pro Forma Combined Statements of Operations | Three Months Ended March 31, |
| 2019 |
| In millions, except per share amounts | DuPont 1 | Pro Forma Adjustments2 | Pro Forma |
| Net sales | $ | 5,414 |
| $ | — |
| $ | 5,414 |
|
| Cost of sales | 3,621 |
| 22 |
| 3,643 |
|
| Research and development expenses | 267 |
| — |
| 267 |
|
| Selling, general and administrative expenses | 726 |
| — |
| 726 |
|
| Amortization of intangibles | 256 |
| — |
| 256 |
|
| Restructuring and asset related charges - net | 71 |
| — |
| 71 |
|
| Goodwill impairment charge | — |
| — |
| — |
|
| Integration and separation costs | 611 |
| (173 | ) | 438 |
|
| Equity in earnings of nonconsolidated affiliates | 40 |
| — |
| 40 |
|
| Sundry income (expense) - net | 84 |
| — |
| 84 |
|
| Interest expense | 151 |
| 29 |
| 180 |
|
| (Loss) Income from continuing operations before income taxes | (165 | ) | 122 |
| (43 | ) |
| (Benefit from) Provision for income taxes on continuing operations | (91 | ) | 30 |
| (61 | ) |
| (Loss) Income from continuing operations, net of tax | (74 | ) | 92 |
| 18 |
|
| Net income attributable to noncontrolling interests of continuing operations | 4 |
| — |
| 4 |
|
| Net (loss) income from continuing operations attributable to DuPont | $ | (78 | ) | $ | 92 |
| $ | 14 |
|
| | | | |
| Per common share data: | | | |
| (Loss) Earnings per common share from continuing operations - basic | $ | (0.11 | ) | | $ | 0.02 |
|
| (Loss) Earnings per common share from continuing operations - diluted | $ | (0.11 | ) | | $ | 0.02 |
|
| | | | |
| Weighted-average common shares outstanding - basic | 750.0 |
| | 750.0 |
|
| Weighted-average common shares outstanding - diluted | 750.0 |
| | 753.1 |
|
| |
1. | See the historical U.S. GAAP Consolidated Statements of Operations. |
| |
2. | Certain pro forma adjustments were made to illustrate the estimated effects of the Transactions, assuming that the Transactions had occurred on January 1, 2018. The adjustments include the impact to "Cost of sales" of different pricing than historical intercompany and intracompany practices related to various supply agreements entered into with the Dow Distribution, adjustments to "Integration and separation costs" to eliminate one time transaction costs directly attributable to the Distributions, and adjustments to "Interest expense" to reflect the impact of the Financings. |
SEGMENT RESULTS
In the first quarter of 2020, in preparation for the Proposed N&B Transaction, DuPont changed its management and reporting structure to realign costs associated with its polysaccharides pre-commercial activities from the Non-Core segment to the N&B segment. The reporting changes have been retrospectively reflected in the following discussion of segment results for all periods presented. Refer to Note 21 to the interim Consolidated Financial Statements for additional information.
Prior to April 1, 2019, the Company's measure of profit/loss for segment reporting purposes is pro forma Operating EBITDA as this is the manner in which the Company's chief operating decision maker ("CODM") assessed performance and allocates resources. The Company defines pro forma Operating EBITDA as pro forma earnings (i.e., pro forma “Income from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / other post employment benefits (“OPEB”) / charges, and foreign exchange gains / losses, excluding the impact of costs historically allocated to the materials science and agriculture businesses that did not meet the criteria to be recorded as discontinued operations and adjusted for significant items. Effective April 1, 2019, the Company's measure of profit/loss for segment reporting purposes is Operating EBITDA as this is the manner in which the Company's CODM assesseschief operating decision maker ("CODM") assessed performance and allocates resources. The Company defines Operating EBITDA as earnings (i.e., “Income from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / OPEB benefits / charges, and foreign exchange gains / losses, adjusted for significant items. Reconciliations of these measures can be found in Note 2122 to the interim Consolidated Financial Statements. Prior year data has
Effective February 1, 2021, DuPont changed its management and reporting structure. The reporting changes have been updated to conform with the current year presentation.
Pro forma adjustments usedretrospectively reflected in the calculationfollowing discussion of pro forma Operating EBITDA were determined in accordance with Article 11 of Regulation S-X and were derived from DuPont's historicalsegment results for all periods presented. See Note 22 to the interim Consolidated Financial Statements and accompanying notes, adjusted to give effect to the Distributions as if they had been consummated on January 1, 2018. The pro forma adjustments impacting pro forma Operating EBITDA reflect the impact of various supply agreements ("supply agreements") entered into in connection with the Dow Distribution and are outlined in the preceding section, Supplemental Unaudited Pro Forma Combined Financial Information, as adjustments to "Cost of sales." The impact of these supply agreements is reflected in pro forma Operating EBITDA for the periods noted above as it is included in the measure of profit/loss reviewed by the CODM in order to show meaningful comparability among periods while assessing performance and making resource allocation decisions. There were no pro forma adjustments for the three months ended March 31, 2020.additional information.
ELECTRONICS & IMAGINGINDUSTRIAL
The Electronics & ImagingIndustrial segment is a leading global supplier of differentiated materials and systems for a broad range of consumer electronics including mobile devices, television monitors, personal computers and electronics used in a variety of industries. The segment is a leading provider of materials and solutions for the fabrication of semiconductors and integrated circuits, and provides innovative metallization processes for metal finishing, decorative, and industrial applications. Electronics & ImagingIndustrial is a leading provider of platemaking systems and photopolymer plates for the packaging graphics industry, and digital printing inks for a variety of applications in the textile, commercial printing, and home-office markets. In addition, the segment provides cutting-edge materials for the manufacturing of rigid and flexible displays for organic light emitting diode ("OLED"),. In addition, the segment produces innovative engineering polymer solutions, high performance parts, medical silicones and other display applications.specialty lubricants.
| | | | | | | | |
| Electronics & Industrial | Three Months Ended |
| In millions | March 31, 2021 | March 31, 2020 |
| Net sales | $ | 1,300 | | $ | 1,115 | |
| | |
| Operating EBITDA | $ | 436 | | $ | 327 | |
| Equity earnings | $ | 9 | | $ | 9 | |
|
| | | | | | |
| Electronics & Imaging | Three Months Ended |
| In millions | March 31, 2020 | March 31, 2019 |
| Net sales | $ | 884 |
| $ | 825 |
|
Operating EBITDA 1 | $ | 253 |
| $ | 288 |
|
| Equity earnings | $ | 9 |
| $ | 3 |
|
| |
1. | For the three months ended March 31, 2019, operating EBITDA is on a pro forma basis. |
|
| | |
Electronics & ImagingIndustrial | Three Months Ended |
| Percentage change from prior year | March 31, 20202021 |
| Change in Net Sales from Prior Period due to: | |
| Local price & product mix | (1(1) | )% |
| Currency | (13 | ) |
| Volume | 915 |
|
| Portfolio & other | — |
|
| Total | 717 | % |
| |
| |
| |
| |
| |
| |
Electronics & ImagingIndustrial net sales were $884$1,300 million for the three months ended March 31, 2020,2021, up 717 percent from $825$1,115 million for the three months ended March 31, 2019.2020. Net sales increased due to a 915 percent increase in volume and a 3 percent favorable currency impact partially offset by a 1 percent decline in price and a 1 percent unfavorable currency impact.price. Volume growth was driven by Semiconductor Technologies new technology ramps at advanced nodes within the logic and foundry segment and increased memory demand in servers and data centers. Volume growth within Interconnect Solutions was driven by higher material content in next-generation smartphones. Within ImageIndustrial Solutions, volume gains in display materials and healthcare more than offset weakness in aerospace and flexographic printing were mostly offset by declined demand for digital printing inks and OLED materials.printing.
Operating EBITDA was $253$436 million for the three months ended March 31, 2021, up 33 percent compared with $327 million for the three months ended March 31, 2020 down 12 percent compared with pro forma Operating EBITDA of $288 million for the three months ended March 31, 2019 due to the absence of $51 million in income from an asset sale in 2019 partially offsetdriven by strong volume gains and cost savings.
NUTRITION & BIOSCIENCES
The Nutrition & Biosciences segment is an innovation-driven and customer-focused segment that provides solutions for the global food and beverage, dietary supplements, home and personal care, energy, animal nutrition and pharma markets. The segment is one of the world's largest producers of specialty ingredients, developing and manufacturing solutions for the global food and beverage, dietary supplements, enzymes and pharmaceutical excipient markets. Additionally, the segment is an industry pioneer and innovator that works with customers to improve the performance, productivity and sustainability of their products and processes, through differentiated technology in ingredients applications, fermentation, biotechnology, chemistry and manufacturing process excellence.
|
| | | | | | |
| Nutrition & Biosciences | Three Months Ended |
| In millions | March 31, 2020 | March 31, 2019 |
| Net sales | $ | 1,551 |
| $ | 1,535 |
|
Operating EBITDA 1 | $ | 385 |
| $ | 349 |
|
| Equity earnings | $ | — |
| $ | — |
|
1. For the three months ended March 31, 2019, operating EBITDA is on a pro forma basis.
|
| | |
Nutrition & Biosciences | Three Months Ended |
Percentage change from prior year | Mar 31, 2020 |
Change in Net Sales from Prior Period due to: | |
Local price & product mix | 2 | % |
Currency | (2 | ) |
Volume | 1 |
|
Portfolio & other | — |
|
Total | 1 | % |
Nutrition & Biosciences net sales were $1,551 million for the three months ended March 31, 2020, up from $1,535 million for the three months ended March 31, 2019. The increase was due to a 2 percent increase in local pricegrowth and a 1 percent increase in volume partially offset by a 2 percent unfavorable currency impact. Health & Biosciences volume gains were driven by probiotics along with strong demand in home & personal care and animal nutrition. Volume gains in Food & Beverage were led by specialty proteins and cellulosics driven by increased demand in packaged foods and on-going strength ingain on the plant-based meat category partially offset by declines in sweeteners due to challenges in supply chain.sale of assets.
Operating EBITDA was $385 million for the three months ended March 31, 2020, up 10 percent compared with pro forma Operating EBITDA of $349 million for the three months ended March 31, 2019 due to pricing gains and a favorable product mix led by Health & Biosciences.
TRANSPORTATIONWATER & INDUSTRIALPROTECTION
The TransportationWater & Industrial segment provides high-performance engineering resins, adhesives, silicones, lubricants and parts to engineers and designers in the transportation, electronics, healthcare, industrial and consumer end-markets to enable systems solutions for demanding applications and environments. The segment delivers a broad range of polymer-based high-performance materials in its product portfolio, including elastomers and thermoplastic and thermoset engineering polymers which are used by customers to fabricate components for mechanical, chemical and electrical systems. In addition, the segment produces innovative engineering polymer solutions, high performance parts, specialty silicones and differentiated adhesive technologies to meet customer specifications in automotive, aerospace, electronics, industrial, healthcare and consumer markets. Transportation & Industrial is a global leader of advanced materials that provides technologies that differentiate customers’ products with improved performance characteristics enabling the transition to hybrid-electric-connected vehicles, high speed high frequency connectivity and smart healthcare.
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| | | | | | |
| Transportation & Industrial | Three Months Ended |
| In millions | March 31, 2020 | March 31, 2019 |
| Net sales | $ | 1,144 |
| $ | 1,317 |
|
Operating EBITDA 1 | $ | 308 |
| $ | 373 |
|
| Equity earnings | $ | 1 |
| $ | — |
|
1. For the three months ended March 31, 2019, operating EBITDA is on a pro forma basis.
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| | |
Transportation & Industrial | Three Months Ended |
Percentage change from prior year | March 31, 2020 |
Change in Net Sales from Prior Period due to: | |
Local price & product mix | (4 | )% |
Currency | (1 | ) |
Volume | (8 | ) |
Portfolio & other | — |
|
Total | (13 | )% |
Transportation & Industrial net sales were $1,144 million for the three months ended March 31, 2020, down from $1,317 million for the three months ended March 31, 2019. The change in net sales was due to an 8 percent decrease in volume, a 4 percent decrease in local price, and a 1 percent unfavorable currency impact, primarily in EMEA. Volume declines were primarily due to impact of the COVID-19 pandemic on the automotive industry and the other key industrial markets.
Operating EBITDA was $308 million for the three months ended March 31, 2020, down 17 percent compared with pro forma Operating EBITDA of $373 million for the three months ended March 31, 2019 driven primarily by the impact of the volume and nylon price declines within Mobility Solutions.
SAFETY & CONSTRUCTION
The Safety & ConstructionProtection segment is a leading provider of engineered products and integrated systems for a number of industries including worker safety, water purification and separation, aerospace, energy, medical packaging and building materials. The segment satisfies the growing global needs of businesses, governments, and consumers for solutions that make life safer, healthier, and better. By uniting market-driven science with the strength of highly regarded brands, the segment strives to bring new products and solutions to solve customers' needs faster, better and more cost effectively.
| | | | | | | | |
| Water & Protection | Three Months Ended |
| In millions | March 31, 2021 | March 31, 2020 |
| Net sales | $ | 1,328 | | $ | 1,276 | |
| Operating EBITDA | $ | 355 | | $ | 357 | |
| Equity earnings | $ | 12 | | $ | 7 | |
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| | | | | | |
| Safety & Construction | Three Months Ended |
| In millions | March 31, 2020 | March 31, 2019 |
| Net sales | $ | 1,276 |
| $ | 1,283 |
|
Operating EBITDA 1 | $ | 368 |
| $ | 374 |
|
| Equity earnings | $ | 7 |
| $ | 8 |
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1. For the three months ended March 31, 2019, operating EBITDA is on a pro forma basis.
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| | | | |
SafetyWater & ConstructionProtection | Three Months Ended |
| Percentage change from prior year | March 31, 20202021 |
| Change in Net Sales from Prior Period due to: | |
| Local price & product mix | 2— | % |
| Currency | (13 | ) |
| Volume | (41 | ) |
| Portfolio & other | 2— |
|
| Total | (14 | )% |
SafetyWater & ConstructionProtection net sales were $1,328 million for the three months ended March 31, 2021, up from $1,276 million for the three months ended March 31, 2020 downdriven by a 3 percent favorable impact from $1,283currency and volume growth of 1 percent. Local price and portfolio remained flat. Strong volume gains in Water Solutions and increased demand within Shelter Solutions residential construction and do-it-yourself applications were offset by volume declines in Safety Solutions.
Operating EBITDA was $355 million for the three months ended March 31, 2019 as a 2 percent increase in local price and a 2 percent increase in portfolio were more than offset by volume declines of 4 percent and a 1 percent unfavorable impact from currency globally. The portfolio impact reflects the recent acquisitions in the Water Solutions business. Local price increased led by the Safety and Water Solutions. Volume gains in Water Solutions and demand for TYVEK® protective garments were more than offset by volume declines in Safety and Shelter Solutions due to weakened demand across end markets and declined construction activity as a result of the COVID-19 pandemic.
Operating EBITDA was $3682021, flat compared with $357 million for the three months ended March 31, 2020 down 2 percent compared with pro forma Operating EBITDA of $374 million for the three months ended March 31, 2019 due to lower volumes and the absence of licensing income more than offsetting pricingas volume gains improved product mix, and productivity actions.actions were offset by higher manufacturing and supply chain costs.
NON-COREMOBILITY & MATERIALS
The Non-CoreMobility & Materials segment isprovides high-performance engineering resins and adhesives to engineers and designers in the transportation, electronics, industrial and consumer end-markets to enable systems solutions for demanding applications and environments. The segment delivers a leading global supplierbroad range of polymer-based high-performance materials in its product portfolio, including elastomers and thermoplastic and thermoset engineering polymers which are used by customers to fabricate components for mechanical, chemical and electrical systems. In addition, the segment supplies key materials for the manufacturing of photovoltaic cells and panels, including innovative metallization pastes, backsheet materials and silicone encapsulantsencapsulates and adhesives. The segment also includes the Company's share of the results of the HSC Group, a U.S.-based group of companies that manufacture and sell polycrystalline silicon products for the photovoltaic and semiconductor industries. Additionally, the segment provides materials used in componentsspecialty pastes and films forused in consumer electronics, automotive, and aerospace markets. The segment alsoMobility & Materials is a global leader of advanced materials that provides sustainable materialstechnologies that differentiate customers’ products with improved performance characteristics enabling the transition to hybrid-electric-connected vehicles and services for sulfuric acid production and regeneration technologies, alkylation technology for production of clean, high-octane gasoline, and a comprehensive suite of aftermarket service and solutions offerings, including safety consulting and services, to improve the safety, productivity, and sustainability of organizations across a range of industries. The Non-Core segment is also a leading producer of specialty biotechnology materials for carpet and apparel markets as well as polyester films for the healthcare, photovoltaics, electronics, packaging and labels, and electrical insulation industries.high speed high frequency connectivity.
| | | | | | | | |
| Mobility & Materials | Three Months Ended |
| In millions | March 31, 2021 | March 31, 2020 |
| Net sales | $ | 1,215 | | $ | 1,091 | |
| | |
| Operating EBITDA | $ | 278 | | $ | 215 | |
| Equity earnings | $ | 3 | | $ | 1 | |
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| | | | | | |
| Non-Core | Three Months Ended |
| In millions | March 31, 2020 | March 31, 2019 |
| Net sales | $ | 366 |
| $ | 454 |
|
Operating EBITDA 1 | $ | 42 |
| $ | 98 |
|
Equity earnings 2 | $ | 22 |
| $ | 30 |
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1. For the three months ended March 31, 2019, operating EBITDA is on a pro forma basis.
2. Represents equity in earnings (losses) of nonconsolidated affiliates included in pro forma Operating EBITDA, the Company's measure of profit/loss for segment reporting purposes, which excludes significant items. Accordingly, the Non-Core segment presented above excludes a restructuring charge of $1 million which is presented in "Equity in earnings of nonconsolidated affiliates" in the Company's interim Consolidated Statement of Operations.
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| | | | |
Non-CoreMobility & Materials | Three Months Ended |
| Percentage change from prior year | March 31, 20202021 |
| Change in Net Sales from Prior Period due to: | |
| Local price & product mix | 21 | % |
| Currency | —3 |
|
| Volume | (127 | ) |
| Portfolio & other | (9— | ) |
| Total | (1911 | )% |
Non-CoreMobility & Materials net sales were $366$1,215 million for the three months ended March 31, 2021, up from $1,091 million for the three months ended March 31, 2020. Net sales increased due to a 7 percent increase in volume, a 3 percent favorable currency impact and a 1 percent increase in local price. Volume growth was driven by gains in Performance Resins and Advanced Solutions attributable to the continued recovery of the global automotive market as well as strong demand for microcircuit materials. Engineering Polymers volume declined due to global supply constraints on key raw materials.
Operating EBITDA was $278 million for the three months ended March 31, 2021, up 29 percent compared with $215 million for the three months ended March 31, 2020 downdriven by volume gains and cost savings from $454 million forproductivity actions.
Corporate
Corporate includes certain enterprise and governance activities including non-allocated corporate overhead costs and support functions, leveraged services, non-business aligned litigation expenses and other costs not absorbed by reportable segments. The sales and activity of to be divested and previously divested businesses including the three months ended March 31, 2019 due to 2 percent pricing gains more than offset by a 12 percent volume declineoperations of Biomaterials, Clean Technologies, and 9 percent portfolio decline. The third quarter 2019 sale ofSolamet® business units, and the Sustainable Solutionstrichlorosilane business reduced sales by 9 percent. Volume gains(“TCS Business”) along with its equity ownership interest in metallization pastes were more than offset by declines in trichlorosilane demand. Biomaterials volume declines were primarily a result of weakened demandsDC HSC Holdings LLC and Hemlock Semiconductor L.L.C. (the "HSC Group”) historically included in the carpet and apparel markets.Non-Core segment are reflected as Corporate activity.
Operating EBITDA was $42 million for the three months ended March 31, 2020, down 57 percent compared with pro forma Operating EBITDA of $98 million for the three months ended March 31, 2019 primarily due to volume declines and lower HSC Group equity earnings.
CHANGES IN FINANCIAL CONDITION
Liquidity & Capital Resources
Information related to the Company's liquidity and capital resources can be found in the Company's 20192020 Annual Report, Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources. Discussion below provides the updates to this information for the three months ended March 31, 2020.
The Company continually reviews its sources of liquidity and debt portfolio and may make adjustments to one or both to ensure adequate liquidity and increase the Company’s optionality and financing efficiency as it relates to financing cost and balancing terms/maturities. The Company’s primary source of incremental liquidity is cash flows from operating activities. COVID-19 continues to adversely impact the broader global economy, including negatively impacting economic growth and creating disruption and volatility in the global financial and capital markets, which increases the cost of capital and adversely impacts the availability of and access to capital,which could negatively affect DuPont’s liquidity. Management expects the generation of cash from operations and the ability to access the debt capital markets and other sources of liquidity will continue to provide sufficient liquidity and financial flexibility to meet the Company’s and its subsidiaries obligations as they come due; however, DuPont due.
is unable to predict the extent of COVID-19 related impacts which depends on highly uncertain and unpredictable future developments, including the duration and spread of the COVID-19 outbreak, and the speed and extent of the resumption of normal economic and operating conditions. In light of this uncertainty, the Company has taken steps to further ensure liquidity and capital resources, as discussed below.
| | | | | | | | |
| In millions | March 31, 2021 | December 31, 2020 |
| Cash, cash equivalents, and marketable securities | $ | 6,385 | | $ | 2,544 | |
| Total debt | $ | 12,622 | | $ | 15,612 | |
|
| | | | | | |
| In millions | March 31, 2020 | December 31, 2019 |
| Cash and cash equivalents | $ | 1,748 |
| $ | 1,540 |
|
| Total debt | $ | 17,543 |
| $ | 17,447 |
|
The Company's cash, and cash equivalents, and marketable securities at March 31, 20202021 and December 31, 20192020 were $1.7$6.4 billion and $1.5$2.5 billion, respectively, of which $1.1$1.9 billion at March 31, 20202021 and $1.4$1.8 billion at December 31, 20192020 were held by subsidiaries in foreign countries, including United States territories. The decrease in cash and cash equivalents held by subsidiaries in foreign countries is due to repatriation activities. For each of its foreign subsidiaries, the Company makes an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States.
Total debt at March 31, 20202021 and December 31, 20192020 was $17.5$12.6 billion and $17.4$15.6 billion, respectively. The increasedecrease was primarily due to a $250 million draw on the 364-Day Revolving Credit Facility, which was partially off-set by a declinetermination and repayment of the Company's $3 billion Term Loan Facilities in the Commercial Paper outstanding balance. first quarter of 2021.
As discussed below,of March 31, 2021, the drawCompany is contractually obligated to make future cash payments of $12,702 million and $6,457 million associated with principal and interest, respectively, on debt obligations. Related to the 364-Day Facility was relatedprincipal balance, $2,000 million, which relates to temporary dislocationthe May 2020 Notes, will be redeemed on May 13, 2021 and the remainder will be due subsequent to March 31, 2022. Related to interest, $525 million will be due in the market for commercial papernext twelve months and the remainder will be due subsequent to March 31, 2022. The decrease in March 2020.debt and interest obligations since December 31, 2020 is due to the release of obligations associated with the N&B Notes Offering that were separated from the Company on February 1, 2021, upon consummation of the N&B Transaction. This resulted in $6,250 million of principal, mostly due subsequent to 2025, and related $2,637 million of future interest obligations being separated from the Company.
Special Cash Payment
In connection with and in accordance with the terms of the N&B Transaction, prior to consummation of the Exchange Offer and the N&B Merger, DuPont received a one-time cash payment of approximately $7.3 billion, (the "Special Cash Payment"), which is subject to post-closing adjustment pursuant to the terms of the N&B Separation and Distribution Agreement. The Company utilized the Special Cash Payment to repay the $3 billion Term Loan Facilities and will use a portion of the Special Cash Payment to redeem the May 2020 Notes, as discussed below.
Term Loan and Revolving Credit Facilities
In November 2018, the Company entered into a term loan agreement that establishes two term loan facilities in the aggregate principal amount of $3 billion, (the “Term Loan Facilities”) as well as a five-year $3 billion revolving credit facility (the “Five-Year Revolving Credit Facility”). Effective May 2, 2019, the Company fully drew the two Term Loan Facilities in the aggregate principal amount of $3.0 billion and the Five-Year Revolving Credit Facility became effective and available. The Five-Year Revolving Credit Facility is generally expected to remain undrawn, and serve as a backstop to the Company’s commercial paper and letter of credit issuance. In June 2019,
On February 1, 2021, the Company terminated its fully drawn $3 billion Term Loan Facilities. The termination triggered the repayment of the aggregate outstanding principal amount of $3 billion, plus accrued and unpaid interest through and including January 31, 2021. The Company funded the repayment with proceeds from the Special Cash Payment.
On April 15, 2021, the Company entered into a 364-day $750 million revolving credit facility (the “Old 364-Day Revolving Credit Facility”). In March 2020, the Company made a draw on the Old 364-Day Revolving Credit Facility in the aggregate principal amount of $250 million.
Subsequent to March 31, 2020, the Company repaid the $250 million draw on the Old 364-Day Revolving Credit Facility.
In April 2020, the Company entered into aan updated $1.0 billion 364-day revolving credit facility (the “$1B“2021 $1B Revolving Credit Facility"). The as the $1.0 billion 364-day revolving credit facility entered in April 2020 (the “2020 $1B
Revolving Credit Facility replaced the Old 364-Day Revolving Credit Facility, improving the Company’s liquidity position in response to near term uncertainties.Facility") expired mid-April. As of the effectiveness of the 2021 $1B Revolving Credit Facility, the Old 364-Day2020 $1B Revolving Credit Facility was terminated. The $1B Revolving Credit facility may be used for general corporate purposes.
May Debt Offering
On May 1, 2020, the Company completed an underwritten public offering of senior unsecured notes (the “Notes”“May 2020 Notes”) in the aggregate principal amount of $2 billion of 2.169 percent fixed rate Notes due May 1, 2023 (the “May Debt Offering”). The proceeds fromUpon consummation of the N&B Transaction, the special mandatory redemption feature of the May Debt Offering are expected to be used bywas triggered, requiring the Company to repay or redeem the Company’s $0.5 billion in floating rate notes due November 2020 and $1.5 billion of 3.77 percent fixed-rate notes due November 2020 (collectively, the “2020 Notes”). Upon consummation of the Proposed N&B Transaction, the Company will be required to mail a notice of redemption to holders of the Notes, with a copy to the Trustee, setting forth the date of redemption of all of the Notes on the date (“Special Mandatory
Redemption Date”) that is the later of (i) three (3) Business Days after the consummation of the Proposed N&B Transaction and (ii) May 1, 2021. On the Special Mandatory Redemption Date, the Company will be required to redeem all of the May 2020 Notes at a redemption price equal to 100% of the aggregate principal amount of the May 2020 Notes plus accrued and unpaid interest, if any, up to but excluding the Special Mandatory Redemption Date. In the event a special mandatory redemption is triggered,interest. On May 3, 2021, the Company expects toprovided notice that it will redeem the May 2020 Notes on May 13, 2021. The Company will fund the redemption with proceeds from the Special Cash Payment.
Commercial PaperLaird Performance Materials
In April 2019, DuPont authorized a $3 billion commercial paper program (the “DuPont Commercial Paper Program”). AtOn March 31, 2020,8, 2021, the Company announced that it had issued $1.7 billion of commercial paper ($1.8 billion at December 31, 2019). As noted previously, the Company did experience some temporary illiquidity in the commercial paper market in March 2020, attributable to overall disruptions to financial markets from the ongoing COVID-19 outbreak. Since March 31, 2020, the Company has noted greater stability and liquidity in the commercial paper market. The Company expects commercial paper to remain a primary liquidity source going forward.
Nutrition & Biosciences Financing
In connection with the Proposed N&B Transaction, N&B Inc. entered into a Bridge Commitment Letter in an aggregate principal amount of $7.5 billion, (the “Bridge Loans”)definitive agreement with Advent International to secure committed financingacquire Laird Performance Materials for the Special Cash Payment and related financing fees and expenses. The aggregate commitment under the Bridge Letter is reduced by, among other things, (1) the amount of net cash proceeds received by N&B Inc. from any issuance of senior unsecured notes pursuant to a Rule 144A offering or other private placement, (the "N&B Notes Offering") and (2) certain qualifying term loan commitments under senior unsecured term loan facilities.
In January 2020, N&B Inc. entered into a senior unsecured term loan agreement in the amount of $1.25 billion split evenly between three- and five-year facilities. As a result of entry into the term loan agreement, the commitments under the Bridge Commitment Letter were reduced to $6.25$2.3 billion. The remaining $6.25 billionacquisition is expected to be funded throughclose in the N&B Notes Offering and/or the Bridge Loans. The proceeds from drawdowns on the term loan facilitiesthird quarter of 2021, subject to regulatory approvals and the N&B Notes Offering, if any, and/or the Bridge Loans would be used to make the Special Cash Payment and to pay the related financing fees and expenses. The commitments under the Bridge Commitment Letter and the availability of funding under the term loan agreement are subject toother customary closing conditions, including among others, the satisfaction of substantially all the conditions to the consummationand will be part of the proposed transaction with IFF.Electronic & Industrials segment. The Company intends to pay for the acquisition from existing cash balances.
Borrowing under the term loan agreement and, if any, under the Bridge Loans would occur immediately prior to the closing of the Proposed N&B Transaction. Any issuance of the N&B Note Offering for some or all the remaining $6.25 billion would likely occur in advance of the closing.
Pursuant to the Merger Agreement, the fees and expenses associated with the financing, including fees associated with any prepayment will be borne (A) entirely by N&B Inc. if the transaction closes; and (B) equally by DuPont and IFF if the Merger Agreement terminates. However, if the Merger Agreement is terminated by IFF, in accordance with its terms, for breach by DuPont, such fees and expenses will be borne entirely by DuPont; and if terminated by DuPont in accordance with its terms for breach by IFF, such fees and expenses will be borne entirely by IFF.
Credit Ratings
The Company's credit ratings impact its access to the debt capital markets and cost of capital. The Company remains committed to a strong financial position and strong investment-grade rating. At April 30, 2020,2021, DuPont's credit ratings were as follows:
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| | | | | | | | | | |
| Credit Ratings | Long-Term Rating | Short-Term Rating | Outlook |
| Standard & Poor’s | BBB+ | A-2 | Negative WatchStable |
| Moody’s Investors Service | Baa1 | P-2 | Stable |
| Fitch Ratings | BBB+ | F-2 | Stable |
The Company's indenture covenants related to its 2018 Senior Notes and May Debt Offering2020 Notes contains certain limitations on the Company’s ability to incur liens and enter into sale lease-back transactions, mergers and consolidations as well as customary events of default. The Term Loan Facilities, the Five-Year Revolving Credit Facility and the 2020 and 2021 $1B Revolving Credit FacilityFacilities contain a financial covenant, typical for companies with similar credit ratings, requiring that the ratio of Total Indebtedness to Total Capitalization for the Company and its consolidated subsidiaries not exceed 0.60. At March 31, 2020,2021, the Company was in compliance with this financial covenant.
Summary of Cash Flows
The Company’s cash flows from operating, investing and financing activities, as reflected in the interim Consolidated Statements of Cash Flows, are summarized in the following table. The cash flows related to Dow and CortevaN&B have not been segregated and are included in the interim Consolidated Statements of Cash Flows for the three months ended March 31, 2019.2021 and 2020.
| | | | | | | | |
| Cash Flow Summary | Three Months Ended |
| In millions | March 31, 2021 | March 31, 2020 |
| Cash provided by (used for): | | |
| Operating activities | $ | 378 | | $ | 718 | |
| Investing activities | $ | (2,260) | | $ | (124) | |
| Financing activities | $ | (2,458) | | $ | (344) | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | $ | (37) | | $ | (45) | |
| Cash, cash equivalents and restricted cash reclassified as discontinued operations | $ | — | | $ | 6 | |
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| | |
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| | | | | | |
| Cash Flow Summary | Three Months Ended |
| In millions | March 31, 2020 | March 31, 2019 |
| Cash provided by (used for): | | |
| Operating activities | $ | 718 |
| $ | 26 |
|
| Investing activities | $ | (124 | ) | $ | (1,000 | ) |
| Financing activities | $ | (344 | ) | $ | (1,032 | ) |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | $ | (45 | ) | $ | 50 |
|
| Cash, cash equivalents and restricted cash reclassified as discontinued operations | — |
| $ | 5,204 |
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Cash Flows from Operating Activities
In the first three months of 2020,2021, cash provided by operating activities was $718$378 million, compared with cash provided by operating activities of $26$718 million in the same period last year. The increasedecrease in cash provided by operating activities was primarily due to an increase in the use of cash for net working capital, as well as a decrease in cash usednet income after adjustment for non-cash items such as net gain on sales of businesses and investments, restructuring and asset related charges, goodwill impairment charges, and depreciation and amortization. Activity related to the N&B business is included in all three months of the comparative period and the first month of 2021.
| | | | | | | | |
Net Working Capital 1 | March 31, 2021 | Dec 31, 2020 |
| In millions (except ratio) |
| Current assets | $ | 12,540 | | $ | 8,349 | |
| Current liabilities | 5,667 | | 3,616 | |
| Net working capital | $ | 6,873 | | $ | 4,733 | |
| Current ratio | 2.21:1 | 2.31:1 |
1.Net working capital offset byhas been presented to exclude the impactassets and liabilities related to the N&B Transaction. The assets and liabilities related to the N&B Transaction are presented as assets of discontinued operations and liabilities of discontinued operations, respectively, in the Dow and Corteva Distributions to period earnings.Condensed Consolidated Balance Sheets for the year ended December 31, 2020.
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| | | | | | |
| Net Working Capital | March 31, 2020 | Dec 31, 2019 |
| In millions (except ratio) |
| Current assets | $ | 10,392 |
| $ | 9,999 |
|
| Current liabilities | 8,545 |
| 8,346 |
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| Net working capital | $ | 1,847 |
| $ | 1,653 |
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| Current ratio | 1.22:1 |
| 1.20:1 |
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Cash Flows from Investing Activities
In the first three months of 2020,2021, cash used for investing activities was $124$2,260 million, compared to cash used for investing of $1,000with $124 million in the first three months of 2019.2020. The decreaseincrease in cash used was primarily attributable to lower capital expendituresan increase in purchases of investments and an increasea decrease in proceeds from sales of property and businesses. The firstbusinesses (net of cash dividend), partially offset by a decrease in capital expenditures. Activity related to the N&B business is included in all three months of 2019 also contains activity related to the materials sciencecomparative period and agriculture businesses prior to the Distributions.first month of 2021.
Cash Flows from Financing Activities
In the first three months of 2020,2021, cash used for financing activities was $344$2,458 million compared with $1,032$344 million in the same period last year. The primary driver of the decreaseincrease in cash used was a reductionan increase in payments on long-term debt and an increase in share purchases of common stock, a reduction in dividends paid to stockholders, partially offset by decreased issuances of short-term notes payable and lower proceeds from issuance of long-term debt. The firstdebt transferred to IFF at split-off. Activity related to the N&B business is included in all three months of 2019 also contains activity related to the materials sciencecomparative period and agriculture businesses prior to the Distributions.first month of 2021.
Dividends
On February 12, 2020,18, 2021, the Board of Directors declared a first quarter dividend of $0.30 per share, paid on March 16, 2020,15, 2021, to shareholders of record on February 28, 2020.March 1, 2021.
On April 29, 2020,28, 2021, the Company announced that its Board declared a second quarter dividend of $0.30 per share payable on June 15, 2020,2021, to shareholders of record on May 29, 2020.28, 2021.
Share Buyback Programs
On June 1, 2019, the Company's Board of Directors authorized a new $2 billion share buyback program, which expires on June 1, 2021.2021 ("2019 Share Buyback Program"). As of March 31, 2020,2021, the Company repurchased 16.923.7 million shares under this program since inception at a total cost of $982 million.$1.5 billion. See Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, for additional information.
In the first quarter of 2021, the Company's Board of Directors authorized a new $1.5 billion share buyback program, which expires on June 30, 2022 ("2021 Share Buyback Program"). The Company expects to repurchase shares under the 2021 Share Buyback Program after the completion of the 2019 Share Buyback Program.
Pension and Other Post EmploymentPost-Employment Plans
DuPont expects to make additional contributions in the aggregate of approximately $60$75 million by year-end 20202021 to certain non-US pension and other post employmentpost-employment benefit plans. Any such contribution could be funded by existing cash balances and/or cash from other available sources of liquidity.
Restructuring
In March 2020, the Company approved restructuring actions designed to capture near-term cost reductions following the expected closureand to further simplify certain organizational structures in anticipation of the Proposed N&B Transaction (the "2020 Restructuring Program"). As a result of these actions, the Company recorded pre-tax restructuring charges of $111$170 million during the first quarter of 2020,inception-to-date, consisting of severance and related benefit costs of $96$118 million and asset related charges of $15$52 million. The Company expects actions related to this program to beActions associated with the 2020 Restructuring Program are considered substantially complete by the end of 2020.complete. Future cash payments related to the 2020 Restructuring Program are anticipated to be up to $130$36 million primarily related to the payment of severance and related benefits and contract termination charges.benefits.
In June 2019, DuPont approved restructuring actions to simplify and optimize certain organizational structures following the completion of the DWDP Distributions (the "2019 Restructuring Program"). As a result of these actions, the Company has recorded pre-tax restructuring charges of $156$124 million inception-to-date, consisting of severance and related benefit costs of $122$97 million and asset related charges of $34$27 million. The Company expects actions related to this program to beActions associated with the 2019 Restructuring Program are considered substantially complete in the second quarter of 2020.complete. Future cash payments related to the 2019 Restructuring Program are anticipated to be approximately $75$6 million primarily relatedand relate to the payment of severance and related benefits.
In September and November 2017, the Company approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the "Synergy Program"), adopted by the DowDuPont Board of Directors. The Synergy Program was designed to integrate and optimize the organization following the DWDP Merger and in preparation for the DWDP Distributions whereby the Company has recorded pre-tax restructuring charges attributable to the continuing operations of DuPont of $490$346 million inception-to-date, consisting of severance and related benefit costs of $215$138 million, asset related charges of $209$159 million and contract termination charges of $66$49 million. The activities related to the Synergy Program are expected to result in additional cash expenditures of $59 million consisting of severance and related benefit costs and contract terminations. Actions associated with the Synergy Program, including employee separations, are considered substantially complete (seecomplete. Future cash payments related to the Synergy Program are anticipated to be $13 million and relate to the payment of severance and related benefits.
See Note 54 to the interim Consolidated Financial Statements).Statements for more information on the Company's restructuring programs.
Off-balance Sheet Arrangements
Guarantees arise in the ordinary course of business from relationships with customers and nonconsolidated affiliates when the Company undertakes an obligation to guarantee the performance of others if specific triggering events occur. At March 31, 20202021 and December 31, 2019,2020, the Company had directly guaranteed $185$180 million and $187$189 million, respectively, of such obligations. Additional information related to the guarantees of the Subsidiaries can be found in the “Guarantees” section of Note 1314 to the interim Consolidated Financial Statements.
Contractual Obligations
Information related to the Company's contractual obligations at December 31, 2019 can be found in the Company's 2019 Annual Report, Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Contractual Obligations. In the first quarter of 2020, there have been no material changes in the company's contractual obligations since December 31, 2019.
OTHER MATTERS
Recent Accounting Guidance
See Note 2 to the interim Consolidated Financial Statements for a description of recent accounting guidance.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported in the interim Consolidated Financial Statements and accompanying notes. Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Annual Report”) describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. DuPont’s accounting policies that are impacted by judgments, assumptions and estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2019 Annual Report. Since December 31, 2019, there have been no material changes in the Company’s accounting policies that are impacted by judgments, assumptions and estimates. See the discussion in this section for information regarding the valuation of assets and impairment considerations.
Valuation of Assets and Impairment Considerations
The Company tests goodwill for impairment annually during the fourth quarter as of October 1, or more frequently when events or changes in circumstances indicate that the fair value is below its carrying value. Goodwill is evaluated for impairment using qualitative and/or quantitative testing procedures. The Company performs goodwill impairment testing at the reporting unit level which is defined as the operating segment or one level below the operating segment. One level below the operating segment, or component, is a business in which discrete financial information is available and regularly reviewed by segment management. The Company aggregates certain components into reporting units based on economic similarities.
As a result of the related acquisition method of accounting in connection with the Merger, Historical EID’s assets and liabilities were measured at fair value resulting in increases to the Company’s goodwill and other intangible assets. The fair value valuation increased the risk that declines in financial projections, including changes to key assumptions, could have a material, negative impact on the fair value of the Company’s reporting units and assets, and therefore could result in an impairment.
COVID-19 continues to adversely impact the broader global economy and has caused significant volatility in financial markets. If there is a of lack of recovery or further global softening in certain markets, mainly in which the Transportation & Industrial segment operates in such as automotive, oil & gas and select industrial end-markets, or a sustained decline in the value of the Company's common stock, the Company may be required to perform additional impairment assessments for its goodwill, other intangibles, and long-lived assets, the results of which could result in material impairment charges.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Note 1920 to the interim Consolidated Financial Statements. See also Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk, of the Company's 20192020 Annual Report on Form 10-K for information on the Company's utilization of financial instruments and an analysis of the sensitivity of these instruments.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains a system of disclosure controls and procedures to give reasonable assurance that information required to be disclosed in the Company's reports filed or submitted under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. These controls and procedures also give reasonable assurance that information required to be disclosed in such reports is accumulated and communicated to management to allow timely decisions regarding required disclosures.
As of March 31, 2020,2021, the Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO), together with management, conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the CEO and CFO concluded that these disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15 that was conducted during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
In connection with the Distributions,N&B Transaction, there were several processes, policies, operations, technologies and information systems that were integrated following the Merger which have been replicated, transferred or separated. DuringThrough the quarter ended March 31, 2020,2021, the Company continued to take steps to ensure that adequate controls were designed and maintained including planning for separation activities related to the Proposed N&B Transaction.throughout this transition period.
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DuPont de Nemours Inc.
PART II - OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
The Company and its subsidiaries are subject to various litigation matters, including, but not limited to, product liability, patent infringement, antitrust claims, and claims for third party property damage or personal injury stemming from alleged environmental torts. Information regarding certain of these matters is set forth below and in Note 1314 to the interim Consolidated Financial Statements.
Litigation
See Note 1314 to the interim Consolidated Financial Statements.
Environmental Proceedings
The Company believes it is remote that the following matters will have a material impact on its financial position, liquidity or results of operations. The description is included per Regulation S-K, Item 103(5)(c) of the Securities Exchange Act of 1934.
Divested Neoprene Facility, La Place, Louisiana - EPA Compliance Inspection
In 2016, the EPA conducted a focused compliance investigation at the Denka Performance Elastomer LLC (“Denka”) neoprene manufacturing facility in La Place, Louisiana. Historical EID sold the neoprene business, including this manufacturing facility, to Denka in the fourth quarter of 2015. Subsequent to this inspection, the U.S. Environmental Protection Agency (“EPA”), the U.S. Department of Justice (“DOJ”), the Louisiana Department of Environmental Quality (“DEQ”), the Company (originally through Historical EID), and Denka began discussions in the spring of 2017 relating to the inspection conclusions and allegations of noncompliance arising under the Clean Air Act, including leak detection and repair. DuPont, Denka, EPA, DOJ and DEQ are continuing these discussions, which include potential settlement options.
New Jersey Directive PFAS
On March 25, 2019, the New Jersey Department of Environmental Protection (“NJDEP”) issued a Directive and Notice to Insurers to a number of companies, including Chemours, DowDuPont, Historical EID, and certain DuPont subsidiaries. NJDEP’s allegations relate to former operations of Historical EID involving poly- and perfluoroalkyl substances, (“PFAS”), including PFOA and PFOA- replacement products. The NJDEP seeks past and future costs of investigating, monitoring, testing, treating, and remediating New Jersey’s drinking water and waste systems, private drinking water wells and natural resources including groundwater, surface water, soil, sediments and biota. The Directive seeks certain information as to future costs and information related to the historic uses of PFAS and replacement chemicals including “information ranging from use and discharge of the chemicals through wastewater treatment plants, air emissions, and sales of products containing the chemicals to current development, manufacture, use and release of newer chemicals in the state.”
ITEM 1A. RISK FACTORS
Other than the risk factor set forth below, thereThere have been no material changes in the Company's risk factors discussed in Part I, Item 1A, Risk Factors, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The extent to which the novel coronavirus (COVID-19) and measures taken in response to it, impact DuPont’s business, results of operations, access to sources of liquidity and financial condition depends on future developments, which are highly uncertain and cannot be predicted.2020.
DuPont is actively monitoring the global impacts of COVID-19, including the impacts from responsive measures, and remains focused on its top priorities - the safety and health of its employees and the needs of its customers. The company’s business and financial condition, and the business and financial condition of the company’s customers and suppliers, have been impacted by the significantly increased economic and demand uncertainties created by the COVID-19 outbreak. In addition, public and private sector responsive measures, such as the imposition of travel restrictions, quarantines, adoption of remote working, and suspension of non-essential business and government services, have impacted the company’s business and financial condition. Many of DuPont’s facilities and employees are based in areas impacted by the virus. While most DuPont manufacturing sites remain in operation, DuPont has reduced or furloughed certain operations in response to government measures, employee welfare concerns and the impact of COVID-19 on the global demand and supply chain. DuPont’s manufacturing operations may be further adversely affected by impacts from COVID-19 including, among other things, additional government actions and other responsive measures, more and /or deeper supply chain disruptions, quarantines and health and availability of essential onsite personnel. Furthermore, COVID-19 continues to adversely impact the broader global economy, including negatively impacting economic growth and creating disruption and volatility in the global financial and capital markets, which increases the cost of capital and adversely impacts the availability of and access to capital,which could negatively affect DuPont’s liquidity. DuPont is unable to predict the extent of COVID-19 related impacts on its business, results of operations, access to sources of liquidity and financial condition which depends on highly uncertain and unpredictable future developments, including, but not limited to, the duration and spread of the COVID-19 outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions resume. DuPont’s financial results may be materially and adversely impacted by a variety of factors that have not yet been determined, including potential impairments of goodwill and other assets. DuPont is taking actions, including reducing costs, restructuring actions, and delaying certain capital expenditures and non-essential spend. In addition, the company may consider further reductions in or furloughing additional operations in response to further and/or deeper declines in demand and/or or supply chain disruptions. There can be no guaranty that such actions will significantly mitigate the impact of COVID-19 on the company’s business, results of operations, access to sources of liquidity or financial condition. After the COVID-19 outbreak has subsided, DuPont may experience materially adverse impacts to its business, results of operations and financial condition as a result of related global economic impacts, including any recession that has occurred or may occur in the future.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table provides information regarding purchases of the Company’s common stock by the Company during the three months ended March 31, 2020:2021, under its share buyback program announced on June 1, 2019 which expires June 1, 2021:
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| Issuer Purchases of Equity Securities | | Total number of shares purchased as part of the Company's publicly announced share repurchase program | Approximate dollar value of shares that may yet be purchased under the Company's publicly announced share repurchase program (In millions) |
| Period | Total number of shares purchased | Average price paid per share |
| January | — | | — | | — | | 1,018 | |
| February | 2,500,050 | | 70.01 | | 2,500,050 | | 843 | |
| March | 4,349,157 | | 74.72 | | 4,349,157 | | 518 | |
| First Quarter 2021 | 6,849,207 | | $ | 73.00 | | 6,849,207 | | $ | 518 | |
On March 8, 2021, the Company announced a new $1.5 billion share buyback program, which expires on June 30, 2022. The Company has not made any repurchases under the new program.
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| Issuer Purchases of Equity Securities | | Total number of shares purchased as part of the Company's publicly announced share repurchase program 1 | Approximate dollar value of shares that may yet be purchased under the Company's publicly announced share repurchase program 1 (In millions) |
| Period | Total number of shares purchased | Average price paid per share |
| January | — |
| — |
| — |
| 1,250 |
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| February | — |
| — |
| — |
| 1,250 |
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| March | 6,079,728 |
| 38.2 |
| 6,079,728 |
| 1,018 |
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| First Quarter 2020 | 6,079,728 |
| $ | 38.2 |
| 6,079,728 |
| $ | 1,018 |
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1. | On June 1, 2019, the Company announced a new $2 billion share buyback program, which expires on June 1, 2021. |
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
In anticipation of and to facilitate the proposed transaction with IFF, DuPont is planning for the internal separation of the N&B Business, both domestically and internationally, through a series of transactions that are intended to be tax-efficient from both a United States and foreign perspective (collectively, the "N&B Internal Separations"). See Part I, Item 1 and Part II, Item 1A of this report for more information regarding the proposed transaction. The N&B Internal Separations are currently expected to consist of internal transactions undertaken by DuPont and its subsidiaries to separate ownership of the N&B Business from ownership of their other businesses, including a number of distributions intended to qualify as tax-free spinoffs for United States tax purposes under Section355 of the Internal Revenue Code. The N&B Internal Separations are expected to occur in the United States and in (or involving entities domiciled in) various jurisdictions, including (but not limited to) China, India and the Netherlands. Following the completion of the N&B Internal Separations, DuPont expects that DuPont will effectuate the separation, pending DuPont Board approval, in a distribution intended to qualify as a tax-free spinoff for United States tax purposes under Section 355 of the Internal Revenue Code. The DuPont subsidiaries, or their successors, that are included in the current plans for the N&B Internal Separations as distributing corporations in the N&B Internal Separations (each in one or more tax-free spinoffs for United States tax purposes under Section 355 of the Internal Revenue Code) are the following: Rohm and Haas Electronic Materials (Shanghai) Ltd; DDP Specialty Products India Private Limited; Specialty Electronic Materials Netherlands Holding 5, B.V.; Specialty Electronic Materials Netherlands B.V.; DuPont Services Company B.V.; Performance Specialty Products NA, LLC; Specialty Products US 2, LLC; Specialty Products US, LLC; DDP Specialty Electronic Materials US, Inc; Rohm and Haas Electronic Materials CMP Inc; DDP Specialty Electronic Materials US 5, LLC; DDP Specialty Electronic Materials US 4, LLC; DDP Specialty Electronic Materials US 8, LLC; Specialty Products US 4, LLC; and DDP Specialty Electronic Materials US 9, LLC.
ITEM 6. EXHIBITS
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| EXHIBIT NO. | | DESCRIPTION |
| | | Employment Contract byThird Amended and betweenRestated Certificate of Incorporation of DuPont de Nemours, Inc. and Matthias Heinzel, effective August 1, 2011, as amendedincorporated by the Terms of Treatment dated October 28, 2014 as fully executed on November 21, 2014, and dated November 11, 2019 as fully executed on November 30, 2019. |
| | | Letter Agreement by and betweenreference to Exhibit 3.1 to DuPont de Nemours, Inc. and Matthias Heinzel dated May 28, 2019.’s Current Report on Form 8-K filed April 30, 2021. |
| | | Letter Agreement byFifth Amended and betweenRestated Bylaws of DuPont de Nemours, Inc. and Matthias Heinzel dated August 30, 2019 as fully executed on September 26, 2019. |
| | | Letter Agreementincorporated by and betweenreference to Exhibit 3.2 to DuPont de Nemours, Inc. and Matthias Heinzel dated October 25, 2019 as fully executed’s Current Report on October 28, 2019.Form 8-K filed April 30, 2021. |
| | | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101.INS | | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH | | XBRL Taxonomy Extension Schema Document. |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
*Filed herewith
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DuPont de Nemours, Inc. Signatures |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DUPONT DE NEMOURS, INC.
Registrant
Date: May 5, 20204, 2021
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| By: | /s/ MICHAEL G. GOSS | | | |
| Name: | Michael G. Goss | | | |
| Title: | Vice President and Controller | | | |
| City: | Wilmington | | | |
| State: | Delaware | | | |