UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2021March 31, 2022
OR
| | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 001-38710
Corteva, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| | Delaware | Delaware | | | 82-4979096 | | Delaware | | | 82-4979096 | |
| (State or other Jurisdiction of Incorporation or Organization) | (State or other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) | (State or other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
| 974 Centre Road, | Wilmington, | Delaware | 19805 | | (302) | 485-3000 | | |
| 9330 Zionsville Road, | | 9330 Zionsville Road, | Indianapolis, | Indiana | 46268 | | (833) | 267-8382 | |
| (Address of Principal Executive Offices) (Zip Code) | (Address of Principal Executive Offices) (Zip Code) | | (Registrant’s Telephone Number, including area code) | (Address of Principal Executive Offices) (Zip Code) | | (Registrant’s Telephone Number, including area code) |
Commission File Number 1-815
E. I. du Pont de Nemours and Company
(Exact Name of Registrant as Specified in Its Charter)
| | Delaware | Delaware | | | 51-0014090 | | Delaware | | | 51-0014090 | |
| (State or other Jurisdiction of Incorporation or Organization) | (State or other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) | (State or other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
| 974 Centre Road, | Wilmington, | Delaware | 19805 | | (302) | 485-3000 | | |
| 9330 Zionsville Road, | | 9330 Zionsville Road, | Indianapolis, | Indiana | 46268 | | (833) | 267-8382 | |
| (Address of Principal Executive Offices) (Zip Code) | (Address of Principal Executive Offices) (Zip Code) | | (Registrant’s Telephone Number, including area code) | (Address of Principal Executive Offices) (Zip Code) | | (Registrant’s Telephone Number, including area code) |
Securities registered pursuant to Section 12(b) of the Act for Corteva, Inc.:
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, par value $0.01 per share | CTVA | New York Stock Exchange |
Securities registered pursuant to Section 12(b) of the Act for E. I. du Pont de Nemours and Company:
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| $3.50 Series Preferred Stock | CTAPrA | New York Stock Exchange |
| $4.50 Series Preferred Stock | CTAPrB | 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.
| | | | | | | | | | | | | | |
Corteva, Inc. Yes | Yes | x | No | o |
| E. I. du Pont de Nemours and Company | Yes | x | No | o |
No oE. I. du Pont de Nemours and Company Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)files).
| | | | | | | | | | | | | | |
Corteva, Inc. Yes x No oE. I. du Pont de Nemours and Company Yes x No
| Yes | x | No | o |
| E. I. du Pont de Nemours and Company | Yes | x | No | o |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | | | | |
| Corteva, Inc. | Large Accelerated Filer | x | Accelerated Filer o | Non-Accelerated Filer | o | Smaller reporting company o | Emerging growth company o |
| | | | | | | |
| E. I. du Pont de Nemours and Company | Large Accelerated Filer | o | Accelerated Filer o | Non-Accelerated Filer | x
| Smaller reporting company o | Emerging growth company o |
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.
| | | | | |
Corteva, Inc.☐E. I. du Pont de Nemours and Company ☐
| o |
| E. I. du Pont de Nemours and Company | o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| | | | | | | | | | | | | | |
Corteva, Inc. Yes ☐ No xE. I. du Pont de Nemours and Company Yes ☐ No
| Yes | o | No | x |
| E. I. du Pont de Nemours and Company | Yes | o | No | x |
Corteva, Inc. had 734,185,000723,700,000 shares of common stock, par value $0.01 per share, outstanding at July 30, 2021.April, 28, 2022.
E. I. du Pont de Nemours and Company had 200 shares of common stock, par value $0.30 per share, outstanding at July 30, 2021,April, 28, 2022, all of which are held by Corteva, Inc.
E. I. du Pont de Nemours and Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q (as modified by a grant of no-action relief dated February 12, 2018) and is therefore filing this form with reduced disclosure format.
CORTEVA, INC.
E. I. DU PONT DE NEMOURS AND COMPANY
Table of Contents
Explanatory Note
Corteva owns 100% of the outstanding common stock of EID (defined below), and EID owns, directly or indirectly, 100% of DAS (defined below). EID is a subsidiary of Corteva, Inc. and continues to be a reporting company, subject to the requirements of the Securities Exchange Act of 1934, as amended.
Unless otherwise indicated or the context otherwise requires, references in this Quarterly Report on Form 10-Q to:
• "Corteva" or "the company" refers to Corteva, Inc. and its consolidated subsidiaries (including EID);
• "EID" refers to E. I. du Pont de Nemours and Company and its consolidated subsidiaries or E. I. du Pont de Nemours and Company excluding its consolidated subsidiaries, as the context may indicate;
• "DowDuPont" refers to DowDuPont Inc. and its subsidiaries prior to the Separation of Corteva (defined below);
• "Historical Dow" refers to The Dow Chemical Company and its consolidated subsidiaries prior to the Internal Reorganization (defined below);
• "Historical DuPont" refers to EID prior to the Internal Reorganization (defined below);
• "Internal Reorganizations" refers to the series of internal reorganization and realignment steps undertaken by Historical DuPont and Historical Dow to realign its business into three groups: agriculture, materials science and specialty products. These steps include:As part of the Internal Reorganization:
1.the April 1, 2019 transfer of the assets and liabilities aligned with EID’s material science businesses including EID’s ethylene and ethylene copolymers business excluding its ethylene acrylic elastomers business, (“EID ECP”)were transferred or conveyed to DowDuPont, whichseparate legal entities that were ultimately conveyed by DowDuPont to Dow;Dow on April 1, 2019;
2.the May 1, 2019 distribution of EID legal entities containing the assets and liabilities of EID’s specialty products business (the “EID Specialty Products Entities”)were transferred or conveyed to DowDuPont;separate legal entities that were ultimately distributed to DowDuPont on May 1, 2019;
3.the May 2, 2019 conveyance of Historical Dow's agriculture business ("Dow Ag Entities") to EID;EID on May 2, 2019; and
4.the May 31, 2019 contribution of EID to Corteva, Inc. on May 31, 2019. Refer to the company’s Annual Report on Form 10-K for the year ended December 31, 20202021 for further information.
• "Dow Distribution" refers to the separation of DowDuPont's materials science business into a separate and independent public company, effective as of 5:00 pm ET on April 1, 2019 by way of a distribution of Dow Inc. through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Dow’sDow Inc.’s common stock, par value $0.01 per share, to holders of DowDuPont's common stock, as of the close of business on March 21, 2019;stock;
• "Merger” refers to the all-stock merger of equals strategic combination between Historical Dow and Historical DuPont;
• "Merger Effectiveness Time” refers toDuPont on August 31, 2017 at 11:59 pm ET;2017;
• "Dow" refers to Dow Inc. after the Dow Distribution;
• "DuPont" refers to DuPont de Nemours, Inc. after the Separation of Corteva (on June 1, 2019, DowDuPont Inc. changed its registered name to DuPont de Nemours, Inc.);
• "DAS" refers to the agriculture business of Historical Dow AgroSciences;
• "Separation" or "Separation of Corteva" refers to June 1, 2019, when Corteva, Inc. became an independent, publicly
traded company;
• "Corteva Distribution" refers to the pro rata distribution of all of the then-issued and outstanding shares of Corteva, Inc.'s common stock par value $0.01 per share, on June 1, 2019, which was then a wholly-owned subsidiary of DowDuPont, to holders of DowDuPont's common stock as of the close of business on May 24, 2019;
• "Distributions" refers to the Dow Distribution and the Corteva Distribution; and
• “Letter Agreement” refers to the Letter Agreement executed by DuPont and Corteva on June 1, 2019, which sets forth certain additional terms and conditions related to the Separation, including certain limitations on each party’s ability to transfer certain businesses and assets to third parties without assigning certain of such party’s indemnification obligations under the Corteva Separation Agreement to the other party to the transferee of such businesses and assets or meeting certain other alternative conditions.
This Quarterly Report on Form 10-Q is a combined report being filed separately by Corteva, Inc. and EID. The information in this Quarterly Report on Form 10-Q is equally applicable to Corteva, Inc. and EID, except where otherwise indicated.
The separate EID financial statements and footnotes for areas that differ from Corteva, are included within this Quarterly Report on Form 10-Q and begin on page 70.58. Footnotes of EID that are identical to that of Corteva are cross-referenced accordingly.
PART I. FINANCIAL INFORMATION
Item 1.CONSOLIDATED FINANCIAL STATEMENTS
Corteva, Inc.
Consolidated Statements of Operations (Unaudited)
| | | | | | | | | | | | | | |
| (In millions, except per share amounts) | Three Months Ended
June 30, | Six Months Ended June 30, |
| 2021 | 2020 | 2021 | 2020 |
| Net sales | $ | 5,627 | | $ | 5,191 | | $ | 9,805 | | $ | 9,147 | |
| Cost of goods sold | 3,010 | | 2,829 | | 5,430 | | 5,098 | |
| Research and development expense | 293 | | 273 | | 574 | | 553 | |
| Selling, general and administrative expenses | 998 | | 965 | | 1,731 | | 1,722 | |
| Amortization of intangibles | 180 | | 176 | | 363 | | 339 | |
| Restructuring and asset related charges - net | 135 | | 179 | | 235 | | 249 | |
| Other income - net | 298 | | 89 | | 635 | | 90 | |
| Interest expense | 7 | | 14 | | 14 | | 24 | |
| Income from continuing operations before income taxes | 1,302 | | 844 | | 2,093 | | 1,252 | |
| Provision for income taxes on continuing operations | 284 | | 78 | | 462 | | 205 | |
| Income from continuing operations after income taxes | 1,018 | | 766 | | 1,631 | | 1,047 | |
| (Loss) income from discontinued operations after income taxes | (45) | | 0 | | (55) | | 1 | |
| Net income | 973 | | 766 | | 1,576 | | 1,048 | |
| Net income attributable to noncontrolling interests | 3 | | 6 | | 6 | | 16 | |
| Net income attributable to Corteva | $ | 970 | | $ | 760 | | $ | 1,570 | | $ | 1,032 | |
| Basic earnings per share of common stock: | | | | |
| Basic earnings per share of common stock from continuing operations | $ | 1.37 | | $ | 1.01 | | $ | 2.19 | | $ | 1.37 | |
| Basic loss per share of common stock from discontinued operations | (0.06) | | 0 | | (0.07) | | 0 | |
| Basic earnings per share of common stock | $ | 1.31 | | $ | 1.01 | | $ | 2.12 | | $ | 1.37 | |
| Diluted earnings per share of common stock: | | | | |
| Diluted earnings per share of common stock from continuing operations | $ | 1.37 | | $ | 1.01 | | $ | 2.18 | | $ | 1.37 | |
| Diluted loss per share of common stock from discontinued operations | (0.06) | | 0 | | (0.07) | | 0 | |
| Diluted earnings per share of common stock | $ | 1.31 | | $ | 1.01 | | $ | 2.11 | | $ | 1.37 | |
| | | | | | | | | | |
| (In millions, except per share amounts) | Three Months Ended
March 31, | |
| 2022 | 2021 | | |
| Net sales | $ | 4,601 | | $ | 4,178 | | | |
| Cost of goods sold | 2,724 | | 2,420 | | | |
| Research and development expense | 268 | | 281 | | | |
| Selling, general and administrative expenses | 735 | | 733 | | | |
| Amortization of intangibles | 179 | | 183 | | | |
| Restructuring and asset related charges - net | 5 | | 100 | | | |
| Other income - net | 17 | | 337 | | | |
| Interest expense | 9 | | 7 | | | |
| Income (loss) from continuing operations before income taxes | 698 | | 791 | | | |
| Provision for (benefit from) income taxes on continuing operations | 121 | | 178 | | | |
| Income (loss) from continuing operations after income taxes | 577 | | 613 | | | |
| (Loss) income from discontinued operations after income taxes | (10) | | (10) | | | |
| Net income (loss) | 567 | | 603 | | | |
| Net income (loss) attributable to noncontrolling interests | 3 | | 3 | | | |
| Net income (loss) attributable to Corteva | $ | 564 | | $ | 600 | | | |
| Basic earnings (loss) per share of common stock: | | | | |
| Basic earnings (loss) per share of common stock from continuing operations | $ | 0.79 | | $ | 0.82 | | | |
| Basic earnings (loss) per share of common stock from discontinued operations | (0.01) | | (0.01) | | | |
| Basic earnings (loss) per share of common stock | $ | 0.78 | | $ | 0.81 | | | |
| Diluted earnings (loss) per share of common stock: | | | | |
| Diluted earnings (loss) per share of common stock from continuing operations | $ | 0.79 | | $ | 0.81 | | | |
| Diluted earnings (loss) per share of common stock from discontinued operations | (0.01) | | (0.01) | | | |
| Diluted earnings (loss) per share of common stock | $ | 0.78 | | $ | 0.80 | | | |
See Notes to the Interim Consolidated Financial Statements beginning on page 8.
Corteva, Inc.
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
| | (In millions) | (In millions) | Three Months Ended
June 30, | Six Months Ended June 30, | (In millions) | Three Months Ended
March 31, | |
| | 2021 | 2020 | 2021 | 2020 | | 2022 | 2021 | |
| Net income | $ | 973 | | $ | 766 | | $ | 1,576 | | $ | 1,048 | | |
| Net income (loss) | | Net income (loss) | $ | 567 | | $ | 603 | | |
| Other comprehensive income (loss) - net of tax: | Other comprehensive income (loss) - net of tax: | | | Other comprehensive income (loss) - net of tax: | | | |
| Cumulative translation adjustments | Cumulative translation adjustments | 243 | | 97 | | (160) | | (575) | | Cumulative translation adjustments | 91 | | (403) | | |
| Adjustments to pension benefit plans | Adjustments to pension benefit plans | 8 | | (6) | | 16 | | (6) | | Adjustments to pension benefit plans | 8 | | 8 | | |
| Adjustments to other benefit plans | Adjustments to other benefit plans | (160) | | (1) | | (317) | | 2 | | Adjustments to other benefit plans | 3 | | (157) | | |
| Unrealized gain on investments | 0 | | 0 | | 10 | | 0 | | |
| Unrealized gain (loss) on investments | | Unrealized gain (loss) on investments | — | | 10 | | |
| Derivative instruments | Derivative instruments | 31 | | (2) | | 96 | | 4 | | Derivative instruments | (25) | | 65 | | |
| Total other comprehensive income (loss) | Total other comprehensive income (loss) | 122 | | 88 | | (355) | | (575) | | Total other comprehensive income (loss) | 77 | | (477) | | |
| Comprehensive income | 1,095 | | 854 | | 1,221 | | 473 | | |
| Comprehensive income attributable to noncontrolling interests - net of tax | 3 | | 6 | | 6 | | 16 | | |
| Comprehensive income attributable to Corteva | $ | 1,092 | | $ | 848 | | $ | 1,215 | | $ | 457 | | |
| Comprehensive income (loss) | | Comprehensive income (loss) | 644 | | 126 | | |
| Comprehensive income (loss) attributable to noncontrolling interests - net of tax | | Comprehensive income (loss) attributable to noncontrolling interests - net of tax | 3 | | 3 | | |
| Comprehensive income (loss) attributable to Corteva | | Comprehensive income (loss) attributable to Corteva | $ | 641 | | $ | 123 | | |
See Notes to the Interim Consolidated Financial Statements beginning on page 8.
Corteva, Inc.
Consolidated Balance Sheets (Unaudited)
| | (In millions, except share amounts) | (In millions, except share amounts) | June 30, 2021 | December 31, 2020 | June 30, 2020 | (In millions, except share amounts) | March 31, 2022 | December 31, 2021 | March 31, 2021 |
| Assets | Assets | | | Assets | | |
| Current assets | Current assets | | | Current assets | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 2,861 | | $ | 3,526 | | $ | 2,809 | | Cash and cash equivalents | $ | 2,031 | | $ | 4,459 | | $ | 2,404 | |
| Marketable securities | Marketable securities | 39 | | 269 | | 60 | | Marketable securities | 290 | | 86 | | 114 | |
| Accounts and notes receivable - net | Accounts and notes receivable - net | 6,792 | | 4,926 | | 6,772 | | Accounts and notes receivable - net | 7,275 | | 4,811 | | 6,792 | |
| Inventories | Inventories | 3,541 | | 4,882 | | 3,589 | | Inventories | 4,986 | | 5,180 | | 4,321 | |
| Other current assets | Other current assets | 1,052 | | 1,165 | | 1,192 | | Other current assets | 1,296 | | 1,010 | | 1,405 | |
| | Total current assets | Total current assets | 14,285 | | 14,768 | | 14,422 | | Total current assets | 15,878 | | 15,546 | | 15,036 | |
| Investment in nonconsolidated affiliates | Investment in nonconsolidated affiliates | 68 | | 66 | | 62 | | Investment in nonconsolidated affiliates | 91 | | 76 | | 64 | |
| Property, plant and equipment | Property, plant and equipment | 8,343 | | 8,253 | | 7,858 | | Property, plant and equipment | 8,483 | | 8,364 | | 8,173 | |
| Less: Accumulated depreciation | Less: Accumulated depreciation | 4,002 | | 3,857 | | 3,565 | | Less: Accumulated depreciation | 4,150 | | 4,035 | | 3,874 | |
| Net property, plant and equipment | Net property, plant and equipment | 4,341 | | 4,396 | | 4,293 | | Net property, plant and equipment | 4,333 | | 4,329 | | 4,299 | |
| Goodwill | Goodwill | 10,207 | | 10,269 | | 10,069 | | Goodwill | 10,109 | | 10,107 | | 10,146 | |
| Other intangible assets | Other intangible assets | 10,413 | | 10,747 | | 11,070 | | Other intangible assets | 9,865 | | 10,044 | | 10,584 | |
| Deferred income taxes | Deferred income taxes | 442 | | 464 | | 290 | | Deferred income taxes | 471 | | 438 | | 433 | |
| Other assets | Other assets | 1,740 | | 1,939 | | 1,974 | | Other assets | 1,886 | | 1,804 | | 1,987 | |
| | Total Assets | Total Assets | $ | 41,496 | | $ | 42,649 | | $ | 42,180 | | Total Assets | $ | 42,633 | | $ | 42,344 | | $ | 42,549 | |
| Liabilities and Equity | Liabilities and Equity | | | Liabilities and Equity | | |
| Current liabilities | Current liabilities | | | Current liabilities | | |
| Short-term borrowings and finance lease obligations | Short-term borrowings and finance lease obligations | $ | 677 | | $ | 3 | | $ | 1,529 | | Short-term borrowings and finance lease obligations | $ | 1,018 | | $ | 17 | | $ | 1,250 | |
| Accounts payable | Accounts payable | 3,070 | | 3,615 | | 2,891 | | Accounts payable | 3,685 | | 4,126 | | 3,098 | |
| Income taxes payable | Income taxes payable | 234 | | 123 | | 369 | | Income taxes payable | 180 | | 146 | | 165 | |
| Deferred revenue | Deferred revenue | 748 | | 2,662 | | 431 | | Deferred revenue | 2,435 | | 3,201 | | 2,247 | |
| Accrued and other current liabilities | Accrued and other current liabilities | 2,523 | | 2,145 | | 2,309 | | Accrued and other current liabilities | 2,335 | | 2,068 | | 2,239 | |
| | Total current liabilities | Total current liabilities | 7,252 | | 8,548 | | 7,529 | | Total current liabilities | 9,653 | | 9,558 | | 8,999 | |
| Long-Term Debt | 1,101 | | 1,102 | | 1,102 | | |
| Other Noncurrent Liabilities | | | |
| Long-term debt | | Long-term debt | 1,154 | | 1,100 | | 1,102 | |
| Other noncurrent liabilities | | Other noncurrent liabilities | | |
| Deferred income tax liabilities | Deferred income tax liabilities | 935 | | 893 | | 752 | | Deferred income tax liabilities | 1,203 | | 1,220 | | 902 | |
| Pension and other post employment benefits - noncurrent | Pension and other post employment benefits - noncurrent | 4,767 | | 5,176 | | 6,039 | | Pension and other post employment benefits - noncurrent | 2,983 | | 3,124 | | 4,954 | |
| Other noncurrent obligations | Other noncurrent obligations | 1,816 | | 1,867 | | 1,957 | | Other noncurrent obligations | 1,704 | | 1,719 | | 1,814 | |
| | Total noncurrent liabilities | Total noncurrent liabilities | 8,619 | | 9,038 | | 9,850 | | Total noncurrent liabilities | 7,044 | | 7,163 | | 8,772 | |
| Commitments and contingent liabilities | Commitments and contingent liabilities | | | Commitments and contingent liabilities | | |
| Stockholders’ equity | Stockholders’ equity | | | Stockholders’ equity | | |
Common stock, $0.01 par value; 1,666,667,000 shares authorized;
issued at June 30, 2021 - 734,421,000; December 31, 2020 - 743,458,000; and June 30, 2020 - 748,485,000 | 7 | | 7 | | 7 | | |
Common stock, $0.01 par value; 1,666,667,000 shares authorized;
issued at March 31, 2022 - 725,320,000; December 31, 2021 - 726,527,000; and March 31, 2021 - 738,321,000 | | Common stock, $0.01 par value; 1,666,667,000 shares authorized;
issued at March 31, 2022 - 725,320,000; December 31, 2021 - 726,527,000; and March 31, 2021 - 738,321,000 | 7 | | 7 | | 7 | |
| Additional paid-in capital | Additional paid-in capital | 27,682 | | 27,707 | | 27,891 | | Additional paid-in capital | 27,760 | | 27,751 | | 27,630 | |
| | Retained earnings | Retained earnings | 941 | | 0 | | 508 | | Retained earnings | 750 | | 524 | | 268 | |
| Accumulated other comprehensive loss | (3,245) | | (2,890) | | (3,845) | | |
| Accumulated other comprehensive income (loss) | | Accumulated other comprehensive income (loss) | (2,821) | | (2,898) | | (3,367) | |
| Total Corteva stockholders’ equity | Total Corteva stockholders’ equity | 25,385 | | 24,824 | | 24,561 | | Total Corteva stockholders’ equity | 25,696 | | 25,384 | | 24,538 | |
| Noncontrolling interests | Noncontrolling interests | 240 | | 239 | | 240 | | Noncontrolling interests | 240 | | 239 | | 240 | |
| Total equity | Total equity | 25,625 | | 25,063 | | 24,801 | | Total equity | 25,936 | | 25,623 | | 24,778 | |
| Total Liabilities and Equity | Total Liabilities and Equity | $ | 41,496 | | $ | 42,649 | | $ | 42,180 | | Total Liabilities and Equity | $ | 42,633 | | $ | 42,344 | | $ | 42,549 | |
See Notes to the Interim Consolidated Financial Statements beginning on page 8.
Corteva, Inc.
Consolidated Statements of Cash Flows (Unaudited)
| | (In millions) | (In millions) | Six Months Ended
June 30, | (In millions) | Three Months Ended March 31, |
| | 2021 | 2020 | | 2022 | 2021 |
| Operating activities | Operating activities | | | Operating activities | | |
| Net income | $ | 1,576 | | $ | 1,048 | | |
| Adjustments to reconcile net income to cash used for operating activities: | | | |
| Net income (loss) | | Net income (loss) | $ | 567 | | $ | 603 | |
| Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities: | | Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities: | | |
| Depreciation and amortization | Depreciation and amortization | 617 | | 583 | | Depreciation and amortization | 307 | | 304 | |
| Provision for (benefit from) deferred income tax | Provision for (benefit from) deferred income tax | 124 | | (136) | | Provision for (benefit from) deferred income tax | (37) | | 47 | |
| Net periodic pension and OPEB benefit, net | Net periodic pension and OPEB benefit, net | (641) | | (168) | | Net periodic pension and OPEB benefit, net | (71) | | (318) | |
| Pension and OPEB contributions | Pension and OPEB contributions | (149) | | (167) | | Pension and OPEB contributions | (55) | | (84) | |
| Net (gain) loss on sales of property, businesses, consolidated companies and investments | Net (gain) loss on sales of property, businesses, consolidated companies and investments | (1) | | 30 | | Net (gain) loss on sales of property, businesses, consolidated companies and investments | 3 | | — | |
| Restructuring and asset related charges - net | Restructuring and asset related charges - net | 235 | | 249 | | Restructuring and asset related charges - net | 5 | | 100 | |
| Other net loss | Other net loss | 143 | | 185 | | Other net loss | 104 | | 54 | |
| Changes in assets and liabilities, net | Changes in assets and liabilities, net | | | Changes in assets and liabilities, net | | |
| Accounts and notes receivable | Accounts and notes receivable | (1,957) | | (1,712) | | Accounts and notes receivable | (2,372) | | (2,012) | |
| Inventories | Inventories | 1,334 | | 1,271 | | Inventories | 234 | | 467 | |
| Accounts payable | Accounts payable | (525) | | (717) | | Accounts payable | (406) | | (448) | |
| Deferred revenue | Deferred revenue | (1,931) | | (2,147) | | Deferred revenue | (782) | | (401) | |
| Other assets and liabilities | Other assets and liabilities | 532 | | 812 | | Other assets and liabilities | (227) | | (262) | |
| Cash used for operating activities | (643) | | (869) | | |
| Cash provided by (used for) operating activities | | Cash provided by (used for) operating activities | (2,730) | | (1,950) | |
| Investing activities | Investing activities | | | Investing activities | | |
| Capital expenditures | Capital expenditures | (269) | | (202) | | Capital expenditures | (179) | | (137) | |
| Proceeds from sales of property, businesses and consolidated companies - net of cash divested | Proceeds from sales of property, businesses and consolidated companies - net of cash divested | 26 | | 18 | | Proceeds from sales of property, businesses and consolidated companies - net of cash divested | 5 | | 20 | |
| | Investments in and loans to nonconsolidated affiliates | Investments in and loans to nonconsolidated affiliates | (1) | | 0 | | Investments in and loans to nonconsolidated affiliates | (6) | | — | |
| | Purchases of investments | Purchases of investments | (56) | | (361) | | Purchases of investments | (234) | | (40) | |
| Proceeds from sales and maturities of investments | Proceeds from sales and maturities of investments | 285 | | 298 | | Proceeds from sales and maturities of investments | 10 | | 194 | |
| Other investing activities - net | (2) | | (5) | | |
| Cash used for investing activities | (17) | | (252) | | |
| Other investing activities, net | | Other investing activities, net | — | | (1) | |
| Cash provided by (used for) investing activities | | Cash provided by (used for) investing activities | (404) | | 36 | |
| Financing activities | Financing activities | | | Financing activities | | |
| Net change in borrowings (less than 90 days) | Net change in borrowings (less than 90 days) | 254 | | 966 | | Net change in borrowings (less than 90 days) | 744 | | 828 | |
| Proceeds from debt | Proceeds from debt | 419 | | 2,434 | | Proceeds from debt | 311 | | 419 | |
| Payments on debt | 0 | | (879) | | |
| | Repurchase of common stock | Repurchase of common stock | (550) | | (50) | | Repurchase of common stock | (235) | | (350) | |
| Proceeds from exercise of stock options | Proceeds from exercise of stock options | 66 | | 17 | | Proceeds from exercise of stock options | 40 | | 38 | |
| Dividends paid to stockholders | Dividends paid to stockholders | (192) | | (194) | | Dividends paid to stockholders | (102) | | (97) | |
| Payment for acquisition of subsidiary's interest from the non-controlling interest | 0 | | (60) | | |
| | Other financing activities | (24) | | (20) | | |
| Cash (used for) provided by financing activities | (27) | | 2,214 | | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (14) | | (95) | | |
| (Decrease)/increase in cash, cash equivalents and restricted cash | (701) | | 998 | | |
| Cash, cash equivalents and restricted cash at beginning of period | 3,873 | | 2,173 | | |
Cash, cash equivalents and restricted cash at end of period1 | $ | 3,172 | | $ | 3,171 | | |
| | Other financing activities, net | | Other financing activities, net | (44) | | (17) | |
| Cash provided by (used for) financing activities | | Cash provided by (used for) financing activities | 714 | | 821 | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash equivalents | | Effect of exchange rate changes on cash, cash equivalents and restricted cash equivalents | (31) | | (50) | |
| Increase (decrease) in cash, cash equivalents and restricted cash equivalents | | Increase (decrease) in cash, cash equivalents and restricted cash equivalents | (2,451) | | (1,143) | |
| Cash, cash equivalents and restricted cash equivalents at beginning of period | | Cash, cash equivalents and restricted cash equivalents at beginning of period | 4,836 | | 3,873 | |
Cash, cash equivalents and restricted cash equivalents at end of period1 | | Cash, cash equivalents and restricted cash equivalents at end of period1 | $ | 2,385 | | $ | 2,730 | |
1. See page 1714 for reconciliation of cash and cash equivalents and restricted cash equivalents presented in interim Consolidated Balance Sheets to total cash, cash equivalents and restricted cash equivalents presented in the interim Consolidated Statements of Cash Flows.
See Notes to the Interim Consolidated Financial Statements beginning on page 8.
Corteva, Inc.
Consolidated Statements of Equity (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions, except per share amounts) | Common Stock | Additional Paid-in Capital "APIC" | | (Accumulated Deficit) Retained Earnings | Accumulated Other Comp (Loss) Income | Treasury Stock | Non-controlling Interests | Total Equity | |
| 2020 | | | | | | | | | |
| Balance at January 1, 2020 | $ | 7 | | $ | 27,997 | | | $ | (425) | | $ | (3,270) | | $ | — | | $ | 246 | | $ | 24,555 | | |
| Net income | | | | 272 | | | | 10 | | 282 | | |
| Other comprehensive loss | | | | | (663) | | | | (663) | | |
| Common dividends ($.13 per share) | | (97) | | | | | | | (97) | | |
| Issuance of Corteva stock | | 14 | | | | | | | 14 | | |
| Share-based compensation | | 2 | | | | | | | 2 | | |
| Repurchase of common stock | | (50) | | | | | | | (50) | | |
| Other - net | | 40 | | | (2) | | | | (2) | | 36 | | |
| Balance at March 31, 2020 | $ | 7 | | $ | 27,906 | | | $ | (155) | | $ | (3,933) | | $ | — | | $ | 254 | | $ | 24,079 | | |
| Net income | | | | 760 | | | | 6 | | 766 | | |
| Other comprehensive income | | | | | 88 | | | | 88 | | |
| Common dividends ($.13 per share) | | | | (97) | | | | | (97) | | |
| Issuance of Corteva stock | | 3 | | | | | | 3 | | |
| Share-based compensation | | 19 | | | | | | 19 | | |
| Acquisition of a noncontrolling interest in consolidated subsidiaries | | (37) | | | | | | (15) | | (52) | | |
| Other - net | | | | | | | (5) | | (5) | | |
| | | | | | | | | |
| | | | | | | | | |
| Balance at June 30, 2020 | $ | 7 | | $ | 27,891 | | | $ | 508 | | $ | (3,845) | | $ | — | | $ | 240 | | $ | 24,801 | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| (In millions, except per share amounts) | Common Stock | Additional Paid-in Capital "APIC" | Retained Earnings | Accumulated Other Comp Income (Loss) | | Non-controlling Interests | Total Equity |
| 2021 | | | | | | | |
| Balance at January 1, 2021 | $ | 7 | | $ | 27,707 | | $ | — | | $ | (2,890) | | | $ | 239 | | $ | 25,063 | |
| Net income (loss) | | | 600 | | | | 3 | | 603 | |
| Other comprehensive income (loss) | | | | (477) | | | | (477) | |
| Common dividends ($0.13 per share) | | (97) | | | | | | (97) | |
| Issuance of Corteva stock | | 38 | | | | | | 38 | |
| Share-based compensation | | | | | | | — | |
| Repurchase of common stock | | (18) | | (332) | | | | | (350) | |
| Other - net | | | | | | (2) | | (2) | |
| Balance at March 31, 2021 | $ | 7 | | $ | 27,630 | | $ | 268 | | $ | (3,367) | | | $ | 240 | | $ | 24,778 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions, except per share amounts) | Common Stock | Additional Paid-in Capital "APIC" | | Retained Earnings (Accumulated Deficit) | Accumulated Other Comp (Loss) Income | Treasury Stock | Non-controlling Interests | Total Equity |
| 2021 | | | | | | | | |
| Balance at January 1, 2021 | $ | 7 | | $ | 27,707 | | | $ | 0 | | $ | (2,890) | | $ | — | | $ | 239 | | $ | 25,063 | |
| Net income | | | | 600 | | | | 3 | | 603 | |
| Other comprehensive loss | | | | | (477) | | | | (477) | |
| Common dividends ($0.13 per share) | | (97) | | | | | | | (97) | |
| Issuance of Corteva stock | | 38 | | | | | | | 38 | |
| | | | | | | | |
| Repurchase of common stock | | (18) | | | (332) | | | | | (350) | |
| Other - net | | | | | | | (2) | | (2) | |
| Balance at March 31, 2021 | $ | 7 | | $ | 27,630 | | | $ | 268 | | $ | (3,367) | | $ | — | | $ | 240 | | $ | 24,778 | |
| Net income | | | | 970 | | | | 3 | | 973 | |
| Other comprehensive income | | | | | 122 | | | | 122 | |
| Common dividends ($0.13 per share) | | | | (95) | | | | | (95) | |
| Issuance of Corteva stock | | 28 | | | | | | | 28 | |
| Share-based compensation | | 23 | | | (1) | | | | | 22 | |
| Repurchase of common stock | | | | (200) | | | | | (200) | |
| | | | | | | | |
| Other - net | | 1 | | | (1) | | | | (3) | | (3) | |
| Balance at June 30, 2021 | $ | 7 | | $ | 27,682 | | | $ | 941 | | $ | (3,245) | | $ | — | | $ | 240 | | $ | 25,625 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| (In millions, except per share amounts) | Common Stock | Additional Paid-in Capital "APIC" | Retained Earnings | Accumulated Other Comp Income (Loss) | | Non-controlling Interests | Total Equity |
| 2022 | | | | | | | |
| Balance at January 1, 2022 | $ | 7 | | $ | 27,751 | | $ | 524 | | $ | (2,898) | | | $ | 239 | | $ | 25,623 | |
| Net income (loss) | | | 564 | | | | 3 | | 567 | |
| Other comprehensive income (loss) | | | | 77 | | | | 77 | |
| Common dividends ($0.14 per share) | | | (102) | | | | | (102) | |
| Issuance of Corteva stock | | 40 | | | | | | 40 | |
| Share-based compensation | | (31) | | | | | | (31) | |
| Repurchase of common stock | | | (235) | | | | | (235) | |
| Other - net | | | (1) | | | | (2) | | (3) | |
| Balance at March 31, 2022 | $ | 7 | | $ | 27,760 | | $ | 750 | | $ | (2,821) | | | $ | 240 | | $ | 25,936 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
See Notes to the Interim Consolidated Financial Statements beginning on page 8.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| | | | | | | | |
| Corteva, Inc. | |
| Notes to the Interim Consolidated Financial Statements (Unaudited) | |
Table of Contents
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("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, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included. Results for interim periods should not be considered indicative of results for a 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, 2020,2021, collectively referred to as the “2020“2021 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.
Certain reclassifications of prior year's data have been made to conform to current year's presentation.
During the first quarter 2020, the company recorded an increase of $40 million to APIC relating to net assets recorded as transferred as part of the 2019 Internal Reorganizations that were retained.
Since 2018, Argentina has been considered a hyper-inflationary economy under U.S. GAAP and therefore the U.S. Dollar (“USD”) is the functional currency for our related subsidiaries. Argentina contributes approximately 45 percent to ourboth the company's annual Sales and EBITDA. We remeasure net monetary assets and translate our financial statements utilizing the official Argentine Peso (“Peso”) to USD exchange rate and translate our financial statements.rate. The ability to draw down Peso cash balances is limited at this time due to government restrictions and market availability of U.S. Dollars. The devaluation of the Peso relative to the USD over the last several years has resulted in the recognition of exchange losses (refer to Note 65 – Supplementary Information, to the interim Consolidated Financial Statements, and Note 9 – Supplemental Information, to the company's 20202021 Annual Report). As of June 30, 2021,March 31, 2022, a further 10 percent deterioration in the official Peso to USD exchange rate would reduce the USD value of our net monetary assets and negatively impact pre-tax earnings by approximately $20$15 million. We will continue to assess the implications to our operations and financial reporting.
NOTE 2 - RECENT ACCOUNTING GUIDANCE
Recently Adopted Accounting Guidance
In December 2019,November 2021, the FASB issued Accounting Standards Update ("ASU") 2019-12, Income TaxesASU 2021-10, Government Assistance (Topic 740)832): Simplifying the Accounting for Income Taxes,Disclosures by Business Entities about Government Assistance, which was part of the FASB’s Simplification Initiativerequires business entities to identify, evaluate, and improve areas of GAAPdisclose transactions with a governmental entity for which costa grant or contribution accounting model is used in recognizing and complexity can be reduced, while maintaining or improving the usefulness of the information provided to users of the financial statements.measuring such transactions. This ASU amends ASC 740, Income Taxes, by removing certain exceptions to the general principles, and clarifying and amending current guidance. The new standard is effective for fiscal years and periods within those fiscal years, beginning after December 15, 2020.2021, and early adoption is permitted. The company adopted this guidance on January 1, 20212022 and it did not have a material impact on the company’s financial position, results of operation or cash flows.disclosures.
NOTE 3 - DIVESTITURES AND OTHER TRANSACTIONS
Separation Agreements
In connection with the Distributions, DuPont, Corteva, and Dow (together, the “Parties” and each a “Party”) have entered into certain agreements to effect the Separation, provide for the allocation of DowDuPont’s assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) among the Parties, and provide a framework for Corteva's relationship with Dow and DuPont following the Separations and Distributions (collectively, the "Separation Agreements"). For additional information see Note 13 - Commitments and Contingent Liabilities.
DuPont
Pursuant to the Separation Agreements, DuPont and Corteva indemnifies the other against certain litigation, environmental, tax, workers' compensation and other liabilities that arose prior to the Corteva Distribution. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. In connection with the recognition of liabilities related to these matters, the company records an indemnification asset when recovery is deemed probable. At June 30, 2021, the indemnification assets are $31 million within accounts and notes receivable - net and $50 million within other assets in the interim Consolidated Balance Sheet. At June 30, 2021, the indemnification liabilities are $77 million within other noncurrent obligations in the interim Consolidated Balance Sheet.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Dow
Pursuant to the Separation Agreements, Dow and Corteva indemnifies the other against certain litigation, environmental, tax and other liabilities that arose prior to the Corteva Distribution. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. In connection with the recognition of liabilities related to these matters, the company records an indemnification asset when recovery is deemed probable. At June 30, 2021, the indemnification liabilities are $54 million within accrued and other current liabilities and $14 million within other noncurrent obligations in the interim Consolidated Balance Sheet.
Performance Chemicals
On July 1, 2015, Historical DuPont completed the separation of its Performance Chemicals segment through the spin-off of all of the issued and outstanding stock of The Chemours Company (the "Chemours Separation"). In connection with the Chemours Separation, Historical DuPont and The Chemours Company ("Chemours") entered into a Separation Agreement (as amended, the "Chemours Separation Agreement"), discussed below, a Tax Matters Agreement and certain ancillary agreements, including an employee matters agreement, agreements related to transition and site services, and intellectual property cross licensing arrangements. In addition, the companies entered into certain supply agreements.
Chemours Separation Agreement
The Chemours Separation Agreement sets forth, among other things, the agreements between the company and Chemours regarding the principal transactions necessary to affect the Chemours Separation and also sets forth ancillary agreements that govern certain aspects of the company’s relationship with Chemours after the separation. Among other matters, the Chemours Separation Agreement and the ancillary agreements provide for the allocation between Historical DuPont and Chemours of assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after the completion of the Chemours Separation.
Pursuant to the Chemours Separation Agreement, Chemours indemnifies the company against certain litigation, environmental, workers' compensation and other liabilities that arose prior to the distribution. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. In 2017, EID and Chemours amended the Chemours Separation Agreement ("2017 Amendment") to provide for a limited sharing of potential future perfluorooctanoic acid (“PFOA”) liabilities for a period of five years beginning July 6, 2017. In January 2021, Chemours, DuPont and Corteva entered into a binding memorandum of understanding ("MOU") amending the Chemours Separation Agreement, and thereby replacing the 2017 Amendment.
In connection with the recognition of liabilities related to these matters, the company records an indemnification asset when recovery is deemed probable. At June 30, 2021, the indemnification assets are $64 million within accounts and notes receivable - net and $255 million within other assets (along with the corresponding liabilities within accrued and other current liabilities and other noncurrent obligations in the interim Consolidated Balance Sheet).
At June 30, 2021 indemnification liabilities related to the MOU, primarily associated with environmental remediation related to PFAS, were $24 million within accrued and other current liabilities and $75 million within other noncurrent obligations in the interim Consolidated Balance Sheet. During the three and six months ended June 30, 2021, the company recorded charges of $34 million and $37 million, respectively, to (loss) income from discontinued operations after income taxes, related to the MOU. The charge in the three months ended June 30, 2021 is primarily related to an increase in the environmental remediation accrual for Chemours' Fayetteville Works facility for estimated costs for on-site surface water and groundwater remediation to address and abate PFAS discharges arising out of pre-July 1, 2015 conduct. The increase is the result of further detailed engineering and design work related to Chemours’ environmental remediation activities at the site under the Consent Order between Chemours and the North Carolina Department of Environmental Quality. Based on the upper end of the range of reasonably possible outcomes, the company’s potential exposure above the amount accrued relating to the Fayetteville Works facility is approximately $20 million at June 30, 2021.
In addition to the above, the company has recognized a liability of $12.5 million as of June 30, 2021 within accrued and other current liabilities in the interim Consolidated Balance Sheet related to the settlement agreement between Chemours, DuPont, EID, Corteva and the State of Delaware. During the three months ended June 30, 2021, the company recorded a charge of $11 million to (loss) income from discontinued operations after income taxes, related to the settlement.
See Note 13 - Commitments and Contingent Liabilities, to the interim Consolidated Financial Statements, for further discussion of the amendment to the Chemours Separation Agreement, MOU, environmental matters indemnified by Chemours and the settlement with the State of Delaware.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4 - REVENUE
Revenue Recognition
Products
Substantially all of Corteva's revenue is derived from product sales. Product sales consist of sales of Corteva's products to farmers, distributors, and manufacturers. Corteva 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. However, the company has some long-term contracts which can span multiple years.
Revenue from product sales is recognized when the customer obtains control of the company's product, which occurs at a point in time according to shipping terms. Payment terms are generally less than one year from invoicing. The company elected the practical expedient and does not adjust the promised amount of consideration for the effects of a significant financing component when the company expects it will be one year or less between when a customer obtains control of the company's product and when payment is due. TheWhen the company has elected to recognizeperforms shipping and handling activities whenafter the transfer of control has transferred to the customer as an expense in cost of goods sold.(e.g., when control transfers prior to or at shipment), these are considered fulfillment activities, and accordingly, the costs are accrued when the related revenue is recognized. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. In addition, the company elected the practical expedient to expense any costs to obtain contracts as incurred, as the amortization period for these costs would have been one year or less.
The transaction price includes estimates of variable consideration, such as rights of return, rebates, and discounts, that are reductions in revenue. All estimates are based on the company's historical experience, anticipated performance, and the company's best judgment at the time the estimate is made. Estimates of variable consideration included in the transaction price primarily utilize either the expected value method or most likely amount dependingbased on the nature of the variable consideration.historical experience. These estimates are reassessed each reporting period and are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
will not occur upon resolution of uncertainty associated with the variable consideration. The majority of contracts have a single performance obligation satisfied at a point in time and the transaction price is stated in the contract, usually as quantity times price per unit. For contracts with multiple performance obligations, the company allocates the transaction price to each performance obligation based on the relative standalone selling price. The standalone selling price is the observable price which depicts the price as if sold to a similar customer in similar circumstances.
Licenses of Intellectual Property
Corteva enters into licensing arrangements with customers under which it licenses its intellectual property. Revenue from the majority of intellectual property licenses is derived from sales-based royalties. Revenue for licensing agreements that contain sales-based royalties is recognized at the later of (i) when the subsequent sale occurs or (ii) when the performance obligation to which some or all of the royalty has been allocated is satisfied.
Remaining Performance Obligations
Remaining performance obligations represent the transaction price allocated to unsatisfied or partially unsatisfied performance obligations. The company applies the practical expedient to disclose the transaction price allocated to the remaining performance obligations for only those contracts with an original duration of more than one year or more.year. The transaction price allocated to remaining performance obligations with an original duration of more than one year related to material rights granted to customers for contract renewal options were $118$120 million, $115$123 million and $110$113 million at June 30, 2021,March 31, 2022, December 31, 20202021 and June 30, 2020,March 31, 2021, respectively. The company expects revenue to be recognized for the remaining performance obligations evenly over the next 1period of one year to 6six years.
Contract Balances
Contract liabilities primarily reflect deferred revenue from prepayments under contracts with customers where the company receives advance payments for products to be delivered in future periods. Corteva classifies deferred revenue as current or noncurrent based on the timing of when the company expects to recognize revenue. Contract assets primarily include amounts related to conditional rights to consideration for completed performance not yet invoiced. Accounts receivable are recorded when the right to consideration becomes unconditional.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| | Contract Balances | Contract Balances | June 30, 2021 | December 31, 2020 | June 30, 2020 | Contract Balances | March 31, 2022 | December 31, 2021 | March 31, 2021 |
| (In millions) | (In millions) | (In millions) |
Accounts and notes receivable - trade1 | Accounts and notes receivable - trade1 | $ | 5,763 | | $ | 3,917 | | $ | 5,787 | | Accounts and notes receivable - trade1 | $ | 6,029 | | $ | 3,561 | | $ | 5,764 | |
Contract assets - current2 | Contract assets - current2 | $ | 23 | | $ | 22 | | $ | 21 | | Contract assets - current2 | $ | 24 | | $ | 24 | | $ | 22 | |
Contract assets - noncurrent3 | Contract assets - noncurrent3 | $ | 56 | | $ | 54 | | $ | 51 | | Contract assets - noncurrent3 | $ | 58 | | $ | 58 | | $ | 53 | |
| Deferred revenue - current | Deferred revenue - current | $ | 748 | | $ | 2,662 | | $ | 431 | | Deferred revenue - current | $ | 2,435 | | $ | 3,201 | | $ | 2,247 | |
Deferred revenue - noncurrent4 | Deferred revenue - noncurrent4 | $ | 111 | | $ | 116 | | $ | 109 | | Deferred revenue - noncurrent4 | $ | 104 | | $ | 120 | | $ | 111 | |
1.Included in accounts and notes receivable - net in the interim Consolidated Balance Sheets.
2.Included in other current assets in the interim Consolidated Balance Sheets.
3.Included in other assets in the interim Consolidated Balance Sheets.
4.Included in other noncurrent obligations in the interim Consolidated Balance Sheets.
Revenue recognized during the sixthree months ended June 30,March 31, 2022 and 2021 and 2020 from amounts included in deferred revenue at the beginning of the period was $2,464$1,339 million and $2,271$924 million, respectively.
Disaggregation of Revenue
Corteva's operations are classified into two reportable segments: Seed and Crop Protection. The company disaggregates its revenue by major product line and geographic region, as the company believes it best depicts the nature, amount and timing of its revenue and cash flows. Net sales by major product line are included below:
| | | | | | | | | | | | | | |
| Three Months Ended
June 30, | Six Months Ended
June 30, |
| (In millions) | 2021 | 2020 | 2021 | 2020 |
| Corn | $ | 2,180 | | $ | 2,057 | | $ | 4,068 | | $ | 3,921 | |
| Soybean | 1,160 | | 1,085 | | 1,337 | | 1,266 | |
| Other oilseeds | 271 | | 219 | | 567 | | 467 | |
| Other | 169 | | 177 | | 300 | | 339 | |
| Seed | 3,780 | | 3,538 | | 6,272 | | 5,993 | |
| Herbicides | 969 | | 909 | | 1,955 | | 1,732 | |
| Insecticides | 460 | | 445 | | 845 | | 823 | |
| Fungicides | 311 | | 224 | | 572 | | 453 | |
| Other | 107 | | 75 | | 161 | | 146 | |
| Crop Protection | 1,847 | | 1,653 | | 3,533 | | 3,154 | |
| Total | $ | 5,627 | | $ | 5,191 | | $ | 9,805 | | $ | 9,147 | |
.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| | | | | | | | |
| Three Months Ended
March 31, |
| (In millions) | 2022 | 2021 |
| Corn | $ | 1,930 | | $ | 1,888 | |
| Soybean | 172 | | 177 | |
| Other oilseeds | 277 | | 296 | |
| Other | 145 | | 131 | |
| Seed | 2,524 | | 2,492 | |
| Herbicides | 1,205 | | 986 | |
| Insecticides | 418 | | 385 | |
| Fungicides | 304 | | 261 | |
| Other | 150 | | 54 | |
| Crop Protection | 2,077 | | 1,686 | |
| Total | $ | 4,601 | | $ | 4,178 | |
Sales are attributed to geographic regions based on customer location. Net sales by geographic region and segment are included below:
| | Seed | Seed | Three Months Ended
June 30, | Six Months Ended
June 30, | Seed | Three Months Ended
March 31, | |
| (In millions) | (In millions) | 2021 | 2020 | 2021 | 2020 | (In millions) | 2022 | 2021 | |
North America1 | North America1 | $ | 3,104 | | $ | 2,903 | | $ | 4,314 | | $ | 4,193 | | North America1 | $ | 1,184 | | $ | 1,210 | | |
EMEA2 | EMEA2 | 298 | | 264 | | 1,245 | | 1,145 | | EMEA2 | 926 | | 947 | | |
| Latin America | Latin America | 234 | | 206 | | 508 | | 422 | | Latin America | 323 | | 274 | | |
| Asia Pacific | Asia Pacific | 144 | | 165 | | 205 | | 233 | | Asia Pacific | 91 | | 61 | | |
| Total | Total | $ | 3,780 | | $ | 3,538 | | $ | 6,272 | | $ | 5,993 | | Total | $ | 2,524 | | $ | 2,492 | | |
| | Crop Protection | Crop Protection | Three Months Ended
June 30, | Six Months Ended
June 30, | Crop Protection | Three Months Ended
March 31, | |
| (In millions) | (In millions) | 2021 | 2020 | 2021 | 2020 | (In millions) | 2022 | 2021 | |
North America1 | North America1 | $ | 738 | | $ | 663 | | $ | 1,271 | | $ | 1,138 | | North America1 | $ | 821 | | $ | 533 | | |
EMEA2 | EMEA2 | 412 | | 379 | | 1,067 | | 965 | | EMEA2 | 656 | | 655 | | |
| Latin America | Latin America | 354 | | 309 | | 598 | | 527 | | Latin America | 327 | | 244 | | |
| Asia Pacific | Asia Pacific | 343 | | 302 | | 597 | | 524 | | Asia Pacific | 273 | | 254 | | |
| Total | Total | $ | 1,847 | | $ | 1,653 | | $ | 3,533 | | $ | 3,154 | | Total | $ | 2,077 | | $ | 1,686 | | |
1.Represents U.S. & Canada.
2.Europe, Middle East, and Africa ("EMEA").
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 54 - RESTRUCTURING AND ASSET RELATED CHARGES - NET
2021 Restructuring Actions
As discussed inDuring the 2020 Annual Report, on February 1,first quarter of 2021, Corteva approved restructuring actions designed to right-size and optimize its footprint and organizational structure according to the business needs in each region with the focus on driving continued cost improvement and productivity. As a resultThrough the first quarter of these actions,2022, the company expects to record totalrecorded net pre-tax restructuring charges of approximately $130$165 million to $170 million, comprisedinception-to-date under the 2021 Restructuring Actions, consisting of approximately $40 million to $50$76 million of severance and related benefit costs, $40 million to $60$44 million of asset related charges, $10 million to $15$6 million of asset retirement obligations and $40 million to $45$39 million of costs related to contract terminations (contract terminations includes early lease terminations). Future cash payments related to this charge are anticipated to be approximately $80 million to $100 million, primarily related toThe company does not anticipate any additional material charges from the payment of severance and related benefits, asset retirement obligations, and costs related to contract terminations. The restructuring2021 Restructuring Actions as actions associated with this charge are expected to bewere substantially complete inby the end of 2021.
The charges related to the 2021 Restructuring Actions related to the segments, as well as corporate expenses, were as follows:
| | | Three Months Ended June 30, | Six Months Ended June 30, | | Three Months Ended March 31, |
| (In millions) | (In millions) | 2021 | 2021 | (In millions) | 2022 | 2021 |
| Seed | Seed | $ | 3 | | $ | 17 | | Seed | $ | (2) | | $ | 14 | |
| Crop Protection | Crop Protection | 9 | | 37 | | Crop Protection | (2) | | 28 | |
| Corporate expenses | Corporate expenses | 9 | | 56 | | Corporate expenses | 2 | | 47 | |
| Total | Total | $ | 21 | | $ | 110 | | Total | $ | (2) | | $ | 89 | |
The belowfollowing table is a summary of charges incurred related to 2021 Restructuring Actions for the three and six months ended June 30,March 31, 2022 and 2021:
| | | Three Months Ended June 30, | Six Months Ended June 30, | | Three Months Ended March 31, |
| (In millions) | (In millions) | 2021 | 2021 | (In millions) | 2022 | 2021 |
| Severance and related benefit costs | Severance and related benefit costs | $ | 10 | | $ | 49 | | Severance and related benefit costs | $ | 2 | | $ | 39 | |
| Asset related charges | Asset related charges | 9 | | 22 | | Asset related charges | (1) | | 13 | |
| Contract termination charges | Contract termination charges | 2 | | 39 | | Contract termination charges | (3) | | 37 | |
| Total restructuring and asset charges - net | $ | 21 | | $ | 110 | | |
| Total restructuring and asset related charges - net | | Total restructuring and asset related charges - net | $ | (2) | | $ | 89 | |
A reconciliation of the December 31, 20202021 to the June 30, 2021March 31, 2022 liability balances related to the 2021 Restructuring Actions is summarized below:
| | (In millions) | (In millions) | Severance and Related Benefit Costs | Asset Related1 | Contract Termination2 | Total | (In millions) | Severance and Related Benefit Costs | Asset Related1 | Contract Termination2 | Total |
| Balance at December 31, 2020 | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | |
| Charges to income from continuing operations | 49 | | 22 | | 39 | | 110 | | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | $ | 52 | | $ | — | | $ | 12 | | $ | 64 | |
| Charges to income (loss) from continuing operations | | Charges to income (loss) from continuing operations | 2 | | (1) | | (3) | | (2) | |
| Payments | Payments | (9) | | 0 | | (23) | | (32) | | Payments | (19) | | — | | (4) | | (23) | |
| Asset write-offs | Asset write-offs | 0 | | (22) | | 0 | | (22) | | Asset write-offs | — | | 1 | | — | | 1 | |
| Balance at June 30, 2021 | $ | 40 | | $ | 0 | | $ | 16 | | $ | 56 | | |
| Balance at March 31, 2022 | | Balance at March 31, 2022 | $ | 35 | | $ | — | | $ | 5 | | $ | 40 | |
1.In addition, the company has a liability recorded for asset retirement obligations of $6 million as of June 30, 2021.March 31, 2022.
2.The liability for contract terminations includes lease obligations. The cash impact of these obligations will be substantially complete by 2022.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Execute to Win Productivity Program
During the first quarter of 2020, Corteva approved restructuring actions designed to improve productivity through optimizing certain operational and organizational structures primarily related to the Execute to Win Productivity Program. Through the second quarter of 2021, the company recorded net pre-tax restructuring charges of $182 million inception-to-date under the Execute to Win Program, consisting of $119 million of asset related charges and $63 million of severance and related benefit costs. The company does not anticipate any additional material charges from the Execute to Win Program as actions associated with this charge were substantially complete by the end of 2020.
The Execute to Win Productivity Program charges related to the segments, as well as corporate expenses, were as follows:
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| (In millions) | 2021 | 2020 | 2021 | 2020 |
| Seed | $ | 0 | | $ | 0 | | $ | 0 | | $ | 3 | |
| Crop Protection | 2 | | 37 | | 6 | | 55 | |
| Corporate expenses | 0 | | 4 | | 0 | | 46 | |
| Total | $ | 2 | | $ | 41 | | $ | 6 | | $ | 104 | |
The below is a summary of charges incurred related to the Execute to Win Productivity Program for the three and six months ended June 30, 2021 and 2020:
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| (In millions) | 2021 | 2020 | 2021 | 2020 |
| Severance and related benefit costs | $ | 0 | | $ | 4 | | $ | 0 | | $ | 46 | |
| Asset related charges | 2 | | 37 | | 6 | | 58 | |
| Total restructuring and asset related charges - net | $ | 2 | | $ | 41 | | $ | 6 | | $ | 104 | |
A reconciliation of the December 31, 2020 to the June 30, 2021 liability balances related to the Execute to Win Productivity Program is summarized below:
| | | | | | | | | | | | |
| (In millions) | Severance and Related Benefit Costs | Asset Related1 | | Total |
| Balance at December 31, 2020 | $ | 53 | | $ | 3 | | | $ | 56 | |
| Charges to income from continuing operations | 0 | | 6 | | | 6 | |
| Payments | (20) | | (3) | | | (23) | |
| | | | |
| Asset write-offs | 0 | | (6) | | | (6) | |
| Balance at June 30, 2021 | $ | 33 | | $ | 0 | | | $ | 33 | |
1.In addition, the company has a liability recorded for asset retirement obligations of $18 million as of June 30, 2021.2022.
Other Asset Related Charges
During the three and six months ended June 30,March 31, 2022 and 2021, the company recognized $112$6 million and $119$7 million, respectively, in restructuring and asset related charges - net in the interim Consolidated StatementStatements of Operations, from non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 65 - SUPPLEMENTARY INFORMATION
| | | | | | | | | | | | | | |
| Other Income - Net | Three Months Ended
June 30, | Six Months Ended
June 30, |
| (In millions) | 2021 | 2020 | 2021 | 2020 |
| Interest income | $ | 18 | | $ | 9 | | $ | 39 | | $ | 27 | |
| Equity in earnings / (losses) of affiliates - net | 2 | | (2) | | 5 | | (3) | |
Net gain (loss) on sales of businesses and other assets1 | 1 | | 16 | | 1 | | (30) | |
Net exchange (losses) / gains2 | (14) | | 1 | | (49) | | (60) | |
Non-operating pension and other post employment benefit credit3 | 328 | | 91 | | 653 | | 182 | |
Miscellaneous expense - net4 | (37) | | (26) | | (14) | | (26) | |
| Other income - net | $ | 298 | | $ | 89 | | $ | 635 | | $ | 90 | |
| | | | | | | | | | |
| Other Income - Net | Three Months Ended
March 31, | |
| (In millions) | 2022 | 2021 | | |
| Interest income | $ | 15 | | $ | 21 | | | |
| Equity in earnings (losses) of affiliates - net | 10 | | 3 | | | |
| Net gain (loss) on sales of businesses and other assets | (3) | | — | | | |
Net exchange gains (losses)1 | (47) | | (35) | | | |
Non-operating pension and other post employment benefit credit (costs)2 | 75 | | 325 | | | |
Miscellaneous income (expenses) - net3 | (33) | | 23 | | | |
| Other income - net | $ | 17 | | $ | 337 | | | |
1.The six months ended June 30, 2020 includes a loss of $(53) million relating to the sale of the La Porte site, for which the company signed an agreement in 2020, and closed during the first quarter of 2021.
2.Includes net pre-tax exchange lossesgains (losses) of $14$(15) million and $37$(23) million associated with the devaluation of the Argentine peso for the three and six months ended June 30,March 31, 2022 and 2021, respectively, and $22 million and $31 million for the three and six months ended June 30, 2020, respectively.
3.2.Includes non-service related components of net periodic benefit credits (costs) (interest cost, expected return on plan assets, amortization of unrecognized gain (loss), amortization of prior service benefit and settlement loss)gain (loss)).
4.3.Miscellaneous expenseincome (expenses) - net for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 includes losses on salechanges from remeasurement of receivables,an equity investment, tax indemnification adjustments related to changes in indemnification balances as a result of the application of the terms of the Tax Matters Agreement between Corteva and Dow and/or DuPont, losses on sale of receivables and other items. Miscellaneous expense - net forAdditionally, the three and six months ended June 30,March 31, 2022 includes estimated settlement reserves and the three months ended March 31, 2021 also includes a gain from remeasurement of an equity investment and realized losses on sale of available-for-sale securities.
The following table summarizes the impacts of the company's foreign currency hedging program on the company's results of operations. The company routinely uses foreign currency exchange contracts to offset its net exposures, by currency, related to the foreign currency-denominated monetary assets and liabilities. The objective of this program is to maintain an approximately balanced position in foreign currencies in order to minimize, on an after-tax basis, the effects of exchange rate changes on net monetary asset positions. The hedging program gains (losses) are largely taxable (tax deductible) in the U.S., whereas the offsetting exchange gains (losses) on the remeasurement of the net monetary asset positions are often not taxable (tax deductible) in their local jurisdictions. The net pre-tax exchange gains (losses) are recorded in other income - net and the related tax impact is recorded in provision for (benefit from) income taxes on continuing operations in the interim Consolidated StatementStatements of Operations.
| | | | | | | | | | | | | | |
| (In millions) | Three Months Ended
June 30, | Six Months Ended June 30, |
| 2021 | 2020 | 2021 | 2020 |
| Subsidiary Monetary Position Gains (Losses) | | | | |
| Pre-tax exchange gains (losses) | $ | 36 | | $ | (13) | | $ | (15) | | $ | (239) | |
| Local tax (expenses) / benefits | (13) | | 5 | | (14) | | 28 | |
| Net after-tax impact from subsidiary exchange gains (losses) | $ | 23 | | $ | (8) | | $ | (29) | | $ | (211) | |
| | | | |
| Hedging Program Gains | | | | |
| Pre-tax exchange (losses) gains | $ | (50) | | $ | 14 | | $ | (34) | | $ | 179 | |
| Tax benefits / (expenses) | 12 | | (3) | | 8 | | (43) | |
| Net after-tax impact from hedging program exchange (losses) gains | $ | (38) | | $ | 11 | | $ | (26) | | $ | 136 | |
| | | | |
| Total Exchange Losses | | | | |
| Pre-tax exchange (losses) gains | $ | (14) | | $ | 1 | | $ | (49) | | $ | (60) | |
| Tax (expenses) benefits | (1) | | 2 | | (6) | | (15) | |
| Net after-tax exchange (losses) gains | $ | (15) | | $ | 3 | | $ | (55) | | $ | (75) | |
| | | | | | | | | | |
| (In millions) | Three Months Ended
March 31, | |
| 2022 | 2021 | | |
| Subsidiary Monetary Position Gain (Loss) | | | | |
| Pre-tax exchange gain (loss) | $ | 6 | | $ | (51) | | | |
| Local tax (expenses) benefits | (4) | | (1) | | | |
| Net after-tax impact from subsidiary exchange gain (loss) | $ | 2 | | $ | (52) | | | |
| | | | |
| Hedging Program Gain (Loss) | | | | |
| Pre-tax exchange gain (loss) | $ | (53) | | $ | 16 | | | |
| Tax (expenses) benefits | 13 | | (4) | | | |
| Net after-tax impact from hedging program exchange gain (loss) | $ | (40) | | $ | 12 | | | |
| | | | |
| Total Exchange Gain (Loss) | | | | |
| Pre-tax exchange gain (loss) | $ | (47) | | $ | (35) | | | |
| Tax (expenses) benefits | 9 | | (5) | | | |
| Net after-tax exchange gain (loss) | $ | (38) | | $ | (40) | | | |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Cash, cash equivalents and restricted cash equivalents
The following table provides a reconciliation of cash and cash equivalents and restricted cash (included in other current assets)equivalents presented in the interim Consolidated Balance Sheets to the total cash, cash equivalents and restricted cash equivalents presented in the interim Consolidated Statements of Cash Flows. Corteva classifies restricted cash equivalents as current or noncurrent based on the nature of the restrictions, which are included in other current assets and other assets, respectively, in the interim Consolidated Balance Sheets.
| | (In millions) | (In millions) | June 30, 2021 | December 31, 2020 | June 30, 2020 | (In millions) | March 31, 2022 | December 31, 2021 | March 31, 2021 |
| Cash and cash equivalents | Cash and cash equivalents | $ | 2,861 | | $ | 3,526 | | $ | 2,809 | | Cash and cash equivalents | $ | 2,031 | | $ | 4,459 | | $ | 2,404 | |
| Restricted cash | 311 | | 347 | | 362 | | |
| Total cash, cash equivalents and restricted cash | $ | 3,172 | | $ | 3,873 | | $ | 3,171 | | |
| Restricted cash equivalents | | Restricted cash equivalents | 354 | | 377 | | 326 | |
| Total cash, cash equivalents and restricted cash equivalents | | Total cash, cash equivalents and restricted cash equivalents | $ | 2,385 | | $ | 4,836 | | $ | 2,730 | |
EID entered intoRestricted cash equivalents primarily relates to a trust agreement in 2013 (as amended and restated in 2017), establishing and requiringfunded by EID to fund a trust (the "Trust") for cash obligations under certain non-qualified benefit and deferred compensation plans upondue to the Merger, which was a change in control event, and is classified as defined in the Trust agreement. Under the Trust agreement, the consummation of the Merger was a change in control event.current. Restricted cash at June 30, 2021,equivalents for March 31, 2022 and December 31, 2020, and June 30, 2020 is related2021 also includes contributions to the Trust.MOU Escrow Account as further described in Note 12 - Commitments and Contingent Liabilities, to the interim Consolidated Financial Statements, which is classified as noncurrent.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 76 - INCOME TAXES
For periods between the Merger Effectiveness Time and the Corteva Distribution, Corteva and its subsidiaries were included in DowDuPont's consolidated federal income tax group and consolidated tax return. Generally, the consolidated tax liability of the DowDuPont U.S. tax group for each year was apportioned among the members of the consolidated group based on each member’s separate taxable income. Corteva, DuPont 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 a tax matters agreement. See Note 312 - DivestituresCommitments and Other Transactions,Contingent Liabilities, for further information related to indemnifications between Corteva, DowDuPont and DuPont.Dow.
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.
During the three and six months ended June 30, 2021,March 31, 2022, the company recognized $18$35 million and $25 million, respectively, of net tax benefits associated with changes in accruals for certain prior year tax positions in various jurisdictions.
During the three and six months ended June 30, 2020, the company recognized a tax benefit of $51 million to provision for income taxes on continuing operations related to a return to accrual adjustment associated with an elective changechanges in accounting methoddeferred taxes for the 2019certain prior year tax year impact of the 2017 Tax Cuts and Jobs Act 's (“The Act”) foreign tax provisions.
During the three and six months ended June 30, 2020 the company recognized a tax benefit of $14 million to provision for income taxes on continuing operations related to a return to accrual adjustment to reflect a change in estimate on the impact of a tax law enactment in a foreign jurisdiction.positions as well as from stock-based compensation.
The company routinely uses foreign currency exchange contracts to offset its net exposures, by currency, related to the foreign currency-denominated monetary assets and liabilities. The objective of the program, which resides in the U.S., is to maintain an approximately balanced position in foreign currencies in order to minimize, on an after-tax basis, the effects of exchange rate changes on net monetary asset positions, which can drive material impacts on the company's effective tax rate. For further discussion of pre-tax and after-tax impacts of the company's foreign currency hedging program and net monetary asset programs, refer to Note 65 - Supplementary Information.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 87 - EARNINGS PER SHARE OF COMMON STOCK
The following tables provide earnings per share calculations for the periods indicated below:
| | | | | | | | | | | | | | | | |
| Net Income for Earnings Per Share Calculations - Basic and Diluted | Three Months Ended
June 30, | Six Months Ended June 30, | |
| (In millions) | 2021 | 2020 | 2021 | 2020 | | |
| Income from continuing operations after income taxes | $ | 1,018 | | $ | 766 | | $ | 1,631 | | $ | 1,047 | | | |
| Net income attributable to continuing operations noncontrolling interests | 3 | | 6 | | 6 | | 16 | | | |
| | | | | | |
| Income from continuing operations available to Corteva common stockholders | 1,015 | | 760 | | 1,625 | | 1,031 | | | |
| (Loss) income from discontinued operations available to Corteva common stockholders | (45) | | 0 | | (55) | | 1 | | | |
| Net income available to common stockholders | $ | 970 | | $ | 760 | | $ | 1,570 | | $ | 1,032 | | | |
| | | | | | | | | | | | |
| Net Income (Loss) for Earnings (Loss) Per Share Calculations - Basic and Diluted | Three Months Ended
March 31, | | |
| (In millions) | 2022 | 2021 | | | | |
| Income (loss) from continuing operations after income taxes | $ | 577 | | $ | 613 | | | | | |
| Net income (loss) attributable to continuing operations noncontrolling interests | 3 | | 3 | | | | | |
| | | | | | |
| Income (loss) from continuing operations available to Corteva common stockholders | 574 | | 610 | | | | | |
| (Loss) income from discontinued operations available to Corteva common stockholders | (10) | | (10) | | | | | |
| Net income (loss) available to common stockholders | $ | 564 | | $ | 600 | | | | | |
| | | | | | | | | | | | | | |
| Earnings Per Share Calculations - Basic | Three Months Ended
June 30, | Six Months Ended June 30, |
| (Dollars per share) | 2021 | 2020 | 2021 | 2020 |
Earnings per share of common stock from continuing operations | $ | 1.37 | | $ | 1.01 | | $ | 2.19 | | $ | 1.37 | |
| Loss per share of common stock from discontinued operations | (0.06) | | 0 | | (0.07) | | 0 | |
| Earnings per share of common stock | $ | 1.31 | | $ | 1.01 | | $ | 2.12 | | $ | 1.37 | |
| | | | | | | | | | |
| Earnings (Loss) Per Share Calculations - Basic | Three Months Ended
March 31, | |
| (Dollars per share) | 2022 | 2021 | | |
Earnings (loss) per share of common stock from continuing operations | $ | 0.79 | | $ | 0.82 | | | |
| (Loss) earnings per share of common stock from discontinued operations | (0.01) | | (0.01) | | | |
| Earnings (loss) per share of common stock | $ | 0.78 | | $ | 0.81 | | | |
| | | | | | | | | | | | | | |
| Earnings Per Share Calculations - Diluted | Three Months Ended
June 30, | Six Months Ended June 30, |
| (Dollars per share) | 2021 | 2020 | 2021 | 2020 |
| Earnings per share of common stock from continuing operations | $ | 1.37 | | $ | 1.01 | | $ | 2.18 | | $ | 1.37 | |
| Loss per share of common stock from discontinued operations | (0.06) | | 0 | | (0.07) | | 0 | |
| Earnings per share of common stock | $ | 1.31 | | $ | 1.01 | | $ | 2.11 | | $ | 1.37 | |
| | | | | | | | | | |
| Earnings (Loss) Per Share Calculations - Diluted | Three Months Ended
March 31, | |
| (Dollars per share) | 2022 | 2021 | | |
| Earnings (loss) per share of common stock from continuing operations | $ | 0.79 | | $ | 0.81 | | | |
| (Loss) earnings per share of common stock from discontinued operations | (0.01) | | (0.01) | | | |
| Earnings (loss) per share of common stock | $ | 0.78 | | $ | 0.80 | | | |
| | Share Count Information | Share Count Information | Three Months Ended
June 30, | Six Months Ended June 30, | Share Count Information | Three Months Ended
March 31, | |
| (Shares in millions) | (Shares in millions) | 2021 | 2020 | 2021 | 2020 | (Shares in millions) | 2022 | 2021 | |
| Weighted-average common shares - basic | Weighted-average common shares - basic | 737.3 | | 749.2 | | 740.3 | | 749.6 | | Weighted-average common shares - basic | 727.0 | | 743.4 | | |
Plus dilutive effect of equity compensation plans1 | Plus dilutive effect of equity compensation plans1 | 6.0 | | 2.4 | | 6.1 | | 2.4 | | Plus dilutive effect of equity compensation plans1 | 3.9 | | 6.2 | | |
| | Weighted-average common shares - diluted | Weighted-average common shares - diluted | 743.3 | | 751.6 | | 746.4 | | 752.0 | | Weighted-average common shares - diluted | 730.9 | | 749.6 | | |
Potential shares of common stock excluded from EPS calculations2 | Potential shares of common stock excluded from EPS calculations2 | 2.1 | | 11.9 | | 2.1 | | 11.0 | | Potential shares of common stock excluded from EPS calculations2 | 2.5 | | 2.9 | | |
1.Diluted earnings (loss) per share considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect.
2.These outstanding potential shares of common stock relating to stock options, restricted stock units and performance-based restricted stock units were excluded from the calculation of diluted earnings (loss) per share because (i) the effect of including them would have been anti-dilutive.anti-dilutive; and (ii) the performance metrics have not yet been achieved for the outstanding potential shares relating to performance-based restricted stock units, which are deemed to be contingently issuable.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 98 - ACCOUNTS AND NOTES RECEIVABLE - NET
| | (In millions) | (In millions) | June 30, 2021 | December 31, 2020 | June 30, 2020 | (In millions) | March 31, 2022 | December 31, 2021 | March 31, 2021 |
Accounts receivable – trade1 | Accounts receivable – trade1 | $ | 4,318 | | $ | 3,754 | | $ | 4,396 | | Accounts receivable – trade1 | $ | 5,603 | | $ | 3,441 | | $ | 5,231 | |
Notes receivable – trade1,2 | Notes receivable – trade1,2 | 1,445 | | 163 | | 1,391 | | Notes receivable – trade1,2 | 426 | | 120 | | 533 | |
Other3 | Other3 | 1,029 | | 1,009 | | 985 | | Other3 | 1,246 | | 1,250 | | 1,028 | |
| Total accounts and notes receivable - net | Total accounts and notes receivable - net | $ | 6,792 | | $ | 4,926 | | $ | 6,772 | | Total accounts and notes receivable - net | $ | 7,275 | | $ | 4,811 | | $ | 6,792 | |
1.Accounts receivable – trade and notes receivable - trade are net of allowances of $216$232 million, $210 million, and $203 million at June 30, 2021, $208 million atMarch 31, 2022, December 31, 2020,2021, and $207 million at June 30, 2020.March 31, 2021, respectively. Allowances are equal to the estimated uncollectible amounts and are based on the expected credit losses and were developed using a loss-rate method.
2.Notes receivable – trade primarily consists of receivables for deferred payment loan programs for the sale of seed products to customers. These loans have terms of one year or less and are primarily concentrated in North America. The company maintains a rigid pre-approval process for extending credit to customers in order to manage overall risk and exposure associated with credit losses. As of June 30, 2021,March 31, 2022, December 31, 2020,2021, and June 30, 2020March 31, 2021 there were no significant impairments related to current loan agreements.
3.Other includes receivables in relation to indemnification assets, value added tax, general sales tax and other taxes. No individual group represents more than 10 percent of total receivables. In addition, Other includes amounts due from nonconsolidated affiliates of $92$124 million, $106$104 million, and $114$115 million as of June 30, 2021,March 31, 2022, December 31, 2020,2021, and June 30, 2020,March 31, 2021, respectively.
Accounts and notes receivable are carried at the expected amount to be collected, which approximates fair value. The company establishes the allowance for doubtful receivables using a loss-rate method where the loss rate is developed using past events, historical experience, current conditions and forecasts that affect the collectability of the financial assets.
The following table summarizes changes in the allowance for doubtful receivables for the sixthree months ended June 30, 2021March 31, 2022 and 2020:2021:
| | | | | |
| (In millions) |
2020 | |
Balance at December 31, 2019 | $ | 174 | |
Net provision for credit losses | 124 | |
Write-offs charged against allowance | (6) | |
Recoveries collected | (78) | |
Other | (7) | |
Balance at June 30, 2020 | $ | 207 | |
| |
| 2021 | |
| Balance at December 31, 2020 | $ | 208 | |
| Net benefit for credit losses | (5) | |
| |
| Balance at March 31, 2021 | $ | 203 | |
| |
| 2022 | |
| Balance at December 31, 2021 | $ | 210 | |
| Net provision for credit losses | 485 | |
Recoveries collectedWrite-offs charged against allowance / other | (51) | |
Other | 1117 | |
| |
| |
| |
Balance at June 30, 2021March 31, 2022 | $ | 216232 | |
The company enters into various factoring agreements with third-party financial institutions to sell its trade receivables under both recourse and non-recourse agreements in exchange for cash proceeds. These financing arrangements result in a transfer of the company's receivables and risks to the third-party. As these transfers qualify as true sales under the applicable accounting guidance, the receivables are derecognized from the interim Consolidated Balance Sheets upon transfer, and the company receives a payment for the receivables from the third-party within a mutually agreed upon time period. For arrangements involving an element of recourse, which is typically provided through a guarantee of accounts in the event of customer default, the guarantee obligation is measured using market data from similar transactions and reported as a current liability in the interim Consolidated Balance Sheets.
Trade receivables sold under these agreements were $177$17 million and $188$11 million for the three and six months ended June 30,March 31, 2022 and 2021, respectively, and $161 million and $176 million for the three and six months ended June 30, 2020, respectively. The trade receivables sold that remained outstanding under these agreements which include an element of recourse as of June 30, 2021,March 31, 2022, December 31, 2020,2021, and June 30, 2020March 31, 2021 were $135$130 million, $157$166 million, and $146$128 million, respectively. The net proceeds received are included in cash used forprovided by (used for) operating activities in the interim Consolidated Statements of Cash Flows. The difference between the carrying amount of the trade receivables sold and the sum of the cash received is recorded as a loss on sale of
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
receivables in other income - net in the interim Consolidated Statements of Operations. The loss on sale of receivables was $41 million and $43 million for the three and six months ended June 30,March 31, 2022 and 2021, respectively, and $36 million and $38 million for the three and six months ended June 30, 2020, respectively.was not material. See Note 1312 - Commitments and Contingent Liabilities for additional information on the company’s guarantees.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 109 - INVENTORIES
| | (In millions) | (In millions) | June 30, 2021 | December 31, 2020 | June 30, 2020 | (In millions) | March 31, 2022 | December 31, 2021 | March 31, 2021 |
| Finished products | Finished products | $ | 1,680 | | $ | 2,584 | | $ | 1,831 | | Finished products | $ | 2,691 | | $ | 2,497 | | $ | 2,508 | |
| Semi-finished products | Semi-finished products | 1,406 | | 1,813 | | 1,364 | | Semi-finished products | 1,635 | | 2,076 | | 1,386 | |
| Raw materials and supplies | Raw materials and supplies | 455 | | 485 | | 394 | | Raw materials and supplies | 660 | | 607 | | 427 | |
| Total inventories | Total inventories | $ | 3,541 | | $ | 4,882 | | $ | 3,589 | | Total inventories | $ | 4,986 | | $ | 5,180 | | $ | 4,321 | |
NOTE 1110 - OTHER INTANGIBLE ASSETS
The gross carrying amounts and accumulated amortization of other intangible assets by major class are as follows:
| | (In millions) | (In millions) | June 30, 2021 | | December 31, 2020 | June 30, 2020 | (In millions) | March 31, 2022 | | December 31, 2021 | March 31, 2021 |
| | | Gross | Accumulated
Amortization | Net | | Gross | Accumulated
Amortization | Net | Gross | Accumulated
Amortization | Net | | Gross | Accumulated
Amortization | Net | | Gross | Accumulated
Amortization | Net | Gross | Accumulated
Amortization | Net |
| Intangible assets subject to amortization (Definite-lived): | Intangible assets subject to amortization (Definite-lived): | | | | | | Intangible assets subject to amortization (Definite-lived): | | | | | |
| Germplasm | Germplasm | $ | 6,265 | | $ | (444) | | $ | 5,821 | | | $ | 6,265 | | $ | (317) | | $ | 5,948 | | $ | 6,265 | | $ | (190) | | $ | 6,075 | | Germplasm | $ | 6,265 | | $ | (634) | | $ | 5,631 | | | $ | 6,265 | | $ | (571) | | $ | 5,694 | | $ | 6,265 | | $ | (380) | | $ | 5,885 | |
| Customer-related | Customer-related | 1,966 | | (434) | | 1,532 | | | 1,984 | | (380) | | 1,604 | | 1,961 | | (322) | | 1,639 | | Customer-related | 1,953 | | (515) | | 1,438 | | | 1,953 | | (487) | | 1,466 | | 1,956 | | (404) | | 1,552 | |
| Developed technology | Developed technology | 1,485 | | (603) | | 882 | | | 1,451 | | (525) | | 926 | | 1,463 | | (462) | | 1,001 | | Developed technology | 1,485 | | (716) | | 769 | | | 1,485 | | (679) | | 806 | | 1,485 | | (565) | | 920 | |
Trademarks/trade names1 | 2,013 | | (132) | | 1,881 | | | 2,019 | | (99) | | 1,920 | | 161 | | (85) | | 76 | | |
| Trademarks/trade names | | Trademarks/trade names | 2,011 | | (192) | | 1,819 | | | 2,012 | | (172) | | 1,840 | | 2,013 | | (112) | | 1,901 | |
| Favorable supply contracts | Favorable supply contracts | 475 | | (349) | | 126 | | | 475 | | (302) | | 173 | | 475 | | (255) | | 220 | | Favorable supply contracts | 475 | | (420) | | 55 | | | 475 | | (396) | | 79 | | 475 | | (326) | | 149 | |
Other2 | 404 | | (243) | | 161 | | | 405 | | (239) | | 166 | | 405 | | (227) | | 178 | | |
Other1 | | Other1 | 405 | | (262) | | 143 | | | 405 | | (256) | | 149 | | 405 | | (238) | | 167 | |
| Total other intangible assets with finite lives | Total other intangible assets with finite lives | 12,608 | | (2,205) | | 10,403 | | | 12,599 | | (1,862) | | 10,737 | | 10,730 | | (1,541) | | 9,189 | | Total other intangible assets with finite lives | 12,594 | | (2,739) | | 9,855 | | | 12,595 | | (2,561) | | 10,034 | | 12,599 | | (2,025) | | 10,574 | |
| | Intangible assets not subject to amortization (Indefinite-lived): | Intangible assets not subject to amortization (Indefinite-lived): | | | | | | Intangible assets not subject to amortization (Indefinite-lived): | | | | | |
| IPR&D | IPR&D | 10 | | — | | 10 | | | 10 | | — | | 10 | | 10 | | — | | 10 | | IPR&D | 10 | | — | | 10 | | | 10 | | — | | 10 | | 10 | | — | | 10 | |
Trade name1 | | | | 1,871 | | — | | 1,871 | | |
| | | Total other intangible assets | Total other intangible assets | 10 | | — | | 10 | | | 10 | | — | | 10 | | 1,881 | | — | | 1,881 | | Total other intangible assets | 10 | | — | | 10 | | | 10 | | — | | 10 | | 10 | | — | | 10 | |
| Total | Total | $ | 12,618 | | $ | (2,205) | | $ | 10,413 | | | $ | 12,609 | | $ | (1,862) | | $ | 10,747 | | $ | 12,611 | | $ | (1,541) | | $ | 11,070 | | Total | $ | 12,604 | | $ | (2,739) | | $ | 9,865 | | | $ | 12,605 | | $ | (2,561) | | $ | 10,044 | | $ | 12,609 | | $ | (2,025) | | $ | 10,584 | |
1.Beginning on October 1, 2020, the company changed its indefinite life assertion of its trade name asset to definite lived with a useful life of 25 years. This change is the result of the launch of BrevantTM seed in the retail channel in the U.S. Prior to changing the useful life of the trade name asset, the company tested the asset for the impairment under ASC 350- Intangibles, Goodwill and Other, concluding the asset was not impaired.
2.Primarily consists of sales and farmer networks, marketing and manufacturing alliances and noncompetition agreements.
The aggregate pre-tax amortization expense from continuing operations for definite-lived intangible assets was $180$179 million and $363$183 million for the three and six months ended June 30,March 31, 2022 and 2021, respectively, and $176 million and $339 million for the three and six months ended June 30, 2020, respectively. The current estimated aggregate pre-tax amortization expense from continuing operations for the remainder of 20212022 and each of the next five years is approximately $358$522 million, $701$620 million, $621$606 million, $607$569 million, $570$558 million and $559$498 million, respectively.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1211 - SHORT-TERM BORROWINGS, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES
The following tables summarize Corteva's short-term borrowings and finance lease obligations:obligations and long-term debt:
| | Short-term borrowings and finance lease obligations | Short-term borrowings and finance lease obligations | Short-term borrowings and finance lease obligations |
| (In millions) | (In millions) | June 30, 2021 | December 31, 2020 | June 30, 2020 | (In millions) | March 31, 2022 | December 31, 2021 | March 31, 2021 |
| Commercial paper | Commercial paper | $ | 494 | | $ | 0 | | $ | 671 | | Commercial paper | $ | 984 | | $ | — | | $ | 1,218 | |
| Repurchase facility | Repurchase facility | 150 | | 0 | | 800 | | Repurchase facility | — | | — | | 30 | |
| Other loans - various currencies | Other loans - various currencies | 31 | | 1 | | 55 | | Other loans - various currencies | 33 | | 15 | | — | |
| Long-term debt payable within one year | Long-term debt payable within one year | 1 | | 1 | | 1 | | Long-term debt payable within one year | — | | 1 | | 1 | |
| Finance lease obligations payable within one year | Finance lease obligations payable within one year | 1 | | 1 | | 2 | | Finance lease obligations payable within one year | 1 | | 1 | | 1 | |
| Total short-term borrowings and finance lease obligations | Total short-term borrowings and finance lease obligations | $ | 677 | | $ | 3 | | $ | 1,529 | | Total short-term borrowings and finance lease obligations | $ | 1,018 | | $ | 17 | | $ | 1,250 | |
| | | | | | | | | | | | | | | | | | | | |
| Long-term debt | |
| (in millions) | March 31, 2022 | December 31, 2021 | March 31, 2021 |
| Amount | Weighted Average Rate | Amount | Weighted Average Rate | Amount | Weighted Average Rate |
| Promissory notes and debentures: | | | | | | |
| Maturing in 2025 | $ | 500 | | 1.70 | % | $ | 500 | | 1.70 | % | $ | 500 | | 1.70 | % |
| Maturing in 2030 | 500 | | 2.30 | % | 500 | 2.30 | % | 500 | 2.30 | % |
| Other loans: | | | | | | |
| Foreign currency loans, various rates and maturities | 53 | 15.00 | % | 1 | 6.82 | % | 1 | | 5.89 | % |
| Medium-term notes, varying maturities through 2041 | 107 | | 0.35 | % | 107 | — | % | 109 | | — | % |
| Finance lease obligations | 3 | | | 3 | | 4 | | |
| Less: Unamortized debt discount and issuance costs | 9 | | | 10 | | 11 | | |
| Less: Long-term debt due within one year | — | | | 1 | | 1 | | |
| Total long-term debt | $ | 1,154 | | | $ | 1,100 | | | $ | 1,102 | | |
The estimated fair value of the company's short-term and long-term borrowings, including interest rate financial instruments, was determined using Level 2 inputs within the fair value hierarchy. Based on quoted market prices for the same or similar issues, or on current rates offered to the company for debt of the same remaining maturities, the fair value of the company's short-term borrowings and finance lease obligations was approximately carrying value.
The fair value of the company’s long-term borrowings, including debt due within one year, was $1,139$1,107 million, $1,168$1,121 million, and $1,141$1,121 million as of June 30, 2021,March 31, 2022, December 31, 2020,2021, and June 30, 2020, respectively, and was determined using quoted market prices for the same or similar issues, or current rates offered to the company for debt of the same remaining maturities (Level 2 inputs).
Debt Offering
In May 2020, EID issued $500 million of 1.70 percent Senior Notes due 2025 and $500 million of 2.30 percent Senior Notes due 2030 (the May 2020 Debt Offering). The proceeds of this offering are intended to be used for general corporate purposes.March 31, 2021, respectively.
Repurchase Facility
In February 2021,2022, the company entered into a new committed receivable repurchase facility of up to $1 billion$500 million (the "2021"2022 Repurchase Facility") which expires in December 2021.2022. Under the 20212022 Repurchase Facility, Corteva may sell a portfolio of available and eligible outstanding customer notes receivables to participating institutions and simultaneously agree to repurchase at a future date. The 20212022 Repurchase Facility is considered a secured borrowing with the customer notes receivables inclusive of those that are sold and repurchased, equal to 105 percent of the outstanding amounts borrowed utilized as collateral. Borrowings under the 20212022 Repurchase Facility have an interest rate equal to the Adjusted Term Secured Overnight Financing Rate ("SOFR") plus a margin of LIBOR+0.850.75 percent.
As of June 30, 2021, $158 million of notes receivable, recorded in accounts and notes receivable - net,March 31, 2022, there were pledged as collateral againstno outstanding borrowings under the 20212022 Repurchase FacilityFacility.
Foreign Currency Loans
The company enters into short-term and long-term foreign currency loans from time-to-time by accessing uncommitted revolving credit lines to fund working capital needs of $150 million, recordedforeign subsidiaries in short-term borrowingsthe normal course of business (“Foreign Currency Loans”). Interest rates are variable and finance lease obligationsdetermined at the time of borrowing. Total unused bank credit lines on the interim Consolidated Balance Sheet.Foreign
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Currency Loans at March 31, 2022 was approximately $255 million. The company’s long-term Foreign Currency Loans have varying maturities through 2024.
Revolving Credit Facilities
In November 2018, EID entered into a $3 billion, 5-year revolving credit facility and a $3 billion, 3-year revolving credit facility (the “Revolving Credit Facilities”). The Revolving Credit Facilities became effective in May 2019. Corteva, Inc. became a party at the time of the Corteva Distribution. In May 2021, the company entered into an amendment that extended the maturity date of the 3-year revolving credit facility from May 2022 to May 2023. Other than the change in maturity date, there were no material modifications to the terms of the credit facility. During May 2022, the Credit Facilities were refinanced for purposes of extending the maturity dates to 2027 and 2025 for the 5-year and 3-year revolving credit facilities, respectively, lowering the facility amount of the 3-year revolving credit facility to $2 billion and transitioning the interest rate to a floating rate utilizing Adjusted Term SOFR plus a margin of 0.10 percent. The Revolving Credit Facilities may serve as a substitute to the company's commercial paper program, and can be used, from time to time, for general corporate purposes including, but not limited to, the funding of seasonal working capital needs. The Revolving Credit Facilities contain customary representations and warranties, affirmative and negative covenants and events of default that are typical for companies with similar credit ratings. Additionally, the Revolving Credit Facilities contain a financial covenant requiring that the ratio of total indebtedness to total capitalization for Corteva and its consolidated subsidiaries not exceed 0.60.
In March 2020, the company drew down $500 million under the $3 billion 3-year revolving credit facility as a result of the volatility and increased borrowing costs of commercial paper resulting from the unstable market conditions caused by the COVID-19 pandemic and repaid that borrowing in full in June 2020. There were no additional borrowings and the unused commitments under the 3-year revolving credit facility were $3 billion as of June 30, 2021.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1312 - COMMITMENTS AND CONTINGENT LIABILITIES
Guarantees
Indemnifications
In connection with acquisitions and divestitures, the company has indemnified respective parties against certain liabilities that may arise in connection with these transactions and business activities prior to the completion of the transactions. The term of these indemnifications, which typically pertain to environmental, tax and product liabilities, is generally indefinite. In addition, the company indemnifies its duly elected or appointed directors and officers to the fullest extent permitted by Delaware law, against liabilities incurred as a result of their activities for the company, such as adverse judgments relating to litigation matters. If the indemnified party were to incur a liability or have a liability increase as a result of a successful claim, pursuant to the terms of the indemnification, the company would be required to reimburse the indemnified party. The maximum amount of potential future payments is generally unlimited. See pages 10 and 24below for additional information relating to the indemnification obligations under the Chemours Separation Agreement and the Corteva Separation Agreement.
Obligations for Customers and Other Third Parties
The company has directly guaranteed various debt obligations under agreements with third parties related to customers and other third parties. At June 30, 2021,March 31, 2022, December 31, 20202021 and June 30, 2020,March 31, 2021, the company had directly guaranteed $115$105 million, $94$105 million, and $112$108 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 in the event of default by the guaranteed party. All of the maximum future payments at June 30, 2021March 31, 2022 had terms less than one year. The maximum future payments include $22$21 million, $17$21 million and $20$23 million at June 30, 2021,March 31, 2022, December 31, 20202021 and June 30, 2020,March 31, 2021, respectively, of guarantees related to the various factoring agreements that the company enters into with third-party financial institutions to sell its trade receivables. See Note 98 - Accounts and Notes Receivable - Net, to the Consolidated Financial Statements, for additional information.
The maximum future payments also include agreements with lenders to establish programs that provide financing for select customers. The terms of the guarantees are equivalent to the terms of the customer loans that are primarily made to finance customer invoices. The total amounts owed from customers to the lenders relating to these agreements was $648$180 million, $16$15 million and $622$178 million at June 30, 2021,March 31, 2022, December 31, 20202021 and June 30, 2020,March 31, 2021, respectively.
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.
Litigation
The company is subject to various legal proceedings, including, but not limited to, product liability, intellectual property, antitrust, commercial, property damage, personal injury, environmental and regulatory matters arising out of the normal course of its current businesses or legacy EID businesses unrelated to Corteva’s current businesses but allocated to Corteva as part of the separation of Corteva from DuPont. It is not possible to predict the outcome of these various proceedings, as considerable uncertainty exists. However, the ultimate liabilities could be material to results of operations and the cash flows in the period recognized.
Indemnifications under Separation Agreements
The company has entered into various agreements where the company is indemnified for certain liabilities. The term of this indemnification is generally indefinite, with exceptions, and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. In connection with the recognition of liabilities related to these matters, the company records an indemnification asset when recovery is deemed probable. See Note 3 - Divestitures and Other Transactions, to the interim Consolidated Financial Statements for additional information related to indemnifications.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Chemours/Performance Chemicals
ReferPursuant to Note 3 - Divestitures and Other Transactions, to the interim Consolidated Financial Statements for additional discussion of the Chemours Separation Agreement.Agreement resulting from the 2015 spin-off of the Performance Chemicals segment from Historical DuPont, Chemours indemnifies the company against certain litigation, environmental, workers' compensation and other liabilities that arose prior to the distribution.
In 2017, EID and Chemours amended the Chemours Separation Agreement was amended to provide for a limited sharing of potential future liabilities related to alleged historical releases of perfluorooctanoic acids and its ammonium salts (“PFOA”) for a five-year period that began on July 6, 2017. In addition, in 2017, Chemours and EID each paid $335 million to settlesettled 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 as a result of the historical manufacture or use of PFOA at
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
the Washington Works plant outside Parkersburg, West Virginia. This plant was previously owned and/or operated by the performance chemicals segment of EID and is now owned and/or operated by Chemours. The 2017 settlement did not resolve claims of certain class members who did not have claims in the Ohio MDL or whose claims are based on diseases first diagnosed after February 11, 2017. Since the 2017 settlement, 96 claims alleging personal injury were filed in the Ohio MDL and a number of additional pre-suit claims for personal injury were asserted.
On May 13, 2019, Chemours filed suit in the Delaware Court of Chancery against DuPont, EID, and Corteva, seeking, among other things, to limit its responsibility for the litigation and environmental liabilities allocated to and assumed by Chemours under the Chemours Separation Agreement (the “Delaware Litigation”). On March 30, 2020, the Court of Chancery granted a motion to dismiss. On December 15, 2020, the Delaware Supreme Court affirmed the judgment of the Court of Chancery. Meanwhile, a confidential arbitration process regarding the same and other claims hadhas proceeded (the “Pending Arbitration”).
On January 22, 2021, Chemours, DuPont, Corteva and EID entered into a binding memorandum of understanding containing a settlement to resolve legal disputes originating from the Delaware Litigation and Pending Arbitration, and to establish a cost sharing arrangement and escrow account to be used to support and manage potential future legacy per- and polyfluoroalkyl substances (“PFAS”("PFAS") liabilities arising out of pre-July 1, 2015 conduct (the “MOU”). The MOU replaces the 2017 amendment to the Chemours Separation Agreement. According to the terms of the cost sharing arrangement within the MOU, Corteva and DuPont together, on one hand, and Chemours, on the other hand, agreed to a 50-50 split of certain qualified expenses related to PFAS liabilities incurred over a term not to exceed twenty years or $4 billion of qualified spend and escrow account contributions (see below for discussion of escrow account) in the aggregate. DuPont’s and Corteva’s 50% share under the MOU will be limited to $2 billion, including qualified expenses and escrow contributions. These expenses and escrow account contributions will be subject to the existing Letter Agreement, under which DuPont and Corteva will each bear 50% of the first $300 million (up to $150 million each), and thereafter DuPont bears 71% and Corteva bears the remaining 29%.
In order to support and manage any potential future PFAS liabilities, the parties have also agreed to establish an escrow account.account ("MOU Escrow Account"). The MOU provides that (1) no later than each of September 30, 2021 and September 30, 2022, Chemours shall deposit $100 million into an escrow account and DuPont and Corteva shall together deposit $100 million in the aggregate into an escrow account and (2) no later than September 30 of each subsequent year through and including 2028, Chemours shall deposit $50 million into an escrow account and DuPont and Corteva shall together deposit $50 million in the aggregate 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). Over this period, Chemours will deposit a total of $500 million in the account and DuPont and Corteva will deposit an additional $500 million pursuant to the terms of the Letter Agreement. Additionally, if on December 31, 2028, the balance of the escrow account (including interest) is less than $700 million, Chemours will make 50% of the deposits and DuPont and Corteva together will make 50% of the deposits necessary to restore the balance of the escrow account to $700 million. Such payments will be made in a series of consecutive annual equal installments commencing on September 30, 2029 pursuant to the escrow account replenishment terms as set forth in the MOU. The MOU provides that no withdrawals from the MOU Escrow Account can be made before year six, except to fund mutually agreed upon third-party settlements in excess of $125 million. Starting with year six, withdrawals can only be made to fund qualified spend if the parties’ aggregate qualified spend in that particular year is greater than $200 million. Beginning with year 11, the amounts in the MOU Escrow Account can be used to fund any qualified spend.
During 2021, the company contributed its initial deposit into the MOU Escrow Account, which is classified as noncurrent restricted cash equivalents and is included in other assets in the interim Consolidated Balance Sheets.
After the term of this arrangement, Chemours’ indemnification obligations under the original 2015 Chemours Separation Agreement, would continue unchanged, subject in each case to certain exceptions set out in the MOU. Under the MOU, Chemours waived specified claims regarding the construct of its 2015 spin-off transaction, and the parties will dismiss the pending arbitrationPending Arbitration regarding those claims (as discussed below).claims. Additionally, the parties have agreed to resolve the Ohio MDL PFOA personal injury litigation (as discussed below). The parties are expected to cooperate in good faith to enter into additional agreements reflecting the terms set forth in the MOU.
During the three months ended March 31, 2022, the company recorded charges of $4 million to (loss) income from discontinued operations after income taxes in the interim Consolidated Statement of Operations, related to the MOU.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Corteva Separation Agreement
On April 1, 2019, in connection with the Dow Distribution, Corteva, DuPont and Dow entered into the Corteva Separation Agreement, the Tax Matters Agreement, the Employee Matters Agreement, and certain other agreements (collectively, the “Corteva Separation Agreements”). The Corteva Separation Agreements allocate among Corteva, DuPont and Dow assets, employees, certain liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) among the parties and provides for indemnification obligation among the parties. Under the Corteva Separation Agreements, DuPont will indemnify Corteva against certain litigation, environmental, tax, workers' compensation and other liabilities that arose prior to the Corteva Distribution and (ii) Dow indemnifies Corteva against certain litigation, environmental, tax, workers' compensation and other liabilities that relate to the Historical Dow business, but were transferred over as part of the common control combination with DAS, and Corteva indemnifies DuPont and Dow for certain liabilities. The term of this indemnification is generally indefinite with exceptions, and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. See Note 3 - Divestitures and Other Transactions, to the interim Consolidated Financial Statements for additional information relating to the Separation.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DuPont
Under the Corteva Separation Agreement, certain legacy EID liabilities from discontinued and/or divested operations and businesses of EID (including Performance Chemicals) (a “stray liability”) were allocated to Corteva or DuPont. For those stray liabilities allocated to Corteva (which may include a specified amount of liability associated with that liability), Corteva is responsible for liabilities in an amount up to that specified amount plus an additional $200 million and, for those stray liabilities allocated to DuPont (which may include a specified amount of liability associated with that liability), DuPont is responsible for liabilities up to a specified amount plus an additional $200 million. Once each company has met the $200 million threshold, Corteva and DuPont will share future liabilities proportionally on the basis of 29% and 71%, respectively; provided, however, that for PFAS, DuPont will manage such liabilities with Corteva and DuPont sharing the costs on a 50% - 50% basis starting from $1 and up to $300 million (with such amount, up to $150 million, to be credited to each company’s $200 million threshold) and once the $300 million threshold is met, then the companies will share proportionally on the basis of 29% and 71% respectively, subject to a $1 million de minimis requirement. AsDuring the second quarter of June 30, 2021, the aggregate amount of the company’s cash spent and liabilities accrued exceedexceeded the stray liability thresholds, including PFAS, noted above. Therefore, any future liabilities recognized subsequent to the second quarter of 2021 will be shared at the reduced rates noted above.
At March 31, 2022, December 31, 2021, and March 31, 2021, the indemnification assets were $31 million, $25 million, and $28 million, respectively, within accounts and notes receivable - net and $80 million, $75 million, and $51 million, respectively, within other assets in the interim Consolidated Balance Sheets. At March 31, 2022, December 31, 2021, and March 31, 2021, the indemnification liabilities were $32 million, $20 million, and $52 million, respectively, within accrued and other current liabilities and $116 million, $117 million, and $91 million, respectively, within other noncurrent obligations in the interim Consolidated Balance Sheets.
Litigation
The company is subject to various legal proceedings, including, but not limited to, product liability, intellectual property, antitrust, commercial, property damage, personal injury, environmental and regulatory matters arising out of the normal course of its current businesses or legacy EID businesses unrelated to Corteva’s current businesses but allocated to Corteva as part of the separation of Corteva from DuPont. It is not possible to predict the outcome of these various proceedings, as considerable uncertainty exists. The company records accruals for legal matters when the information available indicates that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Accruals may reflect the impact and status of negotiations, settlements, rulings, advice from counsel and other information and events that may pertain to a particular matter. For the litigation matters discussed below, management believes that it is reasonably possible that the company could incur liabilities in excess of amounts accrued, the ultimate liability for which could be material to the results of operations and the cash flows in the period recognized. However, the company is unable to estimate the possible loss beyond amounts accrued due to various reasons, including, among others, that the underlying matters are either in early stages and/or have significant factual issues to be resolved. In addition, even when the company believes it has substantial defenses, the company may consider settlement of matters if it believes it is in the best interest of the company.
Lorsban® Lawsuits
As of March 31, 2022, there were pending personal injury lawsuits filed and additional asserted claims against the former Dow Agrosciences LLC, alleging injuries related to chlorpyrifos exposure, the active ingredient in Lorsban®, an insecticide used by commercial farms for field fruit, nut and vegetable crops. Corteva ended its production of Lorsban® in 2020. Chlorpyrifos products are restricted-use pesticides, which are not available for purchase or use by the general public, and may only be sold to, and used by, certified applicators or someone under the certified applicator's direct supervision. These lawsuits do not relate to Dursban®, a residential type chlorpyrifos product that was authorized for indoor purposes, which was discontinued over two decades ago prior to the Merger and Corteva’s formation and Separation. Claimants allege personal injury, including autism, developmental delays and/or decreased neurologic function, resulting from farm worker exposure and bystander drift and in utero exposure to chlorpyrifos. Certain claimants have also put forth remediation claims due to alleged property contamination from chlorpyrifos. Discovery is expected to continue through at least 2022. As of March 31, 2022, an accrual has been established for the estimated resolution of certain claims.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Litigation related to legacy EID businesses unrelated to Corteva’s current businesses
PFAS, PFOA, PFOS and Other Related Liabilities
For purposes of this report, the term PFOA means collectively perfluorooctanoic acid and its salts, including the ammonium salt and does not distinguish between the two forms, and PFAS, which means per- and polyfluoroalkyl substances, including PFOA, PFOS (perfluorooctanesulfonic acid), GenX and other perfluorinated chemicals and compounds ("PFCs").
EID is a party to various legal proceedings relating to the use of PFOA by its former Performance Chemicals segment for which potential liabilities would be subject to the cost sharing arrangement under the MOU as long as it remains effective. Management believes that it is reasonably possible that EID could incur liabilities related to PFOA in excess of amounts accrued. However, any such losses are not estimable at this time due to various reasons, including, among others, that the underlying matters are in their early stages and have significant factual issues to be resolved. The company has recorded a liability of $23 million and an indemnification asset of $17 million at June 30, 2021, related to testing drinking water in and around certain former EID sites and offering treatment or an alternative supply of drinking water if tests indicate the presence of PFOA in drinking water at or greater than the national health advisory level established from time to time by the EPA.
Leach Settlement and Ohio MDL Settlement
EID has residual liabilities under its 2004 settlement of a West Virginia state court class action, Leach v. EID, which alleged that PFOA from EID’s former Washington Works facility had contaminated area drinking water supplies and affected the health of area residents. The settlement class has about 80,000 members. In addition to relief that was provided to class members years ago, the settlement requires EID to continue providing PFOA water treatment to 6 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. As of June 30, 2021,March 31, 2022, approximately $2 million had been disbursed from the account since its establishment in 2012 and the remaining balance is approximately $1 million.
The Leach settlement permits class members to pursue personal injury claims for 6 health conditions (and no others) that an expert panel appointed under the 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. After the panel reported its findings, approximately 3,550 personal injury lawsuits were filed in federal and state courts in Ohio and West Virginia and consolidated in multi-district litigation in the U.S. District Court for the Southern District of Ohio (“Ohio MDL”). The Ohio MDL was settled in early 2017 for $670.7 million in cash, with Chemours and EID (without indemnification from Chemours) each paying half.
Post-MDL Settlement PFOA Personal Injury Claims
The 2017 Ohio MDL settlement did not resolve claims of plaintiffs who did not have claims in the Ohio MDL or whose claims are based on diseases first diagnosed after February 11, 2017. The first was a consolidated trial for these claims,of two cases; the first, a kidney cancer case, which resulted in a hung jury, while the second, Travis and Julie Abbot v. E.I du Pont de Nemours and Company (the “Abbot Case”), a testicular cancer case, resulted in a jury verdict of $40 million in compensatory damages and $10 million for loss of consortium. The loss of consortium award was subsequently reduced to $250,000 in accordance with state law limitations. Following entry of the judgment by the court, EID filed post-trial motions to reduce the verdict, and to appeal the verdict on the basis of procedural and substantive legal errors made by the trial court. The trial court recently granted EID’s motion to reducecompany believes the lossmerits of consortium award to conform with state tort reform laws limiting these damages to $250,000. The company is continuing its other appeals to reducethe appeal will be successful in reducing the jury verdict or eliminateeliminating its liability, in whole or part.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
In January 2021, Chemours, DuPont and Corteva agreed to settle the remaining approximately 95 matters, as well as unfiled matters, remaining in the Ohio MDL, with the exception of the Abbot case, for $83 million, with Chemours contributing $29 million to the settlement, and DuPont and Corteva contributing $27 million each. The company recorded a liability for its share of the settlement, with a charge to (loss) income from discontinued operations after income taxes,paid $27 million during the year ended December 31, 2020, and paid $11 million and $27 million during the three and six months ended June 30, 2021, respectively.2021. As agreed to in the settlement, the plaintiffs' counsel filed a motion to dissolve the MDL.
Other PFOA Matters
EID is a party to other PFOA lawsuits that do not involve claims for personal injury. Defense costs and any future liabilities that may arise out of these lawsuits are subject to the MOU and the cost sharing arrangement disclosed above. Under the MOU, fraudulent conveyance claims associated with these matters are not qualified expenses, unless Corteva, Inc. and EID would prevail on the merits of these claims.
New York. EID is a defendant in about 50 lawsuits, including a putative class action, brought by persons who live in and around Hoosick Falls, New York. These lawsuits assert claims for medical monitoring and property damage based on alleged PFOA releases from manufacturing facilities owned and operated by co-defendants in Hoosick Falls and allege that EID and 3M supplied some of the materials used at these facilities. EID is also one of more than ten defendants in a lawsuit brought by the Town of East Hampton, New York alleging PFOA and PFOS contamination of the town’s well water. Additionally, EID, along with 3M, Chemours and Dyneon, have been named defendants in complaints filed by eighteleven water districts in Nassau County, New York alleging that the drinking water they provide to
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
customers is contaminated with PFAS and seeking reimbursement for clean-up costs. The water district complaints also include allegations of fraudulent transfer.
New Jersey. At June 30, 2021,March 31, 2022, 2 lawsuits were pending, one brought by a local water utility and the second a putative class action, against EID alleging that PFOA from EID’s former Chambers Works facility contaminated drinking water sources. The putative class action was voluntarily dismissed without prejudice by the plaintiff.
In late March of 2019, the New Jersey State Attorney General filed 4 lawsuits against EID, Chemours, 3M and others alleging that operations at and discharges from former EID sites in New Jersey (Chambers Works, Pompton Lakes, Parlin and Repauno) damaged the State’s natural resources. Two of these lawsuits (those involving the Chambers Works and Parlin sites) allege contamination from PFAS. The Ridgewood Water District in New Jersey filed suit in the first quarter 2019 against EID, 3M, Chemours, and Dyneon alleging losses related to the investigation, remediation and monitoring of polyfluorinated surfactants, including PFOA, in water supplies. DuPont and Corteva were subsequently added as defendants to these lawsuits. These lawsuits include claims under the New Jersey Industrial Site Recovery Act ("ISRA") and for fraudulent conveyance.
Alabama / Others. EID is one of more than thirty defendants in a lawsuit by the Alabama water utility alleging contamination from PFCs, including PFOA, used by co-defendant carpet manufacturers to make their products more stain and grease resistant. In addition, the states of Alaska, Michigan, Mississippi, New Hampshire, North Carolina, South Dakota, Vermont and VermontFlorida recently filed lawsuits against EID, Chemours, 3M and others, claiming, among other things, PFC (including PFOA) contamination of groundwater and drinking water. The complaints seek reimbursement for past and future costs to investigate and remediate the alleged contamination and compensation for the loss of value and use of the state’s natural resources. Motions to dismiss the Michigan, Vermont and New Hampshire cases have been denied.
Ohio. EID is a defendant in 3 lawsuits:lawsuits, including an action by the State of Ohio based on alleged damage to natural resources, a putative nationwide class action brought on behalf of anyone who has detectable levels of PFAS in their blood serum, and an action by the City of Dayton claiming losses related to the investigation, remediation and monitoring of PFAS in water supplies. The trial with respect to the natural resources lawsuit is scheduled for April 2023. The third lawsuit, a putative nationwide class action brought on behalf of anyone who has detectable levels of PFAS in their blood serum seeks declaratory and injunctive relief, including the establishment of a “PFAS Science Panel.” In March 2022, the trial court certified a class covering anyone subject to Ohio laws having minimal levels of PFOA plus at least one other PFAS in their blood. The trial court requested further briefing on whether the class should be extended to include other states that recognize analogous claims for relief. EID, along with the other defendants, filed a petition to appeal the class certification decision, while continuing to defend the lawsuit at the trial court.
Netherlands. In April 2021, 4 municipalities in the Netherlands filed complaints alleging contamination of land and groundwater resulting from the emission of PFOA and GenX by Corteva, DuPont and Chemours. The municipalities seek to recover costs incurred due to the alleged emissions, including damages for investigation costs, construction project delays, depreciation of land, soil remediation, liabilities to contractors, and attorneys’ fees.
Delaware. On July 13, 2021, Chemours, DuPont, EID and Corteva entered into a settlement agreement with the State of Delaware reflecting the companies’ and the State’s agreement to settle and fully resolve claims alleged against the companies regarding their historical Delaware operations, manufacturing, use and disposal of all chemical compounds, including PFAS. Under the settlement, the companies will collectively pay $50 million to fund environmental projects, including sampling and community environmental justice and equity grants, which shall be utilized to fund the Natural Resources and Sustainability Trust (the “NRST Trust”). If the companies, individually or jointly, within 8 years of the
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
settlement, enter into a proportionally similar agreement to settle or resolve claims of another state for PFAS-related natural resource damages, for an amount greater than $50 million, the companies shall make a supplemental payment directly to the NRST Trust (“Supplemental Payment”) in an amount equal to such other states’ recovery in excess of $50 million. Supplemental Payment(s), if any, will not exceed $25 million in the aggregate. All amounts paid by the companies under the settlement are subject to the MOU and the Corteva Separation Agreement with Chemours bearing responsibility for 50%, or $25 million, of the $50 million payment due to the NRST and DuPont and Corteva each bearing $12.5 million of the remaining amount.amount, which Corteva paid in January 2022. Under the settlement, if the state sues other parties and those parties seek contribution from the companies, the companies will have protection from contribution up to the amounts previously paid under the settlement agreement. The companies will also receive a credit up to the amount of the payment if the state seeks natural resource damage claims against the companies outside the scope of the settlement’s release of claims.
Aqueous Firefighting Foams. Approximately 1,2802,350 cases have been filed against 3M and other defendants, including EID and Chemours, and more recently also including Corteva and DuPont, alleging PFOS or PFOA contamination of
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
soil and groundwater from the use of aqueous firefighting foams. Most of those cases claim some form of property damage and seek to recover the costs of responding to this contamination and damages for the loss of use and enjoyment of property and diminution in value. Most of these cases have been transferred to a multidistrictmulti-district litigation proceeding in federal district court in South Carolina. Approximately 1,1652,020 of these cases were filed on behalf of firefighters who allege personal injuries (primarily kidney and testicular cancer) as a result of aqueous firefighting foams, while 60 are fromfoams. Approximately 190 of these cases were filed by water utility or municipal water districts. Most of these recent cases assert claims that the EID and Chemours separation constituted a fraudulent conveyance. A schedule of initial trialsDiscovery for these cases is expected to be established incontinue through 2022, with a water district "bellwether" trial expected for early 2023. The court has encouraged all parties to discuss resolution of the second halfwater utility and water district category of 2021.cases. Consistent with the Court's instruction and under the mutual obligations of the MOU, Corteva, EID, DuPont and Chemours have engaged with the plaintiff's counsel on these cases.
EID did not make firefighting foams, PFOS, or PFOS products. While EID made surfactants and intermediaries that some manufacturers used in making foams, which may have contained PFOA as an unintended byproduct or an impurity, EID’s products were not formulated with PFOA, nor was PFOA an ingredient of these products. EID has never made or sold PFOA as a commercial product.
Fayetteville Works Facility, North Carolina
Prior to the separation of Chemours, EID introduced GenX as a polymerization processing aid and a replacement for PFOA at the Fayetteville Works facility in Bladen County, North Carolina. The facility is now owned and operated by Chemours, which continues to manufacture and use GenX.
At June 30, 2021,March 31, 2022, several actions are pending in federal court against Chemours and EID relating to PFC discharges from the Fayetteville Works facility. One of these is a consolidated putative class action that asserts claims for medical monitoring and property damage 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 another action withover approximately 100 property owners near the Fayetteville Works facility filed a complaint against Chemours and EID in May 2020. The plaintiffs seek compensatory and punitive damages for their claims of private nuisance, trespass, and negligence allegedly caused by release of PFAS.
In addition to the federal court actions, there is an action on behalf of about 100 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. The plaintiffs’ claims for medical monitoring, punitive damages, public nuisance, trespass, unjust enrichment, failure to warn, and negligent manufacture were dismissed.
Generally, site-related expenses related to GenX claims are subject to the cost sharing arrangements as defined in the MOU.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Environmental
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 June 30, 2021, the company had accrued obligations of $335 million for probable environmental remediation and restoration costs, including $57 million for the remediation of Superfund sites. These obligations are included in accrued and other current liabilities and other noncurrent obligations in the interim Consolidated Balance Sheet. 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 $569 million above the amount accrued at June 30, 2021. Consequently, itSheets. 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.
For a discussion of the allocation of environmental liabilities under the Chemours Separation Agreement and the Corteva Separation Agreement, see the previous discussion on page 24.20.
The above noted $335 million accrued obligations includes the following:
| | | As of June 30. 2021 | | As of March 31, 2022 |
| (In millions) | (In millions) | Indemnification Asset | Accrual balance3,4 | Potential exposure above amount accrued3 | (In millions) | Indemnification Asset | Accrual balance3 | Potential exposure above amount accrued3 |
| Environmental Remediation Stray Liabilities | Environmental Remediation Stray Liabilities | | | Environmental Remediation Stray Liabilities | | |
Chemours related obligations - subject to indemnity1,2 | Chemours related obligations - subject to indemnity1,2 | $ | 149 | | $ | 149 | | $ | 275 | | Chemours related obligations - subject to indemnity1,2 | $ | 153 | | $ | 153 | | $ | 254 | |
Other discontinued or divested businesses obligations1 | Other discontinued or divested businesses obligations1 | 0 | | 77 | | 181 | | Other discontinued or divested businesses obligations1 | 18 | | 74 | | 186 | |
| Environmental remediation liabilities primarily related to DuPont - subject to indemnity from DuPont2 | Environmental remediation liabilities primarily related to DuPont - subject to indemnity from DuPont2 | 37 | | 37 | | 62 | | Environmental remediation liabilities primarily related to DuPont - subject to indemnity from DuPont2 | 42 | | 44 | | 65 | |
| | Environmental remediation liabilities not subject to indemnity | Environmental remediation liabilities not subject to indemnity | 0 | | 72 | | 51 | | Environmental remediation liabilities not subject to indemnity | — | | 80 | | 54 | |
| Indemnification liabilities related to the MOU4 | | Indemnification liabilities related to the MOU4 | 21 | | 108 | | 23 | |
| Total | Total | $ | 186 | | $ | 335 | | $ | 569 | | Total | $ | 234 | | $ | 459 | | $ | 582 | |
1.Represents liabilities that are subject to the $200 million thresholdsthreshold and sharing arrangements as discussed on page 24,21, under Cortevathe header "Corteva Separation Agreement."
2.The company has recorded an indemnification asset related to these accruals, including $30$35 million related to the Superfund sites.
3.Accrual balance represents management’s best estimate of the costs of remediation and restoration, although it is reasonably possible that the potential exposure, as indicated, could range above the amounts accrued, as there are inherent uncertainties in these estimates. Accrual balances includes $63 million for remediation of Superfund sites. Amounts do not include possible impacts from the remediation elements of the EPAs October 2021 PFAS Strategic Roadmap (as applicable) or possible revisions to Chemours' Consent Order with the North Carolina Department of Environmental Quality, as any possible impacts, to the extent such items would be reimbursable under the MOU, are not yet determinable.
4.Accrual balance excludes indemnificationRepresents liabilities of $99 million to Chemours, relatedthat are subject to the cost$150 million threshold and sharing arrangementagreements as discussed on page 20, under the MOU (see page 10).header "Chemours / Performance Chemicals."
Chambers Works, New Jersey
On January 28, 2022, the State of New Jersey filed a request for a preliminary injunction against EID and Chemours seeking the establishment of a Remediation Funding Source ("RFS") in an amount exceeding $900 million for environmental remediation at EID's former Chambers Works facility in New Jersey. The RFS primarily relates to non-PFAS remediation, which is not subject to the MOU. Chemours has accepted indemnity and defense for these matters, while reserving rights and declining demand relating to the ISRA and fraudulent transfer matters as alleged under the existing New Jersey natural resource lawsuits discussed on page 23.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1413 - STOCKHOLDERS' EQUITY
Share Buyback Plan
On August 5, 2021, Corteva, Inc. announced that its Board of Directors authorized a $1.5 billion share repurchase program to purchase Corteva, Inc.'s common stock, par value $0.01 per share, without an expiration date.date ("2021 Share Buyback Plan"). The timing, price and volume of purchases will be based on market conditions, relevant securities laws and other factors. In connection with the 2021 Share Buyback Plan, the company repurchased and retired 4,585,000 shares during the three months ended March 31, 2022 in the open market for a total cost of $235 million.
On June 26, 2019, Corteva, Inc. announced that its Board of Directors authorized a $1 billion share repurchase program to purchase Corteva, Inc.'s common stock, par value $0.01 per share, without an expiration date. The timing, price and volume of purchases will be based on market conditions, relevant securities laws and other factors.
Duringdate ("2019 Share Buyback Plan"). In connection with the three and six months ended June 30, 2021,2019 Share Buyback Plan, the company purchasedrepurchased and retired 4,324,000 shares and 11,970,000 shares, respectively, in the open market for a total cost of $200 million and $550 million, respectively. During the six months ended June 30, 2020, the company purchased and retired 1,865,0007,646,000 shares in the open market for a total cost of $50 million.$350 million during the three months ended March 31, 2021. Repurchases under the 2019 Share Buyback Plan were completed during the third quarter of 2021.
Shares repurchased pursuant to Corteva's share buyback planplans are immediately retired upon purchase.repurchase. Repurchased common stock is reflected as a reduction of stockholders' equity. The company's accounting policy related to its share repurchases is to reduce its common stock based on the par value of the shares and to reduce its retained earnings for the excess of the repurchase price over the par value. When Corteva has an accumulated deficit balance, the excess over the par value is applied to APIC. When Corteva has retained earnings, the excess is charged entirely to retained earnings.
Noncontrolling Interest
In June 2020, the company completed the acquisition of the remaining 46.5 percent interest in the Phytogen Seed Company, LLC joint venture from J. G. Boswell Company. As the purchase of the remaining interest did not result in a change of control, the difference between the carrying value of the noncontrolling interest and the consideration paid, net of taxes was recorded within equity.
Corteva, Inc. owns 100 percent of the outstanding common shares of EID. However, EID has preferred stock outstanding to third parties which is accounted for as a non-controlling interest in Corteva's interim Consolidated Balance Sheets. Each share of EID Preferred Stock - $4.50 Series and EID Preferred Stock - $3.50 Series issued and outstanding at the effective date of the Corteva Distribution remains issued and outstanding as to EID and was unaffected by the Corteva Distribution.
Below is a summary of the EID Preferred Stock at June 30, 2021,March 31, 2022, December 31, 2020,2021, and June 30, 2020,March 31, 2021, which is classified as noncontrolling interests in Corteva's interim Consolidated Balance Sheets.
| | | | | |
| Shares in thousands | Number of Shares |
| Authorized | 23,000 |
| $4.50 Series, callable at $120 | 1,673 |
| $3.50 Series, callable at $102 | 700 |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Other Comprehensive Income (Loss) Income
The changes and after-tax balances of components comprising accumulated other comprehensive lossincome (loss) are summarized below:
| | | | | | | | | | | | | | | | | | | | |
| (In millions) | Cumulative Translation Adjustment1 | Derivative Instruments | Pension Benefit Plans | Other Benefit Plans | Unrealized Gain (Loss) on Investments | Total |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| 2020 | | | | | | |
| Balance January 1, 2020 | $ | (1,944) | | $ | 2 | | $ | (1,247) | | $ | (81) | | $ | 0 | | $ | (3,270) | |
| Other comprehensive (loss) income before reclassifications | (575) | | (22) | | (9) | | 2 | | 0 | | (604) | |
| Amounts reclassified from accumulated other comprehensive loss | 0 | | 26 | | 3 | | 0 | | 0 | | 29 | |
| Net other comprehensive (loss) income | (575) | | 4 | | (6) | | 2 | | 0 | | (575) | |
| Balance June 30, 2020 | $ | (2,519) | | $ | 6 | | $ | (1,253) | | $ | (79) | | $ | 0 | | $ | (3,845) | |
| | | | | | |
| 2021 | | | | | | |
| Balance January 1, 2021 | $ | (1,970) | | $ | (67) | | $ | (1,433) | | $ | 590 | | $ | (10) | | $ | (2,890) | |
| Other comprehensive (loss) income before reclassifications | (160) | | 109 | | (5) | | 1 | | 3 | | (52) | |
| Amounts reclassified from accumulated other comprehensive loss | 0 | | (13) | | 21 | | (318) | | 7 | | (303) | |
| Net other comprehensive (loss) income | (160) | | 96 | | 16 | | (317) | | 10 | | (355) | |
| | | | | | |
| Balance June 30, 2021 | $ | (2,130) | | $ | 29 | | $ | (1,417) | | $ | 273 | | $ | 0 | | $ | (3,245) | |
| | | | | | | | | | | | | | | | | | | | |
| (In millions) | Cumulative Translation Adjustment1 | Derivative Instruments | Pension Benefit Plans | Other Benefit Plans | Unrealized Gain (Loss) on Investments | Total |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| 2021 | | | | | | |
| Balance January 1, 2021 | $ | (1,970) | | $ | (67) | | $ | (1,433) | | $ | 590 | | $ | (10) | | $ | (2,890) | |
| Other comprehensive income (loss) before reclassifications | (403) | | 71 | | (4) | | 1 | | 4 | | $ | (331) | |
| Amounts reclassified from accumulated other comprehensive income (loss) | — | | (6) | | 12 | | (158) | | 6 | | $ | (146) | |
| Net other comprehensive income (loss) | (403) | | 65 | | 8 | | (157) | | 10 | | $ | (477) | |
| Balance March 31, 2021 | $ | (2,373) | | $ | (2) | | $ | (1,425) | | $ | 433 | | $ | — | | $ | (3,367) | |
| | | | | | |
| 2022 | | | | | | |
| Balance January 1, 2022 | $ | (2,543) | | $ | 72 | | $ | (396) | | $ | (31) | | $ | — | | $ | (2,898) | |
| Other comprehensive income (loss) before reclassifications | 91 | | (13) | | 8 | | 3 | | — | | 89 | |
| Amounts reclassified from accumulated other comprehensive income (loss) | — | | (12) | | — | | — | | — | | (12) | |
| Net other comprehensive income (loss) | 91 | | (25) | | 8 | | 3 | | — | | 77 | |
| | | | | | |
| Balance March 31, 2022 | $ | (2,452) | | $ | 47 | | $ | (388) | | $ | (28) | | $ | — | | $ | (2,821) | |
1.The cumulative translation adjustment lossgain for the sixthree months ended June 30, 2020March 31, 2022 was primarily driven by the weakening of the USD against the Brazilian Real ("BRL") andpartially offset by the South African Rand ("ZAR")strengthening of the USD against the USD.European Euro ("EUR") and Swiss Franc ("CHF"). The cumulative translation adjustment loss for the sixthree months ended June 30,March 31, 2021 was primarily driven by strengthening of the weakening ofUSD against the Swiss Franc ("CHF"), Brazilian Real ("BRL") and the European Euro ("EUR") against the USD.Euro.
The tax (expense) benefit (expense) on the net activity related to each component of other comprehensive income (loss) was as follows:
| | (In millions) | (In millions) | Three Months Ended
June 30, | Six Months Ended
June 30, | (In millions) | Three Months Ended
March 31, | |
| | 2021 | 2020 | 2021 | 2020 | | 2022 | 2021 | |
| Derivative instruments | Derivative instruments | $ | (7) | | $ | (3) | | $ | (25) | | $ | 2 | | Derivative instruments | $ | (1) | | $ | (18) | | |
| Pension benefit plans - net | Pension benefit plans - net | (3) | | 1 | | (5) | | (3) | | Pension benefit plans - net | (2) | | (2) | | |
| Other benefit plans - net | Other benefit plans - net | 48 | | 0 | | 97 | | 0 | | Other benefit plans - net | 3 | | 49 | | |
| | Benefit from (provision for) income taxes related to other comprehensive income items | $ | 38 | | $ | (2) | | $ | 67 | | $ | (1) | | |
| (Provision for) benefit from income taxes related to other comprehensive income (loss) items | | (Provision for) benefit from income taxes related to other comprehensive income (loss) items | $ | — | | $ | 29 | | |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A summary of the reclassifications out of accumulated other comprehensive lossincome (loss) is provided as follows:
| | (In millions) | (In millions) | Three Months Ended
June 30, | Six Months Ended
June 30, | (In millions) | Three Months Ended
March 31, | |
| | 2021 | 2020 | 2021 | 2020 | | 2022 | 2021 | |
Derivative Instruments1: | Derivative Instruments1: | $ | (10) | | $ | 28 | | $ | (15) | | $ | 35 | | Derivative Instruments1: | $ | (15) | | $ | (5) | | |
Tax benefit2 | 3 | | (7) | | 2 | | (9) | | |
Tax (benefit) expense2 | | Tax (benefit) expense2 | 3 | | (1) | | |
| After-tax | After-tax | $ | (7) | | $ | 21 | | $ | (13) | | $ | 26 | | After-tax | $ | (12) | | $ | (6) | | |
| Amortization of pension benefit plans: | Amortization of pension benefit plans: | | | Amortization of pension benefit plans: | | | |
Prior service benefit3,4 | $ | (1) | | $ | (1) | | $ | (1) | | $ | (1) | | |
Actuarial losses3,4 | 13 | | 1 | | 27 | | 2 | | |
Prior service (benefit) cost3,4 | | Prior service (benefit) cost3,4 | $ | (1) | | $ | — | | |
Actuarial (gains) losses3,4 | | Actuarial (gains) losses3,4 | 1 | | 14 | | |
| Settlement loss3,4 | 0 | | 1 | | 1 | | 3 | | |
Settlement (gain) loss3,4 | | Settlement (gain) loss3,4 | — | | 1 | | |
| Total before tax | Total before tax | $ | 12 | | $ | 1 | | $ | 27 | | $ | 4 | | Total before tax | $ | — | | $ | 15 | | |
Tax benefit2 | (3) | | 0 | | (6) | | (1) | | |
Tax (benefit) expense2 | | Tax (benefit) expense2 | — | | (3) | | |
| After-tax | After-tax | $ | 9 | | $ | 1 | | $ | 21 | | $ | 3 | | After-tax | $ | — | | $ | 12 | | |
| Amortization of other benefit plans: | Amortization of other benefit plans: | | | Amortization of other benefit plans: | | | |
Prior service benefit3,4 | $ | (231) | | $ | 0 | | $ | (461) | | $ | 0 | | |
Actuarial gains3,4 | 24 | | 0 | | 47 | | 0 | | |
| Curtailment gain | (1) | | 0 | | (1) | | 0 | | |
Prior service (benefit) cost3,4 | | Prior service (benefit) cost3,4 | $ | — | | $ | (230) | | |
Actuarial (gains) loss3,4 | | Actuarial (gains) loss3,4 | — | | 23 | | |
| | Total before tax | Total before tax | $ | (208) | | $ | 0 | | $ | (415) | | $ | 0 | | Total before tax | $ | — | | $ | (207) | | |
Tax benefit2 | 48 | | 0 | | 97 | | 0 | | |
Tax (benefit) expense2 | | Tax (benefit) expense2 | — | | 49 | | |
| After-tax | After-tax | $ | (160) | | $ | 0 | | $ | (318) | | $ | 0 | | After-tax | $ | — | | $ | (158) | | |
| Unrealized Loss on Investments4 | Unrealized Loss on Investments4 | $ | 1 | | $ | 0 | | $ | 7 | | $ | 0 | | Unrealized Loss on Investments4 | $ | — | | $ | 6 | | |
Tax benefit2 | 0 | | 0 | | 0 | | 0 | | |
Tax (benefit) expense2 | | Tax (benefit) expense2 | — | | — | | |
| After-tax | After-tax | $ | 1 | | $ | 0 | | $ | 7 | | $ | 0 | | After-tax | $ | — | | $ | 6 | | |
| Total reclassifications for the period, after-tax | Total reclassifications for the period, after-tax | $ | (157) | | $ | 22 | | $ | (303) | | $ | 29 | | Total reclassifications for the period, after-tax | $ | (12) | | $ | (146) | | |
1.Reflected in cost of goods sold.sold in the interim Consolidated Statements of Operations.
2.Reflected in provision for (benefit from) income taxes from continuing operations.operations in the interim Consolidated Statements of Operations.
3.These accumulated other comprehensive income (loss) income components are included in the computation of net periodic benefit credit of the company's pension and other benefit plans. See Note 1514 - Pension Plans and Other Post Employment Benefits, for additional information.
4.Reflected in other income - net.net in the interim Consolidated Statements of Operations.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1514 - PENSION PLANS AND OTHER POST EMPLOYMENT BENEFITS
The following sets forth the components of the company's net periodic benefit (credit) benefit cost for defined benefit pension plans and other post employment benefits:
| | | Three Months Ended
June 30, | Six Months Ended
June 30, | | Three Months Ended
March 31, | |
| (In millions) | (In millions) | 2021 | 2020 | 2021 | 2020 | (In millions) | 2022 | 2021 | |
| Defined Benefit Pension Plans: | Defined Benefit Pension Plans: | | | Defined Benefit Pension Plans: | | | |
| Service cost | Service cost | $ | 5 | | $ | 8 | | $ | 12 | | $ | 13 | | Service cost | $ | 4 | | $ | 7 | | |
| Interest cost | Interest cost | 91 | | 140 | | 182 | | 281 | | Interest cost | 108 | | 91 | | |
| Expected return on plan assets | Expected return on plan assets | (228) | | (249) | | (458) | | (500) | | Expected return on plan assets | (190) | | (230) | | |
| Amortization of unrecognized loss | 13 | | 1 | | 27 | | 2 | | |
| Amortization of prior service benefit | (1) | | (1) | | (1) | | (1) | | |
| Amortization of unrecognized (gain) loss | | Amortization of unrecognized (gain) loss | 1 | | 14 | | |
| Amortization of prior service (benefit) cost | | Amortization of prior service (benefit) cost | (1) | | — | | |
| Settlement loss | Settlement loss | 0 | | 1 | | 1 | | 3 | | Settlement loss | — | | 1 | | |
| Net periodic (credit) benefit cost | $ | (120) | | $ | (100) | | $ | (237) | | $ | (202) | | |
| Net periodic benefit (credit) cost | | Net periodic benefit (credit) cost | $ | (78) | | $ | (117) | | |
| Other Post Employment Benefits: | Other Post Employment Benefits: | | | Other Post Employment Benefits: | | | |
| Service cost | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1 | | |
| | Interest cost | Interest cost | 5 | | 17 | | 11 | | 33 | | Interest cost | 7 | | 6 | | |
| Amortization of unrecognized loss | 24 | | 0 | | 47 | | 0 | | |
| Amortization of prior service benefit | (231) | | 0 | | (461) | | 0 | | |
| Curtailment gain | (1) | | 0 | | (1) | | 0 | | |
| Net periodic (credit) benefit cost | $ | (203) | | $ | 17 | | $ | (404) | | $ | 34 | | |
| Amortization of unrecognized (gain) loss | | Amortization of unrecognized (gain) loss | — | | 23 | | |
| Amortization of prior service (benefit) cost | | Amortization of prior service (benefit) cost | — | | (230) | | |
| | Net periodic benefit (credit) cost | | Net periodic benefit (credit) cost | $ | 7 | | $ | (201) | | |
NOTE 1615 - FINANCIAL INSTRUMENTS
At June 30, 2021,March 31, 2022, December 31, 20202021 and June 30, 2020,March 31, 2021, the company had $1,923$1,414 million, $2,511$3,400 million and $2,073$1,602 million, respectively, of held-to-maturity securities (primarily time deposits and money market funds) classified as cash equivalents in the interim Consolidated Balance Sheets, as these securities had maturities of three months or less at the time of purchase; and $39$290 million, $43$86 million and $60$49 million at June 30, 2021,March 31, 2022, December 31, 20202021 and June 30, 2020,March 31, 2021, respectively, of held-to-maturity securities (primarily time deposits)deposits and foreign government bonds) classified as marketable securities in the interim Consolidated Balance Sheets, as these securities had maturities of more than three months to less than one year at the time of purchase; and $53 million at March 31, 2022 of held-to-maturity securities (primarily foreign government bonds) classified as marketable securities and included in other assets in the interim Consolidated Balance Sheets, as these securities had maturities more than one year at the time of purchase. The company’s investments in held-to-maturity securities are held at amortized cost, which approximates fair value. At DecemberAdditionally, at March 31, 2020,2021, the company had $226$65 million of available-for-sale debtsecurities. The above noted securities classified asare included in cash and cash equivalents, marketable securities, other current assets and other assets in the interim Consolidated Balance Sheet.Sheets. The company’s held-to-maturity securities relating to investments in foreign government bonds at March 31, 2022 and available-for-sale securities at March 31, 2021 are discussed further in the “Debt Securities” section below.
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 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. The company has not designated any 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, and multinational grain exporters. 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
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
material loss is expected. Market and counterparty credit risks associated with these instruments are regularly reported to management.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The notional amounts of the company's derivative instruments were as follows:
| Notional Amounts (In millions) | Notional Amounts (In millions) | June 30, 2021 | December 31, 2020 | June 30, 2020 | Notional Amounts (In millions) | March 31, 2022 | December 31, 2021 | March 31, 2021 |
| Derivatives designated as hedging instruments: | Derivatives designated as hedging instruments: | | | Derivatives designated as hedging instruments: | | |
| Foreign currency contracts | Foreign currency contracts | $ | 767 | | $ | 1,164 | | $ | 721 | | Foreign currency contracts | $ | 1,043 | | $ | 1,252 | | $ | 1,030 | |
| Commodity contracts | Commodity contracts | $ | 143 | | $ | 383 | | $ | 165 | | Commodity contracts | $ | 531 | | $ | 845 | | $ | 239 | |
| Derivatives not designated as hedging instruments: | Derivatives not designated as hedging instruments: | | | Derivatives not designated as hedging instruments: | | |
| Foreign currency contracts | Foreign currency contracts | $ | 878 | | $ | 647 | | $ | 770 | | Foreign currency contracts | $ | 1,106 | | $ | 103 | | $ | 715 | |
| Commodity contracts | Commodity contracts | $ | 5 | | $ | 0 | | $ | 19 | | Commodity contracts | $ | 81 | | $ | 4 | | $ | 154 | |
Foreign Currency Risk
The company's objective in managing exposure to foreign currency fluctuations is to reduce earnings and cash flow volatility associated with foreign currency rate changes and to mitigate the exposure of certain investments in foreign subsidiaries against changes in the Euro/USD exchange rate. Accordingly, the company enters into various contracts that change in value as foreign exchange rates change to protect the value of its existing foreign currency-denominated assets, liabilities, commitments, investments and cash flows.
The company uses foreign exchange contracts to offset its net exposures, by currency, related to the foreign currency denominated monetary assets and liabilities of its operations. The primary business objective of this hedging program is to maintain an approximately balanced position in foreign currencies so that exchange gains and losses resulting from exchange rate changes, after related tax effects, are minimized. The company also uses foreign currency exchange contracts to offset a portion of the company’s exposure to certain forecasted transactions as well as the translation of foreign currency-denominated earnings. The company also uses commodity contracts to offset risks associated with foreign currency devaluation in certain countries.
Commodity Price Risk
Commodity price risk management programs serve to reduce exposure to price fluctuations on purchases of inventory such as corn and soybeans. The company enters into over-the-counter and exchange-traded derivative commodity instruments to hedge the commodity price risk associated with agricultural commodity exposures.
Derivatives Designated as Cash Flow Hedges
Commodity Contracts
The company enters into over-the-counter and exchange-traded derivative commodity instruments, including options, forwards, futures and swaps, to hedge the commodity price risk associated with agriculture commodity exposures.
While each risk management program has a different time maturity period, most programs currently do not extend beyond the next two years. Cash flow hedge results are reclassified into earnings during the same period in which the related exposure impacts earnings. Reclassifications are made sooner if it appears that a forecasted transaction is probable of not occurring.
The following table summarizes the after-tax effect of commodity contract cash flow hedges on accumulated other comprehensive loss:income (loss):
| | | Three Months Ended
June 30, | Six Months Ended
June 30, | | Three Months Ended
March 31, | |
| (In millions) | (In millions) | 2021 | 2020 | 2021 | 2020 | (In millions) | 2022 | 2021 | |
| Beginning balance | Beginning balance | $ | 10 | | $ | (15) | | $ | (16) | | $ | 2 | | Beginning balance | $ | 47 | | $ | (16) | | |
| Additions and revaluations of derivatives designated as cash flow hedges | Additions and revaluations of derivatives designated as cash flow hedges | 73 | | (22) | | 103 | | (44) | | Additions and revaluations of derivatives designated as cash flow hedges | 63 | | 30 | | |
| Clearance of hedge results to earnings | Clearance of hedge results to earnings | (10) | | 21 | | (14) | | 26 | | Clearance of hedge results to earnings | (14) | | (4) | | |
| Ending balance | Ending balance | $ | 73 | | $ | (16) | | $ | 73 | | $ | (16) | | Ending balance | $ | 96 | | $ | 10 | | |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
At June 30, 2021,March 31, 2022, an after-tax net gain of $63$58 million is expected to be reclassified from accumulated other comprehensive lossincome (loss) into earnings over the next twelve months.
Foreign Currency Contracts
The company enters into forward contracts to hedge the foreign currency risk associated with forecasted transactions within certain foreign subsidiaries.
While each risk management program has a different time maturity period, most programs currently do not extend beyond the next two years. Cash flow hedge results are reclassified into earnings during the same period in which the related exposure impacts earnings. Reclassifications are made sooner if it appears that a forecasted transaction is probable of not occurring.
The following table summarizes the after-tax effect of foreign currency cash flow hedges on accumulated other comprehensive loss:income (loss):
| | | Three Months Ended
June 30, | Six Months Ended
June 30, | | Three Months Ended
March 31, | |
| (In millions) | (In millions) | 2021 | 2020 | 2021 | 2020 | (In millions) | 2022 | 2021 | |
| Beginning balance | Beginning balance | $ | 6 | | $ | 16 | | $ | (17) | | $ | 0 | | Beginning balance | $ | 31 | | $ | (17) | | |
| Additions and revaluations of derivatives designated as cash flow hedges | Additions and revaluations of derivatives designated as cash flow hedges | (30) | | 3 | | (5) | | 19 | | Additions and revaluations of derivatives designated as cash flow hedges | (82) | | 25 | | |
| Clearance of hedge results to earnings | Clearance of hedge results to earnings | 3 | | 0 | | 1 | | 0 | | Clearance of hedge results to earnings | 2 | | (2) | | |
| Ending balance | Ending balance | $ | (21) | | $ | 19 | | $ | (21) | | $ | 19 | | Ending balance | $ | (49) | | $ | 6 | | |
At June 30, 2021,March 31, 2022, an after-tax net loss of $21$49 million is expected to be reclassified from accumulated other comprehensive lossincome (loss) into earnings over the next twelve months.
Derivatives Designated as Net Investment Hedges
Foreign Currency Contracts
The company has designated €450 million of forward contracts to exchange EUR as net investment hedges. The purpose of these forward contracts is to mitigate FX exposure related to a portion of the company’s Euro net investments in certain foreign subsidiaries against changes in Euro/USD exchange rates. These hedges will expire and be settled in 2023, unless terminated early at the discretion of the company.
The company elected to apply the spot method in testing for effectiveness of the hedging relationship.
Derivatives not Designated in Hedging Relationships
Foreign Currency Contracts
The company uses foreign exchange contracts to reduce its net exposure, by currency, related to foreign currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. The netting of such exposures precludes the use of hedge accounting; however, the required revaluation of the forward contracts and the associated foreign currency-denominated monetary assets and liabilities intends to achieve a minimal earnings impact, after taxes. The company also uses foreign currency exchange contracts to offset a portion of the company’s exposure to the translation of certain foreign currency-denominated earnings so that gains and losses on the contracts offset changes in the USD value of the related foreign currency-denominated earnings over the relevant aggregate period.
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 corn and soybeans. The company uses forward agreements, with durations less than one year, to buy and sell USD priced commodities in order to reduce its exposure to currency devaluation for a portion of its local currency cash balances. Counterparties to the forward sales agreements are multinational grain exporters and subject to the company’s financial risk management procedures.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 Consolidated Balance Sheets. The presentation of the company's derivative assets and liabilities is as follows:
| | | June 30, 2021 | | March 31, 2022 |
| (In millions) | (In millions) | Balance Sheet Location | Gross | Counterparty and Cash Collateral Netting1 | Net Amounts Included in the interim Consolidated Balance Sheet | (In millions) | Balance Sheet Location | Gross | Counterparty and Cash Collateral Netting1 | Net Amounts Included in the interim Consolidated Balance Sheet |
| Asset derivatives: | Asset derivatives: | | | | Asset derivatives: | | | |
| Derivatives designated as hedging instruments: | Derivatives designated as hedging instruments: | | | Derivatives designated as hedging instruments: | | |
| Foreign currency contracts | Foreign currency contracts | Other current assets | $ | 1 | | $ | 0 | | $ | 1 | | Foreign currency contracts | Other current assets | $ | 16 | | $ | — | | $ | 16 | |
| Commodity contracts | | Commodity contracts | Other current assets | 5 | | — | | 5 | |
| Derivatives not designated as hedging instruments: | Derivatives not designated as hedging instruments: | | | | | Derivatives not designated as hedging instruments: | | | | |
| Foreign currency contracts | Foreign currency contracts | Other current assets | 36 | (20) | | 16 | | Foreign currency contracts | Other current assets | 21 | (28) | | (7) | |
| | Commodity contracts | | Commodity contracts | Other current assets | 3 | | — | | 3 | |
| | Total asset derivatives | Total asset derivatives | | $ | 37 | | $ | (20) | | $ | 17 | | Total asset derivatives | | $ | 45 | | $ | (28) | | $ | 17 | |
| | Liability derivatives: | Liability derivatives: | | | | | Liability derivatives: | | | | |
| Derivatives designated as hedging instruments: | Derivatives designated as hedging instruments: | | | Derivatives designated as hedging instruments: | | |
| Foreign currency contracts | Foreign currency contracts | Accrued and other current liabilities | $ | 21 | | $ | 0 | | $ | 21 | | Foreign currency contracts | Accrued and other current liabilities | $ | 80 | | $ | — | | $ | 80 | |
| Derivatives not designated as hedging instruments: | Derivatives not designated as hedging instruments: | | | | | Derivatives not designated as hedging instruments: | | | | |
| Foreign currency contracts | Foreign currency contracts | Accrued and other current liabilities | 72 | (20) | | 52 | | Foreign currency contracts | Accrued and other current liabilities | 114 | (28) | | 86 | |
| | Commodity contracts | | Commodity contracts | Accrued and other current liabilities | 3 | | — | | 3 | |
| Total liability derivatives | Total liability derivatives | | $ | 93 | | $ | (20) | | $ | 73 | | Total liability derivatives | | $ | 197 | | $ | (28) | | $ | 169 | |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| | | December 31, 2020 | | December 31, 2021 |
| (In millions) | (In millions) | Balance Sheet Location | Gross | Counterparty and Cash Collateral Netting1 | Net Amounts Included in the Consolidated Balance Sheet | (In millions) | Balance Sheet Location | Gross | Counterparty and Cash Collateral Netting1 | Net Amounts Included in the Consolidated Balance Sheet |
| Asset derivatives: | Asset derivatives: | | | | Asset derivatives: | | | |
| Derivatives designated as hedging instruments: | Derivatives designated as hedging instruments: | | | Derivatives designated as hedging instruments: | | |
| Foreign currency contracts | Foreign currency contracts | Other current assets | $ | 15 | | $ | 0 | | $ | 15 | | Foreign currency contracts | Other current assets | $ | 37 | | $ | — | | $ | 37 | |
| Derivatives not designated as hedging instruments: | Derivatives not designated as hedging instruments: | | | | | Derivatives not designated as hedging instruments: | | | | |
| Foreign currency contracts | Foreign currency contracts | Other current assets | 40 | | (40) | | 0 | | Foreign currency contracts | Other current assets | 31 | | (20) | | 11 | |
| Commodity contracts | | Commodity contracts | Other current assets | 3 | — | | 3 | |
| Total asset derivatives | Total asset derivatives | | $ | 55 | | $ | (40) | | $ | 15 | | Total asset derivatives | | $ | 71 | | $ | (20) | | $ | 51 | |
| | Liability derivatives: | Liability derivatives: | | | | | Liability derivatives: | | | | |
| Derivatives designated as hedging instruments: | Derivatives designated as hedging instruments: | | | Derivatives designated as hedging instruments: | | |
| Foreign currency contracts | Foreign currency contracts | Accrued and other current liabilities | $ | 38 | | $ | 0 | | $ | 38 | | Foreign currency contracts | Accrued and other current liabilities | $ | 1 | | $ | — | | $ | 1 | |
| Derivatives not designated as hedging instruments: | Derivatives not designated as hedging instruments: | | | | | Derivatives not designated as hedging instruments: | | | | |
| Foreign currency contracts | Foreign currency contracts | Accrued and other current liabilities | 97 | | (40) | | 57 | | Foreign currency contracts | Accrued and other current liabilities | 23 | | (20) | | 3 | |
| Commodity contracts | | Commodity contracts | Accrued and other current liabilities | 2 | | — | | 2 | |
| Total liability derivatives | Total liability derivatives | | $ | 135 | | $ | (40) | | $ | 95 | | Total liability derivatives | | $ | 26 | | $ | (20) | | $ | 6 | |
| | | June 30, 2020 | | March 31, 2021 |
| (In millions) | (In millions) | Balance Sheet Location | Gross | Counterparty and Cash Collateral Netting1 | Net Amounts Included in the interim Consolidated Balance Sheet | (In millions) | Balance Sheet Location | Gross | Counterparty and Cash Collateral Netting1 | Net Amounts Included in the interim Consolidated Balance Sheet |
| Asset derivatives: | Asset derivatives: | | | | Asset derivatives: | | | |
| Derivatives designated as hedging instruments: | Derivatives designated as hedging instruments: | | | Derivatives designated as hedging instruments: | | |
| Foreign currency contracts | Foreign currency contracts | Other current assets | $ | 19 | | $ | 0 | | $ | 19 | | Foreign currency contracts | Other current assets | $ | 38 | | $ | — | | $ | 38 | |
| Derivatives not designated as hedging instruments: | Derivatives not designated as hedging instruments: | | | | | Derivatives not designated as hedging instruments: | | | | |
| Foreign currency contracts | Foreign currency contracts | Other current assets | 101 | | (57) | | 44 | | Foreign currency contracts | Other current assets | 52 | | (32) | | 20 | |
| | Total asset derivatives | Total asset derivatives | | $ | 120 | | $ | (57) | | $ | 63 | | Total asset derivatives | | $ | 90 | | $ | (32) | | $ | 58 | |
| | Liability derivatives: | Liability derivatives: | | | | | Liability derivatives: | | | | |
| Derivatives designated as hedging instruments: | | Derivatives designated as hedging instruments: | | | | |
| Foreign currency contracts | | Foreign currency contracts | Accrued and other current liabilities | $ | 16 | | $ | — | | $ | 16 | |
| Derivatives not designated as hedging instruments: | Derivatives not designated as hedging instruments: | | | | | Derivatives not designated as hedging instruments: | | |
| Foreign currency contracts | Foreign currency contracts | Accrued and other current liabilities | $ | 65 | | $ | (56) | | $ | 9 | | Foreign currency contracts | Accrued and other current liabilities | 46 | | (30) | | 16 | |
| | Total liability derivatives | Total liability derivatives | | $ | 65 | | $ | (56) | | $ | 9 | | Total liability derivatives | | $ | 62 | | $ | (30) | | $ | 32 | |
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.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Effect of Derivative Instruments
| | | Amount of Gain (Loss) Recognized in OCI - Pre-Tax1 | | Amount of Gain (Loss) Recognized in OCI - Pre-Tax1 | |
| | Three Months Ended
June 30, | Six Months Ended
June 30, | | Three Months Ended March 31, | |
| (In millions) | (In millions) | 2021 | 2020 | 2021 | 2020 | (In millions) | 2022 | 2021 | |
| Derivatives designated as hedging instruments: | Derivatives designated as hedging instruments: | | | Derivatives designated as hedging instruments: | | | |
| Net investment hedges: | Net investment hedges: | | | Net investment hedges: | | | |
| Foreign currency contracts | Foreign currency contracts | $ | (7) | | $ | (5) | | $ | 14 | | $ | 4 | | Foreign currency contracts | $ | 7 | | $ | 21 | | |
| Cash flow hedges: | Cash flow hedges: | | | Cash flow hedges: | | | |
| Foreign currency contracts | Foreign currency contracts | (37) | | 4 | | (6) | | 23 | | Foreign currency contracts | (102) | | 31 | | |
| Commodity contracts | Commodity contracts | 92 | | (26) | | 128 | | (60) | | Commodity contracts | 86 | | 36 | | |
| Total derivatives designated as hedging instruments | Total derivatives designated as hedging instruments | $ | 48 | | $ | (27) | | $ | 136 | | $ | (33) | | Total derivatives designated as hedging instruments | $ | (9) | | $ | 88 | | |
|
1.OCI is defined as other comprehensive income (loss).
| | | Amount of (Loss) Gain Recognized in Income - Pre-Tax1 | | Amount of Gain (Loss) Recognized in Income - Pre-Tax1 | |
| | Three Months Ended
June 30, | Six Months Ended
June 30, | | Three Months Ended March 31, | |
| (In millions) | (In millions) | 2021 | 2020 | 2021 | 2020 | (In millions) | 2022 | 2021 | |
| Derivatives designated as hedging instruments: | Derivatives designated as hedging instruments: | | | Derivatives designated as hedging instruments: | | | |
| Cash flow hedges: | Cash flow hedges: | | | Cash flow hedges: | | | |
Foreign currency contracts2 | Foreign currency contracts2 | $ | (2) | | $ | 0 | | $ | (1) | | $ | 0 | | Foreign currency contracts2 | $ | (3) | | $ | 1 | | |
Commodity contracts2 | Commodity contracts2 | 12 | | (28) | | 16 | | (35) | | Commodity contracts2 | 18 | | 4 | | |
| Total derivatives designated as hedging instruments | Total derivatives designated as hedging instruments | $ | 10 | | $ | (28) | | $ | 15 | | $ | (35) | | Total derivatives designated as hedging instruments | $ | 15 | | $ | 5 | | |
| Derivatives not designated as hedging instruments: | Derivatives not designated as hedging instruments: | | | Derivatives not designated as hedging instruments: | | | |
Foreign currency contracts3 | Foreign currency contracts3 | $ | (50) | | $ | 14 | | $ | (34) | | $ | 179 | | Foreign currency contracts3 | $ | (53) | | $ | 16 | | |
Foreign currency contracts2 | Foreign currency contracts2 | (30) | | 17 | | (28) | | 17 | | Foreign currency contracts2 | (36) | | 2 | | |
Commodity contracts2 | Commodity contracts2 | (5) | | 1 | | (17) | | 10 | | Commodity contracts2 | (22) | | (12) | | |
| Total derivatives not designated as hedging instruments | Total derivatives not designated as hedging instruments | (85) | | 32 | | (79) | | 206 | | Total derivatives not designated as hedging instruments | (111) | | 6 | | |
| Total derivatives | Total derivatives | $ | (75) | | $ | 4 | | $ | (64) | | $ | 171 | | Total derivatives | $ | (96) | | $ | 11 | | |
1.For cash flow hedges, this represents the portion of the gain (loss) reclassified from accumulated OCI into income during the period.
2.Recorded in cost of goods sold.sold in the interim Consolidated Statements of Operations.
3.Gain recognized in other income (expense) - net was partially offset by the related gain on the foreign currency-denominated monetary assets and liabilities of the company's operations. See Note 65 - Supplementary Information, to the interim Consolidated Financial Statements, for additional information.
Debt Securities
The company’s debt securities include foreign government bonds classified as held-to-maturity securities at March 31, 2022 and U.S. treasuries classified as available-for-sale securities at March 31, 2021. The company’s investments in held-to-maturity securities are held at amortized cost, which approximates fair value, and are held by certain foreign subsidiaries in which the USD is the functional currency. The estimated fair value of the available-for-sale securities at DecemberMarch 31, 20202021 was determined using Level 1 inputs within the fair value hierarchy. Level 1 measurements were based on quoted market prices in active markets for identical assets and liabilities. The available-for-sale securities at DecemberMarch 31, 2020 are2021 were held by certain foreign subsidiaries in which the USD is not the functional currency. The fluctuations in foreign exchange are recorded in accumulated other comprehensive lossincome (loss) within the interim Consolidated Statements of Equity. These fluctuations are subsequently reclassified from accumulated other comprehensive lossincome (loss) to earnings in the period in which the marketable securities are sold and the gains and losses on these securities offset a portion of the foreign exchange fluctuations in earnings for the company.
The following table provides the investing results from available-for-sale securities for the three and six months ended June 30,March 31, 2021:
| | | | | | | | | | | | | | | | | |
| Investing Results | Three Months Ended
June 30, | Six Months Ended
June 30, |
| (In millions) | 2021 | 2021 |
| Proceeds from sales of available-for-sale securities | $ | 65 | | $ | 226 | |
| | |
| Gross realized losses | (1) | | (7) | |
| Total | $ | 64 | | $ | 219 | |
| | | | | | | | | | | | | | | |
| Investing Results | | Three Months Ended March 31, |
| (In millions) | | 2021 |
| Proceeds from sales of available-for-sale securities | | $ | 161 | |
| | |
| Gross realized losses | | $ | (6) | |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table summarizes the contractual maturities of the company's investments in debt securities at March 31, 2022:
| | | | | | | | |
Contractual Maturities of Debt Securitites1 | | |
| (In millions) | Amortized Cost | Fair Value |
| Within one year | $ | 60 | | $ | 60 | |
| One to five years | $ | 53 | | $ | 53 | |
1.The company's debt securities securities at March 31, 2022 consists of foreign government bonds, which are classified as held-to-maturity.
NOTE 1716 - FAIR VALUE MEASUREMENTS
The following tables summarize the basis used to measure certain assets and liabilities at fair value on a recurring basis:
| | | | | | | |
June 30, 2021 | | Significant Other Observable Inputs (Level 2) | |
(In millions) |
Assets at fair value: | | | |
| | | |
Marketable securities | | $ | 39 | | |
Derivatives relating to: | | | | | | | | | | | March 31, 2022 | | Significant Other Observable Inputs | | (In millions) | Level 1 | Level 2 | | Assets at fair value: | | | | | | | | | Marketable securities | | $ | — | | $ | 290 | | Derivatives relating to:1 | | | | | Foreign currency | | — | | 37 | | | Commodity contracts | | — | | 8 | | Equity securities2 | | 29 | | — | | | Total assets at fair value | | $ | 29 | | $ | 335 | | | Liabilities at fair value: | | | | Derivatives relating to:1 | | | | | Foreign currency | | — | | 194 | | | Commodity contracts | | — | | 3 | | | | | | | Total liabilities at fair value | | $ | — | | $ | 197 | |
| | | | | | | | | | | | December 31, 2021 | | Significant Other Observable Inputs | | | | (In millions) | Level 1 | Level 2 | | Assets at fair value: | | | | | | | | | | | Marketable securities | | $ | — | | $ | 86 | | | | | | | | | | | | | Derivatives relating to:1 | | | | | | Foreign currency | | — | | 68 | | | Equity securities2 | | 48 | | — | | | | Total assets at fair value | | $ | 48 | | $ | 154 | | | | Liabilities at fair value: | | | | | Derivatives relating to:1 | | | | | | Foreign currency | | — | | 24 | | | | Total liabilities at fair value | | $ | — | | $ | 24 | | |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) | | | | | | | | | | March 31, 2021 | Significant Other Observable Inputs | | | (In millions) | Level 1 | Level 2 | | Assets at fair value: | | | | | | | Marketable securities | $ | — | | $ | 49 | | | Debt Securities: | | | U.S. treasuries3 | 65 | | — | | Derivatives relating to:1 | | | | Foreign currency | — | | 90 | | | | | | Total assets at fair value | $ | 65 | | $ | 139 | | | Liabilities at fair value: | | | Derivatives relating to:1 | | | | Foreign currency | — | | 62 | | | | | | Total liabilities at fair value | $ | — | | $ | 62 | |
1.See Note 15 - Financial Instruments for the classification of derivatives in the interim Consolidated Balance Sheets. 2.The company's equity securities are included in other assets in the interim Consolidated Balance Sheets. 3.2 | | | |
Foreign currency | | 37 | | |
| | | |
Total assets at fair value | | $ | 76 | | |
Liabilities at fair value: | | | |
Derivatives relating to:2
| | | |
Foreign currency | | 93 | | |
| | | |
Total liabilities at fair value | | $ | 93 | | |
| | | | | | | | | | |
| December 31, 2020 | | Significant Other Observable Inputs | |
|
| (In millions) | Level 1 | Level 2 |
| Assets at fair value: | | | | |
| | | | |
| Marketable securities | | $ | — | | $ | 43 | | |
| Debt securities: | | | | |
U.S. treasuries1 | | 226 | — | | |
Derivatives relating to:2 | | | | |
| Foreign currency | | — | | 55 | | |
| Total assets at fair value | | $ | 226 | | $ | 98 | | |
| Liabilities at fair value: | | | | |
Derivatives relating to:2 | | | | |
| Foreign currency | | — | | 135 | | |
| Total liabilities at fair value | | $ | — | | $ | 135 | | |
| | | | | | | |
June 30, 2020 | | Significant Other Observable Inputs (Level 2) | |
(In millions) |
Assets at fair value: | | | |
| | | |
Marketable securities | | $ | 60 | | |
Derivatives relating to:2
| | | |
| | | |
Foreign currency | | 120 | | |
Total assets at fair value | | $ | 180 | | |
Liabilities at fair value: | | | |
Derivatives relating to:2
| | | |
Foreign currency | | 65 | | |
Total liabilities at fair value | | $ | 65 | | |
1. The company's investments in debt securities, which are available-for-sale, are included in "marketable securities" in the interim Consolidated Balance Sheets.
2. See Note 16 - Financial Instruments for the classification of derivatives in the interim Consolidated Balance Sheets.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1817 - SEGMENT INFORMATION
Corteva’s reportable segments reflects the manner in which its chief operating decision maker ("CODM") allocates resources and assesses performance, which is at the operating segment level (seed and crop protection). For purposes of allocating resources to the segments and assessing segment performance, segment operating EBITDA is the primary measure used by Corteva’s CODM. The company defines segment operating EBITDA as earnings (loss) (i.e., income (loss) from continuing operations before income taxes) before interest, depreciation, amortization, corporate expenses, non-operating (benefits) costs, - net, foreign exchange gains (losses), and net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting, excluding the impact of significant items. Effective January 1, 2021, on a prospective basis, the company excludes from segment operating EBITDA net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting. Non-operating (benefits) costs - net consists of non-operating pension and other post-employment benefit (OPEB) costs, tax indemnification adjustments and environmental remediation and legal costs associated with legacy EID businesses and sites. Tax indemnification adjustments relate to changes in indemnification balances, as a result of the application of the terms of the Tax Matters Agreement, between Corteva and Dow and/or DuPont that are recorded by the company as pre-tax income or expense.
| | | | | | | | | | | |
As of and for the Three Months Ended June 30, (In millions) | Seed | Crop Protection | Total |
| 2021 | | | |
| Net sales | $ | 3,780 | | $ | 1,847 | | $ | 5,627 | |
| Segment operating EBITDA | $ | 1,123 | | $ | 370 | | $ | 1,493 | |
Segment assets1 | $ | 23,804 | | $ | 12,996 | | $ | 36,800 | |
| | | |
| 2020 | | | |
| Net sales | $ | 3,538 | | $ | 1,653 | | $ | 5,191 | |
| Segment operating EBITDA | $ | 956 | | $ | 309 | | $ | 1,265 | |
Segment assets1 | $ | 24,356 | | $ | 13,034 | | $ | 37,390 | |
1. Segment assets at December 31, 2020 were $23,751 million and $13,099 million for Seed and Crop Protection, respectively.
| | | | | | | | | | | |
For the Six Months Ended June 30, (In millions) | Seed | Crop Protection | Total |
| 2021 | | | |
| Net sales | $ | 6,272 | | $ | 3,533 | | $ | 9,805 | |
| Segment operating EBITDA | $ | 1,740 | | $ | 691 | | $ | 2,431 | |
| | | |
| 2020 | | | |
| Net sales | $ | 5,993 | | $ | 3,154 | | $ | 9,147 | |
| Segment operating EBITDA | $ | 1,537 | | $ | 547 | | $ | 2,084 | |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Reconciliation to interim Consolidated Financial Statements
| | | | | | | | | | | | | | |
Income from continuing operations after income taxes to segment operating EBITDA
(In millions) | Three Months Ended
June 30, | Six Months Ended
June 30, |
| 2021 | 2020 | 2021 | 2020 |
| Income from continuing operations after income taxes | $ | 1,018 | | $ | 766 | | $ | 1,631 | | $ | 1,047 | |
| Provision for income taxes on continuing operations | 284 | | 78 | | 462 | | 205 | |
| Income from continuing operations before income taxes | 1,302 | | 844 | | 2,093 | | 1,252 | |
| Depreciation and amortization | 313 | | 300 | | 617 | | 583 | |
| Interest income | (18) | | (9) | | (39) | | (27) | |
| Interest expense | 7 | | 14 | | 14 | | 24 | |
| Exchange losses (gains) - net | 14 | | (1) | | 49 | | 60 | |
| Non-operating benefits - net | (315) | | (91) | | (626) | | (164) | |
| | | | |
Mark-to-market losses on certain foreign currency contracts not designated as hedges1 | 23 | | | 22 | | |
| Significant items | 135 | | 179 | | 235 | | 302 | |
| | | | |
| Corporate expenses | 32 | | 29 | | 66 | | 54 | |
| Segment operating EBITDA | $ | 1,493 | | $ | 1,265 | | $ | 2,431 | | $ | 2,084 | |
1.Effective January 1, 2021, on a prospective basis, the company excludes net Net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting. Foraccounting represents the three and six months ended June 30, 2020,non-cash net gain (loss) from changes in fair value of certain undesignated foreign currency derivative contracts. Upon settlement, which is within the unrealized mark-to-market gain was $27 million. Refer to page 56 for further discussionsame calendar year of execution of the company’s Non-GAAP financial measures.contract, the realized gain (loss) from the changes in fair value of the non-qualified foreign currency derivative contracts will be reported in the respective segment results to reflect the economic effects of the foreign currency derivative contracts without the resulting unrealized mark to fair value volatility.
| | | | | | | | | | | |
Segment assets to total assets (in millions) | June 30, 2021 | December 31, 2020 | June 30, 2020 |
| Total segment assets | $ | 36,800 | | $ | 36,850 | | $ | 37,390 | |
| Corporate assets | 4,696 | | 5,799 | | 4,790 | |
| Total assets | $ | 41,496 | | $ | 42,649 | | $ | 42,180 | |
| | | | | | | | | | | |
As of and for the Three Months Ended March 31, (In millions) | Seed | Crop Protection | Total |
| 2022 | | | |
| Net sales | $ | 2,524 | | $ | 2,077 | | $ | 4,601 | |
| Segment operating EBITDA | $ | 569 | | $ | 491 | | $ | 1,060 | |
Segment assets1 | $ | 24,146 | | $ | 14,144 | | $ | 38,290 | |
| | | |
| 2021 | | | |
| Net sales | $ | 2,492 | | $ | 1,686 | | $ | 4,178 | |
| Segment operating EBITDA | $ | 617 | | $ | 321 | | $ | 938 | |
Segment assets1 | $ | 24,799 | | $ | 13,349 | | $ | 38,148 | |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Reconciliation to interim Consolidated Financial Statements
| | | | | | | | | | |
Income (loss) from continuing operations after income taxes to segment operating EBITDA
(In millions) | Three Months Ended
March 31, | |
| 2022 | 2021 | | |
| Income (loss) from continuing operations after income taxes | $ | 577 | | $ | 613 | | | |
| Provision for (benefit from) income taxes on continuing operations | 121 | | 178 | | | |
| Income (loss) from continuing operations before income taxes | 698 | | 791 | | | |
| Depreciation and amortization | 307 | | 304 | | | |
| Interest income | (15) | | (21) | | | |
| Interest expense | 9 | | 7 | | | |
| Exchange (gains) losses | 47 | | 35 | | | |
| Non-operating (benefits) costs | (65) | | (311) | | | |
| | | | |
| Mark-to-market (gains) losses on certain foreign currency contracts not designated as hedges | 36 | | (1) | | | |
| Significant items (benefit) charge | 22 | | 100 | | | |
| | | | |
| Corporate expenses | 21 | | 34 | | | |
| Segment operating EBITDA | $ | 1,060 | | $ | 938 | | | |
| | | | | | | | | | | |
Segment assets to total assets (in millions) | March 31, 2022 | December 31, 2021 | March 31, 2021 |
| Total segment assets | $ | 38,290 | | $ | 35,698 | | $ | 38,148 | |
| Corporate assets | 4,343 | | 6,646 | | 4,401 | |
| Total assets | $ | 42,633 | | $ | 42,344 | | $ | 42,549 | |
Significant Pre-tax (Charges) Benefits Not Included in Segment Operating EBITDA
The three and six months ended June 30,March 31, 2022 and 2021, and 2020, respectively, included the following significant pre-tax (charges) benefits which are excluded from segment operating EBITDA:
| | (In millions) | (In millions) | Seed | Crop Protection | Corporate | Total | (In millions) | Seed | Crop Protection | Corporate | Total |
| For the Three Months Ended June 30, 2021 | | | |
| For the Three Months Ended March 31, 2022 | | For the Three Months Ended March 31, 2022 | | |
Restructuring and Asset Related Charges - Net 1 | Restructuring and Asset Related Charges - Net 1 | $ | (115) | | $ | (11) | | $ | (9) | | $ | (135) | | Restructuring and Asset Related Charges - Net 1 | $ | (5) | | $ | 2 | | $ | (2) | | $ | (5) | |
| Estimated settlement expense2 | | Estimated settlement expense2 | — | | (17) | | — | | (17) | |
| Total | Total | $ | (115) | | $ | (11) | | $ | (9) | | $ | (135) | | Total | $ | (5) | | $ | (15) | | $ | (2) | | $ | (22) | |
| | | | | | | | | | | | | | |
| (In millions) | Seed | Crop Protection | Corporate | Total |
| For the Three Months Ended June 30, 2020 | | | | |
Restructuring and Asset Related Charges - Net 1 | $ | (135) | | $ | (40) | | $ | (4) | | $ | (179) | |
| | | | |
| Total | $ | (135) | | $ | (40) | | $ | (4) | | $ | (179) | |
| | | | | | | | | | | | | | |
| (In millions) | Seed | Crop Protection | Corporate | Total |
| For the Six Months Ended June 30, 2021 | | | | |
Restructuring and Asset Related Charges - Net 1 | $ | (136) | | $ | (43) | | $ | (56) | | $ | (235) | |
| | | | |
| Total | $ | (136) | | $ | (43) | | $ | (56) | | $ | (235) | |
| | (In millions) | (In millions) | Seed | Crop Protection | Corporate | Total | (In millions) | Seed | Crop Protection | Corporate | Total |
| For the Six Months Ended June 30, 2020 | | | |
| For the Three Months Ended March 31, 2021 | | For the Three Months Ended March 31, 2021 | | |
Restructuring and Asset Related Charges - Net 1 | Restructuring and Asset Related Charges - Net 1 | $ | (145) | | $ | (58) | | $ | (46) | | $ | (249) | | Restructuring and Asset Related Charges - Net 1 | $ | (21) | | $ | (32) | | $ | (47) | | $ | (100) | |
Loss on Divestiture2 | — | | (53) | | — | | (53) | | |
| | Total | Total | $ | (145) | | $ | (111) | | $ | (46) | | $ | (302) | | Total | $ | (21) | | $ | (32) | | $ | (47) | | $ | (100) | |
1.Includes Board approved restructuring plans and asset related charges as well as accelerated prepaid amortization expense. See Note 54 - Restructuring and Asset Related Charges - Net, to the interim Consolidated Financial Statements for additional information.
2.Includes a loss recorded in other income - netConsists of estimated Lorsban® related to the sale of the La Porte site.reserves.
.
NOTE 18 - SUBSEQUENT EVENTS
In response to Russia’s military conflict with Ukraine, in April 2022 the company announced its decision to withdraw from Russia and, having already paused new sales in the country, is initiating a plan to stop production and business activities. Russia contributes approximately 2 percent of the company's annual net sales. The company expects charges in the range of $25 million to $75 million in connection with the announcement.
Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statements About Forward-Looking Statements
This report contains certain estimates and forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, which are intended to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and may be identified by their use of words like “plans,” “expects,” “will,” “anticipates,” “believes,” “intends,” “projects,” “estimates,” “outlook,” or other words of similar meaning. All statements that address expectations or projections about the future, including statements about Corteva’s financial results or outlook; strategy for growth,growth; product development,development; regulatory approval,approvals; market position, liquidity,position; capital allocation strategy; liquidity; environmental, social and governance (“ESG”) targets and initiatives; the anticipated benefits of recent acquisitions, timing of anticipated benefits from restructuring actions, or cost savings initiatives; and the outcome of contingencies, such as litigation and environmental matters, expenditures, and financial results, as well as its expectations related to its separation of Corteva from DowDuPont and the agreements related thereto, are forward-looking statements.
Forward-looking statements and other estimates are based on certain assumptions and expectations of future events which may not be accurate or realized. Forward-looking statements and other estimates also involve risks and uncertainties, many of which are beyond Corteva’s control. While the list of factors presented below is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. 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 disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on Corteva’s business, results of operations and financial condition. Some of the important factors that could cause Corteva’s actual results to differ materially from those projected in any such forward-looking statements include: (i) failure to successfully develop and commercialize Corteva’s pipeline; (ii) failure to obtain or maintain the necessary regulatory approvals for some of Corteva’s products; (ii) failure to successfully develop and commercialize Corteva’s pipeline; (iii) effect of the degree of public understanding and acceptance or perceived public acceptance of Corteva’s biotechnology and other agricultural products; (iv) effect of changes in agricultural and related policies of governments and international organizations; (v) effect of competition and consolidation in Corteva’s industry; (vi) effect of competition from manufacturers of generic products; (vii) costs of complying with evolving regulatory requirements and the effect of actual or alleged violations of environmental laws or permit requirements; (viii) effect of climate change and unpredictable seasonal and weather factors; (ix) risks relatedfailure to oilcomply with competition and commodity markets;antitrust laws; (x) competitor’s establishment of an intermediary platform for distribution of Corteva's products; (xi) impact of Corteva's dependence on third parties with respect to certain of its raw materials or licenses and commercialization; (xii) effect of industrial espionage and other disruptions to Corteva’s supply chain, information technology or network systems; (xiii) effect of volatility in Corteva’s input costs; (xiv) failure to realize the anticipated benefits of the internal reorganizations taken by DowDuPont in connection with the spin-off of Corteva and other cost savings initiatives; (xv) failure to raise capital through the capital markets or short-term borrowings on terms acceptable to Corteva; (xvi)(xv) failure of Corteva’s customers to pay their debts to Corteva, including customer financing programs; (xvii)(xvi) increases in pension and other post-employment benefit plan funding obligations; (xviii)(xvii) risks related to environmental litigation and the indemnification obligations of legacy EID liabilities in connection with the separation of Corteva; (xix) effect of compliance with laws and requirements and adverse judgments on litigation; (xx)(xviii) risks related to Corteva’s global operations; (xxi)(xix) failure to effectively manage acquisitions, divestitures, alliances, restructurings, cost savings initiatives, and other portfolio actions; (xxii)(xx) capital markets sentiment towards ESG matters; (xxi) risks related to COVID-19; (xxiii) risks related(xxii) Corteva’s ability to activist stockholders; (xxiv)recruit and retain key personnel; (xxiii) Corteva’s intellectual property rights or defend against intellectual property claims asserted by others; (xxv)(xxiv) effect of counterfeit products; (xxvi)(xxv) Corteva’s dependence on intellectual property cross-license agreements; (xxvii)(xxvi) other risks related to the separationSeparation from DowDuPont; (xxviii)and (xxvii) risks related to the Biden executive order Promoting Competition in the American Economy;Russia and (xxix) risks associated with our CEO transition, including failure to timely identify a successor CEO.Ukraine military conflict.
Additionally, there may be other risks and uncertainties that Corteva is unable to currently identify or that Corteva does not currently expect to have a material impact on its business. Where, in any forward-looking statement or other estimate, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of Corteva’s management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. Corteva disclaims and does not undertake any obligation to update or revise any forward-looking statement, except as required by applicable law. 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 or other estimates is included in the “Risk Factors” section of Corteva’s 20202021 Annual Report, as modified by subsequent Quarterly Reports on FormsForm 10-Q and Current Reports on Form 8-K.
Recent Developments
COVID-19 PandemicGlobal Economic Conditions
On March 11, 2020,Economic activity continues to be impacted by the World Health Organization (“WHO”) declaredevolution of the novel coronavirus disease (“COVID-19”("COVID-19") a pandemic. The global health crisis caused by COVID-19, although varying regionally depending on government policies and the related government actionsregulations and stay at home orders have negatively impacted economic activity and increased political instability across the globe. Since the crisis began Corteva has engaged its global Integrated Health Services Pandemic & Infectious Disease Team to take actions and implement guidelines and protocols in response to the COVID-19 pandemic described in its 2020 Annual Report, Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, COVID-19 Pandemic.
When COVID-19 is demonstrably contained, the company anticipates a rebound in economic activity, depending on the rate, pace, and effectiveness of the containment efforts deployed by various national, state, and local governments, vaccination rates, and the ability of COVD-19 variants to overcome containment efforts, available vaccines, and medical treatments. These varying levels of recovery have created a misalignment of supply and demand for labor, transportation and logistic services, energy, raw materials and other inputs, which have been exasperated in certain regions by other events, including extreme weather and military conflict between Russia and Ukraine. Corteva will continue to actively monitor the situationglobal conditions and may take further actions altering its business operations that it determines are in the best interests of its stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential effects any suchThese alterations or modifications may have onimpact the company's business, including the effects on its customers, employees, and prospects, or on its financial results for 2021 and beyond. With the foreseeable future. The ongoing factors driving volatility in global markets the company will continue to monitor various factors that could impact our business' earnings and cash flows of the business, including,include, but are not limited to military conflict and resulting economic sanctions, the inflation of, or unavailability of raw material inputs and transportation and logistics services, currency fluctuations, expectations of future planted area (as influenced by consumer demand, ethanol markets and government policies and regulations), trade and purchasing of commodities globally and relative commodity prices.
2021 Restructuring Actions
On February 1, 2021, Corteva approved restructuring actions designedIn response to right-sizeRussia’s military conflict with Ukraine, in April 2022 the company announced its decision to withdraw from Russia and, optimize footprinthaving already paused new sales in the country, is initiating a plan to stop production and organizational structure accordingbusiness activities. Russia contributes approximately 2 percent of the company's annual net sales. The company expects charges in the range of $25 million to the business needs$75 million in each regionconnection with the focus on driving continued cost improvement and productivity. As a result of these actions, the company expects to record total pre-tax restructuring charges of approximately $130 million to $170 million, comprised of approximately $40 million to $50 million of severance and related benefit costs, $40 million to $60 million of asset related charges, $10 million to $15 million of asset retirement obligations and $40 million to $45 million of costs related to contract terminations (contract terminations includes early lease terminations). Future cash payments related to this charge are anticipated to be approximately $80 million to $100 million, primarily related to the payment of severance and related benefits, asset retirement obligations, and costs related to contract terminations. The restructuring actions associated with this charge are expected to be substantially complete in 2021.
During the six months ended June 30, 2021, the company recorded pre-tax charges of $110 million, recognized in restructuring and asset related charges - net in the company's interim Consolidated Statement of Operations, primarily related to the payment of severance and related benefits and contract termination charges.
The 2021 Restructuring Actions are expected to contribute to the company’s ongoing cost and productivity improvement efforts through achieving an estimated $70 million of savings on a run rate basis by 2023. See Note 5 - Restructuring and Asset Related Charges - Net, to the interim Consolidated Financial Statements for additional information.announcement.
Share Buyback Plan
On August 5, 2021, Corteva, Inc. announced that its Board of Directors authorized a $1.5 billion share repurchase program to purchase Corteva, Inc.'s common stock, par value $0.01 per share, without an expiration date.date ("2021 Share Buyback Plan"). The timing, price and volume of purchases will be based on market conditions, relevant securities laws and other factors. In connection with the 2021 Share Buyback Plan, the company purchased and retired 4,585,000 shares during the three months ended March 31, 2022 in the open market for a total cost of $235 million.
On June 26, 2019, Corteva, Inc. announced that its Board of Directors authorized a $1 billion share repurchase program to purchase Corteva, Inc.'s common stock, par value $0.01 per share, without an expiration date.date ("2019 Share Buyback Plan"). The company expects to completecompleted the share repurchase program in2019 Share Buyback Plan during the third quarter of 2021. The timing, price and volume of purchases will be based on market conditions, relevant securities laws and other factors. DuringIn connection with the three and six months ended June 30, 2021,2019 Share Buyback Plan, the company purchased and retired 4,324,0007,646,000 shares and 11,970,000 shares, respectively,during the three months ended March 31, 2021 in the open market for a total cost of $200 million and $550 million, respectively. During the six months ended June 30, 2020, the company purchased and retired 1,865,000 shares in the open market for a total cost of $50$350 million.
Overview
The following is a summary of results from continuing operations for the three months ended June 30, 2021:March 31, 2022:
•The company reported net sales of $5,627$4,601 million, up 810 percent versus the same quarter last year, reflecting a 59 percent increase in price and 7 percent increase in volume, partially offset by a 2(6) percent favorable impact fromunfavorable currency impact. Volume and a 1 percent increase in price.price gains were driven by early demand and continued penetration of new products, continued focus on the company's price for value strategy and pricing for higher raw materials and logistical costs. The unfavorable currency impacts were led by the Turkish Lira and the Euro.
•Cost of goods sold ("COGS") totaled $3,010$2,724 million in the secondfirst quarter of 2021,2022, up from $2,829$2,420 million in the secondfirst quarter of 2020,2021, primarily driven by increased volumes, and higher input costs, freight and logistics, which are primarily market-driven, partially offset by ongoing cost and productivity actions.
•Restructuring and asset related charges - net were $135$5 million in the secondfirst quarter of 2021,2022, a decrease from $179$100 million in the secondfirst quarter of 2020.2021. The charges for the three months ended June 30, 2021March 31, 2022 primarily relaterelates to $112 million ofthe non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits, and $21 million related to severance and related benefit costs, and asset related charges associated with 2021 Restructuring Actions.
•The provision for income taxes for the three months ended June 30, 2021 includes net tax benefits of $18 million associated with changes in accruals for certain prior year tax positions in various jurisdictions.traits.
•Income (loss) from continuing operations after income taxes was $1,018$577 million, as compared to $766$613 million in the same quarter last year.
•Operating EBITDA was $1,461$1,039 million for the three months ended June 30, 2021, upMarch 31, 2022, improved from $1,236$904 million for the three months ended June 30, 2020March 31, 2021 primarily driven by volume gains and strong price execution which more than offset cost headwinds. The company experienced cost headwindsand volume gains in the quarter including higher input costs, freight and logistics, which are primarily market-driven, and higher commission expense. The headwinds areall regions, partially offset by the company's ongoing execution on its productivity programs.inflation and currency headwinds. Refer to page 5647 for further discussion of the company's Non-GAAP financial measures.
The following is a summary of results from continuing operations for the six months ended June 30, 2021:
•The company reported net sales of $9,805 million, up 7 percent versus the same period last year, reflecting a 4 percent increase in volume and a 2 percent increase in local price and a 1 percent favorable impact from currency.
•COGS totaled $5,430 million in the six months ended 2021, up from $5,098 million in the six months ended 2020, primarily driven by increased volumes and higher input costs, freight and logistics, which are primarily market-driven, partially offset by ongoing cost and productivity actions.
•Restructuring and asset related charges - net were $235 million in the six months ended 2021, a decrease from $249 million in the six months ended 2020. The charges for the six months ended June 30, 2021 primarily relate to $119 million of non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits, and $110 million relate to severance and related benefit costs and asset related charges, and contract termination charges associated with 2021 Restructuring Activities.
•The provision for income taxes for the six months ended June 30, 2021 includes net tax benefits of $25 million associated with changes in accruals for certain prior year tax positions in various jurisdictions.
•Income from continuing operations after income taxes was $1,631 million, as compared to $1,047 million in the same period last year.
•Operating EBITDA was $2,365 million, up from $2,030 million for the six months ended June 30, 2020, primarily driven by strong price execution, volume gains, and favorable mix, which more than offset cost headwinds. The company experienced cost headwinds in the quarter, including higher input costs, freight and logistics, which are primarily market-driven, and higher commission expense. The headwinds are partially offset by the company’s ongoing execution on its productivity programs. Refer to page 56 for further discussion of the company's Non-GAAP financial measures.
In addition to the financial highlights above, the following events occurred during or subsequent to the sixthree months ended June 30, 2021:March 31, 2022:
•The company returned approximately $750$335 million to shareholders during the sixthree months ended June 30, 2021March 31, 2022 under its previously announced share repurchase program and through common stock dividends.
•On August 5, 2021, Corteva, Inc. announced that its Board of Directors authorized a $1.5 billion share repurchase program to purchase Corteva, Inc.'s common stock, par value $0.01 per share, without an expiration date. The timing, price and volume of purchases will be based on market conditions, relevant securities laws and other factors.
•On July 21, 2021, the company's Board of Directors approved an increase in the common stock dividend of $0.13 per share to $0.14 per share.
Selected Financial Data
| | | | | | | | | | | | | | |
| In millions, except per share amounts | Three Months Ended
June 30, | Six Months Ended
June 30, |
| 2021 | 2020 | 2021 | 2020 |
| Net sales | $ | 5,627 | | $ | 5,191 | | $ | 9,805 | | $ | 9,147 | |
| | | | |
| Cost of goods sold | $ | 3,010 | | $ | 2,829 | | $ | 5,430 | | $ | 5,098 | |
| Percent of net sales | 53 | % | 54 | % | 55 | % | 56 | % |
| | | | |
| Research and development expense | $ | 293 | | $ | 273 | | $ | 574 | | $ | 553 | |
| Percent of net sales | 5 | % | 5 | % | 6 | % | 6 | % |
| | | | |
| Selling, general and administrative expenses | $ | 998 | | $ | 965 | | $ | 1,731 | | $ | 1,722 | |
| Percent of net sales | 18 | % | 19 | % | 18 | % | 19 | % |
| | | | |
| Effective tax rate on continuing operations | 21.8 | % | 9.2 | % | 22.1 | % | 16.4 | % |
| | | | |
| Income from continuing operations after income taxes | $ | 1,018 | | $ | 766 | | $ | 1,631 | | $ | 1,047 | |
| | | | |
| Income from continuing operations available to Corteva common stockholders | $ | 1,015 | | $ | 760 | | $ | 1,625 | | $ | 1,031 | |
| | | | |
| Basic earnings per share of common stock from continuing operations | $ | 1.37 | | $ | 1.01 | | $ | 2.19 | | $ | 1.37 | |
| Diluted earnings per share of common stock from continuing operations | $ | 1.37 | | $ | 1.01 | | $ | 2.18 | | $ | 1.37 | |
Results of Operations
Net Sales
Net sales were $5,627$4,601 million and $5,191$4,178 million for the three months ended June 30,March 31, 2022 and 2021, and 2020, respectively. The increase was primarily driven by a 59 percent increase in price and a 7 percent increase in volume versus the prior year period.period, partially offset by a (6) percent unfavorable currency impact. Volume increasesand price gains were driven by seasonal timingearly demand and increased soybean acres in North America, together with continued adoption of new technology in both segments. Currency and local price represented increases of 2 percent and 1 percent, respectively.
| | | | | | | | | | | | | | |
| | Three Months Ended
June 30, |
| 2021 | 2020 |
| Net Sales
($ Millions) | % | Net Sales
($ Millions) | % |
| Worldwide | $ | 5,627 | | 100 | % | $ | 5,191 | | 100 | % |
North America1 | 3,842 | | 68 | % | 3,566 | | 69 | % |
EMEA2 | 710 | | 13 | % | 643 | | 12 | % |
| Latin America | 588 | | 10 | % | 515 | | 10 | % |
| Asia Pacific | 487 | | 9 | % | 467 | | 9 | % |
| | | | | | | | | | | | | | | | | | | | |
| Q2 2021 vs. Q2 2020 | Percent Change Due To: |
| Net Sales Change | Local Price & | | | Portfolio / |
| $ In millions | $ | % | Product Mix | Volume | Currency | Other |
North America1 | $ | 276 | | 8 | % | — | % | 6 | % | 2 | % | — | % |
EMEA2 | 67 | | 10 | % | 5 | % | (1) | % | 6 | % | — | % |
| Latin America | 73 | | 14 | % | 6 | % | 5 | % | 3 | % | — | % |
| Asia Pacific | 20 | | 4 | % | 2 | % | (2) | % | 5 | % | (1) | % |
| Total | $ | 436 | | 8 | % | 1 | % | 5 | % | 2 | % | — | % |
1.Represents U.S. & Canada.
2.Europe, Middle East, and Africa ("EMEA").
Net sales were $9,805 million and $9,147 million for the six months ended June 30, 2021 and 2020, respectively. The increase was primarily driven by a 4 percent increase in volume versus the prior-year period. Gains were driven by the continued penetration of new products, continued focus on the company's price for value strategy and strong execution globally. Local pricerecovery of higher input costs. The unfavorable currency impacts were led by the Turkish Lira and currency represented increases of 2 percent and 1 percent, respectively.the Euro.
| | | | Six Months Ended
June 30, | | Three Months Ended
March 31, |
| | 2021 | 2020 | | 2022 | 2021 |
| | Net Sales
($ Millions) | % | Net Sales
($ Millions) | % | | Net Sales
($ Millions) | % | Net Sales
($ Millions) | % |
| Worldwide | Worldwide | $ | 9,805 | | 100 | % | $ | 9,147 | | 100 | % | Worldwide | $ | 4,601 | | 100 | % | $ | 4,178 | | 100 | % |
North America1 | North America1 | 5,585 | | 57 | % | 5,331 | | 58 | % | North America1 | 2,005 | | 44 | % | 1,743 | | 42 | % |
EMEA2 | EMEA2 | 2,312 | | 24 | % | 2,110 | | 23 | % | EMEA2 | 1,582 | | 34 | % | 1,602 | | 38 | % |
| Latin America | Latin America | 1,106 | | 11 | % | 949 | | 11 | % | Latin America | 650 | | 14 | % | 518 | | 12 | % |
| Asia Pacific | Asia Pacific | 802 | | 8 | % | 757 | | 8 | % | Asia Pacific | 364 | | 8 | % | 315 | | 8 | % |
| | | First Half 2021 vs. First Half 2020 | Percent Change Due To: | | Q1 2022 vs. Q1 2021 | Percent Change Due To: |
| | Net Sales Change | Local Price & | | Portfolio / | | Net Sales Change | Price & | | Portfolio / |
| $ In millions | $ In millions | $ | % | Product Mix | Volume | Currency | Other | $ In millions | $ | % | Product Mix | Volume | Currency | Other |
North America1 | North America1 | $ | 254 | | 5 | % | — | % | 4 | % | 1 | % | — | % | North America1 | $ | 262 | | 15 | % | 8 | % | 7 | % | — | % | — | % |
EMEA2 | EMEA2 | 202 | | 10 | % | 4 | % | 1 | % | 5 | % | — | % | EMEA2 | (20) | | (1) | % | 9 | % | 3 | % | (13) | % | — | % |
| Latin America | Latin America | 157 | | 17 | % | 9 | % | 14 | % | (6) | % | — | % | Latin America | 132 | | 25 | % | 12 | % | 14 | % | (1) | % | — | % |
| Asia Pacific | Asia Pacific | 45 | | 6 | % | 2 | % | 1 | % | 5 | % | (2) | % | Asia Pacific | 49 | | 16 | % | 5 | % | 17 | % | (3) | % | (3) | % |
| Total | Total | $ | 658 | | 7 | % | 2 | % | 4 | % | 1 | % | — | % | Total | $ | 423 | | 10 | % | 9 | % | 7 | % | (6) | % | — | % |
1.Represents U.S. & Canada.
2.Europe, Middle East, and Africa ("EMEA").
Cost of Goods Sold
COGS was $3,010$2,724 million (53(59 percent of net sales) and $2,829$2,420 million (54(58 percent of net sales) for the three months ended June 30,March 31, 2022 and 2021, and 2020, respectively. The increase was primarily driven by increased volumes and higher input costs, freight and logistics, which are primarily market-driven, an increase in volumes in both crop protection and seed and unfavorable currency,market-driven. The increases are partially offset by ongoing cost and productivity actions. The market driven trends are expected to continue as global supply chains and logistics remain constrained across industries.
COGS was $5,430 million (55 percent of net sales) and $5,098 million (56 percent of net sales) for the six months ended June 30, 2021 and 2020, respectively. The increase was primarily driven by higher input costs, freight and logistics, which are primarily market-driven, an increase in volumes in both crop protection and seed and unfavorable currency. The increases in costs are partially offset by ongoing cost and productivity actions. The market-driven trends are expected to continue as global supply chains and logistics remain constrained across industries.
Research and Development Expense
R&D expense was $293$268 million (5(6 percent of net sales) and $273$281 million (5(7 percent of net sales) for the three months ended June 30,March 31, 2022 and 2021, and 2020, respectively. The increasedecrease was primarily driven by increasesdecreases in variable compensationcontract labor, salaries and unfavorable currency.
wages due to cost and productivity actions, and favorable currency, partially offset by additional spending on various R&D expense was $574 million (6 percent of net sales) and $553 million (6 percent of net sales) for the six months ended June 30, 2021 and 2020, respectively. The increase was primarily driven by increases in variable compensation, unfavorable currency and increases in laboratory costs.projects.
Selling, General and Administrative Expenses
SG&A expenses were $998$735 million (18(16 percent of net sales) and $965$733 million (19(18 percent of net sales) for the three months ended June 30,March 31, 2022 and 2021, and 2020, respectively. The increase was primarily driven by increases in commission expense and unfavorable currency, partially offset by lower bad debt expense and ongoing cost and productivity actions taken to curtail spending.
SG&A expenses were $1,731 million (18 percent of net sales) and $1,722 million (19 percent of net sales) for the six months ended June 30, 2021 and 2020, respectively. The increaserelatively flat, which was primarily driven by higher commission expense, unfavorable currency,travel, promotion and selling expensesadvertising costs due to drive sales, partially offset by lowerthe lifting of COVID-19 restrictions, and bad debt expense, functional spend,which were offset by favorable currency and travel expensea favorable impact from the company's deferred compensation plans due to COVID-19 related restrictions put into place late in the first quarter of 2020.market declines.
Amortization of Intangibles
Intangible asset amortization was $180$179 million and $176$183 million for the three months ended June 30, 2021March 31, 2022 and 2020, respectively, and $363 million and $339 million for the six months ended June 30, 2021 and 2020, respectively. The increase was primarily driven by amortization of the trade name asset that was changed from indefinite lived intangible asset to definite lived in the fourth quarter of 2020.2021. See Note 1110 - Other Intangible Assets, to the interim Consolidated Financial Statements for additional information.
Restructuring and Asset Related Charges - Net
Restructuring and asset related charges - net were $135$5 million and $179$100 million for the three months ended June 30,March 31, 2022 and 2021, and 2020, respectively. The charges in the secondfirst quarter of 2021 primarily relate to severance and related benefit costs, contract termination charges, and asset related charges associated with 2021 Restructuring Actions.
In addition, during the three months ended March 31, 2022 and 2021, the company recognized $6 million and $7 million, respectively, in restructuring and asset related charges, net in the interim Consolidated Statement of Operations, from non-cash accelerated prepaid royalty amortization expense related to the Roundup Ready 2 Yield®Yield® and Roundup Ready 2 Xtend® Xtend® herbicide tolerance traits under the Execute to Win Productivity Program and severance and related benefit costs, asset related charges, and contract termination charges associated with 2021 Restructuring Actions. The charges in the second quarter of 2020 related to non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits and severance and related benefit costs and asset related charges under the Execute to Win Productivity Program.
Restructuring and asset related charges - net were $235 million and $249 million for the six months ended June 30, 2021 and 2020, respectively. The charges in the first half of 2021 primarily related to non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits under the Execute to Win Productivity Program and severance and related benefit costs, asset related charges, and contract termination charges associated with 2021 Restructuring Actions. The charges in the first half of 2020 primarily related to non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits and asset related charges and severance and related benefit costs under the Execute to Win Productivity Program.
See Note 54 - Restructuring and Asset Related Charges, Net, to the interim Consolidated Financial Statements for additional information.
Other Income - Net
Other income - net was $298$17 million and $89$337 million for the three months ended June 30,March 31, 2022 and 2021, and 2020, respectively. The increasedecrease was primarily due to an increasedriven by a decrease in non-operating pension and other post-employmentpost employment benefit credit, driven bycredits due to the prior year impact of the December 2020 OPEB plan amendments, as discussedestimated settlement reserves related to Lorsban®, an increase in the 2020 Annual Report. Themark-to-market losses on an equity security, and an increase was partially offset by ain exchange losses.
Pre-tax net exchange loss duringlosses were $47 million and $35 million for the three months ended June 30,March 31, 2022 and 2021 compared to a net exchange gain during the three months ended June 30, 2020.
Other income - net was $635 million and $90 million for the six months ended June 30, 2021 and 2020, respectively. The increase was primarily due to an increase in non-operating pension and other post-employment benefit credit, driven by the December 2020 OPEB plan amendments as discussed in the 2020 Annual Report. In addition, Other income - net for the six months ended June 30, 2020 includes a $(53) million loss on the sale of the La Porte site.
The company routinely uses forward exchange contracts to offset its net exposures, by currency denominated monetary assets and liabilities of its operations. The objective of this program is to maintain an approximately balanced position in foreign currencies in order to minimize, on an after-tax basis, the effects of exchange rate changes. The net pre-tax exchange gains and losses are recorded in other income - net and the related tax impact is recorded in provision for (benefit from) income taxes on continuing operations in the interim Consolidated Statement of Operations.
See Note 65 - Supplementary Information, to the interim Consolidated Financial Statements for additional information.
Interest Expense
Interest expense was $7$9 million and $14$7 million for the three months ended June 30,March 31, 2022 and 2021, and 2020, respectively, and $14 million and $24 million for the six months ended June 30, 2021 and 2020, respectively. The change was primarily driven by lower average commercial paper balancesforeign currency loans entered into in 2022 and lowerhigher interest rates, partially offset by higher average long-term borrowings.rates.
Provision for (Benefit from) Income Taxes on Continuing Operations
The company’s provision for income taxes on continuing operations was $284$121 million for the three months ended June 30, 2021March 31, 2022 on pre-tax income from continuing operations of $1,302$698 million, resulting in an effective tax rate of 21.817.3 percent. The effective tax rate was unfavorablyfavorably impacted by geographic mix of earnings. Those unfavorable impacts were partially offset by $18 million of net tax benefits associated with changes in accrualsdeferred taxes for certain prior year tax positions, in various jurisdictions, as well as tax benefits related to the issuance offrom stock-based compensation.
The company’s provision for income taxes on continuing operations was $78$178 million for the three months ended June 30, 2020March 31, 2021 on pre-tax income from continuing operations of $844$791 million, resulting in an effective tax rate of 9.2 percent. The effective tax rate was favorably impacted by geographic mix of earnings, $20 million of net tax benefits associated with changes in accruals for certain prior year tax positions in various jurisdictions, which includes a tax benefit of $14 million related to a return to accrual adjustment to reflect a change in estimate on the impact of a tax law enactment in a foreign jurisdiction. In addition, during the three months ended June 30, 2020, the company recognized a tax benefit of $51 million to provision for income
taxes on continuing operations related to a return to accrual adjustment associated with an elective change in accounting method for the 2019 tax year impact of the 2017 Tax Cuts and Jobs Act's (“The Act”) foreign tax provisions.
The company’s provision for income taxes on continuing operations was $462 million for the six months ended June 30, 2021 on pre-tax income from continuing operations of $2,093 million, resulting in an effective tax rate of 22.122.5 percent. The effective tax rate was unfavorably impacted by the tax impact of certain net exchange losses recognized on the re-measurement of the net monetary asset positions which were not tax-deductible in their local jurisdictions, as well as geographic mix of earnings. Those unfavorable impacts were partially offset by $25$(7) million of net tax benefits associated with changes in accruals for certain prior year tax positions in various jurisdictions, as well as tax benefits related to the issuance offrom stock-based compensation.
The company’s provision for income taxes on continuing operations was $205 million for the six months ended June 30, 2020 on pre-tax income from continuing operations of $1,252 million, resulting in an effective tax rate of 16.4%. The effective tax rate was favorably impacted by geographic mix of earnings, $18 million of net tax benefits associated with changes in accruals for certain prior year tax positions in various jurisdictions, which includes a tax benefit of $14 million related to a return to accrual adjustment to reflect a change in estimate on the impact of a tax law enactment in a foreign jurisdiction. In addition, during the six months ended June 30, 2020, the company recognized a tax benefit of $51 million to provision for income taxes on continuing operations related to a return to accrual adjustment associated with an elective change in accounting method for the 2019 tax year impact of the The Act's foreign tax provisions. The effective tax rate was unfavorably impacted by the tax impact of certain net exchange losses recognized on the re-measurement of the net monetary asset positions which were not tax-deductible in their local jurisdictions, as well as tax charges related to the issuance of stock-based compensation.
(Loss) Income from Discontinued Operations After Tax
(Loss) income from discontinued operations after tax was $(45) million and $(55) million for the three and six months ended June 30, 2021, respectively, and $0 million and $1 million for the three and six months ended June 30, 2020. The three and six months ended June 30, 2021 primarily reflects charges relating to PFAS environmental remediation activities for legacy operations at the Fayetteville Works facility and the settlement with the State of Delaware for PFAS related natural resource damage claims. Refer to Note 3 - Divestitures and Other Transactions, to the interim Consolidated Financial Statements for additional information.
EID Analysis of Operations
As discussed in Note 1 - Basis of Presentation, to the EID interim Consolidated Financial Statements, EID is a subsidiary of Corteva, Inc. and continues to be a reporting company, subject to the requirements of the Exchange Act. The below relates to EID only and is presented to provide an Analysis of Operations, only for the differences between EID and Corteva, Inc.
Interest Expense
EID’s interest expense was $20$18 million and $45$22 million for the three months ended June 30,March 31, 2022 and 2021, respectively, and $42 million and $87 million for the six months ended June 30, 2021 and 2020, respectively. The change was primarily driven by the items noted on page 49, under the header "Interest Expense," and by lower average borrowings on the related party loan between EID and Corteva, Inc., partially offset by the items noted above, under the header "Interest Expense." See Note 2 - Related Party Transactions, to the EID interim Consolidated Financial Statements for further information.
Provision for (Benefit from) Income Taxes on Continuing Operations
EID’s provision forbenefit from income taxes on continuing operations was $281$119 million for the three months ended June 30,March 31, 2022 on pre-tax loss from continuing operations of $689 million, resulting in an effective tax rate of 17.3 percent. EID’s provision for
income taxes on continuing operations was $174 million for three months ended March 31, 2021 on pre-tax income from continuing operations of $1,289$776 million, resulting in an effective tax rate of 21.8 percent. EID’s provision for income taxes on continuing operations was $71 million for the three months ended June 30, 2020 on pre-tax income from continuing operations of $813 million, resulting in an effective tax rate of 8.7 percent.
EID’s provision for income taxes on continuing operations was $455 million for the six months ended June 30, 2021 on pre-tax income from continuing operations of $2,065 million, resulting in an effective tax rate of 22.0 percent. EID’s provision for income taxes on continuing operations was $190 million for the six months ended June 30, 2020 on pre-tax income from continuing operations of $1,189 million, resulting in an effective tax rate of 16.022.4 percent.
EID’s effective tax rates for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 were driven by the items noted on page 49, under the header “Provision for Income Taxes on Continuing Operations” and a tax benefit related to the interest expense incurred on the related party loan between EID and Corteva, Inc. and the items noted on page 42, under the header “Provision for (Benefit from) Income Taxes on Continuing Operations.” See Note 2 - Related Party Transactions, to the EID interim Consolidated Financial Statements for further information.
Corporate Outlook
The company is increasingaffirming its previously provided outlook for the full-year 2022 net sales outlook for 2021 and expects an approximate 7 – 8 percent increaseOperating EBITDA. Net sales is expected to be in net sales. Additionally, the range of $16.7 billion and $17.0 billion and Operating EBITDA is expected to be in the range of $2.8 billion and $3.0 billion. The company is increasing earningsadjusted its expectations for 2021 and expects an increase in Operating EBITDA and Operating Earnings Per Share, which is now expected to be in the range of 20 – 25 percent$2.35 and 33 – 40 percent, respectively.$2.55 per share, reflecting lower average share count.
Corteva is not able to reconcile its forward-looking non-GAAP financial measures to its most comparable U.S. GAAP financial measures, as it is unable to predict with reasonable certainty items outside of the company’s control, such as Significant Items, without unreasonable effort (refer to page 5748 for Significant Items recorded in the three and six months ended June 30, 2021March 31, 2022 and 2020)2021). During 2021,2022, the company expects to record $130 million to $170 million for the 2021 Restructuring Actions and approximately $130$102 million for non-cash accelerated prepaid royalty amortization expense as restructuring and asset related charges. See Note 54 - Restructuring and Asset Related Charges - Net, to the interim Consolidated Financial Statements, for additional information on the company’s 2021 Restructuring Actions and accelerated prepaid royalty amortization.
Recent Accounting Pronouncements
See Note 2 - Recent Accounting Guidance, to the interim Consolidated Financial Statements for a description of recent accounting pronouncements.
Segment Reviews
The company operates in two reportable segments: Seed and Crop Protection.
Seed
The company’s seed segment is a global leader in developing and supplying advanced germplasm and traits that produce optimum yield for farms around the world. The segment is a leader in many of the company’s key seed markets, including North America corn and soybeans, Europe corn and sunflower, as well as Brazil, India, South Africa and Argentina corn. The segment offers trait technologies that improve resistance to weather, disease, insects and herbicides used to control weeds, and trait technologies that enhance food and nutritional characteristics. In addition, the segment provides digital solutions that assist farmer decision-making with a view to optimize product selection and, ultimately, help maximize yield and profitability.
Crop Protection
The crop protection segment serves the global agricultural input industry with products that protect against weeds, insects and other pests, and disease, and that improve overall crop health both above and below ground via nitrogen management and seed-applied technologies. The segment offers crop protection solutions that provide farmers the tools they need to improve productivity and profitability, and help keep fields free of weeds, insects and diseases. The segment is a leader in global herbicides, insecticides, nitrogen stabilizers and pasture and range management herbicides.
Summarized below are comments on individual segment net sales and segment operating EBITDA for the three and six months ended June 30, 2021March 31, 2022 compared with the same period in 2020.2021. The company defines segment operating EBITDA as earnings (loss) (i.e., income (loss) from continuing operations before income taxes) before interest, depreciation, amortization, corporate expenses, non-operating costs-net,benefits (costs), foreign exchange gains (losses), and net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting, excluding the impact of significant items. Non-operating costs-netbenefits (costs) consists of non-operating pension and other post-employmentOPEB benefit (OPEB) credits,(costs), tax indemnification adjustments and environmental remediation and legal costs associated with legacy EID businesses and sites. Tax indemnification adjustments relate to changes in indemnification balances, as a result of the application of the terms of the Tax Matters Agreement, between Corteva and Dow and/or DuPont that are recorded by the company as pre-tax income or expense. Beginning January 1, 2021, the company excludes net unrealized gains or losses from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting. See Note 1817 - Segment Information, to the interim Consolidated Financial Statements for details related to significant pre-tax benefits (charges) excluded from segment operating EBITDA. All references to prices are based on local price unless otherwise specified.
A reconciliation of segment operating EBITDA to income (loss) from continuing operations after income taxes for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 is included in Note 1817 - Segment Information, to the interim Consolidated Financial Statements.
| | Seed | Seed | Three Months Ended
June 30, | Six Months Ended
June 30, | Seed | Three Months Ended
March 31, | |
| In millions | In millions | 2021 | 2020 | 2021 | 2020 | In millions | 2022 | 2021 | |
| Net sales | Net sales | $ | 3,780 | | $ | 3,538 | | $ | 6,272 | | $ | 5,993 | | Net sales | $ | 2,524 | | $ | 2,492 | | |
Segment operating EBITDA | Segment operating EBITDA | $ | 1,123 | | $ | 956 | | $ | 1,740 | | $ | 1,537 | | Segment operating EBITDA | $ | 569 | | $ | 617 | | |
| | Seed | Seed | Q2 2021 vs. Q2 2020 | Percent Change Due To: | Seed | Q1 2022 vs. Q1 2021 | Percent Change Due To: |
| | Net Sales Change | Local Price & | | Portfolio / | | Net Sales Change | Price & | | Portfolio / |
| $ In millions | $ In millions | $ | % | Product Mix | Volume | Currency | Other | $ In millions | $ | % | Product Mix | Volume | Currency | Other |
| North America | North America | $ | 201 | | 7 | % | — | % | 6 | % | 1 | % | — | % | North America | $ | (26) | | (2) | % | 5 | % | (7) | % | — | % | — | % |
| EMEA | EMEA | 34 | | 13 | % | 10 | % | (1) | % | 4 | % | — | % | EMEA | (21) | | (2) | % | 11 | % | — | % | (13) | % | — | % |
| Latin America | Latin America | 28 | | 14 | % | 10 | % | — | % | 4 | % | — | % | Latin America | 49 | | 18 | % | 9 | % | 11 | % | (2) | % | — | % |
| Asia Pacific | Asia Pacific | (21) | | (13) | % | — | % | (16) | % | 3 | % | — | % | Asia Pacific | 30 | | 49 | % | 9 | % | 49 | % | (9) | % | — | % |
| Total | Total | $ | 242 | | 7 | % | 1 | % | 4 | % | 2 | % | — | % | Total | $ | 32 | | 1 | % | 8 | % | (1) | % | (6) | % | — | % |
| | | | | | | | | | | | | | | | | | | | |
| Seed | Q2 2021 vs. Q2 2020 | Percent Change Due To: |
| Net Sales Change | Local Price & | | | Portfolio / |
| $ In millions | $ | % | Product Mix | Volume | Currency | Other |
| Corn | $ | 123 | | 6 | % | 3 | % | 2 | % | 1 | % | — | % |
| Soybeans | 75 | | 7 | % | (2) | % | 8 | % | 1 | % | — | % |
| Other oilseeds | 52 | | 24 | % | 4 | % | 11 | % | 9 | % | — | % |
| Other | (8) | | (5) | % | (5) | % | (2) | % | 2 | % | — | % |
| Total | $ | 242 | | 7 | % | 1 | % | 4 | % | 2 | % | — | % |
| | | | | | | | | | | | | | | | | | | | |
| Seed | First Half 2021 vs. First Half 2020 | Percent Change Due To: |
| Net Sales Change | Local Price & | | | Portfolio / |
| $ In millions | $ | % | Product Mix | Volume | Currency | Other |
| North America | $ | 121 | | 3 | % | (1) | % | 3 | % | 1 | % | — | % |
| EMEA | 100 | | 9 | % | 5 | % | 1 | % | 3 | % | — | % |
| Latin America | 86 | | 20 | % | 9 | % | 20 | % | (9) | % | — | % |
| Asia Pacific | (28) | | (12) | % | 2 | % | (15) | % | 1 | % | — | % |
| Total | $ | 279 | | 5 | % | 1 | % | 3 | % | 1 | % | — | % |
| | Seed | Seed | First Half 2021 vs. First Half 2020 | Percent Change Due To: | Seed | Q1 2022 vs. Q1 2021 | Percent Change Due To: |
| | Net Sales Change | Local Price & | | Portfolio / | | Net Sales Change | Price & | | Portfolio / |
| $ In millions | $ In millions | $ | % | Product Mix | Volume | Currency | Other | $ In millions | $ | % | Product Mix | Volume | Currency | Other |
| Corn | Corn | $ | 147 | | 4 | % | 3 | % | 1 | % | — | % | — | % | Corn | $ | 42 | | 2 | % | 8 | % | (1) | % | (5) | % | — | % |
| Soybeans | Soybeans | 71 | | 6 | % | (2) | % | 7 | % | 1 | % | — | % | Soybeans | (5) | | (3) | % | 6 | % | (8) | % | (1) | % | — | % |
| Other oilseeds | Other oilseeds | 100 | | 21 | % | 4 | % | 14 | % | 3 | % | — | % | Other oilseeds | (19) | | (6) | % | 8 | % | (2) | % | (13) | % | — | % |
| Other | Other | (39) | | (12) | % | (5) | % | (7) | % | — | % | — | % | Other | 14 | | 11 | % | 5 | % | 8 | % | (2) | % | — | % |
| Total | Total | $ | 279 | | 5 | % | 1 | % | 3 | % | 1 | % | — | % | Total | $ | 32 | | 1 | % | 8 | % | (1) | % | (6) | % | — | % |
Seed
Seed net sales were $3,780$2,524 million in the secondfirst quarter of 2021,2022, up 71 percent from $3,538$2,492 million in the secondfirst quarter of 2020.2021. The increase was due to a 4driven by an 8 percent increase in volume, a 2 percent favorable impact from currency andprice. This gain was partially offset by a 1 percent increasedecline in local price.volumes and a 6 percent unfavorable currency impact.
Higher volumes wereThe increase in price was driven by more normalized deliverystrong execution globally, led by EMEA and North America, with corn price up 8 percent globally. The decline in volume was driven by seasonal timing of deliveries in North America, compared to the prior-year period, coupled with increased soybean acreage in North America. In addition, the company delivered $80 million in sales in the second quarter primarily due to robust earlywhich was partially offset by strong demand for corn in Latin America. This increase was also driven by canola growth in Canada, which represents early settlement of the season compared to the year-ago period. FavorableBrazil. Unfavorable currency impacts were primarily drivenled by the Canadian Dollar. The increase in local price was led by strong execution in Latin AmericaTurkish Lira and EMEA.the Euro.
Segment operating EBITDA was $1,123$569 million in the secondfirst quarter of 2021, up 172022, down 8 percent from $956$617 million in the secondfirst quarter of 2020. Volume gains, lower royalties, reduced bad debt expense, ongoing cost and productivity actions, and continued price2021. Price execution more than offset higher input costs from unfavorable yields on European corn and sunflower. Segment operating EBITDA margin improved by more than 260 basis points versus the prior-year period.
Seed net sales were $6,272 million for the first six months of 2021, up 5 percent from $5,993 million for the first six months of 2020. The increase was due to a 3 percent increase in volume, a 1 percent increase in local price and a 1 percent favorable impact from currency.
The increase in volume was driven by higher soybean sales in North America, market share gains in the Brazil Safrinha, earlier shipments in the Brazil summer season, and canola growth in Canada. Local price gains were driven by strong adoption of new seed technology, including price execution in Latin America and EMEA, with corn price up 3 percent globally. These gains were partially offset by competitive pricing pressure in North America soybeans, where price was down 2 percent. Favorable
currency impacts primarily from the Canadian Dollar and the Euro more than offset unfavorable impacts from the Brazilian Real.
Segment operating EBITDA was $1,740 million for the first six months of 2021, up 13 percent from $1,537 million for the first six months of 2020. Continued price execution, lower royalties, lower bad debt expense, volume gains, and ongoing cost and productivity actions were more than offset by seasonal timing in North America, higher input and freight costs, the unfavorable impact of currency, and the unfavorable year-over-year impact from unfavorable yields on European corn and sunflower and higher freight costs. Segment operating EBITDA margin improved by more than 200 basis points versus the prior-year period.remeasurement of an equity investment.
| | Crop Protection | Crop Protection | Three Months Ended
June 30, | Six Months Ended
June 30, | Crop Protection | Three Months Ended
March 31, | |
| In millions | In millions | 2021 | 2020 | 2021 | 2020 | In millions | 2022 | 2021 | |
| Net sales | Net sales | $ | 1,847 | | $ | 1,653 | | $ | 3,533 | | $ | 3,154 | | Net sales | $ | 2,077 | | $ | 1,686 | | |
Segment Operating EBITDA | Segment Operating EBITDA | $ | 370 | | $ | 309 | | $ | 691 | | $ | 547 | | Segment Operating EBITDA | $ | 491 | | $ | 321 | | |
| | | | | | | | | | | | | | | | | | | | |
| Crop Protection | Q2 2021 vs. Q2 2020 | Percent Change Due To: |
| Net Sales Change | Local Price & | | | Portfolio / |
| $ In millions | $ | % | Product Mix | Volume | Currency | Other |
| North America | $ | 75 | | 11 | % | 2 | % | 8 | % | 1 | % | — | % |
| EMEA | 33 | | 9 | % | 2 | % | (2) | % | 9 | % | — | % |
| Latin America | 45 | | 15 | % | 3 | % | 8 | % | 4 | % | — | % |
| Asia Pacific | 41 | | 14 | % | 3 | % | 6 | % | 7 | % | (2) | % |
| Total | $ | 194 | | 12 | % | 3 | % | 5 | % | 4 | % | — | % |
| | | | | | |
| Crop Protection | Q2 2021 vs. Q2 2020 | Percent Change Due To: |
| Net Sales Change | Local Price & | | | Portfolio / |
| $ In millions | $ | % | Product Mix | Volume | Currency | Other |
| Herbicides | $ | 60 | | 7 | % | 2 | % | 1 | % | 4 | % | — | % |
| Insecticides | 15 | | 3 | % | 2 | % | (3) | % | 4 | % | — | % |
| Fungicides | 87 | | 39 | % | 4 | % | 28 | % | 9 | % | (2) | % |
| Other | 32 | | 43 | % | 6 | % | 34 | % | 3 | % | — | % |
| Total | $ | 194 | | 12 | % | 3 | % | 5 | % | 4 | % | — | % |
| | | | | | | | | | | | | | | | | | | | |
| Crop Protection | First Half 2021 vs. First Half 2020 | Percent Change Due To: |
| Net Sales Change | Local Price & | | | Portfolio / |
| $ In millions | $ | % | Product Mix | Volume | Currency | Other |
| North America | $ | 133 | | 12 | % | 3 | % | 7 | % | 2 | % | — | % |
| EMEA | 102 | | 11 | % | 2 | % | 2 | % | 7 | % | — | % |
| Latin America | 71 | | 13 | % | 9 | % | 9 | % | (5) | % | — | % |
| Asia Pacific | 73 | | 14 | % | 3 | % | 8 | % | 6 | % | (3) | % |
| Total | $ | 379 | | 12 | % | 4 | % | 6 | % | 3 | % | (1) | % |
| | | | | | |
| Crop Protection | First Half 2021 vs. First Half 2020 | Percent Change Due To: |
| Net Sales Change | Local Price & | | | Portfolio / |
| $ In millions | $ | % | Product Mix | Volume | Currency | Other |
| Herbicides | $ | 223 | | 13 | % | 4 | % | 6 | % | 3 | % | — | % |
| Insecticides | 22 | | 3 | % | 5 | % | (3) | % | 1 | % | — | % |
| Fungicides | 119 | | 26 | % | 4 | % | 21 | % | 4 | % | (3) | % |
| Other | 15 | | 10 | % | 3 | % | 8 | % | (1) | % | — | % |
| Total | $ | 379 | | 12 | % | 4 | % | 6 | % | 3 | % | (1) | % |
| | | | | | | | | | | | | | | | | | | | |
| Crop Protection | Q1 2022 vs. Q1 2021 | Percent Change Due To: |
| Net Sales Change | Price & | | | Portfolio / |
| $ In millions | $ | % | Product Mix | Volume | Currency | Other |
| North America | $ | 288 | | 54 | % | 17 | % | 37 | % | — | % | — | % |
| EMEA | 1 | | — | % | 7 | % | 6 | % | (13) | % | — | % |
| Latin America | 83 | | 34 | % | 17 | % | 16 | % | 1 | % | — | % |
| Asia Pacific | 19 | | 7 | % | 4 | % | 9 | % | (2) | % | (4) | % |
| Total | $ | 391 | | 23 | % | 11 | % | 18 | % | (5) | % | (1) | % |
| | | | | | |
| Crop Protection | Q1 2022 vs. Q1 2021 | Percent Change Due To: |
| Net Sales Change | Price & | | | Portfolio / |
| $ In millions | $ | % | Product Mix | Volume | Currency | Other |
| Herbicides | $ | 219 | | 22 | % | 12 | % | 14 | % | (4) | % | — | % |
| Insecticides | 33 | | 9 | % | 9 | % | 7 | % | (7) | % | — | % |
| Fungicides | 43 | | 16 | % | 6 | % | 20 | % | (6) | % | (4) | % |
| Other | 96 | | 178 | % | 33 | % | 148 | % | (3) | % | — | % |
| Total | $ | 391 | | 23 | % | 11 | % | 18 | % | (5) | % | (1) | % |
Crop Protection
Crop protection net sales were $1,847$2,077 million in the secondfirst quarter of 2021,2022, up 1223 percent from $1,653$1,686 million in the secondfirst quarter of 2020.2021. The increase was due to a 5driven by an 18 percent increase in volume a 4 percent favorable impact from currency and a 3an 11 percent increase in local price. These gains were partially offset by a 5 percent unfavorable currency impact and a 1 percent unfavorable portfolio impact.
The increase in volume was driven by strong early demand for herbicides in North America on supply concerns and continued penetration of new and differentiated products, including EnlistTM, ArylexTM herbicide, and PyraxaltRinskorTM insecticide, coupledherbicides and ZorvecTM fungicide. The increase in price was broad-based, with gains in all regions led by early demand in LatinNorth America, which shifted approximately $50 million in sales from the third quarter. These volume gains were partially offset by an approximate $60 million impact from our decision to phase out select low-margin products. Favorableand mostly reflected pricing for higher raw material and logistical costs. Unfavorable currency impacts were primarily fromled by the Turkish Lira and the Euro. The increase in local priceportfolio impact was driven by strategic price increasesa divestiture in North America, coupled with strong price execution globally.Asia Pacific.
Segment operating EBITDA was $370$491 million in the secondfirst quarter of 2021, up 2053 percent from $309$321 million in the secondfirst quarter of 2020. Volume2021. Pricing and volume gains from new products, continued pricing execution,and productivity and favorable impacts from currencyactions more than offset the unfavorable impact of currency, higher input costs, including raw material costs.costs, and higher SG&A. Segment operating EBITDA margin improved by more than 130460 basis points versus the prior-year period.
Crop protection net sales were $3,533 million for the first six months of 2021, up 12 percent from $3,154 million for the first six months of 2020. The increase was due to a 6 percent increase in volume, a 4 percent increase in local price and a 3 percent favorable impact from currency, partially offset by a 1 percent unfavorable portfolio impact.
Volume gains were led by continued penetration of new products, including ArylexTM and EnlistTM herbicides and Pyraxalt™ insecticide. These volume gains were partially offset by an approximate $130 million impact from our decision to phase out select low-margin products. The increase in local price was primarilyperiod largely driven by gains in Latin Americanew and North America. Favorable currency impacts primarily from the Euro more than offset unfavorable impacts from the Brazilian Real. The portfolio impact was driven by prior-year divestitures in Asia Pacific.
Segment operating EBITDA was $691 million for the first six months of 2021, up 26 percent from $547 million for the first six months of 2020. Favorable mix, continued penetration of new products, and ongoing cost and productivity actions more than offset higher input costs, including raw material costs. Segment operating EBITDA margin improved by more than 220 basis points versus the prior-year period.
Non-GAAP Financial Measures
The company presents certain financial measures that do not conform to U.S. GAAP and are considered non-GAAP measures. These measures include Operating EBITDA and operating earnings (loss) per share. Management uses these measures internally for planning and forecasting, including allocating resources and evaluating incentive compensation. Management believes that these non-GAAP measures best reflect the ongoing performance of the company during the periods presented and provide more relevant and meaningful information to investors as they provide insight with respect to ongoing operating results of the company and a more useful comparison of year over year results. These non-GAAP measures supplement the company's U.S. GAAP disclosures and should not be viewed as an alternative to U.S. GAAP measures of performance. Furthermore, such non-GAAP measures may not be consistent with similar measures provided or used by other companies. Reconciliations for these non-GAAP measures to U.S. GAAP are provided below.
Operating EBITDA is defined as earnings (loss) (i.e., income (loss) from continuing operations before income taxes) before interest, depreciation, amortization, non-operating (benefits) costs - net,benefits (costs), foreign exchange gains (losses), and net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting, excluding the impact of significant items. Non-operating (benefits) costs - netbenefits (costs) consists of non-operating pension and OPEB credits,benefits (costs), tax indemnification adjustments and environmental remediation and legal costs associated with legacy businesses and sites of Historical DuPont.sites. Tax indemnification adjustments relate to changes in indemnification balances, as a result of the application of the terms of the Tax Matters Agreement, between Corteva and Dow and/or DuPont that are recorded by the company as pre-tax income or expense. Operating earnings (loss) per share is defined as "Earnings"earnings (loss) per common share from continuing operations - diluted" excluding the after-tax impact of significant items, the after-tax impact of non-operating (benefits) costs - net,benefits (costs), the after-tax impact of amortization expense associated with intangible assets existing as of the Separation from DowDuPont, and the after-tax impact of net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting. Although amortization of the company's intangible assets is excluded from these non-GAAP measures, management believes it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in amortization of additional intangible assets. Net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting represents the non-cash net gain (loss) from changes in fair value of certain undesignated foreign currency derivative contracts. Upon settlement, which is within the same calendar year of execution of the contract, the realized gain (loss) from the changes in fair value of the non-qualified foreign currency derivative contracts will be reported in the relevant non-GAAP financial measures, allowing quarterly results to reflect the economic effects of the foreign currency derivative contracts without the resulting unrealized mark to fair value volatility.
Reconciliation of Income (Loss) from Continuing Operations after Income Taxes to Operating EBITDA
| | | | | | | | | | | | | | |
| Three Months Ended
June 30, | Six Months Ended
June 30, |
| (In millions) | 2021 | 2020 | 2021 | 2020 |
| | | | |
Income from continuing operations after income taxes (GAAP) | $ | 1,018 | | $ | 766 | | $ | 1,631 | | $ | 1,047 | |
| Provision for income taxes on continuing operations | 284 | | 78 | | 462 | | 205 | |
| Income from continuing operations before income taxes (GAAP) | 1,302 | | 844 | | 2,093 | | 1,252 | |
| Depreciation and amortization | 313 | | 300 | | 617 | | 583 | |
| Interest income | (18) | | (9) | | (39) | | (27) | |
| Interest expense | 7 | | 14 | | 14 | | 24 | |
| Exchange losses (gains) - net | 14 | | (1) | | 49 | | 60 | |
| Non-operating benefits - net | (315) | | (91) | | (626) | | (164) | |
| | | | |
Mark-to-market losses on certain foreign currency contracts not designated as hedges1 | 23 | | | 22 | | |
| Significant items charge | 135 | | 179 | | 235 | | 302 | |
| | | | |
| Operating EBITDA (Non-GAAP) | $ | 1,461 | | $ | 1,236 | | $ | 2,365 | | $ | 2,030 | |
1.Effective January 1, 2021, on a prospective basis, the company excludes net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting. For the three and six months ended June 30, 2020, the unrealized mark-to-market gain was $27 million. | | | | | | | | | | |
| Three Months Ended
March 31, | |
| (In millions) | 2022 | 2021 | | |
| | | | |
Income (loss) from continuing operations after income taxes (GAAP) | $ | 577 | | $ | 613 | | | |
| Provision for (benefit from) income taxes on continuing operations | 121 | | 178 | | | |
| Income (loss) from continuing operations before income taxes (GAAP) | 698 | | 791 | | | |
| Depreciation and amortization | 307 | | 304 | | | |
| Interest income | (15) | | (21) | | | |
| Interest expense | 9 | | 7 | | | |
| Exchange (gains) losses | 47 | | 35 | | | |
| Non-operating (benefits) costs | (65) | | (311) | | | |
| Mark-to-market (gains) losses on certain foreign currency contracts not designated as hedges | 36 | | (1) | | | |
| Significant items (benefit) charge | 22 | | 100 | | | |
| Operating EBITDA (Non-GAAP) | $ | 1,039 | | $ | 904 | | | |
Significant Items
| | | | | | | | | | | | | | |
| Three Months Ended
June 30, | Six Months Ended
June 30, |
| (In millions) | 2021 | 2020 | 2021 | 2020 |
| Restructuring and asset related charges - net | $ | (135) | | $ | (179) | | $ | (235) | | $ | (249) | |
| Loss on divestiture | — | | — | | — | | (53) | |
| Total pretax significant items charge | (135) | | (179) | | (235) | | (302) | |
Total tax benefit impact of significant items1 | 28 | | 36 | | 51 | | 59 | |
Tax only significant item benefit2 | — | | 29 | | — | | 10 | |
| Total significant items charge, after tax | $ | (107) | | $ | (114) | | $ | (184) | | $ | (233) | |
| | | | | | | | | | |
| Three Months Ended
March 31, | |
| (In millions) | 2022 | 2021 | | |
| Restructuring and asset related charges - net | $ | (5) | | $ | (100) | | | |
Estimated settlement expense1 | (17) | | — | | | |
| | | | |
| Total pretax significant items benefit (charge) | (22) | | (100) | | | |
Total tax (provision) benefit impact of significant items2 | 6 | | 23 | | | |
| Total significant items benefit (charge), after tax | $ | (16) | | $ | (77) | | | |
1.Consists of estimated Lorsban® related reserves.
2.Unless specifically addressed above, the income tax effect on significant items was calculated based upon the enacted tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment.
2.The tax only significant item benefits for the three and six months ended June 30, 2020 are primarily related to a benefit due to an elective change in accounting method that alters the 2019 impact of the business separation on The Act's foreign tax provisions and a state tax valuation allowance in the U.S. based on a change in judgment about the realizability of a deferred tax asset.
Reconciliation of Income (Loss) from Continuing Operations Attributable to Corteva and Earnings (Loss) Per Share of Common Stock from Continuing Operations - Diluted to Operating Earnings (Loss) and Operating Earnings (Loss) Per Share
| | | | | | | | | | | | | | |
| Three Months Ended
June 30, | Six Months Ended
June 30, |
| (In millions) | 2021 | 2020 | 2021 | 2020 |
| | | | |
Income from continuing operations attributable to Corteva (GAAP) | $ | 1,015 | | $ | 760 | | $ | 1,625 | | $ | 1,031 | |
| Less: Non-operating benefits - net, after tax | 237 | | 67 | | 474 | | 124 | |
| Less: Amortization of intangibles (existing as of Separation), after tax | (140) | | (137) | | (283) | | (251) | |
| | | | |
Less: Mark-to-market losses on certain foreign currency contracts not designated as hedges, after tax1 | (18) | | | (17) | | |
| Less: Significant items charge, after tax | (107) | | (114) | | (184) | | (233) | |
| Operating Earnings (Non-GAAP) | $ | 1,043 | | $ | 944 | | $ | 1,635 | | $ | 1,391 | |
| | | | | | | | | | |
| Three Months Ended
March 31, | |
| (In millions) | 2022 | 2021 | | |
| | | | |
Income (loss) from continuing operations attributable to Corteva (GAAP) | $ | 574 | | $ | 610 | | | |
| Less: Non-operating benefits - net, after tax | 49 | | 237 | | | |
| Less: Amortization of intangibles (existing as of Separation), after tax | (139) | | (143) | | | |
| | | | |
| Less: Mark-to-market gains (losses) on certain foreign currency contracts not designated as hedges, after tax | (28) | | 1 | | | |
| Less: Significant items benefit (charge), after tax | (16) | | (77) | | | |
| Operating Earnings (Loss) (Non-GAAP) | $ | 708 | | $ | 592 | | | |
| | | | | | | | | | | | | | |
| Three Months Ended
June 30, | Six Months Ended
June 30, |
| 2021 | 2020 | 2021 | 2020 |
| | | | |
Earnings per share of common stock from continuing operations - diluted (GAAP) | $ | 1.37 | | $ | 1.01 | | $ | 2.18 | | $ | 1.37 | |
| Less: Non-operating benefits - net, after tax | 0.32 | | 0.09 | | 0.64 | | 0.16 | |
| Less: Amortization of intangibles (existing as of Separation), after tax | (0.19) | | (0.19) | | (0.38) | | (0.33) | |
| | | | |
Less: Mark-to-market losses on certain foreign currency contracts not designated as hedges, after tax1 | (0.02) | | | (0.02) | | |
| Less: Significant items charge, after tax | (0.14) | | (0.15) | | (0.25) | | (0.31) | |
| Operating Earnings Per Share (Non-GAAP) | $ | 1.40 | | $ | 1.26 | | $ | 2.19 | | $ | 1.85 | |
Diluted Shares Outstanding (in millions) | 743.3 | | 751.6 | | 746.4 | | 752.0 | |
| | | | | | | | | | |
| Three Months Ended
March 31, | |
| 2022 | 2021 | | |
| | | | |
Earnings (loss) per share of common stock from continuing operations - diluted (GAAP) | $ | 0.79 | | $ | 0.81 | | | |
| Less: Non-operating benefits - net, after tax | 0.07 | | 0.31 | | | |
| Less: Amortization of intangibles (existing as of Separation), after tax | (0.19) | | (0.19) | | | |
| | | | |
| Less: Mark-to-market gains on certain foreign currency contracts not designated as hedges, after tax | (0.04) | | — | | | |
| Less: Significant items benefit (charge), after tax | (0.02) | | (0.10) | | | |
| Operating Earnings (Loss) Per Share (Non-GAAP) | $ | 0.97 | | $ | 0.79 | | | |
Diluted Shares Outstanding (in millions) | 730.9 | | 749.6 | | | |
1.Effective January 1, 2021, on a prospective basis, the company excludes net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting. For the three and six months ended June 30, 2020, the unrealized mark-to-market gain was $27 million.
Liquidity and Capital Resources
Information related to the company's liquidity and capital resources can be found in the company’s 20202021 Annual Report, Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity & Capital Resources. The discussion below provides the updates to this information for the sixthree months ended June 30, 2021.March 31, 2022.
| | (In millions) | (In millions) | June 30, 2021 | December 31, 2020 | June 30, 2020 | (In millions) | March 31, 2022 | December 31, 2021 | March 31, 2021 |
| Cash, cash equivalents and marketable securities | Cash, cash equivalents and marketable securities | $ | 2,900 | | $ | 3,795 | | $ | 2,869 | | Cash, cash equivalents and marketable securities | $ | 2,321 | | $ | 4,545 | | $ | 2,518 | |
| Total debt | Total debt | $ | 1,778 | | $ | 1,105 | | $ | 2,631 | | Total debt | $ | 2,172 | | $ | 1,117 | | $ | 2,352 | |
The company's cash, cash equivalents and marketable securities at June 30, 2021, December 31, 2020, and June 30, 2020 were $2,900 million, $3,795 million and $2,869 million, respectively. Total debt at June 30, 2021, December 31, 2020, and June 30, 2020 was $1,778 million, $1,105 million, and $2,631 million, respectively. The increase in debt balances from December 31, 20202021 was primarily due to funding the company’s seasonal working capital needs and capital expenditures. See further information in Note 1211 - Short-Term Borrowings, Long-Term Debt and Available Credit Facilities, to the interim Consolidated Financial Statements.
The company believes its ability to generate cash from operations and access to capital markets and commercial paper markets will be adequate to meet anticipated cash requirements to fund its operations, including seasonal working capital, capital
spending, funding of the MOU escrow account,dividend payments, share repurchases and pension obligations. Corteva's strong financial position, liquidity and credit ratings will provide access as needed to capital markets and commercial paper markets to fund seasonal working capital needs. The company's liquidity needs can be met through a variety of sources, including cash provided by operating activities, commercial paper, syndicated credit lines, bilateral credit lines, long-term debt markets, bank financing and committed receivable repurchase facilities. Corteva considers the borrowing costs and lending terms when selecting the source to fund its operations and working capital needs. During the six months ended June 30, 2021, the company has experienced increased operating costs for freight and raw materials. The company also has experienced increased costs for materials used in various capital expenditures and capacity expansion projects. The increases in costs have been due, in part to, inflation and the rising demand from the economic recovery from the lifting of COVID-19 pandemic restrictions and government stimulus in some regions, while the supply for certain materials have not returned to pre-pandemic levels. The company expects this trend to continue as global supply chains and logistics remain constrained across industries.
The company had access to approximately $6.4$6.6 billion at June 30, 2021,March 31, 2022 and $6.4 billion at December 31, 2020,2021, and $6.3 billion at June 30, 2020,March 31, 2021, respectively, in committed and uncommitted unused credit lines.lines, which includes the uncommitted revolving credit lines relating to the Foreign Currency Loans. In addition to the unused credit facilities, the company has a $1 billion 2021$500 million 2022 Repurchase Facility (as defined below). These facilities provide support to meet the company’s short-term liquidity needs and for general corporate purposes which may include funding of discretionary and nondiscretionarynon-discretionary contributions to certain benefit plans, severance payments, repayment and refinancing of debt, working capital, capital expenditures, repurchases and redemptions of securities and funding Corteva's costs and expenses.
In March 2020,November 2018, EID entered into a $3.0 billion five-year revolving credit facility and a $3.0 billion three-year revolving credit facility (the “Revolving Credit Facilities”). The 2018 Revolving Credit Facilities became effective May 2019. Corteva, Inc. became a party at the time of the Corteva Distribution. In May 2021, the company drew down $500 million underentered into an amendment that extended the three yearmaturity date of the 3-year revolving credit facility from May 2022 to May 2023. Other than the change in maturity date, there were no material modifications to the terms of the credit facility. During May 2022, the Credit Facilities were refinanced for purposes of extending the maturity dates to 2027 and 2025 for the 5-year and 3-year revolving credit facilities, respectively, lowering the facility amount of the 3-year revolving credit facility to finance its short term liquidity needs$2 billion and transitioning the interest rate to a floating rate utilizing Adjusted Term SOFR plus a margin of 0.10 percent. The Revolving Credit Facilities may serve as a result ofsubstitute to the volatility and increased borrowing costs ofcompany's commercial paper resultingprogram, and can be used, from time to time, for general corporate purposes including, but not limited to, the unstable market conditions caused by the COVID-19 pandemic, and repaid that borrowing in full in June 2020.funding of seasonal working capital needs. The Revolving Credit Facilities contain customary representations and warranties, affirmative and negative covenants and events of default that are typical for companies with similar credit ratings. The Revolving Credit Facilities also contain a financial covenant requiring that the ratio of total indebtedness to total capitalization for Corteva and its consolidated subsidiaries not exceed 0.60. At June 30, 2021March 31, 2022 the company was in compliance with these covenants.
The company enters into short-term and long-term foreign currency loans from time-to-time by accessing uncommitted revolving credit lines to fund working capital needs of foreign subsidiaries in the normal course of business (“Foreign Currency Loans”). Interest rates are variable and determined at the time of borrowing. Total unused bank credit lines on the Foreign Currency Loans at March 31, 2022 was approximately $255 million. The company’s long-term Foreign Currency Loans have varying maturities through 2024.
In May 2020, EID issued $500 million of 1.70 percent Senior Notes due 2025 and $500 million of 2.30 percent Senior Notes due 2030 (the May 2020 Debt Offering). The proceeds of this offering are intended to be used for general corporate purposes.
The company's indenture covenants include customary limitations on liens, sale and leaseback transactions, and mergers and consolidations affecting manufacturing plants, mineral producing properties or research facilities located in the U.S. and the consolidated subsidiaries owning such plants, properties and facilities subject to certain limitations. The outstanding long-term debt also contains customary default provisions.
The company has meaningful seasonal working capital needs based in part on providing financing to its customers. Working capital is funded through multiple methods including cash, commercial paper, the 2021 Repurchase Facility,a receivable repurchase facility, the Revolving Credit Facilities, and factoring.
In February 2021,2022, in line with seasonal working capital requirements, the company entered into a committed receivable repurchase agreement of up to $1.0 billion$500 million (the "2021"2022 Repurchase Facility"), which expires in December 2021.2022. Under the 20212022 Repurchase Facility, Corteva may sell a portfolio of available and eligible outstanding customer notes receivables to participating institutions and simultaneously agree to repurchase at a future date. See further discussion of this facility in Note 1211 - Short-Term Borrowings, Long-Term Debt and Available Credit Facilities, to the interim Consolidated Financial Statements.
The company has factoring agreements with third-party financial institutions to sell its trade receivables under both recourse and non-recourse agreements in exchange for cash proceeds in an effort to reduce its receivables risk. For arrangements that include an element of recourse, the company provides a guarantee of the trade receivables in the event of customer default. Refer to Note 98 - Accounts and Notes Receivable - Net, to the interim Consolidated Financial Statements for more information.
The company also organizes agreements with third-party financial institutions who directly provide financing for select customers of the company's seed and crop protection products in each region. Terms of the third-party loans are less than a year and programs are renewed on an annual basis. In some cases, the company guarantees a portion of the extension of such credit to such customers. Refer to Note 1312 - Commitments and Contingent Liabilities, to the interim Consolidated Financial Statements for more information on the company’s guarantees.
The company's cash, cash equivalents and marketable securities at June 30, 2021,March 31, 2022, December 31, 2020,2021, and June 30, 2020March 31, 2021 are $2.9$2.3 billion, $3.8$4.5 billion, and $2.9$2.5 billion, respectively, of which $2.7$2.2 billion, $3.1$2.9 billion, and $2.7$2.4 billion at June 30, 2021,March 31, 2022, December 31, 2020,2021, and June 30, 2020,March 31, 2021, respectively, was held by subsidiaries in foreign countries, including United States territories. The 2017 Tax Cuts and Jobs Act ("The Act") required companies to pay a one-time transition tax on the untaxed earnings of foreign subsidiaries. Upon actual repatriation, such earnings could be subject to withholding taxes, foreign and/or U.S. state income taxes, and taxes resulting from the impact of foreign currency movements. The Act also introduced a 100 percent dividends received deduction regarding earnings of foreign subsidiaries. The cash held by foreign subsidiaries is generally used to finance the subsidiaries' operational activities and future foreign investments. At June 30, 2021,March 31, 2022, management believed that sufficient liquidity is available in the U.S. with global operating cash flows, borrowing capacity from existing committed credit facilities, and access to capital markets and commercial paper markets.
Summary of Cash Flows
Cash used forprovided by (used for) operating activities was $643$(2,730) million for the sixthree months ended June 30, 2021March 31, 2022 compared to $869$(1,950) million for the sixthree months ended June 30, 2020.March 31, 2021. The change in cash used for operating activities was driven by an increase in working capital requirements primarily due to higher earnings partially offset byreceivables from revenue growth, higher inventories for expected demand and changes in working capital.deferred revenue due to higher application of customer payments to accounts receivable.
Cash used forprovided by (used for) investing activities was $17$(404) million for the sixthree months ended June 30, 2021March 31, 2022 compared to $252$36 million for the sixthree months ended June 30, 2020.March 31, 2021. The change was primarily due to higher purchase of investments, lower proceeds from sales and maturities of investments, and higher capital expenditures.
Cash provided by (used for) financing activities was $714 million for the three months ended March 31, 2022 compared to $821 million for the three months ended March 31, 2021. The change was primarily due to lower purchasesproceeds from issuance of investments, partly offset by higher capital expenditures. The company is increasing its expected 2021 capital expenditures to $600 - $650 million, which is primarily driven by increases in costs for materials used in various capital expenditureslong-term debt, and capacity expansion projects.
Cash (used for) provided by financing activities was $(27) million for the six months ended June 30, 2021 compared to $2.2 billion for the six months ended June 30, 2020. The change was primarily due to lower borrowings partially offset by higherlower repurchases of Corteva common stock.
In January 2021, the company's Board of Directors authorized a common stock dividend of $0.13 per share, payable on March 15, 2021, to the shareholders of record on March 1, 2021. In April 2021, the company's Board of Directors authorized a common stock dividend of $0.13 per share, payable on June 15, 2021, to the shareholders of record on May 14, 2021. In July 2021, the company’s Board of Directors approved an increase in the common stock dividend of $0.13 per share to $0.14 per share. In July 2021,2022, the company's Board of Directors authorized a common stock dividend of $0.14 per share, payable on SeptemberMarch 15, 2021,2022, to the shareholders of record on AugustMarch 1, 2022. In April 2022, the company's Board of Directors authorized a common stock dividend of $0.14 per share, payable on June 15, 2022, to the shareholders of record on May 13, 2021.2022.
On August 5, 2021, the company's Board of Directors authorized a $1.5 billion share repurchase program to purchase Corteva, Inc.'s common stock, par value $0.01 per share, without an expiration date.date (“2021 Share Buyback Plan”). The company repurchased $485 million under the 2021 Share Buyback Plan since the inception of the plan. In connection with the 2021 Share Buyback Plan, the company repurchased and retired 4,585,000 shares during the three months ended March 31, 2022 in the open market for a total cost of $235 million.
On June 26, 2019, the company's Board of Directors authorized a $1 billion share repurchase program to purchase Corteva, Inc.'s common stock, par value $0.01 per share, without an expiration date.date (“2019 Share Buyback Plan”). The company completed the 2019 Share Buyback Plan during the third quarter of 2021. In connection with the 2019 Share Buyback Plan, the company repurchased $850 million under its share buyback plan sinceand retired 7,646,000 shares during the Corteva Distribution and expects to completethree months ended March 31, 2021 in the program in 2021.open market for a total cost of $350 million.
For the full year 2021,2022, the company expects repurchases to repurchase at least $850exceed $800 million under the share buyback plans2021 Share Buyback Plan discussed above. The total amount, timing, price and volume of purchases will be based on market conditions, relevant securities laws and other market and company specific factors.
During the three and six months ended June 30, 2021, the company purchased and retired 4,324,000 shares and 11,970,000 shares, respectively, in the open market for a total cost of $200 million and $550 million, respectively. During the six months ended June 30, 2020, the company purchased and retired 1,865,000 shares for a total cost of $50 million. See Note 1413 - Stockholders' Equity, to the interim Consolidated Financial Statements for additional information related to the share buyback plan.plans.
EID Liquidity Discussion
As discussed in Note 1 - Basis of Presentation, to the EID interim Consolidated Financial Statements, EID is a subsidiary of Corteva, Inc. and continues to be a reporting company, subject to the requirements of the Exchange Act. The below relates to EID only and is presented to provide a Liquidity discussion for the differences between EID and Corteva, Inc.
Cash used forprovided by (used for) operating activities
EID’s cash used forprovided by (used for) operating activities was $663$(2,727) million and $920$(1,946) million for the sixthree months ended June 30,March 31, 2022 and 2021, and 2020, respectively. The change was primarily driven by lower interest on related party debt and the items abovenoted on page 50, under the header, "Summary of Cash Flow".Flow."
Cash provided by (used for) financing activities
EID’s cash provided by (used for) provided by financing activities was $(7)$711 million for the sixthree months ended June 30, 2021March 31, 2022 compared to $2,265$817 million for the sixthree months ended June 30, 2020.March 31, 2021. The change was primarily driven by lower proceeds from issuance of long-term debtborrowings and higher payments on long-term debt on related party debt.other financing activities.
See Note 2 - Related Party Transactions, to the EID interim Consolidated Financial Statements for further information on the related party loan between EID and Corteva, Inc.
Guarantees and Off-Balance Sheet Arrangements
For detailed information related to Guarantees, Indemnifications, and Obligations for Equity Affiliates and Others, see the company’s 20202021 Annual Report, Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Off-Balance Sheet Arrangements and Note 1312 - Commitments and Contingent Liabilities, to the interim Consolidated Financial Statements.
Contractual Obligations
Information related to the company's contractual obligations at December 31, 20202021 can be found on page 7364 of the company's 20202021 Annual Report. There have been no material changes to the company’s contractual obligations outside the ordinary course of business from those reported in the company’s 20202021 Annual Report.
Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Note 1615 - Financial Instruments, to the interim Consolidated Financial Statements. See also Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk, of the company's 20202021 Annual Report, for information on the company's utilization of financial instruments and an analysis of the sensitivity of these instruments.
Item 4. CONTROLS AND PROCEDURES
Corteva, Inc.
a) 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 Securities and Exchange Commission. 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 June 30, 2021,March 31, 2022, 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.
b)Changes in Internal Control over Financial Reporting
There have been no changes in the company's internal control over financial reporting that occurred during the quarter ended June 30, 2021March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting.
E. I. du Pont de Nemours and Company
a) Evaluation of Disclosure Controls and Procedures
EID maintains a system of disclosure controls and procedures to give reasonable assurance that information required to be disclosed in their 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 Securities and Exchange Commission. 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 June 30, 2021,March 31, 2022, EID's CEO and CFO, together with management, conducted an evaluation of the effectiveness of EID'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.
b)Changes in Internal Control over Financial Reporting
There have been no changes in EID's internal control over financial reporting that occurred during the quarter ended June 30, 2021March 31, 2022 that have materially affected, or are reasonably likely to materially affect, EID's internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1.LEGAL PROCEEDINGS
The company is subject to various legal proceedings, including, but not limited to, product liability, intellectual property, antitrust, commercial, property damage, personal injury, environmental and regulatory matters arising out of the normal course of its current businesses or legacy EID businesses unrelated to Corteva’s current businesses but allocated to Corteva as part of the Separation of Corteva from DuPont.
Often these proceedings raise complex factual and legal issues, which are subject to risks and uncertainties and which could require significant amounts of senior leadership team’s time. Litigation and other claims, along with regulatory proceedings, against the company could also materially adversely affect its operations, reputation, and/or result in the incurrence of unexpected expenses and liability. Even when the company believes liabilities are not expected to be material or 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. Information regarding certain of these matters is set forth below and in Note 1312 - Commitments and Contingent Liabilities, to the interim Consolidated Financial Statements.
Litigation related to Corteva’s current businesses
Canadian Competition Bureau Formal Inquiry
On January 30, 2020, the Canadian Competition Bureau (the “Bureau”) filed a court order for the company to produce records and information as part of a formal inquiry under civil sections of Canada’s competition laws. The inquiry is in response to allegations by the Farmers Business Network ("FBN") that Corteva and other seeds and crop protection manufacturers and wholesalers unilaterally or in coordination refused, restricted and/or impaired supply of products to FBN in western Canada. This inquiry follows an informal request for information from the Bureau pursuant to which the company voluntarily provided documents and engaged in discussions with the Bureau outlining how its conduct was and continues to be compliant with Canadian competition laws. Corteva continues to cooperate with the Bureau’s inquiries, but believes the likelihood of material liability is remote.
Federal Trade Commission Investigation
On May 26, 2020, Corteva received a subpoena from the Federal Trade Commission (“FTC”) directing it to submit documents pertaining to its crop protection products generally, as well as business plans, rebate programs, offers, pricing and marketing materials specifically related to its acetochlor, oxamyl, and rimsulfuron and other related products in order to determine whether Corteva engaged in unfair methods of competition through anticompetitive conduct. Corteva has cooperated with the FTC’s subpoena, and continues to believe the likelihood of material liability is remote.
ChlorpyrifosLorsban® Lawsuits
As of July 2021,March 31, 2022, there were 17 pending personal injury and remediation lawsuits filed against the former Dow Agrisciences,Agrosciences LLC in California alleging injuries related to exposure to, or contamination by, chlorpyrifos, exposure, the active ingredient in Lorsban®, an insecticide used by commercial farms for field fruit, nut and vegetable crop.crops. Corteva ended its production of Lorsban® in 2020. Chlorpyrifos products are restricted-use pesticides, which are not available for purchase or use by the general public,Further information with respect to these proceedings is set forth under “Lorsban® Lawsuits” in Note 12 – Commitments and may only be sold to, and used by, certified applicators or someone under the certified applicator's direct supervision. These lawsuits do not relate to Dursban®, a residential-type chlorpyrifos product that was authorized for indoor purposes, which was discontinued over two decades ago priorContingent Liabilities, to the Merger and Corteva’s formation and Separation.
Currently, 10 cases filed in Monterey County allege personal injury, including autism, developmental delays and/or decreased neurologic function, resulting from farm worker exposure and bystander drift and in utero exposure to chlorpyrifos. The Monterey County cases have been consolidated for discovery purposes, but not for trial. The first trial is set to begin in March 2022. The remaining cases are from the California Central Valley and allege personal injury from occupational, in utero and post-natal exposure to chlorpyrifos oxon, as well as exposure from drinking water contaminated with chlorpyrifos. Additionally, the Central Valley cases include remediation claims due to alleged property contamination from chlorpyrifos. Discovery for the Central Valley cases only recently begun and is expected to continue through 2021. Any losses are not estimable at this time due to various reasons, including, among others, that the litigation remains in its early stages and significant factual issues remain to be resolved.interim Consolidated Financial Statements.
Litigation related to legacy EID businesses unrelated to Corteva’s current businesses
As discussed below and in Note 1312 - Commitments and Contingent Liabilities, to the interim Consolidated Financial Statements, certain of the environmental proceedings and litigation allocated to Corteva as part of the Separation from DuPont relate to the legacy EID businesses, including their use of PFOA, which, for purposes of this report, means collectively perfluorooctanoic acid and its salts, including the ammonium salt and does not distinguish between the two forms, and PFAS, which means per- and polyfluoroalkyl substances, including PFOA, PFOS (perfluorooctanesulfonic acid), GenX and other
perfluorinated chemicals and compounds ("PFCs"). Management believes that it is reasonably possible that EID could incur liabilities related to PFOA in excess of amounts accrued. However, any such losses are not estimable at this time due to various reasons, including, among others, that the underlying matters are in their early stages and have significant factual issues to be resolved.
On May 13, 2019, Chemours filed suit in the Delaware Court of Chancery against DuPont, EID, and Corteva, seeking, among other things, to limit its responsibility for the litigation and environmental liabilities allocated to and assumed by Chemours under the Chemours Separation Agreement (the “Delaware Litigation”). On March 30, 2020, the Court of Chancery granted a motion to dismiss. On December 15, 2020, the Delaware Supreme Court affirmed the judgment of the Court of Chancery. Meanwhile, a confidential arbitration process regarding the same and other claims has proceeded (the “Pending Arbitration”). On January 22, 2021, Chemours, DuPont, Corteva and EID entered into a binding memorandum of understanding containing a settlement to resolve legal disputes originating from the Delaware Litigationrelated to Chemours' responsibility for litigation and Pending Arbitration,environmental liabilities allocated to it, and to establish a cost sharing arrangement and escrow account to be used to support and manage potential future legacy per- and polyfluoroalkyl substances (“PFAS”)PFAS liabilities arising out of pre-July 1, 2015 conduct (the “MOU”). See Note 1312 - Commitments and Contingent Liabilities, to the interim Consolidated Financial Statements for further discussion.
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 matters below involve the potential for $1 million or more in monetary fines and are included per Item 103(c)(3)(iii) of Regulation S-K of the Securities Exchange Act of 1934, as amended.
Related to Corteva's current businesses
La Porte Plant, La Porte, Texas - Crop Protection - Release Incident Investigations
On November 15, 2014, there was a release of methyl mercaptan at EID's La Porte, Texas, facility. The release occurred at the site’s crop protection unit resulting in four employee fatalities inside the unit. The Chemical Safety Board (“CSB”) issued its final report on June 18, 2019, which included recommendations related to the emergency response program at La Porte.
Corteva responded to the CSB on September 30, 2019 outlining the actions it has taken to date to address the recommendations for the site and providing its plan to address the CSB’s remaining recommendations. After the conclusion of the CSB investigation, criminal U.S. Environmental Protection Agency ("EPA") and the Department of Justice ("DOJ") investigations related to the incident continued.
On January 8, 2021, EID and the facility's former unit operations leader were indicted by the DOJ on two felony and one misdemeanor charges of violations of the Clean Air Act related to the release. On January 18, 2022, the U.S. District Court of the Southern District of Texas dismissed the felony charge for failing to implement a safety practice. The maximum statutory penalties per charge are $500,000, or twice the gross gain or loss derived from the incident, as well as up to three years of probation and related ongoing reporting obligations. Corteva cooperated fully withThe company moved to dismiss the government’s investigationremaining charges and will vigorously defend against these charges. Thethe trial is currently scheduled for MarchOctober 2022.
Related to legacy EID businesses unrelated to Corteva’s current businesses
Sabine Plant, Orange, Texas - EPA Multimedia Inspection
In June 2012, EID began discussions with the EPA and the DOJ related to a multimedia inspection that the EPA conducted at the Sabine facility in March 2009 and December 2015. The discussions involve the management of materials in the facility's wastewater treatment system, hazardous waste management, flare and air emissions, including leak detection and repair. These discussions continue.A final consent decree was approved by the federal court in January 2022, pursuant to which EID agreed to pay a civil penalty of $3.1 million and attorney's fees to the State of Texas. Under the Separation Agreement, Corteva and DuPont will share any future liabilities proportionally on the basis of 29% and 71%, respectively.
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. EID sold the neoprene business, including this manufacturing facility, to Denka in the fourth quarter of 2015. In the spring of 2017, the EPA, the DOJ, the Louisiana Department of Environmental Quality, EID and Denka began discussions relating to the inspection conclusions and allegations of noncompliance arising under the Clean Air Act, including leak detection and repair. These discussions, which include potential settlement options, continue. Under the Separation Agreement, DuPont is defending and indemnifying the company in this matter.
New Jersey Directive PFAS
On March 25, 2019, the New Jersey Department of Environmental Protection (“NJDEP”) issued a Statewide PFAS Directive to several companies, including Chemours, DuPont, and EID. The Directive seeks information relating to the use and environmental release of PFAS and PFAS-replacement chemicals at and from two former EID sites in New Jersey, Chambers Works and Parlin, and a funding source for costs related to the NJDEP’s investigation of PFAS issues and PFAS testing and remediation.
New Jersey Directive Pompton Lakes
On March 27, 2019, the NJDEP issued to Chemours and EID a Natural Resource Damages Directive relating to chemical contamination (non-PFAS) at and around EID’s former Pompton Lakes facility in New Jersey. The Directive alleges that this contamination has harmed the natural resources of New Jersey. It seeks $125,000 as reimbursement for the cost of preparing a natural resource damages assessment, which the State will use to determine the extent of such damage and the amount it expects to seek to restore the affected natural resources to their pre-damage state.
Natural Resource Damage Cases
Since May 2017, several municipal water districts and state attorneys general have filed lawsuits against EID, Corteva, Chemours, 3M, and others, claiming contamination of public water systems by PFCs, including but not limited to PFOA. These actions with the municipalities and states seeking economic impact damages for alleged harm to natural resources, punitive damages, present and future costs to cleanup PFOA contamination and the abatement of alleged nuisance with filtration systems. Further information with respect to these proceedings is set forth under "Other PFOA Matters" in Note 1312 - Commitments and Contingent Liabilities, to the interim Consolidated Financial Statements.
Netherlands Municipality Cases
In April 2021, four municipalities in the Netherlands filed complaints alleging contamination of land and groundwater resulting from the emission of PFOA and GenX by Corteva, DuPont and Chemours. Further information with respect to these proceedings is set forth under "Other PFOA Matters" in Note 1312 - Commitments and Contingent Liabilities, to the interim Consolidated Financial Statements.
Settlement with the State of Delaware
On July 13, 2021, Chemours, DuPont, EID and Corteva entered into a settlement agreement with the State of Delaware reflecting the companies’ and the State’s agreement to settle and fully resolve claims alleged against the companies regarding their historical Delaware operations, manufacturing, use and disposal of all chemical compounds, including PFAS. Further information with respect to this settlement is set forth under "Other PFOA Matters" in Note 13 - Commitments and Contingent Liabilities, to the interim Consolidated Financial Statements.
Nebraska Department of Environment and Energy, AltEn Facility
The Environmental Protection Agency (“EPA”) and the Nebraska Department of the Environmental and Energy (“NDEE”) are pursuing investigations, response and removal actions, litigation and enforcement action related to an ethanol plant located near Mead, Nebraska and owned and operated by AltEn LLC (“AltEn”). The agencies have alleged violations under the Resource Conservation and Recovery Act (“RCRA”) and other federal and state laws stemming from AltEn’s lack of compliance with the terms and conditions of its operating permits and other regulatory requirements. Corteva is one of six seed companies, who were customers of AltEn (collectively, the "Facility Response Group"), participating in the NDEE’s Voluntary Cleanup Program to address certain interim remediation needs at the site. In February 2022, Corteva, along with other members of the Facility Response Group, filed a lawsuit against AltEn and certain of its affiliates to preserve certain contractual and common law indemnification claims.
Item 1A. RISK FACTORS
The significant factors known to us that could materially adversely affect our business, financial condition, or operating results are described in our most recently filed annual report on Form 10-K under Item 1A - Risk Factors, and are supplemented by the following risk factorsfactor below.
Risks Related to our IndustryOur business, financial condition and results of operations could be materially affected by disruptions in the global economy caused by the ongoing conflict between Russia and Ukraine.
A recent executive order may resultThe global economy has been negatively impacted by the military conflict between Russia and Ukraine. Additionally, the company announced its decision to withdraw from Russia and, having already paused new sales in additional regulationthe country, is initiating a plan to stop production and business activities. We have experienced shortages in materials, the inability to insure shipments, and increased costs for transportation, energy, and raw material and other inputs due in part to the negative impact of the agricultural industry thatRussia-Ukraine military conflict on the global economy. Further escalation of the military conflict or related geopolitical tensions, including increased trade barriers or restrictions on global trade, could result in, among other things, cyberattacks, supply disruptions, and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chains. Such geopolitical instability and uncertainty has negatively impacted on our ability to sell to, ship products to, collect payments from, and support customers in certain regions. Logistics restrictions, including closures of air space and shipping ports, the impositionreduction of significant coststhe availability of farmable land, and restrictions on the Company’s business operationsdestruction of facilities could further increase these adverse impacts and negatively impact demand for our products in the future.region. While Ukraine and Russia do not constitute a material portion of our business revenues, further escalation or expansion of economic disruption or the conflict's current scope could have a material adverse effect on our results of operations. In addition, the effects of the ongoing conflict could heighten many of our known risks described in Part I - Item 1A – “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 10, 2022.
On July 9, 2021, President Biden issued an executive order promoting competition in the American economy. The order encouraged further examination and efforts by U.S. regulatory agencies to avoid market concentrations for agricultural inputs, that could challenge the survival of family farms. The executive order also directs the U.S. Secretary of Agriculture to take action to ensure that the intellectual property system, while still incentivizing innovation, does not also unnecessarily reduce competition in seed and other agricultural input markets beyond what is reasonably contemplated by the U.S. Patent Act and propose strategies for addressing those concerns across intellectual property, antitrust, and other relevant laws. While the ultimate impact of the executive order will depend on the actions ultimately resulting from the U.S. regulatory authorities, actions taken by such authorities may increase the regulation and regulatory costs associated with our industry in the future and restrict the company from pursuing certain growth opportunities, including mergers and acquisitions.
Risks Related to our Operations
The transition in our chief executive officer position will be critical to our success and our business could be negatively impacted if we do not successfully manage this transition.
On June 23, 2021, the company announced that James C. Collins, Jr., chief executive officer ("CEO") will retire from all positions with the company by December 31, 2021. While the company is currently engaged in a search for a new CEO, any failure to timely hire a qualified CEO could hinder the company’s strategic planning, execution and future performance. The departure of key leadership personnel, such as a CEO, can take from the company significant knowledge and experience. While this loss of knowledge and experience can be mitigated through successful hiring and transition, there can be no assurance that we will be successful in such efforts. Further, if the company’s new CEO formulates different or changed views, the future strategy and plans of the company may differ materially from those of the past. While Mr. Collins entered into a letter agreement intended to facilitate a smooth transition, if the company does not successfully manage this transition, it could be viewed negatively by our customers, employees or investors and could have an adverse impact on our business and strategic direction.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table summarizes information with respect to the company's purchase of its common stock during the three months ended June 30, 2021:March 31, 2022:
| | | | | | | | | | | | | | |
| Month | Total Number of Shares Purchased | Average Price
Paid per Share | Total Number of Shares Purchased as Part of the Company's Publicly Announced Share Buyback Program1 | Approximate Value of Shares that May Yet Be Purchased Under the Programs(1) (Dollars in millions) |
| | | | |
| April 2021 | 1,317,265 | | $ | 47.60 | | 1,317,265 | | $ | 287 | |
| May 2021 | 1,411,685 | | 46.75 | | 1,411,685 | | 221 |
| June 2021 | 1,595,384 | | 44.69 | | 1,595,384 | | 150 | |
| Total | 4,324,334 | | $ | 46.25 | | 4,324,334 | | $ | 150 | |
| | | | | | | | | | | | | | |
| Month | Total Number of Shares Purchased | Average Price
Paid per Share | Total Number of Shares Purchased as Part of the Company's Publicly Announced Share Buyback Program1 | Approximate Value of Shares that May Yet Be Purchased Under the Program(1) (Dollars in millions) |
| | | | |
| January 2022 | 1,311,419 | | $ | 47.31 | | 1,311,419 | | $ | 1,188 | |
| February 2022 | 1,269,140 | | 49.94 | | 1,269,140 | | 1,125 | |
| March 2022 | 2,004,820 | | 54.83 | | 2,004,820 | | 1,015 | |
| Total | 4,585,379 | | $ | 51.32 | | 4,585,379 | | $ | 1,015 | |
1. On June 26, 2019,August 5, 2021, Corteva, Inc. announced that its Board of Directors authorized a $1$1.5 billion share repurchase program to purchase Corteva, Inc.'s common stock, par value $0.01 per share, without an expiration date. The timing, price and volume of purchases will be based on market conditions, relevant securities laws and other factors.
Item 5. OTHER INFORMATION
None.
Item 6.EXHIBITS
| | | | | | | | |
Exhibit
Number | | Description |
| | | |
| | Separation and Distribution Agreement by and among DuPont Inc., Dow Inc. and Corteva, Inc. (incorporated by reference to Exhibit No. 2.1 to Amendment 3 to Corteva’s Registration Statement on Form 10 (Commission file number 001-38710), filed on April 16, 2019). |
| | | |
| | Amended and Restated Certificate of Incorporation of Corteva, Inc. (incorporated by reference to Exhibit No. 3.1 to Corteva’s Current Report on Form 8-K (Commission file number 001-38710), filed on June 3, 2019). |
| | | |
| | Amended and Restated Bylaws of Corteva, Inc. (incorporated by reference to Exhibit No. 3.1 to Corteva’s Current Report on Form 8-K (Commission file number 001-38710), filed on October 10, 2019). |
| | | |
| | Amended and Restated Certificate of Incorporation of E.I. du Pont de Nemours and Company (incorporated by reference to Exhibit 3.1 to E.I. du Pont de Nemours and Company’s Current Report on Form 8-K (Commission file number 1-815) dated September 1, 2017). |
| | |
| | Amended and Restated Bylaws of E.I. du Pont de Nemours and Company (incorporated by reference to Exhibit 3.2 to E.I. du Pont de Nemours and Company's Current Report on Form 8-K (Commission file number 1-815) dated September 1, 2017). |
| | |
| 4 | | Corteva agrees to provide the Commission, on request, copies of instruments defining the rights of holders of long-term debt of Corteva and its subsidiaries. |
| | |
| | Form of CFO Special RSU Agreement (incorporated by reference from the Form 8-K (Commission file number 001-38710) dated April 6, 2021).Time-Vested Restricted Stock Unit Award Terms under 2019 Corteva, Inc. Omnibus Incentive Plan |
| | |
| | Letter Agreement between James C. Collins, Jr. andForm of Option Award Terms under 2019 Corteva, Inc., dated June 21, 2021 (incorporated by reference from the Omnibus Incentive Plan |
| | |
| | Form 8-K (Commission file number 001-38710) dated June 23, 2021).of Performance Stock Unit Award Terms under 2019 Corteva, Inc. Omnibus Incentive Plan |
| | |
| | |
| | |
| | |
| | Rule 13a-14(a)/15d-14(a) Certification of the company’s and EID’s Principal Executive Officer. |
| | | |
| | Rule 13a-14(a)/15d-14(a) Certification of the company’s and EID’s Principal Financial Officer. |
| | | |
| | Section 1350 Certification of the company’s and EID’s Principal Executive Officer. The information contained in this Exhibit shall not be deemed filed with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the registrant under the Securities Act of 1933, as amended. |
| | | |
| | Section 1350 Certification of the company’s and EID’s Principal Financial Officer. The information contained in this Exhibit shall not be deemed filed with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the registrant under the Securities Act of 1933, as amended. |
| | |
| 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 | | Inline XBRL Taxonomy Extension Schema Document |
| | | |
| 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| | | |
| 101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| | | |
| 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
| | | |
| 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| | |
| 104 | | Cover Page Interactive Data File – The Cover Page XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101.INS) |
SIGNATURE
Corteva, Inc.
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.
| | | | | | | | |
| CORTEVA, INC. |
| (Registrant) |
| | |
| Date: | August 6, 2021May 5, 2022 |
| | |
| | |
| By: | /s/ Brian Titus |
| | |
| | Brian Titus |
| | Vice President, Controller |
| | (Principal Accounting Officer) |
E. I. du Pont de Nemours and Company
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.
| | | | | | | | |
| E. I. du Pont de Nemours and Company |
| (Registrant) |
| | |
| Date: | August 6, 2021May 5, 2022 |
| | |
| | |
| By: | /s/ Brian Titus |
| | |
| | Brian Titus |
| | Vice President, Controller |
| | (Principal Accounting Officer) |
CONSOLIDATED FINANCIAL STATEMENTS OF E. I. DU PONT DE NEMOURS AND COMPANY
E. I. du Pont de Nemours and Company
Consolidated Statements of Operations (Unaudited)
| | | Three Months Ended
June 30, | Six Months Ended June 30, | | Three Months Ended
March 31, | |
| (In millions, except per share amounts) | (In millions, except per share amounts) | 2021 | 2020 | 2021 | 2020 | (In millions, except per share amounts) | 2022 | 2021 | |
| Net sales | Net sales | $ | 5,627 | | $ | 5,191 | | $ | 9,805 | | $ | 9,147 | | Net sales | $ | 4,601 | | $ | 4,178 | | |
| Cost of goods sold | Cost of goods sold | 3,010 | | 2,829 | | 5,430 | | 5,098 | | Cost of goods sold | 2,724 | | 2,420 | | |
| Research and development expense | Research and development expense | 293 | | 273 | | 574 | | 553 | | Research and development expense | 268 | | 281 | | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | 998 | | 965 | | 1,731 | | 1,722 | | Selling, general and administrative expenses | 735 | | 733 | | |
| Amortization of intangibles | Amortization of intangibles | 180 | | 176 | | 363 | | 339 | | Amortization of intangibles | 179 | | 183 | | |
| Restructuring and asset related charges - net | Restructuring and asset related charges - net | 135 | | 179 | | 235 | | 249 | | Restructuring and asset related charges - net | 5 | | 100 | | |
| Other income - net | Other income - net | 298 | | 89 | | 635 | | 90 | | Other income - net | 17 | | 337 | | |
| Interest expense | Interest expense | 20 | | 45 | | 42 | | 87 | | Interest expense | 18 | | 22 | | |
| Income from continuing operations before income taxes | 1,289 | | 813 | | 2,065 | | 1,189 | | |
| Provision for income taxes on continuing operations | 281 | | 71 | | 455 | | 190 | | |
| Income from continuing operations after income taxes | 1,008 | | 742 | | 1,610 | | 999 | | |
| Income (loss) from continuing operations before income taxes | | Income (loss) from continuing operations before income taxes | 689 | | 776 | | |
| Provision for (benefit from) income taxes on continuing operations | | Provision for (benefit from) income taxes on continuing operations | 119 | | 174 | | |
| Income (loss) from continuing operations after income taxes | | Income (loss) from continuing operations after income taxes | 570 | | 602 | | |
| (Loss) income from discontinued operations after income taxes | (Loss) income from discontinued operations after income taxes | (45) | | 0 | | (55) | | 1 | | (Loss) income from discontinued operations after income taxes | (10) | | (10) | | |
| Net income | 963 | | 742 | | 1,555 | | 1,000 | | |
| Net income attributable to noncontrolling interests | 0 | | 3 | | 1 | | 11 | | |
| Net income attributable to E. I. du Pont de Nemours and Company | $ | 963 | | $ | 739 | | $ | 1,554 | | $ | 989 | | |
| Net income (loss) | | Net income (loss) | 560 | | 592 | | |
| Net income (loss) attributable to noncontrolling interests | | Net income (loss) attributable to noncontrolling interests | 1 | | 1 | | |
| Net income (loss) attributable to E. I. du Pont de Nemours and Company | | Net income (loss) attributable to E. I. du Pont de Nemours and Company | $ | 559 | | $ | 591 | | |
See Notes to the Interim Consolidated Financial Statements beginning on page 75.63.
E. I. du Pont de Nemours and Company
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
| | | Three Months Ended
June 30, | Six Months Ended
June 30, | | Three Months Ended
March 31, | |
| (In millions) | (In millions) | 2021 | 2020 | 2021 | 2020 | (In millions) | 2022 | 2021 | |
| Net income | $ | 963 | | $ | 742 | | $ | 1,555 | | $ | 1,000 | | |
| Net income (loss) | | Net income (loss) | $ | 560 | | $ | 592 | | |
| Other comprehensive income (loss) - net of tax: | Other comprehensive income (loss) - net of tax: | | | Other comprehensive income (loss) - net of tax: | | | |
| Cumulative translation adjustments | Cumulative translation adjustments | 243 | | 97 | | (160) | | (575) | | Cumulative translation adjustments | 91 | | (403) | | |
| Adjustments to pension benefit plans | Adjustments to pension benefit plans | 8 | | (6) | | 16 | | (6) | | Adjustments to pension benefit plans | 8 | | 8 | | |
| Adjustments to other benefit plans | Adjustments to other benefit plans | (160) | | (1) | | (317) | | 2 | | Adjustments to other benefit plans | 3 | | (157) | | |
| Unrealized gain on investments | 0 | | 0 | | 10 | | 0 | | |
| Unrealized gain (loss) on investments | | Unrealized gain (loss) on investments | — | | 10 | | |
| Derivative instruments | Derivative instruments | 31 | | (2) | | 96 | | 4 | | Derivative instruments | (25) | | 65 | | |
| Total other comprehensive income (loss) | Total other comprehensive income (loss) | 122 | | 88 | | (355) | | (575) | | Total other comprehensive income (loss) | 77 | | (477) | | |
| Comprehensive income | 1,085 | | 830 | | 1,200 | | 425 | | |
| Comprehensive income attributable to noncontrolling interests - net of tax | 0 | | 3 | | 1 | | 11 | | |
| Comprehensive income attributable to E. I. du Pont de Nemours and Company | $ | 1,085 | | $ | 827 | | $ | 1,199 | | $ | 414 | | |
| Comprehensive income (loss) | | Comprehensive income (loss) | 637 | | 115 | | |
| Comprehensive income (loss) attributable to noncontrolling interests - net of tax | | Comprehensive income (loss) attributable to noncontrolling interests - net of tax | 1 | | 1 | | |
| Comprehensive income (loss) attributable to E. I. du Pont de Nemours and Company | | Comprehensive income (loss) attributable to E. I. du Pont de Nemours and Company | $ | 636 | | $ | 114 | | |
See Notes to the Interim Consolidated Financial Statements beginning on page 75.63.
E. I. du Pont de Nemours and Company
Consolidated Balance Sheets (Unaudited)
| | (In millions, except share amounts) | (In millions, except share amounts) | June 30, 2021 | December 31, 2020 | June 30, 2020 | (In millions, except share amounts) | March 31, 2022 | December 31, 2021 | March 31, 2021 |
| Assets | Assets | | | Assets | | |
| Current assets | Current assets | | | Current assets | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 2,861 | | $ | 3,526 | | $ | 2,809 | | Cash and cash equivalents | $ | 2,031 | | $ | 4,459 | | $ | 2,404 | |
| Marketable securities | Marketable securities | 39 | | 269 | | 60 | | Marketable securities | 290 | | 86 | | 114 | |
| Accounts and notes receivable - net | Accounts and notes receivable - net | 6,792 | | 4,926 | | 6,772 | | Accounts and notes receivable - net | 7,275 | | 4,811 | | 6,792 | |
| Inventories | Inventories | 3,541 | | 4,882 | | 3,589 | | Inventories | 4,986 | | 5,180 | | 4,321 | |
| Other current assets | Other current assets | 1,052 | | 1,165 | | 1,192 | | Other current assets | 1,296 | | 1,010 | | 1,405 | |
| | Total current assets | Total current assets | 14,285 | | 14,768 | | 14,422 | | Total current assets | 15,878 | | 15,546 | | 15,036 | |
| Investment in nonconsolidated affiliates | Investment in nonconsolidated affiliates | 68 | | 66 | | 62 | | Investment in nonconsolidated affiliates | 91 | | 76 | | 64 | |
| Property, plant and equipment | Property, plant and equipment | 8,343 | | 8,253 | | 7,858 | | Property, plant and equipment | 8,483 | | 8,364 | | 8,173 | |
| Less: Accumulated depreciation | Less: Accumulated depreciation | 4,002 | | 3,857 | | 3,565 | | Less: Accumulated depreciation | 4,150 | | 4,035 | | 3,874 | |
| Net property, plant and equipment | Net property, plant and equipment | 4,341 | | 4,396 | | 4,293 | | Net property, plant and equipment | 4,333 | | 4,329 | | 4,299 | |
| Goodwill | Goodwill | 10,207 | | 10,269 | | 10,069 | | Goodwill | 10,109 | | 10,107 | | 10,146 | |
| Other intangible assets | Other intangible assets | 10,413 | | 10,747 | | 11,070 | | Other intangible assets | 9,865 | | 10,044 | | 10,584 | |
| Deferred income taxes | Deferred income taxes | 442 | | 464 | | 290 | | Deferred income taxes | 471 | | 438 | | 433 | |
| Other assets | Other assets | 1,740 | | 1,939 | | 1,974 | | Other assets | 1,886 | | 1,804 | | 1,987 | |
| | Total Assets | Total Assets | $ | 41,496 | | $ | 42,649 | | $ | 42,180 | | Total Assets | $ | 42,633 | | $ | 42,344 | | $ | 42,549 | |
| Liabilities and Equity | Liabilities and Equity | | | Liabilities and Equity | | |
| Current liabilities | Current liabilities | | | Current liabilities | | |
| Short-term borrowings and finance lease obligations | Short-term borrowings and finance lease obligations | $ | 677 | | $ | 3 | | $ | 1,529 | | Short-term borrowings and finance lease obligations | $ | 1,018 | | $ | 17 | | $ | 1,250 | |
| Accounts payable | Accounts payable | 3,070 | | 3,615 | | 2,891 | | Accounts payable | 3,685 | | 4,126 | | 3,098 | |
| Income taxes payable | Income taxes payable | 234 | | 123 | | 369 | | Income taxes payable | 180 | | 146 | | 165 | |
| Deferred revenue | Deferred revenue | 748 | | 2,662 | | 431 | | Deferred revenue | 2,435 | | 3,201 | | 2,247 | |
| Accrued and other current liabilities | Accrued and other current liabilities | 2,525 | | 2,148 | | 2,312 | | Accrued and other current liabilities | 2,347 | | 2,070 | | 2,257 | |
| | Total current liabilities | Total current liabilities | 7,254 | | 8,551 | | 7,532 | | Total current liabilities | 9,665 | | 9,560 | | 9,017 | |
| Long-Term Debt | 1,101 | | 1,102 | | 1,102 | | |
| Long-Term Debt - Related Party | 2,745 | | 3,459 | | 3,842 | | |
| Other Noncurrent Liabilities | | | |
| Long-term debt | | Long-term debt | 1,154 | | 1,100 | | 1,102 | |
| Long-term debt - related party | | Long-term debt - related party | 1,825 | | 2,162 | | 3,012 | |
| Other noncurrent liabilities | | Other noncurrent liabilities | | |
| Deferred income tax liabilities | Deferred income tax liabilities | 935 | | 893 | | 752 | | Deferred income tax liabilities | 1,203 | | 1,220 | | 902 | |
| Pension and other post employment benefits - noncurrent | Pension and other post employment benefits - noncurrent | 4,767 | | 5,176 | | 6,039 | | Pension and other post employment benefits - noncurrent | 2,983 | | 3,124 | | 4,954 | |
| Other noncurrent obligations | Other noncurrent obligations | 1,816 | | 1,867 | | 1,957 | | Other noncurrent obligations | 1,704 | | 1,719 | | 1,814 | |
| | Total noncurrent liabilities | Total noncurrent liabilities | 11,364 | | 12,497 | | 13,692 | | Total noncurrent liabilities | 8,869 | | 9,325 | | 11,784 | |
| Commitments and contingent liabilities | Commitments and contingent liabilities | | | Commitments and contingent liabilities | | |
| Stockholders’ equity | Stockholders’ equity | | | Stockholders’ equity | | |
Preferred stock, without par value – cumulative; 23,000,000 shares authorized;
issued at June 30, 2021, December 31, 2020, and June 30, 2020: | | | |
| Preferred stock, without par value – cumulative; 23,000,000 shares authorized; issued at March 31, 2022, December 31, 2021, and March 31, 2021: | | Preferred stock, without par value – cumulative; 23,000,000 shares authorized; issued at March 31, 2022, December 31, 2021, and March 31, 2021: | | |
| $4.50 Series – 1,673,000 shares (callable at $120) | $4.50 Series – 1,673,000 shares (callable at $120) | 169 | | 169 | | 169 | | $4.50 Series – 1,673,000 shares (callable at $120) | 169 | | 169 | | 169 | |
| $3.50 Series – 700,000 shares (callable at $102) | $3.50 Series – 700,000 shares (callable at $102) | 70 | | 70 | | 70 | | $3.50 Series – 700,000 shares (callable at $102) | 70 | | 70 | | 70 | |
| Common stock, $0.30 par value; 1,800,000,000 shares authorized; 200 issued at June 30, 2021, December 31, 2020, and June 30, 2020 | 0 | | 0 | | 0 | | |
| Common stock, $0.30 par value; 1,800,000,000 shares authorized; 200 issued at March 31, 2022, December 31, 2021, and March 31, 2021 | | Common stock, $0.30 par value; 1,800,000,000 shares authorized; 200 issued at March 31, 2022, December 31, 2021, and March 31, 2021 | — | | — | | — | |
| Additional paid-in capital | Additional paid-in capital | 24,131 | | 24,049 | | 23,981 | | Additional paid-in capital | 24,202 | | 24,196 | | 24,083 | |
| | Retained earnings / (accumulated deficit) | 1,752 | | 203 | | 580 | | |
| Accumulated other comprehensive loss | (3,245) | | (2,890) | | (3,845) | | |
| Retained earnings | | Retained earnings | 2,478 | | 1,922 | | 792 | |
| Accumulated other comprehensive income (loss) | | Accumulated other comprehensive income (loss) | (2,821) | | (2,898) | | (3,367) | |
| Total E. I. du Pont de Nemours and Company stockholders’ equity | Total E. I. du Pont de Nemours and Company stockholders’ equity | 22,877 | | 21,601 | | 20,955 | | Total E. I. du Pont de Nemours and Company stockholders’ equity | 24,098 | | 23,459 | | 21,747 | |
| Noncontrolling interests | Noncontrolling interests | 1 | | 0 | | 1 | | Noncontrolling interests | 1 | | — | | 1 | |
| Total equity | Total equity | 22,878 | | 21,601 | | 20,956 | | Total equity | 24,099 | | 23,459 | | 21,748 | |
| Total Liabilities and Equity | Total Liabilities and Equity | $ | 41,496 | | $ | 42,649 | | $ | 42,180 | | Total Liabilities and Equity | $ | 42,633 | | $ | 42,344 | | $ | 42,549 | |
See Notes to the Interim Consolidated Financial Statements beginning on page 75.63.
E. I. du Pont de Nemours and Company
Consolidated Statements of Cash Flows (Unaudited)
| | | Six Months Ended
June 30, | | Three Months Ended
March 31, |
| (In millions) | (In millions) | 2021 | 2020 | (In millions) | 2022 | 2021 |
| Operating activities | Operating activities | | | Operating activities | | |
| Net income | $ | 1,555 | | $ | 1,000 | | |
| Adjustments to reconcile net income to cash used for operating activities: | | | |
| Net income (loss) | | Net income (loss) | $ | 560 | | $ | 592 | |
| Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities: | | Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities: | | |
| Depreciation and amortization | Depreciation and amortization | 617 | | 583 | | Depreciation and amortization | 307 | | 304 | |
| Provision for (benefit from) deferred income tax | Provision for (benefit from) deferred income tax | 124 | | (136) | | Provision for (benefit from) deferred income tax | (37) | | 47 | |
| Net periodic pension and OPEB benefit, net | Net periodic pension and OPEB benefit, net | (641) | | (168) | | Net periodic pension and OPEB benefit, net | (71) | | (318) | |
| Pension and OPEB contributions | Pension and OPEB contributions | (149) | | (167) | | Pension and OPEB contributions | (55) | | (84) | |
| Net (gain) loss on sales of property, businesses, consolidated companies, and investments | Net (gain) loss on sales of property, businesses, consolidated companies, and investments | (1) | | 30 | | Net (gain) loss on sales of property, businesses, consolidated companies, and investments | 3 | | — | |
| Restructuring and asset related charges - net | Restructuring and asset related charges - net | 235 | | 249 | | Restructuring and asset related charges - net | 5 | | 100 | |
| Other net loss | Other net loss | 143 | | 185 | | Other net loss | 104 | | 54 | |
| Changes in assets and liabilities, net | Changes in assets and liabilities, net | | | Changes in assets and liabilities, net | | |
| Accounts and notes receivable | Accounts and notes receivable | (1,957) | | (1,712) | | Accounts and notes receivable | (2,372) | | (2,012) | |
| Inventories | Inventories | 1,334 | | 1,271 | | Inventories | 234 | | 467 | |
| Accounts payable | Accounts payable | (525) | | (717) | | Accounts payable | (406) | | (448) | |
| Deferred revenue | Deferred revenue | (1,931) | | (2,147) | | Deferred revenue | (782) | | (401) | |
| Other assets and liabilities | Other assets and liabilities | 533 | | 809 | | Other assets and liabilities | (217) | | (247) | |
| Cash used for operating activities | (663) | | (920) | | |
| Cash provided by (used for) operating activities | | Cash provided by (used for) operating activities | (2,727) | | (1,946) | |
| Investing activities | Investing activities | | | Investing activities | | |
| Capital expenditures | Capital expenditures | (269) | | (202) | | Capital expenditures | (179) | | (137) | |
| Proceeds from sales of property, businesses, and consolidated companies - net of cash divested | Proceeds from sales of property, businesses, and consolidated companies - net of cash divested | 26 | | 18 | | Proceeds from sales of property, businesses, and consolidated companies - net of cash divested | 5 | | 20 | |
| Investments in and loans to nonconsolidated affiliates | Investments in and loans to nonconsolidated affiliates | (1) | | 0 | | Investments in and loans to nonconsolidated affiliates | (6) | | — | |
| Purchases of investments | Purchases of investments | (56) | | (361) | | Purchases of investments | (234) | | (40) | |
| Proceeds from sales and maturities of investments | Proceeds from sales and maturities of investments | 285 | | 298 | | Proceeds from sales and maturities of investments | 10 | | 194 | |
| Other investing activities - net | (2) | | (5) | | |
| Cash used for investing activities | (17) | | (252) | | |
| Other investing activities, net | | Other investing activities, net | — | | (1) | |
| Cash provided by (used for) investing activities | | Cash provided by (used for) investing activities | (404) | | 36 | |
| Financing activities | Financing activities | | | Financing activities | | |
| Net change in borrowings (less than 90 days) | Net change in borrowings (less than 90 days) | 254 | | 966 | | Net change in borrowings (less than 90 days) | 744 | | 828 | |
| Proceeds from related party debt | 29 | | 67 | | |
| | Payments on related party debt | Payments on related party debt | (743) | | (246) | | Payments on related party debt | (337) | | (447) | |
| Proceeds from debt | Proceeds from debt | 419 | | 2,434 | | Proceeds from debt | 311 | | 419 | |
| Payments on debt | 0 | | (879) | | |
| | Proceeds from exercise of stock options | Proceeds from exercise of stock options | 66 | | 17 | | Proceeds from exercise of stock options | 40 | | 38 | |
| Payment for acquisition of subsidiary's interest from the non-controlling interest | 0 | | (60) | | |
| | Other financing activities | (32) | | (34) | | |
| Cash (used for) provided by financing activities | (7) | | 2,265 | | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (14) | | (95) | | |
| (Decrease) / increase in cash, cash equivalents and restricted cash | (701) | | 998 | | |
| Cash, cash equivalents and restricted cash at beginning of period | 3,873 | | 2,173 | | |
| Cash, cash equivalents and restricted cash at end of period | $ | 3,172 | | $ | 3,171 | | |
| | Other financing activities, net | | Other financing activities, net | (47) | | (21) | |
| Cash provided by (used for) financing activities | | Cash provided by (used for) financing activities | 711 | | 817 | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash equivalents | | Effect of exchange rate changes on cash, cash equivalents and restricted cash equivalents | (31) | | (50) | |
| Increase (decrease) in cash, cash equivalents and restricted cash equivalents | | Increase (decrease) in cash, cash equivalents and restricted cash equivalents | (2,451) | | (1,143) | |
| Cash, cash equivalents and restricted cash equivalents at beginning of period | | Cash, cash equivalents and restricted cash equivalents at beginning of period | 4,836 | | 3,873 | |
| Cash, cash equivalents and restricted cash equivalents at end of period | | Cash, cash equivalents and restricted cash equivalents at end of period | $ | 2,385 | | $ | 2,730 | |
See Notes to the Interim Consolidated Financial Statements beginning on page 75.63.
E. I. du Pont de Nemours and Company
Consolidated Statements of Equity (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Preferred Stock | Common Stock | Additional Paid-in Capital "APIC" | (Accumulated Deficit) Retained Earnings | Accum. Other Comp (Loss) Income | Treasury Stock | Non-controlling Interests | Total Equity |
| 2020 | | | | | | | | |
| Balance at January 1, 2020 | $ | 239 | | $ | 0 | | $ | 23,958 | | $ | (406) | | $ | (3,270) | | $ | — | | $ | 7 | | $ | 20,528 | |
| Net income | | | | 250 | | | | 8 | | 258 | |
| Other comprehensive loss | | | | | (663) | | | | (663) | |
| Preferred dividends ($4.50 Series - $1.125 per share, $3.50 Series - $0.875 per share) | | | (2) | | | | | | (2) | |
| Issuance of Corteva stock | | | 14 | | | | | | 14 | |
| Share-based compensation | | | 2 | | | | | | 2 | |
| Other - net | | | 32 | | (2) | | | | | 30 | |
| Balance at March 31, 2020 | $ | 239 | | $ | 0 | | $ | 24,004 | | $ | (158) | | $ | (3,933) | | $ | — | | $ | 15 | | $ | 20,167 | |
| Net (loss) income | | | | 739 | | | | 3 | | 742 | |
| Other comprehensive loss | | | | | 88 | | | | 88 | |
| Preferred dividends ($4.50 Series - $1.125 per share, $3.50 Series - $0.875 per share) | | | | (3) | | | | | (3) | |
| | | | | | | | |
| Issuance of Corteva stock | | | 3 | | | | | | 3 | |
| Share-based compensation | | | 19 | | | | | | 19 | |
| Acquisition of a noncontrolling interest in consolidated subsidiaries | | | (37) | | | | | (15) | | (52) | |
| | | | | | | | |
| Other - net | | | (8) | | 2 | | | | (2) | | (8) | |
| Balance at June 30, 2020 | $ | 239 | | $ | 0 | | $ | 23,981 | | $ | 580 | | $ | (3,845) | | $ | — | | $ | 1 | | $ | 20,956 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Preferred Stock | Common Stock | Additional Paid-in Capital "APIC" | Retained Earnings | Accum. Other Comp Income (Loss) | Non-controlling Interests | Total Equity |
| 2021 | | | | | | | |
| Balance at January 1, 2021 | $ | 239 | | $ | — | | $ | 24,049 | | $ | 203 | | $ | (2,890) | | $ | — | | $ | 21,601 | |
| Net income (loss) | | | | 591 | | | 1 | | 592 | |
| Other comprehensive Income (loss) | | | | | (477) | | | (477) | |
| Preferred dividends ($4.50 Series - $1.125 per share, $3.50 Series - $0.875 per share) | | | 0 | (2) | | | | (2) | |
| Issuance of Corteva stock | | | 38 | | | | | 38 | |
| | | | | | | |
| Other - net | | | (4) | | 0 | | | (4) | |
| Balance at March 31, 2021 | $ | 239 | | $ | — | | $ | 24,083 | | $ | 792 | | $ | (3,367) | | $ | 1 | | $ | 21,748 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | (In millions) | (In millions) | Preferred Stock | Common Stock | Additional Paid-in Capital "APIC" | Retained Earnings (Accumulated Deficit) | Accum. Other Comp (Loss) Income | Treasury Stock | Non-controlling Interests | Total Equity | (In millions) | Preferred Stock | Common Stock | Additional Paid-in Capital "APIC" | Retained Earnings | Accum. Other Comp Income (Loss) | Non-controlling Interests | Total Equity |
| 2021 | | | |
| Balance at January 1, 2021 | $ | 239 | | $ | 0 | | $ | 24,049 | | $ | 203 | | $ | (2,890) | | $ | — | | $ | 0 | | $ | 21,601 | | |
| Net income | | 591 | | | 1 | | 592 | | |
| Other comprehensive loss | | (477) | | | (477) | | |
| Preferred dividends ($4.50 Series - $1.125 per share, $3.50 Series - $0.875 per share) | | (2) | | | (2) | | |
| | Issuance of Corteva stock | | 38 | | | 38 | | |
| | Other - net | | (4) | | | (4) | | |
| Balance at March 31, 2021 | $ | 239 | | $ | 0 | | $ | 24,083 | | $ | 792 | | $ | (3,367) | | $ | — | | $ | 1 | | $ | 21,748 | | |
| Net income | | 963 | | | 963 | | |
| Other comprehensive income | | 122 | | | 122 | | |
| 2022 | | 2022 | | |
| Balance at January 1, 2022 | | Balance at January 1, 2022 | $ | 239 | | $ | — | | $ | 24,196 | | $ | 1,922 | | $ | (2,898) | | $ | — | | $ | 23,459 | |
| Net income (loss) | | Net income (loss) | | 559 | | | 1 | | 560 | |
| Other comprehensive income (loss) | | Other comprehensive income (loss) | | 77 | | | 77 | |
| Preferred dividends ($4.50 Series - $1.125 per share, $3.50 Series - $0.875 per share) | Preferred dividends ($4.50 Series - $1.125 per share, $3.50 Series - $0.875 per share) | | (3) | | | (3) | | Preferred dividends ($4.50 Series - $1.125 per share, $3.50 Series - $0.875 per share) | | (2) | | | (2) | |
| | Issuance of Corteva stock | Issuance of Corteva stock | | 28 | | | 28 | | Issuance of Corteva stock | | 40 | | | 40 | |
| Share-based compensation | Share-based compensation | | 23 | | (1) | | | 22 | | Share-based compensation | | (31) | | | (31) | |
| | Other - net | Other - net | | (3) | | 1 | | | (2) | | Other - net | | (3) | | (1) | | | (4) | |
| Balance at June 30, 2021 | $ | 239 | | $ | 0 | | $ | 24,131 | | $ | 1,752 | | $ | (3,245) | | $ | — | | $ | 1 | | $ | 22,878 | | |
| Balance at March 31, 2022 | | Balance at March 31, 2022 | $ | 239 | | $ | — | | $ | 24,202 | | $ | 2,478 | | $ | (2,821) | | $ | 1 | | $ | 24,099 | |
| |
See Notes to the Interim Consolidated Financial Statements beginning on page 75.63.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| | | | | | | | |
| E. I. du Pont de Nemours and Company | |
| Notes to the Consolidated Financial Statements (Unaudited) | |
Table of Contents
| | Note | Note | | Page | Note | | Page |
| 1 | 1 | | | 1 | | |
| 2 | 2 | | | 2 | | |
| 3 | 3 | | | 3 | | |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
As a result of the Business Realignment and the Internal Reorganization, Corteva, Inc. owns 100% of the outstanding common stock of EID. EID is a subsidiary of Corteva, Inc. and continues to be a reporting company, subject to the requirements of the Exchange Act. The primary differences between Corteva, Inc. and EID are outlined below:
•Preferred Stock - EID has preferred stock outstanding to third parties which is accounted for as a non-controlling interest at the Corteva, Inc. level. Each share of EID Preferred Stock - $4.50 Series and EID Preferred Stock - $3.50 Series issued and outstanding at the effective date of the Corteva Distribution remains issued and outstanding as to EID and was unaffected by the Corteva Distribution.
•Related Party Loan - EID engaged in a series of debt redemptions during the second quarter of 2019 that were partially funded through an intercompany loan from Corteva, Inc. This was eliminated in consolidation at the Corteva, Inc. level but remains on EID's consolidated financial statements at the standalone level (including the associated interest).
•Capital Structure - At June 30, 2021,March 31, 2022, Corteva, Inc.'s capital structure consists of 734,421,000725,320,000 issued shares of common stock, par value $0.01 per share.
The accompanying footnotes relate to EID only, and not to Corteva, Inc., and are presented to show differences between EID and Corteva, Inc.
For the footnotes listed below, refer to the following Corteva, Inc. footnotes:
•Note 1 - Summary of Significant Accounting Policies - refer to page 9 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 2 - Recent Accounting Guidance - refer to page 9 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 3 - Divestitures and Other TransactionsRevenue - refer to page 9 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 4 - RevenueRestructuring and Asset Related Charges - Net - refer to page 1112 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 5 - Restructuring and Asset Related ChargesSupplementary Information - Netrefer to page 13 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 6 - Income Taxes - refer to page 14 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 67 - Supplementary InformationEarnings Per Share of Common Stock - Not applicable for EID
•Note 8 - Accounts and Notes Receivable - Net - refer to page 16 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 79 - Income TaxesInventories - refer to page 18 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 8 - Earnings Per Share of Common Stock - Not applicable for EID
•Note 9 - Accounts and Notes Receivable - Net - refer to page 2017 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 10 - InventoriesOther Intangible Assets - refer to page 2117 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 11 - Other Intangible Assets - refer to page 21 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 12 - Short-Term Borrowings, Long-Term Debt and Available Credit Facilities - refer to page 2218 of the Corteva, Inc. interim Consolidated Financial Statements. In addition, EID has a related party loan payable to Corteva, Inc.; refer to EID Note 2 - Related Party Transactions, below
•Note 1312 - Commitments and Contingent Liabilities - refer to page 2319 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 13 - Stockholders' Equity - refer to page 26 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 14 - Stockholders' EquityPension Plans and Other Post Employment Benefits - refer to page 29 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 15 - Pension Plans and Other Post Employment BenefitsFinancial Instruments - refer to page 3229 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 16 - Financial InstrumentsFair Value Measurements - refer to page 3235 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 17 - Fair Value Measurements - refer to page 38 of the Corteva, Inc. interim Consolidated Financial Statements
•Note 18 - Segment Information - Differences exist between Corteva, Inc. and EID; refer to EID Note 3 - Segment Information, below
•Note 18 - Subsequent Events - refer to page 37 of the Corteva, Inc. interim Consolidated Financial Statements
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 - RELATED PARTY TRANSACTIONS
Transactions with Corteva
In the second quarter of 2019, EID entered into a related party revolving loan from Corteva, Inc., with a maturity date in 2024. As of June 30, 2021,March 31, 2022, December 31, 2020,2021, and June 30, 2020,March 31, 2021, the outstanding related party loan balance was $2,745$1,825 million, $3,459$2,162 million, and $3,842$3,012 million, respectively (which approximates fair value), with interest rates of 1.52%1.67%, 1.62%1.67%, and 1.80%1.62%, respectively, and is reflected as long-term debt - related party in EID's interim Consolidated Balance Sheets. Additionally, EID has incurred tax deductible interest expense of $13$9 million and $28$15 million for the three and six months ended June 30,March 31, 2022 and 2021, respectively, and $31 million and $63 million for the three and six months ended June 30, 2020, respectively, associated with the related party loan from Corteva, Inc.
As of June 30,March 31, 2022, December 31, 2021, and March 31, 2021, EID had payables to Corteva, Inc., of $57$32 million, $27 million and $91$55 million included in accrued and other current liabilities, respectively, and other noncurrent obligations, respectively, $92$116 million, at December 31, 2020$117 million, and $91 million, included in both accrued and other current liabilities and other noncurrent obligations, respectively, and $119 million and $82 million at June 30, 2020, included in accrued and other current liabilities and other noncurrent obligations, respectively, in the interim Consolidated Balance Sheets related to Corteva's indemnification liabilities to Dow and DuPont per the Separation Agreements (refer to page 921 of the Corteva, Inc. interim Consolidated Financial Statements for further details of the Separation Agreements).
NOTE 3 - SEGMENT INFORMATION
There are no differences in reporting structure or segments between Corteva, Inc. and EID. In addition, there are no differences between Corteva, Inc. and EID segment net sales, segment operating EBITDA, segment assets, or significant items by segment; refer to page 3936 of the Corteva, Inc. interim Consolidated Financial Statements for background information on the segments as well as further details regarding segment metrics. The tables below reconcile income (loss) from continuing operations after income taxes to segment operating EBITDA, as differences exist between Corteva, Inc. and EID.
Reconciliation to interim Consolidated Financial Statements
| | | | | | | | | | | | | | |
Income from continuing operations after income taxes to segment operating EBITDA
(In millions) | Three Months Ended
June 30, | Six Months Ended
June 30, |
| 2021 | 2020 | 2021 | 2020 |
| Income from continuing operations after income taxes | $ | 1,008 | | $ | 742 | | $ | 1,610 | | $ | 999 | |
| Provision for income taxes on continuing operations | 281 | | 71 | | 455 | | 190 | |
| Income from continuing operations before income taxes | 1,289 | | 813 | | 2,065 | | 1,189 | |
| Depreciation and amortization | 313 | | 300 | | 617 | | 583 | |
| Interest income | (18) | | (9) | | (39) | | (27) | |
| Interest expense | 20 | | 45 | | 42 | | 87 | |
| Exchange losses (gains) - net | 14 | | (1) | | 49 | | 60 | |
| Non-operating benefits - net | (315) | | (91) | | (626) | | (164) | |
| | | | |
Mark-to-market losses on certain foreign currency contracts not designated as hedges1 | 23 | | | 22 | | |
| Significant items | 135 | | 179 | | 235 | | 302 | |
| | | | |
| Corporate expenses | 32 | | 29 | | 66 | | 54 | |
| Segment operating EBITDA | $ | 1,493 | | $ | 1,265 | | $ | 2,431 | | $ | 2,084 | |
1.Effective January 1, 2021, on a prospective basis, the company excludes net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting. For the three and six months ended June 30, 2020, the unrealized mark-to-market gain was $27 million.
| | | | | | | | | | |
Income (loss) from continuing operations after income taxes to segment operating EBITDA
(In millions) | Three Months Ended
March 31, | |
| 2022 | 2021 | | |
| Income (loss) from continuing operations after income taxes | $ | 570 | | $ | 602 | | | |
| Provision for (benefit from) income taxes on continuing operations | 119 | | 174 | | | |
| Income (loss) from continuing operations before income taxes | 689 | | 776 | | | |
| Depreciation and amortization | 307 | | 304 | | | |
| Interest income | (15) | | (21) | | | |
| Interest expense | 18 | | 22 | | | |
| Exchange (gains) losses | 47 | | 35 | | | |
| Non-operating (benefits) costs | (65) | | (311) | | | |
| | | | |
| Mark-to-market (gains) losses on certain foreign currency contracts not designated as hedges | 36 | | (1) | | | |
| Significant items (benefit) charge | 22 | | 100 | | | |
| | | | |
| Corporate expenses | 21 | | 34 | | | |
| Segment operating EBITDA | $ | 1,060 | | $ | 938 | | | |